Archives: 08/2017


Why should a city, state, or federal government put statues in public parks?  Doing so addresses no plausible market failure, while using taxpayers funds and, as demonstrated tragically over the past few weeks, generates controversy, polarization, and violence. Thus governments should take down all statues, regardless of their political implications.

This is not “erasing” history but instead leaving it where it belongs, in the hands of private actors and mechanisms.  Historians, textbook authors, universities, learned societies, the History Channel, and many other individuals and organizations can all present their own views of history and battle for the hearts and minds of the public.  Government statues are government putting its thumb on the scale, which is one step down the slippery slope of thought control.


Learn the History of Liberty with the Encyclopedia of Libertarianism

The Encyclopedia of Libertarianism, published in 2008 in hard copy, is now available free online at The Encyclopedia includes more than 300 succinct, original articles on libertarian ideas, institutions, and thinkers. Contributors include James Buchanan, Richard Epstein, Tyler Cowen, Randy Barnett, Ellen Frankel Paul, Deirdre McCloskey, and more than 100 other scholars.

A couple of years ago, in an interesting discussion of social change and especially the best ways to spread classical liberal ideas at Liberty Fund’s Online Library of Liberty, historian David M. Hart had high praise for the Encyclopedia



He goes on to suggest specific articles in the Encyclopedia that are “essential reading” for understanding “successful radical change in ideas and political and economic structures, in both a pro-liberty and anti-liberty direction.” Here’s his guide to learning about the history of liberty in the Encyclopedia of Libertarianism:

  1. The Ancient World
    1. “Liberty in the Ancient World”
    2. “Epicureanism”
    3. “Stoicism”
  2. Medieval Period
    1. “Scholastics - School of Salamanca”
  3. Reformation & Renaissance
    1. “Classical Republicanism”
    2. “Dutch Republic”
  4. The 17th Century
    1. “English Civil Wars”
      1. “The Levellers”
      2. “John Milton” & “Puritanism”
    2. “Glorious Revolution”
      1. “John Locke” & “Algernon Sidney”
      2. “Whiggism”
  5. The 18th Century
    1. 18thC Commonwealthmen - “Cato’s Letters”
    2. The Scottish Enlightenment
      1. “Enlightenment”
      2. “Adam Smith”, “Adam Ferguson” & “David Hume”
    3. The French Enlightenment
      1. “Physiocracy” - “Turgot”
      2. “Montesquieu” & “Voltaire”
    4. “American Revolution”
      1. “Declaration of Independence” - “Thomas Jefferson” & “Thomas Paine”
      2. “Constitution, U.S.” - “James Madison”
      3. “Bill of Rights, U.S.”
    5. “French Revolution”
      1. “Declaration of the Rights of Man and of the Citizen”
  6. The 19th Century
    1. “Classical Liberalism” - the English School
      1. “Philosophic Radicals”
      2. “Utilitarianism” - “Jeremy Bentham”
      3. “Classical Economics” - “John Stuart Mill”
    2. “Classical Liberalism” - the French School
      1. “Jean-Baptiste Say” & “Benjamin Constant”
      2. “Charles Comte” & “Charles Dunoyer”
      3. “Frédéric Bastiat” & “Gustave de Molinari”
    3. Free Trade Movement
      1. “Anti-Corn Law League” - “John Bright” & “Richard Cobden”
    4. “Feminism and Women’s Rights”
      1. “Mary Wollstonecraft”
      2. “Condorcet”
    5. Abolition of Slavery - “Abolitionism”
      1. “William Wilberforce”
      2. “William Lloyd Garrison” & “John Brown”
      3. “Frederick Douglass” & “Lysander Spooner”
    6. [The Radical Individualists]
      1. “Thomas Hodgskin”, “Herbert Spencer”, & “Auberon Herbert”
    7. The “Austrian School of Economics” I
      1. 1st generation - “Carl Menger”, “Eugen von Böhm-Bawerk”
      2. interwar years - “Ludwig von Mises”, “Friedrich Hayek”
  7. Post-World War 2 Renaissance
    1. “Mont Pelerin Society” - “Friedrich Hayek”, “Milton Friedman”, “Karl Popper”, “James Buchanan”
    2. Institute for Economic Affairs (IEA) & “Antony Fisher”
    3. Foundation for Economic Education (FEE) & “Leonard Read”
    4. Institute for Humane Studies & “F.A. Harper”
    5. The Austrian School of Economics II
      1. post-WW2 2nd generation - “Ludwig von Mises”, “Friedrich Hayek”, “Murray N. Rothbard”, “Israel Kirzner”
    6. “Chicago School of Economics” & “Milton Friedman”
    7. “Objectivism” & “Ayn Rand”
    8. “Public Choice Economics” & “James Buchanan”

I could add more essays to his list, but I’ll restrain myself to just one: Along with the essays on the Constitution and James Madison, read “Federalists Versus Anti-Federalists” by Jeffrey Rogers Hummel.

By the way, you can still get the beautiful hardcover edition. Right now it’s half-price at the Cato Store.

The 2017 Stress Tests: Are US Banks Really in Good Shape?

“… equally efficacious, and equally a hoax.” – Benjamin Disraeli, 1848[1]


One of the highlights of the U.S. summer for Fed watchers is the annual ritual in which the Fed’s economic soothsayers peer into their crystal balls, a.k.a. their stress tests, to reassure us that the U.S. banking system is robust and getting stronger all the time.

You see, while the future is uncertain, the results of the stress tests are not. Praise be that the news is always good and getting better.

This year, the news is particularly good. As usual, the key capital metrics across the system are better than ever. And whereas in previous years there were always dunces who failed, the latest set of stress tests are the first in which all the banks passed and this year’s class laggard, Capital One, got only the mildest of slaps on the wrist.

As James Ferguson of The MacroStrategy Partnership notes in a recent commentary on the latest stress tests:

… everywhere you look, the Fed now seems to be bending the rules  in the banks’ favour. … This [stress test] appears to be a test that has been designed to be passed.”[2]

In fact, the Fed is so pleased with the performance of its stress-test examinees that it decided to reward them (or, more precisely, their shareholders) with a big dividend/buyback party that will give them a big windfall.[3] The Fed provides the punchbowl which will be paid for by other bank stakeholders including taxpayers — yes, the same taxpayers who are still being compelled to subsidize the banks (via Too Big to Fail, deposit insurance, and such like) to take excessive risks and overleverage themselves, and who stand to pay the bill if there is another crisis and the banks get bailed out again.[4]

It is curious that these capital distributions are being welcomed by many of the same people who have argued vociferously against higher capital requirements. Advocates of low capital requirements say that high capital requirements would limit banks’ lending capacity, but they fail to note that this is what dividend payouts do too.

Nor is there any sign that the Fed is inclined to take away the punchbowl any time soon. Former Fed chairman William McChesney Martin must be turning in his grave.

Indeed, plans are afoot to make future stress tests even less demanding: the days when banks felt challenged by the Fed’s stress tests are well and truly over.

So this year’s stress tests are great news for bank shareholders, but bad news for everyone else.

You Should Be Able to Vindicate Federal Property Rights in Federal Court





Your Guide to the NAFTA Renegotiation

The North American Free Trade Agreement has been a source of controversy since well before its implementation in 1994.  It was the first trade agreement involving the United States and a “developing” country, so it raised concerns that a giant sucking sound from south of the border would hoover up U.S. investment and jobs.  Ross Perot, Pat Buchanan, and most Democratic presidential candidates beginning with John Kerry all lamented the imminent or unfolding devastation wrought by NAFTA.

Even though the U.S. manufacturing sector has continued to attract more investment than every other countries’ manufacturing sectors ever since NAFTA was implemented, and even though that implementation did not accelerate the trend of U.S. manufacturing job decline, which had been underway for 14 years since employment peaked at 19.4 million in 1979 (2.6 million decline between 1979 and 1993; 2.7 million decline between 1993 and 2007; 600,000 increase between 1993 and 1999), NAFTA became a symbol of corporate excess and a rallying cry for organized labor, environmental organizations, and other anti-business groups over the years.  It also made it nearly impossible for Democrats in Congress to support trade liberalization in the ensuing decades.

During the 2008 presidential election campaign, Democratic candidates John Edwards, Hillary Clinton, and Barack Obama all vowed to re-open NAFTA to make it less unfair for U.S. workers.  Within a few weeks of assuming office, President Obama let the president of Mexico and the prime minister of Canada know that he wasn’t about to follow through on his NAFTA pledges and risk disrupting North American production and supply chains that have enabled regional producers to compete more effectively against Asian and European rivals, while delivering better goods and services at more affordable prices to consumers.

Probably owing to the anti-trade agreement fervor that brewed during the debates over Trade Promotion Authority and the Trans-Pacific Partnership over the last few years, killing NAFTA (and the TPP) became a central plank in Donald Trump’s presidential campaign. Although, regrettably, he withdrew the United States from the TPP, Trump seems to have been talked off the ledge about jettisoning NAFTA , which (as of this morning) is being renegotiated.

As a guide to better understanding what’s on the table and what’s at stake, my colleagues Simon Lester, Inu Manak, and I produced this working paper: Negotiating NAFTA in the Era of Trump: Keeping the Trade Liberalization In and the Protectionism Out.


What Will Happen If Trump Kills DACA: A Timeline of Expiration

For updated data for this post based on the 6-month delayed enforcement of the DACA repeal, please read this post.

On the campaign trail, Donald Trump claimed that he would cancel President Obama’s Deferred Action for Childhood Arrivals (DACA) program, which allows young unauthorized immigrants—known as “Dreamers”—to live temporarily without fear of removal and work legally. To many people’s surprise (including mine), President Trump decided in January to maintain the program, issue renewals, and even allow new applicants into the program. But this will likely change soon.

Now several states led by Texas are attempting to force the president’s hand, requesting in a letter that he terminate the program by September 5 or face a lawsuit. Texas already successfully challenged President Obama’s 2014 attempt to expand DACA to a broader range of immigrants who came here as children and to create a new program for undocumented parents of U.S. citizens called DAPA. This makes a lawsuit very likely to succeed. Even if it were possible for the Trump administration to defend DACA legally, it is not clear that Attorney General Jeff Sessions would want to defend a policy that he has called constitutionally “very questionable.” In July, he refused to say he would defend it.

After the election, President Trump promised to “work something out” with the Dreamers, and in July, President Trump said that he alone will decide the future of DACA. But the politics just became much more difficult. Texas has essentially forced him to defend in court something that he had characterized as illegal amnesty on the campaign trail and something his biggest supporters hate. Moreover, Trump’s record with the courts is already making him appear inept, so he would likely not want to take the political hits when he could easily lose the case anyway.

If the president does rescind the DACA memorandum on September 5, the program will likely not disappear overnight. Rather, it will slowly wind down over the next two years.

Stopping the President from Going Nuclear

Add yesterday’s rage-spasm of a press conference to the growing list of reasons reasonable people are inclined to worry about Donald Trump’s proximity to nuclear weapons. In addition to what it suggested about Trump’s moral compass (“Very fine people” aren’t attracted to posters that look like this), his performance also highlighted questions about the judgment, temperament, and impulse control of the man entrusted with the world’s most fearsome arsenal.

Last week, recall, Trump threatened North Korea with nuclear annihilation: “North Korea best not make any more threats to the United States…. They will be met with fire, fury and frankly power the likes of which this world has never seen.” “Fire and fury” was ad-libbed, apparently, but on Thursday, he upped the ante: “if anything, that statement may not be tough enough.” (For a cooldown lap, on Friday, Trump warned he was “not going to rule out a military option” in Venezuela.)

When you’re faced with a president who has weekly meltdowns on Twitter and likes to “wing it” with nuclear threats, it tends to concentrate the mind painfully on the legal and practical restraints to presidential power. Does the president have the constitutional power to launch a nuclear first strike on a country for “mak[ing] threats”? If he decides to act on that impulse, is there anything Congress can do to stop him?

The first question’s the easy one: the answer is no. In the absence of an imminent attack, the president has no constitutional power to rain down “fire and fury” on North Korea. As Ilya Somin explains here, “the Constitution very clearly reserves to Congress the power to start a war.”

The president retains some independent power to act defensively: to “repel and not to commence war” or “repel sudden attacks,” as Madison’s notes from the Convention put it. We can argue about whether a second strike—launch under attack—is included within this power. But the constitutional power to “repel sudden attacks” doesn’t include the power to launch them.

The whole point, as James Wilson told the Pennsylvania ratifying convention in 1787, was to design a “system [that] will not hurry us into war…. It will not be in the power of a single man… to involve us in such distress; for the important power in declaring war is vested in the legislature at large.”

Is there anything Congress can do to prevent a trigger-happy president from hurrying us into nuclear war?  Congressman Ted Lieu has drafted a bill that he hopes will do just that.  HR 669, the “Restricting First Use of Nuclear Weapons Act,” provides that “The President may not use the Armed Forces of the United States to conduct a first-use nuclear strike unless such strike is conducted pursuant to a declaration of war by Congress that expressly authorizes such strike.”

Someone from the John Yoo school of constitutionalism might argue that the law encroaches on presidential prerogatives by “micromanaging” the means available to protect national security. But Lieu’s bill is clearly constitutional: if Congress can tell the president not to use ground combat troops in a particular war, it has the legal authority to bar him from launching an unauthorized nuclear first strike.

Would Lieu’s bill work, though? Here, I have my doubts.