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GMU Econ alum Alexander Salter explains that Kamala Harris’s “joy would cost US dearly.” Two slices:

American progressives are out of ideas. Instead of a bold economic agenda, all they have to offer is reruns of policy failures. Vice President Kamala Harris’s recent proposals are notable examples. Behind the facade of joy hides an alarming indifference to the immense costs her schemes would create if she wins the presidency. Economists have a duty to point out just how destructive these proposals are.

Exhibit A is her call for price controls on groceries. Ignore the rhetorical sleight-of-hand from the campaign and its defenders, who insist they only want to clamp down on “price gouging.” This is clearly a call for the government to crack down on retailers who are selling food at any price Harris and other progressive elites deem excessive.

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Perhaps most egregious is her endorsement of President Biden’s plan to tax unrealized capital gains. Just look at the awful incentives this policy would create. Instead of keeping their wealth in capital markets, bearing risk and facilitating growth, those experiencing unrealized capital gains would likely have to divest their position to discharge their tax liability. This policy seems designed to dry up capital markets, or else provide a beachhead for future direct wealth seizures by the government. Those objecting that the policy only applies to the hyper-rich (those with a net worth of more than $100 million) are clearly unfamiliar with the history of the income tax. Once upon a time, only high income earners paid any tax at all. Now the IRS has its tendrils everywhere. The same will eventually be true with unrealized capital gains, unless we root out this weed right away.

Writing in the Wall Street Journal, Amber Gunn accurately describes rent control as “a great destroyer.” Two slices:

Rent control is in vogue among Democrats. President Biden in July proposed capping landlords’ annual increases at 5%, and Kamala Harris vowed to “take on corporate landlords and cap unfair rent increases.” Those ideas are destructive, and Argentina offers the latest proof.

When President Javier Milei assumed office in December 2023, he inherited triple-digit inflation and a flailing economy. His “shock therapy” plan to resuscitate the country included eliminating government jobs, contracts and subsidies. Perhaps the most successful measure, however, was repealing a rent-control law the National Congress had passed in 2020

In a bid to provide renters more economic security, the statute locked landlords into tenant-controlled leases for a minimum of three years and capped rent. The consequences were swift and brutal: 45% of landlords reportedly elected to sell their properties. Many others either converted their units into Airbnb-type short-term rentals or increased rates prior to the law going into effect. As the Cato Institute relates, the average rent for a two-bedroom apartment in Buenos Aires rose from nearly 18,000 pesos a month at the end of 2019 to 334,000 pesos four years later, well beyond the 210,000 pesos a month if the rate had tracked inflation. Since the law’s repeal, supply has reportedly rebounded and prices have fallen by double digits.

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As Swedish economist Assar Lindbeck observed, “In many cases rent control appears to be the most efficient technique presently known to destroy a city—except for bombing.” No matter how many times we try, we can’t outsmart economic first principles.

Samuel Gregg reflects on “The Road to Serfdom at 80.” (HT GMU Econ alum Dominic Pino) A slice:

Neither Hayek nor Tocqueville had a deterministic conception of this drift away from liberty. Both saw, however, a rationale at work as people traded liberty—and then steadily increasing amounts of freedom—for other things they valued. Those “other things” could range from greater equality in the distribution of wealth to more state-provided economic security and stability, or the hope that the turmoil of economic life could be managed more efficiently from the top down by ostensibly apolitical technocrats and experts. In any case, the diminution of liberty is far removed from the suddenness of a military coup d’etat such as that experienced by Tocqueville in France by President Louis-Napoleon in 1851, or seizures of power akin to that staged by the Bolsheviks in Russia in October 1917 or the National Socialists in Germany between January 1933 and June 1934.

In a way, much of Road involves Hayek extending Tocqueville’s logic by showing the ratchet effect in the belief that it is worth giving up some liberty to secure other seemingly good ends. A key ingredient of Hayek’s argument is that as it becomes clear that the trade-off has not delivered what was promised (or has even produced negative unintended consequences), the response of those advocating for, say, a more equal wealth distribution is not to concede that it was a mistake to diminish liberty. Instead, they invariably insist that they require more power—and therefore that society may have to accept less freedom—to achieve the desired goal.

James Pethokoukis warns of allowing legitimate national-security steps to turn into industrial policy. A slice:

Economists tend to be skeptical of industrial policy because government planners lack market knowledge. Subsidies and regulations disrupt price signals, which coordinate economic activity more effectively than bureaucrats can. What’s more, industrial policy often becomes a playground for special interests, leading to cronyism and the addition of unrelated objectives. As Friedrich Hayek noted, it’s a “fatal conceit” to design what we can’t fully understand.

Bruce Yandle sees the reality of Trump and other modern politicians. A slice:

Many politicians refuse to accept findings from countless studies showing how the cost of tariffs, which include retaliation from affected countries, will always, partly, if not entirely, be carried on the backs of consumers. Just as sure as water runs downhill, higher prices cause people to buy less of the taxed good. This is precisely how tariffs deliver protection for domestic special interests who would prefer to see consumers pay a little more money and buy their own products.

Thanks to all the ways politics and the complexities of the economy can intersect and obscure things, it’s always been far too easy to deny or disbelieve such a commonsense fact. Asked about it recently, Trump responded, “a tariff is a tax on a foreign country: That’s the way it is, whether you like it or not. It’s a tax that doesn’t affect our country.”

Go figure.

Reason‘s Matthew Petti makes the case that “the war on ‘foreign influence’ has become a war on the First Amendment.”

Art Carden details some of the damage done by a “debauched currency.”

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… is from page 177 of the 2012 revised edition of Steven Landsburg’s great 1993 book, The Armchair Economist:

It is said that figures don’t lie, but liars figure. Perhaps a more serious problem is that honest people figure carelessly. The antidote is careful attention to exactly what is being measured, and how it differs from what you would really like to measure if you could.

DBx: Yes.

Everyone today understands that nominal dollar figures from the past must be adjusted for inflation in order to make the dollar figures of prices, wages, income, and wealth from the past comparable to those of the present. But other, equally important adjustments to quantitative data are necessary if we are not to be misled by these data. For example:

– If country A has a higher percentage than does country B of its households earning annual incomes of (say) one-half or less of its median household income, no conclusion – without further information – is possible about whether or not country A has more low-income households than does country B. If country A’s median household income is higher than that of country B, many country A households that are classified as ‘low income’ might well have higher real incomes than do many of country B households that are not classified as ‘low income.’

– Do figures on annual incomes include or exclude government benefits received and taxes paid?

– Do figures on hourly wages include or exclude the value of employer-provided fringe benefits?

– What criteria are used to determine if some activity is or isn’t classified as “manufacturing”?

– What criteria are used to determine if a particular kind of economic transaction in country A by residents of country B is classified as a purchase of country A’s exports or foreign investment in country B?

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This law professor Zephyr Teachout is a whirlwind of economic illiteracy.

Editor, Washington Monthly

Editor:

Zephyr Teachout packs copious confusion into her attempted defense of Kamala Harris’s proposal that the federal government superintended the pricing decisions of grocers (“Stop Calling Kamala Harris’ Anti-Price-Gouging Proposal Price Controls,” Sept. 9).

Central to Teachout’s case is the fact that the anti-price-gouging statutes favored by Harris do not impose specific maximum prices of the sort that were imposed, say, during World War II. But this distinction is one of vocabulary and not of substance. A government that threatens to punish merchants for selling at nominal prices higher than deemed appropriate by government clearly intends to control prices. It’s no surprise, therefore, that economists routinely analyze prohibitions against so-called “price gouging” using exactly the same tools they use to analyze other forms of price controls.

Unfortunately, the fruits of these analyses are lost on Teachout. For example, she ignores the well-known conclusion that merchants who are free, post-natural disaster, to raise prices to high, market-clearing levels will, pre-natural disaster, have stronger incentives to carry as inventories more goods that are likely to be in high demand if a natural disaster strikes. By outlawing post-disaster price hikes, government harms consumers by causing reductions the inventories available when natural disasters strike.

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030

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In my latest column for AIER I express my utter distaste for politicians and their con games. A slice:

Politicians’ practice of calling each of us targeted voters by our first names, and of suggesting that we should think of each of them as people who we know on a first-name basis, is meant to trick us into thinking that they care for us in the same way as do those individuals with whom we really are on a first-name basis. This practice is a mercenary maneuver to gain our confidence on the cheap. It is literally a con game. “Kamala calls me by my first name and lets me call her by hers. I can put my confidence in her!”

We thus put trust in individuals who’ve done nothing to earn it. Some of these individuals turn out, luckily, to be decent human beings. But far too many of them are little more than con men and women. In their selfish quest for personal power, they gain our confidence under false pretenses. They trick our emotions into prompting us to suppose that they know more about us than they do, that they care more about us than they do, and that they – like our actual friends – will sacrifice their own welfare in order to further ours.

One of the great mysteries of modernity – this age of science, reason, and rationality – is the widespread, unthinking presumption that winning a democratic election turns members of our favored political party into people as trustworthy as our neighbors, siblings, and even parents. We give to elected politicians, almost none of whom any of us knows personally, the power to take our money and interfere with our personal and commercial affairs. The very same acts that, if carried out by unelected Smith, would land her in prison, instead, if carried out by elected-to-office Jones, often win him praise for being a selfless visionary helping to lead his people to the Promised Land.

If candidates for office were referred to more formally as, say, Ms. Harris and Mr. Trump – and if these candidates and their campaigns similarly referred to each of us as Ms. Smith and Mr. Boudreaux – there would be conveyed the more honest realization that we don’t personally know the candidates and they don’t know us. Voters might, just might, be a bit more guarded when pondering whether or not to turn more power over to Ms. Harris or Mr. Trump than when pondering the same about Kamala or Donald. And regardless of which candidate wins the election, when in office that individual would be less likely to be mistaken as someone who should be regarded as a personal friend and confidant.

Of course, precisely because this false familiarity is a winning political tactic, it will not be abandoned. Each of us, for the rest of our lives, every election year will receive missives and mailings, addressed to us by our first names, from the many Bens, Beths, Jerrys, and Jennifers who pant for political office and who have no shame in using whatever ploys they believe will improve their prospects of laying hold of the power they so desperately crave. Such political pandering is all-too-familiar. Yet it’s a con game.

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George Will has some questions for Harris and Trump. Two slices:

For him: JD Vance says “a million cheap knock-off toasters aren’t worth the price of a single American manufacturing job.” Do you, too, believe that no cumulative consumer benefits can compensate for any churnings of U.S. employment?

For her: Your party’s platform, which is longer than Joseph Conrad’s “Heart of Darkness,” begins with a bromide (“Our nation is at an inflection point”) and leaves no banality unemployed. (Small businesses are “the glue of our communities”; farmers are “the backbone of our country.”) Even worse, 26 times the platform boasts about “cracking down” (or some permutation of that phrase) on this or that. Doesn’t your party’s enjoyment of punishing make it sound like a dominatrix?

For him: Aggregate 2022 revenue of Fortune 500 U.S. companies equaled more than one-third of global gross domestic product, yet your party’s platform insists “we are a Nation in SERIOUS DECLINE.” Elaborate.

For her: Your party’s platform accuses your opponent of “stacking the Court” by appointing judges that please his party. Are you vowing not to do likewise? Do you support progressives’ plan to pack the Supreme Court by legislating term limits to force the retirement of three conservative justices?

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For both: A joke perennially pertinent in Washington concerns an economist and a normal person falling into a deep pit with sides too steep to climb. The normal person exclaims, “We’re trapped!” The economist placidly replies, “Don’t worry, we will simply assume a ladder.” What do each of you assume — torrid economic growth forever, 20 million elderly Americans moving to Australia, whatever — to justify your shared promise not to alter Social Security and Medicare, which are driving the nation off a fiscal cliff as their trust funds disappear?

Here’s the abstract of a new paper by Art Carden and Ilia Murtazashvili titled “W.H. Hutt: An Economist for the Twenty-First Century”:

We introduce W.H. Hutt’s under-appreciated economic insights. Hutt’s contributions include widelyregarded and heralded contributions to the analysis of labor institutions, macroeconomics, and constitutional political economy, but there remains much to be learned from studying Hutt’s work and incorporating his insights into modern analysis.

[DBx: I’m delighted that serious scholars are working on Hutt, for a gaggle of poorly informed individuals are now tendentiously struggling to portray Hutt (1899-1988) as that which he most certainly was not: a racist.]

Wall Street Journal columnist Mary Anastasia O’Grady applauds Elon Musk’s fight for free speech in Brazil. A slice:

If free speech is a measure of a modern liberal democracy, Brazil is in trouble. A crackdown on expression and the denial of due process for those who contradict the state’s version of the truth dates back to 2020. Now it’s getting worse.

The latest example is Supreme Court Judge Alexandre de Moraes’s Sept. 1 shutdown of Elon Musk’s X social-media site (formerly Twitter). As part of the court’s order, anyone caught using a virtual private network to evade the ban is subject to a fine of 50,000 reais (nearly $9,000) a day. Judge de Moraes also announced a freeze of the financial accounts of Starlink, the satellite system belonging to Mr. Musk’s SpaceX. Starlink is used by internet providers that serve millions of Brazilians.

Judge de Moraes has nothing against X per se. His beef is with social-media influencers whose use of irreverence and derision as rhetorical weapons against the ruling establishment makes them popular on the right side of Brazilian politics.

Swiftian satire is loads of fun if you’re the forgotten man, powerless against a notoriously corrupt system. But Judge de Moraes calls these nonconformists purveyors of disinformation and a threat to democracy. He considers it his job to gag them.

This has put him at odds with Mr. Musk, who isn’t involved in Brazilian politics but has a commitment to free speech. Other platforms have obeyed the court’s instructions to block antiestablishment opinion makers. Mr. Musk refuses to comply on grounds that doing so would violate Brazil’s constitution, which in Articles 5 and 220 explicitly protects speech.

Wall Street Journal columnist Allysia Finley reports on yet further evidence of the damage done to ordinary Californians by that state’s “progressive” policies. A slice:

Summer ain’t over in California until the lights go out. A one-hour power outage kicked off my Labor Day weekend. My sister, who lives 15 minutes away, had it worse: Her home lost electricity for nearly a day. On Friday folks across the state lost power with nearly 130 outages in the city of Los Angeles alone.

Such is life in California. Los Angeles Mayor Karen Bass blamed Friday’s outages on “extreme heat.” The real culprit: the state’s climate policies. As the Golden State plunges into darkness, the rest of the country could follow.

Democrats in Sacramento last year scrambled to keep open the state’s only active nuclear plant and several aging natural-gas plants to prevent power shortages. But their drive to power all things with green energy is straining the grid and people’s pocketbooks to a breaking point.

Scott Sumner is correct: “No matter how much you think you know about the economy, it is bigger and more complex than you can imagine.”

My intrepid Mercatus Center colleague, Veronique de Rugy, talks with Vance Ginn about government spending.

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… is from page 108 of my late, great colleague Walter Williams’s excellent 2011 book, Race & Economics: How much can be blamed on discrimination?:

Our short discussion of the trucking industry before and after deregulation offers additional confirmation of our working hypothesis that government regulations close avenues of entry and reinforce economic handicaps. Deregulation has not only served to help minorities enter an industry in greater numbers; it has also benefitted consumers through lower prices and greater convenience in securing services.

Deregulation has been valuable in another important way. It has increased black participation in the trucking industry without depending upon controversial measures that have caused so much divisiveness in our society, namely quotas and racial preferences.

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David Henderson isn’t impressed with Brad DeLong’s case for industrial policy. A slice:

What is neoliberalism and who advocated it? DeLong never tells us. He doesn’t name even one neoliberal economist. (I know only one economist who self-identifies as a neoliberal: my co-blogger Scott Sumner.) DeLong seems to have in mind people who call or called themselves classical liberals, economic conservatives, and libertarians. A number of us in those days shared most of those views, although many of us disagreed with DeLong about whether shrinking the state and deregulating would lead to higher economic inequality. I never heard one of them state, and I never stated, that markets would always deliver better outcomes than government programs could. Usually? Yes. Almost always? Probably. But always? That case is much harder to make, which may explain why none of us tried to make it.

Also, if the consensus is that this approach failed spectacularly, it shouldn’t be hard to point to evidence both of the failure and of the consensus. DeLong doesn’t even try. Does he think airline deregulation, which brought down airfares, trucking and railroad deregulation, which brought down shipping rates and revived the railroad industry, failed? Or how about getting rid of price controls on oil, gasoline, and natural gas in the 1980s, measures that ended shortages and revived America’s energy industries? DeLong doesn’t address any of this.

Joel Kotkin and Michael Toth report on businesses fleeing California. A slice:

California’s climate policies, while largely irrelevant for global emissions, have chased out large employers like Chevron. A recent report from the California Air Resources Board projects that these policies are directing billions in subsidies to “clean” tech firms whose employees are disproportionately upper-income earners. This is what Holland & Knight’s Jennifer Hernandez calls the “Green Jim Crow.” California’s climate policies drive up the cost of housing, food and electricity while destroying thousands of energy-sector jobs held primarily by black and Latino workers.

Ms. Harris, who embraced California’s climate policies as attorney general and a senator, worked to limit building on the suburban fringe, one reason California now has the nation’s second lowest homeownership rate. A recent study by Knock.com found the median family in San Jose or San Francisco would need 125 years to save the money necessary to make the down payment on a median-priced home; in Atlanta or Houston (where Chevron’s new headquarters is) the figure is 12 years. Not one unionized construction worker can afford to buy a median-priced home in any coastal California county, according to a recent study by economist John Husing.

Speaking of California, Jack Nicastro reports on more of that state-government’s nannying.

Jim Dorn’s letter in Thursday’s Wall Street Journal is excellent:

Your editorial is correct in arguing that Democrats twist the word “freedom” to mean something the Framers of the U.S. Constitution never intended. Namely, the use of government to achieve social or distributive justice by directing scarce resources to political ends satisfying interest groups, rather than to secure the natural rights of each individual.

As James Madison, the chief architect of the Constitution, wrote in 1792: “That is not a just government, nor is property secure under it, where the property which a man has in his personal safety and personal liberty, is violated by arbitrary seizures of one class of citizens for the service of the rest.”

With limited government under a just rule of law, and a free-market economy, people are more likely to enjoy tranquility and prosperity than in a society lacking those institutions.

James A. Dorn
Cato Institute

GMU Econ alum Romina Boccia joins with Ivane Nachkebia to correct the Washington Post on Social Security.

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… is from page 192 of 1987 Nobel-laureate economist Robert Solow’s October 13th, 1988, lecture, “My Evolution as an Economist,” in Lives of the Laureates, William Breit and Roger W. Spencer, eds. (3rd ed., 1995):

We often say among ourselves that the best way to learn a subject is to teach it. There is some truth in that, but one wants to be clear about what the kernel of truth is. You don’t have to teach a subject to master its mechanical and technical details. Books will do quite nicely for that. The experience of teaching does, if you take it seriously, require you to figure out how to explain the subject at hand clearly; and that is already a higher level of understanding than the first.

DBx: Pictured above is one of the greatest economics professors of all time, Ken Elzinga, teaching his famed Principles of Microeconomics course at the University of Virginia.

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GMU Econ alum Dominic Pino isn’t impressed with economic-populists’ attachment to reality. Two slices:

Economic populists will often talk as though they are calculating realists who are thinking strategically, as opposed to us crazy free-market ideologues who live in the fantasy world of perfect theory.

So let’s put on our strategic-thinking cap and look at the government’s pending decision — supported by Joe Biden, Kamala Harris, Donald Trump, and J. D. Vance, all in the name of economic populism — to block Nippon Steel’s attempted acquisition of U.S. Steel.

That’s basically what Advancing American Freedom (AAF), the conservative advocacy group led by Mike Pence, has done in a new memo.

AAF starts by looking at the deal itself. Nippon Steel offered $15 billion to buy U.S. Steel. That’s about 40 percent more than the company is currently valued. It’s $8 billion more than the next best offer. “When put to a vote, 98% of U.S. Steel shares supported the acquisition,” the memo says.

…..

Biden was always going to do what the union bosses wanted, because that’s what Democrats do. But Republican opposition on “strategic” grounds is just as nonsensical as opposition on economic grounds. The supposedly pragmatic realism of populist economics is anything but.

My intrepid Mercatus Center colleague, Veronique de Rugy, explains that the larger problem of government isn’t its inefficiency. A slice:

But that’s nothing in comparison with the enormous deficit spending, and debt, that will come about because of Medicare’s and Social Security’s unfunded liabilities. CBO projects that the federal government will have to borrow $124 trillion for those two programs alone. The worse culprit of the two is Medicare.

And then there is the economic damage caused by all the government’s misallocation of capital and the creation of perverse incentives, such as moral hazard, from both handouts to the private sector (some of which Musk has received) and grants to state and local governments. Regarding the latter, according to Chris Edwards at Cato, “federal aid to the states totaled $721 billion in 2019.”

“Ilana Redstone speaks with Ben Klutsey about how a pluralistic democracy depends on our willingness to challenge our assumptions.”

Juliette Sellgren talks with Dartmouth College professor Henry Clark about growth.

Eric Boehm makes clear “why Trump’s child care policy incoherence matters.”

Emma Camp shares some bad, although unsurprising, news from college campuses.

Dan Morenoff identifies a likely cause of corporate CEOs’ retreat from ESG.

Art Carden draws some lessons about political economy from college football.

Also reflecting on college football – and, more generally, on present-day college “student-athletes” – is George Will. A slice:

As the college football season begins, a word to the wise: If you spot your university’s quarterback cruising around campus in a Lamborghini, don’t go all Woodward and Bernstein, thinking you have spotted a Pulitzer-worthy scandal (“Lamborghini-gate”). The quarterback might be looking for the molecular biology lab (or not). His vehicle is his legal, rule-abiding reward for pleasing well-heeled alumni by bringing his talented passing arm to their alma mater before he graduates to the NFL. There, he might even take a pay cut.

Welcome to the world of NIL, where athletes are paid for the use of their name, image and likeness. What has been said of Washington (the shocking thing is not what’s done there that is illegal, but what is legal) can now be said of the college athletics industry. It is lightly superintended — very lightly — by the NCAA, which endearingly persists in referring to “student athletes.”

The new football season, which will end shortly before spring practices begin, will be the first in forever to be free of sanctimony about “amateurism.” Few recruiting rules will be broken because few such rules exist.