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… is from page 8 of Cormac Ó Gráda’s 2015 paper “Neither Feast Nor Famine: England Before the Industrial Revolution,” which is chapter 1 of Institutions, Innovation, and Industrialization: Essays in Economic History and Development (Avner Greif, Lynne Kiesling, and John V.C. Nye, Eds., 2015):

Famines are nearly always linked to economic backwardness. Their virtual elimination globally (in peacetime) is one of the achievements of modern economic growth.

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… is from page 8 of Dartmouth economist Bruce Sacerdote’s excellent 2017 paper “Fifty Years of Growth in American Consumption, Income, and Wages“ (link added):

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My intrepid Mercatus Center colleague, Veronique de Rugy, talks with GMU Econ alum Adam Michel about government-debt reduction.

George Will offers an argument in support of “principled nonvoting.” Two slices:

This is not a normal time. Granted, scores of millions of Americans normally — and reasonably — think their political options should be much better: The memory of man runneth not to a time when voters exclaimed, “What a divine presidential choice we have this year!” Still, 2024 is so abnormal, consider, without necessarily embracing, an argument in defense of principled nonvoting. Plainly put, the argument is: Elections register opinions. Abstaining from voting can express a public-spirited and potentially consequential opinion.

Regarding the supposed duty to vote, the right and ability to ignore politics is an attribute of a good society. (Totalitarian societies forbid notparticipating in the enveloping politics.) As for the supposed duty to become satisfactorily informed:

Polls showed that in 1964, two years after the Cuban missile crisis, only 38 percent of Americans knew that the Soviet Union was not a NATO member. In 2006, only 42 percent could name the government’s three branches. The average American works harder at being informed when choosing a refrigerator than when picking a president.

…..

It might be a constructive signal to both parties if, for the first time in a century, more than half the electorate would not vote. (Only 48.9 percent voted in 1924.) Voters’ eloquent abstention would say that they will return to the political marketplace when offered something better than a choice between two Edsels.

Joshua Windham calls for an end to the egregious “open-fields” doctrine.

Kimberlee Josephson is right that Mises was right and Elizabeth Warren is wrong. A slice:

Time will test the best of what Apple has to offer. And so far, the benefits derived from Apple products have extended far beyond the smartphone sector. It is perhaps worth noting that Warren Buffett believed the iPhone to be “enormously underpriced” and he said he’d give up his private airplane before he would the iPhone. “What it [iPhone] does for you, it’s incredible” and, if to add to Buffett’s sentiments, what Apple’s success has done for other sectors is also incredible.

In addition to empowering small businesses who have leveraged Apple products for transactions in a variety of ways, Apple has also supported the creation of adjacent innovations which can have spillover use effects in the marketplace. For instance, in 2021, Apple’s Advanced Manufacturing fund awarded $45 million to Corning Incorporated to further research and development for creating the toughest smartphone glass ever made, Ceramic Shield. The various forms of protection and connection that Apple has established for its hardware, its software, and its content is truly impressive and should be a point of pride for the United States.

Economic advancement occurs when companies increase their capacity for market linkages thanks to business growth. When production and sales increase, a larger and more diversified market occurs igniting new demands for market offerings and new opportunities for job seekers and entrepreneurs. Indeed, businesses depend on vast networks of suppliers, distributors, and ancillary service providers. Businesses never operate in silos and firms survive and thrive when value is derived through market interactions. As it turns out, Apple’s walled garden has produced rather strong vines.

“Trump promised to ‘drain the swamp.’ He did the opposite.”

Jacob Sullum rightly decries Ron DeSantis’s unprincipled cultural warriorism.

George Leef asks: “Why must social workers believe in leftist shibboleths?” A slice:

A veteran professor of social work has just written an article that dares to criticize her field’s obsession with “social justice.” Naomi Farber is an associate professor in the University of South Carolina College of Social Work, and her piece “The Dystopian World of Social Work Education” gives us an insider’s view of the way leftist theories are shoving aside practical instruction.

Farber writes, “The calls to ‘decenter whiteness’ and ‘decolonize curricula’ are ubiquitous among schools of social work, including those at the most prestigious and hence most influential universities.” She continues, “The changes that have occurred already threaten the value of a once-respectable profession as successive cohorts of social workers enter the field prepared to act more as social justice warriors than trustworthy providers of important services to vulnerable people.”

John O. McGinnis makes the case for overturning Chevron.

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… is from page 221 of the Definitive Edition (Ronald Hamowy, ed., 2011) of F.A. Hayek’s 1960 book, The Constitution of Liberty:

The conception of freedom under the law … rests on the contention that when we obey laws, in the sense of general abstract rules laid down irrespective of their application to us, we are not subject to another man’s will and are therefore free. It is because the lawgiver does not know the particular cases to which his rules will apply, and it is because the judge who applies them has no choice in drawing the conclusions that follow from the existing body of rules and the particular facts of the case, that it can be said that laws and not men rule.

DBx: Hayek was born on this date – May 8th – in 1899. Happy 125th birthday, sir.

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Here’s a follow-up note to a recent correspondent:

Mr. B__:

Thanks for your follow-up to my recent note critical of Dani Rodrik’s take on trade.

You write that I “don’t appreciate that workers validly feel more nervousness and anger when the jobs they lose are to foreign goods than when they lose jobs to their fellow Americans who do things like introduce new technology or choose to shop online than at malls.”

If workers feel this way, it’s likely because the general public is constantly fed the fib that international trade is a categorically distinct, especially large, and uniquely disruptive source of economic change and job destruction. Yet it isn’t. In a country as large and as dynamic as the U.S., job losses directly connected to trade are a very small portion of the job losses that routinely occur.

One role of the economist is to reveal such realities rather than to pretend that such misapprehensions are valid.

But there’s a deeper point: Jobs lost to imports are lost because of decisions made by fellow citizens no less than are the jobs that are lost when fellow citizens, say, choose to increase their online shopping and decrease their shopping in brick-and-mortar stores. It’s commonplace to say that “jobs are destroyed by imports,” that “international trade destroyed this or that industry,” and that “foreigners are stealing our jobs.” But this language is highly misleading.

Imports, as such, don’t destroy any particular jobs in America; those particular jobs are destroyed by fellow Americans choosing to buy imports. International trade destroys no American industries; industrial decline blamed on trade is caused by fellow Americans choosing to buy more imports. Foreigners never “steal” jobs – not only because a job isn’t a piece of property, but also because all such job losses occur only because fellow Americans choose to change their spending patterns.

If you’re okay with economic change and the loss of particular jobs caused by the decisions made by fellow Americans, then you should be okay with economic change and the loss of particular jobs that arise when Americans buy more imports. Such job losses are caused by fellow Americans.

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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… is this recent tweet by trade scholar Dan Ikenson:

It’s not so much that we “need foreign savings,” but that foreigners need, desire, demand US investments. Even when US policymakers play roulette with fiscal policy or when the world is in a seemingly chaotic state and US policymakers are exacerbating the problem, investors want dollar denominated investments in US assets. May change at some point. But for now there is a strong argument to make that foreign investment in US (not mindless consumerism) drives the trade deficit.

DBx: Yep.

An unfortunately common practice, even among economists, is to talk or write about the U.S. trade deficit as if it’s necessarily a consequence of inadequate savings by Americans and would, therefore, shrink or disappear altogether if only Americans saved more.

For example, if the U.S. trade deficit this month is $70 billion, this fact does indeed mean that foreigners this month are investing in America $70 billion more than Americans this month are investing abroad. From this reality people conclude that “if only” we Americans as a whole saved more we either would have invested at least $70 billion more this month in foreign ventures and assets or we Americans, rather than foreigners, would have undertaken in the U.S. that $70 billion of investment in America that is instead being undertaken by foreigners.

But this conclusion is mistaken. Investment opportunities aren’t dispensed by nature for all to see, with the fastest or most-frugal individuals on the globe seizing them, leaving no further opportunities for others. Until and unless every human need and whim is fully satisfied, creative individuals will have opportunities to make productive and profitable investments. Investment opportunities are ultimately the creations of human ingenuity. When a Norwegian or Bulgarian uses U.S. dollars to build a business in the U.S., that activity causes the U.S. trade deficit to be higher than it would be had that Norwegian or Bulgarian instead used his or her dollars to purchase American exports. But it isn’t the case that had we Americans saved more we would have built that business. Absent the foreign investment in America, that particular business would not have been built at all, and perhaps no similar business would have been built.

Ditto with portfolio investments: foreigners might see – correctly or incorrectly – prospects for profit that we Americans miss.

In short, the amount of investment done in a country during some period, or over long expanses of time, is not a nature-given fact independent of the particular individuals who are making the investments. And, importantly, because the amount of investment opportunities is practically unlimited, there is simply nothing inherently harmful about U.S. trade deficits to Americans. As Ikenson points out above, quite the opposite is the case.

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The Editorial Board of the Wall Street Journal warns: “Freddie Mac and its Biden regulator want to guarantee second mortgages. What could possibly go wrong?” A slice:

As usual, the likely losers would be taxpayers. One risk is that home prices fall, causing some homeowners with second mortgages to default. An equity buffer helps reduce defaults, which is one reason foreclosure rates remain near record lows. A reduction in equity would make defaults and foreclosures more likely.

Former Democratic Rep. Brad Miller testified in a 2015 hearing on the 2008 financial crisis that “the subprime mortgage model was to lend to people who already owned their own homes—70% were refinances and had a lot of equity in their home—and the mortgages were designed to catch them in a cycle of borrowing and borrowing again.”

He blamed banks for being greedy, but they were merely responding to incentives created by the government and Fannie and Freddie. If Fan and Fred buy and guarantee second mortgages, this will also create new risks in the financial system.

Richard McKenzie details the unfortunate yet unsurprising reality of California’s new minimum wage for workers at fast-food restaurants. A slice:

The political supporters, who surely know the findings of the minimum-wage studies, might object vociferously: “Most past statistical studies on minimum-wage hikes have found meager percentage reductions in employment in covered worker groups (generally, lower than 3 percent of covered workers) and hours worked.” They would be right, for the literature they’ve reviewed. Yet they overlook how employers are not fools, unable to recognize and use other ways of legally responding to government mandates, with the intent of offsetting partially, if not totally, the labor-cost increases from money wage-rate hikes.

Employers know very well that the mandated money-wage increase is hardly the only way workers are compensated, and may not even be the most important form of compensation (on the margin) for some, or even a few, covered workers (especially those with children who need flexible schedules).

Employers also face competitive market pressures to control their labor costs and advance their profits in financial markets. Employers who don’t respond to minimum-wage mandates by cutting their labor costs (perhaps because they want to be “nice” to their workers) can be left behind with relatively higher production costs, and with higher prices and lower sales than those who do make the cuts. The extant competition can force all competitors to respond even when they would prefer not to do so.

Scott Sumner has some rather remarkable news for the many people who believe that zoning protects residential and other non-industrial areas from being uglified by industrial facilities.

Arnold Kling shares his thoughts on the memorial service for his dissertation supervisor, Robert Solow.

I’m eager to read Kristian Niemietz’s new work, Imperial Measurement: A cost-benefit analysis of Western colonialism.

J.D. Tuccille argues against banning people from recording the police.

Writing in the Wall Street Journal, J. Howard Beales and GMU Law’s Timothy Muris analyze “Lina Kahn’s failed FTC experiment.” Two slices:

President Biden has embraced modern progressivism and ditched his liberal economic-policy inheritance. Nowhere is this more striking than in competition policy—the past 40 years of which, Mr. Biden says, have been a failed experiment. His complaint is the consumer-welfare standard, the nearly half-century bipartisan consensus that competition policy should be judged by whether consumers benefit from a given arrangement.

Today’s Democrats aren’t the first to argue that the Federal Trade Commission, now led by Lina Khan, needs drastic change. New leadership after the 1968 and 1980 elections argued the same. In a recent analysis for the Competitive Enterprise Institute, we compared Ms. Khan’s tenure with her predecessors’ from those two eras. The contrast is revealing.

…..

The FTC has persisted in relentless norm-busting, beginning with Mr. Biden’s designating Ms. Khan as chair immediately after she was confirmed as a commissioner—without telling the Senate he intended to do so. It continued by limiting information available to minority commissioners, companies under investigation and Congress. Further, according to a designated agency ethics official, Ms. Khan became the first agency employee to ignore the advice that she recuse herself from participating in a specific party matter owing to “appearance or other federal ethics grounds.” Before joining the commission Ms. Khan had opined that Meta, one of the parties to a challenged merger, should be denied such acquisitions. She chose to participate anyway, and members of the commission sought to conceal her disregard for ethical guidance.

Norms are essential, particularly when people with strong but different opinions must work together. When they are undermined, so too are social and professional cohesion. Such is the case at Ms. Khan’s FTC. While the commission is certainly active, promulgating rules and filing lawsuits, the painstaking organization and planning necessary to make its efforts permanent are nowhere to be found. As legendary basketball coach John Wooden said, “Never mistake activity for achievement.”

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… is from page 93 of the 2009 Revised Edition of Thomas Sowell’s Applied Economics: Thinking Beyond Stage One:

The implicit assumption that mortality rates reflect the amount or quality of medical care is seldom subjected to any empirical test in media or political discussions comparing American medical care with medical care in other countries with more comprehensive government involvement in medical care. But the relevant comparison would be between mortality rates in different countries from health problems in which medical care makes a substantial difference, even if not the only difference. This would still not be a perfect comparison, since even here other differences between the populations in the countries being compared are factors as well. But it would be a much more relevant comparison than those that are usually made by the media and politicians. When the American College of Physicians calculated the death rate for “mortality amenable to health care” the United States was in the top three countries with low death rates of this sort out of 19 countries studied.

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Ron Bailey argues that “AI regulators are more likely to run amok than is AI.” A slice:

With his own considerable foresight, the brilliant political scientist Aaron Wildavsky anticipated how the precautionary principle would actually end up doing more harm than good. “The direct implication of trial without error is obvious: If you can do nothing without knowing first how it will turn out, you cannot do anything at all,” he wrote in his brilliant 1988 book Searching for Safety. “An indirect implication of trial without error is that if trying new things is made more costly, there will be fewer departures from past practice; this very lack of change may itself be dangerous in forgoing chances to reduce existing hazards….Existing hazards will continue to cause harm if we fail to reduce them by taking advantage of the opportunity to benefit from repeated trials.”

John Masko applauds push-back against California’s nanny state. A slice:

A Proposition 65 warning can be required even if there is no scientific evidence that anyone has been sickened by consuming a given product—chocolate, for instance. While a Consumer Reports study in 2022 found that popular chocolate bars contained more than California’s recommended allowable doses of cadmium and lead, no research has linked eating chocolate to a higher risk of birth defects or metal toxicity.

Dandelion Chocolate started its warning by covering its legal bases, as all California businesses must. But then, in smaller print further down, things got cheeky: “Cadmium is a naturally-occurring component in soil, and many plants take it up as they absorb nutrients, which is how it gets into our cocoa beans. According to the CDC, cadmium is commonly found in vegetables, and in relatively high concentrations in leafy greens like spinach. The law won’t allow us to say much more about how the tiny trace amounts in our product will affect your health, but if you want to reduce your exposure to cadmium generally, you might consider eating fewer leafy greens.”

In this short paragraph, I saw something I had almost never seen before. During the two years I lived in San Francisco and on many visits since, I had often seen businesses—straining under the city and state’s regulatory and tax burdens—react with acceptance, a sigh or even an exasperated roll of the eyes. But with laughter and open ridicule? With the sarcastic suggestion that customers worried about chocolate bars should instead eat fewer vegetables? This was entirely new. This wasn’t mere frustration, but the anger of a San Francisco business tired of being asked to behave like an obedient child in the face of overbearing authority run amok.

Here’s the abstract of a new paper by Alessandro Caiumi and Giovanni Peri: (HT Clark Packard)

In this article we revive, extend and improve the approach used in a series of influential papers written in the 2000s to estimate how changes in the supply of immigrant workers affected natives’ wages in the US. We begin by extending the analysis to include the more recent years 2000-2022. Additionally, we introduce three important improvements. First, we introduce an IV that uses a new skill-based shift-share for immigrants and the demographic evolution for natives, which we show passes validity tests and has reasonably strong power. Second, we provide estimates of the impact of immigration on the employment-population ratio of natives to test for crowding out at the national level. Third, we analyze occupational upgrading of natives in response to immigrants. Using these estimates, we calculate that immigration, thanks to native-immigrant complementarity and college skill content of immigrants, had a positive and significant effect between +1.7 to +2.6\% on wages of less educated native workers, over the period 2000-2019 and no significant wage effect on college educated natives. We also calculate a positive employment rate effect for most native workers. Even simulations for the most recent 2019-2022 period suggest small positive effects on wages of non-college natives and no significant crowding out effects on employment.

Arnold Kling reflects on his book, written with Nick Schulz, Invisible Wealth. A slice:

The contrast between rich countries and poor countries also is striking. We cite a paper by David Henderson and Charley Cooper that in 28 high-income countries average annual income per person is at least $9000 but the majority of the world’s people live in countries where the average annual income per person is less than $800.

We include analysis by economists at the World Bank which says that 82 percent of the wealth in the United States is intangible, meaning wealth that does not consist of natural resources or capital equipment.

Meanwhile, in the United States, white-collar work rose from 22 percent of the labor force in 1910 to 76 percent in 2000. One hundred years ago, Americans worked mostly with things. Today, they work mostly with symbols and/or with people. To put it another way, over the course of the 20th century, we went from 3/4 of the labor force working in the [mainstream economics] textbook economy to 3/4 working in the intangible economy.

Joakim Book reminds us that, although we inhabit a reality of inescapable scarcity, there’s every reason to believe that people in markets reasonably free can and will continue to produce ever-greater abundance. A slice:

The basic rationale is thus simple: “Although we live in a world of a limited number of atoms,” as Marian Tupy and Gale Pooley say in their masterful creation Superabundance, “there are virtually infinite ways to arrange those atoms. The possibilities for creating new value are thus immense.”

Economic growth itself, said University of Mississippi economist Josh Hendrickson in an interchange with The Guardian’s George Monbiot a few years ago, is about “finding more efficient uses of resources.” It’s about observing how market prices and the profit motive urge entrepreneurs and businesses to economize on production while producing more value for consumers. We can visibly see this in the products that technology has merged into one (smartphones displacing a dozen or more physical appliances), or the thinner cans or more efficient engines that innovation routinely delivers.

Economists aren’t just playing word games when they say that growth can keep going forever. We can always make more stuff since the physical atoms under our command right now are far from all the physical atoms on our planet (or solar system). By growth, economists mean value-creation exchanged in the marketplace, a market that can change in the types of value we exchange, and the growing portion of our economies can involve fewer atoms than what came before.

“Resource” which the general public think of as physical collections of elements in the ground, economists define much more broadly. Nothing becomes a resource until the human mind makes it so, i.e., “there are no resources until we find them, identify their possible uses, and develop ways to obtain and process them” to quote Julian Simon, whose pioneering work in resource economics prompted Tupy and Pooley to launch their Superabundance project.

UCLA economist Lee Ohanian reports on the destruction, by California’s minimum-wage diktats, of employment opportunities open to low-skilled workers in that state. (HT George Leef) A slice:

It is nothing short of bizarre that California would choose to specify a substantially higher minimum wage for its fast-food industry, which tends to hire workers who are much younger than other industries, which have a minimum wage of about $16 per hour. About 30 percent of fast-food workers are teens, and another 30 percent are between twenty and twenty-four years old. With 60 percent of its workforce twenty-four or younger, the fast-food industry stands in sharp contrast to the other industries, in which only about 13 percent of workers are that young.

Young workers have less experience than older workers and are still in the process of building skills, both of which tend to limit the amount of value that young workers can create for an employer. Young workers are also expensive from a human resources standpoint, because they require significant training and because they tend to move in and out of employment frequently, reflecting school schedules. Annual worker turnover in the fast-food industry exceeds 100 percent, which raises employer recruiting and training costs significantly.

Fast-food employers have few alternatives to a $20 minimum wage other than cutting their workforces or raising prices, as fast-food profit margins are slim, averaging 5‒8 percent. Labor advocates typically argue for the need of a “living wage” when it comes to the pay of less-skilled workers. But this ignores the fact that many of those workers are part time, and it also ignores the fact that fast-food owners and their investors must receive adequate compensation for their time and capital. Living wages can mean no wages, which is what has happened for over 9,500 California fast-food workers since last September.

Pierre Lemieux is correct: “In my view, economists who take economics seriously can only tell policymakers what the latter don’t want to hear given their incentives and their selection.” A slice:

James Buchanan, one of the main artisans of public choice economics, was also a major political philosopher. He persuasively argued that the possibility of an auto-regulated order where government direction is not constantly required is central to modern economics (see notably his 1979 book What Should Economists Do?). This idea, Buchanan wrote, “is in no way ‘natural’ to the human mind which, in innocence, is biased toward simplistic collectivism.” Economists must thus teach “a vision of economic process that is not natural to man’s ordinary ways of thinking.” They should try to teach these ideas to the public much more urgently than consult with politicians and bureaucrats, who benefit from simplistic collectivism.

The economist who takes economics seriously cannot be a faithful adviser to a democratic Prince more than he can be coopted in the service of an authoritarian government.