But perhaps what Mr. Cass and protectionists are defending is not literally social anthropomorphism but simply collectivism, the bundles (or should I say the “fasces”?) of doctrines claiming that the collective is superior to the individual and that collective choices should take precedence over individual choices. Mr. Cass writes:
Dig to the bottom of the post-war case for free trade, and one finds not a closely reasoned and unassailable doctrine, but rather a condescending lecture about preferring the global to the national interest. Who was the “we” that had “agreed” to this?
Condescending? Since, for Mr. Cass, individuals are not practically or morally competent to make their own decisions (like, say, buying dolls from Chinese sellers), since individual liberty does not create an auto-regulated order, they need collective discipline and our author knows which collective, which “we,” they should be submitted to: not the world collective but the United States collective. One collective must rule and the “national interest” is the best collective interest. By the way, how does one calculate the collective interest in a numerous society of different individuals with different preferences and in different circumstances? At any rate, once some majority determines the goals, all individuals will have to obey, or else. Economists, we are told, “have a vital role to play in analyzing how best to accomplish the nation’s goals.”
Fortunately and quite coherently, a large number of economists have tended to stand more on the individual’s side. In the (classical) liberal and individualist perspective, individuals live in different, often overlapping, societies—the world, their countries, their villages, their online communities, their professions, etc.—because each thinks it is in his interest to do so. In a free society, characterized by individual liberty, each one pursues his own goals (his “ends” in the terms of Friedrich Hayek). Each one is free to pursue his own happiness.
That the collectivist ideology espoused by protectionists would lead to logical contradictions is not surprising. In defending the “national interest,” protectionists are strangely incoherent, as 19th-century economist James Mill and his more famous son John Stuart already pointed out. The protectionists want their country’s resources (“our national resources”) to produce goods for the consumption of foreigners, which is what exportation is; and they hate to see the resources of foreigners used to produce goods for their fellow citizens, the importing country’s residents, which is what importation means. To be coherent with their own collectivist logic, they should instead favor imports and fight exports.
Former president Trump likes to attack President Biden’s record on inflation. For example, last month in New Hampshire, Trump said: “Biden’s inflation catastrophe is demolishing your savings and ravaging your dreams.”
It is ironic, then, that two of Trump’s signature 2024 campaign promises — a massive increase in tariffs and a massive reduction in immigration — would also cause prices to spike.
Trump has floated creating “a ring around the U.S. economy” by imposing a blanket 10 percent tariff on all imports to the U.S. This would directly raise the prices of trillions of dollars of imports, eroding the purchasing power of consumers’ wages and incomes. It would raise the prices of intermediate goods for U.S.-based firms, which would lead to further price increases for American consumers. And it would lead to retaliatory tariffs from other nations, causing further price hikes.
George Will said it best: “A significant date in the nation’s civil rights progress involved an African American baseball player named Robinson, but not Jackie. The date was Oct. 3, 1974, when Frank Robinson, one the greatest players in history, was hired by the Cleveland Indians as the major leagues’ first black manager. But an even more important milestone of progress occurred June 19, 1977, when the Indians fired him. That was colorblind equality.”
So, what determines CEO pay? Supply and demand. In the last decades, as a result of a more globalized economy, large firms saw increasing competition. Whereas national firms used to be worried mostly about other domestic players, they now have to worry about competitors all around the world. The cost of managerial mistakes in the face of this competition is also greater. The demand for extremely rare managerial skills has thus increased in order to avoid these mistakes. This is why we observe that more than 60 percent of corporate executives now have graduate degrees (compared to less than 10 percent in the 1930s) in pure sciences, mathematics, engineering, and statistics. They are also older – reflecting greater acquired experience – than in the past.
Simultaneously, the supply of such skills has not kept up with demand. The time needed to accumulate skills and experience is considerable and few people want to have the downsides of being a CEO. That life is stressful and less conducive to family formation. There is a strong reputational aspect to the craft. Errors can follow a person for a long time, forever tainting a reputation. Few people want to follow that path given these trade-offs. Moreover (and somewhat counterintuitively), while CEOs of top firms are smart people, they are probably not the smartest people in terms of cognitive abilities. But they score higher on non-cognitive abilities such as autonomy, self-discipline, resilience, and impulse control. These non-cognitive skills are complementary to the cognitive skills. The problem is that the combination of such complementary skills is rare, resulting in only a small pool of possible candidates. The supply is growing slowly.
Demand is increasing faster than supply, which results in growing CEO pay. It’s basic economics.