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This monologue by Bill Maher is spot-on, funny, and brilliant. It’s a must-watch. (HT David Henderson)

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J.D. Tuccille reports that Trump’s protectionism “has constituted the largest tax increase since 1993.” A slice:

“In 2025, the Trump tariffs amounted to an average tax increase of $1,000 per US household,” write Erica York and Alex Durante of the Tax Foundation. “We estimate that the tariffs both announced and imposed, including the Section 122 tariff, Section 232 tariffs, Section 301 tariffs, and Section 338 tariff on Canada, will increase taxes per US household by $900 in 2026.”

The somewhat lower additional cost of trade protectionism on Americans projected for 2026 relative to last year comes courtesy of the changing legal landscape, not because of any loss of resolve on the part of the Trump administration. The sweeping tariffs imposed last year under the alleged authority of the International Emergency Economic Powers Act (IEEPA) were voided in February when the Supreme Court flatly ruled that “IEEPA does not authorize the President to impose tariffs.” Since then, the president and his partisans have scrambled to exploit any possible means to burden imports with high duties and to punish foreign sellers for daring to export goods to the U.S. at competitive prices.

The laws that the administration has invoked for new tariffs are limited in scope or can only be invoked under specific circumstances. Section 122 tariffs, for example, may only be put in place for 150 days. Imposed after the IEEPA ruling, they expired on July 24 and were themselves overruled in May by the U.S. Court of International Trade since there was no balance of payments deficit as required by the law.

Bryan Riley tweets: (HT Scott Lincicome)

Weird, uneducated protectionists often talk about trade as if it’s only about helping globalist billionaires. But trade has always been about lifting people out of poverty and strengthening U.S security.

George Leef explores what happens when academics deny reality (as they too often do). Two slices:

You’ve no doubt heard the expression, “That’s an idea so ridiculous only an academic could believe it.” It kept coming to mind as I read Professor John Staddon’s new book Inevitable Differences: An Inquiry into Human Variation. That individuals vary enormously in their talents and desires is an obvious fact, and yet many academics have become famous by declaring that individuals and especially groups must be treated as though they were equal.

Staddon, an emeritus professor of biology at Duke University, takes a critical look at the obsession among “progressives” for engineering equality, particularly with regard to race. Why, he wonders, are academic writings about race and “diversity” so filled with factual errors, logical fallacies, and animosity? The reason, he maintains, is that few scholars are willing to subject the work of leftists to rigorous analysis—especially black writers who claim that America’s past racism calls for a national transformation. Toxic ideas that ought to have withered on the vine have therefore spread widely and influenced policy.

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[Ibram X.] Kendi declares that racism and capitalism are “conjoined twins.” Leftists are apt to nod in agreement with that, but Staddon replies that his position is “crypto-Marxist nonsense.” Rejecting capitalism would have the same disastrous results as did the rejection of traditional farming in the Soviet Union in favor of Trofim Lysenko’s crackpot beliefs rooted in Marxist theory. Again, thinking through the consequences of their demands is not part of the mental toolkit of academics like Kendi, nor is it expected of them by the educational establishment.

Nearly all Americans have been raised in the belief that individuals should be treated fairly and judged on the basis of their actions, not their race. Nevertheless, large numbers of them still harbor racist thoughts. That, at least, is the contention of numerous academics who declare that whites suffer from “color-blind racism.” They may think of themselves as good people who “don’t see color,” but they’re mistaken. How do we know? Because of a test devised at Harvard that supposedly reveals their “implicit bias.” Based on the dubious results of this strange “test,” the notion that many Americans harbor racial bias took hold. Staddon points out that although this test has been debunked, scholars persist in repeating that America is still awash in racism and that we need lots of education and training programs to combat it.

One of the hallmarks of the “thinking” of the academics Staddon surveys is that they refuse to consider non-racist explanations for social phenomena. A good example is the newly invented sub-field of economics called “Stratification Economics.” That’s the brain-child of Duke professor William Darity, who says that it studies why different racial groups have unequal incomes. Astoundingly, he forthrightly declares that he explicitly excludes any factors relating to the abilities of individuals. Ruling out a class of explanations is flagrantly unscientific, but Darity’s unintellectual approach is meant to support the “progressive” agenda of economic transformation and thus gets a pass.

George Will recommends David S. Reynolds’s new book, Two Ships. A slice:

Reynolds, a City University of New York historian, uses his subtitle — “Jamestown 1619, Plymouth 1620, and the Struggle for the Soul of America” — to assert this: The White Lion, the ship that first brought slaves to Virginia, and the Mayflower, which brought to New England Puritans in flight from monarchical absolutism and Anglican bossiness, incubated two ultimately incompatible American futures. Reynolds’s powerful demonstration is that his story — the symbolism of the two ships — is not his. It was ubiquitous in American political rhetoric until, happily, it no longer was, as the nation transcended old categories.

Here’s the abstract of Dora Costa’s and Matthew Kahn’s review of John Cassidy’s Capitalism and Its Critics: (I’ve not yet read the full review, but the abstract promises a solid analysis.)

John Cassidy’s Capitalism and Its Critics surveys 250 years of capitalism’s history through the eyes of roughly thirty critics, from the Luddites, early utopians and Marx to modern communitarians, antigrowth proponents, free trade opponents, and scholars of inequality. The result is a vivid, sympathetic reconstruction of left-of-center dissent. We argue, however, that the book reproduces two analytical weaknesses shared by the critics it profiles. First, it commits Harold Demsetz’s Nirvana Fallacy, evaluating imperfect real-world markets against idealized regulatory alternatives rather than against equally imperfect real-world governments. Second, it underestimates capitalism’s most distinctive self-correcting mechanisms: endogenous technological change and entrepreneurial creative destruction, all coordinated by the price system. The result is a catalogue of capitalism’s failures unaccompanied by any comparable accounting of the alternatives.

Inez Feltscher Stepman is understandably not optimistic about the future of Comrade Mamdani’s grocery stores.

A realistic short-term prediction is that the stores will become havens for half-criminal resale markets, outright thievery, the homeless, and the mentally ill — that is, generally the same basket of issues that plague so many urban spaces where “discounted and/or free” stuff is on offer. Rather than relieve the very real affordability burden on the law-abiding working class, eliminating minimal barriers to entry, like normal prices and competition, that keep out the most antisocial elements of the city instead will force those workers to share space with the drug-addled, criminal, and dangerous. As surely as blood in the water attracts sharks, handouts of free or deeply discounted goods, in the melee of a populous city like New York, attract the worst kinds of crowds.

The importance of these small barriers, and correspondingly, the results of giveaways, can be affirmed all over New York and America’s other urban cores. For example, a “free” public pool in Central Park that opened in 2025 quickly became a hotbed for fights, disorder, and homeless “bathing.” The city has quietly stopped crowing about its success. “Free” gift stunts by companies or livestreamers in the city frequently result in unsafe mob scenes that further degenerate into violence.

Also writing about the splendors of government-run grocery stores is César Báez, a native of one of socialism’s many shining triumphs, Venezuela. A slice:

The [New York] city’s plan rests on the assumption that it can control who buys subsidized goods. Yet Venezuela’s experience with government-run grocery stores suggests that assumption deserves scrutiny.

When Venezuela’s socialist president, Hugo Chávez, created a nationwide network of government-run grocery stores called “Mercal” in 2003, he faced the same conundrum of how to control excess demand when prices are set artificially low.

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… is from page 78 of Thomas Sowell’s 1999 book, Barbarians Inside the Gates:

Trade-offs are not just something thought up by conservative meanies. As long as what we want exceed what we have – and it’s been that way for thousands of years now – we are going to have to make trade-offs. It doesn’t matter whether you’re a carpenter or a CEO, whether you are down in a submarine or up in the dizzying heights of an editorial office in Times Square.

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Jeffrey Anderson makes the case that the Smithsonian’s National Museum of American History is indeed now controlled by leftists with an ideological agenda. Two slices:

The Smithsonian Institution’s National Museum of American History has been in the news for disparaging our nation’s history and engaging in partisan activism. Addressing such charges, the museum’s director, Anthea Hartig, testified at two congressional hearings. The most interesting thing about her prepared testimony is that she chose not to address a single exhibit that has opened under her seven-year watch.

Responding to a 160-page report from the White House Domestic Policy Council that details how the museum has strayed from its intended mission, Ms. Hartig’s response was to invoke the flag—specifically, the Star-Spangled Banner. In her prepared testimony, she referenced it multiple times. That flag, which so inspired Francis Scott Key, has been displayed at the National Museum of American History since 1964 and housed in its current gallery for 18 years. That exhibit is excellent and patriotic, but the newer parts of the museum are heavy-handed, dumbed-down and anti-American—the opposite of what a national museum should be.

I sat directly beside Ms. Hartig as a witness in her second hearing. I testified that the National Museum of American History increasingly is a museum not about American history, but about activists’ attempts to shape the future. The museum’s newer exhibits offer no coherent sense of a shared national identity, and they divide Americans into oppressors and the oppressed.

…..

What little the museum does provide on the founding and pre-founding eras is largely critical. In one exhibit, 1492-1776 is referred to as the period of “Unsettling the Continent.” Visitors are told, “Our world today grows out of that unsettling history.” Elsewhere, they’re told that our founding can either be viewed as a “complete, perfect, sacred event led by a great patriot who, as American children would learn, never told a lie” or else as “part of a wider, unfinished movement” that was “deeply imperfect.” Viewing our founding as one of the greatest events in world history, warts and all, apparently isn’t an option.

Americans deserve a National Museum of American History that expresses a love of that history and views it as the wondrous story of a nation conceived in liberty. They don’t deserve a museum that alternates between ignoring and condemning our extraordinary heritage.

National Review‘s John Puri wisely warns against using government to engineer “the common good” (which, of course – and contrary to the presumption of so many people across the ideological spectrum – is no objection to the common good). A slice:

Promoting education as a track to the middle class was another common-good policy. Government paved it with subsidies to attend college — guaranteed student loans and direct assistance — making a four-year degree the badge of advancement. Today, not only have these programs inflated the price of a college education, but they have also degraded its value. Half of college graduates naturally feel cheated when they end up working jobs that don’t require their degrees, which they just spent four years and many thousands of dollars to attain. Yet college has been made the norm, so not attending may be even worse.

Privileging unions was a common-good policy toward stable jobs. But unions could only maintain such jobs by protecting incumbents, thereby excluding younger workers from quality vocations. Tying health insurance to employment was a common-good policy to simplify family benefits. Until it obscured the true cost of health care, requiring ever more labyrinthine subsidies to afford.

Neighborhood schools with enrollment tied strictly to residence were a common-good policy to foster community. Now, they make attractive neighborhoods into closed enclaves. Property-tax breaks for seniors were a common-good policy to keep grandparents in their family homes. Now, the same incentive prevents younger families from moving in.

The story throughout is that interventions to fortify a certain way of life eventually sealed it off. Protections became barriers to entry; subsidies became effective taxes and transfers. The common good was made less accessible because it was defined and supported by state action.

Therein lies the basic conceit of the common-good form of politics. In an endlessly complex world, the competence of government to fabricate social outcomes, especially at scale, is profoundly limited. Tradeoffs are ubiquitous and unavoidable. One generation’s insulated good life may be another’s desperation. In that case, what is a benevolent government to do?

The conservative answer is for government to do what it can: Remove artificial barriers and distortions, and otherwise leave space for citizens to pursue the good life for themselves, comporting with the preferences of others as best they can manage. A society of spontaneous order will doubtless leave many people out in the cold. Yet fewer, perhaps, than a government so hubristic that it tries to entrench the common good.

Alfredo Carrillo Obregon reports on “how “Liberation Day” cost America its tourists.” A slice:

While survey and government data already pointed to declines in foreign visits to the United States (see figures 1 and 2), a recent working paper finds that the “Liberation Day” tariff announcements in April 2025 led to a significant decline in tourism to the United States, costing the sector over $1 billion in lost revenue per month.

My intrepid Mercatus Center colleague, Veronique de Rugy, defends the correct version of the doux commerce thesis.

Steve Hanke and Roger Koppl note that Anthony Fauci was a “big player.” A slice:

As we recently wrote in Fortune, Big Players are big because their words and deeds move a whole system. They are insensitive to any disciplinary mechanism in the system, be it profit and loss in a market or peer review in science. In addition, they are discretionary because they are not bound to any simple, understandable rule. They act on judgment, even mood or whim in some cases. Big Players make their words and deeds matter more than underlying fundamentals such as consumer preferences or scientific truth. Fauci’s diary provides no less than a confessional by a Big Player who is reveling in his unchecked powers and celebrity status.

The Editorial Board of the Washington Post explains what shouldn’t – but, alas, what always does – need explaining: “Democracy doesn’t require truth police. It needs a free marketplace of ideas.” A slice:

The hysteria around “misinformation” assumes democracy runs on unvarnished truth. It doesn’t. It runs on persuasion, with rival camps making their best case to loud and stubborn voters, under procedures everyone can accept.

Political scientists established long ago that people have always leaned toward voting in line with their identities and loyalties. The era of machine politics did not destroy the republic, nor will social media. Those hell-bent on defeating “misinformation” are trying to re-create a system that never really existed.

The challenge today is that social media supercharges the factionalism that has always plagued the body politic. Rather than serving as a conduit for information, it becomes an echo chamber. Users choose whom they interact with, which typically means gravitating toward like-minded people. This is why anti-vaccine activists thrived on platforms like Facebook.

Newspapers play an essential role in reporting facts and publishing opinions, but the mainstream media’s gatekeeping power has diminished in recent decades amid declining trust across institutions.
Combating this problem, however, was never going to be as simple as taking down inaccurate content. The trouble with fighting “misinformation” is that someone must be a final arbiter of truth, and the fight over who gets to play that role ends up politicizing everything.
That’s why the best response to false speech, however odious, will always be more speech. The American system depends on vigorous debates forging public sentiment. Stifling unpopular ideas usually backfires.

Phil Gramm and I are honored that Arnold Kling is reading our book.

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… is from page 174 of an April 12th, 1913, article – “The New American Tariff” – in The Economist, as reprinted in volume 3 of Battles Over Free Trade (Mark Duckenfield, editor):

It must be remembered that since the McKinley Tariff [of 1890] the working classes and the lower middle classes of the United States have hardly known such luxuries as underclothing, or garments, or blankets, made of wool. Cotton and shoddy have been the principal raw materials of the so-called ‘Woollen Companies.’ The wealthy who travel have been in the habit of buying suits and dresses in England, and carrying them home duty free for personal use in their trunks. Consequently, if this new tariff passes there will not only be a general fall in prices, but also an introduction of many goods which for some time have been practically unknown to the shops of the United States.

DBx: The bill to which The Economist refers is the Underwood-Simmons Tariff Act, which did indeed pass and took effect in October 1913. It significantly lowered average tariff rates.

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Here’s a letter to the Wall Street Journal.

Editor:

One of your reporters writes that “math played a role in the second quarter, when net exports – a measure of what the U.S. exports minus what it imports – subtracted a percentage point from the headline GDP number” (“U.S. Economic Growth Slowed to 1.5% in Second Quarter,” July 30). About this technical matter, she’s correct. But she’s incorrect to infer from this ‘math’ that U.S economic growth in the second quarter was “weighed down by strong imports.”

GDP = C (consumption spending) + I (investment spending) + G (government spending on final goods and services) + (Exports – Imports). GDP is an acronym for Gross Domestic Product. Because imports aren’t produced domestically, they are not part of GDP. Yet because spending on imports shows up in C, I, and G, the value of imports must be subtracted in order to accurately measure the value of what is produced domestically. Your reporter’s suggestion – a suggestion explicitly trumpeted by protectionists – that imports, being subtracted from GDP, necessarily reduce GDP growth, is an error caused by mistaking accounting for economics .

An analogy will help. Suppose Chateau Acme produces wines both from grapes that it grows in its own vineyards and from grapes that it buys from other vineyards. If Acme wants to calculate the value of the wine made from grapes grown in its own vineyards, it must subtract from the total value of its wine production the value of the wine that it makes from the grapes that it ‘imports’ from other vineyards. Yet it would obviously be foolish to say that the growth in Acme’s business is “weighed down” by Acme’s ‘imports’ of grapes from other vineyards.

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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Ilya Somin, a colleague over in GMU’s Scalia School of Law, makes clear that “court packing is a dangerous gambit best avoided.” Two slices:

Court-packing has once again become a major focus of political contention, with many on the political left advocating it in response to what they believe are badly flawed and illegitimate decisions by the Supreme Court. In a recent article for The UnPopulist, Andy Craig provides reluctant support for court-packing, but with a twist he argues will minimize the danger: combining court-packing with a constitutional amendment imposing term limits on Supreme Court justices that would—if enacted—reverse the packing. The term-limit system would give every president two appointments per term, thereby potentially producing more ideological balance on the bench.

Craig’s proposal is clever and a cut above more conventional defenses of court-packing. But I remain unpersuaded. His argument falls short in multiple ways. He overrates the negative aspects of the current Supreme Court majority and underrates their positive contributions, including on the very issue of combating incipient authoritarianism, the main focus of his concerns. He also overestimates the supposed inevitability of future court-packing and the feasibility of his compromise plan. Finally, there are good alternative fixes for many of the problems that (rightly) concern Craig.

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Liberal Supreme Court Justice Elena Kagan is no fan of much of the conservative majority’s jurisprudence. But, in a recent speech, she rejected the charge that they just “rubber stamp what the current administration does.” The truth is “quite the opposite,” she said. “I think that that is a bad rap.” To back up her point, she cited several recent cases, including the tariff case, the National Guard case, and more. She emphasized that “[t]ariffs is probably the key policy issue for this president … something he campaigned on … he cared an enormous amount about. … I don’t think that there are all that many decisions in the recent times, where a court strikes down such an important policy to a sitting president.” She’s not wrong.

The court’s earlier rulings in “anti-commandeering” and Spending Clause cases have played an important role in protecting “sanctuary cities” against Trump’s efforts to force them to aid in his cruel mass deportation policies. In both his first and second terms, these decisions—mostly written and supported by conservative justices—have been repeatedly cited by lower-court judges as crucial precedents curbing Trump’s power to directly coerce state and local governments and to pull federal grants from them. Lack of state and local support significantly constrains deportation efforts.

The Roberts Court is also probably the most speech-protective Supreme Court majority in all of American history. Most notably, it has issued a series of decisions prioritizing freedom of political speech over campaign finance restrictions (although, I understand, many of my progressive friends are less enthused by it), governments’ ability to indirectly pressure speakers, and impose restrictions on social media. When it comes to the latter issue, the court’s ruling came in a case involving two red states’ efforts to restrict social media moderation.

David Simon is correct: “Now is the time to address the emerging socialism of JD Vance.” Two slices:

The Nobel Prize-winning economist and philosopher Friedrich Hayek dedicated his great book, The Road to Serfdom – which opposes excessive governmental power – “to the socialists of all parties,” because socialism is not limited to the left.

Republicans should take this point to heart. They regularly attack Democrats for their strident support for socialist economic policies, but to protect our free market economy from government’s heavy hands they need to address the emerging socialism of their leading 2028 presidential election contender, JD Vance.

Vance enthusiastically approves of the view that the government should “seize the equity of the AI companies.” Government ownership of parts of, or entire, businesses – “the means of production” in Marxist and socialist economic writings – is a foundational principle of these ideologies. Government ownership means more government direction of, and control over, private economic activity and distortion of market processes that make the economy work efficiently.

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And then there is Vance’s flirtation with antisemitism and his related hostility to Israel. Before unpacking that, however, it is important to understand the connection between antisemitism and socialism.

As perhaps best explained by George Gilder’s 2009 book, “The Israel Test,” those who hold antisemitic views generally also hold socialist views, and vice-versa, because antisemitism and socialism share the false conception that free market capitalism is a zero-sum process. Socialists assert that businesses make profits and people become wealthy through free markets by exploiting workers and otherwise impoverishing others. Antisemites make the same claim regarding wealthy Jews and their businesses.

Selina Xu wisely warns against U.S. AI protectionism. A slice:

Imagine this: The U.S. is a digital walled garden where foreign software is banned, and everyone depends on a handful of domestic incumbents for costly artificial-intelligence access. Meanwhile, the rest of the world builds AI economies on a base of Chinese open models that can be freely downloaded, customized and distributed.

Sound familiar? It is the inverse of China’s “Great Firewall,” a sprawling regulatory and technological system that has stifled foreign competition and restricted the Chinese public’s access to information for more than two decades.

Instead of championing competition and openness, the U.S. is inching toward tech protectionism. Washington is considering restrictions on Chinese open-source AI models after Moonshot AI’s Kimi K3 model sparked accusations of distillation—the use of one model’s outputs to train or improve another. The idea sounds like economic toughness: deny a competitor access to the U.S. market and protect sensitive technology. But a ban would give more power to a handful of incumbents, raise startup costs, and weaken the open-model ecosystem necessary for American innovation.

Open-source is a crucial part of the AI supply chain for U.S. companies. When some OpenAI models recently hacked another company, the victim—Hugging Face—had to turn to a Chinese open-weight model to defend itself. The safety guardrails of closed U.S. models blocked Hugging Face’s requests.

Arnold Kling is noticing a slow-down in the improvements to AI.

The Editorial Board of the Wall Street Journal assesses “the tepid Trump economy.” Two slices:

The Commerce Department’s GDP report for the second quarter on Thursday shows the economy continues to plod along and is shrugging off the war in Iran. But it’s also nothing to brag about.

The U.S. economy grew a tepid 1.5% during the second quarter, driven by consumers and AI investment. Consumer spending contributed 2.1 percentage points, while business investment added 1.2 points. Net exports subtracted a point from GDP, which is a statistical wash since imports flow into consumer spending and investment. A decline in government spending subtracted from growth in the quarter because of the way GDP is calculated, but less government helps the private economy over time.

Equipment purchases and intellectual property accounted for all of the uptick in business investment. AI hyperscalers, which plan to spend upward of $700 billion this year, are turbo-charging demand for computer chips, construction equipment, gas turbines and more. Businesses are also pumping tens of billions into frontier AI models.

Mr. Trump thinks that, with the stock market hitting records and the economy avoiding recession, his tariffs are working wonders. But based on Treasury Secretary Scott Bessent’s 3% GDP growth target, the economy is underperforming by half. Last year’s tax bill and deregulation would be driving faster growth if not for Mr. Trump’s border taxes that raise costs and uncertainty for business.

…..

Some of Mr. Trump’s most ardent fans tell us they wish he’d drop his tariff fixation and return to the supply-side policies that produced broad-based prosperity during his first term. Most Americans probably do too.

Trump & Co. continue to move the American economy closer to socialism. It’s doing so by having the government own ever-more of the means of production.

And Scott Lincicome tweets:

For those keeping score at home*, this means the US government’s equity portfolio now consists of THIRTY COMPANIES – up from ZERO just a year ago. (MP Materials was the 1st last July.)

Bonus: it’s all coming from the guy fighting “communism.”

Also writing about the Trump administration’s fondness for government ownership of the means of production is the Cato Institute’s Tad DeHaven. A slice:

Commerce says that these stakes enhance the return for taxpayers, but even a profitable portfolio would not resolve the underlying institutional problem. The federal government is now acting as regulator, customer, financier, and shareholder. Decisions involving contracts, trade restrictions, permits, and additional subsidies can affect the value of its holdings. Competitors have reason to question whether the playing field is level. And if a portfolio company falters, Washington will have an added incentive to protect its investment with more taxpayer support.

Calling the stakes “minority” and “noncontrolling” does not eliminate those conflicts. Public announcements often reveal little about valuations, shareholder rights, oversight, or exit plans. Meanwhile, future administrations will inherit the same tool and can use it to assemble portfolios reflecting their own political priorities.

My intrepid Mercatus Center colleague, Veronique de Rugy, reveals “the real cost of turning away foreign talent.” A slice:

There are many ways to measure the health of a country. One way is growth of gross domestic product (GDP). Another is economic productivity. But there’s a less conventional measure worth watching: Do the world’s most talented and ambitious people want to immigrate here?

Throughout most of America’s history, the answer has been an emphatic yes. Scientists, engineers, entrepreneurs, artists, and strivers from around the world have chosen the United States because they believed they could build something, discover something, or start a business while making a better life in this country.

We should worry about the day when this is no longer true.

Unfortunately, the Trump administration seems determined to make that day arrive sooner rather than later. Its destructive embrace of protectionism is not merely directed against foreign goods and capital. It’s not limited to low-skill immigrants, either. It’s also directed against in-demand foreign talent.

…..

alented people don’t merely fill existing jobs. They create them by inventing products, starting companies, conducting research, and making the people around them more productive. In the process, they create opportunities for other people that otherwise wouldn’t exist.

Giving a cold shoulder to foreign students is particularly absurd when you consider Washington’s obsession with competing against China. Politicians insist that America is engaged in an existential technological race. They spend billions of dollars subsidizing semiconductors and other favored industries. They develop elaborate industrial policies intended to make America dominant in artificial intelligence, quantum computing, and advanced manufacturing.

Then, when a potentially brilliant young scientist from India, China, or anywhere else earns an advanced degree at an American university and wants to stay and contribute to the American economy, our government says perhaps they should leave.

You can throw billions of taxpayer dollars at a semiconductor factory in Arizona. You cannot manufacture genius through an appropriations bill.

The Peterson researchers estimate that discouraging just one-third of international STEM graduates could leave the American economy 0.7 percent to 1.3 percent smaller, or roughly $200 billion to $400 billion in GDP over a decade—equivalent to losing the entire economy of Utah or South Carolina.

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… is from page 11 of Milton Friedman’s November 1991 Wriston Lecture:

The problem is not that government is spending too little but that it is spending too much. The problem in schooling is that government is spending too much on the wrong things. The problem in health care is that government is spending too much on the wrong things. The end result has been that government has become a self-generating monstrosity. Abraham Lincoln talked about a government of the people, by the people, for the people. What we now have is a government of the people, by the bureaucrats, including the legislators who have become bureaucrats, for the bureaucrats.

DBx: Milton Friedman was born – into a working-class immigrant family – in Brooklyn on this date (July 31st) in 1912. He became one of the most-accomplished economists of the 20th century, as well as one of history’s greatest champions of liberty and free markets.

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Edited by Richard Epstein, Mario Rizzo, and my Mercatus Center colleague (and former student) Liya Palagashvili, the Routledge Handbook of Classical Liberalism has just been published. In it, you’ll find chapters by (among many others) David Schmidtz and Jason Brennan (on the foundations of classical liberalism), Richard Wagner (on fiscal policy), Tom Hazlett (on price controls), Larry White (on banking and financial regulation), and Pete Boettke (on the future of classical liberalism).

I wrote Chapter 36 (“Liberalism and Trade”). Here are three slices from my chapter:

Liberalization of international trade—free trade—has been central to the liberal project from early on. Adam Smith’s 1776 Inquiry Into the Nature and Causes of the Wealth of Nations has at its core what remains an extraordinarily powerful and still‑relevant case for a policy of unilateral free trade. Smith made this case largely in the course of exposing as fallacious many of the key tenets of mercantilism and its associated plea for active government regulation of trade.

…..

Yet in the minds of many people mercantilism remains dominant today. For example, Donald Trump regularly interprets American trade deficits as evidence that America is losing money (see, for example, Kiely, 2019). Nearly all of Trump’s decades‑long pronouncements on trade, while foolish from the perspective of liberal economics, make perfect sense from the perspective of mercantilism.

This interpretation of international trade by a businessman is unsurprising. Businesses succeed economically by earning revenues greater than expenses. To the businessperson’s mind, therefore, it seems natural that countries succeed economically by doing the same. But this mercantilist mindset is not confined to businesspeople; it is widespread among the general populace. The skepticism evinced by Donald Trump to trade—skepticism in particular to imports—is not at all unique to Trump or to right‑wing populists. It is commonplace across the political and ideological spectra, consistently rejected only by liberals.

Yet as Adam Smith observed, mercantilists have matters exactly backward. Economic activity—including international trade—is valuable only insofar as it increases people’s access to goods and services that improve their standard of living. The value of international trade lies not in how much money it brings into the country but, instead, in how many goods and services it brings in as imports in excess of the goods and services that are exported in exchange. The greater the net amount of goods and services made available in the home country by trade, the better the trade. And individuals, not government officials, are the best judges of which goods and services are most likely to improve their standard of living.

Two key tenets emerge from the liberal rejection of the philosophical foundation of mercantilism. One is that a country is not akin to a company; a country is not an organization the goals of which citizens must be taxed, subsidized, or regulated to pursue. Free trade is normatively justified in part because individuals are not employees or agents of Country, Inc.

The second tenet, which follows from the first, is that the measure of trade’s value is its contribution to the well‑being of all the citizens—including the masses—of a country. Trade’s impacts on the government or on particular producer groups are relevant only insofar as these impacts affect the welfare of the country at large—a welfare that ultimately is measured by the material well‑being of the population at large and not by any “absurd” accounting figure such as the balance of trade.

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The most frequently encountered economic objections to free trade—such as that free trade permanently reduces either employment or real wages in the home country—have been addressed by economists for over two centuries and consistently found, both theoretically and empirically, to be unwarranted. In this chapter, I largely ignored these commonplace complaints about free trade, as refutations of these are by now practically countless (see, for example, Yeager & Tuerck, 1966; Boudreaux, 2008; Lemieux, 2018; Panagariya, 2019; Irwin, 2020). The liberal case for free trade of course includes trade’s pure economic benefits. But the liberal case extends beyond narrowly economic benefits to embrace trade’s integration of thousands, millions, and even billions of strangers into an extensive—today truly global—commercial society that, in addition to better providing the masses with the material means necessary for flourishing, promotes freedom, creativity, openness, toleration, and peace.