Much Good Economics Is Little More Than Debunking Man-In-the-Street Fallacies

A meme going around states that some number of Nobel laureate economists assert that Biden’s “Build Back Better” plan will improve the lot of everyone. Here’s a thought about why the most brilliant economists might not have gotten that right.

(Don Boudreaux)

In my most-recent column for AIER, I distinguish one kind of economists from a second kind. The first, as did Adam Smith, spend much of their time debunking fallacies embraced by the man-in-the-street; the second specialize in spinning intricate theoretical justifications to support man-in-the-street superstitions.

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Economic reality being complicated, it’s nearly always true that a set of conditions can be imagined under which outcomes that are highly improbable in reality can be shown to be possible. Conditions can be described under which, in reality, it’s possible for protective tariffs or export subsidies to result in greater prosperity in the home country. Yet such conditions are wholly implausible.

Possibility, be aware, is a very weak standard. Almost every outcome that is possible – such as you surviving a fall off of a skyscraper because you luckily land in a huge drift of freshly fallen snow – will never occur. And so just because some outcome is possible doesn’t mean that it’s plausible. Furthermore, just because some outcome is plausible doesn’t mean that it’s probable.

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Every undergraduate econ major learns by her junior year how to draw a graph depicting a minimum wage having only positive, and no negative, effects on low-skilled workers. And if well-taught, this econ major also learns that the conditions under which such a graph describes reality are highly implausible. But no matter. Because the public’s desire to believe in the goodness of minimum wages is so intense, the supply is ample of anti-Smithian economists willing to satisfy this desire – willing to assure the man-in-the-street that his utter ignorance of economics is, in fact, economic brilliance.

Source: Much Good Economics Is Little More Than Debunking Man-In-the-Street Fallacies

The ‘Experts’ Are Wrong: The American Health-Care System Is World-Beating

Our system needs many fixes, but when it matters most, there’s no better place to get sick.

The most tedious allegation that critics of the U.S. health-care system make is that we spend exorbitantly for poorer results compared with socialized systems in other rich countries. It underpins the Democrats’ ongoing mission to expand Medicare and levy price controls on prescription drugs.

But these critics distort the truth. If a person is going to get sick — and we all are at some point — there’s no better place to do so than the United States.

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Government-run systems simply guarantee equal access to long waits for care.

Take Canada, where I grew up. Patients face a median wait of nearly six months between getting a general practitioner’s referral and receiving treatment from a specialist. While the average emergency-room wait time in the United States is about 40 minutes, ER wait times in Nova Scotia averaged two and a half hours this summer — the highest they’d been in four years.

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Detractors of the U.S. health system also tend to ignore evidence that mitigates the United States’ poor performance on some health metrics.

For instance, the United States ranks last among the Commonwealth Fund’s eleven rich countries in life expectancy. But the unpleasant truth is that Americans kill each other at a rate seven times higher than in other high-income countries. And no health-care system in the world can revive the dead.

It’s not just homicides. We’re twice as obese as other rich countries. We die in car crashes and from drug overdoses at nearly four times the rate of such peer nations as Sweden, the United Kingdom, and the Netherlands.

There’s also wide regional variation in health outcomes throughout the United States. A study published in the Journal of the American Medical Association found that “the life expectancy of Minnesota, a state comparable in size and demographics to Sweden or Denmark, has more similar population health outcomes to these countries than Minnesota has in comparison to Mississippi.”

Then there’s infant mortality, where the United States routinely ranks lower than our peers. Yet countries report births differently around the globe. France counts only the babies born after the 22-week mark, while Poland imposes a one-pound, two-ounce threshold.

In contrast, the United States reports every live birth. And our doctors work to save more premature babies than in any other developed nation. Thanks to superior care and medical technology here in the States, most of those preterm babies survive. And the Herculean effort we undertake to rescue babies that other rich countries don’t even count as live births skews our infant mortality rate higher.

Source: The ‘Experts’ Are Wrong: The American Health-Care System Is World-Beating

Quotation of the Day…

(Don Boudreaux) Tweet … is from page 225 of the 5th edition (2015) of Thomas Sowell’s excellent volume, Basic Economics (footnote deleted):

Even though most studies show that unemployment tends to increase as minimum wages are imposed or increased, those few studies that seem to indicate otherwise have been hailed in some quarters as having “refuted” this “myth.” However, one common problem with some research on the employment effects of minimum wage laws is that surveys of employers before and after a minimum wage increase can survey only those particular businesses which survived in both periods. Given the high rates of business failures in many industries, the results for the surviving businesses may be completely different from the results for the industry as a whole. Using such research methods, you could survey people who have played Russian roulette and “prove” from their experiences that it is a harmless activity, since those for whom it was not harmless are unlikely to be around to be surveyed. Thus you would have “refuted” the “myth” that Russian roulette is dangerous.

Source: Quotation of the Day…

Democrats Are Denying Basic Economics

The simplest way to understand economics is that it is a reckoning with unavoidable tradeoffs. If you spend money on something, you may obtain something in return—but you lose the ability to use those resources on something else. In the world of politics, economics helps us weigh the merits of those tradeoffs. It answers the question: Do the benefits of a policy outweigh the costs? Sometimes the benefits are larger. Sometimes they are meager or even nonexistent. But there are always costs. To acknowledge this is merely to acknowledge reality.

Under President Joe Biden, however, Democrats in Washington have decided that they can simply wish those tradeoffs away by declaring that they do not exist. Over and over again, they have argued that their policies do not or should not have any costs whatsoever.

Just this week, for example, White House press secretary Jen Psaki responded to a question about the tax impact of the $3.5 trillion spending plan now working its way through Congress by declaring that “there are some…who argue that in the past companies have passed on these costs to consumers…we feel that that’s unfair and absurd and the American people would not stand for that.”

When taxes are raised on corporations—the “companies” in Psaki’s response—corporations often respond by passing that tax on to others. In some cases, they pass costs to consumers. In others, as the Cato Institute’s Scott Lincicome wryly notes on Twitter, they reduce the amount they would have otherwise spent on wages. They have to pay more to do business, and so they make adjustments accordingly. Costs create consequences and tradeoffs.

Source: Democrats Are Denying Basic Economics

Continue reading “Democrats Are Denying Basic Economics”

Even With Climate Change, the World Isn’t Doomed

Scott Adams has his “Law of Slow Moving Disasters”. Any disaster that we can see coming from a long way away tends to get solved long before it reaches us.

Humanity has overcome far greater problems before and can do so again.

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Young people across the world are terrified of climate change, according to a forthcoming Lancet study. More than 45% of people 16 to 25 in the 10 countries surveyed are so worried that it affects their daily life and functioning. Almost half of young Americans believe “humanity is doomed,” and two-thirds think “the future is frightening.” But while climate change is a problem, panic is unwarranted.

The data show that humanity has overcome much larger threats over the past century. In 1900, if humanity had gotten rid of air pollution—mostly indoor pollution caused by smoky fuels like wood and dung—the benefit would have been equivalent to global gross domestic product rising 23%. To a young audience, that might look like an insufficient measure of well-being, but higher GDP means better health, lower mortality, greater access to education and in general a better standard of living. By 2050 the problem of air pollution will be mostly solved. And that’s only one of the many issues humanity has shorn down over the last 100 years, according to data 21 top economists and I gathered.

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The challenge climate change poses, both to the environment and society, looks rather small compared to those humanity has already met. Noble Prize-winning climate economist William Nordhaus has shown that a 6.3-degree Fahrenheit rise in world temperatures by 2100—which is probable if policy makers do little to stop climate change—would cost only 2.8% of global GDP a year. The United Nations’ latest estimate puts it even lower at 2.6% of GDP for a 6.6-degree Fahrenheit increase.

Moreover, the U.N. expects the average person to be 450% as rich in 2100 as today, absent the cost of climate change. Following current temperature projections, global warming would knock that down to only 434% as rich. That’s a problem, but it isn’t the end of the world.

Source: Even With Climate Change, the World Isn’t Doomed

Socialism Must Lower – It Cannot Raise – Living Standards for the Masses

(Don Boudreaux) Tweet My latest column for AIER is the first of a two-part series on the indispensability, for the productive use of resources, of market-determined prices . A slice:

The reason socialism inevitably wastes resources is rooted in the fact that, under such a regime, the state owns all means of production (or what Mises called “goods of higher order”). Without private ownership of the means of production, there is no genuine exchange of the means of production. There is no transfer of ownership of plots of land, of factories, of commercial lathes, or of stockpiles of iron ore and bauxite. With no exchange of the means of production, there are no prices of the means of production. (Each price, after all, is among the terms on which one thing is exchanged for another.) And with no prices of the means of production, the manager of a factory that produces, say, lawn mower blades can’t possibly know whether the lowest-cost method of producing these blades involves the use of steel or of aluminum or of carbon fiber.

Source: Socialism Must Lower – It Cannot Raise – Living Standards for the Masses

America’s middle-class is disappearing…. but it’s because they’re moving up, NOT down!

The new animated “bar chart race” visualization above is a dynamic version of the second static chart, and both show the percent shares of US households by total money income for three income categories annually from 1967 to 2020: a) low-income households earning $35,000 or less, b) middle-income households earning between $35,000 and $100,000 and c) high-income households earning $100,000 or more (all in constant inflation-adjusted 2020 dollars).

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As I’ve explained many times before in reference to these data, the “middle-class is disappearing” as we hear all the time, but it’s because middle-income households in the US are gradually moving up to higher-income groups, and not down into lower-income groups as the mainstream media and leftists (but I repeat myself) would have you believe….

Source: Animated chart of the day: America’s middle-class is disappearing…. but it’s because they’re moving up, NOT down!