Highlights of Don Boudreaux Talk: Championing Free Trade in an Age of Economic Nationalism

Last week, Don Boudreaux, an economics professor at George Mason University, delivered an enlightening Zoom presentation to the Stanford Classical Liberals group, which I am fortunate to be a part of. What strikes me about Don’s discussions is not only his robust data-driven approach but also his ability to weave insights from economic history and theory—a rarity in today’s fast-paced discourse. This historical lens enriches his arguments, particularly during the Q&A segment that kicks off around the 52-minute mark. His extensive knowledge often reminds me of George Stigler’s remark about Milton Friedman: “Milton is the best economist in a bad century,” suggesting that the 19th century laid the groundwork for modern economic thought far more than the 20th century did.

1:50: Don’s Virginia license plate becomes a quirky talking point.

5:00: U.S. industrial capacity is currently at an unprecedented peak.

6:50: Industrial production is hovering just under 1% of its historical high.

7:35: Manufacturing output in the U.S. is currently 5.4% shy of its all-time high.

8:25: Manufacturing capacity is only marginally below its peak—an encouraging sign.

8:50: A striking revelation: while we’ve suffered significant losses in apparel and leather goods, we’ve seen monumental gains in computers and electronics, a fact that merits further exploration.

13:20: Although manufacturing employment as a share of total jobs has significantly declined since 1944, pinpointing the exact impact of China remains elusive.

16:18: Manufacturing productivity has surged since the late 1940s—a clear indicator of progress.

17:40: Both wages and productivity have experienced upward trends.

18:30: Average real wages faced stagnation from the early 1970s until the early 1990s, but post-1990, they soared.

20:30: A closer examination of assets, liabilities, and net worth suggests that trade deficits do not erode our wealth as commonly believed.

21:30: The average net worth has seen a remarkable increase.

27:40: An intriguing quiz regarding the “China Shock” highlights current economic dynamics.

32:40: Jobs lost due to the influence of Jonah Salk—an ironic twist; my father would have appreciated if those job losses had occurred 13 years earlier, while my sister would have preferred 3 years earlier.

34:00: A look back at the 1963 Buick Skylark illustrates how keeping used cars longer impacts new car sales, ultimately affecting new car producers’ employment.

A slightly related anecdote: During my time at the University of Rochester in the late 1970s, my colleague Ronald Schmidt posed an intriguing question to his class: “What is General Motors’ most significant competitor?” Despite knowing the market shares, I mistakenly answered “Ford.” The correct answer? The used car market. If every used car owner could extend their vehicle’s life by just a year, major car manufacturers would face a significant drop in demand.

35:20: Job losses attributed to imports aren’t a unique phenomenon; they are part of a broader economic narrative.

36:00: Don expresses a desire for economists to abandon a particular habit he finds unproductive.

40:00: It’s hard to argue that anyone in the U.S. hasn’t benefited immensely from trade.

DRH comment: I previously made a similar point in a talk at Hoover, only to be misinterpreted by a fellow presenter—whose name I can’t disclose due to Chatham House rules. She paraphrased my argument, suggesting I claimed those disadvantaged by trade should be thankful for Walmart. My actual point was about the benefits of over two centuries of trade, of which Walmart is but a fraction. She persisted in her misrepresentation. Sigh.

41:20: Don laments the existence of the trade deficit concept—an opinion I wholeheartedly share. For further context, see what the late Herb Stein articulated in my Concise Encyclopedia of Economics.

43:40: Are we saving sufficiently?

45:00: Insights into why investors are drawn to the U.S. market.

46:00: Who knew that Ikea is Dutch-owned? This fact underscores Don’s overarching point: there’s nothing inherently magical about national borders.

52:00: A reflection on how relaxing price controls can distort the growth of real wages.

53:50: A question arises regarding trade with hostile nations.

55:30: Are clothes pins essential for national security?

58:00: The influx of foreign students in the U.S. contributes positively by reducing trade deficits.

1:04:20: The optimal tariff theory, first posited by Robert Torrens two centuries ago, is revisited. DRH note: I was introduced to this concept through a paper by Grant Reuber at the University of Western Ontario in early 1972, leading to a fruitful discussion.

1:06:50: A discussion on Edgeworth and the implications of poison.

1:07:20: Trade with China and the treatment of its workers come under scrutiny.

1:09:00: Are Chinese manufacturing wages keeping pace with productivity growth?

1:15:50: A critical look at industrial policy.

1:16:45: Oren Cass’s characterization of the free market as a “drunk donkey” prompts further discussion.

1:20:00: The question of government subsidies for R&D arises. When queried about subsidizing industries with substantial positive externalities, Don responds critically: (1) How can the government accurately identify those industries? (2) Alfred Marshall noted, upon returning to Britain from the U.S., that subsidizing nascent industries tends to fall flat.