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… is from page 407 of the 2016 second edition of Thomas Sowell’s excellent volume Wealth, Poverty and Politics:

Monstrously appalling things done by some peoples to others darken the history of every region on the planet, but descendants of peoples guilty of the worst or most extensive villainies of the past are by no means always the most prosperous peoples today. Conversely, few peoples have been persecuted for so many centuries, in so many parts of the world as the Jews, who today prosper and achieve. None of this suggests that persecution has no economic effects, but only that how much is an empirical question, not a foregone conclusion.

DBx: Yes.

If the ‘logic’ (such as it is) were valid of those persons who today argue that justice requires white Americans to be taxed more in order to pay reparations to the descendants of American slaves, then it follows that gentiles in most parts of the world should be taxed more in order to pay reparations to Jews.

I, of course, would oppose any proposal to pay reparations to Jews – and my opposition comes from the same logical, empirical and ethical place that produces my opposition to pay reparations to blacks.

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… about economic history and freedom.

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Here’s a letter to the New York Times.

Editor:

Oren Cass’s case against increased Chinese investment in America rests exclusively on fears that Beijing will use such investments to undermine U.S. national security (“Is Trump About to Invite In the Biggest Predator in the World?” May 8). If these fears are warranted, Mr. Cass’s larger case for protective tariffs – a case that he has relentlessly offered for many years – is especially unwarranted.

Mr. Cass portrays the Chinese government as a devious “predator” with virtually unlimited willpower and access to resources. Facing such an enemy, the U.S. government should do all it can to strengthen America’s economy as well as those of America’s allies. This goal is best served by promoting free trade with Latin America, Canada, Europe, the Middle East, Africa, India, Oceania, and most of East Asia. Such free trade would enrich the U.S. economy and those of our allies and thereby enhance our national security. It would also entice governments whose allegiances are now torn to ally more firmly with the U.S. and against China.

Yet in countless other writings and interviews, Mr. Cass proposes the use of protective tariffs to eliminate U.S. trade deficits, raise revenue, create more manufacturing jobs, and simply to protect American workers from imports – a protectionist program that would require raising tariffs not only on U.S. imports from China, but on imports from nearly all other countries, including our closest allies. Indeed, Mr. Cass has praised Pres. Trump’s embrace of such extensive tariffs. This sort of U.S. protectionism, however, weakens U.S. national security and strengthens Beijing’s hand.

By attempting to justify protectionism with mutually incompatible arguments, Mr. Cass undermines his credibility as an analyst of trade and trade policy.

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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Marc Wheat and Joel Griffith report that Trump’s tariffs punitive taxes on Americans’ purchases of imports are – surprise! – raising the prices that Americans pay for automobiles. A slice:

The tariff damage is already concrete. Toyota alone expects tariff-related costs to reach $9 billion in its current fiscal year and has warned of up to three separate price increases in 2026 if tariffs continue. It comes as no surprise, then, that the Wall Street Journal recently reported that companies like Honda, Nissan, and Toyota may have to pull affordable, entry-level cars off the market if the tariffs continue because those vehicles are no longer profitable. Meanwhile, new vehicle prices overall have surged back toward all-time highs since “liberation day,” with midsize SUVs jumping 2.8 percent, adding more than $1,300 to the sticker price. Used vehicles are no refuge: The Manheim Used Vehicle Index is up 6.2 percent since March 2025, as higher new-car prices push buyers into an already tight used-car market. Keeping older cars on the road is no bargain either: Auto repair costs are up 6.1 percent since March 2025, driven by tariffs on the more than 44 percent of collision parts that are imported.

The car, particularly the affordable car, is quintessentially American. Henry Ford famously wanted to make cars his employees could afford to buy. Thanks to his breakthrough assembly line, millions of everyday Americans discovered the joy and convenience of automotive travel. More than a century later, personal vehicles enable individuals to chase employment opportunities far from their chosen neighborhoods while juggling family responsibilities and maintaining in-person friendships despite the distance. Cars equal freedom and adventure. That is why the first edition of the Independence Index, published by Advancing American Freedom (AAF), where we work, tracked car affordability as a metric indicating Americans’ ability to pursue happiness. Affordability cratered post-Covid, as the number of weeks of median income needed to buy a new car skyrocketed from 34 weeks prior to Covid to 45 weeks by mid-2022. Prices have increased further since then. With maintenance costs increasing to more than 80 cents per mile, declining car affordability disincentivizes teenagers (barely one in three of whom are in the workforce) and those without a higher education from obtaining gainful employment.

The Cato Institute’s Alfredo Carrillo Obregon talks about the recent ruling against Trump’s Section 122 tariffs. (HT Scott Lincicome)

Brian Albrecht writes insightfully about AI and jobs. Four slices:

The economy is not one production function. It is many activities. When AI makes some of them cheaper, people don’t just buy more of the same thing. They buy something else.

Every dollar you spend lands somewhere. Some dollars land in activities with lots of human labor inside them: a restaurant, a therapist, a roofer. Some land in activities with almost none: a streaming subscription, an automated checkout, cloud storage. So when we are tracing out what happens when AI gets cheaper, it’s not just “Can AI do my job?” It is “When everyone saves money because AI did my job cheaper, what do they buy next?”

…..

Start with software as a microcosm. This is a sector that has already been heavily automated by digital inputs for decades. If substitution were going to drive labor out of a sector, this is where you’d see it first…. The most software-intensive industries don’t just retain human labor; they have a higher labor share (67%) than the least software-intensive ones (55%). Heavy digital inputs didn’t drive out human labor. If anything, the industries that automated the most are the ones that spend the most on workers. BLS projects U.S. employment to increase by 5.2 million from 2024 to 2034. Software-developer employment? Up 17.9%, despite direct AI exposure.

…..

…..

Charles Cooke is harsh – rightly so – on that firehose of economic ignorance Alexandria Ocasio-Cortez, whose latest gusher of silliness is a claim that no one can really earn a billion dollars. A slice:

Properly understood, this is a confession. It is, of course, patently untrue that one “can’t earn a billion dollars” in the United States, because around 1,000 people have done it. Some of those people — Michael Jordan, Tiger Woods, Magic Johnson, and LeBron James, to name a few — are in sports. Some, such as Steven Spielberg, Taylor Swift, and Jay-Z, are in entertainment. Many, such as Elon Musk, Jeff Bezos, and Palmer Luckey, are in business. All of those people “earned” their billion dollars and did so by providing something — athletics, movies, cars, music, technology — that people wanted to buy. That isn’t a “myth”; it’s as close to a stone-cold fact as exists in our economy. What Ocasio-Cortez means when she disputes it — what she is confessing — is that she can’t earn a billion dollars.

And, indeed, she cannot, because, to put it bluntly, she is useless. I have never understood why AOC’s critics like to razz her for having been a bartender. There is nothing at all wrong with being a bartender. Bartenders are useful. Bartenders supply a service that is in demand and, at the high end at least, are able to do things that most people cannot. The problem with AOC is that she is a socialist politician, and socialist politicians are to a dynamic economy as rice is to a garbage disposal. Were all the bartenders to disappear in a puff of smoke tomorrow evening, the United States would be a considerably worse place. Were all the socialist politicians to disappear, we would have occasion for the mother of all celebrations.

Also rightly critical of Ocasio-Cortez is Reason‘s Christian Britschgi.

David Henderson makes a strong case against the provision of TSA-style security for Amtrak.

The Wall Street Journal‘s Editorial Board wisely applauds the Virginia Supreme Court’s finding against that state’s recent gerrymander. A slice:

It’s a gutsy decision, two weeks after 3.1 million Virginians voted to adopt the gerrymander, 51.7% to 48.3%. But don’t blame the court for this timing. All along, Justice Kelsey says, the state “insisted that we cannot lawfully decide this case prior to the referendum.” Democrats were betting that if the amendment won at the ballot box, the court would flinch at countermanding the will of the people.

Yet as the majority rightly holds, if the state Supreme Court can’t decide the constitutionality of the amendment before the vote, then it has to make the legal call afterward, unless Virginia is going to give up on judicial review. The upshot is that Virginia’s midterms will be held under the old House map, which is split 6-5 in favor of Democrats, more or less fairly reflecting the state’s purple politics.

Bill Conerly is a fan of Tyler Goodspeed’s Recession. A slice:

Tyler Goodspeed, Recession’s author, is unusual in not focusing on one particular issue. He describes a market economy as generally resilient in the face of small shocks. But an unusually large shock, such as the pandemic of 2020, can cause a recession. More commonly, the unlucky coincidence of several small shocks occurring at once will trigger recessions. Some economies are more resilient—handling the shocks better—especially with regards to their banking systems, a point Goodspeed emphasizes.

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… is from pages 171-172 of Menzie Chinn’s and Douglas Irwin’s excellent 2025 textbook, International Economics:

The Lerner Equivalence Theorem – that an import tariff is equivalent to an export tax – carries a powerful message: a country that tries to protect import competing industries from foreign competition may be able to help those industries expand, but it will also force other industries to contract. High trade barriers will harm export-oriented industries, erase some of the gains from trade, and reduce national income.

DBx: Yes. And such import restrictions might also reduce foreign investment in the ‘protected’ country, denying to the citizens of that country many of the fruits of the savings and entrepreneurial ideas of their fellow human beings who happen to live abroad.

…..

Protectionists point with pride to the firms and jobs that their trade barriers help to create and sustain. These firms and jobs are real, but these firms and jobs are not – contrary to protectionist mythology – evidence of the success of protectionism. These firms and jobs represent wasted resources – workers, capital, and other inputs that, absent the protectionism, would have been used to produce outputs elsewhere in the country. And these foregone outputs – these outputs that are not produced – would almost certainly have had higher values than those of the additional outputs made possible by protectionism.

It is the rare protectionist who even acknowledges that protectionism cannot protect particular firms and jobs without destroying, elsewhere in the domestic economy, other firms and jobs. Most protectionists believe in free lunches – miracles – manna from heaven – rabbits pulled from hats – 10 minus 2 equalling fifteen. But even those rare protectionists who do acknowledge the inescapability of this trade-off never tell us how they know that the value to the people of the home country of the protected firms and jobs is, or will be, greater than the value of the destroyed firms and jobs.

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Here’s a letter to The Economist.

Editor:

Only by overlooking key historical facts is Joseph Stiglitz able to argue that “John Maynard Keynes saved capitalism from itself” (April 8). Perhaps the most important of these facts is one that’s famously documented by Milton Friedman and Anna Schwartz: the failure of the Federal Reserve. A central bank established to be a lender of last resort to a banking system that government, not capitalism, kept excessively fractured, the Fed allowed the money supply to contract by about 30 percent between 1929 and 1933. This spark for the Great Depression wasn’t a failure of capitalism; it was a failure of government.

And it was government failure that extended the Great Depression. Robert Higgs has marshaled ample evidence that New Deal policies and rhetoric – not capitalism – created such uncertainty for investors that they remained on the sidelines until after WWII.

As for Keynes, the irony – as George Selgin documents in his 2025 book, False Dawn – is that FDR rejected Keynes’s belief that economic downturns are best treated with deficit spending. And Keynes, to his credit, warned FDR not to cartelize the economy through the National Recovery Act – an unfortunately unsuccessful effort by Keynes to save capitalism, not from itself, but from the state.

If your readers want a more accurate history of Keynes and the Great Depression, they should ignore the potted one served up by Prof. Stiglitz and instead consult the works of economists such as Friedman and Schwartz, Higgs, and Selgin.

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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Here’s GMU Econ alum Caleb Petitt on yesterday’s U.S. Court of International Trade’s 2-1 ruling against Trump’s Section 122 tariffs punitive taxes on Americans’ purchases of imports:

The U.S. Court of International Trade ruled 2-1 against the Trump administration’s invocation of Section 122 of the Trade Act of 1974 to implement a 10% global tariff today. The ruling brings America one step closer to being free from President Trump’s executive overreach and harmful economic policies.

The use of Section 122 to impose 10% global tariffs was deemed illegal because the condition for allowing executive imposition of tariffs is not met in the current state of the American economy. Section 122 allows the president to impose tariffs in response to “large and serious United States balance-of-payments deficits.” The Trump Administration conflated balance-of-payments deficits with trade deficits to justify the tariffs.

The United States does not, and cannot, while maintaining floating exchange rates, have a balance-of-payments deficit. As Philip Magness observes, the “term referred to a drawdown on official gold and other currency reserves of the United States under the old Bretton Woods currency peg system, which was abandoned in the early 1970s and officially terminated in 1976.” Congress did not intend for Section 122 to apply to trade deficits when it passed the Trade Act of 1974.

Along with the ruling that the tariffs are illegal, the court issued a permanent injunction against the tariffs on the three importer plaintiffs (Burlap and Barrel, Inc., Basic Fun, Inc., and The State of Washington. The injunction means that the Section 122 tariffs are no longer in effect against those plaintiffs, but remain in effect for all other importers. All other importers have to either file their own lawsuits or wait for an appeal to a court that would issue a broader injunction.

The injunction is an indication that the court was more confident in its ability to curtail executive overreach in Congress’s tariff authority. When the U.S. Court of International Trade and U.S. District Court for the District of Columbia ruled against the International Emergency Economic Powers Act (IEEPA) tariffs last year, they refused to issue an injunction on the tariffs. Although a universal injunction would have been more beneficial, the limited injunction is a step in the right direction.

President Trump has been far more willing to overstep the limits of his authority in his second term regarding tariffs. He implemented tariffs on steel and aluminum against China in his first term, which, although economically harmful, were done within his powers as President. His use of IEEPA and Section 122 to impose sweeping tariffs has gone far beyond his powers and has been considerably more economically harmful than his more limited tariffs in his first term.

The courts have rightfully struck down these attempts. However, Congress has done almost nothing to hold back President Trump from usurping its tariff authority. Congress needs to be more proactive in defending its constitutional powers.

The case will likely be appealed, where there will hopefully be a more definitive judgment. After that, assuming that the higher courts uphold the ruling, it is unclear what the Trump administration will do next. The tariffs are unpopular and are hurting the economy as the midterm elections are approaching quickly. Despite their illegality and unpopularity, the Trump administration seems committed to imposing burdensome and illegal tariffs. Only time will tell what the administration will do next.

Also applauding the CIT’s ruling against Trump’s contemptuous abuse of the law is the Editorial Board of the Wall Street Journal. Two slices:

Another tariff swing and another legal miss for President Trump. A 2-1 majority of the U.S. Court of International Trade on Thursday ruled his Section 122 tariffs unlawful. Although the White House may turn to other statutes to dun businesses and consumers, the decision is important for the rule of law and limits on willful presidential discretion.

…..

Nixon imposed a global 10% tariff to stanch the deteriorating U.S. balance of payments. A customs court in 1974 ruled that tariff unlawful, which prompted Congress to enact Section 122. As it turned out, the end of Bretton Woods resolved the balance-of-payments problem since under a floating exchange rate system the balance always nets to zero.

Mr. Trump’s lawyers argue that the President can still impose tariffs because trade deficits are part of the balance of payments, and the President can pick and choose among the components. “Such an expansive reading of the statute would raise a non-delegation issue, which in turn would prompt a constitutional question,” the judges write.

But the judges say there is no need to address the constitutional arguments since the law doesn’t give the President the authority he claims. “Although the current account (and the balance of trade as a component of the current account) are relevant to balance-of-payments deficits, they are distinct, and the statute recognizes the distinction,” they write.

Eric Boehm, too, has a few words about the CIT’s ruling against Trump’s on-going attempts to use tariffs to subject Americans to artificial increases in scarcity. A slice:

With this latest defeat, Trump has now racked up five consecutive losses in tariff-related cases during his second term. The previous “emergency” tariffs were ruled unlawful four different times: by the CIT, by a federal district court, by a federal appeals court, and, ultimately, by the U.S. Supreme Court.

Maybe Trump will finally get the message. The president does not have unchecked, unilateral power to impose tariffs for any reason and at any time. Thursday’s ruling is another victory for the rule of law.

Daniel Hannan tweets: (HT Scott Lincicome)

The courts have again struck down Trump’s tariffs on grounds of executive overreach. Good news for the US economy and for the US Constitution.

A question for the MAGA fanatics who will now respond. Who is claiming compensation? Has a single foreign country asked for its money back? No. The compensation is going to American firms. You know why?

BECAUSE TARIFFS ARE A TAX PAID BY AMERICANS.

Paul Gigot’s discussion with Ben Sasse is excellent. A slice from the transcript; Sasse is speaking:

I’m on a chemotherapy that’s being delivered to the 97% of my tumors that are benign, and those don’t get hit nearly as hard as the 3% that are mutated. And if you can deliver the poison straight to the tumor, you can have a much, much higher dose of chemotherapy. And so that was only possible because there’s a clinical trial, which is another way of saying to the FDA, “Hey, back off a little bit.” Instead of just saying no, no, no, no, to every drug, allow these researchers to experiment. And if patients are willing to take on some of the downside risk, which is a lot of toxicity, I mean, I’ve been able to regrow a little bit of skin on my face, but I bleed out of my scalp and I bleed all over the place, but a huge part of it is skin production is incredibly difficult. When you’re on the super poison, I’ll take it. I’m alive at almost five months because I’m able to deliver this, we’re able to deliver the superpoison to my tumors. And I think we need a world where the FDA is a lot less universal no, go really, really slow on the safety efficacy trade off and saying, “Well, we need to keep people safe, therefore we can’t give them access to this drug.” The way for research to move forward faster is to allow a lot more experimentation. And I think we should have less government prohibitions.

Here’s Bruce Yandle on “the great American bread machine and future prosperity.” A slice:

Any firm whose activities are significantly affected by federal government policies tends to hesitate when what the government may do next cannot be predicted accurately. Will my taxes rise nest year? Will tariffs be imposed on my products or my competitors’ products? Will my competitors be saved from bankruptcy? What about me? Will my manufacturing plants be raided by ICE and my workers taken into custody or shipped away? What about tariffs on what I use as major inputs—aluminum, steel, fertilizer? These are some of the policy questions firms across the United States are facing, and accurate prediction is partly determined by past behavior.

My Mercatus Center colleague Alden Abbott writes wisely about competition, cronyism, and antitrust.

GMU Econ alum Romina Boccia continues to warn of the ill-consequences in store for us Americans from  the U.S. government’s fiscal incontinence. A slice:

The United States is also different from other advanced economies due to the unique role that the US dollar plays in global financial markets. As the issuer of the world’s dominant reserve currency and a primary supplier of safe assets, the US benefits from what economists call an “exorbitant privilege.” This enables the US government to sustain higher debt levels than other countries.

Even this privilege is not without limits, however. Estimates suggest that the dollar’s status may expand the US government’s debt capacity by roughly 20 percent of GDP, putting the US threshold where debt begins to weigh on growth closer to 100 percent of GDP than 80.

And “exorbitant privilege” is not a permanent entitlement, either. It depends on investor confidence, the depth and liquidity of US financial markets, and the absence of credible alternatives to US dollar dominance. Should that confidence weaken, because of political dysfunction, fiscal irresponsibility, and the rise of competing safe assets, the US advantage could erode.

Counting on privilege as a substitute for discipline is a risky strategy. And allowing higher debt to depress economic potential reduces long-term income growth and Americans’ opportunities.

My intrepid Mercatus Center colleague, Veronique de Rugy, is no fan of TrumpIRA.gov. A slice:

The better path is genuine simplification: a universal savings account that shields its owner from the tax bias against saving, allows contributions from any after-tax income, imposes no restrictions on withdrawals, and requires no government match and no new federal spending. Canada and the United Kingdom have run this experiment. Accounts were used enthusiastically across all income levels, including by moderate- and lower-income households who value flexibility above all else.

Finally, if politicians truly care about securing Americans’ retirement income, they should have the courage both to reform Social Security (to stop lower-income seniors from being hit with an automatic 23 percent benefit cut while preventing massive increase of the debt) and to reform a tax code that creates silly disincentives to save.

Art Carden offers an example of how the free market supplies quality-assurance.

The Editors of National Review ponder the “Dems’ data center freak-out.”

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… is from page 525 of F.A. Hayek’s brilliant Postscript – “Why I Am Not a Conservative” – to the Definitive Edition (Ronald Hamowy, ed., 2011) of Hayek’s 1960 volume, The Constitution of Liberty:

The chief evil is unlimited government, and nobody is qualified to wield unlimited power.

DBx: Indeed so.

Hayek was born on this date – May 8th – in 1899.

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Here’s a note to a second cousin of mine.

Prentiss:

Suspicious of my and other economists’ support for free trade, you offered at my Facebook page the following comment:

So we remove all our tariffs and trade restrictions. America buys cheap foreign stuff exclusively. All domestic production ceases. The only jobs are in medicine, education, government, retail (Amazon) and gardening. Did Adam Smith discuss this?

I understand that it’s commonplace in certain circles – on both the political left and right – to conclude that if we Americans eliminate our protectionist policies, we’ll end up impoverishing ourselves by importing lots of things at low prices as we produce only services. But this conclusion makes no sense.

Forget the difficulty of squaring a fall in the prices of things that people want to buy with impoverishment of those people. Forget also that the empirical evidence contradicts your prediction about U.S. production: As tariff rates from the end of WWII until about eight years ago steadily fell, U.S. industrial production rose, as did U.S. exports of goods. Forget, too, that, even as we imported more goods from abroad, more than half of the value-added of the manufactured goods that we purchase today (2023) remains American-made. Instead, let’s explore your argument’s logic.

If you mean (as do large numbers of people who I encounter) that elimination of U.S. protectionism will result in Americans importing lots of stuff and exporting nothing in return, then, well, that’s bizarrely unrealistic. Foreigners supply their exports to us in order to earn dollars to spend or invest in the U.S. If foreigners wanted nothing from us, they’d sell nothing to us. It follows that the more foreigners sell to us, the more they’ll buy from us. Further, just as economic theory predicts, as our imports rise, so too do our exports rise.

It’s silly to worry that foreigners will deluge us with gifts, expecting from us nothing in return. (By the way, if foreigners were ever to put Americans first in this way, that would be to our enormous advantage, just as it is to our advantage whenever technological innovations enable us to get more output from fewer inputs.)

But perhaps you instead mean that elimination of U.S. protectionism will result in Americans specializing fully in services (and not at all at producing tangible things), and paying for our imported goods by exporting services. Again, as an empirical matter this outcome is extremely unlikely, but – national-security concerns aside – there would be nothing to lament about this outcome if that’s where free trade takes our economy.

The highest-paying jobs are in the service sector – a big reason why the vast majority of Americans aspire to work in the service sector. What’s true for service-sector workers Taylor Swift and Warren Buffett (and also Don Boudreaux and Prentiss Davis), who are much wealthier than they’d be if they were forced to work in manufacturing plants, is true for most American workers. And to the extent that free trade would increase the demand for U.S. service-sector output, the productivity of Americans working in the service sector would almost certainly rise as would the real wages earned by those Americans.

This outcome would be applause-worthy.

But, to repeat, the fact that today (2024) two-thirds of American exports are goods alone makes it’s highly unrealistic to suppose that elimination of U.S. trade barriers would result in the American economy specializing completely in services.

…..

As for Adam Smith, he understood trade very well and, therefore, he would never have supposed that a country that imports more after freeing its trade would export less.

Sincerely,
Don