Here are some housing articles that caught my eye: 1.  A recent paper by Sven Damen, Matthijs Korevaar & Stijn Van Nieuwerburgh has the following abstract: Residential properties with the lowest rent levels provide the highest investment returns to their owners. Using detailed rent, cost, and price data from the United States, Belgium, and The Netherlands, we show that this phenomenon holds across housing markets and time. If anything, low-rent units hedge business cycle risk. We also find no evidence for differential regulatory risk exposure. We document segmentation of investors, with large corporate landlords shying away from the low-tier segment possibly for reputational reasons. Financial constraints prevent renters from purchasing their property and medium-sized landlords from scaling up, sustaining excess risk-adjusted returns. Low-income tenants ultimately pay the price for this segmentation in the form of a high rent burden. I have not read the paper, so I have no evidence against any of the claims made in the abstract.  Nonetheless, it’s worth noting that this is exactly the result I would have expected based on my experience being a landlord back in Boston.  I think of that experience as being one of the two biggest mistakes in my life (along with writing a textbook.)  I found that the return from being a landlord is not worth the aggravation, at least for me.  I would expect potential landlords to insist on a higher rate of return—a “compensating differential”—before being willing to invest in property in a low-income area where the problem tenants are especially common. 2.  In a recent post, I argued that the so-called “housing bubble” was a myth, it never happened.  I cited the fact that real housing prices had fully recovered to 2005-06 levels, and thus if prices were obviously too high back at that time, then they must also be too high today.  Some commenters argued that real housing prices are not the correct metric, and that housing really was overvalued in 2005-06.  But Kevin Erdmann has a post that suggests other measures of housing affordability are also back at 2005-06 levels: If this ratio is again much too high, are we about to have another 2008-style crash? 3.  There’s an ongoing debate about the cause of the recent migration from blue states to red states.  Matt Yglesias has a tweet that suggests the problem is housing prices: To avoid reasoning from a price change, it’s best to look at the relationship between prices and quantities.  Yglesias implicitly does this and correctly claims that the migration to red states is primarily caused by building restrictions in blue states that raise housing prices and push people to places where housing is cheaper.  The high housing prices in blue states suggest that these are very desirable places to live, at the margin.  Here’s Bloomberg: A 1,100-square-foot (102-square-meter) house on a cul-de-sac in the city of Santa Clara recently sold for $2.2 million, drawing 11 offers, said Vinicius Brasil, an agent with Keller Williams. It was an average home in a spot that’s not necessarily the most prestigious, but conveniently close to companies like Apple and Nvidia, he said. But the story is a bit more complicated than the generalization that people are moving from expensive blue states to cheap red states.  Illinois is an inexpensive blue state than continues to lose population, even relative to purple states like Wisconsin and red states like Indiana.  Colorado and Washington are expensive blue states that are gaining population.  This suggests that housing costs are not the only factor driving interstate migration.  The “revealed preference” that can be inferred from price and migration data strongly suggests that the public regards Colorado and Washington as better than average blue states, while Illinois is regarded as a worse than average blue state.  Some of that may reflect things like weather, but not all.  South Dakota has a growing population despite worse weather than Illinois and more expensive housing.  One thing South Dakota does not have is a state income tax, which is also true of fast-growing Texas, Florida, Nevada, Tennessee and Washington.  (That’s not to deny that weather is a big factor in Florida’s rapid growth.) 4.  In the past, I pointed to Austin as an example of how housing construction could reduce rents.  New data suggests the gains were even larger than I had imagined, far larger: Nowhere in the country have rents declined as much as they have in Austin — now 22% off the peak reached in August 2023, according to Redfin. The median asking rent is $1,399 per month, down $400 in less than three years. . . .  In 2021 — which Reed calls “the year of extreme” — developers poured into Austin as pandemic-era corporate relocations surged and remote workers flocked to the city seeking lower taxes, sunny weather, a plethora of tech startups and a robust social scene. Builders typically take two years to go from buying land to welcoming tenants, and as their cranes climbed into the sky, the new arrivals crammed in to the existing apartment stock. . . .  Then came the flood of new apartments. Developers dumped almost 50,000 rental units on the city in 2023 and 2024, according to Fannie Mae data. That represented a 14% increase in the supply, the biggest on a percentage basis for any major US metro area. (0 COMMENTS)

Israel is the only democracy in the Middle East but it seems a lot more alien and chaotic than many of the older democracies of the West. Hear Rachel Gur of Reichman University explain to EconTalk’s Russ Roberts how the Israeli political system works and sometimes, doesn’t work. The conversation brings into relief the challenges […] The post The Unusual World of Israeli Democracy (with Rachel Gur) appeared first on Econlib.

  Matt Taibbi: The Collapse of the Censorship Regime Interview by Zach Weissmueller and Liz Wolfe, “Just Asking Questions,” Reason, February 27, 2025. Excerpt: The Department of Homeland Security…has this concept, you know, they call it building resilience on the one hand, or pre-bunking on the other, which is this idea of introducing a potentially controversial or difficult idea to an audience early so that they’ll be more accepting of it later. So, for instance, if it’s usually it’s done in a way that’s supposed to be prophylactic, like you warn somebody five months ahead of time that there could be, you know, Russians might interfere with the election, and that will make people more receptive to the idea that there is when you do that story later on. But sometimes they also like to introduce an idea. And this is all about how do we protect people against certain kinds of ideas and how do we conditioned them to accept others, like about the vaccine. And either they talk about building resilience, which is we want the the population to and sort of on their own reject psychologically certain ideas before they’re even posed to them. So there’s a lot of signaling that goes on in media…the 60 Minutes [German hate speech] thing felt to me like a classic seeding of a of an idea. There’s so much more there, including how Google and most other search engines became much less useful for people who want to know what was actually said and not just read some “trusted” reporter’s view. I rarely watch a 1-hour plus interview. This was the exception, partly because I had a bad headache that day and had trouble writing. But I’m glad I made the exception. I recommend 1.25 time. YMMV.   British PM Is Wrong, There Is No Free Speech In The UK by Beth Brelje, The Federalist, February 28, 2025. Excerpts: Despite draconian laws that punish people for expressing themselves, United Kingdom Prime Minister Keir Starmer lied about his country’s terrible free speech record during a White House meeting with President Donald Trump on Thursday. And: Father Sean Gough, a Catholic priest, was arrested in 2023 for standing silently at a closed abortion business with a sign reading “praying for free speech.” He also had an “offensive” bumper sticker, “Unborn lives matter.” He was interrogated by police and criminally charged, according to the Standing for Freedom Center. UK pro-life activist Isabel Vaughan-Spruce has been arrested twice for silent prayer outside an abortion business.   Distribution Tables Distort the Tax Policy Debate by Adam N. Michel, Cato at Liberty, February 28, 2025. Excerpts: As Republicans work to extend and expand the 2017 Tax Cuts and Jobs Act (TCJA) before it expires, politicians will relitigatethe deceptive distributional statistics that purport to show who benefits most from tax cuts. These distribution tables are inherently limited, often grossly misleading, result in distorted policy outcomes, and make fundamental tax reform all but impossible. And: The first two columns in Table 1 report the Tax Policy Center and the Tax Foundation’s estimates of the TCJA’s effect on after-tax income from the time of passage. This measure tells policymakers if particular groups are made better off after the changes. The two sets of results from the TJCA tell a broadly similar story: all income groups saw higher after-tax incomes in 2018 following the tax cuts. The first two measures are not identical because the underlying models use different definitions of annual income and different methodologies for distributing some tax changes, like the corporate income tax.   The accompanying pic is of Weissmueller, Taibbi, and Wolfe. (0 COMMENTS)

Question: Uber offers a membership option that entitles members to a percentage reduction in the price of Uber rides. Evaluate the following two statements: 1- Suppose an Uber customer is indifferent between becoming an Uber member or paying the standard Uber ride price. This customer will never spend less, and, in general, will spend more on Uber rides if the customer becomes a member. (Assume that Uber rides are a homogenous good.) 2- Introducing the membership option can never reduce the number of Uber rides this customer takes.     Answer: If the Uber customer is indifferent between the two options, his utility must be the same regardless of which option he chooses. In other words, the two budget constraints the customer faces under either option must be tangent to the same indifference curve. Once we recognize this, then answering the first part of the question becomes straightforward. The figure below illustrates the two options. The vertical axis measures the customer’s expenditures on all other goods. The horizontal axis measures the number of Uber rides the customer purchases.  Given an income of 0A, the customer faces a budget constraint of AF if he does not purchase the membership option. Given his preferences and the budget constraint, he will spend 0B on all other goods and AB on Uber rides.  If the customer purchases the membership option, he gives up spending AC on all other goods, even if he doesn’t purchase a single Uber ride. However, doing so reduces the price per Uber ride, so the budget constraint becomes flatter than before. Now, his budget constraint is ACE. In this case, he will spend OD on all other goods and AD on Uber rides.  Hence, total expenditure on Uber rides with the pass will rise by the amount BD, so the first statement is true. As for the second statement, the short answer is that it’s false. For example, suppose Uber rides were an inferior good. In this case, the membership option may reduce the number of Uber rides the customer purchases even though the membership reduces the price per ride. (0 COMMENTS)

President Trump recently proposed a “gold card” aimed at high net worth immigrants, which would sell for $5 million. Tyler Cowen has an article in Bloomberg that discusses the pros and cons of this proposal: It’s a good idea, both from the standpoint of government revenue and for wealthy prospective immigrants. But the US would have to be careful not to foreclose other, more affordable ways for people to come and work and live in the country. I also see advantages and risks in this proposal.  If I slightly disagree with Tyler, it’s because he may have overestimated the number of cards that would be sold: Trump estimates that the US could sell one million gold cards, which would give holders quick residency rights and a path to citizenship, family members included. That would bring in $5 trillion. He also suggests that many companies would buy them to bring in talented workers. Even if his estimates are overly optimistic, there is some real money on the table. Of course “real money” is an ambiguous phrase, but another Bloomberg piece suggests that Trump’s estimate is wildly inflated: Nuri Katz, founder of Canada-based immigration consultancy Apex Capital Partners, said investors taking advantage of the program would most likely need a net worth of roughly $50 million and estimated that “50 to 200” people would apply. He said he expects people from Asia, including China and the Middle East, as well as Russians and Canadians to be the first to look at these visas.  If I had to guess, it might be something closer to 800 applications per year.  To see where I got that guesstimate, let’s return to Cowen’s article: Under current law, there already is a path to residency and citizenship by investing in the US through the EB-5 program. After expenses are accounted for, and depending on details, the cost is about $1 million. That’s an 80% discount on a gold card, and meanwhile the government gets the benefit of new jobs added to the US economy. . . . The best-case scenario is that the US offers a gold card and expands (or at least does not limit) cheaper ways of getting into the country. Replacing the $1 million investment with a $5 million flat fee, on its own, seems like an upgrade. A lot of people who can afford $1 million can also afford $5 million.  Is it true that “A lot of people who can afford $1 million can also afford $5 million”?  Nuri Katz seems to think the program would appeal to people who had $50 million in assets, ten times the price of the visa.  One source suggests that there are about 12 times as many American households with $10 million in wealth as there are households with $50 million in wealth.  If that ratio also applies to wealthy foreigners, then there may well be 12 times as many people who can afford the EB-5 visa as there are people who can afford a gold card.  Because about 10,000 EB-5 visas are granted each year, gold card sales might be expected to be closer to 800.  Two other considerations could impact the estimate of 800 gold cards.  First, the EB-5 visa is much more popular than the 10,000/year figure suggests, as there is a big backlog of applications.  That suggests that the 800 estimate may be too low.  On the other hand, the EB-5 visa is intended for those making a $1 million investment, whereas the gold card would require a fee to be paid directly to the US government.  That distinction makes the EB-5 seem much more attractive.  Of course these are very rough estimates, but the 1 million gold card figure cited by Trump seems extremely optimistic. Elon Musk came to the US as a student, and presumably would not have been able to afford a $5 million gold card.  His example suggests that Trump may wish to revisit his campaign proposal to award green cards to foreigners who graduate from Americans colleges and universities.  The government would presumably need to put in safeguards to avoid the policy being abused by “diploma mills,” but it seems like a policy that would be especially effective at attracting many talented young people. (0 COMMENTS)

According to the International Property Rights Index, prepared by the Property Rights Alliance, Colombia ranks 80th out of 125 countries. While this result reflects some progress in the protection of property rights compared to nations with less institutional development, it also highlights significant challenges. Factors such as corruption, legal insecurity, and weak protection of intellectual property rights negatively affect the perception and guarantee of these rights in the country. Although Colombia has implemented reforms to improve the investment environment and strengthen respect for property, the path to more robust and reliable protection remains long. The current ranking indicates that there is room for improvement for Colombia to ensure a more stable and attractive framework for investment and economic development. One of the main challenges Colombia faces regarding property rights is the persistent legal insecurity concerning rural property. For decades, the armed conflict has resulted in land dispossession and forced displacement, leaving millions of Colombians without secure access to their properties. Although the Peace Agreement signed in 2016 included measures to return land to victims and promote agrarian reform, the process has been slow and complex. Land restitution continues to face difficulties, both due to unclear property titles and the presence of illegal armed actors preventing displaced persons from returning to their lands. In addition, in urban areas, the informality in land tenure also represents a significant challenge. There are cases where properties are not properly registered or lack formal titles, limiting access to financial services and the economic development of thousands of citizens. Formalization policies have made progress in recent years, but their implementation has not been sufficient to reduce the negative impact that legal insecurity has on private property in the country. For Colombia to advance in respecting property rights, it will be crucial to continue strengthening the institutions responsible for guaranteeing private property, promoting formalization, and improving transparency in restitution and titling processes. The protection of intellectual property in Colombia is another key aspect of the discussion on property rights. Although the country has made progress in creating a legal framework that regulates patents, copyrights, trademarks, and other aspects related to intellectual property—and despite the existence of entities such as the Superintendency of Industry and Commerce (SIC), which resolves disputes related to industrial property, and the National Copyright Directorate, which oversees copyright-related issues—significant challenges remain. Piracy, counterfeiting, and copyright infringement continue to be prevalent problems. These practices affect both the creative industry and the country’s technological and industrial development, limiting innovation and entrepreneurship. The lack of effective enforcement of regulations, combined with weak institutional capacity to address these violations, harms both domestic and international companies seeking to protect their innovations in the Colombian market. Strengthening intellectual property protection is not only crucial for ensuring fair competition and respect for inventions but is also an essential component for attracting foreign investment, fostering economic growth, and promoting a culture of innovation in the country. The protection of property rights in Colombia, both physical and intellectual, is essential to ensuring economic freedom which fosters investment, growth, and social well-being. Property rights are the foundation of any society that values individual freedom, as they allow people to enjoy the fruits of their labor and creativity without undue interference. For Colombia to move toward a freer and more prosperous system, it is crucial to strengthen the institutions responsible for protecting these rights and to promote transparency in the titling and restitution processes. Only with a solid framework of property rights can the legal certainty needed to incentivize investment and economic development be guaranteed—key elements for sustained growth in an open and competitive market economy. Likewise, intellectual property protection takes on a central role in a world where ideas and innovation drive progress. Combating piracy and ensuring the defense of inventions not only promotes fair competition but is also a fundamental step for Colombia to integrate competitively into the global economy. Ultimately, guaranteeing property rights strengthens economic freedom and creates the necessary conditions for a freer and more prosperous society, where development is within everyone’s reach.   Omar Camilo Hernández Mercado is a law student at the Universidad Libre de Colombia, Senior coordinator of Students for Liberty in Colombia, and a seminarist in “The Austrian School of Economics” at the International Bases Foundation.  (0 COMMENTS)

  In a recent interview with Canadian psychologist Jordan B. Peterson, Conservative Party leader Pierre Poilievre noted some important facts about Canadian oil. The whole 11-minute interview is worth watching. Some highlights: 4:10: The nature of the Canadian trade surplus. “Yes, it is a ripoff. Canada is ripping itself off.” 4:25: Canada’s entire trade surplus with the United States is due to oil and natural gas. 4:30: Canada exports $120 billion in oil and gas to the United States at enormous discounts to market prices. 4:40: The reason: “We have been so stupid.” 4:50: Because of various restrictions, Canadians have not been able to develop the infrastructure to refine and transport energy to world markets. 5:10: So Canadians are stuck. Canadians sell a barrel of oil to Americans for a discount of 10 to 40% off the world price. 5:20: Until recently, Canada sends 99% of its oil exports to America. 5:40: Canada sells all its natural gas to the United States because Canada doesn’t have a natural gas liquefaction terminal. 6:20: If he becomes Prime Minister, Poilievre intends to approve refineries and LNG plants. 6:30: If Trump wants to make America richer, the last thing he should do is block Canadian energy from going into his marketplace. (DRH note: Poilievre understands international trade; I don’t think Trump does. When Trump sees cheap imports, this co-author of The Art of the Deal thinks it’s not a deal.) 6:45: Why Trump should approve the Keystone Pipeline. 7:20: Should have more trade in electricity. 8:15: Trudeau refused to cooperate with German and Japanese governments on natural gas. (So says Jordan Peterson: I haven’t checked this.) 9:14: What do you do when someone throws money out a window? Great answer. 9:50: The integrated economy–an automobile crosses the border 8 or 9 times.   The accompanying picture is of Poilievre. (0 COMMENTS)

Two years ago, a bright-eyed student stepped off a plane from Melbourne after a 17-hour flight to the United States, excited to begin a college journey in a new country. He had never been to the USA before and was ready to deal with whatever tribulations studying in a foreign country had in store. However, one challenge he didn’t expect came from the strong US dollar. He still vividly remembers heading to Target to buy dorm-room essentials and being shocked at the prices when he converted them into Australian dollars. Prices that seemed reasonable when denominated in strong US dollars pinched when converted into the weaker Australian dollars he had exchanged during the trip.  If someone were to imagine the issues international students might face, the strength of the US dollar is not typically acknowledged as a significant issue over something like homesickness and culture shock. However, when the US dollar appreciates against a student’s home currency, college becomes more expensive. The stronger the US dollar becomes, the more currency a student will require to get a single US dollar. If, for instance, a student had previously traded one dollar in their local currency for $0.75, but then the value of the US dollar increased so that one dollar in their local currency could only buy $0.60, then every expense just got significantly higher. Small fluctuations might not seem extraordinary when considering the price of a single meal, but they mean big changes when a student earns foreign currency and pays for tuition and housing in US dollars. A student might look to get around the issues caused by a strong US dollar by taking advantage of the law of one price, which says a good should have the same price everywhere in the world but might take some time to work. Using this information, an international student facing a stronger dollar might think of bringing over goods from their home country for weaker home currency and selling them in the US for stronger dollars. Under the law of one price, it would hold that the value of whatever object they sell in America would have the same value as it did back home. Unfortunately, tariffs, transportation costs, and other barriers might stand in the way. A stronger dollar might mean furniture is cheaper in Australia than in the US, but shipping it is prohibitively costly and could attract unwanted attention from customs officials. Someone might be able to make a few dollars buying low in their home country and selling high in the US. However, shipping costs, transaction costs, and the distractions that might come with running what looks like an international smuggling operation might mean it isn’t feasible to operate on a scale that would pay for an education. International students have another option. They might also want to buy currency futures to reduce their exposure to the risks associated with a stronger dollar, but life as an international student is already stressful and complicated–and given the kinds of decisions college students make, it’s not clear they’ll make especially wise choices in markets for foreign exchange or about their portfolio of currency futures. Exchange rate risk is all too real for international students. A stronger dollar creates challenges for international students and higher education institutions as it makes goods and services the US sells to foreigners–like higher education–more expensive. If you see an international student who looks especially ecstatic or glum, there’s a chance it has something to do with exchange rates. At least one Australian student has learned to keep a close eye on exchange rates to avoid unpleasant surprises. Now, whenever he looks at his bank account the exchange rate is always in the back of his mind. On some days, when the US dollar is particularly strong, it feels like every expense is amplified. It’s a reminder that for international students, the fluctuating strength of the US dollar can mean the difference between a simple shopping trip and a major financial headache.   Darcy Nicholls is a student and member of the tennis team at Samford University from Melbourne, Australia. Art Carden is an economics professor at Samford University. (0 COMMENTS)

Consider the market for aluminum and the general tariff of 25% that the US administration has planned to impose on all American importers of this metal starting March 12 (compared to a current tariff of 10% that hits fewer aluminum products and exempts some countries including Canada and Mexico). A very good starting point for a rapid economic analysis is a Wall Street Journal story: Bob Tita, “Tariffs Fracture Aluminum Industry: ‘It’s Going to Cost Me a Lot of Money,’” February 26, 2025. I will add my own questions on some related issues. The new tariff or tax will hit imported aluminum (primary aluminum from smelters and recycled aluminum, in the form of ingots, slabs, billets, and sows, plus some derivative products such as extrusions) and will, as is typically the case, be totally or mostly paid by the buyers of imported aluminum. Only a small proportion of the global production of aluminum is purchased by Americans, so a reduction in domestic demand following the tariff is unlikely to affect world prices significantly; in other words, foreign aluminum producers will not “eat” the American tariff. American consumers will ultimately pay it in the increased prices of their manufactured goods containing aluminum such as automobiles, windows, and beer cans. This the more obvious as the new tariff applies to imports from all countries. In fact, the bidding up of the aluminum price started on the American market as soon as the tariff was announced. Many econometric studies have confirmed these results for the tariffs imposed during Donald Trump’s first term. Another standard result of economic analysis is that American purchasers of domestically produced aluminum (which covers roughly 40% of the supply on the American market) will also pay the increased tariff. The reason is that no efficient manufacturer of aluminum goods would buy any imported aluminum if it costs more than the domestically produced equivalent. This arbitrage—buying at the lower price and not at the higher—will push up the price of domestic aluminum to the level of imported aluminum. Indeed, this is precisely why domestic aluminum producers favor the tariff: it protects them (like in protectionism) against competition and pushes up the price of their own output. They get “a profit windfall.” After the announcement of the new aluminum tariff, as the WSJ story mentions, “prices for U.S.-made aluminum are rising as well.” (See also the explanations in my post “The Elementary Economics of Tariffs and Protectionism, February 2, 2025.) The domestic producers of aluminum will be benefited to the detriment of the domestic consumers of goods containing aluminum. Domestic manufacturers and exporters of such goods will also be harmed as their profits and the value of their productive assets decrease. Some capital will move to other economic sectors. An official at Tompkins Products, a Detroit manufacturer of parts for automotive transmissions, expresses the same idea when he says that the new tariff “is going to cost me a lot of money that I don’t have.” He will have to reduce his production compared to what it would otherwise have been. “Producing a ton of primary aluminum,” notes the WSJ, “typically uses more electricity than a single household consumes in an entire year.” One reason for the high cost of aluminum production in Amerca is the high cost of electricity compared to, say, Canada, from where 75% of American consumption of aluminum comes. Electricity accounts for some 40% of the cost of operating a smelter. In other words, American producers do not seem to have a comparative advantage in aluminum production, which implies that sacrificing one (average) housing unit for every ton of aluminum domestically produced is a waste. As usual, the market, that is, the free interaction of hundreds of millions of participants, is incomparably better at effecting these allocation choices than political and bureaucratic processes. Would foreign (or domestic) firms build new smelters in America, replace previous international competition, and bring domestic prices down from their initial after-tariff level? This is possible but it would take time—at least a decade, the WSJ suggests—especially since electricity production would have to expand. The prospective owners of new American smelters would also need to be reasonably sure that the tariff will not later be reduced or eliminated, undercutting the reason for producing more aluminum in America. In other words, the tariff will create a new constituency against its future reversal. This is an expected economic result: for example, the steel industry, which has been protected off and on for the past hundred and fifty years, still needs protection; similarly, the one-hundred-year-old Jones Act, which protects ship owners (and indirectly shipyards) against foreign competition, has been politically impossible to repeal despite its costs for American shippers and consumers (see the work of Colin Grabow and Scott Lincicome on the Jones Act). Going much further than the WSJ story, we may also ask, What does liberty have to do with the American aluminum market? At least three related things. First, untrammeled economic freedom would allow American consumers to buy their aluminum-containing goods from the least expensive sources. It would allow American and foreign manufacturers to serve American consumers most efficiently. It would not handicap American producers of aluminum goods for domestic and foreign markets. Second, the American government would not discriminate, “take sides” in Anthony de Jasay’s terms, among its own citizens (or residents) by favoring domestic aluminum producers against domestic consumers and manufacturers of aluminum goods—for example, favoring American investors in aluminum smelters against American beer drinkers. This idea of a non-discriminatory state (except when required by the very maintenance of a free society) has been a major strand in classical-liberal economics and political philosophy up to and including major contemporary theorists such as James Buchanan, Friedrich Hayek (see the links to my reviews of his Law, Legislation, and Liberty), and Anthony de Jasay. Third, even if the domestically imposed tariffs were partially or totally paid by foreign exporters, and even if the trade war did not get out of control, there is nothing in the economist’s standard tools of analysis that allows him, in trade matters, to ignore or discount the losses of foreigners. As Nobel economist John Hicks noted in a 1942 article, The Manchester Liberals believed in Free Trade not only on the ground of Fairness among Englishmen, but also on the ground of Fairness between Englishmen and foreigners. The State, so they held, ought not to discriminate among its own citizens; also it ought not to discriminate between its own citizens and others. (0 COMMENTS)

I see a lot of discussion about what the government should do with the $1 trillion dollars that DOGE intends to save by reducing wasteful government spending. In fact, this is not a meaningful question, as even in the unlikely scenario where DOGE achieves $1 trillion in saving, there would be no money available to disburse. Of course the government can send checks to the public if it wishes to. But that’s not because it has “money” in the ordinary definition of the term, it is because it is able to borrow money.  Assume the following data: Federal spending  = $6.2 trillion Federal revenues = $4.4 trillion Federal borrowing (budget deficit) = $1.8 trillion If DOGE were able to reduce spending by $1 trillion, cutting the total down to $5.2 trillion, then the budget deficit would fall to $800 billion.  But that would not mean that the government had $1 trillion dollars in cash that it could disburse as it wishes, rather it would mean the federal government was borrowing $1 trillion less than before. The federal government could decide to go ahead and borrow the same $1.8 trillion that it was borrowing before DOGE made its savings, and they could then distribute $1 trillion to the public in transfer payments.  But in that case, they’d merely be substituting one form of federal expenditure for another, essentially creating a new UBI spending program.  Total government spending would remain at $6.2 trillion.  What would that accomplish?   I recently saw Elon Musk give an impassioned speech to Trump’s cabinet indicating that the budget deficit was unsustainable:   Elon Musk takes aim at national debt, warns of ‘de facto bankruptcy’ without DOGE: ‘$2 trillion in deficits’ That may be a bit extreme, but he’s right that the budget deficit is a major problem.  For that reason, it would make no sense to return the saving to the public, as the deficit problem would remain as large as ever.  Of course the fact that something is illogical no longer has any implication in today’s America: Trump, Musk float idea of $5,000 ‘DOGE dividend’ checks. Here’s what experts say Again, there is no money to give back to the public.  The federal cookie jar is empty. OK, so what’s the counterargument to my post?  How could someone defend the proposal to refund $1 trillion to the public?  The argument would have several components: 1. First, you’d argue that the budget deficit is not a real problem, and that there’s no reason to reduce our current deficit of $1.8 trillion.  You might cite some sort of MMT model.  Obviously I think that’s wrong, but let’s go with this assumption for the moment. 2. Second, you’d have to argue that we’d be better off reducing spending on current programs by $1 trillion, and increasing spending on “transfers to the public” by $1 trillion.    As a practical matter, any $1 trillion reduction in federal spending is likely to almost entirely come from reductions in various entitlement programs like Social Security, Medicare and Medicaid.  That’s because the GOP doesn’t want to cut defense, and interest payments are a contractual obligation than cannot be cut.  The remaining programs are relatively small, and also unlikely to be cut—at least in aggregate, some will be cut (foreign aid) and some will be increased (border security.)   For this sort of plan to make sense, you’d have to argue that it’s better to give every adult a check for roughly $5000, rather than disburse the same amount of money to a subset of the adult population through various retirement, medical and welfare programs. I hope you see the bizarre nature of this proposal.  In order to advocate refunding $1 trillion to the public from DOGE savings, you must buy into not one but two controversial theories.  Furthermore, these theories are from opposite sides of the political spectrum.  The theory that huge deficits don’t matter is a far left idea associated with MMTers.  The theory that programs like Social Security and Medicare are bad is associated with those on the far right. I’ve met many people who hold one of these two views.  But I don’t recall ever meeting a single person that holds both of these views.  And yet to favor refunding this so-called “money” to the public, you’d have to simultaneously hold both views. I find that people often have trouble thinking about two topics at the same time.  One topic is the size of the budget deficit.  The other topic is the proper role of government.  Let me explain with the following example.  Suppose someone argued that America would be better off replacing $1 trillion in federal spending on various programs with $1 trillion spent on a new $5000/person UBI program.  Based on what I have said in the post above, you might assume that I’d regard this change as undesirable.  Not necessarily.  It’s very possible that a UBI program would be superior to current government uses of this borrowed money.  But I would also argue that an even better solution would be to not borrow the money in the first place. Suppose my wife told me that she had just gone to the bank and borrowed 1.8 million dollars.  Then she asked me what we should do with the money.  Should we buy stocks, bonds, Bitcoin, property?  I would not respond to this question by considering possible uses for $1.8 million, I’d ask her why the heck did she decide to borrow $1.8 million?   Yes, a UBI program might be nice.  But who’s going to pay for it?  Cutting government spending by $1 trillion doesn’t free up money for a UBI program, it doesn’t even reduce our national debt.   All it does is slow the rate at which our national debt is increasing.  We are so deep in a hole that even painful sacrifices will provide little immediate benefit.  The fact that policymakers hold out “visions of sugarplums” shows how deeply unserious our politics has become.     (0 COMMENTS)