The Editorial Board of the Washington Post explains what shouldn’t – but, alas, what nevertheless today does – need explaining: Government-run grocery stores will fail to improve the lives of their customers

From Cafe Hayek.

"The economics of public stores are fraught. By lowering prices below the market rate, stores struggle to fulfill surging demand and shortages become inevitable. That was the case at Kansas City’s Sun Fresh Market, which closed last year after wasting $18 million of taxpayer money.

Sourcing and stocking perishable food products is a complex business with notoriously thin profit margins. Despite claims by progressives that grocery stores price-gouge, profit margins usually fall between 1 to 3 percent. Partly that is due to shoplifting. Finding good real estate will also be costly in a city with scarce availability. (Whole Foods is owned by Amazon, which was founded by Post owner Jeff Bezos.)

Promising free stuff sounded nice on the campaign trail, but someone needs to pay for it. When his predecessor tried to trim spending on libraries, Mamdani called it “cruel.” Now that he’s in charge, his preliminary budget plan calls for nearly $30 million in library cuts. Those and many other cuts are probably necessary to get the bloated city budget on a more sustainable footing.

…..

The mayor has said before that his grocery idea would be “political experimentation.” But as the Big Apple faces a $5.4 billion budget shortfall and Mamdani threatens a 9.5 percent hike in property taxes, it’s foolish to spend money studying a foregone conclusion."

Would Adam Smith Support the Jones Act?

Why The Economist is wrong about Smith’s stance on protectionist maritime laws.

By Caleb Petitt of The Independent Institute. 

"In an article in The Economist, it was claimed that Adam Smith would likely have supported the Jones Act because he supported the Navigation Acts. This claim is wrong on two counts. First, the idea that Smith supported the Navigation Acts is either overstated or entirely false. The Navigation Acts did not have a single aim or apply to a single sphere of commerce. Rather, they were seen both as promoting defence and opulence, and the clauses can largely be divided into those that apply to trade with Europe and those that apply to their colonies. There are four combinations of spheres of regulation and reason for regulating that could have been used to support the Navigation Acts: (Colonies, Opulence), (Colonies, Defense), (Europe, Opulence), and (Europe, Defense).

Smith clearly rejected support for the Navigation Acts for three of the four reason-sphere combinations. He advocated the relaxation or repeal of the Navigation Acts as regulations on the colonies, rejecting them as sources of defense and opulence. He also clearly stated that the Navigation Acts, as they related to European trade, were harmful to British opulence, leaving only European regulations for defensive purposes as the only possible justification for the Acts.

The European regulations were also meant to regulate trade specifically with the Dutch, not European trade generally. Smith acknowledged that the Navigation Acts were targeted at the Dutch, but also believed that they had not hindered Dutch trade, had not helped England in her wars against the Dutch, or reduced Dutch naval power. The Navigation Acts targeted the Dutch because the Dutch were the principal country engaged in the carrying trade, a country moving goods between two foreign countries, which was seen at the time as a uniquely beneficial manner of trade. That means Smith undermined a reason for supporting the Navigation Acts when he argued against the idea that there was anything special about the carrying trade.

Smith’s acknowledgment and emphasis of the point that the Navigation Acts were targeted against the Dutch also undermined support for the Navigation Acts further undermined support for them. The Dutch were strong rivals and dangerous enemies when the Navigation Acts were passed. But since then, Dutch and English interests were harmonized with the Glorious Revolution, which positioned France, not the Netherlands, as England’s chief rival. Even if Smith thought the European regulations in the Navigation Acts were effective, which appears unlikely, he certainly saw that the regulations against the Dutch were outdated in the wake of the Glorious Revolution. 

Second, regardless of Smith’s view of the Navigation Acts, Smith would be appalled by the Jones Act today because the empirically demonstrable impacts of policies shaped his policy views. You could not simply say a restriction on free trade was justified for national defense to get Adam Smith on your side; you had to show that it worked. 

For example, Smith was very critical of the herring bus bounty, which was said to improve Britain’s defense by increasing Britain’s sailors and shipping. He did not say that defense was a bad justification, but said that the bounty was too large, that it encouraged fraud, that it was not well adapted to the Scottish mode of fishing, and that it increased the price of a staple food. 

If Adam Smith looked at the impact of the Jones Act today, he would see that Jones Act vessels cost dramatically more to build than comparable foreign ships, they drive up prices, particularly in non-contiguous states and territories, and that the American ship-building industry is virtually non-existent. It would be easy for Adam Smith to see that the Jones Act has not established America as a ship-building nation, has not promoted its defense, and has done more harm than good."

Should Policy Restrict Share Buybacks?

By Jeffrey Miron.

"Many politicians believe that corporate share buybacks create “perverse” incentives for firms to prioritize short-term investments over future ones. The 2022 Inflation Reduction Act included a 1 percent tax on all buybacks, and President Trump recently issued an executive order to prohibit share buybacks for underperforming defense contractors.

Recent research, however, shows that

legalizing share repurchases increased investment by 8.0–9.8 percent among public firms … [and] improved public companies’ access to equity capital.

Moreover, the firms receiving these investments

tended to be younger, smaller, and higher-growth, and typically held less cash … suggest[ing] that legalizing share repurchases allowed capital to flow from cash-rich, mature firms to cash-needy firms with greater growth opportunities.

These results make sense: Shifting cash from firms that do not have immediate productive uses to firms that do is good for economic efficiency. Inhibiting this shift stifles corporate investment and growth."

Jason Furman on AI contestability

From Marginal Revolution.

"This ease of switching has forced companies to pass the gains from innovation on to users. Free tiers now offer capabilities that recently would have seemed almost unimaginable. OpenAI pioneered a $20-per-month subscription three years ago, a price point many competitors matched. That price has not changed, even as features and performance have improved substantially.

One recent analysis found that “GPT-4-equivalent performance now costs $0.40/million tokens versus $20 in late 2022.” That is the equivalent of a 70 percent annual deflation rate — remarkable by any standard, especially in a time when affordability has become a dominant public concern.

And this is only the foundational model layer. On top of it sits a sprawling ecosystem of consumer applications, enterprise tools, device integrations and start-ups aiming to serve niches as specific as gyms and hair salons.

Users aren’t the only ones switching. The people who work at these companies move from one to another, a sharp contrast to work in Silicon Valley during the era of do-not-poach agreements."

The Atlantic’s Critique of Homeschooling Ignores the Real Education Crisis

By Corey A. DeAngelis. Excerpt:

"The Atlantic recently ran a story headlined “He Was Homeschooled for Years, and Fell So Far Behind.” It profiles Stefan Merrill Block, who was homeschooled in his early years and later struggled to catch up once he entered traditional schooling. But one rough experience doesn’t invalidate an entire movement that is delivering superior results for millions of families across the country.

Homeschool students are outperforming kids in government schools by a wide margin. Brian Ray’s peer-reviewed systematic review in the Journal of School Choice examined dozens of studies on the topic. Seventy-eight percent of those studies found homeschoolers scoring significantly higher academically than their public school peers. They beat traditional school kids by 15 to 25 percentile points on standardized tests. These solid results hold up regardless of family background, income level, and whether the parents ever held a teaching certificate.

Government schools deliver exactly the opposite outcome. In Chicago alone, there are 55 public schools where not a single kid tests proficient in math. They spend about $30,000 per student each year and still fail to produce basic proficiency. The Nation’s Report Card shows nearly 80 percent of US kids aren’t proficient in math. That’s the real crisis staring us in the face, and it demands accountability from the system that claims to serve our children."

Better defined property rights improve economic growth

Tweet from Vincent Geloso.

 

Hold Harmless for Whom? The Impact of COVID Era Policies on School Funding, Teachers, and Students

Michah W. Rothbart, Samantha Cervantes, and Amy Ellen Schwartz of Syracuse University.

"Abstract 

This study evaluates the fiscal and academic consequences of New York City’s hold harmless policy during COVID-19, which aimed to stabilize school expenditures amid unexpected enrollment declines by restoring schools’ funding up to initial levels. We examine how school racial composition predicts whether or when schools receive hold harmless “treatment” and assess the impact of hold harmless on financial resources, staffing, and student outcomes, exploring heterogeneity by timing of policy announcement. Although schools with higher White student shares were no more likely than those with higher Hispanic or Black shares to receive hold harmless funds, schools with higher Black shares that did receive them saw larger per-pupil allocations due to deeper enrollment losses. Overall, hold harmless schools experienced significant increases in per-pupil spending, and reduced pupil-teacher ratio and class size, while maintaining the size of the teaching workforce. We find hold harmless had no effect on attendance or chronic absenteeism in 2021 or 2022, but improved both in 2023, when it was announced earlier. Although funds often rolled over to later years, we find no corresponding gains in student outcomes. Overall, the policy effectively preserved school-level spending and staffing – as intended – with some improvements in student outcomes when announced early."