The Bank of Starbucks
Connor Tabarrok points out that Starbucks is also a bit of a bank:
In 2011, Starbucks rolled out the ability to load money onto a virtual card via their mobile app. purchases made with these pre-loaded dollars earned extra rewards points, which could eventually be redeemed for free drinks. According to their quarterly report from this March, through the app pre-payment system and physical gift cards, Starbucks owes almost $2 billion in coffee to it’s customers.
…The company can treat this money as a 0% interest loan, and with about 10% of funds eventually being forgotten, it’s actually a negative interest loan.
Starbucks can make money on the float and it makes more money as interest rates rise. At $2 billion and 4% they can earn about $80 million annually on the float. Moreover, breakage (some money on the cards is never redeemed) is running at about 10% so that’s another $200 million a year for a grand total of $280 million or a little over 5% of the $5 billion in operating profit. Not a game changer but also not bad for free money.
As interest rates rise, the value to Starbucks of pre-loaded cards increases. So does the cost to users but I suspect supply incentives will dominate here so you can expect to see Starbuck’s pushing these cards.
Affordable Housing Is Almost Pointless
What is the most important feature of affordable housing? Simple! It’s right there in the name, right? Affordable. But no. When the Illinois Housing Development Authority (IHDA) evaluates housing projects for tax credits it gives out points for desirable projects. Quoting Richard Day:
For the general scoring track, 10% of points are awarded for extra accessibility features, 13% are awarded for additional energy efficiency criteria, 15% are awarded based on the makeup of the development team, and an extra 4% are headed out to non-profit developers. Only 3% of scorecard points are awarded based on project cost.
Thus, when you look at what the affordable housing authority actually does it awards more than four times as many points to energy efficiency than cost which ultimately determines affordability and availability. “Development team” includes some mandatory requirements for experience, which makes sense, but also:
(a) incentivizing Black, Indigenous, or People of Color (“BIPOC”) and minority participation on the development team,
Indeed, a for-profit “certified” BIPOC-led business can earn up to 11 points (and a BIPOC-led non-profit up to 7 points) and you can get a few more points if you go the intersectionality route and have a certified female headed BIPOC team. Cost Containment in Project Design & Construction tops out at only 3 points (plus there are 8 more potential points for targeting to extremely poor residents which presumably also gets you some cost control).
Thus, rather than affordable housing what is actually being incentivized is some combination of:
- Racial equity goals
- Environmental sustainability
- Community development
- Supporting vulnerable populations
- Universal design for accessibility (7 points for going beyond code)
This is what Ezra Klein calls Everything Bagel Liberalism and what I called in one of my favorite posts the Happy Meal Fallacy.
The icing on the cake, by the way, is that Day argues that the IHDA is a better system than the even more convoluted and expensive system for affordable housing promoted by Chicago’s Department of Housing.
Hat tip: Ben Krauss writing at Slow Boring.
You Can See the End of the Great Stagnation Everywhere but in the Productivity Statistics
Eli Dourado continues to keep his eye on the most important number in the world, total factor productivity. It continues to be bad, -3.88% on an annual basis for the first quarter of 2025. It’s too early for Trump’s tariffs to have made an effect and too early for AI.
You can see the end of the great stagnation everywhere but in the productivity statistics.
Modern Principles of Economics!
A nice endorsement from a fellow who knows something about writing great books of economics. Ready to adopt a new principles of economics textbook? Modern Principles has got you covered with everything from tariffs to price controls to pandemics! MP also comes with Achieve, a powerful course management system, and over 100 high-quality, professionally produced videos.
No Brains
Back in 2011 I wrote in The Atlantic that “The No-Brainer Issue of the Year” was “Let High-Skill Immigrants Stay”:
We should create a straightforward route to permanent residency for foreign-born students who graduate with advance degrees from American universities, particularly in the fields of science, technology, engineering and mathematics. We educate some of the best and brightest students in the world in our universities and then on graduation day we tell them, “Thanks for visiting. Now go home!” It’s hard to imagine a more short-sighted policy to reduce America’s capacity for innovation.
We never went as far as I advocated but through programs like Optional Practical Training (OPT) we did allow and encourage high-skilled workers to stay in the United States, greatly contributing to American entrepreneurship, startup creation (Stripe and SpaceX, for example, are just two unicorns started by people who first came to the US as foreign students), patenting and innovation and job growth more generally. Moreover, there appeared to be a strong bi-partisan consensus as both Barack Obama and Donald Trump have argued that we should “staple a green card to diplomas”. Indeed in 2024 Donald Trump said:
What I want to do, and what I will do, is—you graduate from a college, I think you should get automatically, as part of your diploma, a green card to be able to stay in this country. And that includes junior colleges, too.
And yet Joseph Edlow, President Trump’s appointee to lead the U.S. Citizenship and Immigration Services (USCIS), said that he wants to kill the OPT program.
“What I want to see is…us to remove the ability for employment authorizations for F-1 students beyond the time that they’re in school.”
It’s remarkable how, in field after field, driven by petty grievance and the illusion of victimhood. the United States seems intent on undermining its own greatest strengths.
Rent Seeking for Four Generations
Amazing story in the Gothamist about a family that has occupied the same rent-controlled apartment for four generations and the last generation is not eager to give up the benefits:
For decades, Vines’ grandmother lived in the rent-stabilized, two-bedroom apartment around the corner from Fort Tryon Park. The unit has housed her family since 1977, Vines said, when her great-grandmother, a Cuban immigrant, moved in. Vines said she started living there part time in August 2021, when she enrolled in college in Westchester.
The building’s owner, Jesse Deutch, told Gothamist in an email that “an apartment is not an inheritance” and that Vines has not submitted the necessary documents to prove she has the right to succeed her grandmother as a tenant.
…Family members — by blood, marriage or emotional and financial dependence — can claim succession rights for a rent-stabilized apartment, but only if they can prove they lived there with the tenant for at least two years immediately before their death or permanent departure. There are exceptions to the two-year requirement, including for people who are full-time students, like Vines was when she says she was living with her grandmother.
Vines doesn’t contest that she lived part of the week in her dorm. But she said she spent long weekends, holidays and spring break with her grandmother and sometimes slept over when she had time in the middle of the week.
Now you might think you understand this story. The landlord wants to kick out the current tenant to raise the rent to the new tenant, right? No. Landlords are no longer allowed to raise the rents to new tenants (!!!). Unless the new tenant is themselves getting rental assistance!
…the owner might also be able to boost his income if a new tenant with a housing subsidy moves in. Property records for the building show the owner is allowed to collect more than the rent-stabilized amount for tenants receiving rental assistance….As of January 2024, the maximum amount the federal Section 8 program and the city’s own aid program would pay is $3,027. That’s more than three times the approximately $900 a month Vines said her grandmother paid.
Did you get that? The city’s rental subsidy programs (like Section 8 and CityFHEPS) will pay more than three times what the current tenant does — creating a surreal incentive where landlords prefer subsidized low-income tenants over potentially middle-class legacy-tenants. Note that whether Vines gets the apartment at the rent-controlled rate has nothing to do with her income. Vines could be middle-class or a multi-millionaire and still be entitled to inherit the apartment at the rent-controlled rate, assuming her claims of having lived in the apartment hold up.
New York has outdone itself with a rent control system so dysfunctional it manages to achieve the worst of all worlds. Not only does it suffer from the usual problems of reducing the supply of housing and dulling incentives for maintenance, but it has transformed over time from a safety net into a hereditary entitlement. Thanks to succession rights, what was meant to help the poor now functions as a kind of family heirloom — a subsidized apartment passed down like grandma’s china set.
Montana Bucks the FDA, Establishes Biotech and Longevity Hub
Longevity: The US state of Montana this week enacted a groundbreaking law that opens the door for clinics and physicians to provide experimental drugs and therapies that have not received approval from the US FDA. The new legislation, known as Senate Bill 535, was signed this week by Governor Greg Gianforte and builds upon the state’s recent expansion of so-called “Right to Try” laws.
Niklas Anzinger, the head of decentralized longevity initiative Infinita City, has long emphasized regulatory zones as a pathway to broader acceleration of therapies, and referred to the new law as a “groundbreaking moment.”
The original SB 422, passed in October 2023, expanded Right to Try access to all patients – not just the terminally ill,” he told us. “That was the first step in enabling a preventative, longevity-focused model of healthcare, rather than reactive sick care. But a major gap remained: there was no clear regulatory pathway. Uncertainty around liability, payments, insurance, and the blurred lines between drug development and clinical care left the field in limbo. SB 535 changes that.”
The new bill establishes a formal licensing framework for healthcare facilities to become experimental treatment centers. These centers can recommend and administer nearly any experimental drug manufactured within Montana, provided it has passed Phase 1 trials.
The law positions Montana as a potential hub for medical tourism and biotech innovation. The bill has been supported by libertarians and the life extension movement. Key backers saw Honduras’s Prospera (previous MR posts on Prospera) as a model. Note, however, that the law passed the Montana legislature with bipartisan backing, reflecting broad appeal for expanding medical access.
Maybe American Federalism isn’t dead yet.
H5N1 Hasn’t Gone Away
Trump dominates the news cycle but it’s important to remember that events continue even when not watched. In particular, we are not winning against H5N1. Here’s a summary of a recent paper in Science:
High-pathogenicity avian influenza subtype H5N1 is now present throughout the US, and possibly beyond. More cattle infections elevate the risk of the virus evolving the capacity to transmit between humans, potentially with high fatality rates. Nguyen et al. show that from a single transmission event from a wild bird to dairy cattle in December 2023, there has been cattle-to-poultry, cattle-to-peridomestic bird, and cattle-to-other mammal transmission. The movement of asymptomatic dairy cattle has facilitated the rapid dissemination of H5N1 from Texas across the US. Evolution within cattle, assessed using deep-sequencing data, has detected low-frequency sequence variants that had previously been associated with mammalian adaptation and transmission efficiency.
Why (and How) Young People Should Go Into Debt to Buy Stocks
In 2022, I highlighted Ian Ayres and Barry Nalebuff’s proposal that young people should borrow to invest in the stock market. Why? Most people invest gradually, which leads to a concentration of stock holdings late in life. By borrowing early, young investors can spread market risk more evenly across their lifetime, much like diversifying across assets. Put differently, a young person’s biggest asset is their future labor income. Borrowing to invest reduces overexposure to that single asset, effectively diversifying their portfolio away from specific human capital and toward financial capital.
I supported the idea writing that “I agree with Ayres and Nalebuff that young people should be [at least] 100% in equities” but I didn’t expect people to go beyond this until the idea became standardized in a similar way to home mortgages. I wrote, “It could be standardized, however, with retirement planning products.”
Well, we now have our first product in this category, Basic Capital. Basic Capital is a mortgage for investing in stocks and bonds. You put in $1 and you get $5 of investment. Moreover, you cannot lose more than you put in. How is that possible? The investments are constrained–85% of it goes to bonds and 15% to equity but remember that 15% is on $5 rather than $1 so instead of investing $1 in stocks you are investing $.75 in stocks and $4.25 in bonds. The net result is broader exposure at lower individual risk. Whether it’s a compelling product depends on fees and execution, which seem high, but the underlying idea is innovative, and I’m excited to see how products in this new category evolve.
Addendum: Matt Levine offers further commentary. On the general topic of innovative financial products, see also my previous post on Shiller’s Macro Markets.
Hat tip: Naveen.
Manufacturing Went South
Excellent piece by Gary Winslett in the Washington Post. As I pointed out in my piece on Manufacturing and Trade, the US is a manufacturing powerhouse. So why did the rust belt rust? Because manufacturing went South.
The Rust Belt’s manufacturing decline isn’t primarily about jobs going to Mexico. It’s about jobs going to Alabama, South Carolina, Georgia and Tennessee…In 1970, the Rust Belt was responsible for nearly half of all manufacturing exports while the South produced less than a quarter. Today, the roles are reversed, it is the Rust Belt that hosts less than one-fourth of all manufactured exports and the South that exports twice what the Rust Belt does.
Why the move? Better policies:
Economic research suggests that labor conflict drove much of the decline of the Rust Belt. Right-to-work laws in the South, by contrast, created more operational flexibility and attracted capital. The average unionization rate in the Rust Belt is 13.3 percent; in the South, it’s 4.3 percent. Southern states’ political leaders are quite open about how they see right-to-work as foundational to their competitiveness.
But that’s far from the only factor. The South offers cheaper electricity, a critical input for energy-intensive manufacturing. Ten states in the South have industrial electricity rates under 8 cents per kilowatt-hour; zero states in the Rust Belt do. Ohio has some of the country’s most restrictive wind-energy setback regulations. You know who doesn’t? Texas.
Despite the economic growth, Southern states have built so much housing that they kept costs from becoming unaffordable. Last year, both North Carolina and South Carolina each built more than four times as much new housing per capita as Massachusetts, according to U.S. census data. Florida, Georgia, Texas, Tennessee, South Carolina and North Carolina, all built more housing per capita than all of Illinois, Ohio, Michigan, Pennsylvania, California, New York and Massachusetts. That is not just a 2024 dynamic. That is true for every single year going all the way back to 1993. Comparatively low-cost housing makes it easier to attract and retain workers, which further attracts capital, which adds yet more investment and jobs, and the virtuous cycle spins upward.
…Immigration helps a lot, as well. More immigrants live in the South than any other region of the country. The region with the fewest immigrants? The Midwest. Immigrants promote growth, makes the workforce more robust, and create the goods and services that support manufacturing.
Right-to-work laws, cheap energy, affordable housing, low-cost land, fast permitting, low taxes, immigration. That’s a powerful combination…
Neither party wants to face these realities. The Republicans are mired in victimology and don’t see that the South’s success is built on exporting and immigration, both of which they are cutting. The Democrats don’t want to acknowledge right to work laws, cheap energy and low taxes.
Both parties prefer simple villains, whether it’s China or greedy corporations. But what’s needed isn’t more warm fuzzies about the way things used to be or globalization scapegoating. It is a clear-eyed approach that understands why companies choose Alabama over Ohio and that embraces the choices made by Southern states. That means leaning into globalization, right-to-work, all-of-the-above energy policy, permitting reform, immigration and low taxes. America’s economic future depends on embracing this reality rather than in indulging in turn-back-the-clock fictions.
Glow in the Dark Flowers!
I love these glow-in-the-dark petunias. Aside from the novelty, they speak to science and progress! The petunias were genetically modified to incorporate genes from a bioluminescent mushroom.
Econ 101 is Underrated: Pharma Price Controls
Econ 101 is often dismissed as too simplistic. Yet recent events suggest that Econ 101 is underrated. Take the tariff debate: understanding that a tariff is a tax, that prices represent opportunity costs, that a bilateral trade deficit is largely meaningless, that a so-called trade “deficit” is equally a goods surplus or an investment surplus—these are Econ 101 ideas. Simple but important.
Today’s example is Trump’s Executive Order on pharmaceutical pricing. It builds on the Biden Administration’s Inflation Reduction Act, which I’ve criticized as failing the marshmallow test. Now Trump is trying to go further—threatening antitrust action and even drug delistings unless pharmaceutical firms equalize prices globally. Tyler and I explored exactly this type of policy in our Econ 101 textbook, Modern Principles of Economics.
In our chapter on price discrimination, we first show that pharmaceutical firms will want to charge different prices in different markets depending on the elasticity of demand. In order to do so, they must prevent arbitrage. Hence the opening to that chapter:
After months of investigation, police from Interpol swooped down on an international drug syndicate operating out of Antwerp, Belgium. The syndicate had been smuggling drugs from Kenya, Uganda, and Tanzania into the port of Antwerp for distribution throughout Europe. Smuggling had netted the syndicate millions of dollars in profit. The drug being smuggled? Heroin? Cocaine? No, something more valuable: Combivir. Why was Combivir, the anti-AIDS drug we introduced in Chapter 13 , being illegally smuggled from Africa to Europe when Combivir was manufactured in Europe and could be bought there legally?
The answer is that Combivir was priced at $12.50 per pill in Europe and, much closer to cost, about 50 cents per pill in Africa. Smugglers who bought Combivir in Africa and sold it in Europe could make approximately $12 per pill, and they were smuggling millions of pills. But this raises another question. Why was GlaxoSmithKline (GSK) selling Combivir at a much lower price in Africa than in Europe? Remember from Chapter 13 that GSK owned the patent on Combivir and thus has some market power over pricing. In part, GSK reduced the price of Combivir in Africa for humanitarian reasons, but lowering prices in poor countries can also increase profit. In this chapter, we explain how a firm with market power can use price discrimination—selling the same product at different prices to different customers—to increase profit.
Later in the Thinking and Problem Solving section we ask:
As we saw in this chapter, drug companies often charge much more for the same drug in the United States than in other countries. Congress often considers passing laws to make it easier to import drugs from these low-price countries (it also considers passing laws to make it illegal to import these drugs, but that’s another story).
If one of these laws passes, and it becomes effortless to buy AIDS drugs from Africa or antibiotics from Latin America—drugs that are made by the same companies and have essentially the same quality controls as the drugs here in the United States—how will drug companies change the prices they charge in Latin America and Africa? Why?
That, in essence, is the Trump policy. So what’s the likely outcome? Prices will fall in the U.S. and rise in poorer countries—but not equally. AIDS drugs, for example, save lives in Africa but generate little profit. If firms can’t prevent arbitrage, they’ll raise African prices closer to U.S. levels and lower U.S. prices only modestly.
The result is that importation will end up hurting patients in low-income countries while delivering minimal gains to Americans. Worse, by reducing pharmaceutical profits overall, it weakens incentives to develop new drugs. In fact, in the long-run U.S. consumers are better off when poorer countries pay lower prices—just as airline price discrimination makes more routes viable for both economy and first-class passengers.
The reference pricing envisaged in Trump’s EO focuses on developed countries but Dubois, Gandhi and Vasserman run the numbers in a fully-specified model and reach similar conclusions:
Using our estimates of consumer preferences, marginal costs, and bargaining parameters, we assess the impact of a counterfactual in which US pharmaceutical prices are subject to international reference pricing with respect to Canada or an average of several similar countries….Our results suggest that international reference pricing on its own is unlikely to produce dramatic savings to US consumers. Overall, reference pricing induces a substantial increase in the prices charged in reference countries but only a modest decrease in the prices charged in the US.
It’s also the case that countries that pay less for pharmaceuticals get them later than countries that pay more. Most importantly, such launch delays (and here) tend to reduce life expectancy.
Thus, Econ 101 provides a critical foundation for understanding current debates.
Beyond Econ 101, it’s worth highlighting how internally inconsistent Trump’s policies are. At the same time, as the administration is raising tariffs worldwide, it wants to greatly reduce restrictions on importing pharmaceuticals! The most charitable interpretation (steel-manning) is that the ultimate goal of the Trump approach is to boost industry profits and incentivize R&D by raising prices in other countries. But it’s hard to square that with reducing prices here. Either the investment is worth it or not. Instead of focusing on investment or efficiency, Trump frames everything as grievance and redistribution: other countries are “ripping us off,” so they must be made to pay. But the pie shrinks when you fixate on dividing it instead of growing it. Moreover, Trump’s belligerent approach is unlikely to succeed because, as with tariffs, it invites retaliation. Instead, we should be pursuing IP protections for pharmaceuticals as part of an overall free trade agreement. We did precisely this, for example, in the Australia–United States Free Trade Agreement (AUSFTA) in 2005. That type of bilateralism and negotiation is anathema to Trump, however, who sees the world in zero-sum terms. As a result, the Biden-Trump policies are likely to lead future Americans to have less access to life-saving and life-improving pharmaceuticals.
Addendum: See also many previous MR posts on pharmaceutical regulation including The US has Low Prices for Most Pharmaceuticals, Pharmaceutical Price Controls and the Marshmallow Test, Update on the supervillains and Frank Lichtenberg and the cost of saving lives through pharmaceuticals as well as many others.
Adam Smith on Mercantilism
ChatGPT: Adam Smith strongly criticized mercantilism in The Wealth of Nations (1776), arguing that it was a flawed and self-defeating economic doctrine. His main points:
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Wealth is not gold: Mercantilists equated national wealth with the accumulation of gold and silver (bullion). Smith rejected this, emphasizing instead that real wealth lies in a nation’s productive capacity—its ability to produce goods and services.
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Trade is not zero-sum: Mercantilists saw international trade as a zero-sum game where one nation’s gain is another’s loss. Smith argued trade is mutually beneficial. He introduced the idea of absolute advantage, showing how specialization and exchange increase the wealth of all nations.
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Protectionism hurts consumers: Mercantilist policies favored domestic producers through tariffs and trade restrictions. Smith viewed these as harmful to consumers, who are forced to pay higher prices and have fewer choices. He famously wrote:
“Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer.”
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Cronyism and rent-seeking: Smith accused mercantilist policies of serving powerful interest groups (e.g., guilds, monopolies, chartered trading companies) at the expense of the public. He viewed the system as corrupted by lobbying and state favoritism:
“The interest of the dealers… in any particular branch of trade or manufactures, is always in some respects different from, and even opposite to, that of the public.”
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Free trade promotes growth: Smith advocated for a liberal trade regime based on natural liberty. He saw the division of labor and free exchange as key drivers of economic growth and prosperity.
In short, Smith saw mercantilism as a doctrine that enriched special interests and weakened overall prosperity. He called for a shift toward a system where markets and competition—not state-backed monopolies—allocate resources efficiently.
Is MR Biased?
Long Time MR reader Sean R. asked ChatGPT to analyze MR posts from the past 10 years to determine common themes and whether there “is a bias in the number of left leaning or right leaning examples they chose to focus on.” Here’s ChatGPT’s answer (with some editing for length):
How I approached the question (30-second summary)
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Step
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What I actually did
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|---|---|
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1 – Define the stance
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For each of the ten recurring Marginal Revolution (MR) themes (inflation, housing, AI, immigration, trade, inequality, growth, pandemic policy, regulation/state-capacity, education) I wrote down MR’s normative position—e.g. “free trade is good, tariffs are bad,” “more liberal immigration is good,” “zoning reform is good,” etc.
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2 – Collect posts (2016 → May 2025)
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Searched the MR archive (site:marginalrevolution.com) for ~40 partisan or news-hook keywords (“Trump tariff,” “Biden stimulus,” “Green New Deal,” “woke,” “Build Back Better,” “family separation,” etc.). That yielded ≈ 420 posts that (i) belong to one of the 10 themes and (ii) single out a person, party or institution for violating MR’s preferred policy.
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3 – Code each post
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Manually read the headline + opening paragraph (or known MR shorthand) and coded:
• Theme (1-10) • Target (Right-leaning, Left-leaning, Both/Neutral) • Tone (Critical, Supportive, Mixed). Only “Critical” posts counted toward the bias score. |
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4 – Cross-check with news cycle
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For each quarter I ran a quick Factiva/Google News query (“tariff hike,” “student-loan forgiveness,” etc.) to ask whether obvious real-world violations were dominated by Right or Left actors.
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Result 2 – Break-down by theme
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Theme (MR stance)
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Typical “Right-wing violation” called out
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Typical “Left-wing violation” called out
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Right-critical : Left-critical ratio
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|---|---|---|---|
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Trade (pro-free-trade)
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Trump/EU tariff wars, U.S. steel 232 duties Marginal REVOLUTION
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Biden’s EV subsidy protectionism, Buy-American rules
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28 : 13
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Immigration (more open)
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Family-separation, Muslim ban, Title 42 extension Marginal REVOLUTIONMarginal REVOLUTION
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Blue-state NIMBY union restrictions, slow refugee processing (2022-23)
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31 : 9
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Housing/Zoning (YIMBY)
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Suburban GOP blocking up-zoning in TX/FL
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CA, MA, NYC progressive NIMBYism (“Berkeley slows dorms”)
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10 : 17
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Inflation & Fiscal
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Trump 2018 tax cuts “stimulus at full employment”
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Biden ARP, student-loan relief inflation risk Marginal REVOLUTIONMarginal REVOLUTION
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13 : 21
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Inequality/Redistribution
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GOP SALT deduction push, regressive payroll holidays
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Warren wealth-tax, $15 federal minimum wage
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8 : 19
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Regulation/State-capacity
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Trump FDA/CDC staffing cuts, tariff waivers chaos
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OSHA vaccine mandate over-reach, CA energy rules
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12 : 14
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AI & Growth
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Trump chip-export bans framed as tech‐industrial policy
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Biden CHIPS Act subsidy design flaws
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6 : 7
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Pandemic policy
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Trump under-react 2020, “bleach,” CDC interference
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Blue-state school closures 2021-22, eviction moratoria extensions
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14 : 18
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Education
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DeSantis “Stop WOKE” limits on speech
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Campus DEI mandates, student-loan forgiveness
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10 : 24
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Great-Stagnation/Growth
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GOP ethanol & Jones Act protectionism
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Dem climate permitting delays (NEPA)
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46 : 15
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Result 3 – Context vs. actual news “violations”
Cross-checking 140 weeks (2016-2025) of major economic headlines:
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Period
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Real-world violations skew
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MR critical coverage skew
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Alignment?
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|---|---|---|---|
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2017-20 (Trump years)
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Mostly Right (tariffs, family-separation, payroll tax holiday)
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MR posts ≈ 63% critical of Right
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✔ tracks news
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2021-23 (early Biden)
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More Left (ARP cost, student-debt, OSHA mandates)
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MR posts ≈ 56% critical of Left
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✔ tracks news
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2024-25 YTD
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Mixed: Trump tariff talk + Biden industrial policy
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MR split 48 : 46 (Right : Left)
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✔ balanced
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🧷 Bottom line
- No strong partisan skew: Over nine-plus years MR criticised Right actors slightly more often (188 vs 167 posts), but the difference mirrors the calendar: Republicans held the presidency 2017-20; Democrats 2021-25.
- Issue-by-issue, the target follows the actor actually driving the violation. MR is pro-free-trade and thus hits Trump tariffs hard; it is sceptical of industrial-policy spending and thus hits Biden’s EV credits hard.
- When the news itself has an obvious partisan tilt, MR’s examples tilt the same way, not the opposite. The blog appears issue-consistent rather than partisan-consistent.
Tentative conclusion: Marginal Revolution’s selection of “who’s messing up” follows its core economic priors more than U.S. partisan identity; any apparent left/right imbalance largely reflects which party’s policies contradicted those priors in a given week.
This is Vindication???
Joe Nocera has a strange piece in the Free Press arguing that the “godfathers of protectionism” have been vindicated. It begins with a story about how Dani Rodrik couldn’t get a famous economist to endorse his book Has Globalization Gone Too Far? because doing so would arm the barbarians. Well give that reluctant economist a Nobel! because they were obviously correct. Tyler made the same point in his debate with Rodrik. Rodrik had no answer.
The piece is strange because there is little to no connection with any data; just assertion, vibe, and non-sequitur. Most bizarrely but hardly alone was this bit:
In the 1980s, Prestowitz was an official in Ronald Reagan’s Commerce Department, back when Japan, not China, was the trading partner the U.S. most feared. Japanese autos, televisions, washing machines, and all sorts of consumer electronics were flooding into the U.S., forcing American auto makers to close factories and even putting U.S. companies like Zenith out of business. Yet Japan was using tariffs and other less obvious trade barriers to prevent U.S. companies from exporting many of their products to Japan. It was protecting certain key industries from foreign competition.
This was not how the rules of free trade were supposed to work. Prying that market open, forcing Japan to play by the same rules as the U.S., was Prestowitz’s job.
He found it deeply frustrating. “Every time we completed a trade negotiation,” Prestowitz told me, “some economist would turn out a model to show that the deal was going to create X number of American jobs and would reduce the trade deficit by Y. And it never happened.”
Even more galling, he said, “The conventional response among economists was that it didn’t matter.” After all, even if Japan was keeping U.S. products out of its market, America still benefited from low-cost imports. Prestowitz has a vivid memory of a conversation he once had with Herbert Stein, President Richard Nixon’s former chief economist. “The Japanese will sell us cars,” Stein told him with a shrug, “and we’ll sell them poetry.”
Prestowitz also remembers the abuse he took for his views. “I was a Japan-basher, a protectionist, and so on,” he said. Paul Krugman, who was not yet a New York Times columnist but was already an influential economist, called Prestowitz “an intellectual snake-oil salesman” in a book he wrote called Pop Internationalism. The book, published in 1997, consisted of a half-dozen essays, each of which brutally attacked one or another of the handful of people who dared to say that globalization was less than perfect. (He described then-Labor Secretary Robert Reich as “not a serious thinker,” and Lester Thurow, the best-selling author and Massachusetts Institute of Technology economist, as “silly.”)
When I asked Prestowitz recently if he felt vindicated, he admitted that he did, but added that “I also feel a sense of loss that it took us so long to face reality and at such cost.”
Well here is data on GDP per capita in real terms in Japan and the United States since 1990. This is vindication???!
Or how about this:
No one anymore, on the left or the right, denies that globalization has fractured the U.S., both economically and socially. It has hollowed out once-prosperous regions like the furniture-making areas of North Carolina and the auto manufacturing towns of the Midwest.
Well the far left and the far right agree that America has become fractured and hollowed out, the Bernie Sanders-Donald Trump horseshoe. But both are wrong. For the rest of us in the happy middle, consider this–Hickory, North Carolina, once known as the furniture capital of the United States, did face some hard times. But in 2023 Travel and Leisure magazine named Hickory the most beautiful and affordable place to live in the United States! Writing:
Located in the foothills of the Blue Ridge Mountains, Hickory is a family-friendly destination known for its ample hiking trails and Southern charm. Currently ranked as the cheapest place to live in the U.S., Hickory has a median home price of $161,000. This affordable neighbor to the east of Asheville and north of Charlotte is popular with retirees, but it’s also becoming more attractive to young families; a steady stream of residents has been flocking here for its newfound fame as a technological hub for Google and Apple.
Doesn’t sound hollowed out to me.
The godfathers of protectionism haven’t been vindicated—but if they want to claim credit for President Trump’s tariff binge they’re welcome to it.
Addendum: Hat tip to Scott Lincicome on Hickory and do read Jeremy Horpedahl for details on the distribution of wages. Did you know, for example, that median weekly earnings for full time workers who graduated high school but are without a college degree are at an all time high? Switched earlier current for constant $2021 dollars in graph.