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… is from page 73 of Deirdre McCloskey’s forthcoming book, Equality of Permission [original emphasis]:

An equality of outcome, the brain surgeon paid at the finish line, or the tenth mile, the same as the street sweeper, certainly comports with an equality of souls…. But unfortunately in large groups the ignoring of a person’s marginal work product, and making payments according to the noble belief in the equality of human worth – in which all us monotheists and modern liberals do, I affirm yet again, fervently believe – does not work. Through gross misallocation in the short run, and the collapse of spurs to innovation in the long, such an enforced equality of outcome leads in a large group to a dismal equality of poverty, and then to tyranny. Such attempts fail every time at large scale, even when they are kindly and sincere and gentle.

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I’m pleased that the Washington Post published this letter of mine.

Alvin E. Roth made a compelling case for allowing people to receive monetary payments in exchange for donating kidneys [“90,000 people are waiting for an organ that can’t be bought,” op-ed, May 10]. Squeamishness about such transactions doesn’t come close to outweighing the enormous benefits of saving thousands of lives.

But in the unfortunately likely event that such squeamishness continues to prevent payment for kidney donations, an intermediate step is worthwhile – namely, as University of Michigan law professor Adam Pritchard and I first proposed in the 1990s, when people receive or renew their driver’s licenses, offer to pay them to sign up to be organ donors.

As of 2023, just under 50 percent of licensed drivers in the U.S. are registered donors. A small inducement — say, $50 — to register would likely result in a large increase in registrations without anyone sacrificing a kidney or other organ unless and until they are declared dead.

Taking this intermediate step toward compensating people for offering kidneys for transplant might increase the likelihood of the best policy — the one proposed by Roth — eventually being adopted.

Donald J. Boudreaux, Fairfax

The writer is an economics professor at George Mason University and a senior fellow at the Mercatus Center.

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Clifford Winston explains what shouldn’t – but, alas, what always does – need explaining: Protecting companies from competition might well increase their market share, but it also weakens them; it makes them less efficient and more fragile. Two slices:

At first glance, the airline and auto industries seem much different. Airlines are frequently in and out of bankruptcy court, while the large automakers have avoided that fate since the recession of 2007-09 thanks to massive and recurring government intervention. But both are domestic industries operating in a global world, kept afloat by a regulatory scaffolding that gives priority to producer stability over consumer welfare and industry efficiency.

While we rightly celebrate the 1978 Airline Deregulation Act, airports and foreign competitors that could serve U.S. routes weren’t deregulated. Public airport monopolies and duopolies allow airlines to raise fares. With foreign carriers prohibited from flying domestic U.S. routes, domestic fares have been kept artificially high even while load factors approached 85% just before the Iran war. As a result, when a domestic shock hits, the system lacks the diversified global networks and capital depth needed to absorb the blow.

…..

From the 1964 “Chicken Tax” to the 100% tariffs on Chinese electric vehicles in 2025, Washington has walled off the American consumer. These barriers have allowed domestic makers to abandon the low-cost econobox segment entirely, focusing instead on $80,000 SUVs. Because they are shielded from the $15,000-a-car global competitors that are modernizing fleets in Europe and Asia, automakers have become addicted to a narrow, affluent demographic.

In both industries, the government’s protectionist solution has become poisonous. By shielding companies from the efficiency frontier of global competition, we have created industries that are too small to be truly global yet too large to be allowed to fail locally.

Resolving this crisis of financial brittleness requires a shift from a national-champion model to a global-industry model.

The Washington Post‘s Editorial Board correctly points to the Trump administration’s suspension of its tariffs punitive taxes on Americans’ purchases of imported beef as the administration’s “tacit admission that tariffs raise prices.” A slice:

Worried about the politics of affordability heading into the midterms, President Donald Trump has already exempted other food staples and home goods. In February, he allowed more beef imports from Argentina. He would have taken this additional step earlier if not for lobbying by ranchers, who want to keep beef prices as high as possible.

My intrepid Mercatus Center colleague, Veronique de Rugy, talks with Jessica Melugin about antitrust.

My GMU Econ colleague Thomas Stratmann, writing at National Review, makes the case that the failure of Spirit Airlines offers a good opportunity to reset antitrust. Two slices:

Short of praising the Met Gala, it’s hard to think of a more controversial thing you could do online than defend big business. The left has long crusaded against corporate America, but increasingly the populist right does too, turned off by toxic business practices like DEI and ESG.

But what happens when the contempt for business goes too far? What happens when it destroys a low-cost airline, hurting American workers and consumers?

This is the situation confronting those who cheered on the Biden administration’s antitrust revolution. Under the oversight of Jonathan Kanter at the Department of Justice’s Antitrust Division and Lina Khan at the Federal Trade Commission, the government largely abandoned the consumer welfare standard, which holds that the feds should interfere with mergers or business contracts only if the consumer stands to be directly harmed.

…..

The consumer welfare standard is, of course, meant to place the consumer front and center in antitrust policy. But it also functions as a restraint on regulators, creating clear and limited criteria for when government may intervene in markets. It understands that left to their own devices, regulators will act arbitrarily and create unintended consequences they can’t foresee at the outset.

This is exactly what the Biden team wrought with Spirit Airlines. Now, all eyes turn to Donald Trump. Trump has never fully thrown in with the anti-bigs, but some in his administration, including his Antitrust Division interim head Omeed Assefi and FTC Chairman Andrew Ferguson, risk paying an unhealthy amount of homage to Khan and the rest of the Biden antitrust enforcers by keeping alive antitrust suits with little obvious connection to the consumer welfare standard.

Current enforcers should treat Spirit Airlines not as a mere talking point against the Biden administration but also as a cautionary tale. The left claims to fight the bigs, but their meddling too often hurts those they try to help. The right has its own brand of populism, but it must avoid the left’s mistakes if it’s going to be effective.

GMU Econ alum Erik Matson writes insightfully about David Hume’s counsel that, when we ponder politics, it’s wise to assume that everyone is a knave. A slice:

For Hume, we should assume knavery in our political reasoning because collective action—the core of political life—distorts judgment and encourages knavish behavior toward those outside our social groups. Political life, in other words, brings out the knavery in us. In democratic politics, ordinary people of apparently decent character come together and end up authorizing coercive acts of injustice and, in some cases, outright moral atrocities.

Desmond Lachman warns of the U.S. government’s fiscal incontinence.

My Mercatus Center colleague Garrett Brown interviews my great emeritus GMU Econ colleague Richard Wagner about American federalism.

Arnold Kling brings his usual wisdom to this discussion of Zionism vs. anti-Zionism. A slice:

Once again, the Zionist project is caught in the middle of external conflicts. In this case, it is the conflict between Third Worldism and the Western tradition.

Third Worldism unites the left and Islamists. The Islamists are a bigger part of the alliance in Britain than in the United States. They have a shared hostility to markets, to American power, and to white people. (On straight vs. queer, the left and the Islamists would seem to disagree, but they apparently have set aside their differences.)

Whatever accidents of history that allowed the state of Israel to get to where it is today, I think that it would be terrible to see the country sacrificed on the altar of Third Worldism. That ideology strikes me as evil and backward. I believe that most Americans reject it. But it would not surprise me to see the Democrats adopt it in 2028.

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… is from page 523 of Richard Lewinsohn’s August 1933 Current History paper, “The Rise of Economic Nationalism”:

When the state actively enters the commercial field, there is everywhere an accompanying increase of economic nationalism, no matter whether it is on the basis of socialism as in Soviet Russia or on the basis of capitalism as in Western and Central Europe.

DBx: Yes.

American progressives have much to answer for. They led the way over the decades to intrude the U.S. government into the American economy. Among the unsurprising, although not to say inevitable, outcomes is MAGAism.

Please note that I don’t excuse members of today’s “New Right” and of other MAGA-aligned movements for their economic ignorance and arrogance. I only note that their economic understanding and policy proposals share much more with those of progressives than they – and progressives – care to admit.

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

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

…..

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

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

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

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

…..

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

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

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

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

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

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

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

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

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

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

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

Vance Ginn argues that “freedom still works.”

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

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

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

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

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The illogic of Trumpian protectionism is Everestian.

Editor:

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

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

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

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

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

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

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

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

…..

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

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

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

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

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

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

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

It still ain’t enough.

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

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

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

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

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

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

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

DBx: Yes. This truth is fundamental.

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

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