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… is from page 162 of Deirdre McCloskey’s superb forthcoming – in November – book, Equality of Permission; “Thaler” is Richard Thaler, who in 2017 was awarded the Nobel Prize in Economics for his work in behavioral economics; one of Thaler’s books is Nudge (co-authored with Cass Sunsteain), which proposes the oxymoronic policy of “libertarian paternalism”:

Paul Krugman enthusiastically tweeted about Thaler’s prize: “Yes! Behavioral econ is the best thing to happen to the field in generations.” Thaler gives Paul and the other plausible illiberals another reason to recommend bossing people around. For their own good, you understand.

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One of Cafe Hayek’s dozens of faithful readers, who prefers to remain anonymous, requests that I post again the “Quotation of the Day” from exactly five years ago. I’m happy to do so.
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Quotation of the Day…

… is from page 14 of the first volume (“Rules and Order,” 1973) of F.A. Hayek’s brilliant trilogy, Law, Legislation, and Liberty:

In civilized society it is indeed not so much the greater knowledge that the individual can acquire, as the greater benefit he receives from the knowledge possessed by others, which is the cause of his ability to pursue an infinitely wider range of ends than merely the satisfaction of his most pressing physical needs. Indeed, a ‘civilized’ individual may be very ignorant, more ignorant than many a savage, and yet greatly benefit from the civilization in which he lives.

DBx: Who can seriously doubt either the truth or the significance of this insight?

Think of any five-minute slice of your life today: you munching on breakfast; you showering; you putting in your contact lenses; you driving to the gym; you using your smartphone to chat with your mother or with your child or with your business associate; you reading this blog post; you having a hard roof above your head and with your feet and furniture resting firmly on hard floors. You having indoor plumbing and artificial lighting. It’s impossible to comprehend all the uncountable different bits of knowledge that were put to use, almost all by strangers, to make each of these experiences possible for you.

You know virtually nothing about how to make any of these experiences a reality. And yet these experiences are not only a reality, their reality is so regular and reliable that you (as do we all) take them for granted. Each of us in modern society, every moment of every day, is served by the knowledge and efforts of billions of strangers.

Why are you not in awe of this amazingness? Why do you believe that the relatively few glitches, real or unreal, in the modern economy – “Damn, my Internet connection just went down!” or “Damn, Amazon’s delivery of my gourmet Keurig coffee pods is delayed by 24 hours!” or “Damn! Thomas Piketty has graphs that reveal that some people have lots more money in their financial portfolios than I have in mine!” – are the relevant facts to focus on rather than the sheer amazingness of modernity for ordinary people?

…..

I’ve often said that this book by Hayek – volume one of Law, Legislation, and Liberty – is the single most important book that I’ve ever read. I’m now re-reading it, cover to cover, for what is probably the fourth time since I first read it as a senior in college in 1979. My assessment of it stands. It’s not perfect, but it’s sublime. No book has had as big an impact on my worldview as has this one. Some works have come close: Leonard Read’s “I, Pencil”; Deirdre McCloskey’s Bourgeois Dignity; Frederic Bastiat’s Economic Sophisms; Richard Dawkins’s The Blind Watchmaker; Julian Simon’s The Ultimate Resource 2; Armen Alchian’s Economic Forces at Work; Adam Smith’s An Inquiry Into the Nature and Causes of the Wealth of Nations; H.L. Mencken’s A Mencken Chrestomathy; James Buchanan’s and Richard Wagner’s Democracy in Deficit; Thomas Sowell’s Knowledge and Decisions; Geoffrey Brennan’s and Loren Lomasky’s Democracy and Decision; Robert Higgs’s Crisis and Leviathan; Richard Epstein’s Simple Rules for a Complex World; Don Lavoie’s National Economic Planning: What Is Left?; Paul Heyne’s textbook, The Economic Way of Thinking; Oliver Williamson’s The Economic Institutions of Capitalism; Etienne de la Boetie’s The Politics of Obedience – but none quite matches the first volume of Hayek’s Law, Legislation, and Liberty.

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Here’s a letter to F&D Magazine, a publication of the IMF.

Editor:

U.S. Trade Representative Jamieson Greer wrote more than 2,100 words about trade yet managed to get correct approximately nothing (“Economics for the Real Economy,” June 2026). Just listing his errors would take nearly as many words, so I here address only one of his mistakes, namely, his claim that in the decades before Trump entered the White House tariffs were “left untried” – that the U.S. pre-Trump embarked upon an experiment with free trade based, not on experience, but only on the abstract, unrealistic models of dogmatic economists.

While it’s true that over the 70 years following the end of WWII tariff rates generally fell and trade became more free, it’s untrue that tariffs and protectionism were “left untried.” For example –

– In the 1970s, Nixon not only imposed, for several months, across-the-board import surcharges of 10%, he negotiated the Multi-Fiber Arrangement, which formalized restrictions dating back to the 1930s on imports of textiles. These import restrictions remained in effect until 2005.

– To avoid even harsher protectionist policies from Congress, the Reagan administration persuaded the Japanese to agree to “voluntary export restrictions” on automobiles. Reagan also tariffed motorcycles, semiconductors, and softwood lumber – the latter of which lasted well into the 21^st century.

– Obama slapped tariffs on tires.

– Imports of steel have been restricted for decades.

More importantly, tariffs have been profusely imposed throughout history – including in the United States – and across countries. And although you’d never know it from Mr. Greer’s essay, these actual, real-world tariffs and other trade restrictions are among the most empirically studied phenomena in economics. The consensus conclusion is strong: protective tariffs and trade restrictions make countries that impose them less prosperous than they would otherwise be. Protectionism slows economic growth and suppresses real wages. Removal of trade restrictions promotes economic growth.

Contrary to the impression conveyed by Mr. Greer, we economists oppose tariffs not because we sit surrounded by ivy-covered walls pondering only a priori thoughts and taking pleasure in spinning bizarre tales of imaginary worlds. We economists oppose tariffs because, first, we understand that the scarcity of resources means that no industry in a country can expand without some other industry or industries in that country contracting; second, we also understand – and we have evidence to back this understanding – that government officials have neither the knowledge nor the incentives to allocate resources as well as resources are allocated by market forces; and third, we’ve empirically investigated the effects of protectionism and overwhelmingly find that it enriches special-interest groups at the greater expense of the public.

It’s unfortunate yet forgivable that my dentist and Uber drivers are likely ignorant of this reality, but it’s alarming and unforgiveable that this same ignorance is not only apparently shared, but also peddled, by the U.S. Trade Representative.

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 Wall Street Journal‘s Collin Levy decries the autocratic-like spread of the image of Trump. A slice:

This sort of leader-worship is common among autocrats. In Cuba, Vietnam and China, images of Fidel Castro, Ho Chi Minh and Mao Zedong have long been present in government buildings, schools and private businesses. (Not to mention T-shirts and key chains for despot tourist kitsch.) In North Korea, citizens are expected to hang pictures of Kim Jong Un in their homes.

Sober observers of our democracy note that these mundane flights of Mr. Trump’s ego don’t rise to the level of consequential decisions on policy or foreign affairs. But they are assaults on the country’s character as a republic born from distrust of monarchical grandiosity.

Billy Binion explains that “Trump’s proposed $250 bill is everything the founders despised.” A slice:

America’s 250th is a celebration of the Founding, an experiment defined, at its core, by a rejection of monarchs and leader worship. It is why George Washington opposed the U.S. Mint putting his face on coinage—that sort of adulation was incompatible with what he was trying to build. He was not alone. As the plan was debated by the U.S. House, one early representative cautioned against “imitating the flattery and almost idolatrous practice of Monarchies with respect to the honor paid to their Kings, by impressing their images and names on their coins.” Lawmakers settled on the emblem of liberty instead.

It is hard to know if Washington et al. would be disappointed that U.S. currency has since evolved to feature past leaders who made significant contributions. But the law’s constraint—that they no longer be living—is in keeping with the reservations the first president expressed about indulgent reverence for the top office, and whoever is in it at any given time. America was leaving that nonsense behind. A $250 bill dedicated to the current president is the exact sort of egomaniacal vanity project the Founders detested.

Noah Rothman is right: “Only the Cuban revolution’s true believers can still contend with a straight face that the island’s problems have been imposed on them by the United States.” A slice:

Yes, Trump’s sanctions and blockade tactics have throttled the island’s economy, Cuban economist Mauricio de Miranda Parrondo conceded in a New York Times op-ed. “But Cuba’s economy was already on the brink of collapse,” he added. “What is happening in Cuba today is essentially the result of decades of structural economic failure under a rigid political system that has consistently resisted any reform.” And that resistance is buckling.

Ossified revolutionary slogans might sustain the Cuban regime’s comfortable apologists in the West, but they are packaged and retailed to a foreign audience.

Adam Millsap makes the case that the real revolutionaries are the defenders of classical liberalism.

Pay attention to Timothy Taylor.

J.D. Tuccille calls for a renewal of federalism.

Hardwood Federation tweets: (HT Scott Lincicome)

Tariffs have rippled through the US economy, trickling down to home renovation and decreased numbers of home ownership.

Lumber demand is down because of tariffs.

The Editorial Board of the Washington Post opines on Beijing giving the Chinese people at least some of what is rightfully theirs: more freedom to trade with people in Africa. A slice:

China recently implemented a “zero-tariff” policy for 53 countries in Africa. As Chinese and African citizens increasingly reap the mutual benefits of trade, America is losing out by heading in the opposite direction.

China imports mostly raw materials and resources from Africa — crude oil, copper, cobalt, agricultural products and unprocessed minerals. Removing import taxes mean that Chinese consumers will benefit from lower prices and Chinese companies will pay less for inputs into their own manufacturing.

Tax-free imports to China won’t alone help the continent move up the value chain, but they provide African nations with much-needed hard currency. The young continent also benefits from imports of higher value manufactured goods that improve lives.

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… is from page 7 of Richard Salsman’s paper, “Alexander Hamilton As Economist: A Proper Verdict,” which is a chapter in the hot-off-the-press book Unsung Heroes of the Market: The 24 Underrated Economists You Need to Know – a volume edited by Robert Whaples, Christopher Coyne, Gregory Robson, and Diana Thomas:

He [Hamilton] knew that a capital surplus (net inflow), mirroring a merchandise deficit, was akin to an international vote of confidence in the United States.

DBx: Hamilton was correct. Private investors do not knowingly invest in declining industries or economies. They invest in industries and economics with promise.

This truth that was understood by Hamilton is no less real and relevant today than it was in the late 18th century. Yet President Trump and countless other protectionists – left, center, and right – incessantly repeat the myth that U.S. trade deficits are a signal that the U.S. is “losing” at trade, either because of our own incompetence or inadequate savings, or because of perfidious foreigners taking advantage of Americans.

I repeat: No economic concept is responsible for more confusion and lousy policy than the so-called “balance of trade.”

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I’m serving as guest editor for a forthcoming issue of the Journal of New Finance. Here’s the call for papers.

………..

We invite you to submit proposals for original papers to be published in a special issue of the Journal of New Finance. Each accepted paper will be awarded an honorarium of $600, and the authors are expected to participate in an online workshop on the papers.

The subtitle of this special issue – which indicates its focus – is “Tariffs, Capital Allocation, and Global Fragmentation.” Over the past ten or so years, the multilateral rules-based global trading system that reigned from the end of WWII until the early 21st century has come under severe attack. Why is economic nationalism now ascendant? What sorts of protectionism and industrial policies are playing out? What are the likely economic and political consequences of this fragmentation of global trade and finance? Is it desirable to reverse this fragmentation and, if so, what are plausible means of doing so?

If you have ideas for original research into this timely issue, please submit by July 1st an abstract of 500 to 600 words.

* Extended abstract submission deadline: July 1st
* Notification of abstract acceptance: July 15th
* Full paper submission deadline: October 15th
* Expected publication date: January 2027

Proposal can be submitted to me at [email protected]

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Here’s a letter to the Wall Street Journal – a letter pointing out only some of the flaws in Greg Ip’s latest column.

Editor:

A new report showing that real hourly wages have risen by 3% since 2019 while profits have risen by 50% has Greg Ip worried “about the political stability of an economy in which ever more output flows toward shareholders instead of employees” (“The Record Divide Between Corporate Profits and Worker Pay,” May 29).

Mr. Ip misses two important realities that should calm his fears.

First, more than half of American workers already own corporate shares through their retirement plans. Thus, a large portion of the “ever more output flows toward shareholders” are flows also toward employees rather than, as Mr. Ip writes, “instead of employees.”

Second, nothing stops workers from more directly profiting from the boom in equity values. Buying corporate shares is today easier than ever; it can be done inexpensively with a smartphone. And because shares can be purchased in small lots, almost every American worker can, even apart from his or her retirement plan, afford to join the ranks of capitalist investors. If and to the extent that workers don’t take advantage of this opportunity, that result reflects workers’ free choice rather than a problem with the economy.

It’s intellectually fashionable to portray workers in free markets as haplessly pitted against capitalists in a zero-sum struggle for wealth. Yet for the reasons given above – and well as because capitalists’ earn wealth only by producing goods and services that improve the living standards of the masses – this portrayal is false.

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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David Henderson knows an absurd economic argument when he sees one.

My Mercatus Center colleague Jack Salmon is justly critical of Jasper Boll’s, Emmanuel Saez’s, and Gabriel Zucman’s attempted justification for increasing the taxation of billionaires.

The Editorial Board of the Washington Post rightly criticizes Elizabeth Warren’s predictable impulse to have government intervene in the economy. A slice:

Warren hasn’t arrived at her position because she thinks AI will be beneficial to workers, however. Instead, she thinks it “could further rig our economy,” driving up unemployment and the price of electricity.

“Americans are hanging on by their fingernails in an economy that funnels wealth to the ultra-rich and leaves crumbs for working people,” Warren writes.

Never mind that the latest survey of financial well-being from the Federal Reserve found that 73 percent of Americans say they’re doing fine. And some 81 percent of workers who use generative AI say it saves time.

Warren has never been one to let the data inhibit her demagoguery. The primary opportunity Warren sees in AI is not enhancing productivity or helping cure diseases. She sees it as a revenue piñata for politicians to whack.

Also from the Washington Post‘s Editorial Board is this just criticism of labor unions continuing to do what labor unions have long been in the habit of doing: Seeking monopoly privileges for their members at the expense of consumers and non-unionized workers. Two slices:

Autonomous vehicles have the potential to revolutionize the transportation industry and make U.S. roads safer. Yet unions are doing everything they can to keep them off the road.

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This is rent-seeking, plain and simple. These unions represent an established industry looking to use state governments’ control of public roads to cut off competition.

David Neumark finds that minimum-wage legislation isn’t closing racial gaps.

Darin Bartram warns of the regrettable precedent being set by Trump’s “anti-weaponization” fund. Two slices:

There are plenty of reasons to be wary of President Trump’s so-called Anti-Weaponization Fund, which will compensate claimants who say federal law-enforcement or regulatory agencies targeted them for political reasons. These include the cost, nearly $2 billion in public funds, and the wrongful actions of many of the prospective recipients, including rioters who assaulted police officers on Jan. 6, 2021.

Here’s another reason: It will set a precedent that a future president could use to bypass Congress and the courts to implement wide-reaching policies without congressional support—including race-based reparations.

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Remedying perceived harm to Mr. Trump’s supporters stemming from the Russia-collusion investigations or the events following Jan. 6 could seamlessly morph into a future president’s deciding to implement an even broader remedial program—providing reparations to black Americans for slavery and “systemic racism.” The Trump fund would give legitimacy to administrative compensation for a politically defined class of government victims—even if neither Congress nor any court has authorized such compensation.

Justice should be administered impartially and shouldn’t be weaponized against political rivals. That happened with Mr. Obama’s Russia-collusion investigation, which continued through Mr. Trump’s first term. It continued through the Biden administration. But the Anti-Weaponization Fund is the wrong remedy, and one that risks making the government even more lawless.

Erik Lidström explores “our stone age brain in Adam Smith’s Great Society.”

Norbert Michel and Jai Kedia describe the Federal Reserve’s post-2008 powers as “a fiscal time bomb.”

Clark Packard identifies yet another of Trump’s trade ‘policies’ that is likely driven, not by any principle – in particular, here, to reduce U.S. reliance on critical imports from China – but, rather, by self-dealing. A slice:

China’s rare-earth chokehold poses genuine strategic and economic problems—one serious enough to briefly shutter American auto plants and rattle defense procurement officials when Beijing moved to restrict exports in 2025. A supply chain concentrated in the hands of a single foreign country willing to use it as a lever in trade disputes demands a serious and credible policy response. What the Vulcan situation describes is the opposite and implies a larger inherent flaw with industrial policy: A $670 million government commitment, including the largest Pentagon loan of its kind, pushed through in weeks at the direction of a White House official with a personal relationship to the president’s son, whose venture fund had taken a stake in the recipient company three months earlier.

Whether or not the sequence of events proves anything unlawful, or mere coincidence, it is exactly the kind of arrangement that erodes public confidence and raises a straightforward question that has so far gone unanswered: If the administration is serious about reducing American dependence on Chinese rare-earth supply chains, why does its industrial policy find a way to personally benefit the president’s family? Perhaps it’s a coincidence, but the public has a right to know more.

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… is from page 60 of the hot-off-the-press book by my GMU Econ colleague Christopher Coyne and his frequent co-author, GMU Econ alum Abigail Hall, Austrian Economics: An Introduction:

Private markets contain mechanisms to guide economic actors. Property rights over the means of production incentivize owners to use resources efficiently because they reap the rewards for doing so and bear the costs of failing to do so. Prices emerge through market exchange and inform producers and consumers of the trade-offs they face in the purchase of inputs for production (producers) and in the price they pay for purchasing final outputs (consumers). Finally, profit and loss accounting informs producers about whether their decisions align with the underlying preferences of consumers.