The Wall Street Journal‘s Editorial Board understandably is pessimistic about the coming consequences of the U.K.’s new Prime Minister, Andy Burnham. A slice:
Alas, here Mr. Burnham appears to have the wrong instincts. He supports greater state control over utilities, wants the government to take the lead on housing construction, and is on the prowl for other taxes to raise. It’s hard to tell where he stands on the economy-suffocating net-zero climate policies Labour has championed. He emphatically rebuffed a plea by former Prime Minister Tony Blair to revisit the more market-friendly version of Labour that worked in the late 1990s.
All that plays well with Labour’s noisy progressive flank and assuages members who are nervous about growing support for the Green Party to Labour’s left. But it won’t deliver the economic results voters demand. Mr. Burnham has a limited chance after he takes office to pivot, especially on matters such as welfare reform. It’s a good sign that he seems not to want to appoint Ed Miliband, a popular left-winger and net-zero true believer, as Chancellor of the Exchequer, in charge of economic policy.
Also critical of the apparent ignorance of Andy Burnham is Allister Heath. (HT Andy Morriss) A slice:
Even given the low bar set by recent prime ministers, this was a shockingly poor speech from our Prime Minister-designate, a farrago of nonsense, historical revisionism, blatant contradictions, economic illiteracy and character assassination.
Given Burnham’s demonisation of the 1980s – and thus of its principal architect, Margaret Thatcher, one of the just two truly great British PMs of the past 85 years – the Kumbaya politics was especially hypocritical, as was the nonsensical claim that he will be “pro-business” while renationalising all that moves.
Burnham claims to believe that he will end factional politics, a delusion born of his ludicrous appointment by acclamation. Following a colour-by-numbers approach to speech-giving, the new Labour Party leader believes his arrival will usher in “a new politics”, that he will govern on behalf of “forgotten places everywhere”, that he “will be a leader for all places”.
If that sounds like drivel, that’s because it is. Does Burnham really believe that a jaded, disillusioned public that has heard all of this before will be swayed by his remix of all of the old tunes? Or is his Messiah complex so pronounced that he believes that simply willing a revolution will automatically see it enacted?
If so, we are truly in trouble as a nation, though not as much as Burnham himself when he realises that there are no levers to be pulled to fix any of Britain’s pathologies.
He is the seventh PM in a decade and evidently has no clue what to do. We are living beyond our means, an ever larger welfare state sucking the lifeblood from a quasi-stagnant private sector economy that is now too small, too constrained by red tape and taxes and command-and-control policies to fund our ruling class’s socialistic ambitions.
“California’s billionaire tax is backfiring before it begins,” as reported by by Mohamed Moutii.
David Inserra explains what shouldn’t – but, alas, what today even in the U.S. nevertheless does – need explaining: “Broadcasters should not lose their licenses because they don’t broadcast a president’s speech.”
Juan Londoño argues that “the White House’s approach to frontier AI might be worse than an ‘FDA for AI’.” A slice:
The White House’s executive order on frontier AI supposedly set up a voluntary evaluation process for frontier AI models that, according to the text, should not be interpreted as a pre-release vetting or licensing regime. However, once Anthropic decided to expand access to its Fable and Mythos models, the White House responded by invoking export control powers that would prevent foreign nationals from accessing these models, even if they resided in the US. As Anthropic itself admitted, enforcing this mandate was so complex that there was no choice but to shut down the models. Before this incident, there was no indication that these export controls could be invoked, and Anthropic and the AI industry at large were caught off guard.
This episode clearly draws out the issues with the current evaluation regime: It is seemingly arbitrary; the industry has no clear and public standard over what would make a model “safe” or “dangerous”; and there is no clarity over what the executive can and cannot do to models it deems to be too dangerous to release. This uncertainty, as seen in recent examples, can disrupt not only AI companies but also businesses worldwide that rely on these products.
Timothy Taylor shares a research paper that finds a positive payoff to U.S. federal-government funding of R&D. A slice:
Let’s put all this in some perspective. The US GDP is about $30 trillion in 2026 (actually a little higher, but round numbers are useful here). Thus, the thought experiment of spending $30 billion more per year involves a spending increase of about 0.1% of GDP per year–and sure enough, after about 10 years, it raises per capita GDP by about 0.1% using either approach. This may look like a wash. But notice that the estimates here are based on increasing R&D for only a 10-year period, while the benefits are projected out over 30 years. To put this another way, the current costs of an overall boost in R&D spending–like long-term investments in physical infrastructure–are more than repaid over an extended period of time. But to get the long-run payoff, you need to pay the short-term costs.
[DBx: This finding runs counter to my priors, but a quick perusal of the paper reveals that the research appears to be solid. Question for advanced econ students: When public-choice realities are taken into account, what does this paper’s finding – assuming it to be sound – imply about additional federally funded R&D? The answer isn’t obvious (at least not now to me). Public-choice realities suggest, on one hand, that, because the positive payoff is long-run while the costs are paid in the short-run, too little of this funding is now occurring and, hence, additional funding would yield positive results. On the other hand, public-choice realities warn against trusting government officials to extend such funding in economically justified ways.]
Back in April, Chelsea Follett made clear that “calls for wealth redistribution rest on a faulty premise about inequality.” A slice:
Recent work on multidimensional inequality suggests that the world has not been drifting toward ever greater gaps, but that the rich and the poor have been converging in material comfort. Calls for global wealth taxes or massive new aid programs often rest on the assumption that international trade and economic freedom have failed to deliver broadly shared gains. Yet the long-term evidence suggests the opposite.
J.K. Lundblad tweets: (HT Scott Lincicome)
There is a misconception that protectionism will make the supply chain more robust by reshoring it.
Often, historical evidence suggests the opposite: protecting domestic production leads to more fragility by restricting the supply chains ability to adapt.
I also discussed this in my big tariff/trade essay:
“In 2022, for example, the US faced an extreme shortage of baby formula. The immediate cause was a suspected bacterial contamination at a major producer, which forced a temporary plant closure. The true cause, however, was a protected supply chain; imported baby formula faced high tariffs and red tape, which allowed the US formula market to be controlled by just three suppliers. When panic buying set in, the domestic supply chain couldn’t adapt, and store shelves emptied. The shortages were only resolved by importing formula en masse from Europe aboard military cargo jets.
To witness firsthand the effects of protectionism, we could look at the state of two industries that are perhaps the most protected under the guise of “national security” in the US: steel and shipbuilding. For decades, the government peppered these sectors with protective tariffs, subsidies, “buy American” requirements, etc. As a consequence, however, their inefficiency has become so severe that the United States now fears that it cannot produce the wares it needs in the event of a war. So, it is looking to outsource shipbuilding and steel-making to Korean and Japanese companies instead. In other words, efforts to ensure supply-chain independence have bred a desperate dependence on allies instead.
The impression is given that a worker’s “benefits” are financed by his “contributions.” The fact is that taxes currently being collected from current workers are being used to pay benefits to persons who have retired or to their dependents and survivors. No trust fund in any meaningful sense is being accumulated. (“I am You.”)
“Central planning fails not because of insufficient intelligence, but because of the nature of productive knowledge: tacit, local, fleeting, and held privately by those who acquired it through their work,” the company wrote, citing Friedrich Hayek. “Attempting to aggregate knowledge for the use of a centralized intelligence faces the same challenge.”
The most absurd assertion which can be put into language is that a thing (e.g., free trade) is true in theory but is false in practice. For, if free trade is not true in practice, something else, viz., restricted trade, is alleged to be true and beneficial in practice. It will therefore be a matter of scientific investigation to find out how restriction acts, what forces it brings into action, what are the laws of those forces, what are the conditions of successful restriction, etc. etc.-in short, to find out the theory and philosophy of restriction. The theory thus found will be “true” because deduced from observation and ratified by experience. But it was conceded, at the outset, that free trade is true in theory. Hence it would follow, if free trade is true in theory but not in practice, that two opposite and contradictory propositions about the same subject-matter could both be true at the same time. This is the height of absurdity. Any one, therefore, who makes this assertion is either guilty of very loose thinking, or else he seeks an escape, at all hazards, from rational conclusions against which he can no longer contend.
A high rate of monetary expansion would not be desirable but a free society can live with any rate of monetary expansion, provided there isn’t an attempt to eliminate its effects by price and wage controls. What a free society cannot live with is an attempt to repress inflation.
