“Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes and a tolerable administration of justice; all the rest being brought about by the natural course of things. All Governments which thwart this natural course, which force things into another channel, or which endeavor to arrest the progress of society at a particular point are unnatural, and to support themselves are obliged to be oppressive and tyrannical.”
This quote from economist Adam Smith in 1755 remains valid in 2026, according to Professor Peter Jacobson of the University of Kansas, who delivered the latest Economic Freedom lecture at the Pearson-Eby Liberty Academy (PELA).
Jacobson said economic research indicates that countries that follow Smith’s prescription for national wealth, free of conflict with other countries, with low taxes, and with a fair application of justice, have a higher Gross Domestic Product (GDP). Countries with higher GDP also have longer life expectancy and lower infant mortality, both indicating better access to health care, shorter working hours, and economic “rules” that lead to individual prosperity.
Jacobson explained one of the “rules,” beginning with buyers and sellers:
“Voluntary exchanges should be mutually beneficial. When you buy, for example, a phone from Walmart, Walmart stands to gain by selling it to you because they’re getting benefit from it, but you also value the phone more than you value your money; otherwise, you wouldn’t buy it in the first place. When you exchange things, both people end up being better off than they were before.
“It also gives people an incentive to assemble resources in different ways, which improve their value. To be a successful entrepreneur, essentially what you have to do is you have to take already existing things, and you have to rearrange them in a way that they’re more valuable after you do the rearranging than they were before. You take a lot of raw materials, shape them into something new, and people say, ‘Yeah, I think that you made this better than the raw materials. I’m gonna pay you more for that thing than you pay for the inputs.’ So you’re creating value of entrepreneurship.
“Economic freedom provides people with property, prices, and the mechanisms of profit and loss. When this happens, people take care of their resources better, they exchange them with those who value them more, and they innovate them, turn them into better products. And so this is why economic freedom is important for growth.”
Impact of tariffs
Jacobson explained: “Ultimately, tariffs are taxes. That’s what they are, taxes on imported goods. When you tax something, there’s less of it. And so, what do tariffs mean? Tariffs mean there’s less mutually beneficial exchange. There are people in countries that you would have traded with before; now, because of tariffs, you won’t. So, one win-win exchange is gone when a tariff disincentivizes it. Tariffs do lead ultimately to higher prices.
“In fact, there’s been a lot of consternation about that over the last few months. We’ve had trade wars with Canada that have led to higher prices; companies not being able to get things. If you’ve worked in manufacturing, if you’ve worked in industry at all, companies have been facing these. So basically, this is part of the reason that prices are going up right now. And one of the difficulties is when prices are higher, your income, as an American citizen, is effectively lower.
“Think of it this way. So maybe China is selling sweaters, and the American sweater industry is being hurt by this. So, we impose a tariff on Chinese sweaters. How does the tariff actually keep the Chinese sweater from being competitive? It makes them too expensive. That means Americans will switch to the other option, which is American sweaters, which makes sense. We’re trying to protect the American sweater industry, but the problem with that is, the American sweaters were originally losing the competition because they’re more expensive, right? So the American consumer now has less money to spend on other American goods.
“Sometimes the claim is made that tariffs are actually good, because it provides the U.S. a better deal. The U.S. can say, if you don’t give us a better tariff rate from your country, then we’re going to impose higher tariffs on you. Notice this logic actually highlights that tariffs are economically damaging. If you’re using tariffs to remove tariffs, which is the argument, you’re admitting that the tariff itself is not a good thing.”
Kansas debt and taxation
Jacobson says Kansas debt was a modest $10.07 billion in 2025, according to the Reason Foundation, putting Kansas in 40th place in the U.S. He also commented on the state’s tax burden.
“I would say for the state of Kansas, given that it’s a red state, taxes are actually relatively high compared to most other red states. A lot of this is political fallout from long before many people in this room were paying attention to politics. To give you an idea, the Tax Foundation State Tax Competitiveness Index ranks states on how competitive they are compared to their taxes. Kansas is at the bottom half for property taxes, corporate taxes, and income taxes. There’s a thought in Kansas that taxes were cut way too much and that caused problems in the 2010s. I would say even if you think that’s true, I think perhaps it’s time to admit Kansas has swung too far back in the opposite direction; that it shouldn’t be that Kansas is one of the highest tax states.
The next PELA seminar on freedom will be November 11th at Ottawa University.
