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Here’s a letter to a new correspondent.

Mr. B__:

You label as “drivel and nonsense” my (satirical) proposal that the U.S. government protect domestic automakers by punitively taxing automobiles kept for longer than five years. “No one reasonable,” you write, “thinks keeping cars longer threatens our auto makers like imported cars do.”

I agree that almost no one recognizes that extending the life of existing automobiles reduces the demand for newly produced automobiles every bit as much as does the importation of automobiles. But my point is that people should recognize this reality, for it helps expose the case for protective tariffs on automobile imports as, well, drivel and nonsense.

In 2024, Americans bought 16.1 million new automobiles. Thirty-nine percent of these vehicles – or 6.3 million – were imported. (So in 2024, sales of new American-made cars were roughly 10 million.) In that same year (according to Claude), Americans relinquished between 10 to 12 million vehicles in order to purchase newly produced automobiles. If each of these relinquished vehicles were instead kept for one year longer, that number would swamp that of imported vehicles.

It follows that if the threat posed to America’s economy by imported automobiles is so great that the government is justified in punitively taxing Americans’ purchases of imported vehicles, then the threat posed by extended-life automobiles is even greater, thus requiring even stronger government efforts to discourage Americans from extending the lives of their existing automobiles.

If you extend the life of your car in order to save money, would you be cool with the government penalizing you for this effort? If not, why are you cool with the government penalizing you for buying an imported car in order to save money?

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030

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Here’s a letter to the Wall Street Journal.

Editor:

You report that because “Americans are keeping their cars longer than ever … the average vehicle on U.S. roads is about 13 years old, a historic high and a 10% jump from a decade ago” (“Americans Are Keeping Their Cars Longer Than Ever – and Remaking the Auto Industry,” June 6). One result, of course, is reduced demand for new American-made automobiles.

The Trump administration insists that its tariffs on imported automobiles are necessary to protect the U.S. auto industry and America’s industrial economy. Shouldn’t the administration, then, also impose tariffs (that is, taxes) on Americans who keep their cars too long – say, beyond five years? After all, the demand for newly produced American-made automobiles – for U.S. industrial output – is reduced no less by Americans who lengthen the time they keep their old wheels than it is by Americans who purchase imported cars.

If the endeavor to make America’s economy great again requires that government restrict Americans’ choices in order to raise the demand for newly produced American cars, that endeavor must include not only tariffs on auto imports but also punitive taxes on cars maintained and kept longer at home – and, by the way, also on the sale of used cars.

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030

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Sheldon Richman rightly cheers Jeff Bezos’s defense of large fortunes earned in market economies. Two slices:

When an American businessman defends the large fortunes made—that is, earned—in the marketplace, it’s something to celebrate. Jeff Bezos, the creator and head of Amazon.com, did just that in a recent wide-ranging interview on CNBC’s Squawk Pod with host Andrew Ross Sorkin on May 20, 2026.

While his remarks on political philosophy did not go far enough in defending the morality of money-making, they went farther than anything we have heard from a businessman in quite some time, if ever.

…..

Here is Bezos, one of the richest men in the world, claiming that being worth a billion dollars or more is not immoral when it comes from pleasing consumers.

He elaborated:

There was one outlet. Then there were two. Then there were three. The way to you made the billion dollars or hundred million dollars or 10 million dollars or anything is that you create a service that people love, and if millions of people choose your service, you’re gonna end up with a billion dollars.”

Mind-blowing, no? This wasn’t Ludwig von Mises or Ayn Rand or Milton Friedman defending the earning of great wealth through production. It was a guy who actually did it. He’s proud, as he should be. He innovated, executed his plan, benefitted hundreds of millions of people beyond calculation—and, as a result, did extraordinarily well for himself. (Like other wealthy people, Bezos consumes only a tiny percentage of the total value he creates.)

Why would anyone begrudge such a person the fruits of his labor? Many motives can explain the animosity, among them, envy and sheer hatred of achievement. To be more charitable, however, we can add “ignorance” to the list. Some clueless people may really believe that Bezos has more because others have less.

The Editorial Board of the Wall Street Journal is correct: Donald Trump’s enthusiasm for government taking partial ownership of – “stakes in” – private companies is a step down the same road on which Bernie Sanders now calls for government to seize 50 percent of the equity in AI companies. Three slices:

Many of America’s worst policy mistakes have been bipartisan mind melds. A new example comes this week from Bernie Sanders, who wants the feds to take ownership stakes in AI companies. Hmmm. Which Republican might have inspired this statist brainstorm?

Mr. Sanders teased his forthcoming legislation in a New York Times op-ed that pitched a U.S. AI sovereign wealth fund. “Even President Trump, in an executive order, has proposed establishing an American sovereign wealth fund,” Mr. Sanders writes.

Yes, and we blasted the President’s idea last year. Sovereign wealth funds typically enrich a country’s rulers and friends far more than its citizens. Democrats criticize the Trump family businesses for profiting from the Presidency with crypto deals. Imagine the temptation for corruption if government owns stakes in America’s wealthiest companies.

…..

The unhappy truth is that President Trump helped pave Mr. Sanders’s road to AI socialism with his industrial policy. In return for approving Nippon Steel’s acquisition of U.S. Steel, Mr. Trump demanded a “golden share” that gives the government veto power over major business decisions. He has already blocked the closure of an unproductive Illinois plant.

The U.S. took a 9.9% equity stake in Intel last summer as it floundered. Mr. Trump claims credit for the subsequent 300% surge in Intel’s share price. He should really thank the business decisions of CEO Lip-Bu Tan—whom he had earlier called to resign—and insatiable demand for chips by AI hyperscalers.

The Administration has also taken equity stakes in critical mineral developers MP Materials, Lithium Americas, Vulcan Elements, Trilogy Metals and USA Rare Earth. There may be some cases when the feds need to invest for security or defense needs, but Mr. Trump is doing it with little restraint. This week he invested in coal plants, of all things.

…..

The U.S. leads the world in AI because entrepreneurs and investors have combined to innovate and compete. Political control would stifle that growth and cede leadership to China. It would be a tragedy for the ages if AI became the road to American socialism.

Matt Yglesias tweets: (HT Scott Lincicome)

It’s so funny to me that the “take stakes” euphemism has talked Republicans into doing nationalization of industry.

Jeffrey Depp writes insightfully about AI, as well as about the arrogant – and in many cases, venal – itch to have government regulate it. (HT Alden Abbott) Two slices:

The more fundamental question is whether either level of government possesses the knowledge, incentives, or institutional capacity to regulate a technology evolving at extraordinary speed. Before deciding who should regulate AI, we should first ask whether government can regulate it effectively at all.

The answer is no.

Critics of AI regulation often focus on innovation, competitiveness, or economic growth. Those concerns matter. But they are secondary to a more fundamental insight developed by economists associated with the Austrian and Virginia schools of political economy. The problem is not simply that regulation may slow innovation. It is that neither federal nor state regulators possess the knowledge necessary to determine what AI should become. And even if they did, the political process would steadily transform limited oversight into expansive control.

The result is a regulatory project almost certain to fail on its own terms.

…..

Israel Kirzner extended Hayek’s insight by emphasizing entrepreneurial discovery. Markets are not static systems moving neatly toward equilibrium. They are dynamic processes through which entrepreneurs discover opportunities others have missed. Competition matters not because it produces a predetermined outcome, but because it reveals information nobody previously recognized.

AI development exemplifies this process. No regulator predicted the explosive growth of prompt engineering—the practice of shaping inputs to get better outputs from AI systems. Few anticipated the rapid rise of AI coding assistants. Fewer still foresaw how quickly businesses would integrate generative AI into legal services, drug discovery, customer support, software development, and scientific research. Those discoveries emerged through experimentation.

That poses a serious problem for regulators. Any reporting requirement, disclosure standard, certification process, or safety framework necessarily reflects current knowledge. It embodies policymakers’ best understanding of responsible AI development at a particular moment.

But what if that understanding is wrong? More realistically, what if it is incomplete? The danger is not merely that regulators may make mistakes. It is that regulation freezes today’s assumptions into tomorrow’s rules.

A reporting framework developed in 2026 reflects what policymakers believe AI risks and opportunities look like in 2026. Yet the market’s understanding of those risks and opportunities may look entirely different in 2028 or 2030.

The great Bruce Yandle counsels Trump to be more realistic and modest.

Ben Zycher bids “good riddance to the SEC’s climate disclosure requirement.” A slice:

Climate policy — the political control of energy supplies — is tailor-made for the achievement of leftist ideological goals unrelated to the environment. Accordingly, the environmental left will not and cannot abandon climate alarmism.

Sooner or later there will be a left-wing U.S. administration with control over the various regulatory agencies. Accordingly, such policies must be opposed vigorously, and pulled out by the roots in whatever form they are found.

Eric Boehm decries the Trump administration’s continuing efforts to escape its legal and ethical obligation to refund the tax – a.k.a. tariff – revenues that it unlawfully collected from Americans.

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… is from Alexander Hamilton’s Report on Manufacturers, which was submitted to the U.S. House of Representatives on December 5th, 1791:

The question must still be, whether the surplus, after defraying expences, of a given capital, employed in the purchase and improvement of a piece of land, is greater or less, than that of a like capital employed in the prosecution of a manufactory: or whether the whole value produced from a given capital and a given quantity of labour, employed in one way, be greater or less, than the whole value produced from an equal capital and an equal quantity of labour employed in the other way: or rather, perhaps whether the business of Agriculture or that of Manufactures will yield the greatest product, according to a compound ratio of the quantity of the Capital and the quantity of labour, which are employed in the one or in the other.

DBx: This quotation is drawn from that part of Hamilton’s Report on Manufacturers in which he debunks – brilliantly – physiocracy, which was the theory that all economic value ultimately is created by agriculture and not by manufacturing (or any other economic pursuit). (Hamilton undoubtedly was taking aim at Thomas Jefferson’s romantic embrace of the agricultural economy.)

A greater deployment of resources to agriculture draws resources away from manufacturing – thus requiring, if we’re concerned about the economic consequences, a comparison of the value of the additional agricultural output to the value of the foregone manufacturing output. If the latter is greater than the former, the perceived positive value of the additional agricultural output does not economically justify the production of that output, for its production brings about the loss of greater economic value that could have been produced by more manufacturing activity.

Exactly so. But Hamilton’s point is more general. It applies to the increased outputs of any goods or services, regardless of how these outputs are classified (for example “manufacturing” or “services,” or “semiconductors” or “machine tools” or “children’s dolls”).

Industrial-policyists, although frequently citing Hamilton in support of their schemes, stubbornly ignore this important point: No domestic industry or firm can be expanded without causing some other domestic industry or industries, or firm or firms, to be smaller than they would otherwise be.

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Here’s a letter to the Wall Street Journal.

Editor:

You asked five prominent economists to offer ideas “for reducing income inequality” (“Five Ideas for Reducing Income Inequality,” June 5). Of the five, only John Cochrane dared come close to challenging your question’s faulty premise – namely, that large income differences in a market economy are a problem that demands government attention. In markets, incomes are produced and earned, and they rise with the size of the contributions income earners make to the material welfare of their fellow human beings. There is no ‘problem’ here over which to wring our hands.

What does warrant hand-wringing is the economic misunderstanding of too many prominent economists. Emmanuel Saez, for example, in unimaginatively proposing to soak the rich, is apparently unaware that such soaking will – in addition to discouraging entrepreneurial innovation – deplete the stock of capital, thus reducing worker productivity and, in turn, lower real wages. Glenn Hubbard, in pinning the blame for the growth in income difference on globalization and technology, too readily accepts the claim – first peddled by progressives and now also by MAGA conservatives – that many ordinary Americans haven’t prospered over the past few decades. This claim has been thoroughly refuted by careful researchers, including Jeremy Horpedahl, Michael Strain, and Phil Gramm, Bob Ekelund, and John Early.

Also baseless is Heather Boushey’s allegation that the decline of labor unions resulted in workers having too little bargaining power. Another careful researcher, Scott Winship, finds that, although the percentage of workers who are members of unions has been falling since 1955, inflation-adjusted worker pay since then has not only been rising, but has kept pace with rising worker productivity – proof as solid as proof gets that labor-market competition continues to ensure that workers aren’t underpaid.

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030

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