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The Benefits of Free Trade Are at Risk - Econlib
When I was a full-time economics professor at the Naval Postgraduate School, I always taught my master’s students about comparative advantage. I showed them that if two people were on a desert island and discovered each other, they could each have more by specializing in producing the good in which they had a comparative […]
What Makes International Trade Unique: Politics - Econlib
Those of us who teach and study international trade sometimes get the question: “how is international trade different from domestic trade?” From a purely analytical perspective, national borders do not change the fundamentals of trade. Whether one is trading with Bart in Baton Rouge, Brad in Boston, or Brent in Berlin, the fundamentals stay the […]
The King of New York - Econlib
When Joe Biden was president, Republicans rightly complained that he often abused his power when doing things like cancelling student debts. They also rightly complained when the federal government usurped the power of state and local governments. The GOP is traditionally seen as favoring “federalism”. Was the GOP complaint about the president exceeding his constitutional […]
Revealed preference as an analytical tool - Econlib
Economists like to look at actual behavior as a way of inferring what people believe. This is called “revealed preference.” I’ve always found it to be a very useful tool. Recent statements by top Trump administration officials have puzzled observers on both sides of the political spectrum. Here’s the National Review, a conservative publication that […]
The Basic Error About International Trade - Econlib
There is a fundamental misconception of international trade. Under different disguises and confusions, it is that the collective state trades, instead of individuals and private organizations trading. Recent illustrations are worth reporting. On his so-called “reciprocal tariffs,” President Trump declared (“Trump’s Next Round of Tariffs—25% on Steel and Aluminum—Won’t Be So Easily Averted,” Wall Street […]
The Tension in Discussions of Tariff Burdens - Econlib
Many people who discuss who actually pays for tariffs claim that they are paid solely by consumers. Even many economists, including co-blogger Pierre Lemieux, say that. But it’s important to look at what people are implicitly assuming when they make that claim. Here’s what I wrote in “Tariffs Will Hurt Canadians and Americans Alike,” […]
Prices and the Possibility of Civilization - Econlib
“I give you the toast of the Royal Economic Society, of economics and economists, who are the trustees not of civilization, but of the possibility of civilization.” John Maynard Keynes, quoted in Dwight E. Robinson, “Economics and ‘The Possibility of Civilization’” Four Judgments, Quarterly Journal of Economics 67(1), Feb 1953, pp. 50-75, p. 50 […]
Bitcoin isn't money - Econlib
In a recent interview, Eugene Fama predicted that the price of Bitcoin will fall to zero: This newfound mainstream adoption has given Bitcoin an illusion of legitimacy, but Fama argues that it doesn’t change the fundamental issue: Bitcoin still has no intrinsic value. “If demand for Bitcoin disappears, so does its pricing,” Fama emphasized. When […]
Are Conflicts of Interest at the FDA a Big Problem? - Econlib
I caught a little snippet on Fox News Channel in the last day or two of RFK, Jr. in the White House after he was confirmed as secretary of the Department of Health and Human Services (HHS.) I was already nervous about him. When I hear someone who is used to advocating government coercion say […]
The Left and the Right: A Non-Mysterious Puzzle - Econlib
Wall Street Journal editorial writer Barton Swaim writes that mainstream Democrats have lost their hot and divisive rhetoric to criticize Trump’s firehose of pronouncements and actions since his election. The subtitle is revealing: “Democrats still attack him, but they’ve reverted from catastrophizing to ordinary partisan rhetoric” (“Trump Somehow Lowers the Temperature in Washington,” February 14, […]
Stephanie King on Getting Rid of the Penny - Econlib
Let’s quit producing both the penny and the nickel. On Super Bowl Sunday, President Trump announced that the federal government would stop producing pennies. Good for him. This is long overdue. This week, I contacted a former Marine student, Stephanie King, who, in 2006, had approached me with a thesis topic. Often when students […]
A VAT is not a tariff - Econlib
Under the US Constitution, Congress is supposed to set tariff rates. But our government stopped paying attention to the Constitution long ago, so we also need to think about the implications of the president’s views on tariffs. Here’s Fortune magazine: Still, Trump blames the VAT for the U.S. trade deficit with the European Union, which hit […]
Is China waking up? - Econlib
Over the past decade, China has drifted away from its previous policy of free market reforms, toward a more statist economic model. Statism almost never works, and the recent Chinese experience is no exception. Now Bloomberg reports that China may be willing to move back toward a somewhat more market-oriented economic policy regime: Chinese President […]
Who Won the Socialist Calculation Debate (with Peter Boettke) - Econlib
For more than a century, some economists have insisted that central planning can outperform markets. Economists like Mises, Hayek, and Friedman disagreed. Who won this debate? Is it over? Does AI change how we should think about the power of planning? Listen as economist Peter Boettke of George Mason University discusses what is known as the […]
Animal Personalities, Individual Dignity, and Equilibrium - Econlib
A review of John A. Shivik, Mousy Cats and Sheepish Coyotes: The Science of Animal Personalities, (Beacon Press, 2017) Economists can learn a lot from non-economists. Biologist and animal rescuer John Shivik’s charming 2017 book Mousy Cats and Sheepish Coyotes is an excellent example. He, likely unintentionally, offers two deep insights for economists. First, […]
I, Can - Econlib
Alex Tabarrok, over at Marginal Revolution, had a good post on February 14 about how little people know about how things work. He quoted from an essay by Charles Mann, who has a new series titled “How the System Works.” Here’s a quote from Mann, a quote that Alex didn’t use but that I like: […]
My Weekly Reading for February 16, 2025 - Econlib
California’s Terrible Wildfires Exposed a Variety of State Policy Failures by Steven Greenhut, Reason, February 14, 2025. Excerpts: Regarding brush clearance, the governor has agreed that we need to step up the process. The California Environmental Quality Act, or CEQA, and other laws require Environmental Impact Reports (EIRs) for clearance projects and two to three […]
My Weekly Reading for February 2, 2025 - Econlib
The End of North America by Paul Krugman, Paul Krugman Substack, January 31, 2025. Excerpt: As I wrote the other day, in the three decades since NAFTA went into effect, North American manufacturing has evolved into a highly integrated system whose products — autos in particular, but manufactured goods more broadly — typically contain components from […]
The Elementary Economics of Tariffs and Protectionism - Econlib
The imposition of high tariffs by President Donald Trump yesterday suggests a review of the elementary economics of this sort of government intervention. A tariff (or tax) imposed by the government of country D (“domestic”) on a good G imported from country F (“foreign”) has three major effects. First, the tariff increases the price of […]
Does money make you happy? - Econlib
Studies of happiness often find a positive correlation between income and subjective well-being. Put simply, rich people tend to be happier than poor people. Of course, correlation by itself doesn’t prove causation. In the past, I’ve suggested that the positive correlation largely reflects reverse causation. Happy personalities are likely to be more motivated and capable […]
California Burning: Causes and the Way Forward - Econlib
There are two competing narratives about the causes of the tremendous destruction of buildings and lives that the recent Southern California fires have wreaked. One group of people blames the destruction on climate change. Another group blames it on bad government policy that has nothing to do with climate. Which side is more correct? […]
Introduction to R. R. Reno’s Return of the Strong Gods - Econlib
Over the last several years, there has been no shortage of books arguing that liberalism, in the broad sense, has gone wrong over the last few generations. Every now and then I read one of these books to see what I might learn or gain. As Edmund Burke said, “He that wrestles with us strengthens […]
Time, Transactions Costs, and Technology - Econlib
In keeping with my habit of taking time to appreciate the importance of the small stuff in life, I want to talk about one little thing that’s changed in my lifetime that, for me at least, has been a big improvement – the experience of going to the movie theater. More specifically, how the issue […]
L.A. Fires: Consumers Are Price Gougers - Econlib
Prices on the real estate market in Los Angeles County confirm elementary economic theory. The economically illiterates seem surprised. See “Rent Rose by 10 Percent Across L.A. Country After Fires. That’s Illegal,” Washington Post, January 23, 2025. The Wall Street Journal writes (“After the Fires, Bidding Wars and Cutthroat Demand Take Over L.A.’s Rental Market,” […]
My First “Conversation” With DeepSeek - Econlib
I had my first, short conversation with DeepSeek V3 yesterday, January 28, after trying several times to create an account. The Chinese chatbot has been hot news for a few days and even caused a big drop in AI-related stock prices. I asked DeepSeek the question that had been on my mind since reading that […]
Glenn Loury on the Enemy Within - Econlib
Glenn Loury is a Professor of Economics and International and Public Affairs at Brown University. Loury is also a Fellow of the Econometric Society, and the American Academy of Arts and Sciences, and is the author of many books including The Anatomy of Racial Inequality, Race, Incarceration, and American Values, and the title of this […]
Jimmy Carter, the original DOGE-bro? - Econlib
Until Joe Biden came along, conservatives rated Jimmy Carter as the worst US presidents in the post-WWII era. There are many reasons to criticize Carter’s record: high inflation combined with economic stagnation, weak foreign policy, and a general sense that America’s best days were behind us. Ronald Reagan crushed Carter in the 1980 election with […]
Immigration and food prices - Econlib
High food prices were a big problem for the Biden administration. It will be interesting to see if the problem reoccurs under the new administration. Here’s Bloomberg, discussing a recent crackdown on illegal aliens in Florida: The law, SB1718, requires businesses to use a federal system called E-verify to confirm that every employee can work […]
Some Numeracy About Tariffs on Tequila - Econlib
If you’ve followed my work, you know that I’m no fan of tariffs. I think it’s important, though, not to exaggerate their effects. In “Trump’s Tariffs To Tank Tequila,” Reason, January 28, 2025, Eric Boehm writes: That’s because President Donald Trump’s threatened tariffs on imports from Mexico will increase prices and could reduce the […]
A Stormy Celebration of Globalization - Econlib
I have an important tradition I like to uphold: every winter storm, I like to eat citrus fruit. Sumo oranges are typical, but lemons and limes will suffice too. I started this tradition when I was a visiting scholar at Syracuse University. Being in Central New York and close to Lake Ontario, winter storms happen. […]
On Barbie and Impossible Expectations - Econlib
Let me state upfront that while I’ll be talking about a particular element of the recent Barbie movie, I have not actually seen the film and I don’t have any particular plans to do so. That said, the movie certainly made a big impact, and one scene in particular is often cited as being particularly powerful. […]
Oil Prices, Interest Rates and War - Econlib
The Financial Times recently reported that President Trump is encouraging OPEC producers to boost supply: Donald Trump has called on Opec to push down global oil prices and insisted that central banks around the world lower interest rates “immediately” afterwards. In a speech to executives in Davos on Thursday, the US president urged Saudi Arabia […]
Tariffs on Canada and Mexico Are Way Worse Than Tariffs on China - Econlib
Some bad news and then some good news and then some bad news. Bad News On January 21, on his first full day in office, President Trump threatened to impose a 10% tariff rate on imports from China. His beef is that “China,” whatever that means (cue co-blogger Pierre Lemieux), is sending to Mexico chemical […]
Why AI Is Good for Humans (with Reid Hoffman) - Econlib
[ANNUAL LISTENER SURVEY: https://www.surveymonkey.com/r/KYV5XPG. Vote for your 2024 favorites!] Should we worry about the human future in a world of AI? Reid Hoffman is unafraid and even optimistic. He argues that the brave new world that awaits is going to be great for humanity. Listen as he talks about his book Superagency with EconTalk’s Russ Roberts […]
My Weekly Reading for January 26, 2025 - Econlib
What Obamacare Hath Wrought by Tevi Troy, Commentary, 2025. Excerpts: The Obama team held a series of internal meetings to discuss what to do after the loss of the Senate supermajority. Most aides, including Chief of Staff Rahm Emanuel, suggested that they work with Republicans at this point on a compromise “skinny” plan that Pelosi […]
Trickle-down in Austin - Econlib
Trickle-down economics is often caricatured as the claim that by giving money to the rich, the benefits will eventually trickle down to the poor. That theory is probably false, but that’s not what advocates of trickle-down are actually recommending. Housing is one area where trickle-down actually does work. A recent Kevin Erdmann post showed that […]
Politics Feeds Mounting Discontent and Hatred - Econlib
An interesting reflection by The Economist‘s US editor, John Prideaux, in a subscriber-only newsletter is worth quoting at some length (“How to Cover Trump 2.0,” Checks and Balances, January 10, 2025): Perhaps the least important thing about the awful fires in and around Los Angeles is Donald Trump’s response to them. And yet he’s about […]
Public Choice Doesn’t Require Us to Assume People Are Evil - Econlib
Public Choice, the economist James M. Buchanan explained, is built on the “homely” proposition that politicians are just like the rest of us. We call this “behavioral symmetry.” They have their own interests, and they try to satisfy those interests. Furthermore, we can understand people’s behavior in the voting booth and the bureau using the […]
Cat Cardiologists, Howard Hughes, Symphony Music, and Economic Growth - Econlib
Our cat Theo has a heart disease. We found that out from a cat cardiologist. A cat cardiologist? Really? Yes, really. Why do I mention this on a site called EconLog? Because the fact that there are cardiologists for cats is a sign of economic growth. I’m pretty sure that fifty years ago we didn’t […]
Not Enough “Political Will,” but What Is That? - Econlib
The idea that the only thing missing in a project is “political will” is a cliché representative of our times. We find it again in a Financial Times article about regulating social media ( “The Coming Battle Between Social Media and the State,” January 21, 2025): But there are two problems with regulating social media […]