Tweet

In my latest column for AIER, I make the case that not all economists are guilty of Gregory Collins’s charge of having too-narrow an understanding of human nature and motivation. I also defend my Adam Smithian distinction between consumption and production from Collins’s misunderstanding of that distinction. A slice:

Protectionists typically justify their policies by pointing to the particular jobs they save. Economists respond that protectionism also destroys particular jobs. They also note that protectionism reduces the spending power of domestic consumers. In public debates, protectionists often ignore the first point while eagerly seizing on the second to make what they believe is a “gotcha” argument against economists.

“Aha!” protectionists cry. “Economists’ view of humanity is absurdly narrow! Unlike us protectionists, who understand that people are not only consumers but also producers, economists think people are only consumers. How silly! We can therefore ignore economists.”

If economists were guilty as charged, then policy recommendations rooted in our positive analysis would indeed be worthless. But we’re innocent.

To see why requires that the analytical distinction between “consumption” and “production” be made clear. “Consumption” is a label for ends; “production” is a label for means. The particular content of the ends (and of the means) isn’t specified. “Consumption” can refer to the wise pursuit and embrace of the true and the beautiful as defined by Aristotle or Aquinas (or by Adrian Vermeule, Pope Leo, the Dalai Lama, Hasan Piker, Nick Fuentes, whoever) no less than to myopic attempts to gratify the most fleeting desires of the flesh.

When economists say that individuals act to satisfy as many consumption desires as possible, we describe a category of human action; we prescribe nothing. We simply mean that individuals act to achieve as many of their ends as possible. When challenging protectionist policies and other government interventions, we explain that such policies increase some individuals’ ability to achieve their ends only by reducing the ability of others to achieve theirs. Economics imposes no restrictions on what those ends are or ought to be, and it makes no value judgment about one set of ends compared with another.

Nor do economists elevate consumption over production. Rather, we point out that production is a means to consumption, whatever the particular consumption desires might be. To argue for policies that treat production as an end in itself is therefore to commit a category error.

It is akin, for example, to mistaking an emergency appendectomy for an end on par with the patient’s goal of good health. The successful performance of the surgery has genuine value, and the surgeon may rightly take satisfaction in performing her craft with skill and care. Yet no sensible person would wish to protect the surgeon’s job by opposing a pharmaceutical breakthrough that ensures appendixes never again rupture. The dignity and satisfaction the surgeon derives from her work come from restoring patients to health. If patients are already healthy, the surgeon would be perverse — and most undignified — to insist on performing unnecessary operations.

No competent economist denies that work has dignity or that individuals find satisfaction and meaning in their work beyond the incomes they earn. What economists deny is the practical possibility of using government to protect some individuals’ pursuit of dignity and other nonmaterial goals without obstructing other individuals’ pursuit of the same.

Tweet

David Henderson warns of “the deadly focus on income and wealth inequality.” Three slices:

You might think that the focus on wealth inequality has come about because of the huge growth in wealth of the 100 or so wealthiest people in the world, many of whom live in the United States. While that surely has made the issue more prominent, the upset about inequality began well before that. I date it at 1992. In 1992, Jeff Bezos, whose wealth is close to $300 billion, had not yet even started Amazon, the source of his wealth. He and his then-wife MacKenzie Scott started Amazon two years later, in a rented garage. In 1992, Elon Musk, now the world’s wealthiest man, was a twenty-one-year-old undergraduate at Queen’s University in Kingston, Ontario, who was about to transfer to the University of Pennsylvania.

…..

There are many myths about inequality. While I don’t have space to dispel all of them here, I’ll point to two that are highly relevant.

The first is the idea that increases in income inequality mean that the poor are worse off. French economist Thomas Piketty, author of Capital in the Twenty-First Century, often writes as if he thinks that wealth is zero-sum so that increases in various groups’ wealth and income must come at the expense of others. In discussing the United States in the late twentieth century, for example, he calls an increase in the income share of the top 10 percent an “internal transfer between social groups.” Yet, on the very same page, he admits that income for the bottom 90 percent slowly grew over that same period.

Consider Piketty’s statement about the United States and France: “And the poorer half of the population are as poor today as they were in the past, with barely 5 percent of total wealth, just as in 1910.” That is nonsense. If the poor have the same percentage of wealth as they had in 1910, they are much richer because wealth is much greater.

…..

Lower economic growth means more deaths

With real wages and real incomes growing more slowly due to higher taxes on wealth, people would invest less in safety. We wouldn’t demand that our jobs be quite as safe because, with lower real income, we would value safety less. We wouldn’t make our homes quite as safe. We might not replace that old Camry with a new safer-driving Tesla. We wouldn’t spend quite as much on medical care that raises our probability of living longer.

In short, higher taxes on wealth lead to more death. Even though they might not know it, and probably don’t, those who focus on reducing wealth inequality by reducing the wealth of the wealthy are advocating a system in which more people die.

Let’s not do that. Let’s have an economic system in which people live longer. To get there, we need to reject plans to have the government take more of people’s wealth.

My GMU Econ and Mercatus Center colleagues Tyler Cowen and Alex Tabarrok put together this splendid primer on rent control. Follow the actual science and read it.

My intrepid Mercatus Center colleague, Veronique de Rugy, decries this decryable fact: “The GOP Is warning about socialism while quietly embracing it.” Two slices:

The socialist program would be a catastrophe. So, here’s an awkward question: Why is a Republican administration quietly doing the public ownership of businesses part on its own?

Last week, the Commerce Department announced that letters of intent have been signed to provide federal incentives to seven more companies under the CHIPS program. Each letter of intent is conditioned on the government taking an equity stake. By a Cato Institute count, that brings the federal corporate portfolio to roughly 30 firms.

A year ago, these deals looked like improvisation—one-offs stitched together under pressure with President Donald Trump’s fluid negotiating style. Now, the department announces them in batches. Federal ownership of private companies has become routine, and it is happening on the right even as members busily point fingers at the left for its socialism.

To be sure, this is not the abolition of private property that some in the DSA would love to see. But strip away the label and look at the mechanism. Socialism’s defining move is to put ownership and decision making in the same collective hands. A government equity stake does exactly that. Washington already regulates these firms, buys from them, and subsidizes them. Now, it owns pieces of them. Every lever it controls—tariffs, permits, contracts, the next tranche of subsidies—moves the value of its own holdings.

Colorado Gov. Jared Polis, a Democrat, sees the implication of the government stake ownership more clearly than most Republicans do. “When government owns part or all of private companies,” he writes, “government is no longer just setting the rules—it becomes a player in the game and sets the rules to its own advantage and against the people.” Polis adds: “Socialism concentrates political and economic power in the same hands.” He is right, and it ought to sting.

…..

Finally, you can spare me the national-security argument about needing the domestic chip capacity, steel, and rare-earth materials that these companies provide. Government ownership is not the instrument. Procurement contracts and long-term purchase agreements can secure supplies without making the Commerce secretary a shareholder.

The DSA at least tells Americans clearly what it wants. The danger on the right is quieter: a government acquiring the means of production one letter of intent at a time, and a political party acting as though socialism is something only the other side can do.

Speaking of Trumpian government ownership of the means of production, here’s Bill Anderson.

Alex Tabarrok summarizes J.D. Vance’s economic philosophy: “Socialism is evil … now let me tell you all about my socialist policies to fix the economy.”

Scott Lincicome tweets:

US imposes 50% aluminum tariff.
Canadian aluminum imports collapse.
US aluminium prices increase (by ~50%).

If only we could tease out a connection!

James Talevich’s letter in today’s Wall Street Journal is excellent:

Regarding Rob Arnott’s op-ed “Thank You for Your Success, He Said” (July 29): As my first economics professor at California State University, Fullerton, told us, “The beauty of capitalism is that all these greedy people milling about pursuing their own self-interest make life better for everyone.” Every high-school graduate should be able to articulate this principle, because its application is universal.

Every impoverished nation on earth suffers from a shortage of competent capitalists. With no capitalists, you starve. With one capitalist, you are underpaid and overcharged. With a hundred capitalists bidding for your labor and competing for your disposable income with lower prices and higher quality, everyone has a steadily increasing standard of living. With a million, you get America.

HumanProgress.org reports this happy reality:

Real median family income in the U.S. has roughly tripled since 1947, climbing from about $34K to over $105K in today’s dollars.

Despite all the doom and gloom, American families are far more prosperous than their grandparents were.

Tim Carney reports on a recent example of the importance of Bruce Yandle’s insight into coalitions of bootleggers and Baptists.

Here’s blue-sky insight from my GMU Econ and Mercatus Center colleague Bryan Caplan.

“It sounds like they’re talking about you, David Schmidtz.”

Tweet

… is from page 39 Lawrence W. Reed’s soon-to-be-published book, Born of Ideas [link added]:

So much of sound economics reduces to what Pelatiah Webster would likely regard as common sense: Don’t spend what you haven’t got. Don’t mortgage your children’s future. Leave people alone to produce and create. Refrain from cheating your creditors or your customers. Be honest with money. Let trade be unfettered by superstition, fallacy, or the arrogance of officials. Work hard. Save and invest wisely. Honor your contracts. Establish a stable framework under the rule of law so that people can go about their business. Follow the Golden Rule. Keep the peace.

Tweet

Peter Earle remembers the late Victor Niederhoffer.

Ilya Somin, a GMU colleague over in the Scalia School of Law, writes with insight about the (il)legality of the latest round of Trump’s tariffs punitive taxes on Americans’ purchases of imports. Two slices:

President Donald Trump recently used Section 301 of the Trade Act of 1974 to impose massive new tariffs on 60 U.S. trading partners, including the European Union, Canada, Australia, Japan, South Korea, and more. Imports from 41 trading partners will now face 12.5 percent tariffs, and the others will be subject to 10 percent levies.

In February, the Supreme Court invalidated Trump’s International Emergency Economic Powers Act of 1977 (IEEPA) tariffs, which imposed tariffs of 10 percent or more on almost all U.S. trading partners. The imposition of the import duties left us with the highest tariff rates since those that severely exacerbated the Great Depression and would have resulted in some $1.4 trillion in new taxes for Americans over the next decade. In a case I helped develop and litigate, the court’s 6-3 decision held that IEEPA does not authorize tariffs and that the president could not legally claim unlimited tariff authority. With the new Section 301 tariffs, Trump seeks to circumvent the Learning Resources v. Trump decision and once again enact a broad trade war without congressional authorization.

…..

It is important that the courts continue to hold the line by striking down presidential tariff power grabs. And it is also desirable that they do so quickly. Judges can reduce the damage caused by illegal tariffs if they refuse to stay initial rulings blocking them.

The Federal Circuit’s stay of the initial ruling against the IEEPA tariffs enabled the Trump administration to collect some $166 billion in illegal tariff payments, greatly increasing the harm caused by the policy. Much of the harm caused by illegal tariffs—including lost sales, investment opportunities, and higher prices paid by consumers—cannot be fixed by giving tariff refunds later. Neither can the damage to the U.S. economy. And, as the IEEPA experience shows, even the refunds themselves are not a given. Billions remained unpaid five months after the Supreme Court’s decision, and the Trump administration is trying to avoid refunding some of the money.

In the long run, Congress should act to curb presidential tariff authority, ideally by eliminating or severely restricting all statutes that grant it. Enacting Democratic Sen. Ron Wyden’s proposed legislation to the latter effect would be a good start. Unless and until Congress acts, strong judicial review must continue to be a vital line of defense against illegal and economically destructive taxation imposed by the president.

David Harsanyi, writing at the New York Post, puts the prices that Americans today pay for food into historical perspective. A slice:

The anxiety over prices is driving people to embrace socialist ideas like Mayor Zohran Mamdani’s $70 million city-owned supermarket chain.

And it’s the reason why many right-wing economic populists are pestering President Trump to stop fighting Iran so he can “focus” on lowering food prices.

Sorry, but they’re all wrong: We’re not living through an unprecedented food crisis.

In 1901, the average American family spent 42% of its disposable budget on food, according to the US Bureau of Labor Statistics.

In 1945 it was 23%. In 1965 it was 15%. In 1985 it was around 12%.

Today, per Agriculture Department calculations, it’s 9.7%.

That number is driven by a historically high rate of dining out and having food delivered.

If we remove eating out from the equation and measure only grocery and supermarket shopping, the average family spends just 7.9% of its budget on food — and a discriminating shopper can probably do better.

None of this is even to mention that modern consumers have access to an amazing array of products and delicacies from around the globe that would have blown the minds of previous generations.

The American diet is the most diverse in the world, incorporating a wide variety of cuisines and year-round availability of products that were once seasonal.

Because of highly efficient global supply chains, a person can go to any big-box store in the nation and buy affordable produce from Central America, or beverages from Asia, or salmon from Scandinavia or curry from India.

Even with all this, Americans spend far less of their income on food than any people in any other nation on Earth, the USDA has found.

GMU Econ alum David Hebert reports on the growing opposition to Trump’s tariffs punitive taxes on Americans’ purchases of imports. A slice:

In 2025, as in 2018, many of the tariffs that President Trump imposed appealed to “national security.” The Section 232 tariffs on steel, aluminum, and copper, for example, were justified along these grounds. Production of these materials is so important, the logic goes, that we should willingly overpay to promote domestic production, in support of America’s army and fleet.

To be clear, domestic production is one way to ensure that America has a ready supply of these materials. By the same logic, every family could ensure a ready supply of food if they grew their own vegetables and raised their own livestock. What matters is not protecting domestic production, but making sure that domestic access continues unabated in times of war.

Let’s take steel as an example. The question we should ask is “how dependent on foreign steel are we, really?” The American Iron and Steel Institute reports that only 23 percent of finished steel in the US was imported; the remaining 77 percent was produced domestically. The Association for Iron & Steel Technology finds that the US is currently the third-largest steel producer in the world, behind only China and India. And the US International Trade Administration reports that the US imports steel from, in order of most-to-least: Canada, Brazil, Mexico, Korea, Germany, Taiwan, Japan, Vietnam, India, Turkey, and 68 other countries. In other words, if Canada decided to stop selling steel to the US, we would still have 78 other countries, each with plenty of steel firms within them, from whom to buy this critical material.

Still, national security is a legitimate concern and promoting it is perhaps among the most legitimate functions a government can perform. To that end, free trade and globalization have done far more to promote a safer nation than any protectionist policy. A report from the Center for Strategic & International Studies evidences that increased trade between nations reduces the likelihood of war in the first place. Globalization, likewise, ensures a robust and diverse web of potential suppliers such that if war were to break out, access to critical materials would continue largely unabated.

George Will surveys three important issues that Americans should – but, alas, likely won’t – take up with candidates for seats in Congress. A slice:

About 99.9 percent of Americans would be startled, or bemused, or both, to learn that they are living during 53 national “emergencies.” (The count is from the Brennan Center for Justice at New York University School of Law.) These have been declared by presidents whose powers are enhanced by invoking the National Emergencies Act of 1976.

Some of these declared emergencies have become long in the tooth: Six were declared in the previous century. In a recent hilarity, the current president said his tariffs respond to the “emergency” of a national trade deficit. This continuous 50-year fact — a.k.a. something normal — has coincided with soaring national prosperity, but is an “emergency.” Go figure.

Thank goodness for this: “Airlines push back against ICE enforcement at airports.”

Steven Koonin exposes the hack environmental ‘science’ passed off as a consensus conclusion of the members of the National Academies of Sciences, Engineering, and Medicine. A slice:

When the National Academies of Sciences, Engineering and Medicine speak, Americans assume they are hearing from thousands of the country’s most accomplished researchers. That isn’t always true.

The academies released a report on July 16 asserting that specific extreme weather events can be tied to greenhouse gas emissions. Media coverage treated the report as the collective judgment of more than 8,400 members—each elected for a lifetime of distinguished achievement. The report itself reinforces that impression, declaring that it “represents the position of the National Academies.”

But look who actually wrote it. Of the 14 report authors, only one is a National Academies member. Of the 14 reviewers, only one is a member. Only one of the two people overseeing the review process is a member. The report states that reviewers “were not asked to endorse the conclusions or recommendations . . . nor did they see the final draft before its release.” There is no indication that more than a few academies members even saw the report before it was released.

The National Academies’ institutional seal is being used to bless the conclusions of a small committee, not the thousands of researchers whose prestige gives that seal its weight.

That isn’t a fluke. It is how the system works, as I know from six years as chairman of an academies oversight committee. The National Academies are really four entities under a single brand. Three of these are the honorific academies, with elected membership earned, permanent and under no obligation to produce reports. The fourth is the National Research Council, a staff-run operation that solicits studies, recruits committees and produces reports. Academies members oversee the process at a high level, but day-to-day decisions are made by nonmember staff and outside experts.

Tweet

… is from page 289 of the original edition of Walter Lippmann’s sometimes deeply flawed but profoundly insightful and still-important 1937 book, The Good Society:

[I]n a liberal democracy, the law must seek primarily to regulate human affairs by a system of individual rights and duties rather than by administrative commands from the ruling officialdom…. I have called this the reciprocal method of social control as distinguished from the overhead method of regulating human relations. In broad terms we may then say that liberalism seeks to govern primarily by applying and perfecting reciprocal obligations, whereas authoritarianism governs primarily by the handing down of decrees. The liberal system seeks to define what one man may expect from all other men, including the officials of the state, and to guarantee that expectation. The authoritarian system permits the official to declare what he wishes other men to do and to enforce his will.

Tweet

This letter of mine just came on line at the Washington Post and will appear in tomorrow’s (August 6th’s) print edition:

Matthew Lynn’s July 31 online op-ed, “Trump’s tariffs aren’t crushing global trade,” argued that the Trump administration’s tariffs “did not work the way the Econ 101 crowd expected them to.”

It’s true that despite the tariffs, “the U.S. economy did not crash, inflation did not spiral out of control, and shelves at Walmart are not empty.” But this reality doesn’t contradict Econ 101. The case against tariffs isn’t that they invariably unleash economic Armageddon. Instead, the core economic case against tariffs is that they reduce the rate of economic growth, the effect of which compounds over time for as long as the tariffs remain in place. Tariffs make most people poorer than they would otherwise be. The recent tepid growth of real U.S. gross domestic product is consistent with what we in the Econ 101 crowd predicted.

Lynn also wrote that “in total, U.S. imports increased from $275 billion in May 2024 to $312 billion in May 2026.” But why start with May 2024, nearly a year before Liberation Day? According to the Federal Reserve Economic Data to which Lynn linked, imports hit their peak in March 2025. This was the month before Liberation Day. Since then, imports are down by about 9 percent. This fact is evidence — not defiance — of economic logic.

Donald J. Boudreaux, Fairfax

The writer is an economics professor at George Mason University.

Tweet

Diego Sánchez de la Cruz reveals “the hidden economic message of Nolan’s ‘Odyssey’.” A slice:

Commerce alone, however, was not enough. These networks depended upon institutions of cooperation. The Amarna Letters reveal rulers addressing one another as “brothers,” exchanging gifts, negotiating alliances, and maintaining permanent diplomatic contacts. Greek society reflected the same logic through xenia—the sacred obligation to offer hospitality to strangers. In a world where long-distance trade depended on trust between people who had never met, such norms were not merely moral ideals; they were essential economic institutions.

Seen in this light, Nolan’s The Odyssey becomes more than an adaptation of Homer. It offers a powerful illustration of what classical liberal thinkers have argued for centuries: war destroys far more than cities. It undermines trust, disrupts commerce, and replaces voluntary cooperation with coercion. David Ricardo demonstrated why trade benefits all participants through comparative advantage, while Frédéric Bastiat captured its political significance in his famous maxim: “When goods do not cross borders, soldiers will.” Modern research broadly supports the intuition. Political scientists John Oneal and Bruce Russett have consistently found that countries with stronger commercial ties are, on average, less likely to fight one another. Trade does not eliminate conflict, but it changes incentives by increasing the costs of war.

The historical record points in the same direction. Since the Second World War, international trade has expanded at an unprecedented pace. Over the same period, extreme poverty has fallen dramatically, life expectancy has risen across the globe, and—despite many tragic exceptions—the world has experienced the longest period without direct war between the major powers in modern history. As Steven Pinker argues in The Better Angels of Our Nature, the long-term decline of violence reflects many factors, but the spread of commerce, stronger institutions, and wider networks of cooperation has undoubtedly been one of them.

Nolan’s film also offers an important reminder. Prosperity is not a permanent condition. Markets do not sustain themselves automatically. They depend upon trust, stable institutions, enforceable contracts, and the rule of law. When those foundations begin to crumble, commercial networks can disappear with astonishing speed—as they did more than three thousand years ago. That may be the deepest lesson of Nolan’s The Odyssey: civilisation is not held together by military power alone, but by a fragile web of trust and voluntary exchange that must constantly be preserved. In reminding us of that timeless truth, Nolan has done something increasingly rare: he has turned a Hollywood blockbuster into a compelling defence of the institutions that underpin peace, prosperity, and human flourishing.

“Trump said tariffs on aluminum would boost domestic production. The White House now admits that didn’t happen” – so reports the ever-informative Eric Boehm. A slice:

When President Donald Trump first slapped tariffs on imported aluminum, the goal was clear: Increase domestic aluminum production for national security purposes.

The executive order Trump signed in March 2018 declared that aluminum was being imported in “such quantities and under such circumstances as to threaten to impair the national security of the United States.” A Commerce Department report laid out the argument in more detail: If the U.S. found itself in a major war, it would need reliable supplies of aluminum (to make weapons, aircraft, and more) and should not depend on imports to meet that need.

Tariffs, the administration insisted, would create the economic circumstances necessary for America to produce more aluminum.

A lot has happened since then. Aluminum prices have increased. A lot. Products made with aluminum—from beer cans to cars — have gotten more expensive as a result. Trump has raised and changed the aluminum tariff several times. The baseline tariff has gone from 10 percent to 25 percent, and there is now an additional 50 percent tariff on products made largely from aluminum.

But one thing hasn’t happened. America is not producing more aluminum.

You don’t have to trust the economic reports. Ask the Trump administration how its aluminum tariffs are working out.

“The domestic production and supply of primary aluminum, which is critical to the U.S. economy and defense industrial base, is still in insufficient supply,” the president declared last month, citing information provided by Commerce Secretary Howard Lutnick.

David Henderson is rightly appalled by the authoritarian arrogance of some prominent and powerful “pro-choice” progressives.

The evident wild fabrications committed by this Jason Arday “professor” are astonishing. Arday’s “career” is living proof of the gullibility of progressives whenever the issue of race is raised. A slice:

Jason Arday, who received media attention for becoming the youngest black professor ever at the University of Cambridge in England, has recently come under scrutiny for allegedly fabricating his professional affiliations and plagiarizing his academic work.

Now, another line on his résumé is in doubt: Arday says on his official faculty website that he is a visiting professor at The Ohio State University in the Office of Diversity and Inclusion — but Ohio State’s DEI office shuttered in 2025, and the school said he was never an employee.

“We have no record of an employee by that name,” Ohio State University spokesman Benjamin Johnson told National Review on Tuesday.

Roger Pielke, Jr, is correct: “Keeping up with data center-driven electricity demand requires supply-side solutions, not bans.”

Speaking of data centers, Lynne Kiesling writes insightfully about the economics of their energy supplies.

The Editorial Board of the Washington Post reports on an example of the trust in government regulators that keeps ordinary Europeans poorer than ordinary Americans. A slice:

Like most E.U. laws, this one sets out broad “standards” that are meant to be hashed out by courts down the road. “Manipulative and deceptive techniques,” for example, are defined as anything that “materially” distorts behavior by “appreciably” impairing an informed decision, leading people to make choices they “would not have otherwise taken” that are “reasonably likely” to cause “significant harm.”

Which techniques? What counts as significant? The law doesn’t say.

The “vulnerable” are also broadly defined. Alongside age and disability, the protected classes include anyone in “a specific social or economic situation.” Wouldn’t that literally cover anyone?

Such broad language cripples innovation. Large technology companies waste millions on swarms of lawyers to puzzle over such ambiguities. Smaller companies, crushed by compliance costs, never get off the ground.

Embarrassingly for Europe, the continent has maybe one company that would qualify as a frontier AI lab: France’s Mistral. And its best models have fallen behind what the U.S. and China have to offer.

Wall Street Journal columnist Jason Riley predicts that “socialists may prove surprisingly strong in November.” A slice:

The mainstreaming of socialism also appears in polling, which shows that people furthest to the left tend to be younger. A Cato Institute survey published last year found that 62% of adults under 30 hold a “favorable” view of socialism. Nor is the trend limited to Democrats. The polling firm Echelon reported last month that, while “older Democrats are split on” socialism and “younger Democrats are very much in favor,” it’s “also worth noting that social democracy and socialism elicit less steadfast unfavorable views among younger Republicans compared to their older fellow partisans.”

Young people are by definition less experienced and by nature more idealistic. Hence the appeal of a political system that seeks to manufacture equal outcomes through central planning and government redistribution has a certain logic. Historically, socialism’s appeal has been especially notable among more educated and more affluent young people.

When Karl Marx and Friedrich Engels published “The Communist Manifesto” in 1848, Marx was 29 and Engels two years his junior. Marx’s father was a successful lawyer. The family owned vineyards and rental properties and employed multiple servants. Marx attended the University of Bonn, where he spent more time drinking than studying. After a year, his father transferred him to the University of Berlin, where he continued to rack up debts for his family to pay off and, according to one biographer, “became a bohemian student who merely regarded the university as his camping ground.”

Damon Root tells of U.S. Supreme Court Associate Justice Elena Kagan’s efforts to resist the efforts of many of her fellow progressives to reduce the independence of the U.S. Supreme Court.

Tweet

… is from Samuel Gregg’s excellent July 2024 paper, “A Free, Prosperous and Secure America”:

America’s emphasis should thus be upon developing new technologies – whether military, dual-use, or civilian. Constant innovation is critical for maintaining and extending America’s military technological edge. To facilitate that growth, policymakers should consider what economic conditions are most likely to generate and incentivize such developments. As observed, we have good reason to believe that an economy characterized by liberty, entrepreneurship, competition, and dynamic trade, within the United States and between America and the rest of the world, is far more proficient at delivering this type of innovation consistently. Economic nationalist policies conversely are unlikely to do so.

Tweet

Wall Street Journal columnist William McGurn is understandably dismayed by J.D. Vance’s hostility to free markets – which, of course, in practice is hostility to private property rights. A slice:

But market reality is more complex than a boxing match in which one guy wins and one guy loses.

For the real winner is the customer, who gains greater choice, better prices, higher-quality goods and services or some combination thereof because people must compete for his dollar. It is the customer, not “the market,” who determines which producers win.

This isn’t how Mr. Vance sees it. Where Mr. Buchanan in the 1990s railed against the North American Free Trade Agreement, Mr. Vance attacks free-market icons such as Milton Friedman. It’s telling that in his new book, “Communion,” the chapter the vice president devotes to economics is called “A Dismal Science,” a phrase Thomas Carlyle coined in the 19th century as he opposed the coalition of evangelical Christians and economists fighting slavery.

Today Mr. Vance says that while Friedman’s ideas might have worked “in a world where there are Christian guardrails on everything,” they are ill-suited for our more secular age.

“The caricature of Milton Friedman as one who advocated for selfishness or a sort of chaotic freedom that undermined the common good is a classic straw man,” says David Bahnsen, a National Review trustee and managing partner of the Bahnsen Group, a $10 billion wealth-management firm. “Friedman’s love of free enterprise was rooted to his argument that it optimized conditions for social cooperation—not that he was apathetic about such.”

If we’re going to have an honest talk about justice, human dignity and social harmony, do we really believe any third party—especially the government—will make better choices than we ourselves would make?

While market critics are quick to point out the limitations of the market and its participants, they place extraordinary trust in the people they think will fix it. The beauty of capitalism is it is designed for imperfect people. Competition limits the harm they can do and provides real alternatives.

“The danger begins not when men compete to serve,” says the Rev. Robert Sirico, president emeritus and a co-founder of the Acton Institute, “but when they conspire—privately or politically—to prevent others from competing with them.”

My GMU Econ colleague Vincent Geloso explains that “the biggest winners from new technologies are usually the people who use them, not the people who invent them.” A slice:

In the nineteenth century, barbed wire sold for four cents a pound, but allowed farmers to prevent considerable losses from animal escapes and to protect high-value crops. By reducing the cost and increasing the utility of fencing, barbed wire is estimated to have increased the value of farmland by a full one percent of GDP. National food brands charge a few cents more by offering consumers the assurance of reputation. Others pioneered preservation methods, eliminating many costly problems of adulteration and food poisoning. The same logic applies to computers, cellphones, landline phones, telegraphs, meatpacking, pharmaceutical drugs, automobiles, fax machines, tractors, coal engines, electrical utilities and appliances, air conditioning, and hundreds more inventions.

Each of these innovations produced massive gains to society, and most of the value is captured by the consumer, not the inventor or even the producer. Nobel laureate William Nordhaus tried to calculate how much value is captured by innovators and producers, and relative to how much is passed on to consumers. Using different assumptions and approaches, he found that 1.3 to 2.2 percent of the total value generated is captured by innovators of the technology, and the rest is passed on to consumers. Buyers ultimately receive this value in lower costs, time savings, better quality goods and services, and entirely new opportunities.

My intrepid Mercatus Center colleague, Veronique de Rugy, makes the case for permissionless innovation in AI.

Surse Pierpoint writes insightfully about the legacy of Karl Marx. A slice:

So why does Marx remain one of the most cited authors in the humanities and social sciences, a century and a half after his death, in fields far removed from the one where his core claims were actually tested?

In a 2023 paper in the Journal of Political Economy, Phillip Magness and Michael Makovi offer an answer that is uncomfortable for anyone who assumes Marx’s academic prominence reflects the strength of his ideas. Using Google’s Ngram data, Magness and Makovi built a “synthetic Marx” — a weighted composite of contemporaneous socialist writers, including Ferdinand Lassalle, Johann Karl Rodbertus, and Oscar Wilde — chosen because their citation trajectories tracked Marx’s closely before 1917. Then they watched the lines diverge. After the Bolshevik Revolution, Marx’s citations broke sharply away from those of his peers, while the synthetic composite did not. Before 1917, Marx was known among rival socialist factions and the economists who had already rejected him. After 1917, the Russian state needed a founding philosophy for what was, in plain terms, a seizure of power. It got one, retroactively, by making Marx a household name.

The Washington Post‘s Editorial Board reveals “the hidden cost of the government’s corporate buying spree.” Two slices:

This is not the proper role of government. The free market is always better than politicians at efficiently allocating investment capital. Republicans once understood the dangers of the federal government picking winners and losers, but the Trump administration has been hoovering up shares of private companies at a rate that would’ve made Democratic predecessors blush.

The Biden administration used the Chips Act to throw money at companies but did not take ownership stakes — perhaps because the legislation did not explicitly allow for equity purchases.

That omission from the law isn’t stopping Lutnick’s Commerce Department, which has purchased nearly $4 billion in ownership stakes since December. After this latest round of investments, the federal government’s total equity portfolio has ballooned to 30 companies, up from zero before President Donald Trump’s second term.

…..

The Commerce Department claims the equity stakes will “enhance the return for the U.S. taxpayer.” What it does not say is that taxpayers are on the hook if these companies collapse.

And if the government decides these companies are too important to fail and must be propped up, it further distorts the market. The most innovative and economically feasible projects might not succeed if the government plays favorites.

National Review‘s Dan McLaughlin continues to write wisely about the current fashion among some conservatives of invoking “the common good” as an excuse for rejecting the foundational principles of America’s founding. A slice:

As to appeals to the superior wisdom of disaffected youth or the need to bend truth to fashion, I think it preferable to stand for what we already know and instead seek to pass it on. One of the things I find mystifying, in reading the proponents of these ideas, is the alternative history in which the decades between 1913 and 1979 were somehow the Long March of libertarianism and small government through American society, in comparison to the expansive bureaucracy and social welfare states of the 1790s. Another is the idea that, say, the education and home ownership sectors have been tragically bereft of government involvement over the past several decades. That’s not an America I recognize. To Michael [Brendan Dougherty]’s charge that markets have replaced private civil society, I am inclined to think that in most cases markets have stepped in only to sell things people previously didn’t need to buy. Wet streets do not cause rain.

Joey Politano tweets: (HT Scott Lincicome)

American factory construction continued declining in official data released today as CHIPS Act projects finish, IRA projects get cancelled, and tariffs weigh on nearly all industries

Total US factory construction is down 32% from its 2024 highs and 22% over the last year alone