In mid-October 2023, I wrote a draft of a blog post that I didn’t end up posting. I’m running it below, word for word as I wrote it in October. In October, I ran it by a friend who is very pro-immigration and, even though he largely agreed with it, he thought my proposal wouldn’t stand a snowball’s chance in hell of being accepted. The barriers to people immigrating from anywhere, he argued correctly, are just too high. So the idea of letting people in from Gaza didn’t seem worth bothering to push. He persuaded me. I shouldn’t have been persuaded. Because look at what just has happened. The Biden administration is starting to talk about letting people in from Gaza. Here’s a post from Dave DeCamp from antiwar.com, titled, “White House Considers Taking in Palestinian Refugees from Gaza.” And here’s a quote from his short post: The Biden administration is considering taking in certain Palestinian refugees and giving them a permanent safe haven in the US, CBS News reported on Tuesday. The report said that officials across several government agencies are examining options to resettle Palestinians who have immediate family members who are American citizens or permanent residents. They are also considering making the option available for Palestinians with any relatives who are Americans. The number of Palestinians eligible for permanent resettlement in the US is expected to be relatively small, but the report said it would mark the first time the US refugee program accepts Palestinians in large numbers. I should not have accepted the idea that proposals that seem unlikely today will be unlikely 6 or 7 months from now. Here’s my post from October. I’ve kept the same title. Or, at least, let some of them in. Nikki Haley and Ron DeSantis have been competing recently for the title of who most wants to keep people from Gaza out of the United States. I can’t compete, because I want to allow many of the people from Gaza in to the United States. And even in the likely case that I can’t convince many people, I want to allow many people to leave Gaza. They are not allowed do so now. Many critics of Israeli government policy have claimed that Israel has made Gaza into an “open-air prison.” But a simple look at a map tells you that that can’t be true. The Israeli government can’t do it alone. What has made Gaza into an open-air prison is the fact that Israel’s government won’t let many Gazans enter Israel and that Egypt’s government won’t let many Gazans enter Egypt. There’s not complete closure for people entering Israel, or, at least, there wasn’t before the horrendous Hamas murders on October 7. Similarly, there hasn’t been, until recently, complete closure into Egypt. But in both cases, it was a trickle. Of course, there’s one other possible way to exit Gaza: by boat. But Israel’s Navy forcibly prevents people from leaving Gaza by boat. Let’s imagine that the U.S. government or some other government decides to let in some people from Gaza and that the various governments persuade Israel’s government to let them go. How would a government choose whom to let in? It should be obvious that it’s a really bad idea to let in members of Hamas or even non-members who strongly support the Hamas agenda of wiping out Jews. And vetting them is not easy. What kinds of records would a government require? When I immigrated to the United States in 1977, I had to get a statement from the RCMP that I had no criminal record in Canada. That was relatively easy to do. Can the U.S. government trust a police force in Gaza to the same extent it could trust the RCMP? Probably not. In short, I don’t have a good way to suggest for vetting potential immigrants from Gaza. But that doesn’t mean that no one does. In particular, I would want to know what Alex Nowrasteh and David Bier, two immigration analysts and proponents at the Cato Institute, think. One thing that helps the vetting problem is self-selection. Many people would rather stay in Gaza than leave because they still believe that they can take over Israel and run the Jews into the sea. Fortunately, that’s highly unlikely, but try telling them that. Better yet, don’t try telling them that. Leave them and choose from the ones who want to come. Let’s say that the vetting problem is solved. We’re unlikely to get, say one million people from Gaza. It’s more likely to be hundreds of thousands. If it were, say, 200,000, that’s approximately 10 percent of the number of residents. That may not sound like a lot. But one conclusion I came to when I was an economist with President Reagan’s Council of Economic Advisers is that if you solve 10 percent of a problem, and do so with almost no new government spending, you’ve done a lot. And the way to have almost no government spending, beyond the amount spent on vetting, is to let them work. People coming from Gaza, like immigrants from other low-income countries, would immediately multiply their productivity, as Bryan Caplan has shown in Open Borders: The Science and Ethics of Immigration. So there would be no need for government to house or feed them. You might wonder why, then, governments in various cities are breaking their budgets to house and feed immigrants who come in through our southern border. It’s for one main reason: for the first 180 days they’re here, they can’t legally work. What about the fear that even those who don’t support Hamas will be anti-semitic? This is a reasonable fear. But before Ariel Sharon forcibly removed thousands of Jews from Gaza, those Jews got along reasonably well with many of their Arab neighbors. What changed is that now the only contact most residents of Gaza have ever had with Israelis (the median age of a resident of Gaza is about 19) is with Israeli soldiers or Israeli police. That’s bound to affect, in a negative way, their overall impression of Jews. The late Carlos Ball, whose father was once the Venezuelan ambassador to the United States, told me that his father had said, “Never judge a country by its government bureaucracy.” The implication was that the people of any country are almost always nicer than the bureaucrats. If I had had to judge Americans by the way the bureaucrats at the Immigration and Naturalization Service treated me, I wouldn’t have wanted to come. Similarly, many Gazans who come here might well be anti-semitic. But most of them would be too busy making a living and enjoying the incredible wealth that they would be creating. Trade creates peace. It also reduces racism.   (0 COMMENTS)

America is an outlier. Its GDP per capita is far higher than any other country with at least 10 million people. The US GDP per capita (PPP adjusted) is $85,373, while the next nine range from Taiwan at $77,858 to the UK at $58,880.  (All of these are IMF estimates for 2024.)  If you prefer nominal GDP measured at current exchange rates, the gap is even larger. The US is again at $85,373, while Australia comes in second at $66,589. There’s another way in which the US is an outlier.  We’ve experienced much more immigration than any other country.  How should we think about those two facts? Opponents of immigration often claim that it makes America poorer by depressing wages.  Presumably this means that if we had experienced less immigration, we’d be even richer.  Imagine that instead of 330 million people, our population had only risen to 110 million—to somewhere between Germany and Japan.  How rich would we be in that case? I suppose it is possible that even though America is much richer than all other mid-sized and large countries, and even though we’ve had vastly more immigration than other countries, the immigration has depressed incomes in America. Perhaps with lower levels of immigration we’d be even more of an outlier. But does that seem likely? David Levey directed me to a recent study of this question, by Alessandro Caiumi and Giovanni Peri.  Here’s the abstract: In this article we revive, extend and improve the approach used in a series of influential papers written in the 2000s to estimate how changes in the supply of immigrant workers affected natives’ wages in the US. We begin by extending the analysis to include the more recent years 2000-2022. Additionally, we introduce three important improvements. First, we introduce an IV that uses a new skill-based shift-share for immigrants and the demographic evolution for natives, which we show passes validity tests and has reasonably strong power. Second, we provide estimates of the impact of immigration on the employment-population ratio of natives to test for crowding out at the national level. Third, we analyze occupational upgrading of natives in response to immigrants. Using these estimates, we calculate that immigration, thanks to native-immigrant complementarity and college skill content of immigrants, had a positive and significant effect between +1.7 to +2.6% on wages of less educated native workers, over the period 2000-2019 and no significant wage effect on college educated natives. We also calculate a positive employment rate effect for most native workers. Even simulations for the most recent 2019-2022 period suggest small positive effects on wages of non-college natives and no significant crowding out effects on employment.  [Emphasis added] I think this is the key: native-immigrant complementarity and college skill content of immigrants Other countries tend to be good at one thing, such as building cars or pumping oil out of the ground.  America’s diverse population allows us to adapt to changing global trends.  When new industries develop, we are usually in the forefront (smart phones, fracking, pro basketball, e-commerce, electric cars, AI, GMO foods, superhero movies, high speed trading, etc., etc.  We have all kinds of people, able to fill all sorts of niches. Opponents of immigration may have in mind a model where adding labor to a fixed quantity of land reduces per capita output.   But that’s not how the real world works.  America’s people, not its land, is its greatest resource. PS.  The per capita GDP of very small countries is often distorted by factors such as multinational earnings, oil income, and tax haven status.   (1 COMMENTS)

Every public policy comes with its own set of externalities and unintended consequences. Moreover, because politics exists at the nexus between competing interests, outcomes can often approach zero-sum, whether or not this was the initial aim of policymakers. Simply put, someone gains while someone loses; there is always a cost. In my previous post, we ended by taking a cursory glance at some of the social costs of drug prohibition, such as increased violence, property crimes, and a rise in the incidence of overdose deaths. In this post, we will take a deeper look into the (sometimes hidden) costs imposed by the War on Drugs™.    The Astonishing Growth of the Prison-Industrial Complex While comprising roughly 4.23% of the world’s population, America is responsible for nearly one-quarter of the world’s prison population. At any given time, 1.9 million individuals are the unwilling guests of Federal, state, and local prisons, a per capita rate of 565 per 100,000 residents. (Note: in the wake of COVID, many states elected to release prisoners early due to health and staffing concerns. This has led to a temporary 16% drop in the incarceration rate). For the sake of comparison, China, which has four times the population of the United States and is known for its repressive regime, has 1.7 million people incarcerated in its prison system – a per capita rate of a mere 119 individuals per thousand. According to the Federal Department of Prisons, some 44% of inmates in Federal correctional facilities are there because of drug offenses. That number decreases to roughly 25% for state and local facilities, a share of the prison population exceeded only by those imprisoned for violent offenses. In creating a whole new class of criminal, drug policy generated an ever-increasing need for space to house these inmates. While Richard Nixon-era drug policy tended towards treatment over incarceration (which isn’t to say that Nixon didn’t want incarceration; he did, at least of certain segments of society), Reagan’s Comprehensive Crime Control Act of 1984 established mandatory minimum sentencing for drug offenders (and civil asset forfeiture, another social cost that bears discussion). This, of course, precipitated a rise in the prison population, but it was the Clinton Administration’s Violent Crime Control and Law Enforcement Act of 1994 that jump-started the prison construction industry.  Not only did this law mandate a minimum sentence of 25 years for individuals convicted of a felony for the third time, it earmarked $97 billion for the construction of new prisons. State and local governments availed themselves of this funding, and while adding their own, 544 correctional facilities were built between 1990 and 2015, an average of one every 10 days. The straw that stirs this noxious drink is the Prison Industry Enhancement Certification Program (PIECP). While the Thirteenth Amendment made it possible for prisoners to be used as a cheap source of labor, this was restricted to utilization by individual states, as it was illegal to transport prisoner-made goods across state lines or use prison labor for private entities. When the PIECP was approved by Congress in 1979, these restrictions on prison labor were lifted, introducing perverse incentives into the criminal justice system by way of the profit motive. With Reagan’s ACT requiring new space for the influx of drug offenders, corporations and political leaders not only began contracting for the building and management of new facilities, but officials began negotiating with the private sector for opportunities to monetize and profit from prison labor (Chang & Thompkins, 2002). In essence, prisons went from being a nominally rehabilitative, functionally punitive institution to being an avenue of profit. Thus, the prison-industrial complex was born. Much of the literature on this odd paradigm focuses on the rise of private prisons, but although these facilities are problematic, they house a mere 8% of incarcerated individuals. The pressing issue is that the profit motive that exists in private for-profit correctional facilities also exists in publicly funded state and local facilities. This is reflected in the fact that large institutional investors such as Merrill/BofA Securities purchase prison-construction bonds to the tune of over $2.3 billion annually (Cummings, 2012). They are willing to underwrite the construction of both private and public prisons because they guarantee generous returns. This ROI is insured by the low wages paid to inmates, both those employed in facility upkeep and those laboring for private industry.  Estimates suggest that inmate labor is responsible for over $2 billion in goods and services, while prisoners earn pennies on the dollar; the average wage is between 13 to 52 cents per hour. Additionally, correctional facilities earn extra revenue by charging back to inmates items such as room and board, court costs, and necessities such as toiletries. These chargebacks can take up to 80% or more of the inmate’s eager wages, and some even leave their incarceration in a monetary deficit. Prisoners who are fortunate enough to work for private employers under the PIECP program are paid a higher wage that must be commensurate with prevailing local wages. This comprises less than 6% of inmates, and their chargebacks tend to be even higher. The irony of this situation is that the PIECP was intended to enhance the rehabilitative function of prison labor by imparting inmates with skills that would be valued on the market after their release. A confluence of interests, from politicians who wish to appear tough on crime during election season, police departments that benefit from enhanced funding and equipment to focus on drug arrests, prisons that directly benefit from contracted labor, and private interests wishing to exploit the many opportunities available to them from financing, construction and low-cost labor, have all conspired to turn the whole thing into a cottage industry of perverse incentives. In my next post, we will continue with the militarization of police.   Tarnell Brown is an Atlanta based economist and public policy analyst. (0 COMMENTS)

Who do tariffs punish? Many people think they punish unscrupulous, shifty foreign manufacturers who aren’t playing fair and “dumping” their shoddy wares on American markets at prices below American producers’ costs, but that’s not true. Tariffs are sanctions and penalties imposed on American consumers for not paying enough. Governments regularly impose sanctions on other governments for various abuses of human rights and international treaties, or other similarly bad behavior. These sanctions can be a refusal to allow a country’s citizens to trade with another country’s citizens or an outright trade embargo. The basic idea is that punishing a country with trade sanctions will get it to change its behavior. Or, perhaps, by punishing a country’s citizens, we can inspire them to rise up and throw off the chains of their oppressors.  Sanctions have a checkered history and a less-than-inspiring track record. Protectionism is a classic example of a policy that does the opposite of what it is supposed to do. It increases American employment in the protected industries, but the workers’ additional earnings are transferred dollar for dollar from consumers. We could use the land, capital, labor, and other resources more efficiently to make something else. According to a Daily Mail poll asking about Donald Trump’s plan for 10% tariffs on all imports, “24 percent of likely voters strongly support the policy proposal while another 30 percent tend to support it.” Protectionism is bipartisan: a few weeks ago, Reuters reported that Senate Democrats from manufacturing states were pushing for tariffs on Chinese electric vehicles because “Allowing heavily subsidized Chinese vehicles to enter the U.S. marketplace would endanger American automotive manufacturing.” It’s not hard to show that any gains to domestic producers come out of domestic consumers’ pockets. It’s also fairly easy to show that the reduction in gains from trade for consumers is greater than the increase in gains from trade going to producers and the tax revenue the government enjoys. These videos from Marginal Revolution University walk you through the graphs. If you scratch an economist, you will find someone more enthusiastic about free international trade than the average person and the median voter. Indeed, 1100+ economists signed a 2018 open letter from the National Taxpayers Union urging the government to abandon protectionism. Unfortunately, the median voter embraces populist demagoguery and votes enthusiastically for tariffs and other restrictions on international trade. The results do not Make America Great Again. They just make us poorer.  Tariffs on foreign goods are “sanctions” on American consumers. Their crime? Not wanting to pay as much as domestic producers want. (0 COMMENTS)

Russ Roberts, EconTalk Host The favorite EconTalk episodes for host Russ Roberts are when he and his guest have an unusually powerful connection such as his recent episode with Charles Duhigg, and the ones where he learns something mind-blowing, like Adam Mastroianni’s insight that you can’t reach the brain through the ears. Listen as Russ […] The post The Top EconTalk Conversations of 2023 (with Russ Roberts) appeared first on Econlib.

The OC Register reports that a California judge has struck down a new law allowing as many as four units on a single lot: “The Legislature finds and declares that ensuring access to affordable housing is a matter of statewide concern and not a municipal affair,” SB 9 states. “Therefore, … (this law applies) to all cities, including charter cities.” But the law does nothing to guarantee more affordable housing, Kin wrote. At the same time, he rejected the state’s argument that SB 9 promotes housing affordability at lower income levels by increasing the overall housing supply. ” ‘Affordable’ refers to below market-rate housing,” Kin wrote. The state gave “no evidence to support the assertion that the upzoning permitted by SB 9 would result in any increase in the supply of below market-rate housing.” Redondo Beach City Attorney Michael Webb hailed Kin’s ruling, saying SB 9 amounts to a “kind of trickle-down economics applied to zoning.” In fact, the single best way to provide more affordable housing is to build more unaffordable housing.  And contrary to the claims of Michael Webb, housing is textbook example of trickle down economics in action. Consider the following analogy.  Suppose you are worried about high used car prices.  Low wage workers are struggling to afford the few used cars that are available on the market.  Would you suggest that the car companies start building some crappy junkers, which sell for $5000?  Obviously not.  The optimal solution would be to build more “unaffordable” new cars.  The affluent people that buy those new cars would then sell their old cars, which would put downward pressure on the price of used cars.  Eventually the benefits would “trickle down” to those people who are unable to afford new cars.  Not only does trickle down economics work, it’s the key to understanding important markets such as autos and housing. In any advancing society, new houses should be better than existing homes.  That means that new houses will be “unaffordable” to the median purchaser of houses of that size.  That’s good.  That’s how living standards improve over time.  If new houses were no more expensive than existing homes, then we’d all still be living in log cabins. Judge Kin doesn’t seem to understand the laws of supply and demand.  He speaks of building houses at price points below “market rate”, whereas the whole point of the policy is to make housing more affordable by reducing the market price of housing.  Build more mansions, and the benefits will trickle down to the working class.  I don’t even like the phrase ‘trickle down’, as it suggests the process is slow.  The benefits of housing construction will flood down onto the lower end of the market. PS.  The judge’s decision applies to the state’s 121 “charter cities”, but not the much larger number of “general law” cities that lack a charter. (0 COMMENTS)

Yet Another Drug War Failure by Ted Galen Carpenter, antiwar.com, April 23, 2024. Excerpt: Despite such spectacular policy failures, drug warriors in the United States and other countries cling to hard-line strategies and refuse to face an inconvenient economic truth.  Governments are not able to dictate whether people use mind-altering substances.  Such vices have been part of human culture throughout history.  Governments can determine only whether reputable businesses or violent criminal gangs are the suppliers.  A prohibition strategy guarantees that it will be the latter – with all the accompanying violence and corruption.  The ongoing bloody struggles among rival cartels to control the lucrative trafficking routes to the United States merely confirm that historical pattern. And a great last line: Ecuador is just the most recent proof.  Prohibition is akin to expecting long-term victory in a game of Wack-a-Mole. I’m a little picky about language. I would have said “Ecuador is just the most recent evidence.”   The Jones Act: Consequences of a Destructive Industrial Policy by Timothy Taylor, Conversable Economist, April 24, 2024. Excerpt: The United States has had an industrial policy aimed at boosting its domestic shipbuilding industry since the passage of the Merchant Marine Act of 1920, commonly known as the Jones Act. Whatever the arguments for the passage of the bill a century ago, it has over time been a disaster for the US maritime industry, and continues to impose significant costs on other parts of the US economy. Colin Grabow goes through the arguments in “Protectionism on Steroids: The Scandal of the Jones Act” (Milken Institute Review, Second Quarter 2024, pp. 44-53). And: 2) The higher costs of Jones-Act-compliant US shipping naturally impose heavy costs on places like Hawaii, Alaska, and Puerto Rico. Weird consequences result, and Grabow provides a number of examples. Puerto Rico gets its liquified natural gas from Nigeria, because there are no Jones-Act-compliant US ships to transport natural gas within the United States. US lumber producers complain that they have a disadvantage vs. Canadian firms, because the US lumber producers must use higher-cost Jones Act ships to send their products to US destinations, while Canadian lumber producers can use cheaper international shipping companies.   It’s Time to Take a Hard Look at Public Libraries by Marc Joffe. Cato at Liberty, April 25, 2024. Excerpt: Like mom and apple pie, the public library seems so intrinsically good that it should be beyond criticism. But like any institution that consumes millions of tax dollars, public libraries should not be free from scrutiny. And the facts are that neighborhood libraries have largely outlived their usefulness and no longer provide value for the public money spent on them. Consider the situation in Northern California, for example. In this fiscal year, four Bay Area counties (Alameda, Contra Costa, San Mateo, and Santa Clara) are collectively spending $270 million to operate their library systems, with some cities chipping in extra to finance extended operating hours. Contra Costa County is spending $20 million of state and county funds to build a new library in Bay Point, and El Cerrito voters may see a sales tax measure on the November ballot, part of which will go to building a new library as part of a transit‐​oriented development near a Bay Area Rapid Transit station. The public library’s historical functions of lending physical books and enabling patrons to view reference materials are being made obsolete by digital technology. An increasing proportion of adults are consuming e‑books and audiobooks in addition to or instead of printed books, with younger adults more likely to use these alternative formats.   There’s a kind of racism embedded in DEI by Erec Smith, Boston Globe, April 19, 2024. Unlike traditional racism — the belief that particular races are, in some way, inherently inferior to others — prescriptive racism dictates how a person should behave. That is, an identity type is prescribed to a group of people, and any individual who skirts that prescription is deemed inauthentic or even defective. President Biden displayed prescriptive racism when he said “If you have a problem figuring out whether you’re for me or Trump, you ain’t Black,” a statement that implicitly prescribes how Black voters should think. “Prescriptive racism” is probably a new term for most readers, but it’s not exactly a novel concept. It has a historical analogue: the concept of the “uppity Negro,” a Black person who dared to act like an equal to whites. One of this term’s most famous usages is attributed to Lyndon B. Johnson, who apparently said: “These Negroes, they’re getting pretty uppity these days and that’s a problem for us since they’ve got something now they never had before, the political pull to back up their uppityness.” Clearly, “uppity” was meant to describe people of color who exercised “agentic” power — that is, they were competent and did not need a white person’s heroism. These “uppity” Black people were forgetting their scripted lines, as it were.       (0 COMMENTS)

Pierre Lemieux’s excellent post on The Economist‘s dismissal of an argument against gun control reminded me of a line from, I think, one of Robert MacNeil’s books. He said, “It has always been axiomatic to me that easy access to firearms would lead to more crime, in particular, homicide.” See the problem? It’s not axiomatic. It might be true, but it’s not axiomatic. MacNeil’s claim has to be researched. I remember, when I read that years ago, being so disappointed that a person who made his early living as a reporter would regard such a claim as axiomatic. And because he did, he probably never pursued the evidence. (0 COMMENTS)

I mentioned in a previous post that The Economist appears to lose all rationality when one specific topic is broached. The writer of the magazine’s April 20 newsletter “The World in Brief” gave another illustration: he could not mention the 25th anniversary of the horrible Columbine school massacre without doing the rhetorical equivalent of a child hiding behind the couch to stop watching a horror movie—which is the horror of guns in the hands of peaceful citizens: Gun-rights supporters often say, nonsensically, that the only way to stop a bad guy with a gun is a good guy with a gun. It is not the only way, but often the most efficient. This is why cops are armed (more and more apparently even in the UK) and why mass murderers never attack shooting ranges or gun club meetings. It is a simple matter of incentives. Even if you want to die while killing people, you still want to do the killing. The efficiency of guns against violent criminals comes not only from their deterrent effects but also from their usefulness in self-defense when deterrence has not worked perfectly. “Nonsensically”? We know of many documented cases where an armed ordinary citizen saved his own life and the lives of others. The FBI publishes an annual report on events where “one or more individuals actively engaged in killing or attempting to kill people in a populated area.” Many of these cases fit the federal definition of mass shootings. The latest of those reports covers 2022 and the 50 cases that occurred during that year, with 313 injured or killed victims. (People who count hundreds of mass shootings per year in the United States include many other sorts of gun incidents.) Three or 6% of the 50 cases documented by the FBI were stopped by an armed ordinary citizen. In two of those cases (4% of the total), a mass murderer was fatally shot by an ordinary citizen, compared with seven cases (14%) by law enforcement. The two cases are summarized as follows in the FBI report (p. 11): In one incident [Charleston, West Virginia], an armed bystander engaged the shooter, killing him, after the shooter fired into a crowd attending a party outside an apartment complex. In one incident [Greenwood, Indiana], an armed citizen killed the shooter as he began firing in a mall food court. In this last incident, 22-year-old Elisjsha Dicken had just come to the mall with his girlfriend when a mass shooting started. Three people had already been killed and two wounded. Dicken drew his pistol and exchanged fire with the mass murderer, whom he fatally shot. Greenwood’s police chief declared that “many more people would have died if not for a responsible armed citizen that took action very quickly” (“Elisjsha Dicken Stops a Mass Shooting,” Wall Street Journal, July 19, 2022). Reported cases of armed self-defense in individual aggressions are more numerous. Note that all school shootings have occurred in places where teachers or staff were banned from having a gun under penalty of felony. We also know, by following murder cases and their investigations in the press, that in at least some of them, peaceful individuals who were murdered could conceivably have stopped their murderers if they had been armed. We can suspect that in many cases, the victim’s last thought must have been “If only I had a gun.” There are real, identifiable individuals who lose their lives or are severely injured and who were forbidden by their own benevolent governments to carry means of protection. One intuitive objection claims that, even if armed self-defense works, the greater availability of guns on which it is predicated will lead to more murders or aggressions with firearms. Historical and other empirical evidence exists against this objection, but assume for a moment that the latter is valid. Consider what it amounts to claiming: that it is morally acceptable to forbid a peaceful and innocent person to defend himself or herself against a violent aggressor in order to reduce the probability that some unknown person in the future will be the victim of a criminal armed with a gun. It is analogous to a policy that would jail all young men between the age of 17 and 24 in order to prevent 39% of murders (see my post “A Simplistic Model of Public Policy”; see also “The Purpose of a Gun is Not to Kill.”) ****************************** Hiding behind the couch not to see the non-horror movie (2 COMMENTS)

Hardly a day goes by without further evidence that the world is moving toward Viktor Orban-style authoritarian nationalism. Here’s the latest piece of evidence, from the WSJ: A small group of the former president’s allies—whose work is so secretive that even some prominent former Trump economic aides weren’t aware of it—has produced a roughly 10-page document outlining a policy vision for the central bank, according to people familiar with the matter. . . .  Several people who have spoken with Trump about the Fed said he appears to want someone in charge of the institution who will, in effect, treat the president as an ex officio member of the central bank’s rate-setting committee. Under such an approach, the chair would regularly seek Trump’s views on interest-rate policy and then negotiate with the committee to steer policy on the president’s behalf. Some of the former president’s advisers have discussed requiring that candidates for Fed chair privately agree to consult informally with Trump on the central bank’s decisions, the people familiar with the matter said.  These things don’t tend to end well.  (Recall the Nixon/Burns Fed of the early 1970s.) Here’s Patrick Horan (who was my colleague at the Mercatus Center) in the National Review: Some of Donald Trump’s economic advisers are reportedly discussing ways to devalue the U.S. dollar should the former president be elected again this year. Chief among these advisers is Robert Lighthizer, who spearheaded the Trump administration’s trade war with China and could be Treasury secretary in a second administration. Proponents of the idea argue that making the dollar weaker against other currencies would make U.S. exports relatively cheaper, which would lead to a reduction in the trade deficit. They might wish to check with some Latin American economists to see how the “devalue your way to prosperity” approach worked in that region of the world. Reporters often engage in reasoning from a price change, but Horan does a nice job of avoiding that mistake.  He points out that any analysis of the impact of devaluation must begin with the question of how it is to be achieved: To start, let’s consider a critical concept in international economics: the “impossible trinity.” According to this principle, a country cannot have all three of the following at the same time: a fixed exchange rate, free movement of capital or investment, and monetary sovereignty (the ability to conduct monetary policy independently). It can only pick a maximum of two. Since 1971, the United States has chosen free capital flows and monetary sovereignty while letting exchange rates float based on market fundamentals. This choice is the norm among large, developed economies. To weaken the dollar to some desired rate vis-à-vis other currencies means fixing the exchange rate. That means either free movement of capital or monetary sovereignty will have to go. He then discusses the implications of the various ways in which the dollar might be devalued.  Read the whole thing.   PS.  In the long run, the only really effective way of devaluing the real exchange rate is with higher domestic saving.  And yet populists are allergic to almost any public policy proposal that would boost national saving rates, such as deficit reduction.  Populism aims at making people feel better today, whereas higher savings rates imply sacrificing today for more growth in the future.  Big current account surpluses tend to occur in thrifty countries like Singapore, Japan and Germany.   (0 COMMENTS)