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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:

Neither will it follow that an accumulation of debt is desirable, because a certain degree of it operates as capital. There may be a plethora in the political as in the natural body; there may be a state of things in which any such artificial capital is unnecessary. The debt, too, may be swelled to such a size as that the greatest part of it may cease to be useful as capital, serving only to pamper the dissipation of idle and dissolute individuals; as that the sum required to pay the interest upon it may become oppressive and beyond the means which a government can employ consistently with its tranquility to raise them; as that the resources of taxation to face the debt may have been strained too far to admit of extensions adequate to exigencies which regard the public safety.

Where this critical point is cannot be pronounced, but it is impossible to believe that there is not such a point.

And as the vicissitudes of nations beget a perpetual tendency to the accumulation of debt, there ought to be in every government a perpetual, anxious, and unceasing effort to reduce that which at any time exists as fast as shall be practicable consistently with integrity and good faith.

DBx: Keep in mind that this warning of excessive government debt was issued by a man who was not as fearful of such debt as were many others of his generation.

…..

It’s too bad that in today’s U.S. government there is nothing remotely close to “a perpetual, anxious, and unceasing effort to reduce” government indebtedness “as fast as shall be practicable consistently with integrity and good faith.” Too many politicians and pundits treat government debt as, if not a freebie, an easy and always-acceptable means of funding today’s government expenditures with little or no risk to the public fisc or to the well-being of future citizens-taxpayers.

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Here’s a follow-up email to a new correspondent.

Mr. B__:

Responding to my point that keeping existing automobiles longer is as much a ‘threat’ as are automobile imports to the production of new cars, you write that “if we stretch the life of our cars, it is only a one time negative impact on the demand for new cars.” My point, therefore in your view, is “limp.”

You’re overthinking my point, which is simply that imports are only one among countless substitutes for goods and services produced domestically.

A fall in the demand for domestically produced new cars is caused no more by increased automobile imports than by increased used-car sales. A fall in the demand for home-kitchen ranges and ovens is caused no more by increased imports of home appliances than by increased demand for dining out. A fall in the demand for domestically produced lumber is caused no more by increased lumber imports than by increased use of flooring and decking made of composite materials. A fall in the demand for domestically produced aluminum is caused no more by increased aluminum imports than by technological advances at recycling aluminum. A fall in the demand for domestically produced tires is caused no more by increased tire imports than by improved road and highway surfacing. A fall in the demand for domestically produced diapers is caused no more by increased diaper imports than by falling birth rates.

This list can be much extended.

National-security considerations aside, imports’ only distinguishing feature is that they are easily demonized. We (rightly) simply don’t think of criticizing our fellow citizens for, say, buying used cars instead of new cars, or building their decks with composite materials instead of with wood. But let those same fellow citizens buy imported cars or build their decks with imported lumber, and protectionists scream holy hell about the damage done to the U.S. auto industry and about the loss of jobs for sawmill workers. And politicians – left, center, and right – storm in, vocal cords ablaze, promising to “solve” this mirage of a “problem” with tariffs that allegedly will “protect” us Americans from the wiles and ruses of scurrilous, conniving, “unfair” foreigners.

I’m disturbed by just how cavalier protectionists are about restricting their fellow citizens’ economic freedom. But I’m at least equally disturbed by just how stubbornly puerile and ignorant are the intellectual arguments typically presented for protectionism as if these prove beyond any shadow of a doubt that protective tariffs enrich a nation.

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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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.

…..

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.

…..

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.

…..

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.