Tweet

… is from page xvi of the Second Edition (2025) of GMU alum Benjamin Powell’s excellent book Out of Poverty: Sweatshops in the Global Economy:

The laws of economics do not put “profits over people.” They dictate which policies will help poor workers and which policies will harm them.

DBx: Yes.

And pick any randomly chosen policy today peddled by either the progressive left or the MAGA right and you will likely pick a policy that, although marketed as helping the poor, actually hurts the poor.

Tweet

Phil Magness is no fan of J.D. Vance’s new book. Two slices of Magness’s review:

JD Vance’s disdain for economists has become a pronounced and recurring theme of his political career. In his new book Communion, the vice president devotes an entire chapter titled “A Dismal Science” to attacking the way that mainstream economists have allegedly distorted our entire political system for the worse.

It’s unclear if Vance knows that his chosen pejorative for economics — “the dismal science” — originated in a notorious pro-slavery essay by Thomas Carlyle. The abolition-inclined economists of the 19^th century were “dismal” in Carlyle’s mind precisely because they wedded the tools of “supply and demand” to the “sacred cause of Black Emancipation,” and thereby upended what he saw as a natural social order. Vance largely misses that lesson, although he shares other dimensions of Carlyle’s famously acerbic disdain for measurements of economic prosperity.

…..

Unsurprisingly, Vance’s claims do not hold up under empirical scrutiny.

For several decades, the Bureau of Economic Analysis (BEA) has provided detailed estimates of the economic value of household production, including unpaid work such as “cooking, cleaning, and child care.” Note that these are the very same “unmeasurable” tasks that Vance considers to be the Achilles heel of GDP. And yet, easily accessible reports from the BEA’s website not only measure them with a high degree of accuracy — they also estimate an “adjusted GDP” growth rate that incorporates these measurements.

Ryan Bourne makes clear that “JD Vance’s feared “Cult of Growth” has never run America.” A slice:

The vice president’s criticism is mostly a strawman. I don’t know any economists who advocate GDP maximization. In fact, most economists talk about ill-defined concepts like “social welfare” all the time. The limits of GDP as a proxy for human welfare are emphasized in any 101-level economics course, including this study aid for high schoolers. As my colleague John Cochrane tweeted last month: “GDP answers the question posed to it…. What is the total value of goods and services produced in the market economy…. It is a terrible measure of things it wasn’t designed to measure: consumer surplus, welfare, non-market activity, happiness, etc.”

What economists have emphasized is that GDP is highly correlated with many non-economic outcomes we care about, including life expectancy, literacy, sanitation, and a host of other obviously good things. In other words, GDP is not and doesn’t pretend to be synonymous with human welfare, but formal economic activity appears highly related to that. Anyone proposing policy that crushes output in the name of another objective should therefore be wary of dismissing falling incomes or consumption as mere accounting trivia.

In any case, it’s especially laughable to claim that policymakers prioritize maximizing GDP over all else. A quick review of Congressional Budget Office and Joint Committee on Taxation bill scorings shows that GDP projections have little bearing on whether a bill becomes a law. Of 17 bills scored with respect to GDP since 2000, four passed, one of which was thought to produce a long-term drag on GDP. Of the 13 that failed, nine were projected to boost GDP, including three bills to liberalize immigration. Imagining what America would look like if a true GDP-maximizer had been at the reins drives the point home: Vance’s appraisal of economic policy is off the mark.

The Editorial Board of the Wall Street Journal reports on Comrade Mamdani’s support for an effort to harm workers. A slice:

Sooner or later in today’s America, if you are successful in business you will be targeted as guilty of some alleged political sin. It doesn’t matter how many jobs you create or what services you provide. Ask Amazon.

On Monday New York City Mayor Zohran Mamdani endorsed the Teamsters-backed Delivery Protection Act. Introduced by Democratic Socialists of America council member Tiffany Cabán, the bill would force Amazon to reclassify subcontractors and workers in its delivery network as employees. It could also potentially hit those of other delivery companies such as FedEx.

The Teamsters and its left-wing allies are using New York City to test-drive the ban on subcontracting, which they hope to take nationwide. Mr. Mamdani’s office says Amazon and others use subcontractors “to shield them from responsibility,” which “leaves workers vulnerable and corporations free to avoid accountability for reckless conditions on city streets.”

That’s a misdirection. Amazon’s last-mile delivery network relies on some 40 subcontractors, which employ more than 5,000 workers. This sophisticated network is what can get the goods you order to your doorstop in hours, and it provides flexibility for workers who have irregular schedules such as college students and home caretakers.

Amazon requires its subcontractors to provide full-time employees health coverage and paid time off. Subcontractor drivers earn on average roughly $24 an hour. Many subcontractors offer additional benefits, including tuition assistance and paid vacation.

These small businesses reflect the diversity that progressives claim to favor. Amazon says “25% are owned by Black or Hispanic entrepreneurs, 10% are veteran-owned, and 10% are graduates of our Road to Ownership program”—a company initiative that helps high-performing employees become business owners.

Subcontractors also provide workers’ compensation for workers injured on the job. Vans are equipped with technology that notifies subcontractors of unsafe driving behavior. The cargo e-bikes that couriers peddle around Manhattan cannot travel faster than 12 miles per hour. If New York City streets are becoming more perilous, don’t blame Amazon.

One goal of the bill is to aid plaintiff attorneys who figure they can obtain bigger legal payouts for accidents from Amazon than they could from its small-business partners. Directly employing subcontractors could also impel Amazon to carry more expensive insurance coverage, which would raise delivery costs.

George Will conveys this happy news: “Chicagoans are getting fed up with the city’s teachers union.” A slice:

The CTU’s president, Stacy Davis Gates, who likes her son’s private school, vows to “create the crisis by which the boss … the government can no longer ignore you.” But the CTU is the government’s boss, having engineered the election of a former CTU organizer, Brandon Johnson, as mayor.

Johnson’s guileless candor indicates the CTU’s sense of invulnerability: “I personally don’t give a lot of attention to grades. … My responsibility is not simply to grade the system, but to fund the system.” So, deciding “whether or not our public school system is working” depends not on measuring cognitive outcomes. Rather, it depends solely on the amount of taxpayer money that flows into the system, ultimately to the CTU.

In light of the Trump administration’s suppression of Americans’ economic freedoms, Reason‘s Eric Boehm asks: “What kind of country would America be if people were freely allowed to peacefully deliver goods that had been consensually bought and sold?” A slice:

The list of victimless crimes is unfortunately long and quite ugly—covering everything from arranging flowers without a state-issued permission slip to selling booze at certain times of the day.

Make some room near the top of the list for this one. A Canadian trucker was reportedly arrested by the Border Patrol in New Mexico for “unauthorized domestic freight operations.”

Agents in Las Cruces, New Mexico, arrested the driver (who has not been identified publicly) for allegedly hauling cargo in violation of a nonimmigrant visa, Border Patrol Chief Rosario Vasquez wrote in a post on X. Vasquez said the driver faces “prosecution and subsequent deportation.”

Truly, a serious crime that demands the federal government’s attention. What kind of country would America be if people were freely allowed to peacefully deliver goods that had been consensually bought and sold? I bet this guy was getting paid for his labor too! The horror.

This is illegal because of some nakedly protectionist laws that restrict “cabotage,” the transportation of goods within the United States. As TruckNews.com, a trade publication, explains: foreign truck drivers “are permitted to enter the United States to transport international freight…but generally may not haul cargo that is both picked up and delivered within the U.S.”

Trucks and roads work the same way in Canada as they do in the U.S., so this restriction has nothing to do with safety and everything to do with limiting competition for truck driving jobs in America.

Mani Basharzad makes this powerful case: “We need to do nothing about AI” – with “we,” of course, meaning “the government.”

Who’d a-thunk it? (HT Scott Lincicome)

A year after New York City barred landlords from passing their broker fees on to renters, a new kind of paywall has emerged in one of the nation’s most competitive rental markets. Renters are now paying brokers thousands of dollars simply to learn which apartments are available.

My Mercatus Center colleague Garrett Brown talks with my former GMU Econ colleague Bart Wilson about humanomics.

Should economists continue to credit Joan Robinson with the ‘should we put rocks in our harbor’ criticism of protectionism? Timothy Taylor weighs in.

Tweet

… is from page 7 of Menzie Chinn’s and Douglas Irwin’s excellent 2025 textbook, International Economics:

Moreover, one of the defining features of the recent period is record levels of cross-border holdings of assets – everything from factories and other real estate to stocks and bonds. This means that someone from Poland might take out a mortgage on her house from a Swiss bank, or an American credit card holder might pay a record low interest rate because of China’s eagerness to lend to the rest of the world.

DBx: Yes.

Always remember that, by the rules of accounting, U.S. trade deficits (or, more precisely, current-account deficits) are a necessary accounting result of U.S. capital-account surpluses – that is, of net inflows of capital to the United States. The arithmetic behind the accounting is that all U.S. dollars that are invested by foreigners in the U.S. are U.S. dollars that foreigners cannot also use to purchase U.S. exports.

Next time you encounter some government official or media pundit talking or writing as if U.S. trade deficits are necessarily a problem, remember that these ‘deficits’ keep interest rates in the U.S. lower than they would otherwise be, and thus these ‘deficits’ not only reduce the burden of debt for American consumers, they also spur investment in American businesses (which, over time, raises American workers’ real wages).

Tweet

Pow! Slam! Art Carden wrestles successfully with myths about so-called “trade deficits.” A slice:

In their textbook, Modern Principles of Economics, Tyler Cowen and Alex Tabarrok ask what happens when Walmart buys toys from a Chinese supplier. I decided to test this once by going to my local Walmart and buying an action figure of All Elite Wrestling’s Brody King, which is part of the Jazwares “Unrivaled” collection and a Walmart exclusive. After tax, the figure cost me $21.82. The figure was manufactured in China for a company (Jazwares) based in Florida, represents an athlete who lives in Georgia and works for a company also based in Florida, and was purchased (and taxed) in Alabama. There is value added at every stage and by people around the world, but let’s focus strictly on the share of the figure that goes to the Chinese manufacturer.

What does the manufacturer do with the dollars he earns by selling me (via Jazwares and Walmart) a wrestling figure? He wants the dollars for dollar-denominated transactions. First, he might want to buy American goods and services. In the Chinese context, one of the services they seek to purchase is American higher education. Second, he might want to invest in the United States by (for example) buying new bonds issued by American corporations. Third, he might want to lend to the U.S. government by purchasing new Treasury bonds. In both cases, he might also want to purchase dollar-denominated assets, such as existing stocks and bonds. Fourth, he might want to increase his dollar reserves for several reasons. The US dollar is the world’s reserve currency; it is famously stable and widely used for transactions in the United States.

Fifth and finally, the Chinese manufacturer might want to sell the dollars to someone who wants to do any of these things.

How does the transaction affect the balance of payments? The trade deficit widens because we imported the figure. That receives considerable attention, but I think the attention the trade deficit receives is overstated. In the long run, countries pay for their imports with their exports. Additionally, the dollars “come back” to the United States as foreign direct investment. The current account deficit (the trade balance) is identical to the capital account surplus.

Matthew Lau is correct: “Protectionists live in economic wonderland.” A slice:

In recent years, the White House’s Protectionist-in-Chief has turned much of the political landscape into an upside-down Wonderland. Among the things that are now topsy-turvy is that the Republican Party increasingly practices socialism, while actual socialists, at least on international trade, champion freer markets.

Under socialism, government owns the means of production, which the U.S. government increasingly wants to do. In June, through $750 million in investments, it took minority equity stakes in two semiconductor companies. In July, through up to $874 million in additional funding, it took minority equity stakes in six more and increased its ownership of a seventh. The Cato Institute counts 30 companies in the federal government’s expanded corporate portfolio. “Republicans warning that communists are taking over the Democratic Party might first ask why their own administration is so eager to have the government acquire pieces of private companies,” Cato analyst Tad DeHaven suggested.

Writing in the Washington Post, GMU Econ alum Julia Cartwright reviews Daron Acemoglu’s new book, What Happened to Liberal Democracy? A slice:

Not every argument is equally strong. Still, “What Happened to Liberal Democracy?” is a book for these times, when many Americans sense that the nation is at an inflection point. Acemoglu’s answer is neither despair nor nostalgia. It is a rallying cry to return to liberal democracy, the system that turns individual freedom into prosperity for all. Right, left or center, the tasks laid out are for everyone: Invest in your community, demand institutions that answer to their citizens and defend the freedoms of people you disagree with.

Paul Meany makes this ever-important point: “Economic liberty begins where government privilege ends.”

Reem Ibrahim reveal yet another front on which the Trump administration is protecting Americans from arrogant and overreaching bureaucrats – not!

David Henderson on Hayek on power.

Shiv Parihar decries the economic ignorance of proponents of legislated minimum wages. Two slices:

This issue is personal for me. The jobs that these policies kill once helped keep me alive.
At 5, I was living in a Utah shelter at the height of the Great Recession. My single mother had little education or experience, but she needed work. Low-wage, entry-level positions were her path into the job market. She didn’t have a job that paid $15 an hour until 2023. If the minimum wage had been $15, she might not have had one at all.

Minimum-wage jobs were even more helpful to my father. He was a high school dropout who had been to jail. Had the minimum wage been $15, far fewer employers would have been willing to gamble on an applicant like him, especially one with a child to take care of half the week.

Utah has never raised its minimum wage above $7.25 an hour, the current federal floor. That isn’t much. But for my family, it was the difference between dinner and an empty stomach.

…..

The well-intentioned supporters of minimum wage hikes think of themselves as battling for everyday Americans, and I’m sure that can feel good. But hundreds of thousands of the poorest Americans have stories like mine. The fight for $15 is a fight against us.

Tweet

… is from page 109 of Robert Higgs’s Summer 1995 Critical Review paper, “Coercion Is Not a Societal Constant,” as this paper is reprinted in the superb 2004 collection of some of Bob’s essays, Against Leviathan (footnote deleted; link added; original emphasis):

[G]overnment stipulation of private-property rights differs fundamentally from government command and control. In the former case, the government sets rules regarding only what may not be done – namely, a person may not take actions that violate the established rights of another. Therefore, the choices people make and hence the outcomes of the socioeconomic process remain open-ended to an enormous degree. The concept of “spontaneous order” – a pattern of socioeconomic arrangements, transactions, and realizations unforeseen and unforeseeable by anyone, including those who establish the prevailing private-property rights – nicely expresses the workings of a society based on private-property rights. In the command-and-control case, however, the authorities stipulate what must be done.

Tweet

Now that 30 days have passed since the Wall Street Journal published Phil Gramm’s and my piece arguing that Alexander Hamilton would almost certainly not approve of Trump’s tariffs punitive taxes on Americans’ purchases of imports, I can share our piece here in full and without charge. It’s beneath the fold. (Note that authors choose neither these titles nor subheadings. For this article, I wouldn’t have chosen either of these. The reason is that Hamilton did indeed see a significant role for protective tariffs,  although – as Gramm and I argue – not for the conditions under which Trump imposes tariffs.)

[continue reading…]

Tweet

Ryan Bourne explains that “burrito-gate reflects inflation’s toxic legacy.”

Brian Albrecht carefully lays out the likely consequences of Mamdani’s government-run grocery stores.

National Review‘s Jim Geraghty is right: “Both parties embrace what’s popular and abandon what’s right.” A slice:

The Republican president keeps taking a government stake in private companies, now up to 30 firms. As the Cato Institute observes, the U.S. government taking an ownership stake in private companies is now routine, and a Republican-controlled House and Senate are ready to make it official federal policy under law, not just some rogue administration’s actions. Zohran Mamdani wants to “seize the means of production”; today’s Republicans want to establish a federal ownership stake in the means of production. A future President Alexandria Ocasio-Cortez or some other progressive Democrat will appreciate Trump-era Republicans establishing the precedent and the legitimacy of the federal government strong-arming many kinds of companies into giving them ownership shares.

Justin Amash tweets:

One of the worst things about Trump is that he’s ushering in more corporate welfare, cronyism, and socialism while parading it under the banner of capitalism, so we end up with all the failings of those ideologies but with a generation of young people blaming the market economy.

Although commonly described as a “non-renewable resource,” petroleum continues to become more abundant. Gale Pooley tells us why.

Although never described as a “non-renewable resource,” elevators in the U.S. are more limited in number than they would be under freer markets. Eric Boehm tells us why.

The Washington Post‘s Editorial Board warns of the U.S. government’s fiscal incontinence. A slice:

The fiscal challenges scheduled to arrive in the 2030s are actually based on optimistic assumptions. They are from the CBO’s baseline estimates, which assume no wars, no recessions, low and stable inflation and no new government programs or tax changes.

Imagine how much worse the debt will look when there is a recession. If, heaven forbid, the U.S. needs to boost defense spending for a protracted war, it doesn’t have much room to grow.

Starting with World War II levels of debt and exceeding Great Depression levels of annual deficits, the U.S. is not prepared to face the demographic-induced challenges that loom, let alone world events nobody can predict.

Budget hawks have been talking for years about many of these problems, and it may have felt like not much has happened. The federal budget has been able to withstand more than many expected. But the 2030s is when the bill comes due.

Tweet

… is from page 155 of my late, great colleague Walter Williams’s 2015 book, American Contempt for Liberty, which is a collection of many of Walter’s columns and essays; this quotation specifically is from Walter’s August 31st, 2011, syndicated column, “Race and Economics“:

The National Industrial Recovery Act of 1933 and the Fair Labor Standards Act of 1938 broadened the number of workers covered by minimum wages, with negative consequences for black employment across a much wider range of industries. Good intentions motivate most Americans in their support for minimum wage laws, but for compassionate public policy, one should examine the laws’ effect. That’s seen by putting oneself in the place of an employer and asking, “If I must pay $7.25 an hour to no matter whom I hire, does it pay me to hire a worker who’s so unfortunate as to have skills that enable him to produce, say, only $4 worth of value an hour?” Most employers would view hiring such a worker as a losing economic proposition; therefore, a minimum wage law discriminates against low-skilled workers by reducing employment opportunity.

Tweet

GMU Econ alum Dave Hebert, writing in today’s Wall Street Journal, explains that – contrary to assertions by Peter Navarro and many other protectionists – imports do not suppress economic growth. A slice:

The $1,000 Italian espresso machine bought in Ohio enters consumption spending even though it wasn’t produced in the U.S. So to total domestic production accurately, the tabulators subtract its import value. The purchase adds $1,000 in one column and subtracts $1,000 in another. As the agency tasked with tabulating official GDP statistics, the Bureau of Economic Analysis, says, “to avoid including foreign production in GDP it is necessary to subtract the value of imports.”

Imports are subtracted not because they make the U.S. poorer, but because foreign production isn’t American production. Trade protectionists incorrectly view domestic production and economic health as synonymous. But American prosperity comes from what people can buy and use, and the factory’s address has nothing to do with that.

The last time the trade deficit shrank dramatically was in 2009, when it decreased by nearly half. It fell because Americans were in the throes of the worst recession since the Great Depression. The trade-deficit hawks’ misreading of the economic scoreboard was discredited: A shrinking trade deficit turned out to be the signature of an economy in ruins. A widening trade deficit, on the other hand, is the mark of an economy with money to spend.

Chelsea Follett writes insightfully about the ancient fear of overpopulation – a fear rendered unwarranted by innovative free markets. Here’s her conclusion:

Globalized markets and modern technology have accomplished what even Zeus could not in the wildest dreams of the ancients. Humanity has pushed back the constraints that once seemed as fixed and inescapable as a hero’s fate in a Homeric epic. We now easily feed a population perhaps 100 times larger than the one known to the ancient Greeks. If only public wisdom would catch up.

George Leef recommends the new book, Books and the Founding Fathers and Their Influence on America Today, by George H. Nash and Timothy G. Nash.

Jason Willick ponders the rise of the DSA. A slice:

In his 1992 book “The End of History and the Last Man,” Francis Fukuyama famously argued that — at least for the time being — the great ideological struggles over how modern societies should govern themselves were over. Liberal, democratic capitalism had won out with the Soviet Union’s collapse. As he wrote: “All future efforts to push social equality beyond the point of a ‘middle-class society’ must contend with the failure of the Marxist project. For in order to eradicate those seemingly ‘necessary and ineradicable’ differences, it was necessary to create a monstrously powerful state.”

Fukuyama described the post-Cold War world well. But no consensus lasts forever, and the stigma against Marxism in America is clearly weakening as the memory of the Soviet Union fades. The title Democratic Socialists of America tries to dissociate today’s American socialists from the 20th-century socialist dictatorships. But, of course, the Soviet Union styled itself as a union of “republics.” Sometimes a label tries too hard.

Speaking of the DSA, the Wall Street Journal‘s Editorial Board reports on the economically clueless front-running Democratic candidate for governor of Wisconsin. A slice:

Her “Tax the Rich” agenda includes “a new tax bracket for millionaires and large corporations.” How high would Ms. Hong raise rates on wealthy Wisconsinites? In a recent debate, she suggested a top rate near 8.65%, up about one percentage point. Yet she has sponsored legislation to create a top rate of over 17%. And her campaign is floating the idea that “if millionaires and corporations chip in 17 cents out of every dollar earned after that first million, it could lower all our property taxes by 44%.”

To compare, Wisconsin’s current corporate tax is 7.9%, and the country’s highest business rate, according to the Tax Foundation, is 11.5% in New Jersey. On personal income, the top tax rate in New York City is 14.8%, with California at 13.3%. Such punishing rates are economically harmful, and Wisconsin doesn’t need a reason beyond winter weather for residents to flee to Florida or Arizona.

Wall Street Journal columnist Andy Kessler accurately describes the DSA’s ideology as “fertilizer for the feeble-minded.” A slice:

Zoh-Mart would be great branding for New York’s city-run grocery stores—though they’re doomed to fail. The mayor says they’ll have 30% discounts on a “core basket of goods.” Did he even take Econ 101? Price discovery is critical, else you get hoarding, shortages and bare shelves. Or worse, La Libreta ration cards like in Cuba. This has all been tried before. “You’re a mayor, dude,” Sen. John Fetterman (D., Pa.) said on Newsmax, “Pick up trash. Fix some potholes.” No fun in that. Viva la revolución!

The movement’s promises go downhill from there. Darializa Avila Chevalier is running for Congress, endorsed by Mr. Mamdani. She wrote, in a since-deleted tweet, “No more police at all ever.” Ever? She wrote to CNN that her tweets don’t reflect who she is today. She’s 32. The DSA Abolition Working Group’s website says they plan to “defund the police by rejecting any expansion to police budgets or scope of enforcement while cutting budgets annually towards zero.” Yeah, that’s ever. Bye, bye order.

Steve Landsburg explores, with his usual deep insightfulness, the fever of many people to seize much of Elon Musk’s wealth.

Scott Winship tweets: (HT Scott Lincicome)

I’ve been playing around with the [Raj] Chetty data, and I’m finding that 80% of people with parents in the bottom 3/5 of income are better off than their parents, compared with only half of people raised in the top fifth.

Back to Dave Hebert, who here, at his Substack, puts into proper perspective a recent report that protectionists are touting as evidence of the benefits of Trump’s tariffs punitive taxes on Americans’ purchases of imports.