Wall Street Journal columnist Allysia Finley rightly complains that Trump’s tariffs counteract those of his policies that promote economic growth. Two slices:
He quickly reverses the Biden overregulation—then squanders the gains by imposing tariffs.
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The press gleefully warns such a result could induce a recession, which would vindicate their pre-election predictions. Worries about a recession fanned by the press could even trigger a recession. Mr. Trump might consider that nobody is privately cheering on his tariff blunder more than his opponents. Why give them validation?
Pierre Lemieux warns of the dangers – economic and moral – of capital controls. A slice:
Not surprisingly, then, capital controls—whether on inflows or outflows—raise many problems. Government allocation, that is, allocation by politicians and bureaucrats, at least partly replaces market signals and incentives. Those who can tax can also control and ban if only with prohibitive tax rates or the threat thereof. A tax on capital inflows would prevent American businesses from freely appealing to foreign lenders or investors. It would limit the purchase of American dollars by foreign tourists. Perhaps, after a few decades of autarkic controls, remittance flows would be reversed and Americans would need to pay a tax to receive foreign remittances from exiled family members. Remember that, at the turn of the 20th century, Argentina was among rich countries. Similarly, if capital inflows can be collectively managed, so can outflows, such as investment or travel abroad.
Timothy Taylor patiently explains the fundamental errors of those many persons who insist that so-called “trade deficits” necessarily reduce the size of the domestic economy. A slice:
Or say the US imposes tariffs on imported goods, so that US imports decline. Many of those imported goods are used by US firms as inputs to production. The reason US firms import these inputs is that they are either less expensive or higher quality (or both) than the same product would be if produced in US borders (if indeed they are even produced at all within US borders). Thus, all the US firms that have been depending on imported inputs (which includes most large and successful US multinationals) are facing a rise in their costs. As a result, they may decide to cut back on their levels of investment.
Or say the US imposes tariffs on imported goods, so that US imports decline. Many of these imports are purchased by consumers, who choose these items because that they are either less expensive or higher quality (or both) than the same product would be if produced in US borders (if indeed the product is even produced at all within US borders). Thus, when these consumers face the necessity to purchase alternative goods,they will be buying something that they would have preferred less–based either on higher price or a difference in quality. As a result, consumers may decide to cut back.
My emeritus Nobel-laureate colleague, Vernon Smith, is not impressed with Joseph Stiglitz’s book The Road to Freedom. Here’s his conclusion:
The needed policy implications are quite clear, and they have nothing to do with Stiglitz’s market failure and everything to do with how markets function. Indeed, the appropriate policy recommendation is to fully support the market-system maximization of prosperity, as did Friedman and Hayek, then use incentive mechanisms to improve the relative positions of those who are disadvantaged in that system. Never kill the goose that lays eggs of gold; rather nourish and feed her with joy and allow innovation to hatch some of those eggs.
Greg Caskey reviews Ryan Yonk’s and Ethan Yang’s The China Dilemma. Here’s his conclusion:
The China Dilemma presents a counterapproach to the prevailing approaches to China. It does so by deploying public choice reasoning to understand the actions of CCP actors. This yields a number of key insights. For one, choosing the pragmatic route over the strictly ideological route is a consistent feature of CCP actions over the last few decades. This approach has terrific explanatory power, answering questions such as: Why crack down on Jack Ma and other tech tycoons at the expense of billions of dollars of economic activity? (Answer: Maximize political power and stability.) Why constantly threaten to invade Taiwan and stoke nationalistic flames within the domestic populace along these lines? (Answer: Maximize political power and stability.) In line with Capitalist Peace Theory, economic engagement has no doubt raised the costs of war for China by creating strong incentives for cooperation through trade and commerce. But public choice theory “reconciles the merits of engagement and economic growth” (p. 30) with the realities of power-maximizing CCP decision-making. To the extent economic liberalization occurs, it isn’t due to the CCP’s embrace of the internal merits of this approach relative to others, but rather that it bolsters the CCP’s authoritarian rule.
GMU Econ alum Jeremy Horpedahl is correct: “Egg prices don’t need to be investigated – it’s just supply and demand.”
Hayek would like this essay by Christine Rosen.
