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… is from page 169 of my GMU Econ colleague Bryan Caplan’s excellent forthcoming – in April 2027, from the University of Chicago Press – book, Unbeatable: The Brutally Honest Case for Free Markets [footnote deleted]:

This “slippery slope argument” is rooted not in paranoia, but history. The best predictor of future behavior is past behavior. In the past, when governments received the power to cheaply remedy glaring market failures at low cost, they could have done so and declared victory. They almost never did. Indeed, governments spurned streamlined textbook fixes – like taxing negative externalities and subsidizing positive externalities – from the get-go. Issuing edicts – “command and control” – has far more demagogic appeal. Once governments start issuing edicts, they keep issuing. Angry complaints and shocking incidents organically arise – and the crowd-pleasing response is not cost-benefit analysis, but “decisive action” against malefactors of great wealth and alien lands.

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Megan McArdle writes insightfully about California’s pending proposal to soak the rich. Three slices:

These days, legislators generally don’t enact tax hikes so confiscatory that they trigger an immediate, obvious response. They adjust income tax rates by a few percentage points, fiddle with the deductions or impose new levies on some tiny portion of the economy, like using ride-hailing services. That can affect decisions about savings, work and investment, but probably not immediately. These gradual changes make it hard for economists to distinguish tax policy’s effects from everything else that’s happening in a $33 trillion economy. That leaves plenty of room to debate whether — and how much — taxpayers respond to incentives.

So economists can thank a California chapter of the Service Employees International Union for providing Americans a natural experiment: What happens when you slap a whopping wealth tax on some of the richest people in the world? The SEIU has sponsored Proposition 40, a ballot initiative to levy a one-time 5 percent wealth tax on California billionaires, with much of the money going to the health care system that (not coincidentally) employs many SEIU members. Depending on what California voters decide — a recent poll suggests the initiative is leading but still short of a majority — we may get a clear example of the limits of taxation.

…..

Several California billionaires have already announced their departures, including Peter Thiel and Google founders Larry Page and Sergey Brin. [Gabriel] Zucman’s paper notes that if some of the most prominent tech barons succeed in fleeing, revenue estimates fall to $89 billion, but then argues that there are many small-fry billionaires who escape Forbes’s wealth rankings but still have to pay the tax. Adding them back in raises revenue to $115 billion.

This assumes the undetected small fry haven’t done their best to exit, but why would we assume that? Why should we believe that those who loudly announced they were shifting their residency before the year began were the only people who fled ahead of the SEIU initiative?

…..

But billionaires, like economists, are capable of making assumptions. They probably assume that if the tax succeeds, progressives will come back for an encore. And if it fails, they’ll try, try again. Those seem like sound assumptions — sounder, in fact, than the assumption that Californians can grab 5 percent of everything the billionaires have, and the billionaires will just have to sit there and let them take it.

Also writing with insight about ‘progressives” thuggish itch to seize the wealth of productive people is Wall Street Journal columnist Allysia Finley. A slice:

Because targeting Main Street businesses isn’t popular, Democrats instead lambaste billionaires. See California’s Proposition 40, which seeks to impose a 5% tax on the fortunes of residents with more than $1 billion in net worth. French economist Emmanuel Saez, one of the initiative’s architects, recently explained to the New York Times that targeting only billionaires was a strategic choice, since they “are no longer very popular.”

In 2020, Mr. Saez helped 14 California Democratic lawmakers, including now-Attorney General Rob Bonta, craft a bill to impose a 0.4% wealth tax on taxpayers with more than $30 million in assets. It foundered amid opposition from Gov. Gavin Newsom, but if Proposition 40 passes, don’t be surprised if wealth tax proponents later seek to lower the threshold.

New York City Mayor Zohran Mamdani names and shames billionaires like Citadel CEO Ken Griffin. This is a head-fake. His proposed tax hikes would primarily whack owners of local bodegas, plumbing companies and other small businesses. So, too, “millionaire taxes” popping up in states across the country.

Abdul El-Sayed, Michigan’s Democratic nominee for U.S. Senate, advocates imposing an additional death tax by requiring heirs to pay income tax on inheritances worth more than $1 million. Some 24 million Americans could get soaked, most of whom are solidly middle-class. He also wants to remove the $184,500 earnings cap on the 12.4% Social Security payroll tax “to make sure the rich pay their fair share.”

If you earn more than $184,500, you are rich. Congratulations. Progressives don’t merely want to redistribute wealth. They want to raise taxes to aggrandize their own power and level opponents. Then they can decide what’s fair and who has enough.

A third insightful take on the French “economists'” case for seizing the wealth of productive people is offered by the Editorial Board of the Wall Street Journal. A slice:

The wealth-tax dollar threshold is also likely to be reduced to hit more wealthy people, especially to compensate for income-tax losses from billionaires leaving. M. Zucman has said as much himself. “This one-time tax is just the starting point of what could be,” he told the Capital & Main news site this year.

He has also suggested an annual 2% wealth tax: “Even if you factor in the fact that some billionaires will move, the state would still be vastly better off with a 2% annual wealth tax.” So even he admits some billionaires will move out of California.

M. [Gabriel] Zucman laments that many billionaires use their wealth to advocate for free markets and individual liberty. “Everything that is downstream of the political system—including the courts, regulatory power, economic policy, media independence and so on—is affected by the surge of billionaire influence,” he said in an interview this summer posted on the UC Berkeley website.

Left-wing French economists are the leading intellectual architects of France’s—and Europe’s—current fiscal and political uproar. You almost have to wonder if they are so determined for the U.S. to make the same mistakes because America’s relative success is an embarrassing rebuke to their ideas.

[DBx: I put “economists” in quotation marks because, although Gabriel Zucman, Thomas Piketty, and Emmanuel Saez are credentialed and employed as economists, none of them gives any evidence of possessing the remotest familiarity with the economic way of thinking. Each supposes that wealth is produced independently of human incentives, institutions, and effort. And each specializes, not in analyzing how economic order emerges from decentralized human action, but instead in processing data in ways seemingly designed to stir that most dangerous of human emotions, envy.]

David Simon explains why Comrade Mamdani and other of today’s socialists ignore socialism’s history. A slice:

Our aspiring socialist leaders expect, more importantly, to enjoy the power to dictate every aspect of our lives.

Consider some of the aspects of life that various highly socialist nations have chosen to regulate to varying degrees and which those who seek to be our socialist rulers could choose to determine for each of us.

Where each of us lives, both in which city or town and in which specific house or apartment. The specific job in which we may or will work and for which employer. How much we may earn.

Which foods and other goods we may purchase. How much of each we may purchase. And from which vendor(s) we may purchase.

David Bier exposes some economic fallacies about immigration spread by Trump’s White House.

Kimberlee Josephson ponders consumer behavior.

Wall Street Journal columnist Mary Anastasia O’Grady reports on the victory in Brazil of the socialist-populist Lulu. A slice:

Lula’s win for a fourth nonconsecutive term as president is hardly a mandate. His personal story of rising from a poor family, his charisma and his left-wing populism have made him a champion of organized labor and an icon of Latin socialism. He was a bosom buddy of Fidel Castro. Over the years he has carried many Workers’ Party candidates on his coattails. But this time he struggled.

Young Brazilians want affordability and opportunity, and Lula hasn’t delivered. In 2026 inflation is expected to come in close to 5.2%. Forecasts for next year put it above 4.3%. Wages haven’t kept up. With an inflation target of 3%, the central bank has set its overnight lending rate, known as the Selic, at a punishingly high 13.75%. The drag on the country’s many heavily indebted businesses and households is palpable. Growth for 2026 is expected to come in below 2%.

Richard Ebeling reflects on “John Stuart Mill on liberty, tyranny and restraints on government.”

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… 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.

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… 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.

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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.

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… 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.

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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

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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.

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… 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.