Cafe Hayek

Happy 109th, Fritz!

F.A. Hayek was born on this day in 1899.  To mark this occasion, I offer a brief passage from page 104 of Hayek's 1973 book Law, Legislation, and Liberty, Vol. 1: Rules and Order:

Maintaining the overall flow of results in a complex system of production requires great elasticity of the actions of the elements of the system, and it will only be through unforeseeable changes in the particulars that a high degree of predictability of the overall results can be achieved.

Interfering with trade and technological advances in order to protect certain producers from disappointment (and, hence, from the need to adjust to changes) not only makes the economy less productive over time, but also infuses it with greater uncertainty.

Unreasonable Reasonableness

Here's a letter that I sent today to the Wall Street Journal:

Adhering to the general practice of saying that free trade has both winners and losers, you introduce two letters on Nafta with the heading "Nafta Has Helped Some, Hurt Some" (Letters, May 2).  But this familiar endeavor to appear reasonable misleadingly implies that trade across political boundaries has a unique propensity to help some and hurt others.  In fact, any economic change helps some and hurts others.

Would you introduce letters on the polio vaccine with "Vaccine Has Helped Some, Hurt Some"?  After all, the vaccine eliminated jobs for workers who made crutches, wheel chairs, and iron-lung machines.  Of course, the benefits of the vaccine - especially over the long run - far outweigh the costs.  Likewise with consumers' freedom to spend their incomes as they choose.  And free trade is nothing more than consistently allowing consumers to spend their incomes as they choose.

Sincerely,
Donald J. Boudreaux

This earlier post of mine addresses the same point in a slightly different way.

Optimal Population?

In his new book, Common Wealth, Jeffrey Sachs expresses his concern about population growth.  Worried by a U.N. prediction that global population will rise to 9.2 billion by the year 2050, from 6.6 billion today, Sachs says (on page 23 of his new book) the following about these additional 2.6 billion persons:

I will argue at some length that this is too many people to absorb safely, especially since most of the population increase is going to occur in today’s poorest countries.  We should be aiming….to stabilize the world’s population at 8 billion by midcentury.

(HT Karol Boudreaux)

Eight billion.  I'm not sure where Sachs got that number.  And, to be frank, I'm not curious about where he got it.  He could have dreamed it up in his sleep, or taken it from a multi-year study conducted by a lavishly funded committee made up of the world's most accomplished economists, demographers, environmentalists, statisticians, physicians, and other Very Smart Experts.  No matter where the number comes from, it's worthless.  There is simply no way to know how many persons the earth can "support" in the year 2050 (or any other year, for that matter).

First is the question: support at what standard of living?  Even if we grant the validity of the resources-are-very-tightly-limited supposition (upon which fear of population growth chiefly rests), there is no objective, scientifically determinable "optimal" number of people who can be alive at any one time.  According to the resources-are-very-tightly-limited supposition, the less that people consume, the greater are the amounts of resources that will be left for the future -- the greater is the earth's carrying capacity.  In this view, resources are simply 'out there,' waiting to be gathered, processed, and consumed by humans.  So more humans (or the same number of humans consuming more) will deplete resources faster than will fewer humans (or the same number of humans consuming less).

So on this resources-are-very-tightly-limited supposition, as people decrease their material standard of living, the earth can sustain a larger population.

How do we know today at what average standard of living persons alive in 2050 will seek to achieve?  We don't.  It's conceivable that the typical person alive in 2050 will have become so devoted to saving the earth that the prevalent culture and norms will dictate that most persons settle for material living standards lower than those that ordinary Americans enjoy today -- or, perhaps even lower than ordinary Americans enjoyed in 1950.  If so, then surely the "optimal" global population in the year 2050 will be lower than it would be if most persons alive in 2050 will seek to achieve living standards much higher than ordinary Americans now enjoy.

A much deeper problem with Sachs's eight-billion number is that, in calculating it, there is no way to predict how human creativity will alter the world during the next 42 years.  It's ludicrous to pretend that we can know now what, say, the average MPG will be for internal-combustion engines in 2050.  Hell, we don't even know if automobiles and lawnmowers and the like will still use such engines then.

Will another Norman Borlaug arise, between now and 2050, to spark another green revolution?  Will someone invent a way to efficiently power automobiles with air?  Will someone develop new and better techniques for defining and enforcing private property rights in ocean-going fish stocks so that the tragedy of the commons called "over-fishing" is eliminated?  Will an enterprising entrepreneur invent a means for ordinary households to power their homes with mulch or autumn leaves or small fragments of fingernail clippings?

Think back 42 years to 1966.  Who in that year imagined personal computers in nearly every home in America?  The Internet?  Digital cameras?  Cell phones?  Quality wines sold in screw-top bottles?  Buying music with literally the click of a button (and not having to burn fossil fuels in driving to the record store).  Aluminum cans that contain only a fraction of the metal that cans contained back then?  The Kindle (that will reduce the number of trees cut down to enable people to read books)?  Medical advances that make hip-replacements about as routine as getting cavities filled by the dentist?  Microfiber?

There is no way -- literally, no way -- to know how technology and social institutions will change between now and 2050.  Given this impossibility -- and given the fact that we can nevertheless predict with confidence that technology will advance and that social institutions will change -- to assert that "optimal" population in the year 2050 will be eight-billion persons is ludicrous in the extreme.  It's faux-science, and deserves only ridicule.

Future Jobs

The following letter of mine is published in today's edition of the New York Times:

To the Editor:

Bob Herbert quotes the observation by Andrew L. Stern, president of the Service Employees International Union, that Americans today “cannot see where the jobs of the future are that will allow their kids to have a better life than they had.” Mr. Stern adds, “And they’re not wrong.”

But when could Americans of any generation foresee future jobs? Did the blacksmith in 1890 foresee jobs in the auto industry? Did the corner grocer in 1940 foresee his son prospering as a regional manager for Wal-Mart?

Did the telegram-deliverer in 1950 foresee his child designing software for cellphones? Did the local pharmacist in 1960 foresee his daughter’s job as a biomedical engineer?

Our inability today to see the details of the future is no more worrisome than was the same inability of our grandparents. 

Donald J. Boudreaux
Fairfax, Va., Dec. 22, 2007
The writer is chairman of the economics department, George Mason University.

"It's Getting Better All the Time"

If the New York Times and other major, elite news outlets are to be believed, the only real question today is whether ordinary people will meet their end by being roasted or flooded to death by man-made global warming or by being crushed -- as they crawl in search of crumbs of toxic food not grown locally -- beneath the diamond-studded heels of boots worn by the richest one-percent of the population.

Patrons of the Cafe know that Russ and I are generally skeptical of most of the fear-mongering about the state of humanity.  Admittedly, we are both deeply influenced by the late Julian Simon, who is, in my opinion, the most underrated economist ever to live.

So I'm delighted to learn that Manoj Padki has started the wonderful new blog "It's Getting Better All the Time" (whose title comes from this book written by Julian Simon and his student Stephen Moore).  In this blog, Manoj will report and document many of the countless ways that humans are progressing.  I will visit Manoj's blog at least once each day.

The State of Manufacturing in the U.S.

I have never believed that making things is inherently better -- inherently more likely to produce widespread prosperity, inherently more noble, inherently more meaningful -- than is the supplying of services.  And until I notice a widespread pattern of parents hoping that their children grow up to become factory workers rather than to become doctors, lawyers, and bank presidents, I'll continue to believe that, whether they know it or not, most Americans value jobs in the service sector pretty darn highly.

Nevertheless, the state of manufacturing in the U.S. is quite strong.  To learn more, take this quiz:

1)     In what year did U.S. Manufacturing output reach its all-time peak? 
a.     1966   b. 1976   c. 1986   d. 1996   e. 2006

2)     In what year did U.S. Manufacturing revenue reach its all-time peak? (inflation adjusted)
a.     1966   b. 1976   c. 1986   d. 1996   e. 2006

3)     In what year did U.S. Manufacturing profits reach their all-time peak? (inflation adjusted)
a.     1966   b. 1976   c. 1986   d. 1996   e. 2006

4)     In what year did U.S. Manufacturing exports reach their all-time peak? (inflation adjusted)
a.     1966   b. 1976   c. 1986   d. 1996   e. 2006

5)     Average annual compensation (wages + benefits) for US manufacturing jobs is
a.     $36,000    b. $46,0000  c. $56,0000  d. $66,000

6)     What are the relative sizes of the US and Chinese manufacturing sectors?
a.     China outputs 2.5 times the US  b. Equal  c. The US outputs 2.5 times China

7)     Which country produces the largest share of total world manufacturing output?
a.     China   b. Japan   c. Germany   d. France   e. US

Answers:

1)  e. 2006 (Source: Economic Report of the President, 2007)

2)  e. 2006 (Source: Bureau of the Census)

3)  e. 2006 (Source: Bureau of the Census)

4)  a. 2006 (Source: U.S. International Trade Commission)

5)  d. $66,414 (Source: National Association of Manufacturers)

6)  c. The U.S. output is 2.5 times as much as China (Source: U.N. Industrial Development Org.)

7)  e. U.S. manufacturing output is 21 percent of world total (Source: U,N. Industrial Development Org.)

(HT: David Boaz)

This study by Cato's Dan Ikenson has the fuller story.

Let's Have Less Hot Air About Global Warming

I am not so much a skeptic of global warming as I am of politicized efforts to deal with it.  I am most assuredly a skeptic of pronouncements, predictions, and assumptions made by natural scientists -- and by politicians and pundits -- about global-warming's likely consequences on human economy and society.  Many (most?) of these scientists have no earthly idea of the fundamental logic of market exchange.  (This charge is no criticism; it merely points to an inevitable result of a deep division of labor.  After all, most of us who are not environmental scientists are poorly equipped to grasp the important details and nuances of environmental science.  Likewise, specializing in natural science (or in politics, or Hollywood acting) reduces the time and effort you put forward to study and understand the economy.)  And someone with no firm grasp of economic principles can be as right as right can be about global warming and its causes while simultaneously being utterly benighted about what to do about it and even whether or not something should be done about it.

Here's a letter of mine that appears in today's edition of the Washington Times:

Let's grant (if just for the sake of argument) that environmental scientists have proved that Earth's ideal average temperature was reached about a century ago and that the temperature is rising because of human activity ("Just the facts," Op-Ed, yesterday).

The truth remains that these scientists have no expertise to judge whether government can be trusted with the power and resources to "combat" global warming. Nor can these scientists tell us how a free market likely would deal with global warming's consequences.

Contrary to widespread belief, environmental scientists can legitimately say nothing about whether, or how, to respond to global warming.

DONALD J. BOUDREAUX
Chairman
Department of Economics
George Mason University
Fairfax

On the edge

I stumbled on The Edge today (HT: Ego Food), a site on science and knowledge. They ask a question every year of a bunch of smart people. This year's question is: What are you optimistic about? Why? (OK, two questions. Sort of.)

They have 160 responses. A few of them (Dennett and Dawkins for starters and maybe more than a few more) are optimistic that religion will die out in the very near future. This strikes me as remarkably unlikely. (I think it equally unlikely that were religion to die out that its death would result in a world of peace and harmony.)

But some of the others I found very interesting, including Chris DiBona, Max Tegmark and Geoffrey Carr. The latter is the science editor of the Economist and he speaks rather cheerfully about population growth and why Malthus was wrong.

BTW, Morgan Rose in this essay and its sequel, defends Malthus against many unfair attacks.

My quick scan of the list of contributors reveals no economists. Yet I think many economists (this one for example) are very optimistic about many things, including a rising worldwide standard of living and increases in life expectancy.

One thing I am not particularly optimistic or pessimistic about is human nature.