Few deny the importance of human capital (economists’ fancy word for education and skills) for economic development. This importance is obvious: better-educated workers are more productive and can be more effectively combined with physical capital, thereby increasing the productivity of the former (and wages as a byproduct).

Well-protected property rights, low taxation, and minimal regulation increase the returns on human capital acquisition — all the things that speak to economic freedom. For example, if the government imposes strict regulations, the ability of individuals to respond is diminished. For example, if the state requires a special license to practice a profession (as is the case in the United States, where about 20 percent of jobs are regulated by professional orders or licensing systems, it becomes difficult to benefit from the accumulation of human capital. Since all these conditions are synonymous with economic freedom, it is clear that the latter is crucial for motivating human capital acquisition.

However, some argue that the state encourages education through subsidies, especially post-secondary education. By taxing the rich to help the less fortunate acquire human capital, the state not only supports the less well-off but also stimulates economic growth. However, these taxes reduce economic freedom.

This tension implies that economic freedom is a double-edged sword. On the one hand, it encourages the accumulation of human capital. But if the state taxes the wealthy to redistribute to the less fortunate, this reduction in economic freedom can paradoxically lead to an increase in human capital.

Which effect dominates? There are good reasons to believe that the theoretical case for the state promoting human capital accumulation through redistribution is exaggerated. First, a highly interventionist state that taxes heavily and intervenes extensively in credit markets can stifle the supply of credit from financial institutions or businesses to students. This supply — dollar for dollar — is often more effective than that of the state. Why? Because these institutions want to be repaid and will therefore offer loans to those who are likely to be able to repay the amounts borrowed. The state does not have the same incentives. After all, the politician who promises subsidies for university attendance does not need to be financially reimbursed; instead, he expects to win the vote of the subsidy recipient.

Moreover, many types of human capital investments (professional, university, technical, college degrees) involve a degree of uncertainty. Why? Because generally, the time spent learning has no value unless the degree is obtained. A person who needs to take ten courses to obtain a certification but only completes nine will not receive nine-tenths of the diploma’s return — they will likely receive close to zero. The risk of non-completion is a form of uncertainty and represents a cost. Income tax increases the weight of this risk by making risk-taking less profitable. If people are risk-averse, the negative effect of one dollar of tax is greater than the positive effect of one dollar of subsidy.

This is why, when examining the existing empirical literature on economic freedom and human capital, particularly the work of economist Horst Feldmann, we find that more economic freedom leads (on net) to an increase in human capital. Using the Fraser Institute’s Economic Freedom Index, Feldmann found that an additional point of economic freedom increased high school enrollment rates by 33.48 to 37.98 percentage points. Another group of researchers, using data from 86 countries, confirmed that finding when they found that an additional point of economic freedom increased the rate of return on education by 0.45 percentage points. This means that freer economies were able to make human capital (and self-improvement) more enticing for workers.

In forthcoming work with Alicia Plemmons and Justin Callais, I test whether economic freedom favored intergenerational educational mobility — whether children’s educational status in adulthood is determined by their parents. The idea is that, if economic freedom is net beneficial, we should see the children of poor parents be able to acquire more human capital. We found exactly that — economic freedom is potently associated with greater educational mobility.

In conclusion, the argument in favor of state intervention in education — without which there would not be enough investment in human capital — is not particularly convincing. The case for more economic freedom, for its part, is far stronger. 

A reader recently reminded me that North Korea’s official name is the Democratic People’s Republic of Korea. North Korea’s bitterly ironic naming convention has been used by other totalitarian states. The German Democratic Republic was the official name for East Germany. The genocidal government of Pol Pot in Cambodia was known as Democratic Kampuchea. South Yemen’s breakaway communist regime was known as the People’s Democratic Republic of Yemen.

We know from those who have escaped from North Korea that despite their extreme suffering, people there are told they are living in the greatest country in the world. As FA Hayek explained in The Road to Serfdom, “If the feeling of oppression in totalitarian countries is in general much less acute than most people in liberal countries imagine, this is because the totalitarian governments succeed to a high degree in making people think as they want them to.”

The American identity revolves around freedom. In one survey, 91 percent of Americans shared that freedom is their most important value. In another survey, 91 percent of Americans said, “the right to vote is either extremely or very important to the nation’s identity.” As for preserving freedom, 94 percent say “the US Constitution is ‘important’ to protect their liberty and freedom.”

Reasonable people might be concerned about whether most Americans grasp the true meaning of freedom. Collectivists have successfully led people to believe that democracy is synonymous with freedom. Some individuals genuinely believe that by defending our democracy, they are safeguarding freedom. They have confused the classical liberal ideal of freedom with what FA Hayek called political freedom, “the participation of men in the choice of their government, in the process of legislation, and in the control of administration.”

Voting doesn’t guarantee a society will move toward minimizing “coercion or its harmful effects.” Hayek calls us to remember, “we have seen millions voting themselves into complete dependence on a tyrant [and] has made our generation understand that to choose one’s government is not necessarily to secure freedom.”

In his 1960 work The Constitution of Liberty, Hayek described how the “partial realization” of “the ideal of freedom” is what “made possible the achievements of [Western] civilization.” He continued with this warning: “We must hope that here there still exists wide consent on certain fundamental values. But this agreement is no longer explicit; and if these values are to regain power, a comprehensive restatement and revindication are urgently needed.” 

In 2024, we can say that widespread “agreement” on the ideal of freedom is gone. 

In The Constitution of Liberty, Hayek explained that he used the words freedom and liberty interchangeably. With clarity, Hayek distinguished two forms of freedom: the classical liberal ideal of freedom from coercion and the collectivist ideal of freedom from necessity. He explains that these two ideals cannot coexist logically or morally. Once freedom from necessity becomes a widespread goal, demands for the redistribution of wealth become the norm.

The classical liberal ideal of freedom from coercion means private individuals have the autonomy to make choices and carry out personal plans instead of being forced by another’s arbitrary decisions. In The Road to Serfdom, Hayek explained that a free society depends on the virtues of “independence, self-reliance, and the willingness to bear risks, the readiness to back one’s own conviction against a majority, and the willingness to voluntarily cooperation with one’s neighbor.”

The collectivist ideal of freedom from necessity erodes these virtues. In Hayek’s words, freedom from necessity means “release from the compulsion of the circumstances which inevitably limit the range of choice of all of us.”  

As Hayek wrote in The Constitution of Liberty, the ideal of freedom from necessity means politicians claim to do the impossible — “to satisfy our wishes.” Hayek explains how freedom from necessity requires authorities to exercise the power of coercion to limit personal freedom. Individuals tend to comply when their environment or circumstances are controlled by someone else, compelling them to act in ways that serve someone else’s goals.

Hayek sounded this alarm in The Road to Serfdom: “There can be no doubt that the promise of greater freedom has become one of the most effective weapons of socialist propaganda and that the belief that socialism would bring freedom is genuine and sincere.”

Doubting politicians’ good intentions is wise, but doubting those of our neighbors, colleagues, and family members is counterproductive. Let’s imagine a future where the classical liberal ideas of freedom from coercion become mainstream once more. If that happens, it will be because our “neighbors” have had a change of heart. As Hayek pointed out in The Road to Serfdom, many we know “would recoil if they became convinced that the realization of their program would mean the destruction of freedom.” 

The recoil might start when our good-natured neighbors grasp the evil of coercion. Hayek wrote in The Constitution of Liberty, “Coercion is evil precisely because it thus eliminates an individual as a thinking and valuing person and makes him a bare tool in the achievement of the ends of another.” The range of personal choices erodes in fundamental ways—what university will admit you, what occupations are open to you, what car you can drive, how you heat your home, etc. Coercing an individual so that someone else can be free from the necessity of choice never produces freedom. 

Hayek’s warning is a powerful reminder of the outcome of our confusion.

Once this identification of freedom with power is admitted, there is no limit to the sophisms by which the attractions of the word ‘liberty’ can be used to support measures which destroy individual liberty, no end to the tricks by which people can be exhorted in the name of liberty to give up their liberty.

Let’s not just point the finger at politicians. Some need little persuasion to abandon their freedom. Hayek explains, “there are people who do not value the liberty with which we are concerned, who cannot see that they derive great benefits from it, and who will be ready to give it up to gain other advantages.” To these people, “the necessity to act according to one’s own plans and decisions may be felt by them to be more of a burden than an advantage.”

Authoritarians do not impose socialism from the top down; it is welcomed by many from the bottom up. 

If we are puzzled by why our neighbors believe what we think is crude propaganda, we shouldn’t be. In her novel Seduction of the Minotaur, Anaïs Nin wrote, “We do not see things as they are, we see them as we are.” In this case, if freedom seems burdensome to some, they will be convinced by sophistry that supports their view. 

These people are easily convinced that wealth redistribution — especially if it benefits them and is approved by elected officials — equals greater freedom. They will then perversely hail as beneficial to society every proposal that reduces the freedom of private individuals to order their own conduct. Constitutional guarantees limiting the power of government will then be defined as obstacles to freedom and democracy.  

Hayek wrote, “The task of a policy of freedom must…be to minimize coercion or its harmful effects, even if it cannot eliminate it completely.” When the ideal of true freedom from coercion is no longer a shared societal goal, history teaches that unimaginable horrors can be just around the corner.   

Although I’ve taught Principles of Microeconomics  (“ECON 101”) nearly every year now for the past 42 years, I never tire of this course. I deeply love walking into the classroom each and every day to do my best to share with my (mostly freshmen) students the economic way of thinking. I am just as eager and excited to teach my Fall 2024 course as I was to teach my Fall 1982 course – and, indeed, as I was to teach every one of the countless Intro to Econ courses that I’ve taught in between.

I teach this course as if it’s the only formal exposure my students will ever have to economics. This approach is realistic, because most of the students in my course will take at most one other economics course during their collegiate careers. I see as my principal responsibility to instill in my students enough knowledge of basic economics so that they, when fully into adulthood, will take an adult stance when encountering economic arguments presented by politicians and pundits.

If I do my job well, each of my students will leave my course at the semester’s end with an understanding of the following ten lessons.

1. Poverty has no causes; wealth has causes. No effort, sacrifice, risk-taking, or creativity is required to be mired in poverty. Following the reverse of Nike’s famous mantra suffices to ensure poverty: Just don’t do it. Poverty is simply the condition that humanity finds itself in if too little wealth is created.

Unlike poverty, wealth doesn’t just happen. To escape poverty requires the creation of wealth. Effort must be put forward, sacrifices must be made, risks must be taken, and creativity must be unleashed – all by us humans – if we are to transform any of the atomic and molecular mash-ups given to us by nature into outputs that improve our lives. Adam Smith signaled this reality in the full title of his magnificent 1776 book, An Inquiry Into the Nature and Causes of the Wealth of Nations.

2. Wealth is created, not “distributed”; therefore, in a market economy the “distribution” of income and of wealth has no policy relevance. To understand that wealth must be created is to understand the indispensable roles of individual human effort, sacrifice, risk-taking, and creativity. Wealth, being a human creation – rather than being goodies created by nature and dispensed like manna from heaven – emerges only from the minds and hands of its creators. It belongs to them. And so in a market economy those individuals who create more wealth have more wealth.

I’m tempted to say that the “distribution” of wealth in such an economy thus has no more policy relevance than does the distribution of “A” grades in a fairly taught-and-tested college classroom. Just as those students who are smartest and who study hardest tend to get the highest grades are entitled to keep their high grades – just as those high grades are not extracted from the grades or brains of students who are less smart or who study less diligently – the wealth earned in markets by high-income earners is not extracted from those people who earn lower incomes. But this formulation doesn’t do the market justice. While in a classroom, “A” students don’t seize their high marks from students who earn lower marks, nor do these “A” students do much to help their less-talented or less-diligent classmates. But in a market economy, individuals who earn high incomes do so only by increasing the economic well-being of other human beings. In a market economy, the higher is Smith’s income relative to that of Jones, the more Smith has done, compared to Jones, to enrich his or her fellow human beings.

3. The economy is impersonal – implying, importantly, that prices and wages are not arbitrary. Nearly all economic phenomena are, as F.A. Hayek was fond of saying, “the results of human action but not of human design.” As Arnold Kling puts it:

Economic outcomes are determined by general forces, like supply and demand, as opposed to the intentions — good or bad — of individuals.

Inflation does not rise because of a surge in greed. And it does not fall because greed recedes.

The grocery store owner does not control the price of eggs. That price is determined by supply and demand.

Market outcomes aren’t intended by anyone – not by God, government, or corporations.

4. It’s good that the economy is impersonal. In an impersonal, market economy you are treated like an adult. What you earn is due, above all, to your efforts and not to your personal connections (or lack thereof), or to the caprice of individuals who might hate you just as easily as might love you.

5. Tradeoffs are inescapable. Save for breathable air on the earth’s surface, every resource, good, or service is scarce – meaning, there isn’t enough of it naturally to satisfy every conceivable human desire that it might be used to satisfy. From this fact follows another – namely, to use a scarce good to satisfy one particular desire necessarily requires that some other desire or desires that could have been satisfied remain unsatisfied. That the market (or any other human institution) fails to satisfy some human desires is true, and will always be true. Good economists understand that this reality is no mark against the market.

6. There’s no objectively ‘best’ pattern of tradeoffs. You are likely to choose differently than I would choose exactly how many bottles of beer are best to sacrifice to acquire a pair of jeans. Your particular tradeoff is right for you, as mine is for me. And being liberal adults, neither of us wishes to coerce the other into trading-off differently.

7. Exchange is mutually beneficial. The power to say ‘no’ to an offer means that any and all exchanges that do occur are mutually beneficial. This reality holds even if one party to an exchange is a pauper and the other a multi-billionaire.

8. The economic benefits and costs of economic exchange are unaffected by political borders. Traders’ political citizenships are no more economically relevant than are traders’ eye colors, their fondness for tattoos, or the first letters of their last names. Trades that occur across political borders have precisely the same economic consequences as do trades that occur within political borders.

9. Jobs are costs, not benefits. Because costs are the flip-side of choice, someone who chooses to hold a job obviously believes that holding the job is worthwhile. But the job is worthwhile not in and of itself but, rather, because it’s a means of acquiring spending power. The chief value of any job, therefore, is found in the amount and quality of goods and services that job enables the jobholder to acquire. If you think me here to be unduly ‘economistic,’ ask yourself if you can think of any job that anyone who isn’t independently wealthy will hold for any length of time if that person were paid no income to perform that job. Unless you can think of such a job, my point stands.

10. The government is human, not divine. Governments are chosen by humans and operated by humans. And humans do not obtain god-like knowledge, wisdom, or goodness by acting politically. This point, as stated, seems to be trivially true. But trivial it, in fact, is not. Sample the many political programs and policy proposals routinely described in newspapers, in magazines, and on television and websites. You’ll discover that a great majority of them will work as their proponents promise only if government officials somehow come to possess the knowledge, wisdom, and goodness that we associate with divine creatures. These programs can’t possibly work as promised if carried out by mere mortals.

Every student who, at each semester’s end, leaves an economic classroom having internalized at least some of the above propositions is a student who has learned an unfortunately rare, yet extremely valuable, lesson.

In 2018, 1,200 Yale undergraduates crowded into one of the University’s largest venues, Battell Chapel, ready to listen and learn. But the students sitting in the glow of the chapel’s stained-glass windows, who comprised almost a quarter of Yale’s undergraduate population, were not there for a church service. They were there for the most popular class in Yale’s 316-year history: Psychology and the Good Life – or, as it was more colloquially known, “the happiness class.”

Undergraduates attending Yale that year would have been born between 1996 and 2000, among the first Generation Z students to darken the doors of an Ivy League university older than the United States itself. By 2018, according to Professor Laurie Santos, those students faced a “mental health crisis” at Yale and on campuses across the United States. To combat it, Santos created the course advocating for positive psychology and behavioral change. And clearly, there was an appetite for it.

According to Abigail Shrier, who herself spent time as a student at Yale (and Columbia and Oxford, a veritable bouquet of prestigious universities), Generation Z is “the loneliest, most anxious, depressed, pessimistic, helpless, and fearful generation on record.” And she’s not the only one to say so. Jonathan Haidt, Jean Twenge, and others studying Generation Z have said much the same. But Shrier’s new book, Bad Therapy: Why The Kids Aren’t Growing Up, proffers a different theory than the others (one much less focused on the impact of the smartphone and social media): that happiness-centered parenting and copious amounts of therapy have rendered Gen Z the most dysfunctional generation on record. Shrier would likely consider the 1,200 Yale students looking for happiness in a psychology class exhibit A (or Z, if you will).

For Shrier, “bad therapy” hinges upon iatrogenesis, the idea that a treatment intended to cure could be inflicting harm. As she notes at the outset, some people (children included) have legitimate mental health disorders and need professional help. But others — who more often are the focus of discussions surrounding the “youth mental health crisis” — are merely “worrie[d], fearful, lonely, lost, and sad.” In other words, they are unhappy young people, and they’re looking to mental health professionals to help them find happiness or “diagnose” why they can’t.

Shrier interviews one expert who observes, “happiness is actually a very rare emotion, statistically speaking”; the more you hunt for it, “the more likely you are to be disappointed.”           It’s also difficult to achieve when focusing on yourself. And yet that’s precisely what therapy has you do. “Attending to our feelings often causes them to intensify” — if you are not already happy, focusing on your unhappiness is an unlikely path to becoming so.

The meat of Shrier’s argument rests upon the claim that such iatrogenic therapy has become commonplace in schools and parenting manuals across the United States. What once was a school counselor or two is now an expanded team of psychology staff that inculcates “trauma-informed education.” Two years ago, California “announced a plan to hire an additional ten thousand counselors to address young people’s poor mental health.” 

Mental health surveys, often written by the Centers for Disease Control and Prevention (CDC), according to Shrier, are designed merely to keep school psychologists in business, ask leading questions of students at the height of pubescent, hormonal impressionability: “During the past year, did you do something to purposely hurt yourself without wanting to die, such as cutting or burning yourself on purpose?”; “Have you ever participated in a game or challenge, by yourself or with others, that involved getting dizzy or passing out on purpose for the feeling it caused? (This game or challenge is also called the Choking Game, the Fainting Game, Pass Out, Knock Out, Tap Out, or Black Out.)”?; Have you ever tried to lose weight by “fasting or abusing laxatives?” This specificity, even though suicide and self-harm are extremely contagious behaviors that – when it comes to other forms of reporting, such as journalism – are subject to guidelines to minimize the possibility of copycat behavior.

At home, Shrier paints a parallel picture. Parents have adopted “gentle parenting” strategies to keep their children emotionally attuned and happy, thinking they need “sophisticated knowledge of the human brain and its infinitely complex systems to discover what’s troubling [their] own kids.” Parents live in fear of unintentionally inflicting “childhood trauma” or “adverse childhood experiences” (ACEs) on their kids, which are said to negatively impact a child for life. But in attempting to avoid such experiences, Shrier says that parents swing too far in the other direction, effectively handicapping their kids. “Kids arrive at school having never heard the word ‘no’,” a recipe for disaster in a class with twenty other kindergarteners who have also never heard the word. Pair this with the statistic that “teachers were the most likely to be the first to suggest an ADHD diagnosis in children,” and children are on a trajectory for psychotropic drugs and therapy from the time they enter kindergarten at age five.

While the educational and parenting trends Shrier linked were eye-opening, perhaps the keenest insight Shrier makes is one she doesn’t spill much ink expounding:  when it comes to raising and shaping our kids, moral language has been replaced by that of the therapeutic. But what happens when, as Jessica Grose writes for Slate, “childhood misbehavior is much more likely to be described in terms of therapeutic symptoms than character flaws”? When one’s inability to overcome his or her vices is reframed not as a moral failing, but as “mental illness”? When any whiff of negativity is labeled as “trauma,” and those who inflict it are “toxic,” to be shunned? Well, as Shrier writes: “agency [slinks] out the back door.” 

One question prompted by Shrier’s book is what happens to the moral formation of children when religion and religious institutions, which have historically provided many of the benefits that therapy purports to achieve without some of its more obvious drawbacks, erode over time, as they have in recent decades in America. Shrier’s book displays some of the effects of this replacement in Generation Z, which is the least religious generation recorded in the United States. Therapy has become the secular replacement for religion in the public sphere, and the Diagnostic and Statistical Manual of Mental Disorders (DSM) is its sacred text.

The philosopher Alasdair MacIntyre saw this coming decades ago. His seminal 1981 work, After Virtue, decried the ills of  “emotivism,” or “the doctrine that all evaluative judgments and more specifically all moral judgments are nothing but expressions of preference, expressions of attitude or feeling.” He identifies that the Enlightenment West has no way of measuring rival theories of morality against one another. MacIntyre highlights three main characters on the cultural stage that embody “emotivist modes of manipulative behavior”: one of which just so happens to be “the therapist.” According to MacIntyre, therapists cannot engage in moral debate, but “purport to restrict themselves to the realms in which rational agreement is possible — that is, … to the realm of fact, the realm of means, the realm of measurable effectiveness.”

But in a confused society, which cannot coalesce upon what a “fact” even is, much less a common vision of the good (or a shared law reinforcing it), the primary character-shaping individuals in kids’ lives (parents and educators) struggle to decide upon which normative values to instill and pass on. Values that, in decades past, have always been supplied in America by a moral realism, that is, a combination of religion and virtues like honesty, courage, wisdom, and accountability, among others. America has, for the most part, combined the West’s biblical heritage and commercial virtues, an approach that many of our founders understood well. Failure to do so leads in many directions, one of which is a least-common-denominator catch-all: therapy – a cheap, emotivist substitute for virtue and an objective sense of right and wrong.           

To recover what Shrier presents as lost in Bad Therapy, we need not only a stronger sense of resilience, as Shrier proposes, but something more akin to moral realism as a remedy to our therapeutic age: a return to virtue, and the institutions that promote and spread it. 

This return would bolster a sense of community and belonging, spur character development alongside the teaching that there is much greater than oneself, give an account of human failing and promote responsibility when the failure is your own. This would shape young people to be better participants in the workforce, as they grapple with the challenges of building skills and careers in a dynamic environment. Instead of self-centered self-care, this approach promotes caring for one’s neighbor as oneself. Instead of chasing happiness and avoiding suffering, moral realism teaches the reality that, in an imperfect world, suffering is to be expected – but that what matters most is how one responds to it. Even the best individually tailored therapy and medication cannot do this.

Despite the polarizing tone of her book, Shrier’s broader points are timely and much needed: that therapy doesn’t cure all our ills, and perhaps even makes them worse; that if everything is trauma then nothing is; that humans are resilient and have been for millennia; that we can continue to be so if we choose.

“The happiness class” at Yale moved to the university’s concert venue, Woolsey Hall, to accommodate the great number of students interested in learning the psychology behind being happy. It’s almost as though the class represented a microcosm of Western society, a symbol of the therapeutic approach superseding moral realism in the public square. Shrier uncovers the pathos of the therapeutic, but the next step for young people is to understand and believe that their freedom and virtue are gifts, with which to live a life of excellence.   

Electricity is among the most-regulated sectors of the U.S. economy. A century of public-utility regulation of entry and rates has given way to new suites of government intervention. Wholesale electricity is centrally planned in most states, creating a contrived retail market. At the same time, government policies have increasingly displaced thermal generation (natural gas, oil, coal, and nuclear) with intermittent wind and solar power, requiring costly battery storage.

Today, a growing number of regions are subject to rising power rates, conservation appeals, and service interruptions. The Great Texas Blackout of February 2021 caused hundreds of deaths from a lack of heating and other services, not to mention a hundred billion dollars in damages. California, which in 2000–2001 suffered shortages that closed businesses and schools, endures “green” electricity rates at double the national average. Other states and regions are pursuing policies that portend similar results.

Economic discoordination can inconvenience, disrupt, and even kill. But this threat to reliable, affordable electricity is not the result of market failure but government failure, abetted by expert error from the knowledge problem and by politicization.

Read the full Explainer:

Nearly ten years ago, I wrote what I thought was a provocative essay about polygamy and the state. Specifically, I claimed that the state acts like a polygamist, enforcing a cruel and explicitly patriarchal regime on single mothers. Perversely, the justification for this repressive regime is compassion, even “social justice.”  

One of the most corrosive aspects of patriarchy is that it treats women as objects, rather than active moral agents in their own right. It is certainly true that, given the weak bargaining position women are often placed in, in traditional societies, women appear to accept inferior roles. But as Gerry Mackie famously argued, even the worst institutions — footbinding and infibulation, for example — have a “rational element” from the perspective of women trapped in these systems. Lisa Tessman has a theory of contingency and virtue, about the struggle of women to preserve a space for virtue in lives circumscribed by sexist rules.

In the years since I wrote the first version, the performance and repression of our welfare system has, if anything, gotten worse. The “privilege” of being raised in a two-parent household is being denied to more and more children. We can’t ignore the truth: the state is a small-minded polygamist, outlawing marriage to anyone except the welfare system and — worse — insisting that the women stay at home rather than finding jobs.

About eight million US families are headed by single mothers, and of those nearly three million live below the poverty line defined by the government. Many sustain this tenuous existence with “assistance,” ranging from subsidies on housing and food to childcare and education grants. The state is no Puritan, and does not enforce a rule of exclusivity on the sex lives of these women. But it has an iron-clad rule that if a woman gets married, or gets a job, she loses her benefits. 

This so-called “benefits trap” has been commented on by both the left and right as an odd policy. Brittany Birken, director of community and economic development at the Federal Reserve Bank of Atlanta, testified before a joint oversight committee here in North Carolina about a proposed consolidation of welfare programs known as the “One Door” policy.

Birken used an anecdote to illustrate the problem: she had talked to a single mother in Florida who had been offered a 10-cent per hour raise, and more hours, in her part-time job. The woman said (according to her calculations) if she accepted the promotion she would lose her benefits through the childcare subsidy program.

“We confirmed her math. For that $200 a year increase, she was going to lose access to $9,000 in childcare subsidies,” Birken said. “The real dilemma that families can face is advancing in their career or making financial ends meet.”  Women who find themselves in this no-win situation are not lazy; they are rational, because they have to accept the situation as it is.

Of course, that’s not how the architects of the welfare system think about it. These program heads no doubt see the system protecting women who are otherwise defenseless, with no other means of raising their children. The problem is that these “benefits” are contingent, and the contingencies — no jobs, no marriage — are detrimental to women long term, and disturbingly similar to the restrictions a polygamist would impose.

Some people in the US are poor. They aren’t poor by world standards, perhaps — a minimum wage job in the US puts you in the top 30 percent of the world income distribution — but by US standards, they are poor. Welfare state logic insists that if you are a good person, you care about people who are (especially through no fault of their own) poor. Therefore, we (the state) should do something. 

Passing those programs requires some political compromises, and intentionally creating obstacles to access, or means testing. Contingencies and guard rails are erected to limit fraud, and direct money only to those “who really need it.”  But those conditions trap recipients in a cycle of poverty from which escape is very difficult. Get a job, lose your benefits. Get married, lose your benefits. 

Astonishingly, the effective marginal tax rates for poor people with children can approach, or in some cases exceed, 100 percent. As the Center for Hunger Free Communities put it: “Families that successfully increase their earnings should not find themselves worse off due to the consequent loss of benefits…. While a higher income can be an important step in a family’s progress towards self-sufficiency, the increased child food insecurity in this group suggests they may be experiencing the ‘cliff effect.’ This occurs when an increase in income causes an overall reduction in total resources due to a loss of benefits or increased tax liability.”

Welfare policies are, for the most part, well-intentioned. But their perverse effect is real. Our welfare system traps women in hopeless lives, depending on a state that — like a small-minded polygamist — doesn’t really want them, but is too jealous to let them go.

Last week, former President Donald Trump stirred the pot by posting a social media message praising Brittany Mahomes, the wife of Kansas City Chiefs star quarterback Patrick Mahomes, for “strongly defending” him on social media.

Whether liking a few social media posts constitutes a strong defense of the GOP presidential contender is debatable. Regardless, rumors quickly erupted that Taylor Swift, who dates Chiefs All-Pro tight end Travis Kelce, might have sat in a separate suite at Arrowhead Stadium in the NFL’s season opener to distance herself from Ms. Mahomes. As snubgate rumors swirled, many egged Swift on.

“Taylor Swift Literally Distances Self From Trump-Supporting Bestie Brittany Mahomes,” the Daily Beast reported with approval. 

Hopes that Swift and Mahomes were on the outs were soon dashed, however.  

Sources close to Swift told The US Sun that there was no truth to the feud rumors and the two remain “very good friends.” The following day, Swift and Mahomes were reunited publicly at the US Open Men’s Final in New York City. 

The story didn’t end there, however. Many fans took to Twitter to rip on “spineless” Taylor Swift for not unfriending Mahomes. 

The idea that Swift, who on Tuesday endorsed Kamala Harris for president, should purge from her life people who don’t share her political beliefs is not a healthy or enlightened one. After all, the world would be a dull place if we disassociated from those who didn’t share our views. Intellectual diversity enriches our lives and sharpens us, which is why so many preeminent thinkers throughout history have embraced it. 

“I never considered a difference of opinion in politics, in religion, in philosophy, as cause for withdrawing from a friend,” Thomas Jefferson famously observed.

This is the proper sentiment, and many will tell you the ability to disagree is essential to a healthy constitutional democratic system, especially a pluralistic one like the United States, where people have vastly different life experiences, faiths, ethnicities, cultural identities, and ideas. They are right, but the ability to disagree is essential to something even more important: friendship.

Some might find the claim that friendship is more important than politics strange, but I believe it’s true. Ideas matter. Policy matters. But the older I get, the more I’m convinced that few things in life matter more than relationships, and friendships are near the top of the human relationship hierarchy.

While few may realize it, our closest family members and friends are likely to have a far deeper and more meaningful impact on our lives than policies emanating from Washington, D.C. I think most of us understand this. Value is subjective, but my hunch is that, if asked, few people would give up a cherished friend for a government program. I know I wouldn’t. 

Unfortunately, for a variety of reasons, the number of Americans who don’t have friends is growing. Over the last 35 years, the percentage of Americans who report having “no close friends” has increased 500 percent, for both men and women. During the same period of time, the percentage of men and women who say they have ten or more friends has collapsed, according to a 2021 American Perspectives Survey.

This “friendship recession” has only grown worse the last few years. Earlier this year, PBS reported that 20 percent of American men don’t have a single close friend, up from just 3 percent in 1990. 

The reasons behind this friendship recession are no doubt varied, but they likely stem from increased social isolation and the decades-long decline in community associations that Harvard scholar Robert Putnam chronicled in his best-selling book Bowling Alone.

This is a concerning trend. We saw the perils of social isolation during the pandemic when substance abuse, mental illness, self-harm, and extremism spiked during government lockdowns. This surge was no accident. 

Social interaction is a key ingredient to positive mental health, and friendship is a foundational human need.

The fact that Swift and Mahomes aren’t willing to let their differing views on politics ruin an otherwise healthy friendship is a good thing. It’s a celebrity version of the late Justices Ruth Bader Ginsburg and Antonin Scalia, who famously became best friends even though they represented the polar opposites of the Supreme Court. 

“We were best buddies,” Ginsburg said of her SCOTUS colleague, following his unexpected death in 2016.

During the silly season of presidential elections, which often brings out the worst in us, it’s important to remember that true friendship is worth more than political pride.

To give presidential candidates, who don’t even know who we are, power over our most intimate relationships is to bestow them with one more power of which they are not worthy.

ESG investing poses a grave threat to the principles that lifted billions out of poverty. It neither does much good nor performs very well. Therefore, it must end.  

So asserts Ending ESG, a collection of essays edited by Phil Gramm and Terrence Keeley. Gramm, a former Republican senator and economics professor, and Keeley, a former managing director at Blackrock, are well-suited to make the case. The book’s lengthy introduction is co-authored by Gramm and Keeley. It traces the Environmental, Social and Government (ESG) investment movement back to the United Nations. Not to the Kofi Annan era of the late 90s and early 2000s, that is, but all the way back to the 1948 Universal Declaration of Human Rights.  

The authors do not dwell upon this early history, but it is worth briefly unpacking. Eleanor Roosevelt chaired the drafting committee of the UN Declaration. She explained that many of its members “thought that lack of standards for human rights the world over was one of the greatest causes of friction among the nations, and that recognition of human rights might become one of the cornerstones on which peace could eventually be based.” This was a pressing priority in the wake of World War II.

Jacques Maritain, a French Philosopher who provided intellectual inspiration for the document, explained how consensus was achieved: “we agree on these rights provided we are not asked why. With the ‘why’ the dispute begins.” History has since tested the stability of agreeing not to ask why.

Over the next 75 years, the UN’s declaration of rights eventually led to ESG. Inspired by the declaration, the UN launched development goals (eradicating poverty, gender equality, environmental sustainability, etc.). Then, the UN released investment principles based on these goals, to be adopted by major asset managers, banks, public pensions, and regulatory bodies. To the shock of anyone familiar with other UN efforts, the UN’s work on ESG has paid off.  

ESG has been adopted by major institutions over the world, in word if not always in deed. The result is that “the private economy is increasingly being coerced into meeting a growing number of environmental and social goals that Congress never mandated.”  

The cost of such coercion is high. For one, it undermines the legal and ethical basis of economic progress. Whereas the economic Enlightenment was “founded on the principle that people own the fruits of their own labor and thrift,” ESG is a “throwback to the medieval concept of communal property.” Throughout 14 essays, mostly penned by Gramm and/or Keeley, Ending ESG argues against such an ESG-inspired return to medieval economics.

ESG might seem high-minded and noble compared to the hard-nosed alternatives of fiduciary responsibility and shareholder primacy. But appearances are deceiving. When it comes to results, the economic enlightenment enabled 128,000 individuals to escape abject poverty every single day. In contrast, it’s not clear if the ESG movement has accomplished anything of note, other than lowering the popularity of Wall Street and Corporate America among conservatives, contributing to the anti-business turn on the right.

And though the ESG movement claims to care about eradicating poverty and protecting the environment, we should not take these claims too seriously. Keeley cites a research finding that there is “no evidence that socially responsible investment funds improve corporate behavior.” Moreover, it’s difficult to even assess the impact of ESG strategies since “ESG scores among leading rating agencies correlated only 54 percent of the time.”  

The evidence is compelling, but it raises a puzzling question: if ESG does “neither much good nor very well,” why do so many people seem to believe it does both? Where did ESG critics go wrong? Why did it take nearly two decades for ESG to face substantial backlash?  

One problem is that the defenders of fiduciary responsibility failed to provide adequate moral foundations for their view. Keeley cites Milton Friedman’s classic 1970 New York Times piece, “The Social Responsibility of Business is to Increase Its Profits.” There, Friedman argued:

In a free‐enterprise, private‐property system, a corporate executive is an employee of the owners of the business. He has direct responsibility to his employers. That responsibility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while conforming to the basic rules of the society, both those embodied in law and those embodied in ethical custom.

Friedman, a committed positivist, did not found his concept of social responsibility on a universal ethical standard, other than the need for business executives to defer to shareholder desires. And, in his view, this will usually mean to seek profits while conforming to existing laws and customs. These laws and customs will vary from time to time, and from place to place. And so, apparently, will the social responsibilities of businesses.

In his essay “How Conservatives Can Get ESG Right”, Keeley endorses Friedman’s analysis. Yet it suffers from two major flaws, flaws that also weaken Keeley’s arguments. First, businesses and investors are not just passive recipients of laws and ethical customs. Business leaders are norm-makers, not just norm-takers.  

The most successful business leaders are able to cast a compelling long-term vision, one that includes but goes beyond making money, and to persuade their investors to remain focused on the long-term. That is, business leaders lead their investors, they don’t merely respond to investor preferences. Further, policymakers depend on the counsel of industry to respond to technological innovations, as we are now seeing with artificial intelligence. And business leaders seek to influence both the law and public opinion, such as through lobbying, public relations, media, and publishing their own thoughts.  

This is understandable. To survive, businesses cannot merely conform to the basic rules of society — they must influence them. But how, and in which direction? For example, should they oppose crony subsidies and regulations, which may help their profits, at least in the short term, but undermine economic dynamism and the very legitimacy of their businesses? Friedman’s positivism does not provide much guidance here.  

After all, the ethical customs and laws of a society may grow increasingly hostile to private enterprise. Indeed, they seem to be doing so now. Business leaders cannot be expected to stand by as activists assault the legal and ethical foundations of economic progress, or as government agencies violate their constitutional rights. While Ending ESG recommends that business leaders “keep politics out of the boardroom,” this is no longer an option for major corporations, if it ever was.

Moreover, activist shareholders increasingly are advancing shareholder proposals that are harmful to the long-term interests of the very corporations in which they own shares. This means businesses increasingly have to defend themselves against their own shareholders. Complicating matters further, the nature of business ownership has radically changed since 1970, with the rise of passive index investors and pension-fund activism. It’s no longer safe to assume that major investors will all agree on maximizing the long-term value of a particular firm, especially if that firm is engaged in ESG-unfriendly lines of business. What most investors do, and should, prioritize is very much up for debate.

Keeley claims “there is no practical alternative to shareholder primacy.” But clearly, there is. For one, many American states now have the option of “benefit corporation,” an option that replaces shareholder primacy with responsibilities to an array of stakeholders. And in Europe, the concepts of double materiality and co-determination override any commitment to shareholder primacy.  

Now, it’s true that such stakeholder governance often comes at a cost. On the other hand, stakeholder advocates will claim the cost is worth it, whether to save the planet, or to advance “equity.” It’s incumbent, therefore, upon ESG critics to advocate an alternative vision, not merely to fall in line with convention.

Without casting a bold vision for the future of free enterprise, there is no hope of ending ESG. Keeley himself recommends that “Republicans need a road map that would enable society to get all the good out of ESG without the bad.” He also refers approvingly to “growing numbers of shareowner resolutions seeking lower carbon emissions or increased workforce diversity.” But why defer to the United Nations, of all institutions, as a moral authority? Why grant any moral worth to counterproductive Western divestment from fossil fuels? Why pay even lip service to skin-deep diversity metrics?  

Just as Friedman recommended business leaders “conform” with convention, Keeley accepts ESG’s goals, while challenging its methods on pragmatic grounds. This is not a sustainable division of labor. It makes no sense for capitalists to legitimize the NGOs, global institutions, and academics working to delegitimize capitalism and advance the “religion of humanity.”

In the words of Argentine President Javier Milei,

Milton Friedman used to say that the social role of an entrepreneur is to make money. But that’s not enough. Part of their investment must include investing in those who defend the ideals of freedom, so the socialists can make no further advances. And if they don’t do it, they [the socialists] will get into the State, and use the State to impose a long term agenda that will destroy everything it touches. So we need a commitment from all of those who create wealth, to fight against socialism, to fight against statism, and to understand that if they fail to do so, the socialists will keep coming.

Fortunately, there are reasons for hope. 

Some business leaders are taking a more active role in advocating for the principles of economic enlightenment. In 2023, prominent Silicon Valley investor Marc Andreesen published the Techno-Optimist Manifesto. Andreesen’s manifesto defended free markets and attacked ESG as part of a “mass demoralization campaign.” Tech founder Brendan McCord launched the Cosmos Institute. Cosmos is bringing together philosophers with technologists in an Oxford University seminar, to discuss how technology can promote human flourishing. Elon Musk, of course, been scathingly critical of ESG, calling it a scam. And Liberty Energy CEO Chris Wright releases an annual Bettering Human Lives report that argues for prioritizing the elimination of energy poverty over ESG goals.

Beyond business leaders themselves, the Alliance Defending Freedom recently released a “Statement of Principles on the Purpose of a Corporation.” The statement declares that “the proper purpose of business is to advance human flourishing by creating economic value through excellence in the provision of goods and services.” And the Abundance Institute has been making the case for “long-term tech optimism.”

To be sure, no particular one of these efforts is definitive. Nor, combined, will they be sufficient to defend the “economic enlightenment” against illiberal assaults. Yet if more affirmative visions for free enterprise are paired with reasonable, evidence-based critiques of ESG, such as those offered by Gramm and Keeley, ESG’s days might, indeed, be numbered.

Tariffs, often promoted as a tool to protect American jobs and industries, are a hidden tax that disproportionately burdens consumers and producers alike. Both the Trump and Biden administrations have embraced these protectionist policies, and future administrations may likely do the same. But these policies do more harm than good, undermining the very people they are designed to protect.

Recently, protectionist policies have been championed by the Trump-Pence administration, continued by the Biden-Harris administration, and likely doubled down upon by Trump-Vance or Harris-Walz. Tariffs may seem like a good way to shield domestic industries from foreign competition by making imports more expensive, but the reality is starkly different. Tariffs are taxes on imports; like all taxes, the costs are inevitably passed down to the consumer. When the federal government imposes tariffs, it raises the prices of goods that many American businesses rely on, leading to higher costs. This isn’t just an abstract economic concept — it affects every American who buys a car, electronics, groceries, or other everyday items.

In 2023, the US imported over $3.8 trillion of goods and services while exporting $3.05 trillion. This nearly $7 trillion in trade volume highlights how imports and exports play a role in the US economy, supporting millions of American jobs, but is a relatively small share of the $27.3 trillion economy. While the US ran a current account deficit as imports exceeded exports by $773.4 billion in 2023, this amount doesn’t tell the whole story. 

For instance, the US had significant trade surpluses with regions like South and Central America ($54.9 billion) and countries like the Netherlands ($43.7 billion) and Hong Kong ($23.6 billion). Conversely, it recorded deficits with China ($279.4 billion), the European Union ($208.2 billion), and Mexico ($152.4 billion). Notably, while substantial, trade with China represents only 8.4 percent of the total US international trade volume, even as it accounts for 36 percent of the current account deficit. This deficit and the total trade deficit are met with a capital account surplus, with funds flowing into the US, including investments that help finance the national debt, support lower interest rates, and support capital to businesses.

International trade provides mutually beneficial exchanges between people in different countries, supporting peace and prosperity.

The Real Economic Impact of Tariffs

Proponents of tariffs often argue they are necessary to rebuild America’s manufacturing sector, but the problem isn’t foreign competition — it’s at home. US manufacturers’ core issues stem from excessive government spending, high taxes, inflated minimum wages, overregulation, and a lack of right-to-work laws. Instead of addressing these root causes, tariffs exacerbate the problems by acting as an additional tax on American businesses and consumers.

When tariffs are imposed, the costs of imported goods rise. These goods are finished products, raw materials, and components that American producers rely on in their supply chains. This increased cost of production ripples through the economy, making American goods more expensive both domestically and internationally and hurting US businesses’ ability to compete.

Take, for example, the tariffs on steel, which were implemented to protect US steel producers. While they may have helped some steel manufacturers, they raised costs for industries that depend on steel, such as the automotive and construction sectors. These industries were forced to pass on these costs to consumers, making American-made goods more expensive and less competitive. Rather than revitalizing manufacturing, these tariffs hinder growth, slow job creation, and harm consumers.

Moreover, tariffs fail to address the real reasons behind the loss of manufacturing jobs. Automation and technological advances have displaced many jobs, allowing US manufacturing output to reach record highs with fewer workers. The Rust Belt’s loss of manufacturing jobs is less about foreign competition and more about the evolving nature of the global economy, tariffs do nothing to solve these domestic challenges.

When tariffs increase, they tax what we purchase from other countries. This tax directly affects producers and consumers who rely on foreign goods. The process reduces the demand for foreign currencies to purchase foreign goods while raising demand for the dollar, especially when the federal government runs deficits that result in higher interest rates. This results in an appreciated dollar by roughly the size of the tariff itself. This currency appreciation helps keep the cost of the taxed goods from rising too quickly, but it simultaneously disrupts the supply chain and other factors of production. As the dollar appreciates, US exports become more expensive for foreign buyers, leading to fewer exports and more imports. This dynamic undermines the goal of balancing or reducing the trade deficit with the targeted country or others.

Moreover, foreign countries often respond with retaliatory tariffs, raising costs for their producers and consumers while driving a wedge between trade relationships. This creates direct costs and increases economic and political uncertainty — something businesses dread when planning for the future. Although tariffs don’t directly cause inflation — an issue controlled by the Federal Reserve’s monetary policy — they raise prices on specific goods through the added tax. These increased costs can ripple through the supply chain, affecting many products. International trade is complex, and protectionist measures like tariffs only exacerbate the complexities, worsening the situation.

The current account deficit with other countries is balanced by a capital account surplus, where foreign savings flow into the US, helping finance our national debt and keeping interest rates lower than they would otherwise be. However, the flow of funds is slowing as some countries shift away from the US dollar, opting for gold and other assets. This trend poses a risk to the US economy by potentially restricting our ability to trade with other countries and raising the cost of borrowing as interest rates rise. This shift from the dollar, known as de-dollarization, underscores the importance of maintaining strong international trade relationships and avoiding protectionist policies alienating trading partners. As global confidence in the US dollar wanes, the economic benefits of foreign investment could diminish, leading to higher costs for Americans.

Tariffs Worsen Broader Problems at Home

As noted above, the broader economic problems facing the US stem from high taxes, overregulation, and government policies that make it more expensive for businesses to operate. Tariffs worsen these problems by raising costs for American businesses and consumers. By taxing imports, tariffs increase the prices of goods that US producers need to remain competitive. This adds to the burdens already imposed by high taxes and government mandates, effectively taxing Americans twice — once through tariffs and again through the costs of domestic overregulation.

Rather than addressing the domestic policy environment that has hindered US competitiveness for decades, tariffs only complicate matters. US companies struggle with excessively high corporate taxes, incentivizing them to move operations overseas. Before the Tax Cuts and Jobs Act of 2017, the US had the highest corporate tax rate in the developed world. While the Act lowered the federal corporate tax rate to 21 percent, proposals to raise it to 28 percent would once again make US companies less competitive globally.

Like Texas, right-to-work states in the South have demonstrated how pro-growth policies can attract manufacturing jobs by creating a business-friendly environment. These states have attracted jobs lost from the Rust Belt by fostering lower taxes and fewer regulations. On the other hand, tariffs stifle economic growth by driving up costs, making it harder for these states to sustain their competitive advantage.

In sum, tariffs don’t solve American businesses’ real issues — they make them worse. Instead of protectionist measures, the US needs to focus on reducing domestic costs by lowering taxes, cutting red tape, and fostering an environment that encourages innovation and growth.

Protectionism: A Failed Policy

The economic data between 2016 and 2021 highlight the failure of protectionist policies, including raising tariffs that began in 2017. 

Consider that global manufacturing output was $14.1 trillion in 2016, with China leading at $4 trillion and the US following at $2.3 trillion. In 2021, it rose to $16 trillion, with China’s part increasing to $4.9 trillion and the US’s to $2.5 trillion. Global manufacturing output grew by 13.5 percent. While China’s manufacturing surged by 22.5 percent, the US had a more modest increase of 8.7 percent. Of course, this period had significant initial and retaliatory tariffs between these countries and lockdowns in response to a global pandemic.

Since 2017, the Trump and Biden administrations have imposed $79 billion in tariffs as part of protectionist policies meant to shield domestic industries. Despite these efforts, global manufacturing continued to grow, and the economic pie expanded — but China captured a larger slice, increasing its share from 28.3 percent to 30 percent. The US trade deficit with China continued to widen, undermining the asserted goal of protectionism. Meanwhile, US manufacturers struggle with higher production costs, passed down to American consumers through increased prices on specific goods.

The Case for Free Trade

The US should abandon protectionism and embrace free trade policies that foster innovation, improve efficiency, and lower costs for consumers and businesses. When countries engage in free trade, all parties benefit from the specialization of labor and resources. Protectionist measures like tariffs distort markets, raise costs, and create uncertainty, hurting American consumers and producers.

Free trade doesn’t mean ignoring unfair trade practices by bad actors like China. However, the best way to address these challenges is not through blanket tariffs but by expanding trade with allies and non-hostile nations. For example, the Trans-Pacific Partnership (TPP) offered an opportunity to strengthen economic ties with 12 countries, pressuring China to play by the rules or risk losing access to major markets. Unfortunately, withdrawing from the TPP in 2017 was a missed opportunity to enhance American competitiveness while holding China accountable.

Conclusion

Tariffs are not the right tool to address the challenges facing American industries. They are a tax on imports, raising costs for consumers and producers while failing to tackle the real issues at home: excessive government spending, high taxes, overregulation, and outdated domestic policies hinder US competitiveness. By embracing free-market solutions — eliminating tariffs, reducing spending, reforming taxes, and cutting regulations — the US can create an environment where American businesses can thrive without relying on harmful protectionist measures. The path forward lies in pro-growth free trade efforts — unilaterally or through agreements with other countries — and domestic reforms, not in tariffs that hurt those they aim to protect.