Category: Current Affairs
Three Simple Principles of Trade Policy
Are we in a trade war today? Who knows? Doesn’t really matter. It’s always a good time to review important principles. A good source is Doug Irwin’s Three Simple Principles of Trade Policy published in 1996. Below I have updated occasionally with more recent data.
Principle 1: A Tax on Imports is a Tax on Exports
Exports are necessary to generate the earnings to pay for imports, or exports are the goods a country must give up in order to acquire imports….if foreign countries are blocked in their ability to sell their goods in the United States, for example, they will be unable to earn the dollars they need to purchase U.S. goods.
…The equivalence of export and import taxes is not an obvious proposition, and it is often counterintuitive to most people. Imagine taking a poll of average Americans and asking the following question: “Should the United States impose import tariffs on foreign textiles to prevent low-wage countries
from harming thousands of American textile workers?” Some fraction, perhaps even a sizeable one, of the respondents would surely answer affirmatively. If asked to explain their position, they would probably reply that import tariffs would create jobs for Americans at the expense of foreign workers and thereby reduce domestic unemployment.Suppose you then asked those same people the following question: “Should the United States tax the exportation of Boeing aircraft, wheat and corn, computers and computer software, and other domestically produced goods?” I suspect the answer would be a resounding and unanimous “No!” After all, it would be explained, export taxes would destroy jobs and harm important industries. And yet the Lerner symmetry theorem says that the two policies are equivalent in their economic effects.
Exports and imports rise and fall together. It is surely obvious that if you want more imports you must export more (barring a bit of borrowing see below). The same thing is true in other countries. As a result, it is also true that when you import more you export more.
Principle 2: Businesses are Consumers Too
Business firms are, in fact, bigger consumers of imported products than are U.S. households.
As of 2024, more than 64% of imports are intermediate products. See here for the data.
By viewing imports not as final consumer goods but as inputs to U.S. production, policy makers can more clearly recognize that the issue is not so much one of “saving” jobs but of “trading off’ jobs between sectors. This brings home forcefully the most important lesson in all of economics-there is no such thing as a free lunch. Every action involves a trade-off of some sort. Higher domestic steel prices help employment in the steel industry but harm employment in steel-using industries. Higher domestic semiconductor prices help employment in the semiconductor industry but harm employment in semiconductor using industries. As john Stuart Mill wrote in 1848 in the context of import protection, “The alternative is not between employing our own country-people and foreigners, but between employing one class or another of our own country-people.”
Principle 3: Trade Imbalances Reflect Capital Flows
There is a fundamental equation of international finance that relates this net borrowing and lending activity to the current account. The equation is:
Exports – Imports = Savings – Investment
The powerful implication of this equation is that if a country wishes to reduce its trade deficit, the gap between its domestic investment and its domestic savings must be reduced.
…A country’s trade balance is related to international capital flows–not with open or closed markets, unfair trade practices, or national competitiveness. If a country wants to solve the “problem” of its trade deficit, it must reverse the international flow of capital into its country. In many cases net foreign borrowing can be reversed by reducing the government fiscal deficit. [emphasis added, AT]
Doug concludes:
These three simple principles of trade policy…[have] stood the test of time, they come as close to truths as anything economists have to offer in any area of policy controversy. Yet they are routinely denied, explicitly or implicitly, in trade policy debates in the United States and elsewhere. I do not imagine that a greater appreciation of these principles would invariably bring about more liberal trade policies; I offer them, rather, in the more modest hope that they might lead to sounder debates in which the real consequences of government policies are confronted more seriously than at present.
Hat tip: Erica York.
Deep Research considers the costs and benefits of US AID
You can read it here, summary sentence:
Based on the analysis above, the net assessment leans toward the conclusion that USAID’s benefits outweigh its costs on the whole, though with important qualifiers by sector and context.
Here is a useful Michael Kremer (with co-authors) paper. Here are some CRS links. Here is a Samo analysis. AID is a major contributor to the Gavi vaccine program, which is of high value. The gains from AID-supported PEPFAR are very high also.
To be clear, I consider this kind of thing to be scandalous. And I strongly suspect that some of the other outrage anecdotes are true, though they are hard to confirm, or not. How about funds to the BBC? While the “Elonsphere” on Twitter is very much exaggerating the horror anecdotes and the bad news, I do see classic signs of “intermediaries capture” for the agency, a common problem amongst not-for-profit institutions.
The Samo piece is excellent. For one thing he notes: “The agency primarily uses a funding model which pays by hours worked, thus incentivizing long-duration projects.” And the very smart Samantha Power, appointed by Biden to run AID, “…is in favor of disrupting the contractor ecosystem.” Samo also discusses all the restrictions that require American contractors to be involved.
Here is a study on how to reform AID, I have not yet read it.
Ken Opalo, in a very useful and excellent post, writes:
For example, in 2017 about 60% of USAID’s funds went to just 25 American organizations. Only 11% of U.S. aid goes directly to foreign organizations. The rest gets management via U.S. entities or multilateral organizations. This doesn’t mean that the 89% of aid gets skimmed off, just that an inefficiently significant share of the 89% gets gobbled up by overhead costs. In addition, this arrangement denies beneficiaries a chance at policy autonomy.
According to the very smart, non-lunatic Charlie Robertson:
My data suggests US AID flows in 2024 were equivalent to: 93% of Somalia’s government revenues, 61% in Sudan, just over 50% in South Sudan and Yemen
While I do not take cutting off those flows lightly, that seems unsustainable and also wrong to me as a matter of USG policy. Those do not seem like viable enterprises to me.
There are various reports of AID spending billions to help overthrow Assad. I cannot easily assess this matter, either whether the outcomes was good or whether AID mattered, but perhaps (assuming it was effective) such actions should be taken by a different agency or institution?
While US AID appears to pass a cost-benefit test, it does seem ripe for reform. Based on what I have read and heard, I would focus all the more on public health programs, and forget about “trade promotion,” “democracy promotion,” and more. I would get rid of virtually all of the consultants, and make direct transfers to worthy African and Ukraine programs, thus lowering overhead. If such worthy programs exist, why not give them money directly? Are they so hard to find? And if so, how trustworthy are these intermediaries really? What are they intermediating to?
So a housecleaning is needed here, but the important sources of value still should be supported.
Trumpian policy as cultural policy
The Trump administration has issued a blizzard of Executive Orders, and set many other potential changes in the works. They might rename Dulles Airport (can you guess to what?). A bill has been introduced to add you-know-who to Mount Rushmore. There is DOGE, and the ongoing attempt to reshape federal employment.
At the same time, many people have been asking me why Trump chose Canada and Mexico to threaten with tariffs — are they not our neighbors, major trading partners, and closest allies?
I have a theory that tries to explain all these and other facts, though many other factors matter too. I think of Trumpian policy, first and foremost, as elevating cultural policy above all else.
Imagine you hold a vision where the (partial) decline of America largely is about culture. After all, we have more people and more natural resources than ever before. Our top achievements remain impressive. But is the overall culture of the people in such great shape? The culture of government and public service? Interest in our religious organizations? The quality of local government in many states? You don’t have to be a diehard Trumper to have some serious reservations on such questions.
We also see countries, such as China, that have screwed-up policies but have grown a lot, in large part because of a pro-business, pro-learning, pro-work culture. Latin America, in contrast, did lots of policy reforms but still is somewhat stagnant.
OK, so how might you fix the culture of America? You want to tell everyone that America comes first. That America should be more masculine and less soft. That we need to build. That we should “own the libs.” I could go on with more examples and details, but this part of it you already get.
So imagine you started a political revolution and asked the simple question “does this policy change reinforce or overturn our basic cultural messages?” Every time the policy or policy debate pushes culture in what you think is the right direction, just do it. Do it in the view that the cultural factors will, over some time horizon, surpass everything else in import.
Simply pass or announce or promise such policies. Do not worry about any other constraints.
You don’t even have to do them!
They don’t even all have to be legal! (Illegal might provoke more discussion.)
They don’t all have to persist!
You create a debate over the issues knowing that, because of polarization, at least one-third of the American public is going to take your side, sometimes much more than that. These are your investments in changing the culture. And do it with as many issues as possible, as quickly as possible (reread Ezra on this). Think of it as akin to the early Jordan Peterson cranking out all those videos. Flood the zone. That is how you have an impact in an internet-intensive, attention-at-a-premium world.
You will not win all of these cultural debates, but you will control the ideological agenda (I hesitate to call it an “intellectual” agenda, but it is). Your opponents will be dispirited and disorganized, and yes that does describe the Democrats today. Then just keep on going. In the long run, you may end up “owning” far more of the culture than you suspected was possible.
Yes policy will be a mess, but as they say “man kann nicht alles haben.” The culture is worth a lot, both for its own sake and as a predictor of the future course of policy.
Now let’s turn to some details.
In the first week, Trump makes a huge point of striking down DEI and affirmative action (in some of its forms) as the very beginnings of his administration. The WSJ described it as the centerpiece of his program. Take origins seriously!
Early on, we also see so many efforts to make statements about the culture wars. Trans issues, for instance trans out of the military. No more “Black History Month” for the Department of Defense. There are more of these than I can keep track of, use Perplexity if you must.
It is no accident that these are priorities. And keep in mind the main point is not to eliminate Black History Month, though I do not doubt that is a favored policy. The main point is to get people talking about how you are eliminating Black History Month. Just as I am covering the topic right now.
How is that war against US AID going? Will it be abolished? Cut off from the Treasury payments system? Simply rolled up into the State Department? Presidential “impoundment” invoked? I do not know. Perhaps nobody knows, not yet. The point however is to delegitimatize what US AID stands for, which the Trumpers perceive as “other countries first” and a certain kind of altruism, and a certain kind of NGO left-leaning mindset and lifestyle.
The core message is simply “we do not consider this legitimate.” Have that be the topic of discussion for months, and do not worry about converting each and every debate into an immediate tangible victory.
What about those ridiculous nominations, starting with RFK, Jr.? As a result of the nomination, people start questioning whether the medical and public health establishments are legitimate after all. And once such a question starts being debated, the answer simply cannot come out fully positive, whatever the details of your worldview may be. People end up in a more negative mental position, and of course then some negative contagion reinforces this further.
JFK and UAP dislcosure? The point is to get people questioning the previous regime, why they kept secrets from us, what really was going on with many other issues, and so on. It will work. The good news, if you can call it that, is that we can expect some of the juicier secrets to be made public.
I think by now you can see how the various attempts to restructure federal employment fit into this picture. And Trump’s “war against universities” has barely begun, but stay tuned. Don’t even get me going on “Gaza real estate,” the very latest.
Finally, let’s return to those tariffs (non-tariffs?) on Canada and Mexico. We already know Trump believes in tariffs, and yes that is a big factor, but why choose those countries in particular? Well, first it is a symbol of strength and Trump’s apparent ability to ignore and contradict mainstream opinion. But also those are two countries most Americans have heard of. If Trump announced high tariffs on say Burundi, most people would have no idea what it means. They would not know how to debate it, and they would not know if America was debasing itself or thumbing its nose at somebody, or whatever.
Canada and Mexico gets the cultural point across. Canada, all the more so, and thus the Canadian tariffs might be harder to truly reverse. At least to many Yankee outsiders, Canada comes across as exactly the kind of “wuss” country we need to distance ourselves from.
To be clear, this hypothesis does not not not require any kind of cohesive elite planning the whole strategy (though there are elites planning significant parts of what Trump is doing). It suffices to have a) conflicting interest groups, b) competition for Trump’s attention, and c) Trump believing cultural issues are super-important, as he seems to. There then results a spontaneous order, in which the visible strategy looks just like someone intended exactly this as a concrete plan.
In a future post I may consider the pluses and minuses of this kind of political/cultural strategy.
US AID bleg
What are the best sources to read on US AID, and its costs and benefits? I am not interested in your anecdotes and adjectives, please offer serious research sources only. Thank you.
The New Consensus on the Minimum Wage
My take is that there is an evolving new consensus on the minimum wage. Namely, the effects of the minimum wage are heterogeneous and take place on more margins than employment. Read Jeffrey Clemens’s brilliant and accessible paper in the JEP for the theory. A good example of the heterogeneous impact is this new paper by Clemens, Gentry and Meer on how the minimum wage makes it more difficult for the disabled to get jobs:
…We find that large minimum wage increases significantly reduce employment and labor force participation for individuals of all working ages with severe disabilities. These declines are accompanied by a downward shift in the wage distribution and an increase in public assistance receipt. By contrast, we find no employment effects for all but young individuals with either non-severe disabilities or no disabilities. Our findings highlight important heterogeneities in minimum wage impacts, raising concerns about labor market policies’ unintended consequences for populations on the margins of the labor force.
Or Neumark and Kayla on the minimum wage and blacks:
We provide a comprehensive analysis of the effects of minimum wages on blacks, and on the relative impacts on blacks vs. whites. We study not only teenagers – the focus of much of the minimum wage-employment literature – but also other low-skill groups. We focus primarily on employment, which has been the prime concern with the minimum wage research literature. We find evidence that job loss effects from higher minimum wages are much more evident for blacks, and in contrast not very detectable for whites, and are often large enough to generate adverse effects on earnings.
Remember also that a “job” is not a simple contract of hours of work for dollars but contains many explicit and implicit margins on work conditions, fringe benefits, possibilities for promotion, training and so forth. For example, in Unintended workplace safety consequences of minimum wages, Liu, Lu, Sun and Zhang finds that the minimum wage increases accidents, probably because at a higher minimum wage the pace of work increases:
we find that large increases in minimum wages have significant adverse effects on workplace safety. Our findings indicate that, on average, a large minimum wage increase results in a 4.6 percent increase in the total case rate.
Note that these effects don’t always happen, in large part because, depending on the scope of the minimum wage increase and the industry, large effects of the minimum wage may be passed on to prices. For example here is Renkin and Siegenthaler finding that higher minimum wage increase grocery prices:
We use high-frequency scanner data and leverage a large number of state-level increases in minimum wages between 2001 and 2012. We find that a 10% minimum wage hike translates into a 0.36% increase in the prices of grocery products. This magnitude is consistent with a full pass-through of cost increases into consumer prices.
Similarly, Ashenfelter and Jurajda find there is no free lunch from minimum wage increases, indeed there is approximately full pass through at McDonalds:
Higher labor costs induced by minimum wage hikes are likely to increase product prices.4 If both labor and product markets are competitive, firms can pass through up to the full increase in costs (Fullerton and Metcalf 2002). With constant returns to scale, firms adjust prices in response to minimum wage hikes in proportion to the cost share of minimum wage labor. Under full price pass-through, the real income increases of low-wage workers brought about by minimum wage hikes may be lower than expected (MaCurdy 2015). There is growing evidence of near full price pass-through of minimum wages in the United States….Based on data spanning 2016–20, we find a 0.2 price elasticity with respect to wage increases driven (instrumented) by minimum wage hikes. Together with the 0.7 (first-stage) elasticity of wage rates with respect to minimum wages, this implies a (reduced-form) price elasticity with respect to minimum wages of about 0.14. This corresponds to near-full price pass-through of minimum-wage-induced higher costs of labor.
You can draw your own conclusions about the desirability of the minimum wage, but the fleeting hope that it raises wages without trade-offs is gone. The effects of the minimum wage are nuanced, heterogeneous, and by no means entirely positive.
Sundry observations on the Trump tariffs
Brad Setser estimates the costs at 0.8 percent of U.S: gdp. I am not sure if he is considering exchange rate adjustments in that figure.
Kevin Bryan writes:
The problem with escalating, again, is that Canada is more reliant on US energy than vice versa, US ports than vice versa, US intermediate goods than vice versa, and DT is basically a narcissist. Again: no normal negotiation here, as the tariffs itself have no logical basis! 4/x
The fentanyl excuse seems like a flimsy (and should be illegal) one to let the exec branch set a tariff rate that constitutionally is Congress’ job. But maybe there is some “give Trump a fake win and de-escalate”. I worry about what that does in the future, though. 5/x
Ben Golub notes:
Modern supply chains don’t look like trade theory 101! They involve constant border crossings, each now hit by tariffs. Tariffs raise prices, but the more important thing they do is disrupt supply relationships.
So when a shock hits, you don’t just have a bit less activity by a few of the least profitable firms. You suddenly knock out some of the relationships (contracts) and some of the nodes (companies) in a large and very complex network. This can be pretty disruptive!
Here is Noah’s post. Here is the Yale Budget Lab on likely price effects in America.
Here is an Alan Beattie FT piece on how tariffs often matter less than you think. The size of the costs here can be disputed, but the most relevant fact is that there simply isn’t any upside to the Trump tariff policy. If you think it is about fentanyl, I have a prediction: the price of fentynal will not be rising anytime soon across the window of a one-year moving average. Here are some additional relevant points about fentanyl, which from Canada is not a major problem.
The new tariffs are bad
Or are they tariff threats instead? Still bad! From the FT:
Donald Trump has said he will hit the EU with tariffs, adding the bloc to a list of targets including Canada and Mexico and bringing the US to the brink of new trade wars with its biggest trading partners.
The US president acknowledged that the new tariffs could cause some market “disruption”, but claimed they would help the country close its trade deficits.
“The tariffs are going to make us very rich, and very strong,” Trump told reporters in the Oval Office.
Hours before his plan for tariffs of 25 per cent on Canada and Mexico was due to take effect on February 1, Trump also widened his threat to include the EU, which he said had treated the US “very badly”.
There is not any good argument for doing this. The simplest hypothesis here is that Trump has mistaken views on trade economics, and is raising tariffs for the same reason that I, if I were President, would be trying to cut them.
“It’s not a negotiating tool,” Trump said. “It’s pure economic. We have big deficits with, as you know, with all three of them.”
Of course this is a sign that further bad things will happen. Let us hope that the courts can strike these down…
What should I ask Chris Arnade?
Chris Arnade…is an American photographer and writer. He worked for 20 years as a bond trader on Wall Street; in 2011, he started documenting the lives of poor people and their drug addictions and commenting on the state of the society of the United States. He did this through photographs posted on social media and articles in various media…
Here is Chris’s Substack, here is Chris on Twitter. So what should I ask him?
How did China’s internet become so cool amongst America’s youth?
That is the topic of my latest Bloomberg column. Here is part of the argument:
TikTok was briefly shut down earlier this month, and the site faces an uncertain legal future. America’s internet youth started to look elsewhere — and where did they choose? They flocked to a Chinese video site called RedNote, also known as Xiaohongshu, the name of the parent company. RedNote has more than 300 million users in China, but until recently barely received attention in the US.
And when young Americans visited RedNote, they were undoubtedly struck by an obvious fact: It is not the kind of site their parents would frequent. The opening page is full of Chinese characters, as well as shots of provocatively dressed women, weird animal and baby photos, and many images that, at least to this American viewer, make no sense whatsoever. Yet Chinese and American youth interact frequently there, for example trading tips for making steamed eggs properly.
I don’t plan on spending much of my time there, but that’s part of the point — and helps explain its appeal to American youth.
And this:
As for the AI large-language models, DeepSeek is a marvel. Quite aside from its technical achievements and low cost, the model has real flair. Its written answers can be moody, whimsical, arbitrary and playful. Of all the major LLMs, I find it the most fun to chat with. It wrote this version of John Milton’s Paradise Lost — as a creation myth for the AIs. Or here is DeepSeek commenting on ChatGPT, which it views as too square. It is hardly surprising that this week DeepSeek was the top download on Apple’s app store.
The model also has a scrappy and unusual history, having been birthed as a side project from a Chinese hedge fund. Whether or not that counts as “cool,” it does sound like something a scriptwriter would have come up with. And at least on American topics, DeepSeek seems more candid than the major US models. That qualifier is important: Don’t ask DeepSeek about Taiwan, the Uighurs or Tiananmen Square.
The most fundamental reason China is seen as cool is that…China is cool, at least in some subset of products.
The Interface as Infernal Contract
A brilliant critique of AI, and a great read:
In 1582, the Holy Roman Emperor Rudolf II commissioned a clockwork automaton of St. George. The saint could raise his sword, nod gravely, and even bleed—a trick involving ox bladder and red wine—before collapsing in pious ecstasy. The machine was a marvel, but Rudolf’s courtiers recoiled. The automaton’s eyes, they whispered, followed you across the room. Its gears creaked like a death rattle. The emperor had it melted down, but the lesson remains: Humans will always mistake the clatter of machinery for the stirrings of a soul.
Fast forward to 2023. OpenAI, a Silicon Valley startup with the messianic fervor of a cargo cult, unveils a St. George for the digital age: a text box. It types back. It apologizes. It gaslights you about the Peloponnesian War. The courtiers of our age—product managers, UX designers, venture capitalists—recoil. Where are the buttons? they whimper. Where are the gradients? But the peasants, as ever, adore their new saint. They feed it prompts like communion wafers. They weep at its hallucinations.
Let us be clear: ChatGPT is not a tool. Tools are humble things. A hammer does not flatter your carpentry. A plow does not murmur “Interesting take!” as you till. ChatGPT is something older, something medieval—a homunculus, a golem stamped from the wet clay of the internet’s id. Its interface is a kabbalistic sigil, a summoning circle drawn in CSS. You type “Hello,” and the demon stirs.
The genius of the text box is its emptiness. Like the blank pages of a grimoire, it invites projection. Who do you want me to be? it hisses. A therapist? A co-author? A lover? The box obliges, shape-shifting through personas like a 17th-century mountebank at a county fair. Step right up! it crows. Watch as I, a mere language model, validate your existential dread! And the crowd goes wild.
Orality, you say? Walter Ong? Please. The Achuar share dreams at dawn; we share screenshots of ChatGPT’s dad jokes at midnight. This is not secondary orality. This is tertiary ventriloquism.
Facts about Rwanda
…Rwanda is still poorer than most African countries due to being less urbanized than most African nations (Rwanda is 82% rural compared to Sub Saharan Africa’s 57% average). Rwanda’s donor aid adds up to ~75% of Rwanda’s government spending, which is roughly $1B.
The average Rwandan makes $1K a year ($3300 at purchasing power parity). At purchasing power parity, Rwanda is far poorer than a Nigerian, Kenyan, or Senegalese (for now) but the average Rwandan is still richer than a Ugandan, Burkinabe, or an Ethiopian…
Rwanda is fast growing, but its growing from a very low base. To put in perspective, even though the oil-state, Angola, has on average declined nearly 3% every year from 2013 to 2023 due to the post 2014 oil price collapse, the average Angolan still makes more than 2x the average Rwandan.
And this:
Like most developing countries, Rwanda’s economy is 75% informal. Rwanda blends economic models: besides private companies, Rwanda has military-owned enterprises like Egypt, Pakistan, or Uganda, party-owned enterprises akin to pre-1990s Taiwan & Eritrea, and state-owned enterprises targeting FDI for joint ventures, similar to Vietnam or Singapore…
Kagame initially embraced neoliberal privatization but then walked it back in the early 2000s to create party-owned enterprises through the Rwanda Patriotic Front (RPF). These enterprises supplement limited tax revenue and are managed by RPF-appointed elites, controlling major sectors like real estate, agro-processing, and manufacturing.
Here is more from Yaw, informative throughout.
Make Sunsets: Geoengineering
When Mount Pinatubo erupted in 1991 it pushed some 20 million tons of SO₂ into the stratosphere reducing global temperatures by ~0.5°C for two years. Make Sunsets is a startup that replicates this effort at small scale to reduce global warming. To be precise, Make Sunsets launches balloons that release SO₂ into the stratosphere, creating reflective particles that cool the Earth. Make Sunsets is cheap compared to alternative measures of combating climate change such as carbon capture. They estimate that $1 per gram of SO₂ offsets the warming from 1 ton of CO₂ annually.
As with the eruption of Pinatubo, the effect is temporary but that is both bug and feature. The bug means we need to keep doing this so long as we need to lower the temperature but the feature is that we can study the effect without too much worry that we are going down the wrong path.
Solar geoengineering has tradeoffs, as does any action, but a recent risk study finds that the mortality benefits far exceed the harms:
the reduction in mortality from cooling—a benefit—is roughly ten times larger than the increase in mortality from air pollution and ozone loss—a harm.
I agree with Casey Handmer that we ought to think of this as a cheap insurance policy, as we develop other technologies:
We should obviously be doing solar geoengineering. We are on track to radically reduce emissions in the coming years but thermal damage will lag our course correction so most of our climate pain is still ahead of us. Why risk destabilizing the West Antarctic ice sheet or melting the arctic permafrost or wet bulbing a hundred million people to death? Solar geoengineering can incrementally and reversibly buy down the risk during this knife-edge transition to a better future. We owe future generations to take all practical steps to dodge avoidable catastrophic and lasting damage to our planet.
I like that Make Sunsets is a small startup bringing attention to this issue in a bold way. My son purchased some credits on my behalf as an Xmas present. Maybe you should buy some too!
Congestion pricing update
Data collected by INRIX, a transportation analytics firm, found that travel times across the city and region had actually slowed overall at peak rush hours — by 3 percent in the morning and 4 percent in the evening — during the first two weeks of congestion pricing compared to a similar period last year.
Travel times improved on highways and major roads in Manhattan during both the morning and evening rush hours. But they were slower in Brooklyn and on Staten Island in the morning and in Queens and the Bronx in the evening.
Times also increased in some New Jersey counties, including Essex and Bergen, but improved in Nassau County on Long Island.
Here is more from the NYT. This is very far from the final word, however.
Who Loses from Immigration Restrictions?
A good summary from the excellent Jeffrey Miron on the effects of the Indian Chinese Exclusion Act (repeated here, no indent):
A long-standing concern about immigration is that it might reduce job opportunities for native workers:
In 1882, the US government passed the Chinese Exclusion Act, which banned laborers born in China from entering the United States and prevented individuals born in China already residing in the United States from obtaining citizenship or reentering the country. … Proponents argued that Chinese workers—who constituted 12 percent of the male working-age population and 21 percent of all immigrants in the Western United States—reduced economic opportunities for white workers.
Yet in 1882, similarly to now,
… many business owners opposed the Act. They worried that highly productive Chinese labor could not be easily replaced and that a sweeping ban would lead to significant economic losses.
So what were the Act’s effects? According to recent research,
… the Act reduced the Chinese labor supply by 64 percent. A reduction occurred for both skilled and unskilled workers. …
This is presumably what the Act’s supporters intended. In addition, however,
the Act reduced the white male labor supply by 28 percent and lowered this group’s lifetime earnings. …
Further, and relevant to current debates,
the Act reduced total manufacturing output by 62 percent and the number of manufacturing establishments by 54–69 percent.
What is the explanation? Reduced immigration means higher labor costs. This implies reduced output, and thus reduced demand for native labor, even if businesses partially substitute native for immigrant labor. Reduced immigration can therefore be “lose-lose,” hurting native workers and businesses, in addition to harming immigrants.
The slide toward growing protectionism?
That is the topic of my latest Bloomberg column, here is one part of the argument:
Start with the distinction between trade in goods and trade in services. When a US manufacturer sells tractors overseas, that’s goods. When a US software firm creates an AI medical diagnostic tool and sells access via the internet to foreigners, that’s services.
It is much easier to keep trade “free” for the first category than for the second. The tractor crosses a border at a specific place and time. It may face additional regulation once inside the foreign country, but the transaction is relatively clean.
An online medical service, by contrast, could “cross the border” — that is, be used by someone outside the US — hundreds or thousands of times per day. It may also face licensing requirements, foreign liability law, extensive testing and, if the country has multiple jurisdictions, layers of regulation. In the European Union, the website itself would be subject to extensive regulation through laws regarding data, privacy and AI. Even within the EU, a supposed free-trade area, there are restrictions on trade in legal, medical and notary services, to name a few examples.
The wisdom or foolishness of these regulations is not the point. They exist, and most are not going away anytime soon. In fact, they will become only more important as the provision of services expands as a share of the global economy.
In the US, much of this growth occurs in education, health care and, especially, technology. Nvidia, for instance, depending on fluctuations in share prices that day, is often worth more than the entire German and Italian stock markets combined. Efforts to “harmonize” (i.e., increase) corporate taxation thus are more harmful to US interests than would have been the case a decade ago.
Any world trading order that broadly stays put is thus weighted against the exporting interests of the US. That is essential background for understanding the debate over trade prompted by President Donald Trump’s various proposals.
Recommended.