Category Archives: Economics

In the News: Minimum Wage

Ingrid Case at Employee Benefit News has a thorough writeup of my recent minimum wage paper.

The article is here. The paper is here.


Alan Greenspan and Adrian Wooldridge – Capitalism in America: A History

Alan Greenspan and Adrian Wooldridge – Capitalism in America: A History

Deirdre McCloskey’s review is here. An economic history of the U.S. that is optimistic without being to starry-eyed. Greenspan and Wooldridge say wise things about two of my main policy interests. Early on, they have an excellent 30,000-foot level discussion of regulation. They don’t directly cite my colleague Wayne Crews or his Ten Thousand Commandments, but some of his numbers and many of his arguments appear prominently.

Later in the book, they give a defense of modern prosperity, complementing thinkers such as Julian Simon, Matt Ridley, Hans Rosling, and Deirdre McCloskey. They also draw on Cox and Alm’s ever-useful measure of how many hours an average person must work in order to afford a loaf of bread, a tv, a car, and other things. For the better part of two centuries, Americans have been getting more and better goods in return for steadily decreasing amounts of effort.

In between these two highlights is a fairly comprehensive business history of America, from roughly the founding up until now. Their discussion of the rise of the Carnegie, Rockefellers Vanderbilts, and Morgans of the world would have improved from a deeper discussion of competition theory that includes the Brandeisian view, the Borkian view, as well as the public choice critique of both (see Wayne Crews’ and my recent paper for that). Given Greenspan’s name recognition and Woodridge’s skilled writing and distillations, this is a book that will likely sell far better than the average of its genre, and hopefully will be more read as well. Not perfect, but good—much like the economy it studies.

Nicholas R. Lardy – The State Strikes Back: The End of Economic Reform in China?

Nicholas R. Lardy – The State Strikes Back: The End of Economic Reform in China?

Lardy’s “core conclusion is that absent significant further economic reform returning China to a path of allowing market forces to allocate resources, China’s growth is likely to slow, casting a shadow over its future prospects.” In this case, Lardy largely echoes other recent works such as Elizabeth C. Economy’s The Third Revolution: Xi Jinping and the New Chinese State and Ronald Coase and Ning Wang’s How China Became Capitalist.

China has taken a decidedly dirigiste turn under Xi Jinping. If Xi continues down an increasingly statist path, China’s growth will slow. If market reforms continue, China will prosper. Given the outsize amount of power centralized in his person, this choice is up to him more than anyone else. This will remain the case regardless of whether the current U.S.-China trade war ends tomorrow or continues for years. U.S. presidents come and go, but Xi will likely be around for a long time. And if not him, then someone in his inner circle with similar policy views.

Lardy is an excellent economic analyst, parsing through China’s not-entirely-truthful official statistics as well as international data to give as accurate a picture of China’s trajectory as he can, given the sources. One of his major conclusions is that China’s state-run businesses are severely underperforming compared to the country’s private businesses. State-run enterprises consistently make more and larger losses, are more heavily in debt, and the ones that are profitable tend to be less profitable than their private counterparts. They are also concentrated in legacy industries; China’s growth is less in energy and manufacturing and more in services and technology—precisely where China’s private sector is strongest.

This sounds like good news, but the trouble is that under Xi, the poor-performing state-run share of the economy has been growing. Since government tends to make a hash of whatever it does, if Xi keeps this up, China’s growth will slow. This is an avoidable mistake, but it is an open question if Xi will be willing to admit it.

China has several massive white elephant projects that are wasting precious capital, such as its Belt and Road initiative. While this program and others like it scare China hawks in the U.S., they are weakening China. Government infrastructure projects worldwide are late, overpriced, and often of low quality. The Belt and Road initiative is no different, according to available evidence so far. Moreover, the billions of dollars Beijing is putting into it now cannot put into more productive ventures.

Lardy, like everyone else, is unable to guess which path China will take—state-run and poor, or free and prosperous. Unlike many analysts, Lardy is humble enough to admit that he cannot predict the future. He is hoping Xi will eventually decide to turn China’s policy momentum back towards liberalization. The Chinese people share this hope, and China observers of all stripes should hope the same, whether their politics are hawkish or dovish.

In the News: Minimum Wage Tradeoffs

Here is a writeup of my recent minimum wage paper being syndicated to local newspapers by the Center Square. The full paper is here.

On the Radio: Minimum Wage Tradeoffs

I recently appeared on the Conservative Commandos Radio Show to talk about my recent minimum wage paper. My segment starts at about 28:00 into this YouTube video of the show.

Antitrust in the Washington Post

My colleague Jessica Melugin is quoted, and Wayne Crews’ and my paper is linked to, in Tony Romm’s column about the state-level Google antitrust investigation being headed by Texas’ state attorney general:

But the timing of the states’ latest investigation — and the optics of their announcement — still triggered criticism that the attorneys general hoped to leverage their work for political gain. The Competitive Enterprise Institute, a advocacy group that opposes antitrust law and has received contributions from Google, blasted the probe in September as an exercise that would “benefit state AGs’ political ambitions, but impose harmful costs on consumers, businesses, and the economy.”

The whole article is here; Jess’ statement is here; the paper is here.

Keynes – The General Theory of Employment, Interest, and Money

Keynes – The General Theory of Employment, Interest, and Money

My undergrad macroeconomics teacher was an avowed Keynesian. Most of what he taught was in this book, except in the forms of Marshallian geometric analysis and Samuelsonian algebra. I could have saved 19-year old me a great deal of time and anguish by simply reading Keynes’ original, mostly verbal explanations of his ideas. In fact, that pedagogical experience was one reason I switched my undergrad major from economics to history, despite my much greater enthusiasm for economics. Depending on who teaches intro classes, economic ideas are sometimes taught more clearly outside of economics departments.

People often forget that Keynes worked from the same quantity theory of money framework his rivals Friedman and Hayek relied on—an insight I was never taught in undergrad, thanks in part to poor standard pedagogical practices.

Nearly all economists, regardless of ideology, agree that tinkering with the money supply can induce temporary booms and busts. Where they differ is that for monetarists and other free-market types, the fact that policymakers can mess with the price system does not imply that they should. There are tradeoffs a boom now comes at the price of a bust later. Picking up one part of the economy comes at the cost of dragging down other parts. Moreover, unintended consequences can be unpredictable, and harder to manage than the original problems.

Keynes and many of the economists he has influenced instead work with idealized models of economics and government. Economists, using increasingly sophisticated techniques, are increasingly able to foresee and adapt to changing circumstances and unintended consequences to maintain economic stability. Fiscal and monetary policies will never be perfect, but with careful management they can outperform unmanaged markets. Also in this model, politicians actually listen to economists. Even more fantastically, politicians use their boom-and-bust power in the public interest. They do not use it to influence their electoral prospects, or give favors to rent-seekers.

On the positive side, Keynes’ remarks about animal spirits remain insightful, though underappreciated. Here Keynes shared important common ground with economists from Adam Smith on down to his rough contemporaries such as Philip Wicksteed, Frank Knight, and F.A. Hayek, who all emphasized human psychology in their works over formal modeling.

Keynes’ followers pursued a different path after Paul Samuelson, preferring instead to confine themselves to quantifiable models, and to study Homo economicus rather than Homo sapiens. The old joke about Keynesians being more Keynesian than Keynes ever was is often true. Fortunately, the behavioral economics movement has done much to revive animal spirits in the wake of MIT-Harvard-Princeton’s sterilizing the profession, though many of them forget that human frailties also apply to policymakers and the policies they make.

This is not Keynes’ fault. But his unintentional legacy has harmed economics as a discipline, which has missed out on important insights and discoveries by largely walling itself off from other, less quantitative disciplines for several decades. Keynesian models have also acted as enablers for policymakers eager to hear justifications for things they want to do anyway, and for excuses to forget that can does not always imply ought.