The strength of markets is their ability to coordinate economic activity efficiently and to stimulate and reward innovations that lead to technological progress and economic growth. Government is responsible for protecting the economy and society against market failures that reduce the material quality of life and threaten health and safety, hopefully without losing much of the strength of markets.
Unfortunately, Donald Trump and Kamala Harris are seeking the presidency during a time when the nation is deeply divided. The result is that, to appeal to disparate prospective voters, both candidates are taking positions that would undermine the performance of markets and government. Thus, voters’ choice of candidate must fall to character.
Both Donald Trump and Kamala Harris misrepresent how markets work. For example, Trump claims that gasoline prices have been 50% higher while Harris has been in office as vice-president than they were during his term in office. Trump calls for a policy of “Drill, baby, drill,” to appeal to voters in oil producing states and to the nation’s gas guzzling consumers, while asserting that doing so could reduce gasoline prices by half. However, given that US gasoline prices are determined by world not domestic market forces, for example, Russia’s invasion of Ukraine raised US gasoline prices, Trump cannot offer a credible policy that would greatly reduce oil prices without devasting US oil producers.
Harris appeals to less affluent voters by calling for a federal ban on price gouging in the food and grocery industries. However, such a ban would be an inferior policy under any plausible circumstances where a government intervention was justified. If food and grocery prices are elevated, then firms may be colluding to raise prices, which calls for an antitrust investigation and prosecution. If new firms are discouraged from entering the market to reduce prices, then incumbent firms may be engaging in predatory behavior, which again calls for an antitrust investigation and prosecution. And if the sale of food and groceries has features of a natural monopoly where costs are minimized when there is only one seller in the market, then a new regulatory agency should regulate prices and entry. If none of the above, then let market forces work.
Foreign producers benefit US consumers by competing with domestic firms and reducing prices and by offering products that some consumers find superior to domestic firms’ products. Both Trump and Harris advocate tariffs on Chinese imports to appeal to voters in areas of the country where competition from Chinese and other foreign firms has weakened US firms and increased unemployment. However, instead of implementing tariffs that impede competition from foreign competitors and discourage consumers from purchasing more desirable foreign products, Trump and Harris should advance macroeconomic policies to spur economic activity and increase employment.
Global warming caused by various pollutants may turn out to be markets’ greatest failure as well as a major opportunity for markets to self-correct by developing alternative energy sources, such as wind, solar, and nuclear, that could become commercially viable and reduce global warming. However, Trump asserts that climate change is a hoax and ridicules alternative energy sources to appeal to voters who don’t believe in climate change and/or oppose the use of alternative energy sources.
Harris cast the tie-breaking vote for the biggest climate bill in US history. Yet, she has generally been quiet about her plans to address climate change both for fear of alienating voters in coal producing states, such as the critical swing state of Pennsylvania, who would lose jobs if coal production were curtailed, as well as for fear of alienating more environmentally-conscious younger voters if she tried to reassure the country that she will maintain the Biden administration’s increase in oil production.
Unfortunately, neither candidate has expressed an interest in upholding the government’s responsibility to protect society against the market failure of pollution by implementing efficient emissions taxes that would discourage the use of fossil fuels and would encourage the use of green energy alternatives.
Generally, Trump does not appear to have any interest in using the government to protect society against market failures because if elected, he plans to overturn 140 years of civil service protection by making “every executive branch employee fireable by the president of the United States.” By staffing the government workforce with sycophants who have little knowledge of or interest in improving government efforts to correct market failures, Trump is likely to exacerbate the inefficiencies that his microeconomic policies produced during his first term and to create a dystopian national economy.
Harris has not indicated her plans for the government workforce, but concerns exist that she will appoint some people who have little understanding of the strengths of markets and who would make poor judgments about when government should intervene. For example, Harris may keep Lina Khan as chair of the Federal Trade Commission, which would please populist voters who like Khan’s aggressive approach to antitrust policy to curb big business but alarm voters who manage corporations. In my view, Khan has become emblematic of a lawyer who has very little understanding of the strengths of market forces yet is overly confident in her judgments about when it is appropriate for antitrust authorities to intervene in markets.
Trump and Harris have responded to the challenge of seeking elective office in a deeply divided nation by taking policy positions that are likely to compromise the performance of markets and government. Accordingly, the election is less about comparing the candidates’ economic policy positions because both positions have serious flaws, than about which candidate has the character to reconsider their views on a variety of economic policy issues if they do not want to harm the nation. Using those criteria, Donald Trump has made it clear that he will create a government workforce that will not even attempt to educate him about the perils of his policies. Kamala Harris should unquestionably be the next president of the United States.
