Tweet

David Henderson shares more stunningly mistaken claims found in Joseph Stiglitz’s new book. Two slices from David’s post:

I’ve posted already a link to my critical review of Joseph Stiglitz’s 2024 book, The Road to Freedom: Economics and the Good Society. As you can see, I’m not a fan.

My review could have easily hit 5,000 words. There were so many errors and misleading statements that I didn’t get room to critique. It is, as my military students would say, a “target-rich environment.”

…..

How does Stiglitz know what people wanted? If markets weren’t delivering certain things, there’s a presumption that people didn’t want them very much. That’s not true when there are large externalities or public goods problems. But retirement benefits are private goods. A dollar you save for your retirement is a dollar I can’t have.

Social Security came along in 1935. Why is that significant? Because it was in the middle of a Depression and so it was hardly likely that people’s first instinct was to ask, “How can I save for my retirement?” rather than, “How the heck can I feed my family?” Moreover, given life expectancies at the time, it didn’t make sense for many people to put aside many resources for retirement, even absent the Great Depression. And it was telling that even though the Senate voted for the Clark Amendment to the Social Security bill, an amendment that would have allowed people to avoid Social Security if they had government-approved pension plans, it was not included in the bill. It looks as if the market was trying to provide retirement benefits.

Emma Camp reports that “when cities embrace charter schools, achievement gaps shrink.” A slice:

Cities with high charter school enrollment have consistently improved achievement for low-income students, a new report from center-left think tank the Progressive Policy Institute found. Contrary to choice-skeptical talking points, charter schools breed innovation and push local public schools to improve as well, according to the report.

My intrepid Mercatus Center colleague, Veronique de Rugy, decries the fiscal incontinence of Biden, Harris, and Trump. A slice:

The federal government’s debt is now over $28 trillion by one measurement. That’s $2 trillion more than last year and $6 trillion more than when the Biden-Harris team entered the White House. This debt stands at 100% of America’s GDP, which, other than a one-year exception at the end of World War II, is the highest ratio we’ve ever had. Unlike in 1946, today’s debt is only going to grow. Indeed, debt-to-GDP took a nearly 30-year dive to reach 23% in 1974. Today, federal debt is projected — again, under the rosiest scenarios — to rise to 166% in 30 years.

Steven Greenhut recounts how the removal of rent control in Argentina is having precisely the beneficial consequences that are predicted by ECON 101. A slice:

Here’s another interesting fact from Argentina’s rent controls, per the Journal: “In Buenos Aires—a city dubbed the Paris of the South for its broad avenues and cafe culture—many apartments long sat empty, with landlords preferring to keep them vacant, or lease them as vacation rentals, rather than comply with the government’s rent law.” The newspaper said that owners of many of those 200,000 units are now putting them on the market.

Economist Anne Krueger recounts how Trump-Biden protectionism in the United States is having precisely the negative consequences that are predicted by ECON 101.

The Editorial Board of the Wall Street Journal reports on an effort underway in California to effectively outlaw firms from employing low-skilled teenagers. A slice:

Unions want to raise the state minimum to increase pressure on employers to lift pay for other workers. They’ve linked up with progressive financier Joe Sanberg to bankroll Prop. 32, which would raise the minimum to $18 an hour next year and index the wage to inflation in future years.

Are they trying to keep teens out of work? Abundant economic research shows that higher minimum wages price teens out of the job market because they have the least experience and are usually the least productive. They then miss out on valuable training and lessons, such as showing up on time.

California is a case study. Its minimum wage has climbed faster than overall inflation, increasing from $12 in 2020. The higher minimum wage phased in as businesses were recovering from Gov. Gavin Newsom’s destructive Covid lockdowns, and its effect was entirely predictable: Higher youth unemployment.

A recent study by research shop Beacon Economics found that 90% of the 130,000 newly unemployed in California during the past two years were under age 35. Between the first quarters of 2022 and 2024, unemployment among those ages 16 to 19 increased to 19.2% from 10.8% in California, versus 11.9% from 10.5% nationwide.

Speaking of California, Jon Miltimore tells the tale of the government of that state doubling down on its failed effort to ban plastic bags.

Here’s Adam Carrington on William B. Allen on Montesquieu’s The Spirit of the Laws.

Charles Cooke’s opinion of Kamala Harris is not ambiguous:

I think she’s a dishonest, vapid, opportunistic cipher who, in any serious country, would be considered ineligible to run a post office, let alone to manage the executive branch of federal government.

Tweet

I’m glad that I was never on Twitter.

Mr. V__:

Such potty language! Not being on X I missed this charming tweet that you shared – a tweet that incites you to ask “what in God’s name blinds [me] and other market fundamentalists to corporate greed as the cause of price gouging.”

I’ll take more seriously the theory that price increases are caused by corporate greed if and when proponents of that theory acknowledge and promote its implication – namely, the theory that price decreases are caused by corporate altruism. If you insist on explaining prices as resulting chiefly from the intentions of corporate executives, you have to use this ‘theory’ to explain all prices, not just those that you dislike.

As it happens, today’s Wall Street Journal reports that “last year’s warm winter likely means cheap heat this year.” Here we have a weather event followed by changing prices. If in the wake of hurricanes and other destructive weather events observed price increases are best explained by corporate greed, then it must also be true that in the wake of favorable weather events, such as last year’s warm winter, observed price decreases are best explained by corporate altruism. Is this your theory? Will you and the tweeting pundits whose economic analyses you find to be “more realistic than robotic stories of ‘supply & demand’” publicly applaud energy producers and utility companies for their outburst of selflessness?

Consistency isn’t the only requirement of sound thinking, but it’s one of them. Having never encountered from champions of the “corporate greed” theory of rising prices a “corporate altruism” explanation of falling prices I would reject their theory even if I were unaware of the far more compelling account of price changes – of price increases and of price decreases – offered by the emphatically nonrobotic theory of supply and demand.

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

Tweet

… is from page 30 of Michael Strain’s new paper “Protectionism is Failing and Wrongheaded: An Evaluation of the Post-2017 Shift toward Trade Wars and Industrial Policy”:

All the old questions about industrial policy are worth repeating in light of its revival: Why should we expect the government to do a good job of picking winners and losers or to allocate scarce resources better than the market? If the government intervenes in markets, how will it avoid mission creep, cronyism, and corruption?

DBx: Excellent questions. Industrial policyists seldom bother even to acknowledge such questions, and they never answer them.

Tweet

Oren Cass, Chief Economist
American Compass

Oren:

As chief economist at an influential think tank you commit a surprisingly large number of elementary economic mistakes (“All Who Squander Are Lost,” October 2). The worst of these errors is your presumption that U.S. trade deficits imply that we Americans are consuming beyond our means. This mistaken presumption is itself rooted in the false notion – one that you repeat incessantly – that every dollar increase in U.S. trade deficits implies that we Americans are either going one more dollar into debt to foreigners or that we are selling off on net one dollar’s worth of our assets to foreigners.

You’re wrong.

Because the stock of capital in America (and in the world) isn’t fixed – because this capital can and, under the right conditions does, grow – foreigners can continue, year after year after year, to increase their investments in the U.S. without any decline in Americans’ investment holdings or any increase in Americans’ indebtedness. Indeed, Americans’ net worth can increase even as America’s trade deficits persist and even rise.

What America uniquely offers to the world is a relatively free, a very large, and an intensely entrepreneurial market grounded in reliable protection of property and contract rights. Yet this attractive market environment – unlike, say, land or corporate shares – isn’t classified as an asset for accounting purposes. Therefore, in international accounts the convention of double-entry bookkeeping requires that when foreigners take advantage of our attractive economy by increasing their investments here the accounts show that things that are classified as assets – things owned or owed by Americans – are ‘transferred’ to foreigners.

The result is a false illusion that’s an artifact of an accounting convention – an accounting convention that has always been wholly inappropriate for measuring the performance of a spontaneous, open-ended order that is a market economy. For this reason, no less an economist than Adam Smith described balance-of-trade accounting as “absurd.”

Want evidence of the absurdity of balance-of-trade accounting? If the story you tell were true – a story of U.S. trade deficits being a sure sign of Americans going on reckless spending binges funded by selling off assets to, and borrowing funds from, foreigners – we Americans would now be destitute. After all, America has run an unbroken string of annual trade deficits every year starting 1976. That’s nearly a half-century-long run of annual trade deficits, or 20 percent of our nation’s existence. And yet —

– Inflation-adjusted net worth of nonfinancial corporate businesses in America today (June 2024) is 386 percent greater than it was in 1975, the last year America ran an annual trade surplus. (I adjusted for inflation using this Personal Consumption Price Index calculator.)

– The ratio of nonfinancial corporate business debt to the market value of corporate equities is today (June 2024) only 26 percent of what that ratio was in 1975.

– Most tellingly, the inflation-adjusted total net worth of American households is today (June 2024) 281 percent greater than it was in 1987 (the earliest date for which I can get consistent data). Because the number of households in the U.S. today (2023) is only 47 percent greater than it was in 1987, the average inflation-adjusted net worth of an American household has increased significantly over the past 37 years. This fact alone suffices to discredit your economically naïve tale of American trade deficits draining Americans of wealth.

Other errors stampede through your essay. But no more than what’s written above is necessary to reveal that your understanding of trade and of the American economy is severely wanting.

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

Tweet

J.D. Tuccille is correct: “Trump’s destructive tariff proposals will make us all poorer.” A slice:

With Trump proposing 60 percent tariffs on Chinese goods and universal tariffs up to 20 percent, we’re in Hawley-Smoot territory, and risk another trade war. That means higher prices for American consumers, stiffer costs for American businesses, and retaliation that could, again, torpedo international trade.

That’s not how you build prosperity.

Karl Rove explains some of what Trump gets wrong about William McKinley. A slice:

McKinley didn’t stop there, continuing to promote reciprocity. His most powerful advocacy came at the Pan-American Exposition in Buffalo on Sept. 5, 1901. Addressing representatives of trading partners and a large crowd, the president heralded global modernization, saying “isolation is no longer possible or desirable.” America’s “capacity to produce has developed so enormously,” he declared, that we can’t entertain the “fancied security that we can forever sell everything and buy little or nothing.” He called for “a broad and enlightened policy” of reciprocal agreements, “essential to the continued and healthful growth of our export trade.” His words were warmly received.

They were also his last public ones. The following afternoon, McKinley was shot by an anarchist while receiving visitors in the Exposition’s Hall of Music. He died eight days later.

Mr. Trump skips over a lot of history when he calls McKinley “a big tariff guy.” And he misses the facts when he insists America was “probably the wealthiest it ever was” in the 1890s because of tariffs. Starting in 1893, America wallowed in a depression that lasted nearly four years. It ended only after McKinley defeated William Jennings Bryan over the Democrat’s call for an inflationary silver currency. McKinley’s endorsement of the gold standard restored business confidence. It was this sound-money policy—not tariffs—that restored prosperity.

Clark Packard and Scott Lincicome ponder the power of the U.S. president to impose destructive tariffs.

Michael Strain summarizes some important parts of his excellent new paper “Protectionism is Failing and Wrongheaded: An Evaluation of the Post-2017 Shift toward Trade Wars and Industrial Policy.” A slice:

I argue that much of the policy debate reflects the wrong lessons from the “China shock,” including that trade reduces employment. Indeed, I argue that trade is not about jobs at all — it is about consumption, productivity growth, and wage growth.

I’m very pleased to have been a guest of Jonathan Fortier on a Libertarianism.org podcast to mark the 50th anniversary of the announcement of F.A. Hayek’s Nobel Prize award.

David Henderson shares his notes on Hayek’s most famous academic article, “The Use of Knowledge in Society.”

The Wall Street Journal‘s Editorial Board rightly criticizes CNN and Sen. Bob Casey (D-PA) for peddling economic ignorance. Two slices:

You can tell the Pennsylvania Senate race is tightening because CNN on Wednesday rolled out a hit piece on GOP Senate candidate Dave McCormick’s record as former CEO of Bridgewater Associates. The story happens to fit perfectly with Democratic Sen. Bob Casey’s campaign strategy vilifying private business.

…..

Well-diversified investors take short positions to hedge risks in their portfolio. As the Biden Securities and Exchange Commission explained last year, “short selling provides the market with important benefits, such as providing market liquidity and pricing efficiency.”

Yet the CNN story makes short-selling sound nefarious. “Short positions, which are essentially bets that the companies’ stocks will drop, can hurt corporations by depressing their stock prices, making it harder to gain new financing, invest or hire more workers, according to experts,” CNN says. “For financial institutions, short positions can be lucrative.”

Yes, and so can long positions. The goal of investing is to make money, but short sellers can also lose money if the price of stocks they short rise before their short bets come due.

My intrepid Mercatus Center colleague, Veronique de Rugy, warns of the increasingly perilous debt burden foisted on Americans by the fiscally incontinent U.S. government.

Samuel Gregg looks back on the contributions of Wilhelm Röpke, who was born 125 years ago on this date. Two slices:

Born 125 years ago today, in the northern German town of Schwarmstedt into a devoutly Protestant and classically liberal upper middle-class family, Röpke is remembered today as the intellectual force behind Ludwig Erhard’s liberalization of the German economy in 1948. Within ten years, this transformed a nation buried by a war of unparalleled destruction and 12 years of totalitarianism and economic dirigisme into Europe’s economic powerhouse.

But while a distinguished economic theorist who influenced economic policy during both the Weimar Republic and the postwar Federal Republic, Röpke was always more than an economist. When Röpke first came to the notice of another classical liberal economist, FA Hayek, it was because Röpke was “one of the few young German economists seriously interested in theoretical questions.” Yet as Hayek also observed in a tribute to mark Röpke’s sixtieth birthday, “Röpke realized at an early stage, perhaps earlier than most of his contemporaries, that an economist who is nothing but an economist cannot be a good economist.”

…..

Policy victories matter. No one understood better than Röpke how abolishing price-controls and the establishment of monetary stability in 1948 had saved West Germany from economic catastrophe. Röpke’s bigger message, however, was that if free marketers didn’t identify and address the subterranean intellectual forces driving collectivist impulses, despotism would triumph.

We see this conviction at work in Röpke’s sharp critiques of the Keynesian economic revolution. According to Röpke, Keynes’s effective creation of macroeconomics and his disciples’ efforts to translate concepts like aggregate demand, aggregate employment, and aggregate capital-flows into mathematical formulae and econometrics reflected the influence of scientism — the idea that the only way to know truth is through science and the empirical method — upon intellectuals. In Röpke’s view, scientism encouraged tendencies to regard the economy “as the result of mechanical quanta subject to precise measurement and direction by an omnicompetent technical human intelligence.”

Marcos Falcone justly praises Taiwan.

“Universal Basic Income Shows Why Giving People ‘Free Money’ Doesn’t Work.“

Tweet

… is from page 25 of Art Carden’s excellent paper “Competition, Coercion, and African American Economic Progress in the Work of Robert Higgs,” which is chapter 1 of the hot-off-the-press Legacy of Robert Higgs – a collection of original papers, edited by my GMU Econ colleague Chris Coyne, in honor of the great economic historian Robert Higgs, who earlier this year celebrated his 80th birthday (most references omitted; links added):

Southern employers [in the post-Civil War United States] could discriminate legally. Many wanted to and were encouraged to; however, whether they could discriminate effectively is a question about the incentives they faced in Southern labor markets. Following Becker’s (1971) analysis, Higgs asked whether Black workers were systematically paid less than comparable white workers for the same work. He answers that they were not. If whites had a “taste for discrimination” for which their labor commanded a wage premium, it was extremely weak. Moreover, “equal pay within a given occupation was the most common practice,” and commercial discrimination was weaker and harder to identify than political discrimination. His conclusions were consistent with what he had found in a 1971 paper in the Journal of Economic History about immigrants, where he wrote that “the evidence is quite convincing that at least some American employers preferred wealth to the pleasures of discrimination.” The free market did not eliminate discrimination but punished it.

Tweet

David Henderson describes Joseph Stiglitz’s new book, The Road to Freedom, as one of the worst books he’s read in years. Four slices from David’s excellent review:

Throughout the book, Stiglitz makes strong assertions with little or no evidence. Although the book is heavily footnoted, the footnotes are mainly to explain some of his ideas further or to reference other books or articles, disproportionately written by Stiglitz. There are few hard numbers, and he makes little attempt to cite writings by those he criticizes. He also shows a stunning ignorance of economic history and, in discussing price gouging, shows no awareness of the downside of price controls. His criticism of communism doesn’t even mention the millions of deaths it led to. At times, as when he discusses climate change, he is completely one-sided and seems completely unaware that he is. Moreover, Stiglitz is not shy about engaging in stunning personal attacks on Friedman and Hayek. The result is a book that preaches only to people who (1) already agree with him and (2) don’t need to see good evidence or arguments to support their views.

…..

Similarly, Stiglitz refers to people on the “Right” (he capitalizes the word) as advocates of “trickle-down economics.” They argue, he says, that “if we made the economic pie larger, all would eventually be better off.” (italics in original) Yet, I’ve never been able to find people on the “Right,” whether classical liberal, conservative, or libertarian, using the term “trickle-down economics” to refer to what they believe in. When someone uses terms to describe people’s beliefs, terms that those people never use to describe their own beliefs, we should be suspicious.

While we’re discussing it, though, it’s important to point out that the last two centuries of economic growth completely justify the idea that steady economic growth in a society does make virtually everyone better off. J. Bradford DeLong, an economist at the University of California, Berkeley—and certainly no one whom Stiglitz would regard as a “neoliberal”—beautifully documented that fact in a 2000 National Bureau of Economic Research study aptly titled “Cornucopia: The Pace of Economic Growth in the Twentieth Century.” This isn’t trickle-down economics; it’s gush-down economics.

…..

On a related note, Stiglitz accuses [Milton] Friedman of having been “a key adviser to the notorious Chilean military dictator Augusto Pinochet.” This claim has been refuted countless times. Friedman himself noted—and no one contradicted his claim—that Friedman spent about 45 minutes talking to Pinochet. Does that constitute key advice? And what is one to say about Stiglitz’s own close consulting relationship with Venezuelan strongman Hugo Chavez?

…..

One of the major players among free-market economists in the last century was the late Ronald Coase, who was even a player into the 21st century. Coase famously established that lighthouses in Britain, which so many economists—famously including Stiglitz’s own teacher, Paul Samuelson—assumed had to be provided by government, were actually provided privately. Coase never argued, though, that private producers could feasibly provide all public goods. Yet in a table summarizing various “neoliberal” views, Stiglitz writes, “[The] Coase theorem says that market will efficiently solve public goods problems.” Has he read Coase?

Michael Cannon rightly blasts “Kamala Harris’s irresponsible proposal to expand Medicare.”

The Editorial Board of the Wall Street Journal describes some economically harmful consequences of EV mandates. A slice:

The Environmental Protection Agency’s new greenhouse gas emissions rules require that battery-powered and plug-in hybrid vehicles make up 32% of auto maker sales in 2027. By 2032 no more than 29% of new cars can be gas-powered. Ergo, there will be only one gas-powered model for every two electric cars on dealer lots.

Ms. Harris and Democratic Senate candidate Elissa Slotkin claim the Biden rule isn’t an EV mandate. “No one should tell us what to buy, and no one is going to mandate anything,” Ms. Slotkin says in an ad.

The reality is that there will be many fewer gas-powered cars available, and they’ll cost much more owing to the government’s limit on supply. As her GOP opponent, Mike Rogers, points out in a dueling ad, Ms. Slotkin voted last month to keep the Administration’s mandate in place—an accurate reference to a House resolution to overturn the EPA rules.

Kerry Welsh did business in China, “but Americans benefitted more.” A slice:

Democrats and Republicans might not seem to agree on much these days. But when it comes to trade, they chant “China trade bad, tariffs good” in stereo, even as the data show the exact opposite.

For 15 years, I was responsible for hundreds of millions of dollars in Chinese imports entering the United States. I invented two enduring products—the “Backpack Beach Chair” and the “Magna Cart” portable hand truck—that can be found in Costco and other stores to this day.

Let’s use the Magna Cart to illustrate how America made billions while China made crumbs. The Chinese factory charged me $10 for a cart that cost them $9 to manufacture. U.S. retailers bought it from me for $15, then sold it to consumers for $30.

To recap: The factory made $1, I made $5, and retailers made $15, minus freight and U.S. tariffs.

Jack Nicastro is correct: “To give storm victims the best chance at recovery, let local knowledge and markets guide decisions.”

Today’s federal government in the U.S. is appallingly irresponsible.

My GMU Econ colleague Dan Klein ponders Tim Walz and shouting “Fire!” in a crowded theater.

Kevin Corcoran is understandably unimpressed with the economics of Star Trek.

Jeffrey Blehar sincerely tried to give Kamala Harris a break.

Vanessa Brown Calder warns that Trump’s plan to subsidize IVF will bring disaster. Here’s her sensible conclusion:

Although Trump’s plan is a disaster from the perspective of cost, incentives, and value neutrality, IVF is a true medical miracle for many couples with fertility challenges. Protecting IVF means protecting individuals’ freedom to avail themselves of the most successful procedure to treat a range of fertility issues and create human life, and doing so is critical.

But protecting IVF from efforts to limit its use and reduce its efficacy does not mean subsidizing or mandating coverage. Trump and future policymakers would do well to enthusiastically defend the procedure, but avoid the cost and pitfalls of a government-supported industry.

GMU Econ alum Ryan Young finds in Tolstoy an appreciation of some of the same features of reality that play a prominent role in the economics of scholars such as F.A. Hayek and Israel Kirzner. A slice:

Tolstoy’s characters in Anna Karenina each go through Kirzner-style processes of pursuing happiness. The title character, the unhappily married Anna, begins an affair with a dashing military officer named Vronsky. Parallel to their story is Levin, a young man Tolstoy modeled after himself, and Ekaterina, more often called Kitty, a debutante who is both kind-hearted and impressionable. The novel follows their lives, along with those of their family members and other people around them.

For many of the characters, part of their happiness discovery process is figuring out where to live. They go back and forth between the city and the country, with varying results. The country is a good fit for Levin, who has a pastoral romantic streak; his time in cities reinforces this for him.

Anna and Vronsky are more comfortable in Moscow and St. Petersburg conversing in salons, attending the theater, and dancing at balls, and don’t do as well out in the country. Different people have different preferences, both in markets and in happiness.

However, Anna and Vronsky’s affair is a scandal in their high society city circles. While the male Vronsky is mostly accepted back by his old friends, Anna is shunned in a double standard typical of the time and is isolated and lonely. Anna and Vronsky move abroad for a time to escape social censure, and then to a country estate.

They try new things in these settings, just as an entrepreneur would. While in Italy, Vronsky discovers his artistic talent, though he is disappointed that his skill with the paintbrush is limited to that of a copyist transcribing what he sees. A true artist, such as the one he and Anna meet and who paints her portrait, can instead create original interpretations and can bring hidden qualities into the open. Realizing this, Vronsky puts down his brush.

Tweet

… is from page 369 of F.A. Hayek’s Nobel lecture, “The Pretence of Knowledge,” as this lecture is reprinted in the 2014 collection, The Market and Other Orders (Bruce Caldwell, ed.), of some of Hayek’s essays on spontaneous-ordering forces:

The conflict between what in its present mood the public expects science to achieve in satisfaction of popular hopes and what is really in its power is a serious matter because, even if the true scientists should all recognize the limitations of what they can do in the field of human affairs, so long as the public expects more there will always be some who will pretend, and perhaps honestly believe, that they can do more to meet popular demands than is really in their power. It is often difficult enough for the expert, and certainly in many instances impossible for the layman, to distinguish between legitimate and illegitimate claims advanced in the name of science.

DBx: Yes.

Fifty years ago today – on October 9th, 1974 – the announcement was made that Hayek was awarded the Nobel Prize in economics.

Tweet

Mr. Freddie deBoer

Mr. DeBoer:

You brought admirable soundness of mind to the debate over covid restrictions. I wonder, therefore, why that soundness abandoned you in your recent broadside against ‘neoliberalism.’ In your October 7^th essay “They Still Won’t Say That They’re Sorry” you offer only self-righteous sermonizing amidst a mash-up of cherry-picked facts.

The foundational ‘fact’ on which your case against ‘neoliberalism’ rests is the allegation that “NAFTA and similar free trade agreements” caused America to deindustrialize. The evidence, however, that you offer to support this allegation fails. The fact that rates of fentanyl addiction, crime, and disability-payments are high in some American communities is indeed tragic, but these facts do not imply what you take them to imply – namely, that America has deindustrialized. Nor is deindustrialization implied by the data that you present showing that the absolute number of Americans working in manufacturing peaked in 1979.

Had you looked for direct evidence of American deindustrialization you wouldn’t have found it. The reason is that there has been no deindustrialization. America’s industrial capacity is today at an all-time high and 63 percent larger than it was when NAFTA first took effect in January 1994. And this capacity is being used: industrial output hit its all-time peak in September 2018 and is today only 0.9 percent off of that high. Note, by the way, that mid-2018 is when Trump’s tariffs were kicking into full effect; a case can be made that the slight decline in industrial output since then is a result of this retreat from free trade – that is, a result of a retreat from a policy that you assume, without sound evidence, to promote deindustrialization.

As for manufacturing employment, the relevant measure is not, contrary to your assumption, the absolute number of workers in manufacturing; rather, it’s the percentage of workers employed in manufacturing. Had you looked at the trend in this latter figure (shown here) you’d have discovered that the percentage of workers employed in manufacturing peaked in 1944 and has been steadily declining ever since, with no evident acceleration in this decline when NAFTA arrived, when China joined the WTO (in 2001), or when America began to run its still-unbroken string of annual trade deficits (in 1976).

Although tragic, the rise in fentanyl addiction, crime rates, “deaths of despair,” and many other problems in America cannot possibly have been caused by something – namely, deindustrialization – that never happened. And nor can, as you call it, “unfettered free trade” be blamed for this nonoccurrence.

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