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Wall Street Journal columnist William McGurn applauds the work of Samuel Gregg, who does indeed stand athwart the populist economic tide. Three slices:

These days it isn’t only the Democratic left that has harsh words for the free market. The Republican right has soured on it too. From Donald Trump’s across-the-board tariffs to Marco Rubio’s industrial policy, up goes the cry: Reaganomics is dead!

This is why the Bradley Foundation’s decision to award Samuel Gregg its annual prize is so counterrevolutionary. An Australian by birth and American by choice, Mr. Gregg is an Oxford-educated scholar at the American Institute for Economic Research. In articles, books and debates he makes the case that the invisible hand not only delivers better results than the populist alternatives, it’s also superior morally. On Tuesday night in Washington, he will be honored at a gala emceed by the Journal’s Kim Strassel.

“Popular understanding of capitalism today is driven by mythological narratives,” Mr. Gregg says. “Capitalism’s defenders also have to address the narratives.” One thing these narratives often miss is something economists from Adam Smith to F.A. Hayek acknowledged: The free market depends on virtues it rewards but can’t create itself.

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Feeding the Republican cry that free-market policies are passé is the idea that American workers today are worse off than they were before. Certainly many Americans are struggling in the Biden economy. But the idea that the market is to blame for their problems or that working class Americans have been left behind isn’t supported by the evidence.

“Blue-collar people today are economically much better off than they were in, say, the 1950s or 1970s,” Mr. Gregg says. “Their inflation-adjusted average overall income and benefits are considerably higher, their houses are bigger, and they have access to labor-saving technologies their grandparents couldn’t even envisage.”

“The paradox of markets,” Mr. Gregg adds, “is that people pursuing their rational self-interest unintentionally produce many benefits for others, while dirigiste policies intended to help people often hurt them. Minimum wages, to take one example, seek to help the poor but price them out of labor markets, often robbing them of entry-points into the workforce.”

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“Markets produce the growth that gets us out of poverty,” Mr. Gregg says. “But they also encourage virtues that make us better people while simultaneously working with, rather than against, human nature. All these things make markets morally superior to all the alternatives.”

GMU Econ alum Paul Mueller decries the “Progressive groupthink” that motivated Nobel-laureate economist Esther Duflo’s to say that industrialized countries owe a debt, due to climate change, to the global south. A slice:

And I am not commenting on her published economic work, some of which is no doubt decent. Instead, I want to highlight how outrageously naïve global elites, in this case within the economics profession, have become. There are three major examples of Progressive groupthink in this relatively short interview.

Example 1 – People advance the public good by paying taxes

I think we need to rely on taxation because that is the way in which traditionally we ensure that everyone in the economy, private companies and individuals, contributes to the public good.

Setting aside the dubious claim that all or even most government spending advances the “public good,” what a narrow view of the world!

Does this mean that farmers or doctors or mechanics only contribute to the public good when they pay taxes? The question (should) answer itself! This reasoning suggests that her taxes contribute to the public good, not her research. But perhaps if her work is funded by tax dollars…

[DBx: The above-quoted statement by Duflo is breathtakingly naive. That an economist would utter it is depressing; that an economist with a Nobel Prize to her name utters it is shocking. I do indeed weep for my profession and discipline.]

The Wall Street Journal‘s Editorial Board is justly critical of Biden’s commencement address to Morehouse graduates. A slice:

The polls say President Biden has lost support among black Americans, and the White House appears to have settled on a strategy to win them back: spread more racial division. That’s the main message from the President’s dishonorable commencement address Sunday at storied Morehouse College in Atlanta.

Also critical of Biden’s speech at Morehouse is Noah Rothman. A slice:

The bleakness of life in modern America is unrelenting, as the president explained. “Today in Georgia,” Biden continued, “they won’t allow water to be available to you while you wait in line to vote in an election. What in the hell is that all about?” Once again, Biden and his spectators should take heart — their dour outlook on the state of the nation is fueled by misapprehensions.

Georgia election law does not prohibit voters from consuming whatever they like while waiting to vote, and it doesn’t prohibit service providers from doing business with prospective voters. What it does do is block electioneering from within 150 feet of a polling place or 25 feet from voters queueing up at a polling place. Biden must be aware of this elementary distinction by now; he’s retailed this false attack on Georgia’s election laws for years now. We must assume the truth would inconvenience the president in his effort to dispirit Morehouse’s graduating class.

The dirigiste nanny state in California continues to spread its tentacles.

GMU Econ alum Jon Murphy pulls back the false mask often worn by protectionists. A slice:

National defense is a common justification for protectionist tariffs, and it has been driven to absurd extremes: clothespins, sugar, and baby food have all been described as vital to national defense and subject to tariffs.

In a particularly goofy example, Senator Rick Scott of Florida has called for a ban on Chinese-grown garlic on the grounds it threatens national security.  Now, perhaps if we were a nation of vampires, this claim would make sense.  But it’s hard to see how garlic, even garlic that is potentially tainted, is a threat to national security.  Scott argues that the garlic poses a potential health threat, but that is not the same as a national security threat.

Here’s Alberto Mingardi on “the limitations of AI.”

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… is from page 402 of the 2016 second edition of Thomas Sowell’s important volume Wealth, Poverty and Politics:

Because the redistributionists’ argument is presented as a moral imperative for an affluent society to see that everyone has “basic necessities” – however defined – their proposal often escapes empirical tests of what such policies actually produce, compared to what is produced by policies based on the thesis that “challenging and response” spurs human achievement. The many examples of social degeneration in the wake of the all-encompassing welfare state, in both England and America, might have painfully sobering implications, if so many advocates of the welfare state were not still ignoring painful social consequences, while basking in the glow of a sense of moral superiority.

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Here’s a letter to the Wall Street Journal:

Editor:

After reading Andrew Duehren’s latest piece (“Tariffs Push Up Costs. But Not Always Inflation,” May 19), I plead with you, America’s preeminent financial newspaper, to stop reporting the U.S. “goods deficit.” First of all, this concept has no more economic meaning than would, say, a “things-colored-blue deficit.” There is simply nothing economically special about tangible outputs; a dollar’s worth of tangible outputs has exactly the same value as does a dollar’s worth of intangible outputs – no more and no less.

Second, in the U.S., as in all advanced economies, most GDP is produced by the service sector – specifically, more than three quarters of U.S. GDP is service-sector output. There is thus every reason to expect that we Americans will consistently import more goods than we export and export more services than we import. Reporting, as you do, America’s “goods deficit” creates the false impression that something is amiss on the trade front. And every such impression is seized upon by protectionists to peddle their economic voodoo to voters.

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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Bruce Yandle warns of a “bootleggers and Baptists” coalition to regulate AI. A slice:

In May 2023, OpenAI founder Sam Altman testified before the Senate Judiciary Committee about ChatGPT. Altman demonstrated how his company’s tool could massively reduce the cost of retrieving, processing, conveying, and perhaps even modifying the collective knowledge of mankind as stored in computer memories worldwide. A user with no special equipment or access can request a research report, story, poem, or visual presentation and receive in a matter of seconds a written response.

Because of ChatGPT’s seemingly vast powers, Altman called for government regulation to “mitigate the risks of increasingly powerful AI systems” and recommended that U.S. or global leaders form an agency that would license AI systems and have the authority to “take that license away and ensure compliance with safety standards.” Major AI players around the world quickly roared approval of Altman’s “I want to be regulated” clarion call.

Welcome to the brave new world of AI and cozy crony capitalism, where industry players, interest groups, and government agents meet continuously to monitor and manage investor-owned firms.

The Wall Street Journal‘s Editorial Board is no fan of the United ‘Auto’ Workers. A slice:

Still, it’s apparent that many workers aren’t interested in what the union is selling, which is less about job security than progressive priorities that extend well past the workplace. Mr. Fain presents himself as the vanguard of left-wing politics, as when he denounced Israel’s effort to destroy Hamas in Gaza. The UAW “has been calling for a ceasefire for six months,” he said recently. Why should line workers in Tuscaloosa pay dues for that?

Unions keep losing labor-market share, and official figures show the downward slide hasn’t stopped. Last year 10% of workers were union members, down from 10.1% in 2022. In the private economy, the rate was unchanged at 6%. But among public workers it fell to 32.5%, from 33.1%. Such annual changes might look small, but that’s how erosion works, a little at a time. In 2000 the private workforce was 9% unionized, and for public employees it was 36.9%.

Megan McArdle: “Women are having fewer babies. That’s bad news for retirees.” A slice:

That base reality is often obscured by the terms of the debate — by the arguments over the solvency of the trust funds, the size of cost-of-living adjustments, the merits of Social Security vs. traditional employer pensions vs. (comparatively) newfangled 401(k)s. But if you drill down to fundamentals, all retirement plans represent the same thing: a legal claim on the output of some future worker. Fewer workers per retiree means less output to claim — and more bitter political fights between workers and retirees.

Pierre Lemieux pushes back against the today’s ghosts of J.K. Galbraith and Vance Packard.

Walter Olson shares the good news of the 4th Circuit ruling that federal-tax exemption does not constitute federal financial assistance.

Randy Holcombe reports that the Fed won’t meet its inflation target this year.

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… is from page 44 of Northwestern University economist Joseph Ferrie’s excellent 2011 paper “A Historical Perspective on High-Skilled Immigrants to the United States, 1820-1920,” which is Chapter 1 of High-Skilled Immigration in a Global Labor Market (Barry R. Chiswick, Ed., 2011):

If immigration policy had been formulated by a benevolent social planner in the middle of the nineteenth century when U.S. cities were inundated with large numbers of unskilled Irish immigrants, it might have seemed reasonable to favor the immigration instead of higher-skilled workers – after all, such craft and clerical workers were the backbone of U.S. manufacturing to that point. But such a policy could have delayed by decades the adoption of new techniques made economical by the arrival of unskilled Irish immigrants.

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Bruce Yandle remembers the late Hugh Macaulay on the centenary of Hugh’s birth. A slice:

Those of us who were his colleagues and friends celebrate his life as an economist and moral force in the lives of us all, as well as the lives of his students. Hugh remains one of the most “unforgettable characters we’ve ever met,” to paraphrase one of Reader’s Digest’s most popular series. He is also remembered as one of the profession’s staunchest defenders of markets, always ready to find fault with proposals to constrain the market process.

Tom Hazlett – the Hugh H. Macaulay Endowed Professor of Economics at Clemson University – is no fan of the TikTok ban. Two slices:

Writing in The Free Press, Rep. Michael Gallagher (R–Wisc.)—co-sponsor of the TikTok bill—claims that because the Chinese Communist Party allegedly “uses TikTok to push its propaganda and censor views,” the United States must move to block. This endorsement of the Chinese “governing system” evinces no awareness of the beauty of our own. We can combat propaganda with our free press (including The Free Press). Of greatest help is that the congressman singles out the odious views that the Chinese potentates push: on Tiananmen, Muslims, LGBTQ issues, Tibet, and elsewise.

Our federal jurists will do well to focus on Gallagher’s opening salvo versus TikTok: “A growing number of Americans rely on it for their news. Today, TikTok is the top search engine for more than half of Gen Z.” This underscores the fact that his new rules are not intended to be “content neutral.”

Rather than shouting about potential threats, TikTok’s foes should report any actual mendacities or violations of trust. Where criminal—as with illicitly appropriating users’ data—such misbehavior should be prosecuted by the authorities. Yet here the National Security mavens have often gone AWOL.

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The TikTok ban is Fool’s Gold. The First Amendment is pure genius. Let’s keep one of them.

Scott Lincicome is a fan of sports, but not of subsidized stadiums. Two slices:

[T]he harsh reality for even the biggest sports fan is that arena subsidies are a terrible use of finite government resources and a ridiculously egregious redistribution of wealth from regular Americans—fans and haters alike—to some of the wealthiest people and organizations on the planet.  And, to top it all off, they’re a classic case of political malpractice—local officials delivering massive rents to various cronies by promising unwitting voters the world yet delivering far fewer—but still “seen”—economic and social benefits to their communities.

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Maybe all this government support might be worth the costs if the subsidized facilities at issue produced even a fraction of the benefits that supporters promise, but they don’t. Instead, there are few positions on which more economists agree than the terribleness of sports arena subsidies. A 2022 paper by [J.C.] Bradbury and his same colleagues documented the consensus by summarizing more than 130 studies on the issue over the last 30 years, looking at not just the facilities’ direct pecuniary benefits but also indirect and intangible ones like “civic pride.”

David Henderson, with help from Ryan Bourne, explains that so-called “junk fees” typically serve important purposes.

Edward Glaeser, Radu Barza, César A. Hidalgo, and Martina Viarengo find that “cities are engines of opportunities.”

George Will again eviscerates the case for government control of political speech, including such speech that is funded with more money than ‘progressives’ and some conservatives deem appropriate. Two slices:

Because the Supreme Court has largely agreed that campaign finance restrictions can violate free-speech guarantees, in 2014, not a single Democratic senator opposed amending the First Amendment to empower Congress to regulate the quantity, content and timing of campaign speech. That is, speech about the composition of Congress and the rest of the government. Campaign “reforms” were harbingers of progressives’ subsequent embrace of restrictions on many forms of speech, especially but not only on campuses.

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As an unsuccessful candidate for her party’s nomination in 2008, and accepting her party’s nomination in 2016, Hillary Clinton wanted to “get money out of politics.” But also in 2016 she overcame her aversion to money and outspent Trump 3 to 1. The progressive aspiration is to remove private money from politics.

This would extend government’s domination of society to politics — to the debate about the composition of government. The maximum progressive aim is to remove voluntary political contributions from politics and restrict candidates to spending money that government extracts from voters by taxation. The overwhelming majority of voters — this we know — will not voluntarily pay for politics.

Every year, Americans can check a box on their tax returns, thereby giving $3 (without increasing their tax liabilities) to fund the presidential campaigns of nominees who agree not to accept other money. In 2023, only 3.35 percent of tax filers checked the box.

GMU Econ alum Dominic Pino reports on the mythical great UAW unionization wave.

Johan Norberg has good news.

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… is from page 19 of W. Duncan Reekie’s 1988 Managerial and Decision Economics paper titled “Consumers’ Sovereignty Revisited“; by “custom thought” – a term coined by W.H. Hutt – Reekie refers to that part of the human psyche that fears change:

The essence of a competitive economy is entrepreneurial alertness to and search for new and better ways of doing things – in short, change. Cartelization, however damaging to the community at large, removes or appears to remove the discordant change from cartel participants. Custom thought can thus be readily harnessed to oppose any threatened convulsion.

DBx: Protectionism is the effort to protect particular individuals, in their roles as producers, from having to adjust to changes in the preferences of their fellow citizens. Protectionism, thus, is a means of compelling the masses to pay for the comfort of the few.

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Ms. Lael Brainard
Director, National Economic Council

Ms. Brainard:

In a May 16^th speech you said that “China is using the same playbook it has before to power its own growth by investing in significant industrial overcapacity and flooding global markets with artificially cheap exports.”

With all due respect, you speak economic gobbledygook.

If Apple, Toyota, or Aunt Milly’s Pastry Shoppe ‘invests’ in overcapacity – that is, builds beyond what it can pay for with revenues earned on the additional sales – we recognize that these companies suffer losses while their customers enjoy windfall bargains. Such overbuilding weakens, not strengthens, these companies. So can you explain how overbuilding is a means for an entire economy “to power its own growth”? If one company’s operation with excess capacity causes that company’s profits and profitability to fall – as, of course, it must – by what voodoo does a government that compels many companies simultaneously to operate with excess capacity cause that economy’s profits and profitability to rise?

Because governments excel at pursuing foolhardy economic policies, there’s little doubt that Pres. Xi and his henchmen are arranging for firms throughout China to operate with excess capacity. But the victims of this forced overcapacity are, overwhelmingly, the Chinese people. We Americans are harmed by Beijing’s imprudence only insofar as this overbuilding will result in Chinese producers being rendered in the future less able to profitably export to America.

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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Scott Winship carefully investigated trends in worker pay over the past 50 years. (HT GMU Econ alum Dominic Pino) Here’s the Executive Summary:

The Editorial Board of the Wall Street Journal decries a new and bipartisan spasm of cronyism – cronyism, of course, allegedly justified by the need for Washington to do as Beijing does. Two slices:

Remember when Republicans cared about budget deficits? Alas, spending discipline like free trade has fallen out of fashion on the political right. Some Republicans are now linking their robotic arms with Senate Majority Leader Chuck Schumer to spend hundreds of billions of dollars on artificial intelligence.

If China is “going to invest $50 billion, and we’re going to invest in nothing, they’ll inevitably get ahead of us,” Mr. Schumer said Wednesday in unveiling a “roadmap” for AI policy with Republicans Mike Rounds and Todd Young and Democrat Martin Heinrich. Invest in nothing? Didn’t Washington pass massive climate, infrastructure and semi-conductor spending bills?

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Goldman Sachs estimates that U.S. private investment in AI will total $82 billion next year—more than twice as much as in China. Big tech was late to catch the AI wave. But businesses of all sizes are now using AI to develop medical treatments, improve productivity and logistics, assist customers and more.

Government has been a laggard in adopting AI, but it usually is with new technology. It’s true Beijing is spending heavily to boost its AI capabilities, especially for military uses. However, one reason the U.S. leads China in innovation is that about three-quarters of R&D is directed by private industry. Beyond pure research that private actors won’t do, government is a poor allocator of capital.

Much of Washington’s AI spending would be redundant. Many universities that Republicans want to de-fund because of their response to antisemitism would ironically benefit from the largesse. So would progressive think tanks that want to hamstring business innovation and say AI discriminates against minorities.

Bruce Yandle wisely warns that “when Biden and Trump agree, consumers should worry.” Two slices:

Joe Biden and Donald Trump agree on at least one thing. I know what you’re probably thinking: a little more consensus might be good for the country. But when we’re talking about both major presidential candidates calling to limit the flow of goods to U.S. consumers, shouldn’t we be worried? Each has been touting trade policies that could lead to even higher prices, another challenge to an already stressed Federal Reserve, and slower growth for the country.

Couched broadly in terms of countering China’s aggressive efforts to stimulate its industrial economy, Biden and Trump want wide-ranging higher tariffs on that nation’s electric vehicles and other products. Relatedly, both express concerns about maintaining American manufacturing muscle for national security purposes and gaining a more favorable outcome from the ongoing leadership struggle among the world’s great powers.

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Here’s where economics and politics diverge. Nationalism may attract a meaningful political following, but higher tariffs mean higher prices for the directly affected goods and even more widespread price effects later. A substantial, conclusive body of research tells us as much. Along with the higher prices on imported goods, we should be aware that tariffs are shown to lead to slower economic growth. This is the last thing we should want for an economy that’s been skirting a recession.

So, what about ordinary consumers? Don’t they matter?

Somehow the voices of inflation-weary American consumers no longer seem to be heard when Chinese goods enter the picture. Moreover, lots of people who lack economics degrees understandably don’t realize what protectionism does to their pocketbooks. Neither major political party apparently cares about telling them, or protecting the ability of these individuals to, unencumbered by a Big Brother government, make real marketplace choices about which cars to buy, which shoes to wear or which services to obtain.

Instead, our politicians speak as though the decisions we make while shopping for ourselves and our families are mostly about favoring one country or another. Even after years of supply-chain interruptions, high inflation and resulting high interest rates stretching millions of budgets, they strangely refuse to recognize that international competition helps the American voter and consumer, or that there is something American about being free to choose.

David Legates and Calvin Beisner criticize Consumer Reports for its unscientific propagandizing about climate change.

Juliette Sellgren talks with Ryan Yonk about China.

Bryan Caplan talks with me about Bastiat and housing.

Bob Graboyes reports that “the United Nations casually concedes the falsity of its incendiary Gaza casualty data.”

Pay attention to Arnold Kling.