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Here’s a letter to the Wall Street Journal.

Editor:

Marco Rubio rightly defends western civilization and acknowledges debts owed to the ancient Athenians (“The Birth and Rebirth of Western Civilization,” October 9). But he omits an essential feature of ancient Athens – a feature that he, President Trump, and all Americans would do well to recall: Athens’s rise and excellence were rooted in its openness to, and reliance upon, international trade. As Will Durant explained in The Life of Greece (1939),

Foreign commerce advances even faster than domestic trade, for the Greek states have learned the advantages of an international division of labor, and each specializes in some product; the shieldmaker, for example, no longer goes from city to city at the call of those who need him, but makes his shields in his shop and sends them out to the markets of the classic world. In one century Athens moves from household economy – wherein each household makes nearly all that it needs – to urban economy – wherein each town makes nearly all that it needs – to international economy – wherein each state is dependent upon imports, and must make exports to pay for them….

[I]t is this trade that makes Athens rich, and provides, with the imperial tribute, the sinews of her cultural development. The merchants who accompany their goods to all quarters of the Mediterranean come back with changed perspective, and alert and open minds; they bring new ideas and ways, break down ancient taboos and sloth, and replace the familial conservatism of a rural aristocracy with the individualistic and progressive spirit of a mercantile civilization. Here in Athens East and West meet, and jar each other from their ruts. Old myths lose their grasp on the souls of men, leisure rises, inquiry is supported, science and philosophy grow. Athens became the most intensely alive city of her time.*

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

* Will Durant, The Life of Greece (New York: Simon & Schuster, 1939), pages 275-276.

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The Editorial Board of the Wall Street Journal explains that Trump’s tariffs punitive taxes on Americans’ – including American businesses’ – purchases of imports are harming the GOP politically. A slice:

Canada exports about $40 billion in goods to Michigan every year with vehicles and parts making up roughly half of the total. Michigan’s manufacturing supply chains are deeply integrated with Canada, and small businesses especially have borne the tariff brunt since they have less capacity to absorb the costs than larger companies do.

Voters know they are paying more because of the tariffs even if they don’t know exactly how much. Michigan families have paid $27.2 billion in tariff-driven costs since January 2025, according to the business outfit Michigan Smart Trade Alliance. That’s roughly $6,658 per household.

The Anderson Economic Group estimated the auto tariffs on Canada and Mexico alone last year totaled approximately $1,600 for every vehicle assembled in the U.S. That doesn’t include tariffs on steel and aluminum. The border taxes are shrinking the margins of U.S. auto makers, which means smaller profit-sharing bonuses for workers.

General Motors says it expects a tariff cost hit of between $2.5 billion and $3.5 billion this year. That could mean $3,500 less in bonuses for workers. Didn’t Mr. Trump say his tariffs would help manufacturing workers in places like Michigan? Instead, they are hurting Republicans in swing districts and states around the country.

In New York’s 17th House district, Democratic challenger Cait Conley is hammering GOP Rep. Mike Lawler on tariffs, which she says have “jacked up prices on goods for the average household in the Hudson Valley by $4,200.” If Republicans lose control of Congress, Mr. Trump and his ham-handed border taxes will deserve much of the blame.

Also reporting on the GOP’s self-inflicted political damage – damage due to Trump’s tariffs – is Reason‘s Eric Boehm.

Scott Lincicome shares this headline: “Inflation on many everyday items was entirely due to tariffs, NY Fed says.”

My intrepid Mercatus Center colleague, Veronique de Rugy, wonders why so many Democrats and Republicans today embrace price controls – a government intervention with an unbroken record of failure. A slice:

Prices are the manifestations of countless decisions by buyers and sellers, each acting on individual knowledge no one else has. No buyer’s budget and needs, and no seller’s costs and offerings, are identical. Only a free market can account for this and decide whether a price sticks. Creating laws to cap prices doesn’t make scarcity go away. It just shows up as empty shelves instead of a market-determined price.

Consider credit cards. A 10 percent interest rate cap sounds lovely. Many Americans pay twice that. Why not simply tell banks that’s the limit? Because an interest rate isn’t an arbitrary number. It is the price of credit that reflects funding costs, administrative expenses, and, not least, expected default risks.

Congress can cap the rate, but it can’t cap the risk. When the price a lender can charge falls below what the risk costs, lending stops. Lenders turn down applicants, cut credit limits, and close accounts. The borrowers the cap was supposed to protect still need the money. They end up at the payday lender or the pawn shop instead. In other words, interest rate caps hurt the economically vulnerable people they are supposed to help.

The same problem is even more stark with child care. The service is expensive because caring for small children requires a lot of labor and demand is high, especially when governments subsidize it through vouchers and tax credits. Meanwhile, state and local authorities restrict child care supply through staff-to-child ratios, credential mandates, zoning bans on home-based providers, costly building codes, and more. No wonder prices are so high.

Capping those prices won’t help. If providers cannot cover their expenses at the mandated price, some will reduce capacity. Others will close. The parents lucky enough to secure a remaining slot might pay less. Others will find no available care. The government cannot decree the additional workers and facilities necessary to fill the gap it created.

National Review‘s John Puri tells the tale of the U.S. government’s worsening fiscal incontinence. A slice:

Rather, in keeping with America’s broader fiscal story, it’s almost all about spending: “Outlays in fiscal year 2026 were $7.4 trillion, CBO estimates, $386 billion (or 6 percent) more than in fiscal year 2025.”

It’s true, the Trump administration and Republicans in Congress have cut spending in some visible areas. Outlays are down in the Environmental Protection Agency, the Commerce Department, and food stamps. But these categories were small parts of the budget to begin with, and their reductions were swamped by growing entitlements. Spending on Social Security rose by $86 billion, or 5 percent, because of “increases in average benefits and in the number of beneficiaries.” Medicare and Medicaid each grew by 8 percent, or $132 billion combined, because of increased enrollment and higher health-care costs.

Net interest costs also continued spiraling upward. As debt accumulated and interest rates jumped, servicing expenditures automatically rose by $115 billion last year, or 11 percent — the greatest increase of any single category.

We are reaching the point where interest on the debt exceeds economic growth, ensuring that the debt will keep rising even if we somehow balanced the underlying budget. Which we won’t. The entitlement programs driving the deficit — Social Security, Medicare, and Medicaid — run on autopilot, expanding each year based on predetermined formulas. They are projected to grow much larger over the next ten years. Congress has zero appetite to reform these programs and make them fiscally sound.

Jeff Yass explains why “pouring money into the Ivy League won’t solve its problems.” A slice:

No matter how much money donors throw at the problem, classroom instruction at elite institutions keeps getting worse. In a 2024 survey at Harvard, 45% of students said they were reluctant to share views on controversial topics in class. Sixty percent of grades at Harvard College were A’s in the 2024-25 academic year, up from 24% in 2005-06. That doesn’t sound like an environment of rigorous debate and scholarship.

Under pressure from powerful critics, elite universities have begun to make changes such as adopting statements of institutional neutrality, capping grade inflation, promising to protect open inquiry and establishing civics centers. These changes are cosmetic.

Undergraduate education comprises three elements: students, teachers and classes. If admissions policies, faculty and curriculum don’t improve, administrators haven’t changed anything. They’ve maintained the status quo while trying to deceive the public and get critics off their backs.

For all the Trump administration’s efforts to use federal funding as leverage, elite universities are too wealthy to feel significant pressure from withheld government subsidies. Harvard last reported its endowment at $59.9 billion. In fiscal 2025 the return on the endowment was 11.9%, and the university paid almost no taxes. Administrations at these schools whine about funding cuts because they feel entitled to taxpayer money, but they aren’t hurting.

For the same reason, private donors can’t make much of a difference at these schools. Donations to Ivy League schools get you invitations to cocktail parties and, for the big shots, your name on a building where activist professors who hate you teach classes in which you are the villain.

Paul McDonnold reviews Tobias Straumann’s book Out of Hitler’s Shadow: Debt, Guilt and the German Economic Miracle. A slice:

In June of 1948, Ludwig Erhard, a German who had never joined the Nazis, was director of economics for the United States’ and UK’s occupation zones. A classically liberal economist with a PhD from the University of Frankfurt, he had helped the zones transition to the new Deutsche Mark currency.

At the time, stores were still barren and black markets allocated many goods and services. Without authority or approval from the occupying military leaders, Erhard moved to eliminate extensive consumer price and wage controls.

“As a result,” Straumann writes, “barter trade disappeared literally overnight, and the shops were full again.” The policy move was so successful, it was politically impossible to reverse.

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… is from page 10 of the “The Purpose of International Trade,” which is Chapter II of the 1932 report of a commission in the U.K., chaired by Sir William Beveridge; the title of the collection is Tariffs: The Case Examined:

It is true that almost any kind of manufacturing can, at a price, be done almost anywhere. It is not true that every or any kind of manufacturing can be done as efficiently in one place as in another, i.e. that location is irrelevant to it. Nor is the economic advantage of particular locations for particular industries destroyed by the existence of international boundaries. Within any national area, prudent business men take pains to erect their factories at the point of greatest convenience, having regard to differences in sources of raw materials, location of markets, supply of labor power, and so forth. Such differences do not disappear because the possible sites between which the choice has to be made have a political frontier between them. The development of international trade under conditions of freedom is in itself the proof of gain by national specialisation; if there were no gain, there would be no trade.

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National Review‘s John Puri accurately describes the Trump administration’s “Liberation Day” tariffs as “cockamamie.” A slice:

President Trump imposed the tariffs, in his own words, to close a trade deficit which he deemed a “national emergency.” To his mind, when the United States imports more goods than it exports, it loses money to foreign countries. His original tariff schedule was based on a cockamamie formula that divided bilateral trade deficits by overall imports from each country. The numbers it produced were supposed to represent the cumulative effect of all foreign trade barriers, apparently assuming that, with completely fair trade, the United States would have zero trade deficit (or perhaps a surplus) with every country in the world. Trump then chopped those made-up rates in half as a generous “discount.”

All of this was complete nonsense.

First, the nation does not lose money when it imports more goods and services than it exports. If you focus exclusively on these two kinds of transactions, then yes, Americans are sending more dollars abroad than foreigners send here. But we are no more “losing money” on imports than you are “losing money” when you buy groceries or pay for a haircut. Companies and individuals purchase imports because they have value. There is no loss in mutually beneficial transactions, even when aggregated.

GMU Econ alums Caleb Fuller and Scott Burns reveal what shouldn’t – but, alas, what always does – need to be revealed: protectionism is illogical. A slice:

Perhaps Trump and Bessent are smarter than we lowly economists. Maybe they’ve discovered that trade exists in a quantum realm where it can be both enriching and impoverishing at once. “Schrödinger’s shipping container,” if you will. Or maybe — just maybe — they’re economic grifters, peddling long-debunked fallacies and saying whatever they need to survive a hostile news cycle.

Regardless, reporters should ask Trump and Bessent how the same tactics meant to “liberate” the US economy can “asphyxiate” Iran’s. Inquiring economists would love to know.

Until they can answer that riddle, Trump and Bessent will have to sell voters a tale of two trade wars — one of which promises “the best of times” for Americans while the other portends “the worst of times” for Iranians.

Nick Gillespie talks with Nobel-laureate economist James Heckman.

Extraordinary:

In 1990, practically yesterday for an economic historian, the median person on Earth lived on $4.29 a day. Two centuries earlier, it was roughly $2 a day — a figure that had changed little for millennia. But in 2026, the median person lives on about $11.66 a day.

Matt Ridley asks: “Will anything be a luxury in a richer world?” A slice:

Napoleon III liked to show off his wealth by laying aluminium cutlery at his table and decorating his empress with aluminium jewels. The metal was new, rare and fascinating and for a while people pretended to find it beautiful. Today aluminium is seen as cheap, common and functional. Mass producing a luxury good can destroy its fascination in a flash. But innovation will always find new luxuries to celebrate.

John Stossel makes a sound case for trillionaires. A slice:

People who hate the very rich tend to assume that there’s a finite amount of wealth. So if Musk has a trillion dollars, everyone else must have less.

“That’s simply not true,” explains business ethics professor Chris Freiman. In a free market, businesses create new wealth, because consumers give up dollars only “because they got stuff that they valued more in return.”

Car buyers voluntarily give Musk money because he created a car they value more than other cars.

Likewise, “Steve Jobs became a billionaire, but the rest of the world got a billion iPhones,” says Freiman. Since the exchange was voluntary, “that seems like something to celebrate, not resent.”

Scott Lincicome shares news of the Trump administration’s latest step toward socialism.

Arnold Kling continues to write intelligently about AI.

Bjorn Lomborg makes clear that “most recycling is a waste.” Two slices:

Valuable materials were long recycled without government programs to make it happen. A century ago, scrap supplied about 30% of America’s copper, close to the 32% recycled globally today. Iron, steel and construction debris are recycled because businesses find it profitable.

Yet governments have increasingly pushed citizens to recycle paper, glass and plastics worth less than the cost of collecting and processing them. Sometimes the environmental benefits made up the difference. But over time the means became the end.

…..

Official accounts ignore a cost every household pays: the time spent sorting. Peer-reviewed studies from Sweden and Finland find it takes 26 to 29 minutes a week per person. Value that time at half the minimum wage in each country and it comes to €43 billion to €47 billion a year across the EU, about as much as the entire cost of Europe’s municipal waste system. Across the Organization for Economic Cooperation and Development’s member states, it amounts to $111 billion to $123 billion.

Recycle what is worth recycling. Then throw away the idea that more recycling is always better.

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… is from page 168 of Samuel Gregg’s forthcoming book, The Civilization of Commerce [original emphasis]:

One advantage of commercial society is that the value of such knowledge is constantly put to the test. It is not enough to simply have a new idea. It is equally necessary to subject the idea to the endless feedback provided by the market. Without these ongoing reactions, the capacity of knowledge to change reality becomes more limited. Markets help us to know what is inefficient and understand what requires adaptation. They also reveal gaps in knowledge, tell us which forms of existing knowledge are becoming less economically relevant or commercially unviable, and provide us with information about possible ways forward.

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Mr. Jamieson Greer
U.S. Trade Representative

Mr. Greer:

You continue to insist that persistent industrial trade surpluses are evidence that the countries that run these surpluses have built “excess industrial capacity” that harms other countries, including the United States. I have some questions for you.

– Economic theory and history are clear that, when the people of different countries trade with each other, each country will naturally run trade “surpluses” in some sectors and trade “deficits” in others. Yet you repeatedly point to persistent industrial trade surpluses as evidence of “excess industrial capacity.” What economic criterion distinguishes a trade surplus that reflects comparative advantage, specialization, and ordinary market forces from one that demonstrates “excess capacity”? Why, specifically, is the persistence of a sectoral surplus evidence that the capacity producing it is excessive?

– The U.S. persistently runs large trade “surpluses” in services. Is the persistence of these surpluses itself evidence that the U.S. has “excess service-sector capacity”? If not, why is a persistent surplus in manufactured goods evidence of excess capacity while a persistent surplus in services isn’t? What economic principle distinguishes the two? If instead your answer is yes, and America’s persistent services surpluses do reveal “excess capacity,” what policies will the administration pursue to eliminate the U.S. service-sector “surplus”?

– You’re correct that many foreign governments indeed subsidize their manufacturers, causing manufacturing capacity and output in those countries to expand. And you assert that the U.S. government must respond by tariffing – that is, by punitively taxing – Americans’ purchases of these imports in order to “protect” us from this artificially greater abundance of manufactured outputs. But you’re silent about the sectors in foreign countries that are necessarily made smaller by manufacturing subsidies. In any country, resources drawn by subsidies into industries A, B, and C must come from elsewhere in that country – from industries X, Y, and Z. Capacity and output in these other foreign industries thus contract. We Americans consequently have access to fewer – and more expensive – outputs from foreign industries X, Y, and Z than we would absent the subsidies.

Do you therefore believe that the U.S. government must respond by negatively tariffing – that is, by subsidizing – Americans’ purchases of these imports in order to “protect” us from their unnaturally reduced supplies? If not, how do you square your objection to negative tariffs on imports made artificially less abundant with your support for positive tariffs on imports made artificially more abundant?

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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Mike Munger finds merit and demerit in Victor Davis Hanson’s new book about Trump’s political resurrection. Two slices:

Hanson claims to mount neither a defense nor an attack. But in truth the book is largely a defense, sometimes slipping into embarrassing hagiography of the “You don’t understand Trump’s five-dimensional chess!” genre. Trump’s erratic, self-defeating tariff policy and impetuous military adventures have been head-shaking own goals, not strategic triumphs. Pretending otherwise doesn’t change those basic facts.

Still, the book achieves its goal: documenting the events and conditions that brought us to the current situation. It is tempting to treat the story as two separate questions: a puzzle about the comeback, and a question about what came after. Hanson’s contribution, and it is an important one, is to show that the two cannot be separated; they require a single, integrated answer.

…..

Trump doesn’t mind “selling” because, unlike Coriolanus, he isn’t deeply committed to principle; he sells whatever program he fancies because he can sell anything. Because he is never captive to a program, he never loses his hold on his voters. As he boasted in January 2016,

Tragically, that same confidence underlies the impetuous decisions to impose constant changes in tariff regimes and enormous spending on discretionary war in Iran, which have robbed Trump’s economy of the vitality he (quite rightly) thinks his core policies created. The question is not whether the economy is better now than it was under Biden, because it is. The tragedy is Trump’s conceit that he can sell anything, and the fact that he is right about that. Things should be much better, and would be better if our President didn’t suffer the tragic flaw of overweening pride. As he boasted in January 2016, Trump could “shoot somebody on Fifth Avenue,” and he wouldn’t lose any voters.

Hanson has written an indispensable account of how the counterrevolution Marcuse feared finally arrived. What Hanson has not written, and perhaps could not, is the tragedy: the story of a hero undone not by the ingratitude of those he saved, but by his own conviction that he can sell anything. The real tragedy, the inability of the GOP to capitalize on a generational transformation in political focus by generating new and substantive ideas, is going to affect the U.S. for decades.

GMU Econ alum Paul Mueller warns of the dangers of “postliberalism,” and in particular of Catholic Integralism. A slice:

Popular commentators like Tucker Carlson and online extremists like Nick Fuentes boil postliberalism down to raw friend-enemy politics and crude historical revisionism. In this messy milieu, anti-communism serves as a universal solvent for fascist crimes, downplaying Franco’s atrocities or romanticizing interwar authoritarianism as a ‘lesser evil.’ Whether dressed in academic regalia or broadcast over internet livestreams, the fundamental logic remains identical: the ends justify the regime.

This shocking intellectual move ignores, downplays, or whitewashes grave injustice, tragedy, cruelty, and evil. How can it be justified? Only through a “lesser evil” approach with an even worse enemy or alternative to avoid. While Communism was often the feared alternative, Catholic Reactionaries have also often blamed a “Judeo-Masonic Conspiracy” for societal ills.

My GMU Econ colleague Bryan Caplan celebrates the rideshare revolution.

The federal film-tax-credit – a government subsidy to one of America’s most successful industries – could cost U.S. taxpayers as much as $50 billion – so reports GMU Econ alum Adam Michel. Two slices:

After President Trump’s endorsement, a bipartisan, bicameral group of lawmakers recently introduced the Motion Picture, Television, and Entertainment Revitalization Act. The bill would create the first direct federal subsidy for Hollywood movie studios through a tax credit covering 20 to 30 percent of what film and TV productions pay their workers.

Dozens of states and countries have experimented with subsidies for the film industry. The overwhelming evidence is that the subsidies mostly don’t create new production, don’t meaningfully increase jobs or wages, don’t build an industry that survives without the subsidy, and are fiscally costly.

…..

Hollywood’s problem is not a shortage of subsidies. Thirty-nine states and dozens of countries already pay studios to little effect. A new federal film tax credit would primarily put taxpayers on the hook for multimillion-dollar Hollywood studio productions that would have largely been filmed here anyway. Congress should protect taxpayers from subsidizing Hollywood by rejecting the federal film credit, and states should repeal their programs, too. If filming in the United States costs too much, the answer is lower taxes and easier regulations for all businesses, not billions of dollars in subsidies for a single industry.

Wall Street Journal columnist Jason Riley decries the nativism and bigotry now flooding through the ranks of the GOP. Two slices:

Some Republicans have decided that now is the time for racial and ethnic purity tests. Last month Bo French, Republican nominee for Texas railroad commissioner, posted a photo on social media of Asian students at the University of Texas at Austin celebrating the football team’s victory over Ohio State. “I heard UT graduation this year looked like this,” Mr. French wrote above the image. “I didn’t believe it. The problem is now obviously far worse than anyone imagined.”

Mr. French has a history of this behavior. He has described Democrats as “retarded” and “gay” and asked his social-media followers if Jews or Muslims pose “a bigger threat to the U.S.” His bigotry has prompted condemnation on the left and right, including a stinging rebuke on these pages from Karl Rove. “The GOP has a growing number of Bo Frenches—and not only in Texas,” Mr. Rove wrote. “There are ‘just asking questions’ Jew-haters, misogynists who worship hypermasculinity, conspiracy nuts seeking clicks for profit, and religious bigots who won’t differentiate between Muslim terrorists and Muslim American patriots. These people are diminishing the Republican Party, not building it.”

Bully for Karl. It’s important that party elders call out bigotry wherever it emerges, including within their ranks. A major political party that decides to indulge cranks rather than marginalize them doesn’t deserve to win elections. What’s lost on the MAGA faithful, it seems, is that its anti-Asian sentiment isn’t only morally repugnant but also politically foolish.

…..

Asian-Americans have the highest marriage rates and are least likely to be single parents or engaged in violent crime. Academically, their success has been equally impressive. The most selective colleges in the country typically require an SAT score of at least 1400 for admission. According to the College Board, which administers the SAT, among students who took the test in 2024, 27% of Asian students scored 1400 or higher, compared with 7% of white students.

Asians are another example of what America still offers people of any background who put in the work and develop the skills that free-market capitalism rewards. If more of them are rejecting the identity politics of the Democratic Party, that’s good for the GOP and the country, both of which could use a lot more of those UT Austin fans and fewer Bo Frenches.

The Editorial Board of the Wall Street Journal reports on “France’s bonfire of inanities.” Two slices:

Ostensibly the destructive rioting of the past few days is a student protest against underfunded schools. If you believe that, we have a pont over the Seine to sell you. The riots have been encouraged by politicians on the left, as Dominic Green recently reported on the Journal’s Free Expression newsletter.

Labor-union comrades of Jean-Luc Mélenchon, leader of La France Insoumise (“Indomitable France”), stoked the protests that quickly became riots. Mr. Mélenchon — think Bernie Sanders with a Gallic accent — visited the barricades. It feels like a display of left-wing muscle-flexing before next year’s presidential election, in which Mr. Mélenchon will be a candidate.

The violence obscures the related crisis engulfing public finances. France doesn’t have more money to spend on schools because it doesn’t have more money to spend on anything.

…..

France’s main problem isn’t math. It’s slow growth. The right fiscal reforms, such as tax cuts and welfare and pension reforms that encourage work and investment, would create new opportunities for prosperity. Young people would be the biggest beneficiaries. The alternative is what’s happening in the streets.

Americans can’t afford to gloat from the sidelines. U.S. debt is 100% of GDP, and its politicians can be as feckless as the French. At least the U.S. economy is growing at a healthy clip, but that could change in a hurry with the wrong mix of regulation and a ham-handed attempt to tax our way out of our fiscal hole.

Reading James Pethokoukis is always a positive-sum experience.

GMU Econ alum Julia Cartwright reminds us of the forgotten Maria Edgeworth, aunt of the famous economist F.Y. Edgeworth. A slice:

Her influence and knack for writing about economics for a general audience earned her respect in the field and a place in the rooms where economics was being invented. She befriended Ricardo and followed his sparring with Malthus over trade. She read and critiqued the work of Jane Marcet, whose 1816 “Conversations on Political Economy” became one of the earliest and most influential popular economics textbooks. Where Marcet spoke plainly about economics, Edgeworth hid it in narrative. Together, they helped pave the way for a generation of women to write about the subject.

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… is from page 24 of Peter Boettke’s and Rosolino Candela’s 2025 book, The Historical Path to Liberty and Human Progress [link added]:

Exchangeability of property rights not only allows individuals to make trades that both parties believe will make them better off. When rights over private property are transferable, it also provides an institutional framework within which a system of money prices emerges. The emergence of money prices provides the information to calculate the relative scarcity of different resources, such that “prices can act to coordinate the separate actions of different people” by communicating the dispersed and particular knowledge of millions of individuals (Hayek 1945). People are able to observe prices and determine whether they value the property they have more than the money they could receive for it. Changes in price signals drive the movements in the demand and supply for different goods and services. These price changes provide the information to entrepreneurs as to what products are most urgently demanded and what inputs can be combined to most cheaply produce them.

DBx: Yes.

It follows that by restricting the exchangeability of property rights, protectionism reduces the amount of economic information that people convey to each other.

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Here’s a letter to a new and very angry correspondent.

Ms. Becker:

I’m sorry that you so strongly disapprove of my recent AIER column in defense of libertarianism. Your core complaint is this:

You libertarians have ridiculously high opinions of human nature, assuming most people can approach saintliness. Serious conservatives don’t. We are sober. We are grounded in reality. We know that man is weak, fallible and most of all tempted into sin.

With respect, I disagree that we libertarians have such a high opinion of human nature. Precisely because we understand, as you put it, that humans are “weak, fallible and most of all tempted into sin,” we insist that the power of some individuals to coerce other individuals should be kept to an absolute minimum.

No serious libertarian argues that freedom produces anything close to heaven on earth, with no one succumbing to self-destructive or anti-social temptations. But we recognize two related realities that are missed by many conservatives as well as by progressives.

First, when adults are free to use their own (and only their own) private property – including their own bodies – under a rule of law, each individual personally experiences more of the costs of his or her bad behavior, and reaps more of the fruits of his or her good behavior, than is the case when that freedom is curtailed. This ‘internalization’ of consequences obviously doesn’t turn everyone into a saint – or prevent everyone from being a devil – but it does keep to a minimum the amount of ‘bad’ behavior while encouraging the greatest possible amount of ‘good’ behavior.

Second, any curtailment of libertarian freedom necessarily empowers some individuals to coerce other individuals. Given that we humans are indeed imperfect creatures, it is you – not any libertarian – who is unrealistically optimistic about human nature. I cannot fathom your faith that political power transforms individuals who cannot voluntarily manage their own affairs well into individuals who can coercively manage other individuals’ affairs well.

A truly sober and realistic assessment of human nature leads people of goodwill naturally to a wish to reduce as much as possible the power of the state.

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030