David Henderson loves my colleague Bryan Caplan’s new book, Build, Baby, Build. A slice:
While the claim that we’ve lost our manufacturing sector is false—real manufacturing output peaked in 2007 and is now only 7 percent below that peak—what is true is that we have many fewer manufacturing jobs. The number of jobs peaked in June 1979 and is now 34 percent below that peak, due mainly to increased productivity. Although deregulating [housing] would not do much for manufacturing jobs, it would do wonders for construction jobs. Caplan estimates that unleashing the pent-up demand for housing could double the number of construction jobs from the current 10.8 million for years. This is one of the few claims for which he gives no data in the footnotes, but his claim is almost certainly true. Given the low level of housing construction, it’s not hard to imagine that massive deregulation would double that level, which would imply an approximate doubling of construction jobs.
As a further bonus, notes Caplan, the “deaths of despair” that Nobel Prize winner Angus Deaton and his wife Anne Case have written about, which are differentially borne by working-class men, would decline. And of course, cheaper housing would reduce another form of despair, the despair from being homeless. Caplan cites a study showing that high rents are “one of the best predictors of cities’ homelessness rates.”
Here’s Colin Grabow on “libertarians, trade policy, and national security.” Three slices:
In 2021, for example, my colleague Scott Lincicome published a detailed analysis of claims that a policy consensus favoring unfettered markets (if only!) has undermined American manufacturing with deleterious consequences for national security. As he documented—as did I in a 2023 essay—notions that US industry has atrophied under a regime of vigorous trade liberalization do not comport with the facts. Properly measured both in terms of value‐added and output, the sector remains robust.
That’s true not only of manufacturing broadly but also of defense‐related industries in particular. Indeed, a 2023 Department of Defense report found that “Americans have every reason to be confident about the future of defense supply chains.” US industry, the report added, “still leads the world in innovation and production.”
The premise behind proposed new government interventions to shore up domestic manufacturing on national security grounds is—broadly speaking—very much in question, if not outright debunked.
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Similarly, the protectionist Jones Act has proven a disastrous means of preserving the US commercial shipping and shipbuilding industries. While the law’s reservation of domestic water transport to US‐built and US‐flagged vessels theoretically ensures vibrant shipping and shipbuilding sectors to meet national security needs, its actual result has been a gross lack of maritime competitiveness. With little demand for the US maritime industry’s costly services, the number of oceangoing cargo ships compliant with the Jones Act has more than halved since 1980 while commercial shipbuilding output trails the likes of Croatia and Singapore.
High transportation costs produced by the law, meanwhile, inflict damage across the US economy—including to manufacturers.
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Furthermore, before protectionism is employed, the government should explore other policy options with a much better track record and far fewer downsides. Indeed, as free market advocates have long written, the best way to help US manufacturers and strengthen the US defense industrial base is usually the liberalization of trade barriers and the removal of government interference in market processes, rather than just more tariffs, localization mandates, and subsidies.
Scott Lincicome isn’t favorably impressed by Trump’s scheme to replace the federal income tax with tariffs. Two slices:
This iron law of economics is one that, as Dartmouth economic historian Doug Irwin explains, even protectionist heroes like Alexander Hamilton understood. Congress adopted tariffs that the founding father (and author of the famous/infamous Report on Manufactures) recommended, but these tariffs “were not highly protectionist because Hamilton feared discouraging imports, which were the critical tax base on which he planned to fund the public debt.” This dynamic is also something that today’s Republicans understand—at least when it comes to income taxes: the oft-cited “Laffer curve” posits that a tax on a certain economic activity (usually labor) won’t raise any revenue when it’s set at zero or 100 percent, with a hump (curve) in between.
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The tariff plan would also be plagued with practical problems. In just coverage alone, would Trump’s tariffs apply to all imported necessities like food and beverages (almost $200 billion last year); clothing ($51 billion); shoes ($18 billion); and medicines ($203 billion)? Would it apply to the almost half of all imported goods that are industrial inputs used by American manufacturers to produce (and often export) other stuff? Would it apply to that $700-plus billion in services, including the ever-increasing share transmitted digitally or the $149 billion that Americans spent traveling abroad last year (considered a “travel services import”)? Would it apply to Americans’ personal, small-dollar purchases of retail items, whether made as tourists abroad or via direct mail?
The list goes on and on.
Gale Pooley explains that resources are produced by human knowledge.
Arnold Kling has a different take from Steven Teles on the woes of today’s academy. A slice:
Today’s faculty may have CV’s that look good on paper. They know how to play the publication game. They have much better resources for doing research than faculty had fifty years ago. But what they produce is dull, cookie-cutter work. If it were never published, no one would miss it.
The problem came about because universities stopped hiring on the basis of talent. Instead, they started hiring to meet diversity requirements. In economics, this meant hiring women because they were women. I gather that in the past female economics graduate students were mistreated. That is inexcusable. But the solution should have been better conduct within the economics profession, not the mass recruitment of mediocre female economists.
Jeremy Horpedahl and I documented how published research in economics has become concentrated on gender, race and inequality. This year it got even worse. These are not the most important topics in economics. And even if they were, it is not as if the papers being published have achieved important breakthroughs.
George Will decries today’s bipartisan fiscal recklessness. Three slices:
Economic policy during a second Joe Biden term would be even worse than policy during a second Donald Trump term. Both, however, would continue a bipartisan consensus that for decades has grown broader, deeper, and more economically and culturally debilitating. Americans are sleepwalking toward convulsive pain, a consequence of decades of easy money policies to prevent minor pains.
Social outcomes that are deemed flaws of capitalism — increased inequality and corporate power — are actually largely consequences of government. It has grown excessively interventionist and confident as it and the nation have become addicted to prolonged low interest rates, the “socialization of risk” and the resulting misallocation of capital. Because of government’s “paternalistic fear,” a “bailout culture” has grown: “A safety net once meant to catch the poor at the precipice of hunger was extended under the financial markets.” This was the result of a vow by the Ayn Rand-reading Alan Greenspan, appointed Federal Reserve chairman by Ronald Reagan.
So argues Ruchir Sharma, investor and chairman of Rockefeller International, in his invigorating “What Went Wrong With Capitalism.” This nation has become “the biggest deficit spender in the capitalist world” by increasing increments of risk-aversion and pleasure-delivery by government.
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Because of the fiscal follies during the pandemic — “forgivable loans” (hitherto called grants), cash downpours (recipients, including most Americans, many of them gainfully employed, fattened bank deposits by $3.5 trillion) — the government issued more debt in 12 months than it had in the first two centuries after 1776.
Hitherto, the “cleansing effect” of large recessions culled weak companies, causing a 20 percent increase in bankruptcies. But because of the bailout culture, during the pandemic corporate bankruptcies declined. Did you even notice Biden’s $36 billion bailout of the Teamsters’ retirement plan in 2022?
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Socializing risk benefits the rich most, but others, too. Total U.S. social spending — including health and pension benefits delivered by private employers but mandated or subsidized by government — is about 30 percent of gross domestic product, and the welfare state is the world’s second-most (behind France) generous. But everyone eventually loses from what Sharma calls “a business culture pickled in debt.”
