… is from page 289 of Frank Knight’s January 1948 Philosophical Review paper, “Free Society: Its Basic Nature and Problem,” as this paper is reprinted in Knight’s 1956 collection, On the History and Method of Economics:
The establishment of freedom, rooted in the liberation of the mind from traditional dogma and mythology, enforced by ecclesiastical and political authority, is the greatest revolution of all time or since the dawn of conscious life.
Here’s a letter to a new correspondent.
Mr. Barnett:
Thanks for sharing Oren Cass’s September 4th post in which he argues that Trump’s tariffs are successful. Here are two reactions – one general, the other detailed.
First, no informed free-trader denies the possibility that protectionism can raise domestic manufacturing output, employment, and wages. Therefore, positive movements in these statistics do nothing to discredit the case against protectionism. That case is about the economy as a whole. Tariffs that artificially direct workers, capital, and other resources into manufacturing direct those same workers, capital, and resources out of other productive employments. Cass errs by implying that the rise in total manufacturing output and employment, and in some wages, are evidence of protectionism’s success.
As it happens, since “Liberation Day” (April 2nd, 2025) the average inflation-adjusted wage in the non-farm economy as a whole has been flat, with the average real wage for all production and non-supervisory workers actually falling somewhat.*
Second, while it’s true that manufacturing output is up since “Liberation Day,” Cass too quickly praises protectionism. Indeed, if, as Cass suggests, we should interpret this change in manufacturing output as an effect of trade policy, then protectionism looks pretty bad.
In the 16 months starting in April 2025 through July 2026, manufacturing output rose at an average monthly rate of 0.12%. How does this figure stack up against past performances of manufacturing output, over the same time span, following some notable trade events – events that Cass and other protectionists routinely decry? Answer: Not well.
In the first 16 months (January 1976 through April 1977) of the U.S.’s current 50-year string of annual trade deficits, manufacturing output rose at an average monthly rate of 0.30% (or 2.5 times faster than the rate of growth since “Liberation Day”). In the first 16 months of NAFTA (January 1994 through April 1995), manufacturing output rose at an average monthly rate of 0.34% (or nearly three times faster than the rate of growth since “Liberation Day”). And in the first 16 months (December 2001 through March 2003) of China’s membership in the WTO, manufacturing output rose at an average monthly rate of 0.23% (or almost twice as fast as the rate of growth since “Liberation Day”).**
I concede that it’s child’s play to torture data into humming a desired hymn. But examination of enough appropriate data, over sufficiently long time spans, convincingly reveals that protectionism makes countries poorer while free trade enriches.
The empirical literature here is vast. It includes, but is hardly limited to, James Gwartney, Robert A. Lawson, Ryan Murphy, Matthew D. Mitchell, Horst Feldmann, and Walker Wright, Economic Freedom of the World: 2025 Annual Report; Douglas Irwin’s 2020 Free Trade Under Fire, Arvind Panagariya’s 2019 Free Trade & Prosperity; James Feyrer, “Trade and Income – Exploiting Time Series in Geography,” American Economic Journal: Applied Economics, Vol. 11, October 2019; and Romain Wacziarg and Karen Horn Welch, “Trade Liberalization and Growth: New Evidence,” World Bank Economic Review, Vol. 22, June 2008.
If you correspond also with Oren Cass, I recommend that you ask him to engage with this literature.
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* I asked Claude to do these calculations: https://claude.ai/share/3c279e58-588c-4ce6-a9cc-6397fb35247b
** Calculated by me from these data.
Meanwhile, the administration’s proposal would expand eligibility for the subsidy to millions of married mothers who already choose to stay home. Those families would get the same kind of deadweight spending that went to the 75 percent of EV tax-credit recipients who would have purchased an electric car with or without the subsidy. Millions of other well-off married parents could stop working and reduce their incomes enough to newly qualify for the benefit.
Defenders insist that the proposal would merely repurpose existing spending, not add any more. But it would be impossible to target the new subsidy at only those parents who would otherwise work. If spending truly wouldn’t grow to accommodate new recipients, the change would necessarily redirect benefits from poorer single parents.
…..
The vice president and his allies are doing a motte-and-bailey routine. Among themselves, they openly discuss using state power and taxpayer money to privilege traditional ways of life. Then, when scrutinized by conservatives, they say they are just shifting current spending around. But no, this is a Republican administration seeking to expand the entitlement state so it can influence social outcomes.
Impose a tariff. Businesses warn that costs will rise. Economists explain that tariffs are taxes on imports paid initially by domestic importers. Firms begin adjusting supply chains, absorbing margins or passing some of the additional cost downstream. Then exemptions appear, rates decline, offsets materialize, or entire categories of goods are quietly removed.
And we are asked to believe that the one thing connecting those decisions is not the cost imposed on Americans.
The November 2025 food exemptions are particularly difficult to explain away. The administration removed tariffs from products including coffee and beef amid concerns about grocery affordability. Contemporary reporting explicitly described the move as tariff relief aimed at easing pressure on consumers. But…? No, never mind.
This does not mean every tariff increase produces an immediate, one-for-one increase in retail prices. Exchange rates move. Foreign producers sometimes absorb part of the tax. Importers compress margins. Inventories delay pass-through. Businesses substitute suppliers. Consumers substitute products. The incidence of a tariff can be distributed across several parties and over time.
But none of that rescues the proposition that tariffs somehow make Americans richer by making imported goods more expensive. The repeated reversals demonstrate what should, for a nation owing so much to markets, prices, and property rights, be embarrassingly basic economics. When taxing an imported product begins creating politically uncomfortable consequences, the solution repeatedly turns out to be…taxing it less.
One admirable thing about the president — and I’m being serious here — is that he ran as a tariff man. He was elected on that promise. He loves tariffs. He wanted to impose them. He was very, very clear about that.
Here’s the thing he didn’t do. Not once during the election campaign did he say that the country he wanted to target was Canada. Why?
The idea is absurd. Canada is a longtime friend and ally. We have deeply integrated manufacturing supply chains. It would hurt people in Canada. It would hurt people in the United States. And the president’s political instincts were strong enough that he understood not to run on tariffs against Canada.
Then he won the election. Many people forget that the very first trade policy action of the new Trump administration was a set of tariffs on Mexico, China, and Canada.
These were the so-called fentanyl tariffs. The stated goal was to use access to the American market as leverage to get those countries to stop the flow of fentanyl across their borders. That is fair enough, and the objective is good. There’s one problem, though. Almost no fentanyl came from Canada.
There was almost nothing Canada could do to eliminate fentanyl manufacturing or stop exports of fentanyl, because they basically didn’t have a fentanyl trade to stop in the first place. The stuff was crossing north from the United States about as often as it was crossing south.
So from Canada’s perspective — and from reality’s perspective — this was an arbitrary set of tariffs imposed because of something they hadn’t done. They retaliated with their own tariffs in March and April of 2025. Then the Supreme Court ruled the fentanyl tariffs unconstitutional, they vanished, and the president more or less forgot about Canada.
…..
We are now busily converting that one market into three separate ones. And what we’re spending to do it isn’t the tariff revenue, which is trivial, and it isn’t the 4% of Canadian exports, which they’ll re-route. What we’re spending is Canada’s belief that we are a country worth building a factory next to.
We lose the cluster. We lose the investment that would have come to the border. We lose the cheap parts that made American cars competitive. And we lose the thing that takes generations to build and one weekend to break, which is the assumption that a deal with the United States is a deal.
Bloomberg reports on strengthening ties between Canada and the E.U.
This CNBC piece only further confirms Trump’s complete ignorance of basics facts of international commerce. (HT Scott Lincicome)
When a government exploits a chokepoint, whether Iran holding the Strait of Hormuz or China bringing down the boom on rare earths, it takes a risk. In the short term, Iran or China will achieve asymmetric gains, but over time these returns will diminish. Inventories rise, customers diversify, producers change investment plans, and infrastructure that had been too expensive becomes economical. That’s happening now with China’s hold on critical minerals, and it’s why Beijing’s trading partners are working together more effectively to break that hold.
Looking back, China probably did its trading partners a favor by exploiting the chokepoint it spent decades establishing. Dependence on China for critical minerals has been a national-security vulnerability for those trading partners for decades. We knew that well before China imposed export controls in 2023.
Reason‘s Jacob Sullum tells of growing opposition to Flock cameras.
[C]onsider tariffs, quotas, and other protection against imports. Almost 200 years ago, Alexander Hamilton argued that “infant” industries in the United States should be protected by tariffs so that the growth of those industries would not be stifled by competition from imports. Yet the evidence is clear that import protection is mainly given not to growing infant industries but to what Friedman calls “senile” industries, like steel and shoes. He shows how competition for political influence among special interest groups provides political support for tariffs and other trade restrictions that mainly benefit old declining industries.
DBx: Yep.
I’ll here add one small addition to Becker‘s point. Hamilton argued that in many cases so-called ‘infant-industries’ are best nurtured, not with tariffs, but instead with “bounties” (that is, with subsidies – which Hamilton recognized as having much, although not everything, in common with protective tariffs).
The most obvious example is taxation for purposes of income redistribution. Whatever the merits or demerits of a policy of redistribution, the essence of any such policy is that some people (the net recipients of tax revenues) live partially at the expense of other people (the net payers of tax revenues). Consistent application of the economic logic that powers textbook explanations of externalities leads to the conclusion that government-engineered income redistribution causes too many people to seek such redistribution (chiefly, by exerting less effort than they otherwise would to increase their own earnings), while at the same time causing high-income earners to exert too little effort at earning taxable income.
Absent redistribution, each person would be paid as income an amount closer to the value of what he or she contributes to the market economy — meaning, the market causes each person to internalize the costs and benefits of whatever amount of effort they choose to devote to earning income. But redistribution obstructs this market result; it artificially dims both the personal penalty for not working and the personal reward for working.
Another example of the externalization of internalities is protectionism. Producers’ earnings in competitive markets reflect roughly the value of that product to consumers. When consumers spend their own incomes in whatever peaceful ways they choose, they personally pay the costs and reap the benefits of their choices. Producers that better please consumers are rewarded with higher profits — higher profits voluntarily paid to them by consumers. Markets, in other words, internalize on producers the value of their efforts to please consumers.
Protectionist tariffs and non-tariff barriers, by contrast, externalize this internality. By shrinking consumers’ range of choices, protectionism artificially increases consumer demand for the outputs of protected producers. Protected producers thus earn higher profits without creating more value for consumers. A consequence that belonged inside the producer-consumer relationship has been transferred outside it.
Protected firms free-ride on a portion of their fellow citizens’ incomes — the funds these citizens would otherwise have spent on imports. As a result of protectionism, producers exert less effort than otherwise to please consumers. Far from correcting a market failure, protectionism distorts markets. Protectionism externalizes an internality.
Say socialism and college-educated young people start to dance and cheer. But when you ask them about the specifics of what it would mean, they quickly sour on it as shown in a recent Harvard Caps/Harris poll.
Karl Marx promised a utopia governed by the principle “from each according to his ability, to each according to his needs.” The Democratic Socialists of America has called for an “adequate income for all” and a guaranteed federal job paying a “living wage” to anyone who wants one. But the poll finds that 77% of registered voters under 25 believe their paycheck should be based on the “merit and value of their work.” That belief is even more prevalent among older voters.
Sixty-eight percent of young voters say they want to own their own home. Meanwhile Cea Weaver, Zohran Mamdani’s director of the New York City Mayor’s Office to Protect Tenants, has declared that “private property and . . . especially home ownership is a weapon of white supremacy” and that housing should be regarded as a collective good.
Mr. Mamdani and the DSA platform have also called for “seizing the means of production” and nationalizing all large corporations and essential industries. Claire Valdez, Democratic nominee for New York’s Seventh Congressional District, would “nationalize the airlines.” The mayor plans to establish city-owned grocery stores that he says would “pay no rent and no taxes,” giving them a competitive advantage over ordinary privately owned shops.
All this is out of touch with young voters and how they see their future. Seventy percent of them want to own their own business and 63% see America as the land of opportunity.
Today’s young adults must be the most entrepreneurial socialists in history. What accounts for the divergence between their stated views and the ideology they claim to endorse? Another result may provide a clue. The same poll asked Americans if they have a favorable view of America. For all age groups, 74% answered yes. Only 52% of those under 25 did. Nearly 40% liked China.
Speaking of socialism, here’s Cato’s Tad DeHaven on Trump’s continuing embrace of it.
President Donald Trump’s latest temper tantrum over Canada, including the renaming of Lake Ontario as Lake America after the collapse of trade negotiations, is premised on the claim that “Canada has been ripping off the United States for decades.” At least, that’s what the White House insisted in an August 25 press release about the tariff dispute. But, if that’s true, why are Canadians poorer than Americans and falling further behind?
A new study from Canada’s Fraser Institute points out that while our northern neighbors started the century with high hopes for their economic prospects, the years since have shown them lagging Americans. If Canadians are taking advantage of us, they’re doing a remarkably poor job of it.
“In 1999, inflation-adjusted gross domestic product (GDP) per person in the US was CA$10,766 higher than in Canada. By 2024, that gap had more than doubled to CA$23,757,” write study authors Grady Munro, Jake Fuss, and Joel Emes. “Similarly, in 2010, inflation-adjusted median employment income in the US was CA$6,126 higher than in Canada. By 2024, that gap had increased to CA$8,663.”
The Fraser study notes that since 1999, government-sector employment has been growing faster than private-sector employment in Canada. The opposite has been true in the United States. And while Canadian workers have increased their productivity by 26.7 percent since 1999, they’ve still lost ground as Americans increased productivity by 67.9 percent.
…..
“Despite some early hopes prior to 2014, Canada has made virtually no economic progress relative to its southern neighbour and has instead fallen further behind where it stood at the turn of the century,” the Fraser authors conclude.
Every Labor Day, unions claim responsibility for much of modern America’s cushy living standards. They argue that the eight-hour workday and five-day workweek wouldn’t exist without their valiant efforts against the mighty industrialists. We are supposed to thank unions for minimum wages and workplace safety laws, too, and for banning the scourge of child labor. If not for organized labor, the story goes, we would essentially still be living in the Gilded Age.
The comforts of working in today’s U.S. economy are nothing to scoff at. But to attribute these improvements to labor unions — ignoring the underlying force beneath them all — is to engage in historical revisionism. At best, organized labor ratified improvements in living standards that were already enabled by rising productivity.
It is crucial to remember that mankind’s economic baseline is universal grinding poverty, with life sustained only by subsistence. All improvements in material welfare, from the First Agricultural Revolution onward, must be forged through investment and ingenuity. The Industrial Revolution, the era that unions decry, was an extraordinary advancement in human welfare. Daily economic life has only gotten better since, as free peoples have developed new ways to arrange capital and labor to yield greater wealth for all involved.
Begin with labor hours. Since the 19th century, the number of hours worked per lifetime has more than halved worldwide, while leisure time has increased fivefold. Weekly hours worked by men in the United States have also gradually declined, even as the unionization rate rose and then collapsed. The same is true of American seniors.
The now-standard workweek — five eight-hour days with a two-day weekend — was not a union creation. Rather, it was innovated by Henry Ford at his company’s strictly non-union Highland Park Plant. The productivity revelation that was the assembly line first permitted Ford to give workers one day off a week in 1922, then two days off in 1926. With mass production came the free time needed for mass consumption.
Wages for production workers were rising steadily for decades before the advent of unions. When the first federal minimum wage took effect in the 1930s, at 25 cents an hour, most unskilled workers were earning nearly twice that amount.
As for safety conditions, the rate of workplace fatalities in America has been falling since at least the 1920s, as factories became increasingly automated and more workers shifted into the service sector. When we look at a graph of deaths over time, it’s impossible to tell when federal workplace safety rules were enacted. Child labor was almost nonexistent by the time Congress prohibited it in 1938, since it had plummeted in the prior decades.
Time and again, laws pushed by labor unions were enshrined only after economic growth made them feasible — and after such standards were already being adopted voluntarily. When businesses must compete for employees, they have every incentive to boost productivity and share the proceeds through higher wages and more attractive working conditions.
“The jobs apocalypse is postponed. An AI jobs boom is here.”
Corey DeAngelis continues to expose the dysfunction of government-supplied K-12 “education.”
We study the effects of vast increases in U.S. small business program eligibility standards, which expanded larger firms’ access to support for small businesses. Exploiting quasi-random variation in the timing of these expansions and using administrative Census data, we show that revenues decline for the smallest firms, particularly those that are younger, more productive, and financially constrained. Government procurement contracts also are reallocated to larger firms. Consequently, firm exits increase, wages decline, and patenting falls. These findings highlight the economic consequences of expanding eligibility: by crowding out the smallest firms, resources shift away from high-potential firms, reducing dynamism and innovation.
… is from pages 304-305 of my late, great colleague Walter Williams’s 2015 book, American Contempt for Liberty, which is a collection of many of Walter’s columns and essays; this quotation specifically is from Walter’s January 6th, 2010, syndicated column, “Untrue Beliefs“:
In 1790, farmers were 90 percent of the U.S. labor force. By 1900, only about 41 percent of our labor force was employed in agriculture. By 2008, less than 3 percent of Americans were employed in agriculture. What would you have Congress do in the face of this precipitous loss of agricultural jobs? One thing Congress could do is outlaw all of the technological advances and machinery that have made our farmers the world’s most productive…. U.S. manufacturing has gone through the same kind of labor-saving technological innovation as agriculture. Should we discard that innovation in the name of saving jobs?
Here’s a letter to the Wall Street Journal.
Editor:
Patrick Walsh is right that Alexander Hamilton was more of a protectionist than Andrew Langer made him out to be (Letters, September 7). But this reality doesn’t imply that Hamilton would support Trump’s tariffs. As Phil Gramm and I noted in these pages, Hamilton defended protection largely as a means of helping nascent American manufacturers overcome established European competitors. Because many of Mr. Trump’s tariffs protect mature, and in some cases world-leading, American industries – including steel, automobiles, and pharmaceuticals – it’s illegitimate for Mr. Walsh to leap from Hamilton’s support for infant-industry protection to the conclusion that Mr. Trump’s tariffs are Hamiltonian.
Mr. Walsh, however, is correct on another point – namely, that “Messrs. Trump and Vance, like Hamilton, scorn ideology. They are interested in what Hamilton called the ‘particular situation.’” Sad but true, for a name for people who scorn ideology in order to judge only each “particular situation” is “unprincipled.” Although Mr. Walsh regards this lack of principle in American leaders as a feature to cheer, wiser people recognize it as a bug to fear.
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
The Wall Street Journal‘s Editorial Board reports on Teamsters’ Union violence. A slice:
The Teamsters have a long history of bullying that often becomes violent, and its campaign to organize Amazon workers resulted in a bloody confrontation last week in Riverside, Calif.
The protest at Amazon’s facility has followed a familiar Teamsters playbook. First, the union claimed Amazon workers had signed cards showing support for the union. Then the Teamsters demanded that Amazon bargain with the union, though a secret ballot election was never held and the National Labor Relations Board (NLRB) hadn’t certified the union.
When Amazon refused to bargain, the Teamsters accused the company of committing an unfair labor practice. Last Wednesday the union launched what it called a one-day “unfair labor practice strike” in which labor organizers—most of whom weren’t employed by Amazon—blocked vehicles from entering and exiting the facility.
Amazon says it notified the Riverside County Sheriff’s Department several times throughout the day of “hostile acts by the picketers and blocking the ingress and egress of the site.” Law enforcement declined to respond until people were hurt.
Video footage we’ve seen shows Teamsters blocking a motorcyclist who worked for an Amazon contractor from entering the facility. The worker circled around and tried to bypass their blockade, but in the process knocked down two protesters and crashed on his bike. Teamsters then beat him up as he lay on the ground.
The motorcyclist and the two protesters who were knocked down were hospitalized. It may have been imprudent for the worker to try to circumvent the protesters, but he was trying to make a living by showing up for his job. The Teamsters were denying him that ability, and their blockade made it more likely that someone would get hurt. Yet the union claims it is the victim. Irony alert: The Teamsters claim joining a union improves worker safety, yet their protests are resulting in hazardous work and road conditions.
[DBx: When, to achieve your goal, you must coercively interfere with people voluntarily engaging in commercial activities, your goal is wicked.]
As Americans have fled unions, workers themselves are making more money than ever. The average American worker made $86,977 in wages in 2025. Adjusting for purchasing power, only the average worker in Iceland, Luxembourg or Switzerland made more.
A high union approval rating with a low union membership rate is another case of the disconnect between Americans’ opinions of their own financial situations (pretty good) and their opinions of the economy in general (pretty bad). Americans think unions are a nice idea — for other people. And the gap between what they imagine unions could be and what they actually are does not compel them to sign up to these relics of a bygone economy.
[DBx: Even workers in the bygone past were generally harmed, not helped, by labor unions, for unionized-workers’ win their advantages only by artificially shrinking employment opportunities for other workers – and also, of course, by raising prices of final outputs.]
Charles Cooke warns of misguided nostalgia. A slice:
Consider how common it is at the moment to hear people on both the left and the right talk of a given period within the recent past as if it represented Eden before the Fall. On the left, the period in question might be the New Deal, or any time “before Reagan,” or perhaps any day up to and including the one before Donald Trump became president. On the right, the period might be the 1920s, or the 1950s, or the week before Richard Nixon took the United States off the gold standard. Pick an epoch; the details don’t especially matter. What matters is that, for whatever reason — be it the latest cost of housing or health care or burritos; the existence of billionaires; a sense that there are insufficient opportunities for the young; the decline of religious belief — millions of people have decided that the past was preferable to the present, and those millions of people do not sort into neat left/right groups.
That alone sets this predictor apart from the others. One would expect self-described conservatives to be more prone to nostalgia, and yet polling shows that, in 2026, self-described Democrats are more likely to take a backward glance than self-described Republicans. Asked earlier this year by Pew whether America’s best days were “ahead of us” or “behind us,” only 34 percent of Democrats answered “ahead of us,” compared with 46 percent of Republicans. Historical polling suggests that this gap is a by-product of the incumbent president’s being a Republican and that it will be reversed when a Democrat is next voted into the White House. But this underscores rather than diminishes the point — which is that within both parties, a majority of voters are of the view that modern life is inferior to what preceded it.
This matters, for just as a man who has been given two weeks to live will make profoundly different choices from those of a man who expects to live for another 60 years, so an American who is comfortable with contemporary life — and who expects to remain so — will behave differently than one who is not. Among other things, those two individuals will adopt differing opinions about the integrity of their civic institutions, about the virtue of their regnant culture, about the wisdom of their fellow citizens, and more. One will become habitually pessimistic, the other habitually optimistic. One will be open to change; the other will feel perpetually in danger of losing his national inheritance. One will be more likely than the other to have children, build a business, and otherwise engage with what Edmund Burke described as the “little platoon we belong to in society.”
GMU Econ alum Erik Matson reminds us of the wisdom of John Witherspoon and Pelatiah Webster. [HT my GMU Econ colleague Dan Klein]. A slice:
Witherspoon and Webster supported the ratification of the Constitution against Anti-Federalist dissidents, and they sympathized with Hamilton’s emphasis on the importance of sound money and public credit. But their political–economic visions were ultimately more liberal than his, rooted as they were in a deep appreciation of the beneficial order that obtains when the state concerns itself with enforcing the sacred rules of commutative justice—and relatively little else.
Witherspoon was widely recognized by his colleagues in the Continental Congress for his knowledge in matters pertaining to public finance and economic policy. He was consulted by George Washington about aspects of Washington’s personal finances and frequently by Hamilton and Robert Morris about economic policy. In addition to his clerical and academic obligations, he served on 126 committees in the Continental Congress in the late 1770s and early 1780s, mostly pertaining to public finance.
… is from page 273 of Joseph Epstein’s December 2019 Commentary, “Susan Sontag, Savant-Idiot,” as this essay is reprinted in the 2020 collection, titled Gallimaufry, of some of Epstein’s essays and reviews:
An idiot savant, as is well-known, is a person with serious learning disabilities but gifted in a peculiar and extraordinary way, often mathematically or musically. A savant-idiot, as is not well-known, since I have only just now coined the phrase, is a person who is learned, brainy, even brilliant, but gets everything important wrong.
DBx: The modern world has quite a few savant-idiots.
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