Russell Roberts's Blog, page 6
June 24, 2023
On Evidence of the Economic Consequences of a Policy of Unilateral Free Trade
Commenting on this excellent EconLog post by Pierre Lemieux, “Steve” writes:
One of the issues with free trade is that I think lots of people sort of understand and accept that bilateral free trade makes sense. Unilateral free trade makes people uncomfortable. Of all people, Boudreaux has me mostly convinced that unilateral free trade is also a good idea, but I would still be happier if there was some empirical evidence. Boudreaux seems to believe that economic reasoning is all that is needed to justify ideas, but I think that people who favor unilateral free trade need to do a better job including real numbers and examples to bring the case that we should support unilateral free trade.
Here’s the first of what will be at least two comments that I’ll leave at EconLog in response to Steve’s comment:
Steve:
Thanks for your remarks about unilateral free trade.
Your request for empirical evidence of the beneficial consequences of a policy of unilateral free trade is fair. It’s unfortunate, therefore, that the world has supplied so few examples of national governments following such a policy. But history does have some. An example is Hong Kong which, under British rule from the 1840s until 1997, had almost no trade restrictions. As Columbia University economist Arvind Panagariya summarizes (on page 163) of his data-rich 2019 book, Free Trade & Prosperity, “Industrialization in Hong Kong took place under a wholly free trade regime, with trade playing a central role in it.” The people of Hong Kong famously prospered.
Another example is Britain itself. In the mid-19th century Britain rid itself of almost all protective tariffs, a policy that remained in place until well into the 20th century. I’m no expert on British economic history, but I know enough to know that per-capita income in Britain grew during the latter half of the 19th century. For example, as shown on page 30 of this 2019 paper (by Solomos Solomou and Ryland Thomas), GDP in Britain per hour worked appears in 1900 to have been at least 50 percent higher than it was in 1860. And pages 34 and 35 show that, in the second half of the 19thcentury, Britain’s real GDP grew by 181 percent. Page 37 of this paper shows that British industrial production over this same time period grew by about 250 percent. (The U.K.’s population appears to have grown by about 50 percent from 1850 to 1900.)
This much is certain: The data show that a policy of unilateral free trade did not impoverish the British people or even cause them to economically stagnate.
But would the British people have, during that country’s time as a “Free Trade Nation,” prospered even more had their government instead obstructed their freedom to purchase imports? To answer this question there can obviously be no direct empirical evidence. Anyone who argues such a case – that is, anyone who argues that the British people in the latter half of the 19th century would have prospered even more had the government there not followed a policy of unilateral free trade – must rely on theorizing or on indirect empirical evidence the relevance of which can be established only by theorizing. (Ditto, of course, for anyone who might argue that the people of Hong Kong would have prospered even more had that country not been a free port.)
I have more to say about this matter, but will save my additional ruminations for a later, separate comment.
Some Links
Pierre Lemieux writes insightfully about a Financial Times columnist who Pierre correctly describes as being “quite attuned to the zeitgeist of our times.” Here’s Pierre’s conclusion:
It is not impossible—and I am saying this seriously—that the Financial Times columnist is right and that I, and all classical liberals and libertarians of the past three centuries, are wrong. Perhaps a most just and prosperous future lies in a fuzzy mixture of dirigiste-authoritarian ideas from the left and the right. Or perhaps, more realistically, some of the currently fashionable ideas, stripped of their worst coercive features—that is, reinterpreted à la Hayek* or à la Buchanan**—have something salvageable. But it seems quite obvious, doesn’t it, that the reign of Homo Politicus Perfectus is a regression toward mankind’s impoverished and tribal or collectivist past.
Clark Packard describes the “high cost of a ‘hard’ decoupling from China.” Two slices:
Practically speaking, in order to operationalize a hard economic break with China, the U.S. would need to hire dramatically more customs agents as well as export control and investment monitors to police everyday transactions. Furthermore, as Adam Posen, president of the Peterson Institute for International Economics, recently noted in an excellent Foreign Policy essay,
A unilateral U.S. withdrawal from commerce with China would be partially offset by other economies taking up market share where the United States no longer operated. If anything, it would increase the arbitrage opportunities for other countries and for companies headquartered elsewhere to trade and invest where the United States ceased to do so.
[…] In order for such restrictions to succeed, the United States would have to become a commercial police state on an unprecedented scale. The United States would also have to monitor and prevent its own headquartered companies from moving activities abroad. Washington has done this, on a limited scale, on specific technology transfers. But scale matters, and current proposals would be an order of magnitude more ambitious and thus infeasible.
Even more daunting than the feasibility of administering such a regime, there are tremendous economic costs of a hard decoupling.
When the Trump administration levied extensive tariffs on imports from China—nearly 70 percent of all imports are now covered by an average tariff of 20 percent, up from about 3 percent before the trade war began—the results were predictably bad. According to the New York Federal Reserve, the tariffs cost the average American household an estimated $830 per year when accounting for direct costs and efficiency losses and led to a staggering $1.7 trillion loss in market capitalization for businesses due to slowed investments. My Cato colleague Scott Lincicome and I estimate that the tariffs effectively nullified about half the average household’s savings from the Tax Cuts and Jobs Act of 2017.
…..
While it is likely that some trade and investment between the United States and China will—and maybe should—decline in this era of strategic competition between near‐peers, the reality is that a lot of two‐way trade and investment is largely benign—and in no way “strategic,” i.e., at the nexus of technology and national security. Sabine Weyand, the European Union’s Director‐General for Trade, recently noted in an essay for Internationale Politik Quarterly that 94 percent of EU trade with China is “unproblematic” and that only about six percent is the result of a one‐sided dependency for EU member nations. A comparable analysis for the United States would almost certainly produce similar results.
Juliette Sellgren talks with my Mercatus Center colleague Christine McDaniel about trade.
This is why a Department of Homeland Security “anti-terrorism” program, which distributed approximately $40 million to groups with a tendency to demonize their political opponents, is worrisome. For instance, the agency has funded a program that has produced material classifying mainstream conservative organizations such as the Heritage Foundation, Fox News and the GOP as only a few steps removed from neo-Nazis and far-right terrorists in terms of the threat of radicalization they represent.
I sometimes criticize conservative political rhetoric, but it’s far-fetched to believe that simply watching Fox News puts one on the road to radicalization any more than watching MSNBC does. People are always entitled to their opinions. A government that forgets this could end up normalizing censorship while rendering us all less alert to real threats of radicalization.
Eric Boehm is justly critical of the FTC’s new lawsuit against Amazon.
George Will writes eloquently about immigration. A slice:
Conservatives lacking confidence in the nation’s capacity for assimilation should know that among the 11 million (down from 12.3 million in 2007) illegal immigrants, 62 percent have been here at least 10 years, 21 percent at least 20 years, only 15 percent for less than five years, and 35 percent own their homes. They have assimilated.
Immigration, “the sincerest form of flattery,” is an entrepreneurial act: Families who risk everything by walking from Guatemala to Texas will probably enhance American industriousness.
Immigrants are prolific at starting companies — [Tim] Kane says start-ups create 3 million jobs a year, and “there is no net job creation” without them. Ignore the “lump of labor” fallacy that there is a fixed amount of work, hence a fixed demand for workers. (Do you remember how the nation suffered when tractors displaced agricultural workers? No, you don’t.)
Jon Miltimore reports that “Norway’s wealth tax is backfiring.”
Krishnan Chittur tweets: (HT Jay Bhattacharya)
Starting in 2020, as I was watching the madness unfold, I started deliberately stopping people in grocery stores, gas stations and thanking them for working. Those “essential” workers (not part of the laptop class) were who kept the economy from collapsing and keeping the ruling class comfortable.
It was devastating to find how some of those same people were fired for later not wanting the “vaccine” even as many were infected, immune. What the ruling class did to the millions of working poor was and remains inexcusable – and yet no one in the ruling class has paid any price – their lives have only gotten better off the backs of those “essential” workers.
Quotation of the Day…
… is from page 462 of Armen Alchian’s and William Allen’s Universal Economics (2018; Jerry L. Jordan, ed.); this volume is an updated version of Alchian’s and Allen’s magnificent earlier textbook, University Economics:
Unlimited numbers of jobs are available in this world of scarcity; only the highest-value jobs are filled, given present knowledge and resources. New inventions induce labor to seek and move to the best of other unfilled jobs. The total wealth of the community is increased. The displaced person has no assurance of realizing a net gain from the particular innovation which displaces his previous job; but he does gain from most other innovations that do not displace his job.
DBx: We have three, and only three, options.
Option 1: The government arranges for no one ever to lose a job to changing consumer preferences, to innovation, or to changing spending patterns (including to spending patterns that might change because of trade with foreigners). Everyone gets treated the same, with no special privileges.
Option 2: The government does not involve itself in trying to protect its citizens from losing jobs to changing consumer preferences, to innovation, or to changing spending patterns (including to spending patterns that might change because of trade with foreigners). Everyone gets treated equally, with no special privileges. Over time, even individuals who lose jobs to economic change (and, thus, suffer in the short run), gain in the long run. Enormously so.
Option 3: The government occasionally protects some individuals from losing jobs to changing consumer preferences, to innovation, or to changing spending patterns (including to spending patterns that might change because of trade with foreigners), but on other occasions does not dispense such protection. By the nature of his third option, different people are treated differently. Some individuals enjoy special privileges while others do not.
If given a choice among these three options, the deeply naive person might choose option one. It sounds so lovely! No one is ever pressed by economic circumstances to find new employment. No one is ever incited by the need to obtain another source of income to relocate to another town. Neighborhoods, communities, and the rich social ties that are (truly) very important to real-world human beings (although not to the bloodless homo economici who inhabit the models of neoliberal economists) are forever protected from the mindless and heartless forces of markets and greed.
You don’t have to ponder long the implications of option 1 to realize that, under it, everyone would be desperately poor and the victim of crushing authoritarianism. It would be hell on earth.
Option 2 is liberalism. Free markets. Free trade. Capitalism unprefixed – or as Deirdre McCloskey prefers to call it, innovism. Option 2 isn’t heaven on earth – nothing earthly can ever be such – but there is no doubt that option 2 is so far superior to option 1 that it is a categorically different kind of society. The liberal society is true society in which each of us assists not only our families and neighbors, but also countless strangers, to achieve their various ends, and each of us is so assisted not only by our families and neighbors, but also by countless strangers.
Option 3 is cronyism. It is somewhere between liberalism and option 1. Just where depends upon how much ‘protection’ the government dispenses. The more ‘protection’ dispensed against market forces, the closer is option 3 to option 1. Option 3 is what is proposed by proponents of industrial policy and by other protectionists. The more thoughtful of these proponents of option 3 might recognize that moving a bit away from option 2 toward option 1 imposes some real costs, but – these proponents insist – these costs are worthwhile. (How these proponents make this assessment is mysterious.) But what no proponent of option 3 will admit is that it is inherently inconsistent with equality of treatment and the rule of law, for the very essence of option 3 is to protect some individuals from market forces but not others.
Those persons who are not protected from market forces are denied a privilege granted to other persons. Those persons not protected from market forces, therefore, not only have to bear the costs of adjusting to whatever market forces remain in play, those persons also have to bear the costs of adjusting to the negative consequences of the privileges granted to others.
The above three options exhaust the possibilities. There is no option 3a or option 4.
Which option do you prefer?
June 23, 2023
Bonus Quotation of the Day…
… is this post from earlier this afternoon by Bob Higgs at his Facebook page:
Human beings cannot run as fast as cheetahs, they cannot pull the loads that elephants can, they cannot leap like gazelles, but they are very good at wishful thinking, especially when they think about social and political affairs.
Pilkington Is Mistaken About Trade Deficits
Here’s a second letter in response to Philip Pilkington’s confused and confusing review of Samuel Gregg’s superb book, The Next American Economy.
Editor, Claremont Review of Books
Editor:
Reviewing Samuel Gregg’s The Next American Economy, Philip Pilkington commits several errors when arguing that the American economy is imperiled by U.S. trade deficits (“Protecting the Free Market,” Spring 2023).
For example, Pilkington correctly recognizes that“[i]f financial markets decide that they are no longer willing” to hold dollar-denominated assets the American economy would be in big trouble. But to conclude, as he does, from this trivially true fact that U.S. trade deficits pose a problem for Americans is wildly unjustified. One can with equal correctness say that if financial markets decide that they are no longer willing to hold shares of Apple, Apple’s existing stockholders and employees would be in big trouble. Yet no one leaps from recognition of this mere possibility to the conclusion that current investors in, and employees of, Apple are in financial peril and should therefore divest their investments in Apple and quit their jobs with that company.
Investors don’t make decisions on whims. Investors put and keep resources in companies and countries that they believe have promising futures; they remove resources only from companies and countries that they believe are on paths economically destructive. As long as global investors believe that the American economy is fertile and safe soil for their funds they will continue to invest in America. And these investments will continue, despite the damage wreaked by the U.S. government’s fiscal incontinence, to help expand America’s stock of productive capital beyond the levels it would attain if foreigners consistently cashed out all of their dollars on purchases of American exports.
Pilkington will reply by pointing, as he does in his review, to the Asian financial crisis of 1997-1998. It’s true that the Asian countries that suffered this crisis had run current-account deficits. But contrary to Pilkington’s claim, the problem wasn’t these deficits; it was government interventions. As David Henderson wrote in 1999:
“Crony capitalism,” for example, has badly damaged South Korea, Indonesia, and Malaysia. The South Korean government has forced lenders to waste their money on its favored firms. Indonesia is mired in monopolies on imports and domestic production. Malaysia’s prime minister diverted a large part of Malaysians’ savings toward his political allies.*
Some of these countries’ economies were further weakened by involvement with the IMF, specifically from what Alan Reynolds described as “the moral hazard effect in which the sheer availability of loans at below-market interest rates encourages more national politicians and their foreign lenders to take imprudent and excessive risk.” Reynolds went on to note that “[i]n 1997–98, the Korean stock market fell very sharply shortly after the IMF program was revealed [and] Indonesia’s credit rating was downgraded after the IMF program was revealed….”**
Ironically, in calling for “a strong industrial policy” and “import substitution,” Pilkington proposes precisely the same sorts of interventions in America that were responsible in Asia for a financial crisis that he mistakenly blames on trade deficits.
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
* David R. Henderson, “Global Warning,” Red Herring Magazine, March 1, 1999.
** Alan Reynolds, “Crises and Recoveries: Multinational Failures and National Successes,” Cato Journal, Spring/Summer 2003, Vol. 23, page 101.
Avoid Expertolatry
My old friend, and former NYU and Auburn classmate, Roger Koppl sent to me the following e-mail that I share here with his kind permission:
Dear Don.
I imagine you have been following the controversy over whether Hotez should debate RFK on Joe Rogan’s podcast. That is the sort of topic about which people may have legitimate disagreements, of course. And Hotez is under no obligation to debate that one person on that one podcast. But I think it is an error to say that you don’t decide a “scientific question” by debating an “anti-vaxxer.” The issues with vaccines, including Covid vaccines, are not only “scientific.” Vaccine safety is not a “scientific question” analogous to the question whether a heliocentric or geocentric model is best. Vaccine safety is a multidimensional issue involving science, public policy, personal values, personal risk preferences, social causation, and so on. Besides, the state has no right to force a flat-earther onto a boat even though their fears of falling off the edge are mistaken. There are issues of public health and externalities with vaccines, but, again, they are not “scientific” issues like heliocentric vs geocentric. If I may be permitted the neologism, I’m afraid some opponents of the debate have fallen into expertolatry, the worship of experts. We should always remember that experts are people, not angels or devils. Value expertise, but fear expert power.
Cheers,
Roger
Quotation of the Day…
… is from pages 267-268 of Thomas Sowell’s 1999 book, Barbarians Inside the Gates:
When the history of corporate America is written, one of its most shameful chapters will be about how big business sold out to political correctness, by inflicting the harangues of “diversity consultants” on their employees and donating their stockholders’ money to advocacy groups opposed to the free market on which their own existence depends.
June 22, 2023
Some Links
Indeed, one of the great insights of modern free enterprise thinking is Hernando de Soto’s idea of the mystery of capital. He points out that formal land titling enables people in the developing world to utilize that title as a source of capital. Traditional societies where all land is owned by the chief and corrupt polities that confuse land titling are equally guilty of removing this source of capital from the people. We should therefore always be looking for policies that enable access to capital—even for the landless. People as old as I am might remember that one of Margaret Thatcher’s most successful policies was to allow tenants to buy their state-owned “council houses.” But if Mrs. Thatcher was a distributist, I’m a Dutchman.
Kevin Corcoran writes wisely in defense of the legality of non-compete agreements. A slice:
I’m not of the opinion that non-compete clauses are a universal good, of course. Like most things in life, they have upsides and downsides, and whether the costs outweigh the benefits will be different for different individuals facing different circumstances and trade-offs. The costs are fairly obvious—they put up a barrier to finding new employment after one departs their current job. So, what are the benefits?
One benefit is increased wages. Employers must offer higher wages to prospective new employees to make them willing to accept a non-compete as part of their terms of employment. To see this, just engage in a bit of introspection. Imagine you had two job offers from two different employers. Imagine that everything about the job offers was the same—the type of work, hours, paid vacation, family leave policy, and so forth. The only difference between them was that Company A requires to you sign a non-compete, while Company B does not. Immediately, that makes Company B seem more attractive, all else equal. In order to overcome that, you’d require Company A to offer you higher wages than Company B. Or more vacation, better working conditions, longer paid family leave—there are multiple margins that can be adjusted. But the point is that you’d need something about Company A’s offer to improve relative to B, to make you willing to accept that extra restriction. Are those offsetting benefits “worth it?” The answer for that will be different for everyone. In my case it was, but unlike the legislators and governor of Minnesota, I don’t consider myself fit to determine a single, one-size-fits-all answer to be imposed on everyone else.
Massie’s less-than-utopian wish list begins with the often-promised but unseen-for-many-years “regular order.” All bills come from the committees of jurisdiction. And 12 appropriations bills — never again omnibus monstrosities — acted on by the Oct. 1 beginning of the fiscal year. Under the debt ceiling agreement, tardiness triggers a continuing resolution with spending cuts across the board by 1 percent from the previous year.
Sugar and high-fructose corn syrup are substitutes, so expensive sugar increases the demand for high-fructose corn syrup. Government policy works in both directions here: The federal government subsidizes corn, driving that price down. Given these interventions, it’s common sense for American food companies to substitute high-fructose corn syrup for sugar.
Special interests support this arrangement. “The sugar quota is supported by domestic sugar producers, including the infamous Fanjul brothers, but it’s also supported and indeed was lobbied for by Archer Daniels Midland, the inventors of HFCS,” Tabarrok writes. The Fanjuls are political supporters of Marco Rubio, which likely helps to explain why Rubio has defended the sugar quotas on national-security grounds in the past.
Every other U.S. food company that uses sugar as an input is harmed by these policies. They pay a globally uncompetitive price for sugar and then pass that cost on to U.S. consumers. The extra money paid for sweeteners could have been used to invent new products, lower prices for consumers, employ more workers, invest in new technology, or even give a dividend to shareholders — any combination of those alternative uses would be preferable to shoveling the money to domestic sugar companies because the federal government says so. And for consumers, the costs are especially high on low-income households, which spend a larger percentage of their income on food than higher-income households do.
Iain Murray of the Competitive Enterprise Institute describes the U.S. sugar quotas as the “platonic form of bad public policy.” Concentrated benefits with dispersed costs that skew an entire industry. Higher prices for all consumers, but especially the poor. Special interests working with politicians to keep it in place.
GMU Econ alum Gabriella Beaumont‐Smith exposes three dangers lurking in “carbon tariffs.” A slice:
Second, the history of U.S. tariff policy raises serious concerns that a carbon tariff would not be administered in a sound and impartial manner. Instead, these tariffs would simply be a vehicle for rote protectionism. A prime example of such protectionism is the steel tariffs imposed or maintained under the Bush II, Trump, and Biden administrations, which had political motivations far exceeding any economic ones. At the same time, U.S. trade remedies (antidumping and countervailing duties (AD/CVDs)) law utilizes a process to calculate dumping or subsidization of imports that “injures” domestic industry but can be “remedied” by imposing duties (tariffs). Similar calculations are likely to be used for carbon intensity. However, AD/CVDs law is notorious for being strongly biased against imports and American consumers. Even worse, in reality, the law is used as a way to deliver protectionist rents to a handful of well‐connected companies (including, again, steel).
Here’s Caroline Breashears on “Adam Smith and the rhetoric of life.”
Quotation of the Day…
… is from page 295 of the 1981 Liberty Fund edition of Trygve Hoff’s 1949 study, Economic Calculation in the Socialist Society:
The question, however, is not whether factories can be built and efficiently conducted, but whether the factors of production could have been put to a more advantageous use by employing them elsewhere. In a society whose aim is the maximum production of needs its resources must not be used for producing what may be momentarily lacking and so have a certain value, but for producing goods which, according to the ends stated, are of greater value than other goods. Each factor of production must be so employed as to give the greatest return according to the ends. This, and only this, is the criterion for rational economic activity. For determining this there is needed valuation apparatus, an apparatus with prices and costs varying with the variables with which one has to reckon in the world of reality, and it is here that there arise specific, and so far, unsolved difficulties for the socialist society.
DBx: Proponents of industrial policy frequently point to this profitable subsidized firm or that thriving protected industry as evidence of the success of the government overriding or distorting competitive markets. Such pointing misses the point. The question is not “Is there some amount of subsidies or some degree of protectionism that will enable particular firms or industries to develop or grow and thrive?” The answer to this question is “Of course.” (Remember Adam Smith’s “glasses, hotbeds, and hotwalls” for making excellent wine in Scotland.)
The relevant question instead is “What is sacrificed as a result of the subsidies or tariffs that enable the thriving of the pointed-to firms and industries?” Because the resources diverted by subsidies and tariffs into subsidized and protected firms are scarce and have alternative uses, something is sacrificed. What? And what would have been the value of that which we are now unable to produce and consume compared to the value of that which we actually do – only because of the subsidies and tariffs – produce and consume?
Proponents of industrial policy and protectionism never tell us how the flesh-and-blood government officials charged with implementing industrial policy and protectionism – how the men and women who will override with bureaucratic commands the voluntary choices of individuals investing and spending their own (and only their own) money – can be sufficiently confident that the industrial processes and economic outputs that emerge from their interventions will have greater value for the people of the economy as a whole than is the value of the processes and outputs that their bureaucratic commands prevent from arising. We are to accept interventionists’ assertions of the net benefits of industrial policy and protectionism as a matter of faith.
Because industrial policy and protectionism are guided by faith that government officials can have superhuman knowledge, while market processes are guided by actual on-going feedback of actual information – to and from actual individuals – about the relative values of goods, services, and inputs, I trust that over time better results will emerge from market processes than from government commands that override market processes. I reject the religion of industrial policy or of protectionism.
…..
Pictured above is Trygve J.B. Hoff (1895-1982).
June 21, 2023
Some Links
Here’s the abstract of an excellent new paper by Scott Winship and GMU Econ alum Jeremy Horpedahl:
The Cost-of-Thriving Index (COTI), developed by American Compass executive director Oren Cass, asks whether families can afford a middle-class lifestyle. It compares the costs of five goods and services to the income of a typical full-time male earner. Cass concludes that the cost of thriving has increased dramatically, from 40 weeks of work in 1985 to 62 in 2022. Our improvements to Cass’s estimates indicate the cost of thriving rose by 10 weeks rather than 22. After accounting for the better quality of the goods and services he tracks, the increase was four weeks. The cost of thriving declines when we account for falling federal taxes or include all full-time workers. The after-tax cost of thriving for this broader group fell by 7.5 weeks. These improvements aside, we reject the COTI approach as inadequate for assessing changes in living standards. While Cass’s estimates imply that male earnings have fallen by 36 percent relative to costs, conventional analyses indicate a rise of 19 percent, without accounting for taxes, and an increase of 34 percent after taxes. For the broader group including all full-time workers, the after-tax increase was 53 percent.
And here’s a related essay, at the The Dispatch, by Winship and Horpedahl. Three slices:
More than any other organization, American Compass has blurred the lines between conservatism and progressivism by trotting out the same factually incorrect doomerism the left has relied on for decades.
…..
Cass’ approach mostly fails to account for changes in the quality of goods and services over time. Take housing costs. He compares rents for three-bedroom apartments in Raleigh, North Carolina, in 1985 and 2022, but he ignores the possibility that the typical three-bedroom rental in 2022 is much nicer or larger than what was typical in 1985. An increase in what families typically spend that reflects their ability to afford nicer things is not an increase in costs. When we adjust for quality change using price indexes to translate the improved 2022 costs into 1985 dollars and then re-estimate the change in COTI, we find it increases by just four weeks.
Cass looks at pre-tax earnings of full-time workers and only considers men at least 25 years old. But people pay costs out of after-tax income. And if the focus is narrowed to full-time workers (eliminating complications related to students’ and mothers’ work participation), there is no reason to exclude women or those under 25.
…..
Even official statistics using an inflation measure that overstates the rise in the cost of living find that income rose by 21 percent from 1985 to 2021 among families with a sole breadwinner. Because marriage has declined, single-earner families have become more common since 1985 relative to multiple-earner families, not less common. Median earnings have risen both for men and women. None of these facts suggest that it has become more difficult for a sole breadwinner to afford essential goods and services.
Cass’ claims bear no relationship to reality. The doomerist basis of national conservatism is empirically unfounded, and therefore so are many of the policy priorities it has borrowed from liberal doomers, such as protectionism and industrial policy. Elected conservatives should think twice before following American Compass down a road that proceeds from such a dubious signpost.
Noah Rothman is rightly critical of “anti-market Republicans” – such as Oren Cass, Marco Rubio, and J.D. Vance – who “luxuriate in a left-wing loveliest.” Here’s his conclusion:
“Capitalism” is a ripe target. It gets the blame when a train car traveling on America’s federally regulated rail lines careens off the tracks, compelling federal environmental regulators to burn off its chemical waste to not contaminate groundwater. When emerging economies experience rising violent crime rates, it’s a problem of “fledging capitalism.” Gauche displays of conspicuous consumerism are a gaudy byproduct of “late capitalism.” Taken together, these incompatible rationalizations suggest there are incentives – political, financial, or social – to apply a respectable intellectual gloss onto what is otherwise just a fashion.
“For many people, anti-capitalism is an emotional issue,” the author Rainer Zitelmann wrote for the National Interest. “It is a diffuse feeling of protest against the existing order.” But the existing order has created wonders, material benefits for both rich and poor (categories that have never been more fluid), and a stable social compact that has withstood the test of time. It’s not popular right now to say any of this, which is why it falls to conservatives to say it. It won’t get you invited to the poshest cocktail parties on the circuit, but it has the inestimable virtue of being true.
This letter in today’s Wall Street Journal by Jonathan Coburn is excellent:
There is no way to reconcile environmental, social and governance investing with the fiduciary duty of investment managers unless it can be claimed that ESG won’t result in lower investment returns (“Red States Have Slowed the ESG Juggernaut” by Andy Puzder, op-ed, June 15). BlackRock goes further by claiming ESG investments will provide “better long-term financial outcomes.”
Any such argument flies in the face of conventional investing wisdom. Voluminous research attests to both the folly of trying to predict investment returns and the benefits of diversification in providing higher risk-adjusted, long-term returns. Yet ESG proponents blithely assert that a less-diversified investment approach will provide superior returns. If this were the case, coerced ESG investment wouldn’t be necessary; unless investment managers were incompetent or criminal, they would all embrace ESG.
By hijacking other people’s money to pursue outcomes they haven’t agreed to, coerced ESG investing is a form of theft. Voluntary ESG is already an option and, if the predictions of higher returns are correct, it will become increasingly popular without the need for regulation.
Jonathan Coburn
Apex, N.C.
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