It is necessary for people, most especially politicians and those who campaign for them, to understand that economics is not an optional aspect of our universe. We really do have scarce resources and we really do want to optimise our allocation of those resources. One implication of this is that activities which make losses should not happen. And if an activity starts to make losses then we want that activity to stop happening. This is because a loss is the universe’s method of telling us the alternative uses of those scarce resources would be a better use of those scarce resources.
That is, if we use some thing (whatever, labour, capital, land, buildings, electricity, just whatever) and pay market price for it and then make a profit from selling what we create from using it then we have added value. Profit is the value of the output over and above the value of those inputs in their alternative uses. Losses, equally obviously, mean that we are subtracting value from those inputs. Or, as we can also put this, losses make us all poorer in aggregate, profits make us all richer in aggregate.
For, as it shouldn’t be necessary to point out, that gross domestic product, GDP, that everyone likes to talk about is just the aggregate value added in the economy. Something which profits increase and losses reduce.
Tim Worstall, “Things That Make Losses Are Things That Stop Happening – Aetna Edition”, Forbes.com, 2016-08-17.
June 7, 2018
QotD: Profit and loss
June 5, 2018
Taxing Work
Marginal Revolution University
Published on 22 Nov 2016For most people in developed countries, retirement comes down to a choice: weighing the costs and benefits of continuing to work vs. leisure. An important factor influencing an individual’s decision is their government’s tax and retirement policies.
Most developed countries offer a government-run retirement system with benefits that kick-in at a certain age. That age varies from country to country, usually starting when a worker reaches their early sixties.
Of course, not everyone wants to retire simply because they can receive benefits. People that really love their work may choose not to retire. In some countries, though, that decision can be heavily penalized through lost retirement benefits.
Taxes on earnings plus penalties, like losing retirement benefits, gives us an implicit tax rate. Countries with higher implicit tax rates for older workers see a much lower labor force participation rate for people considered retirement age.
As you might imagine, these government policies on retirement can be extremely costly. Many European governments that penalize non-retirement have been working to reform these policies and reduce implicit tax rates for elderly workers.
In the Netherlands, which had one of the highest implicit tax rates in the 1990s, an older worker could have actually had to pay to work. Since the Netherlands reformed their policies surrounding retirement, they’ve seen an increase in the labor force participation rate for older workers.
In the next video, we’ll cover another big influence on female labor force participation: The Pill.
June 4, 2018
The economic damage of tariffs
Tim Worstall fisks a recent Pat Buchanan brain fart article on the glories of erecting tariff walls against foreign trade:
Pat Buchanan has been going on for decades about how wondrous tariffs are and if only they were brought back then things would be just peachy. Sadly, this all seems to be based on his not understanding trade, tariffs, nor apparently even history. That’s not a good set of recommendations for a policy about trade and tariffs, one that has been tried many a time in history.
Now, it is entirely true that if we returned to a more Hamiltonian policy era then we’d all be richer. But that wouldn’t be because we had tariffs which paid for government rather than an income or corporate tax. It’s because government would be confiscating a very much smaller portion of what we all produce to pay for itself. If the Feds took 3% of everything we do instead of the current 18% or so then sure, we’d all be richer. But that’s true however that tax is raised.
[…]
His argument is that, protected from foreign competition, American business was able to develop and grow into being world beaters. No, I don’t think this is true – I insist that behind tariff barriers companies stagnate. Indeed it’s standard economics that the medium to long term effects of trade are that the competition from foreigners is what makes the domestic companies stronger and more productive. But put that argument to one side. Assume that Buchanan is correct.
For his conclusion to be correct then it must have been true that the total costs of trade were rising in that time period. Total costs being tariffs plus transport. Only if the total costs were rising was protection rising. The tariffs are only part of the story. And as it happens total protection was falling over this time period. The falls in the costs of transport – for the US externally primarily the steam ship – were greater than the rises in the tariffs. Thus the US was becoming more open to trade at this time when industry was booming and growing to world class levels.
That’s not an argument in favour of trade protection now, is it?
The U.S. relied on tariffs to convert from an agricultural economy in 1800 to the mightiest manufacturing power on earth by 1900.
Well, it’s also true that what the US was inside those tariff barriers was the largest free trade area in the world. I’m the guy insisting that free trade makes places grow, Pat the opposite. And the place with more free trade among more people than anywhere else grows fastest? That’s a point in my favour, no, not Pat’s? Remember, the US Constitution expressly forbids the individual states from having tariffs between them…..that regulation is left to the Feds who have never imposed them.
How have EU nations run up endless trade surpluses with America? By imposing a value-added tax, or VAT, on imports from the U.S., while rebating the VAT on exports to the USA. Works just like a tariff.
No, a VAT does not work like a tariff. In no manner at all does it do so in fact. As every economist keeps trying to point out. Within the EU all goods and services, no matter where they’re made, pay the exact same rate of VAT. Well, OK, ladies unmentionables pay a lower rate than motor cars, that’s true, but all unmentionables pay the same rate, all cars. There is no difference made between domestic and foreign production. It’s entirely unlike a tariff therefore, the crucial component of which is that distinction made between home and foreign production.
Stuff made in the EU and sold in the US pays no VAT. Stuff made in the US and sold in the US pays no VAT. Again, we’ve no distinction by source or origin, this is entirely and completely unlike a tariff.
June 3, 2018
“[Libertarians] are the great optimists of the world”
At Catallaxy Files, Australian senator David Leyonhjelm has a guest post, covering the contents of his maiden speech:
When I became the first overt libertarian to be elected to the Australian Senate in 2013, I thought I would use my maiden speech to try and sum up my world view. In this speech, I outlined why I believe the role of governments should be limited to the protection of life, liberty and private property. I tried to highlight the importance of personal responsibility, the dangers of creeping government interference, and the fundamental right to be left alone so long as we’re not harming anyone else.
If I were to give an elevator spiel to someone who wanted to know more about libertarianism, I’d simply tell them that “a libertarian believes you should be able to keep more of your stuff and be left the hell alone”. It sounds too simple to work, but it does, and that’s what is truly great about it.
When you look at nations that slash government red tape, protect private property rights and safeguard civil liberties, you see societies where opportunity abounds, people escape from poverty, and civil society flourishes.
In fact, these policies have done more to lift people out of poverty than any government program anywhere. Free markets and free trade are responsible for one of the most remarkable achievements in human history: from 35% of the world’s population living on US$1.90 or less in 1990 to 10.7% in 2013, according to the World Bank.
As I see it, those who believe in a limited role for governments and the promotion of personal freedom, aka libertarians, are the great optimists of the world. An optimist would never dream of dictating how and when someone else should do something unless it was to prevent harm to another person. An optimist would never look at someone more successful and seek to grab some of their income or wealth. An optimist would never want to see more restrictions on our everyday lives.
Conversely, people who seek to control others, to take more of their earnings, and to redistribute it according to their values, tend to have a pessimistic view. Only a pessimist could look at society and think, we need more control over the daily lives of others. Only a pessimist would think their better off neighbours should be taxed more heavily or that their hard earned should be used on even more government programs.
A lot of the people who fall on the left side of Australian politics will probably decry the fact that I think they’re pessimists. They’ll say they’re the ones with a true and caring heart, and that redistributing wealth is a lofty goal because it helps those in need. This is demonstrably false, as all the evidence shows, but I will happily admit that such people have a heart, if not brains. The old saying, “if you’re not a socialist at 20 you have no heart, but if you’re still a socialist at 40 you have no brains”, still explains a lot.
QotD: Price controls just make things more expensive in real terms
One of the perennial, and pernicious, political ideas is that if things are “too expensive” then we can fix that by just passing a law to make them less expensive. We see this just about everywhere and its sadly not limited to the more idiot sector of the left. Although of course it thrives there. Venezuela is a complete and total mess because Hugo Chavez and Nicolas Maduro thought they would make life cheaper by limiting prices by law. Payday lending doesn’t exist in certain states because people like Elizabeth Warren insist that interest rates should not go “too high”. Those usury laws mean that interest rates are infinite – as the lending simply isn’t available at all. And yes, people over on the right have made the same sort of mistake – Nixon tried to fix gas prices after all.
Price fixing just always leads to things getting more expensive. As David Friedman explains:
The result – that price control results in a cost to the consumer, pecuniary plus nonpecuniary, higher than the uncontrolled price – does not depend on the details of the [supply and demand] diagram. Consumers cannot consume more gas than producers produce, so the nonpecuniary cost must be large enough to drive quantity demanded down to quantity supplied. Quantity supplied is lower than without price control, so cost to the consumer must be higher.
Tim Worstall, “Memo For Would Be Price Fixers – Price Controls Always Make Things More Expensive”, Forbes.com, 2016-08-16.
May 30, 2018
QotD: Microeconomics
… I sincerely believe – believe to the point that I can say that I know – that principles of microeconomics is the most important economics course any student can ever take. Ever. By far. If taught properly, and learned with an open and critical and attentive mind, a principles of microeconomics course will impart to the student more understanding of the operation of economies than will all other economics courses combined – and I include here even well-taught PhD econ courses.
Too many academic economists, in my experience, are bored with microeconomic principles. Such principles are so basic. No genius is required to understand them or to teach them well. Teaching microeconomic principles provides no opportunity to showcase great cleverness or to push out the frontiers of understanding. It is, instead, to repeat timeless verities – and verities the majority of which have been known and understood by wise economists for nearly 250 years, and nearly all of which have been known and understood by wise economists for the past 50 years.
[…]
My goal in teaching Principles of Microeconomics is not to launch my students on a path to earn a doctorate in the subject, or even for them to become econ majors. While I’m always pleased when a student, after taking my class, switches his or her major to economics, I teach the course as if it is the only economics course these students will ever take. (Empirically, this assumption of mine is true.) So unlike many other intro-econ courses, I do absolutely no mathematics; I even draw no cost curves. I define a handful of esoteric terms (such as the “law of diminishing marginal utility”) but never mention many others (such as “perfect competition” or “marginal rates of substitution”) that are typical fare in many other principles-of-microecon courses. I wouldn’t even dream of doing indifference-curve analysis in such a course.
I open the course with some economic history. (“Have you any idea how materially prosperous you are compared to the vast majority of your ancestors?!”) I spend a lot of time on supply and demand. I devote two whole sections to international trade, another to public choice, and one to public goods and taxation. (Each section is two-and-a-half-hours long. And I cover some other topics in addition; I mention these only to give a flavor of my course.)
My goal – by teaching basic, foundational, principles of microeconomics – is to inoculate students against the bulk of the common economic myths that they’ll encounter throughout their lives – myths such as that the great abundance of goods and services available to us denizens of modernity is the result of a process that can be easily mimicked or understood in detail by smart people or planners – that the market value of goods or services can be raised by price floors (such as a legislated minimum wage) or lowered by price ceilings (such as rent control) – that benefits can be created without costs – that government is an institution capable of rising above the realities that ensure that private institutions never perform ‘perfectly’ – that intentions are results – that destruction of property is a source of prosperity – that exchange across political boundaries differs in economically meaningful ways from exchange that takes place within political boundaries – that the only consequences that occur or that matter are those that are easily anticipated and seen.
Don Boudreaux, “Teach the Timeless Verities”, Café Hayek, 2014-08-26.
May 26, 2018
Sir Humphrey debunks the notion of maintaining a “reserve fleet”
The US Navy keeps a lot of ships around after they’ve been retired from active service (sometimes for decades), and some in the UK are asking if the Royal Navy should do something like that with the soon-to-be-retired Type 23 frigates. Sir Humphrey explains in great detail why this shouldn’t happen:
HMS Westminster (foreground) and HMS Iron Duke, Type 23 frigates of the Royal Navy, in the naval base of Portsmouth, August, 2000.
Image via Wikimedia Commons.
The subject of ‘Reserve Fleets’ is something that often comes up across the internet whenever naval forces are discussed. To many casual observers there is an innate draw to the idea of holding ships back as a contingency against a potential threat. No matter how appealing this idea seems on the surface though, there are a multitude of good reasons why keeping complex warships in reserve at the end of their life is usually a very bad idea.
In broad terms these reasons boil down to four key areas – Maintenance & Material and People & Training. Each of these areas poses a challenge which brought together makes it extremely difficult to consider keeping a ship credible once she has paid off.
Maintenance & Material
The Royal Navy has historically not maintained a large reserve fleet since the 1950s, when the combination of the loss of conscript manpower, the increasing complexity of warships adding to reactivation times and the reality that any global conflict would go nuclear quickly meant that reserve fleets were relatively worthless.After the late 1950s the RN maintained a ‘Standby Squadron’ that usually comprised several vessels that while not fully active, were kept in reasonable running order. For many years Chatham dockyard functioned as the home of the Squadron, which usually comprised ships drawn from classes still in service, that could be brought up to readiness quickly to replace other vessels at sea. This occurred during both the Cod War and the 1982 Falklands War.
It is not clear when the Standby Squadron was formally discontinued, but it played a key part in the RN force structure into the 1980s. For instance, the 1981 defence review foresaw a number of escorts (possibly 7-8 out of 50) being held in quasi-active status. The RN also maintained other ships in full reserve – such as during the lifetime of the Invincible class when usually one of the three was placed into reserve for a year or two ahead of deep refits.
The key distinction here is that this sort of set up required a heavy investment of resources and manpower to keep the ships maintained and fit for sea. A modern warship is never truly alone during her active life – there are always people onboard to maintain systems and keep watch over her. By contrast ships that decommission and pay off will progressively see less and less people onboard until one day they have been stripped down and become ‘dead ships’, and they will be left to rot until the scrappers take them.
To keep a ship in a salvageable condition, able to be made ready for sea requires a significant amount of maintenance and upkeep. This is something that is costly, requiring regular dockings, inspections and repairs, as well as the cost of keeping the ship preserved and vaguely usable. To put a ship into Reserve with the intention of using her again does not mean she can be forgotten about – quite the contrary, they require regular care and maintenance.
To put a ship into reserve at the end of her life and be certain of using her again would require an additional refit to rectify defects. It would also require regular inspections, support and attention throughout the period in reserve.
For a ship that is likely to be used again, it makes reasonable sense to do this as every pound spent on preventative maintenance is likely to save many more in reactivation costs. For a ship likely to pay off, this makes far less sense – you are spending a lot of money to park a ship and wait for it to be scrapped.
QotD: Child labour
In response to something I’d written about labor unions, a critic started badgering me about child labor.
What a terrible feature of capitalism, he said.
No, it was a terrible feature of all of world history, I replied.
Thank goodness for people who passed laws against it, he said.
No, I said, thank goodness for capitalism, which created enough wealth that families didn’t have to send their kids to work anymore just to avoid starvation.
Then I was asked: do I really believe my kids would be better off in a factory (than in school, presumably)?
As if the choice we’re talking about is between factory work and school! The actual choice faced by these families is between factory work and starvation.
The British charity Oxfam found that in Bangladesh, where the government caved in to Western demands to suppress child labor, the children — you’ll never guess — didn’t wind up in school! How about that.
Where did they wind up? In prostitution, or dead.
Nice going, geniuses.
Yes, there were laws passed against child labor, but those came when child labor was already practically a thing of the past.
No law is going to keep families from avoiding starvation — and even the left-wing International Labor Organization admits that this is the real reason for child labor. Only capital accumulation makes it possible to end child labor humanely.
My opponent probably isn’t a bad guy. He’s just absorbed the conventional wisdom on pretty much everything.
It’s very easy to blame “capitalism” for child labor. Where is the average person going to hear any other explanation?
Tom Woods, “SJWs Really Mean Well, But Accidentally Starve Some Children”, The Tom Woods Show, 2016-09-13.
May 22, 2018
A variant factor in Chinese economic statistics
I’ve long been on the record as not trusting Chinese government statistics (some examples here, here here, here, here, here, here, here, here here, here, here, here, here, here, here, and here), but this is a twist I hadn’t previously noticed:
A useful and basic rule of thumb about international economic statistics. Never, but just never, believe nor pay attention to anything about the Chinese economy for the first quarter of the year. No, this isn’t because our inscrutable bretheren dissemble more or less at this time of year, it’s not because their statisticians spend January drunk or hungover (unlike our own), it’s because the Chinese New Year obeys its own little calendar.
The modern Chinese New Year begins on the first new moon between January 21st and February 20th. Earlier calendar systems were more complicated:
Chinese five phases and four seasons calendar, used during the Zhou dynasty (c. 1046 BC-256 BC).
Image by Orienomesh-w, via Wikimedia Commons.
Well, OK, so if this was a western country that really celebrated the New Year (say, Scotland) then everyone would be back at work 48 hours later. However, the Chinese New Year is also the start of the two week holiday. Sorta a mixture between American Thanksgiving (you WILL eat at your mother’s table or a close simulacrum of it) plus a Wakes Week (English industrial towns would shut every single factory so that all could get away to the beach for a week. Well, beach not so much, Skegness maybe). The combination of the two means that near every factory in the country shuts for a couple of weeks as the largest migration in history takes place. All those migrant workers heading back to Mom’s dumplings.
If this all took place at the same time each year then our economic statistics would take account of it just fine with our seasonal adjustments. Just like we do with Christmas. We know very well that hundreds of thousands get hired for temporary jobs packing and delivering just before, get laid off immediately afterwards. We don’t see that reflected in the unemployment numbers because we’re not interested. We want to see trends, not known seasonal variations. So too with output and all that – many European factories do close in that week after Christmas. We don’t measure a drop in GDP then because we know about it therefore ignore it.
So Chinese official economic statistics are even less likely to correspond to reality during the first quarter than at any other time of the year.
QotD: Capitalism is the most feminist economic system ever
We really do need to be pointing out that the Good Old Days are now. Both technological advance and productivity growth have been driven by that combination of capitalism and markets. Capitalism, in its lust for profits, leading to the invention. Markets and the ability to copy what works being what creates the general uplift in standards by the spreading and wide use of those inventions.
The net effect of this has been, well, it’s been to make women’s lives vastly better. Starting with the point that many women actually have lives as a result. Childbirth has moved from being the leading cause of female death* to a mild risk which kills very few – each one a tragedy which is why we’re so happy that we have reduced that risk. We’ve automated all the heavy lifting in society meaning that women can indeed, with their generally lighter musculature, compete in near all areas of work. We’ve done more automation of household drudgery than we have of anything else too, freeing the distaff side from that chain upon their ambitions.
We’ve even freed all from the child bearing consequences of bonking – much to the great pleasure of man and woman alike.
Women today are the most privileged, richest, group of women who have ever stumbled across the surface of this planet. And in comparison to the men in their society they’re the most equal too. All of which leads to an interesting question. Just why are they whining so much?
*Possibly an exaggeration but not much of one. Certainly not about the mid 19th century before Semmelweiss.
Tim Worstall, “Capitalism Is The Most Feminist Economic System Ever”, Continental Telegraph, 2018-04-30.
May 20, 2018
Vancouver is the latest jurisdiction to fall for bogus statistics originated by a 9-year-old
Christian Britschgi at the Reason Hit & Run blog:
Plastic straw bans — much like the waste they target — are spreading across the globe, polluting city councils and national parliaments alike with environmentalist movement’s good intentions and undegradable bogus statistics.
The latest to fall is the Canadian city of Vancouver, which this week passed a prohibition on single-use plastic straws, as well as on foam cups and containers. The new law will forbid licensed food servers from giving away these items starting June 1, 2019.
The politicians who passed the latest straw ban are pretty pleased with their planet-saving efforts.
“This is a really important step forward to demonstrate how serious we are in phasing out plastics and making sure we are working aggressively towards zero waste,” said Vancouver Mayor Gregor Robertson in reference to the city’s goal of eliminating waste and litter by 2040.
Other stakeholders were less than celebratory about the new ban.
“The stifling effect of this ban on innovation is very serious,” Joe Hruska of the Canadian Plastic Industry Association announced in a press release. “This ban will do nothing to reduce the amount of material going to landfill or solve the public bin recycling and litter issues.”
[…]
In justifying Vancouver’s straw ban, city officials relied on the same discredited figures used to push similar prohibitions in the United States. The city’s “Single-Use Item Reduction Strategy” states that Canadians collectively throw away 57 million straws a day. A footnote explains that this number is based on the 500 million straws a day Americans use, adjusted for Canada’s population. The footnote provides a link to the recycling company Eco-Cycle, which has popularized this figure.
As Reason reported in January, Eco-Cycle itself got the 500 million straws a day figure from 9-year-old Milo Cress, who surveyed three straw manufacturers to get their estimations of the size of the straw market. Market analysts put daily straw usage in the United States closer to 175 million.
Assuming the same per capita consumption north of the border, that would mean that Canadians toss about 19 million straws a day.
Environmentalists might still find that figure too high, given how much plastic is dumped into the ocean each year. Still, it is worth noting that the vast majority of plastic waste getting into the world’s waterways is not coming from rich countries with well-developed waste control systems. It comes instead from the world’s poor, coastal countries. According to a 2015 study published in the journal Science, anywhere from 4.8 million to 12.7 million tons of plastic entered the ocean in 2010. China was the largest polluter, responsible for about 28 percent of all that waste. The United States was a distant 20th, responsible for about 1 percent of plastic marine debris in 2010. Canada, according to the study’s dataset, ranks 112th, sending about .02 percent of global marine debris into the ocean.
Labor Force Participation
Marginal Revolution University
Published on 17 Nov 2016The formula for the labor force participation rate is simple: labor force (unemployed + employed) / adult population, excluding people in the military or prison for both.
The total labor force participation rate has grown significantly in the United States since the 1950s. But the total growth doesn’t paint a clear picture of how the U.S. workforce has changed, particularly the makeup.
There are several big factors at play influencing the demographics of labor force participation. For starters, women have entered the labor force in greater numbers since the 1950s. At the same time, technology has altered the types of work available. Manufacturing jobs, which tended to employ lower-skilled, less-educated male workers, gave way to more service jobs requiring more skills and education.
In more recent years, the labor force participation rate, though still much higher than it was half a century ago, has been declining.
There are a number of factors influencing the decline. Many more women are working, but fewer men are employed or actively looking for a job. The United States also has an aging population with many Baby Boomers retiring from the labor force.
In an upcoming video, we’ll take a look at one of the big reasons behind why women have been able to enter and stay in the labor force during peak childbearing years: The Pill.
May 18, 2018
Missing the entire point of the capitalist system
At the Continental Telegraph, Tim Worstall tried to explain why the UK Commons committee looking into the Carillion collapse appear to misunderstand the current economic system in a big way:
Frank Field and his mates on the Commons work and pensions committee really do have some ‘splainin’ to do here. For they’ve entirely missed the structure of our current society and the reasons why that structure both exists and works. They go on about the greed at Carillion, the corporate vanity, the bad management. Then they complain that it’s gone bust. Finally, that we need a management system to prevent corporate greed and vanity from bankrupting companies.
No you fools, that Carillion went bust is the very point and purpose of the system. This is how we leach corporate vanity and greed out of the system, those who practise it leave the system.
[…]
What’s being missed is that this is good. Not the greed, obviously, for that’s something ever present in human nature. But what happens to those who act it out, bankruptcy.
[…]
And haven’t they come up with a likely candidate for making things worse? That a committee of bureaucrats should be making commercial decisions for companies instead of the directors and management. Really, that’ll work wonders, won’t it?
[…]
People who screw up, for whatever reason, disappear from the economic stage. Which is what we want of course, those who screw up to leave said economic stage. We have actually tried bureaucracy as a method of managing this and as the persistence of the National Coal Board, the very existence of British Leyland, show, that’s a system which doesn’t work. Either of those organisations would have disappeared at least a decade before they did without bureaucratic interference. Indeed, that’s how the bureaucracy’s actions were justified, to “save” them. That is, markets are more ruthless at weeding out failures than bureaucracies are.
What have we here? A complaint that markets weeded out a failure and to stop this we must have bureaucracy?
Carillion going bust is the very point of our having a market based economic system. Sure, they screwed up – bye bye Carillion. See, it works!
So why the hell are Frank Field and friends complaining? We already have a system which ensures that failures go kablooie – bankruptcy in our market economy.
May 14, 2018
QotD: Words and ideas matter
The way we talk and write – the words we use – what we say and what we don’t say – matter. Of course, the process of articulating thoughts helps each of us who articulates (and that is every human being) to better form thoughts that are otherwise fuzzy and amorphous. More importantly, what we express to others not only informs others of facts, instructions, and perspectives that they would not learn were we not to express our thoughts to them, our talking also expresses and, in doing so, reinforces specific ethical values.
Each and every time you say with a smile “thank you” to the supermarket cashier who tallies your order you add a little more dignity to that person’s life and occupation – and to the social estimation of that and related occupations. Each and every time you tell a homophobic or anti-immigrant joke, you detract from the social valuation of homosexuals or of immigrants. Through our talk we humans are constantly raising the social valuation of some peoples and things and lowering the social valuation of other peoples and things. Your words, individually, might have no detectable impact, but by signaling to your hearers or readers what you regard to be acceptable and unacceptable – honorable and dishonorable – important and insignificant – productive and unproductive – polite and crude – true and false – good and bad – you influence their perceptions and evaluations, if only ever so slightly. If, for example, you express admiration for a hard-working entrepreneur and do so with no trace of envy of that entrepreneur’s monetary success, your audience (be it one person or a million people) becomes a bit more inclined to regard entrepreneurs favorably and to not suppose that successful entrepreneurs’ profits are to be envied.
Obviously, the relation of the speaker to the audience matters. The effect of a mother’s words on the attitudes of her young child is greater than the effect of those same words, spoken by the same woman, to some other-woman’s child. The effect of words about widgets spoken by someone publicly regarded to be an expert in widgetry is greater than is the effect of words about widgets spoken by someone who is not regarded as having expertise in widgetry.
Ideas and attitudes matter. They matter greatly. And ideas and attitudes are transmitted chiefly by words. It is this reality above all that causes me distress when I hear or read someone with a degree in economics (or who is otherwise regarded to be expert in economics) get fundamental economics wrong. When some economist asserts that a country’s growing trade deficit destroys jobs, that’s simply wrong – but the expression of that false notion, especially by an “economist,” contributes to the public’s fear of international trade. When some other economist says that “[t]here’s just no evidence that raising the minimum wage costs jobs,” that, in this case, is not only indisputably wrong but is almost certainly an outright lie – but this economist’s lie contributes to the public’s false belief that hikes in minimum wages are all gain with no risk of loss for low-skilled workers. When economists talk and write, as they too often do, as if government officials possess superhuman capacities to care about strangers and to know enough to intervene productively into those strangers’ affairs, that’s wrong – but such talking and writing gives more phoolish credence to the false notion that state power is an especially trustworthy cure for life’s ailments, large and small.
Don Boudreaux, “Quotation of the Day…”, Café Hayek, 2016-08-01.
