More on Repealing the Laws of Economics

THE ARGUMENT

A sequel to his September 2024 memo, extended to tariffs. The organizing claim is that a government can set a price but cannot compel supply at it — the lesson he draws from rent control and, far more painfully, from California’s fire insurance market. He ends on deficits and Social Security, where he says the arithmetic is not in dispute and few in Washington act.

What it actually claims

1. Price controls bind one side only: a government can cap what landlords and insurers charge, but cannot make them supply.

2. Perplexity, quoted and endorsed by Marks: California insurers barred from forward-looking models stopped writing new policies.

   • •Perplexity: rates required by law to be based on the previous 20 years of average losses
   • •Perplexity: State Farm announced non-renewals for over 70,000 policies statewide in 2024
   • •Perplexity: fewer than a quarter of affected properties were insured against fire
   • •a $5 million house with a 1% annual chance of burning carries a $50,000 expected payout

3. A tariff is a tax, he says, and unless an exporter or importer absorbs it to hold market share, the end-consumer pays it.

   • •a $1.2 trillion US trade deficit in goods in 2024
   • •against a $290 billion positive balance in services

4. Sheltered producers may raise prices and let quality slip, on his account, and exports may actually decline.

5. Targeted tariffs he allows — security, iconic industries, unfair practices — unlike taxing all goods from all countries.

6. Buyers judged US cars costlier but not correspondingly better, one main reason; the job losses he calls probably inevitable.

   • •roughly 7,500 cars imported in 1949, 0.03% of all cars sold in the US
   • •half the 16 million vehicles sold in 2024 were imports
   • •US auto workers’ medical benefits said in 2008 to amount to $1,900 per car

7. He takes from Ferguson that every industrialized economy passed a manufacturing peak, so unfair trade probably was not the cause.

   • •manufacturing’s share of employment declined past roughly $40,000 of per capita GDP, essentially identically in every developed economy
   • •8% of US non-farm jobs are in manufacturing today, down from about 30% in 1950
   • •about 400,000 unfilled job openings in US manufacturing

8. He turns the same charge on Washington: chronic deficits, and a Social Security exhaustion date he says is not conjecture.

   • •fiscal deficits in 41 of the last 45 years, and trillion-dollar-plus deficits in all of the last five
   • •a roughly $1.8 trillion deficit in fiscal 2024, or 6.4% of GDP, in a time of prosperity
   • •the Trust Funds exhausted in 2035, with receipts then sufficient for only 79% of promised benefits

Figures are the author's own, as cited in the memo.

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