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China’s Rare-Earths Bust

Honda says it has co-produced the world’s first hybrid car engine that doesn’t use heavy rare-earth metals, allowing it to cut reliance on imports from China. This innovation, to debut in Honda minivans this fall, illustrates how far we’ve come since the great rare-earths panic of 2010.

Back then, China produced 95% of global rare earths and thought it could hold markets hostage by restricting exports. So it cut export quotas by 40%, partly to push foreign buyers to move factories onshore, and then temporarily blocked shipments to Japan over a territorial dispute in the East China Sea. Prices shot up tenfold as consumers and officials world-wide feared for supplies of 17 obscure elements they learned are used in high-tech gizmos from missiles to smartphones, wind turbines and electric cars.

But no apocalypse was nigh. Beijing’s mercantilist gambit had predictable effects—predictable, at least, for anyone familiar with the work of Julian Simon. The economist...