Today, I continue on the previously explored theme on how economics can create reactions others might find as odd. In my earlier take on this, I described how I am very often glad rather than resentful that a particular good or service requires payment – even (especially?) when its something I really need. For this occasion, I want to discuss an article I recently read where someone is describing “revenge” they took on a former landlord, and why I think their anger was entirely misplaced. The story, if you wish to read it, can be found here. The person in question is describing how years earlier, in the 90s, he and his wife had been renting a property from a real estate agent. They were coming to the end of their lease, and had a house lined up to buy, but the timing wasn’t quite right. So he asked the landlord if they could do a month-to-month arrangement for a couple more months while the home sale and moving preparations to be completed. From the article, A year later, we found a house to buy. We weren’t quite ready to move in, though, so I called the landlord and said we needed two extra months in the apartment. He agreed and told me he’d send over an addendum to the lease for those two months. Know what that addendum contained? A 50 percent increase in rent! I lost my mind. I called him up and asked him how he could double our rent. It wasn’t fair! Already there is some innumeracy showing through in this article – was it a 50 percent increase in rent, or a doubling of rent, aka, a 100 percent increase? Based on what the rest of the article says I’m inclined to think it was the former rather than the latter. He later identifies it as an increase of $500 per month, and I think an increase in rent from $1,000 to $1,500 is a more likely scenario than from $500 to $1,000. But let’s breeze past that and talk about why I think this situation that infuriated this person is actually pretty mundane. I’ve rented numerous apartments over the course of my life, and the situation this gentleman found so outrageous is just a normal part of how rentals work. When my wife and I first moved to Minnesota, we found an apartment we liked and applied to rent. The lease came with a variety of options for length, with a price that adjusted accordingly. You could lease the apartment for as little as nine months, but then your rent would be very high, or you could sign a lease for as long as eighteen months and the monthly rent payment was much lower. If you renewed for a new long-term lease once your initial lease had run its course, there would be a relatively small increase in the rent. Alternatively, you could just switch to a month-to-month arrangement, but the increase in the rental rate would be very large. Again, this has been the case with every rental I’ve ever used. There is always a higher price to pay for shorter term arrangements rather than longer term arrangements. Just imagine you owned an apartment building. Wouldn’t you prefer a situation where you have lots of long-term occupants with a relatively infrequent turnover rates, compared to situations where the occupants are constantly coming and going with short-term arrangements and turnover rates are very high? The latter situation comes with much more uncertainty and much higher transaction costs – and that is reflected in the higher price. If I was a landlord, a six month lease is much less attractive than, say, a two year lease. If someone signs the latter, I know that this property will be occupied and generating income for me for the next two years. If it’s the former, I know I’ll have to go through the time and trouble of finding another tenant six months down the road, and the property may sit empty for some time until I find another tenant – generating expenses for me but no income. So naturally, I’d charge more for short term leases and month to month extensions than for long term contracts. The disgruntled renter actually makes this point himself in the article without realizing it. He describes how, in his anger, he looked up options for just leaving at the initial end of his lease and working out short-term living and storage conditions until he was ready to move into his new house – only to find that doing so would be far too expensive to work. The higher, short-term rate for his present apartment wasn’t some arbitrary increase – it just happened to reflect the normal market rate for short-term rental arrangements, while saving him the extra time and hassle of doing two moves in two months. He also expresses anger that his landlord withheld $300 from his security deposit for cleaning after he left, despite assuring the readers that he left the place in pristine condition. Whether or not this is true depends on if his perception of how thoroughly clean the place was really matched reality – I certainly know many cases where people insist (and believe!) they have done an amazing job at something when the actual result was pretty substandard. The final source of his outrage came when he saw the apartment listed after he moved out and he saw that the new, long-term tenants wouldn’t have to pay the same rate he did for his short-term arrangement: We found the classified ad, and he didn’t list the new rent at $500 more. He listed it for just $100 more than we were originally paying. For a while, no one leased it. And when they finally did, it was for only $75 more a month than we were paying. But, again, that listing was reflecting the rate for a new, long term contract rather than month to month arrangement. While my wife and I were living in that first apartment in Minnesota, we too did a month-to-month rate at the end of our lease while we finished up the home buying process. Those extra couple of months were also significantly more expensive. Yet I never bothered to look back to try to see what the apartment was listed for after we left. Had I ever done so, I never would have expected that the next person to move in on a long-term contract would have to pay the rate we paid for a short-term extension. But my reaction was apparently not the same as this gentleman. He instead made himself miserable with a sense of anger and grievance that seems entirely unfounded to me. And while I went on with my life as normal, he stewed with anger over it until later, he found a chance to sabotage a real estate deal his former landlord was about to close, in order to cost him $25,000. I’ll leave it to you, dear EconLog reader, to decide whether my reaction or his was the more psychologically healthy and reasonable one. (0 COMMENTS)

Recently, co-bloggers Scott Sumner and Kevin Corcoran had a series of excellent posts on causation, coincidence, and identities (Scott’s post is here and Kevin’s are here, here, and here).  I want to add my two cents to the conversation with some readings and thoughts for interested readers. A theme that runs through both their posts is the idea of coincidence: that two events happen together without any apparent causation.  Coincidence happens quite frequently.  Two silly examples: July 14 I bowled the best two games of my life: 161 and 157.  Even the third game, at 118, was better than average.  My average is 110, so this was quite an improvement.  It was also the first time in months I carried a $5 bill in my pocket.  Did the $5 in my pocket cause my bowling game to improve?  It can’t be a coincidence! On July 3, the Boston Red Sox visited Donald Trump in the White House.  Then, they won 10 games in a row and went from bottom dwellers to just a few games behind the division-leading Toronto Blue Jays.  Did Trump boost the Sox?  It can’t be a coincidence! Of course, both these examples are silly.  Anyone claiming a $5 bill and merely being in Trump’s presence caused these events would get laughed out of a room.  Indeed, there is plenty of counterevidence to indicate the combination of time and place is a coincidence: the Washington Nationals visited Trump in 2019 after their World Series victory and they’ve had a losing record ever since.  It’s unlikely Trump caused either the Red Sox’s win streak or the Nationals losing streak. Distinguishing causation from coincidence requires a good theory.  Theory helps us see what is coincidence and what is causation.  Theory, rigorously tested, is a vital lens to understanding the world.  Bad theory leads to confusing coincidence with causation. Of course, this is not to say that even rigorously-tested theories are ultimately correct.  Miasma theory, for example, survived millennia of testing.  Indeed, a lot of evidence existed to support it: bad air tended to congregate around disease.  And the bad air often preceded the disease outbreak.  But, after some careful study and a bit of luck, miasma theory eventually unraveled.  John Snow hypothesized that certain diseases were not caused by bad air, but rather something else (he would die before germs were discovered, but he could see their existence in the data).  The bad air was not causing the disease, but rather caused by the disease.  (For interested readers, I highly recommend The Ghost Map by Steven Johnson.) Determining causation is quite a tricky problem.  Judea Pearl, a brilliant statistician at UCLA, has a series of books exploring causation from a statistical point of view.  His technical book is called Causality and it is a difficult read. While no one will confuse me with a top-tier statistician, even those who are well-versed in the subject find it difficult. For those of us who are not Turing Prize winners, he has a more accessible book: The Book of Why. In this book, he goes over the history of thought in causation and where we are now.  Short version: We really don’t know when two things are causal.  We do our best, but it’s quite a difficult problem.  All models of causation have assumptions, some quite strong, and we can never be sure they actually hold. Which brings me to my final point: the phrase “It can’t be a coincidence!” is quite likely the least scientific phrase in the English language.  Not just because it is often invoked by conspiracy theorists or poor thinkers looking to push their latest half-baked idea, but also because it invokes a level of certainty one cannot have.  Coincidences happen all the time.  There is some probability that the causation is a coincidence.  Even a claim of statistical significance (eg “P

Consider the following tweet: When I moved to Massachusetts in 1982, major cities such as Boston, Cambridge, and Brookline had rent control.  Massachusetts is also one of the most Democratic states in the country.  Today, Massachusetts doesn’t have rent control.  So how did that happen?  In 1994, Massachusetts had a referendum on rent control, and voters opted to ban it statewide.  This is an almost perfect illustration of why I don’t trust public opinion polls on policy issues.  Polls are useful when it comes to clear issues such as which of two candidates people intend to vote for.  But they are not a good way of ascertaining public opinion on policy issues.  If you looked at the poll results above, you might assume that rent control has been adopted almost everywhere in America, even in highly Republican states. People answer questions on the basis of whether something “sounds bad”.  Should people be allowed to advocate Nazi ideologies?  Many people will say “no”.  Is it important for American to allow freedom of speech, even for unpopular ideas?  Many people will say “yes”.  So which of the two is the public’s “actual belief”?  I suspect that most Americans would oppose repealing the 1st Amendment to the Constitution. Imagine an elderly couple living on Social Security who pay $1200/month in rent.  Now the landlord comes along and says that he plans to raise the rent to $2800/month.  That sounds bad.  So when the public is asked whether there should be limits as to how sharply a landlord can raise the rent, they tend to say yes.  But rent control advocates know that this isn’t enough to get them what they want, and actual rent control laws are often much more restrictive than “annual rent increases should not exceed 10%.” America is a democracy.  Based on poll numbers, you might expect all sorts of public policies that we do not currently see.  I suspect that most people are opposed to gas stations charging $8/gallon for gasoline.  But we do not currently have any laws banning retailers from charging $8/gallon. (0 COMMENTS)

Grocery stores are true marvels of markets. Roast chickens don’t fly into your mouth, but they are roasting on a rotating spit in the deli section. Typical grocery stores carry thousands of items that make the land of Cockaigne look meagre.  Pieter Brueghel the Elder, Public domain, via Wikimedia Commons The centuries old myth and poem about Cockaigne depicts a mythical place that far exceeds the sweet joys of paradise. Sure paradise has grass and flowers and plenty of fruit, but the land of Cockaigne “offers better fare”. The food in Cockaigne is “good” and abundant, enough for lunch, supper, and tea. Abundance is an understatement: Cockaigne has rivers “great and fine” of oil, milk, honey, and wine. Water is there too, but thirst isn’t a common experience so people mostly use it for washing and to enjoy the view.  People in Cockaigne have pies and pasties—they are in the walls—full of “rich fillings, fish and meat”. Cloisters, chambers, churches, and halls have shingles made of flour-cakes, and nails of “rich and fat” puddings. When geese are roasted, they fly away and cry, “Geese, all hot, all hot!” Of course, the geese—cooked with copious amounts of garlic—land in your mouth perfectly cooked. Cockaigne has plenty of other benefits like gold-plated roads, jewels, fanciful birds, so grocery stores cannot compare to that. The land of Cockaigne is made up, of course, so people don’t face scarcity. They have all they want—at least the standard items like “geese”, “honey”, “garlic”, and “wine”. Their desire for wine, for example, is easily met by the wine river next to the honey river and the pie-walled churches.  People in the real world, however, face scarcity, which has important implications for how we should think about grocery stores. Our desires often outpace our abilities to satisfy those desires. As such we face consequences when we make choices; economists call these opportunity costs. If a grocer can sell a chicken for $5, you and me and a hungry family alike will have to pay at least that amount to cover the grocer’s opportunity cost and acquire the same chicken. Goods at grocery stores are “pricey” in that obtaining them requires a price, but comparing that system to fanciful utopias and negatively judging grocery stores commits a nirvana fallacy. Price-based allocation systems are better than most relevant alternatives, e.g., coercion.  In this world, we are stuck with prices at grocery stores, and that’s a good thing as we obtain immense benefits that outweigh the costs.  Grocery store prices are incentives for farmers, producers, distributors, and grocers to mimic the conditions of Cockaigne. They are also incentives for consumers to adjust their consumption. Higher (lower) prices encourage producers to provide more (less) and consumers to buy less (more). Like in many other markets, these combined incentives ensure grocery stores are typically stocked with a variety of items, especially when those stores operate in market settings where property rights are generally protected. Prices and the price-allocation system are marvels, so says Hayek, as they almost seamlessly coordinate the myriad and conflicting goals of consumers and producers.  Markets and price signals encourage entrepreneurship and innovation too, which hits you over the head as you walk into the grocery store. Grocer-entrepreneurs want to earn net revenue, and such efforts lower prices and encourage innovation. Every characteristic of grocery stores is some entrepreneur’s attempt to do this: the way apples and oranges are placed for customers to sort through (which helps to lower transaction costs), the enticing layout of fresh meats, the prepared meals, the assortment of jellies, the selection of refrigerators and freezers, the bakery operations, floral arrangements, catering services, and so on. There are discounts, international isles, and snack isles too. Many grocery stores work with banks, optometrists, and cleaning services to provide additional services. Grocers also bundle several services into single items for the convenience of customers; a fresh steak includes deliberate choices made about the quality of meat, its age, weight, and cut that all benefit consumers (HT: Vincent Geloso). Grocery stores don’t have wine rivers, but there are shelves and racks of wine providing myriad options. We might also observe that cooked, seasoned, and warm chickens are cheaper than raw birds—a feat that might have baffled our utopian forebears. It doesn’t matter if this is because there are economies of scale or grocers are using the cooked birds to encourage additional sales. These food items—with different seasonings and there are Kosher-certified ones too—are available for everyone to purchase every day, and they make Utopian visions look paltry. There are so many available benefits—that likely outpace those in the land of Cockaigne—perhaps we shouldn’t take them for granted. You might still be concerned about nominal food prices. The figure below on global (on the left axis) and U.S. (on the right axis) annual food price indices shows how a bundle of food prices have changed in terms of percent change from one year ago. Bundles include standard, commonly available and consumed foods like breakfast cereal, milk, coffee, chicken, wine, and so on. With the exception of 2021 to 2023, food price changes in the U.S. ranged from 0 to about 5% since 1990 (and the same pattern is true until the early 1980s). Global food prices, however, rise and fall with a higher variance. For four decades, U.S. food prices have remained remarkably stable compared to global food prices (note the magnitude of the axes too).  Recent food price increases don’t mean people aren’t reeling, but note the following. Price indices try to track the prices of the same goods over time. Despite substitution adjustments for changes in quality, such improvements, bundling, and innovation remain difficult to recognize. 16 oz. ribeyes might have higher nominal prices, but they are most likely better quality pieces of meat; they are probably fresher or leaner or have more marbling. And, again, there are many more options and alternatives. Nominal prices often ignore these qualitative improvements in wellbeing. While similar to grocery stores of recent decades, grocery stores today are highly concentrated bundles of innovation. There are still discount grocery stores that cater to people with lower incomes, which further softens the blow of higher prices. And grocery stores that cater to higher-income groups and different ethnicities too. Higher prices alone, thus, are not cause for alarm, let alone calls for utopian reconstruction. Grocery stores sell every single one of the goods mentioned in the land of Cockaigne, except for the fanciful things like the crying geese and most don’t sell jewelry (although Walmart, Target, and other larger box-stores do!). Yet, grocery stores make up for these supposed deficits and potentially higher nominal prices with a dizzying array and variety of food, items, and other innovations utopias cannot fathom. They provide such services because of voluntary market settings that align the incentives myriad farmers, producers, shippers, and grocers face. We don’t live in the land of Cockaigne, but we do have grocery stores, and that’s a much better deal.   Byron “Trey” Carson is an Associate Professor of Economics and Business at Hampden-Sydney College in Virginia, where he teaches courses on introductory economics, money and banking, health economics, and urban economics. (0 COMMENTS)

People who think a lot about economics often have reactions that strike others as unusual. For example, I recently finished registering for a 10k run in Astoria, Oregon. As part of the registration process, you had to select when you’ll be picking up your race packet (a prepacked bag that would have, among other things, your race bib with a built in time tracker). There were a few windows of time available in the few days leading up to the race, along with an option to pick it up on the day of the race on-site. This last option came with a “convenience fee” of $25 dollars or so. And as soon as I saw that you had to pay to pick it up at the most convenient time and place, my immediate reaction was, “Oh, that’s nice.” My reasoning was along these lines: Thousands of people run in this event each year. The race organizers have to get all those people set up and ready in a fairly short time on the morning of the run. Encouraging people to already have their race packets picked up and ready to go before all this initial herding of racers happens would do a lot to make the process more streamlined. If all those thousands of people showed up to finally get their packets on the morning of the event at the same time, it would seriously gum up the process. So to minimize that, a fee makes sense. It limits the number of people who need to go through this process at the last minute, and those who do a late pickup will tend to be people who valued that option the most. This is just one of a number of times I’ve found myself feeling grateful that some service or other isn’t available for free. Another time I had this reaction was when I began working at the Medical University of South Carolina in Charleston several years ago. The MUSC campus downtown included a gym facility. Members of the public could get a membership at this gym but MUSC employees, faculty, and students got a discounted membership rate as a perk. I recall hearing a coworker make a comment along the lines of “I don’t see why we just get a discount. We work here, we should be able to use the gym for free!” But I was glad it wasn’t free. MUSC has tens of thousands of employees, students, and faculty. You don’t want to go to a gym that tens of thousands of people can drop into any time for free! Even with the fee, it was usually pretty packed. Making it free would have just made it unusable. One other easy example that comes to mind is airport parking. Any time I have to fly out of Minneapolis airport and leave my car there, I usually have to go up and down the lanes of the parking garage several times to find an open spot. If people could just park their car at the airport and leave it there for free, finding a parking space would go from the realm of from slightly arduous to requiring divine intervention. There are two different questions I think people can easily conflate. The first question is easy to grasp: “Would I like it if I, personally, could get this for free?” (Answer: Yes, obviously!) But the second and very different question is, “Do I want to live in a world where everyone can lay claim to this, for free?” The answer to that question is almost always an emphatic no. When I get something I really value, and that benefits me in a big way, my reaction is to be genuinely and deeply grateful that I paid for it and that it wasn’t available for free. It’s just one of the ways that understanding ideas like trade-offs and opportunity cost and scarcity can broaden your vision and enhance your experience of gratitude. And I think that’s something the world can use a little more of these days. (0 COMMENTS)

A problem in Price Theory. Here’s a question that I gave a number of my students in economics courses at the Naval Postgraduate School. If I recall correctly, a large percent of the students answered it correctly. And this was well before AI. (Of course, since it was on a problem set, they did have a few days to ponder.) See how you do. The government imposes a binding price ceiling on oranges. But it does not impose any price ceiling on orange juice. After the price ceiling on oranges is imposed, what will happen to the price of orange juice? (Assume a competitive market for oranges.) Show your work.   In a few days, I’ll post the answer and try to use my cell phone camera to post a diagram of supply and demand. Meanwhile, have at it, if you so choose. (3 COMMENTS)

A major disagreement between James Buchanan and Anthony de Jasay is whether it is possible to devise a constitution that effectively constrains the state, limits its power and danger. Many other classical liberals and libertarians have struggled with the same question (including Friedrich Hayek), but the opposition between Buchanan and de Jasay is paradigmatic as the two thinkers offer two very different answers anchored in the same economic methodology: neoclassical, subjectivist, non-utilitarian, informed by public choice theory, and opposed to “social choice.” That Buchanan was much influenced by the American constitutional experience makes his theory especially relevant in this country, although its universal implications are obvious. As for de Jasay’s critique of Buchanan, it is deep and cannot be summarily dismissed. James Buchanan argued that institutions can be devised that will constrain the state to stay within limits agreeable to all the citizens. These limits are defined by rules unanimously accepted in a virtual social contract. Each participant realizes that living in a peaceful society (as opposed to the Hobbesian “war of all against all”) is in his own self-interest, provided that he is not exploited by others. Hence, the need to create a state to enforce the social contract and to ensure that the state does not become an instrument of domination and exploitation. The constitution plays this role. Since each individual has a veto—the flip side of unanimity—everybody knows that all must agree to a basic social contract and state constitution if he is himself to reap the benefits of social life. This realization limits the possibility of holdouts, even if the adopted rules may still allow side payments to those who think that their overall situation in anarchy would be better. (Two essential and not overly technical books are Buchanan’s The Limits of Liberty and, with Geoffrey Brennan, The Reason of Rules.) Anthony de Jasay contends that a social contract is a fictitious and useless construction. Public goods can be provided privately, or else they should not be produced at all. A unanimous agreement even on general rules is impossible because it is equivalent to agreeing on their probabilistic consequences in terms of redistribution. Believing that a constitution can effectively constrain the state is wishful thinking. The regime of social choice (collective choice)—that is, of non-unanimous decisions imposed on all—created by a constitution cannot remain limited. Democratic politics will lead to redistributive coalitions vying to get more money and privileges from the government at the cost of fellow citizens. Entitlements and “public goods” will grow uncontrollably. When a decisive coalition (50% plus one) wants a constitutional amendment, it will get it, if only through reinterpretation of existing rules. Qualified majorities will not change that, for enough of their members can be bribed into switching sides. Under democracy, the constitution that will come to prevail is the power of a bare majority over an unrestricted domain. (See notably my Econlib review of de Jasay’s Against Politics or, better, Chapter 2 of the book.) American constitutional history over the past century and a half, as well as the current rapid erosion of constitutional constraints, certainly do not refute de Jasay’s theory. A similar story can be told about French constitutional history as well as the British sort of unwritten constitutions. But the anarchist ideal is not without difficulties either. Sometimes, Buchanan and de Jasay seemed to converge via doubts that each raised about his own theory. De Jasay admitted that he would be happy if Buchanan were right that the state can be constrained (see my Regulation review of de Jasay’s Justice and Its Surroundings). Buchanan observed that the mounting desire of many (if not most) people to be treated like children by the state may imply that “the thirst or desire for freedom, and responsibility, is perhaps not nearly so universal as so many post-Enlightenment philosophers have assumed” (“Afraid to Be Free: Dependency as Desideratum,” Public Choice, 2015). ****************************** The chained guard dog, by ChatGPT (0 COMMENTS)

Is long form reading a dying pastime? Journalist and cultural critic James Marriott joins EconTalk’s Russ Roberts to defend the increasingly quaint act of reading a book in our scrolling-obsessed, AI-summarized age. He urges juggling a paper book and a Kindle, recounts ditching his smartphone to rescue his attention, and shares tactics for finding the […] The post James Marriott on Reading appeared first on Econlib.

  Fiscal Fallout: Washington state government spending surges 116% since 2015 by T J Martinelli, The Center Square, July 14, 2025. Excerpt: Washington state faces deficit spending by 2028 as lawmakers just hit taxpayers with the state’s largest combined tax increase – all driven by massive state spending increases over the past decade, an investigation of state budgets by The Center Square found. Washington state spent about $80 billion in the 2013-15 budget but is set to spend more than $173 billion in 2025-27, a more than 116% increase over that time. U.S. inflation since 2015 has risen [sic] just 35.63%.   New Evidence Underscores the Value of Tobacco Harm Reduction by Jeffrey A. Singer, Cato at Liberty, July 16, 2025. Excerpt: A study published this week in the Annals of Internal Medicineby researchers at the University of New South Wales found that nicotine e‑cigarettes are more effective than nicotine lozenges or gum in helping people quit smoking. This study reinforces earlier research, including a 2023 Cochrane comprehensive review and meta-analysis, as well as a 2021 systematic review of seven randomized controlled trials. Today, an article in Filter highlights a study from Italy showing that people who quit smoking using nicotine e‑cigarettes or heated tobacco products experienced a significant increase in VO2max, the maximum amount of oxygen the body can use during intense exercise—a key measure of cardiovascular fitness and endurance. The 12-week randomized controlled trial found “quitters showed the greatest improvement in VO2max at both week 4 and week 12.” They observed no significant differences between those who used e‑cigarettes to quit and those who used heated tobacco products. DRH note: This finding shouldn’t be that surprising. Nicotine e-cigarettes are a much closer substitute for cigarettes than nicotine lozenges and gum are.   A Free Speech Lesson From Karl Marx by Damon Root, Reason, July 17, 2025. Excerpts: There’s a basic principle of free speech that the censors always seem to forget. Namely, the act of suppressing speech only tends to add more fuel to the speaker’s fire. Don’t believe me? Just ask Karl Marx. And: Take the case of the great Salmon P. Chase. In the summer of 1836, Chase was a successful young lawyer living in Cincinnati, Ohio. On July 12, a proslavery mob forced its way into the offices of a local abolitionist newspaper called the Philanthropist and destroyed the printing press. Two weeks later, the mob went hunting for the paper’s editor, the abolitionist James G. Birney. “I heard with disgust and horror the mob violence directed against the Anti-Slavery Press and Anti-Slavery men of Cincinnati in 1836,” Chase later wrote. “I was opposed at this time to the views of the abolitionists, but I now recognized the slave power as the great enemy of freedom of speech [and] freedom of the press and freedom of the person. I took an open part against the mob.” So began Chase’s extraordinary antislavery career, which included arguing against the Fugitive Slave Act before the U.S. Supreme Court, helping found the antislavery Free Soil Party (whose catchy motto, “Free Soil, Free Speech, Free Labor, and Free Men,” he coined), and eventually replacing the hated Roger Taney, author of the disgraceful Dred Scott decision, as chief justice of the United States. It all started with Chase’s outrage at the sight of proslavery thugs on the rampage against abolitionist speech. “From this time on,” Chase recalled of the violent summer of 1836, “I became a decided opponent of Slavery and the Slave Power.” DRH note: One impressive thing about Chase is that as the Chief Justice of the Supreme Court, he found unconstitutional a measure that he had earlier initiated as Secretary of the Treasury. I believe that it was about whether paper money, which he had introduced, was legal tender. In Hepburn v. Griswold, he was part of the Supreme Court majority in finding that paper money was not legal tender.   Conservatives Shouldn’t Oppose California’s Potential Zoning Reforms by Steven Greenhut, Reason, July 18, 2025. Excerpts: Everything in this world does seem nonsensical, especially as we consider the issue of land-use regulation and California’s efforts (led by progressives) to jump-start housing construction by—yes, you heard this right—reducing the role of government in dictating what we can do with our property. Meanwhile, many conservatives have dug in their heels as they defend ham-fisted progressive-era rules that are anathema to our freedoms. It’s curiouser and curiouser. These conservatives act as if the founders would approve of a system where bureaucrats determine the proper use of every tract in their communities and dictate what owners can do with their land down to the tiniest detail. And where owners must, with tail between their legs, lobby their elected officials for discretionary approval of any building project. They act as if one’s right to use government to control what other people do nearby is in the Constitution up there with the Second Amendment. And: Zoning is a government-created power, so it’s odd seeing opponents of deregulation act as if there’s some fundamental right to it. As such, the government can change the rules when it chooses. For a better approach, let’s let freedom and markets work—in land use and every other aspect of society. Note: Image of Karl Marx was created by ChatGPT. (0 COMMENTS)

Tariffs, like any tax, will generate deadweight loss in the economy.  The deadweight loss is broken down into two categories: the consumption effect of the tariff and the protective effect of the tariff. The consumption effect of the tariff is the lost gains from trade that were occurring before the tariff but are now not because the tariff raised the price of the good.  Under the tariff, people pay more and buy fewer units (or pay more for the same amount). We here at EconLog spend a lot of time focusing on the consumption effect of tariffs.  Indeed, a lot of reporting (and claims) have been about the consumption effect: in other words, they focus on the prices consumers pay. Here, however, I want to highlight the protective effect. The protective effect arises from the loss of productivity caused by the tariff.  Domestic producers increase their production, but they are less efficient at producing those additional units than foreign producers were.  “They are less efficient” is another way of saying that more resources must be consumed to produce those units than would be consumed under free trade.  Furthermore, since protective tariffs protect domestic producers against foreign competition, they discourage firms from pushing to increase productivity.[1] First, we have a chart from the Council on Foreign Relations.  In a March 6, 2025 blog post entitled Steel Productivity has Plummeted Since Trump’s 2018 Tariffs, Benn Steil and Elizabeth Harding provide some tentative data on labor productivity of steel workers versus productivity of all workers.  As the title suggests, steel worker productivity has been falling since 2018.  Prior to 2018, the labor productivity of steel workers was generally keeping pace with other industries.  Since 2018, other industries have been improving productivity, but steel has not.  Of course, these data do not give us a cause.  More in-depth analysis would be required to determine if the drop in steel worker productivity is caused by the tariffs or merely incidental.  But the trend does align with the theory and empirical evidence from past tariff episodes (see, for example, Alexander Klein and Christopher Meissner’s working paper Did Tariffs Make American Manufacturing Great?  New Evidence from the Gilded Age and citations therein).  Tariffs reduce productivity by requiring higher-cost resources to make the goods. Second, we have a recent report from Cleveland-Cliffs, a steel manufacturer in Cleveland, Ohio.  On June 4, Cleveland-Cliffs cancelled plans for a new blast furnace at one of its plants that would reduce costs while maintaining output.  Why did Cleveland-Cliffs cancel these plans?  “Rising tariffs on steel imports…forced Cleveland-Cliffs to prioritize short-term profitability.”  Tariffs discouraged Cleveland-Cliffs from updating their equipment and becoming more competitive with steel plants in Europe and Asia, just as the tariff model predicts.  The protective effect leads to higher marginal costs and, since firms are protected from competition, their incentives to try and reduce costs are weakened. Free trade is a first-best option.  And, more often than not, we see it’s a second-best, third-best, and fourth-best option as well.  Time after time, protectionist policies fail to achieve their stated goals.  A little economics (and even a little political theory) helps us understand why.   — [1] If visualizing these effects on a graph would be helpful, take a look at Figure 7.18 here.  Area B is the deadweight loss stemming from the protective effect and Area D is the deadweight loss stemming from the consumption effect.  Area A is the redistributive effect (redistributing consumer welfare to producers) and Area C is the revenue effect (consumer welfare redistributed to the government). (0 COMMENTS)