Tweet

… is from page 246 of Samuel Gregg’s excellent hot-off-the-press book, The Civilization of Commerce:

One feature of commercial society is that it provides many people with more space for acting and making choices freely about what ends they decide to pursue – at least compared to previous social arrangements. But this liberty goes along with greater interdependence on others; thus, far from encouraging radical individualism, commercial civilization demonstrates that we are intrinsically social beings.

Tweet

… is this recent Facebook post by Sean Malone:

It’s truly insane how many people’s entire political viewpoint is centered around self-righteous nonsense built entirely around strawmen & caricatures of their — overwhelmingly imaginary — opponents.

Tweet

GMU Econ alum Julia Cartwright is no fan of Mariana Mazzucato’s latest book. Two slices:

Something strange has been happening on the American right. A movement that spent the Reagan years quoting Friedrich Hayek now quotes industrial-policy memos with the enthusiasm Bernie Sanders reserves for Scandinavian tax brackets. Tariffs are statesmanship again; the state’s picking industrial winners is “strategic.” Meanwhile the left has rediscovered “the common good” as a rebrand of the dirigisme it never abandoned. Both camps agree on a diagnosis: Capitalism, left to itself, produced shuttered factories, BlackRock landlords, and a financial sector that exists mainly for itself. Both are right that something has gone wrong, and both are wrong about what it is.

What they’re describing, almost without exception, isn’t the failure of the free market. The state’s fingerprints are all over the scene of the crime, which features all kinds of interventions, from bailouts and occupational licensing to a tax code written by lobbyists for the companies that are lobbying the state. The left’s and the right’s misdiagnosis has led each side to prescribe more cronyism dressed up as benevolent planning. That confusion is the terrain Mariana Mazzucato claims with her new book, The Common Good Economy.

…..

The book’s opening chapters survey roughly 25 centuries of thought on “the good.” There are Plato’s philosopher-kings, Thomas Aquinas’s natural law, John Rawls’s veil of ignorance, and the communitarian critiques of Michael Sandel and Alasdair MacIntyre. All of it serves a single argument. Mainstream economics, Mazzucato says, “treats humans as isolated agents and markets as neutral mechanisms,” reactively patching market failures rather than pursuing collective goals. This is the book’s load-bearing wall, and it’s paper-thin. Economics studies individual decision-making because that’s the level at which decisions are made. This is not because economists are hostile to community but because they recognize that aggregate outcomes are the sum of millions of individual actions in response to prices, incentives, and information that not one person possesses in full. It is the same insight behind Leonard Read’s famous example: No single person on earth knows how to make a pencil completely, and yet pencils are being made by the billions. Read thereby makes a methodological claim about how strangers coordinate without a planner, not a moral claim about what’s good.

Mazzucato’s framing therefore amounts to faulting nature. But economics is a positive science that describes how scarce resources are allocated, not a normative one that certifies outcomes as virtuous or vicious. Nor does Mazzucato pause on the literally impossible problem lurking beneath her talk of “co-creation” and collective goal-setting. Nobel laureate Kenneth Arrow proved mathematically that no voting system, committee process, or method of collective deliberation can consistently aggregate everyone’s preferences into a single decision. “The common good” isn’t a destination that Mazzucato’s compass can locate. That she relitigates the individual-versus-collective distinction for three chapters without once seriously engaging the socialist-calculation debate — the argument decisively won by Hayek and Ludwig von Mises a century ago, about why no central planner can replicate the information that a price system aggregates from millions of dispersed decisions — suggests that the author’s straw man isn’t an oversight but a central feature of her thought.

From this shoddy premise, the remainder of the argument follows naturally. Mazzucato assumes that economics has little to say about coordination, incentives, or the unintended consequences of well-meaning government intervention. Each of her prescriptions proceeds as if public-choice theory didn’t exist. But this branch of economics, which applies to public policy the same assumption of self-interest that economists use to study markets, predicts that voters, politicians, and bureaucrats respond to incentives just as everyone else does. Mazzucato cites public-choice scholars James Buchanan and Gordon Tullock and defines “government failure” reasonably well but then ignores the concept over the next 200 pages. She envisions government as “an active shaper of markets” and a “public investor of first resort” that sets “conditionalities” on the firms it funds. She never asks what happens when state agencies are staffed with politically accountable humans who respond to incentives, get lobbied, and eventually see those agencies captured by the industries they’re meant to direct. She diagnoses regulatory capture as a market problem. To address it, she prescribes the exact mechanism — discretionary state power over capital allocation — that produces it.

Mazzucato is at her least convincing on business and finance. She revives Milton Friedman’s shareholder-value essay from 1970 as the villain of her story but never grapples with the mechanism that Friedman described: Profit, under competition, is a signal that a firm has created more value than it has consumed, and loss disciplines the firms that don’t. Mazzucato writes as if every dollar of profit is extracted rather than earned. She considers none of the people whom a profitable company makes better off: employees with paychecks, shareholders (including pension funds that hold ordinary people’s retirement savings), and customers who voluntarily hand over money for something they value more than the cash.

My intrepid Mercatus Center colleague, Veronique de Rugy, talks with Pete Earle and GMU Econ alums Julia Cartwright and Paul Mueller about wealth taxes.

“Trump wants to force data centers to ‘make their own electricity.’ Deregulation would work better” – so explains Reason‘s Josh Pauzé.

Arnold Kling explains why he thinks that “measures of GDP understate the difference between life with and without indoor plumbing.”

The Cato Institute has released its new report titled “Freedom in the 50 States.”

Phil Magness tweets:

Since the White House is now plagiarizing Oren Cass’s stupid chart, here is the corrected version.

And Scott Lincicome adds:

And just a reminder: the job/output gains are concentrated IN THE INDUSTRIES WITH THE LEAST TARIFF PROTECTION.

Tweet

… is from page 30 of Israel Kirzner’s 1985 volume, Discovery and the Capitalist Process [original emphasis]:

What is important about the market economy is that unexploited opportunities for reallocating resources from one (low market valued) use to another of higher value offer the opportunity for pure entrepreneurial gain. A misallocation of resources occurs because, so far, market participants have not noticed the price discrepancy involved. This price discrepancy presents itself as an opportunity to be exploited by its discoverer. The most impressive aspect of the market system is the tendency for such opportunities to be discovered.

Tweet

Here’s a letter to a new correspondent.

Mr. Dimopoulos:

Thanks for your email in response to a post in which I point out that persons who offer to sell nothing to natural-disaster victims are, economically speaking, “price gougers” no less than are the merchants who actually sell goods and services at unusually high prices.

You write: “Price gouging is the actual charging of unconscionably high prices…. People who don’t sell anything don’t charge those prices and aren’t guilty of price gouging.”

With respect, I disagree.

Suppose a hurricane hits New Orleans and, immediately afterwards, Alphonse (from Houston) drives into Mississippi and Alabama to buy tanks of propane and, upon hauling these tanks to New Orleans, sells them there at prices four times higher than before the hurricane. Gaston (also from Houston) remains – unlike Alphonse – comfortably at home doing nothing but accusing Alphonse of “price gouging.”

If there’s a post-hurricane price of propane tanks high enough to induce Gaston also to drive to Mississippi and Alabama to purchase propane tanks, haul these to New Orleans, and sell them, then this reality proves that Gaston is an even ‘worse’ price-gouger than Alphonse. Gaston doesn’t exert the effort to supply desperate New Orleanians with propane only because the price of propane isn’t high enough for him to do so, although it is high enough to induce Alphonse to do so.

In other words, Gaston demands a higher price than does Alphonse to induce him to sell propane. And yet most people – likely including Gaston – pour scorn on Alphonse without putting any blame on Gaston, despite Alphonse’s willingness to sell propane at a price lower than Gaston would ask.

Of course, because Gaston sells nothing, he isn’t literally a “price gouger” as legislation defines this term. But this semantic distinction does nothing to justify the moral condemnation of Alphonse. If you insist on passing moral judgments based upon what people commercially choose to do and not to do, surely Gaston’s offense is worse than Alphonse’s.

Now you might wish to change the example by assuming that Gaston refuses to sell propane at a high price simply because he believes that doing so is immoral. You and Gaston are entitled to your values, but it remains true that Alphonse does far more than Gaston to relieve the hurricane-victims’ suffering.

I’d have more sympathy for the Gastons of the world if they expressed their disapproval of the Alphonses, not by pontificating against the Alphonses, but instead by themselves accumulating inventories of high-demand goods, hauling these to disaster areas, and either giving them away or selling them at prices close to the prices they paid for these goods. Such generous action would indeed be applause-worthy: it would help relieve human suffering by putting more goods into the hands of disaster victims and by lowering the prices that the Alphonses of the world can fetch for their goods.

I have little patience for individuals who reject economic reasoning in order to enjoy the cheap emotional thrill of expressing moral outrage at phenomena they don’t understand. When natural disasters strike, many innocent people are suddenly burdened with desperate material needs that can be met only by marshaling the cooperation of countless strangers.

It’s childish to insist that charitable impulses or public services should be sufficient to elicit the cooperation of enough strangers to relieve all of these burdens at no unusually high cost to the victims. We all wish it were so. But it isn’t. To then tar those individuals who actually do help to relieve burdens, if only at premium prices, with the label “price gougers” is as hypocritical as it is counterproductive.

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

Tweet

George Will makes a strong case that the Fourth amendment protects against warrantless searches of people’s smartphones. A slice:

In the simmering American crisis before 1776, Britain’s colonial governments relied on informers to help them enforce provocative laws restricting the colonists’ economic rights. Those governments also used “writs of assistance,” which empowered customs officials to search buildings for smuggled goods. These search warrants were not limited to particular times and places, and could be issued without any specified suspicion of illegal activity.

In 1791, lingering resentment of writs of assistance resulted in the Bill of Rights, including the Fourth Amendment. It guarantees a right “of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures.”

So, why do the tens of millions of smartphone-carrying travelers who enter the United States each year not have a reasonable expectation of privacy regarding their phones? What reasonable reading of the text and history of the Fourth Amendment exempts border agents from its strictures? What permits them to examine travelers’ contact lists, call histories, messages, voicemails, emails and photographs?

Also writing about unlawful ‘law enforcement’ is Autumn Billings.

The Wall Street Journal‘s Matthew Hennessey is right that ordinary Americans are much more prosperous than they – and many non-Americans – realize. A slice:

The Brits themselves don’t seem to see it. When asked to imagine how they’d fit into the 50-state U.S. economic hierarchy, they rank themselves in the top 10. That is so far off the mark as to qualify as delusional. The U.S. contains within itself more than four dozen economic statelets that are more productive per-capita than the place that once produced Rolls-Royce, the Beatles, Harry Potter and my No. 1 guy, Daniel Day-Lewis.

Mississippi drinks their milkshake.

Over the summer, Americans got a huge kick out of the European soccer fans who expressed amazement at the abundance they encountered while here for the World Cup. It wasn’t only our material wealth that dazzled, but our kindness and generosity. Somehow these visitors landed on our shores thinking the entire country was at daggers drawn over politics—that American society is a roiling mess of racial resentment and economic inequality.

Gee, I wonder where they got that impression?

Americans are also susceptible to misimpressions. Many Americans have convinced themselves they are living in a stagnant, unjust hellhole. They have trouble accepting what visiting Europeans can clearly see. Americans have more, give more, can do more, and live better than anyone in history.

You should stop complaining and thank your lucky stars you were born in the U.S. of A. Things could be so much worse.

The Editorial Board of the Washington Post continues to decry Trump’s tariffs punitive taxes on Americans’ purchases of imports. A slice:

One of the latest victims of U.S. tariffs is a third-generation family business in New Jersey. The Gellert Global Group imports Canadian cheeses, and the food supplier says it’s facing $40 million in additional annual costs after President Donald Trump slapped a 50 percent import tax on dairy products this summer as part of his feud with Canadian Prime Minister Mark Carney.

The company’s lawsuit this week challenging the legal basis for the tariffs tees up another showdown over free trade. In February, the Supreme Court decided 6-3 that Trump lacked authority under a 1977 emergency powers law to impose his “Liberation Day” tariffs. Almost immediately, Trump imposed similar duties under Section 122 of the 1974 Trade Act. The U.S. Court of International Trade struck those down.

After that, administration officials apparently dug through dusty filing cabinets in search of new justifications. In July, Trump invoked a 96-year-old provision buried inside one of the more atrocious pieces of legislation in American history: the Smoot-Hawley Tariff Act. That 1930 law deepened the Great Depression and has become synonymous with the folly of protectionism. Raising tariffs to help domestic producers prompted other countries to retaliate, causing a collapse in U.S. exports.

The laws of economics are unchanged. A tariff is a tax on importing something, and American buyers pay it. Tariffs protect politically favored producers by forcing everyone else to pay more: manufacturers buying inputs, retailers stocking shelves and families shopping for groceries.

GMU Econ alum Dave Hebert corrects Oren Cass. A slice:

So what have been the accomplishments over the past two years in the steel industry? For starters, the producer price index for steel mill products has jumped 48.6 percent since Trump took office. Cleveland-Cliffs’ latest quarterly results show improved profitability and higher shipments. Those are meaningful improvements for the company, but they are hardly surprising. When steel buyers have fewer options, the remaining sellers get more orders and can charge higher prices.

Still, higher profits for a protected producer receiving a $500 million subsidy are woefully insufficient evidence that the country is better off as a whole. For that, we need to look at people in downstream industries who are buying the now more expensive steel.

The domestic auto industry was positioned as a showcase for tariffs. As users of steel, particularly the steel products made in Middletown, their experiences matter for an overall assessment. The results have not been good. Nationally, motor vehicles and parts employment has fallen by about 13,000 jobs since Trump took office. In Michigan, a key state in the upcoming midterms the president has repeatedly promised his tariffs would help, has shed 2,600 jobs over the year ending in August. Automation, vehicle demand, canceled EV programs, and model turnover all play a role in this. Still, higher prices for steel products and longer lead times clearly cannot be helping the situation.

Meanwhile, politics worked exactly the way we would expect it to. Ohio’s congressional delegation wrote a letter to the Department of Energy urging them to keep the award alive. Vice President JD Vance, himself a Middletown native, announced the deal in his hometown. A small, well-organized group got a $500 million subsidy while the costs have been spread across taxpayers and steel buyers.

Tad DeHaven keeps us updated on the rising number of private companies in which the U.S. government now holds equity stakes.

Jane Shaw Stroup tells the sorry tale of how special-interest politics is harming U.S. agriculture and conservation. A slice:

The idea of marrying government-paid conservation with government reduction of farmland started as something of a subterfuge. In 1933, as part of the Roosevelt administration’s effort to prop up falling crop prices, Congress enacted the Agricultural Adjustment Act (AAA). This was the infamous law that led to killing over six million piglets and sows, causing public outrage.

The AAA raised prices. But three years later, the Supreme Court struck down the Agricultural Adjustment Act, finding that its tax-and-subsidy scheme improperly allowed the federal government into agricultural regulation reserved to the states by the Tenth Amendment. (That decision has never been formally overturned, but its restrictions on the role of the government have disappeared.)

Just two months later, the FDR administration came up with another law, the Soil Conservation and Domestic Allotment Act (SCDAA), building on the recently created Soil Conservation Service (now called the Natural Resources Conservation Service). The new law justified controls on crop production to protect the soil and to curb erosion. “The goal was still to raise prices by reducing surplus crops,” explains historian Chandler Hansen, “but now it had the added benefit of implementing conservation practices to improve the health of the land.”

So, the USDA’s early conservation efforts were primarily to get around a stubborn Supreme Court. To be sure, the Depression and the Dust Bowl were wreaking havoc in farm country. But the acceptability of  conservation provided cover for the farmers’ more pressing issue of holding up prices. According to Erik Lichtenberg of the American Enterprise Institute, the CRP is still an “afterthought.” Commenting on the CRP and a smaller conservation program (called EQIP), he recently wrote: “But they serve that function [environmental protection] only to the extent that it coincides with their main goals of protecting agriculture’s natural resource base and supplementing farmers’ incomes.”

Available for free is Jason Furman’s Econvitals.org.

Tweet

… is from page 29 of Thomas Sowell’s February 7th, 2000, column titled “Perennial Economic Fallacies,” as this column is reprinted in Sowell’s 2002 collection, Controversial Essays:

Despite desperate efforts of activists to keep “hunger in America” alive as an issue by manipulating numbers, actual examinations of flesh and blood people show no nutritional differences between people in different income brackets. In contrast to the gaunt and undernourished poor of other times and places, Americans in the lower income brackets today are slightly more likely to be overweight than is the rest of the population.

Tweet

Here’s a letter to a Substack commenter.

Mr. Calamitous:

You’re unhappy with economists’ defense of so-called “price-gouging,” which is the practice of charging (and paying!) unusually high prices in the aftermath of natural disasters and wars. Specifically, you write:

Your example with overcharging for, say, water when there’s been an earthquake is not good for people, it’s cruel. There are times when charity and public service are the proper response, not markets. Markets are a tool we can use in some situations, not a magic wand. The lack of awareness of this is what makes libertarians seem aloof and a little ridiculous.

With respect, I disagree.

First of all, these high prices are not “overcharging.” They reflect the underlying material reality that supplies have suddenly been much-reduced while, simultaneously, demands have suddenly been much-increased. The substantial reduction in supply relative to demand is a reality that raises the market value of each unit of the good that is available. This market value is what it is; a government prohibition of “price gouging” prevents the market from accurately reporting to the world this economic truth. Outlawing “price gouging” is akin to outlawing meteorologists from accurately reporting on the formation and path of hurricanes.

Floridians and Louisianans might for the moment feel better being told that skies will be sunny and winds calm, but because such misinformation prevents them from taking appropriate measures, they’ll regret the lies fed to them when the storms strike.

And so it is with high prices. Prices kept artificially low ‘lie’ to consumers and to suppliers. Buyers fortunate to be near available supplies (or who have family or political connections with suppliers) will over-consume. Worse, suppliers will get neither the information nor incentive necessary to encourage them to take extra steps to bring more supplies into the devastated areas.

You write that such problems should instead be handled by “charity and public services.” Maybe. But the very fact that prices rise to levels that you find objectionable implies that charity and public services aren’t doing the job.

I’ve a question for you. Do you, whenever a natural disaster strikes somewhere in the continental U.S., always take several days off of your job, rent a flat-bed truck, fill it with the likes of propane, bottled water, plywood, and blankets, and then drive that truck to disaster areas and either donate these supplies or sell them at the prices you paid for them?

I’m guessing not.

Now, suppose someone offered to pay you, each time a natural disaster strikes, $5 million to take five days off of work in order for you to rush needed supplies to disaster areas. Would you take this job offer? I’m guessing so – which means that you, sir, are a price gouger. The only difference between you and the “price gougers” who you criticize is that the prices they charge to help relieve the suffering of disaster victims are lower than the prices you charge.

Now I don’t hold against you your inaction induced by the failure of buyers to meet the exorbitant prices you charge. Most people – including me – don’t do much to help rush supplies to disaster victims. But you should stop criticizing the actions of those suppliers who you and others unjustly tar as “price gougers.”

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

Tweet

My intrepid Mercatus Center colleague, Veronique de Rugy, warns Californians to reject Gabriel Zucman’s – and other ‘progressives” – demand for a wealth tax. A slice:

I’ve written plenty about why wealth taxes are economically destructive, administratively nightmarish, and unlikely to achieve anything close to what their advocates promise. But Zucman’s prescription is wrong for a more fundamental reason, as his (and my) native country shows: Raising taxes to fuel ever-larger demands for government spending is a recipe for disaster.

National Review‘s Andrew Stuttaford rightly describes the wealth tax endorsed by Gabriel Zucman as “morally reprehensible” and “economically destructive.” A slice:

Unsurprisingly, Zucman is unhappy about an analysis of the tax’s likely effect by Hoover Institution economists Joshua Rauh and Benjamin Jaros. Proposition 40’s proponents claim that the tax will raise $100 billion. Rauh and Jaros argue that, far from raising that sum, such a tax would end up costing the state tens of billions of dollars. To put it simply (and before considering other negative consequences), that is because the tax would drive billionaires (and the taxes they pay) out of the state. According to the Wall Street Journal, it is already doing so:

Seven billionaires with $539.9 billion in wealth moved out of California between the initiative’s filing last autumn and the date at which residency would be determined for purposes of assessing the tax (Jan. 1, 2026), according to public reports. That means nearly 30% of Prop. 40’s estimated $1.9 trillion potential tax base has already disappeared.

This has not stopped Zucman from claiming that California’s billionaires will stay put. Included in a series of tweets he has written attacking the Hoover duo’s paper was this:

Why would billionaires permanently leave California in response to a one-time tax owed if they lived there on January 1, 2026? It would only make sense for them to leave if the tax becomes annual.

That’s (a bit) like saying that people who have already been burgled have no reason to lock the door to their homes.

Here are Arnold Kling’s thoughts on today’s rioting in France.

Also writing wisely about the rioting in France – and the cluelessness of some alleged “economists,” notably Thomas Piketty about this rioting – is Jonah Goldberg. A slice:

The most obvious answer to France’s problems is economic growth — much easier said than done, of course. The reason that’s so hard for France isn’t because the government is “unresponsive” to the people and their concerns, it’s because it’s too responsive. For decades, the French have demanded the economic policies that got them into this mess, and the government appeased them.

GMU alums Phil Magness and Dave Hebert expose the weakness of arguments for industrial policy.

This extended period of protectionist infancy suggests that the argument needs a new name. We propose the “Peter Pan industry argument” for companies that never grow up because tariffs make sure they never have to.

The question tariff advocates rarely ask is: Why do some American producers have higher costs than foreign rivals even in the face of lower-cost foreign competition? The answer comes down to specific rules and choices within particular firms and industries. Tariffs, and protectionism in general, address none of these. No industry illustrates this like steel, but it is far from the only one.

Scott Lincicome, sharing news from to an Axios report, tweets:

toldja: “the [manufacturing] recovery is being powered by industries at the forefront of the AI and energy boom while the traditional factory sector gets left behind”

The growing mfg industries are ALSO among the least tariff-protected.

The Washington Post‘s Editorial Board makes the case for letting “private capital determine how many data centers America needs.” A slice:

But the political movement to slow down or block the growth of data centers could have adverse consequences for the entire economy. By some estimates, AI-related goods accounted for as much as three-quarters of all global trade growth in the first quarter of 2026 and upward of a third of U.S. economic growth.

Financial risk does not diminish the structural utility of technological advances. Many railroads failed, but the track remained. Ditto for companies in the 1990s that laid fiber-optic cable, which continues to generate value.

If CoreWeave has borrowed too much, creditors and shareholders will bear the consequences. If Microsoft or Meta wants another gigawatt of electricity, they should pay the cost of producing and transmitting it. But neither investors nor consumers benefit when zoning boards, permitting regimes and utility bottlenecks prevent otherwise economically viable projects from being built.

David Henderson recounts a tale told by his late professor, George Hilton.