“[T]here is a second main factor that spawns new economic fallacies every day. This is the persistent tendency of men to see only the immediate effects of a given policy, or its effects only on a special group, and to neglect to inquire what the long-run effects of that policy will be not only on that special group but on all groups. It is the fallacy of overlooking secondary consequences.”
– Henry Hazlitt, Economics in One Lesson. quoted here.
At Cafe Hayek, economist Donald Boudreaux, Professor of Economics at George Mason University, wrote an open letter to Fox News host Bill O’Reilly’s opposition to exporting U.S. oil to other countries. O”Reilly has a populist streak, and he is prone to seeing the seen and not the unseen when it comes to economics, a sin indeed to economics as a science.
Professor Boudreaux is a master educator and prolific letter writer on behalf of common-sense economics. Read his explanation about why the namesake of the O’Reilly Factor 1) gets his economics wrong and 2) fails to see the implication of his own argument to himself as exporting his services
Dear Mr. O’Reilly:
You’re all lathered up because U.S. oil companies are exporting much of their refined gasoline and heating oil to other countries and thereby putting upward pressure on fuel prices here in America. You conclude that these companies have a moral obligation not to export so much….
First some economics. Selling in the global market encourages firms to build larger factories and refineries that, in turn, enable outputs to be produced at lower costs per unit. So while in the short-run rising exports of oil products can cause fuel prices here to spike, the long-run effect might well be lower prices because of larger, more-efficient scales of operation.
Also, more exports of fuel products means more imports of other goods and services. The result is lower prices in America for consumer goods such as clothing and furniture, as well as lower prices of inputs such as steel and industrial machinery used by American factories.
I was amused, by the way, that in your Feb. 17th discussion with Lou Dobbs, Mr. Dobbs shared your anger at rising U.S. oil exports. This is the same Mr. Dobbs who repeatedly complains that the problem with America’s involvement in the global economy is that foreigners stubbornly refuse to buy sufficient amounts of American exports. Go figure.
Now about your ethics. You’re paid so handsomely because there’s a large nation-wide demand for your commentary and bombast. In your career you’ve worked for broadcasters in Boston, Dallas, Denver, Hartford, and elsewhere. And before moving to Fox you were a correspondent for ABC News.
You apparently never hesitated to sell your product to the highest bidder; you never hesitated to export yourself from one market to another in search of higher pay; you never resisted the bidding for your services by buyers (i.e., employers) far and wide which put upward pressure on the amounts of money that you are paid, both to appear on television and to deliver lunch and dinnertime speeches.
So I ask: are you guilty of an offense against those many Americans who – as a result of your responding to market signals regarding the value of your services – must now pay higher prices for the privilege of hearing your commentary? Should you return to your long-ago job at a local Scranton television station, at your long-ago lower salary, and apologize to the good people of Lackawanna County for your greedy and evil habit of exporting yourself to wherever and whoever offers to pay you more money?
Donald J. Boudreaux
Professor of Economics
George Mason University
Fairfax, VA 22030
MasterResource posts in the Henry Hazlitt, seen-and-unseen economics tradition: