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David Henderson’s new biographical essay on Anne Krueger is now up at the Concise Encyclopedia of Economics. Two slices:

Possibly Krueger’s most important contribution to economics is her June 1974 article in the American Economic Review, “The Political Economy of the Rent-Seeking Society.” While in some ways, Gordon Tullock had beat her to the punch with his 1967 article in the Western Economic Journal, “The Welfare Effects of Tariffs, Monopoly, and Theft,” Krueger did a more careful analysis. She also introduced the term that stuck, namely “rent seeking,” and presented some estimates that showed the potentially large cost of rent seeking to the economies of Turkey and India. That she chose those two countries was a natural result of her having spent significant time in both countries, carefully studying their economic systems. In particular, she had closely examined quotas on imports that both countries’ governments used extensively. When a government has discretion in allocating quotas, potential importers will compete for those quotas. The competition might even take the form of bribing government officials.

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Krueger defends the idea that globalization, whatever its problems, has created large net benefits for the people affected by it. In Struggling with Success: Challenges Facing the International Economy (2012), a collection of her speeches and essays, she wrote that, starting in about 1800, globalization led to huge gains for industrial countries and then, after World War II, led to huge gains for almost all countries. The evidence for this, she noted, is that life expectancies increased dramatically around the world, debilitating disease has fallen, and real incomes have risen by a large percentage. How did globalization contribute? By increasing trade across borders. Globalization increased over the last two centuries and especially since World War II for two main reasons: falling transportation costs and reductions in tariffs and in other trade barriers.

The Editorial Board of the Wall Street Journal explains that “cutting the beef tariff is a good idea, but pausing the federal gas tax isn’t.” Two slices:

Mr. Trump may not want to be reminded, but John McCain pitched a gas tax holiday in 2008 during his presidential campaign as prices surged toward $4 a gallon. Ditto Joe Biden in June 2022 when prices hit $5 a gallon after Russia’s invasion of Ukraine. Republicans panned Mr. Biden’s proposal as a “gimmick,” and neither placated voters.

That’s because a temporary pause on the federal gas tax won’t appreciably reduce how much Americans pay at the pump. After the tax holiday ends, prices will increase. A suspension would cost the highway trust fund about $2.1 billion a month in revenue, which would have to be made up with general fund revenue.

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Tariffs are charged on [beef] imports that exceed the quotas, typically at a rate of 26.4%. The quotas are intended to protect U.S. ranchers from foreign competition, but there are other ways to help the industry without raising costs for Americans. For example, ease livestock regulations and Endangered Species Act protections for wolves that prey on cattle.

The best and most immediate way Mr. Trump could reduce costs for Americans would be to drop his tariffs en toto. We know that won’t happen, but it would be a big political and economic winner.

Larry Martin counsels against scrapping the USMCA (the successor agreement to NAFTA).

GMU Econ alum Eli Dourado tweets: (HT Scott Lincicome)

Q1 numbers are in, and utilization-adjusted TFP is down 2.18% annualized.

I regret to report that the 20s are still not roaring.

It seems as though Gavin Newsom’s policy proposals are now concocted by writers for Saturday Night Live. Here’s a slice from a Wall Street Journal editorial:

California’s government can’t keep homeless off the streets, keep energy prices low, or do much of anything else well. But never fear, Gov. Gavin Newsom’s state diaper service is here.

The California Governor who wants to be President said Friday that the state will soon begin providing every “newborn delivered in a participating California hospital” 400 diapers at no cost. “This is what affordability looks like,” he said. “It’s not a slogan. It’s a box. It’s a box of diapers.” Apparently he’s serious.

Californians pay an average of $6.15 a gallon for gasoline, and most can’t afford to buy a home (median price: $750,000). Many parents struggle to pay for a Happy Meal because the state’s $20-an-hour minimum wage for fast-food workers has increased prices. But here’s a box of diapers as a political salve for the state’s costly policies.

J.D. Tuccille is correct: “Don’t waste time arguing over the Surgeon General nominee. Abolish the office.”

Vance Ginn argues that “freedom still works.”

Constanza Mazzina reflects on Adam Smith’s influence in Argentina. A slice:

As the global intellectual community commemorates the 250th anniversary of Adam Smith’s An Inquiry into the Nature and Causes of the Wealth of Nations (1776) this year, the lens of history often focuses on the industrial heartlands of Europe or the early expansion of the United States. However, one of the deepest and most successful applications of Smithian philosophy occurred in the Southern Cone of the Americas. Juan Bautista Alberdi, the intellectual father of the Argentine Constitution (1853), did not merely read Smith; he transformed his economic theories into a foundational institutional framework for a new nation. By analyzing Alberdi’s work, we see that the “Argentine Miracle” at the turn of the nineteenth century, was not a geographic accident, but a deliberate institutional translation of the Scottish Enlightenment.

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… is from page 4 of the late historian Joyce Appleby’s (uneven) 2010 book, The Relentless Revolution: A History of Capitalism:

[I]t can’t be stressed too much that capitalism is as much a cultural as an economic system. A new way of establishing political order emerged. People reversed how they looked at the past and the future. They reconceived human nature. At a very personal level, men and women began making plans for themselves that would once have appeared ludicrous in their ambitious reach.

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The illogic of Trumpian protectionism is Everestian.

Editor:

Ed Gresser masterfully exposes many of the economic fallacies that the Trump administration trots out to justify its punitive taxation of Americans’ purchases of imports (“The ‘Overproduction’ Excuse for Trump’s Tariffs,” May 11). But these fallacies are so numerous that not all of them can be elaborated on in the space allowed.

An example is the inconsistency of the administration’s complaint, on the one hand, that foreign countries produce too many goods that are then exported to the U.S., and on the other hand, that foreign countries have too much industrial capacity that is unused.

If, as the administration believes, Americans’ economic fortunes are damaged by foreigners producing excessively and then offering to sell that ‘excess’ production to us, why does it complain that foreigners are producing less than their production capacity allows? According to the administration’s own logic, foreign producers’ failure to more fully use their capacity should be cause for celebration rather than criticism.

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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Writing in the Washington Post, the Cato Institute’s Scott Lincicome explains that “the main culprit for labor’s shrinking share of the economic pie is government policy, not greedy corporations.” Two slices:

There is no standard measure of the “labor share” — worker compensation as a fraction of gross domestic product — and commonly cited figures are inaccurate. They often omit important sources of employee compensation or distort “corporate” income by failing to account for asset depreciation or by including income from noncorporate or foreign sources. When economists correct these errors, the purported labor-share decline becomes more modest or reverts to historical norms.

Just as important, a rising share of corporate income benefits the 62 percent of American workers who own equities, padding their 401(k)s, IRAs, pension funds and education and health savings plans. With “Trump accounts” for millions of children now coming online, that figure should soon increase, further undermining the zero-sum characterization of a declining labor share as “capitalists” taking from “workers.”

Finally, inasmuch as the decline remains concerning, government policy shoulders much of the blame. In a paper published last month, economists Byunghee Choi and Choongryul Yang find that 45 percent of the declining labor share between the late 1990s and 2019 owed to a reduction in U.S. companies’ hiring and firing. This “rise of inaction” was driven by the increasing costs that firms incurred for worker-related regulatory compliance and employer-provided health insurance.

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That is consistent with other research. Economist Niklas Engbom examined 23 OECD economies between 1991 and 2015 and found that nations with more dynamic labor markets enjoyed faster wage growth. Policies that raised hiring costs — business regulations, labor taxes, employment-protection laws — also reduced labor-market fluidity. Research from Columbia University has found similar effects, which recent events bear out: Immediately after the pandemic, the United States — Engbom’s base case for a “typical high-fluidity country” — experienced lower unemployment and faster wage growth than Europe, where governments discouraged employers from changing headcounts.

U.S. Supreme Court Associate Justice Neil Gorsuch argues that the Declaration of Independence sets the standards by which America should be judged. A slice:

Nor should our nation’s imperfections blind us to the tremendous inheritance we have received. Even a quick glance through history and around our world today confirms how rare it is for a nation to be founded on the hope of realizing equality, liberty and self-government for its citizens. As Daniel Webster observed, it took thousands of years of human history for a nation devoted to the Declaration’s three great ideas to arise, and “miracles” like that “do not cluster.”

The legacy of the Declaration, though, owes only a partial debt to the genius of the document and those who wrote it. Its real guardian, and its hope for the future, lies in the hearts of the American people. Equality, liberty and self-government became the nation’s creed because Americans in generation after generation chose them. And the survival of those ideas depends on each passing generation learning about them anew, engaging with the history that gave rise to them, and choosing them all over again.

Yes, we have our differences. But that was true even at our nation’s founding. Americans hotly debated whether to part ways with Britain. The first vote on the Declaration of Independence split the colonies. Federalists and Anti-Federalists disagreed over whether to ratify the Constitution. Today Americans disagree strongly about important matters, as they always have and perhaps always will. But that, in many ways, is our nation’s greatest strength. By allowing everyone to speak and vote, we seek to harness the ideas of not only one ruler or group of elites; we seek to tap the full wisdom of the American people. In the face of disagreement, we speak and listen, debate and compromise, vote and then chart our way forward together. All of that is exactly what the Declaration hoped for us, and all of it lies at the core of the great American experiment.

Mitch Daniels rightly worries about the U.S. government’s outlandish fiscal recklessness. A slice:

Let’s stipulate that AI will be the transformative wonder that its inventors foresee; that the CBO and other forecasters have often tended to underestimate U.S. economic growth, especially in environments of lightened regulation and taxation; and that the United States somehow sails through an unprecedented streak without a single costly exogenous blow.

It still ain’t enough.

Otto von Bismarck supposedly proclaimed, “There is a Providence that protects idiots, drunkards, children and the United States of America.” After decades reelecting a Congress whose spending behavior qualifies for the first three categories, we can’t count on providential salvation.

This is no time to be touting miracle cures to justify further procrastination. Until America acts to make major changes in laws on the books, the right side of our national business-plan chart will continue to show a sharp downward line and the label, “Big trouble happens here.”

Matthew Lau warns that the Canadian government’s practice of industrial policy through a sovereign wealth fund will harm Canadians. Here’s his conclusion:

Far from driving long-term growth and competitiveness, the Liberal government’s economic policies, including its industrial policy, carried out in large part by the federal entities named in its sovereign wealth fund announcement, have contributed to a productivity crisis and a collapse in business investment in Canada. Carney’s new proposal only promises more of the same.

Andrew Lilico reviews – for which we are grateful – Phil Gramm’s and my 2025 book, The Triumph of Economic Freedom.

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… is from page 35 of Menzie Chinn’s and Douglas Irwin’s superb 2025 textbook, International Economics:

Imports are the benefit of trade, and exports are its cost. Imports directly increase consumers’ utility by making higher utility combinations of goods available than under autarky. Exports, however, do not directly benefit anyone inside the country; they are goods that are produced but given up to other countries. However, the revenue earned from the exports is what pays for the imports that enable consumption to be higher. In other words, the gains from trade arise from imports, and exports are the cost of acquiring imports.

DBx: Yes. This truth is fundamental.

Once you grasp this truth, you cannot help but see that protectionists aim to reduce the gains that their fellow citizens reap from trade. And you cannot help but be mystified that many of the people whose gains from trade are reduced by protectionism continue to mistakenly suppose that, by having their gains from trade reduced, they are somehow enriched.

The logic of the protectionist case is that it’s somehow beneficial for citizens of the home country to work as if they are slaves to citizens of foreign countries: Produce as much as possible for export and receive in return as little as possible. That’s the protectionist (il)logic.

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Such is the ludicrous ‘logic’ of Trumpian trade policy.

Editor, Wall Street Journal
1211 6th Ave.
New York, NY 10036

Editor:

Ed Gresser rightly ridicules the Trump administration’s ridiculous assertion that a country violates the rules of trade whenever that country produces more of any particular good than the citizens of that country purchase for their own consumption (“The ‘Overproduction’ Excuse for Trump’s Tariffs,” May 11). Such allegedly ‘excess’ production, of course, is the norm in trade for countries just as it is with firms. Yet according to Trumpian reasoning, the Ford Motor Company unfairly restricts the commerce of General Motors by producing more automobiles than Ford workers and shareholders purchase – and GM inflicts an equal unfairness on Ford! The government must prevent such injustice!

The logical implication of this Trumpian case for protectionism is that no individual should produce anything beyond what he or she personally uses. In such an ‘economy,’ every person, as a producer, would never be threatened by the ‘excess’ production of other producers. But as a consumer, each person would be unimaginably destitute.

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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Here’s a letter to UVA Lawyer.

Editor:

In a recent speech at UVA Law, U.S. trade representative Jamieson Greer agreed with the notion that U.S. trade needs “rebalancing” (“U.S. Trade Representative Jamieson Greer ’07 Delivers VJIL Keynote,” Spring 2026).

This alleged need is mentioned much, as if it’s a fact as well established as are the laws of thermodynamics. Indeed, U.S. trade deficits are said to be a crisis that triggers presidential powers to impose tariffs under Section 122 of the Trade Act of 1974.

Mr. Greer might be a fine lawyer; he was, after all, trained at UVA Law! But he’s apparently not so fine an economist. Every cent of U.S. trade deficits – more precisely, current-account deficits – is a cent of U.S. capital-account surpluses. That is, U.S. capital-account surpluses exactly balance U.S. current-account deficits, so there’s nothing economically that needs “rebalancing.”

And not only is U.S. trade not unbalanced, America’s decades-long streak of capital-account surpluses means that America is a net recipient of global capital. Investors from around the world have for decades placed, and continue to place, their bets on the U.S. economy. This net inflow of capital enriches not only foreign investors, but also us Americans by increasing the size and productivity of our capital stock, as well as by being a channel through which non-Americans’ entrepreneurial ideas are tested and put to productive use in America.

The administration’s efforts to halt these capital inflows – which is what it means by ‘rebalancing’ trade – reflects a profound misunderstanding of economics and international commerce. If the administration succeeds, we Americans will pay a steep price.

Sincerely
Donald J. Boudreaux (UVA Law ’92)
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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… is from Michelle Clark Neely’s excellent April 1993 paper, “The Pitfalls of Industrial Policy”:

When a government directs resources toward some industries, however, it effectively takes them away from others. Economic theory and practical experience teach us that individual entrepreneurs and firms are better equipped to make these choices.

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GMU Econ alum Meg Tuszynski, writing in the Dallas Morning News, explains what states like Texas can teach states like New York about inequality. Two slices:

When Americans talk about inequality, they usually mean outcomes — who has more and who has less. But a deeper divide runs beneath those outcomes: the growing gap between states that enable economic mobility and those that quietly restrict it.

The Economic Freedom of North America report, from market-oriented think tank Fraser Institute, captures this divide. It measures how much freedom people have to make economic choices — where to work, what to invest in and how to build a life. It evaluates states across three areas: government spending, taxation and labor market regulation.

The results are striking. States like New Hampshire, Tennessee, South Dakota and Texas consistently rank near the top, thanks to relatively light fiscal burdens and flexible labor markets. States like New York, California, Hawaii and New Mexico rank near the bottom. Policy ideas like Mamdani’s proposed rent freezes and raising corporate taxes, along with higher minimum wages, threaten to keep New York perennially stuck at the bottom.

These rankings aren’t just abstract scores. They correlate strongly with real-world outcomes. States with higher levels of economic freedom tend to see faster income growth, stronger job creation and larger inflows of new residents.

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No state is perfect. But the pattern is clear. States that allow people to work, invest and build with fewer barriers tend to generate more opportunity — not just for some, but for everyone.

John Phelan warns the State of Minnesota not to impose a wealth tax.

George Will accurately describes many of the freshly minted college graduates who are now receiving their diplomas as “little Lenins.” A slice:

[Noam] Scheiber’s “Mutiny: The Rise and Revolt of the College-Educated Working Class” is an overexcited presentation of a tragicomic phenomenon: a new, self-imagined proletariat’s revolution. The revolt is not against conditions akin to those in the “dark Satanic Mills” of early 19th-century industrialism.

“Mutiny” usually denotes a rebellion of soldiers or sailors against a military authority. Against what comparable hierarchy are Scheiber’s little Lenins waging insurrections? Against Apple and Starbucks stores, and Hollywood studios. These boys and girls are hardly horny-handed sons and daughters of toil.

Although some were, Scheiber writes, “straining their tendons as they churned out … Frappuccinos.” Really. Page 56.

An unhappy employee of an Apple store consulted with an organizer for the International Association of Machinists union who had been, Scheiber says, “trying to unionize a group of yoga instructors.” Think about that: What banner would yoga instructors brandish at the barricades? Meet our demands (what are yoga instructors’ demands?) or we will strike, inflicting pain. (On whom? Of what sort?)

[DBx: I quickly note that the students taught and trained by those of us at GMU Econ are cured of all such ignorance and of the arrogance that such ignorance breeds.]

Stephanie Slade is right: “Right-wing influencers don’t understand what makes America great.” A slice:

The Dissident Right is furious after Supreme Court Justice Neil Gorsuch told Reason and several other outlets that America is a “creedal nation.”

“The Declaration of Independence had three great ideas in it,” Gorsuch said in a recent interview with Nick Gillespie. “That all of us are equal; that each of us has inalienable rights given to us by God, not government; and that we have the right to rule ourselves. Our nation is not founded on a religion. It’s not based on a common culture, even, or heritage. It’s based on those ideas. We’re a creedal nation.”

Anyone tempted to reject modernity in order to live the ‘simpler’ life on the pre-20th-century American frontier should listen to this engaging podcast. (HT Katherine Mangu-Ward)

The Editorial Board of the Washington Post is understandably critical of Alexandria Ocasio-Cortez’s economically illiterate hostility to Airbnb. A slice:

Ocasio-Cortez argued that Airbnb’s business couldn’t exist without destabilizing housing markets and rapaciously evicting millions: “Now young people are planning for a future where they will never be able to afford to own a home while others have 20 and live off renting it out to them at extortionate rates with zero protections.” A few make billions while millions of Americans bear the cost, she insisted.

Airbnb has achieved impressive scale, but it’s nothing compared to the government. Fewer than 2 percent of American homes are listed on the platform. While there is some evidence it affects home prices in extremely high-tourism areas, it can’t come close to explaining the national rise in home prices.

The housing crisis visible around the country is a result of government simultaneously constricting supply while stoking demand.

For decades, federal tax law has subsidized demand with policies like the mortgage interest deduction and government-backed mortgage securities. Easy monetary policy from the Federal Reserve also contributed to home-price inflation.

Meanwhile, zoning laws and excessive regulations constrain supply much more than renting out a room on Airbnb ever could. Tariffs on building supplies and restrictive immigration policies drive up construction costs. Big cities like New York impose rent controls that discourage new construction or rehabilitation of existing units.

My former GMU Econ colleague Tom Hazlett remembers Ted Turner. Three slices:

Ted Turner, who just graduated from this earthly academy at age 87, was a bon vivant, Playgirl‘s man of the year, and a public embarrassment. He made billion-dollar deals when, you know, a billion was a really big number. He sailed the seas as a champion of the yachting crowd, winning the 1977 America’s Cup aboard the Courageous. He married a beautiful actress, made her do the politically incorrect Tomahawk chops to cheer his Atlanta Braves, and cycled through the ideological spectrum from Randian to Mouth of the South to globalist U.N. benefactor to environmentalist rescuing bison. Jane Fonda, his third wife, deemed him a “romantic swashbuckling pirate” and “my favorite ex-husband.”

The cartoon character he cultivated was for fun and to amortize the lithium load. His real role was Entrepreneur of His Age. Turner held the lead spear when the Late 20th Century Barbarians stormed the gates of the Old Order in American media. Meeting the moment at the perfect instant—when a “deregulation wave” was opening doors long shut—Turner flipped the script on “public interest” regulation concocted during the Progressive Era. Intellectuals largely bemoaned the passing of the administrative state, and the Cronkite audience it favored, devoid of controversy and offered as the “news from nowhere” (as a CBS executive bragged). But the closed-loop spoon feeding was inimical to freedom, open inquiry, and honest debate.

Even before he was finished, the creative destruction triggered by Ted Turner’s wild gambits had left the tyranny of licensed, bureaucratic TV in rubble. What came next may not always look pretty. But freedom of expression has a renewed life, as soon even the chatbots will discover.

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Before then, American broadcasting had been trapped in a pre-constitutional political model. Instead of open competition and robust debate, licensed media reigned. Radio and television were not only limited by regulations, such as the equal time rule and the fairness doctrine, but constrained to artificial scarcity by bureaucratic fiat and then subjected to license renewals under the watchful eyes of powerful congressmen and commissioners. Turner came along when a shard of light was about to shine; he spied the illumination and ran to it at a time when the conventional wisdom missed it.

Ted Turner arbitraged the past into the future. Buy low (UHF licenses regulated into oblivion) and sell high (satellite beams forming the new mass media). The regulated wasteland blossomed into a competitive cornucopia.

…..

Turner had a belief about the future and took a string of incredible gambles. He saw what others did not. And with it, he poked a hole in the 1952 TV Allocation Table and put American media on a new, less regulated path that seamlessly melded into the Internet of today: unregulated, unlicensed, and unleashed. It’s not nirvana. But it gives the First Amendment a fighting chance, and it beats the News from Nowhere. Nice work, Ted. You one crazy bastard.