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Timothy Taylor is understandably unimpressed with the record of that piece of American industrial policy called “the Jones Act.” Two slices:

The United States has had an industrial policy aimed at boosting its domestic shipbuilding industry since the passage of the Merchant Marine Act of 1920, commonly known as the Jones Act. Whatever the arguments for the passage of the bill a century ago, it has over time been a disaster for the US maritime industry, and continues to impose significant costs on other parts of the US economy. Colin Grabow goes through the arguments in “Protectionism on Steroids: The Scandal of the Jones Act” (Milken Institute Review, Second Quarter 2024, pp. 44-53).

The Jones Act “requires that vessels engaged in domestic transportation be registered and built in the United States as well as crewed and at least 75 percent owned by U.S. citizens.” However, the underlying rule goes back to an 1817 law “prohibiting foreign vessels from transporting goods within the U.S.”

…..

Supporters of industrial policy have a tendency to brush aside examples like the Jones Act: “Sure, that’s a foolish way to implement industrial policy, but my plan is a smart way to do so.” “Yes, the Jones Act is a problem, but the way to fix it is with much bigger government subsidies to expand US shipbuilding.” But the Jones Act is a classic example of a special interest law that benefits a small and very vocal group, while imposing large but diffuse costs. The problems of the Jones Act have been well-known for decades, and nothing has changed. Every proposal for industrial policy faces similar political economy dynamics.

Thus, it seems to me that the challenge for supporters of industry policy is not just to pick some alluring industries and then to hand out government favors like Halloween candy, but to specify in advance how they intend to measure success or failure of these subsidies–perhaps with a series of goals that must be met over time or else the subsidies get turned off. In South Korea, for example, which is often cited as an example of successful industry policy, the government subsidies for certain industries were often made contingent on the industries expanding their export sales at prevailing prices in international markets. When industrial policy goes poorly, as in the Jones Act, the costs are broadly felt across an array of related industries.

The Editorial Board of the Wall Street Journal is understandably unimpressed with the FTC’s new effort to block the merger of two high-fashion firms. A slice:

No bureaucratic worries. The FTC pulls the old antitrust trick of redefining the luxury market to discover competitive harm. The agency claims the merger will harm competition in the “accessible luxury” and “affordable” handbag market. The agency describes handbags that retail for several hundred dollars as “affordable,” which they may be for antitrust attorneys in Washington. Most middle-class Americans would consider them a genuine luxury.

The FTC excludes from its market definition brands that don’t sell handbags through multiple channels such as online websites and outlets. “Chanel and Hermes even go so far as to never sell certain handbags online—a customer must go into a store to purchase a Chanel or certain Hermes bag,” the FTC explains. But they’re still competitive luxury brands.

Wall Street Journal columnist Andy Kessler is understandably unimpressed with the moral fortitude of our political ‘leaders.’ A slice:

Media progressives provide rationalizations. In March, former Wikimedia Foundation head Katherine Maher began as CEO of National Public Radio. Bad choice. Her principles seem to include redefining the truth to fit any principles.

In a 2022 TED talk, she said: “For our most tricky disagreements, seeking the truth and seeking to convince others of the truth might not be the right place to start. In fact, our reverence for the truth might be a distraction that’s getting in the way of finding common ground and getting things done.”

From the same speech: “Part of the reason we have such glorious chronicles to the human experience in all forms of culture is that we acknowledge there are many different truths.” My truth: I don’t listen to NPR.

Changing principles and truth-bending will never die. Which reminds me of Groucho’s supposed last words, “Die my dear? Why that’s the last thing I’ll do.”

Pierre Lemieux is understandably unimpressed with The Economist‘s knee-jerk opposition to the right to own firearms.

Wall Street Journal columnist Allysia Finley is understandably unimpressed with Ivy League anti-Israel-protesting students “behaving like barbarians.” A slice:

Elite colleges are supposed to separate the wheat from the chaff in their application process. They are, however, increasingly selecting students for traits that many employers don’t want, such as a passion for progressive activism.

This claim by Arnold Kling seems to me to be correct: “I claim that the stereotypical personality of the Hippie was high in openness. The stereotypical personality of today’s social justice activist is high in neuroticism.” Two slices:

Most of the 1960s anti-war protesters were not pro-Vietcong. They were upset with the sacrifices Americans were making and the casualties on both sides in a war that seemingly had no end. They wanted American policy to aim toward peace, even if this meant conceding that the war would not be won.

Much of mainstream America came to agree that the war was a terrible mess. They were tired of being lied to by President Johnson. They were tired of watching what was happening to their young men in a far-off jungle land. They were tired of South Vietnamese generals whose prowess was at staging coups rather than fighting the enemy. They were tired of the nightly television news that made the war seem grotesque and hopeless. Even Richard Nixon, the candidate of the more hawkish Republican Party, campaigned on a slogan of “Peace with Honor.”

In 2024, my sense is that the protesters are limited to the fringe that supports the bad guys. There is no broader peace movement, as far as I can tell. I could be wrong, but I suspect that the anti-Israel movement on campus is not as popular with the student body as the anti-war movement in 1968. For most people, sympathy for Hamas is too much of a stretch.

I also suspect that the anti-Israel movement is not going to gain a large following in the general public, the way that the anti-war movement gained a following in the Vietnam era. American lives are not being lost in the Middle East. Many Americans admire Israel and view it as a stalwart ally, which was not their perception of South Vietnam.

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The social justice activists strike me as closer to being a cult than a movement. I think that the cult attracts people who are unhealthy psychologically. They have a lot of negative emotions, and the social justice ideology serves to validate and reinforce those emotions.

Jim Bacchus wonders: “Is President Joe Biden more interested in fighting climate change or in sheltering domestic industries from foreign competition?” [DBx: Perhaps I’m too cynical, but I have no such wonder. I’m as certain that Mr. Biden will put his own political welfare above any asserted interest in ‘fighting climate change’ as I am that cows will moo, dogs will bark, and cats will meow.]

Wall Street Journal columnist Mary Anastasia O’Grady argues that “without a credible dollarization strategy, Argentina’s president is at risk of failure.” A slice:

It’s been four months since Mr. Milei took the oath of office, promising to free the nation from the strictures of Peronism. With a passion for liberty and irreverence for the establishment, he’s generated excitement among long-suffering Argentines tired of a century of government modeled on Mussolini’s Italy. He rails against socialism and endorses Western civilization. He backs Israel, a welcome foreign policy in a region that increasingly bows to Tehran.

Yet Mr. Milei’s talk of freedom is at odds with exchange, capital, and lingering price controls. Monthly inflation for March was below market expectations but still high at 11%. “On an annual basis, headline inflation accelerated to 287.9% [year over year],” Goldman Sachs reported April 12. “Core inflation printed at a lower but still high 9.4% [month over month] in March, reaching 300.0% [year over year].”

Nick Gillespie talks with Justin Amash about Congressional dysfunction.

Bob Ewing remembers the late, great Daniel Dennett.

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… is from page 241 of Deirdre McCloskey’s 2024 paper “Market Prices and Wages Do Not Reflect Ethical Value,” which is chapter 19 in The War on Prices: How Popular Misconceptions About Inflation, Prices, and Value Create Bad Policy (Ryan A. Bourne, ed., 2024):

Trades, in economic jargon, are positive sum. Violent coercion, by contrast – such as private hired thugs or public tax gatherers extracting goods from one person to give to another – yields one person a gain and the other person a loss. It’s zero or even negative sum.

DBx: There might be justification for a number of government activities. But the reality identified here by Deirdre should create a strong, if rebuttable, presumption against any such activity. Proposed government actions should have to satisfy a weighty burden of persuasion before being approved. The mere social-engineering fancies of pundits, professors, preachers, and politicians satisfy no such burden even if the verbal or written descriptions of their imagined utopias are sublime.

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Here’s a letter to the Wall Street Journal:

Editor:

Reporting on California’s recent hike in the minimum wage for workers at fast-food restaurants, you note that “a spokesman for the governor said fast-food companies can afford to give their workers a deserved bump in pay” (“California Fast-Food Chains Are Now Serving Sticker Shock,” April 27).

Bad arguments for minimum wages abound, but this one is among the silliest. Elon Musk can “afford” to pay $100 million annually to his dog groomer, but this fact doesn’t mean that he’ll do so simply because the government decrees that the minimum annual salary for dog groomers is $100 million. A business employs only those workers who make positive contributions to its bottom line. Workers who must be paid more than they contribute will find themselves unemployed regardless of the business’s net worth.

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030

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George Will understands why so very many institutions of so-called “higher learning” have become self-spoofing embarrassments. A slice:

Given academia’s nearly monochrome culture, most universities have many infantile adults. These are faculty members who have glided from kindergarten through postdoctoral fellowships (these often support surplus PhDs, who are being manufactured faster than the academic job market can absorb them). To such professors, the 99.9 percent of the world adjacent to campuses is as foreign as Mongolia.

Still, suppose you want to hire a recent college graduate for your business. Suppose one of your applicants attended Harvard while it was becoming an incubator of antisemitic agitations. And suppose the other applicant attended a large public university. The public-university graduate is at least marginally less apt to be enthusiastic about Hamas, which aspires to complete the Holocaust.

Or suppose you seek a young doctor to join your medical practice. You might reasonably hesitate before hiring someone from UCLA’s medical school. There a recent pro-Hamas guest lecturer in a mandatory course on “Structural Racism and Health Equity” led students in a “Free Palestine” chant, directed them to get on their knees and touch the floor in a “prayer” to “mama earth,” and warned the future doctors against the “crapitalist lie” of “private property.”

The leakage of prestige from politicized universities is overdue and wholesome. Those schools that once were preeminent and now are punchlines might soon have a bruising rendezvous with real politics, which, unlike the sandbox radicalism of campus playgrounds, can be serious.

Jeffrey Blehar reveals just how ignorant, unhinged, and – frankly – evil are some of the ‘elite’ school ‘students’ who are today prominent among the campus protestors against Israel.

Let’s wish Stanley Goldfarb much good luck in undermining the State of Michigan’s obnoxious and lethal efforts to inflict woke ideology on medical personnel.

Iain Murray describes the U.S. administrative state as hitting “warp speed.”

GMU Law alum Jeremy Kidd reports on “the wasteful cruelty of ‘stakeholder capitalism.'” Two slices:

Capitalism has raised millions, if not billions, of people out of poverty. It is the greatest engine of human flourishing that has ever existed. It is worth defending, but those willing to do so are few and far between, even in the societies that have most benefitted from the wealth that capitalism has generated. In the late twentieth century, economist Milton Friedman stood against the tide of anti-capitalist propaganda that flourished in the halls of academia.

Friedman is gone but anti-capitalism remains, and it is no longer constrained to academia. It is common in the halls of Congress (Senators Bernie Sanders and Elizabeth Warren come readily to mind) and even in corporate boardrooms, with the modern push for corporations to engage in ESG — Environmental, Social, and Governance — efforts. Champions of capitalism have never been more needed, and Professor R. David McLean’s 2023 book, The Case for Shareholder Capitalism: How the Pursuit of Profit Benefits All makes a strong case for inclusion in that category.

McLean begins, as a defender of capitalism should, with an explanation of profit. Not the profit that anti-capitalists caricature, some dark motive of dastardly villains, twirling their mustaches or adjusting their monocles as they plan to exploit yet another widow or orphan. McLean counters the false melodrama of the anti-capitalist with the mundane “profit” of Adam Smith. It is the (sometimes surprising) pile of money left after the small business owner has paid all of the bills for the month. It is the signal that the value a business owner creates in the lives of his fellow citizens is high enough to pay for all the inputs and have something left over.

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The mistake is not that corporations should obey the law — they should — but that all regulations impose legal or moral obligations on US citizens, including as aggregated into a corporate form. McLean’s mistake arises from an all-too-common source: failure to consider institutional structure. The US government’s power is constrained by the Constitution, so any regulation that violates the Constitution would be unenforceable. Regulatory agencies have limited discretion, and cannot impose a moral or legal obligation on corporations. McLean knows that, and may have even intended to imply it, but institutions matter, and their inadvertent omission could easily confuse. McLean effectively attacks the flaws of Corporate Social Responsibility and its ESG incarnation, calling out activists for pursuing ideological preferences at the expense of shareholders. He traces the flawed, Malthusian lineage of Corporate Social Responsibility to such historical abominations as forced abortions and sterilizations. For all these excellent and needed efforts, McLean misses the institutional questions often enough to fall just short of a complete analysis.

“Is nationalism bad for your health?”

J.D. Tuccille warns that “local hostility to free speech may become a global problem.”

Bruce Yandle ponders today’s inflation.

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… is from page 20 of the original edition of Walter Lippmann’s sometimes deeply flawed but profoundly insightful and important 1937 book, The Good Society:

No government planned, no political authority directed, the material progress of the past four centuries, or the increasing humanity which has accompanied it. It was by a stupendous liberation of the minds and spirits and conduct of men that a world-wide exchange of goods and services and ideas was promoted, and it was in this invigorating and sustaining environment that petty principalities coalesced into great commonwealths.

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April 2024 – to be precise, April 13th, 2024 – marks the 20th anniversary of Cafe Hayek’s launch. Although Cafe Hayek has been exclusively my blog for several years now, it is not my brainchild. That distinction belongs to Russ Roberts, who was then my colleague in Economics at George Mason University. Russ persuaded me to join him in blogging. We pondered names for the blog. “Cafe Hayek,” the name, is also Russ’s brainchild. When the blog was launched, I was aware that I didn’t really understand what ‘blogging’ meant or entailed. But I agreed to join Russ in this endeavor because I so very much respect his judgment and intellectual entrepreneurship.

The first eleven posts were written by Russ, with the very first one titled “Cuban Cars.” I didn’t contribute a post until six days later (on April 19th); it’s titled “Still Alive in the Long Run.” (Having just re-read it, I’m happy to report that I stand by that post.) The post you’re reading now, on April 27th, 2024, is number 18,843 for me. The total number of posts at Cafe Hayek, counting this one, is 20,983. Russ’s posts, therefore, number 2,140.

The single most popular post was written and posted on February 20th, 2016, and is titled “Most Ordinary Americans in 2016 Are Richer Than Was John D. Rockefeller in 1916.”

I’m proud to say that not a single Cafe Hayek post was ghost-written.

For a short time I ran ads on Cafe Hayek, but the sum of money the ads brought it was insufficient to justify the distractions that the ads brought to the blog.

If you’re curious, the gross income the ads brought in averaged about $100 per month. I was and remain happy annually to pay $1,200 pre-tax dollars to keep the blog commercial free. And, yes, I’m aware of the apparent irony that this blog that so very enthusiastically celebrates commerce and the profit motive is commercial-free and turns no monetary profit. I say “apparent” irony because, of course, economists who understand the importance of the material profit motive for creating, sustaining, and increasing mass economic flourishing also understand that human motivation is not limited to material – and certainly not to monetary – matters. I blog here daily because I enjoy it.

But, obviously, I’ve also gained, in many dimensions. Blogging is a low-pressure, excellent means for me to develop, clarify, and sharpen my thoughts. Also, my blogging has brought me speaking engagements – many paid! – that I would otherwise not have gotten. Much more importantly for me, my blogging has brought me friends who I would not otherwise have met. A handful of these friends are now among my dearest. They know who they are.

My intended audience for the blog consists mostly of people who are willing to allow the economic way of thinking to reveal the many marvels of our complex modern, globalized economy. Economics done well truly does supply the intellectual equivalent of X-ray vision glasses – glasses that reveal to those who wear them countless unseen realities that remain hidden to people who refuse to wear these remarkable glasses.

I especially like when students – mostly college, but sometimes high school – write to me in response to my blogging. If I were compelled to summarize this blog’s theme with very few words, it is this: “ECON 101 is vital and too-little appreciated – and it is vastly more important than is ECON 999.”

At the moment I have no plans to shut the blog down or to move over to Substack. Certainly the former will one day change, and maybe the latter will as well.

To all of my readers, I give you my deepest thanks. I’m honored – really honored – that you take time to read my pedestrian prose.

Finally, I thank the Mercatus Center. It has handled what’s under the blog’s hood. My skilled colleagues at the Mercatus Center maintain Cafe Hayek’s technical parts and aspects, about which I have no earthly idea.

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… is from page 239 of Deirdre McCloskey’s 2024 paper “Market Prices and Wages Do Not Reflect Ethical Value,” which is chapter 19 in The War on Prices: How Popular Misconceptions About Inflation, Prices, and Value Create Bad Policy (Ryan A. Bourne, ed., 2024):

The price of water, or the wage of the academic, is not intended by a person or group, neither by you nor by a tyrant nor by a lovely committee of wise economists. So it can no more be praised or blamed ethically than the weather or the varied gifts people have from birth or the house of the Big Bang. The phrase on many lips of “social justice,” Hayek argued, is nonsense. Society does not, in a collective, deliberative, planned human act, settle the price of water or pearls or nurses.

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Claims about the “hollowing out” of American manufacturing are as common today as is sand on a beach. But as readers of this blog know, the data as conventionally gathered and reported contradict both the assertion that Americans “don’t make things anymore” and that America’s capacity to produce industrial outputs has been declining for decades. But are these data the results of manufacturing appropriately defined and of economic activities appropriately categorized? Such questions should be asked from time to time. What, exactly, is meant by a term such as “manufacturing”?

According to the U.S. government, manufacturing is “the mechanical, physical, or chemical transformation of materials, substances, or components into new products.” This definition is reasonable; I’ve no objection to it. But it is nevertheless a human contrivance. And so, if we contrive carelessly – or, worse, tendentiously – the data that we gather and report will give us highly misleading impressions of the underlying reality that we’re interested in better understanding.

If, for example, manufacturing were defined to involve only the manual production of handcrafts, then indeed America’s manufacturing sector would be small. If it were instead defined to include all commercial activities that involve physical transformations of inputs into outputs, the growing of rye and roses, and the raising of pigs and chickens, would be classified – along with steel production, automobile manufacturing, and watchmaking – as manufacturing, resulting in America’s reported manufacturing output today being even larger than is shown in the conventional report. The point is that manufacturing could be defined otherwise, and there surely are possible definitions narrower or broader than the definition now officially used that some serious, thoughtful, and informed people would find reasonable.

The above thoughts were front and center in my mind as I read, on the advice of Doug Irwin, Dartmouth economist Teresa Fort’s splendid paper in the Summer 2023 issue of the Journal of Economic Perspectives – a paper titled “The Changing Firm and Country Boundaries of US Manufacturers in Global Value Chains.” This paper is remarkably informed and informative. My purpose here isn’t to summarize it, but to point out a couple of things in it that especially caught my eye. Fort’s paper only further strengthens the conclusion that American manufacturing is thriving.

The first is this passage on page 35 (which follows this note on page 34: “The Census Bureau defines an ‘establishment’ as a physical location at which employment and payroll records are kept. A firm can thus have multiple establishments—and these establishments need not be classified in the same industry”):

An establishment’s industry is the primary means that government agencies and researchers use to identify manufacturing activity. US statistical agencies use the North American Industry Classification System, commonly referred to as NAICS (and described at https://www.census.gov/naics) to classify establishments. The guiding principle of NAICS is to assign an industry code to an establishment based on the main activities performed by its employees. By contrast, the earlier Standard Industrial Classification System (SIC) classified establishments that provided support services for other establishments of their firm to those establishments’ industry. For example, an R&D lab is always in Services under NAICS, but would have been classified in manufacturing under SIC if its R&D supported the firm’s manufacturing plants. US Census data transitioned from NAICS to SIC between 1997 to 2002 [DBx: Obviously she meant to write “from SIC to NAICS”], a period that coincides with China’s entry to the World Trade Organization, making this issue particularly relevant for research on globalization.

Note that a reported change in U.S. manufacturing output or employment might occur absent any change in actual economic activity. The cause of the reported change might well be due exclusively to a change in how data-gatherers and processors classify the data they gather and process.

The second thing in Fort’s paper that caught my eye for purposes of this post is this passage on page 43:

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Ron Bailey warns that a Greenpeace initiative “will blind and kill children.” A slice:

Greenpeace and other anti-biotech activist groups have logged a win in a crusade that could ultimately blind and kill thousands of children annually. How? By persuading the Court of Appeals of the Philippines to issue a scientifically ignorant and morally hideous decision to ban the planting of vitamin A–enriched golden rice. The objective result will be more children blinded and killed by vitamin A deficiency.

David Henderson is no fan of minimum-wage diktats. A slice:

Moreover, if monopsony does exist, it, by definition, must be regional in nature. You can’t have an employer in, say, high-wage San Francisco having monopsony power over labor in, say, lower-wage Bakersfield. That means that if monopsony is the justification, the minimum wage to offset it should be set for a region rather than a large state: San Francisco should have its high minimum wage and Bakersfield should have its lower minimum wage. So ixnay on a California fast-food wage.

One of the leading proponents of the idea of monopsony in the labor market is British economist Alan Manning of the London School of Economics. He and I debated the minimum wage in an event sponsored by a group of MBA students at Northwestern University. In that debate, Manning claimed that even a large increase in the US minimum wage would cause little or no job loss.

He gave this example to make his case. See if you can spot his implicit, and implausible, assumption. An employer has an employee who produces something worth $12 an hour to the employer. The employer currently pays the employee $8 an hour. So, if the government raises the minimum wage to $10 an hour, the employer will continue to hire the worker. That’s true.

But did you catch his implicit assumption, which is almost certainly false? Here it is. Manning assumed that employers aren’t competing for workers. But if another employer also can hire the worker to produce something worth $12 an hour, why wouldn’t he offer, say, $9 and still make a lot of money on the employee? Then another employer would offer $10. Et cetera. Competition would drive the employee’s wage up close to the value of what he produces. It might not be $12 because the employee has some cost of moving. But it’s likely to be much closer to $12 than to $8. And that means there’s a very thin zone in which to raise the minimum wage and not cause job loss.

Scott Lincicome is correct: “The global economy is far more dynamic—and resilient—than you think.” Two slices:

The day after the accident, for example, the New York Times’ Peter Goodman proclaimed that the “wayward container ship” yet again “shows world trade’s fragility”—and thus serves as a highly visible example of “the pitfalls of relying on factories across oceans to supply everyday items like clothing and critical wares like medical devices.” His NYT colleague Paul Krugman was less hysterical but nevertheless wrote a week later that, “Supply chains are making me nervous again” and warned of broader economic harm. The Washington Post dinged the accident as a result and symbol of “rampant globalization” and openly worried about these disruptions causing “big problems” economically. These outlets certainly weren’t alone in their worry. And social media, as you can imagine, went even further.

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The warnings proved hollow because they assumed that the Port of Baltimore’s billions in economic activity would simply cease in the days and weeks following the bridge accident. Yet mere hours after the Key Bridge collapsed on March 26, shipping companies and supply chain professionals began adjusting their operations to minimize the disruption. The very next morning, for example, ships headed for Baltimore had already started to arrive at alternative ports along the eastern seaboard—ports that subsequently expanded hours and made other operational changes to accommodate the additional cargo (including for all those automobiles).

Columbia University alum Bob Graboyes understandably now loathes his alma mater. A slice:

Use the wrong pronoun or wear a sombrero on Cinco de Mayo, and your university will consider bringing out the firehoses and German shepherds; but assault Jewish students and call for their extermination (along with the eradication of a sovereign nation), and the same university will defend your actions as representing the sacred right to free and open speech. Antisemitism has spread like ebola across American Academia.

Peter Earle and Thomas Savidge argue for removing government from GDP.

Juliette Sellgren talks with Russ Sobel about entrepreneurship.

George Will makes the case for U.S. aid to Ukraine.

Wall Street Journal columnist James Freeman isn’t a fan of NPR’s new CEO, Katherine Maher.

James Capretta tells how to reduce health-care costs.