Gale Pooley explains that economically productive innovation is stifled – not promoted – by industrial policy. A slice:
The effort in the US to create a cartel to regulate and control AI development through Stargate appears more like the construction of a new DMV to protect BigAI from competition. Hayek explained why a system of free markets with distributed knowledge and know-how was far superior to central planning. DeepSeek, TinyZero, and DeepAgent’s approach looks Hayekian. Capitalism recognizes the potential worth of every individual to create value in a free market. In America, we’re not surprised when a small team of brilliant thinkers can create an entirely new approach to solving a problem.
In the latest issue of the Independent Review I review UC-Davis economist Christopher Meissner’s 2024 book, One From the Many: The Global Economy Since 1850. Two slices:
The title of Christopher Meissner’s book on globalization is brilliantly appropriate: One From the Many. It’s a deliberate reference to the Latin phrase familiar to all users of dollar bills, “E pluribus unum,” traditionally translated as “out of many, one.” Yet the unification that Meissner identifies isn’t political; it’s economic. It’s the unification of the peoples of many different nations—of many different cultures, creeds, conditions, and callings—into one society, a society that transcends political boundaries and language differences. It’s the global economy. Its whole is much greater than the sum of its parts.
In this economy today, each person benefits from the creativity and work effort of literally billions of his or her fellow human beings, just as this person promotes—through his or her own creativity and work effort—the well-being of these billions. Today’s globe-spanning market order encourages and directs a division of labor that generates annual global output now worth about $106 trillion, or just over $13,000 for every man, woman, and child. If this output were spread evenly, every person on earth in 2025 would enjoy access to roughly ten times—measured in monetary value—the amount of material goods and services that was available to the typical human being for nearly all of human history until the Industrial Revolution.
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International trade did not alone create what the historian Stephen Davies aptly calls “the wealth explosion” (The Wealth Explosion: The Nature and Origins of Modernity, Edward Everett Root, 2019). If Deirdre McCloskey (Bourgeois Equality, University of Chicago Press, 2016) is correct (as I believe her to be), the main catalyst for this glorious explosion was a change in a more favorable direction of attitudes toward commerce, economic innovation, and creative destruction. Yet globalization both supercharged the wealth explosion and was itself supercharged by the attitudes that make modern prosperity possible.
Meissner—a professor of economics at UC-Davis—accurately subtitled his book The Global Economy Since 1850. After being treated to a quick survey of trade during the many millennia before the modern age, the reader is then immersed in the historical, political, and economic details of the past two hundred years. The reader learns that globalization—of people (through immigration), as well as of goods, services, and capital—is generally a force for good. Meissner reports on how the first great wave of globalization, which crested in the early twentieth century, differs from the second great wave, which we in 2025 are still riding. One key difference is that much more of what’s internationally traded today are component parts. Compared to the past, countries today have far fewer comparative advantages (and disadvantages) at producing whole products—automobiles, kitchen appliances, machine tools—and far more comparative advantages (and disadvantages) at performing the various highly specialized and quite narrow tasks that, when coordinated together by the price system, result in whole products. Very many of today’s imports and exports contain intermediate inputs—including human work effort and creativity—from several different countries. Today, very many goods (and, increasingly, also services) are best described as “Made on Earth” (Daniel J. Ikenson, “Made on Earth: How Global Economic Integration Renders Trade Policy Obsolete,” Trade Policy Analysis No. 42, Cato Institute, December 2, 2009).
Pierre Lemieux offers more insight about trade and tariffs.
Stephanie Slade reminds us that only dynamic economies grow. A slice:
Take trade. A national protectionist aims to stop cheap foreign goods from undercutting domestic producers; he wants Americans to buy American, even if it costs more, because those purchases will support jobs on the homefront. That would make all imports troubling—T-shirts as well as technology, from Canada as well as from China. A national libertarian, in contrast, cares about eliminating dependence on China only in what Ramaswamy called “critical sectors for U.S. security”: military equipment and pharmaceuticals. Moreover, he recognizes that “if we’re really serious about decoupling from China in those critical sectors, that actually means more, not less, trade with allies like Japan, South Korea, India, Vietnam.” Stopping Americans from buying fruit from Peru or cars from Germany makes consumers worse off, and it doesn’t do anything to address concerns that our top geopolitical adversary could control our access to lifesaving drugs. (How serious a concern that ought to be is a separate question.)
Until recently, Trump has been treated as a dyed-in-the-wool protectionist. But at the tail end of the 2024 campaign, he and those around him began to make recognizably libertarian noises. Now, as he begins the difficult task of assembling a governing agenda, two paths lie before him. One leads toward dynamism, the other toward stagnation. The future of American prosperity depends in no small part upon the choices he and his party will make.
You may be wondering how different these options really are. While neither will align perfectly with a typical Reason subscriber’s preferences, even a MAGA-inflected libertarian agenda could represent a major improvement over the left’s militant progressivism or the “muscular” conservatism advocated in recent years by the so-called New Right. As evidence, witness the leading protectionists’ indignant reactions to some of these recent developments.
Oren Cass is often considered the top policy wonk pushing right-wing economic nationalism. A former adviser to presidential hopeful Mitt Romney, Cass in 2020 launched American Compass, a think tank “dedicated to helping American conservatism recover from its chronic case of market fundamentalism.” Since then, he and other nationalist conservatives have endorsed a host of government interventions historically associated with the Democratic rather than the Republican Party, from industrial policy to labor regulations to family subsidies to tariffs. The Cass agenda is explicitly protectionist, seeking to shield American workers from foreign competition and to prop up the domestic manufacturing sector with taxpayer dollars.
For years, both the mainstream media and right-wingers online have treated this as the only plausible future for the GOP. The debut of national libertarianism upended that presumption, and Cass was none too pleased. Days after the election, he began lambasting Ramaswamy’s ideas as “warmed-over market fundamentalism with a dash of nationalism sprinkled on to mask that past-the-expiration-date funk.” His resentment at being overshadowed at what should have been a moment of triumph for nationalist conservatism was almost tangible.
Scott Lincicome is correct: “The ‘retail apocalypse’ doesn’t need a government fix.” Two slices:
Fears of the retail apocalypse have fueled not only piles of breathless reporting on certain store closures and their national economic implications, but also government policy, as states and localities across the United States have responded with subsidies for local businesses, new taxes on online sales, bans on “big box” stores, and so on. Yet, even a decade ago, there were clear signs that the “retail apocalypse” wasn’t actually happening—that brick-and-mortar retail was changing, not dying, and that Americans were basically fine with the result. Now comes a great new paper from the National Bureau of Economic Research (NBER) confirming the early pushback and strongly cautioning against efforts to regulate American retail businesses now or in the future.
Economist Yue Cao and colleagues tested the retail apocalypse thesis by first examining changes in general merchandise stores—25 different national chains and several smaller regional outlets—in 18 metro areas between 2010 and 2019. Then, using these figures and smartphone geolocation data for more than 2.7 million devices, they estimate whether Americans in these places were better or worse off (in terms of “consumer surplus”) in 2019 than they were 10 years earlier.
They found, first and contrary to the conventional wisdom, the number of general merchandise stores in the United States actually increased in the 2010s, from 49,089 to 52,807, as dollar stores, supercenters, and discount department stores more than replaced certain traditional department stores and regional chains.
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Folks peddling the retail apocalypse narrative miss the U.S. market’s fluidity. They assume high walls between different stores, instead of overlapping and constantly changing palates of various goods and services. They assume markets won’t quickly adjust—either through new entrants or modified incumbents—to changing consumer tastes, new innovations, a certain company’s exercise of market power, or its bankruptcy. And they assume American shoppers don’t adapt when the retail landscape changes (e.g., by a store’s closure or its deteriorating quality/prices). In reality, of course, all of these things are happening every day, and they’re a big reason why dire predictions of market doom rarely, if ever, materialize.
This kind of myopia extends into other kinds of retail, as well. The feds blocked grocery giant Kroger’s merger with Albertsons in December on the grounds that the combined entity would reduce market competition and, among other things, lead to higher grocery prices. Yet, since at least the time the merger was first announced in 2022, it’s been clear that competition in the U.S. grocery space was alive and well, albeit different from the old school version federal regulators had in mind. Instead, these two traditional supermarket giants have been steadily losing ground to newer, less-traditional players—especially Walmart, Costco, and others like them.
Alex Tabarrok makes important points about the Trump administration’s attempt to eradicate woke from colleges and universities. A slice:
The Trump administration is targeting universities for embracing racist and woke ideologies, but its aim is off. The problem is that the disciplines leading the woke charge—English, history, and sociology—don’t receive much government funding. So the administration is going after science funding, particularly the so-called “overhead” costs that support university research. This will backfire for four reasons.
First, the Trump administration appears to believe that reducing overhead payments will financially weaken the ideological forces in universities. But in reality, science overhead doesn’t support the humanities or social sciences in any meaningful way. The way universities are organized, science funding mostly stays within the College of Science to pay for lab space, research infrastructure, and scientific equipment. Cutting these funds won’t defund woke ideology—it will defund physics labs, biomedical research, and engineering departments. The humanities will remain relatively untouched.