David Henderson’s new biographical essay on Anne Krueger is now up at the Concise Encyclopedia of Economics. Two slices:
Possibly Krueger’s most important contribution to economics is her June 1974 article in the American Economic Review, “The Political Economy of the Rent-Seeking Society.” While in some ways, Gordon Tullock had beat her to the punch with his 1967 article in the Western Economic Journal, “The Welfare Effects of Tariffs, Monopoly, and Theft,” Krueger did a more careful analysis. She also introduced the term that stuck, namely “rent seeking,” and presented some estimates that showed the potentially large cost of rent seeking to the economies of Turkey and India. That she chose those two countries was a natural result of her having spent significant time in both countries, carefully studying their economic systems. In particular, she had closely examined quotas on imports that both countries’ governments used extensively. When a government has discretion in allocating quotas, potential importers will compete for those quotas. The competition might even take the form of bribing government officials.
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Krueger defends the idea that globalization, whatever its problems, has created large net benefits for the people affected by it. In Struggling with Success: Challenges Facing the International Economy (2012), a collection of her speeches and essays, she wrote that, starting in about 1800, globalization led to huge gains for industrial countries and then, after World War II, led to huge gains for almost all countries. The evidence for this, she noted, is that life expectancies increased dramatically around the world, debilitating disease has fallen, and real incomes have risen by a large percentage. How did globalization contribute? By increasing trade across borders. Globalization increased over the last two centuries and especially since World War II for two main reasons: falling transportation costs and reductions in tariffs and in other trade barriers.
Mr. Trump may not want to be reminded, but John McCain pitched a gas tax holiday in 2008 during his presidential campaign as prices surged toward $4 a gallon. Ditto Joe Biden in June 2022 when prices hit $5 a gallon after Russia’s invasion of Ukraine. Republicans panned Mr. Biden’s proposal as a “gimmick,” and neither placated voters.
That’s because a temporary pause on the federal gas tax won’t appreciably reduce how much Americans pay at the pump. After the tax holiday ends, prices will increase. A suspension would cost the highway trust fund about $2.1 billion a month in revenue, which would have to be made up with general fund revenue.
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Tariffs are charged on [beef] imports that exceed the quotas, typically at a rate of 26.4%. The quotas are intended to protect U.S. ranchers from foreign competition, but there are other ways to help the industry without raising costs for Americans. For example, ease livestock regulations and Endangered Species Act protections for wolves that prey on cattle.
The best and most immediate way Mr. Trump could reduce costs for Americans would be to drop his tariffs en toto. We know that won’t happen, but it would be a big political and economic winner.
Larry Martin counsels against scrapping the USMCA (the successor agreement to NAFTA).
GMU Econ alum Eli Dourado tweets: (HT Scott Lincicome)
Q1 numbers are in, and utilization-adjusted TFP is down 2.18% annualized.
I regret to report that the 20s are still not roaring.
It seems as though Gavin Newsom’s policy proposals are now concocted by writers for Saturday Night Live. Here’s a slice from a Wall Street Journal editorial:
California’s government can’t keep homeless off the streets, keep energy prices low, or do much of anything else well. But never fear, Gov. Gavin Newsom’s state diaper service is here.
The California Governor who wants to be President said Friday that the state will soon begin providing every “newborn delivered in a participating California hospital” 400 diapers at no cost. “This is what affordability looks like,” he said. “It’s not a slogan. It’s a box. It’s a box of diapers.” Apparently he’s serious.
Californians pay an average of $6.15 a gallon for gasoline, and most can’t afford to buy a home (median price: $750,000). Many parents struggle to pay for a Happy Meal because the state’s $20-an-hour minimum wage for fast-food workers has increased prices. But here’s a box of diapers as a political salve for the state’s costly policies.
Vance Ginn argues that “freedom still works.”
Constanza Mazzina reflects on Adam Smith’s influence in Argentina. A slice:
As the global intellectual community commemorates the 250th anniversary of Adam Smith’s An Inquiry into the Nature and Causes of the Wealth of Nations (1776) this year, the lens of history often focuses on the industrial heartlands of Europe or the early expansion of the United States. However, one of the deepest and most successful applications of Smithian philosophy occurred in the Southern Cone of the Americas. Juan Bautista Alberdi, the intellectual father of the Argentine Constitution (1853), did not merely read Smith; he transformed his economic theories into a foundational institutional framework for a new nation. By analyzing Alberdi’s work, we see that the “Argentine Miracle” at the turn of the nineteenth century, was not a geographic accident, but a deliberate institutional translation of the Scottish Enlightenment.
