2026-02-21 20:21:23
The Supreme Court yesterday struck down Trump’s IEEPA tariffs, holding that the statute’s authorization to “regulate… importation” doesn’t include the power to impose tariffs. The majority’s strongest argument is simple: every time Congress actually delegates tariff authority, it uses the word “duty,” caps the rate, sets a time limit, and requires procedural prerequisites. IEEPA has none of these.
The dissent pushes back with an intuitively appealing argument: IEEPA authorizes the President to prohibit imports entirely, so surely it authorizes the lesser action of merely taxing them. If Congress handed over the nuclear option, why would it withhold the conventional weapon? Indeed in his press conference Trump, in his rambling manner, made exactly this argument:
“I am allowed to cut off any and all trade…I can destroy the trade, I can destroy the country, I’m even allowed to impose a foreign country destroying embargo…I can do anything I want to do to them…I’m allowed to destroy the country, but I can’t charge a little fee.”
The argument is superficially appealing but it fails due to a standard result in principal-agent theory.
Congress wants the President to move fast in a real emergency, but it doesn’t want to hand over routine control of trade policy. The right delegation design is therefore a screening device: give the President authority he will exercise only when the situation is truly an emergency.
An import ban works as a screening device precisely because it is very disruptive. A ban creates immediate and substantial harm. It is a “costly signal.” A President who invokes it is credibly saying: this is serious enough that I am willing to absorb a large cost. Tariffs, in contrast, are cheaper–especially to the President. Tariffs raise revenue, which offsets political pain. Tariff incidence is diffuse and easy to misattribute—prices creep, intermediaries take blame, consumers don’t observe the policy lever directly. Most importantly tariffs are adjustable, which makes them a weapon useful for bargaining, exemptions, and targeted favors. Tariffs under executive authority implicitly carry the message–I am the king; give me a gold bar and I will reduce your tariffs. Tariff flexibility is more politically appealing than a ban and thus a less credible signal of an emergency. The “lesser-included” argument gets the logic backwards. The asymmetry is the point.
Not surprisingly, the same structure appears in real emergency services. A fire chief may have the authority to close roads during an emergency but that doesn’t imply that the fire chief has the authority to impose road tolls. Road closure is costly and self-limiting — it disrupts traffic, generates immediate complaints, and the chief has every incentive to lift it as soon as possible. Tolls are cheap, adjustable, and once in place tend to persist; they generate revenue that can fund the agency and create constituencies for their continuation. Nobody thinks granting a fire chief emergency closure authority implicitly grants them taxing authority, even if the latter is a lesser authority. The closure and toll instruments have completely different political economy properties despite operating on the same roads.
The majority reaches the right conclusion by noting that tariffs are a tax over which Congress, not the President, has authority. That is constitutionally correct but the deeper question is why the Framers lodged the taxing power in Congress — and the answer is political economy. Revenue instruments are especially easy for an executive to exploit because they can be targeted. The constitutional rule exists to solve that incentive problem.
Once you see that, the dissent’s “greater includes the lesser” inference collapses on its own terms. A principal can rationally authorize am agent to take a dramatic emergency action while withholding the cheaper, revenue-lever not despite the fact that it seems milder, but because of it. The blunt instrument is self-limiting. The revenue instrument is not. That asymmetry is what the Constitution’s categorical division of powers preserves — and what an open-ended emergency delegation would destroy.
The post Why the “Lesser Included Action” Argument for IEEPA Tariffs Fails appeared first on Marginal REVOLUTION.
2026-02-21 20:10:25
The conclusion of Justice Gorsuch’s concurrence in the tariff case:
For those who think it important for the Nation to impose more tariffs, I understand that today’s decision will be disappointing. All I can offer them is that most major decisions affecting the rights and responsibilities of the American people (including the duty to pay taxes and tariffs) are funneled through the legislative process for a reason. Yes, legislating can be hard and take time. And, yes, it can be tempting to bypass Congress when some pressing problem
arises. But the deliberative nature of the legislative process was the whole point of its design. Through that process, the Nation can tap the combined wisdom of the people’s elected representatives, not just that of one faction or man. There, deliberation tempers impulse, and compromise hammers
disagreements into workable solutions. And because laws must earn such broad support to survive the legislative process, they tend to endure, allowing ordinary people to plan their lives in ways they cannot when the rules shift from day to day. In all, the legislative process helps ensure each of us has a stake in the laws that govern us and in the Nation’s future. For some today, the weight of those virtues is apparent. For others, it may not seem so obvious. But if history is any guide, the tables will turn and the day will come when those disappointed by today’s result will appreciate the legislative process for the bulwark of liberty it is.
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2026-02-21 16:22:09
With the lights back on and freight beginning to move again, in November South Africa won its first credit upgrade in two decades after S&P Global Ratings lifted the sovereign rating by one notch to double B.
Investor confidence is also up. According to Nedbank, private sector investment announcements tripled last year to more than R382bn ($23.6bn). Since the end of 2023, the South African rand has been the world’s best performing major currency on a spot basis reflecting immediate exchange rates, up nearly 15 per cent against the dollar. Over the past 12 months, the JSE all-share index is up 37 per cent in rand terms.
Growth reached 1.2 per cent in 2025, hardly transformative, but double the rate of the previous year. For the first time in a long time, economists are talking enthusiastically about “green shoots” and forecasting year-on-year expansion.
Here is more from David Pilling, Joseph Cotterill, and Monica Mark at the FT.
The post South Africa facts of the day appeared first on Marginal REVOLUTION.
2026-02-21 13:11:03
With Rasheed Griffith and Diego Sanchez de la Cruz. Here is one excerpt:
Rasheed: Tyler, if El Salvador were to become a success story, what would it likely be a success at first? Manufacturing, migratory investment, investment tourism, or something more unusual? Because those typical answers feel like maybe they have missed the boat.
Tyler: I think El Salvador has turned itself into a very safe country which is great news. I think you and I both saw that when we were there. I think under all scenarios they have a very hard time becoming much richer. So I don’t think it’s manufacturing through no fault of their own. But most of the world is de-industrializing. So manufacturing is not a source of growing employment due to automation. But there’s other issues for Central America such as scale and the cost of electricity. El Salvador is not the best in Latin America for either of those compared say to Northern Mexico. So I don’t see what its relative advantage is. And it’s just a small place.
I checked with ChatGPT. one estimate places about third of the population, living in the United States on average. That’s probably the more ambitious one third. So there’s considerable brain drain. I do think in terms of levels they can do much more with tourism. They have an entire Pacific Coast which is quite underdeveloped, and could be developed very fruitfully. Sell condominiums, have people do more surfing. Try to have something a bit more like the next Acapulco, but even there you’re competing against Cancun among other locations and it will boost their level but it won’t be a permanently higher rate of growth.
And that’s the case with many touristic developments. They don’t self compound forever and give you many other productivity improvements. So I expect El Salvador to do much better but I know a lot of people who read Bukele on social media and they think it’s about to be the next Singapore or something and I just don’t know how they’re gonna do that under really any scenario. I do think it will improve and they’ll get more foreign investment and more tourism.
Rasheed: How much is “much better”? That’s doing a lot of work there.
Tyler: When you look at the Pacific Coast and you and I sat right next to the water [it could develop much more]. So that could create quite a few jobs. But in the longer term steady state I think they’ll have a hard time averaging more than 2% growth. So they can attach themselves more closely to the US economy. They use the dollar and let’s just assume their governance does not go crazy. That’s another risk right? So Bukele or whoever succeeds them could overreach. The checks and balances the constitutional protections there seem quite weak. Another possible risk there that even despite his best efforts the country becomes dangerous again. You look at Costa Rica which had been quite safe and did all the right things, and is larger and has many more resources and that’s now becoming a more dangerous place because it was targeted by external, in some cases Mexican drug traffickers. And that could happen to El Salvador as well. So even if think the current campaign is gonna work forever it doesn’t mean the country stays safe forever. It’s not really in a very safe region. So that’s a side risk which will also keep down foreign investment. I don’t know, I’m I am definitely seeing the upside but not super duper optimistic there.
Plenty of fresh material, with transcript, recommended.
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2026-02-21 01:57:42
On Thursday, the Center for American Progress, a prominent left-leaning think tank that often cultivates policy ideas later adopted by the Democratic Party, proposed a two-year freeze on the prices of 24 food items, such as strawberries and ground beef.
Grocers would voluntarily agree to capping the cost of food in exchange for paying lower fees on credit card transactions, according to the proposal, which was written by a group led by Jared Bernstein, who chaired the White House Council of Economic Advisers during Joe Biden’s presidency.
That, in effect, would force credit card companies to absorb the cost of subsidizing food purchases, a highly unusual arrangement. A draft of the proposal said the Federal Reserve could force credit card companies to do so via its regulatory oversight, though that provision was removed after questions from The Washington Post.
It is not clear how else the government might persuade credit card companies to foot the bill, nor how many grocers would agree.
Here is more from The Washington Post. Elsewhere in The Great Forgetting, three Supreme Court Justices seem to have forgotten what the Constitution says.
The post The Great Forgetting, a continuing series appeared first on Marginal REVOLUTION.
2026-02-21 01:16:51
1. Firms are replacing freelancers with AI.
2. General disorder does not seem to be increasing.
3. Fei-Fei Li.
4. India does deepfakes of the dead. It is an interesting question which cultures want this most.
5. Post-patent, future markets in everything? Data, at the very least.
6. Isn’t Harvard supposed to be cutting back?
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