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GMU alum Tom Savidge is no fan of the latest California proposition – Proposition 40 – to soak the rich.

Andrew Stuttaford reports the shocking – shocking! I say – surprise that soaking the rich in Britain drives the rich from Britain.

The Wall Street Journal‘s Editorial Board explains that “GDP growth comes in strong at 3.4% and would be stronger without tariffs and deportation.” A slice:

Mr. Trump says the strong GDP growth is evidence his border taxes are working. Sorry, no. Tariffs are a drag on growth. Investment in manufacturing plants declined 4% in the third quarter and has fallen 36% in his second term. Border taxes have increased uncertainty and business costs, which make it harder for manufacturers to invest.

While the President might point to a new steel plant owing to his 50% steel tariffs, how much investment isn’t happening because of tariffs? U.S. steel prices have increased 52% over the past year and are about two-thirds higher than in Europe. That’s a killer for U.S. makers of appliances, machinery and electric power equipment.

The other major drag on growth is housing, which subtracted 0.12 percentage points from third-quarter GDP. Higher interest rates are the main culprit, but the silver lining is that the housing slowdown has freed up workers for other projects like data centers. Construction firms say they struggle to find workers because of an aging workforce and deportations.

Nearly two-thirds of builders said immigration enforcement is affecting their workforce, compared to 13% a year ago, according to a John Burns Research and Consulting survey. Immigration raids have forced beef processing plants to reduce production. One result: Higher beef prices. The raids have also become a liability for Kansas GOP Sen. Roger Marshall.

“These ICE operations are having a massive chilling effect on the legal, documented, skilled workers that put beef on the table and keep the cattle supply chain moving,” cattle industry groups in Texas, Oklahoma and Kansas warned last month. “These types of disruptions will lead to higher beef prices for consumers.”

Companies seeking protection are immune to shame – as is made clear by this Politico report that’s headlined “Europe’s coffin-makers warn Chinese imports could be death knell for industry.” (HT Scott Lincicome)

Richard Fulmer decries the smearing, led by the “historian” Nancy MacLean, of GMU’s late Nobel-laureate economist, James Buchanan. [DBx: I put “historian” in quotation marks because, rather than report and interpret history, MacLean – as Fulmer shows – distorts history with fallacies generated by such maneuvers as out-of-context quotations. Whether MacLean’s maneuvers are mendacious or the result of astonishing intellectual incompetence is for you to decide – but it’s one or the other, or perhaps a combination of both. And – also astonishing – there are “scholars” who still today defend MacLean’s “scholarship.”]

With her wisdom and economic good sense, Megan McArdle writes about candy and lazy accusations of corporate greed. A slice:

I’m not saying corporations aren’t greedy, because they are. But greed can’t explain why food producers change their recipes; corporations were just as greedy in 1928, when the Reese’s Peanut Butter Cup was invented. They were greedy in 1978, when I was cramming their product into my 5-year-old mouth. Greed is a constant, like the speed of light. It can’t explain why candy formulas have changed, or why candy bars have shrunk, to the frustration of many consumers who feel they’re being cheated out of their full chocolate fix.

So why do companies shrink the product, cheap out on ingredients and stuff our candy with preservatives? One answer is that they can: Food technology has created possibilities that didn’t exist in 1928. But the other answer is that we kind of want them to.

Now, I know you don’t want a tiny, artificial-tasting substitute — you want a full-size, full-chocolate experience, full of natural ingredients. We all want lots of things, from world peace to sporty convertibles. Often, we aren’t willing to pay for what we want.

When cocoa prices skyrocketed between 2022 and 2024, did we want to pay significantly more for a bar of chocolate? Maybe you would, but odds are you’re an affluent professional for whom candy bars are a rare indulgence, so a price spike may not matter much. For many consumers, it matters a lot.

Think about preservatives and stabilizers. They certainly sound awful — who wants their candy embalmed? No one. But who wants a stale Reese’s Peanut Butter Cup? No one. If it’s a choice between that and the preservatives, well…

We could rejigger our modern supply chains, delivering fresh food more frequently instead of engineering it for eternity. But this would make food more expensive — and, as our inflationary era keeps demonstrating, that would anger a lot of people.

Corporations have to juggle trade-offs we’d rather not think about. They often make choices I wouldn’t, but I am not the average consumer. Companies have to guess whether that average consumer would rather have a more expensive chocolate bar or one that is smaller, cheaper to make and designed for a longer shelf life. They apparently reckon most of us hate sticker shock more than the gradual degradation of our favorite products.

You can argue that this is irrational, but many human emotions are, including nostalgia. You can also argue that the companies are guessing wrong (and in this case, Hershey seems to agree). Either way, you’re not arguing against corporate greed. You’re arguing against human fallibility. Alas, that too is a constant.

Sad new: 2018 Economics Nobel laureate, and long-time professor at Yale, William Nordhaus has died. (He is justly famous for, among other things, his 2004 paper “Schumpeterian Profits in the American Economy: Theory and Measurement,” in which he found “that only a minuscule fraction of the social returns from technological advances over the 1948-2001 period was captured by producers, indicating that most of the benefits of technological change are passed on to consumers rather than captured by producers.”)

Nick Gillespie is correct: “For libertarians, election day is the cruelest day of the year.”

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… is from page 6 of Stephanie Slade’s brilliant new (2026) book, Fusionism: Liberty, Virtue, and the Future of the American Right:

A core component of classical liberalism has always been a belief that people should be allowed by law to pursue their own interests as they see fit, so long as they are respecting the rights of others.

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Joseph Schumpeter would not be surprised: A successful entrepreneur in America’s market economy funds ‘research’ carried out by intellectuals who are hostile to successful entrepreneurs in America’s market economy. (HT Phil Magness)

The Editorial Board of the Washington Post explains what shouldn’t – but, alas, what today nevertheless does – need explaining: government ownership of corporate shares is a source of trouble. A slice:

The U.S. government lost about $12 billion on Friday as Intel’s stock fell 29 percent, its worst day since 1974. Last year, the Trump administration took a 10 percent stake in the chipmaker. Even after the sell-off, the trade remains profitable for taxpayers. But the volatility highlights how much it warps the free market when the Commerce Department takes equity positions in dozens of American companies.

Owning such a big share makes the government more inclined to side with Intel in disputes with its competitors and to give the company special favors. The potential conflict came into focus last week when the Federal Communications Commission granted Intel — and only Intel — a one-year exemption from its ban on certain foreign-made advanced robotics.

Intel warned that the rule could prevent it from using automated guided vehicles to move materials in semiconductor manufacturing plants and said there are no U.S.-made robots to use instead. That’s a great argument for scrapping the FCC’s policy altogether. But the ban remains in place, and the FCC hasn’t announced comparable exemptions for other chipmakers with domestic manufacturing operations.

Such is the danger of state capitalism. The government’s picking winners and losers is a recipe for hamstringing investment. Intel’s hotline to the White House could give the company a leg up over competitors that have outperformed it technologically and commercially. Nevertheless, if investors think political protection bestows advantages on Intel in the marketplace, they will be strongly tempted to back the firm over better-managed alternatives. That leaves consumers worse off.

China’s industrial policy is highly inefficient and not worth mimicking. TSMC and Samsung outpace China’s state-backed Semiconductor Manufacturing International Corp. in market share and innovation, despite Beijing’s investing billions in SMIC to make it a market leader. Other state-backed Chinese companies never produced a single chip. The country’s electric-vehicle industry was once the poster child for state investment success, but domestic auto sales have plummeted, and local governments are stuck keeping failing plants on life support. Thus is economic growth depressed and capital consumed that would have more productive uses elsewhere.

Uncle Sam is also meddling in Intel’s business decisions in ways that aren’t necessarily in the best interests of its other shareholders. In June, for example, President Donald Trump announced a deal between Intel and Apple that reportedly caught Intel’s own executives by surprise. And Intel’s chief executive, Lip-Bu Tan, is reportedly playing “Mother, may I?” by checking with Commerce Secretary Howard Lutnick before making major equity sales.

Three illustrious GMU alums – Dave Hebert, Phil Magness, and Paul Mueller – discuss tariffs.

Not that it matters beyond the fact that it’s about an absurd obsession of Trump: “Trump’s tariffs fail to cut US trade deficit, IW report shows.” (HT Scott Lincicome)

John Phelan writes about Milton Friedman, who was announced as a Nobel laureate in economics 50 years ago this month.

GMU Econ alum Adam Michel explains that “Senator Wyden’s data center tax bill mistakes REITs for an AI subsidy.”

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… is from page 117 of the “The General Interest” which is Chapter x of the 1932 report of a commission in the U.K., chaired by Sir William Beveridge; the title of the collection is Tariffs: The Case Examined:

National policy in the economic sphere, as in all other spheres, should be directed to ensure permanent advantages for the population as a whole. The presumption in favour of a policy of Free Trade is that it is so directed – it secures in the long run the use of the national resources of a country in the way shown by experience to be most economical, that is to say, to yield the greatest results for the least effort: the certain advantage of Free Trade is both permanent and general. The advantages, on the other hand, to be obtained by tariffs are either sectional if they are certain, or uncertain if they are general; in each case a strictly temporary gain, if any gain, is far more probable than a permanent one.

DBx: Yes. Yet despite the overwhelming evidence and theory in favor of free trade, protectionists continue to present themselves as social engineers here to save the true and the good by coercively restricting the ways in which their fellow citizens peacefully spend and invest their own money.

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Here’s a letter to Science-Based Medicine.

Editor:

Dr. Jonathan Howard writes about covid and MAHA that “there was a coordinated effort to numb people to their risks, spearheaded by seemingly credible doctors and academics” (“The Novocaine Pushers: Numbing People to Obvious Dangers of COVID and MAHA,” October 29). I offer no comment here on MAHA, which differs categorically from opposition to covid hysteria. But because I’m among the academics whom Dr. Howard accuses of being part of an alleged “coordinated effort” to resist covid hysteria, I have a word or two to say on that front.

I was no part of any such coordinated effort. My opposition to covid hysteria – and to the resulting lockdowns and mandates – resulted exclusively from my ability to reason, observe, and understand both statistics and economics.

It was clear as early as March 2020 that covid’s dangers are concentrated overwhelmingly among the elderly. Nevertheless, the public-health establishment, the major media, and (most) governments heedlessly hurled everyone into a panic by treating covid as if it would kill us all unless we obeyed their commands without question, including retreating into isolation – isolation that had its own very real dangers that covidians ignored. The fact that Dr. Howard apparently can’t conceive that individuals such as me – and especially ones far more skilled and knowledgeable than me, including Drs. Jay Bhattacharya, Martin Kulldorff, Sunetra Gupta, Scott Atlas, and John Ioannidis – can reach conclusions different from his own unless they are “coordinated” by some sinister architect reflects only the childish mind common to all conspiracy theorists.

Who, I ask, was this mysterious coordinator? (Or was it a cabal of coordinators?!) And where is Dr. Howard’s evidence of such coordination? He doesn’t say; he merely asserts that it must have been so – which is remarkable given that his piece is published at a site that boasts in its very title that it is based in science.

Dr. Howard further discredits himself by accusing those of us who tried to calm what we sincerely believed (correctly!) to be the unwarranted and lethal covid hysteria as having “yawned” at covid. Nonsense. Drs. Bhattacharya, Kulldorff, and Gupta authored the Great Barrington Declaration, which took covid’s actual dangers seriously, as it carefully counselled how best to deal with these dangers. Scott Atlas similarly advised the Trump White House that public health would be better promoted by an approach more targeted and science-based than the reckless one-size-fits-all, let’s-shutter-civilization-until-the-disease-is-conquered commands favored by the likes of the Chinese Communist Party and bureaucrats at the World Health Organization.

No physician who is truly science-based interprets disagreement with his prescribed course of action against an ailment as ‘yawning’ in the face of that ailment.

Far from being an example of “science-based medicine,” Dr. Howard’s screed is a nest of baseless insinuations designed to inflame rather than to inform.

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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Michael Boskin identifies “five tricks in policy debates.” A slice:

Fifth is what I will label the arrogance of government intervention success (AGIS). This stratagem, which focuses solely on the easing of a market failure by a theoretically appealing government “solution,” ignores not-infrequent government policy failures, often caused by poor incentives. As with market failures, policy failures come in several varieties, including waste and fraud, regulatory capture, misguided social engineering, excessive dependency, poor targeting, or simple incompetence to carry out the task at hand.

Consider the failed attempts to stimulate the economy with government spending, followed by other ineffective policies (remember “cash for clunkers”?) ladled on top of those allegedly “shovel ready” projects that even President Obama eventually admitted weren’t ready.

The proper comparison puts the imperfect market outcome up against the likely imperfect government intervention to assess the net benefit, positive or negative, from the policy.

The limited numerical, economic, and scientific literacy of much of the population offers many opportunities for politicians and policy analysts to take advantage. One example is California’s expensive climate policies. Our elected leaders claim they will help stop, or at least mitigate, climate change. What percentage of the population knows that the effect of greenhouse gas emissions on climate depends on their global level in the atmosphere, currently about 430 parts per million of atmospheric carbon dioxide? Or that adding up the emissions from each and every country adds about seven-tenths of 1 percent to this concentration annually? And that California’s activities emit about 1 percent of global emissions? So, if—and it’s a big if—California’s policies decreased the state’s emissions by an additional, say, 30 percent above and beyond what the policies already reduce, the result would be a net reduction in carbon dioxide concentrations in the atmosphere of less than one one-hundredth of a part per million?

Hence California’s policies, taken strictly by themselves, can have at best only a trivial effect on climate, even over decades, for the large cost Californians pay in higher and less reliable energy and reduced consumer choice. These costly measures might have some justification if they funded R&D that led to breakthroughs that scaled to true environmental significance at reasonable cost without permanent government subsidies, or if they induced large emissions reductions in other jurisdictions. While California does have such effects on a few other states, it has no influence on by far the largest emitter, China, or the third-largest, India (the United States is second).

The costs and risks from likely global warming certainly should be considered seriously in policymaking. But disingenuous pronouncements on what is achievable at what cost have caused a backlash that now inhibits serious consideration of how technology and adaptation, not just emissions mitigation, can lead to cost-effective solutions.

Steven Hayward ponders “equality and its discontents.”

My intrepid Mercatus Center colleague, Veronique de Rugy, exposes much of what’s wrong with the worldview of today’s enthusiasts for soaking the rich. A slice:

The entire notion misunderstands how fortunes are made. In a market economy, people don’t build great wealth first and redeem it later through good works. They build it by making the world better first.

When I buy an $800 smartphone, it’s because I value the phone more than whatever else I would have bought with the money. The seller values my $800 more than they do the phone. We both walk away richer by our own measure. Neither owes the other anything more.

Repeat this exchange a few hundred million times, and vast fortunes take shape for the people who create amazing technology so abundantly and affordably that we take it for granted. More importantly, though, people hand over every cent of it voluntarily.

As my colleague Arnold Kling aptly explained over the weekend, “Profits are earned within a positive-sum game for society. Profits induce firms to serve consumers and to innovate.” The drive for wealth taxes relies on “the opposite point of view. It regards profits as something that businesses take from the rest of us, as if we can take innovation and efficiency for granted. (It) acts as if we are in a zero-sum environment in which one person’s gain is necessarily another person’s loss.”

And, yes, the gains are divided more fairly than people think. Nobel laureate and Yale University economist William Nordhaus estimated that innovators in the U.S. business sector personally captured, on average, a mere 2.2% of the social surplus they created between 1948 and 2001. The other 97.8% went to everyone else in the form of lower prices, higher wages, better products and goods, and services that didn’t previously exist.

In short, the world has already been compensated, many times over.

Jon Miltimore adds his wise voice to those who oppose Proposition 40. A slice:

Following the Prop 40 announcement, filmmaker Steven Spielberg established residency in New York, while Google co-founders Larry Page and Sergey Brin relocated out of California. Palantir co-founder Peter Thiel moved to Miami, and venture capitalist David Sacks announced a move to Texas. The list goes on.

Few of these people came out and said they were leaving to dodge taxes. But it’s a common response to wealth taxes. When Norway implemented a much smaller wealth tax — raising it to 1.1% — in 2021, more than 30 billionaires and multimillionaires left the country the following year, more than the 13 preceding years combined.

I just bought a copy of Arnold Kling’s new book, America in the 20th Century. I urge you all to do the same.

Chelsea Follett reveals the grim reality of marriage in pre-modern times.

GMU Econ alums Caleb Fuller and Scott Burns ask who put the tariffs in their pricy burritos.

Here’s the abstract of a new paper by Ruohan Wu: (HT Scott Lincicome)

The 2025 U.S. tariff policies provide a natural experiment to examine how import restrictions affect domestic prices. We construct a partial-equilibrium Armington model in which the pass-through of a tariff into retail prices decreases with a product’s domestic supply elasticity and increases with its import dependence. We test these predictions using 2024-2026 U.S. metropolitan-level price data and a difference-in-differences design that compares beef products against alternative protein products and other consumer items. We find that tariffs significantly increased beef prices by approximately 8~11% ($1.7~$2 per pound), with larger effects when domestic supply was more constrained and import dependence was higher, as the model predicts. These findings imply tariff assessments should weigh uneven consumer incidence, not aggregate price effects alone.

The Editors of National Review wisely welcome the Trump administration’s rollback of regulations on the production of methane.

Kevin Williamson is no fan J.D.Vance.

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… is from pages 257-258 of Samuel Gregg’s superb new book, The Civilization of Commerce:

If, for example, a government raises tariffs because it wants to protect particular communities from foreign competition out of a sense of compassion, it often ends up inflicting harm on others, such as consumers who end up paying higher prices or the businesses that experience retaliatory tariffs from abroad.

DBx: Yes.

Indeed, even if foreigners – sensibly attending to their own best interests – refuse to retaliate against U.S. tariffs, some American businesses (and their workers) will suffer as a result of U.S. tariffs because these tariffs reduce the number of dollars foreigners earn to spend on American exports or to invest in U.S.-based companies.

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George Will points to the situation in France as evidence that deficit financing of government expenditures is generally dangerous and often destructive – and evidence of the errors of those persons who insist that we Americans should not fear our own government’s fiscal incontinence. A slice:

Today, political limits replace those formerly imposed by gold. Domestic public opinion can prevent an issuing government from repaying bonds with tax revenue in excess of spending, rather than by printing money. International bond buyers must be wary of default, or creeping repudiation via inflation.

“By combining the judgment of millions of people,” [Robin] Wigglesworth writes, “the bond market” is the world’s cleverest economist and its best political analyst. Today, it is looking askance at France.

There, government social spending (and anti-entrepreneurial cultural habits) has prevented economic growth sufficient to pay the government’s bills. France’s government, which understands the public’s unwillingness to pay for or limit its consumption of government benefits, has resorted to promiscuous borrowing: selling bonds. This shifts onto unborn future voters (the least troublesome kind) the cost of today’s voters’ appetites.

Our modern world, Wigglesworth says, exists partly thanks to the bond market, which pools the savings of billions of people. “It takes money as its raw input and spits out factories and railways, hospitals and casinos, smartphones and semiconductors, wars and vaccines.” It also, however, encourages, by enabling, democracies’ ruinous urge to steal from the future.

Borrowing from the future to benefit the future — e.g., to win wars and build infrastructure — is virtuous. Borrowing to fund the borrowers’ current consumption is decadent. But subsequent generations will do this. Until they can’t. Then comes default, direct or indirect (inflation).

The French are protesting reality. As the bond market measures reality, French appetites for government benefits exceed the money French society is willing to give the government. So, government’s borrowing costs will rise, until they become prohibitive, and chaos intensifies. Or France gets bailed out by Germany, via the European Central Bank.

French protesters have been discussing their discontent in their usual vocabulary of automobiles set aflame. The bond market speaks less colorfully, but decisively.

GMU Econ alum Paul Mueller, in a new paper, identifies “the errors of economic nationalism.” Here’s the Executive Summary:

Economic nationalism is once again in vogue. The United States government now has an ownership stake in approximately 30 private companies. It has also broadened and increased tariffs on its trading partners. Republican officials have been putting forward economic nationalist policies to strengthen labor unions, offer preferential regulatory treatment to large firms, and give other special tax exemptions or subsidies to favored companies and industries. This represents a significant departure from the limited-government, free-market principles of the political right only a few decades ago.

This paper examines the claims and ideas fueling the rise of economic nationalism within the “New Right.” This term encompasses several different groups: postliberals, National Conservatives, America First protectionists, etc. While their concerns vary, they are united in their belief that the federal government should be far more involved in economic matters when it comes to industrial policy and international trade. In other words, they are economic nationalists.

Unfortunately, much of what they advocate carries significant costs, risks, and unintended consequences. Incorrect economic reasoning leads economic nationalists to recommend policies that distort markets, increase corruption, and reduce rates of economic growth, all of which slow or reduce improvements in people’s quality of life.

The New Right’s approach to the global economy has wrongly equated overbearing international governance with international trade. As a result, economic nationalists argue that the US government should actively use its power to protect domestic industries and workers from foreign competition, particularly from adversarial powers like China. They view tariffs not merely as taxes on consumers but as essential tools of statecraft.

President Trump’s “America First” agenda, including the now-defunct 10 percent universal tariff as well as aggressive duties on Chinese goods, has paved the way for the New Right’s economic nationalist agenda.

Alfredo Carrillo Obregon explains that “high tariffs are not just bad economics but bad politics, too.”

“Honda warns the automotive industry will be in trouble due to the 50% US tariff.”

The Wall Street Journal‘s Matthew Hennessey makes clear that “GDP growth means more pie for everyone.” A slice:

That GDP is a flawed indicator of national prosperity is a popular view on both the collectivist left and the statist right. “You can’t eat GDP” is meant to remind you that people’s real lives aren’t governed by economic statistics. The world is a complex place. Rising tides don’t lift all boats. Some boats have holes in them.

All that is fine and true. The world is a complex place. But statistics aren’t irrelevant to people’s real lives either. You need to start with something. What gets measured gets done. You’d never tell an overweight person that body mass index was a poor indicator of overall health because, well, overall health is a complex thing. That would be bad medicine.

All things equal—another economic chestnut the statists hate—a low BMI is better than a high BMI. And a growing GDP is better than a shrinking GDP. That’s good economics.

Many in this country would prefer a politics based on vibes than one based on facts. GDP is a fact. “You can’t eat GDP” isn’t. It only sounds like one.

You know what else you can’t eat? Medicare for All. The progressive shopping list is chock-full of nonedible items: the Green New Deal, rent control, abortion rights, cutting off aid to Israel. You can’t eat any of those things.

Nor can you eat gross domestic happiness or the Happy Planet Index or any of the fruity GDP alternatives floated by those who prefer a world of economic ambiguity to a world of economic facts. Those people want to retain the ability to fiddle with the vibes.

This letter in the Wall Street Journal by E. Vance Winningham of Oklahoma City is worth reading:

Having practiced immigration law for 50-plus years, I have seen firsthand how policy disconnects hit the real economy (“Immigration Raids Hit Housing Market,” U.S. News, Oct. 19). Ignoring moral debates, the financial cost of current Immigration and Customs Enforcement tactics against long-term, noncriminal immigrant family members is arriving immediately in grocery aisles, emergency rooms, construction sites, and family budgets.

When work authorizations expire, permit extensions languish unprocessed, longtime workers are detained and supply shocks cascade across the economy. Farms lose harvesters, hospitals lose aides, builders delay projects and small businesses cut capacity. Consumers pay through higher prices and diminished services. Beyond the immediate trauma inflicted on U.S.-citizen children, taxpayers will shoulder significant state and local social-safety-net costs as household incomes vanish overnight.

Highlighting these supply constraints isn’t an argument against enforcement; it is an argument against ignoring economic realities. For decades, federal policy has signaled “keep out” at the border while the market signaled “help wanted.” Congress has consistently failed to align legal labor supply with actual economic demand. Removing essential labor without functional legal alternatives is not order. It is manufactured scarcity, and every American consumer will now begin paying the price.

J.D. Tuccille, sadly, is correct: “The midterms offer a choice between two brands of socialism.” A slice:

A glimpse of a socialist future can be found not only in the rising tide of explicitly socialist Democrats, but in GOP heir apparent and Vice President J.D. Vance’s repeated denunciation of free-market economic thinking and its emphasis on private choice.

“Do we serve pure, unfettered commercial freedom?” he asked in First Things in 2019. “Or do we serve something higher? And are we willing to use political power to actually accomplish those things?”

In a June interview with The Daily Wire‘s Michael Knowles, Vance returned to the topic to criticize the market-oriented ideas of economist Milton Friedman and called for a state-directed and Christian-infused “American developmentalist” approach to escape what he called “a hyper globalized economy.”

“The policies supported by both major political parties suggest a growing embrace of state ownership of the economy,” warns economist Daniel J. Smith for the American Institute for Economic Research. “The range of policies widely accepted as legitimate options, referred to as the ‘Overton Window,’ has shifted toward greater government direction of the economy, with some conservative politicians and voters now treating partial state ownership as an acceptable function of government.”

Smith pointed out that the economist F.A. Hayek had observed this phenomenon among authoritarians of the right and left in the 1930s. It was why he dedicated his book, The Road to Serfdom, “to the socialists of all parties.”

Why this is important is illustrated by Smith’s recent research into the correlation, or lack thereof, between socialism and political liberty: “The record, from 1789 forward, is not ambiguous. High degrees of political freedom and heavy state ownership of the economy have not been sustained together.”

“Mao the ‘God.‘”

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… is from page 22 of Pierre Lemieux’s excellent 2018 book, What’s Wrong With Protectionism? [footnote deleted]:

[U.S.] exports are a cost because the United States uses its resources to produce goods and services for foreign countries; imports are a benefit because the United States uses the resources of foreign countries to obtain its own goods and services. So, contrary to what the mercantilists thought, the United States should import as much as it can and export as little as possible (assuming it were possible to maintain this regime for long). A reductio ad absurdum of the mercantilist argument is easy. Imagine that the United States ships its export by sea and that the returning ships bring back imported goods. If the returning ships sank, would the situation of exports without imports be a benefit for the United States. Obviously not.

DBx: So true.

Of course (as Pierre recognizes), mercantilists will say that what Americans should receive from foreigners in exchange for American exports is money. In the minds of mercantilists, it’s better if the ship returning with imports sinks and foreigners compensate us Americans by instead depositing lots of money into our bank accounts – money that (the mercantilist ‘logic’ continues) we should never spend on imports. Trump would look at this money and declare it to be evidence that we’re “getting rich!”

This obsession with money is the chief source of Trump’s mistaken beliefs about trade. But the mercantilists never bother to ask: What’s the use of the money? If the money paid to Americans is foreign currency, then that currency has value only because it can ultimately be used by Americans to purchase imports. If instead the money is dollars, then foreigners got those dollars only by earlier selling their exports to Americans. Either way, imports are the benefit of trade while exports are the price paid for imports.