EconLog Archive
Microeconomics
The Second Law of Demand and Supply in Action
It’s no surprise egg prices are soaring. In October 2024, UMASS – Amherst economist Isabella Weber argued that price controls are needed to keep prices under control and, further, that the controls would not have the negative effects we usually predict, such as shortages, deadweight loss, etc. I responded to her claims here. One of .. MORE
International Trade
The Slave to Our Passions
I recently read some interesting comments by a basketball player for the Milwaukee Bucks: Regardless, Antetokounmpo felt weird about facing [former coach] Budenholzer at the other side of the court considering that they were strong and close allies in Milwaukee for five seasons. “It’s definitely weird,” Giannis said. “Seeing him complain about plays that I .. MORE
International Trade
What Would True Reciprocity Mean?
President Trump has now unveiled his outline of the higher tariffs he proposes. They are much higher and, therefore, much more destructive of people’s wealth, than I or, apparently, many others had expected. Trump claims to be doing this in the interest of reciprocity. In his Rose Garden speech, he noted, correctly, that you .. MORE
Income and Wealth distribution
Relative, compared to whom?
It’s often said that after people are wealthy enough to meet their basic needs, they are more concerned about their relative rather than absolute level of well-being. If Smith sees his real income increase by 10% this year, but everyone else around Smith has their real income increase by 20%, Smith doesn’t feel glad that .. MORE
Incentives
To Lie or Not To Lie: Moral and Economic Reasons
The student of economics and especially of public choice theory should expect politicians to lie—and he is certainly not disappointed in America these days. Politicians are ordinary individuals. An ordinary individual is tempted to lie when he considers it is in his interest to do so. I take lying to mean intentionally conveying a statement .. MORE
International Trade
Elasticity and Tax Burdens
The Financial Times has an article discussing the proposed tax on Chinese ships that use US ports: In 2024, about 46 per cent of US bulk fertiliser imports — 6.7mn metric tons — were carried by Chinese-built dry bulk carriers, according to Kpler data. A $1.5mn fee could increase transportation costs by $62.50 per ton, .. MORE
Political Economy
Recent Mistakes I’ve Made
I’m eagerly awaiting Donald Trump’s announcements of increased tariffs on Liberation Day, April 2. I used to think that Donald Trump was an ignoramus who didn’t understand the gains from trade. But now I realize that he understands it better than we economists. All we have are our models and our logical reasoning. Trump has .. MORE
Books: Reviews and Suggested Readings
The Joy of Freedom in the Digital Age
The title of this post comes from co-blogger David Henderson’s beautiful 2001 book The Joy of Freedom: An Economist’s Odyssey. It is one of my favorite books; David captures the optimism of liberalism in a way few other authors can. Since David wrote the book, the world has entered the Digital Age. The proliferation of .. MORE
Economic Education
EconLog Price Theory: Inflation Targets
We’re bringing back price theory with our series on Price Theory problems with Professor Bryan Cutsinger. You can see all of Cutsinger’s problems and solutions by subscribing to his EconLog RSS feed. Share your proposed solutions in the Comments. Professor Cutsinger will be present in the comments for the next couple of weeks, and we’ll post .. MORE
Finance: stocks, options, etc.
Household Net Worth Has Increased Relatively Steadily
On March 7, 2025, I highlighted Herb Stein’s article “Balance of Payments,” which appeared in David R. Henderson, ed. The Concise Encyclopedia of Economics. That led to a lively discussion in the Comments section. Frequent commenter Warren Platts noted that the U.S. Net International Investment as a percentage of GDP has gone downhill since about .. MORE
International Trade
What Ought Economists Do?
Donald Trump’s decision to impose tariffs has sparked a lively debate among economists and others: are tariffs good? Maybe some of them? Should governments then impose those tariffs that are good? While these discussions are interesting in themselves, they also raise a more general question: what should economists be doing at all? The title of .. MORE
International Trade
It Is Basically Holistically Intuitive
To analyze society and the economy, and especially if the goal is to coerce peaceful individuals, an understanding of basic economics should be a must. Economics is needed to think clearly about the social consequences of individual actions and government interventions. An example a contrario was just given by President Donald Trump; the Wall Street .. MORE
Liberty
Laws are for the Little People
I’ve always been skeptical of people that use “national security” as a justification for various repressive policies, including government secrecy, trade barriers, the military draft, censorship, and even taking over Greenland. That’s not to suggest that national security is never a valid concern—I would not advocate releasing nuclear weapons secrets—rather that the concept is overused, .. MORE
Labor Mobility, Immigration, Outsourcing
My Weekly Reading for March 30, 2025
Federal Spending Is a Leaky Bucket by Chris Edwards, Cato at Liberty, March 24, 2025. Excerpt: There are two sides to the inefficiency of federal spending. Spending is funded by taxes, which distort the working, investing, and entrepreneurial choices of individuals and businesses. Each additional dollar in income taxes causes about 40 to 50 cents .. MORE
International Trade
No, VATs Are NOT Like Export Subsidies
Tyler Cowen recently made an uncharacteristic mistake: But there is another way to pose the question and that is “should the resources in the EU be allocated toward export, or not?” And then exports are VAT-free, and within-EU sales generally are not VAT-free. So there is an encouragement to exports here. America has sales taxes, .. MORE
Books: Reviews and Suggested Readings
Social Contract Ambiguity
Michael Huemer’s book The Problem of Political Authority examines various arguments given in favor of establishing the existence of political authority, which he defines as a property containing two aspects: (i) Political legitimacy: the right, on the part of a government, to make certain sorts of laws and enforce them by coercion against the members of its .. MORE
Trade and Exchange
Largest tax increase in US history?
The recently announced auto tariffs are expected to raise roughly $100 billion per year in revenue. How does that compare with other major tax increases? According to the Tax Foundation, the previous record was $76.8 billion for the 2011 tax increase to finance the ACA (Obamacare). In real terms, the auto tariffs are not as .. MORE
Economic and Political Philosophy
The Strangers Who Live Among You
I wonder how Christians who favor the current US government’s war on immigrants can reconcile their stance with Leviticus 19:34, which reads (King James version): But the stranger who dwelleth with you shall be unto you as one born among you, and thou shalt love him as thyself, for ye were strangers in the land .. MORE
International Macroeconomics
The New China Shock
There’s a widespread perception that trade with China caused increased unemployment in America. This is false. Imports from China did reduce jobs in some industries, but this did not have any effect on the overall unemployment rate, as even more jobs were generated in other industries. Last year, the Chinese trade surplus rose to nearly .. MORE
Trade and Exchange
Don Boudreaux Responds to Me and I Respond to Don
I posted on Monday about where I agreed and disagreed with a statement by Veronique de Rugy about imports and exports, particularly about exports. In doing so, I was also disagreeing with Don Boudreaux. Don responded the same day with 2 lengthy comments on my post and 1 new post on his CafeHayek. But .. MORE
International Trade
Trade Deficits Cannot be “Managed”
Writing for the Peterson Institute for International Economics (PIIE), Dr Maurice Obstfeld has a great, non-technical piece addressing some of the claims made by Michael Pettis (among others) that a trade deficit must be “managed.” Obstfeld details the theoretical and empirical issues with Pettis’s claims very succinctly. Allow me to supplement Obstfeld’s comments with my .. MORE