EconLog Archive
Adam Smith
Doug Irwin on Trade Deficits and the Wealth of Nations
In the latest EconTalk, “The Economics of Tariffs and Trade (with Doug Irwin)“, May 5, 2025, Russ Roberts interviews one of the top trade economists in the world, Doug Irwin. Doug recently completed an entry titled “Tariffs” for my Concise Encyclopedia of Economics. Early in the interview, he and Russ talk about trade deficits. Like .. MORE
Uncategorized
My Weekly Reading for May 4, 2025
May the fourth be with you. Understanding the Effects of Tariffs by Kyle Pomerleau and Erica York, AEI Economic Perspectives, April 23, 2025. Excerpt: In 2023, the US applied a simple average tariff of 3.4 percent on imports; that’s the result of 734 distinct tariff rates, the highest of which is 350 percent on some .. MORE
EconTalk
Party Time: Lessons from the aviation investigative process on “fact checking”
In the wake of the airline accidents in Washington DC, Pennsylvania, and Toronto, social and traditional media has been flooded with pictures, (questionable) expert commentary, and theories as to the causes. Before any investigation has even begun, before any evidence has been gathered, before the witnesses can be interviewed or black boxes recovered, an army .. MORE
Politics and Economics
Spoiled by Success
Human beings are restless. Even at the point of our greatest success, we are often unable to leave well enough alone. We repeatedly seek to shake things up. Last October, The Economist did a cover story on the US economy entitled “The Envy of the World“. The US was outpacing almost all other developed countries, .. MORE
International Trade
Imports Arithmetic Doesn’t Explain GDP Drop
Suppose you measure something (say, GDP) in two steps: first, you add in some number (say, the value of imports); second, you subtract the same value. You may say, focusing on the second operation, that “imports are a subtraction in the calculation of GDP.” You may equally say, focusing on the first operation, that “imports .. MORE
Economic Education
Zoltraak: Competition versus Stagnation
There is a Japanese anime entitled Frieren: Beyond Journey’s End. While anime has a justly-deserved reputation for being over-the-top and goofy, this particular series bucks the trend. The plot follows Frieren, an elven mage. Elves in this universe are incredibly long-lived; their typical lifespan reaches thousands of years long. Frieren was part of a party .. MORE
International Macroeconomics
Game theory in Crazy Town
Imagine a young child asks you to play with them. They say they have an invisible unicorn in their room. One response is to play along—perhaps you might suggest that you have an invisible penguin, and ask if it could play with the unicorn. The US government has recently become obsessed with “bilateral trade deficits”, .. MORE
Adam Smith
Free Trade and Economic Freedom
Donald Trump’s trade policies are rightly being derided as economically damaging. According to the Tax Foundation, the average American may experience a $1300 reduction in after-tax income this year if proposed tariffs go into effect. GDP is expected to decline by between 0.8% and 1% this year, depending on how other nations respond. Federal Reserve .. MORE
Foreign Policy
Victims of Communism Day
George Mason University law professor Ilya Somin has been carrying on a campaign for years to make May 1 “Victims of Communism Day.” I agree with his goal, and I’m doing my bit here to publicize it. He writes: May Day began as a holiday for socialists and labor union activists, not just communists. But .. MORE
Economic Growth
It’s Even Better Than A Consumption Surplus
Co-blogger Kevin Corcoran has an excellent recent blog post calling for rebranding the “trade deficit” away from its misleading phrasing and toward the more accurate phrasing of “consumption surplus.” My beloved professors Don Boudreaux and Dan Klein have a similar proposal as well. There is much merit in their arguments. I argue that the situation .. MORE
Books: Reviews and Suggested Readings
Fewer Rules, Better People: The Laws of Bureaudynamics
In his examination of why we should move away from legalism and more in the direction of discretion, Barry Lam concedes that there are strong arguments in favor of a legalist approach. His analysis of legalism continues by looking at what he sees as the selection pressures leading to legalism being further entrenched into social .. MORE
Macroeconomics
Tariffs and the Economy
I am seeing a lot of claims about how tariffs are likely to impact the economy. Here are a few of my views on the issue: 1. The most important impact of tariffs is not their effect on inflation. 2. The most important impact of tariffs is not their effect on the business cycle. 3. .. MORE
Monetary Policy
Global Nationalism: Part 2
A few months back, I did a post discussing the internal contradictions of global nationalism. In yesterday’s election in Canada, we saw an almost perfect example of that problem: “Poilievre had been running a disciplined and effective campaign which had him with a 25-point lead in our final poll of 2024,” Graves told me. Poilievre’s .. MORE
Institutional Economics
Independent Institutions and Private Force
Harvard University is a great private institution, albeit too enmeshed in our naive political zeitgeist. At least two PhD graduates from that university—and in economics, of all fields!—occupy senior positions in Trump’s entourage. About one of them, Elon Musk said that he is “dumber than a sack of bricks,” to which I would not strenuously .. MORE
Books: Reviews and Suggested Readings
Fewer Rules, Better People: Lam’s Case for Legalism
I wrapped up my initial post on Lam’s book Fewer Rules, Better People: The Case for Discretion with the remark that Lam sets out to make a case in favor of legalism (defined as the view that sticking to the rules is the preferable default, with discretion in the enforcement of rules as at best a .. MORE
Economic History
Crisis and Leviathan: The Federal Government in the Civil War
When the Civil War broke out in 1861, the federal government, like any government in any situation, had three sources of money: taxing, borrowing, or printing. Taxing The federal government was much more successful than its Confederate counterpart in funding the war via taxation. In August 1861, tariffs were hiked and the first federal income .. MORE
History of Economic Thought
Joseph Epstein Errs on the Dismal Science
In the April 24 Wall Street Journal (April 23 electronic version), regular writer Joseph Epstein, in an article titled “Is That an Augur, or a Mere Economist?” does a disservice to economics in two ways. I’ll deal mainly with one of them. Epstein writes: Economics is supposed to be a science. The “dismal science” Thomas .. MORE
Energy, Environment, Resources
When Externalities Conflict
Air pollution from coal-fired power plants has negative externalities, damaging human health. Carbon emissions from these power plants contribute to global warming. A recent article in The Economist discusses the recent acceleration in global warming, and suggests that the twin goals of a cleaner air and a cooler planet may be in conflict: Evidence against .. MORE
International Trade
My Weekly Reading for April 27, 2025
With Proposed Glue Trap Ban, San Francisco Sides With the Pests by Christian Britschgi, Reason, April 24, 2025. Excerpt: The “abundance” discourse, sparked by Ezra Klein and Derek Thompson’s book of the same name, has directed a lot of attention to liberal America’s failure to build. Blue cities and blue states can’t deliver projects on time .. MORE
International Trade
Clearing the Air on Tariffs and Trade Deficits
Let’s consider the argument step by step. First, is a trade deficit with a particular country bad? No. One of the easiest ways to see that is to look at your own spending on other producers’ goods. Consider mine. Our household spends over $5,000 a year on groceries from Safeway. But those scoundrels at .. MORE
Adam Smith
Adam Smith Definitely Would Not Approve
Janet Bufton has an excellent recent post on Adam Smith on tariffs. I wish to add my own thoughts to her post. Bufton rightfully points out that Smith would staunchly oppose these tariffs because they focus on the trade deficit, something he calls “absurd.” Smith was a free trader, through and through: All systems of .. MORE