Thanks again to John Stossel for interviewing me a couple of months ago – and to his excellent team for somehow making me appear to be more articulate than I am. This is the full-length interview, which has just been released.
Here’s a letter to the Guardian.
Editor:
I was struck by a realization upon reading Jonathan Watts’s uncritical endorsement of Thomas Piketty, et al.’s, newly released “Global Justice Report: A Plan for Equality & Prosperity Within Planetary Boundaries” (“‘Happiness is not just about GDP’: ambitious plan or utopia?” June 4).
Progressives love to boast of their devotion to “sustainability.” Advertisers seeking their patronage trumpet certain foods and other consumer goods as being “sustainably grown” or “sustainably sourced” – advertisements that exploit progressives’ economically naïve conviction that the normal practice of businesses in market economies is to myopically disregard access to inputs tomorrow in order to unsustainably maximize sales today. Indeed, Messieurs Piketty and Co. share this naïve conviction: their report predicts that myopic market forces will inflict severe damage on the environment – damage that’s avoidable only by adopting their scheme for soaking the rich and harshly restricting economic growth.
This prediction is ironic. There’s nothing unsustainable about free-market activities, for the greatest protector of the environment and surest insurance against resource depletion are secure, tradeable property rights.
But if anyone wants an unambiguous example of a genuinely unsustainable policy, look no further than the scheme endorsed by Messieurs Piketty and Co. Such seizure of wealth and government central economic planning will kill golden-egg-laying geese and destroy the capital that’s necessary for ordinary workers to earn wages high enough to afford these workers the modern luxury of caring about the environment. The end result would be massive poverty, a pathetically puny tax base, and a dirtier and more dangerous environment.
Soak-the-rich taxation and economic central planning, under whatever guise, have always been, and will always be, unsustainable.
Sincerely,
Donald J. Boudreaux
Professor of Economics
andMartha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030
Jack Butler remembers the late Gordon Wood. A slice:
But Wood, who died in a car accident Sunday at 92, was far more than a chronicler of this country’s founding. He did more than any other academic, and perhaps more than anyone in the past 50 years, to sustain the memory and importance of the Revolution and its principles.
Wood was born in Concord, Mass., where one of the first battles of the American Revolution was fought. He became known to the world in 1969 with his first book, “The Creation of the American Republic, 1776-1787.” It won the Bancroft Prize, one of the history profession’s highest honors.
With 1991’s “The Radicalism of the American Revolution,” Wood achieved a popular renown unusual for an academic. His thesis, defended in careful, scholarly and erudite fashion, is also right there in the title and spelled out early and plainly in the Pulitzer Prize-winning book. Our revolution “did not just eliminate monarchy and create republics; it actually reconstituted what Americans meant by public or state power and brought about an entirely new kind of popular politics and a new kind of democratic officeholder.”
Also remembering Gordon Wood is AEI president Robert Doar.
“Gordon Wood on what the Declaration meant for America.”
Here at Cafe Hayek, I featured many passages from Gordon Wood’s books as “Quotations of the Day.”
GMU Econ alum David Hebert is correct:
Treasury Secretary Scott Bessent and others argue that tariffs and industrial policy can restore America’s strength. In reality, diversified supply chains and open markets provide greater resilience than economic nationalism.
Earlier today, in the case of California v. Mullin, the US District Court for the District of Massachusetts issued a decision striking down the Trump Administration’s $100,000 fee on applications for H-1B visas (which are used by tech firms, research institutions, and other organizations to hire immigrant workers and researchers with a variety of specialized skills). Judge Leo Sorokin ruled that the plan is illegal because it usurps Congress’s power to tax.
Eighty-four years is a good, healthy life in America. How much progress has been made in reducing poverty over one person’s lifespan?
A lot, according to new research from Richard Burkhauser of the Civitas Institute and Kevin Corinth of the American Enterprise Institute. They have assembled the longest poverty data series that accounts for taxes, transfer payments and health insurance, stretching 84 years from 1939 to 2023.
It provides some astonishing good news. Over that entire time span, no matter what baseline they chose, the absolute poverty rate fell by at least three-quarters. When including the value of health insurance, poverty fell by up to 97 percent.
The transformation was especially massive for African Americans. In 1939, 93.3 percent of Black children were in poverty. By 2023, it was 5.7 percent.
The story most Americans are familiar with would credit the reduction to the modern welfare state after President Lyndon B. Johnson announced the War on Poverty in his 1964 State of the Union address.
Burkhauser and Corinth’s research allows this claim to be tested. They find that poverty was already in rapid decline from 1939 to 1963, before the federal government’s war against it began. That decline was almost entirely due to rapid economic growth causing incomes to rise.
It’s a common refrain: The middle class is hollowing out; Americans overall are increasingly falling short financially while a few are getting exceedingly rich. There’s even a scoreboard of inequality. We’ve persuaded ourselves that many families can no longer achieve the American middle-class dream the way their parents once did. It’s a political hot button, too — both parties claim to be fighting to preserve Middle America.
But there’s another, much better way the middle class can shrink — when everyone moves up and gets richer. A nation can become so much richer that the ranks of the poor, the working class and the middle class all thin out. The “hollowing out” message requires a curious definition of progress: By its logic, if everyone’s income doubles, the same number of families fail to reach the middle class as in the past.
Thinking about the middle class in this way obscures progress because it mixes inequality with people’s living standards, and those are two different things. In a recent report, we measured class using constant, inflation-adjusted thresholds. The “core” middle class shrank, but so did the classes below the middle — the poor, the near poor and the lower middle class.
In 1979, 36 percent of families were in the middle class. At first, it looks ominous that by 2024, a smaller number — 31 percent — could claim that status. But it’s worrisome only if you overlook that over the same period, the upper middle class grew to 31 percent of families from 10 percent. Meanwhile, the number of Americans falling short of the middle class — once more than half — dropped to 35 percent of all families.
The traditional middle class shrank because so many families became better off over time, not because more people fell short. At the same time, inequality rose, too. The higher up the income ladder a family reached, the more disproportionate the improvement. Rather than the rich getting richer and the poor getting poorer, rich and poor alike grew richer — albeit at much different rates.
One objection we received to these analyses is that they would have looked very different if we had considered wealth rather than income. That’s because income reflects the remuneration people receive in a year while wealth — assets owned less debts owed — reflects resources accumulated over time. But our forthcoming research finds that the share of families whose wealth earned them upper-middle-class status increased, just as the income numbers indicate, while the proportion of families whose wealth fell short of the middle declined.
What is being abandoned is the principle that legitimate production creates legitimate ownership. Jeff Bezos did not find his wealth lying in a field. Musk did not inherit a pile of cash. Nor did these men steal their fortunes from others. Their fortunes were built through sustained judgment, risk, and entrepreneurial effort in markets where consumers voluntarily chose to spend (or not to spend) their money. (Or at least mainly so; see below.) The causal chain from effort to wealth is visible and traceable. Yet the popular conclusion is that the endpoint of that chain is somehow provisional, held subject to democratic revision whenever a current majority finds the accumulation distasteful.
A free society cannot function on such logic. Once you establish that democratic majorities may vote to claw back wealth they find excessive, you have crossed a line we had refused to cross before. The same moral grammar that justifies a wealth tax on ten-figure fortunes also justifies, with equal coherence, a wealth tax on seven-figure ones. The argument rooted in “too much” has no natural stopping point, because “too much” is always defined by whoever is doing the taking.
This discomfort is not eased by acknowledging that some large fortunes benefited from government-granted privileges and cronyism.
… is from page 244 of Deirdre McCloskey’s superb forthcoming book, Equality of Permission [original emphasis]:
I have called primary liberalism “adultism.” Primary liberalism alone among political philosophies does not treat citizens as children. The conservative wants to police and dominate the bad children called citizens. The left progressive wants to subsidize and dominate the sad children called citizens. Bad or sad, all citizens are made into figurative children, and then serfs.
Phil Magness exposes yet another of Quinn Slobodian’s misleading uses of out-of-context or truncated quotations. (HT Scott Lincicome)
Megan McArdle wisely warns of the ill-consequences of the U.S. government’s massive indebtedness. A slice:
The outsize debt was barely sustainable even with the abnormally low interest rates between the 2008 financial crisis and the pandemic. But with 30-year Treasury yields at their highest level in almost two decades, it is not. Interest costs alone exceeded 3 percent of GDP in 2025, more than the government spent on Medicaid or defense. That has helped push the annual budget deficit to almost $2 trillion, or 5.8 percent of GDP. Unless something is done, those numbers will get even worse as the boomers finish retiring and entitlements eat more and more revenue.
There is only one way this kind of profligacy can end: in a fiscal crisis that forces Congress and the president to hike taxes and cut spending, very probably at the worst possible time, when the economy is already nose-diving for some other reason. And here’s the thing: Everyone knows this. There’s a reason you yawn when you’re asked to think about the national debt — it’s because you’ve heard this all a zillion times before. This slow-moving disaster has been on the horizon for decades. We’ve all decided not to think about it until we make landfall on whatever hellscape we’re approaching.
On June 2, the Trump administration submitted a document to the World Trade Organization’s (WTO) Balance-of-Payments Committee supposedly justifying its Section 122 tariffs. The filing is revealing—not for what it gets right but for what it exposes about the administration’s bad faith legal theory. To establish that the United States is experiencing a “large and serious” balance-of-payments (BoP) deficit—as Section 122 requires and Article XII of the General Agreement on Tariffs and Trade (GATT) permits—the administration points to the current account deficit, driven by the trade deficit, as the “most appropriate measure” of a BoP deficit. The argument does not just strain the domestic statute, but it also flatly contradicts how a BoP deficit has been defined in international trade law for decades. By openly and deliberately flouting the GATT, the administration is also exposing its use of Section 122 in a way that undermines the congressional intent when the provision passed—and the larger statute it is a part of.
“L.A. retreats on the minimum wage.” A slice:
In related news, a Carl’s Jr. franchisee that operates 59 restaurants in California in April filed for bankruptcy, blaming the state’s $20 an hour minimum wage for fast-food workers. California Gov. Gavin Newsom cries misinformation whenever we report on the damage caused by the state law, but attacking the messenger won’t help his citizens.
A recent study by the University of California at Santa Cruz also found the $20 minimum had resulted in “higher menu prices for consumers, reductions in employee working hours, widespread elimination of overtime, and loss of benefits for employees,” and more losses “being driven by automation and the adoption of labor replacement technologies.”
Maybe if workers donated as much to Democratic campaigns as unions do, Mr. Newsom would care more about them.
Here’s Jack Nicastro on Samuel Adams (the man, not the beer).
Art Carden ponders “commerce and warehouse clubs.” A slice:
[Sol] Price is an overlooked innovator who deserves a prominent place, alongside Sam Walton, J.C. Penney, the Kresge family, and Charles Walgreen, among the people who changed how Americans shop and who developed a whole sector based on creating value by getting Price’s “six rights” right. The right combination of “rights,” of course, does not exist independently of the process used to find it. It must be discovered, and for that, Price needed liberty—and the much broader space over which people can search for the best they can offer.
How did Price do it? He imagined a future no one else did, and he risked resources to make it a reality. It was a risky proposition. Pretty frequently, people imagine a future and discover that it doesn’t comport with reality.
Price and his people were in a position to make discoveries. Just like the inventor of Tabasco sauce was able to make major inroads using a bunch of surplus cologne bottles, one of Price’s buyers, who was working with a supplier to see what they could sell in large quantities in bulk, remembered that one of the vodka manufacturers they had worked with had used extremely large plastic bottles. It occurred to him that they could package mouthwash the same way.
Jason Willick ponders “what James Madison would say about Bill Pulte.” A slice:
There’s a basic constitutional lesson here: Be wary of giving the government powers you wouldn’t want your enemies to wield. Warrantless surveillance is one such power, and Pulte’s planned elevation illustrates the lesson perfectly.
Here’s the abstract of young Caroline Su’s new paper “How High-Skill Immigration Restrictions Eroded Regional Productivity: Evidence from the 2017 BAHA Executive Order”: (HT Tyler Cowen)
This paper estimates the regional economic impact of high-skill immigration restrictions by analyzing the 2017 “Buy American, Hire American” (BAHA) policy as a quasi-experimental policy shock. By significantly tightening H-1B visa adjudication, BAHA caused new employment petition denial rates to double from 7% to 17%, while STEM-specific rejections tripled to 31%. Using a difference-indifferences framework, this study finds that states highly dependent on H-1B talent experienced a statistically significant 2.8% relative decline in value-added output. This implied a productivity loss totaling roughly $218 billion across the most affected regions. While concurrent tax cuts and deregulation likely offset the impact on employment and wages, the loss of specialized STEM expertise adversely impacted total factor productivity. These findings suggest that policies based on conventional employment metrics may overlook the “hidden damage” to productivity and innovation that drives the broader economy, thereby underestimating the true economic cost of immigration restrictions.
Neither will it follow that an accumulation of debt is desirable, because a certain degree of it operates as capital. There may be a plethora in the political as in the natural body; there may be a state of things in which any such artificial capital is unnecessary. The debt, too, may be swelled to such a size as that the greatest part of it may cease to be useful as capital, serving only to pamper the dissipation of idle and dissolute individuals; as that the sum required to pay the interest upon it may become oppressive and beyond the means which a government can employ consistently with its tranquility to raise them; as that the resources of taxation to face the debt may have been strained too far to admit of extensions adequate to exigencies which regard the public safety.
Where this critical point is cannot be pronounced, but it is impossible to believe that there is not such a point.
And as the vicissitudes of nations beget a perpetual tendency to the accumulation of debt, there ought to be in every government a perpetual, anxious, and unceasing effort to reduce that which at any time exists as fast as shall be practicable consistently with integrity and good faith.
DBx: Keep in mind that this warning of excessive government debt was issued by a man who was not as fearful of such debt as were many others of his generation.
…..
It’s too bad that in today’s U.S. government there is nothing remotely close to “a perpetual, anxious, and unceasing effort to reduce” government indebtedness “as fast as shall be practicable consistently with integrity and good faith.” Too many politicians and pundits treat government debt as, if not a freebie, an easy and always-acceptable means of funding today’s government expenditures with little or no risk to the public fisc or to the well-being of future citizens-taxpayers.
Here’s a follow-up email to a new correspondent.
Mr. B__:
Responding to my point that keeping existing automobiles longer is as much a ‘threat’ as are automobile imports to the production of new cars, you write that “if we stretch the life of our cars, it is only a one time negative impact on the demand for new cars.” My point, therefore in your view, is “limp.”
You’re overthinking my point, which is simply that imports are only one among countless substitutes for goods and services produced domestically.
A fall in the demand for domestically produced new cars is caused no more by increased automobile imports than by increased used-car sales. A fall in the demand for home-kitchen ranges and ovens is caused no more by increased imports of home appliances than by increased demand for dining out. A fall in the demand for domestically produced lumber is caused no more by increased lumber imports than by increased use of flooring and decking made of composite materials. A fall in the demand for domestically produced aluminum is caused no more by increased aluminum imports than by technological advances at recycling aluminum. A fall in the demand for domestically produced tires is caused no more by increased tire imports than by improved road and highway surfacing. A fall in the demand for domestically produced diapers is caused no more by increased diaper imports than by falling birth rates.
This list can be much extended.
National-security considerations aside, imports’ only distinguishing feature is that they are easily demonized. We (rightly) simply don’t think of criticizing our fellow citizens for, say, buying used cars instead of new cars, or building their decks with composite materials instead of with wood. But let those same fellow citizens buy imported cars or build their decks with imported lumber, and protectionists scream holy hell about the damage done to the U.S. auto industry and about the loss of jobs for sawmill workers. And politicians – left, center, and right – storm in, vocal cords ablaze, promising to “solve” this mirage of a “problem” with tariffs that allegedly will “protect” us Americans from the wiles and ruses of scurrilous, conniving, “unfair” foreigners.
I’m disturbed by just how cavalier protectionists are about restricting their fellow citizens’ economic freedom. But I’m at least equally disturbed by just how stubbornly puerile and ignorant are the intellectual arguments typically presented for protectionism as if these prove beyond any shadow of a doubt that protective tariffs enrich a nation.
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
In February 2010, Russ Roberts shared, here at Cafe Hayek, this cartoon.
The point of this cartoon – and of Russ’s sharing it – is that for all jobs created by government ‘stimulus’ spending, there are jobs destroyed by that spending.
There are, however, two important differences between the jobs created and those destroyed by ‘stimulus’ spending: First, the created jobs are seen while the destroyed jobs are unseen; second, the created jobs are highly unlikely to be as productive as are the destroyed jobs.
A skilled artist could update this cartoon, showing Trump (in place of Obama) ‘creating’ jobs with his tariffs – and simultaneously destroying jobs elsewhere in the economy with those same tariffs. And just as Obama partisans saw only that which they wished to see, a vision that fueled their economically unwarranted enthusiasm for Obama, Trump partisans see only that which they wish to see, a vision that fuels their economically unwarranted enthusiasm for Trump.
When I recently wrote about Bezos’s value creation in the Wall Street Journal, some readers objected that Bezos did not build Amazon by himself. Amazon used the internet. The government helped create the internet. Therefore, his wealth is partly a product of government action. Therefore, the state has a moral claim on much of his fortune.
That is Barack Obama’s “you didn’t build that” argument. True, no one builds anything in isolation, and entrepreneurs use laws, courts, roads, schools, electricity, language, science, and prior inventions.
But the redistributionist conclusion does not follow.
Public inputs are not gifts from the state. They are funded by taxpayers. If government taxes citizens to build roads, courts, or networks, it cannot later treat those services as favors that create a second claim on private achievement. Citizens paid for the input. They do not owe the state their output.
Access is not authorship. The internet made online commerce possible. It did not make Amazon inevitable. The same public inputs were available to millions of people. Every major retailer, investor, and bookstore owner had access to the network. They did not change how we shop. Bezos did.
The logic applies universally. The lawyer did not invent the courts. The doctor did not invent medicine. The writer did not invent language. If public input is dispositive, then private property becomes meaningless.
The argument becomes circular when government monopolizes an input. The state taxes citizens to fund infrastructure, restricts or crowds out private alternatives, and then says citizens’ use of state infrastructure proves their dependence on government. That is not moral reasoning. It is a closed loop.
True public goods may justify taxation under clearly defined rules. They do not justify an ownership claim over every enterprise that uses them.
The public inputs argument takes success for granted but never explains why Bezos succeeded while most did not even try. The economist Israel Kirzner provides the answer: entrepreneurial alertness. A successful entrepreneur notices what others miss, acts before others act, and is rewarded if consumers value the result.
Eric Boehm tweets: (HT Scott Lincicome)
The impulse to demand that executive power get used to solve every single perceived problem is the number one thing eroding American democracy
Phil Magness explains why he isn’t a “neoliberal.”
The Takings Clause of the Fifth Amendment states that the government may not take “private property” without paying “just compensation.”As Richard Epstein and Eduardo Penalver – leading takings scholars with widely divergent views on most political and legal issues – explain in a joint essay on the Takings Clause for the National Constitution Center, “the guarantee of just compensation must apply at the very least to cases in which the government engages in the outright confiscation of property.” Stock is private property, and seizing 50% of the stock value of major firms is a pretty obvious case of confiscation.
And it does not matter that Sanders proposes to take “only” 50% of the stock, rather than 100%. If the government seizes half your house or half of your business, that’s still a taking. Indeed, the Supreme Court has held that seizing a much smaller proportion of a property is a taking, as in the famous case of Loretto v. Teleprompter, where New York City required the owner of a building to give up a small portion of the roof to put a cable box there. The same principle applies here.
Sanders refers to the seizure as a “one-time 50 percent tax.” But that labeling doesn’t matter. It’s still obviously an expropriation of property, and not simply a tax on the income it generates or even a property tax. One of the key elements of property rights is control over its use. Sanders makes clear that seizing control for the government is a major objective of the proposal. There can be situations where the boundary between a tax and a taking is fuzzy. But this proposal is very obviously on the taking side of the line.
If merely labeling an expropriation like this a tax could immunize the government from takings liability, they could use the same trick to expropriate virtually any property without compensation. Thus, they could take over your house by claiming that it’s merely an in-kind tax payable in the form of land-use rights. They could take over any business or charitable organization by claiming that it’s a one-time tax payable by turning over the right to control all the organization’s activities. And so on.
Vance Ginn busts the myth of a permanently poor underclass.
A faddish conjecture among progressives right now goes like this: Rich people’s assets appreciate, giving them unrealized capital gains. If they realized the capital gains by selling the assets, they’d have to pay taxes on the gains, so instead they borrow against the value of their assets during their life. Then, when they die, their heirs get the assets and start over at the value when they receive them, so the gains are never taxed.
It’s a neat theory, but does it actually characterize the behavior of high-net-worth individuals? Edward Fox of the University of Michigan Law School and Zachary Liscow of Yale Law School published research on this question last year.
Basically, the rich have no reason to do “buy, borrow, die” because … they have a lot of money. In addition to their unrealized capital gains, in any given year they have lots of salary, business, interest and dividend income, along with realized capital gains, all of which are already taxed.
Fox and Liscow found that rich people’s annual liquid income is higher than their annual consumption, removing the need to borrow to finance their lifestyles.
An analogy for someone with more typical personal finances makes the folly clear. For most people, the largest source of unrealized gains is the increase in value of their home. Someone could, in theory, take out a home-equity loan and use it to finance their consumption. But this isn’t a genius strategy for tax avoidance. They’d still have to pay income tax on the money they earned from their job and then pay back the loan with interest.
Fox and Liscow found that new borrowing for the top 1 percent of wealth-holders only came out to about 2 percent of their annual economic income, which they define to include increases in unrealized gains. Again, it should not be surprising that the very rich aren’t borrowing a ton of money.
For households in the top 1 percent of wealth, they found that the median amount of economic income subject to the income tax is 56 percent, and the median amount of debt as a percentage of wealth is zero percent.
Adam Omary and Jeffrey Singer make clear that “the Surgeon General’s screen warning is not science.”
… is from page 59 of Thomas Sowell’s 1999 book, Barbarians Inside the Gates:
If one confused word can gum up social policies, the legal system, and innumerable institutions throughout society, that word is “equality.” It is one of those vague pieties in which we indulge ourselves, without any serious thought as to what it means or what the actual consequences of pursuing it may be.
