TGIF: The Income Stagnation Myth

Many people, including some free-market advocates, think Americans are materially worse off today than they were in the 1970s. Some subscribers to that view blame globalization, that is, free trade in goods, which means in labor services.

By any reasonable measure, those people are wrong. Stagnation is a myth. Living standards have never been higher. That goes for an increasing portion of the rest of the world too. After thousands of years, extreme poverty has plummeted to under 10 percent in just a few decades.

This is all well documented. Trade specialist Daniel Griswold writes,

This “nostalgianomics” is misplaced. The American economy is certainly more globalized today than it was decades ago, and just as certainly, most Americans are better off today by any real measure of economic well-being than their counterparts were a half century ago. Increased globalization is one of the main reasons why Americans today have higher living standards than they did in the over-idealized past.

Griswold, whose work at the Cato Institute and George Mason University's Mercatus Center has focused on this demonstrable human progress, lays out the case in his 2023 paper "The Misplaced Nostalgia for a Less Globalized Past." (Chelsea Follett interviewed him recently at HumanProgress.org, a Cato project.)

America and the world differ dramatically from the world of a half-century ago. That in itself is not saying much. Since the Industrial Revolution, which was more gradual than we think, change has been the rule. It takes a state to stifle change, and its efforts usually fail, although it can wreak havoc in the attempt. To favor liberty is to favor change, and even though change disrupts patterns and requires adjustments, most people benefit, especially the next generations. Griswold writes:

Along with technological and scientific advancements, the U.S. economy has become far more deeply integrated with the rest of the world. This integration has been driven both by new technologies that have facilitated the movement of goods, services, and people around the world—such as containerization and the internet—and by major trading nations’ concerted efforts to reduce tariffs and other legal restrictions on those same movements.

Unfortunately, trade restrictions are often popular because many people blame the global division of labor for so many ills. Innovation and changing consumer tastes, however, have been more powerful reasons for change. If people are serious about controlling change, they'd have to call on the government to do much more than impose tariffs. Who wants politicians and bureaucrats to regulate science, technology, and consumer choice? Anyone?

Contrary to popular belief, globalization did not "hollow out" the U.S. economy. U.S. manufacturing output has continued to grow. It's not true that "America makes nothing anymore." But as Griswold writes, technology enables producers to create more and better goods with fewer people. Robots now perform the drudgery that human beings used to endure. That trend began in the 1950s, not the 1970s. New jobs have replaced the old jobs because consumer wants are unlimited and businesses profit by satisfying them. That governments have often led the way in opening global markets is not an argument against globalization. It's an argument against government intervention. Politics should steer clear of economics.

What about the alleged wage stagnation? Griswold writes:

Nostalgianomics’ depiction of American “wage stagnation” since the 1970s is fundamentally flawed in several key ways. First, the most typical indicator of such stagnation—U.S. production and nonsupervisory workers’ average inflation-adjusted hourly earnings—relies on an overstated measure of U.S. inflation that makes Americans’ real-wage gains seem smaller over time.

Second, examining only wages excludes nonwage benefits—bonus pay, health insurance, paid leave, contributions to retirement savings, etc.—that have made up an increasing share of total compensation in recent decades.

But hasn't the middle class been shrinking? Actually, it has—but not to worry:

[T]he share of U.S. households earning a middle-class annual income of $35,000 to $100,000 (in 2021 dollars) did indeed shrink since 1979, from 49.1 percent to 39 percent, but so did the share of households earning below $35,000 (from 30.3 percent to 25.2 percent). By contrast, the share of households annually earning more than $100,000 increased from 20.6 percent to 35.8 percent. Thus, the American middle class has shrunk in recent decades—but only due to households getting richer. 

Griswold gives us another way to look at this story.

Even these adjusted income data understate the gains enjoyed by American workers in our more globalized era. In Superabundance: The Story of Population Growth, Innovation, and Human Flourishing on an Infinitely Bountiful Planet, Cato scholars Marian Tupy and Gale Pooley compare time prices (i.e., how many hours people must work on average to acquire various goods and services) across decades and find that American workers have experienced dramatic gains since the 1970s. In particular, they calculate that the number of hours an average U.S. blue-collar worker would have to work to afford a basket of 35 consumer goods fell by 72.3 percent between 1979 and 2019. [Emphasis added.]

That's a huge increase in real wages.

It doesn't sound like stagnation, does it? And we haven't even talked about the quality improvements of products. Americans who aren't typically thought of as wealthy are richer than the middle and upper classes were in the 1970s. "American workers are better off than in decades past," Griswold writes, "not only because familiar goods have become more affordable but also because new types of products have come on the market and spread rapidly." In the 1970s the chairman of General Motors did not have a powerful computer-cum-phone in his pocket. Griswold:

Those who are nostalgic about life in the 1970s would likely have lived without microwaves, personal computers, and the internet. Those looking back to the 1950s forget or ignore the fact that most homes not only lacked air conditioning and color TV but also lacked dishwashers and clothes washers and dryers.

More could be said, but that ought to be enough to dispel the myth of stagnation. (For more, see Griswold's data-rich paper.) The myth may be oddly appealing to certain free-market advocates because it seems to allow them to say to America's rulers, "Statism harms the middle class and poor while benefitting the rich!" But whether or not stagnation has occurred is an empirical, not an ideological matter. If market advocates ignore the facts, they sacrifice their credibility.

The fact is that despite government interference and favoritism (such as central banking, regulation, taxes, subsidies, tariffs, etc.), profit-driven, consumer-serving market forces will increase, within limits, general well-being. Sure, we would have been richer without the intervention, but markets, like Timex watches, can "take a licking and keep on ticking." Acknowledging that we'd have been even better off is not equivalent to saying that incomes have stagnated for the last half-century. That's nonsense. So is the claim that wages have not kept pace with productivity growth or that labor's "share of national output" has shrunk. (See Gene Epstein's lecture at the Mises Institute on these points.)

It's self-defeating to deny what's right before our eyes.

Shame on You, Socialists

American socialists not only pit workers against entrepreneurs; they also pit rich American workers against the poor workers of the rest of the world. Shame on you, socialists!

TGIF: Tariffying Trade-Warmonger Trump

"The word tariff, properly used, is a beautiful word. One of the most beautiful words I’ve ever heard. It’s music to my ears." —Donald Trump

The once and possibly future president threatens to wage economic warfare against countries and companies everywhere if they don't knuckle under to his nationalist demands. He promises to impose tariffs on American firms that calculate that moving operations to Mexico or other foreign locations makes good business sense. He's also ready to strike at allied countries that irritate him by, say, slighting the dollar. (Watch or read his economic-policy speech.)

To his credit he promises to lower taxes on investment and to cut the regulatory burden. He also wants lower energy prices, which would be good all around, but exactly how matters. He's no laissez-faire advocate.

At any rate, Trump's determination to restore the American economy to what it was when much of the world lay in ruins after World War II suggests that, despite all the changes since then, he would much do more than de-tax and deregulate. For example, he promises to lure foreign companies here. Again, how? His government would no doubt play an active role in what should be private matters. He's already promising to make the taxpayers pay for business infrastructure projects. As he said about the audio industry, "It’ll be like it was 50 years ago." He won't be able to turn the clock back, but he can do much damage trying.

This is economic nationalism. He sees the world as an arena in which countries—as if they were companies—compete against one another: for one country to win, the others must lose. Powered by this worldview, Trump wants to be the CEO of the company known as the United States.

His vision is dangerously wrong. The world is not an arena in which countries compete with one another, where one nation's gain is the others' losses. That American manufacturers routinely buy foreign-made materials, tools, machines, and semi-finished products demonstrates this. We have a global division of labor in which capital, resources, and all kinds of goods have been able to move across national boundaries fairly freely as market forces require. As a result, world poverty has diminished unbelievably, and Americans are richer than ever. (The rough spots can be attributed to unabated domestic government intervention.) This progress has been in the making for about 80 years, but the liberalization responsible for it has been reversed recently—to the world's detriment.

Trump understands none of this, and he has no incentive to do so. Since entering politics, his demagogic promise has been to wreak vengeance on the world for, as he sees it, taking advantage of the United States. This is his aggrieved-nation shtick. The U.S. government has been the biggest bully since 1945, but Trump would have gotten nowhere politically had he promised to stop throwing America's weight around. Instead, he portrays the United States as a pitiful giant that has been everyone's chump. It's nonsense.

What's foreign to Trump's mentality is any notion of an unplanned, spontaneous market order built on individual freedom and choice, which is at the heart of sound economics. He must see himself as a hands-on CEO who can solve any problem. That's the last thing we need. He should read Leonard Read's "I, Pencil." (The video version is here.)

In a word, Trump is an economic warmonger, a not-too-distant cousin of a regular warmonger. As the old free traders said, "When goods can't cross borders, soldiers will."

It would be one thing if Trump were promising to shrink the government so much that businesses everywhere wanted to flock to these hospitable shores. But his "New American Industrialism" is an old-fashioned industrial policy in which he or his team of experts would pick winners to carry out his glorious vision. Which firms and industries get protected or subsidized and which don't? Those decisions would be made on a political, not an economic, basis. The problem is that Trump and his experts could not know what they would need to know to carry out their plan. Only the free market—through the unhampered price system—can produce that knowledge, which would be widely dispersed, often tacit, and therefore unavailable to a central bureaucracy. Even the great Donald Trump cannot defy the laws of economics.

What would Trump do if other countries tried to make their economies more hospitable to the world's businesses, say, through rigorous liberalization? Would he up the statist ante? The economic nationalist is not likely to back down.

No one should be surprised that Ludwig von Mises—the unparalleled champion of peace through full liberalism—had much to say about economic nationalism. In Human Action, he wrote: "Economic nationalism is incompatible with durable peace.... It is an illusion to believe that a nation would lastingly tolerate other nations’ policies which harm the vital interest of its own citizens."

Trump might endorse Mises's last sentence, but he'd be missing the point. Other countries would respond to Trump's program. If he responds in turn, he will hurt Americans for sure (and perhaps foreigners). Consumers will largely pay the tariffs and, along with import-using American manufacturers, face higher prices. That's the point!

Freedom in the economic sphere, as in all other spheres of life, is in the deepest interest of all citizens. Protectionism and other interference are not. One industry or firm may calculate that if it can win protection from the state, it will prosper even if others suffer. But protection granted to one interest will encourage others to ask for it too. Now the original gain begins to dissolve. As Mises put it in Socialism: An Economic and Sociological Analysis,

A system which protects the immediate interests of particular groups limits productivity in general and, in the end, injures everybody—even those whom it began by favouring.... The greater the protection afforded to particular interests, the greater the damage to the community as a whole, and to that extent the smaller the probability that single individuals gain thereby more than they lose....

[I]f all particular interests were equally protected, nobody would reap any advantage: the only result would be that all would feel the disadvantage of the curtailment of productivity equally. Only the hope of obtaining for himself a degree of protection, which will benefit him as compared with the less protected, makes protection attractive to the individual. It is always demanded by those who have the power to acquire and preserve especial privileges for themselves. [Emphasis added.]

Why would they all lose? Because, as we've known at least since David Ricardo formulated the law of comparative advantage (or what Mises called the law of association), the division of labor and free exchange bring specialization that yields immense gains to all—even when an individual, group, or nation is less efficient than others at producing a whole range of goods.

Trump displays the words Made in the USA onstage. The wiser course is to specialize and to trade with others rather than trying to produce everything. Market price signals, not Trump, should be our guide. If the frontiers were closed to foreign goods, Mises wrote in Socialism, "Capital and labour would have to be applied under relatively unfavourable conditions yielding a lower product than otherwise would have been obtained."

Thus Trump's blustering warfare would shrink incomes and risk conflict by disrupting the signals that channel productive energies to where consumers most want them.

TGIF: Damn Consumers!

Global free trade is about individual, not national, freedom—for consumers and producers who import raw materials, tools, and semi-finished products.

Aside from its role as an aspect of personal liberty, free trade's efficiency benefits have been well-established since the early 19th century. In this respect, domestic and global trade are the same. Trade restrictions disrupt the productive process, making it less efficient and hence less beneficial to consumers. "All that a tariff can achieve," Ludwig von Mises wrote in Human Action, "is to divert production from those locations in which the output per unit of input is higher to locations in which it is lower. It does not increase production; it curtails it." But people's interests are in expanded, not curtailed, production.

Unfortunately, free trade does not enjoy wide support today. Both major parties oppose it. They don't even pay lip service to it. They think buyers, especially consumers, buy the wrong things from the wrong people. Consumers are an unruly and capricious bunch. They prefer less-expensive, high-quality foreign-made products over more-expensive, lower-quality American-made products. What's overlooked is that they also upset American businesses and workers for reasons other than foreign competition, such as innovation and changing tastes. Also overlooked is that if we can get a better deal from abroad, American labor and resources are freed up for other things.

Government policy favors producers (including workers) over consumers and intermediate buyers. This is idiotic since, as Adam Smith pointed out: "Consumption is the sole end and purpose of all production." This doesn't mean that the government should favor consumers. It means laissez faire.

No one has argued for the wisdom of unfettered international exchange than Henry George. In his 1886 book, Protection or Free Trade, George wrote: "Free trade consists simply in letting people buy and sell as they want to buy and sell. It is protection that requires force, for it consists in preventing people from doing what they want to do."

This runs contrary to the view of the two major parties, which believe that individual liberty should be tolerated only if it conforms to the "national interest" as they define it.

George added:

If Americans did not want to buy foreign goods, foreign goods could not be sold here even if there were no tariff. The efficient cause of the trade which our tariff aims to prevent is the desire of Americans to buy foreign goods, not the desire of foreign producers to sell them…. It is not from foreigners that protection preserves and defends us; it is from ourselves. [Emphasis added.]

Then comes the killer line: "What protection teaches us, is to do to ourselves in time of peace what enemies seek to do to us in time of war." 

How does the protectionist respond to that? Any response would repudiate Adam Smith's wisdom. The major point of The Wealth of Nations is that well-being consists not of piles of gold in government vaults but rather of access to goods. Biden, Trump, and the anti-economists they rely on want you to forget that.

A tariff is a tax. But unlike other taxes, the aim is not to raise revenue. The purpose of a protective tariff is to raise prices and limit choice in the domestic market. That's supposed to punish the foreigner and help domestic competitors, but it's an odd way to do it because many other Americans are harmed. Even the intended beneficiaries are harmed. Many imports are not consumer products. They are inputs that American manufacturers need to make consumer products. The tariff raises producers' costs, drives marginal firms out of business, disemploys workers, and degrades the surviving firms' competitiveness internationally. Even the workers in protected industries then face higher consumer prices, offsetting the benefits they expected from the tariff.

As the British free traders used to say: incomes buy more under free trade. That means incomes buy less under protectionism.

Protectionism squanders scarce resources, restricts individual freedom, and hampers the pursuit of happiness. "This is the crux of the matter," Mises wrote. "All the subtlety and hair-splitting wasted in the effort to invalidate this fundamental thesis are vain."

Tariffs Violate Freedom

Debate goes on over who suffers from U.S. tariffs. Biden and Trump, for example, think U.S. tariffs on Chinese goods hurt China, not Americans. This is nonsense. Even if they hurt Chinese producers (who can sell their goods elsewhere), the tariffs still hurt Americans. Whatever the Chinese do, prices in America for the relevant consumer and producer goods, imported and domestic, will rise—that's the point of the tariff—and choice will shrink. Here's what Henry George had to say in Protection or Free Trade:

If Americans did not want to buy foreign goods, foreign goods could not be sold here even if there were no tariff. The efficient cause of the trade which our tariff aims to prevent is the desire of Americans to buy foreign goods, not the desire of foreign producers to sell them.... It is not from foreigners that protection preserves and defends us; it is from ourselves.

He also wrote:

Free trade consists simply in letting people buy and sell as they want to buy and sell. It is protection that requires force, for it consists in preventing people from doing what they want to do. Protective tariffs are as much applications of force as are blockading squadrons, and their object is the same—to prevent trade. The difference between the two is that blockading squadrons are a means whereby nations seek to prevent their enemies from trading; protective tariffs are a means whereby nations attempt to prevent their own people from trading. What protection teaches us, is to do to ourselves in time of peace what enemies seek to do to us in time of war. [Emphasis added.]

 

This Is the State

 

Trump: Another Special-Interest-Pandering Politician

Trump promises to slam a 100-percent tariff on [Update:] imported cars made in Chinese-owned factories in Mexico. He announced this not to a group of prospective car buyers but to a group of car makers. So what else is new? Car buyers, who outnumber the well-organized car makers but are not themselves organized, would have to pay more for cars they do not want if Trump got his way. That's the point.

This is America first? No, it is not. It is "An Interest Group Whose Votes I Want" First versus everyone else. That's always the case with protectionism. Stopping consumers from buying whatever they want helps some (in the short term) at the expense of the rest. Calling the favored group "America" is self-serving special pleading. Trump's good at that. He thinks he knows better than you.

Trump is just another special-interest-pandering politician. Many people are fine with that because they misunderstand markets and dislike foreigners. But as Adam Smith taught us long ago, the wealth of a nation is determined by the people's free access to the world's products and not by how much they are cut off from those products. We produce to consume. We don't consume to produce.

David Friedman cleverly points out that cars can be produced in two ways: the old-fashioned factory way and by, say, growing grain, loading it on ships headed to, say, Japan, and welcoming the returning car-laden ships. Both production methods are legitimate, and which one prevails should be left to free people making choices in a spontaneously ordered marketplace. Trump obviously never learned about the law of comparative advantage.

TGIF: Tariffs Tax Consumers

We seem to forget that a tariff is a tax. It is formally levied on importers, not on foreigners or things, but since it can usually be passed along, it ends up as an indirect tax on consumers.

The point of tariffs is to protect certain domestic businesses and their employees from formidable foreign competitors by raising import prices and reducing consumer choices. Higher prices! Less choice! Raising import prices gives domestic businesses room to raise their prices -- that's the point. Why have a tariff otherwise? (Tariffs intended to raise revenue rather than protect domestic companies have been imposed in the past, but in those cases, the government wanted people to buy the imports or else no revenue would have been raised.)

To put it mildly, taxes are bad. They are the government's way of taking money from people by force -- stealing -- and preventing them from spending it on their own purposes, activities that would have benefited others through production and trade. In a free society individuals are supposed to be at liberty to set and pursue their own goals. A society in which the government preempts individuals' goals is not fully free.

Even if under some market circumstances importers and foreign exporters have to pay some of a tariff, it's still an indirect tax on other Americans. Diverting money from importers and exporters to the government leaves them fewer dollars to spend or invest here. That's an unseen loss. Was Trump, who promises new anti-China and universal tariffs, daydreaming when he attended the Wharton School all those years ago? What's Biden's excuse? He's left most of Trump's 2017-2020 tariffs in place.

Advocates of tariffs think the taxes will protect American businesses and jobs. But as Milton Friedman liked to remind us, there's no such thing as a free lunch. Even if some jobs are preserved or even restored, it comes at a high price. And, as the radical liberal economist Frédéric Bastiat would say, the price is imposed on a large unseen group of people. That includes people who can least afford it. That's not fair.

Because those forced to foot the bill are not readily identifiable, the overall cost of the tariffs is also unseen and hence unappreciated. Most of us have no sense of the damage the protectionists have done. One study estimated that a single round of Trump anti-China tariffs cost the "typical household" $831 a year. Even when some jobs are saved, the price per job is stupendously expensive. As Donald Boudreaux and Phil Gramm wrote in the Wall Street Journal (paywall), Trump's tariffs to "close the 'washing-machine gap' ... cost $815,000 per job saved, and ... his steel tariffs ... cost ... more than $900,00 per job saved." Think of the opportunities forgone! Think of the opportunities forgone! And remember, for semi-finished goods, some American companies' output is other American companies' input -- meaning higher production costs than foreign companies face. (See "Who Really Pays the Tariffs? U.S. Firms and Consumers, Through Higher Prices.")

Some people will argue that America's astounding economic success in the 19th century is attributable to protective tariffs. The land of the theoretically free certainly had outrageous tariffs from the start. But beware of the post hoc ergo propter hoc fallacy (after this, therefore because of this). America had something else besides tariffs: largely free enterprise and low taxes inside a large free-trade zone. That's a much better explanation; it has a solid theory behind it. (See Donald Boudreaux's "Tariffs and Freedom.") Slavery was the worst departure from classical liberal, or libertarian, principles, but there were other, though less monstrous departures. The tariff was one of them.

Slavery and the tariff had something in common. Both prevented people from freely doing what would do the most good for themselves and others. Through private property, free exchange, and the price system, unmolested markets tend to channel workers' efforts and scarce resources to the activities that best accord with consumers' and hence entrepreneurs' most intense demands. Enslaved people, forcibly and cruelly barred from free labor markets, were forbidden to choose what they would have anticipated as their most rewarding work. That was one way in which slaves suffered, but the prohibition also made almost everyone else poorer than they would have been. How so? As Adam Smith showed in 1776, specialization through the division of labor makes us richer. The bigger the market, the better.

We got rid of slavery, thank goodness. When will we finally get rid of that other mark of tyranny: the tariff and other forms of protectionism? And when will we finally stop taking protectionist demagogues seriously?

TGIF: Cooperation versus Bigotry

We who value individualism, freedom, and social cooperation as essential to flourishing should be distressed by the hostile bigotry that has lately reared its ugly head, to some uncertain extent, on the streets and campuses of America and abroad. This is not new. In America we've seen it intermittently in both directions on racial issues just in this century. It seems related to an intolerant, zero-nuance, take-no-prisoners, and glib attitude among many contenders over racial, religious, and ethnic controversies.

Now it is showing itself in ugly group chants and more personal communication calling for violence against Jews and Arabs, and perhaps even direct harassment and assault.  A couple of people have died. Anti-Semitism and anti-Arabism should be off-limits. Regardless of the target, the unrestrained hostility is frightening on many counts, not least of which is its ominous implications for spontaneous social /market cooperation..

I couldn't possibly know whether these clashes are common or just fringe opportunism -- let's hope the latter. In the heat of a controversy it is possible to misread innocent events and words. The principle of charitable interpretation ought to apply unless solid evidence to the contrary revokes it. We should also be aware that government officials and the news media, for obvious reasons, might be inclined to exaggerate. 

The point is that much could be at stake if impressions are not exaggerated -- including the trust and cooperation that characterize market-oriented societies. Social strife can have severe consequences. Even public demonstrations can create rippling animosity.

I am not suggesting, of course, that limits on free speech and the press would be in order in the name of social cooperation. That would make no sense. For one thing, hate-speech prohibitions and the like would bolster state power with vague statutes: governments have been major disrupters of cooperation, market and otherwise, throughout history. Contrary to what we teach our children, words can hurt, but it's not the kind of hurt that justifies retaliatory force. Threatened and initiated force, though, is another story.

Similarly, restrictions on immigration and the internet, along with enhanced government monitoring and data collection, would be ludicrously ironic since those are the means of interfering with cooperation.

The right and wrong of foreign conflicts, and U.S. government complicity in them, is separate from my point. Strong convictions and feelings are entirely understandable and proper. But when become collectivist bigotry, civil peace can be put at risk. That should worry anyone who grasps the relationship among social cooperation, markets, and general well-being.

Champions of individualism reject the divisive collectivism displayed in ethnic, racial, and religious hostility. Such feeling flows from the tribalism that is a vestige of a primitive, pre-individualist distant past. A person's natal or otherwise unchosen "membership" in a group says nothing about his or her character, moral principles, or position on controversies. The right to be free of coercion is an individual-based, not group-based principle. Persons can think for themselves. That's individualism, both ethical and methodological. We abandon it at great risk.

As the economist Ludwig von Mises explained in Human Action, which he considered calling "Social Cooperation," civilization began to dawn when the earliest perceptive people realized that strangers could represent not existential threats but potential gains from trade. There lay the road to mutual self-interest and prosperity. It was long ago, but some people haven't yet learned. Samuel Johnson was onto something when he said, "There are few ways in which a man can be more innocently employed than in getting money."

I'll give Mises the final word on the link between free cooperation and prosperity, and by implication the danger from overwrought polarization (from Human Action, chapter 24, "Harmony and Conflicts of Interest", section 3, "The Harmony of the "Rightly Understood" Interests):

[N]ature does not generate peace and good will.... What makes friendly relations between human beings possible is the higher productivity of the division of labor. It removes the natural conflict of interests. For where there is division of labor, there is no longer question of the distribution of a supply not capable of enlargement. Thanks to the higher productivity of labor performed under the division of tasks, the supply of goods multiplies. A pre-eminent common interest, the preservation and further intensification of social cooperation, becomes paramount and obliterates all essential collisions. Catallactic competition is substituted for biological competition. It makes for harmony of the interests of all members of society. The very condition from which the irreconcilable conflicts of biological competition arise--viz., the fact that all people by and large strive after the same things--is transformed into a factor making for harmony of interests. Because many people or even all people want bread, clothes, shoes, and cars, large-scale production of these goods becomes feasible and reduces the costs of production to such an extent that they are accessible at low prices. The fact that my fellow man wants to acquire shoes as I do, does not make it harder for me to get shoes, but easier.

Let's not have our mutual interest get lost in the heat of controversy.

TGIF: The Glorious Bourgeois Peace Movement

Those of us whose pro-peace/antiwar principles are of the bourgeois classical-liberal variety need reminding now and again that we have a glorious tradition going back hundreds of years. We need not get lost in the dominant rhetoric that opposes war, empire, and its deadly accouterments from a flawed anti-individualist, anti-Western, and socialist position.

No, we can draw on a proud history of writers and activists who opposed war and intervention not just for the obvious reason --  harm to others -- but also because peace and nonintervention are required for reaping the full benefits of private property, specialization and the division of labor, free global trade, and the unobstructed movement of people in search of better lives. It would be mistaken to regard this as a union of humanitarian and so-called "economic" justifications for peace-mongering. For those classical liberals, freedom to produce, trade, and consume was simply another humanitarian reason to oppose the disruption of war.

Two of the best exemplars of bourgeois pro-market peace activism were the Englishmen Richard Cobden and John Bright, both members of Parliament, manufacturers, orators, and activists. In the mid-19th century, they built a movement that has been in the history books ever since. They are best known for opposing England's tariff on imported grain ("corn"), which raised the price of bread to enrich the land-owing aristocracy. Cobden and Bright successfully fought their battle through the Anti-Corn Law League.

Cobdden and Bright did not compartmentalize but rather explicitly linked free trade to peace and opposition to military spending and intervention. They had a friend and ally on the continent in the French laissez-faire liberal Frédéric Bastiat.

These classical liberals understood that if a social conflict is to be avoided and society is to develop for all, then the industrious members of the population -- entrepreneurs and employees, both of whom produce valuable goods through their labor -- must be free from those who use government-granted privileges to legally steal from the industrious. (Ironically, Marx credited the classical liberals with devising this class analysis, but then screwed it up by putting business creators in the exploiter class.)

Cobden and Bright were not only clear and analytical; they were also passionate. They were great orators inside of Parliament and outside. The liberals' association of peace and free trade can be seen in this example of Cobden's eloquence:

How shall a profession which withdraws from productive industry the ablest of the human race, and teaches them systematically the best modes of destroying mankind, which awards honours only in proportion to the number of victims offered at its sanguinary altar, which overturns cities, ravages farms and vineyards, uproots forests, burns the ripened harvest, which, in a word, exists but in the absence of law, order, and security — how can such a profession be favourable to commerce, which increases only with the increase of human life, whose parent is agriculture, and which perishes or flies at the approach of lawless rapine?

He finishes this passage with a rebuke to those who wanted the English government to compel foreign populations to do business with privileged government-granted monopoly interests:

They who propose to influence by force the traffic of the world, forget that affairs of trade, like matters of conscience, change their very nature if touched by the hand of violence; for as faith, if forced, would no longer be religion, but hypocrisy, so commerce becomes robbery if coerced by warlike armaments.

Cobden told his fellow members of the House of Commons:

It is only necessary that you should be agreed that war is a great calamity, which it is desirable we should avoid if possible.... My object is to see if we cannot devise some better method than war...; and my plan is, simply and solely, that we should resort to that mode of settling disputes in communities, which individuals resort to in private life. I only want you to go one step farther, to carry out in another instance the principle which you recognize in other cases -- that the intercourse between communities is nothing more than the intercourse of individuals in the aggregate. I want to know why there may not be an agreement between this country and France, or between this country and America, by which the nations should respectively bind themselves, in case of any misunderstanding arising which could not be settled by mutual decision of arbitrators.

He also warned about the government's unlimited spending on armaments: "I wish to know where this system is to end."

On another occasion, he advised, "I say, if you want to benefit nations who are struggling for their freedom, establish as one of the maxims of international law the principle of non-intervention."

These men were called "Little Englanders" for the obvious reason: they opposed the empire. Cobden also said, "I believe the progress of freedom depends more upon the maintenance of peace, the spread of commerce, and the diffusion of education, than upon the labours of Cabinets or Foreign offices."

Bright was no less eloquent:

This is war -- every crime which human nature can commit or imagine, every horror it can perpetrate or suffer; and that this is our Christian Government recklessly plunges into, and which so many of our countrymen at this moment think it patriotic to applaud! You must excuse me if I cannot go with you. I will have no part in this terrible crime [the Crimean War against Russia]. My hands shall be unstained with the blood which is being shed.... [B]ut no respect for men who form a Government, no regard I have for "going with the stream," and no fear of being deemed wanting in patriotism, shall influence me in favor of a policy which, in my conscience, I believe to be as criminal before God as it is destructive of the true interest of my country." (83)

This could be said about the United States today: "What are we to say of a nation, which lives under a perpetual delusion that is about to be attacked...?"

As noted, these Manchester men of business (along with their predecessors such as Adam Smith, and successors such as Herbert Spencer) embraced Western classical-liberal values with gusto. They were ready to condemn institutions that did not live up to those values. But despite its flaws, they were not embarrassed to embrace Western modernity, the Enlightenment, and the Industrial Revolution, understanding that all civilizations had flaws, such as slavery and the glorification of war, which were to be eliminated. But they knew better than to throw the baby out with the bathwater, which many people today do not.

Let's not forget these great figures who were vital to the development of today's high living standards and of the universally applicable philosophy of individual liberty, private property, free markets, and peace. This proper foundation for domestic and foreign policy was and today remains explicitly pro-freedom in all spheres and anti-aggression. Thus in the spirit of Cobden and Bright, true liberals are entitled to oppose war and empire while identifying with neither the "left" nor the "right."

TGIF: Extend Tolerance to Commerce

Perhaps you've noticed that we live in intolerant times. Many people claim to be endangered by the mere spoken or written expression of views on a range of issues. This has led to direct action to disrupt speakers on college campuses and elsewhere and to indirect government efforts to censor users of social media, which so far the courts have frowned on.

Believe it or not, this has had a silver lining. It's elicited articulate renewed defenses of free speech and tolerance -- long taken for granted.

But the tolerance movement should go further to include what the late philosopher Harvard Robert Nozick called "capitalist acts between consenting adults." Those are also known in sum as the free market, an unfortunately unnoticed option these days. When it comes to human action, we find wide and increasing support for a host of government measures that interfere with the freedom of individuals to trade with one another on their own terms. Those who have become disillusioned with the intolerant so-called left seem to think the free-market alternative is unworthy of consideration. This may also be true of those who are disillusioned with the intolerant so-called right. They may embrace freedom of conscience, but they draw a line at freedom of exchange, as if conscience had no part in that.

This line seems arbitrary. A product innovator or builder of an enterprise is a creator who may well be as passionate about this chosen life purpose as a writer or an artist. (Ayn Rand stressed this.) The creator offers the product to consumers (or downstream producers), who are free to decide if what's offered on given terms will serve their purposes. They are of course also free to decide that they do not want the offering and to go their own ways. Freedom of conscience permeates life in the marketplace, make no mistake about that.

Why should the work of people who dedicate their lives to such creations rank lower in our estimation than the work of artists? Is it because their products improve "only" material well-being and not spiritual well-being? That's not a good reason. We are not ghosts.

More pertinent, why should the government interfere in consensual transactions deemed merely "economic"? You can see the discrimination in the matter of free speech. Generally, freedom of speech, at least until recently, has been sacrosanct. The First Amendment says it must be. But commercial speech can be and has been regulated and even banned in various ways. It gets no respect.

The courts have long distinguished between so-called fundamental liberties and non-fundamental liberties, a distinction for which no support exists anywhere. What we think of as economic liberties are in the second category and so are deemed less worthy of protection from the government. That means politicians and bureaucrats can put themselves between consenting parties and either forbid or regulate transactions without even the semblance of a compelling reason. They just need to tell the judge that a decree is aimed at some articulated objective. Those who are interfered with may not tell the meddlers, "Mind your own business. If you think you have a better way of doing things, start your own business." That would get them heavily fined at the least. The consequences could be more severe.

Let's look at some common examples, so common they are taken for granted. We have minimum product standards (outlawing less-expensive options), the minimum wage (creating unemployment), price controls such as rent control and so-called gouging bans (creating shortages), housing regulations and zoning (ditto), restrictions and taxes on trade with foreigners (creating higher prices), immigration control (preventing the free exchange of labor, etc.), occupational licensing (barring the choice of one's work), industrial policy (picking winners), and drug and other "vice" prohibition (including the drinking of raw milk!). More could be added. In each case peaceful individuals are prevented from peacefully dealing with each other on mutually agreeable terms. Their freedom of conscience is intruded on by politicians and bureaucrats. Contracts are acts of conscience.

I object to the widely accepted distinction between personal liberty and economic liberty. As Thomas Sowell has pointed out, people select means to achieve all kinds of ends. Economics is a method of understanding the means-ends framework, but it does not provide grounds for distinguishing among ends. All ends are important to those who pursue them or else they would do something else. There is no personal and economic liberty. There is only liberty, which each person has a right to exercise in the pursuit of happiness.

If you believe people should respect each other, then you logically must extend that respect to freedom of commerce.

TGIF: Fins Left, Right, and Center

Th[e] central question is not clarified, it is obscured, by our common political categories of left, right, and center.

--Carl Oglesby, Containment and Change

You got fins to the left, fins to the right
And you're the only bait in town.

--Jimmy Buffett, "Fins"

Champions of individual liberty and its prerequisites can't help but be disheartened by today's political landscape. For decades the Respectable Center has delivered perpetual war, domestic surveillance and secret police, a national vice squad on steroids, uncontrolled spending, soon-to-be-insolvent "entitlement" programs, sky's-the-limit borrowing, Fed monetization, alternating inflation and recession, at-best-sluggish economic growth, impediments to economic mobility, and other bad things.

That's what the "adults in the room" have given us, and that's what they will keep on giving us. The remarkable improvement in living standards that has reached virtually all levels of American society has occurred demonstrably in spite of, not because of, the government.

No wonder many people are looking for an alternative. So what about the most prominent alternatives? Those would be the nihilist identitarian left and the angry populist, or class-oriented, right and left. The outlook is no less good there.

We can dispatch the identitarians quickly. This is the group whose members think that what matters most about people is their membership in tribes defined by unchosen incidental characteristics. Actual liberals -- those who favor individualism and individual freedom  -- can muster no enthusiasm for a program that holds the pseudoscientific category of race, the reality-based categories of sex and sexual orientation, or the abused and worse-than-worthless category of gender as central both to personal identity and social status.

So let's turn to right and left populism. Class leftism may seem promising, but when class analysis comes from ignorant prejudice against commerce and contract, it's fraught with danger. Class populists (left and right) have never learned that the bogey "corporate power" requires the state's power and can't exist without it. I call it "the most dangerous derivative." (See my "Wall Street Couldn't Have Done It Alone." For an alternative, pro-market class analysis, see Social Class and State Power: Exploring an Alternative Radical Tradition.")

If populism simply meant the rejection of rule by elites, what sensible person could object to it? Over the last few years we've seen what elites with political power can do when they control public health.

Unfortunately, we cannot judge political movements only by what they oppose. What do they favor? Aye, there's the rub. The populists on both sides will say they favor freedom and democracy, but those two standards clash with each other. If the majority rules, what happens to the minority's rights and freedom? The populist might concede that some matters ought to be beyond the reach of the majority -- political expression, for example -- but what and how many matters? The committed democrat will want to keep those matters to the barest minimum -- in the name of freedom. It's a scam.

So again, what about the freedom of the minority, the smallest of which is the individual? Populists evade the question by resorting to what the classical liberal Benjamin Constant called the "liberty of the ancients." In his 1819 essay, "The Liberty of the Ancients Compared with that of the Liberty of the Moderns," Constant pointed out that our notion of liberty has changed since antiquity. For the ancients, liberty consisted exclusively of the freedom to participate directly in the political process. As Constant went on:

But if this was what the ancients called liberty, they admitted as compatible with this collective freedom the complete subjection of the individual to the authority of the community. You find among them almost none of the enjoyments which ... form part of the liberty of the moderns. All private actions were submitted to a severe surveillance. No importance was given to individual independence, neither in relation to opinions, nor to labor, nor, above all, to religion. The right to choose one's own religious affiliation, a right which we regard as one of the most precious, would have seemed to the ancients a crime and a sacrilege. In the domains which seem to us the most useful, the authority of the social body interposed itself and obstructed the will of individuals. Among the Spartans, Therpandrus could not add a string to his lyre without causing offense to the ephors. In the most domestic of relations the public authority again intervened. The young Lacedaemonian could not visit his new bride freely. In Rome, the censors cast a searching eye over family life. The laws regulated customs, and as customs touch on everything, there was hardly anything that the laws did not regulate.

The world of 1800s modernity, Constant continued, had a different notion: liberty consisted not only of the freedom to participate in governance but also of the right to live a private life, including the right to use one's property unmolested. As he put it:

First ask yourselves, Gentlemen, what an Englishman, a French-man, and a citizen of the United States of America understand today by the word "liberty". For each of them it is the right to be subjected only to the laws, and to be neither arrested, detained, put to death or maltreated in any way by the arbitrary will of one or more individuals. It is the right of everyone to express their opinion, choose a profession and practice it, to dispose of property, and even to abuse it; to come and go without permission, and without having to account for their motives or undertakings. It is everyone's right to associate with other individuals, either to discuss their interests, or to profess the religion which they and their associates prefer, or even simply to occupy their days or hours in a way which is most compatible with their inclinations or whims. 

Clearly, the populists subscribe to the ancient notion of liberty, and they may not take umbrage at that statement. Whether left or right, they prefer the coercive communitarian politics of antiquity to the individualism and voluntaryism of Enlightenment liberal modernism.

So no wonder they support restrictions on imports and exports, which interfere with our freedom to trade with whoever is willing to trade with us; immigrant restrictions, which interfere with non-Americans' freedom to improve their situation and Americans' freedom to associate with them in all kinds of fruitful ways; and antitrust prosecutions of private tech companies, which interfere with freedom of enterprise and private property.

In each case the populists reject the proven bountiful spontaneous order of markets in favor of collectivist answers both to real and imagined problems. That is, instead of opposing government policies that create and exacerbate problems that are mistakenly attributed to free trade, the free movement of people across arbitrary national borders, and Big Tech as such, they propose that "we" directly address those problems at the ballot box and in the halls of Congress and the offices of unaccountable regulatory agencies. It's social engineering plain and simple.

However, contrary to populist fantasies, there is no "we" that actually rules. For one thing, who is to be included in -- and excluded from -- the "we"? That's a political, not a metaphysical, decision. At best, it's an exercise in question-begging.

Moreover, the voters' diverse views and feelings are always filtered through politicians and bureaucrats, whose frame of reference is partly defined by well-connected special interests. Those are the people who will say what if any products we may buy from and sell to non-Americans; which non-Americans we may and may not socialize with, hire, sell to, and rent to; and what disfavored private companies may do with their own assets.

In other words, populism in the end resembles elitism -- except, as Bryan Caplan argues, at least elites tend to be more economically literate than the masses and so might be "the lesser poison." In public opinion polling, the more-educated respondents are more likely to be favorable to trade with foreigners and immigration. Caplan credits elites with watering down the masses' most extreme demands for protectionism and closed borders, if not quashing them entirely. As he once tweeted, "Elites' problem isn't being 'out of touch' with masses. Elites' problem is denying how irrational masses really are." For any card-carrying populist, this is heresy. (See Caplan's book, The Myth of the Rational Voter: Why Democracies Choose Bad Policies. I review it here.)

To their credit, the populists of left and right support free political speech (although they erroneously apply the same standard to the government and to private firms) and oppose foreign military intervention. But this group -- which comprises such otherwise diverse people as Batya Ungar-Sargon of Newsweek, Glenn Greenwald of System Update, Brendan O'Neill of Spiked, and Tucker Carlson of Fox News -- would have the government spend the savings due to a noninterventionist foreign policy domestically rather than leaving it in the pockets of the taxpayers, who after all are the ones who earned it through the production of wealth for consumers.

Contrary to the populists, the alternative to democracy is not some flavor of authoritarian elitism. It's what's F. A. Hayek called the market order, which is rooted in individual freedom -- in a word, libertarianism.

TGIF: National Conservatism's Ominous Economics

National conservatism is objectionable on many counts -- the name in itself tells you that -- but it does pay tribute to free enterprise. A closer look, however, may cause one to doubt its commitment.

The movement's official Statement of Principles includes Principle 6, which begins encouragingly, though predictably tradition-bound:

We believe that an economy based on private property and free enterprise is best suited to promoting the prosperity of the nation and accords with traditions of individual liberty that are central to the Anglo-American political tradition. We reject the socialist principle, which supposes that the economic activity of the nation can be conducted in accordance with a rational plan dictated by the state.

So far pretty good. When people are free to act peacefully, most will engage in the voluntary exchange of goods and services (including labor) to achieve better lives for themselves and their families. In the process they will acquire possessions the security of which is necessary to the pursuit of sustained, even lifelong projects of all kinds (and not only commercial) aimed at that betterment. In other words, free enterprise and free trade take place when we are left free to pursue our broad interests through peaceful social interaction and the division of labor. It's a bottom-up, emergent environment that requires no coaxing from the government. (Historically, nonstate customary law emerged along with production, the division of labor, and trade. It did not wait for wise rulers to create an appropriate legal environment.)

But then the Statement of Principles starts its trek downhill: "[T]he free market cannot be absolute."

This is ominous. First, it's far from clear what that means. It should be obvious that no enthusiast of the free market thinks society ought to consist entirely of money-making. Life is more than production and trade of material values. Everyone knows that.

The sentence suggests to me that, according to the national conservatives (natcons), people -- even when they restrict themselves to peaceful consensual activities  -- can't be completely free of the cold hand of the state. The very rationale of the Statement tells us this. After all, these are the principles of "national conservativism." It's a nationalist movement. Its essential element is protecting the nation-state through the government. The existence of individuals is not denied, but their interests (as they conceive them) are subordinate to something called national interest. Individuals do not exist for their own sake. Therefore, every consideration is to be passed through the national interest filter. At bottom, then, national conservatism is a collectivist project. We cannot forget that, much less hope for an affinity between natcons and libertarians.

The concern with national interest prompts the question: as conceived by whom and by what criteria? The answer presumably is: according to the criteria of those who are elected to and are able to remain in office. The many problems posed by the perverse effects of democratic politics have been well-documented in theory and history. They include the impotence of any one vote, rational ignorance, rational irrationalism, concentrated benefits/thinly spread costs, inflated political transaction costs, apparently benign incrementalism, campaign theatricality, elites' access to power, and limited accountability. So right from the start, the statement poses more questions than it answers. It does little to reassure people who place a priority on individual liberty. In short, it ignores public-choice economist James Buchanan's call for "politics without romance."

Politicians and bureaucrats, then, would be assigned the task of letting us know when we have, in their judgment, pursued market activities too much. Natcons declare themselves in favor of the rule of law, but remember: the content of the law is as important as due process. It's not enough to be free from decrees handed down on the fly. We also need freedom from duly enacted oppressive legislation, that is, rules that forbid or specify the terms of consensual conduct.

"Economic policy must serve the general welfare of the nation," the statement continues. Clearly, for national conservatives, it's not enough that policy-makers abstain from violating the individual's right to life, liberty, and the pursuit of happiness because through freedom, tradition may fall by the wayside, and the natcons can't have that.

The best explainers of how markets work -- I'm thinking of the Austrian economists -- have shown that the general welfare is exactly what the pursuit of individual welfare in self-regulating markets accomplish. Adam Smith and his best predecessors understood this, even if they got some details wrong.

Let's never forget that strictly speaking, markets don't actually do anything. Only individual human beings act. When they act in a market setting, which is at once economic, legal, and cultural, it's as if people are led by Adam Smith's metaphorical "invisible hand" to do well for themselves by doing good for others. We must supply what others demand because bankruptcy awaits those who ignore others. Barred from government power and forbidden from using physical force and fraud directly, they will seek their own welfare by catering directly or indirectly to consumers. We may not always like what every consumer wants, but as long as no one can initiate force directly or through the state, we can secure ourselves, individually or in association with others, from undesirable influences.

Unsurprisingly, the natcons are dubious about globalism. That word means different things to different people, but the natcons don't like even what libertarians mean: the free movement of people, goods, and money across national lines without government impetus or impediment -- the division of labor writ large. Economists have long demonstrated that global welfare is best enhanced by that route. Significant, though incomplete moves in that direction over the last several decades have gone a long way toward wiping out absolute poverty and infant mortality.

The natcons, like the economic nationalists on the left, lament that "globalized markets allow hostile foreign powers to despoil America and other countries of their manufacturing capacity, weakening them economically and dividing them internally." This is the "hollowed-out America" claim. The problem with the claim is that American factories still produce an incredible volume of goods. What's changed is technology: many fewer people are needed to work in those factories because labor-saving computers and machines are far more productive than people working in jobs that not very long ago were condemned for their mind-numbing drudgery. Jobs that parents once hoped their children would never have to do are now looked to nostalgically by both the natcons and the Michel Moore left.

The Statement goes on:

Crony capitalism, the selective promotion of corporate profit-making by organs of state power, should be energetically exposed and opposed.

That sounds good, but the natcons will have to explain how their policies will avoid crony capitalism. Industrial policy, which is what the national conservatives really want, is an engraved invitation to well-connected business interests to the detriment of everyone else.

More could be said, but you get the idea. The Statement's embrace of free enterprise is hollow indeed. Government intervention, complete with tariffs, import quotas, immigration restrictions, a military-industrial-science complex, and subsidies -- all necessarily constituting de facto central planning -- would be rampant, as would be the lobbying frenzy for special consideration. It's no comfort to know that our rulers would be motivated by the national interest.

Richard Cobden on the Link between Free Trade and Peace

I see in the Free-trade principle that which shall act on the moral world as the principle of gravitation in the universe,—drawing men together, thrusting aside the antagonism of race, and creed, and language, and uniting us in the bonds of eternal peace. I have looked even farther. I have speculated, and probably dreamt, in the dim future—ay, a thousand years hence—I have speculated on what the effect of the triumph of this principle may be. I believe that the effect will be to change the face of the world, so as to introduce a system of government entirely distinct from that which now prevails. I believe that the desire and the motive for large and mighty empires; for gigantic armies and great navies—for those materials which are used for the destruction of life and the desolation of the rewards of labour—will die away; I believe that such things will cease to be necessary, or to be used, when man becomes one family, and freely exchanges the fruits of his labour with his brother man. I believe that, if we could be allowed to reappear on this sublunary scene, we should see, at a far distant period, the governing system of this world revert to something like the municipal system; and I believe that the speculative philosopher of a thousand years hence will date the greatest revolution that ever happened in the world’s history from the triumph of the principle which we have met here to advocate.

--Richard Cobden; Speech; Manchester, England; January 15, 1846

TGIF: Double-Rigging of the Auto Market

U.S. government interference with our lives often resembles a Russian matryoshka doll: regulation is nested in more regulation. Take the provision of Biden's pending Build Back Better bill that would create a big tax credit for people who buy U.S.-built electric vehicles (EV).

Not only would the government distort the domestic auto market by rigging it in favor of electric vehicles over conventional ones, but it also would rig the EV market, Trump-style, in favor of U.S.-made products. This implies that "foreign" EVs are so attractive to American buyers that the domestic offerings need help from the state to compete. That's an argument against the provision right there. If the vehicles that American companies and workers turn out aren't what American buyers would want to buy without subsidies, the manufacturers shouldn't be protected from that important information.

Why not? Because markets exist for consumers and not for producers. Makers of trade policy have no political incentive to operate on that principle because manufacturers of a given product can easily organize for government protection of their livelihoods and reward the politicians who do their bidding. Unfortunately, the same cannot be said for consumers, who have too many other things to worry about. Any kind of trade restrictions hurt them because prices will be higher and product variety will be constrained, especially if a trade war breaks out through tit-for-tat retaliation.

Trade wars end up hurting producers as well, of course. Even without a trade war, when Americans buy less from foreigners, foreigners, having less money, will buy less from Americans and other foreigners. The bad effects ripple globally.

Understandably, electric-vehicle makers in Canada and Mexico are especially upset. Who could blame them? The San Diego Union-Tribune reports, "Canada and Mexico worry the provision would lead to dramatic reductions in EVs purchased in their respective countries and violates the U.S.-Mexico-Canada Agreement, or USMCA, the trade pact the three countries passed last year to replace NAFTA."

So much for the alleged free-trade zone of North America.

But things are not quite so simple as the provision's backers make out, demonstrating that Donald Trump had no monopoly on willful ignorance about the reality of trade. The inhabitants of the United States, Canada, and Mexico do more than trade finished consumer goods with each other. For many years North America has been a single highly integrated market for producers' goods.

According to the Union-Tribune, Canada's consul general for Southern California, Nevada, and Arizona, Zaib Shaikh, points out that, in the newspaper's words, "Determining the country of origin of a given vehicle is complicated because the auto industry of the three North American countries has become so highly integrated."

In other words, It's not clear what an American, Canadian, or Mexican EV is exactly. “'When you think about vehicles assembled in Canada, they’re actually 50 percent U.S.-made,' Shaikh said, 'because the supply chain works so that things are crossed over six or seven times across the border' before a vehicle is finally assembled."

It's hardly the first time that the authors and backers of legislation were ignorant about the thing they sought to regulate.

As already noted, tilting the market toward American manufacturers, even if that were possible today, is not the only objectionable feature of the provision. The provision also aims at tilting the market toward EVs and against vehicles with internal combustion engines. EV purchasers would gain $12,500 in tax credits by 2027. This is in pursuit of the Biden administration's goal of cutting carbon-dioxide emissions 50-54 percent from the 2005 level by 2030 and reaching net-zero emissions across the economy by 2050.

Those targets are important for many people on the fallacious grounds that carbon dioxide is a pollutant that is ruinously warming the climate when in fact it is plant food that is greening the earth and bringing other palpable benefits to mankind. (Thanks to technology, the real pollutants in gasoline are already controlled in today's clean cars.)

To the extent that human-generated CO2 emissions through the use of fossil fuels have contributed to mild global warming since the Industrial Revolution began, they have helped to improve the lives of human beings everywhere by making the natural world more hospitable. During this time, population, life expectancy, and per-capita wealth have grown, while extreme poverty, infant mortality, and deaths from weather extremes have plummeted. Cold kills more people than heat, and the longer growing seasons made possible by warming help feed the world's nearly 8 billion people at a lower cost.

For the foreseeable future, nothing will be able to compete with fossil fuels in providing reliable, inexpensive, and abundant energy -- something billions of people in the developing world desperately need if they are to achieve the living standards that we in the West take for granted.

So rigging the market in favor of electric vehicles is a dumb idea.

Finally, we might welcome tax credits because they provide a chance to keep more of our money, but this principle is a snare and a delusion.  The power to tax (that is, steal) is bad enough without it also being a politician's tool to manipulate market outcomes. That only adds injury to injury.

We Need Markets Now More than Ever

Jeff Tucker's "In a Disease Panic, the Free Market Is Your Friend" ought to be atop everyone's reading list. As libertarians well know, people who are under the delusion that government is a creative element in society, rather than a predator, will never let a good crisis go to waste. (Barack Obama's first chief of staff, Rahm Emanuel, put it just that way.) The historian and economist Robert Higgs has documented the history of exploitation of crises to expand power and consume liberty in America in his classic, Crisis and Leviathan. We can see this process on vivid display with the outbreak of the coronavirus, or COVID-19.

What propels the expansion-through-crisis process is the belief that only government can respond effectively to the crisis. Most people, busy with their lives, don't know enough about economics and politics to see the flaw in the statist's case. By and large, and through no real fault of their own, they operate at a primitive level intellectually. Plus they take for granted what they've enjoyed all their lives: the increasingly accessible abundance of necessities and luxuries, which even a couple of generations ago would have made people green with envy. That is all the result of the fact that, despite all the obstacles, government has not managed to abolish markets, the price system, and entrepreneurship.

Enter Jeff Tucker's article:

The truth is that the market loves you right now, more in the midst of a disease panic than ever before. It would love you even more if companies were not being browbeat by government into curbing sales of essential items. Let the prices of sanitizer and masks rise and you draw more into production and distribution. Throttle the market and you reduce supply. 

The market would have loved you more had the Centers for Disease Control not failed to authorize private companies to test for the virus. It was only after the aggressive protests of the governor of New York that the CDC gave in and let people do what they wanted to do....

In a disease panic, we are learning, people lose their minds and stop thinking clearly about things that matter. They also reach out to authority to save them. All of this is expected. And it’s very sad. Even sadder is how the unscrupulous power mongers among us use such times to enhance the power of the state over our lives and claim it is for our own good. 

Libertarians need to speak up -- now more than ever.

TGIF: A Public Choice Perspective on Trade

Let's say you could make a strictly economic case for government interference with people's trading activities, that is, with their ability to cooperate freely with others across the world. (I have no idea what "strictly economic case" even means, but stay with me.) Would we free traders have to give up? No way.

Why not? Because we could deploy solid persuasive public choice arguments against such interference. I like to think of the Public Choice school of political economy (Buchanan, Tullock, et al.) as emphasizing the incentive problem inherent in government policymaking. Where the Austrians emphasize varieties of the knowledge problem -- policymakers cannot know what they must know to plan our economic activities intelligently -- the Public Choice school focuses on, among other things, the perverse incentives that policymakers, bureaucrats, and citizens face.

Before public choice came along, people tended to operate on a public-interest model of policymaking. They simply assumed that when a man or woman moved from the profit-seeking private sector to the (misnamed) public, or political, sector, he or she suddenly became single-mindedly devoted to the public interest. Egoism gave way to altruism. (Note the additional assumptions that there is such a thing as the public interest and that "public servants" know what it is.) This devotion need not be examined or even questioned; it was axiomatic. If a politician was exposed as corrupt, he was merely an outlier, like the supposed lone "bad apple" who slaughtered noncombatants at My Lai during the U.S. government's war in Vietnam.

The Public Choice school questioned the hitherto unquestionable. Perhaps, its proponents said, if we assume that people acting politically are similar to people acting privately, we could make better predictions about outcomes. This simple move exposed the conventional perspective as naive. Of course, people are people, whether acting privately or politically. All are interested in looking after themselves -- in raising their incomes, influence, and prestige. Political actors are not issued halos and wings when they enter government jobs. But the resistance to the public choice orientation has persisted, and you can detect the opposing model every day -- most especially from newscasters and pundits.

I should add that Robert Higgs makes an important point on this matter. Yes, people are indeed people, but people who are attracted to power are not exactly like the rest of us. Lord Acton famously said that "power tends to corrupt," but Higgs adds, in effect, that power also lures the already corrupted. This makes the public choice case even stronger.

Thus the public choice and Austrian critiques together deliver a one-two knockout punch to government interference with social cooperation. Contrary to the civics textbooks and pundits, politicians and bureaucrats lack 1) insight into what's really good for us who constitute the public and 2) the incentive to pursue it even if they knew what it was. Even if voters sincerely intend to benefit all of society and not just their own personal interests (as Bryan Caplan suggests), that doesn't mean those good intentions will be carried into policy. Human beings enact and execute policies.

Now let's talk about trade. Gather round, folks, and I'll tell you the story of the great Chicken War of the 1960s. In response to lobbying by special interests, France and Germany raised tariffs on cheap American chicken imports. To "retaliate," the U.S. government put a 25 percent tariff on (all countries') light trucks, potato starch, dextrin, and brandy. The truck tariff, which was known as the "chicken tax," was specifically targeted at Germany. The chicken war lasted from 1961 to 1964, and then it ended -- except for one aspect. The tariff on light trucks stayed in place and exists to this day. (For an accounting of the significant unintended consequences of this tariff, see Bryce Hoffman's "If You Aren't Worried about a Trade War, You Don't Know about the Chicken Tax.")

If the truck tax was retaliation for the European chicken tariff, and the chicken tariff disappeared, why does the truck tax still exist?

It's not hard to answer that question. Behind the truck tax was a powerful lobby that didn't give a hoot about America's chicken farmers. That lobby enjoyed its protection against foreign pickup trucks, not only German but also Japanese. So why would the automakers want to let go of their shelter from competition merely because the chicken farmers were freed from their foreign tax? They wouldn't, and they didn't. As a result, Americans pay more for pickups than should have to. (Bryce Hoffman notes that the tariff would have disappeared with the Trans-Pacific Partnership.)

Note the public choice lesson. Bad unintended consequences will likely flow from government policy, regardless of intentions, because it will be driven by concentrated and well-organized special interests and politicians who usually will be more sensitive to those interests, which can deploy money and votes, than to consumers, who are diffuse and unorganized. (We might say that the consumers' interest is the best approximation of the public interest.)

That's only part of the picture. Whenever the government has the power to interfere with our trade, it also has the power to exert leverage on others, including other governments, that may have nothing to do with trade. Thomas Jefferson loved to impose trade embargoes, which he called "peaceful coercion." This week Donald Trump delayed for 30 days the imposition of new tariffs on imported steel and aluminum from the European Union, Canada, and Mexico. He also moved toward canceling those tariffs for Australia, Brazil, Argentina. Is he seeking something in return for scrapping the tariffs? Is he telling the Europeans that if they do not support his hawkish position on Iran, he will go ahead with the trade restrictions? What did he get in return from the other countries?

We don't know. But if Trump has the power to restrict trade, he has the power to forgo restrictions in return for other things he wants -- and those other things are unlikely to be good for most Americans, not to mention the rest of the world.

David Hume said that in proposing government policy, we should assume that the people who will carry them out are "knaves." That of course means trade policy too.

TGIF (The Goal Is Freedom) appears on Fridays. Sheldon Richman, author of America's Counter-Revolution: The Constitution Revisited, keeps the blog Free Association and is executive editor of The Libertarian Institute. He is also a senior fellow and chair of the trustees of the Center for a Stateless Society and a contributing editor at Antiwar.com.

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TGIF: The Dangerous Deficit in Trade Understanding

I was chatting with my tobacconist the other day -- I have no rabbi, no priest, no minister, no imam, no chiropractor, and no lawyer, but I do have a tobacconist -- when it struck me that my trade deficit with him is astronomical.

Read TGIF at The Libertarian Institute.

TGIF (The Goal Is Freedom) appears on Fridays. Sheldon Richman, author of America's Counter-Revolution: The Constitution Revisited, keeps the blog Free Association and is executive editor of The Libertarian Institute. He is also a senior fellow and chair of the trustees of the Center for a Stateless Society and a contributing editor at Antiwar.com.

Become a Free Association patron today!

TGIF: Economic Nationalism: Elitism in Populist Clothing

My old friend and former American Conservative editor Dan McCarthy gets it all wrong about Donald Trump's "national security" tariffs on aluminum and steel.

Read TGIF at The Libertarian Institute.

TGIF (The Goal Is Freedom) appears on Fridays. Sheldon Richman, author of America's Counter-Revolution: The Constitution Revisited, keeps the blog Free Association and is executive editor of The Libertarian Institute. He is also a senior fellow and chair of the trustees of the Center for a Stateless Society and a contributing editor at Antiwar.com.

Become a Free Association patron today!

TGIF: Trading Places

"What protection teaches us, is to do to ourselves in time of peace what enemies seek to do to us in time of war." --Henry George

When Donald Trump can propose tariffs on imported steel, aluminum, washing machines, and solar-panels without being roundly booed off the stage, one has to wonder if reason has any power to win the day. Is this truly a democracy of dunces?

Read TGIF at The Libertarian Institute.

TGIF (The Goal Is Freedom) appears on Fridays. Sheldon Richman, author of America's Counter-Revolution: The Constitution Revisited, keeps the blog Free Association and is executive editor of The Libertarian Institute. He is also a senior fellow and chair of the trustees of the Center for a Stateless Society and a contributing editor at Antiwar.com.

Become a Free Association patron today!