A break from all the Economic Mishigas

With all the economic mishigas dominating news cycle, I thought it was worth sharing a couple of articles that I have recently come across on the topic.

I found myself enjoying Donald Boudreaux’s Op-Ed in the Pittsburgh Tribune-Review. His tongue-in-cheek response to a reader’s email argues that capitalism is alive and well despite the headlines. I have included an excerpt below.

In the morning, my correspondent likely drinks coffee brewed from beans grown in Colombia or Ethiopia. For lunch, he eats a chicken sandwich or a quinoa-and-beet salad. Each of these foods is made available to him only through the efforts of countless strangers — producers such as chicken farmers, beet growers, truck drivers, insurance-company actuaries — spread across the globe and connected to him by a thick web of consensual capitalist acts of commerce.

Mike Munger’s American Institute for Economic Research article makes a rational appeal for capitalism. The entire article is worth the read, but I have included the crux of his argument below.

There are three elements to the argument for capitalism, and while they connect in crucial ways they can be separately defined. Those three elements are (a) division of labor; (b) impersonal exchange based on prices; and (3) economies of scale based on knowledge.

Maybe Capitalism ain't all that bad

Donald Boudreaux’s article takes advantage of the 2018 Nobel Prize winning economist William Nordhaus’s recent notoriety to highlight one of the Nobel Laureate’s older works that attempts to measure the economic impact of technological innovation. The most interesting finding from the paper is that from the period 1948-2001 producers only captured 2.2% of the economic benefits while consumers received the lion’s share of 97.8%. Professor Boudreaux asserts that capitalism, rather than the innovator’s benevolence, is responsible for the split.

I’d be willing to bet the next time you read an article that highlights Jeff Bezo’s $147 billion net worth, it will fail to mention the $6.5 trillion of consumer value created.

Lagniappe: For those who want to read more of Donald Boudreaux’s work, check out his blog Cafe Hayek.