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Here’s a letter to the Wall Street Journal.

Editor:

Your lead on-line headline this morning reads “U.S. Imposes 50% Tariffs on Some Canadian Goods After Last-Ditch Talks Fail” (August 22).

This wording is inaccurate and misleading.

Your headline should instead read “U.S. Imposes 50% Tariffs on Americans’ Purchases of Some Canadian Goods After Last-Ditch Talks Fail.”

Being inanimate, goods pay no tariffs. Tariffs are paid by people. And research shows that the people who pay Trump’s tariffs are overwhelmingly Americans. In a new paper, Gita Gopinath and Brent Neiman find that about 92 percent of the 2025 tariffs were passed through into U.S. import prices, implying that U.S. importers bore roughly 92 percent of the tariff incidence and foreign exporters about 8 percent.”*

Describing U.S. tariffs as being imposed on “goods” hides us Americans from the reality that these levies fall heavily on us.

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

* Gita Gopinath and Brent Neiman, “The Incidence of Tariffs: Rates and Reality,” Journal of Economic Perspectives, Vol. 40, Summer 2026, pp. 123-144.

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Even more accurate would be a headline that reads: “Trump Imposes 50% Tariffs on Americans’ Purchases of Some Canadian Goods After Last-Ditch Talks Fail.” (The “U.S.” isn’t a sentient, acting creature.) But one battle at a time.

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… is from page 414 of the 5th edition (2015) of Thomas Sowell’s Basic Economics [original emphasis]:

Government is of course inseparable from politics, especially in a democratic country, so a distinction must be made and constantly kept in mind between what a government can do to make things better than they would be in a free market and what it is in fact likely to do under the influence of political incentives and constraints.

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Here’s a letter to Semafor. (I add that I nevertheless doubt that Trump understands what he’s saying.)

Editor:

Quoted in “Vance takes his first economic punch in the 2028 primary” (August 21), American Compass’s Oren Cass describes people who don’t share J.D. Vance’s wish that the U.S. dollar lose its role as global reserve currency as members of a “bizarre kind of rump-libertarian right.”

Well now.

Here are six notable people who write or speak favorably of the dollar’s role as global reserve currency. All are prominent, half are center-left, and only one is libertarian.

– Larry Summers (former Secretary of the Treasury under Bill Clinton), testified that “if a country or countries decide to adopt the dollar, the United States can expect to benefit in a number of ways.”

– Jason Furman (Chairman of Obama’s Council of Economic Advisors) said in an interview that the dollar’s reserve-currency status is a “good thing” from which “we get some benefits from that in terms of lower interest rates, cheaper borrowing, and, you know — and some other benefits in terms of ability to, you know, have a higher living standard.”

– Kenneth Rogoff (Harvard professor and former chief economist at the IMF) declared that “the dominance of the dollar – that it’s used in everything, it’s the lingua franca of the global financial system – benefits us a lot of ways.”

– Milton Friedman (Nobel laureate, 1976) asked rhetorically: “Can you think of a better deal than our getting fine textiles, shiny cars, and sophisticated TV sets for a bale of green printed paper? Or for some entries on the books of banks?”

– Kevin Hassett (Director of the National Economic Council under Trump) testifying before Congress in 2013 noted “that we are in a situation where we can print dollars that cost us nothing, really, to make and then give them to people, and they give us BMWs, say, and because they really want to hold the dollars, and that that is an advantageous position for us to be in.”

– Donald Trump (President of the United States) said in July 2025 that “the reserve currency is so important. You know, if we lost that, that would be like losing a world war.”

This list could easily be extended.

Mr. Cass should do his homework before offering commentary.

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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Phil Magness and Sara Albrecht wonder why the Trump administration refuses to reveal just how it came to devise the formula – ‘formula’ – by which it calculated its “Liberation Day” tariffs punitive taxes on Americans’ purchases of imports. Three slices:

When the Office of the U.S. Trade Representative unveiled its now-infamous “Liberation Day” tariff formula in April 2025, economists quickly noticed that something was not right.

At first glance, the formula looked impressive. It had Greek symbols, academic citations, and all the trappings of serious economic analysis. But once economists began examining it, the sophistication quickly fell away. Key terms, they noticed, effectively cancel one another out, leaving little more than a calculation driven by bilateral trade deficits.

For one of us, an economist, that raised a simple question: How did this formula come to be? So he filed a Freedom of Information Act request seeking the records behind it. Then came more than a year of delays, missed deadlines, and back-and-forth with the U.S. Trade Representative.

When the agency finally responded, it said it had found 31 pages of responsive records. It would release none of them — not one email, calculation or even redacted paragraph. Rather, the office insisted that every page is protected because the records include communications between the agency and the White House Council of Economic Advisers about the reciprocal tariff calculations.

Whether those privileges ultimately apply is a question for the courts. But they do not answer the larger question. From an economist’s perspective, the response raises an obvious question: If the economic case for these tariffs was so strong, why is the government so determined to hide its work? And why wouldn’t the Council of Economic Advisers, a body of academic experts, put its name on a document that it reportedly helped to prepare?

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If professional economists inside the council warned that the formula made little sense, the public deserves to know. If they endorsed it, the public deserves to know that, too. What should not happen is for the entire record to disappear behind a blanket claim of executive privilege.

The administration’s handling of one of its own academic sources only deepens the mystery. One of the main academic sources cited in support of the formula was a then-obscure working paper by economists Pau Pujolas and Jack Rossbach. Just days later, a link to the same paper appeared again in a speech by then-chairman Stephen Miran, defending the “Liberation Day” tariffs.

But one of the paper’s authors later said the administration had misused their research to support the opposite of what the paper actually found. As Pujolas explained, “there’s a huge gap between my study and what they’re doing.”

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Reasonable people disagree about tariffs, trade deficits, and industrial policy. But the executive branch owes the public an honest explanation for policies that affect hundreds of billions of dollars in commerce.

When the government asks courts to defer to its judgment, businesses to trust its reasoning, and the public to accept sweeping economic policies, it should be willing to show its work. What is this administration afraid we will see?

Scott Lincicome writes that manufacturing in the U.S. is thriving despite tariffs. Two slices:

The U.S. manufacturing sector’s recent growth is real but has been exaggerated in recent surveys. More importantly, the hard data we now have show that the nation’s industrial upswing is being driven by non-tariff forces—ones that have more than offset a clear tariff headwind. In fact, American factories would likely be doing even better without the tariffs, an inconvenient reality that brand new research confirms. Let’s dig in.

The first problem with the protectionists’ spin is wonky but important: Much of the recent tariff triumphalism rests on PMI surveys that are useful for gauging short-term industry sentiment and forecasting future trends but can misrepresent what’s happening nationwide and over the long term. As economist Dave Hebert just detailed, the PMI records the share of purchasing managers in various U.S. manufacturing industries who report an increase, decrease, or no change in their orders, employment, prices, and other categories of business activity. The index documents only the direction of the change, not its magnitude. Thus, Hebert explains, a big company like Ford could lay off 1,000 workers while two other small automotive firms each hire five, and the index would read 66.7, signaling a robust “expansion” even though actual employment fell by 990.

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Despite these problems, real-world data do show an uptick in the U.S. manufacturing sector, especially in 2026. According to the Federal Reserve’s industrial production index, domestic manufacturing output has been on a decent run since Trump took office, outside of that multimonth dip in the second half of last year.

That’s good news for the sector, but there’s little reason to think it’s owed to Trump’s tariffs. More likely, the growth is happening despite them.

For starters, three powerful factors coincided with the 2025-26 tariffs and are the most likely drivers of U.S. factory output. On the supply side, the One Big Beautiful Bill Act restored and made permanent provisions that allow U.S. businesses to immediately deduct spending on equipment, machinery, and research and development (R&D), and the law temporarily allowed U.S. manufacturers to do the same for spending on structures, effective January 2026. As the Tax Foundation explains at the link above, research shows that cutting the after-tax cost of these business inputs boosts investment and growth, and they estimate that the OBBBA’s permanent expensing provisions will boost long-run GDP by a significant amount (0.7 percent). As I and others have explained for years now, these neutral, free-market reforms are particularly beneficial for large, capital-intensive manufacturers, and their timing aligns with the current U.S. manufacturing acceleration. (The temporary expensing provisions might induce a sugar high but won’t affect long-run growth; they should instead be made permanent.) The White House, for what it’s worth, seems to agree: Its official press release credits business tax cuts, not tariffs, for the current manufacturing “boom.”

Miles Saltiel explains why markets are essential to growth.

National Review‘s Charles Cooke, as usual, is correct – here, specifically, about those whom he accurately describes as “leftist zealots”: “Whether government-run grocery stores or ill-conceived wealth taxes, their doomed pet projects have become articles of faith.” A slice:

In California, Representative Ro Khanna is determined to tax the state’s billionaires, the consequences be damned. In New York City, Mayor Zohran Mamdani is fixated upon the establishment of government-run grocery stores, even as the absurdity of his plan becomes clearer by the week. Both men are impervious to reason. Objections are dismissed, criticisms are deliquesced, contemplation is a skill not yet learned.

Informed that a series of government-run grocery stores would be a burden to the taxpayer, Mamdani merely pounded the Exchequer. Told that this policy might have a deleterious effect on the city’s existing outlets, an aide glibly proposed a subsidy. That subsidy, in turn, will have consequences, and, when those consequences are adumbrated, yet another mitigation will undoubtedly be contrived on the fly. Rube Goldberg, please call your office.

Ro Khanna’s penchant for instantaneous patchwork is more alarming still. Upon hearing that his coveted wealth tax does not intersect with reality, Khanna spontaneously invented an invasive new program: “Allow illiquid founders to pledge shares with a loan from the government to pay tax,” he wrote on X. “The loan period is long but not infinite (e.g. 10 years). The loan is non-resource: at the end of the period, the loan is either paid back in cash, or the government assumes the shares.” That, as it happens, is a preposterous idea. But the instinct is more instructive than the detail. Khanna has his agenda, and he is trying to bend the world around it. Welcome back, Mr. Caligula, we trust you will enjoy your stay.

Also writing about the absurdity of Ro Khanna’s destructive (and immoral) scheme to tax the paper wealth of billionaires is my intrepid Mercatus Center colleague, Veronique de Rugy. A slice:

There is a delicious irony to all of this. Wealth-tax advocates complain about wealthy people borrowing against appreciated stock rather than selling the stock and realizing the gains that trigger capital gains taxes. Yet when their wealth tax creates a liquidity problem, their solution is for billionaires to borrow against appreciated stock, only now from Uncle Sam.

Cuban identified an even deeper problem: The new company doesn’t have to fail for this arrangement to become perverse. A founder could spend the next 10 years building an enormously successful company, creating thousands of jobs, and paying millions in taxes, while continuing to reinvest rather than cash out. After a decade, his shares might be worth far more than when the loan was made—and he still might not have $100 million in cash to repay the wealth-tax loan.

The reason is that success and liquidity are not the same thing. In Khanna’s government-loan scenario, the government could sell the shares used as collateral not because the company failed but because the founder kept his wealth tied up in the venture. Under this system, the incentive is to cash out instead of growing the business, hiring more people, and creating more corporate tax revenue over the long term.

[Mark] Cuban’s response was profane but insightful: “This is the biggest fuck you in the history of entrepreneurship.” While Khanna points to founders so rich that this situation might not be much of a problem now, they made their business decisions and took lots of financial risks when they weren’t threatened by a wealth tax.

Before Republicans get too indignant, they should look in the mirror. The Trump administration helped destroy the norm against government ownership of American businesses by taking a nearly 10 percent stake in Intel and pieces of many other companies, including Trilogy Metals and USA Rare Earth.

No less insightful about the economic folly of Ro Khanna’s scheme to soak the rich is the Editorial Board of the Wall Street Journal. A slice:

But there’s nothing modest about the measure—championed by the SEIU-United Healthcare Workers West—to confiscate wealth from California’s top job creators.

The tax will punish private startup founders whose assets mostly consist of illiquid shares in their companies. They may lack cash and liquid assets to pay the tax bill. What are they supposed to do? The initiative would let them spread the payment over five years, though at a hefty interest charge.

They would also be allowed to defer payment until they are able to monetize their startup stake. As the Tax Foundation explains, the state would then become “a co-investor in the assets.” If they appreciate over time, “California can tax the additional accumulated wealth even if the taxpayer has long since left the state.” Neither option is appealing.

Last weekend on social media Mr. Khanna floated another idea. “Allow illiquid founders to pledge shares with a loan from the government to pay tax,” he wrote. “The loan period is long but not infinite (e.g. 10 years)” and “at the end of the period, the loan is either paid back in cash, or the government assumes the shares.”

“The government would make out if the company succeeds in terms of collection but founders would not be personally liable if the company somehow failed,” he wrote. The latter isn’t true, as others quickly corrected. Hedge fund manager Bill Ackman wrote that a founder could still owe tax if he takes out a loan against his shares from the state and if the company fails.

Mr. Khanna later acknowledged as much. “If the shares go to zero the founder can still face capital gains tax on the deemed sale (basis is often near zero),” he said. “That’s a real issue.” Yes, it is.

A more obvious problem: The state would be lending money to billionaires to pay itself. As Mark Cuban mused, if the state doesn’t receive any incremental revenue, “what’s the point of that?” Also, what happens if a founder can’t pay back the loan in 10 years? The government could then seize the shares.

“I’m sure the investors in those companies will be thrilled about their new partners,” Mr. Cuban wryly noted. His point is that the prospect of government taking partial ownership and control of a startup would chill venture investment.

Palmer Luckey, who co-founded the defense tech startup Anduril Industries, shrewdly noted founders would have a 10-year “speedrun” to pay back their loans—or else surrender their shares to the government—which could warp a business’s incentive to create long-term value for investors. “The behavioral incentives are so obviously horrible,” he wrote.

GMU Econ alum Dave Hebert makes clear this reality: “We can’t tax our way out of the entitlement hole.”

I seldom agree with Donald Trump, but on this matter he’s correct (as reported by the Editorial Board of the Washington Post): The the data-center industry needs “a little public relations help.” A slice from the Post‘s editorial:

That even Loudoun County residents are starting to complain about the bargain they’ve struck speaks to Trump’s point about a PR problem. Opposition to data centers also reflects broader anxieties, and it would help if AI leaders stopped talking nonsense about how their inventions will imminently replace workers — nonsense that appeals to a certain kind of investor but terrifies the public.

Progress on artificial intelligence won’t make humans obsolete, but it can make them wealthier and more productive. Data centers need a better plan for negotiating with local governments, but the frothy debate about the economics of AI also needs a reality check.

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… is from page 217 of my friend, co-author, and former professor Randy Holcombe’s superb 2019 book, Liberty in Peril: Democracy and Power in American History:

The first problem with collective action determined by majority rule is that those in the minority must accept the outcome preferred by the majority. If a group is voting on whether to drink Coke or Pepsi, if a majority votes for Coke, then those who prefer Pepsi get Coke. If the decision were left to the market, those who want Pepsi get Pepsi, those who want Dr Pepper get Dr Pepper, and those who want 7UP get 7UP. If a democratic government is deciding on the characteristics of public schools, the preferences of the majority are imposed on the minority. In a market system that produced schools in the private sector, there is no reason to think that the variety of schools would be any less great than the variety of soft drinks the market produces, allowing those in the minority to have their preferences satisfied too.

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Writing in the Washington Post, the Cato Institute’s Scott Lincicome explains that the U.S. government’s ‘bet’ (with taxpayer funds) on Intel “was even worse than expected.” A slice:

When the Trump administration took a 10 percent stake in semiconductor giant Intel last year, I argued that it was a costly mistake and an affront to American free enterprise. President Donald Trump disagreed. He even took a victory lap in June when Intel’s stock rose more than sixfold in the 10 months following the government’s intervention.

Look closer, though, and Intel’s inflated share price hardly vindicates the administration’s purchase. And the grand experiment that Intel kicked off isn’t just as bad as I warned. It’s worse.

The administration’s holdings are growing at breakneck speed. The running tally at the Cato Institute counts 31 government equity deals — spanning companies in steel, critical minerals, semiconductors, nuclear power, rocket motors and quantum computing — enacted by three different federal agencies acting under murky legal authority. The Commerce Department has based more than a dozen semiconductor and quantum computing deals on the Chips and Science Act, which does not expressly authorize federal shareholding. Some of the equity deals appear to have been coerced by the administration — or at least conditioned on the granting of a permit, subsidy or other government privilege. And more stakes are rumored to be on the way. In a single year, Washington went from one position to a diverse and questionable portfolio, with nary a vote from Congress or the American public.

These stakes have already corrupted American businesses. The Trump administration exercised its “golden share” of U.S. Steel last year to prevent the company from shutting down production at an antiquated Illinois plant. And when Apple CEO Tim Cook visited the White House in August 2025 to lobby for a tariff exemption, Trump and Commerce Secretary Howard Lutnick reportedly pressured Cook to manufacture Apple’s chips using Intel’s factories. Apple ultimately received the tariff carveout. Then, 10 months later, Trump announced (and took credit for) a deal between Apple and Intel that reportedly blindsided Intel’s own executives.

The Wall Street Journal‘s Editorial Board criticizes Trump’s reckless threats to disrupt Americans’ mutually advantageous trade with Canadians and Mexicans. A slice:

Two hours before his self-imposed midnight deadline, President Trump wrote online that he would pause aggressive action abroad for three days, giving negotiators time to finalize some unspecified deal. Iran? No, Canada. Mr. Trump’s reprieve Tuesday for 50% tariffs on $20 billion of imports—hockey sticks, building materials, and other items Americans want to buy—is welcome. But what a way to treat an ally and neighbor.

Any deal will have to be evaluated on its own terms, and if Mr. Trump steps back from raising prices on consumers with new border taxes, that’s progress. Yet his attitude of constant haggling over everything that isn’t nailed down, and some things that were supposed to be, isn’t helpful. Mr. Trump has put into doubt the future of his own U.S.-Mexico-Canada Agreement. Someone should tell him the biggest beneficiaries of free North American trade are Republican states, especially Texas.

After Mr. Trump renegotiated the 1994 North American Free Trade Agreement, renaming it USMCA, he called it the “best agreement we’ve ever made.” That was in 2020. But now USMCA is up for renewal for 16 more years, and Mexico and Canada want to re-sign. Mr. Trump last month declined, at least for now. U.S. Trade Representative Jamieson Greer cited “shortcomings” in the text and singled out “our trade deficits with these countries.” But trade deficits aren’t a measure of prosperity, which is why most economists ignore them.

Texas shows why. The Lone Star State buys more from Mexico than it sells, and it has prospered. Texas traded $303 billion in goods with Mexico in 2025, which is more than the U.S. trades with any single country except Canada and China. Mexico was the state’s largest foreign export market in the first quarter, 27% of the total. Texas exports energy products to Mexico but also machinery, equipment, plastics, aerospace items, auto parts and beverages. Thirty-five percent of Texas foreign trade was with Mexico in 2025.

Texas isn’t alone. Mexico bought 26% of exports from Kansas and Nebraska each in the first quarter. For a majority of American states, the North American neighbors together are the first or second largest export market. Almost 70% of what Michigan exports goes to one of the two USMCA partners. For Nevada, it’s 41% and Maine and Iowa 50%.

Before Nafta, Mexican and Canadian agricultural markets were protected from U.S. competition. Today Mexico is the largest export market for U.S. producers in 13 agriculture categories including pork, poultry, dairy, cheese, apples, pears, wheat, corn and rice. It’s No. 2 for American beef, soy, baked goods, vegetables, prepared foods and condiments.

“Since USMCA was enacted in 2020, Mexico and Canada have collectively scaled up imports of U.S. agricultural goods by $20 billion, totaling $60 billion in 2024,” Democrats on the House Agriculture Committee wrote in a July letter calling for the pact’s renewal. Farmers already hit by Mr. Trump’s trade wars with China now have to worry about sales north and south. It’s bad politics for Republicans trying to win Iowa, to pick one pivotal Senate race.

Texas and other red states have also benefited from integrated manufacturing under Nafta and the USMCA. The web of supply chains that spans the continent allows for joint production across all three countries. With the U.S. leading in research, technology and branding, it assigns production of sophisticated components to its skilled workers and sends intermediate goods to Mexico or Canada for finishing.

This lets American companies preserve high-paid jobs at home while competing globally. It’s the main reason U.S. auto makers have stayed even remotely competitive against foreign models. When Mexico adds value to a Texas-made component and sends it back to the U.S., it completes a production cycle that makes American workers better off. Oh, and don’t forget consumers, who get access to higher-quality goods at better prices, everything from fresh food to medical devices to cars.

Alfredo Carrillo Obregon fears that “the next round of US tariffs on Canada could be the harbinger of even more chaotic trade policy.”

Richard McKenzie explains that mobile capital understandably – and for the good of humanity – flees from where markets and investors are treat badly to where they are treated with respect. A slice:

The global spread of capital now carries a threat to which progressives remain oblivious: Businesses and employees increasingly can move to avoid taxes and regulations. California Gov. Gavin Newsom has learned the lesson of capital’s growing mobility. He opposes a state wealth tax on the ballot in California, and is seeking cover by supporting a federal wealth tax, a likely nonstarter in Congress and at the White House as it would clearly throttle economic growth. Mr. Mamdani will soon have to concede the point or fade rapidly in political relevance.

Governments’ basic competitive problem is that they are landlocked and are competitors for capital that is footloose on a global scale. Their dilemma? Higher taxation of wealth easily transmutes into lower total revenue and economic decline. No wonder so many governments have yielded to the threat and now bid for capital projects with tax concessions and other benefits to attract and hold on to capital.

Progressives and socialists might score political points in coming elections, but their gains will be checked not so much by the right as by states and nations that see development opportunities in other governments’ hostile treatment of capital and wealth.

Kimberlee Josephson writes wisely about the appropriate purpose of private businesses – and about the dangers of losing sight of what’s appropriate.

Christian Britschgi reports on yet another example of the economic destructiveness of labor unions.

Here’s the abstract of a new paper by David Neumark and Emma Wohl:

We provide the first direct estimates of the effects of minimum wages on low-wage workers in families at different points of the distribution of income-to-needs, using data from the Survey of Income and Program Participation, which oversamples low-income families. We find adverse – rather than beneficial – effects of minimum wages on the employment, hours, and earnings of initially-employed low-wage workers in poor and low-income families. Although we do not find a gradient indicating more adverse effects on the poorest low-wage workers, the adverse effects for poor and low-income low-wage workers help explain why minimum wages do not reduce poverty.

The Editorial Board of the Washington Post eloquently exposes the economic illiteracy of Elizabeth Warren and others who protest against dynamic pricing. A slice:

Charging people different amounts based on their online browsing habits would offend many consumers, but it’s unclear how often that occurs. Competition is the best check on personalized pricing: If a business takes it too far, other businesses would gladly take its customers.

Perhaps that’s why government, which faces no competition, has implemented arguably more aggressive personalized pricing than the private sector.

The individual income tax — the largest price Americans pay for the federal government — is calibrated through different rates, deductions and credits to a taxpayer’s individual circumstances. The personal information collected by the Education Department’s Free Application for Federal Student Aid form allows universities to charge families at exactly the level they are willing to pay. Welfare and public housing programs are keyed closely to the recipient’s means and family characteristics.

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… is from page 338 of the “Random Thoughts” section of Thomas Sowell’s 2010 book, Dismantling America:

Perhaps the scariest aspect of our times is how many people think in talking points, rather than in terms of real world consequences.

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Phil Magness and GMU Econ alum Caleb Petitt expose the shoddiness (to put it mildly) of the Stanford Encyclopedia of Philosophy‘s entry on capitalism. Three slices:

Instead of attempting some semblance of balance, the new SEP entry author Chiara Cordelli, a professor of political philosophy at the University of Chicago, used this platform to air her own personal grievances with capitalism as an economic system. The resulting product gives scant attention to proponents of free-market economics. By contrast, Cordelli’s article is loaded with content from the Marxist or socialist far left. Space devoted to critics of capitalism far outpaces even basic descriptions of the economic concept, and proponents of capitalism are reduced to shallow parodies.

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Cordelli’s prose functions as an anti-capitalist advocacy piece rather than a neutral and descriptive encyclopedia entry. It breaks with the normal format of the Stanford Encyclopedia of Philosophy, in which a concept or a philosopher’s work is usually described in its component parts to give a better view of the whole. While other entries usually offer space for debate and criticisms of the author or subject, they seldom comprise the majority of their verbiage.

Cordelli’s barrage of critiques against capitalism is almost twice as long as her description of capitalism’s supporters. Marxist accounts of capitalism account for three times the combined word count of Cordelli’s descriptions of market capitalism and institutionalist theories of capitalism. The author was clearly more concerned with highlighting every minute facet of anti-capitalist academic writing imaginable than with helping readers understand what the concept means, or the reasons that people defend it.

The resulting product is even more egregious when one considers the track records of these competing perspectives. Whatever criticisms may be offered of capitalism, its underlying economic theories have coincided with an unparalleled rise in prosperity and well-being between the late 18^th century and today, often known as the Great Enrichment. By comparison, the Marxist perspectives that dominate Cordelli’s work carry the ignominious baggage of mass atrocity and economic ruin in the 20^th century, though the phrase “Soviet Union” never appears in her entry. Neither do any of its catastrophic copycat regimes, from Maoist China to recent socialist experiments in Venezuela. Economists of any non-Marxian or socialist stripe are relegated to a minimal presence, and where their ideas are discussed at all, a socialist or anti-capitalist critic is almost always brought in at the end and given the last word.

The bizarre result is something akin to an encyclopedia entry about “astronomy” in which the majority of consulted sources are astrologers, and furthermore their horoscope readings are privileged over the empirical calculations of actual scientists who study star movements.

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The Stanford Encyclopedia of Philosophy’s unwillingness to select an author for the entry on capitalism who could provide a charitable or even neutral assessment of the concept is ultimately unscholarly. In the 20th century, socialism resulted in the deaths of tens of millions of people, and capitalism and free markets were the critical factors for lifting billions out of poverty, and yet it is socialism that received the positive encyclopedia entry and capitalism that garnered the hate. Such imbalances could only emerge from an academic environment in which an ideological echo chamber supplants rigorous peer review, and the fashionable socialist perspectives of the professoriate lead it to mistake bad caricatures of a market economy for descriptive fact.

Michael Strain summarizes the myths of the “China Shock.” A slice:

Economic theory suggests that trade liberalization should have little effect on aggregate US employment because job losses from import competition can be balanced by job gains in export-intensive firms and sectors. The economist Robert Feenstra and his coauthors attempt to account for both sides of the ledger.

In a 2019 paper, Feenstra and his colleagues confirm the “China shock” result, finding that 1.9 million jobs were lost between 1991 and 2011, owing to import competition from China, with more jobs lost to competition from global imports. But they also find that a roughly equivalent number of jobs were gained due to export expansion.

One should also consider that manufacturing’s share of total US employment followed a relatively smooth downward trend from the early 1950s until the 2008 financial crisis, when falling productivity actually caused the trend to slow. The decline predates the “China shock” by decades. And there was no obvious trend break in manufacturing’s employment share in 2000 or 2001, which is consistent with the view that, over the long term, declines in manufacturing employment have been driven mainly by productivity growth, not by trade competition.

Finally, the US did not decide to open trade with China in the 1990s in the same way that I decided to have a third espresso this morning. The decision wasn’t nearly so simple or singular.

Yes, China was granted permanent normal trade relations in 2000 and entered the World Trade Organization in 2001. But the US had annually renewed China’s normal trade relations status since 1980, and US trade with China grew rapidly over two decades prior to its WTO accession. According to my calculations, China’s share of total US imports grew during the 1980s, hit 2.5% in 1989, had more than doubled to 5.4% by 1993, and stood at 8% in 1999.

The trend continued following China’s WTO accession. China’s share of total US imports doubled again, from 8.2% in 2000 to 16.4% in 2007. But even this overstates the role of US policy in facilitating the so-called China shock. China’s exports continued to grow in part because the US eliminated the uncertainty created by the pre-2000 annual renewal of trade-policy parameters. They also grew because of China’s internal, pro-market reforms—including a reduction in its own tariff rates.

Nor was the US decision to trade with China made by a shadowy elite. China’s exports to America grew as a result of millions of decentralized, individual decisions. During the 1980s and 1990s, US consumers and businesses increasingly chose to purchase goods made in China, a trend that continued following China’s entry into the WTO.

It is wrong to present the “China shock” as evidence that trade liberalization hurts the working class, or that a powerful, murky, nefarious elite is making deliberate, isolated choices that hurt the majority of Americans.

The Economist reports on what sees as, well, the banality of much of Daron Acemoglu’s research and commentary. Two slices:

More worrying is that his grand thesis of institutions may not reveal very much. Nations prosper when institutions are good, and stagnate when they are bad. True. But what, exactly, is an institution? Rules, norms, enforcement, culture—everything, really. Where do institutions come from? From “critical junctures” and “institutional drift”, whatever that means.

Reviewing one of Mr Acemoglu’s books in 2011, Tyler Cowen of George Mason University noted that the institutional changes it describes only seem to come from other institutional changes, making the core argument regress for ever—turtles all the way down. Duncan Green of the London School of Economics has argued that the framework works mainly in hindsight. Francis Fukuyama of Stanford University has argued that the book waves away the example of China, which has seen blistering economic growth alongside institutions that can quite plausibly be described as extractive.

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Mr Acemoglu’s influence in the AI debate is clear in a recent statement, signed by dozens of prominent economists, which argues that “we must act now” to “steer AI in a direction that complements humans and benefits society”. Who is the “we”, exactly? The Trump administration? And who is to decide what sort of AI does and does not complement humans? Even economists who signed the petition say they are not entirely sure. So great is Mr Acemoglu’s stardom that it can sometimes blind the critical faculties.

The Washington Post‘s Editorial Board continues – wisely – to decry the U.S. government’s fiscal incontinence. A slice:

Politicians are addicted to making promises that require sources of money they don’t have. Their failure to control spending remains one of the biggest threats to the country. If only the $40 trillion milestone [of government indebtedness] could be a wake-up call.

Arnold Kling reinforces the importance of this (Hayekian) point: “Problems in the physical world are complex. Social world problems reach a higher level of complexity.”

I very much enjoyed my conversation this past Friday with Rikki Schlott, for the Cato Podcast, on the absurdity of Comrade Mamdani’s government-created grocery stores.

GMU Econ alum Nikolai Wenzel is a fan of Stephanie Slade’s new book. Two slices:

Fusionism, a new book by Stephanie Slade, a Senior Editor at Reason, attempts to make sense of the seemingly incoherent New Right. Although Slade proposes a renewal of fusionism as a remedy to conservatism’s drift and the challenges facing a divided Republic, the book’s greatest strength lies in its analysis of the trends to date.

The Republican Party, for all its faults, was supposed to understand (instinctively, if not always intellectually) limited government, rule of law, and the basics of economics. From its elected leaders, though, we have gotten tariffs, increased public debt, dodgy respect for habeas corpus in immigration enforcement, and the Saturday Night Live tragicomedy of DOGE (a virtue-signaling, clumsy, and cruel flash in the pan destined to die on the vine when it removed entitlements from the chopping block). The coalition that constitutes the New Right has abandoned conservatism, and instead sells its own form of populist interventionism.

Slade starts by painting a rather glum sketch of the contemporary scene. Within the convoluted and heterogeneous mess she labels “the Dissident Right,” she identifies three major strains:

1. the predominant national conservatives, who are eager to use the coercive power of the modern administrative state to advance (allegedly) conservative causes and push for national primacy;
2. the theocons, who dream of “immanentizing the eschaton” by creating a state theocracy to impose (their understanding of) a transcendent moral order;
3. the neoreactionaries, the Pajama-Boy Nitzscheans who have been given legitimacy to spew their blend of vitriol and conspiracy.

The NatCons have turned their back on the basics of markets and skepticism about administrative power (how sad in this 250^th anniversary year of The Wealth of Nations!). The theocons would repoliticize salvation after three centuries of religious tolerance within Christendom. And, beneath all that, the country’s baser instincts toward power and suppression are flourishing within the neoreactionary right. On the other side, the interventionist excesses of American socialism, with DEI, cancel culture, and continued growth of the administrative-welfare state, are equally horrifying. To paraphrase Richard Nixon, we are all interventionists now.

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Today’s classical liberals are, indeed, alone in a two-front war. The paternalistic Left and the Dissident Right both aggressively push for social and economic control. Liberty, limited government, and free markets have few defenders. Fusionism is an appealing alliance, as Slade proposes it. But who will be the fusionist warriors for individual liberty? Where are the moderates to defend private property? Where have all the pro-business, small-government, free-trade conservatives gone? We can hope that there is a Nockian Remnant out there, biding its time while the dissident storm passes. In the meantime, the libertarian wing of fusionism stands alone, as core agreements have largely been abandoned by those who still call themselves conservatives, but now need hyphenations to distinguish conservatism from their preferred flavor of interventionism.

“ICE admits it investigated a critic based on constitutionally protected speech” – so reports Jacob Sullum.

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… is from Arvind Panagariya’s November/December 2003 Q&A, “Think Again: International Trade”:

Indeed, few developing nations have grown rapidly over time without simultaneous increases in both exports and imports, and virtually all developing countries that have grown rapidly have done so under open trade policies or declining trade protection.