If the government can force us to disclose the source of our funds when we speak publicly, what can’t they require of us? Steve Simpson from the Institute for Justice discussed disclosure laws in light of the Doe v. Reed Supreme Court decision at Cato’s Constitution Day. You can get a copy of the latest Cato Supreme Court Review at our bookstore.

This month’s Cato Unbound features a lead essay by economist and polymath Deirdre McCloskey. Though she’s been professionally associated with the Chicago School, her ideas are anything but predictable, and she’s been one of the strongest critics of the mainstream of her discipline.

Economic activity, she argues, is driven primarily by forces outside of conventional economic theory. Sure, there’s supply and demand, and we all know the story, and there’s nothing terribly wrong with it, at least as far as it goes. Elaborations on the model aren’t wrong either — externalities, transaction costs, asymmetrical information, problems of coordination and public goods — these too are fine, as far as they go.

Where she disagrees is in her claim that a whole lot of things have to happen inside people’s minds before these things become terribly interesting to talk about. The decision to enter a marketplace, or to behave in ways that we might call “a market,” or even just the decision to look for economic incentives, all depend on some fairly deep value judgments. The creation of a highly market-driven society implies a commitment to a set of values.

What values are we talking about? Here’s a sample:

The Big Economic Story of our times has not been the Great Recession of 2007–2009, unpleasant though it was. And the important moral is not the one that was drawn in the journals of opinion during 2009 — about how very rotten the Great Recession shows economics to be, and especially an economics of free markets. Failure to predict recessions is not what is wrong with economics, whether free-market economics or not. Such prediction is anyway impossible: if economists were so smart as to be able to predict recessions they would be rich. They’re not. No science can predict its own future, which is what predicting business cycles entails. Economists are among the molecules their theory of cycles is supposed to predict. No can do — not in a society in which the molecules are watching and arbitraging.

The important flaw in economics, I argue here, is not its mathematical and necessarily mistaken theory of future business cycles, but its materialist and unnecessarily mistaken theory of past growth. The Big Economic Story of our own times is that the Chinese in 1978 and then the Indians in 1991 adopted liberal ideas in the economy, and came to attribute a dignity and a liberty to the bourgeoisie formerly denied. And then China and India exploded in economic growth. The important moral, therefore, is that in achieving a pretty good life for the mass of humankind, and a chance at a fully human existence, ideas have mattered more than the usual material causes.

A society that denigrates small businesses, small landowners, entrepreneurship, thrift, and innovation will see less of each. It will have different laws, customs, and institutions. Its resources will be used differently. Even its class structure will be different.

Societies that make a place for the artisan, the entrepreneur, the innovator — societies that see these people as valuable — will prosper. That’s the essence of the argument, anyway, and I’m only disappointed that we can’t present it in more detail (McCloskey is in the middle of a four-book series on this one very big idea).

Through the rest of the week, we have a lineup of notable response essayists, including U.C. Davis’s Gregory Clark, science journalist Matt Ridley, and Yale University’s Jonathan Feinstein. Be sure to stop by often, or just subscribe to our RSS feed.

From Greg Mankiw:

Friedrich Hayek, The Fatal Conceit: “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”

Bill Clinton, 9/21: “Do you know how many political and economic decisions are made in this world by people who don’t know what in the living daylights they are talking about?”

Today POLITICO Arena asks:

Is Alaska Republican Senate nominee Joe Miller correct to suggest that the federal minimum wage is unconstitutional? And beyond that constitutional question, is this a wise political strategy?

My response:

Joe Miller is absolutely right: The federal government has no authority under the Constitution to set a minimum wage — or to do so many of the countless other things it does today. When Nancy Pelosi was asked where in the Constitution Congress was authorized to order Americans to buy health insurance, she responded, “Are you serious?” That’s a mark of how little America’s political elites today understand the document they take an oath to uphold.

James Madison, the principal author of the Constitution, wrote in Federalist 45 that the powers of the new government would be “few and defined” — a far cry from today’s Leviathan. How did the change happen? In a nutshell, the ideas of the Progressives — in particular, wide-ranging rule by elites — were incorporated in “constitutional law” (not to be confused with the Constitution), not by constitutional amendment but by a cowed Supreme Court following Franklin Roosevelt’s infamous 1937 Court-packing scheme. That opened the floodgates to the modern redistributive and regulatory state that so many Americans love so much today. Don’t take my word for it. Here’s Rexford Tugwell, one of the principal architects of the New Deal, reflecting on his work some 30 years later: “To the extent that these new social virtues [i.e., New Deal policies] developed, they were tortured interpretations of a document [i.e., the Constitution] intended to prevent them.”

But that’s changing, if the Tea Party movement is any indication. The American people are waking up to the truth: The governmnet gives nothing that it doesn’t first take. It’s not Santa Claus. And whether the taking is in the form of money, property, or liberty, it comes to the same thing. So in answer to the question whether telling constitutional truths is wise political strategy, we’ll see. If the people can’t take the truth, it’s only a matter of time before we go the way of civilizations before us. Fortunately, we still have enough freedom to tell such truths.

The State Department has issued a travel warning for U.S. citizens visiting Europe. The alert comes after U.S. and European officials said there was a credible threat of commando style terror attacks against Britain, France, and Germany, similar to the attack in Mumbai almost two years ago.

Although many travelers were left wondering what to do in the face of a broad warning, the Obama administration has decided to take decisive action by stepping up drone strikes along the Afghanistan-Pakistan border against militants affiliated with the Haqqani network, Hafiz Gul Bahadur’s group, and other terrorist outfits.

As I write today over at the Skeptics blog on the National Interest (Online):

Nearly a decade after 9/11, these issues underscore a deeper problem with U.S. policy: determining what constitutes a terrorist sanctuary and deciding what course of action is most prudent for eradicating them.

Drone strikes are imperative for a policy of offshore balancing. Nevertheless, they are piecemeal, tactical efforts that do little to alter the Pakistani security establishment’s support for Islamist proxies as a hedge against India, Pakistan’s primary enemy. Indeed, massive aerial bombings did not win the war in Vietnam, and it’s not going to change the bigger picture in South Asia.

I go on to mention that:

…the neo-jihadists that threaten America are not held hostage to the outdated notion of “territory.” Only we are. We seem to have forgotten that 9/11 was planned not only in Afghanistan, but also in Germany, Spain, and the United States. Even the radicalized youths suspected of plotting the recent Mumbai-style terror plot in Europe came from the same mosque in Hamburg where the 9/11 hijackers gathered.

Check out the entire post here!

Today’s Wall Street Journal headline screams: “Americans Sour on Trade.” And why shouldn’t they? After all, the public is routinely bombarded with misleading or simplistic trade coverage that too often relies on cliché, innuendo, and regurgitated conventional wisdom: it’s Team America versus the world. Without the war metaphor, trade is just a peaceful, mutually-enriching endeavor between consenting parties. BO-RING!

Dan Griswold attributes the declining sentiment to the business cycle and goes on to suggest that this “collective attitude is more reflective of the complaints people hear in the media than of any hard reality on the ground.” Let me continue with that theme because I’ve made no secret of my concern about media’s inclination to eschew context and fact to pitch a particular narrative about trade. The polling data at the heart of today’s WSJ article bears out that concern. A nation that has strong misgivings about trade is less likely to stop a conspiracy of politicians and special interests from taking away their right to do so.

The problem is not just limited to one or two newspapers; the problem is endemic. Here are just a few examples of faulty trade reporting that my colleagues and I have criticized over the past year or so (Exhibit A, B, C, D, E, F, G, H, I, …). And here’s a more recent example from the editorial board of USA Today on Friday, October 1:

“From 2000 to 2009, America’s trade deficit with China surged nearly 300%. During that same time, 5.4 million American jobs in manufacturing were eliminated. It’s tough for U.S. manufacturers to compete against China’s lower wages, looser regulations and cheaper currency.”

Yes, the facts about the trade deficit and the American manufacturing jobs are correct. But the point is to imply that trade is responsible for the destruction of U.S. manufacturing. Nowhere does it mention that U.S. manufacturing jobs peaked in 1979 (well before trade with China was more than a statistical rounding error in our total trade figures) and has been trending downward ever since. Nowhere does it mention that China has lost many millions more manufacturing jobs than we have in the United States because of the same phenomenon: productivity growth. Nowhere in the editorial does it mention that U.S. manufacturing has been breaking records year after year during the decade (with the exceptions of recession years 2002 and 2009) with respect to output, value-added, revenues, profits, return on investment, and exports. Nowhere does it mention that U.S. manufactures are the world’s most prolific, accounting for the largest share of global manufacturing value added. Nowhere does it mention that China has been America’s fastest growing export market for a decade and that U.S. goods exports to China are up 36 percent compared to the same period last year, which is a 50 percent faster growth rate than U.S. exports to the rest of the world. Obviously, that fact would undermine the assertion that “it’s tough for U.S. manufacturers to compete against China’s lower wages, looser regulations and cheaper currency.” Nowhere does it caution that the use of statistics from 2009, the nadir of the recession, might be a bit misleading. Nowhere does it mention that as U.S. manufacturing jobs declined by 3.8 million between 2000 and 2008, a total of 8.8 million new jobs were created in the U.S. economy, for a net gain of 5 million jobs.

Americans have soured on trade largely because of the way media conveys its stories about trade. There is no alternative explanation for a majority of Americans harboring ill-will toward trade. Most Americans enjoy the fruits of international trade and globalization every day and in countless ways, and less than 3% of U.S. jobs loss is attributable to import competition or outsourcing. It is simply implausible that the degree of antipathy toward trade reflected in opinion polls is driven by past personal experiences or realistic fears about the future.

Rather than focus so much on shaping public opinion, media should rid itself of the curse of group think and get back to the basics of objectively reporting the facts, challenging the conventional wisdom, and citing multiples sources. The kind of lazy acceptance of unsubstantiated theories of cause and effect that are evident in international trade reporting these days is reminiscent of the media’s passive role in the months leading up to the invasion of Iraq.

I’ll be speaking at three Students for Liberty conferences this fall — first this weekend in Philadelphia, where they say they’re expecting 180 attendees, and then in New York and Berkeley.

Other speakers at the nine regional conferences include Richard Epstein, Patri Friedman, Tom Palmer, Barry Goldwater Jr., and Gary Johnson.

The conferences are open to both students and non-students. Better yet, non-students can donate via Paypal to cover the costs of penniless students!

Check out the program.