EconLog Archive
Finance
Sell the Gold
In the May 8 edition (electronic) of the Wall Street Journal, editorial writer Kimberley A. Strassel published an editorial titled “America Inc.’s Balance Sheet.” In it, she considered the proposals of Interior Secretary Doug Burgum (one of my two favorite Trump cabinet members, although I would have liked even better if Trump had chosen him .. MORE
Liberty
Is the cure worse than the disease?
Back in January, Tyler Cowen did a post entitled, “Congratulations to Christopher Rufo and Richard Hanania.” This was in reference to their role in fighting DEI policies: As most of you already know, the Trump administration through Executive Orders has taken major steps against affirmative action and also DEI. We will see how the details play .. MORE
Free Markets
The Firm: Disco Corp. and Ronald Coase
For more than two decades, Disco Corp., a Japanese company with $25 billion in annual sales, has been trying to operate as if its 7,000 employees were independent contractors in the open market. The 87-year-old company now manufactures three-fourths of all the machines to cut, grind, and dice semiconductors. An interesting story in the Financial .. MORE
Books: Reviews and Suggested Readings
Fewer Rules, Better People: Discretion and Dispersed Information
In a previous post, I described some cases of the use of discretion in law enforcement from Barry Lam’s book Fewer Rules, Better People. But while citing individual cases can be useful for illustrating an idea, coming to a decision on whether or when discretion should take precedence over legalism can’t be made by citing .. MORE
Regulation
Never Reason from a Population Change
I realize that people get tired of me continually harping on the “never reason from a . . . ” maxim, but it’s a continual problem. A recent NBER study of housing by Schuyler Louie, John A. Mondragon, and Johannes Wieland had the following abstract: The standard view of housing markets holds that the flexibility .. MORE
Central Planning
Why I love Imperfect Competition
Recently, Donald Trump stated that Americans are too wealthy and that his tariffs will fix that: Somebody said, ‘Oh the shelves are going to be open.’ Well, maybe the children will have two dolls instead of 30 dolls. And maybe the two dolls will cost a couple bucks more than they would normally. Indeed, such .. MORE
International Trade
A UK Tariff Scorecard: We Lost
10 > 3.3. With Donald Trump jumping around weekly in announcing this or that tariff increase or tariff cut, it can be hard to keep score. I’m still trying to figure out the Chinese scorecard. But the UK/US scorecard is starting to become clear: we lost. Colin Grabow at the Cato Institute put it well: .. MORE
Labor Market
They Didn’t Take Our Jobs
In my previous post, I took on the common claim that America is losing manufacturing jobs. Not only are jobs growing, but job growth has outpaced population growth—i.e. the increase in the number of people available to fill those jobs—and this has been the case for most of the last four decades. Is the fact that more .. MORE
Politics and Economics
Escalation dominance?
Kyle Chan recently made this claim in a blog post: There is no such thing as escalation dominance. Trump thinks the US will win in a trade war because China sells more to the US than the other way around. A tit-for-tat escalation on tariffs means the US will always be able to tariff more Chinese .. MORE
Economic Methods
My Weekly Reading for May 11, 2025
First, Happy Mother’s Day to all the mothers who are reading this post. CBO Score Shows Medicaid Is Inefficient and Current Spending Levels Unpopular by Michael F. Cannon, Cato at Liberty, May 7, 2025, Excerpts: These projections reveal a troubling and dangerous aspect of Medicaid. If the CBO’s assumptions are reasonable, they further suggest—and I .. MORE
Political Economy
Are Constitutionalism and the Rule of Law Dying?
If we believe Janan Ganesh’s latest Financial Times column, America may be doomed. The column’s subtitle encapsulates the argument: “The revolt against [Trump] isn’t huge, and it isn’t about constitutional principle.” That is, the columnist argues, a large and decisive proportion of Americans don’t believe in constitutional principles that constrain the state (“Take No Comfort .. MORE
Books: Reviews and Suggested Readings
Caplan’s Experience of Mainstream Economists and My Students’ Surprise
On his Substack, Bet On It, Bryan Caplan today posted a segment from his newest book, Unbeatable. The segment is short and so I recommend reading the whole thing. One key paragraph: Mainstream economics and free-market economics: Since I’ve long lived in both of these intellectual worlds, I know their inhabitants well. I don’t just .. MORE
Monetary Policy
The Fed needs a “Strong” leader.
In general, it is assumed that the chair of the Federal Reserve Board is the leader of the Fed. But is that necessarily the case? During the 1920s, Benjamin Strong was effectively the leader of the Fed, despite being merely the president of one of its regional banks (the admittedly important New York Fed). Nothing .. MORE
International Trade
They Took Our Jobs!
The anti-trade protectionists are back in power, and they’re promising once again to “bring back good-paying jobs” that America supposedly had “stolen” from us over the years due to “unfair” foreign competition. Tariffs are of course the preferred tool of protectionists past and present, and President Trump has heralded tariffs as “the most beautiful word .. MORE
International Trade
Some Hidden Costs of Tariffs
The Wall Street Journal has had some fantastic coverage of tariffs since the so-called “Liberation Day” tariffs were announced. One recent article (“Retail Giants Manage to Keep a Lid on Prices but Warn It Can’t Last,” 29 April 2025) demonstrates some important insights into tariffs. Sarah Nassauer, Shane Shifflett, and Sebastian Herrera write (emphasis added): .. MORE
EconTalk
Go Ahead and Keep Them; We’ll Make More
Early in his EconTalk interview with Douglas Irwin, Russ Roberts says: But I just want to pose the question: Suppose they didn’t come back. Suppose foreigners sold us cars and all kinds of things, and we sent them dollars. Americans sent them dollars. And the foreigners really liked the way the dollars looked, so they put them .. MORE
Free Markets
A new neoliberalism?
Among the smarter center-left pundits, we are seeing signs of what might be called a revival of neoliberalism. Here I’m thinking of people like Matt Yglesias, Ezra Klein, Derek Thompson and Noah Smith. (They might not like that label, but I’m more concerned with content than terminology.) Noah Smith recently provided a good explanation of .. MORE
Economic Education
Gas Shortages: Cutsinger’s Solution
Question: Suppose the market price of gasoline is $5.00 per gallon. Politicians, responding to their constituents who believe that such a price is outrageous, impose a price control of $2.00 per gallon. At this price, you want to buy 9 gallons of gasoline per week but gas stations are now only willing to sell you .. MORE
Economic Growth
Tariffs, Growth, and Brexit
Scott Sumner’s post Tariffs and the Economy observes that the most important effects of tariffs are not big, dramatic, or immediate ones. They’re the hits to long-term growth as arrangements gradually become less efficient and lower growth rates compound. The lack of an immediate, catastrophic outcome could be used as an excuse to dismiss tariffs .. MORE
Adam Smith
The Lure of Yesteryear Manufacturing
An eight-second Wall Street Journal video clip illustrates the old-time, labor-intensive manufacturing that some, including the two last US presidents, want to bring back to America by using state coercion and threats (“Trump’s Tariffs Are Lifting Some U.S. Manufacturers,” May 4, 2025). The featured worker in the video clip seems to be endlessly repeating two .. MORE
International Macroeconomics
Is A Negative Net International Investment Position Cause for Concern?
No. The Net International Investment Position (NIIP) is a simple accounting concept. It is the total value of foreign assets owned by Americans in other countries minus the total US assets owned by foreigners. A positive number means that the value (but not the returns) of US-owned foreign assets is greater than the value (but .. MORE