Shall We Repeal the Laws of Economics?

Howard Marks argued in his September 2024 memo that politicians across the spectrum are offering economic proposals that ignore the incontrovertible laws of economics. Marks contended that Harris's anti-price-gouging plan misdiagnoses the cause of grocery inflation — pointing to supply-chain disruptions, pandemic-era stimulus, and wage growth as the real drivers — while Trump's broad tariff proposals would function as a tax on American consumers and undermine the globalization that has held down U.S. inflation for decades. Marks used rent control in New York City as a case study in how price regulation backfires. He cited data showing the city's rental vacancy rate fell to 1.4% in early 2024, the lowest since 1968, and that rental apartment stock grew only 0.3% per year between 2002 and 2017 — outcomes he attributed directly to regulations that make new construction economically unattractive. He extended the argument to California's $20 fast-food minimum wage, first-time homebuyer subsidies, and the Social Security trust fund, each framed as examples of officials promising benefits without acknowledging who pays the cost. Marks's broader thesis is that free markets, despite producing unequal outcomes, generate higher collective welfare than command economies — citing South Korea versus North Korea and China's private-sector-driven growth as historical evidence. He warned that the U.S. deficit, now generating annual interest payments exceeding the Defense Department budget, represents the same pattern of ignoring economic reality at a sovereign scale.