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On this first anniversary of “Liberation Day” – that is, on this first anniversary of Trump’s efforts to liberate us Americans from some of our prosperity – Scott Lincicome, Alfredo Carrillo Obregon, and Chad Smitson look back on the past year. A slice:

Notwithstanding the tariff exemptions, the duties undeniably increased prices for American importers and consumers. Economic research shows that the higher costs from tariffs passed through to prices paid by Americans at a rate as high as 96 percent. The administration and tariff defenders often cite that tariffs did not lead to an inflationary spiral, but—as many economists have repeatedly explained — that outcome was never a serious possibility. What was likely — and what did indeed happen — is that tariffs increased the prices of tariffed goods (imported and domestic) last year, and they remain elevated today. Economists from Harvard Business School have examined thousands of items sold at major US retailers and found significant increases in their prices—especially as compared to pre-tariff trends (Figure 3). Other studies have reached similar conclusions.

David Henderson confesses – factiously – to some recent errors. A slice:

What a fraud that Adam Smith was. What the heck did he know, sitting in Scotland and pontificating about the world? Sure, he predicted that the continental congress, sitting in the 13 colonies, would bring forth a new nation that would become the most powerful in the world. And sure, even then, he knew what a fraud much of higher “education” is. But those were just lucky calls. Moreover, Smith was just trying to rationalize people’s desire to look out for themselves. Too bad he never wrote a book about morality. Then he would have figured out the limits of self-interest.

Edward Pinto and Tobias Peter make the case that what they describe as the “complex set of limits on the ability of large institutional investors (LII) owning 350 or more properties to freely purchase and own single-family rentals” will reduce the supply of housing for low-income Americans.

GMU Econ alum Julia Cartwright, writing in the Washington Post, busts the myth that wartime spending enriches the economy. Here’s her conclusion:

This is not an argument against maintaining a military or fighting necessary wars. It is an argument for honesty about what GDP measures. Economic growth is not simply the volume of spending; it is the creation of value. That means goods and services that people want, that improve their lives and expand future possibilities. By that standard, war is not a source of prosperity but a diversion from it.

GDP can tell you how much money is being spent. It cannot tell you whether that spending is making people better off.

The Editorial Board of the Wall Street Journal criticizes progressives’ efforts to coddle labor unions by violating Americans’ free-speech rights. A slice:

Public worker unions are asking more from the Democrats they help elect, and the latest demand is legal protection against critics. An Oregon law targeting a think tank that notifies workers of their right not to pay union fees is now being imitated in other states.

Oregon’s Worker Fraud Protection Act makes it illegal to “falsely impersonate” a union representative and imposes fines for infractions. The law was written to discourage the Freedom Foundation, which sends out mailers to union members reminding them they can opt out of the union and save money under the Supreme Court’s 2018 Janus v. Afscme ruling.

New York and Hawaii have now introduced copycat legislation. The Oregon law provides that a plaintiff “shall receive statutory damages in an amount of $6,250 per incident,” which could be each individual postcard sent to a union member. In the New York version, the fines are $15,000 per incident. That adds up fast. Hawaii allows for unspecified damages and appropriate relief.

The unions claim the Freedom Foundation is trying to trick workers into thinking the mailings come from the union. But the mailings all identify the foundation or its union educational outreach project in plain sight. Freedom Foundation’s Maxford Nelsen says it’s “very risky to continue our outreach efforts in the state,” and that’s the point. Democrats mean to discourage the think tank from dissuading workers from automatic union fees collection.

Joe Lancaster warns of newly proposed legislation that would codify Trump’s practice of having the U.S. government take ownership shares of private companies.

GMU Scalia Law professor Ilya Somin calls out U.S. Solicitor General John Sauer for giving a factually incorrect answer to Justice Barrett during yesterday’s hearings on the Trump administration’s efforts to overturn birthright citizenship.

Allen Guelzo defends birthright citizenship.

Iain Murray decries “the villainization of business.”

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… is from page 27 of the late Brian Doherty’s marvelous 2007 book, Radicals for Capitalism: A Freewheeling History of the Modern American Libertarian Movement:

In early America, commerce – that great libertarian emollient of all social ills, that creator of wealth and happiness – was breaking free of the old-fashioned strictures and attitudes that denied it respect. We were to be a great commercial republic and, to the best of our ability, a free republic. In other words, a libertarian republic.

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… is from page 180 of Thomas Sowell’s 1983 book, The Economics and Politics of Race: An International Perspective:

Unions are a major factor making labor markets noncompetitive. They have both direct and indirect effects on discrimination. Directly, they have at various times excluded various groups from membership – in the United States, the Irish, the Italians, the Chinese, and blacks perhaps most pervasively of all. Some unions have limited entry to relatives of existing members. This, in effect, excluded members of other racial and ethnic groups.

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Mike Munger offers some wise advice about states and markets to us liberals. (HT Arnold Kling) A slice:

Liberalism has two mutually reinforcing aspects. The first is humility: I can’t assume I’m right. The second is toleration: I can’t assume you’re wrong.

The practice of liberalism therefore rests on a strong, but rebuttable, deference to individual agency. That practice requires a deep skepticism of concentrations of power. Historically, the different flavors of liberalism have privileged some kinds of power and handicapped others. Left liberals have been concerned about corporate power, but optimistic about the state; classical or right liberals downplay concentrations of market power but want sharply to limit the state.

I work and write in the field known as public choice. Public choice began as an antidote to the naïve application of the “market failure” paradigm, in which deviations from perfectly competitive markets always led directly to inefficiencies that markets themselves could never solve. This view was unchallenged in the 1950s and 1960s, and it worked to identify (mostly legitimate) problems with private, decentralized commercial processes. Markets are not perfect, so state action is required.

What was missing was any theory of government failure. Under what circumstances—if ever—would state action likely be counterproductive? Government policy results from the digestion of imperfect inputs: the rational ignorance of voters, the concentrated interests of organized groups, and the principal-agent failures of unaccountable bureaucracies. Why would we expect imperfect government control and direction to be better than imperfect markets? This concern extended worries about market power to concentrations of power more generally.

Damon Root reports on Trump’s unconstitutional attack on birthright citizenship reaching the U.S. Supreme Court. A slice:

A decade ago, I wrote a cover story for Reason magazine titled “Trump vs. the Constitution.” It explained how then-candidate Donald Trump’s call to abolish the constitutional guarantee of birthright citizenship for millions of U.S.-born children ran afoul of the text, history, and original meaning of the 14th Amendment. It also noted the dismaying fact that so many Republicans appeared ready to support Trump’s unconstitutional agenda.

“Most Republicans claim to revere the Constitution,” I wrote. “Yet when it comes to the issue of birthright citizenship, far too many Republicans, from Ed Meese on down to Donald Trump, seem willing to ignore the text and history of the 14th Amendment. Not exactly a reassuring indication of the GOP’s fidelity to originalist constitutional principles.”

Tomorrow, the U.S. Supreme Court will hear oral arguments in Trump v. Barbara, the case arising from Trump’s 2025 executive order on birthright citizenship. And just as I warned a decade ago, the Republican Party is effectively marching in lockstep under Trump’s unlawful direction.

My Mercatus Center colleague Yuliya Yatsyshina asks if the new $100K H-1B fee is protecting American workers.

Stefan Bartl writes that “Earth Hour misses civilization’s true triumph: Human innovation.”

Kimberly Blanton, of Alva, FL, has a letter in the Washington Post that’s worth reading:

My husband and I own a small remodeling business. Tariffs increased costs on many materials and items used in kitchen and bath remodels. We are too small to absorb the tariffs, so we had to raise our prices. Many people have decided not to remodel with prices increasing, so we have had fewer leads and prospects. We had to lay off most of our employees. I had semiretired; I’m 69. I’ve had to return to work in our business full time to replace employees we couldn’t afford to keep. I’m doing the work that four employees used to do. My husband and I cannot even afford to pay ourselves a consistent salary. We are living off of our Social Security benefits and doing our best not to go out of business.

Ed Carson tweets: (HT Scott Lincicome)

The U.S. has made lobbying a key focus of its industrial policy.

The lobbying industry is booming – thanks to the government!

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… is from pages 78-79 of my late, great colleague Walter Williams’s 1995 volume, Do the Right Thing; specifically, it’s from Walter’s December 8th, 1994, column (for which I cannot find a link) “Leviathan Run Amok”:

Any catastrophe attracts vultures to feed off carcasses. In the case of regulations, it’s consultants, lawyers, and accountants. Businessmen know about business, but they know little about all the government mandates that can destroy their business. In come the vultures to advise and counsel them to the tune of thousands of dollars a day. Again, who pays? And again, it’s consumers and workers.

DBx: Were he still alive, Walter would today – March 31st, 2026 – celebrate his 90th birthday. Although he’s been gone now for more than five years, I still intensely miss his good humor, piercing insight, and unyielding principle.

He is pictured here on the evening in May 2017 when he was presented with the Bradley Prize.

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Mr. Oren Cass
Chief Economist, American Compass

Oren:

My friend Steven Kaufman just shared with me your March 2025 F&D Magazine piece – which I hadn’t yet seen – “In Search of the Invisible Hand.”

Your portrayal of the case for free markets – and of the scholars who make that case – is disappointingly tendentious.

Start with your argument that economists make too much of Adam Smith’s metaphor of the invisible hand. You’re correct that Smith used that phrase only once in Wealth of Nations, but you incorrectly infer from this fact that Smith attached little significance to the theme that it summarizes. That theme, which runs through the book, is that in free markets producers, sellers, investors, workers, and consumers not only generally are led to cooperate productively with each other without any central direction or design, but that government interference with such market-coordinated cooperation will likely make things worse. I don’t ever recall, in all of the many times in your writings that you mention Smith, your sharing this passage from Wealth of Nations:

What is the species of domestic industry which his capital can employ, and of which the produce is likely to be of the greatest value, every individual, it is evident, can, in his local situation, judge much better than any statesman or lawgiver can do for him. The statesman who should attempt to direct private people in what manner they ought to employ their capitals would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it.

If you’re intent on making an honest and strong case that Smith was not the staunch advocate of free markets that the economists who you criticize believe him to have been, you should not ignore the above passage.

Regarding the particular context in which Smith used the phrase “invisible hand,” see here and here.

Your chief error, though, is to describe the case for free markets as being based on “blind faith.” Frankly, that’s a smear. People rely on faith when they have neither good reason – that is, no compelling theory – nor good evidence to support their case. Yet over the course of 250 years, economists – starting with Adam Smith – have developed and refined theories of the workings of the market, and have tested these theories with history and empirical data. Among the most notable such tests were performed by another Smith – Vernon, a co-winner of the 2002 Nobel Prize – who constructed laboratory experiments that confirmed that markets are remarkably proficient at coordinating human action absent conscious direction.

And there are mountains of historical verifications of the successful working of spontaneous-ordering market forces. Consult, for example, the Journal of Law & Economics, Regulation magazine, and the Independent Review. Read the data-rich articles and books written by T.S. Ashton, Robert Higgs, Douglas Irwin, Deirdre McCloskey, Douglass North, Elinor Ostrom, Julian Simon, Thomas Sowell, and Lawrence H. White – to name only a few.

It’s true that there are challenges to this theory and history, yet the very existence of these challenges proves that the economic case for free markets isn’t one of blind faith. It’s one of science.

But if you insist on identifying a policy that relies heavily on faith, consider your own endorsement of industrial policy. Economists have a theory of how prices, profits, losses, and other market signals provide both the knowledge and the incentives for resources to continually be directed away from less-productive and toward more-productive uses. What is your and other industrial-policyists’ theory of how the politicians and mandarins who are to carry out your industrial policies will get the knowledge they need in order to achieve economic outcomes superior to those brought about by free markets?

My question is serious. Please identify that theory. Explain how elected officials in the White House and on Capitol Hill, and bureaucrats on the streets and avenues around them, will obtain the knowledge required to out-perform the market at allocating resources. Do so with the rigor that’s found in any ordinary ECON 101 textbook.

Until and unless you identify such a theory, it is you and other interventionists – not those persons who you regularly deride as “market fundamentalists” – who are guided by faith.

Sincerely,
Don

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Prager University’s new short video on the Great Recession was inspired by Chapter 5 of Phil Gramm’s and my 2025 book, The Triumph of Economic Freedom.

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The Wall Street Journal‘s Matthew Hennessey is rightly sickened by the sight of the hammer and sickle being waved promotionally in Times Square. Two slices:

In a better world, the media would treat the appearance of the hammer and sickle at this weekend’s No Kings rallies the same way it treated the appearance of the tiki torches in Charlottesville, Va. That is to say, as evidence that something has gone deeply wrong in our political culture.

In 2017, a platoon of fascist dorks marched across the lawn at the University of Virginia chanting, “You will not replace us.” The entire political world flipped out for weeks—months, years even. They’re still recovering.

In 2026, keffiyeh-clad tankies clustered in New York’s Times Square chanting, “Only one solution, Communist revolution.” How much do you want to bet you’ll never hear about it again?

Communism is like Covid-19: a pathogen of relatively recent vintage that will be with us forever. As Free Expression columnist Louise Perry wrote in January, communism’s “infantile morality” is perennially attractive to the young. Its empty promise of a new world built on sharing and caring appeals to the ignorant envy of the unformed mind. It’s baby stuff

A well-functioning society educates the baby stuff out of its citizens. That doesn’t happen here because the people who do the teaching tend to be communist sympathizers, if not outright believers.

…..

The hammer and sickle represents repression and dictatorship, stagnation and misery, the negation of human rights, the opposite of progress. It is the symbol of unfreedom, and therefore of slavery. It is death on a stick.

When an American sees the hammer and sickle he should feel the same instinct to retch that he feels when he sees the swastika. That he doesn’t—that he rolls his eyes and thinks, “They’re just kids, they’ll grow out of it”—is an insult to the memory of the 100 million [innocent people killed by communism]. And it suggests that the grand total is perhaps not the final tally.

Peter Earle writes wisely about AI. Here’s his conclusion:

History suggests that the economic consequences of sweeping technological change hinge less on the invention than on the institutional ecosystem surrounding it. Electrification required factory redesign. The internal combustion engine required road networks and suburban development. The Internet required specialized software, new legal frameworks, and payment systems. Artificial intelligence will be no different. Its aggregate productivity impact will depend on education systems that adapt, firms that reorganize workflows, and regulatory regimes that neither stifle experimentation nor generate moral hazard. In that sense, the Productivity Panic of 2026 is likely to be less about machines replacing workers than about whether our institutions can evolve as quickly as our technologies.

Danny Crichton is understandably aghast at the economic stupidity packed into new legislation proposed by a U.S. Senator from Vermont and a U.S. Representative from New York City. A slice:

Artificial intelligence is currently the white-hot center of America’s economy. Big Tech is investing more than $750 billion in data centers this year, mostly domestically. Unsurprisingly, wages for construction workers and the skilled trades are skyrocketing. Communities like Virginia’s Loudoun County are almost covering their entire operating budgets through data-center taxes.

Representative Alexandria Ocasio-Cortez and Senator Bernie Sanders want to put a stop to all of that. On Wednesday, the pair jointly proposed a universal halt to America’s AI economy. Their bill would enact a moratorium on new and existing data-center growth as well as a ban on exporting AI chips. The pause would last until Congress passes a “framework” to regulate the industry.

In other words, the degrowth duo want to tie up America’s most innovative and globally competitive industry using the same bureaucratic process that has recently resulted in TSA airport security lines snaking through terminals and parking garages. And they want to take advantage of Americans’ understandable fears about new technology to impose their radical beliefs on the nation’s economy.

The Editors of National Review decry progressives’ determination to further soak the rich. A slice:

Above all, a wealth tax would be unjust because it aims to perpetrate the very expropriation that republican government exists to prevent. The purpose of the tax code is to pay for legitimate state functions, not to seize money from one set of citizens and dole it out to another. Contrary to popular belief, the richest households already contribute the bulk of federal revenue and pay higher effective tax rates than anyone else. Any leftover wealth is rightfully theirs to spend as they see fit.

Absent a compelling message on affordability, progressives are attempting to channel voters’ economic discontent into class resentment. But a punitive tax on the rich would do no one any good, while risking U.S. investment and competitiveness.

My Mercatus Center colleague Satya Marar wonders why politicians in the U.S. want to copy the E.U.’s failed Digital Markets Act. A slice:

Two years after the European Union (EU)’s Digital Markets Act (DMA) took effect, the results have been mixed to negative. Promises about certainty, lower enforcement costs, and a more innovative and competitive digital ecosystem haven’t materialized.

Rather than learn from Europe’s mistakes, Californian policymakers and federal proponents of Sen. Amy Klobuchar (D-MN)’s American Innovation and Choice Online Act (AICOA) would import similar ideas to ostensibly help small businesses and hold tech giants accountable. The EU’s experience shows that DMA-style proposals aren’t just unlikely to achieve these goals. They’re also likely to harm consumers, competition, and innovation.

The Editorial Board of the Wall Street Journal warns against reviving Jimmy Carter’s foolish wish to tax so-called “windfall profits.” A slice:

Fossil-fuel opponents aren’t letting the Iran war go to political waste. Progressives are using rising energy prices to seek higher taxes on oil and gas companies, which would discourage the investment needed to increase supply and bring down prices after the war is over.

Iran’s harassment of shipping through the Strait of Hormuz and attacks on the region’s energy infrastructure have driven up oil and gasoline prices. Enter Rhode Island Sen. Sheldon Whitehouse and California Rep. Ro Khanna, who have introduced a bill that would impose a 50% tax on U.S. crude sold above the 2025 Brent average (roughly $68 a barrel).

Democrats have proposed similar bills to tax the so-called windfall earnings of oil producers in the previous two Congresses, which is a giveaway that the war in Iran isn’t what’s motivating them. They want to reduce U.S. production at any time for any reason.

U.S. producers have benefited from higher prices caused by the war, but much less than the left claims. Some frackers began pulling back rigs last year as prices fell below what they needed to break even on their investments. Producer margins last year were squeezed by inflation, higher interest rates and tariffs.

The price of Brent crude has been bouncing around north of $100 a barrel, though U.S. shale blends trade at a steep discount in part because they are more costly to refine. At a Brent price of $112 under the Whitehouse-Khanna bill, the government would extract $22 in tax for every barrel sold. That’s more than what some producers have been earning in profit.

Higher prices enable companies to boost supply. Taxing production does the opposite. The short-lived U.S. experiment with a windfall oil profits tax from 1980 to 1988 reduced domestic production and resulted in 80% less tax revenue than projected. Congress finally repealed the tax because it made the U.S. more dependent on foreign oil.

The Trump administration is hard at work raising Americans’ cost of living. (HT Scott Lincicome)

The Trump administration ordered U.S. refiners ​on Friday to blend a record amount of #biofuels into their gasoline and diesel this year and next, a move the refining industry said would raise #gas pump #prices already spiking due to the war in Iran.

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… is from page 317 of the late University of Washington economist Paul Heyne‘s undated and previously unpublished manuscript titled “Teaching Economics By Telling Stories,” as it appears in the 2008 collection of Heyne’s writings, “Are Economists Basically Immoral?” and Other Essays on Economics, Ethics, and Religion (Geoffrey Brennan and A.M.C. Waterman, eds.) [original emphasis]:

Moreover, social systems that impinge on us daily in important ways seem threatening when we don’t know how they work. They generate alienation and anxiety. So the best reason for anyone to learn economics is that a knowledge of how markets work empowers the knower. Economic understanding is a powerful antidote to the sense of impotence that comes from supposing that “they” must be in control because “we” are not.

DBx: Yep. Learning sound economics, even if only ECON 101, outfits you with the intellectual equivalent of x-ray-vision glasses: You are able to see forces and consequences that are invisible to people who know little or no economics.

But there’s a downside. (How could there not be? Economics also teaches that there are no solutions, only trade-offs.) Seeing forces and consequences that other people don’t, you naturally want to tell people – often to warn them for their own good – about what you see. But because most of the people with whom you share your econ-vision knowledge do not see what you see, those people think that you’re either a kook or a mercenary liar. Nevertheless, it’s far better to be informed and knowledgeable than to be blind and ignorant.