… with apologies to Ptolemy, who was a far better astronomer than mercantilists were, and are, economists.

Here’s a letter to the Wall Street Journal:

In the Trans-Pacific Partnership trade negotiations, the Obama administration insists on “yarn-forward” rules of origin.  These restrictions would effectively require Vietnamese and Malaysian clothing manufacturers who sell their outputs to Americans to buy their fabric from U.S. – rather than from lower-priced Chinese – textile producers.   Mystified that some Americans oppose such restrictions, U.S. Trade Representative Ron Kirk declares that “It makes sense to structure a trade agreement to ensure that its participants are the primary beneficiaries of the preferences” (Letters, May 16).

Mr. Kirk’s statement is further evidence that the “Progressive” Obama administration still believes in 17th-century economic superstitions – specifically, in the mercantilist myth that a nation’s benefits from trade rise with every increase in the amount of valuable goods and services that its producers ship abroad and fall with every increase in the amount of valuable goods and services that its consumers receive in return.

Sincerely,
Donald J. Boudreaux
Professor of Economics
George Mason University
Fairfax, VA  22030

… is from Jonathan Macey’s fine essay in today’s Wall Street Journal – an essay whose title, “Losing Money Isn’t a Crime,” is spot-on correct and germane:

The real lesson of what J.P. Morgan CEO Jamie Dimon has called the bank’s “egregious failure” in risk management is that hedging is far more difficult to do in real life than it appears to be in theory—because the real world is a complicated place. The trades that J.P. Morgan made were extremely complex, and it certainly appears that they did not work the way that they were supposed to. But the reason that markets work better than central planning is because market participants learn from experience, and they learn fast and thoroughly because they suffer significant losses when their investments, whether they be hedges or not, turn out badly.

Thus, far from serving as a pretext to justify still more regulation of providers of capital, J.P. Morgan’s losses should be treated as further proof that markets work. J.P. Morgan and its competitors will learn from this experience and do a better job of hedging the next time. They will learn because they have to: In the long run their survival depends on it. And in the short run their jobs and bonuses depend on it.

The second lesson from J.P. Morgan’s failed hedging effort is that politicians and regulators are opportunists who will use any pretext to increase their power and influence.

The latest EconTalk episode is David Owen talking about how to teach your kids about money. It’s based on his book, The First National Bank of Dad. The last part of the book and the podcast talk about reading to your kids and how wonderful it is for you and your kids. So I thought I’d list some of the books I’ve enjoyed reading to my kids. Feel free to buy them by clicking through and supporting the Cafe (or its owners, anyway.) I’m sure I’ve forgotten a bunch of others I loved. Add your own favorites in the comments.

Harold and the Purple Crayon by Crockett Johnson–read it so many times I probably once knew it by heart.

The Adventures of Curious George by H.A. Rey–my wife didn’t like reading these but my kids loved them so it was usually me doing the reading.

The Gardener by Sarah Stewart and David Small–a perfect book–poignant, interesting and beautifully illustrated. It choked me up every time I read it.

All Those Secrets of the World by Janet Yolen and Leslie Baker–Another great story, great illustrations, and another good tear jerker for the reader. (The kids don’t get choked up).

Owl Moon by Janet Yolen, illustrated by John Schoenherr–Another beautiful Janet Yolen book.

The Seven Silly Eaters by Mary Ann Hoberman, illustrated by Marla Frazee. Maybe my all-time favorite. A mesmerizing rhymer, perfect story, incredibly beautiful illustrations. I could read this over and over again and my kids loved hearing it.

Wilfred Gordon McDonald Partridge by Mem Fox–This will also choke up the reader. Beautiful book.

… is from John Tamny’s May 13th article “For De-Friending the U.S., Eduardo Saverin Is an American Hero“; Tamny here discussion’s Eduardo Saverin’s sensible move to keep more of what he’s earned – to justly protect his now-substantial property from U.S. tax collectors – by renouncing his U.S. citizenship:

Oddly here, and this speaks to how silly the economic discussion has become, [Facebook] founder Mark Zuckerberg is being lionized for the presumed $1 billion in capital gains taxes he’ll pay the feds.  [Eduardo] Saverin’s avoidance plan means more capital for business growth while Zuckerberg’s non-avoidance ensures more feeding of the beast, yet Saverin’s the bad guy?

… is from page 27 of the 1997 collection of some of Leland Yeager’s finest essays, The Fluttering Veil (George Selgin, ed.); specifically, it’s from Leland’s 1971 essay “Monetarism”:

Recognizing that the world is complicated is not the same as knowing how to succeed with complicated manipulations.

(I had the great good fortune as a student to have had more than my share of outstanding professors – Israel Kirzner, Saul Levmore, and Fritz Machlup, to name only three in addition to Leland.  None surpassed, and few matched, Leland’s skill in the classroom and mastery of the material.)