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George Mason University Econ grad students are generous – as recounted at Facebook by Ilya Somin:

Some studies indicate that economists are more selfish than people in other fields (e.g. – they are more likely to defect in the prisoner’s dilemma). I have always had some reservations about these studies. Now, I believe them even less.

Recently, I was involved in helping “Bob,” a graduate student from an authoritarian state, who has been blacklisted by his government, for speaking out against the dictator’s human rights violations and other repressive policies; if he returns to his home country, he faces further persecution and possible imprisonment (I won’t say which one, so as to avoid attracting further attention to him from his government). He needed to find housing here, while looking for a graduate program in the West, where he can continue his studies (which he can no longer do in his home country), and finding a way to adjust his visa status, so he can work. And, at the moment, he has virtually no resources.

I asked George Mason University econ professor Bryan Caplan for help with the housing issue. Bryan sent an e-mail message to the GMU economics department grad student e-mail list. Within a few hours, we had multiple offers to house Bob for free! All from econ grad students, most of whom aren’t exactly living in palatial accommodations. Bob accepted one of the offers, for which we are very grateful. All thanks to the generosity of economists!

You might ask, why couldn’t I house Bob myself? The answer is that I’m out of town much of the time this semester, as a visiting professor at U of Virginia, and I thought it would be unfair to burden my wife and kids at a time when they already have an extra burden on days when I have to be away. But I was able to provide some other types of assistance.

John Puri reacts to two recent Trump Truth Social posts – posts so arrogant and economically clueless that the English language, for all of its richness, cannot quite adequately describe them. A slice:

Two, what do you mean by “fear” of inflation? (Sorry, I mean Inflation.) It exists right now, and Americans are not exactly thrilled about it.

Three, no, “growth” doesn’t cause inflation. Excessively loose monetary policy, which is what the president demands of the Fed, causes inflation.

Four, our GDP growth should not be at 15 or 20 percent, because that is verifiably ridiculous. And GDP growth isn’t currently at 4, 3, or even 2 percent. It’s at 1.5 percent.

Five, our debt would not be paid off if interest rates were lower. We would barely cut our annual deficit in half if interest rates on every federal bond went to zero.

Six, yes, each percentage-point increase in Treasury bond interest rates does cost the federal government a whole lot of money. Unfortunately, the rate on Treasuries is not legally tied to the Fed’s benchmark rate and is, in fact, free to rise much higher should bond markets think it appropriate — as the last month has demonstrated. Seems like a good reason to get our fiscal house in order. (But we won’t.)

Not that any more is needed, but here’s yet another recent piece of evidence that Trump understands absolutely nothing about trade: (HT Scott Lincicome)

Trump: We could do tremendous good for ourselves by just not trading with countries.. We lose with Mexico $195 billion a year. They have nothing that we have to have, I mean. Hot tamales, tomatoes, a couple of things

Trump, of course, has no monopoly on peddling economic lunacy. Another such peddler is Gavin Newsom – as reported here by the Editorial Board of the Wall Street Journal. A slice:

Mr. Newsom last week issued a press release claiming the state is leading the country in job growth and “boosting productivity and delivering higher wages for workers.” The state’s $16.90 an hour minimum wage—set to rise to $17.40 in January—helps “ensure workers share in that growth,” he said. Where to begin?

It’s true the AI boom is boosting business productivity, driving investment and turbocharging earnings for tech workers. The average weekly wage for information workers in Silicon Valley’s San Mateo County near San Francisco increased to $16,242 during the first quarter of this year (equal to $846,904 a year), up from $15,792 in the prior year and $6,187 in early 2019.

But in recent years the state has added few jobs outside of government, healthcare and social assistance. One reason is that its high minimum wage has raised costs for employers, which in turn are cutting back on unskilled labor. These trends have been exacerbated by California’s $20 an hour minimum wage for fast-food workers.

The Employment Policies Institute reports that California’s restaurant employment has declined for three consecutive years between March 2023 and March 2026—a total of 12,600 job losses in food services and drinking places—according to the Labor Department’s most recent payroll data, while employment in the industry increased nationwide by some 151,700.

Average weekly hours for workers in all industries in California declined to 33.1 hours in July from 34.5 hours three years earlier, while remaining flat nationwide at 34.3. Teen unemployment in California has risen to 22.1% from 11.3% in January 2023, a significantly bigger increase than in the rest of the country (12.1% in July from 10.6% in January 2023 nationwide).

More teens in the Golden State are also dropping out of the workforce. Labor participation has fallen by five percentage points for teens in California, versus 2.3 percentage points nationwide since early 2023. More unemployed youth is a recipe for social problems and a less prepared future workforce.

Meanwhile good news arrived Friday about the national job market as the Labor Department reported 162,000 new jobs in August. That exceeded expectations and is higher than the 31,000 average in the last 12 months. The best news was a 683,000 increase in the civilian labor force and a bump in the labor participation rate to 61.6%. Falling participation has been a growing worry.

The national jobless rate held steady at a low 4.1%, while California’s in July was 5.1%. That’s the fourth highest in the country, after Oregon and Connecticut’s 5.2% and the District of Columbia’s 5.9%.

Clemson University’s – and my former GMU Econ colleague – Tom Hazlett tells of how broadcasters in the U.S. put their free-speech rights at risk in a devil’s deal for ‘free’ access to the electromagnetic spectrum. Two slices:

While most media operate in a laissez-faire regime, terrestrial radio and television broadcasting are licensed, and their airwave access has sometimes been deemed a privilege, not a right. Harvard Law’s Laurence Tribe traces the anomaly to a technical error: “a profound fallacy about spectrum scarcity.” Or as comedian George Carlin put it, “radio and television [are] the only two parts of American life not protected by the free speech provisions of the First Amendment to the Constitution. I’d like to repeat that because it sounds vaguely important.”

Whose cockamamie idea was this? Why, the broadcasters’ own.

The 1927 Radio Act’s “public interest” language was written by the National Association of Broadcasters, as the bill’s sponsor, Sen. Clarence C. Dill (D., Wash.), explained in his 1938 book, “Radio Law.” From the start, Dill saw that “the ‘twilight zone’ between censorship and the refusal to renew a station license because of the service rendered, is undetermined.”

The broadcasters traded freedom for free licenses and a lucrative, protected market. Upstart rivals—the DuMont Television Network in the 1940s and ’50s, then cable TV and satellite in the 1960s—were suppressed, while only a handful of viable stations were assigned to more than 80 TV channels. In return, regulators gained clout over an industry and influence over content.

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When Sen. John McCain (R., Ariz.) and Senate Majority Leader Bob Dole (R., Kan.) argued that the 1996 Telecommunications Act should sell TV stations their new digital broadcasting licenses at market prices—and liberate both their content and their spectrum—the industry again rallied to block deregulation.

ABC now feigns shock that a president could advance his political animus into official determinations of “public interest.” Welcome to the modern era. First Amendment compromises via “regulation by raised eyebrow,” as Nixon’s FCC chairman put it, have long been the currency of the realm.

Leave it to Donald Trump to up the ante radically and tweet out his worst. The list price of censorship just blew the budget, and broadcasters are suing to reclaim their constitutional rights.

Best of luck, ABC. May free speech soon, finally, be yours.

GMU Econ alum Paul Mueller talks with Reason‘s Stephanie Slade about how conservatism lost its way.

Eric Boehm explains what shouldn’t – but, alas, what nevertheless today does – need explaining: As Trump seizes more power for the executive branch (a seizure to which Congress cowardly complies), “Democrats are already eyeing the new tools.” [DBx: As Arnold Kling says, “Have a nice day.”] A slice from Boehm’s essay:

President Donald Trump has greatly—and, in many cases, quite recklessly—expanded the executive branch’s power over private businesses.

The Trump administration has invoked claims of “national security” to levy higher tariffs on everything from steel to musical instruments. It has used the same argument to seize equity shares in more than two dozen private companies, including a so-called “golden share” in U.S. Steel that grants the president the authority to veto future attempts to relocate headquarters or make changes to its production facilities.

And if you think a future Democratic administration will try to stuff those executive powers back into their proper, constitutional boxes, well…don’t hold your breath.

Take California Gov. Gavin Newsom, widely regarded as a serious contender in the 2028 presidential race, for example. Last week, a Canadian journalist asked Newsom to give assurances that a future Democratic administration would roll back the massive tariffs Trump has imposed on goods from Canada.

“I cannot guarantee that,” Newsom said. “But I can guarantee you nothing like this, the level of disrespect, talking past people, talking down to people, talking past and down to you.”

In other words: a kindler, gentler tariff regime, delivered with carefully chosen language.

That might be an improvement, in some ways, over the haphazard nature of Trump’s various trade wars. But it would not be a win for free trade, and it would not help Americans who are struggling to afford the cost of higher tariffs.

Christopher Snowdon also explains something that shouldn’t – but, alas, what nevertheless does – need explaining: “You cannot tax and borrow your way to prosperity.”

Here is at least some good news about the goings-on in the Potomac Swamp.

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… is from page 394 of the 2016 second edition of Thomas Sowell’s Wealth, Poverty and Politics:

Most notable economic, technological or intellectual achievements involve multiple factors – beginning with a desire to succeed in the particular endeavor, without which all the ability and opportunity mean nothing, just as desire and the opportunity mean nothing without the ability. What this implies, among other things, is that an individual, a people, or a nation may have some, many or most of the prerequisites for a given achievement without having any real success in producing that achievement. And yet that individual, that people or that nation may suddenly burst upon the scene with spectacular success when whatever the missing factor or factors are finally get added to the mix.

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My intrepid Mercatus Center colleague, Veronique de Rugy, explains that “Trump’s beef tariff cut accidentally makes the case for free trade.” Two slices:

Take the most recent paper by economists at the Federal Reserve Bank of New York and Columbia University. Mary Amiti, Sebastian Heise, and David Weinstein looked at who shoulders the cost of the tariffs, examining which part of the tariff reaches consumers through higher prices versus which share of the price hike is due to other factors. The group estimates that a 10 percent tariff on all imports will raise U.S. consumer prices by about 2.6 percent. Roughly two-thirds of the increase comes quickly and directly from the tariff being passed on to customers at the border. The remaining third of the price hike shows up more slowly in American-made goods.

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If you want cheaper houses, do not make Canadian lumber more expensive. If you want more affordable cars and appliances, do not tax steel and aluminum inputs. If you want American manufacturers to compete, do not make them pay more for intermediate goods. And if you want American exporters to prosper, do not repeatedly provoke America’s trading partners into retaliating against them. In short, remove the tariffs.

Alfredo Carrillo Obregon, Clark Packard, and Scott Lincicome applaud new efforts in Congress to rein in the executive-branch’s abuse of its delegated power to set tariffs punitive taxes on Americans’ purchases of imports.

Stuart Anderson and Mark Regets warn that “Trump is set to mark a dangerous first for the labor force.” Two slices:

Donald Trump is on track to become the first president in a century to oversee a U.S. labor force that will be smaller when he leaves office than when he entered. Since the start of his second term, the number of people in the United States who are either employed or looking for a job has dropped by 1.6 million — and it’s largely because of Trump’s immigration restrictions. Unless those policies change, a shrinking workforce will cause slower economic growth and lead to more expensive public debt.

This is an anomaly in U.S. history. The civilian labor force has increased by the end of every president’s term, with the possible exception of Abraham Lincoln’s because of the number of people who left the workforce to fight in the Civil War.

Growth accelerated in the decades following World War II largely thanks to the baby boom, increases in female workforce participation and a spike in immigration after 1965. The labor force increased by 6.7 million during Ronald Reagan’s first term and by 8.7 million during his second. Similar growth occurred under Bill Clinton. Falling birth rates slowed the expansion of the U.S.-born labor force after the early 2000s but thanks to immigration the number of total workers still rose by 1.6 million during Barack Obama’s first term and by 3.9 million during his second.

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Removing immigrants from the labor force reduces the domestic market for goods and services. Immigrants are not only workers, but also consumers. As immigrants are expelled and the labor supply shrinks, economic growth diminishes and employers have fewer opportunities to invest in their businesses. That discourages employers from developing their employees’ skills or taking a chance on lower-skilled workers.

The Wall Street Journal‘s Editorial Board reports that “jobs and wages are booming in counties that welcome AI.” Two slices:

President Trump has drawn condemnation for suggesting that communities that block data centers will end up “backwards and poor.” His remark was hyperbolic, but he’s right that areas embracing data centers are enjoying more jobs and faster wage growth.

The Bureau of Labor Statistics last week published industry-level data on state and county employment and wages through March of this year. We compared growth in Loudoun County, Va.—known as Data Center Alley—with other Washington, D.C., suburbs since early 2020 before the pandemic. The disparities are striking.

Loudoun has long been a hub for data-center development because of its easy zoning, relatively low-cost energy and geographical proximity to telecom network exchanges. It’s an exurban county with more land for growth than older suburbs closer to D.C. But it has also embraced growth, unlike those older suburbs. Construction growth has accelerated amid the AI boom, with permitted data-center space increasing by some 150% between 2020 and 2025. Jobs have followed.

Most counties surrounding the capital have experienced little job growth since the pandemic. Loudoun is the exception, with employment surging 17.4% since early 2020. Jobs increased by 1% or less in Fairfax County, Va., and Prince George’s County, Md. Virginia’s Arlington County (-7.3%) and Maryland’s Montgomery County shed jobs (-5.6%).

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Data centers can help to spread prosperity without government intervention and income redistribution. Could that be the real reason America’s political class is turning against them?

Eric Zwick and Owen Zidar share the results of their research that reveals that, in America, the people who get richer than most of their fellow Americans earn their success through entrepreneurship, risk-taking, and hard work – effort that also enriches their fellow Americans. Three slices:

Dick Portillo opened a hot-dog stand in 1963 without knowing how to cook a hot dog. Half a century later he sold the company for $1 billion. The proceeds bought a Chicago-area mansion, a private jet and a 12,000-square-foot waterfront home in Naples, Fla., with its own dock to moor his 130-foot yacht, Top Dog.

“I came from a poor family and at one time thought I didn’t have anything to offer the world,” Portillo wrote in a memoir. The youngest of three children, he was born in Chicago to immigrants from Mexico and Greece and raised partly in one of the city’s most notorious housing projects.

By 2014, the stand he’d built with $1,100 had become the Midwest’s largest privately owned restaurant company with 4,000 employees and no franchises or outside investors. A single Portillo’s could bring in $9 million a year, roughly three times a typical McDonald’s.

Stories like Portillo’s rarely make the news. His business was private. He sold hot dogs, not some shiny new technology. His success grew slowly over decades and in the upper Midwest away from the coasts.

But Portillo’s story is hardly unique. Across America, such business owners—we call them Everywhere Millionaires—have built extraordinary fortunes running ordinary businesses. Some launched their own ventures, working long hours and reinvesting the profits to stay afloat and grow. Others inherited a family firm and built upon the success of prior generations.

Pop culture portrays the rich as an elite few, akin to the Rockefellers and Carnegies of the Gilded Age. But rich private business owners are now so plentiful that we’re living in America’s first Age of Millionaires.

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Indeed, the typical path to $10 million and up comes from owning a company. That path is open in every town, in unglamorous industries, to people without top test scores, fancy degrees or rich parents.

And you don’t need to be a genius to be a successful entrepreneur. The relationship between starting a star business and SAT scores is, in fact, quite weak. The top 10% of test scorers become founders of businesses only 1.3 times as often as those at the median. What matters more is real experience in the working world or early exposure to a family business.

Portillo, for example, didn’t go to college. He enlisted in the Marine Corps seven days after graduating high school in 1957, and he considers his two years at Camp Pendleton among the most important of his life. They taught him teamwork, organizational planning and a deep appreciation for proper training, all of which he later used in building his business.

And increasingly, the opportunity of “unsexy” businesses is drawing elite graduates away from the traditional big-city jobs.

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Unlike the transformational innovation central to economic growth, the innovations of Everywhere Millionaires are often more incremental. Dick Portillo learned to steam buns by watching someone else do it. From that, he built a billion-dollar hot dog behemoth. His business grew because he sold a product that people wanted.

Fifty years later, so did the founders of Dave’s Hot Chicken. Three friends started it in a Los Angeles parking lot with $900 and a passion for Nashville-style hot chicken. Eight years later, they had more than 300 locations and sold the business in 2025 for $1 billion. Several generations removed from Portillo, their success shows that the path from limited means and no fancy degrees to fabulous wealth remains open today.

Casual dining is the poster child of free competition, with businesses opening and closing all the time. We consumers benefit from that churn, as does the economy. Incremental product improvements by one business force its competitors to respond with their own improvements if they hope to keep pace and not lose customers.

Phil Gramm and Mike Solon tell how Ronald Reagan led the way in making Social Security solvent for several decades.

Michael Pakaluk writes with enormous good sense and knowledge about the use and – increasingly – the abuse of the concept of “the common good.”

Philip Klein is right to pay close attention to J.D. Vance’s clever evasiveness and duplicity.

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… is from page 213 of Menzie Chinn’s and Douglas Irwin’s superb 2025 textbook, International Economics:

The past few decades have been an era of globalization. Most countries have moved to reduce trade barriers and take advantage of growing world trade. How have they done so? One way a country can reduce its tariff and non-tariff barriers is simply to act unilaterally. A unilateral tariff reduction occurs when a government decides to reduce its import duties on its own, independently of other countries. In recent years, many developing countries have chosen this path. When China, India, Vietnam, and other Asian countries opened up to world markets, they did so based on domestic political changes in favor of economic reforms, including a more open trade policy.

DBx: Yep.

Contrary to the claims of many protectionists, these Asian economies did not grow because of protectionist measures but, rather, only when they, largely on their own, reduced their protectionist measures. Nor did the growth of these countries’ economies occur at the expense of the United States. Americans grew richer as the people of these countries grew richer.

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This letter of mine – available here by scrolling down – will appear in the print edition of tomorrow’s (September 4th’s) edition of the Washington Post:

Regarding the Sept. 2 news article “Treasury secretary downplays bond market concerns”:

Treasury Secretary Scott Bessent described the sentiment of all but one of the members of the Group of 20 Tuesday, saying that “we believe that non-market-based economies pushing out a never-ending stream of cheap exports is not sustainable.”

Bessent’s correct that the continued exportation of goods at prices below cost is unsustainable. But it’s unsustainable for the exporting countries, not for the United States.

Americans are enriched by the opportunity to purchase goods at prices that are partly subsidized by foreigners. There’s nothing unsustainable about our ability to buy and consume such goods.

What’s unsustainable is foreign companies’ ability to continue to sell their exports to us at prices below costs. If foreign companies are indeed engaging in this self-destructive folly and, as Bessent seems to think, are intent on persisting in it, they will eventually transfer all of their wealth to us. They’ll then no longer be able to afford it, and so it must end. But the resulting damage falls on foreigners, not on Americans.

True champions of a “put America first” policy should cheer, not jeer, foreign companies’ determination to sell exports to Americans at prices below cost.

Donald J. Boudreaux, Fairfax

The writer is an economics professor at George Mason University.

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Daniel Hannan, Director-General of the Institute of Economic Affairs, righty criticizes J.D. Vance’s clueless hostility to economics and free markets. Two slices:

JD Vance is the latest postliberal to embrace what is now, for all intents and purposes, an anti-growth position.

In his latest book, Communion, Vance inveighs against those perennial straw men, the GDP-obsessed economists. We keep hearing about these mysterious figures, cold-hearted calculators who believe that GDP is the only measure that counts. Oddly, despite running the world’s foremost classical liberal think tank, I have yet to meet one.

Vance, though, is convinced that people who “struggle to put a value on anything that can’t be specifically measured” not only exist, but run America. The country is governed, he tells us, “by numbers on a spreadsheet and the people who built those spreadsheets.”

He goes on to write, with the air of a man imparting an original insight, that looking after your children is more fulfilling than adding to GDP. Well, yes, obviously. Whom does he imagine disagrees? Economists, practitioners of what Vance, unconsciously quoting a pro-slavery tract, calls “the dismal science,” will point out that higher living standards — higher GDP, if you insist — frees up time to play with your kids, because you no longer need to work six days a week just to feed them. But no economist, indeed no parent, has ever argued that you get more pleasure from a large bank balance than from reading a bedtime story.

We are used to hearing degrowth rhetoric from the extreme Left. To hear it from a leading figure in the main right-wing party — Vance is said to have locked down big donors and the Republican National Committee in advance of the next presidential election — is extraordinary.

Large chunks of what are still sometimes called the Right have adopted radical socialism: NatCons, Groypers, integralists and a mass of the MAGA rank-and-file. While much of the democratic world has seen a political realignment, in which culture displaces economics as the chief division, this development makes the United States an outlier.

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I suspect that Vance’s real game is to depreciate the whole concept of economic growth because several of the policies he favours, notably on trade, will reduce it. If free trade is the last idea that unites every economist, then, for Vance, the entire profession must be flawed. Or as the vice president puts it in his book, “Maybe economics is just fake.”

Charles Calomiris reveals “the hidden lesson in the history of the Lucas Critique.” Two slices:

The reason contributions to economic thinking can be the butt of such jokes is that they are formalizations of ideas that in some sense we already knew. But formalizations can be important because they show not just that intuition is right, but exactly why it is true, that is, how its truth emerges from and fits into a broader way of thinking about the world. In the process, the logic of many related truths that weren’t so clear are also brought to light.

In the case of the Lucas Critique, its author pointed out that rules of thumb about economic behavior from the past are subject to change if policy circumstances change. The way people set prices for their goods and labor in the market, for example, depends on their expectations of the prices of other goods and services they will have to buy. Past patterns of behavior in price and wage setting may not persist if policies change, and if those changes make people see that they will need to change their price setting behavior accordingly. For example, if an observable expansionary monetary policy causes people to expect prices in general to rise, everyone will be more demanding in the prices they charge for their own goods and services.

Or as Robert Lucas put it in his influential 1976 Carnegie-Rochester volume paper, Econometric Policy Evaluation: A Critique: “Given that the structure of an econometric model consists of optimal decision rules of economic agents, and that optimal decision rules vary systematically with changes in the structure of series relevant to the decision maker, it follows that any change in policy will systematically alter the structure of econometric models.”

The example that Lucas had most in mind was monetary policy’s effects on employment and real output. What we now call “the great inflation” of the 1960s and 1970s was front of mind in 1976. Today it is viewed as a colossal, persistent policy error. Students learn that the cause of the great inflation was that when our government increased its spending (both to fight the Vietnam War, and to achieve the ambitious domestic agenda of the Great Society objectives) the Federal Reserve accommodated the rising deficits by expanding its purchases of government debt, which produced accelerating inflation.

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The many years of denial in the 1960s and 1970s may be the most important lesson we should learn from the history of the Lucas Critique. That self-serving reluctance to learn from economic facts and logic seems as present today as it was then.

The Trump Administration says that trade deficits are evidence that a country is being abused by others and that tariff policies will promote growth by substantially onshoring the global supply chain. Both those claims ignore a vast theoretical and empirical literature in economics. That literature shows that trade deficits today mainly reflect the desire of foreigners to invest in the US. And economic evidence is unanimous in showing that tariffs harm growth by limiting our pursuit of comparative advantage in supplying some goods and services.

The Editorial Board of the Washington Post asks: “State control over oil broke Venezuela. Why is Trump doubling down?” A slice:

President Donald Trump’s removal of socialist dictator Nicolás Maduro in January offered a generational opportunity to counteract the failures of Venezuela’s socialist policies. A pro-America opposition appeared ready to usher in a free market and end the state’s suffocating grip on oil production. Eight months later, the White House’s deal with Maduro’s former vice president risks entrenching the people and policies that tanked the country’s economy in the first place.

And Reason‘s Eric Boehm writes that “Trump’s Venezuela oil deal sells out democracy and free markets.” A slice:

Under the terms of the deal announced by the White House on Monday, the government will hold a 35 percent stake in North American Blue Energy Partners, previously the second-largest private oil producer in Venezuela. The federal government will also hold “veto power over the appointment of any member of” the company’s board of directors, the White House announced.

This is a rather shocking expansion of the state corporatism that the Trump administration has mainstreamed into American politics. Now, in addition to owning stakes in more than two dozen American companies, the Trump administration is giving the federal government direct control over an oil company that will operate in a foreign country while competing with other American and international firms.

It is effectively the “American nationalization of Venezuelan oil,” as National Review termed it. The Trump administration has apparently decided it can solve socialism in Venezuela by…doing socialism in Venezuela.

Meanwhile, the deal also seems likely to create additional hurdles to the democratic transition in Venezuela—a country that is still officially governed by socialist Delcy Rodríguez, Maduro’s second-in-command, who was appointed as interim president by the Trump administration in January.

Writing about Republicans from midwestern farm states, National Review‘s John Puri describes them as “conservatives in the sense that they seek to conserve FDR’s system of farm socialism. Nowhere is this clearer than on ethanol.”

Michael Segal writes informatively about U.S.-Canada trade relations. A slice:

There are numerous discrete problems in U.S.-Canada trade. Canada has a dairy quota, and the U.S. is reluctant to buy Canadian aluminum even though Quebec can produce it inexpensively using hydroelectric power. These can be solved easily. The big problem is the Segal issue—which is named for a cousin of mine.

The Segal issue held up the 1993 North American Free Trade Agreement for months. Publicly it was called the “textile issue,” but in private the negotiators called it the “Segal issue.” Most of the dollars involved a Canadian manufacturer of men’s suits, Peerless Clothing, which was led, after my father’s death, by his first cousin Alvin Segal.

The problem was that Peerless could import fine Italian cloth duty-free to Canada and make it into suits that could be sold in the U.S., undercutting American manufacturers, which faced U.S. tariffs if they imported the same cloth.

The Nafta negotiators worked around this problem by giving Canadian manufacturers a break from Nafta tariffs according to their existing shipments to the U.S., much of which accrued to Peerless. A more elegant repair came in 2001, during the final days of Bill Clinton’s presidency, when the Commerce Department dropped duties on importing Italian cloth to the U.S., leveling the playing field for Canadian and U.S. manufacturers. When the U.S.-Mexico-Canada Agreement replaced Nafta in 2020, Alvin thought the new changes were also wise.

Today, the same issue—different tariffs on imported inputs from other countries—is the core problem between Canada and the U.S. The problem has re-emerged because President Trump has reversed Bill Clinton’s approach and raised tariffs on a vast number of items. That creates a huge flurry of Segal-like issues in many different sectors of manufacturing and trade. There are so many tariffs that differ between the U.S. and Canada that fair trade between the two countries has become overly complicated to achieve.

Mr. Trump may prefer to solve the issue by demanding that Canada raise and lower tariffs in tandem with America. Ottawa wouldn’t accept that. It would be a huge affront to Canadian independence, and it would inflict on Canada the chaos of frequent U.S. tariff changes.

The most sensible approach would be to emulate Mr. Clinton and eliminate most tariffs, with exceptions for national security. As a dual Canadian-American citizen I could imagine friendly Canadians and Americans agreeing jointly to such a plan. Yet even though Mr. Trump thinks so highly of Canada that he has offered it statehood, his enthusiasm for tariffs is greater.

Bill Saporito rightly call Trump’s tariffs punitive taxes on Americans who buy aluminum from Canada “nuts.” Here’s his conclusion:

It’s not cheating when Canadians undersell American aluminum producers. It’s an advantage. It’s logical for the United States to import lower-cost Canadian aluminum and invest in industries in which America enjoys its own advantages — chip design and artificial intelligence, for instance.

Who would flout this logic, trashing a 150-plus-year relationship with a close ally in a disruptive attempt to separate two interdependent economies? Oh, right.

John Stossel reports on the failure of rent control in St. Paul, Minnesota.

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… is from page 179 of David Friedman’s superb 1996 book, Hidden Order:

A capital inflow occurs because foreign investors can get a higher real interest rate here than at home. If the reason the interest rate is high is, as sometimes asserted, that Americans have become increasingly impatient, unwilling to give up present utility for future utility, then it is a symptom of a change that will ultimately make us poorer – we are living on future income and some day the bill will come due. If the reason is that American firms have lots of good investment opportunities, and are therefore happy to offer higher rates than Japanese firms, the bill will still come due, but we will have the returns from those investments to pay it with.

DBx: Yes.

Note that Friedman here writes only of foreign investments incoming to the U.S. made as loans to Americans. Many other foreign investments incoming to the U.S. are not loans; on these investments, nothing ever need be paid back by Americans. An example is a German company building and operating an automobile-producing factory in South Carolina. The shareholders of this firm of course expect to profit, but if the firm fails, the losses are borne by that company’s shareholders and not by Americans. And if that firm succeeds, the positive returns to the shareholders are newly created wealth that would never have existed absent this investment. These returns, in essence, are paid by these shareholders to themselves (despite the fact that international commercial accounting creates the appearance that these returns to foreigners are paid by Americans).

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Until recently I did the following such calculations ‘by hand,’ but I recently realized that ChatGPT can reliably perform these calculations accurately and much more quickly than I am manually able to do so. So this morning I asked ChatGPT to compare the performance of each of the three major U.S. stock-market indices so far during Trump 2.0 (since election day 2024) to their performance over the same time period during Trump 1.0. Remember, Trump 1.0 – although featuring some tariff hikes – gave us nothing like the trade-policy uncertainty and massive tariff hikes of Trump 2.0. Remember also that during Trump 1.0, AI wasn’t much of a thing.

Here are the results of my AI-assisted research:

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National Review‘s John Puri is right: “We don’t need a strategic petroleum reserve.”

The Editorial Board of the Wall Street Journal applauds the reality-signal now being broadcast by the bond market. Here’s its conclusion:

But overall the return to normal debt markets is a good development. U.S. debt held by the public at 100% of GDP is a problem, and on present trend it will get worse. Interest on the debt is now $1 trillion a year, more than the defense budget, and growing. Neither party in Washington is willing to reform the runaway entitlements that are driving the debt.

The bond vigilantes aren’t yet in full cry, but their early murmurs are welcome. They are sending a message to Washington and other Western nations to clean up their fiscal acts. Bond investors may be the only people who can force the politicians to pay attention. The real worry is if the politicians don’t listen.

GMU Econ alum Dave Hebert ponders trade-war strategies.. A slice:

But leverage is not measured by how large your market is. It’s measured by the other party’s next-best alternative. Every time Canada, Europe, Japan, or Britain signs a new trade agreement, that next-best option improves and lowers the cost of saying no to Washington.

This is what tariff strategists and their defenders keep missing. Tariffs can work as a negotiating tool only if two conditions are met. First, the other country must have something it can do to make the tariffs go away. Second, they must not have viable alternatives. If the rules and justifications for tariffs keep changing, if the list of demands keeps expanding and shifting, and if compliance today does not mean predictability going forward, the only rational response is diversification.

And that is exactly what the G7 have been doing.

But while Washington was raising tariff rates on friends and foes, the rest of the G7 has been busy signing new agreements around the world. In January, the European Union concluded its agreement with Mercosur, linking 700 million consumers and saving European firms €4 billion ($4.7 billion) per year in duties once it is fully in force. Shortly thereafter, the EU finished a free-trade agreement with India, which will cut Indian tariffs on 96.6 percent of EU exports.  And in March, the EU completed another deal with Australia and signed a security and defense partnership on top.

Jim Bacchus describes other countries’ diversifying their trade away from the U.S. as “the other Liberation Day.” Two slices:

As the United States under President Donald Trump endeavors to coerce international trading partners through the employment of economic leverage to address both its trade and non-trade concerns, those trading partners, more and more, are simply circumventing the United States.

…..

In all this, and much more, the current transformation of international trade positions the United States on the outside looking in—and likely to watch its already-middling share of global exports shrink even more in the years ahead. US trade policy has increasingly turned the country from a paragon of international trade into a pariah and a market to be avoided, if at all possible. The distinguished international trade economist Robert Lawrence has asserted that President Trump’s trade policies are helping “create a world without America.” This stark assertion may edge a bit toward exaggeration, though less and less so as time passes. What can be stated with increasing certainty is that the protectionist trade policies of Donald Trump, ever in flux, are making it less likely that archaeologists 5,000 years from now will identify the geographical center of 21st-century world trade as being in the United States. To avoid this fate, the US must return to its long-standing policy of freeing trade and establishing and upholding the international rule of law in trade. This should be done through regional agreements, if need be, but preferably within the multilateral legal structure of the World Trade Organization, a vital international institution for which President Trump has so far expressed only contempt.

David Henderson, writing in the Wall Street Journal, makes a powerful case that “California’s wealth tax would spare no one.” A slice:

We’ve seen this before. After the 16th Amendment authorized the federal income tax, it started small. In 1913 the tax rate on married couples filing jointly was 1% on income up to $20,000 (equivalent to some $674,000 today). The top rate was 7%, on income above $500,000 ($16.8 million today). Five years later, in the midst of World War I, the rate was 6% on income up to $4,000 and 77% on incomes over $1 million.

Under Presidents Warren G. Harding and Calvin Coolidge, and with the urging of Treasury Secretary Andrew Mellon, Congress brought rates down substantially at all income levels. But the lowest level they reached, in 1928, was still much higher than in 1913: 25% for incomes over $100,000, and 1.5% to 9% on income up to $20,000.

Then World War II brought higher rates again at all levels. Tax rates on lower incomes were high: 23% on income up to $2,000. Before World War II, the income tax was thought of as the class tax—a high tax on high-income people. In World War II, it became a mass tax.

There’s a lesson here. If you vote for a measure to tax the very wealthy, you might find yourself paying rates even above those meant for the very wealthy. Proposition 40 has the potential to become a stealth tax on all Californians.

Reviewing Unconventional Education and America’s Founding, edited by Nasiyah Isra-Ul at the Foundation for Economic Education, Laura Williams offers much-needed wisdom about education in the U.S.

Let’s hope that Christian Britschgi is correct when he argues that data centers will be saved by federalism…. And perhaps he is!

Here’s the abstract of a new paper by J. Carter Braxton, Kyle Herkenhoff, Chengdai Huang, Michael Nattinger, Jonathan L. Rothbaum, and Lawrence D.W. Schmidt:

We document an increase in U.S. income risk from 1969 to 2019 using newly digitized IRS tax returns, distinguishing permanent from transitory risk. Since the 1970s, permanent income risk increased across the distribution, but most sharply among high earners, rising nearly 70% among the top 5%. We show that, even among top earners, large negative income shocks strongly predict financial distress and higher income risk is linked with higher savings. In a quantitative life-cycle model, rising income risk concentrated at the top lowers the risk-free rate by 0.7pp, increases wealth inequality, and contributes to the “savings glut of the rich.”

Jeffrey Williamson has died.