May 26, 2024

Last month, Aaron Ross Powell sat down with Ryan Bourne, who is the R. Evan Scharf Chair for the Public Understanding of Economics at the Cato Institute, to discuss the new right’s adoption of populist economics. The following Q&A has been adapted from their conversation on Aaron’s ReImagining Liberty podcast.

Aaron Ross Powell: Ryan, you’re an expert in the public understanding of economics. I want to ask you about an important shift that’s taken place since Trump’s takeover of the conservative movement. People on the right used to talk about the importance of free enterprise—certainly that was an emphasis of Reagan-era conservatism. Today, the right has a much more populist perspective on economics. What do they misunderstand about markets?

Ryan Bourne: As economists, we tend to think markets are quite valuable for society. They enable people to convey their subjective preferences about goods and services. Suppliers use those signals to try to meet our wants. In this and other ways, markets are incredibly pluralistic.

The new right, by contrast, believes markets deliver suboptimal outcomes. It thinks we should use the power of the state—through tax regulation and subsidies, tools progressivism has traditionally used to advance a particular social design—in pursuit of the national interest or common good. This makes its view more of a social theory of markets than a purely economic one. The new right’s insistence on a much larger manufacturing sector, a heavy industrial base, families that look a bit more traditional (single-income households, wife as homemaker)—these require configuring markets toward a specific set of social goals.

So instead of seeing markets as an economic mechanism that reflects our pluralism and enables us to satisfy our subjective preferences and desires, they conceive of them as vehicles toward a particular social vision. They set out what they perceive to be the national interest or common good and they’re willing to use the powers of the state to impose it. […]

An interesting feature of the new right is they’ve adopted an economic history of the last half-century that is distinctly progressive in that it believes we have been living under a radical libertarian experiment.

Inflation estimates provided by Moody’s Analytics, combined with voting data, show that states where Donald Trump garnered the most votes in 2020 have on balance experienced higher inflation.

For example, South Carolina experienced the most inflation of any state since the pandemic hit. Its consumer prices rose at a 4.88% annual rate between December 2019 and last month. South Carolina elected Trump with 56% of the votes cast between him and President Biden in 2020.

In contrast, New Hampshire had the least inflation of any state, with prices rising at a 3.75% rate. It elected Biden with 54% of the Trump/Biden vote.

Just as importantly, Binder and her co-authors found that people in Republican-leaning states were more likely to expect that higher inflation. While feelings might seem superfluous, economists and policymakers widely believe that expectations do matter. If people think more inflation is coming, that can lead to higher inflation in fact.