Most commentators present President Trump’s policies toward markets as if they were rationally formulated. In my view, they are making Trump’s policies appear more reasonable and well-founded than they are. That is, they are sanewashing a president who is—How do I say this tactfully?—irrational, delusional, crazy. I will say crazy because it is not a medical term and encompasses a broad range of behavior.
I realize this informal word is a powerful indictment of a sitting president that violates the Goldwater Rule: judgments about a person’s mental health and fitness should not be expressed without conducting an in-person psychological evaluation. However, Trump has repeatedly raised concerns about his grip on reality by claiming he won the 2020 election, the January 6 insurrection was a “day of love,” and Ukraine started the war with Russia. As a result, a synthesis of polls indicates approximately 50% to 60% of the public harbors some level of concern about Trump’s mental state, regardless of how it’s defined.
In the context of assessing Trump’s policies toward markets, my use of the word crazy means that Trump is irrational and delusional to the point where he is incapable of articulating a plausible theory to explain why a policy is justified, drawing on empirical evidence to support or refute the policy’s efficacy in practice, and changing his position if on net it conflicts with the evidence. We therefore live in a dystopian society where fact checking is met with outrage and accusations of bias, mendacity, or conspiracy.
One manifestation of Trump’s craziness is his opposition to policies that seek to improve market efficiency by correcting a market failure, such as highway congestion and air pollution. The theoretical argument for congestion pricing, or tolls, is that motorists do not consider that they may delay other motorists when they choose to drive. Thus, they create social costs by contributing to congestion but they are not charged for those costs. Travelers face two options. If they pay congestion tolls to cover the cost of their contribution to congestion, they do not have to change their driving plans. Or they can avoid paying congestion tolls if they use a different mode of travel like public transit, take a longer but uncongested route, drive during off-peak hours when they will not delay other motorists, or travel to destinations that do not require driving on congested roads.
The NYC congestion pricing experiment set up a congestion zone located at 60th street to the southern tip of Manhattan, where vehicles must pay $9 a day to enter the congestion zone at peak travel hours. Trump opposes congestion pricing because he claims it discourages people from driving to Manhattan, thus reducing business activity. Fact check: congestion pricing discourages people from driving in the congestion zone during peak hours, but people have options to get to Manhattan without paying congestion tolls during peak times and even more options during off-peak times.
Since congestion tolls were implemented, vehicles entering the zone have declined 10%, which has reduced businesses’ costs because fewer shipments are delayed and fewer employees are stuck in gridlock. NYC also has become more accessible, which increases business activity. Car, bus, and taxi speeds have increased and the toll revenues going to the subway can improve its service. Fewer cars on the streets mean walking is more attractive as indicated by the reported increase in foot traffic.
Trump’s rejection of congestion pricing alarmingly illustrates his thought process. He ignores its laudatory objective of giving people options to reduce the social costs of congestion efficiently. He then disregards the available evidence indicating that congestion pricing is reducing congestion without generally reducing business activity and is unaware of congestion pricing’s long-run benefits of improving productivity, land use, and safety.
Trump dismisses another significant social cost, air pollution that contributes to climate change, without considering a constructive policy to address it. Similar to congestion tolls, efficient pollution taxes give people and firms the option to pay for their contribution to pollution or to change their behavior to reduce both their contribution to pollution and tax payment. For example, motorists could help reduce pollution and pay a lower pollution tax by driving electric vehicles instead of internal combustion engine vehicles. Households and firms could use electricity produced by wind and solar energy instead of by fossil fuel-based generation.
But Trump irrationally grouses about efforts to improve the climate, even if those efforts were part of an efficient market where people and firms were charged for their contribution to pollution. Trump’s positions on climate change have been so contradictory that scholars have concluded he is a nihilist who doesn’t understand what climate change is about.
Another manifestation of Trump’s craziness is his enthusiasm for setting inefficient tariffs on imported goods. He refers to tariffs as the most beautiful word in the dictionary and justifies imposing them on imports from China, Canada, and Mexico and threatening to impose them on imports from the European Union because tariffs increase jobs. He erroneously claims without evidence that foreign countries, not U.S. consumers, bear their cost.
Generally, economists oppose tariffs because they amount to a tax paid by consumers and are an inefficient policy to create jobs compared with, for example, policies that increase the nation’s output, such as efficiently targeted investment tax credits. Evidence on the effects of tariffs that Trump imposed during his first term indicated that their billions of dollars in costs to consumers far outweighed the benefits of any jobs saved. In addition, because farmers incurred losses from tariffs, they received nearly $20 billion in additional subsidies. Again, Trump fails to engage with the evidence and claims that tariffs created vast wealth for the US in the late 19th century. Fact check: Researchers conclude that the economy during that period thrived despite high tariffs, not because of them.
Many more of Trump’s policy positions, besides those toward markets, should not be sanewashed. Consider his claim that he knows interest rates better than Fed Chairman Powell. Consider his foreign policy perspectives that are based on an alternative reality. Similar to tobacco package warnings, commentaries on Trump’s policies should be preceded with a caution: positions may be compromised by the president’s mental fitness.
