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Although trucking deregulation has significantly reduced the Teamsters’ power, not a little bit of that power remains in place. Here’s a letter to the Wall Street Journal.

Editor:

Unionized truck-driver Keith Hernandez writes that, in an attempt to “put profits over people,” driverless-truck companies threaten his and other Teamster members’ “good union wages and benefits” (Letters, June 18).

Mr. Hernandez should look in the mirror, for it is he and his fellow Teamsters who put profits over people. The profits are Teamster members’ excessively high wages paid as a result of their union protecting them from competition. The people are the millions of Americans who now pay for delivery services the unnecessarily high prices that result from this restriction of competition.

If driverless-truck companies successfully break this hold of the Teamsters, these companies will indeed profit, but they’ll do so only insofar as they lower the prices that hundreds of millions of American people pay for delivery services.

Labor unions generate profits for their members at the expense of the people. Successful entrepreneurs generate profits for themselves only by enriching the people.

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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My Mercatus Center colleague Jack Salmon exposes “the methodology laundering of minimum wage research.” Two slices:

A question economist have been exploring for decades is whether we actually know what minimum wage increases do to employment. But an equally important question is whether the methods economists have increasingly relied upon to answer that question are as clean as advertised.

A new working paper by David Neumark and Antonio Rodriguez-Lopez, “Modern Difference-in-Differences, Same Old Answer,” lands a serious blow against recent high-profile research claiming that minimum wages have little to no effect on jobs. Their argument isn’t that event-study designs are bad. It’s that the null results attributed to these methods are artifacts of specific, defensible-sounding, but ultimately flawed researcher choices that, once corrected, yield the same old answer: minimum wage increases reduce employment.

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The most striking is the dependent variable. CDLZ measure employment as a share of a varying population, that is, the current population in each period, which itself changes in response to minimum wage policy. This matters enormously. There is a well-documented negative relationship between minimum wages and population: higher minimum wages tend to reduce population in affected areas, as workers and firms relocate. When both employment and population fall after a minimum wage hike, the ratio of the two can actually increase, making it look as though jobs were created when in fact jobs were destroyed. CDLZ never justify this choice, and it’s inconsistent with their stated goal of estimating effects on low-wage jobs.

When Neumark and Rodriguez-Lopez switch to either a constant population denominator or simply log employment, both more defensible specifications, the long-run employment elasticity shifts from a statistically negligible +/- 0.01 to a significant -0.09 (weighted) or -0.20 (unweighted).

Here’s the abstract of Sinem Hacıoğlu Hoke’s and Leo Feler’s new paper, titled “Paying More and Buying Less: 2025 Tariffs and U.S. Household Spending”:

This paper estimates the effects of the 2025 U.S. tariffs on household spending using transaction-level data linked to tariff exposure and a tariff sentiment survey. Comparing high versus low tariff-exposed categories, we find 15 to 20 percent price pass-through. At the mean increase in tariff exposure, prices rise by 1 to 2 percent while spending falls by roughly 4 percent. Survey evidence linking stated intentions to revealed behavior identifies a mechanism for the large spending response: reallocation toward essentials and trade down within categories, concentrated among middle-income households with discretionary slack who express tariff concerns. Low-income households bear a disproportionate welfare burden through regressive pass-through.

Noah Rothman is right: Attacks on Elon Musk’s wealth are attacks on one of America’s finest foundational institutions. A slice:

From the moment that the news of Musk’s deserved prosperity broke, all that Democrats and progressives could think of was how they could get their hands on his money.

Sometimes, they’d tell themselves they need to expropriate his wealth because America’s unsustainable entitlement programs are faltering, as though Democrats hadn’t spent decades demagoguing every meaningful reform to the country’s unfunded liabilities.

Or they’d say that Musk owes his success to government contracts. Therefore, his net worth is fair game — as though federal contracts were a beneficence that Washington can capriciously revoke at will.

In moments of candor, some on the left would argue that it’s simply unethical to allow Musk to enjoy the fruits of his own labor. “Trillionaires shouldn’t exist in a moral society,” argued Representative Jim McGovern.

What’s immoral here is the rapacity to which the Democratic left succumbed. It’s also downright un-American.

As John Locke conceived it, the right to property was as God-granted as the rights to life and liberty. The Lockean ideal is codified in the nation’s founding documents. It is an ideal that protects the individual against being coerced or suborned into sacrificing her talents, efforts, and time to others or the state. As Locke wrote in Two Treatises of Government, “Where there is no property, there is no justice.”

The American foundation is built upon Lockean bedrock, and respect for individual labor and its rewards has contributed in no small measure to America as a force for good in the world.

Charles Cooke writes insightfully about California’s proposed “Billionaire Tax.” A slice:

Why has this happened? There are many reasons, but one of them is that the state’s residents have become all too comfortable having it both ways. Californians want to rely upon the rich to pay almost all of the taxes in the state and to vilify those rich people and to suggest that they shouldn’t exist. By design, California’s budget is heavily reliant upon the wealthy. This is why California collects far more revenue than usual during tech booms and periods of impressive market gains, while during busts and downturns it faces drastic budget deficits. Under the current system, the top one percent of Californians pay around half of all personal income taxes in the state, while the top five percent pay around 70 percent. And unlike in the federal tax code, capital gains are treated as ordinary income in California, which means that when a founder sells his company or an investor realizes his gains, he is taxed at the full rate. The Democrats who run the state insist that this is “fair,” which is their prerogative. But when combined with their open hostility toward those who are paying the bills, it is unsustainable.

A few years ago, the head of the California Federation of Labor Unions, Lorena Gonzalez Fletcher, tweeted “F*ck Elon Musk.” In response, Musk wrote “Message received” and relocated Tesla to Texas. While less profane, the “billionaire tax” has sent the same message, and, whatever its fate, it is now guaranteed to have had the same results.

GMU Econ alum Adam Michel reports that “AI panic is producing terrible tax ideas.” A slice:

In theory, productivity-increasing technologies can replace or complement human labor. New technologies have always replaced some jobs, but in the process, they have created entirely new industries, expanded overall output, and enhanced the value of human inputs and, thus, their wages.

As I explain in a new piece for GIS Reports, the labor is losing to capital story does not show up in the data:

In standard economic models, output is attributed to the combination of labor, capital and technology. Each component can be thought of as earning a share of national income. If, over time, capital became more important for economic output, capital’s share of national income would increase. Empirical evidence does not support this claim.

Figure 1 (below) uses data from the United States Bureau of Economic Analysis to show that the labor share of net income (net of taxes and depreciation, which better captures income actually available to workers and capital owners) is within its historical range, fluctuating above and below the average of 69 percent. Labor’s share rose gradually from the mid-20th century through the early 2000s, declined modestly thereafter and has since returned near its historical average.

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… is from page 86 of Douglas Irwin’s remarkable 2017 history of U.S. trade policy, Clashing Over Commerce:

Indeed, [Alexander] Hamilton was skeptical of high protective tariffs because they sheltered both inefficient and efficient producers, led to higher prices for consumers, and gave rise to smuggling, which cut into government revenue.

DBx: Yes.

Hamilton rejected, for poor reasons, Adam Smith’s case for unilateral free trade. Nevertheless, Hamilton – contrary to what many people today assert or suggest – was no enthusiastic protectionist in the mold of Donald Trump, Bernie Sanders, Sherrod Brown, Peter Navarro, Robert Lighthizer, or Oren Cass. Hamilton was a far more subtle, careful, and informed thinker than are those individuals – left, center, and right – who today clamor for the government to punitively tax, by tariffing imports, the efforts of us Americans to get the greatest value for each dollar that we spend.

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Here’s a letter to a long-time patron of Café Hayek.

Mike:

Thanks for sending along Kim Ruhl’s argument that national-security considerations require a “rethinking” of – that is, a retreat from – free trade.

I don’t have time now to address the details of Mr. Ruhl’s argument, but a general question about this matter demands to be asked: How much trust should we put in the Trump administration’s claims that its tariffs are meant to better ensure U.S. national security when that same administration insists on appointing as Director of National Intelligence a man whose expertise is in real-estate financing and housing development, and whose chief qualification, in Trump’s eyes, seems to be his lap-dog-like loyalty to Trump?

The correct answer to this question, I’m sure, is obvious.

Sincerely
Don

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Wall Street Journal columnist Barton Swaim decries the hubris-swollen belief that government should be given vast powers to determine our economic destiny and, more specifically today, to regulate AI. A slice:

Leave that debate aside and examine the premise of the complaint that we don’t do all-encompassing collective efforts anymore. Maybe we don’t do them because they generate more ruin and folly than good.

The one great exception to that rule—the abolition of racial discrimination in 1964-65—involved the dismantling of state power more than its imposition. The War on Poverty, launched at the same time, succeeded in boosting the unearned income of the poor, but at the cost of making welfare dependency and its ill effects permanent features of American life. Six decades later, taxpayers spend well over $1 trillion a year to prosecute this metaphorical war. As John Early, Robert Ekelund and Phil Gramm showed peremptorily in “The Myth of [American] Inequality” (2022), average real income in the bottom fifth of earners grew by 681% from 1967 to 2017 when you include government benefits. Yet nobody claims the War on Poverty succeeded or that the poor have escaped immiseration. A well-meaning attempt to mitigate suffering by collective effort instead perpetuated it.

More recent salvific efforts also flopped. The 2009 “stimulus” bill—“the most sweeping economic package in U.S. history,” as President Obama called it—sent $825 billion sluicing through the economy in an effort to stave off recession and bring down jobless claims. The country moved out of recession, technically defined, and into a long era of anemic growth and stubbornly high unemployment. Later attempts to vindicate the 2009 stimulus almost always involve the conveniently unfalsifiable claim that the economy would have deteriorated further without it.

As for the most recent catastrophe, the 2020-21 pandemic, you have to search hard for robust defenses of lockdowns, school closures and blowout spending.

“Trump’s light AI touch keeps getting heavier” – so explains James Pethokoukis.

My intrepid Mercatus Center colleague, Veronique de Rugy, exposes the serious foundational flaw in Thomas Piketty & Co.’s latest scheme to attempt to create the hell that they believe would be heaven on earth. A slice:

As such, the most important question for poor countries is not who gains most from growth. It is whether growth happens at all. The countries that are home to most of the world’s remaining extreme poor — places like Madagascar, the Democratic Republic of the Congo, Mozambique, Malawi and Burundi — have not grown for decades. Our World in Data’s Max Rosen points out that Madagascar’s GDP per capita today is roughly the same as it was in 1950.

The reason isn’t a lack of development aid. These are among the world’s most aid-dependent economies. The DRC has received tens of billions of dollars in foreign aid over decades and $1.3 billion in 2024 from the U.S. alone. In past years, Mozambique received as much as half of its government budget from foreign aid. These countries have been the focus of development programs, nongovernmental organization activity, World Bank projects, bilateral donor attention and charitable intervention for generations.

Countries don’t get stuck in extreme poverty because the world has ignored them. They get stuck because they do not produce. And they do not produce because the institutional conditions that make production possible — secure property rights, the rule of law, open markets, protection from predatory government — are largely absent. Countries ranking at or near the bottom of economic freedom indexes are also the poorest. Those that liberalize experience across-the-board income increases.

Economist Vincent Geloso’s research finds that economic freedom is one of the strongest predictors of who escapes persistent poverty and who stays trapped. Colin Doran and Thomas Stratmann have found much the same. The mechanism is straightforward: Property rights give people an incentive to produce. Lower regulatory barriers let businesses form and labor move toward opportunity. Freedom from predatory government encourages long-term investment. Remove these conditions and countries stagnate, no matter how much aid they get.

Scott Winship understandably continues to be skeptical of the empirical claims of Piketty-Saez-Zucman. (HT Scott Lincicome)

David Henderson argues that “Matt Zwolinski makes Emmanuel Saez’s error.”

David Clement explains what shouldn’t – but, alas, what today nevertheless does – need explaining: Tariffs raise the prices paid by buyers of tariffed goods. Two slices:

At the auto dealership, Anderson Economic Group estimated that for a domestically assembled vehicle, the combined effect of steel and aluminum input tariffs and the 25-percent tariff on imported parts adds $2,500 to $4,500 to the sticker price of a new vehicle.

For a fully imported car, S&P Global Mobility put the figure as high as $12,000. The National Automobile Dealers Association estimated an average increase of $3,000 to $4,000 across the new-car market. This is the inevitable result of taxing the steel used for every brake rotor, exhaust system, and engine block assembled in the United States.

A transmission set at $2,000 wholesale faces $500 in new tariff costs. An engine block at $5,000 will have $1,250 tacked on top.

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Tariffs also reach the grocery aisle. Steel and aluminum tariffs are estimated to increase the cost of canned food by 15 to 20 percent, and the same trend hits the beer fridge. The Beer Institute has documented that aluminum is the single largest input cost in American brewing. The US beverage industry paid more than $1.7 billion in excess costs through 2023 from Section 232 tariffs alone — and that was before the 2025 escalation.

The Cato Institute’s Tad DeHaven reports on the latest effort by Republicans to have the U.S. government take equity stakes in private companies – that is, the latest effort by Republicans to move the U.S. economy closer to being socialized. A slice:

The Senate Armed Services Committee appears ready to do what the Republican-controlled Congress should have put a stop to: write the Trump administration’s equity stake power grab into law.

Buried in the Senate-reported version of the latest National Defense Authorization Act is a new subtitle on “Equity Investments and Related Matters.” Its central provision, Section 1051, would give the Department of Defense’s Office of Strategic Capital (OSC) explicit authority to make equity investments in private companies. The bill would establish a new “Department of Defense Equity Investment Account” in the Treasury and authorize OSC’s director to use that account to make equity investments.

Democrats, of course, continue to be fond of wasting other people’s money.

Arnold Kling explains why systems get gamed. A slice:

Systems decay as people learn to game those systems.

I think that one could extend this into a general theory of institutional decay. Every business, religion, political system, or set of social norms is subject to being gamed. People will figure out how to use the rules and practices of the institution to gain personal advantage, at the expense of the overall health of the institution. If the institution manages to adapt and renew itself so that its incentives deter the worst sorts of gaming, it will survive. Otherwise, it will rot.

Ron Bailey shares news of this unfortunate reality: “Over 100,000 kids have died due to Greenpeace blocking genetically enhanced rice, new calculation shows.”

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… is from Samuel Gregg’s brilliant July 2024 paper, “A Free, Prosperous and Secure America”:

Protectionism … gradually dulls our awareness of our comparative advantages as well as opportunities to pursue them. Tariffs and import quotas seek to offset foreign competition’s impact on a given domestic industry. For a time, they may even succeed. But such measures also discourage that industry from adapting and becoming more efficient. The more you protect an industry, the more inflexible and inefficient it will become. If protectionist measures are thus systematically applied to more industries across a state’s economy, the same inefficiencies and inflexibility will emerge everywhere, thereby weakening that economy and therefore a state’s ability to resource its national security needs.

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Eric Boehm breaks down the meaning of the Trump administration’s proposed use of tariffs to combat what it calls “structural excess capacity.” A slice:

Every year, there are many more airplanes manufactured in the United States than the country’s domestic airlines can use.

This is a rather straightforward fact, but it has some important ramifications for the Trump administration’s trade policies, so bear with me for a moment. During 2025, for example, Boeing churned out 600 commercial airliners from its assembly facilities in Washington state and South Carolina. Many of those planes were sold to foreign airlines and exported.

Last year was no outlier: The U.S. routinely exports billions of dollars worth of commercial aircraft and airplane equipment. We make more than we can consume, and we sell the rest to businesses in other countries. This excess manufacturing is not a problem. On the contrary, this is tremendous news for the workers at Boeing and for the company’s shareholders. It’s also great for those foreign buyers—airlines can purchase Boeing planes without first needing to develop a local airliner-production industry.

On the other hand, if America were limited to producing only as many airplanes as it could consume domestically, Boeing’s workers would have less to do, make fewer sales, and probably earn lower pay. Boeing’s shareholders and those foreign airlines would be worse off too. Everyone involved would be poorer.

But the same excess manufacturing capacity that makes Boeing a global leader in airplane production is now becoming a boogeyman for the Trump administration—at least when it is businesses in other countries that are doing it.

George Will praises an effort by Sen. Ted Cruz (R-TX) and Sen. Ron Wyden (D-OR) to rein in the abuse of executive power. Two slice:

Their proposed legislation would inhibit government “jawboning,” defined (by Merriam-Webster) as “the use of public appeals (as by a president) to influence the actions especially of business and labor leaders.” The adjective “public” is underinclusive. One of the senators’ objectives is transparency about hitherto secret pressure.

During the pandemic, executive branch officials in the Biden White House, FBI and elsewhere frequently hectored social media platforms (YouTube, Facebook, Twitter) to adopt particular policies of “content moderation.” In plain language, censorship was the officials’ goal and, often, their achievement. (During the 2020 presidential election, the platforms also, absent government pressure, censored speech about Hunter Biden’s laptop.)

The Biden administration thought that content on the platforms was promoting “vaccine hesitancy” and doubts about “social distancing” and shutdowns generally. The officials wanted to suppress theories about covid-19’s origin (the lab-leak theory, now widely considered plausible). Two states and five individual social media users sued dozens of executive branch officials and agencies, seeking an injunction against them for pressuring the platforms to violate their speech rights by removing, obscuring or otherwise discriminating against their posts.

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The Cruz-Wyden bill is a response to executive misbehavior, and to judicial judiciousness, that requires Congress to legislate. Their bill affirms the principle that the government may not do indirectly (e.g., censor speech) what it is forbidden to do directly. The bill:

Would require government to make public certain kinds of communications with social media companies, artificial intelligence companies and broadcasters. And would establish that plaintiffs must prove only that government attempted censorship, not that its pressure by itself succeeded. And would provide for money damages, instead of mere injunctions, for plaintiffs when an offending official left office while a case wended its way through courts.

So, crude and sneaky overreaching by the executive was followed by the Supreme Court’s austere (and reasonable) refusal to overreach by ignoring principles of standing. This has prompted two lawmakers to respond. If Congress makes that response a law, there will have been a minuet of actions and reactions driven by each branch’s prerogatives, responsibilities and incentives. The separation of powers will have functioned as intended.

Also writing on the Cruz-Wyden effort to rein in executive-branch “jawboning” is Reason‘s J.D. Tuccilli.

My GMU Econ colleague Vincent Geloso reports evidence that shows that economic freedom doesn’t harm the environment. A slice:

For many, economic growth and environmental protection exist in direct tension. People with this belief generate policy proposals to permit growth while protecting the environment. For others, the tension is irremediable — they believe growth necessarily destroys. For these zealots, degrowth is the only way. For both groups, liberalizing the economy — allowing for more economic growth — carries at least a risk of environmental degradation.

In recent work with Justin Callais and Alicia Plemmons, published in Structural Change and Economic Dynamics, we show that there is no reason to worry. We used 49 cases of sustained economic liberalization since 1970 and measured their effects on outcomes such as death rates from air pollution, total greenhouse gas emissions, as well as emissions per capita and per dollar of economic output. In this context, liberalization refers to the adoption of policies that promote international trade, secure property rights, and lessen fiscal and regulatory burdens.

Comparing with similar countries that did not liberalize, we found that while GDP per capita increased 16 percent within ten years for liberalizers, environmental outcomes did not deteriorate. In fact, we found that death rates from air pollution declined modestly, while there were no effects of liberalization on total greenhouse emissions. Moreover, post-2000 liberalizers actually showed signs of lower emissions per dollar of economic activity and capita.

Wall Street Journal columnist Holman Jenkins decries the several factions within today’s U.S. government trying to effectively tax AI into unprofitability. Two slices:

What if the U.S. government decided it could award itself half your house without compensation? Nobody would ever invest in a house again. That’s the Bernie Sanders plan for AI, seizing half the industry’s investment without paying a cent.

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Anthropic founder Dario Amodei warns incessantly about a Chinese AI threat even as his company attracts a trillion-dollar valuation that makes sense only if it will be free to commercialize its innovations rather than see them absorbed into an all-embracing military-cyber-industrial complex.

Geitner Simmons tweets: (HT Scott Lincicome)

It’s extraordinary to see the federal government, with congressional acquiescence, leap into long-term ownership of private industry. I realize the administration is obsessive about maximizing its ability to exert “leverage” on every front it can (hence these equity stakes not only in the defense sector), but this calculated erosion of the government/private spheres is harmful economically, especially for the long term.

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… is from page 418 of Frank W. Fetter’s September 1933 American Economic Review paper on the Smoot-Hawley tariff – a paper titled “Congressional Tariff Theory“:

With nearly every member of both Houses professing belief in the principle of protection, the question as to what sort of protection is proper and what is not proper was frequently raised. The tests that were advanced to separate the just from the unjust were many, and often conflicting. Despite a pretense in the debates that there was some objective test of national welfare, the record of voting on individual items furnishes much evidence in support of the cynical proposition that sound protection was that which raised the prices of things produced by one’s constituents, and unsound protection that which raised the prices of things made by someone’s else constituents.

DBx: The justly infamous Smoot-Hawley tariff was signed into ‘law’ on this date – June 17th – in 1930 by President Herbert Hoover.

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… is from page 70 of Douglas Irwin’s vital 2017 history of U.S. trade policy, Clashing Over Commerce; Doug here is writing of the United States very soon after the Constitution was ratified:

Most Americans embraced the view that commerce was naturally beneficial and required no central direction, in part because they did not want to create an overly powerful national government that might play favorites with certain producers.