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Mark Perry

Mark Perry

Mark J. Perry is concurrently a scholar at AEI and a professor of economics and finance at the University of Michigan’s Flint campus. He is best known as the creator and editor of the popular economics blog Carpe Diem. At AEI, Perry writes about economic and financial issues for American.com and the AEIdeas blog.

Articles by Mark Perry

Third quarterly spelling/punctuation/grammar rant of 2017 on the misuse of it’s for its – Publications – AEI

1 day ago

AEI
Third quarterly spelling/punctuation/grammar rant of 2017 on the misuse of it’s for its

This is my third quarterly grammar/spelling/punctuation rant of 2017, see the previous two here and here.
Below are 10 new examples collected from CD comments and other sources on the Web that illustrate what I think is the most common spelling/punctuation/grammar/orthographic mistake in the English language — the misuse of it’s (or its’) for its. And the bonus graphic above of Kabir’s Bakery in Brooklyn is another example (how did that mistake get through the sign company?). I guess my one-person campaign to bring attention and awareness to this common grammar error is failing….
1. I would like to make you aware that sometime on Monday night to Tuesday morning a car in our outside parking lot had

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More evidence that it’s very hard to ‘beat the market’ over time, even the financial professionals can’t do it – Publications – AEI

2 days ago

AEI
More evidence that it’s very hard to ‘beat the market’ over time, even the financial professionals can’t do it

Just out from the SPIVA® U.S. Scorecard Mid-Year 2017 report, based on returns through June 30, 2017:
Over the five-year period, 82.38% of large-cap managers, 87.21% of mid-cap managers, and 93.83% of small-cap managers lagged their respective benchmarks. Similarly, over the 15-year investment horizon, 93.18% of large-cap managers, 94.40% of mid-cap managers, and 94.43% of small-cap managers failed to outperform on a relative basis (see table above).
As Burton Malkiel wrote in the chapter “Bow to the Wisdom of the Market” in his book Random Walk Guide to Investing; Ten Rules for Financial Success:
Who wants to admit that an amorphous, inorganic entity such as the financial

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In Harvey’s path, an avoidable man-made disaster – Publications – AEI

4 days ago

AEI
In Harvey’s path, an avoidable man-made disaster

Here’s a slightly edited version of this Wall Street Journal op-ed by Clemson University economist David Laband:
In the wake of the devastation wrought by Hurricane Harvey, stories of a different sort of “hardship” have appeared.
For days now, tens of thousands of people have been without power. Food, fresh water, gasoline and other commodities are in short supply. Not surprisingly – to economists at least — prices of certain commodities rose to alleviate the imbalance between individuals’ desires and local availability. Bags of ice that normally sold for $1 were being sold for $10. A post-hurricane chain saw was in the $600 range, plywood was available at $200 a sheet.
To many, price gouging is unconscionable, especially when someone

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Understanding America’s ridiculously large $18.6T economy by comparing the GDP of US metro areas to entire countries – Publications – AEI

4 days ago

AEI
Understanding America’s ridiculously large $18.6T economy by comparing the GDP of US metro areas to entire countries

The table and first map above help to put America’s ridiculously large $18.6 trillion economy (Gross Domestic Product in 2016) into perspective by comparing America’s 20 largest metro economies in 2016 (based on data released yesterday by the Bureau of Economic Analysis) to the economies of entire countries with similar Gross Domestic Products in 2016 (International Monetary Fund data here via Wikipedia). Here are some interesting facts about the size US metro area economies:

America’s largest metro economy – the New York area — produced 8.4% more economic output last year ($1.65 trillion of GDP) than the entire country of Canada ($1.52 trillion of GDP) and the New

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Steve Bannon’s bad economic history….. – Publications – AEI

4 days ago

AEI
Steve Bannon’s bad economic history…..
…. is a slight variation of the title of Dartmouth economist Doug Irwin’s op-ed in yesterday’s Wall Street Journal. Here are some key excerpts below (emphasis added) of that excellent op-ed (ht/Don Boudreaux):
The economic nationalists, and the president himself, believe protectionism will strengthen the American economy. “Look at the 19th century,” said former White House chief strategist Steve Bannon in his recent “60 Minutes” interview. “What built America’s so called ‘American system,’ from Hamilton to Polk to Henry Clay to Lincoln to the Roosevelts? A system of protection of our manufacturing, financial system that lends to manufacturers, OK, and the control of our borders.”
In the nationalists’ narrative, high tariffs were responsible for

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Tuesday afternoon links – Publications – AEI

6 days ago

AEI
Tuesday afternoon links

1. Chart of the Day (above). Using data from the new Census Bureau report on household income, the chart above shows inflation-adjusted median household incomes for two-earner American households annually from 1987 to 2016. Following a decade of stagnant median income of about $88,000, the median income for that group of US households increased for the fourth consecutive year in 2016 to an all-time high of nearly $95,000. Compared to 1987, two-earner US households last year had almost $21,000 more in inflation-adjusted income or roughly $1,750 more income per month.

2. Venn Diagram of the Day I (above). Can gender earnings gaps be explained primarily by gender discrimination or are there other important factors at work?

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Higher ed’s latest taboo? Bourgeois norms…. – Publications – AEI

6 days ago

AEI
Higher ed’s latest taboo? Bourgeois norms….
… is a slight variation of the title of Heather Mac Donald’s excellent op-ed in today’s Wall Street Journal about the controversy that an August op-ed in the Philadelphia Inquirer has caused, written by two distinguished law professors (“Paying the price for breakdown of the country’s bourgeois culture”), here are some key excerpts:
To the list of forbidden ideas on American college campuses, add “bourgeois norms”—hard work, self-discipline, marriage and respect for authority. Last month, two law professors [Amy Wax at the University of Pennsylvania Law School and Larry Alexander at the University of San Diego School of Law]  published an op-ed in the Philadelphia Inquirer calling for a revival of the “cultural script” that prevailed in the

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Electrical workers in FL are paid 2-3X the normal hourly wage and regarded as heroes. But aren’t they price gougers? – Publications – AEI

7 days ago

AEI
Electrical workers in FL are paid 2-3X the normal hourly wage and regarded as heroes. But aren’t they price gougers?
This morning I received this email from a “powerless University of Miami professor”:
I am a loyal reader of your blog and have enjoyed reading your coverage of price-gouging. Since I’m in Miami, still without power from Hurricane Irma, I thought I’d share something that you may find amusing. Florida Power and Light, our power company, is employing thousands of line workers from as far away as Illinois to fix the power lines in the wake of Irma. These line workers are being paid double or triple their normal hourly wages, which provides them with the financial incentive to drive to Florida and work 12-16 hour shifts in sweltering heat. The economics is clear, but why do

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Warren Buffett wins $1M bet made a decade ago that the S&P 500 stock index would outperform hedge funds – Publications – AEI

9 days ago

AEI
Warren Buffett wins $1M bet made a decade ago that the S&P 500 stock index would outperform hedge funds

In 2007, Warren Buffett challenged finance professionals in the hedge fund industry to accept a bet that Buffett described in his 2016 letter to shareholders of Berkshire-Hathaway (see p. 21-21):
In Berkshire’s 2005 annual report, I argued that active investment management by professionals – in aggregate – would over a period of years underperform the returns achieved by rank amateurs who simply sat still. I explained that the massive fees levied by a variety of “helpers” would leave their clients – again in aggregate – worse off than if the amateurs simply invested in an unmanaged low-cost index fund.
Subsequently, I publicly offered to wager $500,000 that no investment pro could

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Explaining US income inequality by household demographics, 2016 edition – Publications – AEI

10 days ago

AEI
Explaining US income inequality by household demographics, 2016 edition

The Census Bureau released its annual report this week on “Income and Poverty in the United States” with lots of newly updated data on household income and household demographics. Based on those new data, I present my annual post titled “Explaining Income Inequality by Household Demographics” (see my previous versions of this analysis for years 2009, 2010, 2011, 2012, 2013, 2014 and 2015).
Most of the discussion on income inequality focuses on the relative differences over time between low-income and high-income American households. But it’s also informative to analyze the demographic differences among income groups at a given point in time to answer questions like:

How are high-income households different

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Price-gougers provide a public service and deserve a medal – Publications – AEI

11 days ago

AEI
Price-gougers provide a public service and deserve a medal
Kevin Williamson explains the first part (price-gougers provide a public service):
Price gouging is treated as moral abomination and, at times, as a legal offense. You know what price-gouging is? A public service. Prices are how we ration scarce goods, and the pain associated with paying unusually high prices is how we learn not to put off laying in supplies until after the disaster has already happened. The guy with supplies to sell has, either through luck or foresight, managed to put himself in possession of what you need — and you did not. You don’t have to thank him, but you do have to pay his price. The profit he makes encourages him to keep planning for the future. If that hurts — it should. Maybe you’ll learn to do

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Some charts from the Census data released this week on US incomes in 2016 showing impressive gains for Americans – Publications – AEI

11 days ago

AEI
Some charts from the Census data released this week on US incomes in 2016 showing impressive gains for Americans
The Census Bureau released its annual report this week on “Income and Poverty in the United States” with lots of new, updated data on household and family incomes, and household demographics, through 2016. Below are four charts based on the new Census data on household income through 2016.

1. Median and Average Household Income, and Average Household Size. The chart above shows: a) average annual household income in 2016 dollars (dark blue line), b) median household income in 2016 dollars (light blue line), and c) average household size (brown line), all from 1967 to 2016.
Median household income last year of $59,030 was an increase of 3.2% from 2015 and brought median

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Happy 137th Birthday to the ‘Sage of Baltimore’ — H.L. Mencken – Publications – AEI

14 days ago

AEI
Happy 137th Birthday to the ‘Sage of Baltimore’ — H.L. Mencken

Tomorrow (September 12) is H.L. Mencken’s birthday. The “Sage of Baltimore” (pictured above) was born in 1880 and is regarded by many as one of the most influential American journalists, essayists and writers of the early 20th century. To recognize the great political writer on his birthday, here are 12 of my favorite Mencken quotes:
1. Every election is a sort of advance auction sale of stolen goods.
2. A good politician is quite as unthinkable as an honest burglar.
3. A politician is an animal which can sit on a fence and yet keep both ears to the ground.
4. Democracy is a pathetic belief in the collective wisdom of individual ignorance.
5. Democracy is also a form of worship. It is the worship of jackals by jackasses.

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Don’t blame Big Oil for the gas price hikes in the wake of Hurricanes Harvey and Irma, blame market forces – Publications – AEI

16 days ago

AEI
Don’t blame Big Oil for the gas price hikes in the wake of Hurricanes Harvey and Irma, blame market forces

In the Washington Examiner, I wrote about the rising oil and gas prices following Hurricanes Harvey and Irma, and the inevitable calls we can expect shortly from Congress for investigations of “price manipulation” by Big Oil, even though the gas price spikes are temporary and reflect market conditions (falling supply, temporary refinery shutdowns, etc.):
After every natural disaster, gasoline prices invariably rise (see chart above for the most recent example). Although prices always start to fall back as the cleanup gets under way and refineries that were temporarily closed are reopened, Congress inevitably holds public hearings to assess blame. We can expect the same to happen

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Which do you prefer: High prices for goods that are available vs. low prices for goods that are not available? – Publications – AEI

17 days ago

AEI
Which do you prefer: High prices for goods that are available vs. low prices for goods that are not available?
Don Boudreaux explains:
Too often the choice is not, say, a bottle of water for $25.00 or a bottle of water for $2.50. The choice instead is a bottle of water for $25.00 or no bottle of water for $2.50. No one wants to pay $25.00 for a bottle of water, but no person desperate for water will reject the option of buying a bottle of water for $25.00 if the alternative is to have no water to buy at the government-capped price of $2.50. Harsh as they are, these alternatives – high prices for goods that are available, or low prices for goods that are not available – are typically the ones that confront people in disaster-ravaged areas.
Which do you prefer: High prices for goods that

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Photo of the day: If only there were some market mechanism to discourage this type of over-buying…. – Publications – AEI

18 days ago

AEI
Photo of the day: If only there were some market mechanism to discourage this type of over-buying….

The photo above from a Tampa Walmart was originally posted on Reddit with the caption “I need it for my family.” It was re-posted on Reddit’s Libertarian website with the caption “If only there was some mechanism to discourage over-buying while simultaneously encouraging extra production and availability during a disaster.” When I posted the photo on Twitter, the best comment I got was “This lady loves anti-price-gouging laws.”
Photo of the day: If only there were some market mechanism to discourage this type of over-buying….
Mark Perry

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Tyler Cowen: Price gouging is a type of hurricane aid – Publications – AEI

20 days ago

AEI
Tyler Cowen: Price gouging is a type of hurricane aid
From Tyler Cowen writing in Bloomberg:
I wish to suggest that price gouging, in spite of its obnoxious-sounding name, is usually the best of a set of bad alternatives. If you are inveighing against high prices after a storm, basically you are lining up with the interests of American big business, at the possible expense of storm victims.
How does that work? There are still shortages of food and water in parts of the Houston area, due to malfunctioning waterworks and postponed deliveries. Let’s say bottled water was selling at $42.96 a case at the local Best Buy, as shown in this photo. A customer can take out his or her smartphone, snap a photo and post it on social media. The photo may go viral, and many people, including the legal

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Quotation of the day on the greatest harm of all ….. – Publications – AEI

20 days ago

AEI
Quotation of the day on the greatest harm of all …..
…. is from Milton Friedman:
That is one reason why trying to do good with methods that involve force lead to bad results, because the people who set out with good intentions are themselves corrupted. And I may add, if they are not corrupted they are replaced by people with bad intentions who are more efficient at getting control of the use of force. The fundamental reason is more profound: the most harm of all is done when power is in the hands of people who are absolutely persuaded of the purity of their instincts and of the purity of their intentions.
Quotation of the day on the greatest harm of all …..
Mark Perry

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Don Boudreaux: If you haven’t personally supplied water to Harvey’s victims, you’ve contributed to higher prices – Publications – AEI

21 days ago

AEI
Don Boudreaux: If you haven’t personally supplied water to Harvey’s victims, you’ve contributed to higher prices
Tim Worstall (in Forbes), Don Boudreaux (at Cafe Hayek), and I (on CD) have all recently (and Matt Yglesias in Slate in 2005) defended the practice of what is called “price gouging” following disasters like Hurricane Harvey as an efficient way to allocate (and attract) scarce resources. As desperate as shortages currently are in the Houston area for water, gasoline and hotel rooms, those shortages are worsened, not improved, by anti-price-gouging laws. Further the recovery process in the Houston area will be greatly impeded in the comings weeks, not improved, by anti-price-gouging laws. As Tim Worstall pointed, the economics of price controls is terribly, terribly simple and

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More for Labor Day: Union videos by Milton Friedman, some quotations and a photo – Publications – AEI

22 days ago

AEI
More for Labor Day: Union videos by Milton Friedman, some quotations and a photo

1. Union Video of the Day I. From a 1980 lecture, Milton Friedman discusses the “real world effects of unions” in the video above.
You must recognize that the only way in which any group of workers through union organization can increase the amount of its pay is to make sure that there are fewer jobs available. There is no way in which a union can simultaneously increase the number of jobs and the pay. The law of demand in economics is inescapable, you can not get out of it. Raise the price of anything and fewer people will buy it.
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2. Union Video of the Day II. From a 1978 lecture, Milton Friedman explains “the power of unions” in the video above and

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For Labor Day: On the declining relevance of labor unions – Publications – AEI

24 days ago

AEI
For Labor Day: On the declining relevance of labor unions

In today’s high-tech, service and knowledge-based global economy, collective bargaining and unions don’t make sense as they once did in the manufacturing-based economy of the 1960s. Investing in skills training and education is a far better path forward than paying union dues to be represented by outdated organizations that will become increasingly irrelevant in the workplaces of the future.
That’s a summary of the argument I make with my AEI colleague Aparna Mathur in a special Point-Counterpoint feature today at Inside Sources. Here’s the opening below, and you’ll find the entire article here at “Counterpoint: Unions Are Irrelevant.”
Labor Day is celebrated to recognize the important contributions that U.S. workers make to

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A challenge for supporters of anti-price-gouging laws: when does a ‘fair’ legal price become ‘illegal gouging’ – Publications – AEI

25 days ago

AEI
A challenge for supporters of anti-price-gouging laws: when does a ‘fair’ legal price become ‘illegal gouging’
Those who oppose anti-price-gouging laws argue that market prices should prevail both before and after a natural disaster like Hurricane Harvey because those market prices will do a better job of allocating scarce resources than artificially-low, government mandated prices. There is no obligation for those opposing price-ceiling laws to personally suggest what the prices will be, since impersonal market forces will determine prices, which will dynamically change and adjust constantly to the changing market condition.
But it seems like there is an obligation for those who support anti-price-gouging laws to explain to us when a price goes from being an “acceptable” price to

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Some new Venn diagrams inspired by Hurricane Harvey – Publications – AEI

26 days ago

AEI
Some new Venn diagrams inspired by Hurricane Harvey

1. Venn Diagram of the Day I (above). Many people easily understand that a major Category 4 hurricane in Texas like Harvey will cause significant disruptions in the market for delivering, processing, and refining crude oil into gasoline, which will naturally put upward pressure on retail gasoline prices. The chart above inside the Venn diagram shows that retail gas prices in Texas have been rising steadily since Harvey hit Texas last Friday. Prices at the pump may spike another 35 cents per gallon in the next two weeks “due to high Labor Day demand and Hurricane Harvey forcing refinery shutdowns along the Gulf Coast” according to this news report. Note the two forces that together both put upward pressure on gas prices: a) higher

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Will ECON 101 professors now have to issue ‘trigger warnings’ when discussing the economics of price controls? – Publications – AEI

26 days ago

AEI
Will ECON 101 professors now have to issue ‘trigger warnings’ when discussing the economics of price controls?
Boy, people are easily triggered these days! Who would have thought that a columnist writing about basic principles of ECON 101 would cause such a triggered reaction to basic economic logic that an organization like Forbes would remove Tim Worstall’s article “Hurricane Harvey Is When We Need Price Gouging, Not Laws Against It” from its website. That original link above to the article was taken down by Forbes a day or two after it first appeared on Sunday, allegedly in response to a hurricane of triggered responses, but you can find a cached version here.
What did Worstall write that was so “offensive” to Forbes readers? Here’s a sample of his “triggering” analysis of ECON 101

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Private sector to the rescue in Texas: Never underestimate the power of the private sector to rise up to any challenge – Publications – AEI

27 days ago

AEI
Private sector to the rescue in Texas: Never underestimate the power of the private sector to rise up to any challenge
A convoy of Wal-Mart trucks with supplies waits to enter New Orleans after Hurricane Katrina in 2005.

Because of a hurricane of claims of price gouging in the wake of Hurricane Harvey, the private sector in Texas and Louisiana is getting slammed with lots of criticism for being greedy, uncompassionate, and focusing only on profits. For example, Texas Attorney General Ken Paxton told CNBC that his office as of yesterday has received more than 500 complaints of price gouging, mostly against businesses accused of selling cases of bottled water for $99, gasoline for $10 a gallon, and hotels charging prices triple or quadruple the normal room rates. But there’s a flip

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Tuesday afternoon links – Publications – AEI

27 days ago

AEI
Tuesday afternoon links

1. Chart of the Day (above) shows updated EIA data released yesterday for America’s net petroleum imports as a share of total products supplied, which has fallen to a 47-year low this year (through July) of 22.1%, the lowest since 1970. As recently as 2005, imports represented 60.3% of the total petroleum supplied and were above 50% in every year from 1998 to 2009. As a result of America’s Shale Revolution and abundance of shale oil, the share of petroleum imports dropped from more than 60% to 22% in just a little more than a decade. It took 35 years for the share of oil imports to go from 21.5% in 1970 to 60.3% in 2005 and then just 12 years to completely reverse that trend. Carpe oleum. 
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2. Venn Diagram of the Day (above).

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Thomas Sowell provides some much-needed education on the obvious implications of anti-price-gouging laws – Publications – AEI

27 days ago

AEI
Thomas Sowell provides some much-needed education on the obvious implications of anti-price-gouging laws
In September of 2004, following two Category 4 hurricanes that hit the southern coast of Florida (Charley and Frances) and caused significant damage, economist Thomas Sowell wrote an op-ed about ‘Price gouging’ in Florida, here are some key excerpts:
In the wake of the hurricanes in Florida, the state’s attorney general has received thousands of complaints of “price gouging” by stores, hotels, and others charging far higher prices than usual during this emergency.
….
When either supply or demand changes, prices change. When the law prevents this, as with Florida’s anti-price-gouging laws, that reduces the flow of resources to where they would be most in demand. At the same time,

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Inspired by Hurricane Harvey, I propose the Maximum Temperature Act to stop unconscionable temperature gouging – Publications – AEI

28 days ago

AEI
Inspired by Hurricane Harvey, I propose the Maximum Temperature Act to stop unconscionable temperature gouging

Inspired by events following Hurricane Harvey, how about a “Maximum Temperature Act”? Specifically, couldn’t the government intervene in the market for temperature-reading equipment to counteract unconscionable “excessively high” summer temperatures (“temperature gouging”) just like state and city governments intervene in local markets to counteract unconscionable “excessively high” prices (“price gouging”) following natural disasters like Hurricane Harvey?
Let me explain, and start with a typical non-economic “Defense of Price Gouging Laws”:
Many residents in Texas and Louisiana have suffered from the devastating effects of Hurricane Harvey in recent days, and some of those

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Free trade doesn’t just make us better off materially. It makes us better people. – Publications – AEI

28 days ago

AEI
Free trade doesn’t just make us better off materially. It makes us better people.
Sarah Skwire explains in her article “The moral and spiritual blessings of trade among all nations” (emphasis added):
Free trade doesn’t just make us better off. It makes us better people. Donald Trump claims that raising barriers to trade is one of the things it will take to “Make America Great Again,” but he is wrong. Greatness—both of wealth and of moral character—comes from trade. And we have known this for a very long time.
…..
We need to insist upon our right not merely to be rich in material things, but to be rich in such spiritual goodness as well. At a minimum, governments ought not to force their citizens to be worse human beings. When governments step in between small peaceful interactions—the

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America has a long history of protectionist failures. Are we doomed to repeat it? – Publications – AEI

August 25, 2017

AEI
America has a long history of protectionist failures. Are we doomed to repeat it?

Scott Lincicome (international trade attorney, Cato Institute adjunct scholar, and adjunct professor at Duke University Law) has a new Cato Institute policy paper out titled “Doomed to Repeat It: The Long History of America’s Protectionist Failures,” here’s the executive summary (emphasis added):
The recent rise in American economic nationalism has accompanied the view that past restrictions on foreign competition were successful in achieving stated policy objectives: decreased imports, increased jobs, industrial revival, open foreign markets, and economic prosperity more broadly. Politicians and pundits use such assertions to justify new nationalist economic proposals, but they ignore a vast repository

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