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Here’s a follow-up note to Mr. P__.

Mr. __:

Thanks for your response to my earlier note, which you describe as “feeble.” You go on to assert that, in that note, I “hide [my] arrogance behind academese.”

With respect, in re-reading my letter I find no whiff of “academese.” But perhaps I’m too accustomed to “academese” to recognize it. Either way, if my examples and argument went over your head, I apologize for not being clearer.

As to your charging me with arrogance, I can only figuratively throw my hands up in bewilderment. Who is it that presumes to superintend how ordinary Americans spend their hard-earned incomes? Who is it that believes that when his fellow citizens are left free to choose what to purchase and what not to purchase they not only choose foolishly, but choose so very foolishly that he must coercively intrude to obstruct these free choices? Who is it that pretends to have divined which industries are too small in the U.S. (and, by implication, which industries are too large)? Who is it that is so cocksure of his beliefs that he boasts about imposing punitive taxes on you, me, and all other of our fellow Americans whenever we spend our money in ways that don’t suit his fancy?

The answer, of course, is Trump.

In contrast, I and other free traders argue simply that Americans should be left free to spend their incomes in whatever peaceful ways they choose, unmolested by what Thomas Sowell called  the “rampaging presumptions” of those persons who have haughtily convinced themselves that they know better than us what is best for us. There is, I submit, nothing about our argument that is arrogant. Quite the opposite.

If you want to see the face of a truly arrogant individual, Mr. P__, look at Trump.

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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Here’s a letter to a long-time critical reader of my blog.

Mr. P__:

Thanks for your email.

You’re “unpersuaded” by my pointing out the economic folly of Pres. Trump declaring that so-called U.S. “goods trade deficits” with individual countries are a national emergency. You write: “President Trump is a skillful corporate executive” while I am “a tenured professor with nothing like his knowhow.” You put your “confidence in his judgement ahead of the musings of intellectuals.”

Skepticism of the musings of intellectuals is healthy, although your skepticism shouldn’t harden into knee-jerk refusal to consider what we academics have to say. So to support my case that it’s foolish for Trump to declare that the run of U.S. goods trade deficits with individual countries is a national emergency, I point you, not to what I and other economists have said for 250 years, but to what Donald Trump himself actually does in running his own businesses.

To wit – he does not demand that each individual entity from which The Trump Organization purchases goods buy from The Trump Organization an amount of goods at least equal in value to the amount of goods that the Trump Organization purchases from that entity. Were Trump to run his business in such a bizarre way, he would demand that each company from which his firm buys office supplies buy from The Trump Organization goods of equal value – and if he discovered that there were no such ‘reciprocal’ purchases, he would conclude that his company is getting “ripped off” by each of those office-supply companies and threaten to restrict his company’s commerce with them.

What’s true for each office-supply company from which The Trump Organization buys goods would be true for each furniture company – each carpet company – each automobile company – each aircraft manufacturer – each golf-cart manufacturer – each catering company – each painter and sculptor whose works are purchased by The Trump Organization. You’ll agree with me that Trump the businessman does not, and would not think to, run his private company in such an absurd manner.

It’s worth nothing that Trump’s company would be especially foolish to attempt to have a “goods trade” balance with each of the entities with which it trades because much of what Trump’s company sells is licensing, merchandising, and endorsements – services all.

There’s no more reason to expect that the U.S. – 80 percent of whose GDP now is services – will have a “goods trade” balance with each of the many countries with which Americans trade than there is to expect that The Trump Organization will have a “goods trade” balance with each of the companies with which it trades. And, again, the Trump Organization does indeed have no such “goods trade” balances and never even thinks to attempt to have them.

So, yes, by all means put your confidence in Trump. But put that confidence, not in Trump the politician but, rather, in Trump the businessman – a person whose actions directly contradict and belie those of Trump the politician.

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 at The Hill, GMU Econ alums Scott Burns and Caleb Fuller explain that, with his “Liberation Day” tariffs, “Trump has resurrected one of economics’ oldest fallacies.” A slice:

Bastiat’s broken window fallacy wasn’t originally about tariffs, but it could have been. The logic is identical: Whether breaking windows or blocking imports, the visible gains in one sector come at the expense of unseen losses elsewhere. In the former case, resources are diverted towards less desirable uses (repairing windows). In the latter, they are diverted to less productive ones.

Should the goal of U.S. trade policy be to raise an army of millions of Americans to assemble iPhones, as Commerce Secretary Howard Lutnick suggested? Not if it comes at the expense of better jobs — for example, designing iPhones. If a $25,000 assembly job displaces a $125,000 design job, Americans aren’t $25,000 richer — we’re $100,000 poorer, and plus we will be stuck paying much higher prices for iPhones. Dave Chappelle had it right: Americans want to buy iPhones, not make them.

Today’s protectionists echo this fallacy with uncanny precision. The fact that trade gets such a bad rap in American politics today is a sad testimony to this myth’s resilience. Tariffs are a clever way for politicians to smash economic windows, then brag about the jobs they create to fix them.

The Wall Street Journal‘s Editorial Board applauds Friday’s ruling by the U.S. Court of Appeals for the Federal Circuit striking down as unlawful Trump’s “Liberation Day” tariffs punitive taxes on Americans’ purchases of imports and import-competing products. Two slices:

President Trump’s tariffs are one of the broadest claims of executive power in American history, taxing imports from anywhere on his personal whim. The problem is he doesn’t have that power under the law or the Constitution, as the Court of Appeals for the Federal Circuit ruled late Friday in V.O.S. Selections v. U.S.

This is a crucial moment for the Constitution’s separation of powers. A 7-4 majority upheld a lower-court decision striking down the tariffs that Mr. Trump imposed under the 1977 International Emergency Economic Powers Act (IEEPA). In February he invoked the law to slap taxes on imports from Mexico, Canada and China, supposedly to address a fentanyl emergency. He later declared the U.S. trade deficit an emergency to justify tariffs on the rest of the world.

…..

Mr. Trump denounced the decision and blamed partisan judges, but judges nominated by Presidents of both parties were on opposite sides of the ruling. The court also left the tariffs in place for now and told the lower court to reconsider its universal injunction under the terms the Supreme Court recently laid out Trump v. CASA. But on a policy as consequential as these tariffs, the ruling can’t merely apply to the plaintiffs in this case alone.

Mr. Trump is bloody-minded on tariffs, and he’ll use whatever other statutes he can. He recently expanded his use of Section 232 national-security power to impose tariffs on “derivative” steel and aluminum products, including bulldozers, furniture, railcars, appliances, air-conditioning parts, butter knives, spray deodorants and strollers. Who knew that baby buggies were a threat to the homeland?

Johan Norberg’s Hayek Book Prize lecture – delivered in Manhattan this past June – is superb.

Here’s Timothy Taylor on Nathan Goldschlag’s Q&A with John Haltiwanger about economic statistics.

National Review‘s Andrew Stuttaford understandably celebrates Buc-ees.

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… is from page 72 of Anne Krueger’s 2020 book, International Trade: What Everyone Needs to Know:

Moreover, it is often economic to source imports in countries different from major export destinations and there is no reason why bilateral current account balances should matter.….

There are three important reasons why President Trump’s approach is mistaken. First, the trade balance – the difference between exports and imports of commodities – is economically meaningless. If anything, it is the balance on goods and services – the current account balance – that may matter. Second, bilateral trade deficits also mean nothing, and in a well-functioning global economy even if all countries’ current accounts were balanced overall, there would still be bilateral deficits and surpluses.

DBx: Indisputably correct. And yet, the economic phenomena that Trump alleges to constitute a national emergency that justifies his “Liberation Day” tariffs are not only continuing U.S. trade deficits exclusively in goods – excluding trade in services, which are 80 percent of U.S. GDP – but U.S. trade deficits exclusively in goods with individual countries.

Trump’s reasoning is the intellectual equivalent of proclaiming that America is now in the midst of a national emergency caused by a rise in witchcraft or an ominous alignment of Jupiter with Mars.

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Worrying that AI will cause lasting unemployment is silly.

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

Editor:

Stuart Berr worries that AI will become so productive that there will be too few jobs left to enable people to earn the incomes necessary to purchase all the goods and services that this new technology churns out (Letters, August 29). This worry is unwarranted. If AI really will produce the cornucopia of output that Mr. Berr fears, the prices of all goods and services will be driven down to zero; no one will need to earn incomes to purchase them. Employment as we know it will be unnecessary. AI will have rescued humanity from the grip of scarcity.

If, instead, the increase in economic production enabled by AI will not eliminate scarcity – as, of course, it will not – there will continue to be human desires to be satisfied. These desires will, as they always have in free societies, inspire entrepreneurs to employ workers to produce outputs aimed at meeting these desires.

Jobs in market economies will disappear only when unmet human desires disappear – an impossible outcome that, were it miraculously to occur, would be cause for unprecedented rejoicing rather than handwringing.

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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Johan Norberg, writing in the Wall Street Journal, explains that great civilizations depend on trade. Three slices:

If you want to understand what makes great civilizations possible, consider a walk on Monte Testaccio in central Rome. This 115-foot hill is actually an artificial mound, made up of fragments of millions of clay amphorae. These once held olive oil imported from Spain, North Africa and the Middle East and were discarded here after the oil was decanted at a nearby port.

Monte Testaccio, “the hill of broken pottery,” was built on international exchange. So was ancient Rome. The Greek orator Aristides claimed that to see all the products of the world, one had two choices: visit the entire world or simply go to Rome. “For whatever is grown and made among each people cannot fail to be here at all times and in abundance,” he wrote, “so that the city appears a kind of common emporium of the world.”

Visitors said almost exactly the same thing about other great civilizations of the past. A medieval observer described the Arab world during its golden age: “Everything produced from the earth is there. Carts carry countless goods to markets, where everything is available and cheap.” In Hangzhou, once the capital of Song China, Marco Polo observed markets linked by canals and warehouses that “supply them with every article that could be desired.”

Similarly, in the late 17th century, an English writer marveled at the Dutch Republic’s prosperity. Its land, he wrote, produced “neither grain, wine, oil, timber, metal, stone, wool, hemp, pitch, nor almost any other commodity of use; and yet we find there is hardly a nation in the world which enjoys all these things in greater affluence; and all this from commerce alone.”

Trade is not a byproduct of greatness but its foundation. Many civilizations have been centered on trade not because they had plenty of resources but because they didn’t.

……

Just as openness makes nations strong, isolation makes them fragile. The Four Horsemen of the Apocalypse are war, plague, famine—and trade barriers. The late Roman Empire undermined its commercial economy through centralization, regulation and debasing the currency. The late Abbasid caliphs militarized their economy in an effort to wrest control from the dominant merchants. After facing tariffs from other countries, the Dutch eventually implemented their own.

The sharpest anti-globalization reversal came in China after the Ming dynasty seized power in 1368, promising to restore stability at any cost. Foreign trade was made punishable by death, and soon even coastal trade was banned. The world’s greatest armada was allowed to rot in the harbor, and the Chinese court burned maps to prevent future voyages.

The result was stability indeed—and centuries of stagnation. China went from the world’s most advanced civilization to a poor one. By the 19th century, it was being attacked and humiliated by European powers that had become rulers of the seas.

…..

The lesson is clear: Protectionism might seem like a shield, but it easily becomes a cage. It’s a way of cutting a nation off from the world’s brains and skills, forfeiting not just wealth but the energy and constant renewal that make civilizations shine. Then all that remains are the fading memories of golden ages—and the broken shards of discarded amphorae.

I believe that I forgot to share this April 8th post, by Alex Tabarrok, on manufacturing and trade, so share it now. Here’s Alex’s conclusion:

Ensuring a robust manufacturing sector depends on sound domestic policies, innovation, and workforce development, rather than trying to devalue the currency or curtail trade. Far from being a nefarious cost, the U.S. role as issuer of the world’s reserve currency confers significant financial and economic advantages that, in the long run, do not meaningfully erode the nation’s manufacturing base.

Je suis honoré – I’m honored – and delighted that the Journal des Libertés translated and published my paper, originally titled “Championing Free Trade In an Era of Economic Nationalism: What Should Economists Do?”

GMU Econ alum Dominic Pino asks “what is wealth?”

Stanford University economic graduate student Jon Hartley reports on his noble resistance to Stanford’s toxic Graduate Workers Union. A slice:

I’m working as a teaching assistant while studying for a doctorate in economics at Stanford, but a campus union is trying to get me fired. The Stanford Graduate Workers Union wants my head on a plate because I refused to sign a membership form and pay dues. I won’t fund an organization whose values and tactics I don’t support.

Similar unions across the country are using their bargaining power not to improve working conditions but to coerce ideological conformity. This isn’t solidarity; it’s suppression. Shame on Stanford for going along with it.

Scott Lincicome decries the amount of time stolen from us Americans by our own government’s ludicrous regulations. A slice:

Before you ask, yes, the TSA shoe rule was needless. As Reason’s Jacob Sullum just detailed, the rule was implemented in 2006—five years after infamous (and clueless) “shoe bomber” Richard Reid first boarded an American Airlines international flight and then tried to ignite explosives in his sneakers (some urgency!). Even back then, the rule made little sense: A week before TSA adopted it, the agency was still advising people that shoe removal was unnecessary, and terrorism experts questioned whether a “shoe bomb” could actually avoid detection and take down a plane. “If you search people’s shoes,” security expert and TSA critic Bruce Schneier toldNewsweek last month, “they’ll just put the bomb somewhere else, like in another piece of clothing.”

The initial skepticism of the rule has only grown over time. In 2011, for example, aviation security experts doubted that the rule was necessary or effective in deterring terrorism, and then-Homeland Security Secretary Janet Napolitano promised the rule would be eliminated “in the months and years ahead.” Most damningly, almost no other places adopted the shoe rule—including common terror targets like Israel (which spends much more on airport security overall). Another clear indication of the rule’s pointlessness: It was nixed last month without any new shoe-safety technologies having been widely deployed.

As Massachusetts Institute of Technology security expert Yossi Sheffi admitted back in 2011, “this seems to be a make-everybody-feel-good thing rather than a necessity.” It’s thus a classic case of “security theater”: onerous and/or annoying government rules and procedures that are originally imposed to assuage public fear of criminal activity but do little or nothing to actually reduce it.

Yet it took 19 years for the government to reverse course.

My GMU colleague over in the Scalia School of Law Todd Zywicki writes insightfully about the separation of powers in the United States.

Arnold Kling reaches this sound conclusion:

When it comes to integrity, the decline from Eisenhower to Trump has been steep. Our system of government, with its checks and balances, is supposed to be robust with respect to the personal qualities of its leaders. But I am not sure that it is robust enough.

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… is from page 397 of The Thomas Sowell Reader:

Politics is the art of making your selfish desires seem like the national interest.

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Ilya Somin, one of my many excellent GMU colleagues over in the Scalia School of Law, writes about yesterday’s ruling by the U.S. Court of Appeals for the Federal Circuit of Trump’s “Liberation Day” tariffs. Ilya was and remains a key player in this case for the plaintiffs. Two slices:

The majority concluded that the tariffs in question are not authorized by the International Emergency Economic Powers Act of 1977 (IEEPA), and that the major questions doctrine precludes interpreting IEEPA to give the president the virtually unlimited tariff authority he claims.

…..

The majority did not address whether the government’s claim of unlimited tariff authority would also run afoul of the nondelegation doctrine, which limits the extent to which Congress can delegate legislative authority to the executive. But it does note the significance of the fact that tariffs are a “core congressional power.”

The majority explicitly chose not resolve the issue of whether IEEPA can be used to impose any tariffs at all. But their reasoning suggests either that such imposition is indeed categorically barred, or that any tariff authority that exists under IEEPA is strictly limited.

The concurring opinion, written by Judge Cunningham, on behalf of four judges goes further than the majority. It concludes that IEEPA does not authorize any tariffs at all. It also indicates that the sort of sweeping delegation of tariff authority claimed by the president here is precluded by the nondelegation doctrine, which limits the extent to which Congress can delegate legislative power to the president, relying in part on the Supreme Court’s recent ruling in FCC v. Consumers’ Research (which was helpful to our case in a number of ways).

National Review‘s Dan McLaughlin believes that the court got it right in yesterday’s ruling against Trump’s “Liberation Day” tariffs punitive taxes on Americans’ purchases of imports and import-competing products. Here’s his conclusion:

The dissent is a grab bag of justifications that will deserve more extended discussion another day, but it is grasping at straws to justify an open-ended “national emergency” power of the sort that should be disfavored in our laws unless it is granted in terms far more explicit than these.

And here’s Eric Boehm on yesterday’s court ruling against Trump’s April 2nd attempt to liberate us Americans from some of the prosperity that comes from being free to spend our incomes as we – rather than as government – chooses.

Reason‘s Jack Nicastro is correct: “Trump’s tariffs and immigration policies are why uour Amazon packages are so expensive and will take forever.”

The Editorial Board of the Wall Street Journal explains a fact that shouldn’t – but, alas, that nevertheless today does – need explaining: “Teen jobless rates are higher in states with higher minimum wages.” A slice:

What do you know? When government increases the price of labor, employers use less of it. Teen unemployment rates in Colorado (16.4%), Washington state (14.8%) and Illinois (14.2%) were also among the highest in the country. So are their minimum wages: Washington ($16.66 an hour), Illinois ($15), and Colorado ($14.81).

Florida has been adding jobs faster than most states, but its teen unemployment rate (12.1%) last year was roughly the national average. Voters in Florida enacted a referendum in 2020 that raised the state’s minimum to $13 an hour this year from $8.56. It is set to increase to $15 in 2026.

The Cato Institute’s Tad DeHaven understandably is no fan of sovereign wealth funds. A slice:

Donald Trump’s autocratic instincts returned to the White House in January, but this time, no adults would be in the room to dissuade him from going full bore. On economic policy, an amped up tariffing agenda came as no surprise, even if the rationales and execution have been stupefying. However, it’s doubtful anyone foresaw prominent American corporations getting partially nationalized within the first six months.

In hindsight, a seed for it was planted in February when Trump signed an executive order instructing his administration to plan the establishment of a US Sovereign Wealth Fund (a bad idea), which could facilitate government ownership stakes in private companies. The order instructed Commerce Secretary Howard Lutnick and Treasury Secretary Scott Bessent to submit the plan to the president within 90 days, including recommendations for funding mechanisms, investment strategies, fund structure, and a governance model.

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… is from page 288 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 profound 1898 essay “The Conquest of the United States by Spain“:

When we have shut all the world out, we find that we have shut ourselves in.