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… is from page 327 of the late Max Corden’s 1974 book, Trade Policy and Economic Welfare:

Trade makes new goods available to a country and so, it would appear, changes tastes and expands wants. In fact there is nothing analytically new here. The essential nature of the static gains from trade is that trade widens choice by presenting a country with a consumption-possibility frontier that differs from the closed economy one. The country can still choose the closed economy bundle of goods, but it can now choose from many more bundles than it was able to in the closed economy. If it is argued that the changes in tastes are undesirable, it is implied that the opening or expansion of trade may have adverse effects in terms of some kind of social welfare function that does not accept the primacy of individual choices.

DBx: Yes.

You show me a protectionist and I’ll show you someone who is arrogant. I’ll show you someone who believes either that he or she has tastes so superior to those of the bulk of most fellow citizens that he or she is entitled to impose his or her tastes on society, or that he or she somehow can divine knowledge, unavailable to others, about how to allocate resources in ways that will outperform the market at satisfying fellow-citizens’ tastes.

…..

Pictured here is W. Max Corden (1927-2023).

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Here’s a letter to the Wall Street Journal.

Editor:

You report that Bill Gates “issued a stark warning about AI’s risks to employment and the human condition” (“Three Takeaways From Bill Gates’s 5,784-Word Warning on AI: ‘There Is No Plan’,” August 26). He complains about AI that “we are not preparing for it,” for he doesn’t “see evidence that leaders, experts and communities are confronting the challenges adequately.” And to slow the adoption of AI, Mr. Gates wants to tax AI tokens and bots.

A far more appropriate warning is against the hubris of Mr. Gates. Because he personally cannot imagine how people free of government coercion will creatively experiment and discover ways of dealing with economic change brought on by AI, he arrogantly presumes that such experimentation and discovery won’t occur. His poor imagination combines with his apparent ignorance of economic history – a history replete with examples of individuals in free societies anticipating challenges and meeting these in ways that politicians and bureaucrats could not possibly match – to cause him to embrace the ‘solution’ beloved by autocrats and tyrants: collective manipulation and management of the economy.

Almost all of what the late Nobel laureate Oliver Williamson called “the economic institutions of capitalism”* emerged through decentralized processes of trial and error in competitive markets – venues in which free individuals, with local knowledge, cooperate with each other to confront problems with nuance, fullness, and creativity that are utterly unattainable by the heavy hand of the state.

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

* Oliver E. Williamson, The Economic Institutions of Capitalism (New York: The Free Press, 1985).

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Trump and other protectionists – left, center, and right – should pause to consider that their favored restriction of economic liberty is one that was also favored by Chairman Mao. Here’s a slice from an excellent new essay by the Canadian-American economist Pierre Lemieux:

Unilateral free trade is not a fantasy. In the middle of the 19th century, the British government basically declared it. Another famous example, closer to us in time, is Hong Kong, whose government, led by British administrators, levied no import tariffs after World War II, generating fast growth even as many people in neighbouring China were starving — literally starving — under Mao Zedong. Both China and Hong Kong started from dire poverty but in 1996, the year before the handover of the territory to the Chinese state, per capita income in Hong Kong was 96 per cent of the U.S. level, while China was still at only eight per cent. (The number for China is now about 30 per cent.)

As Mao’s Selected Works confirm, he — and the Chinese Communist Party with him — thought foreign trade was an instrument of subjugation and tariffs were necessary for Chinese development.

Scott Lincicome shares this line from a recent report: “Trump says the US doesn’t need Canada. The economy says otherwise.”

Garland S. Tucker III tells of how John W. Davis helped to thwart Harry Truman’s attempt to seize U.S. steel mills.

GMU Econ alum Adam Michel explains that taxing the rich can’t close the federal deficit.

Patrice Onwuka offers an inspiring warning of the false promises of the socialism now ascendant in the U.S. Two slices:

I never get tired of only-in-America stories. My belief in the promise of the United States is endlessly renewed by the rich experiences of diverse people who moved to this nation for safety, freedom and opportunity. That’s what makes the socialist movement now surging through the Democratic Party so distressing: It challenges the very ethos that drew my family here.

Socialist candidates running on anti-capitalist sentiment are surging in Democratic primary voting this election season. They oppose the very thing that carried so many families to these shores: the idea that a better life is achievable through your own discipline and effort. This truth about America serves as a beacon of hope to the rest of the world, especially in places where cronyism and corruption reign.

But if we are not careful, the Zohran Mamdani-AOC-Bernie Sanders socialist agenda will snuff that light out.

Forty-one years ago, my family stepped off a plane in Washington, D.C. We left behind life on a tiny British colony in the Caribbean to start over in the U.S.

Montserrat, our previous home, is a 40-square-mile island with an active volcano. We settled in Boston, trading lush green hills, tropical fruit trees, black sand beaches and a slow pace of life for the hustle and bustle of a gritty urban city.

Carrying just a few suitcases, my parents brought their two children to America to give us a better future.
We didn’t live in the multimillion-dollar brownstones of Beacon Hill but in the Dorchester hood surrounded by gang violence, drugs and poverty. Yet those things never infected us. My parents taught us to rise above our circumstances and comport ourselves with dignity.

They also modeled faith and a strong work ethic, laboring at menial, entry-level jobs without complaint. Their belief in delayed gratification paid off when they saved enough to buy a fixer-upper in a better neighborhood on the outskirts of the city.

Importantly, my parents rejected government dependency. During the immigration application process, they had to prove their ability to support their family. Even during hard times, they never sought a penny of public support.

…..

After the joy of America’s 250th anniversary recedes, we must redouble our efforts to educate the populace on the first principles of the capitalist system that make the American Dream possible — property rights, the profit motive, competition and free voluntary exchange — to inoculate our country against the folly of socialism.

Because the government does not — and should not — own your home, your business, your labor, your money or your dreams.

Tosin Akintola is right: “The backlash against data centers is bipartisan, nationwide, and wrong.”

Also right is John Puri: “The notion that data centers are guzzling the nation’s reservoirs is, to put it softly, a fiction.” Two slices:

Based on the most recent figures, data centers consume 17.4 billion gallons of water each year. That sounds like an enormous amount, until you realize the nation consumes tens of trillions of gallons. Even including data centers’ indirect water consumption via the electricity generation needed to power them, they account for less than 1 percent of the country’s total water consumption. Data centers use less water than the nation’s golf courses or California’s almond industry.

…..

Ignore the water demagoguery. Halting the construction of data centers won’t refill the Colorado River or free up critical supplies for Western towns and cities. The only thing that can is a shift away from economically inefficient irrigation, which is best facilitated by fluid markets.

The Editorial Board of the Wall Street Journal makes clear – with evidence from Texas – that rich families are not the principal beneficiaries of school choice. A slice:

‘Vouchers are welfare for the wealthy,” Texas Senate candidate James Talarico said last year, as state lawmakers were on the verge of passing their first law for private-school choice. Now that program is launching, and official statistics show Texas vouchers are no such thing.

More than 85,000 students from 895 school districts have confirmed they’ll use a state-funded scholarship toward private school or home-school expenses in the coming year, according to a report this month by Texas Comptroller Don Huffines. Some 68,000, or 80%, are in households making 200% or less of the federal poverty level. That’s $66,000 for a family of four.

Another 17,300 students are in households between 200% and 500% of the poverty threshold, meaning no more than $165,000 for a family of four. More than 20,000 students, or about 25%, also have a disability. This outcome is by design: The law gives priority to children with disabilities and lower incomes, and a $1 billion funding cap means the program won’t reach other tiers of applicants.

George Will remembers and admires the memorable and admirable Dolly Parton. A slice:

“Once Dolly climbed over a fence and came down hard on something poking through the dirt: the sharp cutting blade of a plow. She nearly severed her toes.” Was she taken to a nearby hospital? No, there wasn’t one. “As Dolly’s older brothers and father held her down, her mother poured kerosene into the wound, packed it in cornmeal, and sewed up the wound with a quilting needle.”

Her family knew the old story of a cheerful preacher saying to a hardscrabble farmer, “This is a right nice place you and Lord have here,” and the farmer replying, “You should have seen the som’bitch when the Lord had it hisself.” Young Dolly was steeped in the ethic of self-reliance.

She was a savvy businesswoman even when getting started in Nashville’s music industry, which was not a lagoon of advanced thinking about the emancipation of women. In 1974, she was 28 and starstruck when Elvis Presley expressed interest in meeting her and recording “I Will Always Love You,” which she had written. But when Presley’s management insisted on at least half the rights to the song, she refused, the meeting was off, and she never met — never again wanted to meet — Elvis. But Ackmann reports that Parton said keeping the copyright to that one song made her enough money — perhaps $10 million — she could have bought Graceland, Elvis’s Memphis home.

Also remembering Dolly Parton is Reason‘s Billy Binion, who writes that she was “grounded in a reverence for the responsibility that comes with personal freedom and individuality. “I don’t want to be anybody else. I’m not responsible for anybody else,” she told CBS in 2023. “But I’m responsible for me.”

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… is from page 255 of Todd Buchholz’s 1995 volume, From Here to Economy:

Before the 1800s, most people in Europe lived as they had in Roman times, with simple agrarian methods leaving their lives at the mercy of droughts and floods. The rise of industrial capabilities permitted incomes to double in just a few decades, a startling development never seen in human history.

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Here’s a letter to the Washington Post.

Editor:

The conclusion of Ramesh Ponnuru’s otherwise excellent exposé of J.D. Vance’s poor understanding of the U.S. dollar’s role as global reserve currency includes a small misstep (“JD Vance vs. King Dollar, revisited,” August 25). Mr. Ponnuru writes there that “lower budget and trade deficits, lower taxes, more manufacturing jobs, cheaper goods and services: These are all appealing but can’t be had simultaneously.”

He’s correct that these outcomes can’t be had simultaneously. He’s correct also that lower budget deficits, lower taxes, and cheaper goods and services are desirable. But he’s incorrect to suggest that lower trade deficits and more manufacturing jobs are necessarily desirable.

U.S. trade deficits are the counterpart of net capital inflows; they reflect the U.S. economy’s unusually great appeal as a destination for investment capital from around the world. Therefore, lower trade deficits brought about by reducing this appeal would be an outcome to jeer rather than to cheer. Similarly, any increase in American manufacturing jobs made possible by tariffs or subsidies that destroy higher-paying American jobs in the roughly 90 percent of the U.S. economy that’s not manufacturing would also be worthy, not of commendation, but of condemnation.

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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This letter was sent ten days ago to the New York Times; it was not published there.

Editor:

Trump administration trade official Peter Navarro’s attempt to justify the White House’s crackdown on transshipments fails on several counts (“It Was a Great Scam While It Lasted,” August 13). First, these transshipments are the inevitable result of a trade regime – such as Trump’s – that, by rejecting the largely uniform tariffs that arise under a policy of most-favored-nation status, imposes wildly different tariff rates across different countries.

Second, while Navarro is correct that transshipping reduces U.S. customs revenues, he neglects to mention that these revenues are paid overwhelmingly by Americans. His complaint about transshipping, therefore, is really a complaint that transshippers are successfully easing Americans’ tax burden.

Third, Navarro is also correct – trivially so – that all motors, pumps, and other goods that Americans import are goods that Americans don’t produce. Yet he’s incorrect to imply that this reality indicts U.S. trade. Trade of course allows us Americans to acquire these goods at costs lower than we’d incur were we to produce these goods ourselves. But by releasing resources in the U.S. from the production of the goods that we import, trade also allows us to produce other goods that, were we to import less, we’d be unable to produce. Like all protectionists, Navarro is utterly blind to the production and jobs that are made possible in the domestic economy only by trade.

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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David Bahnsen rightly excoriates Treasury secretary Scott Bessent’s economically ignorant and arrogant scheme to artificially alter bond yields.

Alan Dlugash accurately describes Bessent’s bond-buying scheme as “peak stupidity in action.”

Also pointing out, here in the pages of the Wall Street Journal, several of the dangers of Bessent’s bond-buying scheme is Stanley Druckenmiller. Two slices:

The Treasury Department announced on Aug. 19 that it would double the size of its long-dated bond buybacks, from $2 billion to at least $4 billion per operation, aimed at the 10- to 30-year sector and running from Sept. 9 through Nov. 4. The announcement came after the 30-year yield touched a 19-year high. Yields fell within minutes. By the next afternoon they had round-tripped to levels above where they started. The market’s verdict was swift and correct: This wasn’t liquidity management, it was price management—and a mistake far larger than $4 billion suggests.

Treasury’s announcement gave the game away. It justified the larger operations as liquidity support in sectors with “consistent strong sponsorship from market participants,” but strong sponsorship is the definition of a healthy, working market. There were no failed auctions, no dealer balance-sheet seizure, no forced unwinds, nothing resembling Treasurys in March 2020 or U.K. gilts in September 2022, the sort of genuine dysfunctional episodes that justify official action. Volatility was contained, and trading was orderly—not a malfunction but the machine doing its job.

Consider what the machine was pricing. Inflation is 3% to 4% and has been above the Fed’s target since 2021. Unemployment is 4.1%, full employment by any definition. The deficit is running near 6% of gross domestic product, a number America has never before produced in peacetime at full employment. The national debt crossed $40 trillion the same week Treasury intervened. Net interest will exceed $1.1 trillion this fiscal year, more than the defense budget. The 10-year yield, even after the summer selloff, sits at or below the economy’s nominal growth rate. That means a borrower (federal government) running 6% deficits at full employment, with above-target inflation, still funds itself at roughly the rate its economy grows.

Historically, that configuration is accommodative, not restrictive, of financial conditions. The bond market wasn’t being a vigilante, as some would argue. It was being a pushover that had finally begun to clear its throat, and Treasury moved to quiet even that.

I have spent five decades trading on a simple premise: Markets aggregate information no committee possesses, and prices are how that information reaches decision makers. The long-term Treasury yield is the most important price in the world. It is also the only fiscal disciplinarian the U.S. has left. Neither party will run on entitlement reform. Both have spent the past decade expanding commitments while ignoring arithmetic. Democracies don’t repair their finances because a budget office publishes a table. They repair them only when the cost of inaction becomes visible and immediate, when mortgage rates bite, when auctions tail, when the political price of a rising long bond finally exceeds the political price of touching spending.

…..

What should happen instead is straightforward. Return buybacks to their stated purpose: small, scheduled, off-the-run liquidity operations announced at quarterly refundings, never off-cycle responses to yield levels. Term out the debt honestly and pay the price the market sets. If the 30-year must trade at 5.5% to clear, that isn’t a crisis. It is an invoice. Then do the only thing that durably lowers long-term yields: address the primary deficit. Reform entitlements gradually and honestly, through means testing, indexing changes, eligibility adjustments phased in over decades—so that the burden is shared across generations instead of dumped on the youngest.

The reward is enormous: A credible fiscal package would do more for the long end of the curve than a buyback program 1,000 times this size.

Governments defending prices against fundamentals always lose. The only variable is how much they spend before conceding. The U.S. shouldn’t put itself on the wrong side of that trade, not with the most important price in the world, and not when that price is trying to say the one thing Washington most needs to hear: Let the bond market speak.

GMU Econ alum Daniel Smith looks back on the terrible effects of price controls during the French Revolution.

Ramesh Ponnuru weighs in on J.D. Vance’s economically clueless remarks about the U.S. dollar’s role as global reserve currency. A slice (although I doubt that U.S. military power played much of a role here):

President Donald Trump has sometimes said he wants a weaker dollar, in line with Vance’s comments, but he’s emphatically defended its reserve status, too. “You know, if we lost that, that would be like losing a world war,” he said in July 2025. But even a somewhat weaker dollar comes with costs. To favor one is to want Americans’ paychecks to be able to purchase fewer foreign goods than they can now. Americans would produce more for the rest of the world and get less in return. Whatever other benefits that would bring, it would mean less affordability.

Viewing the dollar’s high status as a “curse,” as Vance has suggested, raises an additional question: How should the U.S. get rid of it? The dollar became the reserve currency less because of policies deliberately designed to achieve that than because of America’s prosperity and military power, the attractiveness of its capital markets, and confidence in its adherence to the rule of law.

Vance’s cluelessness extends beyond economics. As Eric Boehm notes, the VP is also clueless (or, let’s hope it’s innocent cluelessness) about history – specifically, here, about the legacy of Huey P. Long. A slice:

Indeed, Long’s “every man a king” platform had nothing to do with locking up criminals or more restrictive immigration enforcement, as Vance suggested in the speech. It was, instead, a direct call for a more powerful federal government to seize and redistribute wealth.

“You must keep the wealth of the country scattered, and you must limit the amount that any one man can own,” Long said. To accomplish that goal, Long advocated for limiting individuals to owning no more than $50 million—though he admitted that “it may be necessary that we limit it to less.”

That’s the equivalent of about $1.2 billion today. Effectively, Long was calling for a populist uprising against the billionaires of his time. He was quite literal about it. “Our taxation is going to be to take the billion-dollar fortunes and strip them down to frying size,” he promised.

And that’s not all. The rest of the “every man a king” program called for loan forgiveness and a limit on the number of hours people worked. It is a speech and a political platform that, aside from a few bits of outdated language here and there, sounds like what you’d expect from the likes of Sen. Bernie Sanders (I–Vt.), New York City Mayor Zohran Mamdani, or the Democratic Socialists of America.

Frédéric Bastiat famously described protectionism as “legal plunder” – and in the same correct spirit, the Editorial Board of the Wall Street Journal reports on “the metals lobby’s big steal.” A slice:

The U.S.-Canada trade war escalated again Tuesday as Prime Minister Mark Carney announced new tariffs on some $20 billion in U.S. goods. That includes doubling Canada’s tariff rate on U.S. steel and aluminum to 50% to match Mr. Trump’s, and the political back story here is worth more attention.

Multiple press reports say that an agreement to avert a 50% U.S. tariff on $20 billion in Canadian goods broke down last week in part because of objections by the U.S. steel and aluminum lobbies. The mooted deal would have reduced those tariffs on Canadian steel and aluminum to 25% from 50%.

Call it a case study in how a narrow special interest calls the tune for the rest of the American economy. The current U.S. tariffs on metals date to Mr. Trump’s first term, originally set at 25% for steel and 10% for aluminum, in the name of national security. But his first Administration exempted Canada and Mexico to mitigate the damage to downstream U.S. users in manufacturing and construction.

Soon after taking office for a second time, Mr. Trump removed these exemptions, later raising the tariffs to 50%. After U.S. manufacturers that use steel and aluminum complained that the taxes made them less globally competitive, he imposed a 25% tariff on so-called derivative imports that contain the metals. Who knew stainless steel pots were a national-security threat?

These sky-high border taxes have caused U.S. aluminum and steel prices to soar. The price premium for U.S. aluminum over the global benchmark has increased five-fold since Mr. Trump took office a second time. Americans are now paying roughly 75% more for aluminum than the rest of the world. Steel prices in the U.S. are also about 64% higher than in northern Europe. One reason these differential are larger than 50% is because the metal tariffs are stacked on top of other tariffs on China, which is the world’s largest producer of steel and aluminum.

The metal tariffs (including copper) have raised some $46.9 billion in revenue for the government during the current fiscal year through June, plus $21.8 billion in 2025. That’s good for politicians but a nearly $70 billion tax on Americans.

National Review‘s Jim Geraghty is correct about Trump: “The president keeps coming up with new ways to make goods more expensive.” A slice:

Don’t worry, America. As you lament the high cost of living, the president is here to protect you from the menace of … imported goods from Canada that he has decided are too cheap.

After U.S. trade talks with Canada broke down on Friday, a new tariff of 50 percent is going into effect on Crown Royal whisky, Canadian milk, ice hockey equipment, cement, furniture, lighting fixtures, various tools, fence components, lumber, wood moldings, and a variety of plywood, fiberboard and veneered panels, among other goods. This is separate from the existing U.S. tariffs on steel, lumber and automobiles.

Scott Lincicome shares this revealing graph of Trump’s (non-)effect on U.S. drug overdoses:

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… is from page 101 of Volume 2 (“The Law,” “The State,” and Other Political Writings, 2012) of Liberty Fund’s The Collected Works of Frédéric Bastiat, expertly edited by David M. Hart; specifically, it’s a passage from Bastiat’s essay “The Law”:

No society can exist if respect for the law does not prevail to some degree, but the surest means of ensuring that laws are respected is for them to be worthy of respect. When law and morality contradict one another, citizens find themselves in the cruel quandary of either losing their notion of morality or losing respect for the law, two misfortunes that are as great as each other and between which it is difficult to choose.

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Here’s a letter to American Spectator.

Editor:

Brabim Karki’s attempt to deodorize Trump’s latest tariffs on Americans’ purchases of Canadian goods is akin to dousing a pile of manure with skunk musk (“Trump’s Canada Tariffs Aren’t the Betrayal Ottawa Claims,” August 23).

It’s true that Canada imposes extraordinarily high obstacles on some U.S. exports, especially dairy products. But the asymmetry that Mr. Karki describes runs in both directions. The U.S. imposes substantial tariffs and other trade barriers on several Canadian exports, including softwood lumber, which is subject to a 10 percent Section 232 tariff in addition to significant anti-dumping and countervailing duties.

Nor is it accurate to infer from Canada’s exceptionally high tariffs on a handful of politically sensitive products that Canada’s overall tariff treatment of U.S. goods is more restrictive than America’s treatment of Canadian goods. The Bank of Canada estimated that as recently as July the average U.S. tariff on Canadian goods was about 5 percent, compared to about 1.5 percent for Canada’s average tariff on U.S. goods. These figures predate the just-imposed U.S. tariffs.

Mr. Karki is therefore correct that Canada has erected formidable protectionist barriers around certain industries. But his assertion that there’s a clear tariff “asymmetry” favoring Canadian producers over American producers is unwarranted. The U.S. has its own substantial and sometimes punitive barriers against Canadian products – and Americans, not Canadians, ultimately bear the economic burden of tariffs imposed on goods they purchase.

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