Posts Tagged ‘trade’
“Jobs in factories will come roaring back into our country”*…
When President Trump announced sweeping tariffs on “Liberation Day” last spring, the promise was that manufacturing– and the jobs it provides– would return to the U.S. Scott Lincicome (from the conservative Cato Institute) assesses the “progress” to date…
US manufacturing ended 2025 with a thud, capping a rough year for the sector. To recap, manufacturers shed 63,000 jobs, according to the latest data from the Bureau of Labor Statistics. It wasn’t just labor that was hurting. The Institute for Supply Management’s manufacturing index clocked in at 47.9 for December, marking the 10th consecutive month of contraction as new orders were especially weak and costs at historically elevated levels.
Then there’s the Federal Reserve’s Beige Book of regional economic conditions and surveys from the regional Fed banks, which have repeatedly documented cases of manufacturers delaying hiring and investment amid weak market conditions, rising costs, shrinking profit margins and persistent uncertainty. As for the “hard” data, manufacturing capacity and output, while incomplete, sagged through the Fall.
Overall, the evidence reveals a sector that’s stagnant at best, and a long way from the manufacturing renaissance President Donald Trump promised when he took office for a second time a year ago. No wonder administration officials have pivoted from predicting a factory boom in 2025 to now saying it will happen in 2026 and beyond.
Better tax, regulatory, and monetary policy should indeed provide a tailwind for manufacturing, but the sector will probably continue to struggle. If so, Trump’s tariffs will be a big reason why…
[Lincicome unpacks the several ways that Trump’s tariffs have confounded domestic manufacturing: increased costs (especially on materials/compnents not available in the U.S.) and tariff and policy/regulations that might be politely called “inconsistent” (or less politely, “flighty”); last year, the US tariff code was amended 50 times)– which has added management/coordination costs (Federal Reserve economists estimate that domestic manufacturers will pay $39 billion to $71 billion annually to comply with the new regime, representing time and money they can’t spend on their businesses); but perhaps even more damagingly, has created uncertainty that has slowed corporate action/investment. Lincicome concludes…]
… The harms to manufacturers are consistent with research on past tariff episodes and help to explain why the sector struggled in 2025 — and why things might not get much better this year. Recent forecasts also suggest caution, with manufacturers and supply chain professionals predicting continued headwinds due to the costs, uncertainty and complexity of tariffs. And the Supreme Court won’t save them. If it invalidates Trump’s “emergency” tariffs in the coming days, administration officials have promised to invoke alternate authorities to recreate them.
Global supply chains took years to develop. They’ll take even longer to reorganize and will do so at great cost if, that is, they don’t break altogether in the meantime…
“America’s Manufacturing Renaissance Is Missing in Action,” (gift article) by @scottlincicome.bsky.social in @opinion.bloomberg.com.
Relatedly, Trump’s immigration policy was (like the “manufacturing boom”) supposed to have reduced the federal deficit. The Administration is deporting immigrants at a brisk clip– but at an extraordinary cost, both economically and constitutionally. That’s not to mention the costs to the targeted immigrants themselves, to their familires and to the companies and economies of which they have been preponderantly positive and productive parts. Indeed, a different group at Cato recently published a thorough study demonstrating that– far from being a drag on the economy– immigrants have reduced federal (and state and local) deficits by $14.5 Trillion since 1994… though, of course that contribution is now, thanks to the ICE storm, slowing down.
The immigration crackdown was also supposed to turbo-charge job growth (for the U.S.-born); it has not. Indeed, the climate of fear and the difficulty in securing visas has led to a hiring boom abroad: “Silicon Valley can’t import talent like before. So it’s exporting jobs.”
It’s easy to see Trump’s election and the imposition of his economic and immigration policies as America’s Brexit. That abrupt rupture of social, cultural, and economic conventions is now about a decade old… and the results aren’t pretty…
Brexit, the United Kingdom’s decision to withdraw from the European Union, is a rare contemporary example of a major developed economy raising trade barriers and more generally pulling back from international economic integration. When the Brexit referendum took place in 2016, academic and professional economists generally forecast that the policy about-face would result in a negative hit to the United Kingdom’s economy of about 4% of GDP over the long-term. Rather than a sudden, visible economic shock following the vote, the costs of Brexit have been gradual and cumulative. Now, almost a decade later, new research aims to assess Brexit’s actual impact on the United Kingdom’s economy, which involves the challenging task of comparing the country’s economic indicators to what they would have been if the United Kingdom had remained in the European Union. This research finds that, ten years on, the economic cost of Brexit has been larger than analysts predicted and that prolonged policy uncertainty contributed importantly to the magnitude of the impact… We estimate that by 2025, Brexit had reduced UK GDP by 6% to 8%, with the impact accumulating gradually over time… Understanding the ways in which Brexit resulted in a drag on economic growth for the United Kingdom provides potential lessons about the costs of abruptly pulling back from the global economy for other countries… – “The Economic Costs of Brexit on the UK” (where there is much more detail)
* Donald Trump
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As we interrogate empty promises (and lest we think that history doesn’t rhyme), we might recall that it was on this date in 1856 that the Know Nothing Party (dba, “the American Party” and “Native American Party”) convened in Philadelphia to nominate its first presidential candidate. A nativist (and largely anti-Catholic) group composed of anti-immigrant/Old Stock breakaways from the American Republican and Whig parties, the Know Nothings nominated Millard Fillmore.
The last member of the Whig Party to serve as President, Fillmore had been a Congressional Representative from New York who was elected to the Vice Presidency in 1848 on Zachary Taylor’s ticket. When Taylor died in 1850, Fillmore became the second V.P. to assume the presidency between elections.
Fillmore’s signature accomplishment was the passage of the Compromise of 1850 passed, a bargain that led to a brief truce in the battle over slavery– but was so ill-conceived (it contained the Fugitive Slave Act) and unpopular that Fillmore failed to get his own party’s nomination for President in the election of 1852, which he sat out. Unwilling to follow Lincoln into the new Republican Party, he got the nomination of the Know Nothings– though he was not a member of the party and hadn’t sought it; he was out of the country during the convention. Fillmore finished third in the 1856 election. By the 1860 election, the Know Nothings were no longer a serious national political movement.
“A commodity appears at first sight an extremely obvious, trivial thing. But its analysis brings out that it is a very strange thing”*…
Prices are on everyone’s minds these days. Brian Potter looks underneath the costs of the finished products and services that we typically track to examine the costs of the commodities that go into them…
This American Enterprise Institute chart [above], which breaks down price changes for different types of goods and services in the consumer price index, has by now become very widely known. A high-level takeaway from this chart is that labor-intensive services (education, healthcare) get more expensive in inflation-adjusted terms over time, while manufactured goods (TVs, toys, clothing) get less expensive over time.
But there are many types of goods that aren’t shown on this chart. One example is commodities: raw (or near-raw) materials mined or harvested from the earth. Commodities have many similarities with manufactured goods: they’re physical things that are produced (or extracted) using some sort of production technology (mining equipment, oil drilling equipment), and many of them will go through factory-like processing steps (oil refineries, blast furnaces). But commodities also seem distinct from manufactured goods. For one, because they’re often extracted from the earth, commodities can be subject to depletion dynamics: you run out of them at one location, and have to go find more somewhere else. In my book I talk about how iron ore used to be mined from places like Minnesota, but as the best deposits were mined out steel companies increasingly had to source their ore from overseas. And the idea of “Peak Oil” is based on the idea that society will use up the easily accessible oil, and be forced to obtain it from increasingly marginal, expensive-to-access locations.
(Some commodities, particularly agricultural commodities that can be repeatedly grown on a plot of land, don’t have the same sort of depletion dynamics, though bad farming practices can degrade a plot of land over time. Other commodities get naturally replenished over time, but can still get used up if the rate of extraction exceeds the rate of replenishment; non-farmed timber harvesting and non-farmed commercial fishing come to mind as examples.)
Going into this topic, I didn’t have a great sense of what price trends look like for commodities in general. Julian Simon famously won a 1980 bet with Paul Ehrlich that several raw materials — copper, chromium, nickel, tin, and tungsten — would be cheaper (in inflation-adjusted terms) after 10 years, not more expensive. But folks have pointed out that if the bet had been over a different 10-year window, Ehrlich would have won the bet.
To better understand how price tends to change for different commodities and raw materials, I looked at historical prices for over a hundred different commodities. Broadly, agricultural commodities tend to get cheaper over time, while fossil fuels have a slight tendency to get more expensive. Minerals (chemicals, metals, etc.) have a slight tendency towards getting cheaper, with a lot of variation — 15 minerals more than doubled in price over their respective time series. But this has shifted over the last few decades, and recently there’s been a greater tendency for commodities to rise in price…
[Potter offers a thorough– and fascinating– analysis, concluding…]
… historically commodities have generally fallen in price over time, but recently this trend has increasingly shifted towards rising prices. Natural gas and oil got cheaper until the 1950s and the 1970s, respectively, and since then have gotten more expensive. Beef and pork both got cheaper from 1970 until the 1990s, and since then have risen in price. Agricultural products were almost uniformly falling in price until around 2000, and have almost uniformly risen in price since then.
My general sense looking at historical commodity price data is that the more that production of some commodity looks like manufacturing — produced by a repetitive process that can be steadily improved and automated, from a supply that can be scaled up in a relatively straightforward fashion, without being subject to severe depletion dynamics — the more you’ll tend to see prices fall over time. The biggest decline in price of any commodity I looked at is industrial diamonds, which fell in price by 99.9% between 1900 and 2021d ue to advances in lab-grown diamonds production. This effectively replaced mined diamonds with manufactured ones for industrial uses; roughly 99% of industrial diamonds today are synthetic. Many other commodities had major price declines that were the result of production process improvements — aluminum got cheaper thanks to the invention (and subsequent improvements) of the Hall-Heroult smelting process, titanium’s price declined following the introduction of the Kroll process, and so on. (Steel also got much cheaper following the introduction of the Bessemer process, but that predates USGS price data.) And of course agriculture, which has evolved from crops being harvested manually to being harvested with highly automated, continuous process machinery, closely mirrors the sorts of process improvements we see in manufacturing.
Of course, this trend alone can’t explain changes in commodity prices over time, and there are plenty of commodities — steel, cement, silicon — that are produced in a manufacturing-type operation but which haven’t seen substantially declining prices over their history. And even commodities which resemble manufactured goods have risen in price recently. More generally, there are plenty of things that can shift supply and demand curves to the right or left: cartels, national policies, a spike or collapse in demand, and so on. But the question of “how much, over time, does the production of this commodity resemble a manufacturing process?” seems like a useful lens on understanding the dynamics of commodity prices…
“Do Commodities Get Cheaper Over Time?” from @constructionphysics.skystack.xyz.
* Karl Marx
###
As we brush up on the basics, we might recall that this date in the anniversary of two events that spurred commodity consumption.
Alexander Graham Bell spurred a boom on copper consumption when, on this date in 1915, he placed the first transcontinental phone call, from New York to San Francisco, where the Panama–Pacific International Exposition celebrations were underway and his assistant, his assistant Thomas Augustus Watson stood by. Bell repeated his famous first telephonic words, “Mr. Watson, come here. I want you,” to which Watson this time replied “It will take me five days to get there now!” Bell’s call officially initiated AT&T’s transcontinental service.
And, on this date 45 years later, in 1959, the aluminum market got a boost when the first non-stop transcontinental commercial jet trip was made by an American Airlines Boeing 707, from Los Angeles to New York. The sleek silver plane made the flight in airline official time of 4 hours and 3 minutes, half the usual scheduled time for the prop-driven DC- 7Cs then in regular use on that route.
“The Middle East has oil, China has rare earths”*…
Often called “the seeds of technology,” rare earths are a group 17 metallic elements (the 15 lanthanides plus scandium and yttrium) with unique magnetic, optical, and catalytic properties vital for electronics, defense, chemical processing, petroleum refining, and green energy.
China’s dominance over rare earth elements creates an unprecedented vulnerability in global supply chains that extends far beyond the relatively modest $6 billion market size. The risk of disruption in supply of rare earths has become a critical concern as the nation controls 69% of worldwide mining operations, 92% of refining capacity, and a staggering 98% of permanent magnet production, according to Goldman Sachs analysis from October 2025.
This concentration represents one of the most significant single points of failure in modern industrial infrastructure. Furthermore, the rare earth reserves distribution globally shows heavy concentration in geologically limited regions, making supply diversification extremely challenging.
The economic implications of this dominance become clear when considering potential disruption scenarios. Goldman Sachs warns that even a 10% disruption in industries reliant on rare earth elements could trigger $150 billion in lost economic output, alongside inflationary pressures cascading through multiple sectors. Despite rare earth markets being 33 times smaller than copper markets, their strategic importance creates disproportionate systemic risk…
– “China’s Rare Earth Dominance Creates Global Supply Disruption Risks” [source of the image above, and worth reading in full]
Farrell Gregory explains why they figure so prominently in so much discussion of the global economy and of U.S.- China relations and what we might expect…
Over the course of the last year, we’ve seen China suspend rare earth exports twice, generating a short-lived round of public interest and short-lived “expertise” in America. Each crisis followed a similar progression: an aggrieved China introduces export licensing, effectively suspending US access to certain rare earth elements and downstream products. The American public is subjected to alternating shouts of panic and confident assertions that ‘rare’ is a misnomer and the necessary elements are actually abundant in the Earth’s crust. After a period of confrontation, and likely following concessions on both sides, access is reestablished before too much harm is done.
Examining the differences in each crisis is less important than establishing what is quickly becoming a pattern: China is increasingly willing and able to use its dominance in rare earths as leverage against the U.S. It’s worth noting what a change this is from even five years ago: during the entirety of the 2019-2020 U.S.-China trade war, Beijing never introduced export controls for rare earths, despite making threats to do so. Now China assesses its position differently — they’ve accumulated leverage and they’re willing to use it with increasing frequency.
This frequency might be in part because China’s dominant position in rare earths is a time bomb for both sides. The PRC likely wants to use its REE dominance to extract further concessions before the U.S. manages to defuse this dominance with some combination of reshoring and tech advances.
I think it’s a matter of when — not whether — China decides to activate its standing export control infrastructure. They’ve built up leverage, and over time, that leverage will dissipate. In the near-term future, throttling rare earth and magnet exports is still an effective threat to employ in trade disputes with the U.S. In the medium term, successful reshoring and reliance-decreasing efforts will diminish what concessions China can extract from the U.S.
So, expect the rare earth crisis cycle to play out again. When it does, here are a few clarifications on rare earths that may prove helpful for avoiding the most common misperceptions…
Read on: “China’s Rare Earths Chokehold: A Primer,” from @chinatalk.skystack.xyz.
See also: “Rare Earths,” from @profgalloway.com.
And also this: “China Is Overplaying Its Rare-Earth Hand in Japan” from @bloomberg.com (gift article).
* attributed to Deng Xiaoping
###
As we ponder paucity, we might recall that it was on this date in 1839 that the British East India Company [see here and here] established the Assam Tea Company and began the commercial production of tea (grown from slips furtively exported from China) in the region. Beginning in the 1850s, the tea industry rapidly expanded, consuming vast tracts of land for tea plantations. By the turn of the century, Assam became the leading tea-producing region in the world. That growth and innovations in tea preparation caused the price of tea to drop and demand to grow. Soon, London became the center of the international tea trade.
“Unless we change direction, we are likely to end up where we are headed”*…
… And so, the estimable Cory Doctorow argues in his wonderful blog/newsletter Pluralistic, we’d better make ourselves ready.
Further, in a fashion to last week’s (R)D post on the arrival of authoritarianism in the U.S. (to which your correspondent would have added Garret Graff‘s powerful essay had it landed in time)…
As Trump rails against free trade, demands public ownership stakes in corporations that receive government funds, and (selectively) enforces antitrust law, some (stupid) people are wondering, “Is Trump a communist?”
In The American Prospect, David Dayen writes about the strange case of Trump’s policies, which fly in the face of right wing economic orthodoxy and have the superficial trappings of a leftist economic program.
The problem isn’t that tariffs are always bad, nor is it that demanding state ownership stakes in structurally important companies that depend on public funds is bad policy. The problem is that Trump’s version of these policies sucks, because everything Trump touches dies, and because he governs solely on vibes, half-remembered wisdom imparted by the last person who spoke to him, and the dying phantoms of old memories as they vanish beneath a thick bark of amyloid plaque.
Take Trump’s demand for a 10% stake in Intel (a course of action endorsed by no less than Bernie Sanders). Intel is a company in trouble, whose financialization has left it dependent on other companies (notably TMSC) to make its most advanced chips. The company has hollowed itself out, jettisoning both manufacturing capacity and cash reserves, pissing away the funds thus freed up on stock buybacks and dividends.
Handing Trump a 10% “golden share” does nothing to improve Intel’s serious structural problems. And if you take Trump at his word and accept that securing US access to advanced chips is a national security priority, Trump’s Intel plan does nothing to advance that access. But it gets worse: Trump also says denying China access to these chips is a national security priority, but he greenlit Nvidia’s plan to sell its top-of-the-range silicon to China in exchange for a gaudy statuette and a 15% export tax.
It’s possible to pursue chip manufacturing as a matter of national industrial policy, and it’s even possible to achieve this goal by taking ownership stakes in key firms – because it’s often easier to demand corporate change via a board seat than it is to win the court battles needed to successfully invoke the Defense Production Act. The problem is that Trumpland is uninterested in making any of that happen. They just want a smash and grab and some red meat for the base: “Look, we made Intel squeal!”
Then there’s the Trump tariffs. Writing in Vox EU, Lausanne prof of international business Richard Baldwin writes about the long and checkered history of using tariffs to incubate and nurture domestic production.
The theory of tariffs goes like this: if we make imports more expensive by imposing a tax on them (tariffs are taxes that are paid by consumers, after all), then domestic manufacturers will build factories and start manufacturing the foreign goods we’ve just raised prices on. This is called “import substitution,” and it really has worked, but only in a few cases.
What do those cases have in common? They were part of a comprehensive program of “export discipline, state-directed credit, and careful government–business coordination.”
In other words, tariffs only work to reshore production where there is a lot of careful planning, diligent data-collection, and review. Governments have to provide credit to key firms to get them capitalized, provide incentives, and smack nonperformers around. Basically, this is the stuff that Biden did for renewables with the energy sector, and – to a lesser extent – for silicon with the CHIPS Act.
Trump’s not doing any of that. He’s just winging it. There’s zero follow-through. It’s all about appearances, soundbites, and the libidinal satisfaction of watching corporate titans bend the knee to your cult leader.
This is also how Trump approaches antitrust. When it comes to corporate power, both Trump and Biden’s antitrust enforcers are able to strike terror into the hearts of corporate behemoths. The difference is that the Biden administration prioritized monopolists based on how harmful they were to the American people and the American economy, whereas Trump’s trustbusters target companies based on whether Trump is mad at them.
What’s more, any company willing to hand a million or two to a top Trump enforcer can just walk away from the charges.
In her 2023 book Doppelganger, Naomi Klein introduces the idea of a right-wing “mirror world” that offers a conspiratorial, unhinged version of actual problems that leftists wrestle with.
For example, the antivax movement claims that pharma companies operate on the basis of unchecked greed, without regard to the harm their defective products cause to everyday people. When they talk about this, they sound an awful like leftists who are angry that the Sacklers killed a million Americans with their opiods and then walked away with billions of dollars.
Then there are the conspiracy theories about voting machines. Progressives have been sounding the alarm about the security defects in voting machine since the Bush v Gore years, but that doesn’t mean that Venezuelan hackers stole the 2020 election for Biden.
When anti-15-minute-city weirdos warn that automated license-plate cameras are a gift to tyrants both petty and gross, they are repeating a warning that leftists have sounded since the Patriot Act.
The mirror-world is a world where real problems (the rampant sexual abuse of children by powerful people and authortiy figures) are met with fake solutions (shooting up pizza parlors and transferring Ghislaine Maxwell to a country-club prison).
Most of the people stuck in the mirror world are poor and powerless, because desperation makes you an easy mark for grifters peddling conspiracy theories. But Trump’s policies on corporate power are what happens in the mirror world inhabited by the rich and powerful.
Trump is risking the economic future of every person in America (except a few cronies), but that’s not the only risk here. There’s also the risk that reasonable people will come to view industrial policy, government stakes in publicly supported companies, and antitrust as reckless showboating, a tactic exclusively belonging to right wing nutjobs and would-be dictators.
Sociologists have a name for this: they call it “schismogenesis,” when a group defines itself in opposition to its rivals. Schismogenesis is progressives insisting that voting machines and pharma companies are trustworthy and that James Comey is a resistance hero.
After we get rid of Trump, America will be in tatters. We’re going to need big, muscular state action to revive the nation and rebuild its economy. We can’t afford to let Trump poison the well for the very idea of state intervention in corporate activity…
Trump’s mirror-world New Deal: “The capitalism of fools,” from @pluralistic.net.web.brid.gy.
And for a (think tank’s) take on the state of socio-political play: “U.S. Democratic Backsliding in Comparative Perspective.”
* Chinese proverb
###
As we ready ourselves, we might note (per the Garret Graff piece linked above) that…
Just months short of the nation’s 250th birthday, Donald Trump is close to batting a thousand at speed-running the very abuses of power that led the Founders to write the Declaration of Independence in the first place. Does any of this sound familiar:
- He has refused his Assent to Laws, the most wholesome and necessary for the public good.
- For taking away our Charters, abolishing our most valuable Laws, and altering fundamentally the Forms of our Governments
- He has kept among us, in times of peace, Standing Armies without the Consent of our legislatures.
- He has erected a multitude of New Offices, and sent hither swarms of Officers to harrass our people, and eat out their substance.
- He has obstructed the Administration of Justice, by refusing his Assent to Laws for establishing Judiciary powers.
- He has abdicated Government here, by declaring us out of his Protection and waging War against us.
- For cutting off our Trade with all parts of the world
- For imposing Taxes on us without our Consent
- For depriving us in many cases, of the benefits of Trial by Jury
- For transporting us beyond Seas to be tried for pretended offences
And so on…
And we might recall that it was on this date in 1752 that the Liberty Bell was officially placed in the Pennsylvania State House (now Independence Hall) in Philadelphia. In its early years, the bell was used to summon lawmakers to legislative sessions and to alert citizens to public meetings and proclamations. It is likely that the Liberty Bell was among the bells in Philadelphia to ring on July 8, 1776, when the Declaration of Independence was first read to the public, although no contemporary account of the ringing exists.
“A strange idea was pecking at his brain like a chicken in the egg, and very, very much absorbed him”*…
The estimable Brad DeLong shares the prose outline of one of his lectures…
[In] my “roots of property, exchange, and the division of labor” lecture [I try] to make novel and strange the idea people think that they “own” things: to impress students with how just plain weird that is. And then there are the next steps: That people enter into reciprocal gift-exchange relationships with or using things they “own” is really weird. That reciprocal gift-exchange transforms into cash-on-the-barrelhead one-shot economic “trade” is perhaps the weirdest of all. Where do these things come from? And what are the chances that any Turing-Class intelligent social creature would ever develop them? And how much less efficient and functional as an action-taking anthology-intelligence could the East African Plains Ape possibly be without these social-institutional things that underpin the global-scale societal coördination mechanism we call the “market economy”?
What if we see the idea of “owning” something is one of humanity’s strangest inventions? Before markets, before money, there was a peculiar leap: the belief that things could be “mine” even when I’m not looking. Explore how property and exchange, far from being “natural”, are peculiar to the East African Plains Ape, are societal-scale technologies that turned us into a market-making species, and how that leap—property and exchange—became the foundation of our economic world and of a great deal of our success as an action-taking anthology-intelligence.
That we believe in property and exchange is absolutely key to the “market” institutional mode of organizing the practical-action coördination side of humanity as a successful anthology intelligence. And that is not all that property is key to, for spheres of ownership, action, and control that can be readjusted are very important parts of our conceptual map for a great deal of our additional collective modes and mechanisms of societal organization. And these ideas—not just “I will growl and bite you if you try to drag this zebra carcasse I am eating right now away from me”, but that this is mine and it stays mine even if I am not right here growling—is really weird.
Where and how does it originate?
And why did it make sense for the first of the homines erecti who added this to their shared conceptual maps?…
Touching on the thinking of Doug Jones (who locates the cultural emergence of “property” in the development of the hand-axe), Adam Smith, Aristoteles of Stagire, John Locke, Jean-Jacques Rousseau, and Friedrich Engels, DeLong concludes…
However, once we have constructed this jenga tower on top of its foundations of reciprocity and ownership, one of very key pieces of humanity’s glory and power as an action-taking coördinated anthology-intelligence has fallen into place.
The true genius of the market system lies in its capacity to decentralize decision-making, to push choices and authority out to the periphery—out to the individuals and enterprises who are closest to the ground, who possess the granular, local knowledge that no distant central planner or bureaucratic committee could ever hope to match. In this way, the market harnesses and aggregates the dispersed intelligence of society, transforming millions of individual judgments, preferences, and bits of information into a coherent pattern of production and allocation.
The result is an astonishingly adaptive and responsive system, one that can, at its best, direct resources toward their most valued uses with a minimum of wasted effort. But, and this is crucial, this remarkable coördination is only truly effective for rival and excludible commodities—goods and services for which one person’s consumption precludes another’s, and for which access can be limited to those who pay. In these domains, the market’s invisible hand is real and powerful, allocating goods through the interplay of supply, demand, and price.
When markets are functioning well—when property rights are secure, when contracts are enforced, when information is sufficiently available—they become the central nervous system of a vast, intricate organism. They coordinate sprawling networks of production and exchange, linking together farmers, manufacturers, merchants, workers, and consumers in a web of mutual interdependence. It is the division of labor, enabled and deepened by the existence of wide and deep markets, that serves as the engine of productivity and prosperity. As Adam Smith observed, the specialization of tasks allows individuals to become more skilled and efficient, unleashing a flood of innovation and output that no autarkic household or command economy could hope to rival.
Yet—and this is a point too often ignored—the benefits of this productivity are not distributed evenly or automatically. Who gets what, and how much, is determined by the prevailing structure of bargaining power and the existing arrangements of property. The market does not guarantee justice, only efficiency; it delivers abundance, but it apportions that abundance according to the rules of the game, rules that are themselves the product of history, law, and politics. Thus, while the market is a marvel of coordination, it is never a substitute for vigilance about the distributional consequences it generates…
How ownership and trade have made us truly weird: “‘Property’ & ‘Exchange’ as a Coördination Mechanism at Societal Scale,” from @delong.social.
Apposite (and in the spirit of both DeLong’s concluding observation and Aristotle’s injunction: “Property should be in a general sense common, but as a general rule private… In well-ordered states, although every man has his own property, some things he will place at the disposal of his friends, while of others he shares the use of them.”): “Think LIke a Commoner“
* Fyodor Dostoyevsky, Crime and Punishment
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As we ponder property, we might send insightful birthday greetings to one of its most sardonic observers, William Makepeace Thackeray; he was born on this date in 1811. A novelist and illustrator, he is best known for his satirical works, particularly his 1847–1848 novel Vanity Fair, a panoramic– and piercing– portrait of British society, and the 1844 novel The Luck of Barry Lyndon (which was, of course, adapted for a 1975 film by Stanley Kubrick.
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