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… is from page 261 of the 1992 collection of some of William Graham Sumner’s best essays, On Liberty, Society, and Politics (Roger C. Bannister, ed.); specifically, this quotation is from Sumner’s insightful 1894 essay “The Absurd Effort to Make the World Over”:

[I]t is the greatest folly of which a man can be capable, to sit down with a slate and pencil to plan out a new social world.

DBx: If there is a bigger folly than the one described here by Sumner, it is to put stock – which can be nothing but blind faith – in those persons who sit down with a slate and pencil (or, today, with a keyboard and computer software) to plan out a new social world.

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In the print edition of tomorrow’s (Thursday’s) Wall Street Journal, Phil Gramm and I explain that Trump’s tariffs on steel and aluminum – that is, Trump’s punitive taxes on Americans’ purchases of steel and aluminum – will harm the American economy. A slice:

While total imports compose less than 14% of the U.S. economy, steel imports make up 25% of U.S. steel consumption. The U.S. imports roughly half its aluminum consumption. The new 50% tariff will have negative economic effects far larger than the original 25% tariffs in 2018. Those had carve-outs for Canada and Mexico, the largest suppliers of steel and aluminum to the U.S. Brazil and Korea were also exempt. The 2018 tariffs didn’t cover derivative products that could be imported as substitutes for raw steel and aluminum. This time around prices for consumer goods, such as lawn furniture at Walmart, and producer goods, such as robots in manufacturing plants, will rise as tariffs are imposed on their steel and aluminum content.

The International Trade Commission found that the 2018 tariffs raised the domestic prices of steel and aluminum by 2.4% and 1.6%, respectively. Yet even these modest increases disrupted supply chains and inflicted real damage. From the third quarter of 2009 (the end of the great recession) through 2017, U.S. manufacturing output rose at an average quarterly rate of 0.9%. But from the first quarter of 2018, when Mr. Trump first imposed tariffs, through the end of 2019 (just before the pandemic), manufacturing output fell on average by 0.06% per quarter. Unsurprisingly, while employment in steel and aluminum production grew by a piddling 2,300 jobs in 2018-19, employment in manufacturing industries using steel and aluminum in their production process fell by an estimated 75,000 jobs. The job losses from the new tariffs will be many times greater. The tax on the steel and aluminum content of all imports will affect almost every U.S. trading partner, making it harder to reach reciprocal trade agreements and avoid retaliation.

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The U.S. Secretary of Commerce – who, like the man who appointed him, presumes to know better than do individual Americans how individual Americans should spend their money – doesn’t even know what’s going on in the agency over which he has been given responsibility. Here’s Ramesh Ponnuru:

Commerce Secretary Howard Lutnick joined the administration pile-on against Federal Reserve Chairman Jerome Powell, whose sin is not cutting interest rates. There are good arguments on both sides of the interest-rate question. Then there’s Lutnick’s argument.

Justifying a go-slow approach to reducing rates, Powell said that tariffs have already caused prices to increase for some products, such as personal computers. Lutnick calls that “really sad”: “You would think Powell would know there are no tariffs on personal computers. They currently don’t exist.”

This is . . . not true. Some of the data showing it’s not true come from the Department of Commerce. In fairness, tariffs have been hard to keep track of lately — but that’s not a defense that Lutnick can make.

James Pethokoukis documents and applauds the robustness and resilience of today’s global supply chains web, but warns that this robustness and resilience aren’t unlimited. Here’s his conclusion:

The bottom line is that economic actors have been betting that President Trump’s bark exceeds his bite and that neither tariff spikes nor Middle Eastern conflagration will spiral beyond control. Yet such confidence rests on shaky foundations. Should America crack down on transshipment schemes, or should geopolitical tensions flare higher still, today’s surprising resilience may prove altogether more fragile.

Wall Street Journal columnist Jason Riley tells what government schools could learn from the late Fred Smith, founder of FedEx. A slice:

Mike Feinberg, who co-founded the KIPP charter school network in the 1990s, has said that Smith’s company was a major inspiration. “FedEx didn’t hurt the post office. It made it better,” Mr. Feinberg once told a reporter. “I want the monopoly mindset broken up,” he has also said. “Without competition, neighborhood schools behave like monopolies, delivering low quality at high cost.”

Empirical studies have supported these claims. Research by Caroline Hoxby, an economist at Stanford, demonstrated that schools respond positively to deregulation and competition in the same way that other sectors do. Deregulation of the trucking industry in the 1970s resulted in faster and more-specialized customer service than before at the same price. Competition from foreign automakers has enhanced the quality of domestic vehicles.

“In parcel services, the introduction of competition improved productivity not only because the private firms (United Parcel Services, Federal Express, DHL Worldwide Express, etc.) had higher productivity and productivity growth,” Ms. Hoxby wrote. “The competition also induced the U.S. Postal Service to raise substantially its own productivity.”

The goal of school reformers isn’t simply to create more alternatives for parents but also to provide incentives for underperforming schools to improve or risk losing students to better schools. The most efficient way to improve K-12 education is to make schools compete for students. As Fred Smith and so many other successful entrepreneurs well-understood, more competition makes organizations strive to do better. Less competition breeds complacency.

Mani Basharzad wisely counsels against the technocratic mindset – a mindset had even by many members of the guild that should be least prone to it: economics. A slice:

But the question remains: What should economists do in a free society?

Roger Koppl offers a helpful framework in his book Expert Failure, showing how experts can exist in a liberal order. He lays out four types of expert-public relationships.

First, when there is a monopoly of experts and experts decide for non-experts, we face the rule of experts — central planning is the prime example.

Second, when we have competing experts, but experts still decide for ordinary people, we get a quasi-rule of experts, such as in school voucher systems.

Third, if there is a monopoly of experts but people decide for themselves, we get expert-dependent choice — priests are a good example. But the fourth option is the one that preserves individual liberty: competitive experts and self-rule, where citizens decide for themselves. This is what Koppl calls self-rule or autonomy.

The idea that experts — including economists — should not run the world is not a critique of expertise itself. It’s about putting experts on equal footing with citizens. In a free society, experts are part of the political process — not above it. In self-rule, people are free to make their own decisions and consult experts when needed to reduce information asymmetry and make better choices.

In this system, both ordinary people and experts learn from experience and bear the costs of their mistakes — something that doesn’t happen under the rule of experts.

Charles Cooke is correct about the inconsistencies that are foundational to Trump’s thinking and actions. A slice:

Trump’s philosophical promiscuity makes a mockery of those who would claim him as their own. Whether it is the product of caprice, or of a short attention span, or of a desire for ambiguity does not particularly matter. Since he arrived on the political scene, Trump has achieved the impossible feat of holding contradictory opinions on almost every imaginable topic while cultivating a reputation for conviction. In the last three months alone, he has been for and against increased taxes on the rich; enthusiastic about and irritated by the SALT deduction; in favor of “the largest deportation program in American history,” and concerned about the effect that such a policy might have on employers; so bellicose toward Iran that he flirted with regime change, and so determined to see peace that he cursed out Israel on the White House lawn. Pick a topic — abortion, guns, crime, TikTok — and you will find multiple Trumps. No wonder that those who feel obliged to defend him whatever he does look as if they are suffering from acute schizophrenia.

ICE ramps up its protection of Americans from peaceful people.

George Will is wary of what the future holds now that the United States has become an actual combatant for Israel. A slice:

In its War of Independence (1948), the Six Day War (1967), the Yom Kippur War (1973), and its unending conflict with non-state actors (the Palestine Liberation Organization, Hamas, Hezbollah), including the fourth major war, which began Oct. 7, 2023, Israel has had material, financial, and intelligence assistance from others, but has always done the fighting. Its major departure from this policy, the 1956 British-French-Israeli attempt to seize the Suez Canal that Egypt had nationalized, was a debacle.

By joining Israel against Iran, the United States has expanded its commitments more than it can now know. The United States is waging only a proxy war in Ukraine, but its prestige and credibility are fully at risk there. And now the United States is a participant in a war the likely outcome of which is obscured by the fog of war, and the momentum and direction of which is being set by an ally that has its own agenda.

Adolf Hitler reportedly said to one of his private secretaries, “The beginning of every war is like opening the door into a dark room. One never knows what is hidden in the darkness.” He supposedly said this as he prepared to do what he did 84 years ago last Sunday. He launched Operation Barbarossa, the invasion of Russia that proved his point.

U.S. Operation Midnight Hammer began Friday. Its reverberations are far from over.

Jack Butler applauds AEI’s bestowal of the Irving Kristol award on the great American historian Gordon Wood.

John O. McGinnis reviews Sam Tanenhaus’s biography of William F. Buckley.

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… is a rare repeat. This quotation first (and last) appeared in this spot on December 4th, 2013; it’s from the Preface to Thomas Hardy’s marvelous 1886 novel, The Mayor of Casterbridge and refers to the time before the repeal, in Britain, of the infamous corn laws, which were import restrictions on grain; on this date, June 25th, in 1846 the corn laws were mercifully repealed, enriching the mass of Britain’s citizens:

Readers of the following story who have not yet arrived at middle age are asked to bear in mind that, in the days recalled by the tale, the home Corn Trade, on which so much of the action turns, had an importance that can hardly be realized by those accustomed to the sixpenny loaf of the present date, and to the present indifference of the public to harvest weather.

DBx: On the 175th anniversary of the corn-laws’ repeal, Doug Irwin and I wrote – in a famous journal that was launched as part of an effort to repeal the corn laws – about that momentous event.

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In my latest column for AIER – after having read the “Liberation Day” Executive Order that Trump used to claim the authority to exercise powers conditionally delegated by Congress to the president – I explore the details of this alleged “emergency.” A slice:

I’m incompetent to discuss whether or not this statute, despite making no mention of tariffs, nevertheless authorizes the president to impose tariffs. Some celebrated legal scholars insist that it does not so authorize; others insist that it does. I want instead to emphasize just how — to describe the matter as clinically as possible — preposterous is the alleged “emergency” that Mr. Trump declared as justification of his “Liberation Day” tariffs. According to the April 2 Executive Order, the emergency that justifies these tariffs are persistent American trade deficits. But not just persistent trade deficits; persistent “goods trade deficits.” But further, not just persistent “goods trade deficits”; persistent “goods trade deficits” with individual countries.

According to Mr. Trump, America now confronts an emergency in the form of bilateral “goods trade deficits” with many of the different individual countries with which it trades. The implication is that this emergency will end only if and when the following outcome is achieved: the value of goods — tangible things — that we Americans export each year to Algeria is at least as great as is the value of goods that we import each year from Algeria, and the value of goods that we Americans export each year to Angola is at least as great as is the value of goods that we import each year from Angola, and the value of goods that we Americans export each year to Bangladesh is at least as great as is the value of goods that we import each year from Bangladesh, and so on for every individual country, down to Zimbabwe, with which we Americans conduct trade.

This allegation of “national emergency” is nonsense, not on mere stilts, but atop a rocket taller than Everest and blasting off at Mach 13,000 for the deepest regions of outer space.

The concept of trade deficits is economically meaningful only when it encompasses trade in both goods and services, and then only for trade with the rest of the world. Neither “goods trade deficits” nor one country’s trade deficit with another country has any economic meaning. And meaning isn’t miraculously imparted to these concepts by pairing them with each other. Instead, this pairing — which Mr. Trump does — only multiplies the nonsense.

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First, there’s nothing economically special about goods production. A dollar’s worth of services such as medical care, software engineering, education, or retailing has the same economic value as does a dollar’s worth of goods such as steel, soybeans, lumber, or automobiles. And because nearly 80 percent of American production today is of services — meaning, most Americans today have a comparative advantage at producing services — it would be bizarre if we Americans did not regularly import more goods than we export.

Put differently, the concept of a “goods trade deficit” makes no more sense than does the concept of a “red-things trade deficit.” A dollar’s worth of roses, beef, merlot, and other red things is the same value as a dollar’s worth of aluminum, maize, chardonnay, and other non-red things. If you understand the absurdity of fretting about a red-things trade deficit, you should understand the equal absurdity of fretting about a tangible-things trade deficit.

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Last week, I was honored to deliver the final talk of the academic year to Stanford University’s Classical Liberalism Initiative. In this talk I did my best to bust several of the most prominent myths that fuel the tolerance of today’s protectionism.

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National Review‘s Andrew Stuttaford warns that we Americans will pay higher prices for food because of Trump’s tariffs punitive taxes on Americans’ purchases of imports and of import-competing products – punitive taxes imposed by an administration that Stuttaford accurately describes as “saturated in zombie McKinleyism.” A slice:

Perhaps the food and beverage industry can adjust by finding alternative forms of packaging, and perhaps America’s aluminum and steel industries can increase production to replace some of the metals hit by high tariffs, but, if that happens (past precedent would suggest that that is far from clear) it is unlikely that they will be able to match the pre-tariff import prices. And any increase in production will take time.

Trump’s food tariffs will push up food prices (even if we don’t know yet how much). The increase in packaging costs may give them an extra nudge.

Vance Ginn isn’t impressed with American Compass’s, et al.’s, The Techno-Industrial Policy Playbook. A slice:

National conservatives claim that free markets abandoned America’s heartland. In reality, government failure drove investment away. Rust Belt cities like Detroit, Cleveland, and Buffalo didn’t wither because of capitalism. They collapsed under decades of poor policy choices: excessive taxation, inflexible labor unions, hostile zoning rules, bloated public payrolls, failing schools, and declining public safety. Businesses didn’t leave out of disloyalty — they left because politicians made it unprofitable to stay.

Meanwhile, jobs and capital flowed to states that protected economic freedom and other countries where it was more profitable. States like Texas, Florida, Tennessee, and even Colorado have outperformed many of their peers through stronger spending limits, more predictable tax environments, and competitive labor markets. Where policymakers trusted people over bureaucracies, prosperity followed. That’s not a failure of capitalism — it’s a case study in how markets respond to better limits on government, though those states could use more limits.

The playbook also claims that manufacturing is the backbone of national strength. That’s a romanticized notion more than a modern reality. America hasn’t deindustrialized — we’ve modernized. The US remains the world’s second-largest manufacturer, accounting for about 17 percent of global output. Real manufacturing production has nearly doubled since the 1990s. What’s declined is manufacturing employment, largely because of productivity gains. Machines now do what workers used to. That’s not a decline. That’s economic progress. The push to bring back those jobs, even through heavy subsidy or coercion, misses what most Americans actually want. They don’t long to return to factory floors. They seek flexible, meaningful, and often service-oriented careers in tech, finance, or entrepreneurship. We shouldn’t funnel workers back into yesterday’s economy. We should expand their freedom to pursue tomorrow’s opportunities.

Also writing insightfully about markets and industrial policy is Michael Strain. A slice:

Free markets also create the conditions for political freedom – another traditional conservative commitment. Vance is quite right that markets are the best way to coordinate people across a complex society. When the government tries to do the coordinating, its size and scope necessarily increase.

For example, both the left’s large social programs and the MAGA right’s industrial policy and trade wars attempt to substitute government policy for the coordinating function of markets in determining the composition of private consumption, investment, industry, and employment. That results in more expansive and intrusive government. And when the government is putting its thumb – or, more accurately, its fist – on the scale to determine the prices you face and the occupation you practice, political liberty is both diminished and threatened.

Phil Magness’s latest letter in the Wall Street Journal is a gem:

Roland Fryer’s “The Economics of Slavery” (op-ed, June 18) draws attention to several lessons that economists and historians have brought to light by studying the institution of slavery. Mr. Fryer correctly notes that the plantation system was immensely profitable for the wealthy elite of the antebellum South and that there is a long tail of poverty left in the practice’s wake. These economic realities demonstrate the exploitative nature of the institution as well as its moral abominations.

Yet Mr. Fryer doesn’t broach another dimension of slavery’s economics: namely, that the institution largely depended on government support. Fugitive slave patrols, military expenditures to fend off the threat of slave revolts and censorship of abolitionist materials by the post office were necessary to secure the institution’s economic position. These policies transferred the burden of enforcing the slave system from the plantation masters on to the taxpaying public. Many of the Confederate states cited the feared loss of these public expenditures in their secession declarations of 1861.

Those who mischaracterize slavery as a case of “capitalism run amok” would do well to remember Lord Mansfield’s ruling in Somerset v. Stewart (1772), the landmark abolitionist case: Slavery is “so odious, that nothing can be suffered to support it, but positive law.” Take away its legal sanction and subsidy, and slavery’s entire economic edifice crumbles.

Phillip Magness
The Independent Institute

Another gem is Matthew Hennessey’s latest piece in the Wall Street Journal, which makes this point – one that should be (but, alas, today isn’t) obvious: “Encouraging people to start families is a job for churches and civil society, not the IRS.” Two slices:

Nobody ever had a baby for the tax break. That’s a simple reality that doesn’t seem to have dawned on the social conservatives pushing what they call “family friendly” provisions in the One Big Beautiful Bill Act currently working its way through the Senate. The bill contains several provisions that advocates say will be a boon to new parents and shore up the struggling American family. Don’t count on it.

Birthrates across the West have been plummeting for decades. In 1960, the average American woman had 3.65 children in her lifetime. That’s fallen to about 1.6. It’s a big problem in need of an urgent solution. But the fix won’t be found in the tax code. European countries have showered families with tax incentives and child-care subsidies for years. All to no effect.

In France, the law guarantees generous parental benefits, including paid leave, cash birth grants, child-care payments, mortgage support, and lower fares on public transit. For all this largess, fertility is no higher in France than in the U.S. In Hungary, the example par excellence of family-friendly public policy, birth rates are lower than they are here—and falling.

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The best thing the government can do to support families is to give them the gift of a growing economy. There are plenty of policies proven to do just that and pro-family Republicans should support them. A future full of possibilities to work and consume, to invest in education and save for the future, is worth far more to parents than any one-time payment or targeted tax break. Opportunity is what American families need, not entitlements.

The pronatalists will argue that the law is a teacher. If the government signals that it values children and families, then prospective parents will look past the social and cultural factors keeping them on the sidelines of the baby game. That’s asking a lot from one piece of legislation, no matter how big or beautiful.

Eric Boehm is correct: “Trump’s attack on Iran plainly violates the War Powers Act. Limits on executive power are most important when they are inconvenient.”

Jeffrey Miron and Irati Evworo Diez make the case that “a libertarian president would hardly ever issue EOs, except to undo the broad range of prior EOs that have excessively expanded government control.”

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… is from the late founder of Federal Express, Fred W. Smith, as he is quoted in yesterday’s remembrance of him by the Wall Street Journal‘s Editorial Board:

People talk about capitalism and socialism and communism. There’s only two kinds of economic systems: the market-driven and the government-directed. That’s it! The more you move toward a state-directed economy, the less efficient and more corrupt it becomes.

DBx: Progressives and NatCons take note: Government control over the economy doesn’t become destructive only when it reaches the point of full-on socialism. All government efforts to mute or override prices and other market signals are highly likely to make the allocation of resources less productive than it would be otherwise. Minor efforts along these lines create only minor inefficiencies. Yet as these efforts intensify, so too do the inefficiencies.

The detailed, widely dispersed, and often inarticulable knowledge that must be accessed and acted upon if economies are to function well doesn’t begin to be ignored only when governments take full control of the economy.

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The Wall Street Journal reports on a small American manufacturing company that Trump’s protectionism is driving to the verge of ruin. A slice:

For weeks, Woldenberg and his roughly 500 employees—most at a suburban Chicago headquarters—have hastened to halt shipments, reroute cargo, raise prices and freeze expansion plans. The companies sued President Trump and other administration officials in federal court, winning a reprieve that is now under appeal and on hold. On Wednesday, the companies asked the Supreme Court to intervene in their favor. [DBx: Thus far, the Supreme Court has refused to do so.]

Through it all, the most pressing questions are how to move toy production out of China, where to move it—and how to get tons of manufacturing equipment there in time to meet deadlines for end-of-the-year holidays.

“It’s almost like an evacuation,” Woldenberg said. “We don’t have a place to make important items our reputation is built around.”

Lining up new factories in another country is just the start. Heavy manufacturing-molds must be transported hundreds or thousands of miles by truck or ship and then reassembled. Quality-control processes and safety inspections must be re-created.

On Woldenberg’s list: Vietnam, India and Cambodia. One place he isn’t considering: the U.S. American injection-molding factories aren’t set up—or cost-effective—for the painting, assembly and labor-intensive finishing the toys need, he said.

Scott Sumner is highly critical – and justly so – of Trump economics advisor Kevin Hassett for recently making the absurd assertion that in textbook economics tariffs don’t raise prices. [DBx: Even if you’re convinced to your marrow that tariffs don’t raise prices – and even if (contrary to fact) tariffs in reality don’t raise prices – it’s demonstrably false to assert that economics textbooks say that tariffs don’t raise prices. This claim by Hassett is as ludicrous as would be a claim by a prominent physicist that physics textbooks say that gravity does not affect shiny rocks.]

Last month, Greg Mankiw talked with Gerard Baker about prominent Trump policies.

Wall Street Journal columnist Andy Kessler decries Trump’s move to nationalize the American steel industry. Two slices:

Last week brought us the Golden Share. No, that isn’t a James Bond movie, or a detail from the Steele dossier, although the plot is as sinister. It’s the Trump administration’s first step to nationalize the steel industry.

In exchange for approval of Nippon Steel’s merger with U.S. Steel, the government receives a single preferred share, which includes voting rights and all sorts of control over U.S. Steel’s ability to close factories, invest capital and relocate jobs outside the U.S. This “Golden Share” is a bad idea. Nationalization is a fool’s errand, a slippery slope to fascism’s “government controlling the means of production.” Don’t do it.

President Harry S. Truman tried to nationalize the steel industry in 1952. The Supreme Court ruled against it. President John F. Kennedy wrote a strong letter to a dozen steel companies in 1961 telling them not to raise prices because “the clear call of national interest must be heeded.” Some raised prices anyway and later reduced them under pressure from Kennedy. Thus began the long, steady decline of steel in the U.S. that we’re still trying to arrest.

Now that we’re in the steel-cage driver’s seat, will regulators institute price controls to protect the golden share? Tariffs are already an attempt at price manipulation. Where does it end?

Other examples have been less than stellar. After Penn Central’s collapse in 1970, Congress created the National Railroad Passenger Corp., better known as Amtrak, to run intercity passenger trains—nationalizing much of Penn’s key infrastructure. It has been a sinkhole for capital and an embarrassment. We’ve nationalized banks (Continental Illinois), coal mines and quasi-government agencies (Fannie and Freddie are still government-owned 17 years later). But the concept is mostly foreign—think Venezuela and its nationalized oil company, Petróleos de Venezuela S.A., a total disaster. This expression sums it up: “Governments don’t pick winners and losers, they consistently pick losers.”

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Our stock market is the most valuable in the world, and entrepreneurs flock here from all over to start companies specifically because we don’t have government ownership or interference at the board level. That’s why the future is invented here. If we damage that with golden shares and other anticorporate policies, we’ll damage access to capital for the next wave of great businesses.

Not to torture the metaphor, but the Bond-like “The World Is Not Enough” for government meddlers will kill our golden goose and turn our economy into “Skyfall.”

“An outdated supply management system—designed to protect Quebec’s small dairy farms—is undermining Canada’s global trade ambitions and hurting its own consumers.”

A great entrepreneur – FedEx founder Fred W. Smith – has died; the Editorial Board of the Wall Street Journal remembers him. A slice:

In recent years Smith advocated free trade and its benefits even as the political class turned against it. His voice was especially valuable in reminding Americans that the root of the country’s prosperity has been its openness to trade and global competition.

“Fred Smith was one of the finest Americans of our generation,” said former President George W. Bush about his Yale fraternity brother. “He was a citizen, not a spectator.” Few Americans have contributed as much to the well-being of their country.

Andrew Stuttaford is correct: ESG has always been political. A slice:

Attempts were made (most notoriously the claim that adopting ESG would mean “doing well by doing good”) to argue that ESG was a reliable route to outperformance (it wasn’t) and later, more modestly, that it was a good way to reduce risk (it wasn’t). That’s not to deny that here and there were elements within ESG that could add to investor return, but most of them would have already been covered by “C” (common sense).

In reality, ESG was, from its very beginnings as an idea promoted by the U.N. (a possible clue, I think, Dr. Watson), designed to advance a progressive agenda by diverting asset managers (and by extension corporate managements) away from what, barring specific instructions to the contrary, was their primary duty, generating investor and shareholder return. As such, it was a clever way of using other people’s money to promote changes better decided in a legislature than in the C-suite or on Wall Street. And as such it was not only a form of theft, but profoundly undemocratic.

Alex Tabarrok shares a wonderful video on the eradication of small pox.