"Earlier this week, I was discussing the drug war with a free-market, very libertarian economist. I was opposing it. He said that although he used to favor legalizing drugs, he no longer does. What changed his mind? The horrible consequences of fentanyl in Oregon.
He pointed to the deaths that had occurred because fentanyl was relatively easy to obtain on the street. I responded that you can’t judge the effects of making something legal by pointing to a case where they’re illegal and just assuming that the effects of making them legal would be the same as the effects of keeping them illegal.
First, fentanyl is illegal, even in Oregon, and was illegal even before the legislature reversed some decisions in 2024. Second, the very fact that it’s sold on the street rather than in pharmacies or even Walmart is due to its illegality. If it were truly legal, consumers would know more about what they’re getting and would, therefore, be less likely to overdose.
A good way to see that is to look back to the Prohibition era. Very few people would say that the fact that people could easily get booze in speakeasies meant that producing and selling liquor were legal. They weren’t. Also, because liquor was illegal, you didn’t always know what you were getting. Producers had less incentive than otherwise to establish brand names and advertise. When the production and sale of liquor were legalized in 1933 (thanks, FDR, for one of the few good things you contributed to), deaths from alcohol poisoning fell. It’s reasonable to expect similar consequences from completely legalizing fentanyl."
Saturday, March 21, 2026
Can You Make the Case for the Drug War by Pointing out a Bad Effect of the Drug War?
Opinion: No matter how good AI gets, it won’t beat markets
The economy isn't a vast set of equations. It's a complex discovery process done in real time. Even the best computers aren't up to that
"Whenever we see big leaps in computation, would-be central planners come out of the woodwork, claiming this finally makes it possible to organize the economy better than markets do — optimizing tax rates, producing enough to meet our needs, and allocating resources in a way that maximizes well-being for all.
Such arguments gained theoretical prominence in the early 20th century, saw a resurgence with the mid-century advent of modern computing and operations research, and have emerged again with the impressive advance of artificial intelligence (AI).
But this line of thinking rests on a false premise: that an economy is nothing more than a computational problem to be solved with accurate equations and enough data and processing power.
As I argue in a recent paper for the Montreal Economic Institute, this error was understood as far back as the 18th century by Adam Smith (1723-90). In his Wealth of Nations, which just had its 250th birthday, Smith observed that producing even simple goods requires the co-operation of so many different hands that the full network of exchanges would “exceed all computation.” Even the making of a woollen coat, for instance, required farmers, spinners, dyers, merchants, shippers, and so on just to get from raw materials to market.
Such complexity doesn’t stop the coat from being produced. But Smith’s point is that there is no single mind directing every step of production, from raising the sheep to selling you a brand-new peacoat. Instead, it is through the spontaneous co-operation of the many hands and minds that make up the “invisible hand” of the market that such production is possible.
In the late 19th century, Italian economist Vilfredo Pareto (1848-1923) expanded on this point, observing that co-ordinating even a modest economy and matching resources to uses and preferences would soon cause an explosion in the number of equations to be solved. But today’s computers can handle quintillions of computations per second, more than Pareto could possibly have imagined. Doesn’t that make a difference?
This is where Nobel laureate economist Friedrich Hayek (1899-1992) comes in. Hayek explained that the problem is not merely that the relevant knowledge is decentralized — spread out across millions of individuals — but that it is often tacit. Local shopkeepers’ understanding of their customers’ buying habits cannot be translated into one data point to feed into an AI or any other kind of model. Nor can we predict the emergence of an entrepreneur dreaming up a product that did not exist before.
Most important of all is the phenomenon of prices — indispensable signals that guide our decision making. Prices are neither set in stone nor arbitrarily fixed. Instead, they emerge from real exchanges. When the price of wheat rises, it is because buyers and sellers are competing for a limited supply. This price increase signals something about relative scarcity. It also provides an incentive to adjust consumption and conserve the resource, to look for a substitute, to increase production and to innovate.
In short, prices are not lying around in the wild, waiting to be harvested and fed into an algorithm. Rather, they are the result of constantly evolving discovery. Without this process of discovery, the knowledge embedded in a price simply doesn’t come into existence.
Hayek called the price system, with its ability to generate knowledge in the market, a “marvel.” He described competition as a “discovery procedure” that does much more than allocate resources. When entrepreneurs bring new products to market, for instance, they are making informed bets. If they’re wrong, they bear the cost. If they’re right, they reap the rewards. Through this process, we all learn a little more about what is possible, what is valued and what works.
As for AI, it can process truly vast quantities of historical data to detect patterns, forecast trends and optimize within given parameters. But it can only look backward to find data, whereas economic life is forward-looking and creative. The growth of the social-media influencer market, to choose but one example, could hardly have been predicted by an algorithm 20 years ago. In the same way, today’s algorithms can’t accurately predict what or how much we’ll consume tomorrow, since much of what will matter tomorrow hasn’t been imagined yet.
As powerful and helpful a tool as AI can be to improve logistics, better manage inventories and analyze markets, it remains just that, a tool. It can help us gain a better understanding of markets but only markets themselves can predict and co-ordinate the results of the billions and billions of voluntary exchanges that take place every day."
Friday, March 20, 2026
Ridley: Ehrlich's anti-human legacy
"The butterfly biologist turned rock-star eco-pessimist, Paul Ehrlich has died at the age of 93. That in itself is remarkable because in 1970 he forecast that within the coming decade “100-200 million people per year will be starving to death” and “by 1985 enough millions will have died to reduce the earth’s population to some acceptable level, like 1.5 billion people”. Furthermore, by 1980 the life expectancy of the average American would have fallen 42 years as a result of cancer caused by pesticides.
Yet he not only lived more than 50 years longer than 42; he lived to be one of more than 8 billion people in a world where global life expectancy has increased at the average rate of seven hours per day since he forecast it would collapse. Meanwhile, famine has all but gone extinct, with death rates from mass starvation down to a tiny fraction of what they were in the 1960s. Here are the astounding numbers: in the 1960s, 29.7 million people out of a population of 3 billion died in famines that killed more than 100,000 people each. In the 2010s, 1.1 million out of a population of more than 8 billion died in such episodes: a decline of 99% in the death rate.
In short, Ehrlich was wrong. Not, as the New York Times said in its obituary this week, “premature”, but radically, completely, spectacularly wrong. He was wrong as soon as he put pen to paper and went on being wrong for decades afterwards. He shot to fame with a best-selling book in 1968, The Population Bomb, whose prologue dismissed all hope for humankind: “The battle to feed all of humanity is over. In the 1970s hundreds of millions of people will starve to death in spite of any crash programs embarked upon now. At this late date nothing can prevent a substantial increase in the world death rate.”
Yet something did prevent that. Even as he wrote these words, the world’s population growth rate was falling. New strains of wheat and rice developed by agronomists like Norman Borlaug were starting to transform the productivity of agriculture and India was on the way to banishing famine and becoming a food exporter within a few short years. The amount of food available has increased faster than population on every continent over the last 60 years even as the land area devoted to farming has begun to fall. As so often with environmental pessimism, Ehrlich’s warning was already out of date when it was made.
For the rest of his life Ehrlich remained adamant that he was not so much wrong as…right. In 2008 he was still predicting “an unhappy increase in the death rate”. In 2023 he tweeted plaintively: “If I’m always wrong so is science, since my work is always peer-reviewed, including the POPULATION BOMB and I’ve gotten virtually every scientific honor. Sure I’ve made some mistakes, but no basic ones.” He was indeed laden with honors when he died: including a MacArthur “genius” award in 1990 and honorary membership of London’s Royal Society in 2012 - despite forecasting in 1970 that “If I were a gambler, I would take even money that England will not exist in the year 2000.”
Getting things wrong is clearly very rewarding. But his words had consequences. For many people, the misanthropy and cruelty of his political recommendations were less forgivable than his failed forecasts. His book began with an evening in Delhi when he found the press of people overwhelming. “People eating, people washing, people sleeping. People visiting, arguing and screaming. People thrusting their hands through the taxi window, begging. People defecating and urinating.” The answer to his culture shock, he argued, was coerced, compulsory population control. “The operation will demand many brutal and heartless decisions. The pain may be intense.”
Food aid to India should be made conditional on forcible sterilisation of all those who had three or more children: “coercion in a good cause”. Ehrlich was “astounded” that libertarians objected when the American government took up his suggestion. In 1975 Indira Gandhi was refused World Bank loans unless she began sterilising people. Her son Sanjay obliged, making permits, licences, rations and even housing applications conditional on sterilisation. Eight million people were sterilised. Yet one of the greatest causes of the falling birth rate in the world over the past half century has been kindness, not cruelty: the prevention of child mortality. When mothers can be confident of their children surviving, they plan smaller families.
For Americans, too, Ehrlich recommended coercion and control. In an interview in 1970 he said that television programs should be ordered by the federal government to show large families always in a “negative light”. Commercials should relentlessly shame such people. If that did not work, the government should give women a “bonus for not having babies” or “change the tax structure” to punish the fertile, and if necessary, “legislate the size of the family” and “throw you in jail if you have too many” children.
Immensely influential, Ehrlich set the dirigiste tone for the nascent environmental movement, which saw people as the problem, economic growth as a crime and coercion as necessary. As Ehrlich’s attention switched to the running out of resources in the late 1970s, the economist Julian Simon called his bluff. In 1980 he offered Ehrlich a bet: that the price of a $1,000 basket of five metals (to be chosen by Ehrlich) would fall in real terms by 1990 because human ingenuity meant the world was getting better at finding such resources. The loser was to pay the difference in the price of the basket.
Ehrlich rushed to accept Simon’s “astonishing offer before other greedy people jump in” though he later dissembled that he had been “goaded” into the bet. He chose chromium, copper, nickel, tin and tungsten, with $200 invested in each. But when 1990 came round it was Ehrlich who owed Simon $576.07, all five having fallen in price. Ehrlich would have lost even without taking inflation into account. Grudgingly he made his wife write out the check, before delivering a speech in which he said of Simon, “the one thing we’ll never run out of is imbeciles”.
On my bookshelf stands the Julian Simon award, which I won in 2012 and which is made of the five metals. Simon, who was just three months older than Ehrlich, died at the age of 66 in 1998, far too young. He was never a celebrity."
The Long Shadow of COVID School Closures
By Jeffery L. Degner of AIER. Excerpts:
"Early studies on the impacts of the lockdown were published by the National Institutes of Health (NIH) just months after schools shut down. Students from low-income households suffered the greatest learning losses, similar to those seen after “shutdowns owing to hurricanes and other natural disasters.”
Two years after the lockdowns took effect, further data collected by the National Center for Education Statistics (NCES) reported in an understated way, “the pandemic has potentially impacted achievement and opportunities to learn.”
As was expected, access to the appropriate tools was one of the key drivers for worsening academic outcomes for poor children. The “digital divide” became common parlance among educators who recognized the importance of the issue. This was a critical issue, since at the outset of the lockdowns, 77 percent of public elementary and secondary schools moved online, and 84 percent of college students reported that “some or all classes moved to online-only instruction.”
Low-income households either lacked internet access at home or the hardware necessary for younger students to join class meetings or effectively participate in online learning. In fact, among households below the poverty line, nearly two-thirds lacked either a computer or adequate broadband speed for children to participate in class or finish homework.
Studies conducted by the Brookings Institution provided some of the most stark statistics in terms of poorer students falling farther behind their wealthier peers. For example, elementary schools with higher rates of poverty saw test score gaps compared to wealthier districts increase by 20 percent in math and 15 percent in reading in the 2020-21 academic year. In other words, performance fell further behind and persisted for at least 18 months.
In the broader statistics, elementary scores on standardized tests saw their worst outcomes in 2023, and except for 4th-grade math scores, only 2022 was worse."
"High school upperclassmen who were gearing up for college entrance exams became ill-prepared. In a tremendous irony, test scores moved in the opposite direction of their high school GPAs. For educators on the ground, the explanation was obvious. With many districts mandating that teachers pass their students on through “no fail” policies that were either explicit or implied, regardless of their actual performance, their grades were naturally higher than would have otherwise been the case. Couple that with weaker learning, and the College Board’s report makes complete sense. Grade inflation in the classroom and a dropoff in actual learning was the predictable result."
"Mental health was severely damaged by school closures. A study released in 2023 showed that alongside significant educational losses, there was a rapid increase in anxiety and depression, especially among middle and high school students."
Thursday, March 19, 2026
95% of economists disagree that a cap on US gasoline prices would lower prices at the pump without creating scarcity
A tweet from Jack Salmon of Mercatus.
"Poll of 45 U.S. economists
A temporary cap on US gasoline prices would substantially lower prices at the pump over the next six months without creating scarcity.
95% Disagree
0% Agree
5% Uncertain"
Understanding Demonic Policies (concentrated benefits and dispersed costs lead to an expensive welfare state)
"Matt Yglesias has a good post on the UK’s Triple Lock, which requires that UK pensions rise in line with whichever is highest: wages, inflation, or 2.5 percent. Luis Garicano calls this “the single stupidest policy in the entire Western world” — and I’d be inclined to agree, if only the competition weren’t so fierce.
The triple lock guarantees that pensioner incomes grow at the expense of everything else, and the mechanism bites hardest when the economy is weakest. During the 2009 financial crisis wages fell and inflation declined, for example, yet pensioner incomes rose by 2.5 percent! (Technically this was under a double-lock period; the triple lock came slightly later — as if the lesson from the crisis was that the guarantee hadn’t been generous enough.)
Now, as Yglesias notes, if voters were actually happy with pensioner income growing at the expense of worker income, that would be one thing. But no one seems happy with the result. The same pattern is clear in the United States:
As I wrote in January, there is a pattern in American politics where per capita benefits for elderly people have gotten consistently more generous in the 21st century even as the ratio of retired people to working-age people has risen.
This keeps happening because it’s evidently what the voters want. Making public policy more generous to senior citizens enjoys both broad support among the mass public and it’s something that elites in the two parties find acceptable even if neither side is particularly enthusiastic about it. But what makes it a dark pattern in my view is that voters seem incredibly grumpy about the results.
Nobody’s saying things have been going great in America over the past quarter century.
Instead, the right is obsessed with the idea that mysterious forces of fraud have run off with all the money, while the left has convinced itself that billionaires aren’t paying any taxes.
But it’s not some huge secret why it seems like the government keeps spending and spending without us getting any amazing new public services — it’s transfers to the elderly.
The contradictions of “Elderism” are an example of rational irrationality. Individual voters bears essentially no cost for holding inconsistent political beliefs — wanting generous pensions and robust public services and low taxes is essentially free, since no single vote determines the outcome. The irrationality is individually rational and collectively ruinous. Voters are not necessarily confused about what they want; they simply face no price for wanting incompatible things. Arrow’s impossibility theorem adds another layer: even if each voter held perfectly coherent preferences, there is no reliable procedure for aggregating them into a coherent social choice. The grumpiness Yglesias documents may not reflect hypocrisy so much as the incoherence of demanding that collective choice makes sense — collective choice cannot be rationalized by coherent preferences and thus it’s perfectly possible that democracy can simultaneously “choose” generous pensions and “demand” better services for workers, with no mechanism to register the contradiction until the bill arrives."
Bank Deregulation, New Businesses, and Race and Gender
"Women and minorities start businesses at significantly lower rates than men and whites.
One study examines whether this disparity reflects, in part, access to financing, which
has long been recognized as a major obstacle to business success, particularly for racial minorities.
By measuring the availability of credit before and after passage of major banking bills, the study finds that
the deregulation of interstate banking in the United States between 1994 and 2021 narrowed gender and racial disparities in entrepreneurship by expanding and improving banking services, reducing discrimination in the financial market, and narrowing gaps in firm performance.
Once more, deregulation enables positive change through the free market."