I’ve been setting up my cottage in Canada and relaxing, which is why I haven’t posted this week. I’ll pick up the pace this coming week.
The Young Rothbard: an Uncomfortable Neoclassical Economist
by Joseph T. Salerno, Mises.org, July 3. 2025.
Excerpts:
Rothbard took courses with all these eminent economists but was especially influenced by the institutionalists Arthur] Burns and [Joseph] Dorfman, and there was mutual admiration between Rothbard and both professors. Burns expected Rothbard to make “a prominent place for himself” in the world. Rothbard recalled that in his lectures Burns “was a brilliant theorist” and his “critique of orthodox theory . . . was excellent.” Rothbard held Dorfman in high esteem as a historian of economic thought, writing that “his knowledge of the sources is unparalleled.” He acknowledged Dorfman as one of his “mentors” along with Ludwig von Mises in the dedication of his two-volume treatise on economic thought. Dorfman in turn appreciated Rothbard’s abilities and agreed to chair his dissertation committee. When the dissertation was completed, Dorfman lobbied to have it published by Columbia University Press.
And:
It was during this period of methodological ferment and transition that Rothbard took a course on the philosophy of economics from Ernest Nagel, one of the leading exponents of logical positivism. Nagel’s criticisms of institutionalism favorably impressed Rothbard, who took copious notes on Nagel’s lectures. Commenting that Nagel made “the most convincing case for neo-classical economic theory,” Rothbard sent his lecture notes to Arthur Burns. Burns was impressed with Rothbard’s notes and sent them to Milton Friedman, a former student and then colleague of Burns’s at the National Bureau of Economic Research. Friedman was then writing his famous article on “The Methodology of Positive Economics.” Friedman wrote at the top of the first page of Rothbard’s notes, “Arthur: many thanks. I found it interesting, and, of course, agreed.”
DRH affectionate note about Joe Salerno.
Whenever I see Joe Salerno’s name, I think fondly of an interaction he had with Friedrich Hayek at the second annual conference on Austrian economics, which was held at the University of Hartford in June 1975. Joe was speaking about some aspect of Austrian economics and Hayek, hearing something that he wanted to disagree with or amplify on (I’ve forgotten which), got up and went to the podium. Of course, since Hayek was Hayek (and he had co-won the Nobel Prize the previous fall), it was appropriate to let him speak. Joe was caught off guard, but he quickly recovered, and saluted Hayek. It was so sweet.
How Much Will AI Increase Productivity?
by Timothy Taylor, Conversable Economist, July 7, 2025.
Excerpt, which is a quote from a study that Tim discusses:
AI could contribute between 0.3 and 0.7 percentage points to annual aggregate TFP growth in the United States over the next decade. The predicted impacts across different scenarios are highest in the United States, followed by the United Kingdom, Germany, Canada, France and Italy, and lowest in Japan. These figures indicate that Generative AI will likely be an important source of aggregate productivity growth over the next 10 years but also clarify that the expected gains from the current generation of AI technologies may not be extraordinary. For comparison, the latest technology driven boom linked to information and communication technologies (ICT) has been estimated to have contributed up to 1-1.5 percentage points to annual TFP growth in the United States during the decade starting in the mid-1990s …
DRH note: 0.3 points annually for 10 years is substantial and 0.7 points annually for 10 years is huge.
Latin America: A Lost Century for Catch-up Growth
by Timothy Taylor, Conversable Economist, July 8, 2025.
Excerpt:
It is common in talking about 1980s to refer to it as a “lost decade” for economic growth, when many developing economies around the world were trapped in destructive patterns of debt and inflation. But William F. Maloney, Xavier Cirera, and Maria Marta Ferreyra make a stronger claim about growth in Latin America, which is that the causes and patternsof slow growth go back a century or more. They make the argument in the book, Reclaiming the Lost Century of Growth: Building Learning Economies in Latin America and the Caribbean (World Bank, 2025).
The Distributional Origins of the Canada-US GDP and Labour Productivity Gaps
by James MacGee and Joel Rodrigue, Staff Working Paper 2024-49, Bank of Canada, December 19, 2025.
Excerpt:
Gross domestic product (GDP) per adult in Canada fluctuated between 70% and 90% of that of the United States between 1960 and 2020. Behind this gap lie large, systematic differences in relative incomes across the Canadian and US income distributions. There are small differences in average incomes among lower percentiles of the income distribution while large gaps exist for high-income earners, with larger gaps for business owners and the university-educated. Using data from the World Inequality Database, we find that the top 10% of the income distribution accounts for three-quarters of the gap in GDP per adult between Canada and the United States and up to two-thirds of the measured labour productivity gap. While average hours worked per working-age adult in Canada and the United States were similar in 1970 and 2019, persistent shifts in relative hours worked per adult appear to play a significant role in measured labour productivity differences between 1970 and 2019. Our work suggests that selective emigration of high-ability workers—commonly referred to as brain drain—to the United States may play a signifcant role in accounting for the gaps in GDP per adult and labour productivity. The lower level of innovative activities in Canada is consistent with larger income gaps for high-income earners.
HT to Scott Sumner.
DRH story: The larger gap for the university-educated reminds me of a story. One summer, when I was in Winnipeg en route to my cottage in northwestern Ontario, I went to local radio station CJOB to do an interview on economic issues of the day. After introducing me as someone who had moved from Canada to “the states,” the interviewer said, with an aggressive tone, “So why did you move? Was it the money?” Of course, my reasons were multiple, of which only one was the money, but I also figured if I said that, he would accuse me of waffling or whatever. I realized that in about 0.2 seconds. So I said, “Yes.”
Note: The accompanying picture is of a sunset viewed from my cottage in 2024.
