George Mason University economics professor Don Boudreaux gave an excellent Zoom talk last week to a group I’m part of: the Stanford Classical Liberals. One of the things I most enjoy about Don’s talks is his nailing each point with loads of relevant data. The other thing, which is rare nowadays, is the perspective he brings to issues from his vast knowledge of economic history and the history of economic thought. That shows up in a few places in his talk, especially in Q&A, which begins at about the 52:00 point. Don’s knowledge reminds me of the kernel of truth in something the late George Stigler said about his close friend Milton Friedman: “Milton is the best economist in a bad century.” Stigler’s idea, which I agree with, is that the 19th century was far more important than the 20th century for the development of economic thought.
1:50: Don’s Virginia license plate.
5:00: Industrial capacity in the United States is at an all-time high.
6:50: Industrial production is less than 1% below its all-time high.
7:35: Manufacturing output in the U.S. is 5.4% below its all-time high.
8:25: Manufacturing capacity is only slightly below its all-time high.
8:50: This one blew me away: we lost big time in apparel and leather goods, which I knew, and gained big time in computers and electronic products, which I hadn’t known the full extent of.
13:20: Manufacturing employment as a percent of total employment has plummeted since 1944, but it’s hard to find the effect of China.
16:18: Manufacturing output per worker zoomed from late 1940s on.
17:40: Pay and productivity grew.
18:30: Average real wages stagnated from early 1970s to early 1990s but then zoomed.
20:30: Assets, liabilities, and net worth. Evidence against the idea that trade deficits strip our wealth.
21:30: Average net worth zoomed.
27:40: The quiz about the China Shock.
32:40: Jobs lost due to Jonah Salk. (My father would have appreciated it if those jobs had been lost 13 years earlier; my sister, 3 years earlier.)
34:00: 1963 Buick Skylark. Makes the point that hanging on to used cars longer means fewer people are buying new cars, so you’re putting producers of new cars out of work.
Slightly related thought: I had a colleague at the University of Rochester in the late 1970s who was a master economics teacher. His name was Ron Schmidt. Our mutual colleague Richard Thaler told me at the time of a great question that Ron had asked his class. They got the wrong answer and I got the wrong answer. The question was, “What is General Motors’ most important competitor?” Being aware of the approximate market shares at the time, I answered, “Ford.” Wrong answer. GM’s most important competitor is the used car market. If every used car owner figured out a way to extend his or her car’s life by a year, every major car producer would see a substantial decline in demand.
35:20: Nothing unique about job destruction due to imports.
36:00: One habit economists have that Don wishes we would stop.
40:00: No one in the U.S. today has failed to have his life vastly enriched by trade.
DRH comment: I made this point in a talk at Hoover some years ago and a fellow presenter, whom I’m prohibited from naming because we were under the Chatham House rule, disagreed. She restated my argument to have me saying that people who were unemployed due to trade should be grateful because we have Walmart. I said no, that’s not it. I was saying they should be grateful because we have the benefits of over two centuries of trade, only part of which is due to Walmart. She then again insisted on her misstatement of my argument. Sigh.
41:20: Don wishes that the concept of a trade deficit had never been developed. I agree. See here for what the late Herb Stein wrote about it in my Concise Encyclopedia of Economics.
43:40: Do we save enough?
45:00: Why people like to invest here.
46:00: Ikea is Dutch-owned. Who knew? This actually makes Don’s big-picture point in another way: as I often put it, there’s nothing magic about borders.
52:00: My thought about the distorting effect of relaxation of price controls on growth of real wages.
53:50: Question about trading with a hostile power.
55:30: Are clothes pins essential for national security?
58:00: Foreign students who come here reduce our trade deficits.
1:04:20: The optimal tariff theory: exploiting monopsony power. First argued by Robert Torrens about 200 years ago. DRH note: I first learned this by reading a paper by Grant Reuber at the University of Western Ontario in early 1972. I marked up his paper and went to ask him to explain it. He explained it well.
1:06:50: Edgeworth and poison.
1:07:20: Furniture and then trade with China and Chinese treatment of its workers.
1:09:00: Do Chinese wages in manufacturing keep pace with productivity?
1:15:50: Industrial policy.
1:16:45: Is the free market a “drunk donkey,” as Oren Cass put it.
1:20:00: Most economists accept having the government subsidize R&D (stated by questioner.) So what about having government subsidize industries that have large positive externalities. Answer: (1) How would government know? (2) Alfred Marshall, after returning from the United States to Britain, said he saw that subsidizing infant industries doesn’t work.
