Category Archives: Economics

Jerry Z. Muller – The Tyranny of Metrics

Jerry Z. Muller – The Tyranny of Metrics

This short book is one of the most useful I’ve read in recent years. I will be citing it often. Measurement is a good and useful thing, but it has its limits. Muller’s job in this book is to remind people of those limits. For example, improving school test scores sounds like a good idea, and was a key part of President George W. Bush’s No Child Left Behind education bill. But teachers started teaching to the test, ruining the purpose. This on-the-ground was entirely predictable, but regulators were so intent on using metrics to measure performance, they didn’t think it through.

One key point has to do with social science research. Few journals will publish papers that don’t measure anything–but not everything is measurable. This means that when policymakers and pundits are evaluating a policy, they can leave out important policy impacts. Either they dismiss non-measurable concerns because there is no published empirical research on it, or such concerns never enter their minds in the first place. Like a drunk looking for his lost keys, they only look where the light shines. Better to admit that things exist outside of that light. Better still to create one’s own light and see what is out there. Statistical significance matters, but it should not replace human judgment. It is a complement, not a substitute.


A Tacit Admission of Who Pays for Tariffs

Over at the Washington Post, Heather Long has a writeup on President Trump’s partial delay, until near the end of the holiday season, of new tariffs on popular Chinese-made consumer products. I found this quote interesting:

“The decision to delay new tariffs on Chinese-made toys, smartphones, laptops and other popular holiday gifts is a tacit admission that consumers pay for tariffs, not Chinese producers,” said Ryan Young, a senior fellow at the Competitive Enterprise Institute.

Read the rest of the otherwise-excellent piece here.

CEI Experts: Delay on China Tariffs Shows Real Burden is on Consumers

Press statement, originally posted at

On news today that the US Trade Representative will delay new tariffs on some consumer items until Dec. 15, as well as exclude some products from tariffs. Competitive Enterprise Institute Senior Fellow Ryan Youngand Vice President for Strategy Iain Murray pointed to the tacit admission that consumers are, in fact, burdened by tariffs, contrary to what the Trump administration has maintained.

Senior Fellow Ryan Young said:

“The decision to delay new tariffs on Chinese-made toys, smartphones, laptops, and other popular holiday gifts is a tacit admission that consumers pay for tariffs, not Chinese producers. The administration has been saying otherwise, but it is good to see that they do not believe their own words. Several rounds of China tariffs have so far failed to encourage the Chinese government to make needed reforms. Beijing has instead consistently retaliated with its own trade barriers, hurting the U.S. economy as well as their own. Tariffs do not work. It is time to scrap them in favor of more effective policies. Engaging the WTO dispute resolution process is one such policy and one where the U.S. has an 85 percent success rate. Rejoining the Trans-Pacific Partnership would add to international pressure on Beijing to rein in its illiberal policies. At the very least, Congress needs to take back the tariff-making authority it delegated away to the president back in the 1960s and 1970s.”

Vice President for Strategy Iain Murray said:

“The administration appears to have decided that Christmas is a health, safety, or national security issue, using powers meant for those purposes to delay tariffs on the sort of products Americans like to gift each other on that holiday. At least that recognizes that these tariffs would have been a de facto tax on holiday shopping. The decision also underlines how the administration is abusing power granted it by Congress – power Congress should reclaim urgently.”

Related report: Common Myths and Facts about Trade

The Left Hand Knows Not What the Right Hand Is Doing

Via Politico‘s Morning Trade newsletter: “A new analysis of Trump’s USMCA shows that more than half of the text is identical to the Trans-Pacific Partnership,which Trump withdrew from on his third day in office.”

The study is “How Much of the Transpacific Partnership is in the United States-Mexico-Canada Agreement?,” by Wolfgang Alschner and Rama Panford-Walsh, both of the University of Ottawa.

Stephen Davies – The Wealth Explosion: The Nature and Origins of Modernity

Stephen Davies – The Wealth Explosion: The Nature and Origins of Modernity

In some ways, I have been waiting on this book for 20 years. When I was college age, I saw Davies give several historical lectures at Cato University seminars, read numerous articles by him, and have met him a few times over the years at various events. This book captures his big-picture thoughts on world history. Why is the world so rich today compared to ancient or medieval times? Davies’ answer is similar to Deirdre McCloskey, but not quite the same: cultural attitudes towards openness and change, plus compatible politico-economic institutions are what did it.

But it’s not so simple as that. Nothing is in history. The arrow of causality runs in both directions. Guns, germs, and steel played a role, and so did geography. There are also several instances where a modern takeoff began, but couldn’t sustain itself. There were flowerings of various degrees in China, Japan, Peru, Africa, and Europe, but none of them stuck until 19th century England. Davies argues that there is nothing special about Europe or its people that made it destined to be the place where a modern wealth explosion first sustained itself and spread throughout the world. But Enlightenment ideas, in combination with the many, many other factors listed above, seem to be what did it.

Davies’ other contribution is a proper understanding of what modernity is. It is not a thing or a place, or even a certain set of technologies, or amount of wealth, or percentage of urban dwellers. Modernity is a process. Better players don’t make a better game; people are the same today as we were back in Caesar’s day. But better rules make a better game, as do the players respecting those rules and knowing their importance. Institutions, and the people working within them, need to prefer neophilia to neophobia. They need to be tolerant of people different from them, whether that’s religion, race, appearance, or numerous other characteristics. People who do not go along will not get along—and if political institutions do not encourage or allow people to act civilized, very often they will not.

Davies’ view of world history is unusually humble. He knows enough to know he doesn’t know everything. He doesn’t give a single magic bullet cause for modernity because there isn’t one. It is multicausal, and even then, modernity relies on having an ongoing process in place, not this or that outcome.

As important, he reminds the reader that the culture and institutions behind that process are fragile and reversible. They must be defended.

Tariffs fail to move China, Congress Should Revoke Pres. Trump’s Trade Authority

This is a press statement from CEI. Originally posted here.

President Trump announced a new round of tariffs on China today, pledging to levy a 10 percent tariff on $300 billion of Chinese goods on September 1.

CEI senior fellow Ryan Young said:

“President Trump’s latest China tariffs will begin to affect consumer prices just in time for the holiday season, and will likely encourage a round of retaliatory actions from Beijing. Previous tariffs have repeatedly failed to spark reforms from China’s government, and this iteration will be no different.

“It is likely not a coincidence that President Trump announced the new tariffs within hours of Congress beginning its August recess. Congress is out of session until September 9, more than a week after the tariffs are set to take effect. Multiple bills to return tariff-making authority to Congress have growing bipartisan support. Congress should pass one of them upon its return and prevent President Trump’s tariffs from causing further economic and diplomatic harm to the United States.”

Read more:

A Yardstick for Reform

While recently revisiting my old friend the Export-Import Bank, which is up for reauthorization this September, I was reminded of a quote from Nobel laureate Ronald Coase’s 1975 essay “Economists and Public Policy,” which appears on p. 57 of 1995’s Essays on Economics and Economists:

An economist who, by his efforts, is able to postpone by a week a government program which wastes $100 million a year (which I would call a modest success) has, by his action, earned his salary for the whole of his life.

By this measure, the Ex-Im Bank controversy over the last several years was a success, though there is more work to be done. In 2014 the agency’s authorization lapsed for nearly a year, and after that it was limited to small transactions until May 2019. The total savings run into the tens of billions of dollars.