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… is from page 124 of George Stigler‘s 1965 paper “The Economist and the State,” as this paper is reprinted as Chapter 11 of the 1982 collection of some of Stigler’s writings titled The Economist as Preacher and Other Essays (footnote deleted):

James Mill’s oldest son, surprisingly enough, put up a stronger case against state control of economic life than his much more conservative father had. John Stuart did not follow his father in accepting the invariable wisdom of the democratic state, possibly because he was writing well after the Reform Act. He rested the case much more on the defense of individual liberty, and fully three of the five reasons he gave for favoring laissez faire as a practical maxim were variations on the importance of the dignity, independence, self-reliance, and development of the individual.

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The 1945 Alcoa case is one of many economically perverse antitrust rulings from the era before the embrace of the consumer-welfare standard.

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

Editor:

You correctly describe the DOJ’s new antitrust assault on Google as punishing that company for its success at pleasing consumers (“Punishing Google for Its Search Success,” Nov. 25). Alas, such perverse use of antitrust is nothing new. Before WWII the government sued to break-up Alcoa. In the 1945 final ruling in the case, Judge Learned Hand sided with the government, insisting that Alcoa violated the Sherman Antitrust Act by being especially energetic and diligent at satisfying consumers. As justification for finding Alcoa in violation of the law, the eminent jurist wrote:

True, it [Alcoa] stimulated demand and opened new uses for the metal, but not without making sure that it could supply what it had evoked. There is no dispute as to this; “Alcoa” avows it as evidence of the skill, energy and initiative with which it has always conducted its business; as a reason why, having won its way by fair means, it should be commended, and not dismembered…. It was not inevitable that it should always anticipate increases in the demand for ingot and be prepared to supply them. Nothing compelled it to keep doubling and redoubling its capacity before others entered the field. It insists that it never excluded competitors; but we can think of no more effective exclusion than progressively to embrace each new opportunity as it opened, and to face every newcomer with new capacity already geared into a great organization, having the advantage of experience, trade connections and the elite of personnel.

The message to businesses was as perverse as it was detrimental to the competitive process: To avoid antitrust prosecution, help your competitors by harming your customers.

A great advantage of the consumer-welfare standard which was embraced by the courts starting in the late 1970s, and which has largely guided antitrust enforcement actions from Reagan until Biden, is that it avoids economically destructive rulings such as Alcoa. Let’s hope that the end of the Biden administration also brings an end to the effort to scuttle the consumer-welfare standard.

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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Ryan Young remembers the late, great Fred Smith, who founded – with his wife, Fran – the Competitive Enterprise Institute. Two slices:

Everybody in Washington knew Fred, and Fred knew everybody. Even people who disagreed with everything he stood for couldn’t help but like him. He was always smiling and laughing, even when making serious intellectual arguments. People around him couldn’t help but take on some of his joy. Fred was a Washington institution, in a good way.

It’s sad and a bit weird to write “was” instead of “is.” Fred passed away on November 23, 2024, peacefully and at home. He was 83.

Fred L. Smith, Jr. was born in Jim Crow-era Alabama on the day after Christmas, 1940. His family moved near Slidell, Louisiana when his father got a job as a lock master on the Pearl River. Fred rejected the racism around him, so he figured he was a liberal, and became an activist. He ended up in Washington, working for the newly-founded EPA, and became disillusioned.

His EPA colleagues were focused on growing the agency’s budget, advancing their careers, and signaling their ideology. They were less interested in what Fred cared about, which was discovering the best ways to protect the environment.

Thus began Fred’s embrace of free markets, which led to CEI’s founding in 1984.

…..

One of my fondest Fred memories is the time we had an argument that lasted for two years.

Our dispute was over rent-seeking. This is the economics term for private companies lobbying for special government favors like subsidies, sweetheart contracts, or regulations that hobble competitors.

At the time, Washington was doling out about $100 billion worth of such corporate welfare. Yet, lobbying was only a $3 billion industry. That’s more than a 30-fold return. For comparison, the stock market only yields about 8 percent. With those kinds of returns, the question isn’t why is there so much rent-seeking, but why so little?

I thought the answer was in economics and incentives. Fred thought the answer was in virtue. He had recently borrowed my copy of Deirdre McCloskey’s Bourgeois Virtues, and had taken it to heart. It reinforced Fred’s longtime belief that most, though not all, business people had a sense of decency and honor that limited their rent-seeking.

For the next two years, every time I walked past his office, Fred would bring up some point about business ethics, and I would counter with some public choice theory argument. We would exchange volleys over email, and even in meetings that were supposed to be about something else.

Fred and I eventually realized we were both right. We also realized that our combined perspectives might make a good paper.

Applauding Christopher Cox’s new biography of Woodrow Wilson, George Will rightly says that “at last, Woodrow Wilson’s reputation gets the dismantling it richly deserves.” A slice:

Arguments about past presidents shape the nation’s present understanding of itself, and hence its unfolding future. In recent years, biographies by nonacademics have rescued some presidents from progressive academia’s indifference or condescension: John Adams (rescued by David McCullough), Ulysses S. Grant (by Ron Chernow), Calvin Coolidge (by Amity Shlaes). The rehabilitations of those presidents’ reputations have been acts of justice, as is Christopher Cox’s destruction of Woodrow Wilson’s place in progressivism’s pantheon.

In “Woodrow Wilson: The Light Withdrawn,” Cox, former congressman and former chair of the Securities and Exchange Commission, demonstrates that the 28th president was the nation’s nastiest. Without belaboring the point, Cox presents an Everest of evidence that Wilson’s progressivism smoothly melded with his authoritarianism and oceanic capacity for contempt.

His books featured ostentatious initials: “Woodrow Wilson Ph.D., LL.D.” But he wrote no doctoral dissertation for his 18-month PhD. He dropped out of law school; his doctorate of law was honorary. But because of those initials, and because he vaulted in three years from Princeton University’s presidency to New Jersey’s governorship to the U.S. presidency, and because he authored books, he is remembered as a scholar in politics. Actually, he was an intellectual manqué using academia as a springboard into politics.

My intrepid Mercatus Center colleague, Veronique de Rugy, talks with Tom Church and Danny Heil about DOGE.

David Bier explains that “the math on mass deportation doesn’t add up.”

Kent Lassman reflects on the fall of the Berlin Wall.

Andrew Stuttaford decries “the climate gravy train.”

The Editorial Board of the Wall Street Journal rightly criticizes the attack, by Biden’s mad antitrust dogs, on Google. A slice:

How badly does the Biden Administration want to punish Google? So much that the Justice Department’s antitrust cops are now asking a federal court to hobble the search giant, even though their proposals would hurt consumers and could benefit China. That’s only the start of the reasons to be skeptical of this government market meddling.

In a court filing last week, the DOJ proposed a slew of remedies for Google’s alleged antitrust violations. Federal Judge Amit Mehta ruled in August that Google had maintained an illegal search-engine monopoly by paying web browsers and device manufacturers to be featured by default, even as he acknowledged this wasn’t the primary reason for its success.

“Google has not achieved market dominance by happenstance. It has hired thousands of highly skilled engineers, innovated consistently, and made shrewd business decisions,” Judge Mehta wrote. “The result is the industry’s highest quality search engine, which has earned Google the trust of hundreds of millions of daily users.”

No matter, the government now wants to degrade Google’s search-engine quality to help less successful rivals.

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… is from page 256 of Thomas Sowell’s 1999 book, Barbarians Inside the Gates:

Have theorists wreaked more havoc than war? It is too close to call. Wars may be more destructive while they are raging, but they occur only at intervals, while half-baked theories are constantly creating needless disasters.

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David Von Drehle celebrates George Will’s half-century of writing columns for the Washington Post. Three slices:

When George Will left the defeated senator’s office to become a writer, he had taken the measure of the president’s character. As Nixon’s fortunes rapidly sagged and Will’s explosively soared, a compelling new voice on the Washington scene poured enfilading fire on the Watergate White House from the president’s right flank.

“A year ago the reigning philosophy was survival of the fittest, and Mr. Nixon and his agents were feeling remarkably fit,” Will wrote in 1973 as a columnist for National Review, the conservative bible. “Today, Mr. Nixon has all the friends he has earned and deserves.”

…..

From the beginning, he confounded philosopher Isaiah Berlin’s famous taxonomy of thinkers. According to Berlin, foxlike thinkers know many things. Hedgehog thinkers know one big thing. Will is a crossbreed, neither and both. The many things he knows about — baseball, the Federalist Papers, Supreme Court jurisprudence, Bruce Springsteen, Joan of Arc, gerrymandering, criminal justice, macroeconomics, “the pleasure … of dry martinis at dusk” (really, the list seems endless) — march smartly through his copy thanks to the one big thing that organizes his ideas. He knows that Thomas Jefferson was onto something essential when he wrote that individual humans have certain unalienable rights, and that James Madison was uncommonly astute in constituting a government to protect and serve — but not overwhelm — those rights. With a dollop of Heraclitus mixed in (“Nothing is permanent except change,” which Will sometimes pares down to “nothing lasts”), the essential point emerged. America’s birth of freedom is in eternal tension with the threat of too much government. To preserve the former, one must resist the latter.

…..

In other words, freedom is a birthright, not a grant from government. A corollary followed close behind: Free people are more likely to improve themselves than to be improved by government initiatives.

Will traced this principle to the English philosopher John Locke and his disciples among the American Founders. Their philosophy — he called it “classical liberalism” in “The Conservative Sensibility” — “is the distinction between the public and the private spheres of life. On this distinction, freedom depends.” Strong and independent courts — another of Will’s foundational commitments — are necessary to defend private life against the whims and excesses of elected branches of government.

The first question for every self-described conservative is: conserving what? This was a hot debate when Will was starting out and is still disputed now. Flavors of conservative thought in the 1960s ran from the hierarchical — even authoritarian — conservatism of a bygone Catholic Europe, to the populist and cultural conservatism of white nationalists. Will chose the libertarian strain of conservative ideas associated with Barry Goldwater, the Arizona senator whose failed presidential bid in 1964 was the fire from which Reagan’s phoenix arose in 1980.

Will rejected the vaguely royalist conservatism epitomized by Russell Kirk and Whittaker Chambers, early influences on National Review, as “throne-and-altar, blood-and-soil nostalgia.” Describing himself as “an amiable, low-voltage atheist,” Will felt government could respect religious faith without preferring religious faith. The conservatism of populists like Patrick Buchanan was even less viable. Populism, Will wrote, was about emotions and movements, which tend to be antithetical to individual human rights.

David Henderson exposes yet another incident of bias from the media. A slice:

But here’s what is misleading: the subhead. It reads, “Fossil-fuel tycoons helped return the president-elect to Washington. Now they are seeking to lock in the use of their products for years to come.”

Wow, I thought. Are they trying to require people to use oil and natural gas? That would suck.

Actually, they aren’t. What they’re actually trying to do, according to Benoit Morenne and Collin Eaton, the story’s authors, is get the U.S. government to quit locking in use of energy not produced directly by oil and natural gas.

Phil Magness exposes yet another incident of bias from intellectuals. Two slices:

“It’s the cleanest, neatnest [sic] operating piece of social machinery I’ve ever seen. It makes me envious.” When Rexford Tugwell, an adviser to President Franklin Roosevelt, wrote these words in 1934, he was not referring to the New Deal programs in his purview. He was recording his thoughts on fascist Italy while awaiting an audience with Benito Mussolini. Tugwell reacted with similar awe upon touring the Soviet Union in 1928, penning an essay urging Americans to reflect on what they might adapt from Josef Stalin’s “experiment.”

For progressive historians who depict the New Deal as a “democratization” of the economy, Tugwell creates an unsettling complication. So do the many other leftist intellectuals who turned to the illiberal regimes of interwar Europe as models of economic planning. When conservative writer Jonah Goldberg assembled those episodes in his 2007 book Liberal Fascism,he struck a raw nerve with progressives. Taking America Back — a book from Yale University Press by David Austin Walsh, currently a postdoctoral researcher at Yale — emerged from a decadeslong fit of spite over Goldberg’s explorations of the undemocratic left.

….

To Walsh, [William] Buckley was always a “stalwart defender of white supremacy in America.” This premise leads to a recurring mismatch between Walsh’s narrative and the archival sources he musters. He wants his readers to see “the purge that wasn’t”—a continuum of bigoted cranks in Buckley’s orbit who found themselves excluded only when their antics caused him embarrassment. Instead, Buckley’s letters reveal a genuine distaste for the antisemitic right and half a century of conscious moves to keep it at bay.

As even Walsh concedes, the crackpot elements were stunningly incompetent organizers, belying the notion that they brought any value to Buckley’s supposed “popular front.” [Merwin] Hart’s ineptitude made him a joke, even among other critics of the New Deal. [Russell] Maguire’s mismanagement of The American Mercury tanked the magazine’s reputation within a few years of his acquisition. [Revilo] Oliver destroyed his own academic career. [George Lincoln] Rockwell died at the hands of a fellow Nazi, his cause universally reviled by the public and his life in squalor.

Justin Zuckerman exposes yet another incident of economic ineptitude from the media. A slice:

Did the number of restaurant workers in Washington, D.C., go up after the city voted to increase the minimum wage in a citywide referendum? That’s what The New York Times reporter Priya Krishna claimed in an article that appeared in March, citing figures from the Bureau of Labor Statistics (BLS).

She reported that the total number of workers in the industry had increased from 13,690 in 2022 to 14,168 by September of 2023.

These numbers are false. It turns out that Krishna misunderstood the data she was looking at. The chart she linked to in the article presented numbers “in the thousands,” meaning that the actual data were not 14,168 but 14,168,000, which also makes sense because Krishna didn’t realize she was reading national BLS data—not local figures.

“Should states run lotteries?“

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… is from pages 22-23 of Deirdre McCloskey’s 1987 monograph, Econometric History:

Common-sensical though economics can be, learning to argue in this way does not come automatically with experience of life or scrutiny of The Economist. Pop economics is not the genuine article. As a way of arguing about society, genuine economics is similar to mathematics (a way of arguing about numbers) or literary criticisms (a way of arguing about novels). No adult would regard herself a master of mathematics because she can count to 100 or of literary criticism because she understood the humour in Pooh, the bear of little brain. But the parallel error is made repeatedly in matters economic, even by adults.

DBx: Yes.

Some people ‘naturally’ get the economic way of thinking more readily than do other people. But doing good economics requires always the economic way of thinking. Many PhD-sporting economists – indeed, some with Nobel Prizes to their credit – have never mastered the economic way of thinking. They are poor economists. And again, many people without formal training in economics nevertheless somehow ‘get’ the economic way of thinking (although sound formal training in the subject invariably sharpens this thinking).

Alas, however, most pundits and politicians who write and pronounce on economics haven’t a clue about the economic way of thinking. Such people, for example, refuse to look beyond the most immediate impacts of particular actions. (“See! The tariffs increased employment in the protected industries. Tariffs work!”) Such people mistake stated intentions for results. (“Sen. Snort and Pres. Prickly intend, with their industrial policy, to strengthen the economy. Being democratically elected, we trust that their motives are pure and their methods are effective!”) Such people mistake means for ends. (“Jobs should be ‘prioritized’ above consumption!”) Such people make these and several other economically ignorant errors.

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Here’s a letter to Foreign Policy.

Editor:

You report that “Oren Cass explains how the president-elect has created an ‘enormous amount of space for new thinking.’” (“The Case for Trump’s Tariffs,” Nov. 22).

Nonsense. Trump’s pronouncements on trade have merely reopened space for old non-thinking.

The understanding that Trump and Cass have of trade was all the rage when mercantilist thought was ascendant in the 17^th century. Alarm over trade deficits, fear that imports diminish a country’s productive capacity and shrink its employment opportunities, the presumption that international trade is a zero-sum competition among nations, and the conviction that consumers, entrepreneurs, and investors must be corralled and controlled by government officials lest they import too much, export too little, and invest unwisely were staples of mercantilist dogma.

The new thinking about trade didn’t begin in earnest until the 18^th century when David Hume and Adam Smith showed that mercantilist economic ‘thought’ is a nest of fallacies and superstitions. These scholars, followed later by David Ricardo, exposed mercantilist assumptions, ‘analysis,’ and conclusions as springing from a failure to think seriously about trade – from a lazy or stubborn refusal to trace the consequences of trade beyond those that immediately occur and can be comprehended by a third-grader.

Hume, Smith, Ricardo, and countless competent economists ever since have thoroughly debunked mercantilist notions and nostrums. They have done so repeatedly using both theoretical and empirical analyses. Arguments offered today against free trade by Trump, Cass, and other protectionists are just as new, and just as sound, as are arguments offered today by believers in the geocentric view of the universe.

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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GMU Econ alum Dominic Pino talks with Scott Lincicome about trade.

And this truth from Dominic: “our politicians’ unwillingness to face budgetary reality is a dire problem.”

My intrepid Mercatus Center colleague, Veronique de Rugy, applauds efforts to reduce government waste, fraud, and abuse – but notes that the most important step Congress must take to avoid a fiscal calamity is that it reduce the U.S. government’s reliance on debt.

Gloria Romero makes the case for abolishing the U.S. Department of Education. A slice:

The education industrial complex is a quagmire. Nationally, student academic outcomes have plateaued or declined. Wide achievement disparities affecting racial and ethnic minorities should shock the American conscience. Parents, particularly of African-American and Latino students, want to close these gaps and have embraced school choice. The Trump administration has an opportunity to deliver for children who for generations have been trapped in failing schools by the Democratic Party.

In 1979 President Jimmy Carter, backed by the teachers unions, signed the Department of Education Organization Act. A single department, he reasoned, would reduce administrative costs and improve efficiency. It didn’t.

Reading scores for fourth- and eighth-graders across the country have been largely unchanged since 1990, when the National Assessment of Educational Progress began. According to the most recent NAEP data, in 2022 only 31% of America’s eighth graders were proficient in reading and 27% were proficient in math. That year, the average fourth-grade math score fell by five points to a level last seen in 2005; the average eighth-grade math score fell by eight points to the 2003 level. In California, statewide tests in 2024 found that 70% of African-Americans and 63% of Latinos in grades 3 through 11 can’t read at basic levels of proficiency.

The Editorial Board of the Wall Street Journal is understandably dismayed by Trump’s nominee to head the U.S. Department of Labor. A slice:

Hard to believe, but Donald Trump on Friday night nominated a favorite of teachers union chief Randi Weingarten as his Labor Secretary. Why would Mr. Trump want to empower labor bosses who oppose his economic agenda and spent masses to defeat him?

Mr. Trump’s regrettable choice is Oregon Rep. Lori Chavez-DeRemer. Ms. Weingarten on Thursday tweeted her support for the freshman Republican. Teamsters President Sean O’Brien, who spoke at the Republican National Convention, has also been pulling for her. In a Truth Social post, Mr. Trump said she’ll work toward “historic cooperation between Business and Labor.” But Ms. Chavez-DeRemer has backed union giveaways like the Pro Act, which are not “cooperation.”

Hence the enthusiasm from the labor bosses.

John O. McGinnis counsels careful consideration before overturning New York Times v. Sullivan.

James Madison, the primary architect of the Bill of Rights, famously framed freedom of speech as “property” in one’s opinions, underscoring its vulnerability to state interference. But as with all property, it is subject to certain restrictions when wielded to harm the rights of others. The common law’s property concepts, deeply infused with natural rights theory, provide guidance on what interests may justifiably limit free speech without devolving into arbitrary suppression. These venerable doctrines, shaped over centuries, offer assurance that such protections serve a legitimate purpose rather than an agenda to stifle expression.

Nicolas Cachanosky reports on how Javier Milei’s market-oriented policies are lowering rents in Argentina. A slice:

Once President Javier Milei took office, he repealed the Lipovetzky Law by decree, which quickly reversed its effects. Rental unit supply increased by over 170 percent, and real rental prices dropped by 40 percent from October 2023 levels. Note not only the magnitude of the improvement in this market, but also the immediate effect after the Lipovetzky Law is removed. This market improvement is largely attributed to the repeal of the Lipovetzky Law, allowing landlords and tenants to once again agree on lease terms and price adjustments freely, even in dollars if preferred.

However, there’s another factor at play. Lipovetzky’s Law introduced a new level of regulatory uncertainty. But this uncertainty did not vanish with the removal of the rent controls. Now, fearing future regulations, many landlords are eager to lock in leases or sell properties before rental controls come back, or, for instance, a tax on unoccupied residential properties. Ironically, part of the recent improvement in the rental market can be traced back to this regulatory uncertainty.

Juliette Sellgren talks with historian David Beito about Rose Wilder Lane.

GMU Econ alum Jon Murphy makes an interesting point about “science-guided policy.”

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… is from page 34 of the 1947 “Crofts Classics” edition of John Stuart Mill’s 1859 On Liberty:

However unwillingly a person who has a strong opinion may admit the possibility that his opinion may be false, he ought to be moved by the consideration that however true it may be, if it is not fully, frequently, and fearlessly discussed, it will be held as a dead dogma, not a living truth.