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Here’s a letter sent last week to the New York Times but not published there.

Editor:

You report that “ArcelorMittal, a European steel maker, is donating tens of millions of dollars of foreign steel for President Trump’s new ballroom” (“White House Secures Foreign Steel for Ballroom Project,” April 8).

“Donating” is a euphemism for “dumping” – the practice of selling foreign-made products in the U.S. at prices lower than those products sell for in their producers’ home countries. Because ArcelorMittal sells its steel in Europe at prices above $0, that company is guilty of dumping.

Given the Trump administration’s insistence on protecting Americans from foreign producers who unfairly threaten American workers, will the Department of Commerce correct this injustice by imposing antidumping duties on ArcelorMittal?

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030

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Clark Packard makes a powerful case that “Congress should retire Section 122.” A slice [original emphasis]:

My Cato colleague Kyle Handley has also laid out the historical case for why the administration’s Section 122 invocation doesn’t hold up. As he explains in a recent blog post, Section 122 emerged from the Bretton Woods era of fixed exchange rates, when a balance-of-payments deficit could become a direct claim on US gold reserves. Handley notes that French President Georges Pompidou literally sent a ship to New York to retrieve French gold deposits, a vivid illustration of the kind of payments crisis the statute was actually designed to address. Under today’s floating exchange rate system, no such problem exists—trade deficits are simply mirrored capital inflows. Handley also shows that the current account deficit in 2024, measured as a share of GDP, is not historically unusual and was well below the peaks registered in 2002–2008. Not even then did presidents declare a balance-of-payments emergency. As Handley, who also signed an economists’ amicus brief in support of plaintiffs challenging the Section 122 tariffs in the US Court of International Trade, surmises: “If ‘balance-of-payments deficits’ can be redefined to mean some politically salient trade imbalance, then Section 122 stops being a narrow emergency provision designed for a fixed-exchange-rate system and becomes a standing reservoir of discretionary tariff authority.”

David L. Cohen tweets: (HT Scott Lincicome)

Visual of the Week: Facts are facts. Tariffs raise prices. After a steady decline through 2024, both import and domestic prices shot up right after the 2025 tariff moves, sharply reversing the downward trend line of domestic prices pre-tariffs. Not surprising given the consistent research findings that most tariffs are passed along to American consumers. And it’s also pretty clear that higher prices cut into purchasing power for businesses and consumers which slows economic activity.

National Review‘s Dan McLaughlin busts the myth that housing prices in the U.S. are driven to heights too high by foreigners and outsiders. A slice:

Markets, however, are very good at responding to demand — unless they are unreasonably restricted from providing supply. (To be fair, Vance has also talked about the supply problem, and even Mamdani, as little as he understands markets, has been pushing for more housing construction, even with funds the city is supposed to be investing for its pensioners.) Imposing new tax costs on second-home housing, and trying to stifle demand by excluding institutional buyers from the market, is not the way to incentivize more housing construction.

My Mercatus Center colleague Satya Marar explains how to get bureaucracy out of broadband.

Jordan McGillis points out that the so-called “Great Decompression” of household incomes in the U.S. is driven largely by greater economic opportunities for women. A slice:

What’s the secret of affluence? In modern America, high-income households are powered not by a single breadwinner, but by two sustained professional careers. The Great Decompression—the phenomenon of incomes rising faster for families above the median—is often blamed on slow wage growth for middle-class men since the 1970s. But the rise of educated women is the true driver of the change.

Fifty years of progress in women’s education and career opportunities have led to professional men and women marrying each other, staying in the workforce and leaving traditional couples behind. Inequality between the sexes has declined, but inequality between classes has increased.

The two-income model is generating significant household wealth. The median two-income family today earns about $140,000, double what the median single-income family earns. Roughly 30% of two-income families have an income of more than $200,000 a year, compared with only 11% of single-income families. Today, more than two-thirds of young couples buying homes are dual-income. In the 1970s, the opposite was true.

The Editorial Board of the Washington Post reveals “what most predictions miss about AI job loss.” A slice:

Many people believe that there’s a fixed amount of work to be done, so changes in how the work is allocated are zero-sum. One person’s gain is another person’s loss.

This is not how labor markets actually work. The amount of work is never fixed because humans’ desire for goods and services is unlimited. AI will allow for new production opportunities that weren’t possible before, which will create new jobs that didn’t exist before.

Further, there’s no guarantee that a job will be automated simply because it can be.
It’s technologically possible to grow pineapples in Alaska. Heated greenhouses, with artificial lighting during the dark winter months, could yield fruit. But Hawaiian pineapple growers don’t have to worry about their jobs being taken by Alaskan rivals because it would be so much more expensive to grow pineapples there than in Hawaii.

That’s an extreme example, but the principle holds: something being technologically possible doesn’t mean it’s economically possible. AI is expensive, and it won’t make financial sense for companies to automate many jobs that perhaps could be automated in theory.

My intrepid Mercatus Center colleague, Veronique de Rugy, debunks five zombie myths about taxation. A slice:

Corporations write checks to the IRS, but they don’t bear the tax burden. Every dollar collected for corporate tax comes from a human: the worker who’s paid a lower wage, the shareholder who earns less, and the consumer who pays higher prices at checkout. Research shows that workers bear somewhere between one-third and two-thirds of the corporate tax burden through lower wages. If you have a 401(k), you’re paying it too, quietly, through lower returns on every stock in the fund.

Further, corporate profits are returns on investment. Tax them and you get less investment. Less investment means lower productivity, which leads to lower wages over time. Decades ago, economists Robert Hall and Alvin Rabushka showed a better way: Replace the corporate income tax with a consumption-based system under which businesses deduct all wages and capital investment immediately. No double taxation, no penalty on investment, and revenue without unintended economic damage.

The corporate tax survives because voters mistakenly believe someone else pays it. This belief is expensive.

Stefan Bartl writes insightfully about the three ways governments finance themselves. A slice:

The second way America pays for government is through borrowing. If taxation is the visible bill presented to the public today, debt is the bill postponed until tomorrow. Public choice economics helps explain why this method is so politically attractive. Elected officials seek reelection, and few build careers on openly imposing higher taxes. Borrowing lets them preserve the benefits of spending while muting the immediate pain. The cost is not removed, only transferred. As James Buchanan argued in Public Principles of Public Debt, “The primary real burden of a public debt is shifted to future generations.” That is precisely what makes debt so tempting in democratic politics. Present officeholders get the benefit of spending, while later taxpayers, often not yet born, inherit the obligation.

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… is from page 66 of the late Brian Doherty’s marvelous 2007 book, Radicals for Capitalism: A Freewheeling History of the Modern American Libertarian Movement:

Modern libertarianism is a vision of a radical and just future – but one whose contours are inherent in the meaning of the American Revolution, arising from European traditions of natural law, natural rights, a relationship between man and the state that ought to be contractual and reciprocal; and a vision of man that is rooted in the best of the Western Christian tradition. That vision sees the individual soul as so worth saving that God-made-man would sacrifice himself to do so. And that individual soul is responsible for the choices that can guarantee its own salvation.

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Here’s a letter to the Wall Street Journal.

Editor:

Factual and economic flaws mar Paul Rahe’s argument that, in a world subject to war and other disruptions, tariffs can protect an economy’s resilience (“There’s a Case for Tariffs,” April 16).

Factually, it’s untrue that the pandemic showed that, with free trade and global disruptions, “supply chains collapse. Then nearly everything comes to a halt.” Although America’s economy was indeed severely damaged during the pandemic, the culprits were price controls and lockdowns. Yet despite these obstructions, as Scott Lincicome explains, “a December 2020 U.S. International Trade Commission report found that U.S. manufacturers and global supply chains responded quickly to boost supplies or make new drugs, medical devices, PPE, cleaning supplies, and other goods, and that the pharmaceutical, medical device, N95 mask, and cleaning products (including hand sanitizer) industries were particularly ‘resilient’ (in the ITC’s own words).”

Economically, tariffs cannot increase the domestic capacity to produce particular goods without decreasing the domestic capacity to produce other goods. Because private businesses themselves have strong incentives to accurately assess the risks of global disruptions and optimally diversify their sources of supply to minimize supply-chain troubles – a reality overlooked by Prof. Rahe – tariffs likely create excess capacity in protected, politically powerful industries as they drain resources away from other, politically weaker industries. This political determination of which industries are ‘essential’ and which aren’t weakens the economy’s ability to respond effectively to global shocks.

Finally, Prof. Rahe bizarrely switches gears at the end to justify tariffs as a source of revenue. Whatever the merits or demerits of using tariffs to raise revenue, because revenue tariffs work best the fewer are the imports they block, such tariffs are a poor tool for protecting critical industries from import competition.

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030

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In my latest column for AIER I challenge the conclusion of a new research paper that, to some workers, NAFTA was lethal – and, by extension, that globalization more generally is lethal. Two slices:

Specifically, the researchers found that, from NAFTA’s launch in January 1994 through 2008, mortality increased in those “commuting zones” in the continental United States that had a disproportionately large number of workers producing manufactured goods in competition with imports from Mexico. Especially hard hit in those commuting zones were men who, in 1994, were ages 25 to 44. Losing jobs as a result of the greater freedom of Americans to purchase imports from Mexico, manufacturing workers and members of their households in these hard-hit commuting zones became more likely to commit suicide, turn to drugs or alcohol, or otherwise suffer ill health that raised their chances of going early to their graves.

In short, NAFTA was deadly because NAFTA destroyed manufacturing jobs. It’s a tiny leap from this finding to the conclusion that free trade is very likely hazardous to the health of manufacturing workers and their families. And at least one of the paper’s three authors — University of Chicago economist Matthew Notowidigdo — made this leap when he told the New York Times that his research highlights an “underappreciated cost of globalization.”

The econometrics in the paper is genuinely impressive. I assume that the finding of increased mortality is accurate. But I dispute the conclusion that this rise in mortality can legitimately be said to be the result of the freeing of trade.

Let’s put NAFTA job losses into perspective.

The total number of jobs destroyed by NAFTA from 1994 through 2008 was minuscule compared to total job destruction over those years. The St. Louis Fed has data starting in December 2000 on total monthly layoffs and discharges — that is, for 97 of the 180 months covered by Notowidigdo, et al’s research. During those 97 months, an average of 1.9 million workers in America every month lost or were laid off from jobs they wanted to keep.

How much of this job destruction was caused by NAFTA? The Economic Policy Institute — an outfit hostile to NAFTA — estimates that over the course of NAFTA’s first 20 years, it destroyed a total of 700,000 jobs. Even assuming that all of those 700,000 jobs were destroyed in NAFTA’s first 15 years, that’s an average monthly job loss of only 3,900 — or 0.2 percent of the average total monthly layoffs and discharges during this period.

This picture hardly changes if we compare NAFTA job losses to only manufacturing-worker layoffs and discharges. On average, 194,000 manufacturing workers lost their jobs each and every month from December 2000 through December 2008. NAFTA job losses, therefore, were a mere 2.0 percent of all manufacturing-job losses in those years. Ninety-eight percent of manufacturing-job losses from December 2000 through December 2008 were caused by forces other than NAFTA.

…..

So what are the likely causes of the rising mortality detected by Notowidigdo, et al.? To answer this question requires, as they say, further study. There are several candidates, however, of varying plausibility. These include:

• Increased access to public and private welfare which enables people who lose jobs to remain unemployed longer, perhaps undermining their sense of self-worth.
• Readier access to debilitating drugs, or reduced social stigma from using such drugs.
• Increased occupational-licensing requirements which obstruct unemployed workers’ efforts to pursue new occupations.
• The rise in land-use restrictions which raise the cost of moving to new locations with better job prospects.
• A cultural change that either made the loss of manufacturing jobs more shameful than were such losses prior to NAFTA, or that drained unemployed manufacturing workers of the gumption possessed by previous generations of unemployed workers to actively search for new jobs.

Whatever the actual cause (or causes) of the rise in mortality, blaming NAFTA is incorrect given that it is only one of countless sources of job destruction, and a rather minor source. Even worse is leaping from a finding of rising manufacturing-worker mortality during NAFTA’s first 15 years to the conclusion that, for manufacturing workers generally, globalization is lethal.

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Todd Zywicki, one of my GMU colleague over in the Scalia School of Law, warns that a hostile litigation environment is “behind the staggering drop in U.S. public companies.” A slice:

U.S. public markets are quietly shrinking. Since the late 1990s, the number of publicly traded companies has fallen by more than half. Initial public offerings, once a reliable engine of economic dynamism that let ordinary Americans invest in tomorrow’s great companies, have plummeted.

Founders, executives and investors are doing the math and increasingly deciding that the risks of going public outweigh the rewards. Chief among those risks is a litigation environment so hostile to public companies that it has become a de facto tax on participation in America’s capital markets. It’s a situation that warrants judicial intervention.

As Securities and Exchange Commission Chairman Paul Atkins recently warned, a primary driver behind this liability risk is the explosion of securities class-action lawsuits.

Anyone who has seen “The Wolf of Wall Street” or “Boiler Room” will be familiar with pump-and-dump schemes, where insiders accumulate a company’s stock, spread pernicious rumors to inflate its value, then dump it when the truth comes out. One purpose of securities law is to compensate investors who have been wronged by such schemes. But in the past several decades, securities law has been twisted into a profit engine for lawyers manufacturing their own variation: stoking mounds of bad publicity about a company only to sue once the firm’s stock is affected.

Frequently referred to as “stock drop” lawsuits, these cases often materialize within days of a decline in a company’s market price, regardless of whether any fraud actually occurred.

Meritless securities suits have become a reliable way for trial lawyers to extract massive settlements from public companies, often with little connection to actual investor harm. In these cases, plaintiffs are not required to prove that an investor relied on or was influenced by any alleged misrepresentation or misstatement. Instead, they invoke what lawyers call the “inflation-maintenance theory” — where plaintiffs need not even show that prior false statements pumped up the stock at all, but only that it maintained an inflated stock price until the supposed truth came out through so-called corrective disclosures.

The Washington Post‘s Editorial Board pushes back against fallacies spread by Elizabeth Warren about corporate taxation. A slice:

Never mind that corporate tax receipts were higher than ever in 2025 and have risen by 136 percent since 2019. The corporations with no tax liability were only following the laws that Congress has written.

The most common reason that a corporation would have no income tax liability in a given year is that it did not make a profit. Levying an income tax against a corporation with no net income makes no sense, regardless of its size.

The companies that Warren lists, which include airlines, entertainment companies and health care companies, did make a profit last year. But they still paid no income tax because Congress, correctly, gives them the ability to deduct expenses that further economic growth.

First, they can deduct past losses against present profits. This standard practice, known as “loss carryforward,” is completely normal across the developed world. It protects businesses in more volatile industries from being taxed more harshly than those in steadier industries.

Second, when corporations reinvest their profits in building new facilities, buying new equipment or developing new technologies, the corporate tax lets them deduct that investment. The owners of the corporation never actually received that money. The corporation sent it back out the door as soon as it came in, so taxing it as income would be wrong.

John Puri writes sensibly about the “New Right’s” infatuation with Viktor Orbán. A slice:

Large swaths of the American right — the “New Right”: nationalist-populists, post-liberals, national conservatives — were not captivated by Orbán primarily because he lent aid and comfort to America’s enemies, however (though he shares their view that Ukraine is not a cause worth fighting for). Rather, for these factions, Orbán represented a cathartic way of right-wing politics that wielded state power freely to make society behave. His government blew through the institutional constraints that frustrate impassioned partisans in America — an independent judiciary, a critical press — by dominating them. Orbán openly rewarded friends, turning the state into his personal patronage network.

Consolidating power was Orbán’s means. The end was for the state to direct, if not completely saturate, Hungarian private society. Orbán declared his mission in 2014: “The Hungarian nation is not simply a group of individuals but a community that must be organized, reinforced and in fact constructed. And so in this sense the new state that we are constructing in Hungary is an illiberal state, a non-liberal state.” Illiberal, as in unconcerned with individual rights and the government’s role in securing them. Many in the American right’s intelligentsia believe that the objective of politics here should be similarly revised.

As did Woodrow Wilson, who, like Orbán, spoke of society not as a collection of sovereign individuals to be secured but a single, organic entity to be superintended.

Justly celebrating the ousting of Viktor Orbán is Tom Palmer.

George Will rightly ridicules progressives’ “Ayatollah Itch.” A slice:

Constitutional law is clear: Freedom of speech includes freedom from compelled speech — freedom from coerced affirmations of government catechisms. Furthermore, equity “training” — meaning, invariably, indoctrination — is inherently poisonous. It also is, however, a billion-dollar business, siphoning up government and corporate money, coast to coast. The Pacific Legal Foundation, a public interest law firm that defends Americans from government overreach, and is representing [Joshua] Diemert, has more work to do.

In Illinois, the “LGBTQIA+ Equity and Inclusion” initiative sweeps far beyond compliance with nondiscrimination law, to propounding murky theories of “overlapping identities” and “micro-invalidations.” The purpose, obviously, is to extinguish viewpoint diversity.

Jeffrey Singer explains what shouldn’t – but, alas, what does – need explaining: Government-imposed caps on profits will not fix the problems that proponents of such caps wish to fix.

Barry Brownstein writes insightfully about civility.

Cliff Asness tweets: (HT Scott Lincicome)

“As Asness of AQR Capital Management says, “We still don’t know if Rand’s heroes are realistic. We can debate that. But I’d say these days that the jury is in that her villains are pretty realistic.””

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… is from page 16 of H.L. Mencken’s, A Second Mencken Chrestomathy (1995); specifically, it’s from Mencken’s Preface to his and George Jean Nathan’s 1920 book, The American Credo:

The whole thinking of the country thus runs down the channel of mob emotion; there is no actual conflict of ideas, but only a succession of crazes.

DBx: Strictly speaking, Mencken here exaggerates, but only just a bit. His larger point about crazes stands.

Underlying each successive craze is an idea, or set of ideas, usually either half-baked or completely bonkers. “America’s middle-class has been impoverished by Jeff Bezos, Warren Buffett, and other billionaires!” “Our greater access to goods and services from abroad results in us having less access to goods and services in total!” “The U.S. trade deficit with China proves that China is mistreating Americans! And ditto the U.S. trade deficit with Canada!” “Immigrants come to America to aggressively steal our jobs and to lazily live off of the U.S. welfare state!” “Government-run grocery stores will bring an abundance of groceries to inner cities!” “As long as creditors are willing to lend to the U.S. government, the accumulation of U.S. government debt isn’t a problem!” “Rising prices in the aftermath of natural disasters are caused by greed!”

Fortunately, there are some sound and serious ideas, mostly those called “classical liberal,” always in competition with such nutty ones. Liberal idea are (as the late Bob Tollison never tired of saying) “part of the equilibrium” – meaning, the development, refinement, and promulgation of liberal ideas reduce the negative consequences of the far-more-numerous whackadoodle ideas that are the standard fare served up by politicians, professors, and pundits.

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Prompted by a report from the McKinsey Global Institute, Timothy Taylor documents and applauds “the US as an innovation economy.” A slice:

As the United States approaches its semiquincentennial (that is, half of 500 years) July 4, the McKinsey Global Institute offers a report that reads to me as a meditation on long-run US economic growth in “At 250, sustaining America’s competitive edge” (March 9, 2026). The US became the world’s largest economy in 1860, and has kept that lead since. In my reading, a major theme running through the report is the US leadership in originating and applying new technology.

Charles Calomiris wisely argues that it isn’t capitalism that needs to be ‘reimagined,’ but journalism that allegedly ‘reports’ and comments on capitalism. A slice:

Nowadays, especially as people are fretting about AI taking their jobs, and wondering what can be done to address “growing inequality,” and the “hollowing out of manufacturing,” some pundits wonder whether it is time to re-imagine capitalism. This sort of thinking is visible on both sides of the political spectrum – in that respect, Donald Trump and Bernie Sanders have more in common than either would have us believe.

But instead of re-imagining capitalism, I’d say we need to un-forget the facts about it that we should have known for many years, and un-learn some new non-facts that have crept in to our collective consciousness through a combination of malicious prevarication and lazy learning. As Mark Twain said: “The trouble with the world is not that people know too little; it’s that they know so many things that just aren’t so.’’

I’ve been blessed by friendships with three great scholars – Deirdre McCloskey, the late Allan Meltzer, and Phil Gramm – who have devoted much time and effort to defending capitalism by keeping the factual record straight and getting us to see which facts are most important. All three wrote influential books on the big questions about capitalism. Let’s un-forget and un-learn with them for a moment.

Our amnesiac journey begins with Deirdre McCloskey, who takes us through more books than you can shake a stick at, including her magisterial “Bourgeois Trilogy” (The Bourgeois Virtues: Ethics for an Age of Commerce; Bourgeois Dignity: Why Economics Can’t Explain the Modern World; Bourgeois Equality: How Ideas, Not Capital or Institutions, Enriched the World) and the much shorter and more accessible book written with Art Carden, Leave Me Alone and I’ll Make You Rich: How the Bourgeois Deal Enriched the World.

McCloskey focuses our attention on the great hockey stick of economic history: Prior to the Industrial Revolution, for thousands of years, humans suffered through miserably impecunious lives, with only very few people living at a standard above subsistence (the flat part of the hockey stick). Then, all of a sudden, in the late-eighteenth and early-nineteenth century, we see an increase in average human living standards, first in Britain and Western Europe, and later in other countries, and that improvement (the sloped part of the stick) displays an improvement that is not just permanent, but one that is perpetually growing. Classical economists like Adam Smith, David Ricardo and Karl Marx could never have imagined that this sort of permanent growth was possible, which is a large part of the explanation for why Marx was so pessimistically wrong about the future of capitalism.

The Editorial Board of the Washington Post reports that “amid an immigration crackdown, restaurants and hotels are struggling to provide quality service.” Here’s the conclusion:

But temporary tweaks won’t solve the imbalance in a country where the national unemployment rate edged down to 4.3 percent in March. America needs an orderly border, and the best way to reduce illegal immigration is to create easier legal pathways for people who want to fill jobs that otherwise sit vacant.

Chris Freiman decries government policies that restrict the supply of housing in the U.S. A slice:

The reason why we don’t see developers building more housing in response to higher prices isn’t because they’re not interested in making more money. Rather, it’s because their ability to build is heavily restricted in much of the United States. For instance, large portions of many cities are zoned exclusively for single-family homes. Apartment buildings are prohibited in areas where developers might want to build them. Even when building is permitted, lengthy approval processes can delay projects for years. In San Francisco, it takes an average of 523 days to secure permits for a housing project. In New York, a lawsuit challenging the 2018 Inwood rezoning — intended to allow roughly 1,800 new housing units — held up the first project in the area for approximately three years before it was able to secure final approvals. And height limits, parking requirements, and other regulations can also make construction prohibitively expensive. Recent analysis estimates compliance and fees comprise 24 percent of new home prices.

In short, the root of the problem isn’t primarily increased demand for housing, though demand pressure is present. Rather, the problem is government-imposed restrictions that make it difficult, if not impossible, to adequately increase supply in response. Consequently, prices rise and stay high. Even if every institutional investor disappeared tomorrow, the housing shortage would remain.

Richard Reinsch isn’t favorably impressed with the “abundance” movement. A slice:

As Veronique de Rugy and Adam Michel argue at Civitas Outlook, a movement serious about increasing the supply of housing and infrastructure—the Abundance movement’s most important goals—would also outline a tax policy that is neutral across all economic activity, taxes each dollar only once, and treats income and savings equally. At a minimum, it would question demand-side incentives like the mortgage deduction, and ensure that investments in real estate are not taxed or hindered at higher rates than, say, the production of goods. Abundance advocates at present do not do this. One cannot help but wonder whether such a comprehensive regulatory and fiscal approach is overlooked because it would shift Abundance outside the respectable liberal camp and into the conservative spectrum, removing its appealing allure to the liberal political class that desires both growth and equality.

GMU Econ alum Julia Cartwright identifies “bootleggers, Baptists, and others who benefit from tax complexity.”

Scott Lincicome tweets:

@USTradeRep’s Section 301 case says “systemic overcapacity” abroad causes trade surpluses that harm US manufacturing. As @stanveuger @KyleLHandley show in new comments, there’s no relationship bt low capacity utilization & big trade surpluses – if anything it’s the opposite.

Jacob Sullum is correct: “The FTC’s probe of Media Matters for America is a blatant assault on freedom of speech.”

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… is from page 175 of the 1990 second edition of David Friedman’s excellent book, Price Theory: An Intermediate Text:

More generally, it will pay the landlord to include in the lease contract any terms that are worth more to the tenant than they cost him – and adjust the rent accordingly. Given that he has done so, any requirement that he provide additional security (or other terms in the contract) forces the landlord to add terms to the lease that cost him more than they are worth to the tenant. The ultimate result is a rent increase that leaves both landlord and tenant worse off than before.

DBx: Price theory is beautiful. Among it’s many splendid features is that it warns that government efforts to change one or more terms of an exchange (for example, the level of physical security landlords provide to tenants) will result in changes in other terms of the exchange that make the intended beneficiaries of the first change worse off.

One of many terms in landlord-tenant exchanges (or contracts) is the amount of money that tenants pay monthly to landlords. Proponents of rent-control naively believe that forcing down this term of exchange – that is, forbidding tenants from paying more than some government-allowed monthly rent – is the end of the story. Rent-control proponents stubbornly refuse to see that rental contracts contain countless other terms – some explicit, most implicit – that will, when rent-control is imposed, be adjusted in ways that leave tenants worse off even though tenants are paying a smaller amount of money each month to landlords.

Most proponents of rent controls (and of price controls generally) call themselves “progressive” – a term that in practice seems to be a label for people who proudly look only at the most obvious, intended consequences of economic and policy actions, while ignoring less obvious and unintended consequences.