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)

  Last week’s horrifying aircraft collision at Reagan National Airport (DCA) has focused attention on air traffic control (ATC) staffing. According to press reports, the controller responsible for monitoring helicopter traffic had gone home that night, leaving that responsibility to a second controller responsible for “local traffic.” That apparently was not the only short-staffing in the DCA  tower; at the time the passenger jet and helicopter collided, two controllers were doing the work of a team of four. Another bit of news: The previous night, a different passenger jet aborted landing at DCA because a helicopter was in its flight path, and there have been other recent incidents. That news will likely become more fodder in the Blue Team – Red Team fight, with Democrats criticizing the Trump administration for “strangling” the federal workforce and Republicans responding, Weren’t you just in charge of air traffic control and the rest of that workforce? They’ll both miss an important insight from the tragedy: the peril of Big Government on the cheap. If the double-duty controllers story proves correct (Christian Britschgi offers some reasons to be skeptical), then more controllers are needed—at the very least at Reagan, if not more broadly. But should they continue to be federal employees? And is danger higher if they are?  After all, plenty of first-world countries have private air traffic control and airports with great safety and service records. That should gnaw at both Blue and Red Teams. Democrats typically want bigger government that provides more services, while Republicans—ostensibly—want smaller government at lower taxpayer cost. What we often get is government that tries to do a lot of stuff at low current tax rates—or, put another way, Big Government on the cheap (and with big deficits). Problem is, cheap often means poor quality. From ATC, to our soon-to-be-insolvent public pension system, to the tinderbox of public lands, and many more examples, plenty of America’s policy issues are at least partly the product of Big Government on the cheap. This isn’t the result of some twisted Red–Blue compromise. Lawmaker in both parties have considerable incentive to offer constituents plenty of services but then hold down (or hide) expenditures. The result is government that does lots of stuff, but often not well. DCA is a microcosm of this. For those who live outside the Beltway and are unfamiliar with the airport, it operates almost like a private airport for the political class. Despite its small size and congested location (which may also be contributors to the collision), it handles flights to an astounding number of places so that lawmakers can get themselves, their staffers, and special interests to and from their districts conveniently. The Wichita route that last week’s plane was flying had been added just last year at the behest of Kansas lawmakers. The result of all these politically motivated flights is a highly burdened government operation—Big Government on the cheap.  This should give the Trump administration serious pause. Before the collision, the big news stories of last week were a pair of administration self-inflicted controversies over an Office of Management and Budget memo trying to freeze large portions of federal spending and an OMB email offering federal workers several months’ pay in exchange for their “deferred resignations.” (A similar email went out from OMB specifically to air traffic controllers the night after the collision.) Both are exercises in Big Government on the cheap: cutting money for responsibilities the federal government has taken on.  If the administration truly wanted smaller government, it should be working with the (Republican-controlled) Congress to statutorily pare back federal responsibilities. Such policymaking is hard and requires political capital and consensus-building. It’s also something Trump—whatever his rhetoric—did not pursue in his first presidency. There is little reason to think that will change in his second. So, there will likely be more failures from Big Government on the cheap in the future. Hopefully, they will not be as tragic as last week. (0 COMMENTS)

  For the last 20 years that I taught at the Naval Postgraduate School, I always covered, in every course I taught, Friedrich Hayek’s famous 1945 article “The Use of Knowledge and Society,” American Economic Review, September 1945. It’s well worth reading. Russ Roberts’s recent EconTalk interview of Peter Boettke, “Who Won the Socialist Calculation Debate?,” February 17, 2025, is well worth listening to or reading the transcript of. For in it, Pete, with input from Russ, tracks the history of the debate. Pete notes that Hayek moved one step beyond his mentor Ludwig von Mises. As well as talking about information that central planners didn’t have, Mises had focused on the lack of incentives within socialism. Hayek’s next step was to emphasize that even if lack of incentives were not a problem, central planners could not have the information they needed to plan an economy efficiently. That information was revealed only by market prices, and market prices came about because of hundreds of millions (now billions) of people acting on their own information. Although Hayek never used the term “local knowledge,” that is the term we Hayekians now use to refer to this decentralized information. In the interview, they briefly discuss the issue of tin prices. Here’s the tin discussion, from Hayek’s 1945 article: Assume that somewhere in the world a new opportunity for the use of some raw material, say, tin, has arisen, or that one of the sources of supply of tin has been eliminated. It does not matter for our purpose—and it is very significant that it does not matter—which of these two causes has made tin more scarce. All that the users of tin need to know is that some of the tin they used to consume is now more profitably employed elsewhere and that, in consequence, they must economize tin. There is no need for the great majority of them even to know where the more urgent need has arisen, or in favor of what other needs they ought to husband the supply. If only some of them know directly of the new demand, and switch resources over to it, and if the people who are aware of the new gap thus created in turn fill it from still other sources, the effect will rapidly spread throughout the whole economic system and influence not only all the uses of tin but also those of its substitutes and the substitutes of these substitutes, the supply of all the things made of tin, and their substitutes, and so on; and all his without the great majority of those instrumental in bringing about these substitutions knowing anything at all about the original cause of these changes. The whole acts as one market, not because any of its members survey the whole field, but because their limited individual fields of vision sufficiently overlap so that through many intermediaries the relevant information is communicated to all. The mere fact that there is one price for any commodity—or rather that local prices are connected in a manner determined by the cost of transport, etc.—brings about the solution which (it is just conceptually possible) might have been arrived at by one single mind possessing all the information which is in fact dispersed among all the people involved in the process. Hayek then writes: The marvel is that in a case like that of a scarcity of one raw material, without an order being issued, without more than perhaps a handful of people knowing the cause, tens of thousands of people whose identity could not be ascertained by months of investigation, are made to use the material or its products more sparingly; i.e., they move in the right direction. This is enough of a marvel even if, in a constantly changing world, not all will hit it off so perfectly that their profit rates will always be maintained at the same constant or “normal” level. Why a marvel? Hayek answers: I have deliberately used the word “marvel” to shock the reader out of the complacency with which we often take the working of this mechanism for granted. I am convinced that if it were the result of deliberate human design, and if the people guided by the price changes understood that their decisions have significance far beyond their immediate aim, this mechanism would have been acclaimed as one of the greatest triumphs of the human mind. Its misfortune is the double one that it is not the product of human design and that the people guided by it usually do not know why they are made to do what they do. But those who clamor for “conscious direction”—and who cannot believe that anything which has evolved without design (and even without our understanding it) should solve problems which we should not be able to solve consciously—should remember this: The problem is precisely how to extend the span of out utilization of resources beyond the span of the control of any one mind; and therefore, how to dispense with the need of conscious control, and how to provide inducements which will make the individuals do the desirable things without anyone having to tell them what to do. When I taught this, I paused at the sentence, “I am convinced that if it were the result of deliberate human design, and if the people guided by the price changes understood that their decisions have significance far beyond their immediate aim, this mechanism would have been acclaimed as one of the greatest triumphs of the human mind.” I then said to my students that if the mechanism had been the result of deliberate human design, the human would almost have certainly have won the Nobel Prize in economics. Along the way, Russ and Pete give a very nice treatment of various economic thinkers. On the site are mentioned the bios of over 20 economists. All of the bios are from David R. Henderson, ed., The Concise Encyclopedia of Economics. I wrote all of them, except the one on Karl Marx, which Janet Beales Kaidantzis wrote. Note: The accompanying pic is if Hayek and me. Hayek was autographing my copy of Studies in Philosophy, Politics, and Economics, one of my favorite of his books, in June 1975. (0 COMMENTS)

The New York Times has a very long piece on the issue of immigration. Here’s my version of a TLDR: Denmark has shown that an enlightened progressive government can preserve its welfare state by adopting fairly restrictive policies on immigration.  Thus it’s now OK for American liberals to switch to a position of opposition to large scale immigration. The Democratic Party establishment was already leaning in this direction due to the recent presidential election, but the NYT story provides a sort official sanction for progressives to adjust their views on immigration. To be clear, I agree with those who suggest that the surge in undocumented immigrations during 2021-24 was a problem for the Democrats in the recent election. Indeed, the Biden administration seemed to recognize this fact, but too late to alter voter perceptions.  Nonetheless, I was disappointed by the NYT story, which presented a somewhat distorted view of the broader immigration issue.   Consider the following statement: Many studies find a modestly negative effect on wages for people who already live in a country, falling mostly on low-income workers. A 2017 report by the National Academies of Sciences, Engineering and Medicine, intended as a comprehensive analysis of the economic effects of immigration, contains a table listing rigorous academic studies that estimate immigration’s effects on native wages; 18 of the 22 results are negative. Most readers probably don’t bother following up by examining the report cited by the Times.  Here is its abstract: The Economic and Fiscal Consequences of Immigration finds that the long-term impact of immigration on the wages and employment of native-born workers overall is very small, and that any negative impacts are most likely to be found for prior immigrants or native-born high school dropouts. First-generation immigrants are more costly to governments than are the native-born, but the second generation are among the strongest fiscal and economic contributors in the U.S. This report concludes that immigration has an overall positive impact on long-run economic growth in the U.S. I won’t say the NYT description was false, but it was certainly a bit misleading. Or consider the following item from the Times story: During the Biden administration, the United States experienced its most rapid immigration on record, with a pace of entry that surpassed even that of the peak years of Ellis Island. More than eight million people entered the country, about 60 percent without legal permission. In all, about 16 percent of U.S. residents today were born abroad, exceeding the previous high of 14.8 percent in 1890. Given their previous claim that immigration especially lowers the wages of those at the bottom, you might have expected the Times to provide some data about the effect of the unprecedented wave of immigration.  I think I know why they did not do so.  It turns out that this surge in immigration was associated with unusually large wage gains among the lowest paid workers.  It is clear that the author of the story was trying to cherry pick data that supported their argument, and hide data that suggested immigration doesn’t hurt real wages. The story also mentions the fact that immigrants to countries such as Denmark and Sweden tend to engage in more crime than the native born population.  But they fail to mention that immigrants to the US are far less likely to commit crimes than are native-born Americans.  Indeed, in places like New York City the crime rate often decreases sharply when a wave of immigrants supplant the native born population.  I live in Orange County, which combines an especially high immigrant population with an especially low crime rate.  I wonder why the NYT suggested that America needed to learn from what happened in Denmark, but failed to mention that the immigrant crime problem in Scandinavia does not apply to the US? (1 COMMENTS)

To listen to protectionists, one would think tariffs are something of a miracle drug.  Anything and everything can be solved by tariffs.  Prices too low?  Tariffs will raise ‘em.  Prices too high?  Tariffs will lower ‘em.  Sprained knee?  Just take two tariffs and call me in the morning. Yes, tariffs may seem like a miracle drug that can be applied to any situation (no matter how contradictory).  But what many tariff supporters’ arguments are missing is reasonable political analysis.  I mean “reasonable” in the literal sense: derived from reason.  Or, as put more poetically by James Buchanan, “politics without romance.”  Politics matters. A lot.  So, we need a reasonable political model.  The basic behavioral assumption of public choice models is that people in the political sphere are just the same as they are in the market sphere.  If they are selfish in the market, they will be selfish in politics.  If they are benevolent in the market, they will be benevolent in politics.  And most importantly, people in the political sphere respond to incentives, just like anywhere else. Tariff supporters often misapply this last point about incentives.  True, they will sometimes model politicians as facing incentives, but misapply the analysis.  Take, for example, the argument that tariffs can be used as negotiation tools.  The argument goes that you can threaten another nation with tariffs, impose the costs of the tariffs on them, and force them to bend to your will (whatever that will may be).   The problem with this line of reasoning is that it incorrectly assumes that the politicians face the full costs of the tariffs.  Of course, they do not.  At best, politicians face just a small portion of the costs.  The overwhelming majority of the costs fall upon the citizens of the two countries in the form of lost revenue and lost imports.  It is highly improbable that the politicians are made worse off from the tariffs while their citizens are.  Consequently, there is no incentive for the politicians to change their behavior.  It is for this reason we see tariffs consistently fail as a negotiation tool. Indeed, so-called trade sanctions and tariffs end up having the opposite effect.  The American embargo of Cuba entrenched the Castro regime.  Tariffs and embargoes on Iran failed to halt their nuclear program or weaken the regime.  Putin still wages war in Ukraine despite (or because of?) trade sanctions.  Perhaps most damningly, the Chinese government developed DeepSeek as a direct response to Trump’s original “economic statecraft” against the Communist Party (continued by Biden).   Adam Smith recognized this problem.  In the Wealth of Nations when he is laying out theoretical exceptions to his preferred “system of natural liberty” (ie free trade), he discusses using tariffs as a means of reducing trade barriers (pg 468 of the Liberty Fund Edition.  Common citation: Book IV, Chapter II, paragraph 38-39).  He notes that tariffs could be a potential tool to negotiate lower barriers in other nations.  However, he points out that when judging whether these tariffs will have these effects, one shouldn’t rely on the “science of the legislator,” who has general principles, but rather the politician who is guided by momentary affairs.  Such negotiations could work, he states, but could also lead to war, as he argues they did in 1672. Politicians face a different set of incentives.  The major issue with many tariff supporters’ models is that they improperly model these incentives.  This is a side effect of collectivist thinking; we must always remember that a “nation” is a useful abstraction, but ultimately is made up of individuals who choose.  A “nation” never, ever chooses.  And a government is not synonymous with the nation or the people located therein. (0 COMMENTS)