The Bias in Health Science by Richard Gunderman, Law & Liberty, April 1, 2025. Excerpt: But still, I never suspected outright fraud. It is true that the Lancet, another of the most respected medical journals, had published, with harmful effects in practice, a now infamous paper supposedly linking the measles, mumps, and rubella (German measles) vaccine with the development of childhood autism, but such gross cases of editorial negligence and scientific dishonesty were rare—or so I thought. Relatively recently, however, it has been discovered that a very high percentage of scientific studies are unreproducible, and a smaller but still significant number are outright fraudulent. There are now scientists dedicated to searching out deficient or dishonest scientific papers, and there is an excellent website, Retraction Watch, similarly dedicated. Its investigations often lead to retraction, the signaling that a paper is so seriously flawed that its results or conclusions can no longer be relied upon and should, for preference, not be quoted.   The 3 Myths Supporting NIH Funding by Zachary Caverly, Reason, April 1, 2025. Excerpt: U.S. biomedical science in the era before the NIH was spreading federal money was not hurting for private support, and while some insist that increased government spending only strengthened a good foundation, the public sector’s role is often overstated regarding some canonical research achievements. The Human Genome Project is a good example. The NIH correctly asserts this groundbreaking international collaboration “changed the face of the scientific workforce,” but it was only made possible by the automatic gene sequencer developed by Leroy Hood, who noted the invention received “some of the worst scores the NIH had ever given.” It was only through the generosity of Sol Price—the founder of warehouse superstores—that the technology came to fruition and the human genome was finally sequenced. Similar stories of private generosity in place of government grants can be found forstem cell research. As for the importance of publicly supported academics, consider the story of mRNA vaccine development. The NIH timeline implies that smart government investment into years of HIV research was the key to this lifesaving technology, but the chief innovator of the eventual product, Katalin Karikó, was roadblocked for years in academia and even demoted for her lack of grant acquisition. She would later leave the university setting and work for BioNTech in the private sector to create the Pfizer vaccine. Her story is conspicuously absent from the NIH timeline of events.   Federal Court ‘Vacates in Its Entirety’ the FDA’s Costly and Onerous Lab Test Rule by Ronald Bailey, Reason, April 1, 2025. Excerpt: A federal district court has struck a blow for medical innovation and patient empowerment by overruling the Food and Drug Administration’s (FDA) misbegotten effort to regulate laboratory-developed (LDTs) and in vitro testing. LDTs are diagnostic in vitro tests for clinical use that are designed, manufactured, and performed by individual laboratories. They can diagnose illnesses and guide treatments by detecting relevant biomarkers in saliva, blood, or tissues; the tests can identify small molecules, proteins, RNA, DNA, cells, and pathogens. For example, some assess the risks of developing Alzheimer’s disease, detect the presence of cancers, or guide the treatment of breast cancer. Last May, the agency adopted extensive new rules aimed at regulating those tests for the first time. This is the same agency whose bureaucratic acumen in 2020 massively screwed up COVID-19 diagnostic testing as the pandemic rolled in. As I reported at the time, out of the billions of tests given annually, the FDA sought to justify imposing its burdensome oversight by citing problematic medical device reports and unconfirmed “allegations” for a grand total of nine and four different tests respectively between 2009 and 2023. The remaining examples cited by the FDA are tests that had actually been submitted to the agency for analysis and were subsequently rejected or revised as recommended.   THE 2025 EDCHOICE FRIEDMAN INDEX Excerpt: The 2025 EdChoice Friedman Index is a comprehensive and easy-to-understand measure of the availability of private K–12 educational choice across the United States. Inspired by Milton and Rose Friedman’s vision of universal choice, the index assesses how well each state enables families to direct education funding toward the options they deem best, whether public or private. Since 2020, there has been a rapid increase in educational choice programs across the U.S. Fourteen states have been labeled as offering “universal choice,” but many of these states lack accessibility due to caps on funding. The EdChoice Friedman Index measures how much educational choice families really have. Note: The absence of anything on Trump’s tariffs does not imply agreement. Rather, various other economists are handling this very well and it’s not hard for readers of this blog to find such coverage, both on EconLog and elsewhere. I will have more coverage in the next week, though. (0 COMMENTS)

Reader, it is difficult to overstate just how incredibly bad the “Liberation Day” tariff scheme is.  Top to bottom, it is incoherent.  When the plan was announced on April 2 with Donald Trump holding up a board of seemingly-random numbers, economists had to scramble to figure out what, exactly, these figures came from.  They seemed utterly divorced from reality and had nothing to do with reciprocity.  Folks figured the numbers were the bilateral trade deficit divided by imports to that country.  This prompted the USTR to deny that claim and release their actual calculations.  Somehow, it was worse than what people thought. One would think that a model on “reciprocal” tariffs would include tariffs from the other country.  Indeed, there are already well-established methods in US law and economic theory in determining what reciprocal tariffs should be in the face of unfair trading practices.  Section 301 of the Trade Act of 1974 lays out various remedies, as does the Reciprocal Tariff Act.  Countervailing duty calculations already exist; this new model serves no purpose when it comes to reciprocity or even correcting “unfair” trade practices since it doesn’t take into account any tariffs or nontariff barriers. Rather, the model treats bilateral trade deficits as per se evidence of unfair practices.  One could make an argument that overall trade deficits are bad (but even that is a stretch as such an argument is conditional, not per se, and made even weaker when a nation is the international reserve currency).  But bilateral?  Absolutely not.  There is no reason to think that trade between any two partners would be equally balanced; we do not live in a barter economy.  The entire point of money is to facilitate these bilateral trade imbalances.  I have a trade surplus with my employer.  That is not per se evidence that I am ripping them off.  Likewise, I have trade deficits with the grocer, the butcher, the brewer, and so on.  That is not per se evidence that Rouses Supermarket, Bourgeois Meat Market, nor Abitia Brewing is ripping me off.  If it weren’t for money, we would have to have bilateral trade balance: I would need to find exactly what Rouses wants for my daily meals (I am willing to bet they do not want economics research).  So, the premise of the entire model fundamentally misunderstands the very foundations of monetary economic exchange. But, for the sake of argument, let us assume that the model’s premise is valid.  Let us take a look at the model itself.  The USTR reports the model as the balance of trade with a given country divided by price elasticity of imports (ε) times tariff passthrough (φ) times imports.  This model means nothing; it hides this meaninglessness behind Greek letters, but there is no interpretable meaning to this model.  It’s not obvious it will even do what the authors want it to do.  Reader, you will not find this model in any economics textbook or paper and, at least as of this writing, no one has released an in-depth report on the logic of the model.  So, even if the premise was valid, there is no prima facie reason to think the model itself has anything to do with the premise. But, for the sake of argument, let’s assume that the model is valid.  The model parameters chosen are illogical.  For ε and φ, the USTR chose the same values for each country.  But there is no reason to assume ε and φ would be identical for each country, or even for each good within each country.  Both ε and φ depend on exchange-specific factors.  For example, goods with many substitutes, ε will be higher (or lower if the good has few substitutes).  Consequently, this implies that the calculated tariff rate is likely incorrect; it may be too high and it may be too low.   But, for the sake of argument, let us assume that every country in the world has the exact same ε and φ.  The numbers chosen for these parameters are incorrect.  The authors state:  Recent evidence suggests the elasticity is near 2 in the long run (Boehm et al., 2023), but estimates of the elasticity vary. To be conservative, studies that find higher elasticities near 3-4 (e.g., Broda and Weinstein 2006; Simonovska and Waugh 2014; Soderbery 2018) were drawn on.  Those are some estimates, sure.  But, despite the statement that ε of 4 is “conservative,” it’s actually not.  Many studies find that ε is upwards of 5-7, especially after a trade shock (see, eg, here).  Furthermore, they just set φ at 0.25.*  No citation given.  The only justification given is: The recent experience with U.S. tariffs on China has demonstrated that tariff passthrough to retail prices was low (Cavallo et al, 2021). [link added] But retail prices are not the relevant measure here.  We need total passthrough.  Here is what Alberto Cavallo et al actually say (emphasis added): At the border, import tariff pass-through is much higher than exchange rate pass-through. Chinese exporters did not lower their dollar prices by much, despite the recent appreciation of the dollar. By contrast, US exporters significantly lowered prices affected by foreign retaliatory tariffs. In US stores, the price impact is more limited, suggesting that retail margins have fallen. Our results imply that, so far, the tariffs’ incidence has fallen in large part on US firms. The authors of the report get Cavallo et al exactly backward.  Rather than showing low passthrough, they actually show nearly complete passthrough and that the tariff passthrough was borne by Americans.  This is a horrific case of cherry-picking by the USTR.  Oh, and by the way, research shows φ is closer to 0.8, not 0.25.  Consequently, both ε and φ are underestimated, indicating the tariff calculation is systematically too high. But, for the sake of argument, let us assume that their choices for ε and φ are accurate.  We get to the real kicker.  The authors write: “Assuming that offsetting exchange rate and general equilibrium effects are small enough to be ignored…” This assumption is huge.  Their whole model falls apart if the assumption does not hold.  Here’s the problem: The entire point of the tariffs is to have exchange rate and general equilibrium effects!  They state so multiple times in their report and the Trump Administration’s economic advisors have said so as well.  Thus, the core necessary assumptions of the model never held, meaning the whole thing is bunk ab initio.  Indeed, not 24 hours after the tariff scheme was released, the stock market had its worst two days on record and the dollar depreciated. I don’t think I’ve ever seen a model get proven wrong so fast.  24 hours has got to be some kind of record.  Even the COVID lockdown models, as bad as they were, took a few months to blow up. I repeat again: it is hard to overstate just how bad this model is.  Start to finish, it is incoherent and rife with bad assumptions, bad parameters, and no logic.  This is not the result of reasoned thinking.  It is a shameful display of scientism. *By the way, this is why folks initially thought that the model was just the trade balance divided by imports.  If ε = 4 and φ = 0.25 and the denominator is ε * φ * imports, then ε * φ = 1 and the whole denominator reduces to just imports.  The fact the USTR didn’t see that is problematic. (0 COMMENTS)

Economists sometimes say something banal that doesn’t seem to require much economic education or business experience but only a bit of reflection about individual incentives. Let me do it. What will happen if foreign companies or foreign plants of American companies cannot sell their goods in America without being constantly hit by whimsical American tariffs and threats thereof, up one month, down the next month, and up again? They will move their production facilities to America? But then, they will also know that they risk being hit with whimsical American tariffs on their inputs. And they know that foreign states will often retaliate. Moreover, in these circumstances, the legendary American market will have become much less attractive since most people will be poorer, except for government cronies. The best idea for entrepreneurs may be to stay put or to move to a country still open to trade—or, ideally, to a country unilaterally open to trade if such countries exist. A silver lining would be that Americans and other people similarly victimized in their own countries (“taken advantage of” by their own governments) would stop blindly trusting the state and discover or rediscover the classical liberal and libertarian project of strictly limiting the power and scope of their own leviathan. Alas, it could also go the other way: the mob could clamor for a new, more powerful strongman to fix the wall, make the trains run on time, and get it done. In fact, and taking into account the different forms that authority and Leviathan have taken, it has been that way in most of the world during most of the history of mankind. There is certainly something worse than everyone in the world wishing to come to one’s country: it is if nobody wants to. ****************************** A mercantilist state, by ChatGPT with the new image generator (0 COMMENTS)

  In 1958, Leonard Read, in an attempt to write a version of Hayek’s “The Use of Knowledge in Society” for a wider audience, wrote “I, Pencil.” (It doesn’t cover all of Hayek’s points but it’s pretty good given its short length.) Many economists use Read’s short article in their classes to great effect. It became much wider known when Milton Friedman used it in his PBS TV series, “Free to Choose.” One interesting thing I just thought of is that in laying out the various elements of a pencil that come from other countries, Read does not talk about tariff rates. It wasn’t because there was free trade. In fact, tariff rates around the world were pretty high when Read wrote. Indeed, as I wrote 2 months ago, Trump is single-handedly undoing much of the progress that the world has made on trade since the 1940s. So tariff rates were quite high when Leonard Read was writing. Still, I think it’s interesting to take the 4 countries from which some of the inputs come and note the tariff rates that will now be assigned under Trump’s new high (though not reciprocal) tariff regime. So here are the 4 passages, with the tariff rate after each. Remember that the ✏️ is talking. Hokey? Sure, but it works. A lot of my 30-something military officer students loved it. “My ‘lead’ itself—it contains no lead at all—is complex. The graphite is mined in Ceylon [Sri Lanka].”  Tariff rate: 44%. “To increase their strength and smoothness the leads are then treated with a hot mixture which includes candelilla wax from Mexico, paraffin wax, and hydrogenated natural fats.” Tariff rate: 25%. “An ingredient called ‘factice’ is what does the erasing. It is a rubber-like product made by reacting rapeseed oil from the Dutch East Indies [Indonesia] with sulfur chloride.” Tariff rate: 32%. “The pumice comes from Italy; and the pigment which gives “the plug” its color is cadmium sulfide.” Tariff rate: unspecified. Interestingly, in the Newsweek article that lists Trump’s tariffs, country by country, Italy is not mentioned. (0 COMMENTS)

The recent announced tariffs were computed using a formula that is almost universally viewed by economists as making no sense: Now we discover that even if you think this formula does make sense, the specific calculations were based on the wrong elasticity estimate.  The following is from an AEI report by Kevin Corinth and Stan Veuger: The idea is that as tariffs rise, the change in the trade deficit will depend on the responsiveness of import demand to tariffs, which depends on how import demand responds to import prices and how import prices respond to tariffs. The Trump Administration assumes an elasticity of import demand with respect to import prices of four, and an elasticity of import prices with respect to tariffs of 0.25, the product of which is one and is the reason they cancel out in the Administration’s formula. However, the elasticity of import prices with respect to tariffs should be about one (actually 0.945), not 0.25 as the Trump Administration states. Their mistake is that they base the elasticity on the response of retail prices to tariffs, as opposed to import prices as they should have done. The article they cite by Alberto Cavallo and his coauthors makes this distinction clear. The authors state that “tariffs [are] passed through almost fully to US import prices,” while finding “more mixed evidence regarding retail price increases.” It is inconsistent to multiply the elasticity of import demand with respect to import prices by the elasticity of retail prices with respect to tariffs. Correcting the Trump Administration’s error would reduce the tariffs assumed to be applied by each country to the United States to about a fourth of their stated level, and as a result, cut the tariffs announced by President Trump on Wednesday by the same fraction, subject to the 10 percent tariff floor. As shown in Table 1, the tariff rate would not exceed 14 percent for any country. For all but a few countries, the tariff would be exactly 10 percent, the floor imposed by the Trump Administration. The Cavallo study was gated, but a tweet by Cavallo seems to confirm their interpretation: Unless I’m mistaken, the stock market briefly rose at the beginning of the tariff announcement, as it looked at first like there’d be a uniform 10% tariff on all countries (which would have been a relief to the markets).  Stocks then crashed when it became clear that our major trading partners would face far higher rates.  Thus it looks like $5.4 trillion in wealth was destroyed by a math error by a low-level government official.  (To be clear, there are many other problems with the formula, but this mistake is especially significant.) Of course it is likely that the administration had already decided on high tariffs, and this equation was reverse engineered to provide cover.  Nonetheless, this equation was used to compute the specific rates for each country, and thus probably explains why the EU was hit with a 20% tariff, China with a 34% tariff, and Vietnam with a 46% tariff.  Mistakes do have consequences! All this reminds me a bit of the Chinese Cultural Revolution of 1966-76, when grown-up experts were banished to the countryside and important parts of the economy were turned over to students.   You might argue that anyone can make a math error, and that’s true.  But in an administration that includes skilled economists, it is more likely that someone will catch the error, especially when the final results look “fishy”.  To be fair, even the previous administration fell short in this area.  Larry Summers warned the Biden people that excessive fiscal and monetary expansion could lead to high inflation.  The current administration seems even more anti-elite than the Biden administration, and is especially hostile to the views of economists.  Most talented people have either left the government or are laying low to avoid involvement in the current mess. The administration now has three options: They can admit that the wrong figure was used, and correct the tariffs. They can admit that the wrong figure was used, and also admit that the formula was not the actual justification for the tariffs.  In other words, they can admit that they lied. They can deny that the wrong figure was used in the formula. In the old days, choice #3 would have been unthinkable.  But we are in a new world.  Just a few weeks ago, the administration responded to the Signal chat scandal by claiming that the highly specific battle plans leaked to a reporter at The Atlantic did not constitute “classified information.” Yes, and the sky is green. My wife lived through the Cultural Revolution.  She hoped that she was leaving all that behind when she moved to America. PS.  When I think of the Chinese Cultural Revolution, I often recall this scene from the 1994 Chinese film To Live: Months later, during Fengxia’s childbirth, her parents and husband accompany her to the county hospital. All doctors have been sent to do hard labor for being over educated, and the students are left as the only ones in charge. Wan Erxi manages to find a doctor to oversee the birth, removing him from confinement, but he is very weak from starvation. Fugui purchases seven steamed buns (mantou) for him and the family decides to name the son Mantou, after the buns. However, Fengxia begins to hemorrhage, and the nurses panic, admitting that they do not know what to do. The family and nurses seek the advice of the doctor, but find that he has overeaten and is semiconscious. The family is helpless, and Fengxia dies from postpartum hemorrhage (severe blood loss). (1 COMMENTS)

  Poor Netanyahu but not poor Israelis. Israel’s government has said it will cancel all remaining tariffs on American imports, in an apparent bid to ensure that it is exempt from a new wave of levies that President Trump is set to announce on Wednesday. Israel and the United States, two close allies, have had a free-trade agreement since 1985 that excludes most American products from Israeli tariffs. On Tuesday, Prime Minister Benjamin Netanyahu of Israel presented the decision to remove all remaining tariffs as a move toward greater trade liberalization. This is from Matthew Mpoke Bigg, “On Eve of Trump’s Tariffs Announcement, Israel Says It Will Lift All Duties on U.S. Imports,” New York Times, April 2, 2025. Poor Benjamin Netnayahu. He clearly must have thought that when Donald Trump said he wanted reciprocal tariffs, Donald Trump must have wanted reciprocal tariffs. What Netenyahu didn’t understand is that Trump doesn’t want reciprocal tariffs. Instead, he wants to impose high tariffs on products from most countries no matter the tariff policy of the particular country. There is one bright spot. Having zero tariffs on all imports from the United States is a good move that will benefit most Israelis and cause their real GDP to be slightly higher. It would be even better for most Israelis if Netanyahu were to cut tariffs on all imports to zero. (0 COMMENTS)

Question: Part of the goal of NAFTA (and its successor) was to economically integrate the North American economies. On April 2, President Trump imposed wide-ranging tariffs on just about everything imported into the US.  Included are automobiles manufactured in Mexico and Canada.  The next day, April 3, Stellantis (who owns Chrysler, Jeep, and other brands) announced they were idling factories in Canada and Mexico, as well as temporarily laying off 900 workers at their Detroit powertrain and stamping plant.  Why would tariffs on Mexican and Canadian cars lead to layoffs in American automobile plants? (The answer is below, dear reader.  If you would like to take a shot, stop here and continue on when done). Answer: The Detroit plant makes parts of the Canadian and Mexican factories.  Powertrain and stamping are inputs that are just shipped to Mexico/Canada and assembled there.  By increasing the cost of Mexican/Canadian cars, thus reducing the supply, the tariffs have reduced the demand for American-made automobile parts, leading to the layoffs.  The tariffs that supposedly were to create jobs for American workers is actually reducing their jobs. Explanation: Thanks to NAFTA, and globalization in general, North American economies have become more vertically specialized.  Consequently, that means that American, Mexican, and Canadian manufacturing plants have become complements to one another, not substitutes.  An increase in price of one good reduces the demand for its complement.  The reduction in demand, thus, leads to lower demand for workers, leading to the temporary layoffs. Source (0 COMMENTS)

The customs tariffs imposed on imported goods by President Donald Trump on April 2 will, according to some estimates, bring the average US tariff higher than after the infamous Smoot-Hawley tariffs of 1930 (see “President Trump’s Mindless Tariffs Will Cause Economic Havoc,” The Economist, April 3, 2025). As these tariffs are a tax on American consumers—that is, will typically translate into a corresponding price increase of consumer goods in America—the impact on the cost of living will be significant. The poorest Americans, a large part of whom voted for Trump, will be the hardest hit. Add the (mistaken but perhaps understandable) retaliation of foreign governments. And all that still ignores the impact on poor foreign workers who, in countries like Vietnam, produce inexpensive goods that American consumers want (see my post “Mississippi, Vietnam, and Human Decency.” However, the costly shock that will hit the American economy and the world may have a silver lining. If Mr. Trump does not rapidly back up or is not rapidly forced to, the episode will show again what economists have known for nearly three centuries and what economic history has constantly confirmed—that mercantilism has disastrous effects on most of the population. This could persuade people that consumer sovereignty and free enterprise, which underlie all trade, must not only be restored to their former status but also reinforced against government exaction and all forms of authoritarian or dictatorial power. The silver lining, however, may be a vain hope. Consider the following possibilities. Trump could get the complicity of Congress to increase the deficit and the public debt in order to subsidize the worst-hit American businesses and send taxpayers large government checks with his signature as he did during Covid. This would merely postpone the shock until investors realize that the American state is bankrupt. There could be worse. As Trump is not exactly known for recognizing (or even understanding) his errors, he may be successful in blaming somebody else: greedy companies, “enemies of the people,” foreigners and their governments. The worst-case scenario would be something that often happened in the history of mankind: rulers (especially autocrats or autocrats-to-be or president-for-life types) diverting attention off domestic problems by starting a war or getting involved in one (perhaps on the aggressor’s side), and riding on the patriotism of their hapless subjects. Even if only a small part of these counter-silver-lining effects comes to pass, another black cloud may darken the sky. Economically illiterate or collectivist intellectuals as well as people who think that Trump represents economic freedom and individual liberty will, perhaps for many generations, fall into the arms of authoritarian and tyrannical regimes. “If this is liberty, give me serfdom!” rationally ignorant voters will think. “We need a strong leader to save us.” Future historians may note the role played by misguided people, including some libertarians, who kept repeating “But the Left is worst.” ****************************** A silver lining followed by what? (0 COMMENTS)

Commerce Secretary Lutnick recently had this to say: Donald Trump’s commerce secretary Howard Lutnick Thursday said that people should just let the president run the global economy because he knows what he has been doing. One thing he presumably knows is that his recent announcement destroyed $2.5 trillion in stock market wealth in the US, not to mention additional damage to non-traded firms and foreign firms.  That’s one of the largest one-day destructions of wealth ever achieved by a single individual, perhaps the largest. And here’s the very first article of the US Constitution: Article. I. Section. 1. All legislative Powers herein granted shall be vested in a Congress of the United States, which shall consist of a Senate and House of Representatives. Notice that it says All legislative Powers, not “Most”.  I’m still looking for the part of the Constitution where it says the president should “run the global economy”. There was a time when Congress did actually determine US trade policy.  The Institute for Policy Innovation recently produced a list of 15 treaties passed by Congress that President Trump violated in the past 24 hours.  I won’t list them all, but here are the first two and then the last two, to give you a flavor: On May 23, 1985, Congress passed a US-Israel free trade agreement.Donald Trump just broke it. On September 19, 1988, Congress passed a US-Canada free trade agreement.Donald Trump just broke it. . . .  On October 12, 2011, Congress passed a US-Colombia free trade agreement.Donald Trump just broke it.  And on January 16, 2020, Congress passed Donald Trump’s USMCA, a free trade agreement with Mexico and Canada. Donald Trump just broke his own four year-old trade agreement. I can recall a time when Congress had the power of the purse.  Decisions on taxes and government spending were made by Congress, and the job of the executive branch was to enforce those laws.  Today, congressional spending authorizations are treated as mere suggestions, which the president is free to accept or reject.  The President can enact the largest tax increase in history. Throughout history, intellectuals have repeatedly dreamed of the benevolent dictator, a leader that would cut through the messy job of reaching consensus and would rule in a bold and decisive fashion.  On a few occasions it even worked out, as we saw in Lee Kuan Yew’s Singapore.  But for every Lee, there are a dozen Maduros, Castros or Putins.  The wisdom of the crowd is not always correct, but on average it is less wrong than the wisdom of a single individual. The tariffs recently adopted by the Trump administration never would have been enacted by Congress.  We’ll see how they work out.  Bloomberg reports that the tariff announcement hurt the US stock market much more than foreign markets: US equity index futures tumbled more than 4% after Trump announced a sweeping series of tariffs following the market close on Wednesday, and a gauge of the dollar slumped. But the impact elsewhere was less extreme. The Stoxx Europe 600 was down 1.9%, while the euro was up 2.2% against the dollar, hitting its highest level since October. A broad gauge of Asian stocks fell as much as 1.7%. I wonder how that difference would be explained by mercantilists, especially those who have claimed that tariffs are an effective way of preventing America from being “taken advantage of by foreigners”.  Is this what they expected?  Did they expect the dollar to depreciate on the news? It’s worth noting that some of these trade treaties were clearly more than economic policy initiatives.  It is no coincidence that Israel was the first country to achieve a free trade agreement with the US—we have close ties with Israel related to security issues in the Middle East.  Trump’s repeal of this treaty is more than just economic policy, it’s also foreign policy. The IPI also had this to say: When did it become okay for a president to break treaties lawfully passed by Congress?President Trump is relying on the 1977 International Emergency Economic Emergency Powers Act (IEEEP), which empowers the president to act in cases of “unusual and extraordinary threat.” Can anyone argue with a straight face and a sound mind that the United States faces an unusual or extraordinary threat from literally every country on Earth? A 10% tariff was placed on Heard Island, which has a population of zero humans and a few penguins.  It does have a nice mountain however, a bit reminiscent of our Mt. Rainier: (0 COMMENTS)

It’s no surprise egg prices are soaring.  In October 2024, UMASS – Amherst economist Isabella Weber argued that price controls are needed to keep prices under control and, further, that the controls would not have the negative effects we usually predict, such as shortages, deadweight loss, etc.  I responded to her claims here.  One of the points I raised was: Furthermore, since the price being kept artificially low disincentivizes the supply curve from becoming elastic and/or growing, the costs of price ceilings persist longer than they would otherwise. Four months later, we see this in action.  The high prices of eggs is causing people to consider turning to backyard chicken coops or even renting chickens.  This is an example of the Second Law of Demand: “Elasticities of demand with respect to price are greater the longer the time after a price change” (Universal Economics by Armen Alchian and William Allen, p 116).  In other words, the longer prices remain relatively high, the more people will search out or develop substitutes, making the demand curve more elastic.  The same holds true for supply: the longer prices remain relatively high, the more creative people will be to bring supply to the market.  When eggs were $0.99 a dozen, it made little sense to have a backyard chicken coop, which has start up costs of thousands of dollars.  But, with egg prices pushing the double-digits (a dozen large eggs are selling for $9 at my local store), now the relative price of backyard coops has fallen and people are turning to that alternative.  The demand for eggs is becoming more elastic.  Same with supply, as we see people with coops selling or giving eggs to their neighbors. With price controls in place, this process would be much harder.  The market is moving toward a solution.  Price controls would have slowed this process.  Rather than ending shortages and controlling inflation, Weber’s proposal would have just turned the visible costs invisible.   (0 COMMENTS)