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… is from page 254 of Jennifer Burns’s 2023 Milton Friedman: The Last Conservative (link added):

Friedman and [Anna] Schwartz’s data [from 1929-1933] showed a precipitous 33 percent decline in the quantity of money during what they called “the great contraction.” They convincingly argued that this lack of money transformed an unremarkable dip in the business cycle into a crisis of global proportions. Here was a provocative new explanation for a disaster that continued to cast its shadow across the century. But threaded through the economic argument was another thesis. In 1914, the United States had created a central bank system designed expressly to stabilize the economy. As lender of last resort, the Federal Reserve Board could have opened the spigots and flooded the economy with cash. Why did it fail to do so?

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Reason‘s Eric Boehm explains that “protectionism ruined U.S. Steel.” Two slices:

In response to last month’s news that U.S. Steel would be purchased by Japan-based Nippon Steel, a bipartisan group of senators—including Sherrod Brown (D–Ohio), John Fetterman (D–Penn.), Josh Hawley (R–Mo.), Marco Rubio (R–Fla.), and J.D. Vance (R–Ohio)—have condemned the decision. The three Republicans have gone a step further by formally asking the Biden administration to block the deal because it represents a supposed threat to national security. As a political matter, the reactions to the sale of U.S. Steel have served as a nice reminder that the impulse to intervene in the private affairs of publicly traded companies runs across both major parties.

As a matter of economic policy, however, those senators have completely missed the point. More government intervention is not going to save U.S. Steel. Indeed, decades of protectionist policies seem to have contributed to its downfall.

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The idea that national security is threatened by Nippon’s purchase of U.S. Steel is utterly silly. And the associated idea that the federal government has failed to adequately cradle American steelmakers from foreign competition is simply false. Protectionism failed U.S. Steel by cushioning the company when it needed to innovate, and another round of federal intervention to prevent its sale makes no sense.

Michael Strain justifiably pokes fun at the three U.S. senators who absurdly attempt to use national-security concerns as justification for the government to block Nippon’s acquisition of U.S. steel.

Colin Grabow highlights the cronyist Jones Act’s contributions to offshore wind difficulties. Here’s his conclusion:

The Jones Act has increased the cost and complexity of developing offshore wind while failing to spur the construction of WTIVs beyond a single costly and delayed vessel. For offshore wind developers, this has to be the worst of both worlds. But so long as Congress refuses to confront the maritime lobby, Jones Act‐​induced hindrances will remain a feature of offshore wind farm construction.

George Leef reports on yet another absurd assertion made by proponents of reparations. A slice:

Chicago suffers from a very high rate of violent crime. What’s the mayor to do? Easy — give money away to black residents to lower the racial wealth gap. That will settle all those criminals down.

I’m not making this up. Chicago’s mayor, Brandon Johnson, says he’ll hand out money (“reparations for slavery”) to blacks as a means of reducing violent crime. Hans Bader covers this absurdity for Liberty Unyielding.

He points out some glaring problems with this idea. There is no connection between poverty and crime. People don’t change their behavior when they receive windfalls. Paying out money based on race is unconstitutional.

David Henderson catches Harvard law prof Charles Fried, in his attempt to defend Claudine Gay, failing Reasoning 101.

Here’s the Wall Street Journal‘s Editorial Board on the resignation of Claudine Gay. A slice:

The prescription should be clear, at Harvard and beyond. What has been happening on college campuses results from the failure of leaders to support traditional liberal values of free inquiry and debate. Prestigious institutions are racked with ideological protest from a contingent of students and many faculty who seem to care more about activism than learning. Despite the distraction, or worse, that this poses to good academic work, administrators keep flinching instead of drawing hard lines.

It’s time to try the opposite. Perhaps Larry Summers is available to give it another go.

“Let people reimagine housing to make it more affordable.”

The Tiebout effect doesn’t work perfectly, but it does work. A slice:

Congratulations to California Gov. Gavin Newsom, who is succeeding at his goal of driving away fossil fuel investment and jobs, even while failing to reduce global CO2 emissions. See Chevron’s announcement Tuesday that it is writing down its upstream assets in the Golden State owing to “continuing regulatory challenges.”

Chevron’s write-down acknowledges what the company has been telling California lawmakers for some time: Their energy policies are making the state uninvestable. These include the state cap-and-trade program, low-carbon fuel standard, penalty on “excessive” refiner margins, and a 2022 law limiting new drilling within 3,200 feet of homes and schools.

California policies have made it “riskier than investing in other states, with projects being lower in quality and higher in cost,” Chevron’s Americas Products business president Andy Walz wrote last month in a filing with the California Energy Commission. “Chevron alone has reduced spending in California by hundreds of millions of dollars since 2022.”

GMU Econ alum Dominic Pino decries the U.S. government’s ever-worsening fiscal incontinence.

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… is from Pat Toomey’s August 1st, 2007, Wall Street Journal op-ed titled “Economists Against Protectionism“:

Adam Smith long ago observed that “It is the maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy.” As members of Congress should know — but unfortunately don’t — the maxim of the family applies equally to a nation. This simple truth explains the irresistible logic of free trade.

Free trade among and between people of various nations is the mechanism that allows producers to maximize their comparative advantage while consumers maximize the value they receive for their dollar. Free trade allows American producers to sell jets and software to the Chinese, while American consumers buy toys and apparel from China — a win-win proposition for both buyer and seller.

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The Wall Street Journal‘s Editorial Board wisely rejects Donald Trump’s and Robert Lighthizer’s case for protectionism. A slice:

This reveals what tariffs often do in real life, which is to rob some anonymous Peter to pay some politically powerful Paul. In their earnings calls after nearly a year of Mr. Trump’s metal tariffs, steel makers bragged about record profits, while Whirlpool, Caterpillar and others lamented new costs. Ford pegged its annual hit at $750 million, and the profit-sharing checks sent to its factory workers “would be 10 percent higher were it not for tariffs,” the Detroit Free Press reported.

The public also foots the bill. “U.S. tariffs continue to be almost entirely borne by U.S. firms and consumers,” said a 2020 analysis by economists at the New York Fed, Princeton and Columbia. A study by the Peterson Institute for International Economics found that each job created or saved by Mr. Trump’s steel tariffs cost $900,000. His tax of up to 50% on imported washing machines fared little better, according to a 2019 estimate, supporting 1,800 jobs at a cost of more than $800,000 each.

That last paper is worth a read in particular because it shows how tariffs distort a market. After Mr. Trump’s import tax was imposed, prices on washers went up 11.5%, or about $86, and “all major brands increased prices,” with “no clear distinction between domestic and foreign brands.”

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Robert Lighthizer, Mr. Trump’s chief tariff strategist, recently dismissed such studies as biased in favor of trade. In the face of clear economic evidence, his response is to close his eyes to it. “If all you chase is efficiency—if you think the person is better off on the unemployment line with a third 40-inch television than he is working with only two—then you’re not going to agree with me,” he told the New York Times. “My view is production is the end, and safe and happy communities are the end. You should be willing to pay a price for that.”

This is the hubris of every politician who wants to play social engineer to a continental nation of 330 million. If preserving one Ohio job in steelmaking kills two Michigan jobs in steel manufacturing, well, it takes breaking eggs to make a protectionist omelet. Pressed to react to studies saying that jobs saved via tariffs cost the public nearly $1 million apiece, Mr. Lighthizer praises the virtues of inefficiency. Forget the drain on the productive economy and the lower living standards that result.

Mike Munger writes wisely about AI.

Pierre Lemieux writes wisely about “effective altruism.”

Jon Hartley writes wisely about the “reckoning for the rising-inequality narrative.” A slice:

For many years, authors such as Piketty, Emmanuel Saez, and Gabriel Zucman have had a sort of monopoly on the IRS microdata used to produce their top 1 percent income-share and wealth-share estimates (few researchers have access to the fixed number of IRS data seats). Many critics publicly and privately questioned whether their analysis was biased in ways designed to reinforce the case that inequality was rising sharply.

Now, ten years after the publication of Piketty’s best seller, a different research team — Gerald Auten and David Splinter (of the U.S. Treasury Department and the Joint Committee on Taxation, respectively) — with access to the same IRS data, has produced radically different results trying to measure the same top income shares, albeit with a slightly different methodology.

In their new paper, they have found that post-tax income inequality has hardly changed over recent decades. Auten and Splinter still find that pre-tax income for the top 1 percent has increased but not to the extent estimated by Piketty, Saez, and Zucman (in their most recently updated estimates).

Heather Mac Donald is correct about last-month’s Congressional testimony of three elite-university presidents:

It was those fantastically counterfactual assertions of loyalty to academic freedom that should have doomed Magill and the other two presidents. On any common understanding of truthfulness, their claims to protect “objectionable” views were flagrantly contrary to the facts. Having been exposed as hypocrites, dissemblers, and enforcers of politically correct thinking, they should all be fired as unfit to lead institutions ostensibly dedicated to the pursuit of truth and the transmission of knowledge.

Ironically, however, it was their one correct stance during the entire hearing debacle that put them in peril. However woodenly they asserted their alleged reason for not shutting down the pro-Hamas demonstrations, that reason should have been controlling. Speech should be protected unless it crosses the line into direct threats to individuals or incitement to imminent violence. Student parroting of Islamist slogans does not meet those tests. Allowing a central authority to ban speech that it declares injurious to the common good is a license for precisely the abuse of power that has been the norm throughout human history, a norm that the Founders were so insistent on overturning. Moreover, it has been in the name of creating what Magill called a “safe, secure, and supportive” campus “climate” that universities have suppressed unwelcome facts and unpopular speakers.

The Wall Street Journal‘s Editorial Board argues that Francis Collins’s regrets should be more numerous. Two slices:

Dr. Collins continued: “So you attach infinite value to stopping the disease and saving a life. You attach a zero value to whether this actually totally disrupts people’s lives, ruins the economy, and has many kids kept out of school in a way that they never quite recovered.” This, he explained, “is a public-health mindset,” which was “another mistake we made.”

This was precisely the argument we made on March 20, 2020 (“Rethinking the Virus Shutdown”), for politicians not to accept the lockdown advice of public-health officials as gospel. They think too narrowly, and political leaders have to consider the larger consequences of policies for the public good.

Dr. Collins’s mini-mea culpa still doesn’t make up for his collaboration with Anthony Fauci to discredit the Great Barrington Declaration, which advocated a strategy of focused protection on the elderly and vulnerable while letting younger people at lower risk continue with their lives. Nor does the former NIH head apologize for trying to censor different health-policy advice.

He acknowledged in the Covid discussion that the declaration “could have been a great opportunity for a broad scientific discussion about the pros and cons” of focused protection. But then he blames the declaration’s authors for “short-circuiting” debate by trying to change national policy without first consulting public-health officials. Who really shut down that debate?

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The lockdowns did tremendous harm that we are still living with. That and the effort by Drs. Collins and Fauci to shut off all debate is a major reason the public has lost trust in public-health experts.

And here’s Vinay Prasad on Francis Collins’s recent comments. (HT Jay Bhattacharya)

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… is from page 180 of the original edition of Walter Lippmann’s sometimes flawed but deeply insightful and still-important 1937 book, The Good Society:

The authentic progressive thought of the modern world is an evolution from his [Adam Smith’s] discovery that the wealth of nations proceeds from the division of labor in widening, and, therefore, freer, markets.

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Timothy Taylor reminds us of just how ridiculous protectionists can be in offering national-security excuses for restricting Americans’ abilities to purchase imports. A slice:

What’s especially weird about the letter [written by Sen. Rick Scott (R-FL) in favor of import restrictions on garlic] is that it also refers to regular issues of trade, like whether garlic in China is produced in safe and sanitary conditions, and whether it is being “dumped” in the US by selling at under the cost of production. I take no position here on these regular meat-and-potatoes (with or without garlic) trade issues. What’s interesting to me is the florid invocation of Section 232 and national security on behalf of a root vegetable.

Wall Street Journal columnist Andy Kessler counsels optimism. Two slices:

So yes, out of the depths of the inflation-riddled ’70s came the democratization of computing and finance. It feels to me as if we’re at a similar point. What’s going to be democratized next?

To be fair, there isn’t quite the same level of despair and smoggy dreams. But there is plenty of skepticism. Start with quantum computing, autonomous vehicles and delivery drones. Even the once-in-a-generation innovation of machine learning and artificial intelligence is generating fear and doubt. Like homebrew computers, we’re at the rudimentary stage. Squint a little to see the future.

Especially in medicine. Healthcare pricing, billing and reimbursements are completely nonsensical. ObamaCare made it worse, but change is beginning. Pandemic-enabled telemedicine is a crack in the old way’s armor. Self-directed healthcare will grow. Ozempic and magic pills are changing lives. Crispr gene editing is also rudimentary but could extend healthy life expectancies. Add precision oncology, computational biology, focused ultrasound and more. The upside is endless.

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Every industry is about to change, which will defy skeptics. Figure out how, and then, as Mr. Wozniak suggests, get your hands dirty. As always, the pain point is cost. Look for things that get cheaper—that’s the only way to clear the smoke and get new marvels into global consumer hands. The democratization of every sector will proceed in mysterious ways. Happy hunting for opportunities. And stay warm this New Year’s.

Luther Ray Abel applauds a sensible piece by Tom Zoellner – appearing, amazingly, in the New York Times – on the environment.

Maxim Lott tracks the ideological positions of chatbots. (HT Tyler Cowen)

Andrew Hartz reports on the high cost of self-censorship on campus.

Several weeks ago, David Friedman ably defended Adam Smith from seriously defective interpretations offered by the late Murray Rothbard.

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… is from my emeritus Nobel-laureate colleague Vernon Smith‘s splendid speech “Human Betterment Through Globalization,” delivered in September 2005 at the Irvington-on-Hudson then-headquarters of the Foundation for Economic Education:

The challenge is that we all function simultaneously in two overlapping worlds of exchange. First, we live in a world of personal, social exchange based on reciprocity and shared norms in small groups, families, and communities. The phrase “I owe you one” is a human universal across many languages in which people voluntarily acknowledge indebtedness for a favor. From primitive times, personal exchange allowed specialization of tasks (hunting, gathering, and tool making) and laid the basis for enhanced productivity and welfare. This division of labor made it possible for early men to migrate all over the world. Thus, specialization started globalization long before the emergence of formal markets.

Second, we live in a world of impersonal market exchange where communication and cooperation gradually developed through long-distance trade between strangers. In acts of personal exchange we usually intend to do good for others. In the marketplace this perception is often lost as each of us tends to focus on our own personal gain. However, our controlled laboratory experiments demonstrate that the same individuals who go out of their way to cooperate in personal exchange strive to maximize their own gain in a larger market. Without intending to do so, in their market transactions they also maximize the joint benefit received by the group. Why? Because of property rights. In personal exchange the governing rules emerge by voluntary consent of the parties. In impersonal market exchange, the governing rules—such as property rights, which prohibit taking without giving in return—are encoded in the institutional framework. Hence the two worlds of exchange function in a similar way: you have to give in order to receive.

DBx: Vernon, who is still going strong, was born in Wichita 97 years ago today. Happy Birthday, Vernon!

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GMU Econ alum Paul Mueller continues his insightful series about ESG ‘investing.’ A slice:

Social and governance criteria, in as much as they push “stakeholder capitalism,” make the principal-agent problems unmanageable. By creating many more “principals” (stakeholders) with divergent, often conflicting, interests, managers actually can’t act in the interest of principals even if they want to, because no single interest exists. What’s more, managers can now pursue whatever they want, so long as they can find a relevant stakeholder group whose interests align with theirs.

Ashley Rindsberg believes that we’ve reached peak ESG. A slice:

The idea of stakeholder capitalism is attributed largely to Klaus Schwab, creator and chairman of the World Economic Forum, who began spreading the idea in a 1971 study he co-authored called “Modern Company Management in Mechanical Engineering”. This top-down approach to shaping how wealth is created, and in whose hands it ends up, played well to a media educated in America’s Marxism-infused liberal arts colleges. And the business crowd loved it too. Suddenly, bland business conferences felt less like trade conventions and more like geopolitical summits. You weren’t merely investing in funds, selling widgets, or cooking up ever more optimised ads. You were saving the world.

Scott Sumner warns of the dangers of nationalism.

John Cochrane argues for honesty in arguing about the Claudine Gay affair. Three slices:

Harvard faces a historic choice: Is its main mission advocacy for, advancement of, and indoctrination in a particular political and ideological cause, going by names such as “woke,” “social justice” “critical theory” and “diversity equity and inclusion” (a chillingly Orwellian name since it is exactly the opposite)? Or is its main mission the search for objective truth, via excellence, meritocracy, free inquiry, free speech, and critical discussion, bounded by classical norms of argument by logic and evidence; and to advance and pass on that way of thinking? Even though yes, most of those ideas originated from dead white men whose societies had, in retrospect, some unpleasant characteristics? And to get there, given the BS spreading like cancer and the political and ideological monoculture that pervades the university, it needs a top to bottom cleanup.

This is a key moment. After October 7, a lot of the larger community of alumni, donors, trustees, parents, government and employers, woke up. What, “decolonization” means kill the Jews? Who knew? Well you would have if you had been paying attention, one is tempted to answer, but ok, you had lives to lead and the Orwellian doublespeak is seductive if you’re not paying much attention. They then look a little harder and suddenly see the politicized rot that has taken over the whole university. Now is the chance to force a change.

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Why do I think Gay should go? Because she persecuted Roland Fryer, the brilliant Black economist who inconveniently found the “wrong” results in a classic study of race and policing. Because she fired Ronald Sullivan, also incidentally Black, who had the temerity to provide legal counsel to Harvey Weinstein, from his faculty dean position. The great defender of free speech and academic freedom before Congress found that the mere act of having provided Weinstein legal counsel made students feel “unsafe.” She forced Carole Hooven to resign, for teaching that sex is “binary and biological” in a biology class. She led efforts to expand “teaching in the broad domain of ethnicity, indigeneity, and migration.” (Two Blacks and a woman. If you hadn’t figured it out, this is about politics, not race). I haven’t followed the Ryan Enos (white man, but left wing research) affair carefully, but the charge that she quickly covered it up is out there. Harvard’s announcement of her appointment trumpeted that “She is the founding chair of Harvard’s Inequality in America Initiative” and similar efforts. Harvard is dead last in FIRE’s ranking of free speech and academic freedom.

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Gay is great at doing exactly what Harvard wants! Pursue the far left purification agenda, but lawyer and HR up when asked in plain English to account for it. She should be promoted for this effort! But no, Harvard should fire her because the cause is rotten, not the execution.

GMU Econ alum Lawrence McQuillan explains that, if government allowed it, California could have low-cost housing.

Andrew Stuttaford reports that Javier Milei rejects BRICS.

Jay Bhattacharya tweets:

It’s hard to overstate how irresponsible and destructive Francis Collins’ view is and was. He dispensed with all the rest of public health to focus on covid and lockdown, and countless millions — especially children and the poor — paid the price, sometimes with their lives.

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… is from page 168 of NYU economist William Easterly’s excellent 2006 book, The White Man’s Burden:

The beauty of the market’s focus on the individual is that customer choice gives feedback to suppliers. If flights to Los Angeles on Southwest are fully booked and you attempt to book an additional seat, that’s a signal to Southwest to schedule more flights or raise prices. The wonder of markets is that they reconcile the choices of myriad individuals.

DBx: Yep.

Protectionism obstructs the market’s process of reconciling the choices of myriad individuals. The preferences of protected workers and firm-owners – or of the social engineers who successfully press their industrial-policy schemes – are given artificial weight; the preferences of consumers and other workers, entrepreneurs, and investors are artificially discounted.

Oren Cass and Robert Lighthizer, for example, believe that people who prefer to work in jobs conventionally classified as “manufacturing” should be subsidized to enjoy this preference. (Note that such workers could, without government intervention, retain their manufacturing jobs if enough of them were willing to take pay cuts. The fact that too few such workers are willing to take the pay cuts necessary to retain such jobs means that these workers in fact do not value retention of these jobs highly enough to cover the cost of retaining these jobs.) These protectionists either ignore the fact that other people must be compelled to pay these subsidies, or they insist that the preferences of their favored group somehow deserve to be weighted more heavily than are the preferences of those persons compelled to pay.