In a nicely nuanced editorial, “JD Vance is Wrong: The Market Isn’t a ‘Tool’” Wall Street Journal, May 26, 2025, Matthew Hennessey, deputy editorial features editor of the Journal, took issue with Vice-President Vance, writing: On a recent podcast, New York Times columnist Ross Douthat asked Mr. Vance for an example of how his Catholicism influences his politics. His first instinct wasn’t to cite the social issues typically associated with conservative Catholic political concerns—abortion, immigration, sexual ethics—but to launch a missile at the market. “Well, I think one of the criticisms that I get from the right is that I am insufficiently committed to the capital-M market,” he answered. “The market is a tool, but it is not the purpose of American politics.” Later in his editorial Hennessey wrote: Markets, whether for cheap consumer goods or government bonds, can’t be bullied into compliance with a political agenda. They aren’t governed by the philosophies and desires of men like Mr. Vance. They are governed by the laws of economics the way the physical world is governed by the laws of gravity. You can moan about them all you want, you can lament the trade-offs they demand and the constraints they impose, but you can’t ignore or wish them away. No amount of political will or spilled ink can overrule them. Supply and demand are undefeated.   Note: Because of my contract with the Wall Street Journal, I am not allowed to quote more than 2 paragraphs from a Journal article until 30 days after it appears. But you can find a longer segment from Hennessey’s editorial here.   Vice-President Vance wrote a response, and I responded to him. Here are 2 paragraphs of my 3-paragraph response: Mr. Vance writes that President Trump has also “leveraged access to America’s markets” to get “fairer treatment from foreign partners” on trade, illegal immigration and illegal drugs. But that isn’t using markets as a tool, either; it’s coercively regulating markets to get the president’s desired results. Parenthetically, do Messrs. Trump and Vance really believe Canada’s government can substantially reduce the amount of fentanyl passing through its border with the U.S., which at 43 pounds in fiscal 2024 was 0.2% of the volume seized along the U.S.-Mexico border? Mr. Vance asks, “Should we allow enormous volumes of Mexican produce or Chinese autos to decimate productive American industries—or should we use tools like tariffs and trade remedies to protect them?” Allowing Chinese electric vehicles into the U.S. wouldn’t decimate domestic production, especially if Mr. Trump succeeds in ending EV mandates so that U.S. firms can do what they do best: produce gasoline-power vehicles and hybrids. Preventing people from buying cheaper foreign produce disproportionately hurts poorer families. The vice president unwittingly gives the game away: Tariffs, not markets, are the tool. You can find my whole response here. (0 COMMENTS)

The Theory of Moral Sentiments, by Adam Smith Relationships between people of different generations make up some of the most meaningful connections life has to offer. They shape deep-seated beliefs, goals, and priorities. In The Theory of Moral Sentiments [TMS], Adam Smith describes the human actor as one who is guided by relational experiences. Do relationships between the young and the old have a distinct role in moral formation? My experience suggests that the answer is “yes.” In The Theory of Moral Sentiments, Smith argues that one’s sense of right and wrong develops through interactions with other individuals who serve as reference points for moral approval or disapproval. In this framework, relationships are paramount, especially those that challenge our own view of self. Sympathy is the philosophical core from which readers can draw out the massive importance of human relationships for moral formation. We can never survey our own sentiments and motives, we can never form any judgement concerning them; unless we remove ourselves, as it were, from our own natural station, and endeavor to view them at a certain distance from us. But we can do this in no other way than by endeavoring to view them with the eyes of other people, or as other people are likely to view them…. We endeavor to examine our own conduct as we imagine any other fair and impartial spectator would examine it.1 Emotions and passions are experienced by the individual, but interacting with others and experiencing their approval or disapproval of felt sentiments results in sympathy (harmony of sentiments) or antipathy (disharmony of sentiments). Friendship, market relationships, and family all function as “mirrors,” and these interactions can teach one to engage rightly with his or her passions.2 Relationships between the old and the young provide opportunities to sympathize with an altogether different point of view. Smith reflects on several benefits that emerge from intergenerational relationships, which are chronicled below. The Season of Gaiety Youthful gaiety and weathered wisdom are exchanged in interactions between the old and the young. Children relish the smallest delights, spreading laughter and joy to those around them. Smith did not have children of his own but appears to have experienced the contagion of a child’s lighthearted countenance: Nothing is more graceful than habitual cheerfulness, which is always founded upon a peculiar relish for all the little pleasures which common occurrences afford. We readily sympathize with it: it inspires us with the same joy, and makes every trifle turn up to us in the same agreeable aspect in which it presents itself to the person endowed with this happy disposition. Hence it is that youth, the season of gaiety, so easily engages our affections.3 Sympathizing with a child’s cheerfulness changes the spectator’s view. He or she enters into the happy disposition of the child and sees challenges from a more agreeable perspective. Prudent Parenting Though delightful, the passions of youth require temperance for practical purposes. Gaiety is not known for its protective features. Parental wisdom, gained through age and experience, is an important juxtaposition to the lighthearted folly of youth. “The first lessons which he is taught by those to whom his childhood is entrusted, tend, the greater part of them, to the same purpose. The principal object is to teach them how to keep out of harm’s way.”4 Though less whimsical, the instruction of parents demonstrates the virtue of prudence.5 The weaknesses of youth, according to Smith, are folly and lack of self-command. One instance where Smith makes a critique of young people is in his discussion of friendship as a means of mutual good conduct and service. He writes, “The hasty, fond, and foolish intimacies of young people, founded, commonly, upon some slight similarity of character, altogether unconnected with good conduct… can by no means deserve the sacred and venerable name of friendship.”6 Smith’s critique may be generalized to a lack of concern for the good of the whole or service to someone other than self. Children begin in a state of utter self-obsession, having had few opportunities to see themselves through the eyes of their spectators. “A very young child has no self-command,” writes Smith, but “alarms” its nurse or parents to tend to its discomforts.7 Parents can temper these outbursts, but it is not until the child enters “the great school of self-command” among his peers that he begins to see his emotions as others do.8 The man of “constancy and firmness” has been trained by the great school to see himself as an impartial spectator would.9 Though capacity for virtue is not linear with age, young people are less practiced in sympathy and self-command, and they stand to benefit from relationships with those who are well-trained. A Balm for Despair Smith continues with a contrast between the dispositions of youth and old age. “We are charmed with the gaiety of youth, and even with the playfulness of childhood: but we soon grow weary of the flat and tasteless gravity which too frequently accompanies old age.”10 This comment contains a critique of those who allow themselves to be carried away by despair. The “gravity” which some fall into is not without remedy, though. Sympathy with the young reinvigorates a weary heart: That propensity to joy which seems even to animate the bloom, and to sparkle from the eyes of youth and beauty… exalts, even the aged, to a more joyous mood than ordinary. They forget, for a time, their infirmities, and abandon themselves to those agreeable ideas and emotions to which they have long been strangers, but which, when the presence of so much happiness recalls them to their breast, take their place there, like an old acquaintance, from whom they are sorry to have ever been parted, and whom they embrace more heartily upon account of this long separation.11 “Happiness is a passion that flows naturally from youth but must be cultivated in old age.” Happiness is a passion that flows naturally from youth but must be cultivated in old age, especially when one is plagued with infirmities. Entering into another’s experience through sympathy can offer a refreshing alternative to the habits of the mind. Deceptive Ambition Gaiety and joy are perhaps more visible than the virtues of the elderly, but those in old age are far from lacking in moral abilities. In The Theory of Moral Sentiments, Smith reflects upon humanity’s preoccupation with ease, utility, and distinction through the parable of the poor man’s son. During his youth, the poor man’s son wants to attain the conveniences of the rich. He believes that a palace, a carriage, and personal servants will provide him contentment and proceeds to work tirelessly to attain these luxuries. In the heat of ambition, the poor man’s son “sacrifices a real tranquility that is at all times in his power” and abandons “humble security and contentment.”12 In old age, the poor man’s son discovers that “wealth and greatness are mere trinkets of frivolous utility,” providing no more peace of mind than a tweezer-case.13 Smith admits that most men fall for the same empty promises as the poor man’s son. They imagine that all the trinkets of the rich man are the means to greater happiness. Foolish ambition—a dangerous vice—loses its appeal with the man of old age. But in the languor of disease and the weariness of old age, the pleasures of the vain and empty distinctions of greatness disappear. To one, in this situation, they are no longer capable of recommending those toilsome pursuits in which they had formerly engaged him. In his heart he curses ambition, and vainly regrets the ease and the indolence of youth, pleasures which are fled for ever, and which he has foolishly sacrificed for what, when he has got it, can afford him no real satisfaction.14 Experiencing weakness through age and disease results in wisdom that the young, ambitious man lacks. Smith does not condemn all ambition—it motivates people to cultivate, build, and invent. Despite its benefits, Smith maintains the view that ambition is a “deception” of which young people must be warned.15 The elderly person who has tasted what life has to offer guides the ambitious young man who is mistaken about the source of happiness. The narrative of the poor man’s son offers Smith’s readers the chance to sympathize with the character’s disappointment and proceed soberly. Smith’s Regard for the Elderly Beyond highlighting the differences between the old and the young, Smith makes a strong claim regarding the dignity of the old. He says that one’s treatment of the elderly indicates virtue: “The weakness of childhood interests the affections of the most brutal and hard-hearted. It is only to the virtuous and humane, that the infirmities of old age are not the objects of contempt and aversion.”16 It is easy to respond kindly to a child, but the virtuous response may not be natural. Sympathy transforms our natural inclinations and aversions, making it possible to move past a transactional approach to relationships. For more on these topics, see The Theory of Moral Sentiments Reading Guide. AdamSmithWorks.org. Dan Klein on The Theory of Moral Sentiments. EconTalk. “Vernon Smith on Adam Smith and the Human Enterprise,” by Alain Marciano. Econlib, Jan. 6, 2025. I believe Smith would encourage individuals to cultivate relationships across generations as part of their moral development. The benefits of such relationships illustrate Smith’s view that moral faculties are developed in social settings through the exchange of sympathy. Each season of life comes with sentiments that complement the emotions and passions of others, giving each child, parent, grandparent, and mentor a part to play in cultivating virtue. Footnotes [1] The Theory of Moral Sentiments, by Adam Smith. 110.2 [2] TMS 110.3 [3] TMS 42.3 [4] TMS 212.1 [5] “The care of the health, of the fortune, of the rank and reputation of the individual, the objects upon which his comfort and happiness in this life are supposed principally to depend, is considered as the proper business of that virtue which is commonly called Prudence” (213.5). [6] TMS 225.18 [7] TMS 145.22 [8] TMS 145.22 [9] TMS 146.25 [10] TMS 246.21 [11] TMS 42.3 [12] TMS 181.8 [13] TMS 181.8 [14] TMS 182.8 [15] TMS 183.10 [16] TMS 219.3 Anna Claire Flowers is a Ph.D. student in Economics at George Mason University. She earned a BA in Public Administration and a BA in Economics from Samford University. Her research interests include family economics, in particular the economic significance of family relationships and the economic factors that influence family decision-making. As an Amazon Associate, Econlib earns from qualifying purchases. (0 COMMENTS)

James Buchanan Virginia Political Economy was born in the foyer of the Social Science Building at the University of Chicago early in 1948. In a casual conversation with a fellow graduate student, Warren Nutter, I discovered that we shared an evaluation and diagnosis of developments in Economics, the discipline with which we were about to become associated as licensed practitioners. We sensed that Economics had shifted, and was shifting, away from its classical foundations as a component element in a comprehensive moral philosophy, and that technique was replacing subject. We concurred in the view that some deliberately organized renewal of the classical emphasis was a project worthy of dreams. –James Buchanan. “Virginia Political Economy: Some Personal Reflections.”1 In James M. Buchanan and Liberal Political Economy,2 Richard Wagner argues that the scholarship of James Buchanan was an effort to update the classical political economy of Adam Smith and John Stuart Mill with the tools of modern neoclassical economics. “Normatively,” Wagner (2017, 58) writes, “Buchanan was a democrat who embraced the democratic ideology of self-governance.” He recognized “democracy as simultaneously desirable and subject to a degradation that required conscious effort to resist.” This constitutional project required both efforts to unearth the governing dynamics of alternative institutional arrangements and the educational effort to prepare future scholars with the necessary intellectual background to engage in the ongoing conversation. Buchanan was identifying the misdirection that public economics and public finance were going in the post-World War II reconstruction of the discipline. Economics had adopted a utilitarian and elitist presumption which was comfortable with the notion of governing elites acting for the good of society. Government was seen as a corrective, policy was a tool to achieve ideal outcomes, and economics was the science of administration that would aid in that task. Buchanan was uncomfortable with that set of presumptions from the start. Instead, he saw the need for the examination of the institutional infrastructure within which policy decisions were to be conceived and implemented. In the first major publication of his career, Buchanan argued that economics cannot be divorced from political philosophy. Before we can decide how to finance government activity, we must first determine what activities are to be in the domain of the state. We must first have a theory of the state. Buchanan rejects the position of some classical economists, such as John Baptiste Say, that state activity is always unproductive. He sees the benefits of collective action of the state, but Buchanan is also aware of the dangers of the state. Throughout his career, he wrestled with the question of how the protective and productive state can be empowered, while constraining the predatory state from emerging and leading to democratic degradation. From Dream to Reality In the late 1950s, Buchanan found the opportunity to promote his scholarly dream and to prepare the next generation to continue in this research vein. As Buchanan (1987) recalled it: … in early 1957, Warren Nutter and I found ourselves in a position to actuate the idea we had discussed. We had simultaneously joined the faculty at the University of Virginia in Charlottesville, and we had more or less inherited a leadership role. With enthusiastic support from the then-minimal university administration, and notably from William Duren, then Dean of the Faculty, we established the Thomas Jefferson Center for Studies in Political Economy and Social Philosophy. The Thomas Jefferson Center for Studies in Political Economy and Social Philosophy [TJC] was to serve first and foremost as a home for a community of scholars who wished to explore the operation of a social order built on individual liberty, and second, “as an educational undertaking in which students will be encouraged to view the organizational problems of society as a fusion of technical and philosophical issues.” The problem as Buchanan, and the others associated with the TJC, saw it was that the “social science disciplines are rapidly becoming more and more specialized and compartmentalized.” And, as a result, “young scholars, both graduate students and beyond, are encouraged to devote most of their intellectual activity to narrow and limited subject matter and methodological fields. Great emphasis is placed upon the mastery of technical tools. Breadth in scholarship is largely eliminated by this emphasis, and the student remains ignorant of contributions in the related social science disciplines and in social philosophy.” This would not be a problem if economics was a purely technical discipline akin to mechanical engineering. But it decidedly is not. In fact, intelligence in democratic action relies on tackling the major problems of the social order from a multiplicity of disciplines and differing perspectives. The exclusive focus on technical proficiency comes with a cost. Buchanan asked, “How can our free society expect to survive unless it produces a continuing line of new thinkers who understand, appreciate, and can implement the philosophy of the free society in this rapidly changing world.” In the October 15, 1958 edition of The University of Virginia Newsletter announcing the founding of the Thomas Jefferson Center, Buchanan stated plainly that the center “strives to carry on the honorable of ‘political economy’—the study of what makes for a ‘good society.'” He also elaborated further what the task of the political economist must be. They must first use the technical tools of economic reasoning to understand and assess how alternative institutional arrangements either hinder or promote productive specialization and peaceful social cooperation. But the political economist cannot be content stopping with that vital exercise. They must “try to bring out into the open the philosophical issues that necessarily underlie all discussions of the appropriate functions of government and all proposed policy measures.” Joining Buchanan in this research and educational mission were not only Warren Nutter, but also Ronald Coase, Gordon Tullock, and Leland Yeager. These individuals and their graduate students initiated a paradigm shift in economics, law, and political science over the next decades, and in so doing, reinvigorated the discourse in political economy and social philosophy. Alas, this academic beacon could only shine for so long at the University of Virginia [UVA]. By the late 1960s its founders had scattered far and wide. In the narrative told by members of the Thomas Jefferson Center, this diaspora was the consequence of ideological persecution by members of the faculty outside of economics and their partners in the upper administration. But the research and educational program and its lofty goal of the reclamation of the practice of political economy at its finest hour had already achieved proof of concept. Social philosophy could indeed be practiced from within the disciplinary home of economics, even during the high modern period of scientism. The moral sciences could be envisioned once more as a progressive research program. Buchanan in Blacksburg As the TJC fell out of favor, an enterprising graduate of UVA and the TJC, Charles Goetz, who had moved to Virginia Polytechnic Institute, saw an opportunity. He understood what was lost by the collapse of the TJC project, and he was able to persuade both Tullock and Buchanan to relocate to VPI, and to create the Center for the Study of Public Choice (CSPC). VPI’s administration sought to establish a world-class economics department, and the opportunity to attract Buchanan and Tullock fit perfectly with that desire. Buchanan would have a considerable role in shaping the curriculum. In a memo to Dean Mitchell proposing the establishment of the CSPC, Buchanan sought to lay out the basic vision of this paradigm shift in economics and political science. The public choice perspective, Buchanan states, “involves looking at problems with the simple tools of economic theory.” Why should there be a research and graduate education center devoted to exploring this simple and elementary mode of reasoning through problems in non-market settings? “Because,” Buchanan was quick to add, “the intellectual establishment, which includes almost all of academia, almost all of the media, a great many political leaders, and far too many students, has got away from the simple idea about the political structures that were indeed elementary ideas to our Founding Fathers.” “If we call upon the government to provide goods and services in the public sector as part of our depiction of the ‘good society’, we must examine what public goods are going to be produced, how are those public goods going to be produced and for whom, and in what way will they be financed to ensure both cost effectiveness and justice in the burden to be borne.” Similar to the project at the TJC, the proposed CSPC was to focus its analytical attention on the constitutional rules of the social game we are playing. Once again, one cannot pursue the technicalities of public finance without postulating a theory of the state. We cannot, in other words, do economic science without thinking seriously about political philosophy. If we call upon the government to provide goods and services in the public sector as part of our depiction of the ‘good society’, we must examine what public goods are going to be produced, how are those public goods going to be produced and for whom, and in what way will they be financed to ensure both cost effectiveness and justice in the burden to be borne. In the 1960s, the research and educational program of the TJC was attacked for being ideologically tainted with classical liberalism and modern-day conservativism. In the 1970s, the CSPC would be criticized on methodological grounds for not employing advanced tools in mathematical and quantitative analysis theoretically and empirically. These heated methodological battles resulted in another dissolution of the institutional homeland. In the early 1980s, as the situation became intolerable, Buchanan et al moved to a more hospitable environment, George Mason University (GMU). Like VPI a decade earlier, GMU had just established its Ph.D. program in economics, and thus Buchanan and his colleagues at CSPC would have considerable latitude in shaping the program upon their move from the hills of southern Virginia to the suburbs of Washington, D.C. Simply put, CSPC closed the doors in Blacksburg and opened new doors in Fairfax, keeping the name and most of the staff. GMU continued to stress public choice as a field of specialization and train students for careers in business, the public sector, or academia. The breadth of economic training was emphasized over technical training for the sake of technical training. There were two major differences, however, from CSPC in the 1970s, and it made the program at GMU more akin to the original aspiration of the Thomas Jefferson Center. First, CSPC joined a department that already had the Center for the Study of Market Processes—a research and graduate education program greatly influenced by the work of Ludwig von Mises, F. A. Hayek, and Israel Kirzner. Second, Buchanan was deeply immersed in pursuing questions of social philosophy and had ceased teaching his courses in public finance, devoting his teaching and research interests to constitutional political economy and economic and social philosophy. By 1980, it was crystal clear what the blind spots induced by the Samuelsonian revolution in economics were. The utilitarian, engineering, and elitist presumptions had distorted the discipline beyond recognition to the practitioner of political economy. Buchanan, in his 1964 Southern Economic Association presidential address, had warned about the intellectual dry rot of the allocation as opposed to exchange approach, and the static equilibrium model as opposed to the dynamic process of higgling and bargaining and the emergent properties of the invisible hand. To avoid the pitfalls, the political economists had to acknowledge the subjectivity of value, costs, expectations, and knowledge that is revealed only in the act of choice, and that choice is always within an institutional context that has its own unique reward and penalty structure. Institutions matter. Buchanan’s research program to move to the constitutional level of analysis was bolstered at GMU by two exogenous shocks to the intellectual universe he occupied. First, in 1986 he was awarded the Nobel Prize in Economic Science. Second, the emerging collapse of communism in East and Central Europe and the fiscal crisis of the social democratic welfare states in Western Europe. Institutional transformations were occurring throughout the globe, and Buchanan was a significant theorist of the institutional infrastructure for a productive and peaceful social order. As we have seen, Buchanan both at the TJC and at CSPC made reference to the constitutional project of the American Founding. It is important to remember that in Federalist #1, Alexander Hamilton tells his readers that it is up to them to determine whether the constitution of society that they live under will be a function of accident and force, or of reflection and choice. Clearly in the implied social dilemma, intelligence in collective action requires us to choose reflection and choice as our approach to constitutional design. Buchanan agreed with that, and his research program as laid out in The Calculus of Consent, The Limits of Liberty, and The Reason of Rules is the elaboration on this reflection and choice of the rules of the social game under which we live better together. A genuine institutional economics, then, is about endogenizing the rule formation process and incorporating that into economic analysis. This project had great synergy with the approach of F. A. Hayek, as well as interesting tensions between Hayek’s spontaneous order approach to institutional evolution and Buchanan’s approach to freedom through constitutional construction. But once more, I want to draw your attention to the original depiction of the research and educational mission of the TJC—to use the tools of economic reasoning to explore how alternative institutional configurations impact the ability of individuals to pursue productive specialization and realize peaceful social cooperation through exchange. Moreover, Buchanan’s original program aimed to bring to the forefront the philosophical issues associated with government action, the questions of liberty and autonomy, as well as peace and prosperity. We cannot do economics without philosophy, and we cannot do philosophy without economics. The separation of these disciplines in the 20th century came with a significant cost intellectually and practically, and little benefit outside the arena of academic gamesmanship. We cannot afford this. Onward and Upward For more on these topics, see “A ‘Window’ into Modern Economics: The James M. Buchanan Archives,” by Peter Boettke. Econlib, March 13, 2024. Don Boudreaux on Buchanan. EconTalk. “What Should Economists Do? A Historical Perspective,” by Alain Marciano. Econlib, January 6, 2025. If at UVA, the TJC ran into trouble after a decade due to ideological opposition outside of economics, and the CSPC ran into opposition from within economics due to methodological considerations after roughly a decade, at GMU the combination of CSPC and CSMP (now Mercatus) has maintained a sustained effort in research and training in political economy and social philosophy for over 40 years. All the twists and turns, triumphs and tragedies that have followed over the past 60+ years have made possible the survival of a cadre of moral philosophers in the age of scientism and created the space for a progressive research program in a genuine institutional economics which adds in the continuing practice of the grand tradition of political economy. May it long continue. Footnotes [1] From the James M. Buchanan papers collection in the George Mason University library. Richard Wagner, James M. Buchanan. “Virginia Political Economy: Some Personal Reflections”, 1987. Lexington Books, 2017. Box: 220, Folder: 1. [2] James M. Buchanan and Liberal Political Economy: A Rational Reconstruction, by Richard E. Wagner. *Peter J. Boettke is University Professor of Economics & Philosophy, George Mason University, Fairfax, VA 22030. For more articles by Peter J. Boettke, see the Archive. As an Amazon Associate, Econlib earns from qualifying purchases. (0 COMMENTS)

Can the four-year degree be saved? Not for most learners, I would argue. Once less expensive alternative pathways become clearer and surer, a full-on degree will seem impractical… But why does the degree have to be the only product that colleges sell? And why can’t the American Dream be achieved by other college products, other constructs of career preparation and adultification? —Kathleen deLaski, Who Needs College Anymore?1 (page 166) For many years, America’s leaders adopted the goal that college should be for everyone. Kathleen deLaski says that it is time to provide a different path for young people to follow to find their place in the workforce. DeLaski has spent decades in the field of alternative approaches to workforce development. Her focus is almost entirely on how young people can prepare for jobs. The larger question of how college might lead to a “life well lived” is largely outside the scope of her book. DeLaski sees traditional college as unsuited to large segments of the population: I predict that the silos between workforce training, college, and corporate training will essentially merge into one edu-training sector, but the umbrella may itself be called “college” and the degree may be one of many offerings in the array of learning and training products. (page 5) She notes that the halo around higher education has been tarnished in the past decade, particularly by the rise of student debt and the disruption of the pandemic. In 2020, at the height of the pandemic, a Strada Education Network study found that a surprising 62 percent of Americans preferred shorter-term skills training and nondegree credentials to degree programs. (page 24) She sees workers of the future as identified not by a single degree, but by a set of skills that she refers to as a “skills wallet.” A new age is dawning: the “skills-first” age. And, I will argue, it is already beginning to challenge our college degree culture…. The skills-first movement will push us into the future. As employers hire more of their professional workforces without requiring degrees—and I believe they will eventually, out of necessity—the education landscape will change dramatically. (pages 15-17) Employers are becoming clearer about the particular skills that they want, even as the desired skills may change. This decade has brought and will bring the biggest, most sudden, and broadest shift in skills demand ever. LinkedIn reports that specific skills on job postings changed by 25 percent between 2015 and 2022…. And this was before it was estimated that 40 percent of all work hours could require new or different tasks and skills over the coming decade because of AI. (pages 33-34) In this environment of rapid change, one needs more than just narrow skills. I tell students to build some verifiable “started hard skills,” maybe with industry certifications, but also find ways to demonstrate “starter durable skills” in creative thinking, analytical thinking, collaboration, communication, curiosity, resilience, or motivation. (page 54) Calling these “durable skills” rather than character traits struck me as awkward terminology, a problem that plagues the book. In this case, the issue is more than just semantic. One claim that college administrators might make is that students build these character traits in the process of obtaining the traditional college degree, and that the alternatives that deLaski advocates will fail to do so as effectively. For alternatives, deLaski lists five types of models: Making skills visible; Validating “job-ready” skills; Experience sampling; Micro-pathways; and Embracing the weave. Her terms are far from self-explanatory. Making skills visible means that an educational institution must identify the skills that employers desire and be able to connect course outcomes to obtaining those skills. Validating those skills means passing a particular examination, such as a test on computer network management or some other industry-recognized exam. Experience sampling means combining classroom learning with real-world work experience. Micro-pathways are shorter-term educational experiences that do not require committing to two years or more of college before joining or returning to the work force. The “weave” is a longer-term commitment to move back and forth between classroom and work. Fortunately, deLaski does not rely on theory to articulate these models. Her book is dominated by descriptions of people and programs that illustrate how they work in practice. Still, we have the paradox embodied in what deLaski calls “competing narratives.” Narrative 1: College isn’t worth it, and it’s become unaffordable and too risky. Narrative 2: 72% of “good jobs” require college. (page 134) The second narrative can be used to justify “college for everyone.” But the fact that close to half of all students who start college fail to graduate supports the first narrative. “Suppose that we grant that college today is suitable for the most capable, affluent students. Among the rest, who should attend?” Suppose that we grant that college today is suitable for the most capable, affluent students. Among the rest, who should attend? She suggests narrowing the focus to four groups: Class transporters; Legitimacy label seekers; Degree and license workers; Longing-to-belongers. (page 146) Once again, her terminology seems opaque. Class transporters are people who come from outside of the upper middle class who might benefit from the cultural learning that can be acquired at college. Legitimacy label seekers are those who believe that at some point in their lives they will encounter employers who want to see a college degree. Degree and license workers are people who need an advanced degree to get into their desired profession. And longing-to-belongers are young people who want to be part of a college community, with shared experiences and lifelong friendships. For more on these topics, see Michael Munger on the Future of Higher Education. EconTalk. Bryan Caplan on the Case Against Education. EconTalk. “Educational Freedom,” by Arnold Kling. Econlib, April 1, 2013. With the exception of the degree and license workers, these are intangible reasons for attending college. The alternative models for obtaining skills do not address these intangible benefits. But I would say that there may be an opportunity for new enterprises to provide the cultural learning or community. And society itself may lose its prejudices against people who skip the college path. A question that lingers is whether higher education will adapt or be replaced. I came away from this book thinking that without the lavish government support that colleges and universities currently enjoy, replacement would be the more likely scenario. Footnotes [1] Kathleen deLaski, Who Needs College Anymore? Imagining a Future Where Degrees Won’t Matter. Harvard Education Press, 2025. *Arnold Kling has a Ph.D. in economics from the Massachusetts Institute of Technology. He is the author of several books, including Crisis of Abundance: Rethinking How We Pay for Health Care; Invisible Wealth: The Hidden Story of How Markets Work; Unchecked and Unbalanced: How the Discrepancy Between Knowledge and Power Caused the Financial Crisis and Threatens Democracy; and Specialization and Trade: A Re-introduction to Economics. He contributed to EconLog from January 2003 through August 2012. Read more of what Arnold Kling’s been reading. For more book reviews and articles by Arnold Kling, see the Archive. As an Amazon Associate, Econlib earns from qualifying purchases. (0 COMMENTS)

[ Note: This article was originally published on March 10, 2025 by Scott Sumner at his substack under the title “False Dawn: George Selgin on the New Deal.”] A Book Review of False Dawn: The New Deal and the Promise of Recovery: 1933-1947, by George Selgin.1 Franklin Delano Roosevelt’s New Deal policies had three goals: recovery, relief, and reform. George Selgin has produced an excellent new book that focuses on the first of those three goals—recovery. Did New Deal policies succeed in getting the United States out of the Great Depression? The short answer is no. But False Dawn: The New Deal and the Promise of Recovery 1933-19471 is far from being an anti-Roosevelt polemic. Selgin views Roosevelt’s policies as a mixed bag, some of which did indeed aid the recovery. Unfortunately, some of the policies were worse than useless and actively inhibited recovery. As a result, the U.S. economy remained deeply depressed as late as mid-1940, when the European War intensified. I have spent much of my life researching the causes of the Great Depression. Most of my work has focused on two issues: the impact of the global gold market on aggregate demand, and the impact of Roosevelt’s high wage policies on aggregate supply. Selgin looks at a much wider range of New Deal policies, and I expect this highly readable book to eventually become the standard reference on the macroeconomic effects of the New Deal. I will begin by looking at the impact of the New Deal on aggregate demand. Section 2 will look at the impact of the New Deal on aggregate supply. I will conclude by discussing why you should read Selgin’s book. 1. The New Deal and Aggregate Demand Roosevelt had two primary macroeconomic goals. During his campaign, he publicly committed to reflating the price level back up to its 1926 level. In addition, he hoped to boost employment and output back up from the deeply depressed level of early 1933. Surprisingly, however, FDR was skeptical of both of the two most important policy tools now favored by macroeconomists, fiscal stimulus and money printing. Figure 1 shows the budget deficit as a share of GDP: Figure 1. Federal Surplus or Deficit as a Percent of Gross Domestic Product Notice that the budget moved from a surplus in 1929 to a deficit of about 5% of GDP under President Hoover and then showed no further enlargement until World War II. Contrary to his reputation, Hoover was an activist president. And most of that was discretionary fiscal stimulus, as the “automatic stabilizers” were quite small back in 1929, when federal spending was barely 3% of GDP. Many economists are aware that FDR campaigned on the promise of a balanced budget and ended up running budget deficits. I suspect that many of these economists assume that FDR was a closet Keynesian, and that fiscal stimulus was an important part of the New Deal. Selgin shows that this is a myth; FDR was sincerely opposed to deficit spending during peacetime, and did not significantly increase the budget deficit until WWII. Whatever success the New Deal might have had, it was not due to fiscal stimulus. A better argument can be made in favor of FDR’s monetary policies. But even in this case it was not monetary policy in the modern sense of the term. Instead, monetary conditions improved mostly as a result of three factors: a. A stabilized banking system b. Dollar devaluation c. Gold inflows from Europe FDR took office on March 4, 1933, in the midst of a severe banking crisis. Selgin showed that the major New York banks were actually in decent shape, it was the Federal Reserve banks that were in danger of insolvency, as nervous investors exchanged currency for gold due to fear of dollar devaluation. Prior to taking office, FDR had been unwilling to commit to keeping the United States on the gold standard. In those days, there was a four-month period between the November election and the inauguration day. Selgin suggests that Hoover and FDR each share some blame for the situation spiraling out of control during this extended interregnum, but the end result probably worked in FDR’s favor. By inauguration day, both economic and financial conditions had gotten so bad that Roosevelt had a relatively free hand to try some fairly radical experiments. Unfortunately, Roosevelt didn’t seem to have a clear idea as to which experiments would be most effective. The initial bank holiday relied heavily on ideas provided by banking experts that had been struggling to put together a similar plan during the final days of the Hoover administration. FDR strongly opposed federal deposit insurance, and Congress basically forced the president to accept FDIC as part of a broader banking reform package. (FDR was right to worry that deposit insurance would make banks more reckless.) Roosevelt’s decision to increase the dollar price of gold from $20.67/ounce to $35/ounce did provide a powerful stimulus to the economy. The stimulus would have been even greater if the increase in the nominal (dollar) size of the gold stock had been monetized. But FDR was opposed to anything that smacked of “printing money,” and thus the economy had to rely mostly on increased money velocity during the early stages of the recovery. Fortunately, velocity did increase due to a more stable banking system and higher inflation expectations generated by dollar devaluation. During the mid to late-1930s, additional monetary stimulus was provided by gold inflows from Europe, which boosted the monetary base. But these gold inflows can hardly be viewed as New Deal policies; rather they reflected the way that the U.S. economy benefited from increased war fears in Europe. Selgin views FDR’s dollar devaluation as a net positive for economic recovery, despite some reservations about the messy way that it was handled. Like most economists, Selgin agrees with Keynes’s remark that George Warren’s gold buying program of late 1933 was something like a “gold standard on the booze”, with its daily adjustments in the federal buying price of gold. I’m one of the few (the only?) economists that have defended the program. But this is a detail. I find Selgin’s overall evaluation to be quite convincing. FDR was able to end the contraction and push nominal spending higher through policies that stabilized banking and devalued the dollar, but also missed a number of opportunities to generate a faster recovery through the use of standard monetary and fiscal policy tools. In the end, FDR failed to reach his 1926 price level target, indeed the price level remained below pre-Depression levels until WWII. Nonetheless, the boost given to aggregate demand would normally have generated a satisfactory recovery, if not impeded by other factors. Similar nominal GDP growth after the 1920-21 depression did produce a fast recovery. Instead, the 1930s economy remained deeply depressed due to counterproductive supply-side policies, which I’ll consider in the next section. 2. The New Deal and Aggregate Supply In my work on the Depression, I focused on a single supply-side policy, FDR’s various programs to boost nominal wage rates. But Selgin points out that these wage initiatives were part of a much broader attempt to create private sector cartels. The Agricultural Adjustment Act (AAA) tried to restrict farm output and boost prices. The National Industrial Recovery Act (NIRA) tried to achieve the same goal in other industries. These programs are an almost perfect illustration of the fallacy of reasoning from a price change. It is true that depressions caused by a lack of aggregate demand are often associated with falling prices. But that does not mean that a policy of raising prices through supply restrictions will create an economic boom. It would be like arguing that because people who own Rolls Royce’s are usually wealthy, buying a Rolls Royce is a good way to get rich. The AAA and the NIRA used a mixture of carrots and sticks to encourage farmers to reduce output and raise prices, while manufacturers were encouraged to reduce both output and hours worked, while sharply increasing hourly wage rates. Today, it may seem bizarre to read theories that the Great Depression was caused by a general overproduction that led to falling prices, but this is what happens when you begin reasoning from a price change. You can convince yourself that the solution to a depressed economy is to produce even less! I don’t know of any economist who has done more than George Selgin to warn people of the fallacy of reasoning from a price change. His book Less Than Zero2 is one of the best explanations of what can go wrong with price level targeting, and why NGDP targeting is a superior approach to policy. Surprisingly, some modern economists have claimed that the NIRA might have had an expansionary effect by raising inflation expectations. But higher inflation is expansionary when generated by more aggregate demand, not when generated by less aggregate supply. Selgin emphasizes the negative effects of cartelization programs such as AAA and NIRA, which were probably the single biggest factor holding back the recovery. In percentage terms, prices rose more rapidly after the 1929-33 slump than after the 1920-21 contraction (see Figure 2). Figure 2. Index of Wholesale Prices for the United States But the output recovery was far more impressive after 1921. The post-1933 rise in both the wholesale price level and NGDP was more than sufficient to produce a satisfactory recovery, if not interrupted by adverse supply shocks like the AAA and the NIRA. Notice in Figure 3 below how industrial production stagnated for two years after the President’s Reemployment Agreement was announced in late July 1933. That NIRA policy increased nominal wages by roughly 20% over two months, aborting a promising recovery that had been triggered by dollar devaluation. After the NIRA was ruled unconstitutional in May 1935, a robust recovery resumed until interrupted by another wage shock in late 1936 and 1937, partly related to aggressive unionization drives enabled by the Wagner Act. Figure 3. Industrial Production: Total Index The 1937-38 depression was a major setback for FDR. In addition to the wage shock, Selgin points to a wide array of policies that created headwinds for the business community, such as the new undistributed profits tax which discouraged firms from using retained earnings to finance investment projects. There was also plenty of hot rhetoric, including administration complaints that a capital strike by economic royalists was to blame for the 1937-38 depression. Aggregate demand declined in late 1937 due to policies such as gold sterilization and higher reserve requirements. Even though prices remained well below pre-Depression levels, the price level increases of 1936-37 had led to fears that speculative excess would lead to another 1929-type crash. FDR seemed to want the impossible, for prices to return to 1926 levels without any sort of inflation. Keynesians often blame fiscal austerity for the 1937 slump, but there’s no evidence that the fiscal contraction was anywhere near big enough to explain one of the deepest recessions of the 20th century. Indeed, contrary to the prediction of many Keynesians, a similar austerity policy in 2013 didn’t produce any slowdown in the economy at all, despite also occurring during a zero lower bound period, when fiscal austerity is supposed to be especially contractionary. And much of the 1937 “austerity” reflected the fact that the special 1936 veteran’s bonus payment, always understood to be a one-off policy, was not repeated again in 1937. There is much more of interest. I especially enjoyed Selgin’s coverage of the unexpected prosperity in the immediate postwar period, a period that I knew little about. Keynesians predicted another post-war depression, as the government sharply reduced spending on military operations. Instead, the economy boomed. Selgin convincingly shows that the 1940s economy benefited greatly from New Deal regulatory policies being replaced with more market-oriented pro-business policies. 3. Why You Should Take This Book Seriously I found Selgin’s book to be quite persuasive. But will mainstream economists actually give it a chance? Franklin Roosevelt is generally regarded as a liberal hero, and one of the greatest presidents in U.S. history. In the past, many of the people challenging FDR’s legacy have been right wing cranks. Although Selgin is not a rigid ideologue, he shares my moderate libertarian leanings. So why should a center-left economist take this book seriously? Let’s start from the fact that John Maynard Keynes is arguably the hero of this book. In many key respects, Selgin’s views of the New Deal closely parallel those of Keynes. Keynes also would have preferred that FDR stuck to normal fiscal and monetary stimulus, and eschewed the more radical cartelization policies, as well as the anti-business rhetoric which created uncertainty and reduced what Keynes called the animal spirits of the business community. The second point to consider is that Selgin is not uniformly negative in his appraisal of FDR’s recovery policies—he suggests that banking reform and dollar devaluation did help to boost aggregate demand. The third point to consider is that Selgin repeatedly emphasizes that his somewhat skeptical take on the recovery aspects of the New Deal do not constitute a negative judgment of the overall program, which included relief and reform. A progressive could easily conclude that the New Deal was a net plus due to lasting reforms such as the Social Security Act and the SEC, as well as relief programs for the unemployed, even if it failed to produce a satisfactory recovery in production and employment. “If FDR’s New Deal was effective, why wasn’t it repeated in 2009?” It’s also worth considering the fact that during the (milder) Great Recession of 2008-09, which is the modern slump that most resembles the Great Depression, neither Democratic politicians nor center-left economists seemed all that interested in creating another New Deal. Instead of cartelization of the economy, they opted for policies rejected by FDR, such as fiscal stimulus and printing money (i.e., Quantitative Easing). If FDR’s New Deal was effective, why wasn’t it repeated in 2009? This book is not at all the sort of polemic that some center-left readers might imagine. It’s perfectly okay to view FDR as a liberal hero who won WWII, saved us from fascism, and helped to create a more humane society though various social insurance programs, and still regard the New Deal as being ineffective in promoting recovery. After all, most other developed economies recovered more quickly than the United States, with the notable exception of France, which had an even more dysfunctional NIRA-type program. Many years ago, some progressives gave James Hamilton a hard time for arguing that the New Deal programs like the AAA and the NIRA were counterproductive. Here’s how he responded: “I openly confess to believing that government policies that were explicitly designed to limit manufacturing, agricultural, and mining output may indeed have had the effect of limiting manufacturing, agricultural, and mining output.” For more on these topics, see Robert Higgs on the Great Depression. EconTalk. Hoover’s Economic Policies, by Steven Horwitz. Concise Encyclopedia of Economics. “Revisiting the Great Depression,” by Arnold Kling. Econlib, January 4, 2016. After some recent electoral setbacks, more thoughtful progressives are rethinking public policy issues. While they continue to favor social insurance, some center-left pundits are beginning to emphasize the need for policies that create more “abundance,” which inevitably leads to a focus on the importance of supply-side reforms. I strongly encourage those pundits to read Selgin’s book, which contains many lessons of relevance to today’s world. Footnotes [1] George Selgin, False Dawn: The New Deal and the Promise of Recovery 1933-1947. University of Chicago Press, 2025. [2] George Selgin, Less Than Zero: The Case for a Falling Price Level. Cato Institute, 2018. *Scott Sumner is Professor Emeritus in Economics at Bentley University in Waltham, Massachusetts, and Research Associate on monetary policy at the Mercatus Center. He earned his Ph.D. in economics at the University of Chicago in 1985. He blogs both at EconLog and also at his personal blog at substack, The Pursuit of Happiness. As an Amazon Associate, Econlib earns from qualifying purchases. (0 COMMENTS)

In honor of EconTalk’s 1,000th episode, host Russ Roberts reflects on his long, strange journey from pioneer of the podcast format to weekly interviewer of leading economists, authors, and thinkers. Hear him answer your–and Chat GPT’s–questions about why he got started, how he preps, and how he picks guests. He also explains why debate gave […] The post EconTalk #1000 (with Russ Roberts) appeared first on Econlib.

  Why California Gas Prices Are the Highest in America By Vance Ginn, The Daily Economy, May 23, 2025. Excerpt: According to the US Energy Information Administration (EIA), gasoline prices are generally shaped by five components: crude oil prices, refining costs, distribution and marketing, taxes, and regulations. In California, taxes and regulatory costs alone account for more than $1.30 per gallon — nearly double the national average. California has the highest gas tax in the country, at $0.678 per gallon, not including additional fees and environmental surcharges. Add in the Cap-and-Trade program, the Low Carbon Fuel Standard (LCFS), and boutique fuel blends that are required only in California, and it becomes clear why Californians pay more. And things are deteriorating further. The Mische study warns that with refinery closures due to hostile permitting processes and low expected returns under California’s climate mandates, fuel supply in the state could drop by 20 percent by 2026, even as demand stays relatively stable. Fewer refineries and rigid fuel standards will mean tighter supply and higher prices.   Don’t Put a Tariff on Barbie: Global Trade Increases the Variety and Lowers the Price of Dolls and Almost All Else We Buy by Jeremy Horpedahl, Cato at Liberty, May 23, 2025. Excerpts: President Trump, for his part, seems okay with this, and in two recent interviews he has stated that it’s fine if little girls only have 3 dolls, rather than 30. This might ring true to parents of young kids that can’t walk around the house without stepping on yet another child’s toy, but overall, this is a horrible message of degrowth. One of the main benefits of economic growth is the increasing variety and affordability of goods and services. At some point, kids might get bored with the 300th doll, but this is not something for the government to dictate. And this is the main point: consumers are choosing to buy 30 dolls, or whatever else, because they want to and it brings them joy. Consumers can always choose to buy less on their own, but they are best situated to determine how many dolls and other toys their kids can have (even though, as a parent, this is a constant struggle!). And: When the Barbie movie came out in 2023, I wrote a light-hearted but still serious post about the benefits of economic growth for women and young girls. Compared to when the Barbie doll was first released in 1959, a woman in 2023 could have 3–4 times as many dolls with the same number of hours of work. Or as Chelsea Follett put it, the number of hours needed to work to buy a Barbie fell “from well over an hour to just over 12 minutes.” We should only hope that we would see this progress for goods and services more widely. And indeed, for some categories of goods, we do see this progress.   Reagan’s Trade Doctrine by David Hebert and Marcus Witcher, Civitas Institute, May 26, 2025. Excerpts: Reagan’s commitment to free trade cannot be overstated. However, we must also understand the context in which he made these decisions. The US economy, particularly the auto industry, was in a very rough spot when he took office in 1981. After decades of low gas prices, which made driving big, heavy, less fuel-efficient cars of the sort made in Detroit affordable, an oil crisis beginning in 1973 and amplifying in late 1978 hit American car drivers especially hard. The oil crisis was so severe that it kicked off a series of mini recessions in 1980 and again in 1981. At the same time, Japan had begun exporting cars to the US, and in 1980, Japanese-made cars comprised over 20% of the US market. Their cars had three advantages over domestically produced cars: they were more fuel efficient due to their smaller size and weight-conscious construction, they were cheaper than American cars on the road, and they required significantly fewer repairs than their American counterparts. In many ways, they were superior vehicles. As a result, they were quickly supplanting US cars. Detroit’s Big Three automakers: Ford, General Motors, and Chrysler (now Stellantis) were languishing and were forced to lay off thousands of workers. And: The domestic automobile industry during the 1980s and 1990s illustrates this. Freed from the pressures of foreign competition, the domestic auto industry’s methods and practices calcified around the idea that Americans would purchase mid-size and large-car models. After all, while Japanese cars were still available, they were becoming harder and harder to come by. By contrast, Japanese automakers continued to invest in improving quality. By 1990, the quality gapbetween domestically made cars and Japanese cars (as measured by how frequently repairs were needed) had grown even larger. During the 90s, the Big Three were forced to close 42 of the 63 automotive assembly plants, resulting in tens of thousands of job losses in the industry the VER was supposed to protect. The reason for this is simple and easy to understand: Japanese cars were already better and more affordable than their domestic counterparts in 1981. Because the domestic car industry squandered the opportunity to make crucial adjustments to their fleets, Americans started buying more imported cars. Rather than short-term pains begetting long-term gains, the short-term pains of higher car prices led to greater long-term pains of reduced employment.   The Ongoing Collapse of the Climate Litigation Game by Benjamin Zycher, The National Interest, May 29, 2025. Excerpts: The climate litigation game is simple: attribute any and all damage even remotely plausible to “climate change” and then sue the fossil energy producers for purportedly causing that damage while misleading the public about those asserted impacts despite knowing about them for decades. The claims seem straightforward, and the potential uses for the many, many billions of dollars to be extracted are endless. Alas, the game is in a slow-motion collapse, the latest manifestation of which is the decision by Bucks County, Pennsylvania, Court of Common Pleas Judge Stephen Corr to dismiss the county climate lawsuit against several energy producers. Judge Corr wrote, “… Bucks County fails to state a claim upon which relief can be granted because Pennsylvania cannot apply its own laws to claims dealing with air in its ambient or interstate aspects, and, therefore, we are compelled to dismiss this lawsuit for lack of subject matter jurisdiction.” (emphasis added) And he added, “We join many other state and federal courts in finding that claims raised by Bucks County are solely within the province of federal law.” And the two “money” paragraphs: The response of many of the climate litigants is that the fossil energy producers have known all along that they were creating a climate crisis but hid that information from us. Seriously? Let us summarize what the Intergovernmental Panel on Climate Change in its 1990 First Assessment Report (page 202) made clear: It could not explain why temperatures were higher 5,000-6,000 years ago despite no evidence of an increase in greenhouse gas (GHG) concentrations. Fast forward to the most recent Sixth Assessment Report (2021-2022). The IPCC still cannot narrow down the “likely” range (p. 46) of climate effects of increased GHG concentrations and is able to predict (Table 12.12) various adverse future effects only with low confidence and only under an extreme emissions scenario. Did the fossil energy industry “know” things decades ago that were not known then and are not known today? Obviously not.   Note: I just noticed the misspelling on my pic. I’m still learning ChatGPT. (0 COMMENTS)

In the US, national security has been cited by proponents of protectionism for a wide variety of products, ranging from computer chips to automobiles to shipbuilding.  But when it comes to foreign countries, our protectionists often have a blind spot.  They cannot even imagine that any other country might also have good reasons for national security concerns.   “Everyone has their reasons” is a famous line from the classic French film Rules of the Game.  I was reminded of this line when I read a Bloomberg article about Swiss trade policy.  Switzerland eliminated all tariffs on the manufactured goods, but continues to protect its agricultural industry: Switzerland’s bid for a US trade deal risks sparking a showdown with one political force at least as feisty as President Donald Trump: its own farmers. A country whose lush Alpine pastures, cowbells and cheese underpin the national identity, and whose agricultural lobby wields outsized influence to match, is in danger of a tough reckoning over what that’s worth when economic prosperity is at stake. Countries such as Japan and Switzerland do not have a comparative advantage in agriculture.  Nonetheless, they often protect their farmers for various reasons, including “national security” considerations.  I presume the Swiss were glad that they had an intact farm sector during WWII, when they could not rely on food imports from Germany. At an international level, the political influence of farmers is inversely related to their share of the population, which is a problem for many theories of politics.  In poor countries, farmers are numerous but politically weak.  In almost all developed economies, farmers are a small minority.  But they are viewed a sympathetic lobby, even by city dwellers: Acceptance of the current design of the domestic food market is widespread, despite its burden on consumers, fostered by a national belief in self-reliance. But bigger economic interests may prevail when set against agriculture, which represents a small fraction of gross domestic product. The voice of farmers is often amplified in advanced economies, as seen with recent tractor protests from London to Paris and Brussels. In Switzerland, their influence pervades the political system. Long time readers know that Switzerland has my favorite political system.  The Bloomberg article mentions one more advantage of direct democracy: “Don’t underestimate Swiss diplomacy,” he said. “Whatever deal the Swiss may strike, it would probably have to be accepted by parliament, possibly even by referendum. That could strengthen Swiss negotiators because they can honestly say: Look, we won’t be able to get this through with our people.”     (0 COMMENTS)

Wall Street Journal editor Matthew Hennessey rightly criticied Vice-President JD Vance’s statement that the market is just “a tool, but it is not the purpose of American politics.” (“JD Vance Is Wrong: The Market Isn’t a ‘Tool,’” Wall Street Journal, May 26, 2025). Hennessey argues that markets are simply the way humans naturally trade and exchange without coercion: I give you this, you give me that. Simple exchange is what makes a market. Not faith, not mantras, not brick and mortar. Wherever people come together to trade is a market. … Markets harness supply and demand to coordinate economic transactions between people and firms. They facilitate the free exchange of goods and services. They are mechanisms for shared prosperity based on freedom from coercion. As true as that is, it misses, at least explicitly, an economically inspired philosophical argument that provides an important justification of the market. When he trades in the abstract locus that the market is, an individual aims at satisfying his preferences, whatever they are. He pursues his own ends, goals, or purpose, even when he claims he doesn’t. An individual’s possible purpose of charity, solidarity, or communality is what this individual subjectively considers such. He doesn’t pursue the “purpose of American politics,” except perhaps if he has been infected by naive democratism or becomes, to quote Adam Smith, one of these “insidious and crafty animal[s], vulgarly called a statesman or politician, whose councils are directed by the momentary fluctuations of affairs” (The Wealth of Nations, Book IV, Chapter 2). Contemporary classical libertarianism, even in its tamer forms, is more radical than Mr. Hennessey’s defense may suggest. Let me give two prime examples. Friedrich Hayek, a 1974 Nobel economics laureate, argued that in a free society, each individual is free to pursue his own ends and the state (“government”) does not impose collective ends, which would coercively impinge on individual ends. In the autoregulated order of a free society, there exists no collective purpose. Except for levying necessary taxes, the state can, in normal times, impose only general and abstract rules that forbid the use of certain means that would defeat the benefits that individuals derive from a free society. The state, for example, may ban murder and theft, in conformity with the rule of law, but it may not force an individual in a specific occupation (at least in peacetime, Hayek would say, opening a Pandora box). The “public good” can only reside in rules that facilitate the pursuit of individual ends by all individuals. (These ideas are notably defended in Hayek’s Law, Legislation, and Liberty, whose three volumes I have reviewed on Econlib: Rules and Order, The Mirage of Social Justice, and The Political Order of a Free People.) But is it possible to establish or maintain a free society without imposing this very goal enterprise as a collective purpose to be forced upon any individual? The intellectual enterprise of James Buchanan, laureate of the 1986 Nobel Prize in economics, was to answer the question. He endeavored to find a rational justification beyond Hayek’s recourse to the traditional rules that evolved in Western societies. The subtlety of his (and his co-authors’) social-contractarian solution cannot be overstated. A rational individual, he argued, does not want to be regimented at the service of a collective purpose that could turn against him and exploit him. He can only accept a set of rules that would be chosen unanimously by all individuals, thus giving him a veto right. The state is the organization charged with enforcing the set of rules that benefits each and every individual. The state is constitutionally constrained to remain within these strict limits, so as not to become a tool for the exploitation of some individuals. (The three seminal books developing these ideas are: James Buchanan and Gordon Tullock, The Calculus of Consent; Geoffrey Brennan and James Buchanan, The Reason of Rules; and James Buchanan, The Limits of Liberty—more or less in the order of the most technical to the most accessible. The links are to my reviews.) The radicalism of classical liberalism is a far cry from the economic illiteracy of the insidious and crafty animals who run governments, on the right or on the left, and their supporting mobs. ****************************** Our collective goal is the other way (4 COMMENTS)

  Co-blogger Jon Murphy, in “Why Must Americans Pay Tariffs?” May 29, 2025, points out that U.S. tariffs are largely paid by Americans. He cites the relevant literature. He then goes on to note that trade occurs between individuals and firms, not countries. This is true and important, but it’s not relevant to the issue of who bears the burden of tariffs. A tariff is a tax. There’s a straightforward way to assess who bears the burden of a tax: look at the elasticities of demand and supply. If our elasticity of demand is low and the exporters’ elasticity of supply is high, then we Americans bear most of the burden of the tax. But if our elasticity of demand is high and the exporters’ elasticity of supply is low, then the exporters bear most of the burden of the tax. Here’s what I wrote on that issue in “Tariffs Will Hurt Canadians and Americans Alike,” Defining Ideas, December 19, 2024: Many people who have, like me, been critical of tariffs, have claimed that US consumers bear the whole cost of the tariff. Writing in August 2019, for example, Rachel Layne of CBS News stated, “The fact is, companies here pay tariffs to US Customs and Border Protection when Chinese goods reach America’s shores.” It’s true that Americans write the checks. But one of the first things about taxes that we economists teach undergrads is that knowing who writes the check tells you exactly nothing about who bears the burden of a tax. What determines the split of the burden between producer (exporter) and consumer (importer) is their relative elasticities of supply and demand. Consider Canadian oil. On the one hand, many Americans in the Midwestern states depend upon oil from Canada. In response to the tariff, though, they will probably have oil shipped by train from other parts of the United States. That’s expensive, but it is a way to adjust. But Canadian oil producers have few alternative customers to sell to besides Americans. This lack of good options makes their elasticity of supply low. They’ll likely absorb most of the cost of the tariff by not raising prices very much. The result? Canadian oil producers would bear more than half of the burden of the tariff on oil. The outcome will depend on the goods in question. The fact that so many Canadians are sweating the tariffs that Trump is threatening suggests that they think they will bear a substantial part of the burden. As a generalization, it’s probably true that we U.S. consumers bear most of the burden of the tariffs that the U.S. government imposes. But there’s no necessity for that. It’s an empirical issue. Jon rests a lot of his argument on methodological individualism. But noting the relevance of elasticities of demand and supply does not contradict methodological individualism. (0 COMMENTS)