… is from page 267 of Thomas Sowell’s 1999 book, Barbarians Inside the Gates:
Don’t you get sick and tired of being propagandized and warned almost everywhere you turn? Someone said: “They are the missionaries and we are the Hottentots.”
A follow-up to a friend.
Tim:
Thanks for your reply to my earlier note. You write:
Not all jobs lost are the same. Not all jobs lost to free trade are the same. Not all factories that close are the same. Not all communities in which jobs are lost are the same. And not all free trade agreements are the same. You treat them as if they are and thus dismiss claims that an FTA could raise mortality rates. But jobs long protected in company towns are simply not the same as jobs in say Silicon Valley. It has nothing to do with manufacturing being special and you are perhaps too quick to assume that’s what people are claiming.
I’m not seeing something that you see. I understand that not all jobs (and job losses) are the same. What I don’t understand is what is unique about trade at causing the loss of those jobs that are especially traumatic to lose.
The ultimate cause of job losses in market economies is economic change. Sometimes that change is transmitted by international trade. Sometimes – and most times in a large country such as the U.S. – that change is transmitted by forces having little or nothing to do with trade. What reason is there to single out trade as a source of economic change, or of economic change that causes especially acute harm to workers who lose jobs? I know of none. The fact that trade sometimes has unusually traumatic and heart-rending effects doesn’t make the case. Not only does trade usually not have these effects, sometimes these effects are caused by non-trade sources of economic change, such as labor-saving technology.
It might well be that the economic change fueled by NAFTA caused job losses that led several people to make life choices that put them in early graves. But what of other historical cases? What of manufacturing workers in the 1920s who lost jobs because of electrification? What of manufacturing workers in 1945 who lost jobs because the war ended? What of manufacturing workers in the 1990s who lost jobs because of advances in computer technology? And what about the technology-driven mass destruction of agricultural jobs in the mid-twentieth century – job destruction that was just as large a share of the labor force as was that caused by the “China Shock”? Surely some of those workers committed suicide, turned to drink, or fell into life-draining despair.
It is simply misleading – because mistaken – to single out trade as a source of economic change that causes traumatic job losses.
The right course is to recognize that some unfortunate individual and localized problems are caused by economic change (and, by the way, as well as by efforts to obstruct economic change). And honesty demands that we acknowledge that among the countless sources of economic change is international trade. But to single out trade as if it’s a categorically different, or special, source of economic change makes no more sense than to single out labor-saving technologies invented in Texas, or changes in the preferences of Asian-American consumers, as a special source of economic change.
If voters insist on obstructing trade in order to avoid these traumatic downsides, that would be too bad, but so be it. Voters, however, should then be informed that their aim is too low: To be consistent they should aim to prevent all economic change, no matter its source. Again, it seems to me that to write of trade as if the economic change that it causes is uniquely troublesome is deeply misleading – and dangerous, because it suggests that such economic change should be controlled by political authorities.
Sincerely,
Don
Here’s a letter to a respected friend – who, by the way, is no protectionist.
Tim:
Thanks for your feedback on my letter to the New York Times; it’s always good to hear from you.
You write that I’m “too glib” in questioning the claim that, as the NYT favorably summarized new research, “American workers in communities that were more exposed to competition from Mexican imports saw a significant shortening of their life spans after the trade deal went into effect in 1994.” You give as a hypothetical example a middle-age factory worker who, having lost his job to Mexican imports, commits suicide or becomes an alcoholic.
I’ll defend myself. I never questioned the finding that, in areas subject to increased foreign competition, mortality rates rose. Nor, of course, did I ever I make light of rising mortality. Instead, I questioned the accuracy of blaming this misfortune on trade.
The period studied by the researchers is 1994 through 2008. The St. Louis Fed has data starting in December 2000 on total monthly layoffs and discharges – that is, for 97 of the 180 months covered by the research. During those 97 months, an average of 1.9 million workers in America every month lost or were laid off from jobs they wanted to keep.
How much of this job destruction was caused by NAFTA? The Economic Policy Institute – an outfit hostile to NAFTA – estimates that over the course of NAFTA’s first 20 years, that trade agreement destroyed a total of 700,000 jobs. Even assuming that all of those 700,000 jobs were destroyed in the first 15 years of NAFTA, that’s an average monthly job loss of only 3,900 – or 0.2% of the average total monthly layoffs and discharges during this period. If we add to this number the maximum estimated average monthly job loss caused by the “China Shock” – 15,385 – we find that the average number of jobs destroyed monthly by these two much-criticized and most disparaged sources of increased imports is 19,285 – or 1.0% of total layoffs and discharges.
Most job destruction in the U.S. is caused, not by trade, but by labor-saving technology, changes in consumer preferences, and ordinary, healthy domestic competition. And yet, although this job destruction is massive and has long been on-going, we Americans don’t seem to be killing ourselves in great numbers because of it.
Why would the relatively tiny number of job losses due to trade uniquely increase mortality? I can think of no good reason. The researchers will say that there’s something special about manufacturing jobs, and that manufacturing jobs are disproportionately hit by trade. But the rate of layoffs and discharges in manufacturing was higher during manufacturing’s alleged ‘golden era’ – before America was much-exposed to global markets – than it was during the NAFTA years studied by the researchers.
Did those ‘golden era’ manufacturing-job losses increase mortality? If they did so, trade can’t be blamed, as post-war globalization was still in its infancy. But I’ve encountered no evidence that they did so. Either way, the earlier, higher rate of manufacturing-job loss means that the measured post-NAFTA increase in mortality rates identified by the researchers was likely fueled by factors other than trade – factors such as increased welfare payments that discourage people from moving to other towns to find employment, land-use restrictions that do the same, and more occupational-licensing requirements that close off some employment opportunities.
Because trade is not only not a unique, but not even a major, source of job losses – and because job losses are the proximate cause of the increased mortality identified in the research on NAFTA – and because the rate of manufacturing-job losses pre-NAFTA was higher than since NAFTA took effect – and because there is no evident negative effect on mortality of America’s enormous routine rate of job loss – it seems to me to be mistaken to blame that measured rise in mortality on NAFTA.
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
… is from page 489 of Columbia University law professor Philip Hamburger’s brilliant 2014 book – whose title poses a question to which the book’s text gives the answer “yes” – Is Administrative Law Unlawful?:
Indeed, administrative governance is a sort of power that has long been understood to lack legal obligation. It is difficult to understand how laws made without representation, and adjudications made without independent judges and juries, have the obligation of law; instead, they apparently rest merely on government coercion. They therefore cannot be perpetuated on a theory of consent or acquiescence, and they traditionally would have had the potential to justify revolution. Certainly, when the English Crown justified its power as constitutional, the English and eventually the Americans engaged in revolutions against it.
This letter was submitted last week to the New York Times, but not published there.
Editor:
Ana Swanson reports on a new paper purporting to find, in Ms. Swanson’s words, “that American workers in communities that were more exposed to competition from Mexican imports saw a significant shortening of their life spans after the trade deal went into effect in 1994” (“‘A Lot of Life Years Lost’: How NAFTA Shortened American Life Spans,” March 13). One of the paper’s co-authors describes this apparent loss of life as “an underappreciated cost of globalization.”
I’m skeptical that freer trade, by causing manufacturing job losses, is to blame for increased mortality. From 1958 through 1980, the average monthly rate at which manufacturing jobs were destroyed was 1.6%, or about 275,000 jobs each month. Yet during NAFTA’s first 15 years – the period studied by the paper – the average monthly rate at which manufacturing jobs were destroyed was lower, at 1.3%, or 206,000 jobs each month.* (NAFTA, by the way – using an estimate from the Economic Policy Institute, an anti-NAFTA outfit – destroyed each month a mere 3,900 jobs.)
Because U.S. life expectancy rose from 69.5 years in 1958 to 73.0 years in 1980 – and because manufacturing’s share of total employment was much higher in those years than it was in the years studied by the paper** – it’s likely that the increased mortality described in the paper was caused by something other than NAFTA specifically, or by globalization generally.
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
571-426-5751 (mobile & text)* Calculated from data found here.
**
The latest issue of the Independent Review is devoted to hidden gems in Adam Smith’s Inquiry Into the Nature and Causes of the Wealth of Nations. I was very happy to accept Robert Whaples’s invitation to contribute an essay surveying Smith’s great 1776 work. Here’s a slice from my essay:
The mercantilists’ confusion about the relationship between money and wealth mirrors their confusion about the relationship between production and consumption. Starting with the correct observation that consumption depends on production—and furthered by the also correct observation that producers earn money for what they produce and sell— the mercantilists leaped to the mistaken conclusion that production is an economic activity superior to consumption. After all, consumption, by its nature, consumes goods, resources, and capital, while production produces goods, resources, and capital. Surely we should do as much as possible of the latter and as little as possible of the former. But because people, left to their own devices, are more eager to consume than they are to produce— people, alas, willingly pay to do the former but must be paid to do the latter— intervention by a wise state is necessary to promote production and control consumption.
Although Smith was aware that individuals (and governments) might well consume excessively, he nevertheless understood— as he famously put it, contradicting the mercantilists—that “consumption is the sole end and purpose of all production” (Smith [1776] 1981, 660). For Smith, a person can indeed consume excessively. But such excessiveness occurs only if and when that person’s consumption today reduces his ability to consume tomorrow by an amount that—when tomorrow arrives— the person will regret. Such a person realizes with remorse that his imprudent consumption yesterday diminished the total amount he’s able over time to consume. Ditto when an organization, including government, consumes: That consumption is excessive today only if it reduces its principals’ ability to consume tomorrow by an amount that the principals will regret.
In short, excessive consumption for Smith is consumption that imprudently reduces an economic entity’s ability to consume over a lifetime. Far from being opposed to consumption, Smith sought to maximize it over time.
The mercantilist attitude toward consumption differs categorically from Smith’s attitude. Whereas Smith understood that consumption is the end of economic activity, with production being exclusively a means to promote this end, mercantilists reverse this relationship, treating consumption as a means of promoting production. Smith could barely mask his contempt for this misunderstanding.
Section 122 of the Trade Act of 1974 lets the President impose a temporary 15 percent import surcharge for up to 150 days only when there is a “fundamental international payments problem,” specifically a large and serious United States balance-of-payments deficit, an imminent dollar crash in foreign markets, or an international payments disequilibrium that needs fixing. That language was written in the early 1970s for the old fixed-exchange-rate world under Bretton Woods. Once those rates floated freely after 1971, the crisis the statute targeted simply vanished. Under those rules, the international balance of payments is simply not a problem and is generally acknowledged as such. Even Trump’s own lawyers admitted months ago in court filings that Section 122 has “no obvious application” to ordinary trade deficits. This is not a close call; it is an intentional stretch of a never-used provision the Supreme Court just forced him to swap in after striking down his earlier IEEPA tariffs.
Tariffs are taxes on American buyers and businesses, they raise costs across the supply chain, and they distort free markets exactly the way I have warned for decades. Justifying hundreds of billions in extra costs on companies and consumers with a rule that has been dead letter for fifty years is not clever policy—it is abuse of power that threatens the separation of powers and the rule of law. Courts are already hearing challenges; they should kill this fast. Congress needs to step up, repeal or rewrite these outdated tools, and stop letting any president—Republican or Democrat—play fast and loose with our economy. Limited government and real free markets demand nothing less.
Since wireless routers transmit over radio frequencies, they must be authorized by the FCC to be sold in the U.S.; adding all new foreign-made routers to the “Covered List” means the FCC will not authorize those devices’ transmitters, effectively banning their sale or use.
The announcement specifies that this only applies to new consumer-grade devices and “does not prohibit the import, sale, or use of any existing device models the FCC previously authorized.” It also notes that manufacturers who apply for exemptions on new models can be “granted ‘Conditional Approval’ after finding that such device or devices do not pose such unacceptable risks.”
Perhaps unsurprisingly, the ban will likely make it more difficult for Americans to get wireless routers.
The problem is that banning all foreign-made routers means banning practically all routers. Most manufacturers, including the three largest, make their products overseas.
I want to point to a submission for the record by Bryan Riley of the National Taxpayers Union that deserves attention because virtually everything in it has been documented, warned about, and ignored for years.
Riley’s testimony is concise. He makes three points. First, Ex–Im’s mission creep is real: In 2022, the bank bypassed Congress and expanded from export-financing into subsidizing domestic manufacturing through its “Make More in America” initiative — a program with no direct export requirement and no congressional authorization. Second, the bank hides the true cost of its lending from taxpayers by using Federal Credit Reform Act accounting instead of fair-value accounting. Under FCRA, Ex–Im’s projected $16 billion loan book looks like a $600 million moneymaker for the government. Under fair-value, which is the method that accounts for market risk the way a private lender would, it is an estimated $200 million subsidy, or cost. Third, Congress has called for negotiations to eliminate predatory export subsidies since the Carter administration. Decades later, those negotiations have produced nothing.
The mission-creep problem did not begin with “Make More in America.” It is the defining feature of an institution that has spent nine decades attaching itself to whatever policy priority dominates the headlines. In 2019, it was competing with China. Congress gave Ex–Im a seven-year reauthorization and a brand-new strategic mandate: the China and Transformational Exports Program, with a $27 billion target; 20 percent of the bank’s total lending authority.
Sen. Elizabeth Warren (D-Massachusetts) inserted a provision that would require any build-to-rent homes to be sold within seven years of construction. This is a way many families can afford somewhere to live who otherwise couldn’t afford a down payment, but the seven-year cap means the builders won’t necessarily have enough time to recoup their investments, which will discourage them from starting construction in the first place.
Pro-housing groups from across the country and the political spectrum have warned that it would restrict supply. Even if build-to-rent homes do still get built, the families living in them who couldn’t afford to buy would effectively be evicted by an arbitrary deadline from the federal government.
Sen. Brian Schatz (D-Hawaii) said the measure demonizes people who want to build rental housing. He initially assumed the build-to-rent provision was such bad policy that it must have been “a drafting error,” only for Warren to clarify that it was actually “quite deliberate.”
Jerusalem Demsas is also critical of Elizabeth Warren’s ignorant obstinance on this housing matter: (HT Scott Lincicome)
Warren seems like a uniquely bad actor in the housing policymaking space.
A hostility towards negotiation and a reluctance to accept that there could be any sort of thing as good faith disagreement.
Good on [Brian] Schatz for standing strong here.
John Stossel, as usual, is right:
Politicians say they can “make the economy work better.”
I once believed they could.
But years of reporting taught me that politicians’ attempts to “fix” the economy usually make things worse.
Trial lawyers will now use the L.A. verdict in advertisements to recruit more plaintiffs. They may even use the social-media platforms to advertise. Unemployed? Depressed? Spend your Friday nights scrolling? You could make big money by holding billionaires responsible for your problems.
Trial lawyers and juries may figure that Big Tech companies can afford to pay, but extorting companies is certain to have downstream consequences. Meta and Google are spending hundreds of billions of dollars on artificial intelligence this year, which could have positive social impacts such as accelerating treatments for cancer.
… is from page 20 of the late Brian Doherty’s great 2007 book, Radicals for Capitalism: A Freewheeling History of the Modern American Libertarian Movement:
For all its occasionally zany radicalism, libertarianism is not a utopian ideology. More than any other set of political ideas, it recognizes and is based on the limits that economic reality and human nature place on attempts to use the state to accomplish grand goals.
James Pethokoukis writes wisely about AI. A slice:
Set aside claims that artificial intelligence is mere Silicon Valley hype or just a bubblicious story about massive data-center investment. Across Corporate America, firms are spending on AI tools, experimenting with use cases, and—crucially—starting to see results.
That said, it’s too early to expect an obvious productivity boom reflected in big-picture national data. Two things appear true: First, AI is working as a general-purpose technology. Second, it isn’t yet transforming American business.
But the direction is encouraging.
Here’s Colin Grabow on his recent appearance in a 60 Minutes report on the Jones Act.
Most silly is the assertion that these bureaucracies can be more competent now than in the past because rising global education levels mean more talent is available. As if the main blocker to global growth is a lack of bureaucrats with doctorates.
Throughout, the bank’s recommendations are carefully hedged. The authors acknowledge there is no silver bullet, that there have been many failures and that politicians need to admit when programs aren’t working so they can abandon them. They acknowledge that knowing exactly what industry to target is more of an art than a science.
Ultimately, the World Bank is arguing that industrial policy will work if governments spurn favoritism, reject rigidity and reward successful outcomes regardless of the politics. All governments have to do is act contrary to their very nature.
In other words, industrial policy won’t work.
Vance Ginn reports on the reality of guaranteed basic incomes. A slice:
AEI shows that the bigger and more credible studies tell a very different story. Among the four pilots with treatment groups of at least 500 participants, which together account for 55 percent of all treatment-group participants, the mean effect on employment was minus 3.2 percentage points. AEI also estimates a mean income elasticity of -0.18, which is consistent with standard labor-supply economics.
In plain English, when people receive more unearned income, work tends to fall at the margin. Shocking, I know. Economics still works.
“Don’t Legislate Morality: Most Americans Can’t Agree on What’s Immoral.“
… is from page 312 of Vincent Ostrom’s July-August 1980 Public Administration Review paper, “Artisanship and Artifact“:
The greatest evils inflicted upon humanity have been the work of those who are so confident of their effort to do good that they do not hesitate to use the instruments of evil available to them on behalf of their righteous cause.
