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… is from page 51 of John Barry’s excellent 2012 book, Roger Williams and the Creation of the American Soul: Church, State, and the Birth of Liberty [emphasis original to Coke]:

Then [Sir Edward] Coke took Parliament further. Among Parliament’s traditional rights was bringing “grievances” to the king’s attention. Coke chaired the Committee on Grievances, an odd position for a privy councilor. And he lashed out at the king’s claim that “reason of state,” i.e., the national interest and particularly national security, could justify extraordinary action.

“Reason of state is often a trick to put us out of the right way,” Coke said, “for when a man can give no reason for a thing, then he flieth to a higher strain and saith it is a reason of state.”

DBx: This warning is wise, and every bit as relevant today as it was when the English crown was worn by the Stuarts.

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Unlike most people who reference – usually in support of protectionist schemes – Alexander Hamilton’s 1791 Report on the Subject of Manufactures, I’ve actually read the entire document, carefully. At around 33,000 words, it’s long, but certainly not a terribly heavy lift. And while Hamilton had little of Adam Smith’s or Thomas Jefferson’s talent for composition, his writing style isn’t half-bad.

No one who reads this Report can help but be impressed with Hamilton’s deep intelligence and learning. The reader also encounters several glimpses of a talented economist at work. Alas, though, these are only glimpses. On the whole, Hamilton put more trust in government officials than in market forces to allocate capital and resources in ways that will best industrialize a fledgling economy. He didn’t adequately understand the role of prices, profits, and losses at allocating capital and resources – or, perhaps instead, he understood the logic, but mistakenly supposed that that logic is weak in economies not yet industrialized.

I quickly add that, nevertheless, there is very little in Hamilton’s Report that supports the case for protectionism or industrial policy in the America of the 21st century. Were Hamilton alive today, he almost certainly would not only oppose, but oppose vigorously, Trump & Co.’s case for Trump’s tariffs. Worth noting explicitly is that Hamilton welcomed net inflows of foreign capital (which cause trade deficits) while Trump & Co. insist that these net inflows are a national emergency.

Here two slices of my latest AIER column, which is on Hamilton’s Report.

Hamilton relied on Adam Smith (also without naming him) to expose the errors of physiocracy — that is, the belief that net economic value is produced only by agriculture. Yet Hamilton went further, arguing that manufacturing can be more productive than agriculture. In making this argument, Hamilton was impressive; one might even sense in it an anticipation of some insights revealed by economists’ marginal revolution of 80 years later.

Regardless of how much or little Hamilton intuited of marginalism, he deserves credit for emphasizing the reality and significance of opportunity costs. To produce some increment of agricultural output requires that some increment of manufacturing output not be produced. And that increment of agricultural output is worthwhile to produce only if its value exceeds that of the foregone manufacturing output. Thus did Hamilton defuse the arguments of persons who believed that, to establish the case for keeping America an agricultural nation, it’s sufficient to point to the positive market value of agricultural output.

In this way, and some others, Hamilton revealed a keen ability to think insightfully about economic matters. Nevertheless, on a full assessment, Hamilton in the Report got more wrong about economics than he got right. Not content to support only the removal of artificial barriers in the US against domestic manufacturing, Hamilton argued strenuously that the government must actively promote American manufacturing. That promotion should consist chiefly of subsidies (“bounties”) supplemented by protective tariffs.

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Not only was Hamilton’s case for protection confined to the need to stimulate industrial capacity in a country lacking such capacity, he also preferred subsidies over tariffs (because tariffs, unlike subsidies, reduce supplies of targeted goods), and he welcomed, rather than bemoaned, net inflows of foreign capital.

Nevertheless, Hamilton ultimately had too little confidence in free markets. The late Gordon Wood’s assessment of Hamilton-as-economist is accurate:

Hamilton was so wedded to a hierarchical view of society that he could only imagine industrial investment and development coming from the top down. Thus he was incapable of foreseeing that the actual source of America’s manufacturing would come from below, from the ambitions, productivity, and investments of thousands upon thousands of middling artisans and craftsmen who eventually became America’s businessmen. Hamilton’s historical reputation as the prophet of America’s industrial greatness therefore seems somewhat exaggerated. He certainly wanted a powerful and glorious nation, but he was no more capable of accurately foretelling the future than the other American leaders.

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George Will expresses eloquently his wise objections to the new U.S. Supreme Court ruling in Trump v. Slaughter. Two slices:

On Monday, the Supreme Court enlarged presidential power far beyond its already menacing dimensions, which are beyond anything the Founders could have imagined. Self-described “originalist” justices did so in the name of assuring the president’s democratic “accountability.” The original originalists, the Constitution’s framers, would have winced.

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The unitary executive theory says what the Constitution nowhere says: that any governmental activity with an executive aspect must be controlled by the president. Furthermore, Kagan correctly insists that much of what the independent agencies do — making, within parameters set by Congress, rules that have the force of law — is mischaracterized as executive. Congress delegated this obviously legislative function on the assumption — true for decades, until Monday — that the agencies would not be under presidential domination.

Why, exactly, cannot Congress carve out, by laws, exceptions to the president’s removal power, exceptions that Congress thinks serve the public interest? The president should be duty-bound to take care that those laws are faithfully executed. Never until Monday has this been declared constitutionally forbidden.

The court has made the congressional power exercised over multimember independent agencies irrecoverable. Any president will veto Congress’s attempt to claw back its power. So, it will be nearly impossible for congressional supermajorities to pass legislation reestablishing the bargain it struck when, in the 19th century, it began creating independent agencies.

My Mercatus Center colleague (and also my former student) Liya Palagashvili has this excellent piece in today’s Wall Street Journal. It’s on one of the happy effects of AI on employment. Two slices:

Most debates over artificial intelligence begin with the same question: Which jobs will AI destroy? But the first labor-market shock may not be mass job loss. It may be worker migration from traditional firms.

AI is making it easier for one worker to do tasks that once required a small team. In industries where AI can handle research, drafting, coding, editing and analysis, the result isn’t necessarily unemployment. It may be independence.

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The firm isn’t disappearing, but for some knowledge work, the advantages of being inside one are. Labor-market institutions have yet to adjust. Unemployment insurance assumes one employer, a clean separation, and a search for another job. Health insurance remains heavily tied to employment, and many retirement plans, leave benefits, and tax advantages are organized around the employer.

The most immediate question isn’t whether AI will eventually replace workers. It is whether AI is already making workers less dependent on the firm while policy remains anchored to it.

Ilya Somin applauds the ruling in Trump v. Barbara.

Karl Rove is rightly repulsed by the notion of “heritage Americans.” Two slices:

The historian Gordon Wood put it well. The Revolution that the Declaration announced “radically and thoroughly transformed” American society. It “destroyed aristocracy,” made “the interests and prosperity of ordinary people . . . the goal of society and government,” and released “powerful popular entrepreneurial and commercial energies.”

America wasn’t built by the rich and powerful but in large part by discards, rejects, losers and throwaways who made their way here. “Give me your tired, your poor, / Your huddled masses yearning to breathe free, / The wretched refuse of your teeming shore” Emma Lazarus wrote in her 1883 sonnet, later inscribed on the Statue of Liberty’s pedestal.

Inspired by the Declaration, people have come over the centuries hoping life could be better. Abide by its principles and the Constitution written to secure them, the promise went, and you and America can flourish.

We have. What began as pioneers huddled on a narrow coastal strip, an ocean away from the civilization they knew and facing an immense, unknown land is now a mighty nation that spans a continent.

America has become the most prosperous, compassionate, innovative, open society the world has known. Despite our challenges, doubts and divisions, America still demonstrates every day what a free people can achieve—for their families and the nation—if we strive to make the Declaration’s words real.

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One in seven American residents is an immigrant. For the other six, this Saturday should be a day for special gratitude. Through no action of our own, we were born here, and—alongside all who made their difficult way to America—enjoy the blessings of what happened in Philadelphia in the summer of 1776. Happy Fourth, to every American.

The great Bruce Yandle talks about the economy.

Writing at the Independent Review, my intrepid Mercatus Center colleague, Veronique de Rugy, ponders declining birth rates and America’s aging population.

Scott Atlas makes a powerful case for abolishing the National Institutes of Health. Three slices:

In 1980, economist Milton Friedman said the National Institutes of Health should be abolished. Friedman said the same about another government research agency, the National Science Foundation. And when he was asked what the NSF should be replaced with, he replied: “Nothing.”

Whistleblower documents highlighted in a recent report showed what happens when private billions meet a public agency that can be influenced: Bill Gates’s foundation spent two decades steering the NIH research agenda toward its own priorities — with agency officials as willing partners. The NIH has become a government entity captured by special-interest groups — just as Friedman feared 46 years ago.

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This financial exploitation is compounded by political agendas, regardless of party. President Ronald Reagan’s administration delayed AIDS research funding; Reagan did not address the epidemic publicly until 1987, after more than 36,000 Americans had been diagnosed and nearly 21,000 had died. President George W. Bush restricted embryonic stem cell research on religious grounds. President Barack Obama reversed that ban by executive order. His administration created the NIH’s ideologically driven Sexual and Gender Minority Research Office in 2015.

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The NIH has funded valuable science. But it’s also a governmental monopoly with a roughly $48 billion budget subject to political influence, fiscal abuse and suppression of scientific dissent — one that has diverted billions from actual science to academic operations, racial set-asides and ideological mandates. It is what government agencies always become: an instrument of whoever holds power, and one that escapes accountability. Friedman asked the fundamental question: On whom should the burden of proof rest — on those who force taxpayers to fund government research, or on those who challenge its necessity? Abolishing the NIH is not a case against science. It is a case for science itself.

The video here exposes some of the destructiveness and injustice of rent control.

Thomas Massie tweets this about Trump: (HT Scott Lincicome)

Imagine if Biden or Obama had bragged about shaking down a private company for 10% public ownership.

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… is from page xvii of the Definitive Edition (Ronald Hamowy, ed., 2011) of F.A. Hayek’s 1960 volume, The Constitution of Liberty:

The state of opinion which governs a decision on political issues is always the result of a slow evolution, extending over long periods and proceeding at many different levels. New ideas start among a few and gradually spread until they become the possession of a majority who know little of their origin.

DBx: Yes. Ideas have consequences.

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Here’s a letter to F&D Magazine.

Editor:

Gordon Hanson lists four options for dealing with unemployed (and underemployed) workers in locales hit especially hard by job losses (“Righting Globalization’s Wrongs,” June 2026). He dismisses three of these options: protective tariffs, means-tested targeted assistance, and free markets. His preferred option is a set of “policies that promote local economic development.”

He rightly rejects tariffs and targeted assistance. He also rightly recognizes that local economic development is key. But he mistakenly presumes that such development and free markets are alternatives to each other. In fact, not only is local development possible when markets are free, evidence shows that local markets that are relatively free of government intervention have already ‘solved’ the problem that commands Mr. Hanson’s attention. Indeed, the localized harms that Mr. Hanson and his “China Shock” co-authors attribute to free trade were likely caused instead by government intervention in those locales.

Middlebury College economist Gary Winslett reports that over the past 35 years manufacturing and employment have boomed in the market-friendly Sun Belt. He explains: “The Rust Belt’s manufacturing decline isn’t primarily about jobs going to Mexico. It’s about jobs going to Alabama, South Carolina, Georgia and Tennessee…. This migration didn’t happen by accident. It was driven by specific policy choices. States such as Tennessee, Alabama, South Carolina and Texas have aggressively courted manufacturers by promising business-friendly policy environments.”

All governments need to do is get out of the way.

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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The Wall Street Journal‘s Editorial Board reports on – surprise! – an instance (this one in Michigan) of industrial-policy failure. A slice:

Gov. [Gretchen] Whitmer has authorized nearly $7 billion in business subsidies during her two terms, says the report by James Hohman of the Mackinac Center for Public Policy. Mr. Hohman focuses on eight of the biggest projects, which put $2.7 billion of taxpayer money on the line. Some $1.8 billion has been paid out, and “none of these deals have delivered what was originally announced,” he writes.

Of 20,595 jobs promised from these deals, only 602 have been created—a mere 3%, estimates Mr. Hohman. The under-deliveries include $109 million in 2019 for Fiat Chrysler to upgrade plants and create 6,433 jobs in Warren and Detroit. Fiat Chrysler has added some jobs, says Mr. Hohman, but his evaluation of state reports suggests that’s no thanks to the state incentives, which were canceled.

Another dud: $125 million authorized in 2022 for Gotion to build an electric-vehicle battery plant employing 2,350 people that was never built. A $200 million deal in 2023 to upgrade a paper mill in Billerud was canceled. In 2024 the state touted a $250 million deal to bring semiconductor manufacturer Sandisk to Flint and create 7,400 jobs, but the company pulled out. “The result is a big empty field,” says the report.

Two projects are still alive, but they’ve already reduced their job promises. That includes a Ford EV plant in Marshall offered nearly $1 billion in subsidies since 2023. Ford said recently that 500 jobs had been created at the plant.

Jonathan Turley explains what shouldn’t – but, alas, what always does seem to – need explaining: “Madisonian democracy is designed to avoid the concentration of political power, not wealth.” A slice:

Was James Madison the Zohran Mamdani of his time? Gavin Newsom seems to think so. In joining the growing number of Democratic leaders supporting a wealth tax, the California governor claimed that the U.S. Constitution and our Founders were all about wealth distribution: “The system America’s founders built,” he said, “was designed to prevent the concentration of power in a few hands, but we have allowed that concentration to happen anyway, slowly, in plain sight, over decades.”

But Madisonian democracy is designed to avoid the concentration of political power, not the concentration of wealth. The Founders were great believers in capitalism and the free market. This isn’t the 250th anniversary only of the Declaration of Independence but also of the publication of Adam Smith’s “The Wealth of Nations,” which the Founders embraced. Many of the Founders were themselves quite wealthy, including banker Robert Morris Jr., who was known as the “Financier of the Revolution” and would be a billionaire today.

Our revolution was the first true Enlightenment revolution, heavily influenced by writers such as John Locke, who believed in a natural right to property. That right came not from the government but from God, and “excludes the common right of other Men.”

That Lockean principle was manifest in George Mason’s Virginia Declaration of Rights, which was a basis for the Declaration of Independence. It extolled “the enjoyment of life and liberty, with the means of acquiring and possessing property, and pursuing and obtaining happiness and safety.”

Madison drafted protections from government seizure of property, including the Takings Clause of the Fifth Amendment, which requires compensation for any property taken by the government. The Constitution was later amended to allow for income taxes rather than wealth taxes. Far from supporting a wealth tax, the constitutional system referenced by Mr. Newsom makes a federal wealth tax unconstitutional.

The Editorial Board of the Washington Post applauds Trump’s nomination of Keith Sonderling to be Secretary of Labor. A slice:

As acting secretary, he has overseen the release of rules that would protect franchise businesses and require greater transparency from the country’s largest unions.

GMU alum Thomas Savidge reviews Kurt Couchman’s Fiscal Democracy in America: How a Balanced Budget Amendment Can Restore Sound Governance.

“Trump’s fertilizer tariff retreat is another admission that tariffs raise prices” – so explains Reason‘s Eric Boehm. Two slices:

With fertilizer prices spiking due to the Iran War and contributing to rising food prices, the White House on Monday quietly dropped tariffs on fertilizer imports from Morocco.

Officially, that maneuver is meant to “ensure in the interim that United States farmers have access to a sufficient and timely supply of phosphate fertilizers during the planting and growing season, to ensure a stable domestic crop supply, and to meet our food production needs.”

In reality, this is yet another admission by the Trump administration that tariffs raise prices—otherwise, how could cutting tariffs bring prices down? It is exactly like when the White House rolled back tariffs on coffee, beef, and other imported food last year. Or when the White House rolled back tariffs on farm equipment earlier this month.

Over and over again, the Trump administration is making fools out of allies who insisted that tariffs would not raise prices.

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When you put it all together, Trump’s decision to walk back those tariffs is a damning admission of failure on multiple levels. It exposes how unprepared the administration was for the economic fallout of the war. It reveals, once more, how tariffs have raised prices and harmed crucial American supply chains. It illustrates how Trump’s tariffs have backfired on a specific industry—in this case, farmers — despite their political support for his election. And, thanks to [U.S. Trade Representative Jamieson] Greer’s role in all of this, it shows how lobbyists with protectionist agendas have infiltrated the Trump administration.

Here’s David Bier on Trump v. Barbara.

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… is from page 157 of the original edition of Frank Taussig’s 1915 volume, Some Aspects of the Tariff Question:

The reader who has followed the voluminous economic literature which German scholarship has piled up in recent years meets not infrequently the contention in favor of Schutz der nationalen Arbeit [Protection of National Labor]. Yet often he is left in doubt just how and why national labor is to be shielded by protection, – whether for preventing sudden shifts in the historically rooted industries of a slow-moving people, or for elevating the condition of labor in the whole country. Or, to take another example, it is often set forth, in the same quarters, that the burdens which the great social legislation of Germany imposes on her employers must be offset by duties on the products of competing foreign employers, – a proposition to which the stanch [sic] protectionist would unhesitatingly assent. But, if this be a good ground for compensating duties, why is not a general higher range of wages also a good ground, or any other condition unfavorable to the employer, – e.g., high income or property taxes, or poorer natural advantages? To answer these questions, some severe reasoning is called for: plain commonsense, unsupported by sustained argument from principle, does not suffice.

DBx: As the French purportedly say, plus ça change, plus c’est la même chose. (My very dear friend from France, Veronique de Rugy, tells me that the French don’t actually say this. Mais….) What was true in Bismarck’s Germany is true in Trump’s America: Protectionists fling against the wall all manner of arguments for protectionism, with much mutual inconsistency, hoping that enough credulous or ideologically benighted people will take no notice of the inconsistencies and the obvious absurdities of many of the arguments and assertions.

As I’ve written before, I have a bit of strange sympathy for protectionists, for they saddle themselves with the task of convincing people, in effect, that ten minus two equals fifteen. That’s a difficult task – or, rather, it would be a difficult task if the world were not populated with a large number of people who are eager to believe that, under the right circumstances, ten minus two does indeed equal fifteen.

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Pictured above is Frank Taussig (1859-1940).

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Americans of my generation, and of earlier ones, will remember – not fondly – the gasoline lines of Fall 1973 and the even worse lines of Summer 1979. The gasoline shortages of the disco decade were the predictable consequence of energy price controls that, although eased somewhat by Carter, weren’t completely removed until Reagan eliminated them in January 1981.

I think it likely that a significant reason why Carter lost the 1980 presidential election was that Americans angrily remembered those gawdawful lines of a year earlier and the accompanying anxiety about being able to fuel their automobiles.

Well now, the current Republican administration is displaying the same economic ignorance that Ronald Reagan successfully campaigned against.

There is no surer sign of economic ignorance – indeed, of corpulent and unalloyed economic stupidity – than having government threaten to prevent private suppliers from charging market-clearing prices.

And yet, the Trump administration is proudly putting this ignorance into practice.

When, oh when, will Trumpians finally realize that their hero is as economically illiterate – and as contemptuous of Americans’ economic liberties and property rights – as are any of the many Democratic Socialists who they are convinced their hero is protecting us from?

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Here’s a letter to Politico.

Editor:

Daniel Desrochers gives good reasons why the U.S. economy would be harmed if Trump withdraws the U.S. from the USMCA trade agreement (“Trump now ‘hates’ his own trade deal. But he’ll have a hard time killing it.” June 30). One of these reasons is the resulting uncertainty that American exporters and importers would suffer – uncertainty that raises these companies’ costs of doing business.

There is, however, another major source of rising costs – one more direct than rising uncertainty – that Mr. Desrochers doesn’t mention, namely, many American producers would pay higher prices for inputs if the demise of the USMCA prompts the U.S. government to raise tariffs on imports from Canada and Mexico.

According to Dartmouth trade economist Douglas Irwin, about 60 percent of U.S. imports are inputs into production. In 2025, the U.S imported $917.4 billion of goods from Canada and Mexico – meaning that, in all probability, about $550 billion of those imports are inputs used by producers in the U.S.

Mr. Trump poses as a friend of American business. But what kind of friend recklessly inflicts on businesses not only unnecessary uncertainty and a loss of foreign markets, but also higher production costs?

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