Elon Musk tweets his endorsement of Johan Norberg’s new book, The Capitalist Manifesto.
Sehon briefly talked about rights-based objections to socialism. He seemed to accept the old-school ACLU rights, but scoffed at any notion of rights to private property or freedom of contract. Which makes little sense. A priest builds a church and holds services. If the government seizes it for the greater good, that violates his rights. Great. A merchant builds a factory and conducts business. If the government seizes it for the greater good, that doesn’t violate his rights? What’s the logic even supposed to be? Both religion and commerce infuse some people’s lives with meaning. For other people, they’re both casual affairs. Why protect all religion — and no commerce — from consequentialist calculations?
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In the debate, I told the audience that the 2020 U.S. presidential election nicely exposes the sheer crumminess of democracy. Trump or Biden: Those are your choices. Sehon replied that choosing between Trump and Biden is better than just letting Elon Musk run the show. A straw man, but I still felt like I could hear the whole audience silently cheering the Elon alternative.
GMU Econ alum Jon Murphy busts some myths about free trade and shortages. Two slices:
Were the shortages and economic turmoil that arose during the pandemic due to free trade? Good analysis and wise policy depend on looking at events in their full context. Thus, to fully understand the shortages and what policy is necessary to prevent such a breakdown in the future, we need to understand the legal and economic world of the pandemic. Such an analysis shows that these protectionist justifications do not fly.
The argument that free trade makes an economy vulnerable appears to be correct on the surface: As economies become more interwoven, shocks in one nation can spill over and affect other nations intertwined with them. Thus, to prevent such contagion, isolating or building domestic redundancies into supply chains may be needed to prevent disruptions.
This argument rests on two critical mistakes: a fundamental misunderstanding of trade and erroneous assumptions of the incentives faced by economic actors. Understanding these two faults will allow us to see how their argument that trade makes supply chains vulnerable is incorrect.
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Second, baby formula. The USDA strictly regulates baby formula in the US. In fact, only six producers of baby formula are allowed to operate in the United States, and imports are strictly forbidden unless approved by the FDA. When Abbott Nutrition, one of the six producers, was forced to shut down in May 2022 over safety concerns, a massive shortage of baby formula hit the US. President Biden invoked the Defense Production Act to waive FDA requirements and flew in supply from overseas. Rather than making the US baby formula robust, the protectionist actions made it so vulnerable that they had to be waived to deal with a single factory’s shuttering. These examples show that protectionism weakens supply chains and makes manufacturing more vulnerable to disruptions because alternatives cannot be procured. Free trade cannot be blamed for making supply chains and industries vulnerable to disruptions; rather, it makes them more robust. Free trade cannot be blamed for the shortages resulting from COVID-19. Rather, the lockdowns and price controls caused the disruptions.
The Wall Street Journal‘s Editorial Board identifies some reasons why Bidenomics is unpopular. A slice:
After adjusting for inflation, the typical white family’s income rose 1.3%, the report says. But it shows declines for black and Hispanic families of 1.6% and 1.1%, respectively. Wages for minorities didn’t keep up with inflation, and those for whites barely did.
Eric Boehm reports on a government-run grocery store in Erie, Kansas. A slice:
In Chicago, officials envision a city-owned grocery store as a way to address food deserts in neighborhoods where privately owned stores have closed and moved away. But rather than trying—and inevitably failing—to duplicate those services at the public’s expense, Johnson should instead listen to why the likes of Walmart and Safeway have bailed. “Grocery operators have pointed to crime and homelessness as reasons they’ve needed to invest more in security, driving up costs,” the Chicago Sun-Times reported earlier this year.
Grocery store chains don’t have some anti-Chicago bias. If the people in charge of the city made those neighborhoods safe and economical places to do business, groceries would be as plentiful as they are anywhere else in America. Reducing Chicago’s high crime rate would surely help, though that’s admittedly a long-term project. But there is something city officials could do almost overnight: Reduce Chicago’s commercial property tax rates, which are some of the highest in the country, or the city’s high sales taxes that incentivize consumers (the ones who can, anyway) to do their shopping outside the city.
At best, a government-run grocery store is merely addressing the symptoms, not the underlying problems plaguing Chicago—and it seems unlikely to improve the symptoms, for that matter.
A recent piece by David Leonhardt in the New York Times Magazine leaves John Cochrane mostly grumpy. A slice:
Just about every word of this [a slice from Leonhardt’s article] epitomizes why we are in the sorry state we are. The Biden Administration’s Federal Highway Administration declared (see previous blog post) that none of the “infrastructure” money would be used to expand road capacity, or, most scandalously, “have significant impacts to travel patterns!” Rebuild, perhaps, but not if it solves any of the problems in the first paragraph. No, the private sector will not “subsidize semiconductor manufacturing.” Wasn’t that exactly the sort of activity that Leonhardt just said is best for the private sector to do? Semiconductor manufacturing is doing just fine abroad. The massive money is earmarked to bring it to the US, where we will do it more expensively. This is simple protectionism on steroids; do to chip manufacturing what the Jones Act did for the Merchant Marine and sugar subsidies do to them. “Expand clean energy” with mind-boggling subsidies and protection — on the order of a Trillion dollars, largely for current generation battery powered electric cars, which save no carbon, and which China can also make more cheaply if you care about the environment.
Candace Smith explains that etiquette enhances our individuality.
Here’s the abstract of a new paper by Stan Veuger, Beatrice Lee, Jeffrey Clemens, and John Kearns:
We analyse whether US federal aid to state and local governments impacted economic activity through either direct or cross-state spillover effects during the COVID-19 pandemic. Deploying an instrumental-variables framework rooted in the funding advantage of states that are over-represented in Congress, we find that federal assistance had significantly less impact on state and local government employment, as well as broader measures of economic activity, than estimates from prior crisis responses would imply. The modest employment impacts we find stem largely from the direct effect of states’ own aid allocation, as opposed to spillovers across state lines. These findings point to an important role for variations in fiscal policy transmission mechanisms, namely that cross-state spillovers are less likely to be important when some of the key mechanisms for such spillovers, like robust interjurisdictional supply chains and patterns of consumption, are muted or shut down.
