Some Links
Warren Coats emphasizes the importance of productivity. A slice:
In 1900, US income (GDP) was $4,096 per capita in 2023 dollars, while in 2023 it was $81,695. The US poverty rate fell from 56% to 11.1% over the same period. How was such a dramatic increase in our widely shared standard of living possible? The answer (without explaining how it came about) is increased labor productivity. Each worker has been able to produce more and more and hence earned a higher income.
Putting this differently, more and more people were automated out of their old jobs allowing them to find new ones and produce new things increasing overall output/incomes. Such dynamism does carry the temporary cost of finding new jobs and developing new skills. At any point over the last century that cost could have been prevented by freezing productivity improvements, but that would also have ended the growth in our incomes. Thank heavens such crazies did not win out. But it seems they never stop trying.
The International Longshoremen’s Association (ILA), the union that represents some 47,000 dockworkers, is threatening to strike if the United States Maritime Alliance (USMX), which oversees port operations, goes forward with plans to automate more of these port activities.
Edward Conard explains why the United States outperforms Europe economically. Two slices:
While Europe has created 14 companies worth more than $10 billion in the past 50 years, with about $400 billion of market value in total, Americans have created nearly 250 such companies, worth $30 trillion.
That success has driven up America’s middle-class incomes. The median disposable U.S. household income, according to the OECD, is now 25% greater than the median German household and 60% greater than the median household in Italy.
Europeans’ incomes would be even lower if they weren’t free-riding on American innovation, defense spending and higher drug prices, which incentivize research. America’s median incomes would be higher if we had more talent devoted to supervising and creating jobs for blue-collar workers or Northern Europe-like distribution of test scores.
The outsize success of America’s talented entrepreneurs doesn’t stem from their superior intelligence. It comes from working at companies such as Google and Microsoft, which mine the technological frontier and expose employees to valuable knowledge, insights and opportunities. Apple is worth more than the 30 largest German companies combined. Apple’s employees and its alumni use their knowledge and training to create more value than their counterparts in Europe.
Unlike Europe, the enormous success of American entrepreneurs motivated an army of talented Americans to get valuable on-the-job training, work longer hours, take risks and succeed. A small amount of success bubbles up from a large pool of failure.
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When entrepreneurs capture as little as 5% of the value they create for others, it makes little sense to encourage successful risk-takers to quit working long before they achieve outsize success. With the effect technological success has on the productivity of talented American workers, who are our constraint to growth, and the effect of their productivity on the growth of middle-class incomes relative to Europe, that’s not a “policy failure.”
James Pethoukoukis cheers “‘cutthroat’ American capitalism.”
Ramesh Ponnuru warns of the disingenuousness of Trump’s latest justification for tariffs. Two slices:
Howard Lutnick, Donald Trump’s choice to be commerce secretary, suggested at a news conference with Trump on Monday that “reciprocity” would be the watchword for the new administration’s trade policy. The president-elect agreed: “If they tax us, we’ll tax them the same amount.”
It’s an attractive idea. It sounds fair, and frames the alternative as letting other countries take advantage of us. “Our country loses to everybody,” Trump groused to the gathered media. Even free traders might think reciprocal tariffs are a useful tactic to get other countries to let in U.S. exports.
But the idea has a track record, as does Trump. Those records belie the sales pitch.
Trump’s premise — that we practice free trade while other countries tax our products — is false. Scott Lincicome, a policy analyst at the libertarian Cato Institute, points out that dozens of countries have lower average tariffs than the United States does. Former senator Patrick J. Toomey (R-Pennsylvania), writing in the Wall Street Journal recently, noted that Canada, Britain and Europe “all impose lower taxes on American manufactured goods than the [United States] imposes on comparable imports.”
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The man just likes tariffs. They don’t have to be a response to other countries’ trade barriers to win his support, and they don’t have to win tariff-lowering concessions from them to keep his support. And to be fair, why should he want to limit tariffs in that way? If it really were true that tariffs will “make our country rich,” as he also said on Monday, it would be irresponsible not to raise them.
Whether tariffs will have such positive effects is something nearly all economists doubt, but that’s a debate we can have. “Reciprocity” is a distraction: Trump doesn’t take it seriously — and neither should anyone else.
“Amazon Warehouses Benefit Local Economies, Study Finds.”
Michael Cannon calls for a reform of the tax treatment of health care.
Paul Schwennesen documents more climate lunacy. A slice:
Denmark, according to The New York Times, is going ahead with its livestock “Burp Tax.” Though hotly contested, the Danish government has nevertheless finally settled on levying farmers 300 kroners (~$43) per ton for carbon dioxide emissions, ramping to $106 per ton by 2035. As is the case with many of these farm-targeted green interventions, the action is ludicrously ineffectual at addressing the trumped-up problem, while remarkably effective at further cementing state controls over economic production.
Steven Koonin describes “the right way for Trump to ditch the Paris Agreement.” A slice:
Mr. Trump should highlight these failings and the absent evidence of a “climate emergency” as part of an explanation for the country’s exit from the agreement. Providing this rationale would create a moment for European countries to admit that the climate emperor has no clothes, giving them license to confront the awkward and obvious truths they’ve been avoiding for years.
In its withdrawal, the U.S. should urge all nations to eliminate energy poverty. Energy inequalities across the globe are astounding. On average, an American citizen uses 30 times as much energy as a Nigerian does. There are also inequalities within our own borders: More than a third of U.S. households experience some form of energy insecurity. That fraction will increase if decarbonization efforts continue their current course.
Washington’s goal should be energy for all. Providing affordable and reliable energy, no matter the source, would do far more good for humanity than discouraging fossil fuels based on fear of some vague climate catastrophe. U.S. leadership on this front would counter China’s influence in the Third World through its Belt and Road Initiative. American efforts would increase demand for U.S. energy and energy-technology exports, setting the stage for the future deployment of cost-effective clean technology around the globe.
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