The student of economics and especially of public choice theory should expect politicians to lie—and he is certainly not disappointed in America these days. Politicians are ordinary individuals. An ordinary individual is tempted to lie when he considers it is in his interest to do so. I take lying to mean intentionally conveying a statement that one knows to be false. A milder form of lying would be conveying a statement that one suspects would be revealed false if a low-cost verification were done. (I do not consider innocent lies justified by overwhelming humane considerations, like not telling the whole truth to a dying child; I also exclude lying in self-defense, to a thief or a kidnapper for example.) The economics of lying is the study of why individuals lie or don’t lie and which social consequences follow. There are both economic and moral reasons for an individual not to lie. One major moral justification to avoid lying and acquiring the habit of lying is that a free society requires an ethics of reciprocity, which means treating as a moral equal any individual who is likely to reciprocate. You don’t lie to those who don’t lie to you. (On this, see James Buchanan’s small but enlightening book Why I, Too, Am Not a Conservative.) This moral reason intersects with economics because it calls for the analysis of the institutions necessary to maintain a spontaneous social order offering maximum opportunities to individuals. The freer a society is, the less one feels that others are always trying to swindle him. Honesty and personal integrity, which are closely related to telling the truth, increase trust and reduce transaction costs—and, more generally, the costs of beneficial interaction between individuals. In a collectivist society, on the contrary, the incentive of each individual is to grab as much as possible of the free “public goods” before others crowd it out. The self-interests of some don’t further the self-interests of others but work against them. Ultimately, you lie because everybody lies. (See my post “Self-Interest and Capitalism Are Not Synonymous,” August 22, 2019; on collective choices generating free riders, see Anthony de Jasay, Social Contract, Free Ride.) The pure economic reason for an individual not to lie, and to get into the habit of not lying, is that a reputation of personal integrity will overall carry higher benefits than costs for him—if he lives in a society more rather than less free. At least if he is not “on the spectrum,” an individual cannot both be a known liar and hope that people will trust his word. There is also a distinct risk for a liar to become incoherent if not clownish. (Besides the case of Haitians eating pets and more recent examples, see Guy Chazan, “‘Almost Comical’: The Trump Team’s First National Security Crisis,” Financial Times, March 28, 2025, and “The Cover-Up Is Worse Than the Group Chat,” The Economist, March 27, 2025.) Many reasons explain why the incentives for telling the truth are weaker among politicians. The more activist and excited a politician is, the less traceable will be the intertwined consequences of his policies, especially in the eyes of rationally ignorant voters. From his megaphonic throne, the politician can easily blame others (judges, foreigners, the media, the “enemies of the people”) and argue for more power to the very extent that his policies fail. The more he lies, the more his political competitors will feel justified to do the same. If the chief politician lies shamelessly, his subordinates and sycophants are incentivized to lie, and even expected or ordered to do so. A selection process will bring into politics the individuals who are the most inclined to lie or tolerant of lying. This helps us understand why, in a politicized society, the worst get on top and their example corrupts others (see my post “What Is Kakistocracy”). Once such a regime is entrenched, it will be difficult to reverse; today’s Russia is one example. ****************************** A Cabinet meeting in Syldavia, by DALL-E under the influence of your humble blogger (the red tape is an addendum by the chatbot) (0 COMMENTS)

The Financial Times has an article discussing the proposed tax on Chinese ships that use US ports: In 2024, about 46 per cent of US bulk fertiliser imports — 6.7mn metric tons — were carried by Chinese-built dry bulk carriers, according to Kpler data. A $1.5mn fee could increase transportation costs by $62.50 per ton, a burden that would likely be passed down to farmers, already facing high input costs. Phosphate and nitrogen fertilisers, essential for US crop production, would be hit hardest. . . .The suggested fees are the result of a months-long investigation by US trade officials, initiated by the Biden administration, into how to counter China’s maritime dominance. The probe came in response to complaints from union leaders about Chinese industry subsidies. Japan and Korea are also major builders, with American shipmakers widely considered slow and expensive in comparison. Why can’t US farmers simply pass on this extra cost to the foreign consumers of their exports?  The problem they face is that the tax does not apply to their competitors.  While the global demand for farm goods may be somewhat inelastic, the specific demand for US farm exports is far more elastic, as importing countries have many other suppliers to choose from: Jay O’Neil, a commodities consultant, said that the proposed fees “scare the heck out of me”, adding that they amount to “encouraging crop production expansions in lands of our foreign competitors”.   (0 COMMENTS)

  I’m eagerly awaiting Donald Trump’s announcements of increased tariffs on Liberation Day, April 2. I used to think that Donald Trump was an ignoramus who didn’t understand the gains from trade. But now I realize that he understands it better than we economists. All we have are our models and our logical reasoning. Trump has experience as a trader in the real world who understands that in every trade, there is a winner and loser. He also understands that when domestic car companies charge low prices to Americans, that’s good, but when foreign car companies charge low prices, that’s bad. I really must read The Art of the Deal thoroughly so that I may understand the source of his wisdom. I wasn’t wrong to criticize Kamala Harris for advocating price controls during the presidential campaign. But I’m wrong for having criticized Donald Trump for warning auto companies not to raise prices after his tariffs on cars increase demand and his tariffs on aluminum and steel reduce domestic supply. The difference is that Harris is a Democrat and Trump is a Republican and that makes all the difference. I was wrong to conclude, back in 2021, that Joe Biden had dementia. I should have gone with the insights of Joe Scarborough on MSNBC, who thought that even in March 2024, Joe was “better than he’s ever been, intellectually, analytically.” In recent days, I’ve told American and Canadian friends that the new Prime Minister of Canada, Mark Carney, is someone who wants to regulate people’s lives because of climate change. But now, having read parts of his insightful book Value(s), I realize that, as a central banker, he has profound knowledge of climate change and much basis for his view that “the risks are existential.” Silly me for concluding, after reading Steven Koonin’s book Unsettled, that “[T]he good news is that the long-term economic effect of even substantial global warming will be small.” (0 COMMENTS)

The title of this post comes from co-blogger David Henderson’s beautiful 2001 book The Joy of Freedom: An Economist’s Odyssey. It is one of my favorite books; David captures the optimism of liberalism in a way few other authors can.  Since David wrote the book, the world has entered the Digital Age.  The proliferation of the Internet, cheap digital storage and transmission, and cloud computing has enabled amazing levels of creativity and entertainment to arise.  In particular, the indie scene. Indie (independent) artists are artists who are not tied to a particular movie studio, video game studio, or music label.  Before the digital world, an artist would need a contract with a studio to be a viable artist.  The studio handled a lot of the “backroom” elements of art: promotion, distribution, production, etc.  For a cut of the artist’s revenue, the studio reduced costs for the artist.  This system, however, was often rife with corruption with studios often imposing egregious terms, IP ownership, and other conditions that significantly weakened the artist’s ability to produce (see here in the section “Hating Capitalism, or Hating Specific Capitalists”).  Furthermore, the studios tended to act like conspiring oligopolies: a small group of large firms who colluded to keep prices relatively high by reducing production.  Consequently, the genres of art were limited to whatever the studios decided was “in” for that year.  With some exceptions, radical forms of art were not promoted widely. The digital era ushered in a new era of creative freedom.  With the rise of digital content platforms like YouTube and later Spotify, artists could cut out the middleman.  The websites would host, distribute, and (through increasingly sophisticated algorithms) advertise the art to prospective consumers.  Furthermore, since the marginal cost of using these sites is virtually zero, indie artists could produce new music and distribute it rapidly.  All sorts of new genres and nice music began to emerge: lo-fi, synthwave, atmospheric, new covers of classic hits, and so on.  Indeed, my friend listens to a band that just uses various blunt instruments against various flat surfaces to produce their music.  Is it niche?  Yes.  But it is his niche and thanks to liberal markets, he is able to enjoy it.   We see the same thing in video games.  While the Big Three studios (Nintendo, Sony, and Microsoft) continue to produce and promote their own games, they also have digital storefronts where indie developers can sell their games.  Some studios, like Canada-based Sabotage Studio, have hit it big: their 2023 game Sea of Stars has sold over 6 million copies since it was released in August 2023.  Sea of Stars is a retro-inspired JRPG; it’s a love letter to classics like Chrono Trigger.  Other studios, like Finland-based Remedy Entertainment were able to break into the big leagues with their hit Alan Wake (and later Control).  Alan Wake and Control are Lovecraft-inspired games that rely heavily on atmosphere to tell their stories.  Games like these existed, but were fairly rare pre-digital.  Now, indie games have their own sections on digital stores and their own game award ceremonies.   Liberal markets, not mercantilism or central planning, created digitization.  The market process broke down the barriers (the costs) preventing niches from developing.  Contrary to the “market failure” story, these barriers to entry were the very thing that sowed the downfall of the cartels.  Creative entrepreneurs found a way around the barriers to entry by making things digital.  Consequently, the market expanded, and folks like me can sit in Louisiana and listen to atmospheric music created by a South African musician through a digital streaming service that costs less than a CD. The joy of freedom comes not just from finding elbow room from the raging presumptions of one’s “betters” (to paraphrase Thomas Sowell).  It is the ability to be creative, to enjoy, to satisfy a niche.  Do you want a heavy metal song about how awesome it is to be a dwarf?  You can have it.  A gender-bendered version of Stacy’s Mom called Stacy’s Dad?  Friend, do I have news for you.  Freedom is the freedom to be you.  Markets promote that freedom. (0 COMMENTS)

We’re bringing back price theory with our series on Price Theory problems with Professor Bryan Cutsinger. You can see all of Cutsinger’s problems and solutions by subscribing to his EconLog RSS feed. Share your proposed solutions in the Comments. Professor Cutsinger will be present in the comments for the next couple of weeks, and we’ll post his proposed solution shortly thereafter. May the graphs be ever in your favor, and long live price theory!   Question: Some economists have argued that the Federal Re3serve should raise its inflation target from 2 percent to 3 or even 4 percent. Why might the effect of a higher inflation target on the quantity of real money balances demanded be larger in the long run than in the short run? (0 COMMENTS)

  On March 7, 2025, I highlighted Herb Stein’s article “Balance of Payments,” which appeared in David R. Henderson, ed. The Concise Encyclopedia of Economics. That led to a lively discussion in the Comments section. Frequent commenter Warren Platts noted that the U.S. Net International Investment as a percentage of GDP has gone downhill since about 2007 and now sits at minus 90%. That might sound scary and it did make me wonder. But what matters to most Americans is not how much foreign investment there is but, rather, how much their net worth is and how that has changed. So I looked at those data and was reassured. The St. Louis Fed’s FRED site shows U.S. households’ net worth in current dollars from the 4th quarter of 1987 to the 4th quarter of 2024. It rose from $17.426 trillion in 1987 to $160.345 trillion in 2024. $17.426 trillion in 1987 $ is $47.641 trillion in 2024 $. So household net worth over those 37 years increased by 237%. Of course, the number of households increased too. According to FRED, it rose from 89.479 million in 1987 to 132.216 million in 2024. That means that average household wealth, in 2024 dollars, rose from $532,426 in 1987 to $1,217,504 in 2024, an increase of 129%. How about for the shorter period referenced by commenter Platts: 2007 to 2024? In 2007, household net worth was $65.754 trillion. In 2024 $, that’s $98.702 trillion. So household net worth increased by 62.5%. The number of households increased from 116.011 million in 2007 to 132.216 million in 2024. So household net worth per household increased from $850,799 in 2007 to $1,217,504 in 2024, an increase of 43%.   Note that these are averages, not medians. The net worth for a median household at each point in time is below the average. But what matters here is the average, given that the issue is the situation of the United States as a whole. It says that on average, Americans are getting wealthier despite (maybe partly because of?) increased foreign investment. (2 COMMENTS)

Donald Trump’s decision to impose tariffs has sparked a lively debate among economists and others: are tariffs good? Maybe some of them? Should governments then impose those tariffs that are good? While these discussions are interesting in themselves, they also raise a more general question: what should economists be doing at all? The title of this blog post is an echo of Buchanan’s seminal paper. However, while I allude to Buchanan, it is not his paper that I want to refer to. Rather, I want to point to another of Buchanan’s insights. Let me begin by quoting a revealing (and charming) story told by Richard E. Wagner, a student of Buchanan’s: While sitting excitedly in class the first day, I saw Buchanan glance at his roll sheet. He looked into the room as if looking for someone in particular, then said: “Mr. Wagner, what’s wrong with the American tax system?” I felt an adrenalin rush.  After my summer’s reading, that question was written for me, or so I thought … Instantly I began reciting things I read that summer about simplifying the tax system by reducing exemptions and deductions and such things. Buchanan seemed to be paying close attention to me, which pleased me hugely. When I finished, however, he responded: “Mr. Wagner, you have no business answering a question like that. We are democrats here and not autocrats.”  The gist of Buchanan’s response (which also runs through his work, beginning with Knut Wicksell, whom Buchanan greatly admired) is that economists are in no position to determine what people should want or to judge what is good for them. There is no “truth” in politics, Buchanan tells us in his The Limits of Liberty. And if one agrees with Buchanan and thus rejects “the truth-judgment approach to politics,” it follows that, as he writes in the first chapter, “we cannot claim to play as God, and we can scarcely carry off the pretense that our own private preferences reflect his ‘truth.’” Rather, it is up to the people—each and every one of them—to decide what they want and to be the evaluators of their lives. “A situation is judged “good” to the extent that it allows individuals to get what they want to get, whatsoever this might be, limited only by the principle of mutual agreement,” Buchanan tells us. It is not the job of economists—nor of political philosophers or anyone else, for that matter—to determine what is good for others. Where does that leave economists? They have an incredibly valuable role to play: they are to examine the consequences of different courses of action and recommend different ways forward, given what people want. Thus, economists are concerned with prudence. They ought to give people prudential advice about what are the best means to pursue given ends—very much in line with economists’ aspirations for value-free science. But let me hasten to add that this does not mean that economists should not chide the government for certain actions—indeed, this will often be their task. But in doing so, they must make it clear that they are only taking citizens’ perspective and not judging the governmental actions themselves. What I mean is that economists can criticise governmental action whenever it goes beyond the unanimous consent of citizens (because, to repeat, this is always the measure of “goodness”). But then economists are not putting forward their preferences—or their “truth”—but insisting that government accept the sovereignty of the individual. Economists should be democrats, not autocrats.   Max Molden is a PhD student at the University of Hamburg. He has worked with European Students for Liberty and Prometheus – Das Freiheitsinstitut. He regularly publishes at Der Freydenker. (1 COMMENTS)

To analyze society and the economy, and especially if the goal is to coerce peaceful individuals, an understanding of basic economics should be a must. Economics is needed to think clearly about the social consequences of individual actions and government interventions. An example a contrario was just given by President Donald Trump; the Wall Street Journal reports (“Trump Says He ‘Couldn’t Care Less’ if Car Prices Go Up,” March 30, 2025): “I couldn’t care less, because if the prices on foreign cars go up, they’re going to buy American cars,” Trump said. “I hope they raise their prices, because if they do, people are gonna buy American-made cars. We have plenty.” The president doesn’t seem to understand that a tariff also leads to an equivalent increase in the prices of competing domestically produced goods—American cars in this case. This is precisely why domestic producers of tariffed goods are happy: higher prices for their own products will be protected against foreign competitors. A tariff “protects” only if it allows domestic producers to get higher prices. (For more on this topic, see two of my recent posts, “The Basic Error About International Trade” and “Aluminum, Economics, and Liberty.”) Thus, nobody should have been surprised when Trump apparently warned domestic car producers not to rise their prices under penalty of punishment. He later denied having made this threat (see the March 30 WSJ report): The Wall Street Journal reported last week that Trump had warned executives that the White House would look unfavorably on such a move, leaving some of them rattled and worried they would face punishment if they increased prices. “I never said that,” Trump told NBC. Did he or did not? Perhaps he entertains “basic holistic” beliefs, to use the terms of his trade advisor Peter Navarro as reported by the WSJ: “If you look at this basically holistically, as they say, consumers and Americans are going to be better off, including all the jobs they get,” Navarro said. “They” are certainly not serious economists, who never speak in those terms. However, it must be that only “basic holistic” intuitions can justify the sort of trade war Navarro has been pushing on Trump, admittedly a fertile ground. At the time when he used economic theory instead to reason about such matters, Navarro was closer to reality. In his 1984 book, The Policy Game: How Special Interests and Ideologues are Stealing America (John Wiley & Sons), he attacked special interests and specifically explained how tariffs also push up the prices of domestically produced competing goods: In the absence of trade barriers, goods ranging from autos and apparel to shoes and televisions are offered to consumers at lower prices (or higher quality) than if U.S. producers manufactured them. However, when a device such as a tariff is imposed, the importer must pay a duty to the U.S. government to sell his product. This, in effect, raises the importer’s costs and forces the importer to raise his price by all or part of the duty. U.S. producers can then raise their prices, which hitherto were lowered by import competition. [pp. 75-76, my emphasis] Navarro offers other arguments that are not very original but at least in line with a couple of centuries of economic analysis, for example: However, as the economic analysis indicated, the choice is not between preserving smokestack industries or relying on high tech wonderlands. Rather, it is between a protected but inefficient and declining industrial base versus a more innovative industrial sector that, under the spur of import competition, can and does invest in rapid technological developments that promise a prosperous merger of the two worlds. [p. 89] The clear danger of this [protectionist] trend is an all-out global trade war. … And as history has painfully taught, once protectionist wars begin, the likely result is a deadly and well-night unstoppable downward spiral by the entire world economy. If the world is, in fact, sucked into this spiral, enormous gains from trade will be sacrificed. While such sacrifice might save some jobs in the sheltered domestic industries, it will destroy as many or more in other home industries, particularly those that rely heavily on export trade. At the same time, consumers will pay ten of billions of dollars more in higher prices for a much more limited selection of goods. [pp. 55-56] Of course, one cannot blame somebody for having changed his opinions and explained the reasons why he now thinks he was previously wrong. But basic holistic intuitions of the Tantric-New-Age sort can’t serve as a rational explanation. Nor can cozying up to politicians of all kinds provide a sufficient justification (see my article “Peter Navarro’s Conversion,” Regulation, Fall 2018). ****************************** Basic holistic stuff, by DALL-E and your humble blogger (1 COMMENTS)

Should monkeys have the same rights as humans? What about elephants, ants, or invertebrates? NYU philosopher Jeff Sebo makes the case for expanding your moral circle to many more beings than you might expect, including those based on silicon chips. Listen as Sebo and EconTalk’s Russ Roberts discuss to whom and what we owe moral consideration, how we determine a being’s intrinsic moral […] The post Do All Creatures, Great and Small, and Made From Silicon, Have Rights? (with Jeff Sebo) appeared first on Econlib.

I’ve always been skeptical of people that use “national security” as a justification for various repressive policies, including government secrecy, trade barriers, the military draft, censorship, and even taking over Greenland.That’s not to suggest that national security is never a valid concern—I would not advocate releasing nuclear weapons secrets—rather that the concept is overused, often as a way of achieving other more dubious objectives such as mercantilism and authoritarianism. One “tell” that national security is overused as an excuse for secrecy is that even top officials don’t take the concept seriously.  While Edward Snowden remains in exile for exposing US government crimes, top officials from both parties routinely flout national security laws, with no legal consequences.  Most people are familiar with Clinton’s emails and Trump’s bathroom full of documents, but there are many other such cases that could be cited, including previous slip-ups by Pete Hegseth. A recent example occurred with the Signal chat leaks to Jeffrey Goldberg of The Atlantic.  I predict that none of the people responsible for leaking US military secrets will end up going to jail.  They are not “little people”. As with Watergate, the cover-up is often worse than the crime.  The administration initially denied that the leak included any classified information such as war plans or specific weapons systems.  The Atlantic then decided that if the government didn’t regard this information as classified, there was no reason not to publish the entire Signal chat.  It turned out that top government officials were lying to the press and Congress. When I was young, government officials would have had to resign after a fiasco like Signalgate.  Indeed, when I was young, an obviously unqualified cable news reporter would never be appointed Secretary of Defense, or confirmed by the Senate.  That America is long gone.  (Pete Hegseth once suggested that Hillary Clinton should have been prosecuted for a much more minor security leak.)   Today, a different set of rules applies to the rich and famous.  Blue-collar types go to prison for violating prostitution laws.  The rich and famous purchase sexual favors with diamond bracelets and fancy dinners.  Blue-collar types go to prison for violating drug laws.  Rich and famous addicts go to rehab.   PS.  Older readers may recall Leona Helmsley saying: We don’t pay taxes; only the little people pay taxes. Actually, the rich do pay lots of taxes; it’s the criminal justice system where they have a huge advantage.  PPS.  There was an interesting case right here in Orange County where a 71-year old judge shot his wife after an argument, admitted to the crime, and even said he deserved to be convicted by a jury, and the jury still couldn’t reach a verdict.  Here’s the OC Register: A year and a half after Superior Court Judge Jeffrey Ferguson, while sitting in a police station, said aloud to himself “I killed her. Ladies and Gentlemen of the jury, convict my ass. I did it,” the actual jury tasked with deciding his fate announced they were deadlocked during their ninth day of deliberations, which lasted longer than the trial itself. Imagine the same set of facts for a poor person.  You might say, “It’s complicated”.  Has there ever been a crime of passion that wasn’t?  Even black defendants get a break if they are rich and famous, as we saw in the OJ Simpson case. (0 COMMENTS)