Robert E. Wright's Blog

The fable of the three little pigs and the big, bad wolf can serve as a metaphor to help us to understand how better to mitigate climate risks.

In most of its many iterations, each of three little pigs make themselves homes, one of straw, one of sticks, and one of bricks. The big, bad wolf huffs, puffs, and blows the first two down but he cannot destroy the third.

Most Americans today follow the example of the second pig, building their homes with 2 by 4 “sticks.” They ain’t cheap but prove no match for the big, bad national disaster wolf, who sometimes blows the houses down (derechos, hurricanes, tornadoes), sometimes burns them down (wildfires), sometimes floods them out (avalanches, floods, mudslides), and sometimes swallows them whole (earthquakes, sinkholes). 

Time was, many Americans who lived in areas frequented by natural disaster wolves followed the example of the first pig, living light and cheap in trailers or “shacks.” They often suffered complete losses but if the wolf didn’t kill them, they recovered because they hadn’t invested much.

The third pig seems like the smart one but not every little pig can afford to make its house impervious to the entire pack of natural disaster wolves. And if a wolf doesn’t appear, pig three looks foolish because it could have consumed more or invested in something else instead of those under used bricks.

In a perfect, fairytale world, the little pigs would be able to buy wolf insurance at a price representing the risk that a particular wolf would appear. They could still self-insure by building with straw or brick if they wanted, but they could also build with sticks and, most importantly, get price signals on what type of stick house to build.

If the flood wolf is the biggest threat, the insurance premium would be lowest for a stick house on stilts not too close to any body of water. If the fire wolf is likely to come around, the premium would be highest for a stick house built like a cub scout tinder bundle (as many in southern California are). In the territory of the huff and puff wolf, a house with a robust roof tied to structural footers would have a lower premium than a house with an asphalt shingle roof near the end of its service life.

To ensure that the little pigs paid sufficient attention to the state of their stick homes, insurance contracts in fairytale land would say they have to pay some of the costs of any damage the wolf might cause.

America never had a perfect fairytale insurance system, but it long had one where premiums pretty closely reflected risks, and insureds and insurers both suffered when the big, bad wolf came around. The availability of actuarially fair insurance explains why so many Americans built stick homes.

The problem is that America’s insurance system degraded into a nightmare for insurers and homeowners, especially those in low-risk areas. Due to regulations, premiums on houses in many risky areas are too low. Because regulated premiums often subsidize risk-taking, few build with straw or brick anymore. Worse, many build stick houses of the wrong type, in the wrong places, and do nothing to mitigate risks. They know that if the wolf does its worst, regulators will either force insurers to make them whole or public or private assistance will do so.

Meanwhile, the little pigs who built out of sticks correctly or who live where wolves seldom roam suffer. Their risks remain the same but their premiums increase faster than inflation, or their day-to-day claims face unexpected scrutiny, because their insurers have big bills due to California’s wildfires or Florida’s hurricanes.

Because of the problems in the insurance market, some Americans can no longer afford a mortgage and the mandatory insurance that goes along with it. Insurance costs are also reflected in rents so there can be no American Dream or affordable housing without property insurance reforms.

 Individuals or small teams can move markets or persuadepolicymakers with incisive economic analysis.

Economic analysis melds models, data, and experience to prognosticatebroad market movements or to steer policy discussions. It is empirical but notexclusively quantitative, giving both numbers and words their due weight. Itsynthesizes large swathes of information while searching for big picture patternsthat can help businesses, investors, or policymakers to foresee the next bigcrisis or innovation before it overwhelms positions outflanked by an inherentlyvolatile world.

Economic analysis differs from financial price datadissemination and post-market narration, which date from the 16thcentury. It offers less precise predictions than forecasting, which inmodern form began in the 1920s,because it tries to capture sea changes, not middle run trends or short-termfluctuations. Its scope far exceeds that of securities or even industry analysis.

Warren Buffett and Alan Greenspan both exemplify the powerof economic analysis. The former made billions for stockholders throughextensive reading and contemplation rather than relying on technical signals ortrading hunches. The latter’s understanding of macroeconomy conditions provedlargely ineffable but almost infallible as he guided U.S. monetary policy for thealmost two decades now called The Great Moderation.

This post surveys three older but no less important economicanalyses, Economist editor Walter Bagehot’s (1826-1877) lender of lastresort rule, Brian Anderson’s (1886-1949) case for free trade in the ChaseEconomic Bulletin at the apex of American protectionism, and Wilma Soss’s (1900-1986)empirically based campaign to put women on the board of directors of America’slargest corporations.

Bagehot (pronounced badge ut), longtime editor of TheEconomist, explicated the lender of last resort trigger rule employed bythe Bank of England during the periodic financial crises that struck the Cityof London in the Victorian Age. Sometimes called Bagehot’s Dictum, the rule,laid bare by Bagehot in his 1873 book Lombard Street, statedthat to stave off panic and contagion central banks should lend freely to allborrowers with sufficient collateral at a rate of interest high relative topre-panic levels.

Implemented but left unarticulated by U.S. TreasurySecretary Alexander Hamilton(1757? - 1804) during financial panics in 1791 and 1792, Bagehot’s Rule ensuredthat solvent firms could borrow from the central bank when needed but hadincentive to do so only when no private lender would provide better terms. Thecollateral requirements minimized moral hazard while also protecting thecentral bank from losses. In the aftermath of the 2008 global financial crisis,central bankers, including the Fed’s BrianF. Madigan, pointed to the continued overall usefulness of Bagehot’s Rulewhen “interpreted in the context of the modern structure of financial marketsand institutions.”

A Ph.D. economist, Anderson wrote economic analyses for the ChaseEconomic Bulletin for much of the 1920s and 1930s. One of his themes wasthat America thrived due to trade, not tariffs. Policymakers ignored hisanalysis until America’s high tariff regime exacerbated the Great Depressionand helped foment the Second World War. As nineteenth century French politicaleconomist Frederic Bastiat (1801-1850) putit, “Barriers result in isolation; isolation gives rise to hatred; hatred,to war; war, to invasion.”

Especially relevant for policy discussions today, Andersonwarned against what he termed “thebalance of trade bogey.” Americans fetishized a “favorable balance of trade,”but “the fear” of imports, he explained, “is an idle one” because “Europe willnot merely send us goods, but will also provide us with funds with which to payfor them.” “A rich capitalist country,” he concluded, “can afford to importmore than it exports.”

Financial journalist and notorious corporate gadfly Soss usedher weekly NBC radio show, Pocketbook News, to push for corporategovernance reforms like cumulative voting and independent audits.

Importantly, Soss leveraged her empirical studies of widespreadfemale stockownership to induce many major U.S. corporations in the 1950s, 60sand 70s to put qualified women, like AliceE. Crawford of the Corn Exchange Bank, on their boards. Women remainunderrepresented in C-suites but, thanks in large part to Soss’s trenchantanalysis and promotional efforts, female directors are no longer anomalies.   

Economic analyses require information acquisition but alsothe ability to process data and news as rationally as possible given the naturalconstraintsof the human brain. Many of the best models are mental, incapable of beingexplicitly shared because they form from embodied human capital, or what wasonce known as wisdom.

To gain an edge over competitors, economicanalysts think opportunistically and flexibly, like a fox, hunter, or naturalintelligence, not in well-worn rows, like a hedgehog, farmer, or artificialintelligence. Like Anderson, Bagehot, Buffett, Greenspan, and Soss, the besteconomic analysts read widely and critically, selecting readings based on theirperspicacity rather than reputation or popularity. Then, they write.

 In the immortal words of South Park Elementary guidance counselor Mr. Mackey, “Drugs are bad, mmmm kay.” He might as well have said that tariffs are bad because tariffs and illicit drugs share several key elements. To ensure a healthy body politic, they should be used with caution and in moderation, if at all.

Both tax individuals. Yes, tariffs are taxes. They raise the price-tag of imported goods and their domestically-produced substitutes before you buy them, at which time you likely pay an additional sales tax. Drugs also tax you, though in the more colloquial sense of stressing your mind and body.

Both feed addiction. Tariffs are more addictive than crack cocaine all hopped up on methamphetamine. Or vice versa. Once implemented, high tariffs have proven extremely difficult to reduce because domestic producers get high on them, growing fat and complacent in Uncle Sam’s basement while doing the economic equivalent of wasting their time playing video games and munching on snacks.

Both make people sound dumb. Listening to pro-tariff politicians is like conversing with somebody with a blood alcohol content of about .06. They speak with great confidence but use the wrong words and reason in circles, if at all. Many also sound super paranoid, like they got some bad shrooms or LSD or took too much K.

Both induce smuggling. Illicit drugs essentially have an infinite tariff but tariffs don’t have to be anywhere near that high to give people incentives to smuggle stuff into the country, one way or another. Far from stopping fentanyl from coming into Murica, high tariffs will create new legions of smugglers and smuggling techniques. The so-called War on Drugs will go from unwillable to an outright rout.

Government officials use both to augment their power. But maybe that is what government officials really want, excuses to increase their power. The jackboots might soon kick down your door, not because you are selling or using illicit drugs but because you bought smuggled crap from Temu.

We can rest before tariffs and drug use reach zero. Trying to reach zero percent of anything bad that some people nevertheless want will likely turn into a fool’s errand. Getting back to pre-Trump levels, though, would help, as would improving economic education. “Tariffs are bad, mmmm kay” should be heard, and explained, as frequently as “Drugs are bad.”

Jacob Hornberger recently rightly questioned the federal government’s role in MAHA, shorthand for the Make America Healthy Again movement led by Robert F. Kennedy, Jr. (RFKJ). An inveterate statist, RFKJ may very well employ state power to seek retribution against those responsible for Covid vaccination mandates and other causes of the excess deaths that have plagued the U.S. and other wealthy nations since 2021.

Unfortunately, if Americans are to live longer, healthier lives, the government will have to be involved, in a sense. It will have to reverse the many policies that it put into place that cause so many untimely deaths and so much disability, which has also increased markedly since 2021. To achieve MAHA, in other words, Americans need Elon Musk’s and Vivek Ramaswamy’s DOGE (Department of Government Efficiency) and private market innovation more than they need RFKJ.

For starters, the government should not be in the same business as nutritionists. It should stop telling Americans what is “healthy” and what is not because government bureaucrats do not know and have no incentive to provide good advice, which must be highly tailored due to innate human heterogeneity (“diversity” in Woke parlance). The Food Pyramid alone kills more Americans than the Civil War did.

The government should also get out of the life annuity business or the health insurance business (or better yet, both) because forcing older Americans into both Social Security and Medicare creates perverse incentives: one part of the government wants retirees dead, while another is in charge of keeping them alive. Nobody in their right mind would buy both an annuity and health insurance from the same company but yet Americans are forced into the unnatural arrangement with Uncle Sam.

Obamacare clearly failed. Instead of a new government-led “plan,” let’s let market forces work, as they do in the many areas of the economy that make our lives better. Sean Masaki Flynn makes a powerful argument for moving towards a market-based system like that of Singapore in his 2019 book, The Cure that Works. Singaporeans are much healthier than Americans, and indeed almost everyone else in the world, but spend only a quarter of what Americans do on healthcare. The most telling stat in the book is that in the US, each healthcare provider (HCP) needs on average four administrators to do paperwork. In Singapore, HCPs outnumber administrators four to one.

Americans do not even need a government-funded “public health” apparatus or research funding system like that long run by Anthony Fauci. Before the rise of the administrative state in the postwar period, life insurers did the sort of outreach and research that is the basis for MAHA – don’t smoke or use alcohol or drugs to excess, wash your hands after using the bathroom, and watch what you eat and drink is like 90 percent of it. They backed up their claims with higher premiums, incentivizing people to follow through or to pay for the greater risks they imposed on themselves and others.

Today, unfortunately, life insurers tend to shy away from such activities for fear of regulatory reprisals. That is unfortunate because life insurance regulations are unnecessary because the their reinsurers carefully monitor their financial health and the market is competitive. Moreover, life insurers, not the government, are the large institutions most interested in MAHA and the ones best equipped to induce Americans to make healthier choices at the table and in the gym.

In fact, life and health insurance arguably ought to be covered in the same policy, with insureds who use more health insurance getting a smaller payout when they die than those who remained healthier (all other factors constant, of course). Regulators, though, stymie experimentation with such innovative new approaches, the suppression of which allows other statists to push for Medicare-for-all and other forms of socialized medicine.

In short, to achieve MAHA, the MAGA movement should look more to DOGE and private market incentives than to RFKJ. 

Many state division and secessionist movements are afoot, including one that I had previously not known about, "New Illinois," which would be Illinois minus Chicagoland. See the WSJ's coverage here: https://www.wsj.com/us-news/rural-counties-new-illinois-california-1e1badb5?mod=djem10point 

If you look at a map of any recent presidential election, you will see a sea of Republican red with splotches of Democrat blue. The Red areas also mostly rural areas and the blue ones mostly big cities and their burbs, with some Indian Reservations tossed into the mix.

The Founders and Framers devised the Electoral College (EC) to ensure that presidents would be chosen with input from states and not just majority rule because the president is supposed to represent the nation and not just densely populated areas. Democrats hate it for that reason and are actively trying to undermine it at the national level.

What true small-d democrats should be doing though, is replicating the EC at the state level so that big cities do not dominate rural areas, as they do in California, Illinois, New York, Massachusetts, and other states where blue metro areas control state government. They need to find some way for rural residents  to have more say in policy, at least enough to veto policies that actively hurt them for no good reason.

One problem with straight majority rule is that only one voting precinct needs to be corrupted to throw a close election to the wrong party. Another problem is that if even a real majority lives in a small space or is otherwise narrowly interested in a subject, it can impose its palpably poor policies at low or no cost to themselves on people living in places the majority knows nothing about. 

Consider, for example, the silly prohibition on trapping beavers in Massachusetts. People in Boston passed that because they think beavers are cute. They are, I guess, but they build dams that can damage people's property, not in "the Blue Blood streets of Boston" but in the Berkshires, hours away. The dumbest thing of all about the law is that people can still call exterminators to take out the beavers and hence have an incentive to ERADICATE the busy furry fellows so they do not have pay the exterminator fee again. If they could trap the beavers, they actually have an incentive to cull them rationally because beaver furs have some value. For more backup on this, see https://www.scirp.org/journal/papercitationdetails?paperid=124716&JournalID=192 (no paywall).

As our governments grow ever bigger and more powerful, incentives to break away from ones that do not represent all people will grow. If urban centers do not relinquish their death grip on rural areas by building something like state-level ECs, we may end up with 100 states, or maybe with two national governments, a democratic one that respects minority rights, and a Democratic one that does not.

For more on that, see another open source article I recently published here: https://link.springer.com/article/10.1007/s44282-024-00065-5

Unconstrained democracy has been compared to two wolves and a sheep voting on what is for dinner. The sheep needs a veto and so do our rural residents. 

 No earthly power, short of nuclear annihilation, can stop Russia and China from trading. The countries share a 4.3 thousand kilometer long border over which bulk commodities like oil can be exchanged for precious commodities like gold. Physical currencies, including dollars, euro, renminbi (CN¥), and rubles (₽) can also flow across the border, by plane, train, automobile or, if necessary, camelback.

Physical means of payment need to be safeguarded from third-party bandits, which adds to expenses, but the counterparties need not fear expropriation so long as Putin and Xi remain allied, for each retains incentives to enforce the foreign contracts of the companies in their respective countries. Given the likely size and profitability of current and future trade, private contracts will largely be self-enforcing anyway because the costs of reneging on a deal, loss of future dealings, will exceed the expected benefits of future trade. That is why hundreds of billions of dollars can exchange hands in foreign exchange deals daily with nary a default.

For transactions requiring more speed, or some sort of collateral, Bitcoin or other cryptoassets could be used, and probably already are. 

The cheapest and fastest method to make payments, though, is simply bank to bank, CN¥ for ₽ deposits and vice versa. To thwart such transactions, U.S. officials have imposed secondary sanctions, i.e., sanctions on foreign banks and other financial intermediaries engaged in sanctioned transactions. 

The U.S. officials who imposed secondary sanctions are either daft or engaged in vote mongering. Hopefully, it is the latter because the former continues down a road more costly to the U.S. than to Russia.

Some segment of U.S. voters blames Russia for the invasion of Ukraine and wants the American government to do whatever it can to defeat Putin. Some would even support direct military intervention but most appear content with what is termed “virtue signaling.” In other words, they want to think that U.S. policymakers are actually inflicting harm on Russia’s military capabilities by thwarting its trade. Such voters do not understand even their own domestic finances much less international ones and are easily swayed by headlines and pundits telling them that sanctions have been “strengthened” or “tightened” or other impressive sounding words. Most such people will not vote for Trump but they might also abstain from voting at all unless they can be made more enthusiastic about Biden.

U.S. policymakers, though, might actually believe that their secondary sanctions will prove effective although they simply move the core issue to another level. Much like the internet itself, financial systems are networks and highly malleable ones at that. Information/cash flows that hit nodes (financial institutions) that are blocked due to sanctions or other causes simply reroute to active nodes. Moreover, new nodes can be created at any time to “launder” the money, or in other words to hide its “dirty” origins. Despite decades of effort, U.S. officials have been unable to stop the laundering of illicit drug money by domestic agents and hence stand no chance against foreign launderers, whose transaction data can be altered or hidden from prying eyes.

Policymakers could take more extreme measures but again they can only increase transaction costs, not interdict mutually beneficial trade. Moreover, at some point, they risk their actions hurting an already troubled domestic U.S. economy by making U.S. companies fearful of doing business abroad, which appears to be the main effect of the secondary sanctions so far. In the limit, their actions could be seen as an act of war, like a physical blockade of Russian ports certainly would be.

Extending sanctions to tertiary transactors and beyond threatens a return to a bipolar world, like that of the Cold War era, with two competing spheres or “worlds” that trade in limited quantities and only with government approval. Such an outcome would decrease world output by limiting the gains from trade to those available within the two blocs and also increase the probability of the outbreak of a major war by decreasing economic ties.

The “Free World,” led by the U.S., prevailed in the Cold War but the same outcome is not assured should global trade again be divided. America’s free enterprise system proved more productive relative to the command economies of the two major communist foes, the USSR and China. The economies of the EU and the U.S. today, however, are much more controlled than they were then and the economies of Russia and China are now more fascist, and hence flexible and productive, than the economies of their communist forebears.

Moreover, how the world would divide remains unclear. After decades of invasions and occupations of foreign countries, as well as numerous documented instances of interfering with foreign nations’ sovereignty, the U.S. has lost the moral high ground it possessed after World War II. The Anglosphere, the EU, and India would likely remain within the U.S. bloc but much of the rest of the world could fall into the Sinosphere, creating a rough economic parity that never really existed during the Cold War. Undoubtedly, some countries would play off the two blocs, much as India did for decades, for their own gains.

In sum, the latest round of U.S. sanctions against Russia and those doing open business with Russia might raise transaction costs but cannot stop trade between Russia and China. Hopefully, U.S. policymakers cynically attempt to increase votes to Biden knowing full well that their efforts are too miniscule to affect Russia’s war machine more than at the margin. If they actually believe that sanctions can work if only further tightened, their miscalculation may lead to much higher costs for Americans while actually bolstering China and Russia.

 President Biden now tries to out-Trump former President Trump on protectionist trade policies. Not only did he leave most of Trump’s tariffs in place, he matched Trump’s call for 100 percent tariffs on Chinese EVs and supported a Section 301 petition that, when implemented, will impose still undetermined port duties on Chinese-built ships.

Bilateral trade restrictions like those reduce the economic output of both trading partners. Specifically, the tariffs and port duties hurt U.S. consumers by raising the price they pay for Chinese goods and hurt Chinese manufacturers by eliminating their cost advantages. U.S. manufacturers may benefit, but it is just as likely that untaxed foreign producers that are more efficient than U.S. ones, like Japanese shipbuilders or European EV makers, will gain instead.

By raising the price of all EVs sold in the U.S., tariffs on Chinese EVs will also discourage EV adoption, a purported goal of the Biden administration’s so-called Green New Deal.

Why, then, would Biden turn toward Trumpian protectionism? Because it will certainly generate votes in November. 

U.S. politicians routinely lie to the media and the public, so the only way to know what policymakers are truly thinking is to access their correspondence via a FOIA request. If that is unavailable, as it usually is because they routinely illegally destroy official correspondence, use unofficial back channels to communicate, or redact key information from the documents they are forced to disclose, analysts must follow the money or votes by analyzing who wins or loses, or who thinks they will win or lose, due to specific policy changes.

One possibility is that the Biden administration believes that high tariffs will somehow reduce Chinese military capacity. That seems unlikely, however, as the tie is tenuous. Moreover, the last time that the U.S. imposed heavy economic sanctions and other economic costs on an ambitious East Asian empire, war resulted.

More likely, Biden’s handlers believe that he can take voters from Trump, specifically some untold number of millions who like Trump’s trade policies but who dislike Trump himself, by implementing Trumpian tariffs. Moreover, because independent presidential candidate Robert F. Kennedy, Jr. has also come out in favor of tariffs against China (and any other nation that allows the “exploitation of workers”), Biden does not have to worry about losing any votes due to his trade policies.

Some subset of the anti-Trump the man, pro-Trump trade policy bloc might overlook Biden’s other policies, like the open southern border, just to avoid voting for Trump while still getting Trump-like tariffs. As it becomes clear to Biden’s advisors, however, that most swing voters (not dedicated to either major party) do not believe Biden’s claim that Republicans are to blame for the border crisis by blocking border reform legislation, look for Biden to make some grand gesture towards border security in the months before the November general election, as he tries to win over more of the swing bloc.

That Biden would sacrifice consumer interests to gain votes is unsurprising. Like other U.S. presidents dating back at least to Franklin D. Roosevelt (1933-1945), Biden openly buys votes with taxpayer money. He continues to insist on student debt relief, for example, even though the courts have rebuffed his previous plans. Here, the strategy seems to be to appear to put up a good fight, but if U.S. courts stymie his efforts he can credibly pledge to get a student debt relief bill through Congress during his second term.

High tariffs on Chinese ships and EVs hurt most Americans in their role as consumers. The costs per American per year are too modest to force them to take action, but for decades they understood that free trade promotes their interests and voted accordingly. How, then, can all three leading candidates for president in 2024 support tariffs?

The events of 2020-22 proved that many, if not most, Americans have been poorly educated in biology, economics, and civics. Most willingly followed obviously flawed pandemic policies, many of which were concocted out of thin air (social distancing and masking), and took untested, experimental vaccines simply because authority figures told them to. Government censorship of dissenting voices pointing to the misaligned incentives of vaccine manufacturers and the self-serving regulations and lockdowns imposed by politicians made it difficult to direct people toward unbiased sources and more logical analyses of data about Covid IFR, vaccine danger signals, and the like. Trillions of dollars and millions of lives were lost as a result.

When it comes to economic policies, government censorship is largely unnecessary because aside from those interested in investment decisions, most Americans do not seek out alternative economic policy viewpoints, or fully grasp any randomly encountered. Were a claim about the destructive nature of trade restrictions against China to become popular, however, the U.S. government now has all the tools necessary to squelch it and to discredit the author(s), just as it discredited and disqualified doctors pointing to the true nature of Covid-19 and the effective clinical treatments they developed during the pandemic.

In short, so long as the U.S. government can force traditional mass and social media to censor contrary viewpoints, its policies, including its economic policies, voters will not constrain policymakers. Higher prices will be put down to “corporate greed” and restricted supplies to “global supply conditions.” Budget deficits will continue to grow and military aid to flow. In short, expect more economically irrational policies from Washington.

 In a 137-page and 150-exhibit petition filed with the U.S. Trade Representative (USTR) in March, attorneys and consultants for five large U.S. labor unions allege that the “Government of China” engages in “unfair trade practices” that precipitated the relative demise of America’s shipbuilding industry since 2000 and prevent its recovery. It was filed under Sections 301 and 302 of the Trade Act of 1974, which empowers U.S. economic entities to petition USTR to investigate and rectify non competitive foreign business practices and policies.

Although its economic claims are nonsensical, the petition does have a valid legal basis. Most importantly, it will have strong political support, so its nostrums, including a port levy on Chinese-built ships, may prevail in a US election year. The short- and long-run economic effects of the port levy on China, however, can only be stated in general terms until the details are determined.

The petition does not claim that China has broken any international laws or treaties. Rather, it rests on a part of U.S. trade law that considers “unreasonable” the policy of any foreign government that is “unfair and inequitable.” Such policies include “export targeting,” which U.S. law defines as “any government plan or scheme consisting of a combination of coordinated actions (whether carried out severally or jointly) that are bestowed on a specific enterprise, industry, or group thereof, the effect of which is to assist the enterprise, industry, or group to become more competitive in the export of a class or kind of merchandise.”

Like the legal concept of “export targeting,” the petition contains little economic merit. The complaints amount to no more than admissions of Sino superiority in shipbuilding. They focus on Chinese government investment in the sector rather than U.S. disinvestment in maritime industries, due, in large part, to the actions of the complainants themselves, which raise U.S. labor costs above competitive levels. 

The petition complains of practices also employed by the US government. For example, it notes that “the China Export-Import Bank has provided tens of billions of dollars in loans to support the construction of thousands of vessels in China for export to foreign owners,” without also noting that the United States government has employed an Export-Import Bank since 1934. According to the U.S. House of Representatives, “The Export-Import Bank of the United States (Ex-Im) opens up international markets to U.S. businesses by financing and insuring the sale of U.S. exports when private sector financing is prohibitively expensive or simply not available.”

The petition also claims that “China has given its domestic shipbuilding unfair advantages by mandating the purchase and use of Chinese ships by Chinese state-owned shipping enterprises and state-owned oil companies.” Yet it calls for the strengthening of the Jones Act, also known as the Merchant Marine Act of 1920, which protects the domestic U.S. shipping industry from foreign competition. Almost 50 countries enforce similar “cabotage” laws.

The biggest flaw in the petition may be that it doesn’t recognize that the “Government of China” is merely the agent of the Chinese Communist Party (CCP), the largest and most powerful de facto corporate conglomerate the world has ever seen. The many Chinese state-owned enterprises (SEOs) are best understood not as corporations aided by the Chinese government but as de facto subsidiaries of the CCP’s conglomerate.

Unlike most conglomerates, the CCP is not publicly traded, but rather has taken the form of a private equity venture, with rents accruing to party members. It behaves, however, as many international corporate conglomerates, from the Dutch East Indies Company to 3M, have for centuries by strategically expanding the geographical and industrial scope of its business activities.

For example, the “CCP Inc.” shifts resources between its many units to leverage emerging international opportunities. Its Belt and Road and Maritime Silk Road initiatives differ from the activities of Western multinational corporations, many of which were government subsidized, only in scale. Like other conglomerates, the CCP favors trade between its subsidiaries, a conventional and rational business practice the petition derides as “discrimination against non-Chinese producers and operators.”

The petitioners also lament many discrete facts, like the production of 70 percent of the world’s cargo cranes by a Chinese SOE. Without evidence of coerced sales, all that means is that the Chinese must produce cargo cranes with the best combination of quality and price. It should be thanked for the same reasons that consumers thanked Standard Oil for supplying the world with inexpensive oil. The petition itself notes that China has decreased the global price of commercial vessels, which of course is a problem only for less efficient competitors, like U.S. shipbuilders. Its claim that “non-market acts and policies” allow China to underprice competitors remains completely unsupported.

British shipbuilders made similar complaints about the Japanese ship industry in the 1970s and 1980s. Then and now, such complaints display a profound ignorance of the workings of the free enterprise system, whereby any economic entity, including sovereign governments, remain free to invest in whatever industries they like, while also bearing the costs of overinvestment, as Japan did for several decades after its acclaimed “economic miracle” ended in the 1990s. 

The petition also raises the specter of compromised U.S. national security. It remains unclear, however, why peacetime ownership of ports and ships matter in wartime. In both world wars, for example, the U.S. government nationalized the physical and financial assets of enemy combatants in areas within its control, turned their administration over to the Alien Property Custodian, and utilized them in the war effort. Similarly, U.S. corporations could buy relatively inexpensive Chinese cargo ships in peacetime but deploy them on behalf of the U.S. military if called upon to do so. Steel, after all, owes allegiance to no country. (Computer chips might, but the petition makes no such claim.)

U.S. corporations buy so few Chinese ships that the petition does not call for higher tariffs on Chinese-built ships. Tariff revenues would simply accrue to the U.S. Treasury anyway. Instead, the petitioners want much more direct aid, in the form of the USTR charging Chinese-built ships (regardless of flag) a port fee dedicated to a U.S. Commercial Shipbuilding Revitalization Fund “to help the domestic industry and its workers compete.” Such protectionist measures, however, cannot increase competitiveness because they allow uncompetitive businesses and their unionized workers to continue to conduct business as usual rather than make the difficult choices necessary to increase productivity.

The next step in the process is for the USTR to consult with the Chinese government and to hold a public hearing on the petition. Written comments must be submitted by 22 May, a week before the scheduled start of the public hearing in Washington DC. A week after the hearing ends, post hearing rebuttal comments fall due. After that, USTR will likely make policy recommendations to POTUS. 

 Section 301 has long been a matter of controversy between the US and the World Trade Organization (WTO). In 2020, the US formally questioned the legality of the WTO’s dispute settlement system, particularly its Appellate Body. To move the dispute to the WTO likely would delay any policy implementation for years, so POTUS might act unilaterally in this matter.

As this is an election year, POTUS may use the USTR’s recommendations to try to garner votes. As discussed elsewhere, US politicians have increasingly jettisoned free trade for protectionist policies in the hopes of alleviating the nation’s looming fiscal crisis by taxing foreign firms, especially Chinese ones, to the limited extent possible. A secondary goal is to appear “tough on China,” even if the main effect of a policy is to tax U.S. consumers to subsidize special interests, like unions, sympathetic to the political party currently in power.

Judging the precise effects of the proposed port fee is impossible before USTR and POTUS agree on the specifics. The petitioners want the port fee to be a tonnage duty so that bigger Chinese-built ships pay more, but they do not specify if they want the per-ton fee to increase with ship size. If the last ton costs as much as the first, the port fee will not distort the size of Chinese-built ships docking in the US. If the per ton fee increases steeply, however, smaller ships will be favored.

The petitioners also want the fee to decrease with the age of the ship, which will encourage keeping older, less energy-efficient, and more accident-prone ships to remain in service. Environmental groups will likely oppose that part of the proposal and prevail.

The precise definition of Chinese-built will also be important. If ships built in a foreign country by a Chinese SOE will not be subject to the fee, it will encourage the globalization of Chinese-owned shipbuilders.

The petitioners also want the fee to increase regularly until China’s shipbuilding dominance ends, but they do not specify rates or intervals. They suggest $1 million per ship per clearance as a hypothetical but it is unclear if they see that as a starting or ending figure.

To the extent that the fee becomes high and is binding, the Chinese will have an incentive to hide their ownership of shipbuilders in other countries through complex and opaque chains of shell corporations, secret ownership stakes, or convertible debt financing. Such tactics can be difficult to detect or police.

If the regulations and their enforcement are tight enough, the biggest winners from the proposed port duty in the long term may well be Japanese and South Korean shipbuilders, not the much less competitive American ones. The petition suggests that those countries too might be guilty of “export targeting” but slapping duties on America’s most important allies in any future war ith China will be a much harder sell politically. 

Moreover, the more countries whose ships are subject to a port fee the more the fee will fall on U.S. consumers in the form of higher prices for imports. Ostensibly, the first reaction to a port fee on Chinese-built ships will be to not use those ships, however defined, in international trade to the U.S. That could reduce future demand for Chinese-built ships, lowering the quantity sold at any given price. 

If ships built in Japan, South Korea, and elsewhere were subject to the port levy, however, shippers would have no choice but to pay the port fee and there would be no reason to prefer non-Chinese-built ships. The port fee would then be similar to a tariff, but one based on the tonnage (and potentially age) of the ship rather than the value of the goods aboard. The cost, in other words, would be largely or wholly passed on to American consumers and become just another example of special interest legislation that aids the few by placing a small and difficult to detect tax on the many. The petition recognizes this, but trivializes it by estimating the cost at half a cent per pair of blue jeans. A fee of $1 million per vessel, however, would generate billions of dollars in revenue, which is billions of dollars per year diverted from the pockets of the Americans wearing those blue jeans to uncompetitive U.S. shipbuilders, employees, and unions.

The publication of this two-parter by the Martin Center reminded me that I had drafted something on the topic of college ratings but dropped it. Here it is for your edification and "enjoyment":

Thoseinterested in attending, or sending their children, to university must decideif the time and monetary investment is worth it and, if it is, where to spendtheir precious dollars. Strident claims by presumably knowledgeable governmentofficials that student loans should be wholly or partially forgiven suggestthat many students made the wrong decision and shouldn’t have gone to school atall, or at least not majored in Oppression Studies at Woke U. Some of the “collegecurious” may have decided on emotional or other irrational grounds based onfamily history or an affinity for certain sports, while others were undoubtedlyled astray by college rankings.

Thenotion that colleges and universities can be confidently ranked from top tobottom smacks of deep intellectual hubris. Even the bond rating agenciesattempt only to lump securities into classes based on risk of default and oftenget even that wrong, as anyone who lived through 2008, 1997, 1982, and so forthmay recall. To ascertain that institution X is a smidge “better” than Y, therankers rely upon small changes in various quantitative metrics. Becauseadministrators’ careers and tuition rates often depend upon rankings, thosequantitative metrics havebeen manipulated or even concocted, most recently byColumbia University, the shenanigans of which were exposed by a whistleblowerwho believes that college rankingsare essentially worthless. Before making any decisions, the college-boundat least need to realize that a more highly ranked school may simply be betterat gaming the ranking system, at being dishonest in other words.

Inaddition, properly interpreting many metrics requires context that is noteasily quantified. A school with a high 8-year graduation rate (as measuredby the Washington Monthly), for example, may have an abysmal unreported4-year rate, suggesting that it is adept at bilking students for more tuitionthan expected by making it difficult for them to graduate on time but easy forthem to eventually get a degree, perhaps by making courses challenging butpressuring faculty to relax the requirements for students making up incompletesor retaking classes who appear ready to bail. A relatively low graduation rate,by contrast, might indicate that a school is trying to maintain standards andwilling to fail out students to do it.

Mostimportantly, major rankings never include arguably the two most importantmetrics, learning (what students know/can do upon graduation minus what theyknew/could do upon admission) and lifetime earnings. Some measure purported jobplacement rates and even initial salaries but those skew toward schools withsticky reputations, usually hoary institutions that continue to attract the attentionof recruiters from high paying firms because they presumably produced qualitygraduates in the past. Most of the college curious, however, care more aboutlifetime earnings than initial salary. Moreover, the trajectory of earningsprovides more information about the quality of a school’s ability to educate,rather than to merely train or signal the employability of, their studentsbecause it proxies the original stated goals of higher education, which is tocultivate lifelong learning and independent thought, both of which remainessential to a robust private economy and a vibrant civil society.

Ifirst called for such metrics over a decade ago, in a book (Higher Education and the Common Weal:Protecting Economic Growth and Political Stability with ProfessionalPartnerships, 2010) socontroversial it could only be published in India and is already out of print. Universitiesdo not want to track systematically the careers of graduates, at least thoseunlikely to make big donations, or to measure learning because such informationmight expose their individual and collective weaknesses. Once informed of theindustry’s overall ineffectiveness, fewer people would opt for “higher”education in the first place and many others would attend less expensive, butpedagogically equivalent, institutions. That, of course, would tend to dampentuition, or at least its rate of increase, forcing universities to invest morein pedagogy (and its crucial cognate, research) and less in sports complexes andcomplex administrative systems. Rest assured, then, that the college curiouswill never know with certainty which schools are most likely to increase boththeir ability to earn a living and their ability to positively impact thesocial sphere.

Rankings,however, do not have to be so rank. To better aid those interested in attendingcollege, a disinterested third party could create a grading system focused onthree major cognates of lifetime learning and social and economic achievement.I call it “ESG,” not for the thoroughly debunked environmental, social justice,and corporate governance investment grading system recently popular in Wokecircles but for intellectual energy, social engagement, and universitygovernance.

Intellectualenergy refers to the atmosphere on campus, including the number of outsidespeakers and respectful attendees of their talks (not anti-intellectualprotestors). Contrast Hillsdale College, where I recently spoke to over twoscore faculty and economics students on a balmy weeknight during Homecoming,with another midwestern college of similar size where during an otherwiseuneventful week only a few students turned out on the same subject (theeconomics of slavery) and had to be bribed with “extra credit” to sit physicallyin the room while investigating their social options later that evening ontheir phones.

Bysocial engagement, I mean old-fashioned civic engagement and well-informed,dare I say research-based, attempts to ameliorate social problems. In otherwords, schools should be judged not on the extent that they encourage merevirtue signaling, which signals only iniquity and an anti-intellectualismunbecoming any institution devoted to “higher” education. Universities shouldbe judged on the extent that they encourage students to engage in rationalaction. Society needs the energy, verve, and long-term outlook of its youthbut is not aided by inducing young people to slavishly follow fads ginned up bythe Left, or the Right for that matter. Universities should inculcate responsiblefree speech by directing students to research, write, and orally defend theirpositions before protesting or engaging in other direct action.

Thequality of a university’s governance should be assessed by the checks andbalances that it incorporates to ensure that it keeps its promises and does notdistort its record. As the MartinCenter has shown, some schools have forced out tenurednon-Woke professors by threatening the budgets of noncompliant departments andmembers of promotion and tenure committees and by employing non-disclosureagreements in unethical, if not illegal, ways. If accreditors will notdiscipline, an outside rater should expose such schools because they cannot betrusted to administer donations in line with donorintent, let alone to put the interest of students firstduring publichealth or other emergencies.

Thecollege curious need quality university quality ratings like “ESG” becauseoften they do not (yet) have the intellectual tools needed to properly assessthe claims that college admissions officers and marketing materials make. Few,for example, understand the implications of public choice theory or itsapplication to public and private university administrators. They do not realizethat the beautiful school with the great reputation and super sports teams maybe run to serve the interests of administrators, coaches, and, to a lesserextent, faculty, not students. Such institutions of course claim to bestudent-centered but do not credibly commit to putting students first in anybut the most cursory fashion. They may be highly ranked but in the “ESG” systemsketched above would be graded low.

Infact, most of America’s colleges and universities would receive a failing “ESG”grade, at least initially, because most have repressive intellectualatmospheres where mindless Woke virtue signaling prevails, implicitly supportedby faculty cowed into submission by the ouster of outspoken opponents of thestatus quo enabled by poor governance practices. FIRE and College Pulse joinforces to rankuniversities on 13 free speech metrics. The rankings are relative, though, notabsolute. The fact that the University of Virginia ranks sixth best suggeststhat the rankings only gauge speech prohibitions and do not measure positivecampus intellectual energy (the E in my “ESG” rating) because a recent Heritagereportreveals that Virginia’s universities are “drowningin”DIE (diversity, inclusion, and equity) administrators and policies, and thatUVA is the second worst offender.

Presumably, though, toattract more students from a shrinkingpool some universities will reform to achieve a higher “ESG” grade. Indeed,some new institutions with stronger “ESG” bona fides haveformed and a few incumbents have reformed their cultures rather than joiningthe raceto the bottom taking place in standards. American higher education remains sick,perhaps chronically ill, but by exposing its rotten parts while highlightingthose institutions that remain true to the industry’s original mission ofhelping students to become independent thinkers capable of adding value to boththe economy and society, it could improve outcomes without further ballooningthe national debt.

NB: Tried this at several satirical websites but some of the humor was too high brow. I mean who jokes about the Ninth Amendment?

The government should ban sporting events forthwith because they encourage the consumption of alcohol and other inebriates, gambling, harming animals, idleness, and violence. It doesn’t matter that millions of Americans love to watch sporting events live or on television because sports are not explicitly protected by the Constitution, they divert resources away from BIPOCs, and they emit literally tons of carbon into the atmosphere.  

Anti-sporters like myself have never played or watched any professional sport in our lives, but we know everything there is to know not to like them and that is sufficient to call for a ban. Millions of Americans just like me wonder how long policymakers are going to allow this, this, this genocide to continue. It has got to stop and here is why.  

First, while like-minded allies long ago managed to curtail alcohol sales late in games, all that did was to induce people to start drinking earlier. Now, we’ve discovered via a thorough investigation conducted on Tik Tok, fans show up in the parking lots of sporting events hours early so they can get drunk, gorge themselves on animal products, and likely fornicate too.  

Some might say that impaired driving, not alcohol or drug use per se, kills people and that responsible drug and alcohol use isn’t hurting anyone. Those people are idiots. We don’t have any reliable statistics, but we know that literally millions of babies have been killed by drunk or high sports fans. (Yes, some of those babies may have been squirrels but squirrels are people too!)  

Namby-pamby types will also claim that gambling doesn’t hurt anyone, except the losers, but they knew what they were getting into. But gambling is an addiction, just like drinking and drugs. Again, we don’t have statistics, but we heard an anecdote about a baby run over by a guy checking his phone to see if “da Iggles” covered the spread. We don’t know what that means exactly but we know it is about sports gambling.  

As for harming animals, footballs, we learned on Wikipedia, are made from pig skin. The thought of all those skinless hogs running around somewhere just makes our blood boil. There must be some pretty cold cows out there, too, because baseball gloves and balls are made from cowhide. We’re told that every time a baseball touches the ground, it gets replaced. That’s a lot of baseballs and although cows are pretty big that must be a lot of harmed cows.  

The idleness and violence go hand-in-hand with drinking and gambling. How many trillions of dollars are wasted each year as people watch some guys pat each other’s butts and smash poor balls, or each other? Again, nobody is tracking these things but it is obvious that it is a giant waste.   

It is equally obvious that professional sports are bad for the environment. We can’t find it right now, but we once saw a study that claimed that up to half of global warming is caused by lacrosse alone. 

 If people worked instead of wasting their precious time on professional sports, America could easily afford to pay reparations to BIPOCs and other oppressed groups du jour. The athletes themselves would have to get real jobs too, thus providing even more support for the economy. And taxpayers could stop subsidizing sports stadiums and increase subsidies for worthy things, like NPR and carbon pipelines. 

Banning professional sports might sound unconstitutional. Didn’t the government have to pass an amendment before it banned alcohol? Yes! I’m an expert because I have read the Constitution all the way through, except for the boring and confusing parts, almost three times.  One approach would be to convinces states to ban sports. Start easy, like the Dakotas, which don’t have any sports, except maybe for rodeos. 

Then California because while policymakers there like drug use, they don’t like carbon emissions and need money to pay reparations. The leagues will then lose a lot of their teams and won’t be able to afford to defend themselves in other state legislatures.  Then the federal government could step in under the interstate commerce clause. I couldn’t actually find an amendment saying this, but I have it on good authority that the greatest president of all time, Franklin D. Roosevelt, packed the Supreme Court full of the greatest justices of all time and they all agreed that the Constitution doesn’t mean what it says, it means what they say it means, and they said it means the federal government can do whatever the heck it wants if it affects the economy in any way. If you don’t believe me, ask Farmer Filburn.  

There is an amendment that bothers us, though, the Ninth. It seems to say that people have a bunch of other rights not explicitly mentioned in the Constitution and, taken with the Preamble, suggests that the government ought to leave people to do what they want for the most part. Hardly anyone ever mentions that amendment, though, so we’re guessing it was really about slavery.  

In sum, we don’t like sports though we know nothing about them but we feel that they are bad and are willing to concoct evidence and twist reality to convince a slim majority of our fellow Americans to join us in banning them.  

Robert E. Wright is a Senior Research Fellow at the American Institute for Economic Research and a part time satirist who loves sports and also firearms, which are explicitly protected by the U.S. Constitution yet under assault in Massachusetts.