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… is from page 220 of the 2021 35th anniversary edition of Steven Rhoads’s superb 1985 book, The Economist’s View of the World: And the Quest for Well-Being [footnotes deleted]:

One of the most pernicious effects of the modern project to make economics more “scientific” is the accompanying tendency to ridicule all beliefs that are “empty of empirically verifiable content.” The older economists knew that good economics, like good politics, can settle for less certainty than that.

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Here’s a letter to the Wall Street Journal.

Editor:

So much can, should, and will be said about this flabbergasting message that Pres. Trump sent to Norway’s Prime Minister: “Considering your country decided not to give me the Nobel Peace Prize for having stopped 8 Wars PLUS, I no longer feel an obligation to think purely of Peace, although it will always be predominant but can now think about what is good and proper for the United States of America” (“Trump Links Greenland Threats to Missing Out on Nobel Prize,” January 19).

But one troubling implication that shouldn’t be ignored is that the President of the United States just admitted that in his quest for a personal award he was not thinking about what is good and proper for the United States of America.

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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The Wall Street Journal‘s Editorial Board rightly excoriates Trump for his reckless imposition of tariffs as a means to pressure Europeans into ‘selling’ Greenland to the U.S. government. A slice:

There are good reasons for Washington to care about Greenland, including the island’s strategic position and untapped reserves of rare-earth minerals. Mr. Trump isn’t the first President to suggest buying it outright, but the U.S. already has a high degree of access to the island and Denmark is willing to negotiate more. Tariffs in the cause of bullying imperialism is the wrong way to make a deal, and they might stiffen opposition on the island and in Europe.

Mr. Trump is taking reckless risk with the NATO alliance that advances U.S. interests in the arctic. If he doesn’t believe us, he can look up Norway, Sweden and Finland in an atlas. The latter two joined the North Atlantic Treaty Organization recently, and already are discovering that with Mr. Trump no good strategic deed goes unpunished.

The economics are nonsensical too. All of the countries on his tariff list except for the United Kingdom are members of the European Union with a common trade policy. This means any tariff he imposes on those countries will have to extend to the entire 27-member bloc. So much for the trade deals Mr. Trump negotiated to great fanfare last year with the EU and the U.K.

Members of the European Parliament, which still must approve the U.S.-EU agreement, are threatening to put that pact on ice. This bullying plays poorly with the European public, making it harder for politicians to give Mr. Trump what he wants on Greenland or anything else. The message to these countries is that no deal with Mr. Trump can be trusted because he’ll blow it up if he feels it serves his larger political purposes.

The Greenland Tariff War of 2026 imperils other U.S. priorities. The trade tax on Britain could upset an agreement Mr. Trump struck last year under which Britain will pay more for pharmaceuticals in exchange for Washington dropping tariffs on medication imports from the U.K. Speaking of which: Why Mr. Trump would want to head into midterm elections foisting higher prices on voters worried about affordability is a mystery.

Also writing wisely about Trump’s mad attempt to ‘tariff’ Europeans into ‘selling’ Greenland is the Editorial Board of the Washington Post. Two slices:

President Donald Trump threatened this weekend to unilaterally impose 10 percent tariffs on eight European countries until a deal is reached that makes Greenland part of the United States. In other words, American businesses and consumers will pay higher prices because Denmark, a strong ally which already welcomes U.S. troops and investment in Greenland, isn’t willing to cede territory.

…..

The president and his allies are increasingly making the case that Greenland is strategically vital and resource rich, but America already has easy access. The Space Force maintains a base there. Denmark has been a particularly strong, committed and inoffensive partner. The Danes suffered one of the highest per capita fatality rates in supporting America’s military response to the 9/11 attacks.

Jessica Riedl tweets: (HT Scott Lincicome)

“Emergency” designations need to be completely overhauled in the law. Presidents & Congress can deploy U.S. troops domestically, impose any tariffs, and disregard all spending & deficit limits simply by slapping the word “emergency” on it. “Emergency” now means “I just want it.”

My GMU Econ colleague Bryan Caplan reflects on his recent debate with the socialist Matt Bruenig. A slice:

Even though Bruenig had a lot of common ground [with Caplan], the debate confirmed my pessimism about practical cooperation between libertarians and the left. On a core emotional level, the left is anti-market. Even when they admit that some kinds of deregulation or privatization would have great virtues, they’re not excited by these virtues. What excites them, sadly, is demonizing business and the rich — then making them suffer for their supposed sins.

Brian Albrecht rightly criticizes Trump’s Bernie Sanders-ish proposal to cap interest rates on credit-card balances. A slice:

The love affair with price controls is not partisan. Sens. Bernie Sanders (I-Vermont) and Josh Hawley (R-Missouri) have already introduced legislation to cap credit card interest rates. New York Mayor Zohran Mamdani (D) won his race promising to freeze rents for 2 million residents. When socialists and populist Republicans converge on a policy, it’s usually a sign that politics has overwhelmed economics.

The political appeal to “do something” is obvious. Americans owe roughly $1.23 trillion in credit card debt, with average interest rates approaching 23 percent. Trump can cast himself as defending working families against Wall Street. Voters love a villain.

The economic logic is just as obvious, even if price-control advocates ignore it. Credit card interest rates aren’t arbitrary. They reflect the risk of lending to borrowers with different credit profiles. Higher-risk borrowers default more often, so banks charge higher rates to offset those losses. A 10 percent cap makes lending to millions of these borrowers unprofitable. Banks won’t offer products at a loss. These borrowers won’t get lower rates. They won’t get credit cards at all.

Christopher Lingle and Emile Phaneuf explain “how money laundering became a catch-all excuse to bully and surveil.”

GMU Econ alum David Hebert ponders competition. A slice:

[Adam] Smith recognized that markets don’t just allocate scarce resources. They cultivate habits of honest dealing. A firm that cheats will likely profit in the short run, but certainly not in the long run. The firm that treats and charges customers honestly builds a reputation, attracts repeat business, and ultimately outlasts the swindler.

Smith referred to this as the “discipline of continuous dealings,” which game theorists have taken to calling “repeated play.” When a firm expects future dealings, either with the same customer or with people that customer talks to, cooperation (not defection) becomes the dominant strategy. This isn’t because people become angels, but because cheaters ultimately get punished when their market counterparts do business with someone else instead.

I haven’t yet read this new paper by Rodrigo Adão, John Sturm Becko, Arnaud Costinot, and Dave Donaldson, but its abstract is interesting:

We use global tariffs to reveal the weights that nations implicitly place on the welfare of their trading partners relative to their own. Our estimated welfare weights suggest that formal and informal rules of the world trading system make countries internalize the impact of their policies onto others to a substantial extent, though not fully. On average, countries place 25% less value on transfers to foreigners than transfers to their own residents. Across nations, we find that countries that put higher welfare weights on the welfare of foreigners also tend to receive higher weights from them, consistent with a general form of reciprocity among nations. Using our estimated welfare weights, we provide a first look at what countries stand to lose, or gain, from the dissolution of the world trading system as we know it.

We’re fortunate that Bastiat’s Window will return to its regular schedule of programming in 2026.

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… is from page xi of Francis W. Hirst‘s 1927 book, Safeguarding and Protection:

Common sense tells us that restraints on business are generally bad, that red tape strangles enterprise, that taxes on goods in transit will reduce the volume of transactions, that wage earners will suffer if the things they buy are made artificially dear, that legislation to increase the cost of living and production must be especially disastrous to a populous manufacturing and commercial country like ours.

DBx: Yep.

Unfortunately, these days this common sense isn’t common; it’s rare. Perhaps ironically, those who today most vocally insist upon this common sense are dismissed as “elites.” Go figure.

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Duke University’s great trade economist Ed Tower today emailed to me a new Substack post by Paul Krugman – a post titled “China’s Trade Surplus, Part III.” In this post, the Nobel-laureate Krugman warns of the supposed dangers to the non-Chinese, especially to us Americans, of China’s manufacturing trade surplus.

Although there’s much in Krugman’s post that’s fine and important, much of it – in my non-Nobel-laureate opinion – is weak and wanting. I share here, beneath the fold, a slightly modified version of my reaction, sent earlier today to Ed (and to a few other friends), to Krugman’s post.

[continue reading…]

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Writing at National Review, Sen. Rand Paul (R-KY) decries the authoritarian arrogance displayed by ‘public-health’ officials during the covid pandemic. A slice:

Secret communications are the sine qua non of spycraft, and surprisingly, they were also quite in vogue at the National Institutes of Health (NIH) not too long ago. It’s been six years since Covid-19 arrived on our shores, and from the time we began hearing about this deadly coronavirus, many in the public assumed that the NIH would be working overtime to discover its origins and develop therapies. So it came as a shock to discover that some of the executives at NIH spent a great deal of time trying to cover up what was going on behind closed doors. It’s a sordid tale that proves it’s long past time for Congress to ensure that such potentially dangerous research is subject to the public scrutiny needed to keep Americans safe and experts accountable.

Arnold Kling – who’s currently a visiting professor at UATX – shares his thoughts about a recent report about turmoil at that new university.

Wall Street Journal columnist Kimberley Strassel rightly excoriates Sen. Elizabeth Warren (D-MA) for clinging to progressive economic lunacy. Two slices:

A few election victories aside, the Democratic Party remains adrift in the Donald Trump era, searching for a reconnection to voters. The mere hint of a shift away from pure progressivism isn’t sitting well with Massachusetts Sen. Elizabeth Warren. She on Monday came out swinging at D.C.’s National Press Club, with a speech designed to reassert far-left dominance, stamp out rebels, and lay the table for the 2026 midterms. The lecture was long on scorn and finger-pointing, short on explanations for past failure and evidence that hers is a winning formula. The question is whether the party now meekly succumbs to the browbeating.

…..

What does Warren want? The same thing she’s always wanted: giant (socialistic) governance. Yet she and Sanders are this year offering a strategic twist: Taking a leaf from Trump, they are pushing the party to stoke class divisions and wrap their standard progressive fare in populist language, presenting it as an agenda for “working people.” Warren laid out an agenda that includes all the top progressive goals, though modified to sound more benign (“universal health care”); more class-warfare (“cracking down on corporate landlords”); and more, er, blue-collar (“guaranteeing the right to repair your own cars, machines and business equipment”). Read through this list, however, and pretty much all her ideas were exactly those pushed or enacted by the Biden team and Democrats—an agenda for which they were tossed from office in 2024.

Jeffrey Blehar of National Review rightly excoriates the president of the United States for his appalling megalomania. A slice:

Trump, still smarting from his Nobel rebuke, declared in his post-operation press conference that [Maria] Machado didn’t “have the support” of her country to lead, and instead stated that he himself would run Venezuela until such time as he saw fit to hold elections. (Later he described Venezuelan Vice President Delcy Rodríguez, current head of the regime and longstanding Chávista, as a “wonderful woman.”)

That leads us to Thursday, when Machado arrived with a gift for America’s (and, apparently, Venezuela’s) benevolent leader: her Nobel Peace Prize, which she of course insists properly belongs to him. Trump was happy to agree, posing with a broad grin next to his newest framed trinket. As far as people celebrating trophies they didn’t and never could win goes, it’s not quite like that time when Vladimir Putin stole Bob Kraft’s Super Bowl XXXIX ring — but it has that stench regardless. (Machado, clearly, knows how to “take one for the team.”)

Once again, there is nothing to be done about it except lament the unspeakably small-souled trashiness of our president, a man who needs to be bribed and publicly flattered to maybe do the right thing. Spare me your defense of “She gave it to him! She even said he earned it!” Nobody is fooled by the pretense. Donald Trump took office in 2025; Machado has devoted her entire adult life to opposition to Chávez and Maduro, and her party won an overwhelming election long before he retook power. Trump earned this prize in the same way that he earned the addition of his name to the Kennedy Center: by being vain enough to demand it beyond all reason.

David Lynch reports this:

Introducing the highest U.S. tariffs since the Great Depression, President Donald Trump made a clear promise in the spring: “Jobs and factories will come roaring back into our country.”

They haven’t.

Manufacturing employment has declined every month since Trump declared “Liberation Day” in April, saying his widespread tariffs would begin to rebalance global trade in favor of American workers. U.S. factories employ 12.7 million people today, 72,000 fewer than when Trump made his Rose Garden announcement.

The trade measures that the president said would spur manufacturing have instead hampered it, according to most mainstream economists. That’s because roughly half of U.S. imports are “intermediate” goods that American companies use to make finished products, like aluminum that is shaped into soup cans or circuit boards that are inserted into computers.

…..

“2025 should have been a good year for manufacturing employment, and that didn’t happen. I think you really have to indict tariffs for that,” said economist Michael Hicks, director of the Center for Business and Economic Research at Ball State University in Muncie, Indiana.

Small and midsize businesses have found Trump’s on-again, off-again tariffs especially vexing. Fifty-seven percent of midsize manufacturers and 40 percent of small producers said, in a November survey by the Federal Reserve Bank of Richmond, that they had no certainty about their input costs. Only 23 percent of large manufacturers shared that complaint.

Smaller companies also were more than twice as likely to respond to tariffs by delaying investments in new plants and equipment, the survey found. One reason could be that taxes on imports raise the price of goods used in production much more than they do for typical consumer items, according to a study by the San Francisco Fed.

Clark Packard and Alfredo Carrillo Obregon write that “manufacturing employment data confirm the concentrated benefits — and dispersed costs — of Trump’s tariffs.” A slice:

The latest Bureau of Labor Statistics jobs report offers a stark reminder that US manufacturing continues to struggle. Manufacturing employment fell again in December 2025, marking the third consecutive year with negative net annual job growth. This persistent decline comes despite the Trump administration’s stated goal of revitalizing domestic manufacturing, and data increasingly suggest that the administration’s own policies — particularly, its erratic use of tariffs — are a significant part of the problem.

Andrew Stuttaford criticizes Trump’s reckless use of tariffs to compel a ‘sale’ of Greenland. A slice:

Ultimately, the only people who will decide whether Greenland should be sold, and to whom, are the Greenlanders. If they want to be a part of the U.S., that would be great, but that is something they should decide in a referendum (with, of course, a secret ballot: peer pressure is a thing, especially in small societies). But Trump’s antics are making it less likely that the U.S. will ever get to that point or even a very good second best, such as a compact of association akin to the agreements the U.S. has with the Marshall Islands, Micronesia, and Palau.

Currently, Greenland is an autonomous part of Denmark. Are Danish exporters to be punished because their government wishes to keep the Danish kingdom in one piece? Really?

And then let’s look at the other objects of Trump’s wrath: Norway, Sweden, France, Germany, the U.K., the Netherlands, and Finland, none of which have any formal role to play in this matter. In effect, these sovereign nations are being threatened with a “fine” for sending a (very) small number of their troops to an ally’s territory — and with the agreement of that ally. Trump writes that this force has been sent to Greenland (a “sacred piece of Land”), “for purposes unknown,” a melodramatic turn of phrase. Is Perfidious Albion, eager to avenge past humiliation in North America, planning to use the one officer it is sending to Greenland as the first wave of a British North American Reconquista?

Here are more signs of intelligent life where, until very recently, there seemed to be none: Capitol Hill.

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… is from page 13 of Menzie Chinn’s and Douglas Irwin’s superb 2025 textbook, International Economics:

There are tradeoffs. If the United States wants to produce more food, it can do so by devoting more of its labor force and land to agriculture. However, that means fewer workers are left to producing clothing and other goods. Similarly, the United States can produce more steel by devoting more of its labor and capital to steel production, but then fewer workers and less capital will be available for the production of other goods.

DBx: Sounds trite. And in a sense it is. Even a child, in familiar circumstances, understands the reality of trade-offs – for example, that her spending one more hour watching t.v. is one less hour that she can spend playing outside. But when politicians and pundits talk about international trade, they too often lose sight of the reality, and inescapability, of trade-offs. They presume that, say, if Americans are led by protectionist policies to produce more steel, that’s the end of the story. We Americans produce more steel, as if this steel is free. Little or no thought is given to what we Americans necessarily produce less of.

And also too often, when we economists point out this reality, in addition these days to being dismissed as “elites” or “cosmopolitans,” we are also accused of wishing ill for the American economy.

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Here’s a letter to the Wall Street Journal.

Editor:

Your headline that reads “Trump to Hit European Nations with 10% Tariffs in Bid for Greenland Deal” (January 17) would be more accurate if it instead read “Trump to Hit Americans with 10% Tariffs in Bid for Greenland Deal.”

Because foreigners pay at most 25 percent of the cost of U.S. tariffs, for every dollar of cost that the president inflicts on Europeans to pressure them into ‘selling’ Greenland, he inflicts at least three dollars of cost on us Americans. Perhaps he believes that this cost is one that we should be willing to pay. If so, though, why doesn’t Mr. Trump come clean with us about the cost that he’s inflicting on us? By asserting that certain European countries “will be charged a 10% Tariff on any and all goods and services sent to the United States of America,” without any mention of the much larger cost inflicted on Americans, he reveals either that he’s unaware that Americans will bear this cost or that he wishes to keep Americans in the dark about this reality. Neither possibility is encouraging about his leadership.

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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The Wall Street Journal‘s Editorial Board describes “the ObamaCare enrollment apocalypse that wasn’t.” A slice:

ObamaCare’s annual open enrollment ended Thursday, and what do you know? The media-fueled panic over the expiration of the pandemic-era enhanced subsidies turned out to be a false alarm.

The Centers for Medicare and Medicaid Services (CMS) reported this week that 22.8 million Americans have signed up for ObamaCare plans as of January 3. That’s down from 24.2 million last year. People could still sign up for plans on the federal exchange through Thursday, and some states have extended their open enrollment through the end of the month.

But even if there are few new sign-ups, enrollment is still running higher than it was in 2024—when the sweetened subsidies were available. The 1.4 million decline in sign-ups compared to 2025 enrollment is also less than was predicted. The left-leaning Urban Institute projected that ObamaCare’s subsidized enrollment would drop by 7.3 million.

The Congressional Budget Office’s ObamaCare baseline in 2024 assumed 18.9 million people would enroll in plans this year if the enhanced subsidies vanished. The budget gnomes have repeatedly underestimated ObamaCare enrollment and spending; they need to rework their models.

Tad DeHaven is no fan of the Pentagon taking equity stakes in defense contractors. A slice:

Regarding the equity stake, the DOD’s Under Secretary for Acquisition & Sustainment, Michael Duffy, stated that “We’ve had a pattern within the defense industry of writing checks from the Department on behalf of the taxpayer to expand the industrial base with no promise of return …. This is about to change.”

Yes, the military-industrial complex has a rich history of gouging taxpayers. Efforts by the Pentagon to spend taxpayers’ money more efficiently are thus welcome. But the “return” to taxpayers should be protection from foreign adversaries, not a dividend check they’ll never see that spendthrift politicians will fritter away anyhow. The federal budget isn’t a mutual fund, and it shouldn’t be.

The equity deal puts the Pentagon in the undesirable position of owning part of a contractor that will compete for—and seek to win—large federal procurement awards, raising obvious conflict-of-interest and neutrality concerns. L3Harris’s CEO says the deal is “purely an economic investment” and that the DOD “will not be on the board of directors or involved with managing this company.”

To which I would respond that the Pentagon reports to a president who called up Coca-Cola to badger the company into using cane sugar in its products.

David Henderson reminds us of F.Y. Edgeworth’s famous and still-relevant insight about the “optimum tariff.”

Phil Magness is correct that the Fed is flawed and that politicization will only makes it worse. A slice:

If a central bank must exist, its powers should be tightly constrained. A small toolbox limits the ways in which political actors can manipulate monetary policy. Unfortunately, the modern Fed has amassed an expansive arsenal: rate setting, quantitative easing, emergency lending facilities, market backstops, and regulatory authority over vast swaths of the financial system. In recent years, left-leaning figures in the Fed’s governance even tried to steer the central bank into climate change and Diversity, Equity, and Inclusion initiatives. Each additional tool creates another lever that politicians can pull—subtly or overtly—for their own ends.

Yet even with an overly powerful Fed, a degree of institutional independence remains preferable to direct political control. Elected officials face overwhelming incentives to maximize short-term economic performance, especially heading into elections. That typically means pressuring the central bank to juice growth through easy money, to monetize deficits, or both. The long-term costs—inflation, financial instability, and currency debasement—become someone else’s problem.

This is what makes Donald Trump’s use of lawfare against Powell (and previously against Governor Lisa Cook) so alarming. These actions can only be interpreted as attempts to bring the Fed to heel, clearing the way for more direct presidential control over monetary policy.

Given the Fed’s already-flawed incentive structure, this move risks making policy even more subservient to White House priorities rather than economic realities.

The Washington Post‘s Editorial Board explains that “inflation is not ‘defeated.'” A slice:

Two things can be true at once: the pressures that took the inflation rate to a staggering 8 percent in 2022 have largely subsided. This is presumably what the president is trying to tout. But prices are still rising, particularly in areas that consumers really feel, such as food and drink costs.

Consecutive administrations have adopted this bad habit of talking about “falling” prices, when they really mean increases are slowing.

Agriculture Secretary Brooke Rollins said Wednesday on News Nation that the administration’s new dietary guidelines don’t require spending more on food. Her team ran “1,000 simulations,” she explained, and they found “it can cost around $3 a meal for a piece of chicken, a piece of broccoli, corn tortilla and one other thing.” Not only does that sound unappetizing, it comes across as out of touch.

A report from Congress’s Joint Economic Committee this week found that the average American family paid an additional $310 for groceries last year.

Steven Greenhut sensibly calls for unleashing market forces to address the AI electricity ‘crisis.’

George Will has an idea “to make the midterms slightly less disgusting.” Three slices:

Party loyalty now eclipses legislators’ institutional pride. So, only divided government can make its Madisonian architecture — the separation of powers; what writer Yuval Levin calls “the deliberate recalcitrance of our system of government” — work.

…..

Today, Democrats have pronoun fixations, and Republicans believe whatever the president purports to believe at the moment, including that trade deficits (present for 50 years) suddenly threaten the nation’s existence. So the parties’ craziness quotients are comparable. This is one reason why this year’s elections probably will again reflect electoral parity — a national shrug. Although midterm elections are usually referendums on the incumbent president, and although his negatives exceed his positives generally, and on key issues (the economy, immigration), a “blue wave” is unlikely.

…..

Julia R. Cartwright of the American Institute for Economic Research notes that many self-designated conservatives — she calls them the New Right — have “mastered populism’s simple moral drama.” Progressives have long inflamed ordinary political tussles by characterizing them with Manichean rhetoric: the wicked “oppressors” and the virtuous “oppressed.” Now, faux conservatives are paying progressives the compliment of plagiarism, celebrating the virtuous “people” against the corrupt “elites.” Voters’ choice is between these binary moral dramas.

Jim Bianco tweets: (HT Scott Lincicome)

Downpayment assistance, of any kind, just gives home sellers room to raise prices and creates more housing inflation.

The fix is more supply: get rid of restrictions (zoning laws, building regulations, land-use rules) that hold back construction.

This month is the 250th anniversary of the publication of Thomas Paine’s Common Sense.