Vincent Geloso explains the importance of economic freedom for dealing successfully with pandemics. A slice:
This insight is what my friend Jamie Bologna Pavlik and I set out to test in a recently published article in Contemporary Economic Policy. We relied on the flu pandemic of 1918 to see if institutional flexibility mitigated the damages of the worst pandemic of the 20th century. We used economic freedom as our main variable of interest. Because the economic freedom variables produced by economic historians included measures of regulation, international trade barriers, property rights protection and sound money, we assumed it was a reliable proxy for this flexibility.
We found that economic freedom heavily mitigated the damages (measured by excess death rates) of the 1918 pandemic. In other words, an economically free country faced lower economic costs than less free countries with the same death rates. When we decomposed the effects into the different components of the economic freedom measure, regulation levels yielded consistent effects: more regulatory barriers and burdens meant greater economic damages from the pandemic.
For starters, contrary to the claims of pro-government spending proponents, economists are far from having reached a consensus about the actual return on government spending. While some economists find that a dollar spent by the government generates more of a return than the dollar spent, others find that the return is less than one dollar. And yet others find that if you take into account the future taxes needed to pay for the dollar that’s spent, the multiplier is actually negative, and the economy takes a hit.
After reviewing the recent academic literature for the Mercatus Center’s publication The Bridge, my colleague Jack Salmon and I found that most of “the empirical literature on fiscal multipliers conducted since then (2009) has found economic multipliers resulting from additional government spending ranging from a lower estimate of around 0.2 to an upper estimate of around 0.9.” We go on to explain that in “(p)ulling the results from two dozen academic studies, we calculate an average multiplier at the low end of 0.31 and an average multiplier at the high end of 0.66.”
Yet 97% of U.S. jobs in the aluminum industry are in downstream production or processing. The tariffs will raise costs for them as well as end-users like beer companies and auto makers. A Federal Reserve paper noted last December that Mr. Trump’s Section 232 and 301 tariffs in 2018 were associated with lower manufacturing employment and higher producer prices.
The pandemic’s uncertainty has burdened businesses, and border taxes won’t help. If the U.S. walks back on its trade commitments, how can it criticize China for doing the same? The aluminum tariff is Mr. Trump at his policy worst: He hurts U.S. industry and consumers, while telling America’s friends that his word on trade can’t be trusted.
Chris Edwards is rightly dismayed by biased reporting by the Wall Street Journal on state budgets.
Michael Huemer isn’t optimistic about democracy’s prospects.
Nick Gillespie reports on Nick Cave’s criticisms of cancel culture.
Here’s part 6 of George Selgin’s wonderful series on the New Deal.
