My Weekly Reading for May 18, 2025

by J.D. Tuccille, Reason, May 12, 2025.

Excerpt:

Putting the main opposition party under an “extremist” designation subject to surveillance is a frightening step for a democracy.

“One of the things I appreciate about America is that when the federal government attacks free speech there’s instant pushback by civil society,” Jacob Mchangama, the head of The Future of Free Speech think tank at Vanderbilt University, responded to the controversy. “People take to the streets. In Europe free speech has been in steep decline for years, but there’s no real public outcry, no mainstream concern about democratic backsliding. In fact, the Old World is in a state of delusional ‘Censorship Denial.'”

This wasn’t an isolated incident. Last month, David Bendels, an AfD-associated editor, was sentenced to seven months’ probation for posting a mocking meme of former German Interior Minister Nancy Faeser holding a sign digitally altered to say the German equivalent of “I hate freedom of speech.” Like other members of the last coalition, Faeser has a censorious reputation; she banned Compact magazine as “extremist” just last summer.

by By Nicholas Bloom, Kyle Handley, André Kurmann, & Philip A. Luck, Research Briefs in Economic Policy, No. 431, Cato Institute, April 30, 2025.

Excerpt:

Our research investigates the extent to which the opposing trends in manufacturing and services job growth are related. Our findings reveal that local labor markets more exposed to Chinese import competition experienced larger manufacturing job losses. But these losses were offset by stronger services job growth, which mostly came from job reallocation within firms. Importantly, the extent of this reallocation varied across regions. Places with a high share of college-educated workers—including much of the West Coast and large cities—saw successful transitions, with service job gains outpacing manufacturing job losses. Places with a low share of college-educated workers and high manufacturing dependence—including much of the Midwest and the South—experienced only limited services growth to compensate for manufacturing job losses.

Our findings imply that the China Shock was, on net, a job creator and not a job killer. At the same time, the shock created winners and losers, not just across workers but also across regions, by relocating jobs from the industrial heartland to the coasts and large cities, thereby contributing to the changing geography of jobs in the United States. This experience offers a crucial lesson about today’s debate on tariffs: While trade barriers might bring back some manufacturing jobs, they may not only raise prices but also risk undermining the substantial growth in high-paying service-sector jobs that global trade has fostered, especially in high-education and high-productivity regions. In other words, the aggressive tariff policy advocated by the White House may create a few winners but will likely make America lose overall.

by Timothy Taylor, Conversable Economist, May 13, 2025.

Excerpts:

A team from the McKinsey Global Institute writes about the mushrooms in “The power of one: How standout firms grow national productivity” (May 6, 2025). The thesis, as stated in the subtitle: “National productivity growth is a matter of few firms taking bold strategic action rather than millions of firms raising efficiency.” For the relatively short time frame they analysis in this study, from 2011 to 2019, this seems likely to be true.

The authors have a dataset of 8300 firms across the US, UK, and German economy, all with at least 50 employees and many with more than 500 employees, and focused in four sectors: retail, automotive and aerospace, travel and logistics, and computers and electronics. They refer to this limited group of companies in each country as a “lab economy.” define a “Standout” firm as a company where the productivity growth in that single company, by itself, adds at least 0.01% to the productivity growth of the entire set of companies for the lab economy in one country. Conversely, they define a “Straggler” firm as a single company that, by itself, subtracts at least 0.01% of productivity growth from the entire economy. Of courses, most firms are between these extremes.

And:

First, a relatively small number of Standouts and Stragglers can drive the overall productivity growth patterns of an economy. The report notes: “Fewer than 100 firms in our sample of 8,300—a group that we have dubbed Standouts—accounted for about two-thirds of the positive productivity gains in each of the three country samples we analyzed. … To give a sense of how important a single firm can be, just another dozen or so of the largest Standouts could have doubled productivity growth in their entire country. … In the United States, for instance, 44 Standouts—5 percent of sample firms, accounting for 23 percent of employment share—generated 78 percent of positive productivity growth. … US Standouts included household names like Apple, Amazon, The Home Depot, and United Airlines.

Second, the US has a higher proportion of Standouts relative to Stragglers, compared to the UK and Germany: “US productivity growth from 2011 to 2019 was faster than that of the other countries in our sample at 2.1 percent, compared with 0.2 percent in Germany and close to zero in the United Kingdom. … The US sample had three times more Standouts than Stragglers, while the German and UK samples had almost even numbers.”

Third, US Standouts are more likely to grow and expand, while US Stragglers are more likely to contract, compared with the UK and Germany: “Firms in the US sample had more reallocation of employees from less productive to more productive firms. Leaders grew faster, and underperforming firms more swiftly restructured or exited. In the United States, Standouts include scalers (firms far above average sector productivity that contribute by gaining employees) and restructurers (firms with below-average sector productivity that contribute by losing employees). In Germany and the United Kingdom, this was not the case. Rather, these countries preserved underperforming firms as Stragglers. Frontier firms scaling and gaining share added 0.6 percentage point to productivity growth in the United States, and unproductive firms exiting contributed an additional 0.5 percentage point. Overall, dynamic reallocation, including reallocation across subsector boundaries, added 0.9 of 2.1 percentage points—slightly less than half—to productivity growth in the US sample. In contrast, the contribution of reallocation was negligible in Germany and the United Kingdom. This may be explained by the fact that the United States has highly dynamic factor markets, allowing for quick entry and exit as well as fast scale-up and restructuring.

First, a relatively small number of Standouts and Stragglers can drive the overall productivity growth patterns of an economy. The report notes: “Fewer than 100 firms in our sample of 8,300—a group that we have dubbed Standouts—accounted for about two-thirds of the positive productivity gains in each of the three country samples we analyzed. … To give a sense of how important a single firm can be, just another dozen or so of the largest Standouts could have doubled productivity growth in their entire country. … In the United States, for instance, 44 Standouts—5 percent of sample firms, accounting for 23 percent of employment share—generated 78 percent of positive productivity growth. … US Standouts included household names like Apple, Amazon, The Home Depot, and United Airlines.

by Marc Oestreich, Reason, May 13, 2025.

Excerpt:

When a power plant trips offline or demand suddenly spikes, the power grid has no cushion; it must respond instantly or it unravels. That’s where inertia comes in. In coal, gas, and nuclear plants, massive turbine rotors spin at thousands of rpm. Even when power is cut, they keep turning, releasing stored energy that slows frequency shifts and buys precious time—seconds to a minute—for backup to kick in. It’s not backup power, it’s breathing room. Like the flywheel on a Peloton, it keeps things steady even when input falters.

Once frequency drops too far, automatic protection kicks in. Plants shut down. Substations isolate. The grid severs its own limbs to survive. If imbalance spreads faster than recovery can respond, the collapse cascades. Entire regions go dark—not for lack of power, but lack of time. Even the right answer, a minute late, is no answer at all.

That’s what happened in Spain. On April 28, solar energy was generating nearly 18 gigawatts of electricity—more than half of the national demand. Within an hour, more than two-thirds of it disappeared due to what authorities called a “technical fluctuation.” Grid frequency plummeted. France tried to send emergency power across the intertie, but the imbalance tripped the connection. In five seconds, the entire Iberian grid collapsed.

Experts/government regulators are unsure if solar power alone caused the failure. But a system hell-bent on pushing renewables certainly ensured that the failure was catastrophic. This wasn’t bad luck. It was bad policy made manifest—a sequence I’ve come to call the Four Horsemen of Grid Failure: