In a canonical study from the 1970s, a team of social psychologists enrolled forty students from the Princeton Theological Seminary and asked them to walk across campus to another university building to deliver a talk on the parable of the Good Samaritan. In the biblical story, a man is robbed and left injured at the side of the road; he is then ignored by a passing priest before being cared for by a passing good Samaritan. In the study, the subjects encountered a person (a plant of the researchers) slumped in a doorway, not moving, eyes closed, who would cough and groan as the subject went by—a person, in other words, in need of help. Yet only 40 percent of the seminary students stopped to help the person in need. As the researchers observed, “On several occasions, a seminary student going to give a talk on the parable of the Good Samaritan literally stepped over the victim as he hurried on his way.”
What distinguished the subjects who helped from those who didn’t? Was it something about their character, like their level of religious devotion? It turns out that how religious subjects were explained little about who stopped to help and who didn’t. The most important factor? Whether the subject was in a hurry. Some were randomly assigned to be told they were late to give their talk, while others weren’t. Those who were in a hurry helped far less (10 percent) than those not in a hurry (63 percent). The lesson of the Bad Samaritan is not so much about the effects of hurrying per se. It’s more general: For helping behavior, the situation mattered far more than the person.
Many of us live large portions of our days in a hurry. But people in a hurry are often distracted, to the extent of not reacting to what’s in front of them in the way that they would actually prefer–that is, if people act (or don’t act) in they way they would have preferred if they weren’t in a hurry. The long-ago famous UCLA basketball coach John Wooden is quoted as saying: “Be quick, but don’t hurry.”
Ludwig’s theme about gun violence is that something like 80% of gun violence is not about immediate financial gain, as in a robbery, nor about psychopaths and assassinations, as in the movies, but instead is about a situation where an argument erupts between two people. Ludwig argues that there is often a short window of time when the argument escalates past a critical point into violence. If we can find ways to make the escalation less likely, or to interrupt that (say) 10-minute window, we can reduce the likelihood of one person dying and another person ending up in prison. The solution is often less about confrontation than it is about distraction–so that people who are walking down a tunnel of rage, or close to doing so, can divert to a different path. Ludwig makes no claim that this is a full or complete solution to gun violence, but only that there is considerable evidence from urban design and violence prevention programs that demonstrate real gains.
Ludwig is of course aware that this prescription won’t satisfy those who think the solution to gun violence involves laws and rules to restrict gun use, nor those who believe that a policy of more severe punishments for shooters will cause people in the midst of white-hot anger to think carefully and back away. He writes: “If, for better or worse, the four hundred million firearms in the US aren’t just going to disappear anytime soon, if major nationwide gun control is unlikely in the foreseeable future, then progress on gun violence can—or maybe must—come from figuring out how to reduce the tendency of people to use those widely available guns to harm one another.”
For some previous posts on the lack of evidence for what policies are likely to reduce gun violence, see here and here. For those who want to know more about the Good Samaritan study, the citation is Darley, John M., and C. Daniel Batson. “‘From Jerusalem to Jericho’: A Study of Situational and Dispositional Variables in Helping Behavior.” Journal of Personality and Social Psychology 27, no. 1 (1973): 100–108.
If you are looking for a fairly easy read that describes how economists view the effects of tariffs, you could do worse thatn start with tbhe overview essay by Kyle Pomerleau and Erica York, “Understanding the Effects of Tariffs” (American Enterprise Institute, April 2025). Here, I’ll skip past their historical discussions of US tariffs, and President Trump’s historical affinity for tariffs, and just summarize some bottom lines–with more details available in the paper itself:
Will tariffs reduce the US trade deficit?
Although it may seem intuitive that taxing imports would reduce net imports, tariffs do not have a direct impact on the balance of trade. The trade balance is driven by net lending and borrowing between the United States and the rest of the world. Instead of reducing net imports, tariffs simply reduce overall trade. … Tariffs cannot permanently change the trade balance. Tariffs that reduce imports result in an equivalent reduction in exports in present discounted value, reducing overall trade but not the trade deficit.
How will tariffs affect the US dollar exchange rate?
Tariffs have a direct impact on the value of the USD [US dollar] by changing its supply (or the demand for foreign currency). When a tariff is enacted, it results in reduced US demand for imported goods. Since foreign exporters receive dollars for goods sold to Americans, a reduction in US demand for imported goods would reduce the supply of USD in the world market, resulting in an appreciation of the USD relative to other currencies. … [T]he stronger dollar would have an immediate negative impact on exports. Foreigners would find it more expensive to purchase US goods and services because foreigners earn incomes in their domestic currency and need to convert it to the more expensive USD to purchase US goods. … Finally, the appreciation of the USD due to enactment of a tariff would result in a onetime transfer of wealth from Americans to foreigners. A onetime appreciation of the USD would mean that the USD value of foreign assets would fall because it would become more expensive to convert foreign currencies into USD. At the same time, the stronger USD would be more favorable to foreigners, who could now receive a higher return in their domestic currency for a fixed amount of wealth denominated in USD.
How will tariffs affect the price level, and thus affect the real value of wages?
Intuition suggests that tariffs, like other excise taxes on products, should raise prices. While such taxes may raise the price of the taxed goods, the general price level is ultimately determined by the Federal Reserve’s actions. The Federal Reserve, which has a mandate for both price stability and employment, would likely increase the price level in response to tariffs, but only if the tariff increase were significant. … Note that accommodation by the Federal Reserve results in a onetime adjustment to the price level, not a persistent increase in the rate of inflation. It is worth emphasizing that whether the Federal Reserve accommodates the tariff, it burdens households in the form of lower real, after-tax income. With accommodation, nominal incomes remain fixed while nominal prices rise, resulting in falling real incomes. Without accommodation, nominal incomes fall while nominal prices remain fixed, also resulting in falling real incomes.
Tariffs and the likelihood of retaliation
Trade is a two-sided transaction that benefits both buyers and sellers. The taxes that the United States imposes on foreign goods have a negative impact on the US economy and its trading partners’ economies. Likewise, the taxes foreign countries place on US exports harm both the foreign country imposing the tariffs and the United States. A foreign tariff can reduce demand in a foreign jurisdiction for US goods, reducing income earned by affected US exporters. … In 2018 and 2019, jurisdictions including China, the European Union, Japan, Russia, and the United Kingdom responded to US tariffs by imposing tariffs on US exports, affecting approximately 8.7 percent of 2017 exports (Williams and Hammond 2020). The US Department of Agriculture estimated that in 2018 and 2019, direct US agricultural export losses totaled more than $27 billion (Morgan et al. 2022). Retaliation created an additional drag on US output in the manufacturing sector, which, combined with the effects of higher input costs from tariffs, offset the benefits of protection for the sector (Flaaen and Pierce 2024).
A 10% tariff on goods might plausibly raise about $200 billion per year in tax revenue for the government. For comparison, federal revenue from the individual income tax is more than 10 times as high, at about $2.3 trillion per year.
Consider a proposal to enact a 10 percent across-the-board tariff on imported goods. Actual goods imports totaled $3.3 trillion in 2024 (BEA n.d.) … The taxable base would be smaller after considering noncompliance and behavioral responses. We assume noncompliance of 15 percent, which is consistent with the average across all taxes and the noncompliance rate assumed by the Tax Policy Center when it estimates the revenue effects of a value-added tax (Toder et al. 2011). In addition, we assume an elasticity of −0.76 in the first year that grows to −2 by 2032. … Applying the Joint Committee on Taxation’s latest income and payroll tax offset, which suggests that 26.2 percent of gross tariff revenue over the next decade will be offset through reductions in income and payroll taxes, the 10 percent across-the-board tariff is projected to raise $1.95 trillion over the next decade on a conventional basis …
Pomerleau and York are almost visibly striving for an even-handed tone, which of course endears them to me. But I’ll note that as a result they do not emphasize what seem to me some of the ways in which tariffs can severely injure US manufacturing firms: by taxing the imported inputs that US manufacturing firms need for production, and by the likelihood that US manufacturing firms will lose export markets as other countries retaliate with tariffs of their own.
Jon Hartley serves as interlocutor in “Revisiting Empirical Macroeconomics with Robert Barro” (Hoover Institution, Capitalism and Freedom Podcast, March 25, 2025, audio and transcript available). Here are a few of the comments from Barro that especially caught my eye.
One basic question in economics is about “the multiplier”–that is, how much will an increase in government spending boost the size of the economy. If the boost in government spending doesn’t increase the size of the economy, the multiplier is zero. If it raises the size of the economy one-for-one, then the multiplier is one. Optimists about governmetn spending sometimes claim the multipler is more than one, while pessimists hold that it might be negative. Barro argues that, at least in most settings, the evidence supports a multiplier between zero and one. Barro says:
Looking at the variations in military spending in the US context over a fairly long time period is a very good setting for trying to isolate spending multipliers associated with basically exogenous movements in the amount of government expenditure. You wouldn’t do this for many countries during wartime because the direct destructive effects of wartime tend to be dominant. And typically in wartime you would estimate negative spending multipliers associated with military outlays. But the US is different in that respect. It doesn’t have that kind of massive destruction associated, particularly with World War II.
So it was a very good setting, I think, for looking to isolate the effect of these exogenous and large spending changes. So the multipliers were positive. I mean, the right baseline is 0, not 1. If the multiplier is 1, it means you’re basically getting as much output as you’re using up, which makes it sound like it’s a free thing … But the right benchmark is a multiplier of zero because that means that in order to get the extra spending let’s say for military, you have to cut back on other spending one for one. …
So we found multipliers that were more like a half or something, which means that you have to pay for 50% of the extra. So it’s a multiplier of one and above is kind of completely ridiculous. I mean, a multiplier above one means you’re not only getting the military spending for free, you’re getting something extra for coming from nowhere. It should be a very surprising result to have multipliers that are above one. And you certainly wouldn’t find that in normal times or in some kind of long run setting.
Inflation reduces the value of existing debt. Thus, if government spending leads to an increase in inflation–and thus reduces the value of existing government debt–there is a sense in which the government used inflation to “pay for” its spending increase. Here’s Barro:
So if you have a massive increase [in government spending], such as the transfer payments, even more under Biden than under the first Trump administration, a way to avoid paying for that by cutting other spending or by raising taxes is by having a inflation that’s surprising from a perspective of a pre crisis period. And that basically wipes out a lot of real value of the government bonds that are outstanding and it amounts to a very large temporary source of revenue which can be something like 10, 15% of the GDP. So it’s not a minor deal. And that’s empirically about what happened in the US and also in other places. …
[P]eople don’t like the idea that it might not have been completely crazy to pay for the expenditure in substantial part through this surprise inflation. I get a lot of grief on that point from people who normally, who normally are on my side about things because they just want to think of the inflation as being stupid and being dramatically harmful. So I think what was harmful is the excessive fiscal expansion, particularly under Biden. It was unnecessary to have that vast increase in transfer payments, but given that you had it, we effectively paid for most of it through the surprise inflation. And maybe that part was not so crazy because the alternatives would have been also very costly.
Back in the 20th century, it was common to study causes of economic growth by looking a patterns across countries. However, these studies were inevitably about correlations, not necessarily causation. Thus, a lot of economic research has now shifted to looking for experiments–either designed or “natural” in some way–where causation is more clear. Barro argues that for broad topics of economic growth, cross-country regressions should continue to be viewed as a productive approach.
if you want to think about what matters for growth and, and how it depends on policies and things like property rights and fertility behavior and education and all those, the natural empirical arena to consider there is the cross country experiences where you have a lot of variety in terms of different policies and institutions being put into place and you have some hope from that of trying to isolate what things matter for long run economic growth. And that was the work I particularly put my efforts into in the 1990s going into the 2000s. And for a while there was a tremendous interest in that work and it was probably the most cited part of economics overall. But then you had this kind of so called credibility revolution in econometrics and identification and it was clear that to be using this cross country context leads to a lot of issues where you don’t get perfect identification.
There are some legitimate problems that arise in terms of various things being endogenous and too many things potentially mattering. But then I don’t understand how the outcome from that is supposed to be. Then you ignore the best data that you have that pertain to these questions. What which is this cross country experience, you almost never have experiences in terms of macroeconomics and growth where you have the kinds of exogenous experiments or near experiments that you would want to get clean identification. And then I think it’s really unfortunate that what can be gleaned from the data that are available with the possible identification methods and implementations and then ignoring that I think is a great mistake. But that’s the situation we’re in now. It’s basically you just can’t do that kind of work now. It’s viewed as not legitimate. And I think that that’s really wrong and unfortunate.
Here are the big trends in a nutshell. The red line (measured on the right-hand axis) shows that the average age of the global poulation was about 27 years back in 1980, is now up to about 35 years ,and is headed above 40 years in a few decades. The blue line shows average annual population growth. From 1980 to the present, it fell from 1.8% to about 0.8%, and it’s headed toward negative population growth later this century.
Of cousre, this decline in population growth isn’t distributed equally. This figure shows the timing at which countries start to experience a decline in the “working-age” population, defined here as ages 15-64. As you can see, Germany, France, Italy, and Japan were already experiencing a declin in the working-age population before the year 2000. Since 2000, the US, Canada, China, Korea, and Brazil have joined the club. In the 2030s, India and Indonesia will start to experience a declining working-age population. By later in the century, the pattern is projected to reach countries across Africa, like Nigeria, Ethiopia, Kenya, Ghana, and others.
Does a decline in working-age population necessarily mean a corresponding decline in economic output? Maybe not. There will be more workers with greater experience. In addition, people seem to be maintaining their cognitive sharpness and physical health later in life, which is not only a good thing in and of itself, but also increases the chance that they will continue contributing to the economy as workers for a few years longer. The IMF rreport notes:
Alongside increases in longevity, the functional capacity of older individuals has improved over time. More recent cohorts of older individuals are physically stronger and cognitively abler than earlier cohorts at the same age. Notably, when cognitive capacities are the focus, “the 70s are the new 50s”: Data from a sample of 41 advanced and emerging market economies indicate that, on average, a person who was 70 in 2022 had the same cognitive ability as a 53-yearold in 2000. Over the course of a decade, this pace of improvement in cognitive abilities is associated with an increase of approximately 20 percentage points in the likelihood that individuals remain engaged in the labor market, either by working or actively seeking employment, along with an increase of about six hours in average weekly hours worked and a 30 percent rise in labor earnings, conditional on being employed.
Ultimately,the ability of economies to adjust to these demographic shifts will rely on a few variables: Is there at least a moderate upward trend in the number of people who continue working after age 65? Are people saving more, so that they will be ready for longer retirement? Will the skills of experienced older workers perhaps be an especially good complement with emerging AI tools, thus allowing them to maintain high productivity for longer? Are people planning for old age without too heavy a reliance on support from the smaller younger generations of their families? Is the private sector making the kind of investments in technology and physical capital that can raise the productivity of older workers? Will the public sector adjust old-age pensions to keep them solvent? Is a combination of the private and public sector making the kinds of investments so that homes, public spaces, and care facilities are available and accessible to an older population?
There’s an old line that “everybody talks about the weather, but nobody does anything about it.” One might say something similar about the monumental trend toward global aging. The IMF report sketches out a model of a future where various adjustments in labor force participation, technology, investment, and government policies helps smooth the transition to a “silver economy.” But in many countries, for many people, I suspect it will be a bumpy ride.
China’s economy is an unconventional mixture of central control and subsidies, especially involving the large state-owned firms and the financial sector, mixed with widespread use of privately owned firms and market mechanisms. One common mechanism has been to reward local government officials for meeting the goals that the central government has set for economic growth in their area. This arrangement can work reasonably well–right up to when it doesn’t.
From provinces, directly beneath the central government, down to cities, counties, and townships, each level of local government plays a crucial role in translating national targets into concrete economic outcomes. At the start of each year, local governments set their own growth targets in coordination with higher authorities, drawing on assessments of local economic conditions. A notable feature of this process is the phenomenon of “top-down amplification”—whereby national growth targets are consistently exceeded by provincial targets, which in turn are surpassed by city-level targets. This pattern reflects the incentive structure of China’s governance system, where local officials are assessed based on their ability to implement directives from higher authorities and drive economic growth within their jurisdictions. Consequently, regional leaders often set ambitious growth targets that exceed the expectations of their superiors. This strategy serves a dual purpose: providing a buffer to ensure compliance with higher-level expectations while also motivating subordinates to outperform expectations. In this context, growth targets function not merely as planning tools but as instruments that foster competition among local governments. Our findings reveal a ratchet effect in how local governments adjust their growth targets asymmetrically—raising them aggressively during economic booms but lowering them more cautiously during slowdowns.
This figure illustrates the process in action. The dotted blue line is the national growth rate target. The red solid line is actual growth. The yellow dashed line is the province-level growth target (weighted by economic size of the province) and the green dashed line is the city-level growth target (weighte by economic size of the city).
As the authors point out, it’s useful to think of this figure as in two parts. In the first part, up through about 2010, the target rate for China’s growth is high and the actual growth rate is well above the target. Provinces and cities could set aggressive growth targets accordingly. But after about 2010, the real growth rate drops down to the national target, and the target itself is gradually reduced. The province- and city-level targets also come down, but more slowly.
An unwelcome dynamic emerges here. In the first decade or so of the figure, China’s growth was booming in substantial part as a result of an export surge, following China’s entry into the World Trade Organization in 2001. Lower levels of government could compete with each other to facilitate this growth.
But consider the position of state and local governments as growth rates sag in the second part of the figure. Province- and city-level officials are being held responsible for meeting growth targets, and for them, the idea of proposing lower-level targes for growth is likely to sound dangerous. Many of them will look for ways to prop up the higher growth rates. The province- and city-level governments basically have two sources of funds to do this: land sales and borrowing. Indeed, one reason that China’s growth remained robust during the Great Recession of 2008 was that the central government gave lower levels of government permission to increase their borrowing–and in this way to stimulate their economies. The borrowed money was often used to build infrastructure, not necessarily because the infrastructure was needed, but just because the building itself counted as part of local economic growth for purposes of meeting the targets.
You can see where this is headed. The authors estimate that local-government debt, from 2011-19, grew by an amount equal to 14% of national GDP. The infrastructure that was built during this time was not reflected in greater revenue growth among publicly listed firms (which can be used as a proxy for the underlying economic growth beyond the government debt-induced sugar rush). The authors write:
The disconnect between GDP growth and broader economic indicators may stem from key mechanisms identified in studies of the Chinese economy. As infrastructure investment faced diminishing returns, large-scale projects likely failed to generate meaningful spillover effects (e.g., Qian, Ru, and Xiong, 2024). Meanwhile, the surge in local government debt crowded out capital that could have otherwise supported more productive private enterprises, hindering organic economic growth. This pattern aligns with findings from Cong and others (2019) and Huang, Pagano, and Panizza (2020) on the effects of China’s post-crisis stimulus.
To put it another way, local government officials under competitive pressure across areas to facilitate organic economic growth can be a useful development approach. But local government officials under competitive pressure to substitute for organic economic growth, by using debt to juice the local economy, will tend to leave behind a pile of questionable debt. Meanwhile, China’s official national growth targets were trending down, and how much to trust the official GDP statistics remains a very open question.
We estimate the economic gains from declining mortality in the United States over the twentieth century, and we value the prospective gains that could be obtained from further progress against major diseases. These values are enormous. Gains in life expectancy over the century were worth over $1.2 million per person to the current population. From 1970 to 2000, gains in life expectancy added about $3.2 trillion per year to national wealth, with half of these gains due to progress against heart disease alone. Looking ahead, we estimate that even modest progress against major diseases would be extremely valuable. For example, a permanent 1 percent reduction in mortality from cancer has a present value to current and future generations of Americans of nearly $500 billion, whereas a cure (if one is feasible) would be worth about $50 trillion.
Russia illustrates the opposite situation. It’s health statistics are remarkably poor, suggesting that the overall welfare of Russia’s population is considerably worse than its purely economic statistics would suggest. Nicholas Eberstadt provides the background in “The Russian Paradox: So Much Education, So Little Human Capital” (The American Enterprise, April 8, 2025).
Eberstadt first described Russia’s education and per capita GDP levels in the context of European countries. As the figure shows, Russia’s per capita GDP (horizontal axis) put it near the bottom of the range for European countries, but its education levels (vertical axis) are fairly close to a number of European countries.
But while life expectancies around the world have generally been rising, Russia’s life expectancies have not risen for about a half-century. As a result, Russia ranks with many of the world’s lesser developed countries in life expectancy–in this graph, between Haiti and Benin, well behind Bangladesh, Ethiopia, Rwanda, and others.
How is this possible? One place to start looking for an answer is in the causes of death. This figure shows cardiovascular death rates on the horizontal axis, and “injury” death rates on the vertical axis, where “injury” includes homicide, suicide, poisoning, and “accidents.” The points represent countries of Europe, with the orange point showing the average for all OECD countries (basically, the high-income countries of the world). Russia is clearly the outlier.
I will leave speculating about specific reasons why health in Russia might be so poor to you, gentle reader. I will only note that such miserable health statistics, given the economic and education patterns in Russia, suggest deep level of dysfunctionality and weakness in Russian society.
The economy of Poland has done very well in the last couple of decades, especially in comparison to other countries of eastern Europe that escaped from Soviet political and economic control back in the 1990s. The IMF does semi-regular reviews of national economies in what are called “Article IV” report. Here are some insights from the IMF on Poland’s economy (Republic of Poland — 2024 Arcticle IV Consultation, January 2025).
Poland has achieved substantial economic convergence within the EU. The economy has roughly doubled in size over the last two decades. Real GDP per capita over the same period has increased from just under 50 percent of the EU27 average to 80 percent. Growth has been among the fastest historically for an economy of its income level and size, now the 20th largest in the world in real terms. Social indicators have also improved markedly with strong education outcomes and declining poverty rates. Moreover, income inequality in Poland is among the lowest in the OECD.
One issue for countries like Poland is the dreaded “middle-income trap,” where an economy goes through a pattern of productivity growth and corresponding structural change for a time, but then its rapid growth levels off. However, Poland seems to be proceeding along the path of South Korea, a country which has suffered less from the middle-income trap than many others.
The horizontal axis on the figure measures from the date in which a national economy reached a per capita GDP of $25,000. As you can seem, Korea (blue dashed line) kept growing strongly and Poland (red solid line) has done the same, while countries like Spain and Hungary have seen their growth rates drop off. You should get used to thinking of Poland’s growth experience as similar to that of Korea.
While Poland’s economy has grown, its rates of poverty have fallen (not especially surprising) and also its rates of inequality (somewhat surprising). While greater economic growth and greater inequality do sometimes go together, the connection between the two is heavily shaped by political decisions.
There are now predictions that next year, per capita GDP in Poland will surpass that of Japan. So along with thinking of Poland’s growth experience as similar to that of Korea, you need to get used to thinking of the average standard of living in Poland as similar to that of Japan.
One reservation about these comparisons is worth noting. To compare GDP between countries that use different currencies, one has to choose an exchange rate. There are basically two choices here: a market exchange rate, which will then fluctuate with the sometimes volatile global exchange rate markets, or an exchange rate that is calculated based on the buying power of a currency as measured in internationally tradeable goods. This second approach is called a “purchasing power parity” exchange rate, which is calculated by a research group at the World Bank. (For an overview of their most recent report, see here.)
In general, the PPP exchange rate takes into effect the fact that many goods and services are considerably cheaper in lower-income countries. Thus, the buying power of currencies within that country is larger. A rule-of-thumb is that when comparing average standard of living between countries, per capita GDP converted at the PPP exchange rate makes sense. But when looking at global economic clout, the market exchange rate remains highly relevant.
Getting back to Poland, no country has a guarantee of future economic success, and the IMF report discusses a number of potential bumps for Poland in the economic road ahead. But it’s worth noting that back in the 1990s, when countries across eastern Europe were coming out from under Soviet control, Poland was known as a country that followed a disruptive “shock therapy” approach to its economic transition to a market-oriented economy, as opposed to other countries that sought to follow a more staged and nuanced step-by-step approach. For Poland, the embrace of market economics has paid off.
In an era where many people are highly sensitive to what personal information is being collected about them, and how that information is being used, one sometimes hear the question: Why should the government have any power to know your income? In a US context, the question is often asked around April 15, when income tax returns are due.
Also in a US context, the answer to why the federal government has power to know your income is straightforward: It’s in the US constitution. Specifically, the Sixteenth Amendment ratified in 1913 reads: “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.” Before the amendment was passed, US Supreme Court in 1895 had struck down a federal income tax passed the previous year in the case of Pollock v. Farmers’ Loan & Trust Co.
In several countries, at least some information from income tax returns of both individuals and companies is made available to the public as a policy choice. Public access to corporate tax information is provided in Australia, Iceland, Finland, Norway, Pakistan, and Sweden, and was once the law in Japan. Personal-level public disclosure is available on the internet in Norway, whereas Sweden, Finland and Iceland have systems where one can apply to the tax authorities for information about individuals, in Iceland for only a very limited time period. Pakistan introduced public disclosure for both corporate and personal tax information in 2012. Moreover, the issue is on the policy agenda in several countries, including almost half of the OECD countries. …
Even the United States has had public disclosure of income tax information, if only with occasional and brief experiments. The short-lived Civil War-era income tax provided that the public would be entitled to see the names and tax liabilities of taxpayers. The corporate excise tax of 1909 contained a publicity provision, which was soon after repealed. Information from tax year 1923 income tax returns was publicly released in 1924, although this lasted only to the provision’s repeal in 1926. This episode gave rise to one of the most vivid privacy-related objections to public disclosure. Senator Louis Murphy (D-IA) stated at the time that disclosing income tax data is equivalent to taking “the curtains and shades from the homes of our taxpayers and pull[ing] out the walls of the bathroom to assure that the Peeping Toms shall have full and unobstructed opportunity to feast their eyes on the [tax return]” (as quoted in Leff 1984, pp. 70–71). The Revenue Act of 1934 required all income tax filers to submit a pink-colored form that contained information from the return—name, address, gross income, deductions, taxable income, and tax liability—that would become public. This requirement was, though, abolished before it went fully into effect.
So, would greater public disclosure of income and tax data be a step toward transparency and accountability? Or just give free rein to nosiness and jealousy? Slemrod, writing as an economist, doesn’t seek to address this question directly. But he does point out:
Each November 1, the day the Finnish government publishes citizens’ income and tax payments, is known there as “National Jealousy Day.” Reck, Slemrod, and Vattø (2022) document who searches for whose tax information in Norway, and speculate on the motivations for these searches. Perez-Truglia (2020) argues, using survey data and Norwegian tax records, that the higher wage and salary transparency due to public tax disclosure increases the gap in happiness and life satisfaction between richer and poorer individuals. This finding is reminiscent of Varian’s (2009, p. 8) argument that neighbors may care about the assessment of my house not because they care about my assessment per se, but because they care about their assessment.
Slemrod digs into the trickier questions. When people say that prefer tax privacy, what are they worried about? Government tax enforcement efforts? Romantic interests, spouses, ex-spouses? Co-workers? Difficulties in future economic negotiations over, say, pay in new job, or how much one can afford to donate to an alumi group? A possibility of political or social retaliation? Might we be able to measure greater degrees of privacy or lesser degrees of privacy? For example, perhaps I worry less about my overall income being revealed than I worry about, say, specific charitable contributions being revealed or the size of deductions for medical care.
The value that people place on privacy is notoriously difficult to meaure. Economists measure “value” the value that people place on an object in two ways: what is your willingness-to-pay for an object, and what is your willingness-to-accept for selling the object? For many ordinary goods, these two values will be reasonably similar. But Slemrod points out that when you survey people about how much they would need to be paid for a willingness-to-accept less tax privacy, they tend to give large number, but when you ask them about their willingness-to-pay to protect their tax privacy, they give a much smaller number. To put it another way, people will complain vehemently about invasions of privacy of personal information, but they often don’t bother to take even inexpensive (whether measured in time or money) steps to protect their personal information. that Slemrod writes: “The average willingness-to-accept is 13.5 times larger than the average willingness-to-pay …” One can imagine a tax code that starts off with a list of what personal information you are willing to reveal–or not–but the kicker is that if you reveal less information, you will probably end up paying more in taxes.
When I’m re-reading Jane Austen and other 19th-century novels, I’m sometimes struck by the different attitudes toward financial privacy. In those novels, when a character enters the room, it’s common for other characters to talk about their economic situation: land owned, money “in the funds,” likely inheritances, future jobs, and so on. But characters in those books work hard to avoid talking about personal or romantic feelings. In the modern world, it seems to me that we have inverted this sense of what is private. Many people are quite open about their personal and romantic feelings, positive or negative, in a way that would have been alien to Austen. However, modern people are often quite reticent and find it hard to talk about money, even within the context of family and committed relationships.
This modern desire for economic and tax privacy is somewhat at war with informtion technology. The US economy is moving briskly toward less use of cash, and a number of countries are moving that direction even faster. But when economic transactions are done electronically–whether payrolls or purchases–they leave a record. In that sense, economic privacy is getting harder. If you happen to see my credit-card bills, you would know a great deal about my economic life.
Cement is an intermediate ingredient for making concrete, which in turn is an ingredient for construction of roads and buildings all around the world. The price of cement and the quantity produced is thus a marker for the extent of economic development. A few years ago (I haven’t seen more recent data), China was producing more than half of the cement in the world as part of its ongoing modernization. Moreover, cement is an interesting product, because it exhibits both economies of scale and high transportation costs–so that there tend to be relatively few producers in a given geographic area. For all of these reasons, Fabrizio Leone, Rocco Macchiavello, and Tristan Reed found it worthwhile to investigate “The High and Falling Price of Cement in Africa” (American Economic Journal: Applied Economics 2025, 17(2): 1–40).
For those not fully up to speed on their construction materials, cement is not the same as concrete. The authors explain:
Portland cement (hereafter cement) is the most widely used type of hydraulic cement, which hardens when combined with water. The main inputs to cement production are limestone, clay, and gypsum, which are heated in a kiln to form clinker. Clinker is ground into a fine powder, which is finished cement. In turn, cement is a major input to ready-mix concrete, which is cement mixed with gravel, sand, and water, and delivered to a construction site.
The authors point out that an efficient cement plant has high fixed costs: about $150 million for every million tons of capacity. That is, a larger plant will have a lower per-unit price than a smaller plant, and thus will tend to drive the smaller plant out of business. Cement is heavy, and transporting it by land is costly. Put these two factors together, and markets for cement tend to be localized and concentrated, with a few larger-sized plants dominating each local market. (Economists call this a “natural monopoly,” in which the physical characteristics of the product itself tend to create a lack of local competition.) The exception is a port city with access to water transportation, because moving cement by water is considerably cheaper than moving it over land, so it is possible for such a city to receive cement from competing suppliers.
The authors provide evidence for three facts:
Fact 1: The average price of cement in Africa was the highest of any continent in 2011, and consumption was the lowest.
Fact 2: African economies have on average fewer cement firms and less production capacity than other continents.
Fact 3: The average price of cement in Africa fell by more than in any other continent between 2011 and 2017, coinciding with entry and capacity installation.
The authors seek to disentangle the reasons behind expansion of cement capacity and falling prices across nations of Africa. For example, is it improved technology pushing down costs of production? Greater competition so that cement firms are pressured to charge lower markups above cost? Are the lower prices a sign of anticompetitive or cartel-like behavior among the relatively few cement companies? Have regulatory barriers make it harder to start a cement company in many countries of Africa? Perhaps government rules or corruption in some form had been keeping cement prices high? They write:
Contrary to common belief, our model estimates show that cement was not more expensive in Africa due to anti-competitive conduct or high entry barriers (e.g., due to corruption). Instead, the small size of many national markets limited competition and enabled incumbents to sustain higher markups. Consistently with this view, rapid entry and a decline in marginal cost occurred in Africa at a time of rapid economic growth. … Our findings have implications for public policy, specifically the long standing program to reduce entry barriers and increase competition in low- and middle-income countries. … [O]our results challenge the hypothesis that in the cement industry such policies could have a substantial impact on markups and prices.
In short, cement in Africa is a story of economic fundamentals for a product of particular characteristics in a growing economy.
There’s a fundamental misconception at the root of President Trump’s tariff policies, which is the mistaken claim that the existence of a US trade deficit proves that trade is unfair. There are two related mistaken claims. One is a claim that if tariff and non-tariff barriers to trade were removed, then trade would be balanced. Another is that if the US trade deficit persists, then it proves that trade barriers remain.
As an illustration of this mindset, President Trump said to reporters in the aftermath of his tariff announcement a few days ago: “I spoke to a lot of leaders — European, Asian, from all over the world. They are dying to make a deal, but I said ‘we’re not gonna have deficits with your country’ … to me a deficit is a loss. We’re gonna have surpluses or at worst we’re gonna be breaking even.”
But tariffs do not in fact cause trade deficits. The existence of a US trade deficit does not prove in any way that other countries have larger (or smaller) tariffs. Whether the end result of Trump’s trade negotiations is higher tariffs or a return to the pre-existing tariffs, it’s not going to fix the US trade deficits.
A first key insight here is that tariffs (and other trade barriers) can shift the composition of an economy, but these shifts in composition are not related to the existence of trade deficit or surplus. Think of it this way: When a national economy starts to engage in international trade, it will alter the shape of that economy. Sectors of the economy that are well-suited for exporting will expand; sectors of the economy where other countries are well-suited for exporting will contract.
These trade-induced shifts away from some sectors and toward others can be painful. Indeed, many economic shifts–like automation or other new technologies–can be painful as well. But shifts toward higher-productivity areas is the source of economic growth, and trade-induced shifts toward the areas where an economy has an advantage and away from areas where other countries have an advantage is actually why both sides benefit from trade. Conversely, the proposed new tariffs would cause a high level of economic pain to the US economy, because they are also an attempt to shift sectoral patterns. However, the tariffs seek to shift the sectoral patterns toward areas where the US has less or no global advantage and–necessarily–away from areas where it does.
Whether you agree with my negative view of tariffs or not, here’s the key point: the trade-induced shifts across the size of economic sectors do not require there to be an imbalance of trade. Even if US imports and exports were equal, there would still be US domestic producers who feel a competitive threat from foreign producers of very similar goods. (For example, in the early 1970s when US trade was roughly balanced, or in the late 1980s when trade was near-balance for a few years, there were still concerns over imports.)
In short, trade shifts the mixture of good and services produced in a domestic economy. Conversely, when a nation imposes barriers to trade like tariffs, it shifts the national economy back toward the sectoral patterns that would have existed in the absence of trade. But although these shifts will make some sectors relatively larger or smaller, the shifts are not actually related to trade deficits–not at the bilateral level and not at the overall level.
The misconception that differences in tariffs are the cause and the solution of trade deficits comes in a silly version and a deeper version. The silly version is that if all countries removed their trade barriers, the US would then have a bilateral trade balance with every individual country. But in a global economy, there is no reason why every single pair of countries should have balanced trade–as opposed to countries having trade surpluses with some partners and trade deficits with others. Indeed, although the US has consistently had overall trade deficits since the late 1970s and early 1980s, it has bilateral trade surpluses with a number of economies. In 2023, for example, the US had a surplus in goods trade with Belgium, the United Kingdom, Australia, and others. Indeed, the US had an overall trade surplus in 2023 with the South/Central America region, including trade surpluses with Argentina, Brazil, and Chile.
If you believe that bilateral trade imbalances are caused only by trade barriers, then you need to look at the mixture of US trade surpluses and deficit across countries, and believe that all the countries where the US has a with bilateral trade deficits are treating the US unfairly, and also that all the countries where the US has a bilateral trade surplus are being treated unfairly by the US. But there is literally no evidence that levels of trade barriers match up to trade surpluses. The US has trade deficits with countries where it has already negotiated free-trade agreements. Even the Trump administration doesn’t believe this is true: it has sought to impose tariffs on all US trading partners, not just those where the US has bilateral trade deficits. And one suspects that the Trump administration would be deeply unamused if the countries where the US has bilateral trade surpluses used that as a reason to limit US exports.
So let’s set aside the peculiar and ridiculous claims about bilateral trade deficits and surpluses, and focus instead on the overall US trade deficit. Maurice Obstfeld tackles these issues in “The U.S. Trade Deficit: Myths and Realities” (Brookings Papers on Economic Activity, Spring 2025, presentation of this paper, along with comments and discussion is available here).
As a starting point, consider the pattern of the overall US trade deficit over time. As you can see, the US trade deficit as a percent of GDP was near-zero from the 1950s up through the mid-1970s, and has been mostly in deficit since then.
If the US trade deficit is caused by the tariffs and barriers to trade from other countries, then changes in the trade deficit must be caused by changes in barriers to trade. Thus, the larger trade deficits from the mid-1970s to the mid-1980s must reflect greater barriers to trade from US trading partners, followed by lesser barriers to trade as the US trade deficit declines in size from the mid-1980s to the early 1990s. As the trade deficit then gets larger through the 1990s, this must reflect greater barriers to trade at this time, and the decline in US trade deficits around the time of the Great Recession from 2007-09 must reflect smaller barriers to trade.
Just to be clear, no one actually believes that movements in unfairness of trade explain movements in the US trade deficit. Concerns about unfair Japanese trade barriers were strongly expressed in the early 1970s when overall US trade was close to balance. No one was saying in the late 1980s or in the Great Recession–times when the US trade deficits declined in size–that the cause was a sharp reduction in foreign trade barriers. When US trade deficits rose in the 1990s, the concern was that trade barriers had been reduced because of the North American Free Trade Agreement–not that global trade barriers had gone up. When US trade deficits rose in the early 2000s, the concern was that trade barriers had been reduced when China entered the World Trade Organization, not that global trade barriers had gone up.
More broadly, the the overall argument that the US has larger trade deficits than a half-century ago is because trade barriers around the world are higher than a half-century ago doesn’t pass a basic reality check. As any anti-globalization protester will be happy to tell you, the overall thrust of trade policy around the world in the last half-century has been toward reducing barriers to trade: the World Trade Organization, the US-Mexico-Canada Agreement (USMCA, offspring of NAFTA) and the other 13 “free trade agreements” the US has signed, along with any number of trade-encouraging treaties on issues from taxation to intellectual property.
So if tariffs (and other trade barriers) are not the cause of US trade deficits, what is the cause? If it’s not tariffs, what causes US deficits to rise and fall. The key point here (and this is a standard intro-econ argument, not a personal theory of mine) is that a trade deficit reflects a macroeconomic imbalance. Obstfeld goes through the argument in some theoretical detail. Here, let me illustrate the theory by offering some potential alternative (and partial) explanations changes in the US trade deficit that are unrelated to tariffs.
Here’s a first episode: Back in the 1980s, the federal government ran budget deficits which at the time looked quite large, and the US trade deficit also got larger. At the time, these were sometimes called the “twin deficits.” The intuition went like this: the buying power from the large budget deficits of the 1980s could in theory have gone to buying domestically produced goods, but in fact a lot of it went to buying imported goods. The high US budget deficits of the 1980s were thus a primary cause of the US trade deficits of that time
As a second episode, consider the sharp decline in the size of the US trade deficit around the time of the Great Recession of 2007-09. During a recession, household buying and investment decrease, and as part of that, imports also fall, which leads to a reduced trade deficit. (The recession of 1990-91 also helps to explain the pattern of a smaller trade deficit at that time.)
As a third episode, consider the larger trade deficits that the US economy experienced in the 1990s. This was during the “dot-com boom,” when investors all over the world were eager to put dollars into US-based information technology startups for this new thing called the World Wide Web. To put it another way, the rest of the world shifted to some extent at that time toward investing in the US economy, and to some extent away from buying US-produced goods and services.
Of course, each of these episodes is considerably more complex than my quick discussion here. But My hope is to illustrate that there are a variety of macroeconomic reasons why trade deficits rise and fall that have nothing to do with levels of tariffs in other countries, like surges of US government borrowing, US recessions, and surges of capital inflows from other countries. Conversely, one can also look at countries with consistent trade surpluses and find explanations in their patterns of domestic saving and borrowing, business cycles, and changes in flows of foreign capital. (And in addition, tariffs bring with them factors like retaliation from other countries and shifts in exchange rates that will greatly reduce any effect they can have on trade balance.)
Again, my point in this particular post is not to argue whether tariffs are good or bad. It is just to point out that tariffs are not the likely cause of US trade deficits, nor are they a likely answer. The US government is running enormous budget deficits, and like in the 1980s, the buying power of these deficits as they flow into the economy is keeping purchases of imports high–along with the trade deficit. This is one reason why Obstfeld writes: “U.S. trade deficits are high and likely to rise, notwithstanding new and prospective tariffs.”
Of course, it’s a lot easier politically to blame the unfairness of dastardly foreigners, rather than to get serious about the details of an agenda to reduce US budget deficits or to increase US productivity.
But it’s perhaps worth noting that trade surpluses are not necessarily a sign of economic success, and trade deficits are not necessarily a sign of economic failure. To cite just one prominent example, Japan’s economy has had trade surpluses for most o the last half-cnetury decades and also ultra-slow and near-stagnant growth since the early 1990s, while the US economy has had trade deficits and has been leading the high-income countries of the world in its growth rate.
