Headmaster's Address

The Basic Laws of Human Stupidity

Right at the end of last term I was chatting to one of your parents who recommended a book to me, and then very kindly followed up by giving me a copy. It’s a wonderful little book – more of an essay, really – called “The Basic Laws of Human Stupidity” by the economic historian, Carlo M Cipolla. 

The essay was written in 1976, but I didn’t come across it until this parent recommended it to me a few weeks ago. I’d never heard of Cipolla either – he is Italian, as you might have guessed, and started his academic career there, but ended up as a professor at the prestigious University of California in Berkeley. 

In his essay, Cipolla’s outlines five fundamental laws of stupidity: 

1. Always and inevitably, everyone underestimates the number of stupid individuals in circulation. 
2. The probability that a certain person (will) be stupid is independent of any other characteristic of that person. 
3. A stupid person is a person who causes losses to another person or to a group of persons while himself deriving no gain and even possibly incurring losses. 
4. Non-stupid people always underestimate the damaging power of stupid individuals. In particular, non-stupid people constantly forget that at all times and places, and under any circumstances, to deal and/or associate with stupid people always turns out to be a costly mistake. 
5. A stupid person is the most dangerous type of person. 

I read it over the Easter holidays, and as I did so, Trump’s tariff disaster was unfolding and – what can I say – it felt like I was reading a prophesy in real time. It’s also a really funny book. 

The most crucial of these laws is the third one: that stupid person is someone who causes losses to another person or to a group of persons while himself deriving no gain and even possibly incurring losses.  

Now before anyone writes to me to complain, I am not saying that Trump is stupid. In many ways he clearly isn’t; as a populist politician, he has clearly got enormous strengths and you don’t win the US Presidency twice without having prodigious political acumen. I am, however, saying that this particular policy is stupid in the sense that Cipolla defines it. Some will disagree, but – well – I think they’re wrong, and 99.9% of economists would agree with me – and looking at Trump’s approval ratings, it would seem that the US people also have serious concerns that this may indeed be a frankly stupid policy. 

Back to Law 3, and there’s a great diagram which Cipolla gives to illustrate this ingenious idea. It effectively splits people into four groupings (not necessarily of equal size) – the helpless or hapless, or possibly the incurably idealistic; the bandits; the intelligent; and the stupid. 

Let’s look then at what’s happened since Trump’s tariff announcements on what he called “Liberation Day” – April 2. A tariff, in case you don’t know, is basically a tax on imports into the US. It’s paid by whomever the importer is, to the US government, and then (depending on the market conditions) some or even all of it is passed onto the consumer in the form of higher prices. 

There was clearly some rationale to the different tariff levels imposed – they weren’t entirely random – but it certainly didn’t have much to do with the level of tariffs placed on US goods going the other way, even though that was the supposed justification.  

But they hit all of the US’s closest allies; even allies with whom the US has a trade surplus, such as Australia, were hit. Given that he then U-turned later, for reasons we’ll get to, making this more of a targeted trade war against China, hitting the previously rock-solid allies – countries such as Canada – you will need to work with in order to win such a trade war also doesn’t make any sense.  

He even imposed tariffs on the Heard Island and McDonald Island, a group of uninhabited volcanic islands near Antarctica, covered in glaciers and home only to penguins. I don’t know what the penguins did to annoy Donald, but he imposed a 10% tariff on goods from the Heard Island and McDonald Islands – islands from which it is unlikely that any trade will ensue, for the simple reason that no human being has visited for nearly 10 years. 

There are two key facts here: fact 1: Trump hates trade deficits. He hates the idea of countries exporting more to the US than they import from it. He thinks this is other countries ‘ripping off’ the US. This ignores the reality that importing cheap cars and TVs from other parts of the world – parts of the world which are better at producing this stuff – brings massive benefits to US consumers, who get better things, cheaper. This makes their incomes go a lot further. The US has had a trade deficit for almost the entire post-WW2 period and has been the biggest and strongest economy in the world for pretty much all of that time. In other words, Trump doesn’t really understand international trade at all.   

Fact 2: nobody within his team was prepared to tell him what a terrible idea it was. Some – especially Peter Navarro (of whom more later) – told him it was a fantastic idea. Almost every economist in the world would have little difficulty explaining why they disagreed. 

Of course, someone eventually did tell him, but only after it became clear that there were howls of anguish and disapproval from many, many quarters. By that time, the stock market and especially the bond market – the market for US Treasury bonds – had gone into absolute freefall.  

About $2.5 trillion – that’s 1.9 million million dollars – was wiped off Wall Street and share prices in other financial centres across the globe. Whilst the stock markets recovered partially after he paused the policy, they are still below where they were before the whole thing started.  

So, having initially said he was not going to change course, he then did, calling a 90-day halt – with the exception of China, and even there, a major lowering of tariffs has been announced yesterday, tariffs having eventually reached around 145%. What happens at the end of this is unclear. Trump initially sent his minions out to explain that this was all part of his brilliant masterplan.   

US Treasury Secretary Scott Bessent seems to been the one to persuade Trump to change course, and he has now taken over tariff policy. Peter Navarro – the person who had previously led on this, and who had previously had the ear of Trump, seems to have been sidelined. It was his supposedly authoritative books on trade policy which had persuaded Trump in the first place.  

Navarro’s supposedly scholarly books, by the way, frequently cite a scholar named ‘Ron Vara’. There is no Ron Vara; Ron Vara is just an anagram of Navarro. This is the man whom Trump appointed as his senior adviser for trade and manufacturing. He had argued that tariffs would boost US manufacturing and protect jobs, but the world economy has been thrown into chaos, the US economy may well entering recession and prices are expected to rise. 

The International Monetary Fund (IMF), in the face of the tariffs uncertainty, cut its global growth forecast and says it expects the US to be hit the hardest. It now expects the global economy to grow by 2.8% in 2025, down from its previous estimate of 3.3%, whilst US growth is now predicted to be 1.8% for the year, down from the 2.7% that had been anticipated in January. The IMF also believes a US recession in 2025 has become more likely. So everyone else is harmed, but the US harmed most of all. That, according to Cipolla, is literally the definition of …… stupid. 

So – there you have it. Let’s revisit those laws once again.   

1. Always and inevitably, everyone underestimates the number of stupid individuals in circulation. 
2. The probability that a certain person (will) be stupid is independent of any other characteristic of that person. 
3. A stupid person is a person who causes losses to another person or to a group of persons while himself deriving no gain and even possibly incurring losses. 
4. Non-stupid people always underestimate the damaging power of stupid individuals. In particular, non-stupid people constantly forget that at all times and places, and under any circumstances, to deal and/or associate with stupid people always turns out to be a costly mistake. 
5. A stupid person is the most dangerous type of person. 

Thank you for your attention