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Scott Lincicome ably defends GDP as a meaningful measure of economic performance. A slice:

As I’ve written before, GDP has real methodological quirks. It’s basically a clunky aggregation of several economic indicators—private consumption, gross private investment, government spending, and net exports—that, even in normal times, can produce misleading snapshots of national economies. Import surges and collapses driven by recent U.S. tariffs, for example, distorted quarterly GDP prints last year—to the upside and down—in ways that had little connection to the country’s underlying economic health. Furthermore, the metric fails to account for important activities like leisure and unpaid household work; it doesn’t consider inequality; and it has difficulty properly valuing environmental goods, government expenditures, and new innovations. As we’ve discussed, GDP can be gamed by authoritarian governments with a strong incentive to fudge the numbers. And it can be particularly distorted in a handful of economies that are driven by one type of economic activity (e.g., petrostates or tax havens).

Populist critiques of GDP, however, go much further than these common methodological concerns. On the right, economic nationalists routinely sneer at “libertarian” policies that “merely” boost GDP at the expense of—in their view—more important measures of well-being: native-born wages, mortality, family formation, culture, national security, and so on. On the left, meanwhile, “degrowth” theorists see GDP growth as an outright bad thing because it necessarily means environmental destruction and mistakes economic activity for human welfare. A truly rich society, they argue, maximizes health, happiness, and sustainability over the monetary value of production.

In theory, these critiques make some sense: An economy that grows only by embracing pollution or selling vice doesn’t make people better off in the long term. In reality, however, the anti-GDP coalition goes much further by mechanistically rejecting policies they don’t like because they “only” boost GDP. This gets things badly wrong in several ways.

For starters, humans do value the stuff that GDP measures, so the metric alone—usually adjusted for inflation and divided by a nation’s population (aka, real GDP per capita, or “RGDPpc”) —nis a good starting point for measuring well-being.

Richard Baldwin is not favorably impressed with the track record of Trump’s tariffs punitive taxes on Americans’ purchases of imports. Two slices:

Trumpian tariffs were designed as political theatre. The goal was simple: show the forgotten men and women of America that the President was standing up for them.

The tariffs were meant, as the President said in announcing them, to heal the “once beautiful American dream” that thieving foreigners had “torn apart.” Tariffs were aimed at striking back at the globalist elite that had “stolen our jobs”, and “ransacked our factories.”

Or at least that’s the only way I can make sense of the drama and chaos surrounding the Trumpian tariffs. No planning, or preparation. Lots of grandstanding and spectacle.

…..

One of the lasting legacies of President Trump will be his tariffs, but not in the way he probably thought they would.

Trumpian tariffs were meant to remake world trade around US power.

Instead, they revealed how disruptive tariffs were at home, how limited US trade power was when it acted alone, and how quickly the world could learn to trade around US disorder.

The world did not fragment. America did.

My former Mercatus Center colleague Bob Graboyes offers this handy guide to the Virginia Supreme Court’s ruling in the recent gerrymandering case.

C. Jarrett Dieterle reports on the latest warm embrace by a major MAGA figure of cronyist labor-unionism. A slice:

In recent years, observers have closely tracked the rise of pro-union sentiments on the political right. During his reelection campaign, President Donald Trump garnered headlines for skipping a presidential debate to visit United Auto Workers (UAW), who were on strike in Michigan, while officials like Vice President JD Vance and Sen. Josh Hawley (R–Mo.) have made waves for their pro-union bent. Perhaps most prominently, Teamsters President Sean O’Brien was featured as a speaker at the GOP convention.

But to this point, any actual legislation emanating from the pro-labor right has failed to go anywhere in Congress. That may soon change.

A Hawley-backed bill, known as the Faster Labor Contracts Act (FLCA), seems to be picking up steam and may soon pass the House of Representatives. Unfortunately, the FLCA is a trifecta of bad public policy: It suffers from constitutional infirmities, revives a corrupt government agency, and takes away the voice of both businesses and workers.

National Review‘s Noah Rothman explains what shouldn’t – but, alas, what today in some circles nevertheless does – need explaining: Destroying other people’s property is violence and, well, destructive on many levels. A slice:

“Destroying property, which can be replaced, is not violence,” wrote Nikole Hannah-Jones, the author of the New York Times’ 1619 Project. “To use the same language to describe those two things is not moral.” The New Yorker editor David Remnick agreed. “We don’t have time to finger-wag at protesters about property,” he wrote of the big-box and mom-and-pop stores alike that were put to the torch. “That can be rebuilt. Target will reopen.” Sure, “looting is counterproductive,” NPR CEO Katherine Maher conceded. “But it’s hard to be mad about protests not prioritizing the private property of a system of oppression founded on treating people’s ancestors as private property.”

Of course, the property that was subject to vandalism and destruction wasn’t situated in their own backyards. Perhaps these and other permissive figures on the left would revise that outlook now that the vandals are razing their neighborhoods in the name of anti-capitalism.

Wow!

GMU Econ alum Paul Mueller makes a strong case that George Stigler misread some parts of the works of Adam Smith.

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This past Wednesday evening I talked with AIER’s Paul Mueller – a GMU Econ alum – about trade and national security.

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… is from Henry Martyn’s brilliant 1701 tract, Considerations Upon the East-India Trade:

For, if the Providence of God wou’d provide Corn for England as Manna heretofore for Israel, the People wou’d not be well imploy’d to Plough, and Sow, and Reap for no more Corn, than, might be had without this labour. If the fame Providence wou’d provide us Cloaths without our labour, our Folly wou’d be the same, to be Carding, Spinning, Weaving, Fulling and Dressing, to have neither better nor more Cloaths than might be had without this labour…. In like manner, if the East-Indies wou’d send us Cloaths for nothing, as good or equivalent of those which are made in England by prodigious labour of the People, we shou’d be very ill imploy’d to refuse the Gift, only that we might labour for the same value of Cloaths which might be as well obtain’d by sitting still. A People wou’d bethought extravagant and only fit for Bedlam, which with great for and bustle shou’d imploy itself to ‘remove Stones from place to place, at-last to throw ’em down.

DBx: Yes. Protectionism is insanity – bedlam.

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Here’s a letter to a new correspondent.

Mr. H__:

Thanks for your email.

You write, in response to this post of mine, that I am “too quick at second guessing the president and his administration on its determination of the trade behaviors of other countries.” You say that I “owe the administration the benefit of the doubt.”

With respect, I disagree, and for reasons too many to spell out here. But let me mention one of these reasons: the internal inconsistency of the administration’s assertions about trade.

The Trump administration insists, on the one hand, that foreign countries produce and sell too much to us. In the words of the office of the U.S. Trade Representative, “across numerous sectors, many U.S. trading partners are producing more goods than they can consume domestically. This overproduction displaces existing U.S. domestic production.”

Yet on the other hand, this same administration asserts proudly that the tariffs are paid, not by Americans, but by foreigners.

It’s impossible for both of these claims to be correct (although both can be – and likely are – incorrect). If the tariffs impose virtually no costs on Americans, foreigners must be reducing the prices they charge for their exports by almost the full amount of the tariffs without reducing these exports. So when Mr. Trump boasts that his tariffs are paid overwhelmingly by foreigners, with little or no costs borne by Americans, he’s boasting that his policies do next to nothing to ‘protect’ the American market from foreign countries’ alleged overproduction. Put differently, he is boasting that his policies force foreign exporters to further lower the already excessively low prices they charge in the U.S. market.

If the president understands what he’s talking about – and you implore me not to second-guess him – then he fundamentally disagrees with his Trade Representative, who justifies the tariffs as a means of protecting America from foreign-countries’ “overproduction” (and, presumably, the too-low prices that such overproduction implies).

There’s no reason to give the benefit of the doubt to a group of people who truck in such blatant contradictions.

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 a different angle on Greg Ip’s flawed column on China’s “industrial policy of everything.”

Editor:

Greg Ip warns that the American and other economies will be left “in the dust” by China’s “industrial policy of everything” (“Beijing’s ‘Industrial Policy of Everything’ Leaves Rest of the World in the Dust,” May 15).

For two related economic reasons, Mr. Ip is mistaken.

The first reason is scarcity. Beijing cannot expand all of China’s industries simultaneously. To pump more resources today into the production of, say, rare-earth minerals and steel is necessarily to pump resources out of other industries, say, petroleum and aluminum. Therefore, Beijing’s mandarins can increase the productive capacity of some Chinese industries only by decreasing the productive capacity of other Chinese industries.

The second reason is comparative advantage. Even if, by some miracle, Beijing were to increase the productive capacity of all industries in China, some of these industries would nevertheless produce their outputs at higher costs than are incurred by their foreign competitors. These relatively higher-cost Chinese producers would thus be unable to compete successfully in global markets.

In short, basic and inescapable economic realities ensure that we Americans have nothing to fear from Beijing’s “industrial policy of everything” – which is a policy that attempts to achieve that which is economically impossible.

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 former Mercatus Center colleague Walker Wright explains how trade promotes peace. Two slices:

While the liberal peace theory remains influential, a growing wave of empirical research over the last three decades suggests that markets may play a bigger role than the ballot box. This shift in consensus toward what’s known as the capitalist peace theory posits that trade openness and economic interdependence are among the primary forces that mitigate war. Of course, scholars continue to debate over how much trade and economic freedom contribute to peace. But liberal peace theorists now include economic interdependence as an essential element within the broader liberal peace project. Economic interdependence s “part of the glue that cements the ‘liberal peace’ together.” As trade has grown worldwide, so has peace.

…..

Over two centuries ago, German philosopher Immanuel Kant wrote, “The spirit of trade cannot coexist with war, and sooner or later this spirit dominates every people. For among all those powers (or means) that belong to a nation, financial power may be the most reliable in forcing nations to pursue the noble cause of peace[.]” Others echoed this sentiment. “PEACE,” Montesquieu argued, “is the natural effect of trade.” In Rights of Man, American revolutionary Thomas Paine described commerce as “a pacific system, operating to unite mankind, by rendering nations, as well as individuals, useful to each other … If commerce were permitted to act to the universal extent it is capable of, it would extirpate the system of war, and produce a revolution in the uncivilized state of governments.”

These philosophers and revolutionaries were correct. In the end, trade steers us away from war and brutality and toward peaceful cooperation. If we care about a future that is richer, freer, and more humane, then keeping markets open and people connected through trade is one of the surest paths to a more peaceful world.

Here’s a short clip, from a talk that I gave for AIER this past Wednesday, on why trade reduces the chances of hot shooting wars.

Inu Manak and Allison Smith describe Trump’s trade ‘policy’ as “self-defeating” and as an “illusion of reciprocity.” Three slices:

But the Trump administration’s approach is not reciprocity at all. It is coercive unilateralism dressed up as reciprocity. The United States has pursued reciprocal trade for the past 90 years, but what Trump is doing breaks from this tradition. Under the threat of tariffs and, in some cases, territorial expansion, the administration has pressured U.S. trading partners to accept unbalanced trade concessions. Washington’s goals are to rebalance trade by tilting the playing field in favor of U.S. firms and producers, to force partners to pay for what Trump perceives as past unfairness, and to realign trade policy with foreign policy goals that preserve U.S. hegemony. Other countries are expected to give a lot but get little in return.

The United States, however, cannot remake the entire international trading system on its own. Any structural change to the international order requires others to buy in to the vision that is being sold. U.S. trading partners may be willing to try to appease Trump in the short term, but they do have other trading options—and they are already starting to pursue alternatives to the United States. Trump will need to offer them a few carrots along with using sticks if he wants these trade arrangements to last. Otherwise, the trust and order that the United States built through decades of careful trade compromises will quickly run out. An “America first” trade policy will leave America behind.

…..

Trump’s version of reciprocity has meant negotiating deals that are unlike traditional U.S. trade agreements. In line with his general ethos of moving fast and breaking things, the deals he has struck have bypassed Congress—even though it holds the constitutional authority to regulate commerce with foreign countries, including setting tariff rates. These agreements also lack neutral enforcement mechanisms, making them less durable and more likely to be seen by trading partners as nonbinding. Although a small number of deals resemble the form of typical trade agreements, with detailed commitments to abide by global trade norms such as regulatory transparency, most are loose frameworks that merely set up space for future dialogue. This means that it is not obvious what compliance looks like, leaving room for the United States to claim a deal was breached and demand retaliation.

The United States is not actually lowering tariffs in these trade deals. Instead, it is offering to reduce tariffs from punitive levels to new baseline rates that Trump set on so-called Liberation Day in April 2025. U.S. trading partners are being asked to give more access to their markets to U.S. firms and to accept more restrictions on their exports to the United States. Although the U.S. Supreme Court ruled that Trump’s emergency tariffs were unconstitutional, the administration is working to find alternate tariff mechanisms to form the basis for the agreements it struck before February 2026.

…..

As Washington abandons reciprocity for coercive unilateralism, the biggest victim may be the United States itself. The administration’s insistence on using tariffs as its primary trade tool will raise costs for U.S. consumers and businesses and antagonize its friends and allies. And despite the bluster from the White House, the strategy has clear limits. The cost of using economic coercion against friends is higher than the value of the new market access that can be won through the administration’s patchwork of deals. When trade deals are truly reciprocal, U.S. partners are willing to provide market access and align their policies with Washington at a relatively low cost. But a coercive approach erodes partners’ domestic support for cooperation with the United States and increases political friction.

The Trump administration’s trade agenda is not only asymmetric; it also fails to meet the moment. Countering China’s economic coercion requires a viable alternative that other countries can get behind. Yet Trump has largely wasted leverage on trading partners that were already willing to come to the table, including Japan, the United Kingdom, and Vietnam, and done little to convince some of the largest markets—Brazil, China, and India—to seriously negotiate. And the United States is losing leverage because its attempt to go it alone on trade has encouraged the rest of the world to cooperate more, not less, giving countries more alternatives to Washington.

GMU Econ alum David Hebert decries the Trump administration’s “endless search for emergency tariff authority.” A slice:

The legal foundation for taxing every import into the US has now rested, at various points in the past year, on a 1977 emergency powers law, a 1974 statute designed for a monetary system that no longer exists, and — if the administration’s next move is what trade lawyers expect — a Depression-era provision that has never once been used to impose actual tariffs in almost a century. At some point, running out of legal justifications is a signal worth heeding.

Reason‘s Eric Boehm continues to write insightfully about Trump’s tariffs punitive taxes on Americans’ purchases of imports. A slice:

Simply put: you can’t make tires without rubber, and it is impossible to buy rubber that isn’t imported—because rubber trees do not grow in the United States. (Unless you count the one at the U.S. Botanic Garden in D.C., but that’s probably not going to produce enough rubber to supply Goodyear’s needs.)

That means American tire companies import rubber from places like Thailand, which has a climate well-suited to growing rubber trees and produces a lot more rubber than its domestic industries can consume. Naturally, Thailand exports a lot of that excess rubber to other parts of the world, including the United States.

However, the Trump administration sees other countries with a surplus of rubber production as a threat to be targeted with tariffs. In March, the Office of the U.S. Trade Representative claimed that Thailand’s “trade surplus in sectors such as…rubber” was grounds for slapping higher tariffs on those imports.

That makes very little economic sense.

“Tariffs on natural rubber, no matter how high, won’t bring rubber-tree plantation jobs to Minnesota or North Carolina, but will raise costs and reduce sales for every U.S. manufacturer of airplane and truck tires, vibration dampers in bridges, specialized medical equipment, and so on,” wrote Ed Gresser, a former assistant U.S. Trade Representative, in a prescient piece published earlier this week by the Progressive Policy Institute, where he is a vice president.

George Will writes about Rep. Don Bacon (R-NE), one of the relatively few serious legislators in today’s Congress; Bacon has had enough and is not seeking re-election. A slice:

In the making of laws, Bacon has occasionally made himself a nuisance to people who deserve to be tormented. As he did in February.

The Republican-controlled House was doing its job as it miserably understands this: tugging its forelock and doing the president’s bidding. The president’s confidence in his arguments for his tariffs can be gauged by his eagerness to squelch debate about them.

The House Republican leadership was determined to pass a gag rule to prevent a debate on ending the “emergency” that supposedly justifies the tariffs. The GOP leadership could not afford to lose even three Republicans. Bacon was one of three recalcitrant.

The White House tried to buy Bacon’s compliance by promising tariff and other special benefits for three businesses in his district. Bacon thought the legality of this was dubious, and its unseemliness obvious.

During hours of pressure, a member of his party’s leadership said, “Don, look me in the eye before you vote ‘no.’” Bacon said: “I did before the vote.” The gag rule having failed, the next day the ungagged House rebuked Trump for his tariffs against Canada.

Raymond Niles makes clear that so-called “perfect competition” is highly imperfect; we denizens of market economies ought to give thanks daily that we are at no risk of experiencing it in practice. [DBx: A few years ago, I wrote similarly.]

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… is from page 71 of Deirdre McCloskey’s forthcoming book, Equality of Permission:

“Gimme,” says the voter, believing in the promises by socialists or New Liberals that her benefit is easily achieved by a little pillaging of scapegoats – the bourgeoisie or the rich or the Jews or the foreigners. “Let us have more goodies at other people’s expense.”

DBx: Yep. Far too many politicians – left, right, and center – promise to give voters stuff that is asserted to be either free or paid for by other people who don’t deserve to have what the government takes from them. And far too many voters swallow this convenient excuse for agreeing to receive goodies from the government.

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In my latest column for AIER I use a personal experience from my childhood to launch a discussion of the ubiquity of competition and the damage done by government regulation. Two slices:

Sometime in the early 1970s, when I was 12 or 13 years old, amazing news swept through my family: Uncle Malcolm was going to fly to a business meeting in Baltimore. I’d never known anyone who flew commercially, so this development struck me as stupendous. And stupendous it was.

To see Uncle Malcolm off from the airport on his exotic journey were my parents, my three siblings and me, my maternal grandparents, and my Uncle Eddie with his wife and two daughters. An entire clan gathered at the airport just to watch Uncle Malcolm board the plane. (This was long before non-passengers were prohibited from going through security.)

I remember it well. It was a nighttime flight. I stood at the airport-terminal window looking out at the nose of the big jetliner that Uncle Malcolm had just boarded, envying him for doing something that I’d never done and had no reason to think that I would ever do. Standing next to me, gazing at the plane, was my Uncle Eddie.

“I hope,” I told him without much real hope, “that one day I’ll get to fly in an airplane.”

“I bet you will one day,” Uncle Eddie replied kindly, although with how much sincerity I cannot say.

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Here’s the view from 30,000 feet. When producers are allowed to compete on all margins, including price, they discover the optimal mix of prices and amenities that best satisfy their customers. When governments obstruct that competition, it gets redirected into changing the quality of goods and services such that the resulting price-quality mixes are less desirable than would be the mixes that emerge without government intervention.

After airlines were deregulated almost 50 years ago, consumers revealed that they wanted lower prices with less quality. And by more recently rejecting the bare service offered by Spirit Airlines, consumers revealed that quality can be so low that even very low prices are insufficient compensation to put up with such low quality. These results emerged from competitive market processes and deserve respect. But alas, just as airline regulation forced American air passengers to buy what they would have preferred not to buy, the government’s continuing itch to override market processes will oblige consumers in the future — whenever such interventions occur — to suffer worse economic outcomes.

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Here’s a letter to the Wall Street Journal.

Editor:

Greg Ip warns that China’s “industrial policy of everything” will leave the “rest of the world in dust” (“Beijing’s ‘Industrial Policy of Everything’ Leaves Rest of the World in the Dust,” May 15).

We’ve seen this movie before. An authoritarian government replaces the allocation of resources by markets with allocation by mandarins. That government boasts that its brilliant central plans will unleash an economic boom that will energize all of its industries and raise them to global dominance. Politicians and pundits in countries with market economies are enchanted by the authoritarian state’s swagger, fine words, and pretty plans; they insist that the only hope for saving their economies from the superpower economy being engineered abroad is for their governments also to suppress free markets and elevate government’s role in the economy.

Yet at the end of every such flick, the governmentalization of the foreign economy is revealed to have produced, not a mighty warrior, but a corrupt, dissolute, and diseased invalid.

If politicians and bureaucrats could reliably outperform markets, China’s economy would have been at peak performance under Mao, India would have enjoyed spectacular economic growth under Nehru, and the Soviet Union would still exist, with the standard of living of its citizens being the highest in the world. We Americans, meanwhile – cursed as we are with our bumbling market economy – would be among the poorest people on earth.

But, of course, reality proved otherwise. Why does Mr. Ip suppose that the conclusion of Pres. Xi’s remake of this tired movie will be different?

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