The Wall Street Journal ran a letter co-authored by Charley Hooper and me today (print version tomorrow.) I have hesitated to quote more than 2 paragraphs but I think my contract that allows full quotation only after 30 days applies to my paid work, not my free work. So I’ll take the chance and quote the whole thing. As you note in your editorial “RFK Jr. Conducts His Vaccine Purge” (June 11), HHS Secretary Robert F. Kennedy Jr. fired the 17 members of the Advisory Committee on Immunization Practices over a charge of conflicts of interest. He’s provided no evidence of such entanglements, settling instead for the claim that the “public must know that unbiased science guides the recommendations from our health agencies.” Yet we have evidence of this from a related case. Like ACIP, the Food and Drug Administration uses outside experts on advisory committees. The FDA has tried to exclude members with ties to industry, which has slowed the approval of drugs for rare conditions because the few experts all have such ties. Fortunately, the effects of committee conflicts of interest have been evaluated and shown to be nonexistent. In 2006 the physician Sidney Wolfe and several colleagues published an article in the Journal of the American Medical Association that drew on 76 meetings of FDA advisory committees that involved “yes” or “no” votes on individual drugs. They found that if voters with conflicts of interest had been excluded, none of the 76 outcomes would have changed. The participants with conflicts, moreover, were more likely than those without to vote for drugs that would compete with “their” company’s product. In other words: Until proven otherwise, we have no reason to think ACIP had such a problem before Mr. Kennedy’s purge. David R. Henderson Hoover Institution  Pacific Grove, Calif. Charles L. Hooper  Objective Insights, Inc. Grass Valley, Calif. Thanks to Charley for providing the backup link for the JAMA article. I got a request from the letters editor to provide the link and some screenshots backing up our claim. I was about to leave with my wife to celebrate Father’s Day. (0 COMMENTS)

A recent Bloomberg article suggested that the Fed should declare victory over inflation: Granted, it may feel premature, if not foolhardy, to declare “mission accomplished” on inflation. It’s not just the rise in tariffs and the fall in immigration; there are a lot of structural factors in the economy pointing to more inflation: more debt, an aging work force, slower productivity growth, and a world that trades less and is less reliant on the dollar. Still, declaring victory now will make it easier for the Fed to make policy in the future. First, the days of an inflation rate below 2% may be behind us. If so, the Fed will need to internalize this truth in its communications and policies — or risk becoming too contractionary for too long in the future. When it undertakes its next framework review, it may need to increase its target rate from 2%. It can credibly do so now that inflation has been licked. I’m not convinced that victory has been achieved, nor do I believe it would be a good time to raise the inflation target.  Here’s the 12-month rate of inflation using the core PCE indicator: Core inflation has recently fallen to 2.5%, but that’s still above the Fed’s 2% target.  Furthermore, the Fed has a flexible inflation target.  Under that sort of policy regime, inflation should run a bit below 2% during booms and a bit above 2% during recessions.  We are clearly in an economic boom. I do not see any good economic arguments for raising the inflation target above 2%.  More importantly, even if a higher inflation target were a good idea, the optimal time to raise the target would be during the next period of near-zero interest rates, not when short-term interest rates are above 4%.  The adoption of a higher inflation target can be a powerful tool for stimulating an economy stuck at the zero lower bound. In general, I am skeptical of calls for raising the inflation target.  Doing so would reduce the credibility of the Fed, as investors would begin to doubt its commitment to low inflation.  This might make it even more difficult to bring inflation back down after it overshoots the target rate for an extended period of time. (0 COMMENTS)

Jean-Jacques Rousseau Does technology liberate us or enslave us? How do our social interactions affect our sense of self and our emotional health? Listen as author and master teacher Leon Kass and EconTalk’s Russ Roberts do a close reading of a few paragraphs of Jean-Jacques Rousseau and explore some of the deepest aspects of our relationships […] The post Leon Kass on the Wisdom of Rousseau appeared first on Econlib.

  First, to all the fathers out there, Happy Fathers’ Day. Walmart and Amazon Are Exploring Issuing Their Own Stablecoins by Gina Heeb, AnnaMaria Andriotis, and Josh Dawsey, Wall Street Journal, June 13, 2025 (electronic edition) Excerpt: A move to launch crypto-based payments by Walmart or Amazon that bypasses the traditional payments system would send shivers through the nation’s banks and card-network giants. With vast networks of customers and employees, troves of data and far lighter regulations, retail and technology companies have long been viewed as particular threats to banks, including regional and community lenders. DRH note: Knowing my free-market proclivities, you might be able to guess what my favorite adjective is in the second paragraph above.   Tobacco excise has passed a ‘tipping point’ and is fuelling black market, economists warn by Patrick Commins, The Guardian, June 10, 2025. Excerpts: Economists say regular increases to the tobacco excise have stopped working to further lower smoking rates and are instead encouraging a soaring cigarette black market. Instead, they suggest either a freeze or a cut to the excise rate while Australia cracks down on illicit tobacco. However, a public health advocate warned policymakers not to be “conned” into a radical tax cut. And: Over the past decade, the excise rate per cigarette has tripled from 46c to $1.40. The excise now accounts for $28 of the average $40 price for a packet of 20 cigarettes. For some time a rising tax was associated with the twin benefits of falling smoking rates and rising revenue, but after peaking at $16.3bn in 2019-20, federal excise receipts have plunged. The March budget forecasts tobacco excise receipts will be just $7.4bn in this financial year – the lowest since 2012-13 – and will continue to fall to $6.7bn by the end of the decade. Rather than a sudden collapse in smoking rates, experts point to an explosion in the availability of black market tobacco in recent years. An equivalent of 605.8m cigarettes in illegal tobacco was seized at the border in 2019-20, according to government figures. By 2022-23, border seizures had reached the equivalent of 2.6bn cigarettes before easing to 2.2bn in 2023-24. DRH comment: I vaguely remember when the Canadian government imposed a stiff tax of about $5 per pack in the 1990s. That would translate to over $10 per pack in today’s dollars. Growing up in Canada, I was used to thinking of Canadians as particularly law-abiding. (I’m not sure it was true, but that’s how I thought of my fellow Canadians.) But then we started hearing about boats crossing the St. Lawrence laden with cigarettes from lower-price United States.   Trad Wives and Tallow Fries: How the Wellness Wars Flipped Health and Food Politics Upside Down by Elizabeth Nolan Brown, Reason, July 2025. Excerpts: “I don’t want to be told how many calories are in my Big Mac meal or my quarter pounder meal. I don’t want the government telling me that I can’t put salt on my food,” Sean Hannity declared on Fox News in 2010. “I like junk food. I like McDonald’s. I like Wendy’s. I like Burger King. I love Kentucky Fried Chicken.” This was a common sentiment for conservatives of the era, a time when many on the right viewed attempts to promote health as left-wing and therefore suspect. Some of this Republican pushback was rooted in righteous opposition to intrusions on the free market and consumer choice,as when Democrats attempted to impose sin taxes on sodas or limit the size of sugary drinks stores could sell. But too often, it seemed more like oppositional defiance disorder. And: “The age of Big Gulp conservatism is over,” says Breitbart writer John Carney. “Now we’re into the protein- and blueberry-maxxing age.” And Carney—who jokingly calls yogurt with pomegranate seeds and blueberries his “neofascist breakfast“—thinks this is great. “I’d rather be on the side that’s healthy,” he says. This isn’t just a story about MAGA going health nut; a lot of health nuts went MAGA too, partly as a rejection of the Democratic Party’s centralized public health dogmas, especially during the pandemic. The story of how we got here involves fertility fears and lentil wars, dietary science and social justice, losing our religion and gaining Obamacare. Perhaps most of all it involves COVID-19. DRH comment: When RFK, Jr. was chosen as the secretary of HHS, I told a friend who was surprisingly uncritical of Kennedy, “Be prepared for the nanny state on steroids.” (0 COMMENTS)

The conflict between the American and Chinese governments about the restriction of exports—rare earths in one direction and other goods in the other direction—has been branded a new “supply chain” trade war. The Wall Street Journal wrote (“Supply Chains Become New Battleground in the Global Trade War,” June 11, 2025): A key lesson from the latest skirmish in the U.S.-China trade war: The era of weaponized supply chains has arrived. Weaponization is what governments do when they intervene in the affairs of others. Not only do they weaponize trade against foreign rulers, but tariffs and other trade barriers are a weapon for a government to favor some domestic producers against domestic consumers, as well as against other domestic producers. The conflict over exports marks a return to the 17th and 18th centuries. National governments frequently restricted not only foreign imports but also foreign exports. Grain exports were banned when bad harvests caused prices to rise or government price controls caused shortages. In France, even grain movements between regions were controlled. As I explained in a previous post, the British government once forbade the exportation of some machinery to prevent foreign textile manufacturers from competing with domestic manufacturers. It also tried to prevent the emigration of specialized workers familiar with these machines. Embargoes were weapons of war. As economists have quipped, protectionism is what we do to ourselves that is done by foreign enemies in time of war. Of course, the “what we do to ourselves” must be read as “what some of us do to others among us.” Rare earths are chemical elements found in minerals and used in the fabrication of magnets and many high-tech products with both civilian and military use, as is true of many goods. Restricting or blocking their exportation from China would increase their prices in the rest of the world and thus reduce their use to their next most valuable ones. For example, the price of dysprosium more than doubled in the past two months. People not familiar with economics often ignore the role of prices in avoiding shortages. Note also that substitutes virtually always exist, but the less perfect a substitute is, the less efficient or more costly its use will be (see my post “War and the Economic Concept of Substitution”). Moreover, 30% of the rare earths are located outside China, including in the US. It is true that nine-tenths of their processing is concentrated in China and new plants take time to build, but at least one private company is already planning one in the US—an argument made by Don Boudreaux (see also “Rare-Earths Plants Are Popping Up Outside China,” Wall Street Journal, May 18, 2025). In the current situation, the US government, in the person of Donald Trump, launched a trade war. As the Chinese government retaliated, the US government further increased the tariffs on goods imported from China. In mid-May, a meeting of the two governments’ representatives in Geneva partially rolled back tariffs and paused the cycle of retaliation. But the Chinese government later limited the export of rare earths while the US government intensified its export controls on chips and on education (by limiting Chinese student visas in America). On June 5, Mr. Trump, who had waited in vain for a submissive call from Mr. Xi and lied about receiving one, finally blinked and phoned him. A two-day meeting between cabinet-level aides of the two camps followed last week in London. The two delegations agreed on an unpublished “framework” to revert to the Geneva agreement. In exchange for the Chinese government temporarily easing its restrictions on rare-earth and magnet exports to America, the Trump administration proposed to relax its own restrictions on the sale of jet engines and ethane as well as on Chinese student visas (“Trump Has No China Trade Strategy,” Wall Street Journal, June 11, 2025). But, as the editorial says, “details are few.” After once declaring pompously that “trade wars are good, and easy to win,” the ruler of a great national collective more or less begged the ruler of another large collective to please let us import what we need! Since collective rulers, in their grandeur, don’t like to beg, threats are never far behind their deals. “I will forbid my subjects to import from and export to yours,” can morph into “I will get from you what I want.” Looking at all that from the point of view of the ruled instead of the rulers, which is what we should do, the liberty of individuals and their private organizations to trade is a necessary condition for prosperity, peace, and security. ****************************** Yahoo! Back to the Seventeenth Century, by Pierre Lemieux and ChatGPT (0 COMMENTS)

  In my June 10 post on the penny, I wrote: The U.S. government makes a pretty penny (pun intended) on seigniorage. It’s not as much as it used to be because more and more people use credit cards and even cryptocurrency to buy goods and services. Still, it’s a good amount. The biggest gain from seigniorage is on the $100 bill. Printing one costs the federal government just 9.4 cents. So, when the feds spend this $100, they make a nice profit of $99.90. Not bad. Printing a $1 bill costs the feds 3.2 cents. So even on a $1 bill, the feds make 97 cents. In the comments, Rob Rawlings wrote: I’m a bit confused by the idea of the government earning seigniorage by printing new notes. Happy to be corrected if I’m wrong but don’t they earn seigniorage when they buy back their own bonds with newly created electronic money rather than when they print new paper notes? When they print these new notes (to match an increased demand to hold them rather than electronic money) then the costs of printing seems like it would be a real cost. I agreed that the cost of printing would be a real cost but that that cost was small relative to the face value of a $100 bill and even of a $1 bill. Rob responded: If the newly printed note is provided to a bank in exchange for an equivalent amount of base money, then where is the “net seigniorage”? It seems the seigniorage occurred previously when the government created new base money by buying back bonds. Somehow, in responding, I missed Rob’s second sentence above. I think that’s true. The bottom line is that there is seigniorage and that he identified where it happens. I think I erred in even going in the direction of talking about “net seigniorage,” as you’ll see when I quote Jeff Hummel below. I brought in my monetary theory and policy guru, Jeff Hummel, who sent me the following paragraph: I think we just have a definitional difference here. If you want to look at net seigniorage as you define it, that is fine and sometimes informative. But what I think is the standard way to think about seigniorage is as a tax (a tax on real cash balances), analogous to explicit taxes and government borrowing, the other two main ways governments generate revenue. Both of those have their associated costs of collection that you could at least in theory net out. But no matter how a government creates a new dollar and puts it into circulation, whether with a coin, bill, or electronically as with non-interest-bearing bank reserves, the burden imposed on the government’s subjects (through an eventual reduction of real cash balances) is still ultimately a dollar. I agree with Jeff. Well, almost. I’m going to be a little picky here and point out that the burden of a tax is never (except in the case of a lump-sum tax) the amount of revenue collected. It’s that amount plus the deadweight loss, in this case, from people economizing on their holdings of real cash balances. It occurs me now in retrospect that some readers might think I’m advocating that the federal government print more $100 bills. I’m not. Instead, I’m making a more modest point, and it’s this. Let’s say that the Federal Reserve has chosen an optimal monetary policy, defined however. Scott Sumner will have one definition, John Taylor another, and so on. But let’s hypothesize that in choosing this optimal monetary policy, the Fed assumed that there would be no additional demand in other countries for U.S. currency. In other words, it assumed that whatever U.S. currency was currently being held abroad, there would be no additional demand. But, it turns out, there is additional demand. Then the optimal monetary policy would not be the one the Fed chose. The optimal policy would be to print more $100 bills.   Note 1: Thanks to Rob Rawlings for raising good points and to Jeff Hummel for helping me think through it. Note 2: I gave directions to ChatGPT to draw a picture of a $100 bill with, due to whimsy on my part, the size of Ben Franklin’s head exaggerated. At whatever size, I think Franklin’s expression makes him look a little like Jack Benny. (0 COMMENTS)

As I write this piece, I’m about to board an airplane. I’m in Buenos Aires, Argentina, but in just over 13 hours I’ll be in Zurich, Switzerland. In the 19th century, not even the wealthiest imaginable person would have been able to travel this quickly. Indeed, the entire wealth of the world could not have bought a 13-hour trip of just over 7,000 miles, say, in 1910, because it simply didn’t exist. But now it does and I can book it, which means that at least in this regard I’m richer today than anyone was back in the day. I’m not a multi-millionaire, or even a millionaire, and I don’t even think of myself as being rich at all. I just happen to live in 2025. It’s very likely that the flight crew will be Swiss, since the airline I’m flying is based in Switzerland. Not long ago, most people in the world were unlikely to ever meet people foreign to their own countries. Today still, most people are expected to not move too much during their lifetimes and die pretty close to where they were born. But just as more and more people go to distant places, other people come to ours as well. And our first-hand knowledge of other cultures increases exponentially when they do. Before boarding the plane, I’ll take a pill that frees up my nostrils, so my ears don’t get plugged for a whole day after I take off. (It’s strange, I know. I have to get surgery in my nose to avoid that in the future.) I’ve used these pills before and I know they work exactly as designed. All it took to get them was a visit to the doctor, a prescription, and about twenty dollars. And after I board the plane, I’ll put on headphones that will cancel all surrounding noise as we lift off so I can relax and maybe take a nap. Can you imagine explaining this kind of comfort to the millions of people who, just one century ago, were boarding ships from Europe to America for months-long journeys during which it was very likely that some people would die??? When I’m in the plane, I’ll continue to write this piece on a laptop, the mere concept of which was nonexistent barely fifty years ago. Yet today, millions of people around the world own personal devices like these computers with which they can work, access all kinds of information from multiple sources worldwide, play games, stream movies, et etcetera. As long as you have internet access, you can access more information than in the Library of Alexandria or any other library in the world. Literally. If I get bored on the flight as a write this piece, I’ll probably turn my attention to one of the two books I brought along for the journey. But a person like Aristotle, for example, could not dream of such an object. The fact that there exist printers on a mass scale and a transportation system that allows for books filled with standardized typographies to be distributed across the world is amazing. Once I leave the plane, I’ll immediately text my girlfriend that I’ve arrived safely, something that was inconceivable a few decades ago. We no longer need to write potentially outdated letters that may take months to arrive or make prohibitively expensive calls to talk to our loved ones. The same cellphone I use in Argentina allows me to be in touch with anyone even if I’m in a different continent. Freedom makes all of these things possible. Planes, pills, headphones, laptops, books, cellphones: Whenever we make it possible for human ingenuity to flourish, we come up with new inventions that raise our standard of living over and over. In particular, the ability to trade with others and make profits assures us that people have an incentive to improve not just their lives, but also those of others. This applies to services too, which is why airlines and all other businesses exist. Individuals that you’ll never meet are working hard to make money and at the same time will bring you new inventions that everyone will profit from in different ways. The benefits of free market capitalism and the international division of labor, which we usually take for granted, are incredible, and their extent is probably impossible to fully realize. We often forget what life used to be like, but as we’ve become freer it has only gotten better and continues do so everyday. When you board a plane next year, think about how marvelous this world is for giving regular people like us the chance to enjoy it.   Marcos Falcone is the Project Manager of Fundación Libertad and a regular contributor to Forbes Argentina. His writing has also appeared in The Washington Post, National Review, and Reason, among others. He is based in Buenos Aires, Argentina. (0 COMMENTS)

Tom Wolfe once designated the 1970s as “The Me Decade”.  It seems to me that this label better applies to the 2020s.  Consider this action by the New York state Senate: ALBANY — Under cloak of darkness, the state Senate moved to help more than 130,000 reckless drivers avoid accountability in a middle-of-the-night watering down of the Stop Super Speeders bill, which only targeted the worst-of-the-worst drivers in the first place. . . . Instead of requiring drivers with six or more speed-camera or red-light camera tickets in any 12-month period to install a speed-limiting device in their cars, the bill now only carries that requirement for drivers with 16 or more tickets — and only speed-camera tickets rather than a combination. . . . It’s common Albany knowledge that if legislators can imagine themselves being hurt by a bill, they vote against it. You might think that this is no big deal, as “almost everyone goes over the speed limit”.   I routinely go 10 miles over the limit on interstate highways, but I’ve only received one speeding ticket in my entire life–despite driving an enormous number of miles.  (And that was for going 66 on a rural New York interstate highway back when the national speed limit was 55.) People racking up 10 or 15 speeding tickets in a 12-month period are not normal speeders; they are reckless drivers.  Unfortunately, many of these drivers do not recognize the consequences of their recklessness: And there’s the sheer fact that lawmakers see themselves as drivers first and foremost — and are therefore reluctant to do anything perceived as punishing drivers. Assembly Member Michaell Novakhov (R-Midwood) famously said that six speeding and red-light tickets in a single year was too low a threshold, for example. “I think this is too little,” Novakhov told Streetsblog. “Any driver can get much more than six. It’s the regular constituents, just people like me and you are getting those tickets.” It’s worth noting that he made those comments at the funeral of Natasha Saada and daughters Diana and Deborah, who were killed in March by a recidivist speeder who had just racked up her 16th speed-camera ticket of the year days before the crash. The fact that you might be charged with breaking a law is not a good reason for failing to enact the law. Crypto regulation is another example of where lawmakers put self-interest ahead of the public interest.  Here’s The Economist: When Mr Trump nominated Jay Clayton to head the Securities and Exchange Commission (sec) in 2017, crypto received no mention at all during his confirmation hearing in the Senate. As recently as 2021, the president disdained digital assets. “Bitcoin just seems like a scam” he said of the biggest cryptocurrency. “I don’t like it because it’s another currency competing against the dollar.” Then President Trump discovered that crypto assets would allow business interests to give him hundreds of millions (if not billions) of dollars without triggering laws against bribery.  Here’s The Atlantic: When it was all over, Trump apparently decided he had been thinking too small. In his first term, he made improper millions. In his second term, he is reaching for billions: a $2 billion investment by a United Arab Emirates state-owned enterprise in the Binance crypto exchange using the Trump family’s stablecoin asset. An unknown number of billions placed by Qatar in a Trump-family real-estate development in that emirate, topped by the gift of a 747 luxury jet for the president’s personal use in office and afterward. Government-approved support for a Trump golf course in Vietnam while its leaders were negotiating with the United States for relief from Trump tariffs. Last week, Trump hosted more than 200 purchasers of his meme coin, many of them apparently foreign nationals, for a private dinner, with no disclosure of the names of those who had paid into his pocket for access to the president’s time and favor. The record of Trump real-estate and business projects is one of almost unbroken failure; from 1991 to 2009, his companies filed for bankruptcy six times. Few if any legitimate investors entrusted their money to Trump’s businesses when he was out of office. But since his return to the White House, Trump has been inundated with cash from Middle Eastern governments. Obscure Chinese firms are suddenly buying millions of dollars’ worth of Trump meme coins. So are American companies hard-hit by the Trump tariffs and desperately seeking access and influence. After Trump invited major holders of his crypto funds to dinner, Wired quoted a crypto analyst about the coin’s value proposition: “Before, you were speculating on a TRUMP coin with no utility. Now you’re speculating on future access to Trump. That has to be worth a bit more money.” During Trump’s first term, he argued that TikTok should be shut down.  Then he discovered that TikTok was a valuable way of reaching his supporters.  In his second term, the Trump administration has repeatedly failed to enforce a law that required TikTok to be sold or shut down. To be clear, I am not taking any position on these two issues.  It may well be true that both cryptocurrencies and TikTok are worth preserving.  Rather, I’m suggesting that decisions on these issues are not being made on the basis of what’s in the public interest; rather they reflect the special interest of policymakers.  That’s always been true to some extent, but I’ve never seen it to be as blatant as during the 2020s. (0 COMMENTS)

For today’s post, further thoughts inspired by Barry Lam’s book Fewer Rules, Better People. When Lam puts forth arguments in favor of legalism in his book, one of the main values he argued legalism seeks to preserve is the idea that justice requires we treat like cases alike. If you and I engage in the same behavior, but you are punished for it while I am not, that is arbitrary and unfair. So far, so good. However, there’s a problem. Legalism requires clear and consistent definition for rules of conduct so these rules can be understood by both citizens and enforcers. Unfortunately, working out a consistent definition that accurately classifies every case turns out to be a dead end. As I discussed in my post on Daniel Dennett’s Prime Mammal thought experiment, lines drawn will always end up somewhat arbitrary, and there will be clear cases where that line defines things incorrectly. This isn’t just the case with defining mammals. Michael Huemer wrote an entire book about the nature of knowledge, running over 350 pages. And in the opening line of the first chapter after the introduction, Huemer writes “In this chapter, we will try and fail to define ‘knowledge’.” He starts with the basic first-pass definition of knowledge as a justified true belief, then shows that there are situations where someone can have a justified true belief that X, but still not actually know X – and this turns out to be true for all of the ever more complex definitions of what knowledge is. He makes a similar point in is book Ethical Intuitionism about defining something as simple as a table. He’ll have his students attempt to work out what the definition of a table is – and no matter how carefully they attempt to craft a definition, you can still find instances of things that are obviously tables that don’t find the definition, and things that fit the given definition that still obviously aren’t tables. This is not to say that attempting to define this is pointless, or that the inevitably inexact nature of definitions shows the utter meaninglessness of the phenomenon these definitions attempt to describe.  But we should be aware that for any definition, if we drill down enough, there will be cases when it falls apart, and when that happens, sticking to the definition for its own sake can seriously lead us astray. One example that comes to mind is the Clean Waters Act passed by Congress. The purpose of this act was straightforward enough – to put limits on pollutants being dumped into “the waters of the United States.” However, simply saying “the waters of the United States” is too vague – that term required a more precise definition. So regulators attempted to do just that, adding among other clauses that it included areas “sufficient to support, and that under normal circumstances do support, a prevalence of vegetation typically adapted for life in saturated soil conditions.” This turned out to be a problem for a father and son duo named Ocie and Carey Mills, who were building a cabin on a wooded plot of land in Florida. Unfortunately for them, this wooded lot, with no standing water, contained within the property line a small patch of marsh grass – and marsh grass constitutes “vegetation typically adapted for life in saturated soil conditions.” Thus, by introducing sand and fill dirt on that plot of dry land as part of constructing the cabin, they were guilty of “discharging pollutants into the navigable waters of the United States.” The judge presiding over the case agreed that the Mills couldn’t have realistically been expected to understand that dry land constituted “navigable waters” on the basis that it “may have some saturated-soil vegetation, as is the situation here.” Unfortunately, The Rules Are The Rules™, and Ocie and Carey Mills spent 18 months locked up in a federal prison for polluting the waters of the United States. (As a postscript, after their release, they were instructed to remove those “pollutants.” In this instance, they managed to convince the judge presiding over that case to actually visit the site. Upon doing so, the judge was agreed that it made no sense whatsoever to call the area a “wetlands” constituting “navigable waters,” and described the legal definitions used in this case as “a reversal of terms that is worthy of Alice in Wonderland.”) And this can be a case where the limits of drawing lines and establishing legal definitions can end up working against the value legalism is meant to preserve – the avoidance of arbitrary treatment by ensuring like cases are treated alike. One the one hand, you have a prototypical case of someone dumping waste into a river. On the other hand, you have the Mills placing some fill dirt on a driveway on dry land. For a judge to look at both of those cases and say “Yep, the people in both of these situations ought to be sent to federal prison – after all, justice requires that I treat these like cases alike!” would almost seem like a Monty Python sketch if it wasn’t actually true. This wouldn’t be treating like cases alike – it would be a case of pretending that completely unalike cases are actually alike, and treating the act of putting dirt on a driveway on dry land as the same as dumping chemicals into a river. This seems as arbitrary as anything legalism wishes to avoid. If justice requires that we treat like cases alike, we should also bear in mind that a by-the-book legalism that refuses to make distinctions or exceptions can also result in us treating wildly and obviously unalike cases as if they were alike. (0 COMMENTS)

A great deal of blame for declining GDP has been placed on the impact of imports by the national conservative and protectionist crowds. Pierre Lemieux does an excellent job explaining why imports have no direct impact on GDP here, so there’s really no reason to cover that ground again. It is sufficient to revisit the fact that GDP only accounts for domestic production and consumption; the net export variable simply cancels out the part of consumption measurement that accounts for consumption of imports, reducing the effect to net zero. This renders absurd the argument for tariff increases in order to protect GDP from the influence of foreign goods and services.  On the other hand, tariffs do have an observable negative impact on GDP.  According to the Tax Foundation, the current 10 percent baseline tariff will raise the effective tariff rate to 12.1% – before the effects of retaliation can even be factored in, – reduce GDP by 0.7 percent (again, before accounting for retaliation) and lower market income by 1.2 percent in 2026. This translates to an average tax increase of $1,190 in 2025 and $1,462 in 2026 per household, and a reduction in available goods and services. Yale’s Budget Lab paints an even more grim picture, predicting an eventual effective tariff rate if 22.5 percent, an average per household consumer loss of $3,800 due to a 2.3% rise in price levels, and a persistent GDP decline between 0.4 to 0.6 percent; these are short-run predictions that, again, do not factor in the impact of retaliation on the part of trade partners. Growth from 1870 – 1910 None of this should surprise observers of economic history. During the 1870’s, a period of relatively high tariffs averaging some 35 percent, GDP declined by an average of 0.5%, despite accelerated development in a few protected industries. The period between 1870 to 1913 was one of a rapid transition from an agrarian economy to an increasingly industrialized one. Between 1872 and 1913, the US share of global manufactured exports grew from 2 percent to 14%, while the labor market share in agriculture fell from 48 percent to 32 percent. In roughly the same period, the share of national income paid to the agricultural sector fell by 3 percent, while the share paid to the manufacturing sector rose by 5 percent. As a reflection of this shift, the export of crude materials and foodstuffs declined slightly (people must always eat, after all, while exports of finished goods effectively doubled. Of course, one would surmise that this should have been good for domestic growth, and it would have been had the political machine not gotten to a-lobbying and logrolling. Had manufacturers just left well enough alone, they might have realized that they possessed an inherent comparative advantage in access to raw materials. Large iron ore deposits near Lake Superior benefited iron and steel producers, while the discovery of petroleum, coal and other inputs allowed for price competition with foreign producers who had to source such inputs elsewhere. As we now know, these deposits were hardly inexhaustible, but at the time, they were relatively new and abundant. Instead, manufacturing interests elected to seek “protection” by lobbying for high tariff rates against foreign competitors in their industries. If, as the national conservatives argue, such protection benefits the general welfare, then the evidence should demonstrate higher productivity combined with lowering prices, but that isn’t what happened. As Douglas Irwin demonstrates in Clashing over Commerce : A History of US Trade Policy, productivity growth was no more rapid in the US over this period than it was in Great Britain, which had fewer natural resources, and whose population – and thus domestic consumer markets – grew at a decidedly slower pace. In fact, productivity increased for sectors not affected by trade, such as transportation, utilities, and services, while seeing a decline in agriculture and manufacturing. This is not to say that the scale of manufacturing did not increase; it did. However, the political nature of the imposed tariffs not only shielded American manufacturers from foreign competition, it also shielded them from the benefits of competition. Many disparate manufacturers crept onto the scene, producing less efficiently without creating necessary economies of scale. Innovation lagged behind nations such as Great Britain, because insular manufactories had no incentive to innovate. Conversely, in Great Britain, which imposed marginal tariffs when they bothered to impose any at all, manufacturing grew at an average annual rate of 2.2 percent between 1870 and 1913. During this same period, manufacturing employment grew at an average annual rate of 0.8%, and labor productivity within the sector grew at an average rate of 1.4%. Manufacturing employment increased by 30 percent during the period, with in increase of capital per worker of 76 percent. Hence, despite low tariffs, manufacturing played a huge role in Great Britain’s GDP growth during this era. By 1890, America and Germany had begun to catch up with Britain in large part, ironically, because their low tariff structures allowed for the flow of ideas, processes, and technology both inward and outward. While America invested in formal education that trained executives to tend to the business of manufacturing, Germany focused on vocational training that combined formal teaching with apprenticeships. All of this aside, the real drive behind America matching – then surpassing – Great Britain as an industrial/manufacturing force was the population boom of the 1890s. Recall our earlier look at the growth in non-traded sectors such as transportation and communication. Eventually, this allowed for national markets with goods and services that moved in every direction. As people moved back and forth more freely, transportation costs continued to decrease as demand drove improvements in transportation, allowing laborers to move away from rural areas to more densely populated urban ones. As more labor became available, large factories began to supplement the smaller workshops and foundries that had marked the beginnings of the manufacturing boom. Agricultural workers outnumbered their manufacturing counterparts in 1880 by a factor of three, but by 1920, the number of manufacturing workers had increased from 2.5 million to 10 million. Not all of this growth in the labor force – and the subsequent growth in GDP – was endogenous. Because of a relatively sudden surplus of available higher-wage jobs, 1890 marked the beginning of a large surge in immigration. Between 1870 and 1900, the native-born population doubled, due in large part to higher wages, increased living standards and access to the more advanced medical technology available in the urban areas that large segments of the population were flocking to. Beginning in 1890, the immigration also doubled, from some 7 million to 14 million. With the exception of San Francisco, the new wave of immigrants converged mostly upon the industrial cities of the Northeast and Midwest; cities such as Boston, Chicago, New York, Cleveland, Buffalo and Milwaukee. By 1920, 23 million children had been born to those 14 million immigrants, meaning that one-third of the population belonged to that community. Despite the tariff missteps of the 1870s which rendered productivity in manufacturing inefficient and depressed GDP, this population boom combined with the growth in non-traded sectors eventually complimented an industrial boom resulted in economic growth and increasing productivity; in fact, many economic observers consider this to be the beginning of the American Middle Class. This happened in spite of tariffs, not because of them, and as those such as Klein and Meissner  demonstrate, would have happened a lot sooner without them. The Folly of Smoot Hawley I have often observed that there is scarcely a bad idea that government will not adopt, and certainly none that they will fail to repeat. In many ways, the Smoot Hawley Tariff Act of 1930 was just an inverse reflection of late 1800s measures such as the McKinley Tariff Act of 1890. By the 1920s, American manufacturing had come to dominate global markets, engendering less political concern on the part of politicians. A fall in commodity prices in 1920, triggered by an overall post WWI slowdown of global commodity markets, resulted in an agricultural depression that predated the Great Depression and lasted nearly a decade and a half. In essence, a world no longer at war no longer needed massive amounts of foodstuffs from American farmers, who were now the victims of overproduction and overextended credit. Moreover, a large number of soldiers returned from European theaters of war to their farms, exacerbating the problem. The factors underlying this crisis for farmers should have been obvious for legislators, but rarely are politicians either cognizant of or concerned with proximate cause. Congress’ initial effort to deal with this issue was the McNary–Haugen Farm Relief Act, first introduced in 2024, which called for both a series of protective tariffs and a series of price supports to bolster the profits of farmers. It called for the creation of a Federal agency that would maintain agricultural price levels from 1910 -1914 by purchasing surplus crops, selling them overseas, and therefore taking any loss at taxpayer expense. President Coolidge, perhaps understanding that no market for crops meant no market for crops, vetoed the Act in 1927 and 1928, killing passage both times. Coolidge did commit to then-Commerce Secretary Herbert Hoover’s plan to have a farm board “stabilize” prices via cooperatives , so he can’t be given too much credit. The sorry plight of farmers became a major issue in the election of 1928, with both Democratic candidate Al Smith and Republican candidate Herbert Hoover pledging to revise the Fordney–McCumber Tariff of 1922 in order to create “tariff equality” for agricultural goods. With little daylight between the candidates and most voters outside of farmers enjoying a period of prosperity, the electorate opted for continuity and Hoover won. Soon after his victory, Ways and Means Chairman Willis Hawley announced a hearing on revising the tariff. As Irwin notes, some 1100 individuals provided statements to the committee, resulting in 10,684 pages of testimony that comprised 18 published volumes. Soon, Hawley joined forces with Utah Senator Reed Smoot, and instead of a revision of the Fordney-McCumber Tariff, they supplemented it with their own. Democrats vociferously opposed the bill; Tennessee Senator and future Secretary of State Cordell Hull opined that it would be a feeding trough for the worst logrolling and special interests, while Texas’ Cactus Jack Garner lambasted it as completely lacking in common sense or knowledge of any economic principle. Notwithstanding that they likely would have supported such measures if their party controlled the White House and Congress, they didn’t have the votes to impede it, and the measure passed on June 13, 1930. Hull was right; the Act was over 200 pages, and while its ostensible purpose was to protect American agriculture from foreign competition, it imposed as many duties on manufacturing imports as it did on agricultural.  In a telling mirror of current events, 1028 economists signed a statement published on the front page of the New York Times reflecting a consensus that the tariffs, especially those on manufactured products, were a mistake, as domestic factories at the time already supplied Americans with 96 percent of manufactured goods consumed, leaving exports as the only viable option for expansion and prosperity. Smoot dismissed such concerns as the idiotic prattling of eggheads with no understanding of practical realities, unlike the sugar men and other representatives of special interest with whom he had conversed. As we know, Smoot-Hawley shielded neither agriculture nor manufacturing from market realities. By not repealing and replacing Fordney-McCumber, it added to the tariffs already in place; it added a 15 percent tariff increase to the already extant Fordney-MCumber increase of 64 percent. Given exemptions and other negotiated relief, this resulted in average tariff rates of roughly 60 percent, and global markets responded. To say that the timing of this trade war was bad would be putting it lightly, as America’s stock market crash was already exerting recessionary pressures on global markets that were more closely integrated than global leaders would admit. Nations which instituted direct retaliatory measures against the US reduced their imports by an average of 28-33 percent, while some nations indirectly protested by reducing their imports from everyone, resulting in a decline of US imports to their nations by 15 to 22 percent. As Mitchener et al. observe, the scope of de facto retaliation exceeded official acts of retaliation. The Depression was its own beast which would have happened without any ill-advised trade war. The decline in global GDP would have hampered trade in any case. Because of this, national conservatives tend to argue that Smoot-Hawley was of little consequence, but a less insular outlook that acknowledges the impact global markets have on its members would reveal otherwise. The entire stated impetus of the tariff was to benefit farmers, who were suffering from credit defaults based on loans extended during WWI, the defaults themselves resulting from lower demand for American produce. Retaliatory measures exacerbated this even further; moreover, manufacturing – which had been doing brisk business in exports – also fell victim to retaliation, significantly weakening the one sector which had been doing well. As such, the resulting trade war had a significant impact on trade flows independent of other factors and exacerbated the decline in global – and American – GDP. Having gone into detail on previous instances of high tariffs failing to generate the desired results and instead creating a decline in GDP, it must be mentioned that another favorite argument of national conservatives and protectionists is that early revenue tariffs, as a function of Henry Clay’s “American System,” were responsible for the nation’s growth and economic development. The error  of this argument has been addressed ad  nauseum, including by myself at American Institute for Economic Research’s The Daily Economy. Therefore, those counterarguments, important and valid as they are, will not be repeated here.  A major error made by many when assessing tariffs, even some opponents, is viewing them linearly, as shocks to an otherwise perpetually fixed structure. In essence, while discussions (correctly) center around exogenous impacts such as distorting bilateral trade volume, disrupting supply chains or exacerbating inflationary pressures, few observers address that from a general equilibrium perspective, tariffs endogenously distort the interconnecting networks of global trade flows. In other words, they exert network effects with infinite non-linear differential coefficients impacting prices, availability of supply, and general welfare across the network. Simply put, they redirect exports in an inefficient manner which generally benefits no one. Even if this is not by the design of the politicians who impose tariffs, it is the inherent nature of tariffs to impact markets in this manner. Ceteris paribus, a thing can only be what it is. It is also inherent to tariffs that the higher they are, the more they will negatively impact GDP. It is just in the math of the matter. Let us take a brief look at that math: GDP = C + I + G + (X – M)  Where:  C = Consumer spending  I = Business investment  G = Government spending X = Exports M = Imports Once again, as a practical matter, imports have no direct impact on GDP, as the import variable simply cancels out the portion of consumption that measures spending on foreign products. However, as will soon be demonstrated, high tariff schemes can cause imports to have a negative, indirect impact on GDP. To begin, as one would expect, high tariffs should result in an increase in government revenue, which they may in the short-run. This may also result in an increase in government spending, which may generate future inflationary pressures as these added revenues invariably will not last (this, however, is another, even if related, discussion). Higher tariffs will lower the availability of imports, which is essentially meaningless for measuring direct domestic consumption, but does have an indirect impact via investment. As tariffs distort supply chains, increase the cost of inputs (and, as a function thereof, end prices) and generally decrease profit margins, resources are inefficiently shifted to less import-reliant domestic firms at the expense of choice and availability. Additionally, firms decrease investment when the risk of uncertainty increases, and global trade disputes are often rife with uncertainty. The subsequent higher prices, and hidden costs such as loss of employment in those import-reliant sectors, decreases consumption. Additionally, the retaliation of trade partners has an invariably negative impact on exports, further depressing investment, consumption, and the revenue needed to increase government spending without inflationary pressure. This has always been the impact of  high tariff rates, from the late 1800s, to the onset of the Great Depression. In terms of our current Administration, not only will the outcomes be predictably grim, but as it has added an even greater degree of uncertainty with its bombast, pauses and generally inscrutable whims, they may turn out to be worse than once might predict or imagine.     Tarnell Brown is an Atlanta based economist and public policy analyst. (0 COMMENTS)