Within a decade, however, both elements of the tax-swap bargain collapsed. Congress quickly discovered that income taxes yielded far more revenue than the old tariff system they replaced. To pay for U.S. entry into World War I, they jacked the top marginal rate up to 77 percent in 1918. Attempts to bring the income tax under control succeeded briefly in the 1920s, but President Hoover raised the top rate to 63 percent and Franklin Roosevelt raised it to 79 percent. Under FDR, Congress also reduced the exemption threshold for lower-income earners. What started as a low “class tax”—a tax on only very high-income earners in 1913—became, by 1942, a “mass tax,” a broad-based tax on most American families. When Congress flipped back to the protectionist-dominated Republican Party in 1920, it restored the average tariff rate to 38 percent. In 1930, Congress again opened its doors to industries seeking government protection from the stock market crash. Its intended “stimulus” became the notorious Smoot-Hawley Tariff, which jacked average rates up to 59 percent and instigated a global trade war. The damages from the collapse of this original tax swap took decades to disentangle. Congress recognized its error and ceded its trade policy oversight to the State Department in 1934 as an emergency measure to bypass the tariff system. The liberalization of the global economy since World War II came about through treaties and trade agreements. These measures remain fragile, and they depend on an executive branch that continues to honor international agreements. If Trump abandons our free trade obligations with other countries, the Smoot-Hawley schedule still remains on the books. This is from David R. Henderson and Phillip W. Magness, “Don’t Substitute Tariffs for Income Taxes: You’ll Get Both,” National Review, January 28, 2025. Read the whole thing, which is not long. (0 COMMENTS)

[ANNUAL LISTENER SURVEY: https://www.surveymonkey.com/r/KYV5XPG. Vote for your 2024 favorites! Survey ends Feb. 9th.] Surely perfection is better than imperfection. But applying technology to improve decision-making can backfire. Listen as ed-tech innovator Daisy Christodoulou and EconTalk’s Russ Roberts talk about the costs of seeking perfection when technology is used to improve refereeing in sports. They also talk […] The post Coase, the Rules of the Game, and the Costs of Perfection (with Daisy Christodoulou) appeared first on Econlib.

The End of North America by Paul Krugman, Paul Krugman Substack, January 31, 2025. Excerpt: As I wrote the other day, in the three decades since NAFTA went into effect, North American manufacturing has evolved into a highly integrated system whose products — autos in particular, but manufactured goods more broadly — typically contain components from all three members of the pact, which may be shipped across the borders multiple times. Manufacturers developed this system not just because tariffs were low or zero, but because they thought they had a guarantee that tariffs would stay low. One way of saying this is that until just the other day there was really no such thing as U.S. manufacturing, Canadian manufacturing or Mexican manufacturing, just North American manufacturing — a highly efficient, mutually beneficial system that sprawled across the three nations’ borders. But now we have a U.S. president saying that a duly negotiated and signed trade pact isn’t worth the paper it was printed on — that he can impose high tariffs on the other signatories whenever he feels like it. And even if the tariffs go away, the private sector will know that they can always come back; the credibility of this trade agreement, or any future trade agreement, will be lost. So North American manufacturing will disintegrate — that is, dis-integrate — reverting to inefficient, fragmented national industries. DRH comment: Trump often talks about the beautiful taxes called tariffs. The tariffs are not beautiful. Quite the opposite: they will, as Krugman, says help dis-integrate a beautifully integrated manufacturing system.   Modern China, the Old USSR, and American Attitudes about Trade by Timothy Taylor, Conversable Economist, January 31, 2025. The GATT, formally known as the General Agreement on Tariffs and Trade but informally known as the Gentleman’s Agreement to Talk and Talk, was first signed by 23 countries back in 1947. Over the decades, all that talking led to a substantial decrease in tariffs all around the world. By 1994, the GATT morphed into the World Trade Organization. At that time, it has [sic] about 125 countries, accounting for about 90% of world trade. From a free trade perspective, it was a considerable success. Here’s my hypothetical question: Would the GATT have been able to expand the parameters of free trade around most of the world if it had also included the USSR?   Why RFK Jr. Is Dangerous to Public Health by Editorial Board, Wall Street Journal, January 26, 2025. Excerpt: Congress established the National Vaccine Injury Compensation Program in 1986 for children’s vaccines because an avalanche of litigation was driving manufacturers from the market. The program allows patients who believe they’ve been harmed by vaccines to file claims with the government for compensation, which are adjudicated in special vaccine courts. Why do vaccines receive more liability protection than medicines? For one, the population of potential plaintiffs is much larger for children’s vaccines than for any other medical product. Juries are especially sympathetic when it comes to children, so the payouts and potential liability are also much larger. If patients don’t like the vaccine court judgment, they can still sue manufacturers in federal court. But they rarely do since the standard for proving claims is higher in federal court. But as HHS Secretary, Mr. Kennedy could take action to assist his trial-lawyer pals. The HHS Secretary can add or remove vaccines from the compensation program, as well as specify injuries eligible for compensation. Removing vaccines from the program would open up manufacturers to mass torts based on weak evidence, including animal studies and scattered human cases that purport to link injuries to the shots. DRH comment: It’s nice to see the Journal editors not be swayed by the MAHA [Make America Healthy Again] push for Bobby’s confirmation. I’ve had a number of friends, who I thought agreed with me, tell me that we need the government to regulate, more than it does, what goes in our food. They often use the same arguments that I, and, I thought, they have been arguing against for years, namely, how little power individuals have to choose their foods. I also found Caroline Kennedy’s statement against her cousin interesting. It amounts to “Bobby is a Kennedy.” I was flabbergasted, but shouldn’t have been, by her statement that if Bobby is confirmed at secretary of HHS, he will be in charge of our nation’s health. Who knew?   My Conversation with an Ivermectin Prescriber by Charles L. Hooper, Incidental Insights, February 1, 2025. Excerpt: After finding a few nearby pharmacies that agreed to fill the prescriptions he [Dr. Stephen Banister] wrote—the pharmacists had studied the same information and saw the potential—he started treating patients. Patients who went to other pharmacies were told that ivermectin wasn’t approved by the FDA for COVID-19 and were sent away empty-handed. He redirected them to his preferred pharmacies. For every patient he treated, he instructed them to report back every day. If the patient was getting worse, Banister needed to know. That was never the case. Patients would report the next day that they felt a little or a lot better. The following day they would feel even better. He treated 100 to 200 patients and, while some got better quickly and others got better slowly, they all improved and not a single patient needed to be hospitalized. Charley also references a number of pieces that we co-authored on ivermectin.     (0 COMMENTS)

The imposition of high tariffs by President Donald Trump yesterday suggests a review of the elementary economics of this sort of government intervention. A tariff (or tax) imposed by the government of country D (“domestic”) on a good G imported from country F (“foreign”) has three major effects. First, the tariff increases the price of G in country D, including the prices of the Gs domestically produced: there cannot be two different prices for the same good in a free market. Second, the higher price of G in country D reduces its quantity demanded there but, in the usual simple model (and its college-level graphical representation), increases the proportion supplied by domestic producers. Third, consumers (or business input buyers and their own customers, up to the final consumers) in D are restrained in their preferred trades. Details and qualifications don’t change the gist of these conclusions. Consider: (1) As economists know, it is not impossible that the price of G in D rises less than the tariff. If the residents of D consume a large part of the Gs produced in F, the reduction of the quantity demanded in D may push down the price of the imports—the producers in F “eating” part of the tariffs. What happens is that producers in F are losing such an important part of their market that consumers in D can bid down the price of G. This special case, which opens the possibility of an “optimal tariff” higher than zero, will not be frequent and will rarely cancel the whole price increase in D. Indeed, multiple economic studies have shown that American consumers paid most of the tariffs, if not all, imposed by Trump during his first mandate. It may still be the producers of some goods imported into the United States (D) from Mexico or Canada (F) will absorb part of the tariff, but this will not generally be the case. That Donald Trump said he is sparing oil products from the highest tariffs announced yesterday would suggest that he himself, intuitively and confusedly, is somehow conscious that tariffs are generally paid by the consumers of the country whose government imposes them. (2) Assuming, as economists do, that some individuals in D prefer the Gs produced domestically to those produced in F at equal price, quality, and brand reputation (“national preference”), the reduction in quantity demanded in D will first hit the Gs produced in F. This explains why producers (shareholders and workers) of G in country F will also suffer from the tariffs, and why they will lobby their government to retaliate against some other goods produced in D. To the extent that the residents of D have no (individual) “national preference” (they are simply free individuals in a free country or they can’t distinguish between gasoline produced from oil imported from bad Canadians and that produced by good Americans), the tariff may bring less new production in D and less reduction in imports than otherwise. (3) From the perspective of human welfare, the third consequence—the reduction in trade among willing traders—is the most important even if it may not be immediately visible. Trade is the essence of economic (and social) life. Individuals specialize in what they do best (or least badly) and sell their products for lower prices than less efficient producers could quote. Buyers and final consumers thus obtain more for less: they sell their labor services to productive and competitive businesses at home and buy their goods from the most productive ones, whether the latter are in the same town, the same state or province, or across national borders. A tariff interferes with this process. Competition and trade do create disruptions, but there is no other way to maximize general prosperity. Disruptions and commands by political authorities give no guarantee of that as human history tragically shows. At the limit, the alternative is between trade and war. Trade retaliation only makes things worse. It is irrational from the point of view of general welfare: when you (the domestic ruler) hit your consumers in the face, I (the foreign ruler) retaliate by also hitting my consumers in the face. For anybody without cognitive limitations, I believe, the elementary economics of trade is not very difficult to understand even if an effort is necessary. But there is something more difficult to learn, on the border of economics and moral-political philosophy. I fear this will be forever unknowable to Trump and all those who don’t clearly distinguish between collective and political choices on the one hand, and individual and private choices on the other hand. Competition and disruption (whether by trade, technological progress, change in consumer preferences, etc.) can, at least temporarily and locally, disadvantage some individuals. But from the perspective of general prosperity and human flourishing, it is better that any individual be constrained by the configuration resulting from the equal liberty of all individuals than to be bossed around by the coercive actions of a political ruler, whether a person or a collective. ****************************** The Great Wall of America, by DALL-E (very imperfectly) (0 COMMENTS)

Studies of happiness often find a positive correlation between income and subjective well-being. Put simply, rich people tend to be happier than poor people.Of course, correlation by itself doesn’t prove causation. In the past, I’ve suggested that the positive correlation largely reflects reverse causation. Happy personalities are likely to be more motivated and capable of earning money. Lyman Stone recently directed me to a study showing that genes linked to higher income are associated with much better mental health. The study looked at two sets of genes, one associated with higher levels of education and another associated with more income for any given level of education.  (Presumably the latter are linked to other traits, such as work ethic, self-control, ambition, charisma, prudence and other qualities that are useful in earning more money.)   To be clear, I am not suggesting that money has no impact on happiness.  Rather, I believe the impact is fairly small, and that most of the observed correlation between wealth and happiness comes from the fact that certain types of people are both more likely to become rich and more likely to have happy personalities. I’ve spent multiple years in each of the 5 major income quintiles, and I have never noticed any impact on my happiness from moving to a different income category.  My happiness level seems to reflect my innate personality, not my income. PS.  For decades, philosophers have debated the question of happiness.  What is it?  At age 69, I feel like I’ve finally discovered the answer.   (0 COMMENTS)

There are two competing narratives about the causes of the tremendous destruction of buildings and lives that the recent Southern California fires have wreaked. One group of people blames the destruction on climate change. Another group blames it on bad government policy that has nothing to do with climate. Which side is more correct? The second side. Even if we take as given the idea that climate change has caused fires to be more destructive, governments at all three levels—federal, state, and local—have implemented policies that caused the Southern California fires to be much more destructive than they would have been. Moreover, there is little evidence that climate change was a major cause of the fires. This is from David R. Henderson, “California Burning: Causes and the Way Forward,” Defining Ideas, January 30, 2025. And: Let’s say you that you believe that climate change, a.k.a. global warming, has made fires more extreme. If you think that, doesn’t it follow that you should prepare for such fires? It’s not as if we’re totally helpless. So, let’s consider the various claims about human causes. When I was earning my PhD in economics at UCLA, many professors’ favorite way of posing a question on an exam was to make a statement and ask us to say whether it was true, false, or uncertain. That’s how I’ll evaluate the main claims. I look at the role of Mayor Karen Bass’s absence, the water system, the fire department (alleged) cuts, fire department personnel, trimming back brush, and the role of climate change. Another excerpt: I conclude, therefore, that the claim about the empty Santa Ynez Reservoir being a major cause is uncertain. But here is what’s true. Governments tend to neglect long-term improvements in infrastructure. Why? Incentives. Government managers of government assets have little incentive to preserve and improve them. If they do it well, they capture none of the value they create. If they do it badly, they lose almost nothing. At worst, they get fired, and that’s not even a given. Think of how often we hear about government bureaucracies failing spectacularly, with the bureaucrats in charge holding on to their jobs while taking no pay cuts. Even worse, sometimes legislatures react to bureaucratic failures by giving the bureaucracies more power and bigger budgets. Private owners, by contrast, have a strong incentive to preserve and improve assets.   Then I look at how government regulation will hamper recovery.   Read the whole thing. (0 COMMENTS)

Over the last several years, there have been no shortage of books arguing that liberalism, in the broad sense, has gone wrong over the last few generations. Every now and then I read one of these books to see what I might learn or gain. As Edmund Burke said, “He that wrestles with us strengthens our nerves and sharpens our skill. Our antagonist is our helper.” The antagonist of liberalism I’ve most recently read is R. R. Reno and his book Return of the Strong Gods: Nationalism, Populism, and the Future of the West. Over the next several posts, I will be going through his book and unpacking his overarching argument. As is always the case when I do these extended reviews, the initial posts will simply be my attempts to outline and explain his argument as clearly as I can, with my own views on the matter kept aside. Any points of endorsement or criticism I have will be saved for the end of the series. To the extent that readers have questions or comments about Reno’s ideas, I will do my best in the comments to answer them as I believe he would, rather than with my own point of view. With that preamble out of the way, let’s see what Reno has to say. Reno’s book leans heavily on a metaphorical idea of strong and weak gods. This notion isn’t about actual deities – as Reno puts it: By “strong gods” I do not mean Thor and the other residents of the Old Norse Valhalla. The strong gods are the objects of men’s love and devotion, the sources of the passions and loyalties that unite societies. They can be timeless. Truth is a strong god that beckons us to the matrimony of assent. They can be traditional. King and country, insofar as they still arouse men’s patriotic ardor, are strong gods. The strong gods can take the form of modern ideologies and charismatic leaders. The strong gods can be beneficent. Our constitutional piety treats the American Founding as a strong god worthy of our devotion. And they can be destructive. In the twentieth century, militarism, racism, communism, racism, and anti-Semitism brought ruin. That last point is a key item in Reno’s argument. The many gods of Greek and Norse mythology had wildly different characters. Some of these gods were kind and compassionate, some were mighty but aloof, and some were capricious or outright antagonistic towards mortals. Reno’s metaphorical strong gods, too, can be similarly varied in their social influence. The strong gods of Reno’s work can be socially unifying and beneficial, but they can also be dangerous and destructive. Not everything that “unites societies” by means of “passions and loyalties” will be peaceful or virtuous. Strong gods can be wicked gods. But, Reno says, there are also weak gods. Weak gods are ideas that are meant to make society ever more open, and to continually soften away any rough edges. The modern mind, Reno says, “seeks the ministry of weak gods, or better, the gods of weakening who open things up.” He goes on to say, Today, one of our leading imperatives is inclusion, a god who softens differences. Transgression is prized for breaking down boundaries – opening things up. Diversity and multiculturalism suggest no authoritative center. One major characteristic of “weak gods” is that the weak gods tend to simply be focused on negation – on the vices we seek to avoid, rather than the virtues we seek to cultivate. Those who are most devout in their service to the weak gods would describe themselves as being committed to antiracism, antifacism, antidiscrimination, and the like: These anti imperatives define the postwar era. Their aim is to dissolve the strong beliefs and powerful loyalties thought to have fueled the conflicts that convulsed the twentieth century. What, exactly, is the long run result of these “anti” imperatives? Reno puts it this way, In the pages to follow, I will show how anti-racism and anti-totalitarianism inspired a general theory of society. That theory has many forms, some explicit, others tacit. But it is characterized by a fundamental judgment: whatever is strong – strong loves and strong truths – leads to oppression, while liberty and prosperity require the reign of weak loves and weak truths. Strong national loyalties run the risk of leading to the kind of aggressive, imperialist conquests of Nazi Germany. Weakening the sense of national identity and national loyalty thus mitigates this risk. Strong beliefs in moral rules and truths can lead to the marginalization and ostracism of those who sit outside of the strong social consensus. Weakening public morality – or, equivalently, making public morality ever more open and avoiding the casting of moral judgment – prevents persecution. Here’s an example I think Reno would agree illustrates his claim. In American culture, the importance, even primacy, of the traditional, two-parent household was a strong god. People were expected to get married, and to be married before having any children. Once married, families were expected to stay together. When traditional marriage was a strong god, people who remained unmarried for too long, or who had kids before being married, were looked down upon. Divorce was shunned, and single parents could be pariahs. The strong god of traditional marriage, Reno might say, was replaced with the weak god of nonjudgmental acceptance of all forms of family life as equally valid. Truth is a strong god, and truth is by its nature is exclusionary. Truth, to be upheld, keeps us within barriers, and if you are out of alignment with the truth, that is a failing on your part you are responsible to fix. The strong god of “the truth”, on the other hand, can be replaced by the weak god of “personal truth,” where everything is opened up, where people can unironically say, as one primer against “white supremacy culture” recently put it, “something can be true but not be my truth.” The weak god of “personal truth” would also affirm the reverse – something can validly be “my truth” even if it isn’t true. And this, Reno thinks, is the real source of the woes facing modern society. Society cannot be held together simply by values of negation, or by being endlessly open-ended. The real problem isn’t liberalism, per se, but rather the rule of weak gods over society. As Reno puts it, The West is careening toward crisis not because of a defect deep within modernity. Our troubles do not stem from William of Ockham, the Reformation, John Locke, capitalism, or modern science and technology…The fall of man left every civilization, every era under the law of entropy, which is why renewing shared loves and unifying loyalties is one of the primary arts of leadership. This is what we lack today. The distempers afflicting public life today reflect a crisis of the postwar consensus, the weak gods of openness and weakening, not a crisis of liberalism, modernity, or the West…Our time – this century – begs for a politics of loyalty and solidarity, not openness and deconsolidation. We don’t need more diversity and innovation. We need a home. And for that, we will require the return of the strong gods. But who drove the strong gods out of society, and why? That will be the topic of the next post. (0 COMMENTS)

In keeping with my habit of taking time to appreciate the importance of the small stuff in life, I want to talk about one little thing that’s changed in my lifetime that, for me at least, has been a big improvement – the experience of going to the movie theater. More specifically, how the issue of seating is handled at the theater. When I was in high school, when you wanted to see a movie, you first had to go to the theater to buy the tickets. Online purchases were not an option at that point. Also, and more importantly from my perspective, seating was handled on a first-come-first-served basis. Now, some people don’t care very much about where they are seated in a theater. Others care a lot – if the only seat left is in the front row on the far left side, it can really hamper their ability to enjoy the movie. I’m one of the ones who cares a lot. So in order to make sure I got a good seat, I needed to be among the first to walk in the theater. With very popular movies, this often led to people arriving hours (sometimes days!) before a movie was released to wait in line. While economists usually love the effects of competition, there are exceptions. Competition in a zero-sum situation is wasteful. Waiting in line is a zero-sum game, where one party can only gain at the expense of another. This in turn can lead to more and more resources being spent to ultimately producing the same outcome – the resource in question here being time and the opportunity cost of what else could have been done with that time. Maybe at first showing up an hour before the movie start time would be enough to be assured you’d get one of the good seats. But once other people catch on to that and start showing up an hour early as well, suddenly you might need to show up an hour and a half earlier – then two hours earlier, and so on, and in extreme cases you can have people literally camping out days ahead of time waiting for a movie. These are huge increases in time and opportunity cost, all leading to the same result. But modern technology has made this unnecessary. Now you can buy movie tickets online, days or even weeks ahead of time. And most importantly (for me anyway), movie theaters now have assigned seating, so when you buy your tickets you can also select your seat. Now, seats are still assigned on a first-come-first-served basis with this system. The people who buy their tickets earliest get the first choice of seating. But now the time-related transactions costs have been massively reduced. People don’t need to spend hours of their time sitting in a line to “buy” a better seat. This new system also makes it easier to have more information when making a choice. I might see a movie I want to watch and get ready to buy a ticket, only to then see that it’s already a pretty full showing and there are no good seats left. Knowing this in advance lets me know I might want to look for another showtime on another day, where better seating might be available. And once I’ve selected a ticket, I already know that my spot is locked in, so I don’t feel any need to arrive extra early to the theater to make sure I can find a good seat. And if I’m going to the movies with a group of people, we don’t need to all show up early to make sure there are enough free seats in a row for everyone to sit together. But of course, not everyone cares that much about where they end up sitting. But this technological improvement is still good even accounting for this, because it can ensure a higher level of consumer surplus. Suppose there’s a movie in theaters we both might want to see. Tickets are $15. I value seeing the movie with a good spot at $25, but if I had a lousy seat, I might only value it at $12. You value it at $20 regardless of where you sit. With pre-assigned seating, if only bad seating (from my perspective) is available, I will pass on that showing because it would be a three dollar loss for me to take it, but for you it’s still a five dollar gain. This will tend to cause the final tickets for any showing to go to the customers who value them those tickets more – leading to a higher total consumer surplus at a much lower cost in time. I freely admit that this is far from a life changing shift in my quality of life – it’s just a nice improvement. And maybe to you, it’s not even worth thinking about. But these small, incremental improvements in the quality of life really build up over time – and taking a moment to notice them and be grateful for them is definitely a worthwhile exercise. (0 COMMENTS)

Prices on the real estate market in Los Angeles County confirm elementary economic theory. The economically illiterates seem surprised. See “Rent Rose by 10 Percent Across L.A. Country After Fires. That’s Illegal,” Washington Post, January 23, 2025. The Wall Street Journal writes (“After the Fires, Bidding Wars and Cutthroat Demand Take Over L.A.’s Rental Market,” January 16, 2025): Renters are facing bidding wars and inflated prices, with some offering to pay above the listed rent or multiple months upfront. Landlords are taking advantage of the situation, raising concerns about price gouging. On a free market in ordinary times, both suppliers and demanders are “price gouging.” Note that the expression has no analytical usefulness (it does not help understand the social world) and no relevance to an ethics of reciprocity between free individuals. The suppliers try to get as high a price as possible given the constraint of competition. The demanders on their side try to get as low a price as possible given that many of them are bidding it up like in an invisible auction. On a free market, every price is the result of “gouging” from both the suppliers and the demanders. It is in emergencies that we see this more clearly. The supply of some good or service (say housing) is suddenly reduced—by the fires in Los Angeles County. Consumers, whose demand has not changed, face fewer apartments for rent or houses for sale than they want. The ones who attach more value to housing in the affected market—say, people whose employment place is in the vicinity or who have children in a local school—will bid up rents and house prices. Others will prefer to move to a smaller place or with their parents or friends, or to move farther away. In the short run, the supply of housing is fixed, so a rise in prices is how, in a free market, the available supply gets distributed. The consumers are the ones who bid up the prices. The suppliers obtain a windfall, as consumers get one when building activity is high (or when economic conditions suddenly favor their own businesses). In the longer run, price increases will bring new housing suppliers in the market. By trying to profit from higher prices, “gouging¨” suppliers will gradually increase supply and push prices down. Note the crucial role of free-market prices: they signal both the intensity of demand among consumers and the cost of supply in terms of what the required resources (industrial land, labor, etc.) would produce elsewhere in the economy. (See the always interesting Ryan Bourne and Sophia Bagley’s “Gov. Newsom’s Price Controls Will Slow LA’s Recovery,” Substack, January 15, 2025.) To the price mechanism, two alternatives or a mix of them exist: a permanent shortage—meaning the price is good but the shelves are empty—or some authority giving orders. A third alternative is tribal poverty. On price controls and shortages, think of the old Soviet Union, where the non-nomenklatura buyer faced a 10-year waiting list to buy a car, or the Stockholm housing market, where the waiting for a rent-controlled apartment is 8 to 10 years. When market prices are capped by government, a free black market partially takes over for consumers who prefer to have the good rather than forego it and for suppliers who choose to sell at a higher price—especially since, at the previous price, they have more customers than what they have to sell. To understand these conclusions, only basic economics is needed. Business people get an intuitive understanding of supply and demand, or else they don’t remain long in the market. There is nothing like actually learning the elementary theory of supply and demand: a demand curve slopes downward, a supply curve (generally) upward. Quantity demanded is read along the demand curve, and quantity supplied along the supply curve. When an emergency situation decreases supply, it’s the consumers who are doing the “gouging,” that is, the bidding; if there were no consumers, no price would be bid up. Imagine an auction where no buyer shows up. The Washington Post story mentions the California Attorney General who, from the height of his economic ignorance and with power signs in his eyes, supports another system than individual liberty: On Wednesday, California Attorney General Rob Bonta (D) announced charges against a real estate agent for allegedly attempting to price-gouge a couple who lost their home in the Eaton Fire. … The charge could carry a fine of up to $10,000 and one year in jail. “These predators are looking at the disaster with dollar signs in their eyes,” Bonta said at a Jan. 16 news conference. ****************************** DALL-E is not very literate either (I had to put the supply-demand graph myself on the screen and I could not persuade the robot to write “supply,” not “pupply”) (0 COMMENTS)

High food prices were a big problem for the Biden administration. It will be interesting to see if the problem reoccurs under the new administration. Here’s Bloomberg, discussing a recent crackdown on illegal aliens in Florida: The law, SB1718, requires businesses to use a federal system called E-verify to confirm that every employee can work legally in the US — or face $1,000-a-day fines. On Jan. 13, DeSantis proposed toughening the laws further by requiring county sheriffs to help federal agents arrest and detain migrants.There’s a shortage of people willing to harvest fruit and vegetables — known as stoop work — and farmers fear it will worsen if Trump imposes a Florida-style crackdown across America.“A lot of people left Florida for Georgia, north, scared,” DiMare said as he walked one of his fields this week. “Farmers had to let their crops rot.” The article suggests that the expulsion of undocumented workers could lead to fruit and vegetable production moving to other countries, where labor costs are lower: There’s a wave of populism currently sweeping the globe.  But as noted in a previous post, populists face some uncomfortable trade-offs.  It’s popular to expel undocumented workers.  It’s popular to put tariffs on imports.  It’s popular to run massive budget deficits.  It’s popular to have expansionary monetary policies. So what’s not popular?  Inflation.  Housing is another area where rising prices have impacted living standards.  It also happens to be an area where mass deportations could impact supply: The Department of Homeland Security estimates that there are as many as 11 million undocumented immigrants in the United States, and around 90% of them are of working age. Furthermore, undocumented workers account for nearly 14% of the construction workforce, according to the American Immigration Council, meaning Trump’s deportation plans could hit the sector hard. Garland explained that if the proposed deportations happen, he expects the cost of labor and supplies for homebuilders would continue to rise, which may reduce the already slim supply of homes. To be clear, none of this means that deporting undocumented workers is necessarily a bad idea.  There are costs and benefits to almost any policy. But as President Biden discovered with his green energy policies, voters tend to focus more on the costs than the benefits.  Something to think about.  (0 COMMENTS)