- The American Conservative - https://www.theamericanconservative.com -

Of Course, I’m Biased

Caplan divides them into three categories: antimarket bias, antiforeign bias, make-work bias and pessimistic bias. Antimarket bias describes people feeling that trade and profit are zero-sum games, that one person’s gain is another person’s loss. They haven’t learned that free exchange is win-win and that in a free market, profit comes from cost-cutting innovation. Antiforeign bias, perhaps a vestige of primitive man, consists of distrusting “them” even though our prosperity increases according to how global the division of labor is. Foreigners don’t want to invade us; they want to sell us useful things [bold mine-DL]. Make-work bias is the belief that what makes us rich is jobs, rather than goods, and so anything that eliminates jobs is bad. If that were really true, we could prosper by outlawing all inventions created after 1920. Think of all the jobs that would create! Finally, pessimistic bias is the view that any economic problem is proof of general decline. Lots of people actually think we’re poorer than our grandparents were! ~John Stossel [1]

It’s no secret that I don’t like Caplan’s arguments.  I also find them wanting.  Do “lots of people” actually believe that we are poorer than our grandparents, the folks who lived through the Depression?  I would really need to see some evidence for that.  Not that the self-serving claims of libertarians aren’t enough for me, mind you. 

Profit can come from innovation, or it can come from other ways of cutting costs, such as reducing the price of labour by moving operations to places where labour is exceedingly cheap and of fairly comparable quality (or by importing cheap black market labour that does the same job for half the price or less).  If you could cut costs through innovation and cheaper labour, profits would be even greater–that sounds like a win-win…except for the people who don’t reap any of the profits.  The generalisation about foreigners is true, except in all those cases when it isn’t.  Some foreigners may want to invade; some may want to infiltrate and attack.  If you want to say that most do not want to do this, you might have a point, but the default assumption in favour of importing foreign labour and foreign products is no more rational when it is pursued relentlessly.  What Caplan has categorised as irrational biases are simply different political leanings from his own; he knows that he is rational, so it must be that all these others are irrational.  People do not assume that anything that eliminates jobs is undesirable.  They assume that something that eliminates, for example, the manufacturing sector from their town is undesirable, particularly when that manufacturing provides most of the employment in the town.  The libertarian answer: things change, people should move to another location.  When people respond to this upheaval in a hostile way, it is declared irrationality and bias and the libertarian believes he has answered his critics.  The optimistic bias of every free trader and market enthusiast is that every disruption, upheaval and economic transformation brings net benefits to all at ultimately minimal cost.  That might even be true, but it won’t change the response of the voters harmed by the upheaval.  The people who bear the brunt of those costs don’t care whether the costs are “minimal” in the grand scheme of things–they respond rationally to what is happening around them and are not inclined to measure their present misery against an uptick in national productivity. 

I can see why Caplan’s agenda is attractive.  It would be tempting for me to argue that no one who disagrees with me about policy questions should be allowed to vote.  That would simplify matters considerably, and naturally I think that the resulting policies would be better, but somehow I think someone might suspect that this was a not-so-subtle power grab.  If we were going to start setting up standards for voting, I would want to insist on voters who could also demonstrate foreign affairs and historical literacy, which would disqualify so many people that we would not need ballots, but could settle all important matters by a show of hands.

Advertisement
4 Comments (Open | Close)

4 Comments To "Of Course, I’m Biased"

#1 Comment By M.Z. Forrest On August 1, 2007 @ 6:43 am

It seems the 3 generation claim is a bit of an exageration. Oft cited is the fact that adjusted for inflation the poor and middle class make less today than they did in the 70s. Liberterians then argue that this is indeed true, but those same people enjoy larger homes, VCRS (gives you an idea of how old the argument is), more TVs, more and better cars, and everything else that can be hedonically adjusted.

Depending on how one were to go about it, one could make the argument we are worse off than 2 or 3 generations ago. The argument would have to center around property and how ridiculously it is priced in relation to income. Of course this would ignore a signficant factor, our movement from a significantly agrarian economy to a near complete industrial economy.

#2 Comment By Grumpy Old Man On August 1, 2007 @ 10:32 am

Of course, one could say we’re now wallowing in ticky-tack, cookie-cutter shopping malls, and media crap.

Problem is, our grandparents often lived in shacks and slums, and wallowed in “Mairzy Doats” and the Police Gazette, and people died of TB and were paralyzed by polio.

“Sophists, economists and calculators” try to quantify quality of life. If your quality of life is fully quantifiable, sez I, your quality of life sucks.

#3 Comment By tikhon On August 1, 2007 @ 11:12 am

“Profit can come from innovation, or it can come from other ways of cutting costs, such as reducing the price of labour by moving operations to places where labour is exceedingly cheap and of fairly comparable quality (or by importing cheap black market labour that does the same job for half the price or less). If you could cut costs through innovation and cheaper labour, profits would be even greater–that sounds like a win-win…except for the people who don’t reap any of the profits.”

that in response to Stossel:

“…in a free market, profit comes from cost-cutting innovation.”

Both are false. Profit in the free market comes from supply-and-demand. You can be as innovative and inexpensive as you wish and still not make a profit if there’s no demand. You can be as stodgy and bloated as you wish and still make a hefty profit if your product is in high demand.

Cost-cutting innovation leads to lower costs, not profit. Profit arises from whether supply-and-demand mandates those savings be passed along to the consumer or not.

#4 Comment By Septeus7 On August 1, 2007 @ 10:58 pm

There are so many things wrong with Caplan’s arguments or at least Caplan’s arguments as presented by Stossel that one hardly knows where to begin.

Quote from Stossel: “Antimarket bias describes people feeling that trade and profit are zero-sum games, that one person’s gain is another person’s loss.”

Strawman. Skeptics of unbridled market optimystism are simply saying that in the real world of not-so-ideally “free markets” that their are real winners and real losers.

Quote from Stossel: “They haven’t learned that free exchange is win-win and that in a free market,”

Well that might be nice for those living in “free market world” but I unfortunately have to live in the real world where the foreign governments peg their currency to the value of dollar, have an absolute labor advantage, and practice protectionism against American businesses and do other not-so-free market things.

Quote from Stossel: “Profit comes from cost-cutting innovation.”

Stossel gets an F in Econ 101 for that statement. The answer to every economic question is “it depends.”

More importantly what Stossel fails to understand is maximizing profit is not necessary the greatest moral good and that most Americans not going to cry if some CEO fails to maximize profit for his transnational corporation by keeping the town factory in business; this is not because Americans are irrational it is just that they are not psychopathic materialist like most economists or at least I hope that is the case.

Quote from Stossel: “Antiforeign bias, perhaps a vestige of primitive man, consists of distrusting “them” even though our prosperity increases according to how global the division of labor is.”

Sigh…. the curse of the stupid primitives past and of the ghost of history stikes again. May it never influence us in our global post-modern age of ultimate enlightenment.

What does he mean by “our prosperity” anyway? Does he mean the top 1% of income earners or the rest of us?

Median Real wages have declined from the 70’s on and there used to be a time when a American man could support his family with one income at 40 hours a week and his only dept was a single loan on his house.

Yes sir, we are more wealthy with triple mortgages, credit card dept, while working a 52 hour week for $37,000 a year compared to our unlucky father who worked for $46,000 a year (inflation adjusted) and was foolish enough to think owning his own home outright after 30 years and actually had savings along with a pension plan.

Quote from Stossel: Foreigners don’t want to invade us; they want to sell us useful things.”

No, they want to sell anything including defective toys, poisoned food, and exploding laptops as long we are willing to give something they want mainly our manufacturing base and economic infrastructure aka our economic future. In short they want wealth including all our wealth for themselves.

Quote Stossel: “Finally, pessimistic bias is the view that any economic problem is proof of general decline.”

No, is it proof that market isn’t perfect and we should be working for real solutions rather than spouting optimistic cliche`s about the “invisible hands” and the market how “will finding a way.”

But don’t worry I’m good old Johny Stossel will write his column about how the glorious servant economy is going to save us and how we should learning to stop worrying and learn to love our glorious god of the materialistic “free market.”