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Johan Norberg, using the example of his native Sweden, warns Americans of the dangers of MAGA-DSA socialism. A slice:

Sweden established the Swedish Investment Bank in 1967 to channel long-term finance to industry and in 1970 it founded the state holding company Statsföretag (Swedish State Company), which brought 22 companies under a single umbrella to coordinate and expand government ownership.

Soon, what first seemed like a strength—that state ownership could achieve many goals simultaneously—became a corporate governance nightmare. Boards and management fought over whether profitability or industrial policy should take precedence, making both strategic decisions and accountability difficult.

State ownership also turned government into both umpire and player: the same politicians who regulated industries and distributed subsidies now had a financial interest in the success of particular companies.

Some companies used government resources and guarantees for activities that seem distant from core state responsibilities. A state-owned restaurant group sent two employees to work for McDonald’s in the United States on a fact-finding mission. Armed with this know-how, they later started Clock, a rare example of a government-run hamburger chain, including the distinctly Swedish “Hawaii burger,” topped with pineapple.

At one point, the Swedish Investment Bank led a consortium trying to salvage the Spanish galleon San José, which had sunk off the Colombian coast in 1708 with a treasure of gold believed to be worth billions. The consortium fell apart, and the San José remains on the ocean floor.

Industrial policy gradually became an ad hoc system for rescuing failing companies. Instead of creating new industries, the government increasingly bailed out shipyards, steel companies and textile firms under pressure from trade unions and local politicians. The rescue operation became known as the “Industrial Emergency Room.”

Between 1976 and 1982, the Statsföretag group accumulated total losses of around $2 billion in today’s money, a huge sum for a small economy. Shipyard bailouts had cost the equivalent of $17 billion.

Kjell-Olof Feldt, minister of finance in the Social Democratic government that took over in 1982, described state-owned companies as “a black hole” in the public finances. A spokesman for the biggest center-right party observed: “State ownership of business has, with few exceptions, been a gigantic failure.”

Assar Lindbeck, the Social Democratic economist who first proposed creating the investment bank, came to regret his advice, noting, “I have never heard any informed observer argue that the Investment Bank served any useful purpose during its existence.”

Remarkably, less than 15 years after the new policy had been launched, a consensus had emerged that it had been a costly failure. In the 1980s and 1990s, loss-making companies were closed down and many state-owned companies were sold. One study showed that productivity in companies increased after privatization by between 12 and 36 percent.

GMU Econ alum Dave Hebert reflects on the 2026 Nobel laureates in economics. A slice:

The last implication of this year’s prize that I’ll go over is that credibility matters. A government that announces that they’re going to do something in the future affects people’s behavior today. The government then faces a choice: they can do that thing, in which case it will show that they are credible but it will have very little macroeconomic effect, or they can do something different, which will produce a short-run jolt but will strain their credibility going forward.

Few areas of policy illustrate this better than trade over the last two years. Since January of 2025, tariffs have been announced, threatened, paused, raised, delayed, and cut at a pace that can only be described as “frantic.” As a result, America’s credibility has been strained on the world stage, making it harder to secure any form of trade deal. When people do not believe what the government is saying, that uncertainty itself has a deterrent effect on economic activity. If there is one thing that we have learned, it’s that long-term growth requires long-term plans and long-term plans require credibility.

Mani Basharzad and Bryan Cheang tell “what this year’s Nobel Prize in Economics should teach policymakers about the limits of their power.”

Alan Charles Raul ponders the fraying of the rule of law in the United States. A slice:

The rule of law has mostly held. In Marbury v. Madison, the Supreme Court declared that in “a government of laws, and not of men,” it is “emphatically the province and duty of the judicial department to say what the law is.” In Youngstown, the Court stopped President Harry Truman from seizing the steel mills, even in wartime and notwithstanding the national security context. Justice Robert Jackson’s concurrence anticipated precisely the present weakness in our constitutional governance where a president would dispense with the constraints of law and separated powers: “Congressional inertia, indifference or quiescence,” Jackson wrote, would “enable, if not invite, measures on independent presidential responsibility.” Jackson’s essential lesson was that history has discovered “no technique for long preserving free government except that the Executive be under the law.”

America now confronts a challenge to that technique. In Donald Trump, we have a president who will not agree to be governed by quaint theories of checks and balances, at least so long as Congress can fairly be described as inert, indifferent, and quiescent. Madison believed that an ongoing contest of wills between ambitious legislators and chief executives would keep arbitrary power in check: “Ambition must be made to counteract ambition.” He would be astonished by today’s legislative capitulation.

But the Convention also framed the presidency with George Washington before its eyes — a president who pledged to a foundation for government predicated on “the pure and immutable principles of private morality,” by which he meant virtue, honesty, and respect for what the Declaration invoked as the “Laws of Nature and Nature’s God.” Our Framers never could have expected a president to profess to be restrained “only by my own morality,” rather than by law and fiduciary duty to the public. That is not the hallmark of a constitutional presidency; it is instead a Prince’s creed.

On the legal front, the current-day news is mixed. On emergency tariff powers, the Supreme Court deferred to Congress and reined in the president. On birthright citizenship, the justices sided with the plain words of the Fourteenth Amendment over the president’s intransigent ones. And in the Census and Federal Reserve cases, the chief justice called out presidential “pretexts,” reminding judges that they are “not required to exhibit a naivete from which ordinary citizens are free.” Put less euphemistically, this means that many judges, and some justices, believe the present government is routinely lying to them.

Overall, though, the Court has catered to untrammeled presidential power by summarily reversing scores of lower-court rulings on its “shadow” docket, often without explanation. But the unmitigated apogee of undue deference to the presidency came in Trump v. United States. There, the Court’s majority invented a nearly absolute presidential immunity from federal criminal law and did so in a case concerning the efforts of a president qua candidate to overturn an election by hook or by crook. Unless we can find a way to fix this, America can no longer claim that no man is above the law.

Citing a Financial Times report, Doug Irwin tweets: (HT Scott Lincicome)

Some people thought protectionism would be a political winner. 🤔

Republicans turn on Donald Trump’s tariffs in battle for ‘political survival’

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… is from page 8 of Stephanie Slade’s brilliant new (2026) book, Fusionism: Liberty, Virtue, and the Future of the American Right:

Fusionists, following Hayek, have a moderate to strong inclination toward pluralism: They think that, absent serious rights violations, the state should have a hands-off posture toward private associations. Meanwhile, woke progressivism, which attempts to impose strict egalitarian values on all human associations, is a form of rationalism take to such an extreme that many of its liberal qualities fall away.

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Here’s a letter to a new correspondent.

Mr. Wynn:

Thanks for sharing this tweet by Social-Identity-Thief. The point that Mr. Thief seems to make – one that you expressly endorse – is that, because all taxes raise some prices, my pointing out that tariffs raise some prices does not undermine the case for protectionism. “The case for tariffs,” you conclude, “remains a powerful one.”

Well.

My response (in support of John Puri, who got this discussion rolling) was to Michael Brendan Dougherty’s argument that tariffs, in the long run, lower prices. Mr. Dougherty writes in the centuries-old protectionist tradition that holds that obstructing fellow citizens’ access to goods and services that are produced abroad miraculously increases those citizens’ overall access to goods and services – that is, makes goods and services in the home country more abundant and, hence, available at lower prices.

You and the tweeting Mr. Thief overlook the context of the discussion. But let me make one more point.

Of course all taxes raise some prices. But it’s wrong to leap from this trivially true fact to the conclusion that “the case for tariffs remains a powerful one.” The best economic case for taxes is that they’re necessary to pay for “public goods” – goods that cannot practically be supplied by private market actors. Taking account of notions of fairness and of economic efficiency, economists have spilled oceans of ink exploring how best to levy such taxes. Although legitimate disagreement on this front continues among economists, all serious participants in these scholarly discussions acknowledge that every tax regime will cause the prices of some things to rise relative to those of other things.

As for the case for relying on tariffs as a source of revenue, it’s weak – as explained by (among others) Brian Albrecht.

To repeat my main point: The dominant economic case for protectionism – including the thrust of the Trump-MAGA case – is that tariffs supposedly create a greater abundance of goods and services in the domestic economy and thereby reduce all prices. The dominant economic case against protectionism, then, is to expose the many fallacies that motivate this protectionist case. So contrary to what you and Mr. Thief believe, you have not caught me in a “Gotcha!” by noting a fact that neither I nor any other proponent of free trade has ever denied, namely, that all taxes cause some prices to rise.

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 Editorial Board of the Wall Street Journal justly criticizes Jane Fonda and other ‘progressives’ for opposing a California initiative that would ease Californians’ ability to build and produce. A slice:

The progressive “abundance” movement is getting an election test in California, where the climate lobby and unions have come out swinging against Prop. 45, a ballot initiative that would accelerate permitting for housing, green energy and public works. Here is a snapshot of why life in California is so expensive.

The 1970 California Environmental Quality Act (CEQA) is the bane of businesses and anyone who wants to build in the state. Localities often take years to complete environmental reviews for small projects, which are then subject to lengthy public comment and hearings. Opponents weaponize the law to delay or kill projects.

Homeowners challenge environmental reviews for nearby housing projects they fear could hurt their property values or increase traffic. Building unions threaten litigation to block projects if developers don’t accept prevailing wage mandates. The green left opposes water storage and energy projects, and most everything else.

A gas station owner last decade sued to block a competing gas station across the street from adding several new pumps. Even progressive favorites like bike lanes, food banks and solar farms are ensnared by CEQA. The result: A shortage of housing, water and energy—and inevitably higher prices.

Enter Prop. 45, which would expedite permitting for, and limit litigation against, “essential” projects, including housing, transportation, water, broadband, renewable energy, schools, healthcare facilities and wildfire mitigation. Local governments would have to specify all information that developers must submit at the outset of environmental reviews. That means bureaucrats couldn’t change review standards mid-review. Opponents would have 45 days to submit public comments on draft environmental impact statements.

If a project is approved, opponents would have 30 days to file a lawsuit. Judicial review would be limited to “whether the approval or authorization complies with objective existing laws.” Courts would have 270 days to rule. If judges find fault with a particular aspect of an environmental review, they couldn’t block the projects en toto.

The California Building Industry Association estimates Prop. 45 would decrease the cost of building a new home by $75,000 on average. It would likewise reduce costs for critical infrastructure projects, saving taxpayers billions of dollars and potentially lowering utility bills. Another bonus: Less gridlock on jammed roads.

Wall Street Journal columnist Joseph Sternberg warns of the ill-consequences for Americans of heeding the advice of certain French economists who have no understanding of how actual wealth is created. A slice:

As dangerous is the attitude Proposition 40 embodies. Its premise is that any and all private wealth constitutes an illegitimate diversion of resources away from the state. Despite the initial application to fortunes only above $1 billion, one discerns in the academic literature behind Proposition 40 no limiting principle.

This is foreign to America’s political tradition, in which property rights are a foundation of our liberty. The tax is entirely redistributive and punitive, and in this regard its philosophical radicalness is underappreciated. Probably because the danger it poses to the economy is so distracting.

That’s where the French come in. It’s notable that the key academic advocates of Proposition 40, and wealth taxes in general, are French. Emmanuel Saez, an economist who teaches at University of California, Berkeley, is credited as one of the authors of Proposition 40. His frequent collaborator Gabriel Zucman is a vocal proponent. Between them they have done more than any other economists to provide an intellectual veneer to the case for introducing wealth taxes in America.

Messrs. Saez and Zucman derive their conclusions from Thomas Piketty, also French, whose 2014 book, “Capital in the Twenty-First Century,” revived academic and popular interest in inequality. Mr. Piketty’s political influence has proved more durable than his book’s methodological credibility, and debate still rages about whether any of these people can accurately measure “wealth” at all.

This isn’t a knock on the French, who can be lovely people when they aren’t rioting. But the French origins of Proposition 40 are significant. For one, these economists come from a political-economy tradition very different from America’s.

More to the point, they come from a country that is broke. France has just wrapped up another week of rioting over its government’s lack of money. This time students are demanding more cash for schools. At various other times it was government employees, retirees and farmers. With a nearly 120% ratio of government debt to gross domestic product and fiscal deficits above 5% of GDP each year, there’s no money to give them.

This has encouraged the spread of the convenient fantasy that France—and, by extension, Europe’s other bankrupt states—would have enough money to spend if only the wealthy could be forced to pay their fair share of taxes. Most of the global tax debate of the past decade traces back to this myth.

The problem is that France already tried a wealth tax of its own. It was a flop. The levy consistently generated less revenue than predicted, and President Emmanuel Macron scrapped it in 2018. French economists managed to avoid learning anything about incentives, prosperity or fiscal sustainability from this experience. But they do think they know how to make a wealth tax work better.

Paul McDonnold tells of how the American south is enriched by free enterprise.

Here’s the abstract of a new paper by Pinelopi Koujianou Goldberg, Réka Juhász, Giulia Lo Forte, and Jeff Thurk:

We show that cross-border learning is an important feature of modern semiconductor manufacturing and that several important channels – such as knowledge sharing along global supply chains, the movement of engineers within multinational firms, and foreign direct investment – operate through market mechanisms rather than anonymous technological spillovers. These findings have significant policy implications. When cross-border learning is mediated by purposeful economic relationships, access to frontier knowledge is neither automatic nor guaranteed. Firms and governments can facilitate – or restrict – the international diffusion of technology, implying that policies to foster domestic technological upgrading are likely to be most effective when coupled with continued access to global sources of frontier knowledge.

“US steel prices climb to four-year high as Trump’s tariffs bite.” (HT Scott Lincicome)

James Pethokoukis is optimistic about America.

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… is from page 65 of the late Anthony de Jasay‘s brilliant 1997 volume, Against Politics:

Much of the old confusion we deplore in political theory, and much of the fresh confusion we spread when trying to get rid of what has been spread, springs from false notions of what rationality is and what it does.

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Here’s a letter to National Review.

Editor:

Michael Brendan Dougherty claims to find support for tariffs in F.A. Hayek’s article “Competition as a Discovery Procedure” (“Defending Dynamic Markets,” October 16). This move is as bizarre as claiming to find support for creationism in Darwin’s On the Origin of Species.

Mr. Dougherty’s argument is this: Because tariffs protect domestic producers from foreign competition, these producers will gain access to larger markets. These larger markets will then enable these producers to take advantage of economies of scale denied to them when having to share their markets with foreign rivals. As these firms produce at larger scales, their per-unit costs of production will fall and, voilà, prices will fall – thus justifying the tariffs!

Facepalm.

First, domestic firms that scale up to produce more output draw resources away from other domestic producers, thus causing these other producers to scale down. The prices of the outputs of these other producers rise.

Second, because U.S. tariffs reduce the number of dollars earned by foreigners, foreigners purchase fewer U.S. exports. (Mr. Dougherty should consult another famous economic paper, one written by a student of Hayek: Abba Lerner’s 1936 article “The Symmetry Between Import and Export Taxes.”) The markets served by American firms that export will shrink, causing many of these firms to scale down, thereby raising their per-unit costs of production and, in turn, raising the prices of their outputs.

Third, if (as is likely) a fall in U.S. imports doesn’t cause a dollar-for-dollar fall in U.S. exports, the fall in U.S. imports will also reduce foreign investment in the U.S. – thus denying to some American firms the capital they would otherwise have used to modernize or expand.

Fourth, Hayek’s point in the article cited by Mr. Dougherty is that markets should be left as free as possible in order to discover the best outputs to produce and the best means of producing these outputs. This on-going discovery procedure takes account of as many relevant realities as possible, including the policies of foreign governments. Yet by imposing tariffs – even stable ones – the home government short-circuits the market’s ability to discover and implement these ‘best’ economic plans and procedures. Protection not only prevents buyers from spending their money in ways that most accurately signal to producers just which products buyers want most urgently, it incites protected firms to expand production, not because they’ve discovered better ways to compete for customers but, instead, because government shields them from having to discover better ways to compete for customers.

Mr. Dougherty wants us to swallow the puzzling proposition that protecting firms from competition makes firms more “dynamic” and, hence, improves their economic performance. (If I were to protect my students from being assigned poor grades, would I incent them to study more and, hence, improve their learning?) It’s true that markets deal with, and find ways to reduce, the damage done by protectionism. But this fact is no more an argument for protectionism than is the fact that individuals deal with, and find ways to reduce, the damage done to their homes by hurricanes an argument for hurricanes.

Hayek would be appalled to encounter an attempt to use any of his work to justify protectionism.

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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My intrepid Mercatus Center colleague, Veronique de Rugy, continues to warn of the dire consequences of the U.S. government’s fiscal incontinence. Two slices:

The federal government just closed fiscal year 2026 with a deficit of nearly $2 trillion, according to figures the Congressional Budget Office (CBO) released last Thursday. Only the two pandemic years of 2020 and 2021 were worse. Today, though, there is no recession and no emergency. These enormous budget deficits are the new normal.

The usual response to a deficit warning is that the government just needs more money. It doesn’t. Thanks to the remarkable strength of the private sector, federal revenue rose by 3 percent, to more than $5.4 trillion, over the fiscal year. But spending rose by 6 percent, reaching $7.4 trillion.

…..

As for Medicaid, the problem is one of pricing. And yet competition based on price—the best cost-control tool—has never been seriously tried. Washington covers 90 percent of the cost of states’ expanded Medicaid programs for adults. A state can buy a dollar of spending with just a dime of its own money. Changing the states’ incentives would be key here. Implementing risk-adjusted per-capita caps, through which the federal government would give states a fixed amount per enrollee, would do just that. States would pay for their own inefficiencies or would be able to use every dollar they save by becoming more efficient.

John O. McGinnis writes wisely about AI. Two slices:

Artificial intelligence presents two very different dangers. One is that AI systems will slip out of human control and wreak havoc. The other is that AI systems will do exactly what malevolent humans direct them to do. These dangers can coexist, but they have different implications for AI regulation.

Anthropic CEO Dario Amodei recently called for slowing frontier development to allow more coordination among leading firms and more time to test new models. Pacing the frontier may help with the first risk. But it likely delays the tools to address the second. Advanced AI is already being used to find software vulnerabilities and help repair them. Some companies are also giving selected defenders access to capabilities not available to ordinary users.

The first risk gets much attention because it is so novel. It is claimed that, for the first time, a technology we develop may act autonomously against our interests. Not surprisingly, because this is an unprecedented kind of danger, experts disagree about how serious the threat is. If the danger is that nobody can control the most advanced AI, then being the first country to build it doesn’t solve the problem.

The second danger is the opposite. The machine is dangerous because people control it. The problem is with our fellow humans: criminals, terrorists and officials of geopolitical adversaries, including authoritarian nations like China and Russia. Unlike a catastrophic loss of control brought on by autonomous AI, this all-too-human threat isn’t speculative. Throughout human history, evil people and tyrannical states have used the latest technology to cause massive harm. Here, slowing down AI may delay defenses against AI that the wrongdoers already possess or will acquire regardless of what we do.

…..

These dangers also show that even international treaties to slow down may create more risks. A treaty limiting future development wouldn’t remove models already in circulation. That genie is out of the bottle. Better AI may be our best defense against its granting the wrong wishes.

This point is even clearer when it comes to geopolitical threats. The U.S. government could take advantage of models from frontier companies, perhaps including more advanced ones that aren’t yet publicly available. This access could give the U.S. a military advantage that may be decisive in this technological age. And because other nations know this, they may be deterred from attacking in the first place.

Frontier AI is itself a firewall. Slowing its development can postpone new defenses and leave existing threats in place. A slowdown can cost protection as well as progress.

Scott Lincicome makes clear that “the government’s unprecedented equity portfolio has a distressingly weak legal foundation.”

Jim Dorn argues – persuasively – that Eric Beinhocker’s and Nick Hanauer’s “market humanism” is rooted in opposition to a straw man. A slice:

Beinhocker and Hanauer engage in a strawman argument by distorting or simplifying “libertarianism,” which can also be called “liberalism” or “classical liberalism” (Boaz 2015, p. 8). As David Boaz pointed out, “Libertarianism is the philosophy of freedom.… We should be free to live our lives as we choose so long as we respect the equal rights of others” (Boaz 2015, p. 1). Liberalism is not absolute freedom. Liberals going back to John Locke and Adam Smith bounded freedom by what Friedrich Hayek called “rules of just conduct.”

George Will is not favorably impressed by either candidate – incumbent Jon Husted (R) and Sherrod Brown (D) – for a U.S. Senate seat from Ohio. Two slices:

Two years ago, Democrat Sherrod Brown failed to win a fourth Senate term, losing by just 3.6 points while Donald Trump was carrying Ohio by 11.3 points. This year, Trump is as unloved in football-crazed Ohio as Michigan’s Wolverines. Brown probably will turn 80 in 2032 as a senator.

He plunged from Yale into politics, elected to the state legislature at age 21. His thinking is familiar to Ohioans after half a century advocating economic populism and cultural liberalism. He was for same-sex marriage during his seven terms in the House of Representatives, two decades before the Supreme Court settled the issue. His protectionist credentials are so impeccable he must feel plagiarized by Trump. He favored protectionism before this foolishness became fashionable.

Brown’s opponent, Sen. Jon Husted, was appointed in 2025 to the seat JD Vance filled for just over two years before becoming vice president. Husted’s thinking might not be a concern for voters. They might reasonably assume his convictions are supplied by the president, toward whom almost all congressional Republicans are vigorously subservient.

…..

Brown spoke about his devotion to Social Security, but not — why spoil a balmy autumn day? — about the 2032 exhaustion of its trust fund. There will be plenty of time after the election to ignore this certainty.

DOGE worked only if it’s graded on a curve.

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… is from pages 139-140 of the 2009 Revised Edition of Thomas Sowell’s Applied Economics: Thinking Beyond Stage One:

The incentives of a government agency are very different from those of a family or an insurance company. As a matter of financial self-protection, both families and insurance companies must seek to discourage risky behavior in one way or another. For a government agency, however, financed by taxpayers’ money, there is no such urgency about discouraging the increased risks that people may take when those risks are covered by others. Moreover, the agency gets its biggest political support from helping those suffering the consequences of the risks they have taken, however unwisely, not by criticizing them. Thus government emergency programs help people struck by floods, hurricanes, and other natural disasters make it easier for people whose homes have been destroyed to rebuild at the same locations, in areas where such disasters recur regularly over the years.

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Here’s a letter to National Review.

Editor:

John Puri superbly reveals core flaws in Michael Brendan Dougherty’s argument that tariffs will not raise prices in the long run (“Tariffs Still Raise Prices, Even If They Fall,” October 15). But one other flaw warrants identification, namely, even if the prices of domestically produced substitutes for tariffed goods eventually fall to their pre-tariff levels, the prices of other domestically produced goods and services must rise.

The prices of the outputs of protected firms can, in the long run, be kept at pre-tariff levels only if these firms increase their outputs by the amounts by which imports are kept out of the country. But to expand their outputs, these firms must draw resources away from other domestic industries. As these other industries lose resources, their outputs will fall. And as their outputs fall, the prices of these industries’ outputs will rise.

In short, to the extent that tariffs cause the outputs of protected industries to rise – and, hence, to moderate their price increases – the prices of the outputs of non-protected industries will rise.

There’s no escaping the fact that, because protectionism restricts domestic citizens’ and producers’ access to goods and services, protectionism causes prices to rise.

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