How to Escape the Productivity Slump

Removing policy barriers can unleash a new era of productivity and abundance. 

By Jeremy Horpedahl. 

"Summary: For the past half-century, much of the developed world has experienced a puzzling slowdown in productivity growth—the rate at which workers and businesses become more efficient over time. While digital technologies have advanced at a remarkable pace, innovation in the physical world has slowed considerably. The problem is not a lack of scientific breakthroughs or a shortage of good ideas. Rather, it is a failure to translate discoveries into products, infrastructure, and services that improve everyday life. This slowdown is largely the result of policy choices. By reforming outdated permitting systems, using innovation incentives such as R&D prizes and Advance Market Commitments, and reducing barriers created by protected local monopolies, we can accelerate the spread of new technologies and usher in a new era of prosperity.

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In a previous exploration of the housing affordability crisis, I observed a sobering reality: artificial scarcity is often a policy choice. We have placed arbitrary limits—mostly through local governments—on our ability to build homes, driving up costs and restricting opportunity. But this pattern of self-imposed constraint does not stop at the edges of our neighborhoods. It extends into the institutions and policies that shape economic growth. It is one of the primary reasons why, despite living in an age of extraordinary digital innovation, we remain stuck in a decades-long productivity slump.

Economists often measure technological progress using a concept called Total Factor Productivity (TFP). In simple terms, TFP measures how efficiently an economy turns labor, land, and capital into goods and services. When TFP rises, society discovers better ways to produce more with the same resources.

From the 1920s through the early 1970s, TFP in the United States and much of the developed world grew at more than 2 percent per year. This was the era that gave us commercial aviation, widespread electrification, antibiotics, and the Apollo program. The physical world was transformed in a single generation.

Since the early 1970s, however, productivity growth has slowed dramatically to less than 1 percent in most years. As investor Peter Thiel famously quipped, “We wanted flying cars; instead, we got 140 characters.” Digital technologies have advanced rapidly, while progress in energy, transportation, infrastructure, and advanced manufacturing has been far slower. We can send vast amounts of information across the globe in milliseconds, yet we often struggle to build major infrastructure projects on time or on budget.

A 2020 paper by Nicholas Bloom and co-authors argues that good ideas are getting harder to find – that is, more investment in research and development has become necessary for each new patentable idea. However, more recent research by Teresa Fort and co-authors (currently in working paper form) suggests that this is not the case. The Bloom et al. result may, in fact, be an artifact of focusing on manufacturing firms, which were dominant from about 1970 to 1990. Fort and her co-authors show that patenting and innovation have shifted in recent decades, becoming dominated by firms in information, management, and professional services.

Because manufacturing is a physical process, it is much more likely to be subject to, for example, environmental regulations, whereas an IT firm operates in a much less regulated sector. So, our relative stagnation may not be the result of a scientific drought after all. Universities and research laboratories continue to produce remarkable discoveries. We are not failing at invention; we are failing at diffusion, the process of turning new discoveries into widely used products and services.

The Diffusion Deficit and the Permitting Veto

Innovation does not benefit society until it escapes the laboratory and enters the marketplace. The journey from a peer-reviewed paper to a consumer-ready product is long, expensive, and uncertain. Over time, policymakers have added layer upon layer of regulatory complexity to that journey.

Physical innovation requires physical construction. New technologies need testing facilities, advanced laboratories, semiconductor fabrication plants, energy infrastructure, and transportation networks. Yet building almost anything of significance in the modern West often requires navigating years of environmental reviews, public-comment periods, and multi-agency approvals.

Laws such as the National Environmental Policy Act (NEPA) and state-level counterparts such as the California Environmental Quality Act (CEQA) were originally intended to prevent environmental harm. Over time, however, they have increasingly become tools for the delay of progress. Because these laws frequently allow opponents to challenge projects on procedural grounds, they have contributed to what political scientist Francis Fukuyama calls a “vetocracy”—a system in which many actors can block decisions but few can make them. Average NEPA environmental impact statements now take almost four years to complete, with many extending far beyond a decade. Thankfully, the median is a bit shorter, but still about 2.5 years.

Consider the recent push to reshore semiconductor manufacturing. While the government has allocated billions of dollars in subsidies to build these vital factories, the physical construction is bottlenecked by years of permitting and environmental reviews. A state-of-the-art fabrication plant (commonly called a “fab”) that takes 18 months to build in Taiwan or South Korea can take three to five years just to obtain a permit in the United States.

The result is predictable: projects take longer, cost more, and become less attractive to investors. Even when governments provide subsidies for strategic industries such as semiconductor manufacturing, years of permitting can slow implementation. Time is money, and prolonged regulatory uncertainty discourages investment in capital-intensive industries.

The solution is straightforward, even if politically difficult. Critical infrastructure, advanced manufacturing facilities, and research laboratories should face streamlined approval processes. If projects satisfy clearly defined environmental and safety standards, they should be approved in months rather than years.

Pull Mechanisms: R&D Prizes and Commercialization

Reducing regulatory barriers is only part of the solution. We must also rethink how innovation is encouraged and financed.

In addition to corporate financing, most governments try to support innovation through “push” funding. Researchers receive grants to conduct experiments, purchase equipment, and explore new ideas. This model, some economists argue, can be effective for basic science, especially when commercial applications may be years away.

Commercialization presents a different challenge. Many promising technologies fall into what innovators call the “Valley of Death” – the difficult period between a successful laboratory demonstration and a commercially viable product. At this stage, development costs rise sharply while uncertainty remains high.

That is where “pull” mechanisms become valuable. Instead of paying for research inputs, policymakers reward successful outputs. An Advance Market Commitment (AMC), for example, guarantees that a buyer will purchase a product if it is successfully developed. Rather than funding every possible approach, the sponsor commits to paying for results.

Economist Michael Kremer helped pioneer this approach through vaccine development programs. More recently, Operation Warp Speed demonstrated its effectiveness. The government did more than fund vaccine research; it guaranteed large future purchases for successful vaccines. By reducing market risk, policymakers encouraged firms to accelerate development and manufacturing simultaneously. The result was one of the fastest vaccine-development efforts in history.

Consider other approaches. Throughout history, prizes have also stimulated innovation. The Longitude Prize helped solve a critical navigation problem for maritime trade, while the Ansari X Prize helped launch the private spaceflight industry. Pull mechanisms align private incentives with public goals by rewarding success rather than political connections or grant-writing skill.

Breaking Local Monopolies and Regulatory Capture

When people hear the word “monopoly,” they often think of large technology companies. Yet some of the most significant barriers to innovation exist at the local level.

The electric utility sector provides a clear example of how regulatory design shapes technological adoption. Because most utilities operate as regulated monopolies with government-guaranteed rates of return on capital investments, their business model relies on continuous, large-scale infrastructure growth. 

Put simply, utilities make more money the bigger power plants and power lines they build, so they usually prefer huge projects over things like rooftop solar panels that let people generate their own power without the utility having to build as much infrastructure.

Decentralized energy technologies—such as local battery storage, micro-grids, and advanced management software—directly threaten this model by optimizing the existing grid and reducing the need for new capital projects. As a result, studies from the MIT Energy Initiative and industry financial analysts indicate that utilities frequently leverage legacy regulatory processes to delay or block these decentralized innovations from integrating into the wider network.

Similar dynamics exist elsewhere. State dealership franchise laws frequently restrict direct-to-consumer automobile sales, making it more difficult for new manufacturers to enter the market. Occupational licensing requirements now affect roughly one-fifth of American workers and can create barriers to entry that limit competition and labor mobility.

Innovation depends on what economist Joseph Schumpeter called “creative destruction” – the replacement of older, less efficient business models with better ones. When established interests use regulation to shield themselves from competition, they slow technological adoption and reduce future productivity growth. Encouraging competition and reducing regulatory barriers at the state and local level would help accelerate the diffusion of new ideas throughout the economy.

Choosing Abundance

The productivity slowdown is not an immutable law of nature. It is, at least in part, the consequence of policy choices. Human ingenuity remains as powerful as ever. We have more scientists, more capital, and better tools than any previous generation. The challenge is not generating ideas; it is allowing those ideas to spread.

By streamlining permitting processes, expanding the use of R&D prizes and Advance Market Commitments, and reducing barriers created by protected local monopolies, we can accelerate innovation in the physical world.

An additional one or two percentage points of annual productivity growth may sound insignificant. Yet when compounded over decades, the effects are transformative. Higher productivity means higher incomes, better health outcomes, more abundant energy, and greater opportunities for future generations. The ideas already exist. The question is whether we will allow them to flourish."

At Senate Hearing, Fauci Takes the Fifth To Avoid Accounting for Inconsistent Statements About a Lab Leak

Diary entries show the former public health official acknowledged that U.S.-supported researchers were conducting gain-of-function research in Wuhan that could have caused the pandemic.

By Christian Britschgi of Reason.

"At a hearing of the Senate's Homeland Security and Government Committee today, Anthony Fauci invoked the Fifth Amendment to avoid answering questions about gain-of-function research his former agency, the National Institute of Allergy and Infectious Diseases (NIAID), funded in Wuhan, China, and the role that research might have played in starting the pandemic. 

"I believed in and respect the value of legitimate congressional oversight," said Fauci, who had been subpoenaed to appear before the committee that's chaired by Sen. Rand Paul (R–Ky.), in a brief opening statement. 

"Given Sen. Paul's obvious obsession with calling for my prosecution, his repeated slanderous comments about me, and recently his publicly releasing my unredacted personal diary aimed at embarrassing and intimidating me," Fauci said that he would refuse to answer the committee's questions. 

Even after Paul directed Fauci to answer the committee's questions, noting that he'd received a pardon from President Joe Biden covering his conduct going back to 2014, when the U.S. government first paused funding of gain-of-function research, Fauci repeated the invocation of his Fifth Amendment right to not answer questions. 

At a hearing of the Senate's Homeland Security and Government Committee today, Anthony Fauci invoked the Fifth Amendment to avoid answering questions about gain-of-function research his former agency, the National Institute of Allergy and Infectious Diseases (NIAID), funded in Wuhan, China, and the role that research might have played in starting the pandemic. 

"I believed in and respect the value of legitimate congressional oversight," said Fauci, who had been subpoenaed to appear before the committee that's chaired by Sen. Rand Paul (R–Ky.), in a brief opening statement. 

"Given Sen. Paul's obvious obsession with calling for my prosecution, his repeated slanderous comments about me, and recently his publicly releasing my unredacted personal diary aimed at embarrassing and intimidating me," Fauci said that he would refuse to answer the committee's questions. 

Even after Paul directed Fauci to answer the committee's questions, noting that he'd received a pardon from President Joe Biden covering his conduct going back to 2014, when the U.S. government first paused funding of gain-of-function research, Fauci repeated the invocation of his Fifth Amendment right to not answer questions. 

When Fauci's attorney attempted to address the committee on behalf of his client, Paul said he was not a recognized witness, and eventually ordered him removed from the hearing room. 

Gain-of-function research refers to experiments in which viruses are manipulated in laboratory settings to become more virulent. Fauci has long been a proponent of this controversial research, which some scientists consider dangerous for its potential to create new pandemic viruses. 

While under Fauci's leadership, the National Institute of Allergy and Infectious Diseases (NIAID) issued multiple grants to researchers working at the Wuhan Institute of Virology to support their work making novel coronaviruses that could more easily spread in humans. 

When Paul pressed Fauci about these grants in past Senate committee hearings in 2021, Fauci strenuously denied that these grants funded research that would meet the federal government's definition of gain-of-function research.

He emphatically stated that this research was not subject to the government's gain-of-function funding pause, which ran from 2014 through 2017, and did not qualify for enhanced scrutiny under the subsequent vetting system established after that pause. 

"The [National Institutes of Health] has not ever and does not now fund gain-of-function research" at the Wuhan Institute, said Fauci in response to Paul's questioning during a May 2021 hearing. 

"You do not know what you are talking about," he said in a July 2021 hearing, when Paul pressed him on the NIAID's support for a paper co-authored by Chinese virologist Zheng-Li Shi describing how novel coronaviruses were made in the Wuhan lab to infect human lung cells.  

Today's hearing produced no new statements on this subject, given Fauci's invocation of the Fifth Amendment. 

In subsequent public statements and congressional testimony, Fauci continued to assert such research could not have possibly led to the creation of the virus that caused the pandemic, given how different the published viruses researchers were manipulating were from the virus that causes COVID-19.

When asked by Paul and others whether Chinese researchers might have performed similar unpublished experiments with different viruses that could have led to the creation of the pandemic virus in the Wuhan lab, Fauci pleaded ignorance of Chinese activities. 

"I do not have any accounting of what the Chinese may have done," he said in his May 2021 Senate testimony. 

These denials are contradicted by Fauci's own diary entries from early in the pandemic, in which he took the possibility that research being conducted by the NIAID-supported Shi, which he casually referred to as gain-of-function research, could have created the COVID-19 virus in a lab. 

Fauci's diary entry from January 31, 2020, confirms the previously reported detail that the NIAID director was contacted by researchers who believed that SARS-CoV-2, the virus that causes COVID-19, might well have been engineered given the virus' furin cleavage site on its spike protein that allows it to bind with human cell receptors. 

He took this suggestion seriously enough to convene a call with experts the following day to discuss whether the virus was natural or man-made. 

In a diary entry dated February 1, 2020, Fauci said that all but two researchers on that call "felt that deliberate insertion [of the furin cleavage site] was possible." 

"Given the fact that Dr. Zheng-Li Shi at the University of Wuhan has been working for years in GOF in coronaviruses to allow adaptation of the spike protein to bind to the human" cell receptors, "we could not let this go," reads Fauci's diary entry. 

GOF is the shorthand for gain-of-function research.

That entry shows that, at least at the time, Fauci recognized that NIAID-supported researchers were conducting funded gain-of-function research in Wuhan, and that this research could plausibly have created SARS-CoV-2. 

This contrasts with his later, emphatic testimony that the NIAID never supported gain-of-function research in Wuhan and that Fauci himself was ignorant of Chinese researchers' activities there. 

The experts assembled on that February 2020 call later produced the Proximal Origin paper, which completely dismissed the possibility that SARS-CoV-2 was an engineered virus. Fauci provided editorial input on that paper. 

Repeated tranches of Slack messages from several of the authors of that paper show that before and after publication, they privately believed, in contrast to the paper's conclusions, that the virus could have been engineered in a lab. 

"Our paper was pretty strong in saying 'there's no way' [the virus was engineered], but I have less confidence in that statement at this stage," said Proximal Origin co-author Kristian Andersen, a Danish researcher at Scripps Research, in a Slack message to his co-authors. 

Andersen had been one of the researchers who first contacted Fauci in January 2020 about the possibility that the furin cleavage site on SARS-CoV-2 had been deliberately inserted. 

In later diary entries, Fauci's private statements hew more closely to his public position that NIAID-funded research could not possibly have played a significant role in a possible lab leak. 

"I unfortunately have been drawn into being a target of the far right because I represent something that is antithetical to them, namely, the truth," wrote Fauci in an October 2021 diary entry. "It is stunning how much time is consumed on warding off the egregious lies about the [NIAID] grant that funded [sic] hey small project in the Wuhan institute of virology." 

On that February 1 call, one of two participants to completely dismiss the possibility that COVID came from a lab was Dutch researcher Ron Fouchier, who had conducted gain-of-function experiments on flu viruses that proved so controversial they led to the 2014 pause on U.S. government funding of such research. 

In his diary entry, Fauci thus took Fouchier's belief in a natural origin of SARS-CoV-2 with a grain of salt, saying "this is expected of him since he was the original GOF person."

In other words, the NIAID director believed that one's past conduct of gain-of-function experiments might color one's judgment on whether such research could create a deadly pandemic virus. 

Yet in the years before the pandemic, Fauci was himself a primary champion of government funding of gain-of-function research, who repeatedly argued the potential benefits of this research were worth the acknowledged risks that it could create a pandemic via a lab leak. 

By Fauci's own standard, we might similarly take his own protestations that NIAID-supported research in Wuhan didn't create the pandemic with a grain of salt. 

Fauci has quite ably turned the debate about the risks of the research his agency supported in Wuhan into a semantic discussion about the precise regulatory definition of gain-of-function research. 

Those regulatory definitions themselves require subjective determinations by public health officials about what kinds of experiments might be likely to produce new pandemic viruses. 

Despite his later denials, Fauci's diary entries seem to concede that research meeting that regulatory definition was in fact going on in Wuhan with Fauci's knowledge and NIAID support. 

As Paul said at today's hearing, questions about precise regulatory definitions distract from a more basic question: "The real question is whether [this research] was dangerous; was it wise to fund it?"

How “Liberation Day” Cost America Its Tourists

By Alfredo Carrillo Obregon of Cato.

"Perhaps one of the most puzzling developments in the aftermath of the Trump administration’s multiple tariff salvos has been the lack of retaliation by the governments of affected countries. Most US trading partners have (so far) refused to impose duties on American exports, and many have even negotiated “reciprocal” trade agreements with the administration. Yet, as my colleague Scott Lincicome explained in a column for The Dispatch last year, amid this lack of tit-for-tat response by foreign governments, private individuals abroad are pushing back against Trump’s trade policies by limiting their consumption of American goods and services—most notably, tourism in the United States. 

While survey and government data already pointed to declines in foreign visits to the United States (see figures 1 and 2), a recent working paper finds that the “Liberation Day” tariff announcements in April 2025 led to a significant decline in tourism to the United States, costing the sector over $1 billion in lost revenue per month.

Using the “Liberation Day” announcements as a quasi-experiment and benchmarking tourist arrivals in the United States against those in Canada, the study measures the impact of singling out 75 countries and assigning them a “reciprocal” tariff rate higher than the universal 10 percent baseline. Controlling for origin-country income and bilateral exchange rates, the authors calculate that 315,000 fewer tourists from these 75 countries (i.e., “Annex I countries”) visited the United States each month through September 2025, relative to tourists from countries subject only to the 10 percent baseline rate. 

The finding that Trump’s announcement of the “reciprocal” tariffs led to substantial declines in tourist arrivals from these countries—and thus tourism revenue for the US economy—also holds when the authors alternatively benchmark US tourist arrivals against those in Spain. The authors also rule out increased Immigration and Customs Enforcement (ICE) arrests, USAID cuts, and other Trump-era policy changes as alternative explanations. Importantly, because the authors’ estimates only capture the incremental effect of the “reciprocal” tariffs above the 10 percent baseline, the actual tariff-driven decline in tourist arrivals to the US might be even larger.

More notable than the study’s topline estimates, though, is its finding that the tariff-induced decline in tourism in the United States resulted less from foreigners being unable to afford US travel and more from foreigners having a diminished view of the United States following the “Liberation Day” announcements. On the one hand, other studies have found that Americans bore most of the tariffs’ costs and that the dollar weakened in the aftermath of the 2025 tariffs. On the other hand, the authors calculate that among tourists from the 75 countries assigned a higher “reciprocal” tariff rate than 10 percent, those from North Atlantic Treaty Organization (NATO) countries (i.e., “long-standing US allies”) reduced their travel to the US more than tourists from non-NATO countries. 

The authors also find that tourists from countries assigned an above-median “reciprocal” tariff rate reduced their travel to the US to a similar degree as tourists from countries assigned a below-median “reciprocal” tariff rate. In sum, the authors’ results, differing “by the strength of existing geopolitical relationships but not by the magnitude of the tariff rates,” suggest that the decline in US tourism from these 75 countries is connected to a decline in America’s reputation abroad.

Having estimated a substantial reduction in monthly tourists due to the administration’s tariffs[i], the authors then calculate that the tourism sector lost more than $1 billion in monthly revenue after April 2025. But as if this were not enough, the authors also calculate that tourism firms—“firms where inbound foreign tourism plausibly represents a meaningful share of revenue (e.g., hotels, airlines, entertainment)”—experienced lower stock returns (by two to three percentage points) than other firms one to three days after “Liberation Day.” In sum, the decline in visitors also translated to financial hardship for the sector—both from actual foregone revenue and from negative investor expectations.

With more US tariffs coming down the pipeline and more uncertainty about the future of bilateral trade deals negotiated by the Trump administration with foreign countries, we will see whether foreign governments retaliate more aggressively against US exports. Yet, studies like the one discussed in this blog post confirm what anecdotal evidence has long suggested: Private individuals abroad are not waiting for their governments to respond before they adjust their consumption of US goods and services. More concerningly for the US and Americans, if such actions stem from a diminished US reputation abroad, repairing the damage from the Trump administration’s trade policies might be less straightforward than simply removing existing tariffs.

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[i] In addition to estimating 315,000 fewer monthly travelers from the 75 countries subject to “reciprocal” tariff rates higher than 10 percent, the study finds that the implementation of “fentanyl” tariffs on Canada and Mexico in March 2025 led to a 20 percent decrease in the average number of monthly visitors from Canada and to slower growth in monthly visits from Mexico. Though these results are less definitive than those of the authors’ main model given the limited sample size and the absence of control destinations, their findings on Canadian tourism are consistent with other evidence that Canadians avoided travel to the US in 2025 in response to Trump’s tariffs. In fact, a recent Statistics Canada report finds that leisure-related visits by Canadians to the United States declined by 21.5 percent in 2025 (about 3.2 million visits) while leisure-related visits by Canadians to overseas destinations increased by 12.2 percent in 2025 (about 1.1 million visits). The same report finds that spending on leisure-related visits by Canadians to the United States decreased by $2.2 billion in 2025, while spending on leisure-related visits by Canadians to overseas destinations increased by $3.6 billion."

Industrial carbon tax and carbon capture requirements increase the cost to produce energy, making Alberta uncompetitive with U.S. counterparts

By Jack Mintz. He works at The School of Public Policy, University of Calgary.

Impact of Carbon Policies on Competitiveness in Oil, Natural Gas, and Electric Power: An Alberta–US Comparison

• This study, based on a newly developed methodology to assess the impact of corporate, royalty, and energy taxes on production, estimates the impact of taxes and carbon policies on marginal cost of production in Alberta, Texas, and New Mexico for oil, gas, and power industries.
• In the absence of carbon policies, the existing tax and royalty system in Alberta is tax competitive except for conventional oil, despite the differences in tax systems among the three jurisdictions.
• US and Canadian capital subsidies encourage carbon, capture, utilization, and storage investments but do not improve cost competitiveness since the subsidies are offset by CCUS costs for marginal investments.
• With the existing Alberta carbon tax at $95, not only is Alberta’s conventional oil tax disadvantaged but the oil sands lose most of its tax advantage compared to projects in New Mexico or Texas (with enhanced oil recovery). Natural gas production remains tax competitive. With a carbon tax at $170, oil sand investments are somewhat tax disadvantaged.
• As Alberta’s effective carbon tax rate is increased by raising the rate and/or limiting allowances, both oil and natural gas production will be heavily disadvantaged compared to Texas.
• While much focus has been paid to the impact of the carbon tax on the oil sands, the biggest impact will be on the electric power industry. The carbon tax will noticeably increase power prices in Alberta which will impact competitiveness of many industries. This illustrates well the competitiveness issue for Alberta when carbon taxes apply in Canada but not the United States.

 

Red States Are Winning the Prosperity Race

By Richard K. Vedder & Nicholas Jadwisienczak.

"Republicans disheartened by growing fears of electoral losses at the federal level this fall can take some solace in evidence from a new, soon-to-be-released study that we coauthored for Unleash Prosperity, a group focused on promoting pro-growth policies. The graph below shows the results from that study, revealing that in this century economic growth has been substantially greater in the Republican Red states.

The new study focuses on the more recent years 2020-2024, using modern statistical techniques to show that even after other factors impacting economic change—like climate, the proportion of the population working in manufacturing or producing oil, or the degree of urbanization—are taken into account, Republican-dominated states grew sharply faster than Democratic oriented ones. Controlling for several potential competing explanatory factors, solidly Red states typically had over 25 percent more growth in personal income in the first part of this decade than their Blue counterparts.

Why? Republicans tend to have greater faith in markets to allocate resources and distribute income and wealth and are less inclined to tax the public heavily to fund massive social services, which research shows weaken work effort and business investment—key components in economic growth. For example, the highest income earners in heavily Blue New York City pay over 14 percent in state and local income taxes on some of their income, compared with zero in a more Red city like Miami or Dallas. All eight states with zero state income tax are Red or, in one case, New Hampshire, a swing state that has a history of electing both Democratic and Republican political leaders.

 

Our statistical analysis confirms that one of the biggest sources of income growth in the Red states has come from the in-migration of generally highly productive people fleeing high-tax Blue States. The world’s richest man, Elon Musk, fled deeply Blue California for Red Texas (after earlier moving to the U.S. from South Africa), while leading financial guru Ken Griffen fled Blue Illinois for much Redder Florida. Census Bureau data show that from 2020-2025, Florida received net over two million migrants, divided nearly equally between immigrants moving to the Sunshine State from other countries, and native- born Americans fleeing states like California (which had a massive outmigration of nearly 1.7 million Americans to more congenial locales).

Our study directly refutes a quality-of-life ranking by CNBC that faced conservative backlash after stating that the 10 worst states in the U.S. to live in were Republican states. Florida Governor Ron DeSantis lashed out at the network over that study, calling it “nonsense.”

Our study shows that it was not just productive workers and their families that moved to these Red states, but capital resources as well. For example, Texas recently surpassed California for having the most corporate headquarters among Fortune 500 companies. Companies and people alike vote with their feet, seeking relief from overly expensive and inefficient government programs.

But isn’t a major reason people and companies are moving South the warmer temperatures? Not really.

One of the leading states in out-migration has been strongly Blue but climatically heavenly Hawaii, while such Red states with bitter winters like Montana and South Dakota had significant in-migration from other, often Blue, states.

To be sure, state-based public policy was not the sole factor in explaining differential rates of economic growth. Manufacturing-heavy states like Pennsylvania, Ohio, and Michigan were hurt by the rise of modern manufacturing in emerging nations like China and India, which had lower-cost labor.

A high level of unionization (typically far more prevalent in Blue states) was associated with lower growth, while growth was enhanced by having a large proportion of immigrants in the population, consistent with other research showing immigrants typically have high rates of labor force involvement and are increasingly relatively highly skilled, including such economic superstars as Musk (Tesla, Space X), Nelson Huang (Nvidia) and Microsoft CEO Satya Nadella.

More urbanized areas, controlling for other factors, typically had lower rates of growth as well, probably at least partially because they were also more likely to be associated with far-left governments like Mayor Zohran Mandami’s New York City.

Our little study comes at a most appropriate time, our nation’s 250th birthday, as it clearly demonstrates some of the genius of our nation’s Founders. They put together a federal system of government that largely eliminated legal hassles like passports and work permits for those seeking to move to a more promising environment. As Justice Louis Brandeis memorably said, America’s federal system was one where “a single courageous State may, if its citizens choose, serve as a laboratory and try novel social and economic experiments without risk to the rest of the country.”

Our national government would do well to learn from the actions of the states, benefiting from the presence of 50 laboratories engaging in sometimes novel and innovative experiments that other states could learn from, not to mention the federal government in Washington, D.C."

What Mamdani Can Learn From Hugo Chávez's Government-Run Grocery Store Debacle

Venezuela’s government-run grocery stores led to endless lines, empty shelves, quotas, and corruption.

By César Báez in Reason. 

"New York City Mayor Zohran Mamdani held up a bunch of plantains at a press conference on Monday and promised that New York City shoppers would pay 30 percent less than "typical retail prices" when the city opens five government-run grocery stores at a cost to taxpayers of $70 million.

"How are you going to keep people from taking advantage of that deal?" one reporter asked the mayor. "Is there going to be a limit on the number of items that someone can take?"

"Our RFP [Request for Proposals] makes very clear that this is a program for New Yorkers to be able to put food on the table, not a program for people to be able to make a quick buck through reselling," the mayor responded, before turning it over to Jeanny Pak, the interim president of the New York City Economic Development Corporation. She said the city was looking into a "library card-esque" system that would allow the city to "manage who's buying," with a focus on "everyday New Yorkers."

The city's plan rests on the assumption that it can control who buys subsidized goods. Yet Venezuela's experience with government-run grocery stores suggests that assumption deserves scrutiny.

When Venezuela's socialist president, Hugo Chávez, created a nationwide network of government-run grocery stores called "Mercal" in 2003, he faced the same conundrum of how to control excess demand when prices are set artificially low.

At first, Mercal seemed to work. It quickly became one of Chávez's most popular social programs. In a 2007 episode of his talk show, Aló Presidente, Chávez compared Mercal's prices with those at a nearby grocery store. A kilo of sugar at Mercal cost 740 bolívares, compared with a price of 1,300 bolívares elsewhere. Chicken sold for 1,900 bolívares instead of 4,550. The discounts were roughly 43 percent to 62 percent below prices already regulated by the government. Chávez called Mercal an instrument for building "socialist commerce."

More than 70 percent of households reported buying at least one item at Mercal during the program's peak in popularity in 2005. But eventually artificially low prices led shoppers to clear out the shelves, and the stores became famous for lines that would wind around the block. The share of households shopping at Mercal plummeted below 40 percent by 2014.

The gap between Mercal's subsidized prices and prices at other grocery stores created an obvious resale opportunity. There were complaints of diverted goods, fictitious purchases, store clerks allowing their friends and relatives to jump the line, and corruption in procurement and distribution. Hauling food across the border to resell at market prices in Colombia became a booming industry. Black-market reselling even spawned a new profession: bachaqueo.

The government responded to the shortages with tighter controls. It capped purchases, assigned shoppers a weekday based on the final digit of their national ID number, and registered sales by ID and fingerprint. Some stores required shoppers to bring a baby or present a birth certificate before they could buy diapers.

Centralized procurement created another set of problems. In 2010, Venezuela's Comptroller General audited the state food distributor and found unjustified direct awards, food containers stored outdoors, damaged products, and major discrepancies between inventory and port warehouse records.

Mercal alone did not cause Venezuela's food shortages. It operated inside a larger system of national price and exchange controls, subsidized imports, expropriations, precarious property rights, monetary financing of government deficits, and declining oil production.

Thankfully, Mamdani's program is limited to New York City.

New York's experiment is local, far more limited, and therefore, lower-stakes. Private contractors will operate the stores, while auditors, courts, reporters, and the public can scrutinize the results. Chávez, by contrast, clamped down on the free press and suppressed reporting on his failed policies.

New Yorkers will also have plenty of alternatives. The city's five municipal stores will become part of a food retail market that includes more than 1,100 grocery stores and 10,000 bodegas. 

But the comparison is still useful because, like Chávez, Mamdani will find that he can't escape the laws of supply and demand. His evasive response to the reporter's question suggests that he hasn't given much thought to how the city would manage high demand for cheap groceries. One way or another, the program will require quotas. The alternative is to tolerate price-sensitive shoppers lining up outside stores to buy discount plantains.

The spectacle of food lines would be a public relations disaster for the media-savvy mayor, who has pointed to his policies as evidence that "socialists not only understand economics, just as well as the capitalists who came before." Mamdani's rhetoric evokes Chávez's, who called Mercal "an instrument" for proving that socialism works and that Adam Smith's theory of the invisible hand was a capitalist lie.

Like Chávez, Mamdani is a socialist, an economic populist, and a gifted politician. He understands the rhetorical power of holding up a bushel of plantains. A government can dictate the price, but it cannot guarantee that the plantains will still be there."

Why Capitalism Is the Most Moral Economic System

"Success comes from meeting the needs and wants of others," says businessman and publisher Steve Forbes.

From John Stossel. 

"I've failed!

I make the case for free markets. Young people elect socialists!

What are they thinking? Do they even think? Do they pay any attention to history? Or economics? Socialism always fails. Only markets create environments that let people prosper.

"Getting the right environment—this country's done it better than anyone else," says Steve Forbes in our full interview. "Give people a chance to be creative, experience liberty, and humanity moves forward."

His magazine has made that point for years.

"You and I are failures," I tell him. "We've tried to convince people about the benefits of free enterprise….[Yet] they embrace socialism," believing "posts from people like actor Mark Ruffalo: 'Capitalism today is failing us, killing us, and robbing from our children's future.'"

"Capitalism has done just the opposite!" replies Forbes. "Deaths from famines are down 99 percent in the last 60 years. Standard of living, 10 times better than it was 50 years ago around the world."