Balsa Policy Institute chose as its first mission to lay groundwork for the potential repeal, or partial repeal, of section 27 of the Jones Act of 1920.
"As in, the price of gasoline on the east coast would be $0.63 lower without the Jones Act. That’s insane. Can you imagine what voters would do if they realized they were paying that much extra for gas?"
That's $0.63 lower *per barrel*, right? Not *per gallon*? I don't think anything you said is literally wrong, but it appears to suggest the price would be $0.63 lower per gallon. Might want to reword that.
There are 42 gallons to a barrel, so this would be cost savings of $0.015. That's not a huge amount, but many voters would care about it, at least in principle.
Yeah, not a driver and neither was the editor I was working with and we didn't realize I was transposing the units. That's why I always try to watch the comments shortly after posting.
(And if that's the biggest mistake I made here, given how many claims there are, I'll consider that pretty good.)
I think that’s a very fair summary. Excellent resource you’ve put together, by the way; I’ve been wanting to read a comprehensive primer on the Jones Act for a while and this was very helpful.
Your point 10 argument for opposing repeal is valid. There would be no shipbuilding. We would make as many ships as we do cell phones and TVs. I'm all for reforming or repealing, but not before dealing with the implicit security subsidy provided to all foreign ships by the US Navy. Place a discharge fee on all of the Liberian and other foreign flagged ships to pay for the US Navy. Then we'll see if the US shipbuilding and maintenance industry is truly that uncompetitive.
Right, but our sailors *have* cell phones and TVs, and similar military technology that works just fine, made in many cases by the same foreign military allies who could build ships for us too!
What is fundamentally lost (to us in the US) if nations whose soldiers would literally be fighting alongside ours in a war, build the hulls of the ships as well?
I am fine with the idea of billing other nations for us providing them valuable naval services, but the productive, wealth-enhancing thing (for the US) that our navy is protecting is... the transfer of goods between their ports and ours. Why not add ship hulls to that list of goods, and enhance the value of that trade (to us!) that is being protected?
"As in, the price of gasoline on the east coast would be $0.63 lower without the Jones Act. That’s insane. Can you imagine what voters would do if they realized they were paying that much extra for gas?"
Your statement implies the cost to consumers at the pump would be $0.63 lower, but the supporting quote is talking about the price per barrel. There are 42 gallons to the barrel so a $0.63 price reduction per barrel would only result in a 1.5 cent per gallon reduction at the pump.
In your discussion of compensating those harmed by the repeal, you focus on how small the currently-protected shippers and shipyards really are. But surely the bulk of the opposition will come from the very powerful trucking and railroad industries, who would have to face actual competition from domestic shipping. Those are the unions everyone is tiptoeing around, not the handful of domestic shipyards or whatever. Any plan to get the Jones Act repealed will have to have a plan to deal with truck and railroad unions.
Yeah. It's possible that the increased economic activity and commerce from more active ports would also increase demand for inland transport through second-order effects, but it's a much more complicated question.
It's not obvious that even they would be hurt, or hurt much, at least longer-than-short term. Some amount of extra intra-national shipping by sea would cause extra trucking and training, tho of course it would effectively move it around some.
So what's the real objection to the Jones Act? It can't be efficiency. The article proposed starting a dozen new federal subsidy programs to make up for the cutting of this one - anyone can tell, that's not gonna increase economic efficiency. And the article ignores the most stunningly obvious reason intra-national coastal trade is scarce: Our entire industrial base was sold off to our rivals & enemies, and our cities make very little goods that can be traded.
Is the sentiment in this article just another battle in the ongoing war against the few remaining high paying blue-collar jobs in America? (See the recent longshoremen strike.) Of course everyone knows Progressives hate the working class - and they hate it even more when the working man is financially comfortable.
Btw, this doesn't mean I am a big supporter of the Jones Act. I have no strong opinion. But I can see the arguments presented here against the Act are most unpersuasive.
Your first point sounds more like rhetoric than evidence - there's no reason to assume that replacing one very large ongoing restriction with a number of much smaller short-term restrictions couldn't be efficient. That's the whole argument Zvi is trying to make - that the Jones Act has done way more damage than one might expect, and even the people "winning" from it are few in number and not winning by all that much.
Why can't it be efficiency? Shipping by sea is more often more efficient, e.g. cheaper, and the Jones Act prevents quite a lot of that kind of shipping.
The cost of the "dozen new federal subsidy programs" would be FAR less than the benefits of greater shipping by sea (and rivers/lakes too I guess). I guess maybe you could argue that it's a 'profit' argument versus an 'efficiency' one.
The explicitly stated "sentiment" of the article is that, even just in terms of "high paying blue-collar jobs", there would probably be MORE of them if we could avail ourselves of a in-many-cases better means of shipping goods intra-nationally.
"To qualify, all passengers must also take a full round trip. I am curious what happens if someone decides not to return to the ship and the government finds out."
There was a report on Reddit 7 years ago of somebody missing a boat and receiving a $1,400 fine for exactly this:
I've previously offered an additional opposing argument that is neither disingenuous nor terrible, though it's so rarely made that it's reasonable to leave to off the list. It's not so much an argument against repeal as an argument against -only- repeal.
I'll spare you a rehash of the whole thing. The very short version is
(1) That the motivation of the whole problem is that shipping that meets the Jones criteria is outrageously more expensive than the alternative,
(2) But that this is almost entirely the fault of bad American laws that impose huge burdens only faced by those compliant firms.
(3) Which makes them incredibly uncompetitive and has driven them to the brink of extinction even with Jones Act support.
(4) It is unfair and unjust to impose the whole cost of all those bad American laws on the stakeholders of a particular legal and otherwise arguably viable industry. The costs should instead be borne by the whole public collectively, whether that's via taxation or higher prices on shipping and downstream products.
(5) Consumers should not get off the hook for this responsibility by reforms which allow them to gain from regulatory arbitrage without bearing any expense for the unfairly distributed fallout of bad policies.
(6) The Jones act is bad and does a bad job, but what little it saves from extinction is still better on net than the actual extinction that would occur the moment of a simple repeal. Repeal plus other provisions intended to mitigate the unjust harms would be better than the Jones Act.
There is no way to even summarize the death by a thousand cuts answer here. But in general it's the same combination of regulatory burdens and legal risks that make a lot of American projects vastly more difficult, expensive, and time-consuming than doing the same thing anywhere else in the world. It's the common point for "this is why we can't have nice things" across many topics. The added costs from higher American prices for wages and land are just negligible in a extremely- capital-intensive industry where materials and fuel are priced the same globally and interest rates for credit tend to be in the same ballpark due to financial arbitrage. High wage, high price counties in Northern Europe build lots of ships and do lots of shipping at competitive prices. The public did this to domestic shipping (and all those other industries), and it's unjust if the public doesn't pay for it until it reforms the legal system to allow American industry to perform on a competitive basis again.
It's so politically hard to reform those laws that one kind of needs to hold those potential gains hostage until the political system is willing to relent and finally fix what is incredibly broken.
This hand waving is not convincing. Firms build airplanes, semiconductors, cars at globally competitive prices in the USA. Why is shipbuilding different?
You just named three industries with famously high levels of subsidy, government support, and legal barriers to foreign competition in the form of imports. This is a more recently true description of chips but only because it's a much newer industry.
Keep in mind that US shipbuilding has been internationally uncompetitive since roughly the 1860s (not a typo). This isn't the product of a recent growth in the regulatory state.
Why do you think you have enough of a comparative advantage on this issue to make it worth working on? I mean, the economic case for repealing the act is fairly hard to deny; it seems clear that the real difficulty is a coordination problem, or, if you like to call it that, politics.
I do note I am confused about something: it asserts several times that the Jones Act has destroyed what it meant to protect. That is, the point of the Jones Act was to protect the existing US-built fleet of ships, and encourage the development of a domestic shipbuilding industry. Instead, the article asserts, it has definitely PREVENTED that development.
What is the causal mechanism here? As far as I can tell, the article doesn't say.
I think I can guess. As per Bryan Potter, US shipbuilding was already uncompetitive. And the Jones Act, by giving it a captive market (domestic US shipping), made the problem worse; why try harder if competition is banned? So US shipbuilding remained slow and expensive because they could simply sell to the captive market; and because it is slow and expensive, it can't sell to international customers.
Is that right?
If so, I'm still confused: the incredible need for domestic shipping suggests a market opportunity, even for a small, crummy US shipyard, to increase its production, and for more small, crummy US shipyards to emerge. This, I think, is what Jones et al. imagined would happen. Why hasn't it? If demand is that high, it seems like supply SHOULD rise to meet it.
Haven’t looked into the actual data to on this, so take what I say with grain of salt. But I think the mechanism that Zvi may have hinted at, is that there is little economic incentive to produce domestic shipbuilding to fill in the economic niche (domestic shipping) imposed by the Jones act, because it’s economically cheaper for producers to circumvent that niche entirely, even when we take economies of scale into account (also there might be cost barriers preventing domestic shipbuilders from reaching savings of economies of scale which are too significant to overcome- so that they are trapped in a sort of local maxima)
So, for example, producers might prefer to ship their products from Houston to Rotterdam, then back to Boston, because historically that would be cheaper than paying a domestic ship to travel directly from Houston to Boston. Similarly, producers might have historically preferred to use rail and inland transportation over domestic shipping because it still ends up being cheaper whenever the latter is made available.
In short, my thinking is that while there is a great economic incentive for domestic shipbuilders to fill in the niche that the Jones act creates, this economic incentive hasn’t been great enough to overcome all of the structural factors that make domestic shipping cost-inefficient. Your argument only applies if there are literally no other economic alternatives for producers to transport goods to certain locations in lieu of domestic shipping.
I chose not to include one - this is the explainer.
You can of course donate to Balsa Research (https://www.balsaresearch.com/donate) or you can do various lobbying and spreading of the word, especially to those who can impact the new administration. That's your best bet right now if you have a way.
Are you interested/willing to be involved with the lobbying?
Idk anything about policy reform but can probably connect you with the leadership of the sailors union of the pacific and maybe the longshoremen. My friend in the sailors union didn’t want to read this article initially due to the title.
I imagine the next step would be to write an updated maritime policy that could be handed over to lobbyists (and not use the words “repeal jones act”)? I know you said call to action was to donate to balsa. What do you see as the next steps?
#first
You are doing god's work here, sir, and I will file an amicus brief (I Am Not A Lawyer) at your treason trial.
"As in, the price of gasoline on the east coast would be $0.63 lower without the Jones Act. That’s insane. Can you imagine what voters would do if they realized they were paying that much extra for gas?"
That's $0.63 lower *per barrel*, right? Not *per gallon*? I don't think anything you said is literally wrong, but it appears to suggest the price would be $0.63 lower per gallon. Might want to reword that.
$0.63 per barrel would be absolutely irrelevant, whereas $0.63 per gallon would seem to match Zvi’s description of the hypothetical voters’ reaction.
There are 42 gallons to a barrel, so this would be cost savings of $0.015. That's not a huge amount, but many voters would care about it, at least in principle.
Yes, I assumed that Zvi had misquoted in that section but it seems clear he merely miscalculated. $0.63 per barrel is not especially significant.
Yeah, not a driver and neither was the editor I was working with and we didn't realize I was transposing the units. That's why I always try to watch the comments shortly after posting.
(And if that's the biggest mistake I made here, given how many claims there are, I'll consider that pretty good.)
I think that’s a very fair summary. Excellent resource you’ve put together, by the way; I’ve been wanting to read a comprehensive primer on the Jones Act for a while and this was very helpful.
Yep, I deleted that section, my fault.
Your point 10 argument for opposing repeal is valid. There would be no shipbuilding. We would make as many ships as we do cell phones and TVs. I'm all for reforming or repealing, but not before dealing with the implicit security subsidy provided to all foreign ships by the US Navy. Place a discharge fee on all of the Liberian and other foreign flagged ships to pay for the US Navy. Then we'll see if the US shipbuilding and maintenance industry is truly that uncompetitive.
"There would be no shipbuilding."
Right now, the US accounts for 0.1% of global output, almost exactly on par with...Iran. No shipbuilding is where the JA has gotten us. Anyway, I'm skeptical the impact would be so dire: https://www.cato.org/blog/how-would-jones-act-reform-impact-us-shipbuilding
Right, but our sailors *have* cell phones and TVs, and similar military technology that works just fine, made in many cases by the same foreign military allies who could build ships for us too!
What is fundamentally lost (to us in the US) if nations whose soldiers would literally be fighting alongside ours in a war, build the hulls of the ships as well?
I am fine with the idea of billing other nations for us providing them valuable naval services, but the productive, wealth-enhancing thing (for the US) that our navy is protecting is... the transfer of goods between their ports and ours. Why not add ship hulls to that list of goods, and enhance the value of that trade (to us!) that is being protected?
you said:
"As in, the price of gasoline on the east coast would be $0.63 lower without the Jones Act. That’s insane. Can you imagine what voters would do if they realized they were paying that much extra for gas?"
Your statement implies the cost to consumers at the pump would be $0.63 lower, but the supporting quote is talking about the price per barrel. There are 42 gallons to the barrel so a $0.63 price reduction per barrel would only result in a 1.5 cent per gallon reduction at the pump.
Yes, my mistake, it has been corrected (by deleting the relevant passage entirely)
Podcast episode for this post:
https://open.substack.com/pub/dwatvpodcast/p/repeal-the-jones-act-of-1920
> When the Jones Act was so waived, did the other laws also need to be waved?
Spelling: the last word should be spelled "waived".
In your discussion of compensating those harmed by the repeal, you focus on how small the currently-protected shippers and shipyards really are. But surely the bulk of the opposition will come from the very powerful trucking and railroad industries, who would have to face actual competition from domestic shipping. Those are the unions everyone is tiptoeing around, not the handful of domestic shipyards or whatever. Any plan to get the Jones Act repealed will have to have a plan to deal with truck and railroad unions.
Yeah. It's possible that the increased economic activity and commerce from more active ports would also increase demand for inland transport through second-order effects, but it's a much more complicated question.
Interesting, and worrying
It's not obvious that even they would be hurt, or hurt much, at least longer-than-short term. Some amount of extra intra-national shipping by sea would cause extra trucking and training, tho of course it would effectively move it around some.
So what's the real objection to the Jones Act? It can't be efficiency. The article proposed starting a dozen new federal subsidy programs to make up for the cutting of this one - anyone can tell, that's not gonna increase economic efficiency. And the article ignores the most stunningly obvious reason intra-national coastal trade is scarce: Our entire industrial base was sold off to our rivals & enemies, and our cities make very little goods that can be traded.
Is the sentiment in this article just another battle in the ongoing war against the few remaining high paying blue-collar jobs in America? (See the recent longshoremen strike.) Of course everyone knows Progressives hate the working class - and they hate it even more when the working man is financially comfortable.
Btw, this doesn't mean I am a big supporter of the Jones Act. I have no strong opinion. But I can see the arguments presented here against the Act are most unpersuasive.
"Our entire industrial base was sold off to our rivals & enemies, and our cities make very little goods that can be traded."
The US is the world's second-largest manufacturing country, and its output is only slightly off its all-time high: https://www.cato.org/publications/reality-american-deindustrialization
Your first point sounds more like rhetoric than evidence - there's no reason to assume that replacing one very large ongoing restriction with a number of much smaller short-term restrictions couldn't be efficient. That's the whole argument Zvi is trying to make - that the Jones Act has done way more damage than one might expect, and even the people "winning" from it are few in number and not winning by all that much.
Why can't it be efficiency? Shipping by sea is more often more efficient, e.g. cheaper, and the Jones Act prevents quite a lot of that kind of shipping.
The cost of the "dozen new federal subsidy programs" would be FAR less than the benefits of greater shipping by sea (and rivers/lakes too I guess). I guess maybe you could argue that it's a 'profit' argument versus an 'efficiency' one.
The explicitly stated "sentiment" of the article is that, even just in terms of "high paying blue-collar jobs", there would probably be MORE of them if we could avail ourselves of a in-many-cases better means of shipping goods intra-nationally.
"To qualify, all passengers must also take a full round trip. I am curious what happens if someone decides not to return to the ship and the government finds out."
There was a report on Reddit 7 years ago of somebody missing a boat and receiving a $1,400 fine for exactly this:
https://old.reddit.com/r/legaladvice/comments/8g9p3w/went_on_a_cruise_and_missed_the_boat_on_the_first/?rdt=39027
Here's a more recent example: https://dayton247now.com/news/nation-world/norwegian-cruise-lines-gault-charges-family-9000-after-allegedly-leaving-them-behind-remote-alaska-katchikan-lumberjack-show-tickets-shuttle-island-south-cincinnati-disembarked
The SS United States is currently being taken to Florida to be turned into an artificial reef. It has more value sunk than afloat.
that is to be fair very common for ships that old, it doesn't imply it wasn't valuable at the time
I've previously offered an additional opposing argument that is neither disingenuous nor terrible, though it's so rarely made that it's reasonable to leave to off the list. It's not so much an argument against repeal as an argument against -only- repeal.
I'll spare you a rehash of the whole thing. The very short version is
(1) That the motivation of the whole problem is that shipping that meets the Jones criteria is outrageously more expensive than the alternative,
(2) But that this is almost entirely the fault of bad American laws that impose huge burdens only faced by those compliant firms.
(3) Which makes them incredibly uncompetitive and has driven them to the brink of extinction even with Jones Act support.
(4) It is unfair and unjust to impose the whole cost of all those bad American laws on the stakeholders of a particular legal and otherwise arguably viable industry. The costs should instead be borne by the whole public collectively, whether that's via taxation or higher prices on shipping and downstream products.
(5) Consumers should not get off the hook for this responsibility by reforms which allow them to gain from regulatory arbitrage without bearing any expense for the unfairly distributed fallout of bad policies.
(6) The Jones act is bad and does a bad job, but what little it saves from extinction is still better on net than the actual extinction that would occur the moment of a simple repeal. Repeal plus other provisions intended to mitigate the unjust harms would be better than the Jones Act.
What are the other laws that make shipbuilding so incredibly expensive?
There is no way to even summarize the death by a thousand cuts answer here. But in general it's the same combination of regulatory burdens and legal risks that make a lot of American projects vastly more difficult, expensive, and time-consuming than doing the same thing anywhere else in the world. It's the common point for "this is why we can't have nice things" across many topics. The added costs from higher American prices for wages and land are just negligible in a extremely- capital-intensive industry where materials and fuel are priced the same globally and interest rates for credit tend to be in the same ballpark due to financial arbitrage. High wage, high price counties in Northern Europe build lots of ships and do lots of shipping at competitive prices. The public did this to domestic shipping (and all those other industries), and it's unjust if the public doesn't pay for it until it reforms the legal system to allow American industry to perform on a competitive basis again.
It's so politically hard to reform those laws that one kind of needs to hold those potential gains hostage until the political system is willing to relent and finally fix what is incredibly broken.
This hand waving is not convincing. Firms build airplanes, semiconductors, cars at globally competitive prices in the USA. Why is shipbuilding different?
You just named three industries with famously high levels of subsidy, government support, and legal barriers to foreign competition in the form of imports. This is a more recently true description of chips but only because it's a much newer industry.
ship building has much higher barriers to foreign competition.
Keep in mind that US shipbuilding has been internationally uncompetitive since roughly the 1860s (not a typo). This isn't the product of a recent growth in the regulatory state.
Yeah, Jones Act supporters are overdue for an "are we the baddies" moment. Thanks for working on this.
Why do you think you have enough of a comparative advantage on this issue to make it worth working on? I mean, the economic case for repealing the act is fairly hard to deny; it seems clear that the real difficulty is a coordination problem, or, if you like to call it that, politics.
Exactly. Where is the policymaker’s one page summary that identifies a specific constituency that benefits from repeal?
The one sentence summary of the beneficiaries of 'repeal and payoff the losers': "Everyone benefits."
This is an excellent article.
I do note I am confused about something: it asserts several times that the Jones Act has destroyed what it meant to protect. That is, the point of the Jones Act was to protect the existing US-built fleet of ships, and encourage the development of a domestic shipbuilding industry. Instead, the article asserts, it has definitely PREVENTED that development.
What is the causal mechanism here? As far as I can tell, the article doesn't say.
I think I can guess. As per Bryan Potter, US shipbuilding was already uncompetitive. And the Jones Act, by giving it a captive market (domestic US shipping), made the problem worse; why try harder if competition is banned? So US shipbuilding remained slow and expensive because they could simply sell to the captive market; and because it is slow and expensive, it can't sell to international customers.
Is that right?
If so, I'm still confused: the incredible need for domestic shipping suggests a market opportunity, even for a small, crummy US shipyard, to increase its production, and for more small, crummy US shipyards to emerge. This, I think, is what Jones et al. imagined would happen. Why hasn't it? If demand is that high, it seems like supply SHOULD rise to meet it.
Haven’t looked into the actual data to on this, so take what I say with grain of salt. But I think the mechanism that Zvi may have hinted at, is that there is little economic incentive to produce domestic shipbuilding to fill in the economic niche (domestic shipping) imposed by the Jones act, because it’s economically cheaper for producers to circumvent that niche entirely, even when we take economies of scale into account (also there might be cost barriers preventing domestic shipbuilders from reaching savings of economies of scale which are too significant to overcome- so that they are trapped in a sort of local maxima)
So, for example, producers might prefer to ship their products from Houston to Rotterdam, then back to Boston, because historically that would be cheaper than paying a domestic ship to travel directly from Houston to Boston. Similarly, producers might have historically preferred to use rail and inland transportation over domestic shipping because it still ends up being cheaper whenever the latter is made available.
In short, my thinking is that while there is a great economic incentive for domestic shipbuilders to fill in the niche that the Jones act creates, this economic incentive hasn’t been great enough to overcome all of the structural factors that make domestic shipping cost-inefficient. Your argument only applies if there are literally no other economic alternatives for producers to transport goods to certain locations in lieu of domestic shipping.
Is there a call to action somewhere?
I chose not to include one - this is the explainer.
You can of course donate to Balsa Research (https://www.balsaresearch.com/donate) or you can do various lobbying and spreading of the word, especially to those who can impact the new administration. That's your best bet right now if you have a way.
Are you interested/willing to be involved with the lobbying?
Idk anything about policy reform but can probably connect you with the leadership of the sailors union of the pacific and maybe the longshoremen. My friend in the sailors union didn’t want to read this article initially due to the title.
I imagine the next step would be to write an updated maritime policy that could be handed over to lobbyists (and not use the words “repeal jones act”)? I know you said call to action was to donate to balsa. What do you see as the next steps?