Beginning in 2020, policies allegedly following the science imposed lockdowns, prolonged school closings, church and business shutdowns, and vaccine mandates even for low-risk populations. But data available by the spring of 2020 showed that lethality was concentrated overwhelmingly among the elderly. Simple common sense argued instead for targeted protection. Those who said so—including one of us, Dr. Atlas, from inside the White House—faced attacks in the media and university censure. The collateral damage was sweeping, even beyond extra deaths: historic learning loss, a surge in youth self-harm, delayed and missed medical care, and economic devastation. The full human cost may never be known, yet few institutions have done after-action reviews.
Climate policy shows the same dynamic on a longer fuse. While greenhouse gases do warm the planet, the claim of inevitable catastrophe absent an energy transition—which, conveniently, would be painless—rests on implausible scenarios and on institutional incentives that reward alarm. Scientists who drew attention to that disconnect, such as Judith Curry, were assailed rather than debated.
Germany’s environment minister stated that a consumer surcharge for renewable energy would cost households “as much as a scoop of ice cream” each month; it rose more than tenfold before being scrapped altogether in 2022. The emissions reductions achieved so far have had no detectable effect on the climate. As with subprime and Covid, the architects have faced little reckoning, and because climate consequences unfold over decades, they probably never will.
Well, why do I, after 84 years on this planet (on September 11, thanks), most of it spent thinking about the evidence on how economies work, disagree with the numerous non-believers?
For one thing, as a resident of an economy, I live daily inside a massive experiment proving that it does work pretty much as supply and demand says. So do you live inside it. São Paulo is an enormous city. It exhausts me to drive across it. Yet somehow every day when you go to get a morning coffee, there it is. When you want to buy a new shirt, there it is. If you had the misfortune to live in a country that so strongly denies market forces that it makes them illegal, such as North Korea or the old Soviet Union, this would not be the case. The Soviets made endless jokes about it not being the case.
For another, as an economic historian, I know, and can show you massive evidence, that liberated people become amazingly creative and then make themselves and everyone else amazingly rich. It has happened from 1776 to the present, I’ve told you frequently, to the extent of 25 thousand percent, for the first time in history. In a century or so, if the economists and politicians don’t intervene, everyone will be twice as rich as the average Swiss person now. I mean Africa. I mean everywhere.
For another, as an economist of a mathematical and philosophical bent, I have a vision of the economy as an enormous spontaneous order, like the Portuguese language or the history of art or even the pattern of your own sweet life.
It’s lovely. Let it work.
In a new paper, Joseph Francis unpacks the “China Shock.” Here’s the abstract:
Numbers abound in the “China shock” narrative. In the Wall Street Journal, Treasury Secretary Scott Bessent (2025) claims that higher tariffs are necessary because “3.7 million Americans lost their jobs” as a result of China joining the World Trade Organization in 2001. Bessent cites the research of the economists David Autor, David Dorn, and Gordon H. Hanson, two of whom have also warned in the New York Times that the United States risks facing a “China shock 2.0” unless it reorients its economic policy. “The first time China upended the U.S. economy, between 1999 and 2007,” Autor and Hanson (2025) state, “it helped erase nearly a quarter of all U.S. manufacturing jobs.” They call for the federal government to embrace industrial policy, while also investing in “universities with vibrant STEM programs,” such as Harvard and the Massachusetts Institute of Technology.
Yet an analysis of the underlying econometrics reveals that the empirical basis of these claims is fragile. When Kirill Borusyak, Peter Hull, and Xavier Jaravel’s (2022) corrections to Autor et al.’s research design are applied, the negative effects on living standards — what Autor et al. (2013, 2121) describe as “higher unemployment, lower labor force participation, and reduced wages” — disappear. In addition, Autor et al.’s claim that Chinese imports caused “one-quarter of the contemporaneous aggregate decline in US manufacturing employment” has no meaningful empirical basis. It is a big, attention-grabbing number that the Difference-in-Differences (DiD) model used by Autor et al. cannot actually produce. Such issues recur, moreover, in various other articles that Autor et al. (2019; 2020; 2021) subsequently produced to reinforce their “China shock” narrative.
The Editorial Board of the Washington Post seems to be cautiously optimistic that the U.S. Supreme Court will not allow state and local governments to sue companies for climate-change reasons. Here’s its conclusion:
After Justice Samuel A. Alito Jr. recused himself last week, the energy companies’ path to a five-justice majority became more difficult. That made a punt on procedural grounds more of a possibility, but most of the questions posed Monday focused on the merits of each party’s arguments. If the justices choose to duck in this case, they will eventually need to confront a growing wave of climate litigation suits. They have an opportunity now to close the floodgates before unelected juries put American energy producers out of business.
Joshua Rauh talks goods sense about budget deficits and soaking the rich.
Multinational production in particular interacts with trade liberalization in a synergistic way, with one model suggesting globalized production chains more than double the benefits of trade for a given country. And take some of the others in the list: Foreign-owned multinationals operating in the United States generated $1.52 trillion in American value added in 2024, employed 8.6 million Americans, and conducted nearly $100 billion in U.S. research and development. American multinationals, meanwhile, earned $660 billion on their direct investments abroad in 2025, leaving us with about a $350 billion surplus in direct investment income. FDI also makes U.S. firms more productive. One estimate suggests that in the first decade of the period Vance is talking about made U.S. manufacturing more productive: “FDI spillovers [are] economically important, accounting for about 14% of productivity growth in U.S. firms between 1987 and 1996.”
Critically, we also sit at the center of the global financial and monetary system, a structure of our device and control. The dollar is the world’s currency of exchange, Treasury securities supply much of the world’s collateral, and demand for dollar assets dramatically expands the capital available to, and reduces borrowing and transaction costs for, the U.S. government, businesses, and households alike. This is what economists call “exorbitant privilege” and JD Vance calls “a resource curse.”
But unlike the French revolution or the Bolshevik revolution, for example, the American revolution and its resulting constitution did not center on a change in the cast of characters in high places or on a change in their political language or immediate policy agenda. Its central concern was in establishing new processes by which whoever occupied the places of power could be restrained and replaced. In short, it did not pretend to have a doctrinal truth but instead implied a deep skepticism that anyone had either a monopoly on doctrinal truth or such moral or intellectual rectitude as to be exempt from constraints, condemnations, or dismissals from office by their fellow men.
The act of situating the case for markets within a wider argument about civilization reminds us, moreover, that much more is involved in the defense of market economies than emphasizing their ability to create wealth. Distinctly nonmaterial goods like liberty and justice are equally at stake.
A tariff does not leave consumers free to select which imports they can best do without. It makes the selection for them, or, at least, strongly influences their choice. This may be thought wise. We think it a loss. Nor is a tariff as flexible an instrument as a free exchange-rate. It creates vested interests and can only be readily altered in an upward direction. Further, by reducing imports it tends to make the rate of exchange higher than it would otherwise be. This places export industries at a disadvantage, even if wages and other internal costs do not rise.
