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In February 2010, Russ Roberts shared, here at Cafe Hayek, this cartoon.

The point of this cartoon – and of Russ’s sharing it – is that for all jobs created by government ‘stimulus’ spending, there are jobs destroyed by that spending.

There are, however, two important differences between the jobs created and those destroyed by ‘stimulus’ spending: First, the created jobs are seen while the destroyed jobs are unseen; second, the created jobs are highly unlikely to be as productive as are the destroyed jobs.

A skilled artist could update this cartoon, showing Trump (in place of Obama) ‘creating’ jobs with his tariffs – and simultaneously destroying jobs elsewhere in the economy with those same tariffs. And just as Obama partisans saw only that which they wished to see, a vision that fueled their economically unwarranted enthusiasm for Obama, Trump partisans see only that which they wish to see, a vision that fuels their economically unwarranted enthusiasm for Trump.

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Marian Tupy, writing at National Review, explains that Jeff Bezos’s wealth was indeed built by – by – Jeff Bezos. A slice:

When I recently wrote about Bezos’s value creation in the Wall Street Journal, some readers objected that Bezos did not build Amazon by himself. Amazon used the internet. The government helped create the internet. Therefore, his wealth is partly a product of government action. Therefore, the state has a moral claim on much of his fortune.

That is Barack Obama’s “you didn’t build that” argument. True, no one builds anything in isolation, and entrepreneurs use laws, courts, roads, schools, electricity, language, science, and prior inventions.

But the redistributionist conclusion does not follow.

Public inputs are not gifts from the state. They are funded by taxpayers. If government taxes citizens to build roads, courts, or networks, it cannot later treat those services as favors that create a second claim on private achievement. Citizens paid for the input. They do not owe the state their output.

Access is not authorship. The internet made online commerce possible. It did not make Amazon inevitable. The same public inputs were available to millions of people. Every major retailer, investor, and bookstore owner had access to the network. They did not change how we shop. Bezos did.

The logic applies universally. The lawyer did not invent the courts. The doctor did not invent medicine. The writer did not invent language. If public input is dispositive, then private property becomes meaningless.

The argument becomes circular when government monopolizes an input. The state taxes citizens to fund infrastructure, restricts or crowds out private alternatives, and then says citizens’ use of state infrastructure proves their dependence on government. That is not moral reasoning. It is a closed loop.

True public goods may justify taxation under clearly defined rules. They do not justify an ownership claim over every enterprise that uses them.

The public inputs argument takes success for granted but never explains why Bezos succeeded while most did not even try. The economist Israel Kirzner provides the answer: entrepreneurial alertness. A successful entrepreneur notices what others miss, acts before others act, and is rewarded if consumers value the result.

Eric Boehm tweets: (HT Scott Lincicome)

The impulse to demand that executive power get used to solve every single perceived problem is the number one thing eroding American democracy

Phil Magness explains why he isn’t a “neoliberal.”

Ilya Somin, a GMU colleague over in the Scalia School of Law, calls Bernie Sanders’s scheme to have government seize 50 percent of the equity of AI firms “dangerous and unconstitutional.” A slice:

The Takings Clause of the Fifth Amendment states that the government may not take “private property” without paying “just compensation.”As Richard Epstein and Eduardo Penalver – leading takings scholars with widely divergent views on most political and legal issues – explain in a joint essay on the Takings Clause for the National Constitution Center, “the guarantee of just compensation must apply at the very least to cases in which the government engages in the outright confiscation of property.” Stock is private property, and seizing 50% of the stock value of major firms is a pretty obvious case of confiscation.

And it does not matter that Sanders proposes to take “only” 50% of the stock, rather than 100%. If the government seizes half your house or half of your business, that’s still a taking. Indeed, the Supreme Court has held that seizing a much smaller proportion of a property is a taking, as in the famous case of Loretto v. Teleprompter, where New York City required the owner of a building to give up a small portion of the roof to put a cable box there. The same principle applies here.

Sanders refers to the seizure as a “one-time 50 percent tax.” But that labeling doesn’t matter. It’s still obviously an expropriation of property, and not simply a tax on the income it generates or even a property tax. One of the key elements of property rights is control over its use. Sanders makes clear that seizing control for the government is a major objective of the proposal. There can be situations where the boundary between a tax and a taking is fuzzy. But this proposal is very obviously on the taking side of the line.

If merely labeling an expropriation like this a tax could immunize the government from takings liability, they could use the same trick to expropriate virtually any property without compensation. Thus, they could take over your house by claiming that it’s merely an in-kind tax payable in the form of land-use rights. They could take over any business or charitable organization by claiming that it’s a one-time tax payable by turning over the right to control all the organization’s activities. And so on.

Vance Ginn busts the myth of a permanently poor underclass.

The Washington Post‘s Editorial Board – pointing to solid research – busts the myth that America’s richest people avoid taxation by funding their consumption with massive borrowing. A slice:

A faddish conjecture among progressives right now goes like this: Rich people’s assets appreciate, giving them unrealized capital gains. If they realized the capital gains by selling the assets, they’d have to pay taxes on the gains, so instead they borrow against the value of their assets during their life. Then, when they die, their heirs get the assets and start over at the value when they receive them, so the gains are never taxed.

It’s a neat theory, but does it actually characterize the behavior of high-net-worth individuals? Edward Fox of the University of Michigan Law School and Zachary Liscow of Yale Law School published research on this question last year.

Basically, the rich have no reason to do “buy, borrow, die” because … they have a lot of money. In addition to their unrealized capital gains, in any given year they have lots of salary, business, interest and dividend income, along with realized capital gains, all of which are already taxed.

Fox and Liscow found that rich people’s annual liquid income is higher than their annual consumption, removing the need to borrow to finance their lifestyles.

An analogy for someone with more typical personal finances makes the folly clear. For most people, the largest source of unrealized gains is the increase in value of their home. Someone could, in theory, take out a home-equity loan and use it to finance their consumption. But this isn’t a genius strategy for tax avoidance. They’d still have to pay income tax on the money they earned from their job and then pay back the loan with interest.

Fox and Liscow found that new borrowing for the top 1 percent of wealth-holders only came out to about 2 percent of their annual economic income, which they define to include increases in unrealized gains. Again, it should not be surprising that the very rich aren’t borrowing a ton of money.

For households in the top 1 percent of wealth, they found that the median amount of economic income subject to the income tax is 56 percent, and the median amount of debt as a percentage of wealth is zero percent.

Adam Omary and Jeffrey Singer make clear that “the Surgeon General’s screen warning is not science.”

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… is from page 59 of Thomas Sowell’s 1999 book, Barbarians Inside the Gates:

If one confused word can gum up social policies, the legal system, and innumerable institutions throughout society, that word is “equality.” It is one of those vague pieties in which we indulge ourselves, without any serious thought as to what it means or what the actual consequences of pursuing it may be.

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Here’s a letter to a new correspondent.

Mr. B__:

You label as “drivel and nonsense” my (satirical) proposal that the U.S. government protect domestic automakers by punitively taxing automobiles kept for longer than five years. “No one reasonable,” you write, “thinks keeping cars longer threatens our auto makers like imported cars do.”

I agree that almost no one recognizes that extending the life of existing automobiles reduces the demand for newly produced automobiles every bit as much as does the importation of automobiles. But my point is that people should recognize this reality, for it helps expose the case for protective tariffs on automobile imports as, well, drivel and nonsense.

In 2024, Americans bought 16.1 million new automobiles. Thirty-nine percent of these vehicles – or 6.3 million – were imported. (So in 2024, sales of new American-made cars were roughly 10 million.) In that same year (according to Claude), Americans relinquished between 10 to 12 million vehicles in order to purchase newly produced automobiles. If each of these relinquished vehicles were instead kept for one year longer, that number would swamp that of imported vehicles.

It follows that if the threat posed to America’s economy by imported automobiles is so great that the government is justified in punitively taxing Americans’ purchases of imported vehicles, then the threat posed by extended-life automobiles is even greater, thus requiring even stronger government efforts to discourage Americans from extending the lives of their existing automobiles.

If you extend the life of your car in order to save money, would you be cool with the government penalizing you for this effort? If not, why are you cool with the government penalizing you for buying an imported car in order to save money?

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030

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Here’s a letter to the Wall Street Journal.

Editor:

You report that because “Americans are keeping their cars longer than ever … the average vehicle on U.S. roads is about 13 years old, a historic high and a 10% jump from a decade ago” (“Americans Are Keeping Their Cars Longer Than Ever – and Remaking the Auto Industry,” June 6). One result, of course, is reduced demand for new American-made automobiles.

The Trump administration insists that its tariffs on imported automobiles are necessary to protect the U.S. auto industry and America’s industrial economy. Shouldn’t the administration, then, also impose tariffs (that is, taxes) on Americans who keep their cars too long – say, beyond five years? After all, the demand for newly produced American-made automobiles – for U.S. industrial output – is reduced no less by Americans who lengthen the time they keep their old wheels than it is by Americans who purchase imported cars.

If the endeavor to make America’s economy great again requires that government restrict Americans’ choices in order to raise the demand for newly produced American cars, that endeavor must include not only tariffs on auto imports but also punitive taxes on cars maintained and kept longer at home – and, by the way, also on the sale of used cars.

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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Sheldon Richman rightly cheers Jeff Bezos’s defense of large fortunes earned in market economies. Two slices:

When an American businessman defends the large fortunes made—that is, earned—in the marketplace, it’s something to celebrate. Jeff Bezos, the creator and head of Amazon.com, did just that in a recent wide-ranging interview on CNBC’s Squawk Pod with host Andrew Ross Sorkin on May 20, 2026.

While his remarks on political philosophy did not go far enough in defending the morality of money-making, they went farther than anything we have heard from a businessman in quite some time, if ever.

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Here is Bezos, one of the richest men in the world, claiming that being worth a billion dollars or more is not immoral when it comes from pleasing consumers.

He elaborated:

There was one outlet. Then there were two. Then there were three. The way to you made the billion dollars or hundred million dollars or 10 million dollars or anything is that you create a service that people love, and if millions of people choose your service, you’re gonna end up with a billion dollars.”

Mind-blowing, no? This wasn’t Ludwig von Mises or Ayn Rand or Milton Friedman defending the earning of great wealth through production. It was a guy who actually did it. He’s proud, as he should be. He innovated, executed his plan, benefitted hundreds of millions of people beyond calculation—and, as a result, did extraordinarily well for himself. (Like other wealthy people, Bezos consumes only a tiny percentage of the total value he creates.)

Why would anyone begrudge such a person the fruits of his labor? Many motives can explain the animosity, among them, envy and sheer hatred of achievement. To be more charitable, however, we can add “ignorance” to the list. Some clueless people may really believe that Bezos has more because others have less.

The Editorial Board of the Wall Street Journal is correct: Donald Trump’s enthusiasm for government taking partial ownership of – “stakes in” – private companies is a step down the same road on which Bernie Sanders now calls for government to seize 50 percent of the equity in AI companies. Three slices:

Many of America’s worst policy mistakes have been bipartisan mind melds. A new example comes this week from Bernie Sanders, who wants the feds to take ownership stakes in AI companies. Hmmm. Which Republican might have inspired this statist brainstorm?

Mr. Sanders teased his forthcoming legislation in a New York Times op-ed that pitched a U.S. AI sovereign wealth fund. “Even President Trump, in an executive order, has proposed establishing an American sovereign wealth fund,” Mr. Sanders writes.

Yes, and we blasted the President’s idea last year. Sovereign wealth funds typically enrich a country’s rulers and friends far more than its citizens. Democrats criticize the Trump family businesses for profiting from the Presidency with crypto deals. Imagine the temptation for corruption if government owns stakes in America’s wealthiest companies.

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The unhappy truth is that President Trump helped pave Mr. Sanders’s road to AI socialism with his industrial policy. In return for approving Nippon Steel’s acquisition of U.S. Steel, Mr. Trump demanded a “golden share” that gives the government veto power over major business decisions. He has already blocked the closure of an unproductive Illinois plant.

The U.S. took a 9.9% equity stake in Intel last summer as it floundered. Mr. Trump claims credit for the subsequent 300% surge in Intel’s share price. He should really thank the business decisions of CEO Lip-Bu Tan—whom he had earlier called to resign—and insatiable demand for chips by AI hyperscalers.

The Administration has also taken equity stakes in critical mineral developers MP Materials, Lithium Americas, Vulcan Elements, Trilogy Metals and USA Rare Earth. There may be some cases when the feds need to invest for security or defense needs, but Mr. Trump is doing it with little restraint. This week he invested in coal plants, of all things.

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The U.S. leads the world in AI because entrepreneurs and investors have combined to innovate and compete. Political control would stifle that growth and cede leadership to China. It would be a tragedy for the ages if AI became the road to American socialism.

Matt Yglesias tweets: (HT Scott Lincicome)

It’s so funny to me that the “take stakes” euphemism has talked Republicans into doing nationalization of industry.

Jeffrey Depp writes insightfully about AI, as well as about the arrogant – and in many cases, venal – itch to have government regulate it. (HT Alden Abbott) Two slices:

The more fundamental question is whether either level of government possesses the knowledge, incentives, or institutional capacity to regulate a technology evolving at extraordinary speed. Before deciding who should regulate AI, we should first ask whether government can regulate it effectively at all.

The answer is no.

Critics of AI regulation often focus on innovation, competitiveness, or economic growth. Those concerns matter. But they are secondary to a more fundamental insight developed by economists associated with the Austrian and Virginia schools of political economy. The problem is not simply that regulation may slow innovation. It is that neither federal nor state regulators possess the knowledge necessary to determine what AI should become. And even if they did, the political process would steadily transform limited oversight into expansive control.

The result is a regulatory project almost certain to fail on its own terms.

…..

Israel Kirzner extended Hayek’s insight by emphasizing entrepreneurial discovery. Markets are not static systems moving neatly toward equilibrium. They are dynamic processes through which entrepreneurs discover opportunities others have missed. Competition matters not because it produces a predetermined outcome, but because it reveals information nobody previously recognized.

AI development exemplifies this process. No regulator predicted the explosive growth of prompt engineering—the practice of shaping inputs to get better outputs from AI systems. Few anticipated the rapid rise of AI coding assistants. Fewer still foresaw how quickly businesses would integrate generative AI into legal services, drug discovery, customer support, software development, and scientific research. Those discoveries emerged through experimentation.

That poses a serious problem for regulators. Any reporting requirement, disclosure standard, certification process, or safety framework necessarily reflects current knowledge. It embodies policymakers’ best understanding of responsible AI development at a particular moment.

But what if that understanding is wrong? More realistically, what if it is incomplete? The danger is not merely that regulators may make mistakes. It is that regulation freezes today’s assumptions into tomorrow’s rules.

A reporting framework developed in 2026 reflects what policymakers believe AI risks and opportunities look like in 2026. Yet the market’s understanding of those risks and opportunities may look entirely different in 2028 or 2030.

The great Bruce Yandle counsels Trump to be more realistic and modest.

Ben Zycher bids “good riddance to the SEC’s climate disclosure requirement.” A slice:

Climate policy — the political control of energy supplies — is tailor-made for the achievement of leftist ideological goals unrelated to the environment. Accordingly, the environmental left will not and cannot abandon climate alarmism.

Sooner or later there will be a left-wing U.S. administration with control over the various regulatory agencies. Accordingly, such policies must be opposed vigorously, and pulled out by the roots in whatever form they are found.

Eric Boehm decries the Trump administration’s continuing efforts to escape its legal and ethical obligation to refund the tax – a.k.a. tariff – revenues that it unlawfully collected from Americans.

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… is from Alexander Hamilton’s Report on Manufacturers, which was submitted to the U.S. House of Representatives on December 5th, 1791:

The question must still be, whether the surplus, after defraying expences, of a given capital, employed in the purchase and improvement of a piece of land, is greater or less, than that of a like capital employed in the prosecution of a manufactory: or whether the whole value produced from a given capital and a given quantity of labour, employed in one way, be greater or less, than the whole value produced from an equal capital and an equal quantity of labour employed in the other way: or rather, perhaps whether the business of Agriculture or that of Manufactures will yield the greatest product, according to a compound ratio of the quantity of the Capital and the quantity of labour, which are employed in the one or in the other.

DBx: This quotation is drawn from that part of Hamilton’s Report on Manufacturers in which he debunks – brilliantly – physiocracy, which is a theory that all economic value ultimately is created by agriculture and not by manufacturing (or by any other economic pursuit). (Hamilton undoubtedly was taking aim at Thomas Jefferson’s romantic embrace of the agricultural economy.)

A greater deployment of resources to agriculture draws resources away from manufacturing – thus requiring, if we’re concerned about the economic consequences, a comparison of the value of the additional agricultural output to the value of the foregone manufacturing output. If the latter is greater than the former, the perceived positive value of the additional agricultural output does not economically justify the production of that output, for its production brings about the loss of greater economic value that could have been produced by more manufacturing activity.

Exactly so. But Hamilton’s point is more general. It applies to the increased outputs of any goods or services, regardless of how these outputs are classified (for example “manufacturing” or “services,” or “semiconductors” or “machine tools” or “children’s dolls”).

Industrial-policyists, although frequently citing Hamilton in support of their schemes, stubbornly ignore this important point: No domestic industry or firm can be expanded without causing some other domestic industry or industries, or firm or firms, to be smaller than they would otherwise be.

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Here’s a letter to the Wall Street Journal.

Editor:

You asked five prominent economists to offer ideas “for reducing income inequality” (“Five Ideas for Reducing Income Inequality,” June 5). Of the five, only John Cochrane dared come close to challenging your question’s faulty premise – namely, that large income differences in a market economy are a problem that demands government attention. In markets, incomes are produced and earned, and they rise with the size of the contributions income earners make to the material welfare of their fellow human beings. There is no ‘problem’ here over which to wring our hands.

What does warrant hand-wringing is the economic misunderstanding of too many prominent economists. Emmanuel Saez, for example, in unimaginatively proposing to soak the rich, is apparently unaware that such soaking will – in addition to discouraging entrepreneurial innovation – deplete the stock of capital, thus reducing worker productivity and, in turn, lower real wages. Glenn Hubbard, in pinning the blame for the growth in income difference on globalization and technology, too readily accepts the claim – first peddled by progressives and now also by MAGA conservatives – that many ordinary Americans haven’t prospered over the past few decades. This claim has been thoroughly refuted by careful researchers, including Jeremy Horpedahl, Michael Strain, and Phil Gramm, Bob Ekelund, and John Early.

Also baseless is Heather Boushey’s allegation that the decline of labor unions resulted in workers having too little bargaining power. Another careful researcher, Scott Winship, finds that, although the percentage of workers who are members of unions has been falling since 1955, inflation-adjusted worker pay since then has not only been rising, but has kept pace with rising worker productivity – proof as solid as proof gets that labor-market competition continues to ensure that workers aren’t underpaid.

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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My intrepid Mercatus Center colleague, Veronique de Rugy, explains that European-style “single-payer” health coverage will simply not work in the U.S. if Americans insist on having anything close to excellent modern health care. A slice:

OK, but what about Europe and Canada? Progressives inevitably say: They made it work! This is a rhetorical sleight of hand that collapses on contact with basic facts.

European countries built modest, government-controlled health infrastructures from the ground up over several decades. They contained costs—meaning, among other things, they rationed care—as they expanded access. America did the opposite.

We built the most expensive, technologically advanced, sprawling health system in human history, which consumes nearly 20 percent of gross domestic product (GDP), under mostly private incentives and market pricing. As [Jessica] Riedl puts it, “We cannot simply pay European prices for the more vast American health infrastructure that exists.”

The central theory of single-payer savings has always been this: Slash payments to providers to offset the surge in the use of universal, no-cost-at-point-of-service coverage. The Congressional Budget Office (CBO) took a serious look at this fantasy. Its conclusion was that national health expenditures might actually rise, and demand for care would outrun supply. The final result would be European-style rationing, delays, and forgone services, all leading to worsening health care.

Richard Burkhauser and Kevin Corinth report on their new research into poverty in the U.S. Two slices:

From 1939 to 1963, the overall poverty rate—using our post-tax, post-transfer income measure (excluding health insurance)—fell from 48.5 percent to 19.5 percent, a 29.0 percentage point reduction in just under a quarter century. This decline in poverty was accompanied by a 76 percent increase in real median income over the same period, reflecting the United States’ strong economic growth following the Great Depression in the 1940s and the post-war boom in the 1950s. Between 1963 and 2023, the poverty rate fell by another 15.7 percentage points to 3.7 percent. However, the pace of poverty reduction was no faster after the War on Poverty began than before, even when applying a consistent initial poverty rate (19.5 percent) to compare trends in each period. Under this approach, poverty fell to 5.8 percent between 1939 and 1963 but only fell to 7.8 percent between 1963 and 1987.

…..

Our findings show that poverty fell substantially prior to the War on Poverty, primarily due to increases in market income, without a substantial rise in the dependency of working-age adults and their children on government transfers for most of their income. Poverty continued to decline after the War on Poverty began, but this progress was sustained only by the increasing generosity of transfers, as market income poverty rose and dependency increased. It was not until the welfare reforms of the 1990s and the recovery from the Great Recession that poverty and dependency fell simultaneously. These trends were particularly stark for black people, who experienced a steep decline in poverty before the War on Poverty, primarily driven by an increase in their market income, and a large rise in dependency after it began.

Ryan Bourne and Nathan Miller make clear that “raising the federal minimum wage is a solution in search of a problem.”

Wall Street Journal columnist Joseph Sternberg reports on Beijing’s decision to liberalize the market for labor in China – happy news for the Chinese people as well as for people outside of China who trade with the Chinese people. Here’s his conclusion:

China’s economic slowdown risks significant political and social consequences the regime may struggle to manage and that could get ugly. Still, this is all the more reason to cheer one of the rare occasions when the government’s solution is an expansion of freedom for hardworking Chinese migrants.

GMU Econ alum David Hebert unpacks the import price index.

Brian Albrecht argues powerfully against proposals to tax computer-processing capabilities.

John Stossel wisely counsels that Benjamin Franklin’s counsel remains relevant.

David Bahnsen eloquently champions freedom.

Acyn shares this small yet telling example of the utter cluelessness and illogic (unless tendentiousness at all costs is logical) of Batya Ungar-Sargon and other supporters of Trump’s tariffs punitive taxes on Americans’ purchases of imports: (HT Scott Lincicome)

Ungar-Sargon: The American people who voted for Donald Trump are hurting. He has to somehow alleviate the pain. The best way to do that is a stimulus check. He needs to give them a tariff rebate.

Phillip: Weren’t you an advocate for the tariffs?

Ungar-Sargon: Yes

Phillip: Why are you asking for a rebate?

Ungar-Sargon: We brought in $200 billion in tariffs. And we should now take some of that money and give it to Americans who are struggling.

Phillip: That money already has to be refunded because most of it was illegal.

Ungar-Sargon: That’s actually not clear they have to be refunded.

Phillip: There refunds are happening right now. If tariffs are a good idea—

Ungar-Sargon: Yes, I’m so glad we have that money

Phillip: Why would we have to rebate that money in stimulus checks?