Can the four-year degree be saved? Not for most learners, I would argue. Once less expensive alternative pathways become clearer and surer, a full-on degree will seem impractical… But why does the degree have to be the only product that colleges sell? And why can’t the American Dream be achieved by other college products, other constructs of career preparation and adultification? —Kathleen deLaski, Who Needs College Anymore?1 (page 166) For many years, America’s leaders adopted the goal that college should be for everyone. Kathleen deLaski says that it is time to provide a different path for young people to follow to find their place in the workforce. DeLaski has spent decades in the field of alternative approaches to workforce development. Her focus is almost entirely on how young people can prepare for jobs. The larger question of how college might lead to a “life well lived” is largely outside the scope of her book. DeLaski sees traditional college as unsuited to large segments of the population: I predict that the silos between workforce training, college, and corporate training will essentially merge into one edu-training sector, but the umbrella may itself be called “college” and the degree may be one of many offerings in the array of learning and training products. (page 5) She notes that the halo around higher education has been tarnished in the past decade, particularly by the rise of student debt and the disruption of the pandemic. In 2020, at the height of the pandemic, a Strada Education Network study found that a surprising 62 percent of Americans preferred shorter-term skills training and nondegree credentials to degree programs. (page 24) She sees workers of the future as identified not by a single degree, but by a set of skills that she refers to as a “skills wallet.” A new age is dawning: the “skills-first” age. And, I will argue, it is already beginning to challenge our college degree culture…. The skills-first movement will push us into the future. As employers hire more of their professional workforces without requiring degrees—and I believe they will eventually, out of necessity—the education landscape will change dramatically. (pages 15-17) Employers are becoming clearer about the particular skills that they want, even as the desired skills may change. This decade has brought and will bring the biggest, most sudden, and broadest shift in skills demand ever. LinkedIn reports that specific skills on job postings changed by 25 percent between 2015 and 2022…. And this was before it was estimated that 40 percent of all work hours could require new or different tasks and skills over the coming decade because of AI. (pages 33-34) In this environment of rapid change, one needs more than just narrow skills. I tell students to build some verifiable “started hard skills,” maybe with industry certifications, but also find ways to demonstrate “starter durable skills” in creative thinking, analytical thinking, collaboration, communication, curiosity, resilience, or motivation. (page 54) Calling these “durable skills” rather than character traits struck me as awkward terminology, a problem that plagues the book. In this case, the issue is more than just semantic. One claim that college administrators might make is that students build these character traits in the process of obtaining the traditional college degree, and that the alternatives that deLaski advocates will fail to do so as effectively. For alternatives, deLaski lists five types of models: Making skills visible; Validating “job-ready” skills; Experience sampling; Micro-pathways; and Embracing the weave. Her terms are far from self-explanatory. Making skills visible means that an educational institution must identify the skills that employers desire and be able to connect course outcomes to obtaining those skills. Validating those skills means passing a particular examination, such as a test on computer network management or some other industry-recognized exam. Experience sampling means combining classroom learning with real-world work experience. Micro-pathways are shorter-term educational experiences that do not require committing to two years or more of college before joining or returning to the work force. The “weave” is a longer-term commitment to move back and forth between classroom and work. Fortunately, deLaski does not rely on theory to articulate these models. Her book is dominated by descriptions of people and programs that illustrate how they work in practice. Still, we have the paradox embodied in what deLaski calls “competing narratives.” Narrative 1: College isn’t worth it, and it’s become unaffordable and too risky. Narrative 2: 72% of “good jobs” require college. (page 134) The second narrative can be used to justify “college for everyone.” But the fact that close to half of all students who start college fail to graduate supports the first narrative. “Suppose that we grant that college today is suitable for the most capable, affluent students. Among the rest, who should attend?” Suppose that we grant that college today is suitable for the most capable, affluent students. Among the rest, who should attend? She suggests narrowing the focus to four groups: Class transporters; Legitimacy label seekers; Degree and license workers; Longing-to-belongers. (page 146) Once again, her terminology seems opaque. Class transporters are people who come from outside of the upper middle class who might benefit from the cultural learning that can be acquired at college. Legitimacy label seekers are those who believe that at some point in their lives they will encounter employers who want to see a college degree. Degree and license workers are people who need an advanced degree to get into their desired profession. And longing-to-belongers are young people who want to be part of a college community, with shared experiences and lifelong friendships. For more on these topics, see Michael Munger on the Future of Higher Education. EconTalk. Bryan Caplan on the Case Against Education. EconTalk. “Educational Freedom,” by Arnold Kling. Econlib, April 1, 2013. With the exception of the degree and license workers, these are intangible reasons for attending college. The alternative models for obtaining skills do not address these intangible benefits. But I would say that there may be an opportunity for new enterprises to provide the cultural learning or community. And society itself may lose its prejudices against people who skip the college path. A question that lingers is whether higher education will adapt or be replaced. I came away from this book thinking that without the lavish government support that colleges and universities currently enjoy, replacement would be the more likely scenario. Footnotes [1] Kathleen deLaski, Who Needs College Anymore? Imagining a Future Where Degrees Won’t Matter. Harvard Education Press, 2025. *Arnold Kling has a Ph.D. in economics from the Massachusetts Institute of Technology. He is the author of several books, including Crisis of Abundance: Rethinking How We Pay for Health Care; Invisible Wealth: The Hidden Story of How Markets Work; Unchecked and Unbalanced: How the Discrepancy Between Knowledge and Power Caused the Financial Crisis and Threatens Democracy; and Specialization and Trade: A Re-introduction to Economics. He contributed to EconLog from January 2003 through August 2012. Read more of what Arnold Kling’s been reading. For more book reviews and articles by Arnold Kling, see the Archive. As an Amazon Associate, Econlib earns from qualifying purchases. (0 COMMENTS)

[ Note: This article was originally published on March 10, 2025 by Scott Sumner at his substack under the title “False Dawn: George Selgin on the New Deal.”] A Book Review of False Dawn: The New Deal and the Promise of Recovery: 1933-1947, by George Selgin.1 Franklin Delano Roosevelt’s New Deal policies had three goals: recovery, relief, and reform. George Selgin has produced an excellent new book that focuses on the first of those three goals—recovery. Did New Deal policies succeed in getting the United States out of the Great Depression? The short answer is no. But False Dawn: The New Deal and the Promise of Recovery 1933-19471 is far from being an anti-Roosevelt polemic. Selgin views Roosevelt’s policies as a mixed bag, some of which did indeed aid the recovery. Unfortunately, some of the policies were worse than useless and actively inhibited recovery. As a result, the U.S. economy remained deeply depressed as late as mid-1940, when the European War intensified. I have spent much of my life researching the causes of the Great Depression. Most of my work has focused on two issues: the impact of the global gold market on aggregate demand, and the impact of Roosevelt’s high wage policies on aggregate supply. Selgin looks at a much wider range of New Deal policies, and I expect this highly readable book to eventually become the standard reference on the macroeconomic effects of the New Deal. I will begin by looking at the impact of the New Deal on aggregate demand. Section 2 will look at the impact of the New Deal on aggregate supply. I will conclude by discussing why you should read Selgin’s book. 1. The New Deal and Aggregate Demand Roosevelt had two primary macroeconomic goals. During his campaign, he publicly committed to reflating the price level back up to its 1926 level. In addition, he hoped to boost employment and output back up from the deeply depressed level of early 1933. Surprisingly, however, FDR was skeptical of both of the two most important policy tools now favored by macroeconomists, fiscal stimulus and money printing. Figure 1 shows the budget deficit as a share of GDP: Figure 1. Federal Surplus or Deficit as a Percent of Gross Domestic Product Notice that the budget moved from a surplus in 1929 to a deficit of about 5% of GDP under President Hoover and then showed no further enlargement until World War II. Contrary to his reputation, Hoover was an activist president. And most of that was discretionary fiscal stimulus, as the “automatic stabilizers” were quite small back in 1929, when federal spending was barely 3% of GDP. Many economists are aware that FDR campaigned on the promise of a balanced budget and ended up running budget deficits. I suspect that many of these economists assume that FDR was a closet Keynesian, and that fiscal stimulus was an important part of the New Deal. Selgin shows that this is a myth; FDR was sincerely opposed to deficit spending during peacetime, and did not significantly increase the budget deficit until WWII. Whatever success the New Deal might have had, it was not due to fiscal stimulus. A better argument can be made in favor of FDR’s monetary policies. But even in this case it was not monetary policy in the modern sense of the term. Instead, monetary conditions improved mostly as a result of three factors: a. A stabilized banking system b. Dollar devaluation c. Gold inflows from Europe FDR took office on March 4, 1933, in the midst of a severe banking crisis. Selgin showed that the major New York banks were actually in decent shape, it was the Federal Reserve banks that were in danger of insolvency, as nervous investors exchanged currency for gold due to fear of dollar devaluation. Prior to taking office, FDR had been unwilling to commit to keeping the United States on the gold standard. In those days, there was a four-month period between the November election and the inauguration day. Selgin suggests that Hoover and FDR each share some blame for the situation spiraling out of control during this extended interregnum, but the end result probably worked in FDR’s favor. By inauguration day, both economic and financial conditions had gotten so bad that Roosevelt had a relatively free hand to try some fairly radical experiments. Unfortunately, Roosevelt didn’t seem to have a clear idea as to which experiments would be most effective. The initial bank holiday relied heavily on ideas provided by banking experts that had been struggling to put together a similar plan during the final days of the Hoover administration. FDR strongly opposed federal deposit insurance, and Congress basically forced the president to accept FDIC as part of a broader banking reform package. (FDR was right to worry that deposit insurance would make banks more reckless.) Roosevelt’s decision to increase the dollar price of gold from $20.67/ounce to $35/ounce did provide a powerful stimulus to the economy. The stimulus would have been even greater if the increase in the nominal (dollar) size of the gold stock had been monetized. But FDR was opposed to anything that smacked of “printing money,” and thus the economy had to rely mostly on increased money velocity during the early stages of the recovery. Fortunately, velocity did increase due to a more stable banking system and higher inflation expectations generated by dollar devaluation. During the mid to late-1930s, additional monetary stimulus was provided by gold inflows from Europe, which boosted the monetary base. But these gold inflows can hardly be viewed as New Deal policies; rather they reflected the way that the U.S. economy benefited from increased war fears in Europe. Selgin views FDR’s dollar devaluation as a net positive for economic recovery, despite some reservations about the messy way that it was handled. Like most economists, Selgin agrees with Keynes’s remark that George Warren’s gold buying program of late 1933 was something like a “gold standard on the booze”, with its daily adjustments in the federal buying price of gold. I’m one of the few (the only?) economists that have defended the program. But this is a detail. I find Selgin’s overall evaluation to be quite convincing. FDR was able to end the contraction and push nominal spending higher through policies that stabilized banking and devalued the dollar, but also missed a number of opportunities to generate a faster recovery through the use of standard monetary and fiscal policy tools. In the end, FDR failed to reach his 1926 price level target, indeed the price level remained below pre-Depression levels until WWII. Nonetheless, the boost given to aggregate demand would normally have generated a satisfactory recovery, if not impeded by other factors. Similar nominal GDP growth after the 1920-21 depression did produce a fast recovery. Instead, the 1930s economy remained deeply depressed due to counterproductive supply-side policies, which I’ll consider in the next section. 2. The New Deal and Aggregate Supply In my work on the Depression, I focused on a single supply-side policy, FDR’s various programs to boost nominal wage rates. But Selgin points out that these wage initiatives were part of a much broader attempt to create private sector cartels. The Agricultural Adjustment Act (AAA) tried to restrict farm output and boost prices. The National Industrial Recovery Act (NIRA) tried to achieve the same goal in other industries. These programs are an almost perfect illustration of the fallacy of reasoning from a price change. It is true that depressions caused by a lack of aggregate demand are often associated with falling prices. But that does not mean that a policy of raising prices through supply restrictions will create an economic boom. It would be like arguing that because people who own Rolls Royce’s are usually wealthy, buying a Rolls Royce is a good way to get rich. The AAA and the NIRA used a mixture of carrots and sticks to encourage farmers to reduce output and raise prices, while manufacturers were encouraged to reduce both output and hours worked, while sharply increasing hourly wage rates. Today, it may seem bizarre to read theories that the Great Depression was caused by a general overproduction that led to falling prices, but this is what happens when you begin reasoning from a price change. You can convince yourself that the solution to a depressed economy is to produce even less! I don’t know of any economist who has done more than George Selgin to warn people of the fallacy of reasoning from a price change. His book Less Than Zero2 is one of the best explanations of what can go wrong with price level targeting, and why NGDP targeting is a superior approach to policy. Surprisingly, some modern economists have claimed that the NIRA might have had an expansionary effect by raising inflation expectations. But higher inflation is expansionary when generated by more aggregate demand, not when generated by less aggregate supply. Selgin emphasizes the negative effects of cartelization programs such as AAA and NIRA, which were probably the single biggest factor holding back the recovery. In percentage terms, prices rose more rapidly after the 1929-33 slump than after the 1920-21 contraction (see Figure 2). Figure 2. Index of Wholesale Prices for the United States But the output recovery was far more impressive after 1921. The post-1933 rise in both the wholesale price level and NGDP was more than sufficient to produce a satisfactory recovery, if not interrupted by adverse supply shocks like the AAA and the NIRA. Notice in Figure 3 below how industrial production stagnated for two years after the President’s Reemployment Agreement was announced in late July 1933. That NIRA policy increased nominal wages by roughly 20% over two months, aborting a promising recovery that had been triggered by dollar devaluation. After the NIRA was ruled unconstitutional in May 1935, a robust recovery resumed until interrupted by another wage shock in late 1936 and 1937, partly related to aggressive unionization drives enabled by the Wagner Act. Figure 3. Industrial Production: Total Index The 1937-38 depression was a major setback for FDR. In addition to the wage shock, Selgin points to a wide array of policies that created headwinds for the business community, such as the new undistributed profits tax which discouraged firms from using retained earnings to finance investment projects. There was also plenty of hot rhetoric, including administration complaints that a capital strike by economic royalists was to blame for the 1937-38 depression. Aggregate demand declined in late 1937 due to policies such as gold sterilization and higher reserve requirements. Even though prices remained well below pre-Depression levels, the price level increases of 1936-37 had led to fears that speculative excess would lead to another 1929-type crash. FDR seemed to want the impossible, for prices to return to 1926 levels without any sort of inflation. Keynesians often blame fiscal austerity for the 1937 slump, but there’s no evidence that the fiscal contraction was anywhere near big enough to explain one of the deepest recessions of the 20th century. Indeed, contrary to the prediction of many Keynesians, a similar austerity policy in 2013 didn’t produce any slowdown in the economy at all, despite also occurring during a zero lower bound period, when fiscal austerity is supposed to be especially contractionary. And much of the 1937 “austerity” reflected the fact that the special 1936 veteran’s bonus payment, always understood to be a one-off policy, was not repeated again in 1937. There is much more of interest. I especially enjoyed Selgin’s coverage of the unexpected prosperity in the immediate postwar period, a period that I knew little about. Keynesians predicted another post-war depression, as the government sharply reduced spending on military operations. Instead, the economy boomed. Selgin convincingly shows that the 1940s economy benefited greatly from New Deal regulatory policies being replaced with more market-oriented pro-business policies. 3. Why You Should Take This Book Seriously I found Selgin’s book to be quite persuasive. But will mainstream economists actually give it a chance? Franklin Roosevelt is generally regarded as a liberal hero, and one of the greatest presidents in U.S. history. In the past, many of the people challenging FDR’s legacy have been right wing cranks. Although Selgin is not a rigid ideologue, he shares my moderate libertarian leanings. So why should a center-left economist take this book seriously? Let’s start from the fact that John Maynard Keynes is arguably the hero of this book. In many key respects, Selgin’s views of the New Deal closely parallel those of Keynes. Keynes also would have preferred that FDR stuck to normal fiscal and monetary stimulus, and eschewed the more radical cartelization policies, as well as the anti-business rhetoric which created uncertainty and reduced what Keynes called the animal spirits of the business community. The second point to consider is that Selgin is not uniformly negative in his appraisal of FDR’s recovery policies—he suggests that banking reform and dollar devaluation did help to boost aggregate demand. The third point to consider is that Selgin repeatedly emphasizes that his somewhat skeptical take on the recovery aspects of the New Deal do not constitute a negative judgment of the overall program, which included relief and reform. A progressive could easily conclude that the New Deal was a net plus due to lasting reforms such as the Social Security Act and the SEC, as well as relief programs for the unemployed, even if it failed to produce a satisfactory recovery in production and employment. “If FDR’s New Deal was effective, why wasn’t it repeated in 2009?” It’s also worth considering the fact that during the (milder) Great Recession of 2008-09, which is the modern slump that most resembles the Great Depression, neither Democratic politicians nor center-left economists seemed all that interested in creating another New Deal. Instead of cartelization of the economy, they opted for policies rejected by FDR, such as fiscal stimulus and printing money (i.e., Quantitative Easing). If FDR’s New Deal was effective, why wasn’t it repeated in 2009? This book is not at all the sort of polemic that some center-left readers might imagine. It’s perfectly okay to view FDR as a liberal hero who won WWII, saved us from fascism, and helped to create a more humane society though various social insurance programs, and still regard the New Deal as being ineffective in promoting recovery. After all, most other developed economies recovered more quickly than the United States, with the notable exception of France, which had an even more dysfunctional NIRA-type program. Many years ago, some progressives gave James Hamilton a hard time for arguing that the New Deal programs like the AAA and the NIRA were counterproductive. Here’s how he responded: “I openly confess to believing that government policies that were explicitly designed to limit manufacturing, agricultural, and mining output may indeed have had the effect of limiting manufacturing, agricultural, and mining output.” For more on these topics, see Robert Higgs on the Great Depression. EconTalk. Hoover’s Economic Policies, by Steven Horwitz. Concise Encyclopedia of Economics. “Revisiting the Great Depression,” by Arnold Kling. Econlib, January 4, 2016. After some recent electoral setbacks, more thoughtful progressives are rethinking public policy issues. While they continue to favor social insurance, some center-left pundits are beginning to emphasize the need for policies that create more “abundance,” which inevitably leads to a focus on the importance of supply-side reforms. I strongly encourage those pundits to read Selgin’s book, which contains many lessons of relevance to today’s world. Footnotes [1] George Selgin, False Dawn: The New Deal and the Promise of Recovery 1933-1947. University of Chicago Press, 2025. [2] George Selgin, Less Than Zero: The Case for a Falling Price Level. Cato Institute, 2018. *Scott Sumner is Professor Emeritus in Economics at Bentley University in Waltham, Massachusetts, and Research Associate on monetary policy at the Mercatus Center. He earned his Ph.D. in economics at the University of Chicago in 1985. He blogs both at EconLog and also at his personal blog at substack, The Pursuit of Happiness. As an Amazon Associate, Econlib earns from qualifying purchases. (0 COMMENTS)

In honor of EconTalk’s 1,000th episode, host Russ Roberts reflects on his long, strange journey from pioneer of the podcast format to weekly interviewer of leading economists, authors, and thinkers. Hear him answer your–and Chat GPT’s–questions about why he got started, how he preps, and how he picks guests. He also explains why debate gave […] The post EconTalk #1000 (with Russ Roberts) appeared first on Econlib.

  Why California Gas Prices Are the Highest in America By Vance Ginn, The Daily Economy, May 23, 2025. Excerpt: According to the US Energy Information Administration (EIA), gasoline prices are generally shaped by five components: crude oil prices, refining costs, distribution and marketing, taxes, and regulations. In California, taxes and regulatory costs alone account for more than $1.30 per gallon — nearly double the national average. California has the highest gas tax in the country, at $0.678 per gallon, not including additional fees and environmental surcharges. Add in the Cap-and-Trade program, the Low Carbon Fuel Standard (LCFS), and boutique fuel blends that are required only in California, and it becomes clear why Californians pay more. And things are deteriorating further. The Mische study warns that with refinery closures due to hostile permitting processes and low expected returns under California’s climate mandates, fuel supply in the state could drop by 20 percent by 2026, even as demand stays relatively stable. Fewer refineries and rigid fuel standards will mean tighter supply and higher prices.   Don’t Put a Tariff on Barbie: Global Trade Increases the Variety and Lowers the Price of Dolls and Almost All Else We Buy by Jeremy Horpedahl, Cato at Liberty, May 23, 2025. Excerpts: President Trump, for his part, seems okay with this, and in two recent interviews he has stated that it’s fine if little girls only have 3 dolls, rather than 30. This might ring true to parents of young kids that can’t walk around the house without stepping on yet another child’s toy, but overall, this is a horrible message of degrowth. One of the main benefits of economic growth is the increasing variety and affordability of goods and services. At some point, kids might get bored with the 300th doll, but this is not something for the government to dictate. And this is the main point: consumers are choosing to buy 30 dolls, or whatever else, because they want to and it brings them joy. Consumers can always choose to buy less on their own, but they are best situated to determine how many dolls and other toys their kids can have (even though, as a parent, this is a constant struggle!). And: When the Barbie movie came out in 2023, I wrote a light-hearted but still serious post about the benefits of economic growth for women and young girls. Compared to when the Barbie doll was first released in 1959, a woman in 2023 could have 3–4 times as many dolls with the same number of hours of work. Or as Chelsea Follett put it, the number of hours needed to work to buy a Barbie fell “from well over an hour to just over 12 minutes.” We should only hope that we would see this progress for goods and services more widely. And indeed, for some categories of goods, we do see this progress.   Reagan’s Trade Doctrine by David Hebert and Marcus Witcher, Civitas Institute, May 26, 2025. Excerpts: Reagan’s commitment to free trade cannot be overstated. However, we must also understand the context in which he made these decisions. The US economy, particularly the auto industry, was in a very rough spot when he took office in 1981. After decades of low gas prices, which made driving big, heavy, less fuel-efficient cars of the sort made in Detroit affordable, an oil crisis beginning in 1973 and amplifying in late 1978 hit American car drivers especially hard. The oil crisis was so severe that it kicked off a series of mini recessions in 1980 and again in 1981. At the same time, Japan had begun exporting cars to the US, and in 1980, Japanese-made cars comprised over 20% of the US market. Their cars had three advantages over domestically produced cars: they were more fuel efficient due to their smaller size and weight-conscious construction, they were cheaper than American cars on the road, and they required significantly fewer repairs than their American counterparts. In many ways, they were superior vehicles. As a result, they were quickly supplanting US cars. Detroit’s Big Three automakers: Ford, General Motors, and Chrysler (now Stellantis) were languishing and were forced to lay off thousands of workers. And: The domestic automobile industry during the 1980s and 1990s illustrates this. Freed from the pressures of foreign competition, the domestic auto industry’s methods and practices calcified around the idea that Americans would purchase mid-size and large-car models. After all, while Japanese cars were still available, they were becoming harder and harder to come by. By contrast, Japanese automakers continued to invest in improving quality. By 1990, the quality gapbetween domestically made cars and Japanese cars (as measured by how frequently repairs were needed) had grown even larger. During the 90s, the Big Three were forced to close 42 of the 63 automotive assembly plants, resulting in tens of thousands of job losses in the industry the VER was supposed to protect. The reason for this is simple and easy to understand: Japanese cars were already better and more affordable than their domestic counterparts in 1981. Because the domestic car industry squandered the opportunity to make crucial adjustments to their fleets, Americans started buying more imported cars. Rather than short-term pains begetting long-term gains, the short-term pains of higher car prices led to greater long-term pains of reduced employment.   The Ongoing Collapse of the Climate Litigation Game by Benjamin Zycher, The National Interest, May 29, 2025. Excerpts: The climate litigation game is simple: attribute any and all damage even remotely plausible to “climate change” and then sue the fossil energy producers for purportedly causing that damage while misleading the public about those asserted impacts despite knowing about them for decades. The claims seem straightforward, and the potential uses for the many, many billions of dollars to be extracted are endless. Alas, the game is in a slow-motion collapse, the latest manifestation of which is the decision by Bucks County, Pennsylvania, Court of Common Pleas Judge Stephen Corr to dismiss the county climate lawsuit against several energy producers. Judge Corr wrote, “… Bucks County fails to state a claim upon which relief can be granted because Pennsylvania cannot apply its own laws to claims dealing with air in its ambient or interstate aspects, and, therefore, we are compelled to dismiss this lawsuit for lack of subject matter jurisdiction.” (emphasis added) And he added, “We join many other state and federal courts in finding that claims raised by Bucks County are solely within the province of federal law.” And the two “money” paragraphs: The response of many of the climate litigants is that the fossil energy producers have known all along that they were creating a climate crisis but hid that information from us. Seriously? Let us summarize what the Intergovernmental Panel on Climate Change in its 1990 First Assessment Report (page 202) made clear: It could not explain why temperatures were higher 5,000-6,000 years ago despite no evidence of an increase in greenhouse gas (GHG) concentrations. Fast forward to the most recent Sixth Assessment Report (2021-2022). The IPCC still cannot narrow down the “likely” range (p. 46) of climate effects of increased GHG concentrations and is able to predict (Table 12.12) various adverse future effects only with low confidence and only under an extreme emissions scenario. Did the fossil energy industry “know” things decades ago that were not known then and are not known today? Obviously not.   Note: I just noticed the misspelling on my pic. I’m still learning ChatGPT. (0 COMMENTS)

In the US, national security has been cited by proponents of protectionism for a wide variety of products, ranging from computer chips to automobiles to shipbuilding.  But when it comes to foreign countries, our protectionists often have a blind spot.  They cannot even imagine that any other country might also have good reasons for national security concerns.   “Everyone has their reasons” is a famous line from the classic French film Rules of the Game.  I was reminded of this line when I read a Bloomberg article about Swiss trade policy.  Switzerland eliminated all tariffs on the manufactured goods, but continues to protect its agricultural industry: Switzerland’s bid for a US trade deal risks sparking a showdown with one political force at least as feisty as President Donald Trump: its own farmers. A country whose lush Alpine pastures, cowbells and cheese underpin the national identity, and whose agricultural lobby wields outsized influence to match, is in danger of a tough reckoning over what that’s worth when economic prosperity is at stake. Countries such as Japan and Switzerland do not have a comparative advantage in agriculture.  Nonetheless, they often protect their farmers for various reasons, including “national security” considerations.  I presume the Swiss were glad that they had an intact farm sector during WWII, when they could not rely on food imports from Germany. At an international level, the political influence of farmers is inversely related to their share of the population, which is a problem for many theories of politics.  In poor countries, farmers are numerous but politically weak.  In almost all developed economies, farmers are a small minority.  But they are viewed a sympathetic lobby, even by city dwellers: Acceptance of the current design of the domestic food market is widespread, despite its burden on consumers, fostered by a national belief in self-reliance. But bigger economic interests may prevail when set against agriculture, which represents a small fraction of gross domestic product. The voice of farmers is often amplified in advanced economies, as seen with recent tractor protests from London to Paris and Brussels. In Switzerland, their influence pervades the political system. Long time readers know that Switzerland has my favorite political system.  The Bloomberg article mentions one more advantage of direct democracy: “Don’t underestimate Swiss diplomacy,” he said. “Whatever deal the Swiss may strike, it would probably have to be accepted by parliament, possibly even by referendum. That could strengthen Swiss negotiators because they can honestly say: Look, we won’t be able to get this through with our people.”     (0 COMMENTS)

Wall Street Journal editor Matthew Hennessey rightly criticied Vice-President JD Vance’s statement that the market is just “a tool, but it is not the purpose of American politics.” (“JD Vance Is Wrong: The Market Isn’t a ‘Tool,’” Wall Street Journal, May 26, 2025). Hennessey argues that markets are simply the way humans naturally trade and exchange without coercion: I give you this, you give me that. Simple exchange is what makes a market. Not faith, not mantras, not brick and mortar. Wherever people come together to trade is a market. … Markets harness supply and demand to coordinate economic transactions between people and firms. They facilitate the free exchange of goods and services. They are mechanisms for shared prosperity based on freedom from coercion. As true as that is, it misses, at least explicitly, an economically inspired philosophical argument that provides an important justification of the market. When he trades in the abstract locus that the market is, an individual aims at satisfying his preferences, whatever they are. He pursues his own ends, goals, or purpose, even when he claims he doesn’t. An individual’s possible purpose of charity, solidarity, or communality is what this individual subjectively considers such. He doesn’t pursue the “purpose of American politics,” except perhaps if he has been infected by naive democratism or becomes, to quote Adam Smith, one of these “insidious and crafty animal[s], vulgarly called a statesman or politician, whose councils are directed by the momentary fluctuations of affairs” (The Wealth of Nations, Book IV, Chapter 2). Contemporary classical libertarianism, even in its tamer forms, is more radical than Mr. Hennessey’s defense may suggest. Let me give two prime examples. Friedrich Hayek, a 1974 Nobel economics laureate, argued that in a free society, each individual is free to pursue his own ends and the state (“government”) does not impose collective ends, which would coercively impinge on individual ends. In the autoregulated order of a free society, there exists no collective purpose. Except for levying necessary taxes, the state can, in normal times, impose only general and abstract rules that forbid the use of certain means that would defeat the benefits that individuals derive from a free society. The state, for example, may ban murder and theft, in conformity with the rule of law, but it may not force an individual in a specific occupation (at least in peacetime, Hayek would say, opening a Pandora box). The “public good” can only reside in rules that facilitate the pursuit of individual ends by all individuals. (These ideas are notably defended in Hayek’s Law, Legislation, and Liberty, whose three volumes I have reviewed on Econlib: Rules and Order, The Mirage of Social Justice, and The Political Order of a Free People.) But is it possible to establish or maintain a free society without imposing this very goal enterprise as a collective purpose to be forced upon any individual? The intellectual enterprise of James Buchanan, laureate of the 1986 Nobel Prize in economics, was to answer the question. He endeavored to find a rational justification beyond Hayek’s recourse to the traditional rules that evolved in Western societies. The subtlety of his (and his co-authors’) social-contractarian solution cannot be overstated. A rational individual, he argued, does not want to be regimented at the service of a collective purpose that could turn against him and exploit him. He can only accept a set of rules that would be chosen unanimously by all individuals, thus giving him a veto right. The state is the organization charged with enforcing the set of rules that benefits each and every individual. The state is constitutionally constrained to remain within these strict limits, so as not to become a tool for the exploitation of some individuals. (The three seminal books developing these ideas are: James Buchanan and Gordon Tullock, The Calculus of Consent; Geoffrey Brennan and James Buchanan, The Reason of Rules; and James Buchanan, The Limits of Liberty—more or less in the order of the most technical to the most accessible. The links are to my reviews.) The radicalism of classical liberalism is a far cry from the economic illiteracy of the insidious and crafty animals who run governments, on the right or on the left, and their supporting mobs. ****************************** Our collective goal is the other way (4 COMMENTS)

  Co-blogger Jon Murphy, in “Why Must Americans Pay Tariffs?” May 29, 2025, points out that U.S. tariffs are largely paid by Americans. He cites the relevant literature. He then goes on to note that trade occurs between individuals and firms, not countries. This is true and important, but it’s not relevant to the issue of who bears the burden of tariffs. A tariff is a tax. There’s a straightforward way to assess who bears the burden of a tax: look at the elasticities of demand and supply. If our elasticity of demand is low and the exporters’ elasticity of supply is high, then we Americans bear most of the burden of the tax. But if our elasticity of demand is high and the exporters’ elasticity of supply is low, then the exporters bear most of the burden of the tax. Here’s what I wrote on that issue in “Tariffs Will Hurt Canadians and Americans Alike,” Defining Ideas, December 19, 2024: Many people who have, like me, been critical of tariffs, have claimed that US consumers bear the whole cost of the tariff. Writing in August 2019, for example, Rachel Layne of CBS News stated, “The fact is, companies here pay tariffs to US Customs and Border Protection when Chinese goods reach America’s shores.” It’s true that Americans write the checks. But one of the first things about taxes that we economists teach undergrads is that knowing who writes the check tells you exactly nothing about who bears the burden of a tax. What determines the split of the burden between producer (exporter) and consumer (importer) is their relative elasticities of supply and demand. Consider Canadian oil. On the one hand, many Americans in the Midwestern states depend upon oil from Canada. In response to the tariff, though, they will probably have oil shipped by train from other parts of the United States. That’s expensive, but it is a way to adjust. But Canadian oil producers have few alternative customers to sell to besides Americans. This lack of good options makes their elasticity of supply low. They’ll likely absorb most of the cost of the tariff by not raising prices very much. The result? Canadian oil producers would bear more than half of the burden of the tariff on oil. The outcome will depend on the goods in question. The fact that so many Canadians are sweating the tariffs that Trump is threatening suggests that they think they will bear a substantial part of the burden. As a generalization, it’s probably true that we U.S. consumers bear most of the burden of the tariffs that the U.S. government imposes. But there’s no necessity for that. It’s an empirical issue. Jon rests a lot of his argument on methodological individualism. But noting the relevance of elasticities of demand and supply does not contradict methodological individualism. (0 COMMENTS)

In this episode of EconTalk, Russ Roberts and Jonathan Rauch explore the instrumental and existential purpose of true religion in liberal democracy. In his new book Cross Purposes: Christianity’s Broken Bargain with Democracy, Rauch argues that the recent failure of Christianity has led Americans to transform politics into a “pseudo-religion.” Instead of relying on the protestant Christian theology that built America, both the Left and Right have replaced true faith with their radical partisan doctrines. These secular pseudo-religions fail to provide the profound values and community that liberal democracy requires to be successful, the consequences of which are apparent in the rapidly growing ungovernability and radicalism of America. To heal the nation, Rauch pleads with Christians to return to their faith and become more Christian. He points out that the founding fathers recognized liberal democracy’s inability to fulfill the necessary human need for meaning and community in life. Therefore, they made an implicit bargain with Christianity to maintain the republican virtue that American democracy needed. This bargain however has fallen through, and the liberal institutions it was supposed to support are floundering.  Although Rauch acknowledges the multi-causal nature of Christianity’s failure, his book examines the tragic decisions that Christians made about themselves that have brought us to this point. To do this, he organizes Christianity into three categories: thin, sharp, and thick. Thin Christianity refers to the secularization of the ecumenical, mainstream churches. These churches have lost their shiny counter-culturalism and have melted into secular culture. Instead of “exporting values into society,” they import secular ones into their own thin theology and become culturally irrelevant. Rather than remain distinct, they blend in and lose their dynamic appeal and influence.  Sharp Christianity refers to the secularization and arming of the evangelical church. Rather than blending in, the evangelical church picked sides and aligned themselves with the Republican party. They fell for Donald Trump’s promise of power and ignored the political importance of good character. They scream, “fight! fight! fight!” and desire domination over their secular enemies. Such extremism goes against Jesus’s teachings and drives those interested in Jesus’ message away. In doing this, they lose the essence of their faith and have morphed into right-wing radicals.  The last sector of Christianity is that which Rauch hopes to ignite: thick. This term refers to the type of Christianity that answers the existential questions of life and bolster liberal democracy, the type the founders desired, and the type that clings to Jesus’s teachings. Rauch presents these teachings in three core principles, each with significant secular ramifications. The first, do not fear, refers to Christian’s profound trust in God that all will be well. In the secular sphere, this hopeful faith counteracts the tyrannizing, apocalyptic fear both political parties exhibit, assuring them that losing the election is not the end of the world. The second principle, to imitate Jesus, promotes the protection of minorities and equal dignity of every human as an image bearer of God. These biblical precepts are key principles of liberal democracy and are embedded in the Declaration of Independence and the Constitution. Finally, the third principle of forgiveness recognizes that retribution and judgment are reserved for God. Instead of seeking vengeance, we should treat others with grace and mercy. Liberal democracy also relies on this mindset and rests in the peaceful, merciful governance of toleration, pluralism, and forbearance over the terrorization of the elected political party. These three principles are the linchpin that held America together in the past and they are the remedy for her ailment now. The Christianity that holds to them will support liberal democracy and start to rebuild the meaningful society that Alexis de Tocqueville once found in America.  In closing, Rauch leaves Roberts with a charge for non-Christians to recognize the importance of Christianity for society. Rather than neglecting or being hostile toward Christianity, non-Christians should acknowledge the importance of Jesus’s teachings and the stable, liberal society that they foster. People of faith should not be marginalized in society but welcomed and accepted. In support of this, Rauch shares his own personal journey from despising Christianity, to realizing the essential role it plays in American society. Although not entirely impossible without, American liberal democracy relies on Christianity to preserve and keep it.    Some questions for discussion: –       What distinguishes a true religion from a pseudo-religion?  –       Why cannot liberal democracy provide existential meaning? Can any political system? Why or why not?  –       Can any other religion support liberal democracy? If so, which ones can and what distinguishes them from those that cannot? (0 COMMENTS)

Without trade, life more complex than bacteria could not exist. We are literally made of free trade. It is in every cell of our bodies.  The first lifeforms to evolve on Earth, at least 3.5 billion years ago, were very simple. They were single-celled organisms that lacked a nucleus or the organelles we see in more recently evolved organisms. They live on today as archaea and bacteria. But somewhere along the way, possibly as early as 2.7 billion years ago, some of these simple cells discovered specialization and exchange. In other words, trade. These early entrepreneurs had comparative advantages, like producing energy or providing propulsion. Some of these specialists banded together as a survival tactic. If an energy-producing proto-mitochondria could give up some of its energy in exchange for a proto-flagellum’s help in escaping predators, both benefitted. Both survived, and both reproduced. Eventually, these mutually beneficial trading relationships became permanent. Members of a trading group enclosed themselves inside a common membrane, which itself specialized in protection and chemical balancing.  These early traders became the first eukaryotic cells. All life more complex than bacteria descends from these entrepreneurs. The word “eukaryotic” comes from the Greek words for “good” and “seed,” referring to the nucleus that housed some of the specialists, now called organelles.  Their archaean and bacterial ancestors are prokaryotic cells, or “before seed,” referring to their lack of nucleus and organelles. We can tell that many modern organelles used to be separate organisms because they have their own membranes, and several have their own DNA. Scientists can use mitochondrial DNA, for example, to trace matrilineal descent in humans. Chloroplasts, which can produce energy via photosynthesis, have their own DNA as well. RNA and DNA have their own origin stories.  If someone was designing a cell from scratch, they probably wouldn’t have come up with such a disorganized system of genetic storage. But if a bunch of traders spontaneously came together over time to specialize, exchange, and survive, this kludge model makes perfect sense. The benefits for these early specialists allowed them to further specialize in ways prokaryotic cells still have not, billions of years later. A modern mitochondria, for example, can generate 15,000 times as much energy as a typical prokaryotic bacterium. That provides the cell’s other specialists more energy for accomplishing their own amazing feats, to the benefit of all.  Without each organelle’s own specialized services, from hydration to chemical transport to reproduction, mitochondria would likely not be able to specialize so intensely at its task. Like human trade, this is win-win. Eventually, single-celled eukaryotes discovered a whole new level of trade. Just as organelles benefited by trading with each other inside one cell, so can entire cells benefit from trading with other entire cells. This is how multicellular organisms emerged. In a way, this was the first international trade, between different groups of organisms.  Multicellularity was an amazing innovation. While there are multicellular prokaryotes such as cyanobacteria, it took eukaryotes for multicellularity to really take off. Before long, algae, slime molds, and fungi evolved, and then plants and animals. If some ancient prokaryotic protectionist had been able to stop this process with the bacterial equivalent of tariffs, life as we know it would have evolved much more slowly, or possibly not at all. The next step of evolution required yet another level of trade. Groups of cells found that they could better survive by specializing in one task and exchanging services with other cell groups specializing in something else. This is where organs come from.  This innovation allowed plants and animals to emerge, with distinct cell types that specialize as roots, leaves, lungs, bones, and even brains that would one day think about trade.  At this level, specialization is so intense that no organ-size cell group could survive on its own. A brain cannot exist outside its body. It depends on the other organs to survive, just as they depend on it. They each specialize, exchange, and survive, just as the previous levels did, but at a larger scale than ever seen before. Now we move up yet another level of trade, between different species. Scientists call this symbiosis. Bees and plants trade with each other, with plants providing food and bees providing pollination services. Cleaner fish provide parasite removal services for other fish species, who queue up to get cleaned. These other fish species get a better quality of life and better survival odds in exchange for giving the cleaner fish a free meal, and for not eating the cleaner fish. Once humans emerged, we invented several new levels of trade. Individual humans traded with each other within their tribe, and with humans in other tribes. The specialization and productivity this enabled eventually allowed for villages, cities, states, nations, and even empires. Over millennia, people eventually developed a deep enough division of labor and the technology to trade with each other around the world, when they are allowed to. It is amazing to think that all these levels of trade are operating simultaneously. Every cell in your body, right now, two trillion of them, is engaging in internal trade among their organelles. Each of these cells is part of an organ or body part that is itself a specialist. All of these specialists work together to form an individual person with a single consciousness and free will. This person in turn specializes in certain tasks, such as writing essays about trade, which it then exchanges with specialists in other areas. Biological evolution and social evolution are tightly intertwined in what might be the world’s most intricate dance. It is all made possible by trade, from the microscopic level to the global level. Trade doesn’t just make possible modern prosperity. It makes possible life as we know it. If any one of those levels of trade were to cease, most life on Earth would cease. It is worth taking some time to ponder what this deep heritage of trade means for today’s tariff debate. President Trump’s tariff war could spark a recession or worse, if it hasn’t already. Just as prokaryotic cells still survive today, so would a protectionist America. But prokaryotes haven’t changed much in three billion years. Similarly, a protectionist world’s growth and dynamism would slow.  Liberalism’s greatest achievement, the post-1800 Great Enrichment that is still continuing today, is at risk if Trump’s trade war escalates. A more evolved trade policy has guided life from the first eukaryotic cell on up to Adam Smith and Charles Darwin, who themselves were two highly sophisticated trading blocs of eukaryotic cells. The growth in human trade from their time to ours resulted in the greatest improvement in living standards in our species’ history. Darwin was influenced by Adam Smith’s Theory of Moral Sentiments, in an act of intergenerational trade. Smith gained immortality through print, and Darwin gained insights he could apply to his own ideas. This is yet another level of trade to explore. If you think trade does more harm than good, you’re up against more than just the laws of economics. You’re up against evolution itself and, measured in biomass, the majority of life on Earth.   Ryan Young is senior economist at the Competitive Enterprise Institute. (0 COMMENTS)

In late July 1933, President Roosevelt enacted one of the most destructive economic policies in all of American history. The President’s Re-employment Agreement mandated an immediate 20% rise in hourly nominal wages. The stock market crashed.  This action aborted a promising economic recovery that had raised industrial production by 57% between March and July 1933. By May of 1935, industrial production was actually lower than on day the wage policy was enacted.Almost exactly 90 years ago, on May 27 1935, the Supreme Court saved FDR from his folly. The entire NIRA was ruled unconstitutional, including the wage fixing provisions. Industrial production almost immediately began rising rapidly, and FDR won a historic landslide victory in the November 1936 election. In other news, this caught my eye: The Trump administration’s threat to impose 50 percent tariffs on the European Union and steep tariffs of varying sizes on other critical American trading partners hung in limbo on Thursday after a panel of U.S. federal judges blocked a set of across-the-board charges. But both trade experts and America’s trading partners around the world greeted the news with caution, not celebration. Stocks rose internationally as investors hoped the decision, handed down by the U.S. Court of International Trade, might restrain the assault that Washington is waging on world markets. Of course, the decision will be appealed. It might seem unreasonable that an obscure lower level court could veto a massive change in American global trade policy.  The court was set up to rule on minor trade issues.  Aren’t we a democracy?  But it’s equally true that the president has no legal authority to enact a massive change in American global trade policy.  His recent tariff actions have been based on laws allowing narrowly targeted adjustments in trade policy reflecting issues such as national security.  The law does not allow the president to determine US fiscal policy (which is the prerogative of Congress), nor does it allow the president to change America from a free trading nation to a protectionist nation.  It only looks like the court overstepped its role because it was pushing back against a presidency that had also overstepped its role.   If Congress had enacted massive tariffs, and then the court ruled they were illegal, then it would in fact be overstepping its role.  The GOP-dominated Congress is perfectly free to enact any tariffs proposed by President Trump.  The courts would have no justification for overturning such tariffs. PS.  This is from a very informative article by Ilya Somin: It is worth noting that the panel include judges appointed by both Republican and Democratic presidents, including one (Judge Reif) appointed by Trump, one appointed by Reagan (Judge Restani), and one by Obama (Judge Katzmann). (0 COMMENTS)