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… is from Robert Higgs’s September 10th, 2009, essay titled “The Rise of Big Business and the Growth of Government“:

Because ideology and political movements develop reciprocally, the pervasive reactions to the rise of big business around the turn of the twentieth century gave rise not simply to a proliferation of newly organized interest groups seeking government protection of threatened positions; it also prompted intellectuals, both independents and “hired guns,” to develop new rationales for more active government. Thus Progressivism as ideology developed concurrently with Progressivism as politico-economic practice, each aspect reflecting the changing socioeconomic opportunities and hazards created by the rise of big business and its repercussions throughout the economy.

DBx: The great economic historian, and my dear friend, Bob Higgs today celebrates – in his adopted home of Lafayette, Louisiana, with his lovely wife, Elizabeth – his 82nd birthday. For his sake and ours, may he have many, many more.

Happy Birthday, Bob!

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GMU Econ alum Julia Cartwright, writing in the Washington Post, argues – in the best Masonomics tradition – that the Federal Reserve’s discretion should be restricted with a monetary constitution. Two slices:

The Justice Department this month threatened criminal prosecution of a sitting Fed chair over construction budgets. Political pressure on the central bank is not new. One need only read the memoirs of Ben Bernanke or Paul Volcker to see how presidents have pressed Fed chairs behind closed doors. What is unprecedented, however, is how private interference has given way to overt, escalating political and legal theater, producing widespread economic anxiety.

Institutional stress has a way of transforming theory into necessity. A monetary constitution could take the form of a constitutional amendment that replaces the Fed’s discretionary rate setting with explicit constraints. For example, the amendment could require the Fed to follow a clearly defined inflation benchmark and permit interest rate changes only when the economy deviates from those targets. Binding the Fed’s discretion in this way would insulate monetary policy from political influence, addressing today’s economic anxieties and tomorrow’s vulnerabilities. We need monetary policy by principle, not by spectacle.

…..

The principle of a monetary constitution is straightforward: limit the scope for politically motivated interference. Such a framework could impose rules on money supply growth, requiring it to track the broader economy’s expansion. This would limit the kind of discretionary policy that allowed the Fed to expand the U.S. money supply by more than 20 percent in 2020, a move Warsh has criticized and a surge that greatly contributed to the inflation that followed.

Mandating regular audits of the Fed would enhance transparency, a requirement imposed on every major bank in America but curiously applied far more narrowly to the central bank. A monetary constitution could even allow or encourage private currency competition, including crypto, as an external check on official money. There are two potential paths for how such a monetary policy might be enacted. The first is a constitutional amendment proposed by Congress, which must clear Article V’s deliberately high hurdles. The second route is overhauling the Federal Reserve Act. Because the Fed exists by statute, Congress could rewrite that law to impose a narrow mandate or even phase out the current framework that allows for incredible discretion. This would admittedly be less durable than an amendment but far more feasible politically.

Either approach would deliver much the same result: monetary stability no longer tied to the preferences or fortitude of individual central bankers.

Scott Lincicome documents the capital-market distortions unleashed by what Lincicome calls Trump’s “state corporatism.” Two slices:

In my latest Bloomberg column, I explore an unseen cost of the federal government’s recent and unprecedented investments in private US companies: the distortion of capital markets that have underpinned American growth and innovation for decades. As I explain, Uncle Sam’s 10 percent equity stake in chipmaker Intel has caused its share price to spike, even though the long-troubled company is facing the same operational and strategic challenges that have dogged it for years. The government’s investment has thus likely “diverted tens of billions of dollars of private capital away from potentially more deserving firms and to Intel, with little support for the move beyond—as one semiconductor analyst put it—‘vibes and tweets.’”

…..

As I document, research shows that policy-driven capital misallocation can lead to lower productivity, weaker growth, and a smaller economy over the long term, even if state-backed champions don’t fail outright.

Such distortions have cost China hundreds of billions of dollars in foregone economic output (GDP). The United States would be wise not to follow Beijing’s lead.

Here’s economist Timothy Taylor on economists and Trump’s tariffs punitive taxes on Americans’ purchases of imports. Two slices:

Imports are about 14% of the US economy. Say that the tariffs, with all exceptions and delays factored in, are imposed at an average rate across all imports of about 10%. If 14% of the economy has a 10% increase in tariffs, then the pass-through to consumer prices would be 1.4%. The evidence suggests that’s roughly what’s happening.

…..

The Yale Budget Lab calculates that the additional cost of the tariff so far work out to about $1400 per year for the median household. However, if the cost of the tariffs is expressed as a percent of income, rather than dollar amount, the negative effect is biggest for those with the lowest income levels, because they rely more heavily on less-expensive imported products.

The Wall Street Journal reports on the long-run damage that Trump is likely doing to the reputation of the United States. Two slices:

The image of America also recovers because its fundamentals and soft power remain strong: people still want to go to its universities, watch its movies and admire its economy, says Mitchell Reiss, a longtime U.S. diplomat who is now at the Royal United Services Institute think tank in London.

“A lot of damage is being done by Trump,” he says. “But we are also the most resilient country in the world.”

Others think it could be different this time around. Two things have changed. First, past presidents viewed the international order—the multilateral institutions and web of security and economic alliances set up by Washington—as an asset worth defending. George W. Bush ordered the invasion of Iraq after trying, and failing, to get U.N. backing, but still had a coalition of some 49 countries offering to help.

Trump is unapologetic about pursuing U.S. interests narrowly. He tends to see allies as grasping dependents rather than force multipliers. Gone is talk of promoting Western values like democracy and open markets.

Trump has broken a system of trust between the U.S. and its allies that created a relatively benign global order for the past 70 years, says Robert Kagan, a former member of Republican administrations and fellow at Brookings Institution think tank.

During that time, Kagan argues, American power helped protect allies. In exchange, they hosted American bases, shared intelligence and kept relatively open markets for U.S. firms. Together, the U.S. and its allies faced down challengers, like Russia and China, to this stable order.

Now, Kagan said, allies are unlikely to trust America as much again, regardless of a change in administration. “I think it’s virtually inconceivable to imagine recovery at this point. Let’s imagine three more years of this,” he said. “So he backed off a bit on Greenland. This isn’t the end of the problem, this is still the beginning.”

Another reason anti-Americanism might be stronger this time around is basic pride. Past presidents generally tried to not mock other leaders and nations.

…..

Local manufacturers who for decades sought American buyers are instead diversifying their client rosters. Paul Norriss, who runs a clothing factory in Vietnam with a largely American buyer network, said he has added non-American retailers to reduce his exposure to volatile trade policies.

The damage hurts in other ways. The number of tourists to the U.S. fell by 6% last year, led by a decline in visiting Canadians and Mexicans. After Trump slapped tariffs on Canada, grocers like Loblaws and Sobeys tagged products sourced locally. A popular new app, Maple Scan, lets users try to skirt tariffs and support Canadian companies by identifying local products.

“The U.S., we’ve been neighbors for years, and we’ve fought in wars together. But ultimately, things have become very unpredictable,” said Sasha Ivanov, a Canadian programmer from Calgary who developed the app.

Steven Greenhut is correct: “Free nations don’t have to care about the whims of elected officials.” Two slices:

The freer the nation, the less the public needs to care about anything that its leader might say or do. In freer nations, the leader’s powers are strictly limited, and the citizens’ rights are protected. Yet in America today, we are dependent on every whim, utterance and narcissistic rage post from our president, as he pursues policies that could disrupt our lives. In that way, we’re more like North Korea than our founders’ America.

This has always been true to a degree, but since Donald Trump took office last year, Americans have been experiencing a severe form of political whiplash. Firmly in control of the nation’s massive federal apparatus, MAGA and its Republican lickspittles in Congress have thrived on chaos. Every day, the president issues some new threat. He imposes new tariffs on countries that don’t kiss the ring, then backs off, then imposes even harsher ones.

After getting his feelings hurt for not receiving a peace prize that he believes he deserves, Trump threatened to invade a territory controlled by an ally.

…..

I’ve often criticized Trump-era Republicans for tossing aside their freedom birthright in favor of the stale porridge of authoritarianism. My vain hope today is to convince my newfound anti-Trump allies (who have disliked my years of writing against progressive policies) to view the current national nightmare as a teachable moment.

Both political sides assume they will always control the levers of power. But they forget this important axiom: Don’t ever support a new power that you wouldn’t want in the hands of your worst enemy. Maybe it’s time for Trump’s foes to recognize the importance of limiting executive power, so that no one can abuse it this way in the future.

Judge Glock decries the waste of government-imposed efforts to convert wind power into electricity – an effort that will be especially costly to him, me, and our fellow Virginians. A slice:

A federal judge ruled recently that the Coastal Virginia Offshore Wind project could continue despite the Trump administration’s efforts to pause it on national-security grounds. Supporters of the project argue that the administration’s effort is hypocritical given its “all of the above” energy strategy.

Although the administration’s claims about national security may be a fig leaf, President Trump is right that offshore wind is a bad way to get energy. The CVOW will be one of the most expensive energy projects in U.S. history, and it will burden Virginia’s consumers for decades. Gov. Abigail Spanberger and others claiming the project will foster “affordability” are wrong.

Ilya Somin, a GMU colleague over in the Scalia School of Law, tells us of “Minnesota’s compelling 10th Amendment case against Trump’s ICE surge.” A slice:

Control over state and local government personnel is one of the powers reserved to the states by the 10th Amendment. In addition, as legal scholar Michael Rappaport has shown, the original meaning of the Constitution indicates that such control is a basic element of the sovereignty inherent in being a state in the first place.

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… is from page 580 of the 1988 collection of Lord Acton’s writings and notes to himself (edited by the late J. Rufus Fears), Essays in Religion, Politics, and Morality; specifically, it’s a note drawn from Acton’s extensive papers at Cambridge University:

Every doctrine to become popular, must be made superficial, exaggerated, untrue. We must always distinguish the real essence from the conveyance, especially in political economy.

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My intrepid Mercatus Center colleague, Veronique de Rugy, presents further evidence of the failure of industrial policy. Two slices:

Industrial policy is failing, and not just in Washington. Across America, officials promise to engineer the right economic outcomes by intervening in the market in just the right ways. Most people know that under Presidents Joe Biden and Donald Trump, the idea has exploded. Less appreciated is how enthusiastically governors and state legislators are embracing their own versions.

They repeat the same claims: With the right mix of subsidies, protection, and political direction, one government or another can revive strategic industries and deliver durable economic strength. The results tell a different story.

Wherever it’s found, industrial policy is producing wasted resources, distorted incentives, and fragile outcomes that collapse the moment political support shifts or market realities intrude. Just look at the similarities between Georgia’s famous film-industry tax credits and a few of the federal government’s favorite projects.

A recent Wall Street Journal investigation into Georgia’s experience reads like a textbook example of how the model fails. Film–tax credit schemes are sold as investments in business “ecosystems” and middle-class jobs. In reality, they are either a subsidy to production companies to do what they would have done anyway, or they are bribes to highly visible, highly mobile capital that can leave as quickly as it arrives. Georgia was the latter.

…..

This helps explain why a promised auto-manufacturing renaissance hasn’t materialized. Automakers and suppliers have so far absorbed much of the tariff shock through smaller profit margins, restrained pricing, and selective job cuts. This is not sustainable. Investment decisions are now being reconsidered, and some manufacturers, like Volkswagen, warn that new U.S. plants no longer make sense.

Tariffs did not restore competitiveness or pricing power. They jacked up costs and made American production less attractive at the margin.

These cases all differ in detail but share a common logic: Industrial policy tries to engineer outcomes while ignoring processes. It assumes that political favor can substitute for market incentives. That innovation and customer demand won’t suffer. That shielding firms from competition will make them stronger. Instead, we get fragile industries that are dependent on even more political support.

Jeff Turnbull’s letter in today’s Wall Street Journal is correct:

I enjoyed Cole Murphy’s Cross Country about the Georgia film tax incentive (“Georgia’s Film Tax Incentive Bombs at the Box Office” Jan. 24). I had first hand knowledge of the excessive costs for labor in several Savannah, Ga., area film productions during 2022. I was merely a “background actor” along with hundreds of others, driven to the many set locations in the Savannah area by (spoiler alert) highly paid unionized Teamster workers.

When money is poured into an industry from a government handout, there will always be people ready with buckets to catch it.

The Editorial Board of the Wall Street Journal decries the economic hubris and hypocrisy of Hungarian strongman – a man admired by the clueless Tucker Carlson – Viktor Orbán. Two slices:

Hungarian Prime Minister Viktor Orbán portrays himself as an opponent of European Union overreach. But he’s made a big state bet on electric vehicles, and he’s now relying on the EU’s green mandates to ensure it pays off.

Hungary has long subsidized car makers, and EV-focused German firms are the primary recipients of more than $871 million in subsidies for the automotive industry since 2004, according to Andrea Éltető of the Institute for World Economics, a Budapest-based think tank. She tallied more than $2.57 billion in paid or pending subsidies since 2018 for EV battery factories, with South Korean and Chinese multinationals the top beneficiaries. That comes to more than $3.44 billion in state support for green cars and their parts, in a country with a GDP of about $223 billion.

Mr. Orbán needs EU regulators to manufacture demand for made-in-Hungary electric cars and batteries.

…..

This is an industrial-policy warning for Mr. Orbán’s admirers in the Trump Administration. He needs the same EU he derides to keep his economy running.

Jeffrey Miron – always sensible – argues that the deeper problem exposed by the dispute over the name of the Kennedy Center

is that the federal government should never have created this center in the first place. No effective argument exists for government funding of artistic activity, since private actors consistently produce cultural institutions in response to demand. In fact, private art museums (such as the Museum of Modern Art and the J. Paul Getty Museum) have experienced a significant global boom in recent years. Cultural production more broadly also exists without federal funding, including commercial theaters like Broadway’s Imperial Theatre, film studios like Disney, and symphonies like the Chicago Symphony Orchestra.

The way to avoid polarization over the naming or staffing of an artistic center is for government to exit.

Peter Suderman reports what all decent people ardently hope to be true: “Stephen Miller’s hardline immigration tactics are backfiring.” A slice:

Miller isn’t just seeking dutiful immigration enforcement. And he’s not just spouting ugly rhetoric on social media. He just doesn’t want the public to believe that immigration policy is equivalent to a war on America’s streets, he needs them to, because that’s the only way to justify the sort of wartime tactics he favors on American streets.

Trump’s second-term raids are not merely designed to sweep up immigrants for deportation; they are designed to act as shows of force, a dangerous and occasionally deadly form of political theater. And while Trump bears ultimate responsibility for the immigration sweeps and their consequences, it is Miller who has most clearly shaped their operational character. The masks, the menace, the militarism—these are all direct manifestations of a cruel and apocalyptic worldview, in which force is the only real governing power, illegal immigration represents a form of “invasion,” legal immigration mechanisms like birthright citizenship are “destructive and ruinous policies aimed at the heart of the Republic,” and public protest of deportation raids that turn violent is tantamount to “insurrection.”

Vladlena Klymova calls on the wolves of antitrust to leave Netflix alone. A slice:

By integrating horizontally, Netflix and WBD could both deliver direct savings and expand the assortment of content available through a Netflix–HBO bundle. Disney’s acquisition of Hulu in 2019 made it possible to package Disney+, Hulu, and ESPN+ for $13—down from nearly $18 if purchased separately. To remain competitive, Netflix would likely adopt the same consumer-friendly strategy. Besides, as consumers grow increasingly dissatisfied with the fragmentation of streaming services, bringing multiple services under a single platform would likely prove a long-desired benefit.

Even under a narrow market definition, the streaming-service market includes at least six major rivals. The Netflix–WBD deal would not presumptively render the industry uncompetitive. Antitrust enforcers should bear the burden of proving otherwise. Moreover, platforms such as YouTube also vie for consumers’ screen time, alongside cable and broadcast television, leaving a combined Netflix–WBD with roughly 10.4 percent of what might be called the all-screen viewing market. Bizarre claims that “Netflix has long been a monopoly under even the most generous market definition” completely ignore the fact that there are lots of things on television to watch and plenty of ways (e.g., cable, YouTube TV, DirecTV, Netflix, Disney+) to watch them. This is the case now and will continue to be the case if the deal goes through.

Frank Stephenson is understandably unimpressed with Michael Lind’s 2023 book, Hell to Pay.

GMU Econ alum Daniel Smith warns against the allure of “the policy button.” A slice:

In Bill Cotter’s beloved children’s book series, Don’t Push the Button! a mischievous monster named Larry presents young readers with a tantalizing big red button, sternly warning them not to press it. Of course, the allure proves too strong for toddlers, who gleefully ignore the advice, unleashing a cascade of silly chaos – turning Larry into a polka-dotted elephant or summoning a horde of dancing bananas. The books’ humor lies in the predictable disobedience, but the underlying lesson is clear: some temptations are simply too powerful to resist.

This whimsical analogy holds a sobering truth for the world of economics. Far too many economists, in their policy recommendations, unwittingly craft similar “big red buttons” for policymakers. They design sophisticated interventions intended to fix specific market imperfections with the caveat that these tools should be used judiciously – only when necessary, and with precision. Yet, politicians, driven by electoral pressures, find these buttons irresistible in off-label uses and abuses. The result? Not playful pandemonium, but real-world economic distortions such as deficits, inflation, and moral hazard that often exacerbate the very problems the policy was prescribed to solve.

Economists often position themselves as impartial social scientists, perched in ivory towers far removed from the messy arena of politics. They deploy intricate models to pinpoint “optimal” policy response. For instance, during a recession, they might calculate the exact multiplier effect of a fiscal stimulus package, advocating for targeted government spending to boost aggregate demand. Or they may recommend an “optimal” tax rate or an exactly tailored tariff that can generate slight efficiency gains under rare conditions. In monetary policy, they endorse tools like quantitative easing or financial bailouts to stabilize banking systems. These recommendations stem from a genuine desire to mitigate harm and promote efficiency, rooted in the observation that markets aren’t perfect: externalities, information asymmetries, and behavioral biases can lead to suboptimal outcomes.

However, by blessing these expansive toolkits, economists inadvertently empower policymakers with levers that beg to be pulled in ways and contexts well beyond what the economists intended.  Even if the advice comes with implicit disclaimers, such as “use sparingly,” “monitor side effects,” or “phase out promptly,” these are as effective as Larry’s warnings to a curious child. Policymakers operate in a high-stakes environment where incentives skew toward action over restraint. Re-election hinges on visible results: cutting ribbons on pork-barrel infrastructure projects funded by stimulus or touting low unemployment figures propped up by easy money. Long-term consequences, like mounting public debt, systemic financial risk, or bubbles, are conveniently deferred to future administrations.

This oversight isn’t just a minor flaw; it’s a fundamental methodological error. As Nobel laureate James Buchanan, a pioneer of public choice theory, demonstrated, economists cannot claim scientific neutrality while ignoring the incentives of those who wield power.

Former Virginia governor Doug Wilder, a Democrat, offers wise advice to the new governor of Virginia and her fellow Democrats in Richmond. A slice:

The temptation of new leadership aligned in policy and purpose is to move quickly and expansively. Yet the first question must always be the same: Who will pay? And can they afford it?

Members of the General Assembly have rushed to introduce bills eliminating mandatory minimum sentences for numerous crimes, raising taxes and expanding spending. Each of these proposals deserves debate, but discussion without discipline becomes indulgence.

Will raising taxes shift the burden primarily to those with the greatest ability to pay, or will it squeeze working families already stretched thin? Will increased spending result in measurable improvements in public services, or will it drive the state toward deficits that future generations must repair? Will eliminating sentencing standards improve justice and public safety together, or produce unintended consequences that communities later regret?

Good intentions do not replace careful judgment. Every policy choice carries consequences, financial and otherwise. Gov. Spanberger must demonstrate that she is willing to exercise discipline and resist excesses that extend beyond the mandate voters entrusted to her.

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… is from page 260 of Thomas Sowell’s 1999 book, Barbarians Inside the Gates:

It used to be said that taxes are the price we pay to live in a civilized society. Today, taxes are the price we pay so that politicians can buy the votes of those who are feeding at the public trough.

DBx: I’ve one amendment: Despite the frequently encountered claim, taxes were never the price anyone has paid to live in civilized society. Taxes – however necessary you believe them to be – are taken by force in order to fund the use of force. This reality means that taxes are the price we pay for the existing shortfall of our society from being fully civilized. (I believe that I first encountered this refutation of the claim that ‘taxes pay for civilization’ from Ed Crane.)

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Here’s a letter to the Wall Street Journal.

Editor:

You rightly criticize Pres. Trump’s enthusiasm for a weak dollar (“The Perils of a Falling Trump Dollar,” January 29).

Any American determined to defend Mr. Trump should answer this question: Do you think that a weaker dollar is good for you – you, a typical American, who in exchange for your weaker dollars would receive fewer goods, services, and investment options? If you answer “Yes,” please explain how your life is improved by a reduction in your purchasing power.

If you answer “No,” please explain how that which isn’t good for you individually – and, by implication, that which isn’t good for each of countless other typical individual Americans – nevertheless somehow becomes good for Americans collectively. By what mysterious arithmetic can a series of negative numbers be added together into a positive sum?

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030

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The Editorial Board of the Wall Street Journal calls out Trump for his economically clueless endorsement of a weaker U.S. dollar. Two slices:

President Trump this week said he thinks a weaker dollar is “great,” but he should be careful what he wishes for. Many politicians over the years have contemplated a weaker greenback as an economic miracle cure. They often discover that a weak dollar is a liability.

Mr. Trump made his remark Tuesday amid dollar weakness that is contributing to instability in global foreign-exchange markets. The WSJ Dollar Index, which compares the greenback to a basket of currencies, has fallen about 8% over the past year, and gold’s steady ascent, to above $5,300 per ounce this week, sends its own signal about dollar weakness. The dollar-euro exchange rate is among the most important in the global economy, and the greenback has lost about 14% of its value relative to the euro over the past year.

…..

Some economists in Mr. Trump’s orbit have updated old exchange-rate theories to comport with their protectionist instincts on trade. The idea is that “too much” foreign financial investment into the U.S. overvalues the dollar, which kills exporting industries and creates America’s large trade deficit.

Here, too, evidence of actual harm is hard to spot. This so-called problem exists only because so many foreigners are investing in American economic growth. Worse, the so-called solution is to deter that investment, such as with a withholding tax on interest paid to foreign holders of Treasurys.

Arnold Kling, as usual, is insightful and wise:

I fear that humans desire the moral license to hate other groups of humans. Society works better when we overcome that desire. For much of our history, Americans have succeeded in suppressing large-scale hatred of other Americans. That is no longer the case, and the polarization regarding mass deportation reflects that.

Also wise is Scott Winship, who tweets: (HT Scott Lincicome)

If there were a finite amount of work to be done, I’d be more worried about LLMs and labor demand (though not that worried). LLMs ultimately lack inspiration or motivation to create without someone prompting them.

If you want to know why the price of beef has risen – hint: the reason isn’t “corporate greed” – consult Jack Nicastro.

My intrepid Mercatus Center colleague, Veronique de Rugy, argues that economic growth “is not a luxury or an abstraction. It is a moral obligation to those with the least power, the fewest assets, and the longest futures.” A slice:

This is where the decline in total factor productivity (TFP) becomes illuminating. TFP is often treated as a mysterious residual, a black box labeled “technology.” But it is better understood as a measure of institutional performance: how efficiently a society converts labor, capital, and knowledge into real output. When institutions work — when rules are clear, timelines are predictable, and compliance costs are reasonable — new ideas emerge. When institutions degrade, TFP falls not because people are “so rich they no longer benefit from innovation,” but because society has become worse at enabling innovation.

The work of Eli Dourado, now at the Astera Institute, is particularly clarifying because it is grounded in experience rather than abstraction. His account of technology policy, from aviation to energy, shows how productivity losses accumulate through procedural drag rather than explicit bans. The binding constraint is often not engineering or science, but layers of veto points, open-ended reviews, and regulatory uncertainty that stretch deployment timelines beyond any plausible investment horizon.

The consequence is an economy that looks technologically sophisticated yet struggles to scale. The innovators exist. The capital exists. Even the prototypes exist. What fails is diffusion. Fewer factories are built. Fewer homes are permitted. Fewer energy projects come online. Fewer breakthroughs are commercialized. The result is a steady erosion of TFP and a growing gap between what is technically possible and what actually gets done.

If the growth problem is institutional, then a serious agenda for 2026 must focus less on outcomes and more on process. The question is not what Republicans or Democrats want the economy to look like, but what needs to be done to allow productive activity to scale.

Adam Michel makes clear that the evidence against taxes on wealth “is stronger than ever.”

GMU Econ doctoral candidate Josh Rowley is closely reading Adam Smith’s Inquiry Into the Nature and Causes of the Wealth of Nations.

Speaking of Adam Smith, GMU Econ alum Harrison Searles joins with my GMU Econ colleague Dan Klein to explore the likelihood that Smith and David Hume were proto-Darwinists. [DBx: See also here.]

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… is from pages 433-434 of Johan Norberg’s splendid 2025 book, Peak Human: What We Can Learn from the Rise and Fall of Golden Ages [footnote deleted; link added]:

The other requisites for inclusivity are free markets and free minds. To bring something new into the world, people must be allowed to experiment with and exchange new theories, arguments, goods and services. Every major technological innovation is an ‘act of rebellion against conventional wisdom and vested interests’, explains the economic historian Joel Mokyr, and if conventional wisdom and vested interest are in positions to command what can and can’t be pursued, the result is stagnation.

DBx: Pictured above is one of the many wonderful fruits of human creativity unleashed in an open, free economy. This particular fruit of human creativity isn’t a marvel of technological brilliance; it’s a box. Yet this box – and the logistical innovations that complement it – make it one of the most momentous inventions in human history. These productive innovations are forever under threat from rent-seekers, the economically ignorant, and the arrogant who (whatever their particular reason) oppose change.

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Tom Palmer explains that “zero-sum thinking creates a negative-sum world.” A slice:

We trade with our neighbors. We trade with people on the other side of town. We trade with people we will never meet from hundreds of miles away in our own countries. We trade with people we will never meet in countries on the other side of the planet. We trade with people whose languages we do not understand. We trade with people of different religions, customs, and sports passions. The fundamental economic and moral principles of trade are not affected by distance, language, religion, customs, or sports. They rest on mutual advantage. When a Vermonter exports maple syrup to a Floridian and imports oranges from the Floridian, there is no essential difference between that exchange and one between a Canadian and a Floridian.

Trade creates intertwined interests. Complex and prosperous societies are those in which people depend on each other in myriad ways—for food, clothing, entertainment, transportation, medical care, teaching, and more. That mutual dependence is a source of harmony, not a loss of autonomy. As Frédéric Bastiat, one of the greatest champions of freedom who ever lived, noted, “The one thing that people overlook is that the sort of dependence that results from exchange, i.e., from commercial transactions, is a reciprocal dependence. We cannot be dependent upon a foreigner without his being dependent upon us.”

A Tax on Imports Is a Tax on Exports

A sales tax imposed on Floridians who purchase Canadian maple syrup may please the Vermont producers (unless they are serious about principles), but it is still a tax imposed on Floridians. It will likely raise the price the Vermont maple syrup producers can charge. In the end, the Floridians will pay more. What’s more, however, it will restrict the Canadian market for Florida oranges, even if the Canadians are rational and refrain from “retaliating” by imposing such a tax on themselves. Why? Because a tax on imports has in the aggregate the same impact as a tax on exports. Exports are what you have to send to get imports. After all, what you want are the imports, not the exports, which you have to send away in order to get the imports.

It’s possible — at great cost — to produce oranges up north and maple syrup in Florida, but it’s a lot better for people to exchange Florida oranges for maple syrup from Canada or Vermont. When the Canadians find that Floridians are not buying their now more expensive (price paid to Canadian producers + the tax taken by Uncle Sam) maple syrup, they will not have the U.S. dollars to buy those oranges, meaning that the Floridians are less able to sell to the Canadian market. The market for oranges has just shrunk, which means lower income for Florida orange producers. The country as a whole is not better off. Taxing imports is, in effect, quite like directly taxing exports. (In economics, that’s called the “Lerner Symmetry Thesis.”)

George Will sensibly argues that Trump’s “loutocracy” has abandoned any claims that it might otherwise have had to the benefit of the doubt. Two slices:

Minneapolis is today’s Birmingham. Citizens with smartphones are supplementing journalists in gathering facts. It is infuriating, yet grimly sublime, that the current national administration, which will not stop banging on about how it is restoring America’s greatness, is incessantly embarrassing (about Greenland, vaccines, and much else). The administration requires an addition to the typologies of government: loutocracy.

…..

Trust, including trust in government, is the glue that gives successful societies the cohesion requisite for collaborative dynamism. It is calamitous when government forfeits the public’s trust. But when, as today, such forfeiture occurs, assume the worst.

Today, it is more than prudent, it is good citizenship to assume that everything ICE says, and everything the administration says in support of its deportation mania, is untrue until proved to be otherwise. Or, as Noem might say, until it has been “adjusted.”

Some administration louts have said that the most recent (as of this writing) person killed in Minneapolis by a federal officer was a “would-be assassin” and, of course, a “domestic terrorist.” Because Republicans control congressional committee gavels, and because today’s president controls congressional Republicans, there will be no oversight of ICE’s rampages. The Senate, which disgraced itself by confirming Noem and others unqualified for cabinet positions, is especially unlikely to suddenly acquire the inconvenience of a conscience.

So, expect more killings, and more political smearing of the victims. That ICE’s disgraces will continue is, in its revolting way, a promise kept: loutocracy.

Yuval Levin makes a powerful case that the Trump administration continues to recklessly destroy its legitimacy with the public. Two slices:

The Trump administration is facing a serious and justified political backlash to the brutal excesses evident in its immigration enforcement operations in Minnesota. But even more than that, President Trump and his team are beginning to pay a price for their willful blindness to both the dynamics of American public opinion and the logic of the American constitutional system.

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Americans do not generally share the dark, bitter, vindictive hostility toward immigrants and immigration that characterizes the views of some of Trump’s senior aides. And so most voters are not encouraged but alarmed by the thuggish and fascistic tone of much of the administration’s rhetoric on the subject. The militant ICE recruitment ads, the nativist DHS tweets, the mendacious White House press statements, and the callous reactions of senior officials to the killings of protesters in the course of immigration enforcement operations all convey a hunger for confrontation (if not a lust for blood) that is not only grossly unbecoming of the government of a free society but also extremely unappealing as a way of talking to the country.

The result has been evident in measures of public opinion. About 20 percent of the voters who approved of Trump’s immigration policy a year ago now disapprove of it. Immigration remains among Trump’s strongest issues, because the public trusts him even less to manage the economy, but he is at roughly 40 percent approval now, and falling, regarding immigration. That fall did not begin with the killings in Minneapolis, but it has been exacerbated by them and is probably not over.

The Editorial Board of the Wall Street Journal warns of the damage that Trump’s hostility to immigrants is doing to America’s economy. A slice:

The Census Bureau also projected that net international migration will fall to 321,000 this year. That’s about three-quarters lower than during the first Trump term. If current “trends continue, it would be the first time the United States has seen net negative migration in more than 50 years,” the bureau says.

Restrictionists in the White House will rate this as a success—a sign of progress on the way to Stephen Miller’s goal of zero immigration for many years. But declining immigration—legal and illegal—is notably occurring against a backdrop of falling fertility rates and an aging population. Natural population growth last year was a paltry 519,000, down from 1.1 million in 2017 and between 1.6 million and 1.9 million during the 2000s.

Conservatives say Americans should churn out more babies, but regardless of the virtues of child-rearing, government can’t force people to procreate. Slowing immigration and an aging population present serious workforce challenges, as any employer will tell you. Artificial intelligence and robots can increase productivity. But America will still need workers for all kinds of vital jobs—from health services, to plumbing and electrical repair, to building homes or working in biotech labs.

The Cato Institute’s Marian Tupy, writing in the Washington Post, makes clear that the ultimate source of prosperity is creative ideas rather than atoms and molecules mashed together into different physical forms by nature. Two slices:

In the long run, nations do not become rich and safe by hoarding rocks. They become rich and safe by building the rules and habits that turn knowledge into production, and production into strength. They become rich and safe through ideas.

That is how the United States rose. America had plenty of natural endowments. So did Russia, Venezuela and Congo. What made the U.S. exceptional was a system that rewarded discovery, experimentation, entrepreneurship and scale. When that system works, resources stop being fixed constraints and become problems to be solved. When Santa Barbara, California, suffered from prolonged drought, for example, it built a desalination plant to increase its fresh water supply.

American economist Julian Simon said it plainly: The ultimate resource is people. Scarcity is not mainly a story about nature’s endowments. It is a story about human ingenuity unleashed under good institutions. If markets are allowed to work and innovators are allowed to profit, scarcity gives rise to substitution, efficiency and new supply.

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Trump is right to care about the supply side. He is wrong to think the path to greater productivity runs mainly through controlling more stuff. America’s durable advantage is its capacity to generate and apply ideas under a relatively free and flexible business environment.
That is the strategic resource that compounds.

Robby Soave is correct: Katie Miller – wife of White House’s ardent nativist Stephen Miller – is wildly mistaken to think that classical liberalism is woke leftism. A slice:

Classical liberalism is the forerunner of modern libertarianism: It is a philosophy that emphasizes individual rights, including civil rights and property rights. Classically liberal thinkers such as John Locke helped establish the notion that government should be accountable to the people. Economists such as Adam Smith and David Ricardo used classical liberalism as a guiding principle when arguing in favor of free markets and free trade. In the realm of government, the political leaders associated with classical liberalism and laissez faire economic policies are people such as former President Calvin Coolidge, former U.K. Prime Minister Margaret Thatcher, and Argentinian President Javier Milei. Note that these figures are not exactly defined by their love of wokeness. To the extent that “wokeness” is even a coherent set of views, it emphasizes collective rights for various identity groups instead of the individual-rights framework of classical liberalism.

Leftists tend to agree with classical liberals and even most conservatives on some broad principles, like the notion that people should elect their leaders. But modern liberals, progressives, and leftists tend to disagree sharply with classical liberals and libertarians on economics: They want much more government regulation, taxation, and centralized government control of the economy. On these issues, leftism bears a closer resemblance to the version of conservatism advocated by Stephen Miller—who supports tariffs and extreme restrictions on immigrant labor—than it does to classical liberalism.

Christian Britschgi examines Trump’s executive order that foolishly restricts corporate ownership of homes.

Marcus Witcher reviews historian David Beito’s new book on Franklin Roosevelt. A slice:

Further, FDR rejected calls from Secretary of Labor Frances Perkins “to admit the maximum combined quota for the next three years (82,000 in all).” Most tragically, when the German liner, the SS St. Louis, arrived off the coast of Florida carrying over 900 Jewish refugees, the administration not only did not admit them, the Coast Guard ensured that none of the refugees would be able to swim to freedom. Even after evidence of mass genocide in Europe reached Roosevelt, “the administration’s stance toward refugees showed no sign of shifting.” Beito concludes that “while FDR and his advisors certainly viewed the Nazis as international gangsters, the plight of the Jews was never a priority.”

The Washington Post‘s Editorial Page reports on France’s self-inflicted fiscal woes. Two slices:

France has budget problems, so politicians reached for a politically popular solution: Tax the rich.

Never mind that France already had the second-highest tax rate in Europe for its top bracket at 55.4 percent. Or that it already had surtaxes on income over 250,000 euros and income over 500,000 euros.

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The unsustainable welfare state also means France cannot afford its ambitions to build a self-sufficient military or fully support Ukraine as it fends off Russia.
The bleak conclusion: Politicians in Paris have made promises they can’t keep to a people who are now dependent on government for their livelihoods.

Charismatic socialists keep trying to sell Americans on the European model. Look under the hood, and it’s clearly a lemon.