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Don Boudreaux

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Don Boudreaux is a professor of economics at George Mason University in Fairfax, Virginia, and the author of the blog Cafe Hayek. He was chair of the economics department from 2001 until August 2009. He appeared as a guest on The Bob Zadek Show to discuss insider trading, the debt ceiling, trade and price gouging. Legalize Insider Trading (2009)

On the show

4 appearances, 2009–2022.

Insider trading

Bob Zadek introduced the topic by defining insider trading as the crime in which someone who works for a publicly traded corporation acquires material non-public information about that company and uses it to buy or sell the stock. He cited the indictment of the president of a company called Galleon on an alleged $2 billion insider trading scam, and invoked Milton Friedman’s words that we do not have enough insider trading. Legalize Insider Trading (2009)

Zadek asked Boudreaux who was the first insider trader in American history; after hints, Boudreaux answered Alexander Hamilton. Zadek then told the story: Hamilton, the first Secretary of the Treasury, told his associates to buy up Continentals for pennies on a dollar before the federal government guaranteed them, and they cashed in at 100 cents on the dollar. Boudreaux said he had not known the story and that the wrong in it was not the insider trading but the bailout; he added that Hamilton’s statue stands in front of the Treasury building in Washington. Legalize Insider Trading (2009)

Boudreaux raised what he called insider non-trading. He described a worker who plans to buy 100 more shares of his company’s stock and, on learning from inside information that the company is in worse financial shape than most people believe, cancels the purchase. Boudreaux said the worker profits by being saved from a bad investment, that only active trades can even conceivably be prosecuted, and that the law is therefore fundamentally unfair: the person who actively trades on inside information is punished while the person who uses it not to trade cannot be. In his view, none of it should be illegal. Legalize Insider Trading (2009)

Debt ceiling and government spending

In a July 2011 episode, Zadek and Boudreaux discussed the political battle over the debt ceiling and government spending. Zadek framed the discussion around deficits and jobs, and said the episode would address how deficit spending affects jobs. He described Boudreaux as his favorite blogger at Cafe Hayek and urged listeners to subscribe. The excerpt states that they argued the narrative of default is a political tool and that the real issue is the unsustainable growth of the administrative state and its interference in the free market. The Second American Revolution – NOW (2011)

Trade, supply chains and comparative advantage

In a January 2022 episode, Zadek argued that economic woes are not existential events that happen to Americans but the result of conscious, wrongheaded decisions by government, made by identifiable human beings. He then asked Boudreaux to what extent misunderstanding of basic economics causes problems in trade and the supply chain. Liz Warren’s Crusade against “Big Grocery (2022)

Boudreaux said the extent is huge. He described as naive the belief that supply chains can simply be repatriated — that because of the pandemic we had trouble buying masks or equipment, so tariffs or import restrictions should be imposed to make more of these things at home. He said this view overlooks that we cannot make more of one thing at home without making less of other things: workers, capital and raw materials shifted into producing masks, food or steel must be taken away from producing other things, reducing that output. He said the pattern of production across the globe is determined overwhelmingly by cost, by what economists call comparative advantage, and that we buy steel from Brazil and clothing from Thailand because we can get those things at lower cost from those countries than we can make them at home, freeing workers and resources here to produce things of even higher value. He named Elizabeth Warren and Donald Trump as politicians ready to demagogue the issue, said blaming foreigners is second only to blaming speculators and investment bankers, and said the empirical record shows a high correlation between freedom to trade and prosperity and between trade restrictionism and low economic growth. Liz Warren’s Crusade against “Big Grocery (2022)

Zadek said the complaint about exporting American jobs comes mostly from people on the right, and that he would favor bringing jobs home only if the salary came home with them; he said the world is making us happier and wealthier and asked what is wrong with that. Boudreaux agreed, describing a false nostalgia for the jobs of the 1950s and 1960s, and said his father, who had a sixth-grade education and worked most of his life as a pipefitter in a shipyard, would be appalled if Boudreaux told him he wanted such a job. Boudreaux said he supports free trade ultimately because it is the only ethical system: someone who earns income honestly should have complete freedom to spend it in whatever peaceful ways he or she chooses, and if someone in Toronto makes an American a better offer than someone in Buffalo, that American should be free to buy from the Canadian. He said this simple ethic gets camouflaged behind talk about imports destroying jobs and trade deficits. Liz Warren’s Crusade against “Big Grocery (2022)

Price gouging

Zadek raised price gouging as a fake issue, noting accusations of hoarding and gouging on masks and medicine and that statutes in most cases make price gouging a crime. Boudreaux said the issue arises in the immediate aftermath of a natural disaster — a hurricane, an earthquake, a tsunami — and used a hurricane hitting his hometown of New Orleans as his example. Two things happen simultaneously, he said: supplies are reduced because inventories are destroyed and roads and communications are knocked out, and demand increases as people need plywood to patch roofs. When things become more scarce they become more valuable and prices naturally rise, and prices should be allowed to rise because the high prices signal the rest of the world to rush more supplies of plywood and propane to New Orleans. Price gouging statutes prevent that signal, he said; a price gouging statute is speech control, a prohibition on people expressing how desperately they need something, and it exacerbates the shortage by denying people access to the goods they need. Liz Warren’s Crusade against “Big Grocery (2022)

Across episodes

The episodes show Boudreaux on two 2009 and 2011 appearances addressing insider trading, the debt ceiling and the administrative state, and on a 2022 appearance addressing trade, supply chains and price gouging; the later episode restates the same presumption that government intervention, not market exchange, produces the harms complained of, but the episodes show no development of the argument from the earlier episodes.

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