EconLog Archive
International Trade
Who Bears the Burden of Tariffs?
Co-blogger Jon Murphy, in “Why Must Americans Pay Tariffs?” May 29, 2025, points out that U.S. tariffs are largely paid by Americans. He cites the relevant literature. He then goes on to note that trade occurs between individuals and firms, not countries. This is true and important, but it’s not relevant to the issue of .. MORE
Adam Smith
Life is Made of Trade
Without trade, life more complex than bacteria could not exist. We are literally made of free trade. It is in every cell of our bodies. The first lifeforms to evolve on Earth, at least 3.5 billion years ago, were very simple. They were single-celled organisms that lacked a nucleus or the organelles we see in .. MORE
Law and Economics
Ninety Years Ago
In late July 1933, President Roosevelt enacted one of the most destructive economic policies in all of American history. The President’s Re-employment Agreement mandated an immediate 20% rise in hourly nominal wages. The stock market crashed. This action aborted a promising economic recovery that had raised industrial production by 57% between March and July 1933. .. MORE
Economic Methods
Why Must Americans Pay Tariffs?
A major assertion by the Trump Administration is that tariffs are paid for by foreigners. And, indeed, under very specific circumstances, a tariff may be paid in part or in whole by a foreign producer: if the importing country is a monopsony (or has significant market power), if the exporting country has price power, and .. MORE
Obituaries
Marina von Neumann Whitman, RIP
Economist Marina von Neumann Whitman died, at age 90, on May 20 this year. She was one of my 3 bosses when I was a summer intern at the Council of Economic Advisers in the summer of 1973. (I think of this as the “Watergate summer” because the hearings of the Watergate Committee were .. MORE
Books: Reviews and Suggested Readings
Fewer Rules, Better People: Where Lam Falls Short
I had many good things to say about Barry Lam’s book Fewer Rules, Better People: The Case for Discretion. However, no book is flawless, and no argument leaves no room for pushback. There are several places where I think the analysis in the book falls short, or at least misses out on important insights. While Lam’s .. MORE
Cross-country Comparisons
The Problem with Pessimism
At various points in my life, I’ve been very pessimistic about a variety of things. In 2008, it was monetary policy. Today, it’s fiscal policy and authoritarian nationalism. At the same time, I’ve never been so pessimistic that I started planning a move to Canada or New Zealand. The US remains a pretty great place .. MORE
Incentives
Politicians in Black Robes
Rule of law has long been sacred to the classical liberal. While the term was popularized by British jurist A. V. Dicey, the concept is much older. The rule of law has three distinct characteristics in the common law world:* An absence of arbitrary power on the part of the government Every man (regardless of .. MORE
International Trade
If Mississippi Became a Sovereign Country
Welcome to a little thought experiment. Suppose that Mississippi became a sovereign country. “Sovereign” means that the state apparatus can make any decision, even one that violates international law. The flip side of sovereignty is that the state can also impose its decision on the country’s residents or a portion of them, and that other .. MORE
Energy, Environment, Resources
A Little Price Theory Goes a Long Way
In “Liberation Day for Gas-Powered Cars,” Wall Street Journal, May 22, 2025 (print edition), the Journal editors make a strong case for getting rid of the California government’s mandate that requires an increasing number, year by year, in the percentage of auto makers’ sales that must be “zero-emission vehicles.” For the year 2026, that number .. MORE
Cross-country Comparisons
Politics and Economics in Africa
Despite dramatic progress in a number of areas, global poverty is increasingly concentrated in Africa. This is from a long survey in The Economist: In many ways, there has never been a better time to be born African. Since 1960, average life expectancy has risen by more than half, from 41 years to 64. The .. MORE
Political Economy
My Weekly Reading for May 25, 2025
Air Traffic Control: It’s Management, Not Money by Chris Edwards, Cato at Liberty, May 20, 2025 Excerpts: The Secretary of Transportation, Sean Duffy, is on the case, but so far, he is just proposing to throw more money at the problem. By itself, more money will not cure the ATC system’s deep flaws, which stem from trying .. MORE
Income and Wealth distribution
The Ethics of Inequality
In an era marked by increasing tensions over social justice, wealth redistribution, and the role of the state, it is wise to reflect on the roots of inequality and determine whether they are inherently unjust. From a free-market perspective, inequality can be seen not only as a natural outcome of economic dynamics but also as .. MORE
Labor Mobility, Immigration, Outsourcing
Joe Weisenthal on Jobs and Migration
I saw an interesting tweet by Joe Weisenthal, discussing the question of what determines interstate migration: This is the classic chicken and the egg problem—which comes first? I view this question as an example of the fallacy of composition—what is true for the individual is not always true for the group. I suspect that Weisenthal .. MORE
Economic and Political Philosophy
Murphy on Economic Philosophy
I was thrilled to join Nicholls State University student DJ Insomniac of KNSU Radio on his podcast “Philosophicast.” We discussed the history of economic thought from Adam Smith to Vernon Smith, and many things in between. You can listen to the whole thing here.
Books: Reviews and Suggested Readings
Fewer Rules, Better People: What Lam Gets Right
Barry Lam’s Fewer Rules, Better People: The Case for Discretion raises a number of interesting arguments, and I think he makes a compelling argument for expanding the role of discretion. Early in the book, Lam suggests his argument would seem unappealing to libertarians, on the grounds that to the libertarian, “Top-down authority in general is .. MORE
Cross-country Comparisons
America is a Manufacturing Powerhouse
A recent Bloomberg article by Dan Wang and Ben Reinhardt had some interesting things to say about US manufacturing. Instead of imposing high tariffs, they suggested that the US encourage foreign investment into facilities producing goods in America. I particularly liked this paragraph: But the more that Trump makes the country captive to his impulses—whether .. MORE
Adam Smith
Tariffs as Part of An Optimal Tax System
Writing at the Hoover Institution’s Defining Ideas publication (“Clearing the Air on Tariffs and Deficits,” 24 April 2025), co-blogger David Henderson mentions two plausible arguments for a non-zero tariff. One of those is within an optimal tax regime: One other intellectually respectable argument for tariffs is that they are part of an optimal tax structure. Our .. MORE
Economic and Political Philosophy
Limits on Self-Ownership?
Frequent commenter Monte, who commented on my blog post titled “Mind Your Own Business!”, asked “Do Libertarians believe that government should play a role in setting limits on self-ownership?” I didn’t answer in the comments because I think the question is of more-general interest, and only a small percent of readers read the comments. I’ll .. MORE
Economic and Political Philosophy
The Problem of Extreme Cases
John Stuart Mill famously wrote, about pushing principles to their logical limit, that “unless the reasons are good for an extreme case, they are not good for any case” (On Liberty). This is not obvious, for extremes often produce antinomic or non-generalizable results. One may perhaps affirm that stealing $25 from Elon Musk without anybody .. MORE
Books: Reviews and Suggested Readings
Fewer Rules, Better People: How To Expand Discretion
Barry Lam’s Fewer Rules, Better People: The Case for Discretion makes a series of second-order arguments for why discretion based on the spirit of the law should be expanded over legalism according to the letter of the law. But he doesn’t just make arguments for why things should be different from how they currently are. He .. MORE