Today, we present a guest post written by Jeffrey Frankel, Harpel Professor at Harvard’s Kennedy School of Government, and formerly a member of the White House Council of Economic Advisers. A shorter version in Project Syndicate.
June 22, 2026 — Adam Smith’s book The Wealth of Nations shares with the Declaration of Independence its 1776 birth year and hence its 2026 semiquincentennial. Both documents incarnated a set of liberal ideas that we associate with the Enlightenment. Much is made of the egregious respects in which men who spread these ideals, at the time, fell far short of extending rights to the entire population. This is true, of course. But saying so leaves out how absent altogether these ideals had previously been for almost all previous civilizations in history.
For Adam Smith, liberalism meant putting the emphasis on the individual. He contrasted the new economic philosophy with mercantilism, where each state sought to maximize its economic wealth and geopolitical power (gold reserves, colonies, armies, etc.), with the lot of the individual made subordinate to that common goal.
The liberal cause of 250 years ago called for limited government. Government, along with the class system, the Church, and the military, had been more of an instrument of oppression than the opposite. For the last century however, “liberals” have generally favored expansion of government’s role, because government has, in the US and other advanced countries, been used to promote equality and rights, more than the opposite. Think of federal agents enforcing the right of blacks to sit at lunch counters under the Civil Rights act of 1964.
One can make the distinction between equality of opportunity and equality of results. The Declaration of Independence was about equality of opportunity. The aim was to maximize the inalienable rights of individuals to life, liberty and the pursuit of happiness. Not necessarily the actual achievement of happiness. For a liberal of 1776, the role of government was to maintain a level playing field where the rule of law prevails. “To secure these rights, Governments are instituted among Men…”
The discipline of economics grew out of Adam Smith’s “invisible hand.” It offered something more than just the rights of individuals to pursue their material wellbeing on a level playing field. In the absence of market failures like pollution or monopoly, laissez faire would give an efficient outcome: it would maximize the size of the pie, though foregoing an equal distribution of income.
An enlightened view recognizes the limitations of government, and yet calls for it to supply quite a few public goods: a legal system to settle disputes, a criminal justice system to provide personal security, a common currency to facilitate financial transactions, an army to provide for the common defense, and a system of public education — not least, to spread the lessons of civics, history, and science across all citizens. Eventually, of course, the list came to include much more, such as regulation of occupational safety, meat inspection, and pharmaceuticals (safe but effective drugs). Most advanced countries would add to the list a public health establishment that fights contagious disease and a health care system that gives medical insurance to all; unfortunately there is resistance among some Americans to allowing government agencies that much power, in the name of rights. Some countries go further, nationalizing public utilities (water, electric power, communications), for example.
The appropriate role of government is a lot broader for a modern liberal, than for a classical liberal. The modern usage dates from the Progressive Era that began in the 1890s, or at least from the New Deal that began in 1933. In the first place, distortions like pollution and monopoly are ubiquitous, warranting government interference to achieve efficiency — e.g., taxing pollution or breaking up monopolies. (Adam Smith himself recognized that monopoly frequently spoiled the achievement of efficiency.) In the second place, it is worth giving up a little efficiency (size of the pie) in order to limit inequality of income (the distribution of the slices). The trade-off is necessary because interventions like progressive taxation distort incentives, which slows GDP. But most people think that at least a little such intervention is desirable.
The US Republican party thinks of itself as fighting to reverse the century-long American drift away from the pole of pure libertarianism or laissez faire. They want to repeal Obamacare, make the tax system less progressive, and roll back anti-trust and other regulation. They think they also want to reduce the federal deficit and debt. But in practice, their approach in recent years has been the opposite. And not just on fiscal policy. Trump has crossed thresholds of government involvement in private industry that his predecessors did not, such as grabbing shares in particular companies. He has pushed the country away from any point on the efficient frontier that optimizes the trade-off between efficiency and equality.
Moreover, the country has suffered a long train of abuses and usurpations at the hands of the current president. Erratic decision-making; rampant self-enrichment; violation of laws, agreements and norms; incompetent management; heedless spending; and indiscriminate cutting of government personnel, have all hurt well-being. They have undermined principles, like due process and equal treatment before the law, that we all thought the 1776 experiment had firmly established long ago. One can only pray that American voters eventually come to recall the lessons that used to be taught in schools, lessons from civics, history, and science.
This post written by Jeffrey Frankel.
“Much is made of the egregious respects in which men who spread these ideals, at the time, fell far short of extending rights to the entire population. This is true, of course. But saying so leaves out how absent altogether these ideals had previously been for almost all previous civilizations in history.”
“One can make the distinction between equality of opportunity and equality of results. The Declaration of Independence was about equality of opportunity.”
The Enlightenment utterly changed ourview of how society ought to work, from an emphasis on preserving and expanding the power of the privileged classes to preserving and expanding the welfare and rights of everyone, which in practice meant a sharp narrowing of the gap between the privileged and the rest. The U.S. Constitution was a step in that process of tamping down the power of the privileged, a radical document at the time.
There is nothing in that history which suggests that further change is antithetical to the Enlightenment project, nor to the American project. The founders approved of and instituted radical change. The fact that the Constitution promotes equality of opportunity in no way bars further social progress toward greater equality of outcomes.
Judicial originalists and their ilk utterly ignore the progressive, radical nature of our founding. There’s nothing in a revolution, “no kings” democracy and individual rights that says we should allow the past to shackle us.
Chesterton’s fence? Sure. Harkening back to witch-hunting and flint-lock days to interpret the Constitution? Utterly contrary to the spirit of our founding.
And about “the invisible hand”… Smith used that expression very little, and did not say what it meant. Our culture, particularly apologists for unfettered markets, have asserted that self-interest is what Smith meant; very possibly, he did not. In his “The Theory of Moral Sentiments”, Smith detailed how our observation of our fellows, their praise and approbation, served as a guide to our behavior. Turns our, modern social science thinks he was onto something. (Funny how Smith was foresighted in both economic and social theory, but mostly gets credit for economics, and often credit for a distorted version of his economics.)
Anyhow, the “invisible hand”, based on Smith’s own writing, is very likely not self-interest, but rather our innate desire to win the approval of our fellows.
Off topic – Crimea in a pickle:
https://www.usnews.com/news/world/articles/2026-06-21/ukrainian-attacks-prompt-russian-held-crimea-to-halt-civilian-gasoline-sales
Fuel sales to civilians, including businesses, have been halted. Fuel is being preserved for critical uses due to a shortage caused by Ukrainain attacks on fuel infrastructure. Transportation between Crimea and Russia has also been reduced.
There are claims floating around that civilians are leaving Crimea in droves; I can’t find any news reports confirming those claims, but they make sense. Question is, how?
If I were a Ukrainian decision-maker who wanted to take back land stolen from Ukraine, this is just the sort of thing I’d do. And, by the way, Ukraine is working to cut supply lines to other Russian-occupied parts of Ukraine. That makes tactical military sense, but also, if the presence of Russian speakers is Russia’s excuse for grabbing territory, clear ’em out. Ethnic cleasing can work both ways.
The decision makers in Ukraine have been absolutely brilliant. They have taken fire control over the supply to Russian front line troops leaving those troops dependent on only the supplies that can be carried in on the backs of soldiers hiking as much as 30 miles. The result has been a casualty ratio of more than 10 Russian soldiers for every 1 Ukraine casualty. Russian air and drone defenses were thinned out in the winter/spring with targeted attack and now are being spreed out even thinner by attacks on critical facilities deep into Russia.
Off topic – When Claudia speaks, we should listen:
https://stayathomemacro.substack.com/p/will-the-shadow-fed-chair-please
Many smart things are included, but here’s the one I want to highlight: when there is no forward guidance from the FOMC chair, there is financial advantage to be had from private conversation with Fed personnel. Such conversations amount to “material non-public information” (NMPL), which under law cannot be used to inform financial transactions. Of course, this is exactly the stuff that makes above-market returns to trading possible. You’ve seen “Trading Places”, right?
By keeping likely future Fed policy secret, the potential for trading on knowledge of future Fed policy is increased. Let’s not forget what part of the financial industry Warsh comes from. Let’s not forget who’s president.
Claudia. Oh, so smart.
Well said.
“One can make the distinction between equality of opportunity and equality of results.”
Every time I hear that stupid phrase, I want to barf. There is no separation of opportunity and results. You simply cannot have equal opportunity when you have vast differences in wealth outcomes. Vast inequality allows the wealthy, like Musk, to manipulate the system to their benefit. The wealthy pass great advantages to their children in education and social connections. Giving poor kids a free school lunch doesn’t make up for those advantages.
“equal opportunity” strikes me as a nice theory but as you point out, it is not and never has been our reality.
an equal distribution of income is not why the United States of America was founded. reducing entitlement is a worthy goal, as it provides more opportunity. but uneven results is a hallmark of a free economy, and typically an economy that is very innovative.
Actually, the extent of unevenness differs between a purely market-driven economy and an economy aimed at preserving entitlement. We should expect some difference in income and wealth in a market economy, but not extremes. The very existence of a trillionaire, of thousands of billionaires, is evidence of a big problem. Inherited wealth is not necessary to innovation nor to the general welfare. Nor is great market power.
“Arkansas farmers are planting nearly 40% less rice because plunging market prices have fallen below the high cost of production. A combination of surging input costs (like diesel and fertilizer) and stiff global competition has made planting rice a guaranteed financial loss for many producers.” (Just like with soybeans – U.S. farmers are becoming secondary to farmers in Brazil for world markets.) https://www.farmprogress.com/rice/why-it-s-a-bad-year-to-be-a-u-s-rice-farmer
Off topic? – I kinda think there are two competing approaches to winning elections. One is to do things for voters that they like, while the other is to manipulate various elements of the political system to win advantage. I know this is oversimplified, but starting simple often helps clarify.
Yesterday’s, a bunch of Democratic Socialists won Democratic primaries in NYC (and elsewhere). That’s not surprising, since not long ago, a Democratic Socialist won the mayor’s race and he hasn’t done anything to spoil the mood. Housing affordability, access to day care, access to groceries, fairer tax policy and ending support for Israel’s wars are Democratic Socialist issues, and the majority of voters support them.
Jaime Harrison, former DNC chair, posted this on twitface:
“I say this with no ill will or animosity: if you hate the Democratic Party, then please don’t run for our nomination. Don’t use our resources. Don’t rely on our volunteers. Don’t use our infrastructure. Don’t ask Democrats to invest their time, money, and energy in your campaign.”
So, voters chose some candidates the Harrison doesn’t like, and he wants to pull the rug out from under them – while bearing them no ill will, of course. Democratic voters chose them, and Harrison wants the mechanisms of party power to be denied to them.
Congress has just passed a monumental housing bill with bipartisan support. Voters say housing affordability is among their biggest concern. Seems a good match in an election year, which is why politicians of both parties support the bill. The felon-in-chief has refused to sign the bill, holding the bill hostage to the passage of voter ID legislation. Congress wants to please voters, while the felon stands in the way because he wants to pass a law to disenfranchise voters and jigger elections in his party’s favor.
Two days, two examples of the choice between politics that run mostly on representing the interests of voters, and politics that run on manipulating outcomes. I’m sure y’all can think of others.
These Democratic Socialists are advocating for policies that have made the Scandinavian countries some of the richest, most equal and happiest countries on earth. I think we could do a lot worse. If someone has a problem with that, or with the idea that our party is a big tent, maybe that someone should not be DNC Chair. For decades I supported the DNC even thought they supported policies and candidates that were to the right of where I stand – don’t come whining to me about someone being to the left of the party average. In a two party system, that is what you get. Harrison needs to go – a DNC Chair has to understand the basics of politics in a two party system.
Off topic – Sheila Bair is warning that bank capital adequacy is looking shakey:
https://www.msn.com/en-us/money/markets/frightening-are-regulators-laying-the-groundwork-for-a-new-financial-meltdown/ar-AA26ql51
Bair is naturally focused on the disaster she dealt with, so she doesn’t sound like most of today’s financial-market Cassandras, but that doesn’t mean she’s wrong. Here’s my concern: banks are running lean capital levels at the same time risk has been piling up among non-bank lenders. On the face of it, that sounds like we may have MORE risk than during the housing crisis. Of course, back then a single sector was borrowing massively in support of a bubble, so…Oh…
Meanwhile, another private credit fund has restricted withdrawals:
https://www.reuters.com/legal/transactional/morgan-stanley-restricts-redemptions-private-credit-fund-after-withdrawals-surge-2026-06-23/
Morgan Stanley this time. The ability to limit withdrawals is protection against runs, one feature of private credit which reduces risk. Still, it looks like private credit is becoming a less reliable source of lending. Can’t tell because they don’t open their books.
Off topic – Dalls Fed economists provide estimates of the U.S. economy’s reduced sensitivity to overseas oil shocks, putting numbers to a point that has been made here repeatedly:
“U.S. economy less vulnerable to geopolitical oil price shocks than in the past”
From the summary:#÷
“Recent Federal Reserve Bank of Dallas research shows that the response of U.S. real (inflation-adjusted) GDP growth to this shock is only one-twentieth of what it would have been in 1980. Moreover, the response of U.S. real GDP growth today is only one-sixth of the decline in the rest of the world.”
https://www.dallasfed.org/research/economics/2026/0623
One point that the rest of the world sure has recognized, even if the average American has not: The U.S. has a rather different set of motives now than in the past, because we are so much less exposed to oil shocks than in the past, and because a particularly well-connected sector now has a massive upside during overseas oil shocks.
Check Figure 2 c for a look at a particular U.S. villain when it comes to carbon footprint. In the latter days of the 20th century, household oil consumption accounted for over 55% of the U.S. total. That share dropped as low as 45% around the time of the housing collapse, but has risen to around 50% again. Yes, the denominator is part of the story, but households are more driven by conspicuous consumption than businesses, and it shows.
So, the felon-in-chief administration wants to change the subject from the war to the economy. Interesting choice; Nate Silver’s average of public approval of the felon’s performance across a number of recent polls puts his net approval rating on the economy at -27.1%, on trade at -25.3% and on inflation at -43.8%:
https://www.natesilver.net/p/trump-approval-ratings-nate-silver-bulletin
The war-criminal-in-chief’s net approval for the war in Iran is just -18%; the war is more popular (if “popular ” is the word for it) than his handling of the economy:
https://www.natesilver.net/p/iran-war-polls-popularity-approval
The war criminal/felon has trotted out Scott Bessent, not to talk about the criminal’s record, but instead to paint pretty pictures of the future. Here’s press coverage of Bessent’s economic song and dance on CNBC:
https://finance.yahoo.com/economy/policy/articles/treasury-secretary-scott-bessent-reveals-153806777.html
OK, I can see from Bessent’s performance why even the war is more popular that the felon’s economic policies. Bessent sounds like he’s campaigning, talking about some happy-land future once his guy comes to power; his guy has been in power a year and a half this time and was in charge for a full term once before. I think we ought to be talking about his record, not wild claims about how his lame duck years are going to turn it all around. Compare his record to, say, the Biden years, or the Obama years, or the Clinton years. Heck, compare his performance to Bush Senior and he looks bad. He might compare well to Bush Jr., if you only look at Shrub’s second term.
Bessent’s pitch is riddled with nonsensical claims. Not all the nonsense is new; tariffs are setting the stage for a manufacturing boom, says Bessent – tariffs and “reciprocity” in trade. Of course, we had reciprocity in rules under GATT and the WTO, which the felon has walked away from. As has been pointed out many times by many smart people, balanced bilateral trade is a definition of “reciprocity” only an economic illiterate could support.
Bessent claims AI is going to bring us back to a Greenspan-era 3.2% rate of GDP growth. Based on…Koolaid? The average annual growth of real GDP during Greenspan’s tenure as Fed Chair was 3.2%, yes, but by the final business cycle of his tenure, growth had slowed to 2.8%. And growth in the period from 1945 to the beginning of Greenspan’s tenure was HIGHER, than under Greenspan. There has been a secular decline in real growth for decades, and that decline continued under Greenspan.
AI is going to launch forever 3.2% growth? The World Wide Web launched in 1989, and real GDP growth in the cycle up to 2001 averaged 3.6%, but that included the Y2K fix – forced investment – a wild round of bubbly wealth-effect spending and an emerging markets crisis which pushed down commodity prices and interest rates. It also included faster growth in the workforce. Average growth has been slower ever since, even under Greenspan.
So, Koolaid it is.
Trump: Gas should be $2.25 per gallon, I hope oil companies aren’t price gouging, “They’re gonna be in big trouble”
http://www.msn.com/en-us/money/markets/trump-gas-should-be-2-25-per-gallon-i-hope-oil-companies-aren-t-price-gouging-they-re-gonna-be-in-big-trouble/ar-AA26xmYQ?ocid=BingNewsSerp
At $2.25 a gallon and oil prices at $72 a barrel, the combined gross margins for refining and distribution would be zero. Seriously – Trump is a moron.
Sam Alito says States may not “hobble what the Second Amendment protects: the right of Americans to carry arms for self-defense as they go about their daily lives.”
The Second Amendment doesn’t say guns are for personal protection. It says guns are for the protection of the States:
“A well regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear Arms, shall not be infringed.”
In 2008, the Court decided, in an interpretation that cannot he supported by the language of the Constitution or earlier Court decisions, that the right to bear arms was for self-defense “in the home” (District of Columbia v. Heller). Where’d they see “self defense”? English common law. Not the Constitution. We are subject to English common law when it’s convenient. Where did Alito see “go about their daily lives”? Made it up.
Alito is clearly making stuff up to suit himself and his buddies. By asserting that the right to carry a gun for self defense on OTHER PEOPLE’S PROPERTY without explicit permission, he and his buddies have expanded upon Heller and set the stage for further expansion of gun “rights” in the future. He’s inviting gun owners to bring any effort to restrict guns to the courts. Hospitals and schools next?
Some other bad decision today, too, but this one got under my skin. Alito is just creates precedent out of thin air.