The problem for Cass is not that economists do not consider the costs and benefits of tariffs. It is that they consistently find that the costs outweigh the benefits.
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You might think you’re just shopping for a good deal, but Oren Cass doesn’t approve of your decision because he thinks it harms someone else for you to pay a lower price. When tariffs force you to pay a higher price, you’ll be a little poorer, but according to Cass, it’s for the greater good. It’s the same style of argument that environmentalists make when they argue for higher energy prices and more government spending on green energy. You’ll be a little poorer, but it’s for the greater good.
In many cases, though, it’s not just a little poorer. Cass gives a hypothetical example of a $32 American toaster to replace a $30 import. But, based on prices of toasters made in other developed countries, a fully American toaster would probably cost somewhere closer to $300. Multiplying the cost of a toaster by ten is not good for workers who want to buy toasters, and there’s a whole lot more of them than there ever would be workers who would make toasters.
Cass also believes that your money doesn’t really belong to you, but rather belongs to the nation.
Kevin Corcoran explains some of the substitution effects of minimum wages. A slice:
[I]t’s important to keep in mind that it’s the relative rather than absolute cost that drives these adjustments. Even if the costs of the new machine are more expensive than human labor in absolute terms, the new minimum wage law has still made the use of machines relatively less expensive compared to human labor than before. And that’s all that needs to happen for the substitution effect to kick in.
[DBx: See also this great 1999 paper, on minimum wages, by Don Bellante and Gabriel Picone.]
Of course they’re coming for your investments.
Higher taxes on capital are becoming a centerpiece of liberal politics on both sides of the Atlantic. While Democrats flirt with substantially higher taxes on capital gains (realized or unrealized), Britain’s Labour Party contemplates steeper levies on capital gains and inheritances as Chancellor of the Exchequer Rachel Reeves prepares her first budget proposal for release next month.
The left’s ideological suspicion of capital is only part of the story. The more important phenomenon is a profound change in the tax base in modern economies after 30 years of failed economic policies and hyperactive monetary easing. Capital, rather than labor income, is where the money is now.
For at least 40 years, the value of American households’ assets has increased faster than their incomes. Throughout much of the 1980s, household wealth hovered at or below 500% of disposable income, according to Federal Reserve data. If labor incomes and wealth had increased at the same rate, this ratio would have remained stable. Instead, U.S. household net wealth now stands at 785% of disposable income—and that’s off a peak of 836% in the first quarter of 2022.
Phil Magness reviews Boyce Thompson’s Lincoln’s Lost Colony.
Scott Lincicome reports on “the government’s war on starter homes.” A slice:
In Minnesota, for example, it’s effectively impossible for developers to build a home in the $150,000 to $250,000 price range because of not just land and construction costs but eye-popping regulatory fees: “One third of the total package price, with the land, is in the regulatory costs,” one builder noted, including “your wetland fees, your park dedication fees, your permit costs,” and more. Thus, a house in Corcoran, Minnesota, that costs $182,000 to build will have an all-in cost of $372,000, including $56,000 in administrative costs alone! Throw in a modest profit margin, and you’re well out of “starter” range in the area. The same goes for estimates from Michigan and New Jersey.
Arif Panju asks: “Will SCOTUS take on New York’s latest eminent domain scam?”
GMU Econ PhD candidate Susannah Barnes-Petitt looks at data on the child tax credit. Here’s her conclusion:
Indeed, some research does indicate that in countries where welfare programs for women and children are expansive (like Scandinavian countries), women work fewer hours and experience greater gender gaps in earnings. This result is especially pronounced for mothers, who experience “motherhood penalties” that reduce their participation in the labor force and their hours worked.
Kevin Bass tweets: (HT Jay Bhattacharya)
Science is an amoral enterprise. Its power to do good depends entirely on the scientist’s amorality. When activism and morality are introduced into science, it may temporarily become more exciting, but eventually this process completely destroys science, as we are seeing today.
