Billionaires are consistent with the institutions that underlie economic prosperity.

See Billionaires by Tino Sanandaji & Peter T. Leeson.

"Existing studies of entrepreneurship focus on entrepreneurs whose individual contribution to wealth creation is typically trivial: self-employed persons. This article investigates entrepreneurs whose individual contribution to wealth creation is enormous: billionaires. We explore the relationship between economic development, institutions, and these contrasting kinds of entrepreneurs. We find that the institutions consistent with self-employed entrepreneurs differ markedly from the ones consistent with billionaires. Further, only the latter are consistent with the institutions that underlie economic prosperity. Where well-protected private property rights and supporting, market-enhancing institutions flourish, so do billionaires. But self-employed entrepreneurs do not. Where private property rights are weakly protected and interventionist institutions flourish, so do self-employed entrepreneurs. But billionaires do not."

Public Sector Unions Undermine Accountability

Research on schools, policing, and government spending is clear: public sector bargaining forces taxpayers to finance the erosion of their rights.

By Jason Sorens of AIER. 

"This November, Vermont will vote on Proposal 3, a legislatively referred constitutional amendment to entrench collective bargaining rights in the state’s constitution. If it passes, the Vermont legislature would be barred from adopting any law that “interferes with, negates, or diminishes the right of employees to collectively bargain with respect to wages, hours, and other terms and conditions of employment and workplace safety.” 

The most immediate impacts of Proposal 3, if it passes, would be to authorize unionization for farmworkers and supervisors, the two categories of employees currently exempt from collective bargaining under state and federal law, and to effectively end the ability of the legislature to limit the scope and terms of public sector collective bargaining. The latter change is an especially big problem, because a growing body of evidence demonstrates that public sector collective bargaining undermines accountability to taxpayers and users of public services.

Take public education. Teachers unions exist to promote the interests of teachers, not students, and their activities have damaged school performance and raised costs for taxpayers. Sophisticated empirical studies have repeatedly confirmed these findings.

Stanford economist Caroline Hoxby used state “duty-to-bargain” laws as an instrument to predict the timing and geographic scope of collective bargaining in K-12 education. She found that collective bargaining increased per-student spending but also increased the high school dropout rate, especially in places where there is less competition among public schools.

Political scientist Terry Moe examined “restrictive” collective bargaining contracts in California and found sharply negative effects on student test scores in larger districts. The negative effects on performance were most pronounced for minority students. “Restrictive” contracts are ones that provide due-process protections against firing bad teachers, limit the role of merit rather than seniority in determining assignments, promotions, and layoffs, and cap work and training hours.

A recent national study of the effects of duty-to-bargain laws in the prestigious American Economic Journal: Economic Policy found that the laws had long-term harmful effects on the labor-market success of men who were students at the time that these policies were enacted, with total negative effects on earnings of more than $200 billion every year.

It’s important to acknowledge that one of the authors of that study previously found null effects of union certification elections in Iowa, Indiana, and Minnesota on per-student spending and dropout rates. It could be that effects differ across states or in the long run versus the short run. That’s the reason why social scientists say “read literatures, not papers.” The overall evidence on public sector unionization is firmly negative.

In general, unionization in public schools seems to reduce accountability to parents. School district unionization rates predicted longer school closures during the COVID pandemic, resulting in massive and possibly irreversible learning loss. More unionized schools were less likely to require teachers to teach in person during the pandemic. Stronger unions are associated with fewer effective literacy programs — though this relationship is a rough correlation, not a sophisticated study.

Public safety is another area where collective bargaining has proven harmful. Union contracts frequently shield police from legitimate accountability. Collective bargaining contracts include “delay privileges” that require investigators to wait a certain period before interviewing a police officer who engaged in the use of force. These delay privileges obstruct investigations, reduce the odds that officers face internal discipline, and normalize the excessive use of force.

According to a survey by law professor Stephen Rushin, a whopping 88 percent of police union contracts contain at least one provision that could thwart legitimate disciplinary action, such as mandatory destruction of disciplinary records, bans on civilian oversight, prohibitions on anonymous civilian complaints, and time limits on internal investigations.

Collective bargaining rights increase police misconduct. That’s the conclusion of an empirical study that leveraged a 2003 Florida Supreme Court decision expanding collective bargaining to sheriffs’ deputies. After the change, there was a substantial increase in reports of “violent misconduct” by sheriffs’ offices relative to police departments.

The negative consequences of collective bargaining for the taxpayer are also evident in police and firefighter contracts, according to a causally identified study in the ILR Review. Collective bargaining substantially increases firefighter pay and more modestly increases police pay and reduces their workweek. A well-designed synthetic control analysis published by the Heritage Foundation found that collective bargaining increases the cost of government on average across the US by about $600 to $750 per person per year.

Why are public sector unions so harmful? The biggest reason is that unions are often on both sides of the negotiating table. They fund politicians’ campaigns and lobby them for favorable legislation. In low-turnout local elections, they can be the dominant force. So it’s no surprise that local elected officials give the unions exactly what they want.

The science is clear: public sector unions are bad for taxpayers and the people they are supposed to be serving and protecting. Abolishing public sector collective bargaining is necessary to make government a servant of the people, rather than its master."

Eliminating Corporate Subsidies in Canada: An Opportunity to Boost Growth

By Alex Whalen and Milagros Palacios.  

Though widely used in Canada, economic literature suggests corporate subsidies are a wasteful use of taxpayer dollars that do not boost economic growth.

Subsidies are often unfair to businesses that do not receive them, and substitute the government’s judgment for consumers’ judgment, rewarding firms that create value for politicians rather than those that create value for consumers.

Federal and provincial spending on corporate subsidies has increased substantially over time, with a marked increase beginning in 2015. Between 2007 and 2015, spending on subsidies increased from $22.2 billion to $25.1 billion (inflation-adjusted), or 12.8 percent. From 2015 until 2019, spending increased more rapidly, such that the 2019 level was 44.2 percent more than in 2015. After the pandemic, spending on corporate subsidies increased in 2022, 2023, and 2024. The inflation-adjusted level of spending in 2024 stood at $87.7 billion, more than triple the level observed in 2015.

Even when accounting for both inflation and population, spending on subsidies has increased in every province and at the federal level between 2015 and 2024.

The increased spending on corporate subsidies has occurred in Canada during a period of economic stagnation and renewed interest in policies that can drive economic growth.

Governments in Canada have an opportunity to substantially boost economic growth by eliminating corporate subsidies and directing the savings to broad-based business tax relief.

Medicare for All—with No New Taxes?

By John C. Goodman.

"Democratic candidates and activists appear all-in on “Medicare for All.”

Many supporters of the idea envision a nationwide universal healthcare system that would be financed primarily by increasing taxes on the super-rich. A recent Echelon Insights poll, for example, found that 74% of voters who support Medicare for All believe it could be financed entirely by raising taxes on billionaires.

This is a pipe dream. No country in the world makes health care universally free, paid solely by their wealthiest taxpayers.

The latest Medicare Trustees Report predicts that Medicare’s Part A Trust Fund (hospital insurance) will be exhausted in 2033. Part of the reason is that premiums paid by Medicare enrollees cover only about 14% of the program’s cost. If the rest of the country could join by paying only 14 cents on the dollar, Medicare would go bankrupt overnight.

Although most of what is being said about Medicare for All borders on being silly, Nobel prize-winning economist Paul Krugman has a proposal that is worth serious attention.

Krugman would let everybody voluntarily enroll in Medicare. But, they (and their employers) would have to pay actuarially fair premiums, equal to the average expected cost of their health care. So, there is no free lunch here and no need for additional taxes.

Why would people choose this option? Because Medicare is less costly than private alternatives for the same services. According to the RAND Corporation, private payers (employers and commercial insurers) are paying about 2½ times what Medicare pays for inpatient hospital care. For outpatient care the difference is nearly three times greater. So, in theory, the Medicare premiums people would pay would be substantially lower than what they’re now paying for private health insurance.

Krugman implies that we could all get the same health care for a lot less money. But would we?

Right now, Medicare accounts for 25% of hospital revenues and private insurance and private payers account for 38%, according to the Centers for Medicare & Medicaid Services’ National Health Expenditure Data.

Suppose all the people currently in private sector plans joined Medicare and got their care at Medicare rates. What would happen?

Krugman admits he doesn’t know a lot about health-care economics. But any run-of-the-mill economist, much less a Nobel laureate, should know that if you take 38% of an organization’s revenues and reduce it by as much as two thirds, something is going to change.

Studies show that when hospitals suffer large reductions in their revenues they reduce staff, halt capital spending, provide fewer services and even close down altogether. As a result, we would experience less hospital care and rationing by waiting—perhaps as bad as what we see in Britain and Canada.

There also are other likely changes.

In principle, hospitals compete on three dimensions: price, quality and amenities. In India, which has the freest hospital marketplace in the world, hospitals compete on all three. According to a study published in the journal, Health Policy and Planning, patients know the price of procedures for nonurgent care in advance. Apollo Hospitals (a large hospital chain) publishes their quality measures: mortality rates, readmission rates, and infection rates, for example.

As I showed in Health Affairs, in our highly regulated, bureaucratic system, hospitals do not compete on price or on quality. That leaves amenities.  If you cut American hospital revenues, there will be fewer of them.

When Americans enter a hospital, they normally expect a private room. By contrast, in a typical hospital in the British National Health Service (where the government pays all the costs), most beds are in multi-bed bays, commonly 4–6 patients per bay. Moreover, the few private rooms that are available are normally allocated for medical reasons (such as avoiding infections) and not out of respect for patient privacy.

Canada has a two-tier system, in which patients have to pay out of pocket for privacy. For example, London Health Sciences Centre in Ontario describes its standard accommodation as a four-bed room. A patient can request a semi-private or private room if they pay extra.

Another amenity is food. In Britain and in Canada hospital patients receive what Americans would regard as traditional “hospital food,” delivered on a rigid schedule.

Many American hospitals, by contrast, offer made-to-order meals, served at the patient’s request (hotel-style ordering) and even gourmet menus. Overall, American hospitals spend six times as much on food service as Canadian hospitals ($129.65 per patient day versus $21.38).

Under Krugman’s proposal people might pay less. But they also would get less."

What Mexico City can teach America about the cost of public transit

By Steve Swedberg of CEI.

"I recently vacationed in Mexico. While in Mexico City, I tried to take the metro to attend a concert. At five pesos, or about 30¢, the bargain was hard to beat. Just one problem – it was so crowded that I couldn’t get on. I ended up taking an Uber.

This inconvenience prompted a larger question about transportation economics: What happens when policymakers make transportation extraordinarily cheap while capacity remains limited?

Mexico City’s crowded Metro has many potential causes, including its density, heavy reliance on public transportation, and the capacity and design of its network. An important factor, however, is the price riders pay. Research on Mexico City’s Metro found that when fares rose from three to five pesos in 2014, ridership fell 12 percent. That research also estimates that a 10 percent fare increase was associated with about a 2.5 percent decline in ridership.

These findings illustrate how transit fares can affect demand. Although there are differences between Mexican and American transit, the same economic principle applies in both because American transit agencies also rely heavily on taxpayer subsidies to keep fares low.

Washington, DC’s metro system, WMATA, provides a striking example. WMATA’s average fare is about $3 per passenger, whereas it provides a subsidy of $10.65 per passenger. WMATA also reports that fares recover just 28.2 percent of operating costs. The result is a transit system whose finances depend heavily on public support beyond the farebox.

BART, the San Francisco Bay Area’s regional transit system, faces similar circumstances. Its operating revenues are projected to cover only 32 percent of operating costs in FY2026, while the agency faces a $375 million structural deficit for FY2027. BART’s contingency plan includes both higher fares and substantial service reductions.

Supporters of cheap transit argue that lower fares help people who depend on transit to get to work, school, and other necessities. But those benefits require resources, and the fiscal pressures facing transit agencies like WMATA and BART show that those resources ultimately come from somewhere.

A universally subsidized ride provides the same price reduction to riders regardless of their circumstances, while the cost of the subsidy is borne elsewhere in the public budget. That makes the results of this spending especially important. Lower fares may encourage people to use transit, but subsidies do not necessarily translate into more effective or productive transit systems.

The same concern applies to who receives the subsidy as well. Lower-income households make up a larger share of transit users than of the overall population, but that does not mean they receive all the benefits of subsidized fares.

Recent research finds that some US transit investments and fare policies disproportionately benefit more advantaged populations, while the distribution of the subsidies themselves remains understudied. That raises doubts about whether making every ride cheaper is the most effective way to direct limited public resources toward those who need transportation assistance most.

The distributional concerns are only part of the problem. There is also little reason to assume that more subsidies automatically produce better transit. In his congressional testimony, Reason Foundation’s Marc Scribner cited research showing that increased operating subsidies were largely absorbed by higher costs and were associated with declining transit productivity. In other words, it has cost more to provide a given amount of transit service.

Similarly, the Congressional Research Service found that government operating support has helped sustain lower fares and higher service levels but has also increased operating cost per vehicle-mile.

One reason is that subsidies can weaken the pressure to control costs. When agencies can rely on public funding to cover operating shortfalls, subsidies can allow agencies to absorb rising wages and benefits without corresponding gains in productivity. Scribner’s testimony points to this dynamic by noting that transit labor productivity declined substantially as operating subsidies expanded. 

Because additional subsidies tend to accommodate higher costs instead of generating more productive service, taxpayers are paying more without necessarily getting better quality in return.

Transportation policy cannot escape the economic reality of scarcity. Lowering the price paid by users can change how they travel, but it does not eliminate the costs of providing transportation. Nor does spending more guarantee that subsidies reach those who need them most or produce a more productive system.

Those costs are harder to see when they are spread across multiple public budgets than when the benefit is visible at the farebox. That does not change the fact that transit agencies across the nation and the world face recurring financial dilemmas that show the costs eventually catch up with the subsidy. Cheap transit may be popular, but hiding its cost from riders does not make the bill disappear."

Mike Munger reviews Kim Phillips-Fein’s new book, Country of Lords: Neo-Aristocrats, Social Darwinists, Tech Utopians, and the Long Fight Against Equality in America

From Cafe Hayek.

"This history of the idea of “hierarchy as good,” focusing primarily on the U.S., is useful and interesting. But there are several aspects of the account, and what is left out, that I find puzzling.

First, the focus on hierarchy here is private, or at a minimum non-governmental. But no subjugation is as complete as that of ruled to ruler. Many of the great hierarchy-mongers of American history have designed and operated their power structures supported by the weapons and boot heels of armies and police. Andrew Jackson’s “Trail of Tears”; Lincoln’s suspension of habeas corpus and confiscation of property; Woodrow Wilson’s summary roundup of dissidents, suspension of postal deliveries, and the “Palmer Raids”; Franklin Roosevelt’s seizure of prices and property, followed by forcing thousands of American citizens into concentration camps; Nixon’s draconian wage and price controls; and the intrusive and unconstitutional surveillance state that has grown up after 9/11.

Most recently, and starkly, we saw the comprehensive confinement and draconian dictates of state scientism. The unelected health czar Anthony Fauci offered “I am the science!” as his justification for complete hierarchy; the Biden administration actively crushed dissent, even among those with scientific credentials who were disputing scientific arguments. Surprisingly, the only state actor mentioned here is Woodrow Wilson; he makes the list only because he hosted a viewing of “Birth of a Nation” at the White House.

Second, and perhaps more important, no one claims, to my knowledge, that the distinctive aspect of the U.S. is that there has always been perfect agreement about liberalism and equality under a rule of law. Phillips-Fein does provide a useful service in her careful documentation of some important advocates for hierarchy (even if it is strangely censored to ignore the state), but the actual argument is bizarrely narrow, even myopic. What’s distinctive about the U.S. is not that no voices have clamored for hierarchy, but that those voices have always lost! More than any other nation over the last 250 years, the U.S. has repeatedly recentered itself in equality before the law, and preserved social mobility in the face of substantial efforts to reify hierarchies of many different kinds.

Finally, Phillips-Fein notably strains, and frankly fails, to fit every personality she can scrape up neatly into a single Procrustean anti-egalitarian lineage. John Adams worried that a majoritarian system might struggle to govern, a plausible concern in 1780 given the world’s lack of experience with democracy. Adams is folded in here on the strength of his “ambivalence” about equality; that’s a much softer claim than outright advocacy for hierarchy. Andrew Carnegie is a similar problem: his philanthropic guilt and paternalistic sense of obligation to give back to the public sit awkwardly next to figures like Sumner or Stoddard who denied any such obligation.

When a 250-year argument has its founding-era anchor express nothing stronger than concern for an untried system, that’s a sign the argument is weak. Phillips-Fein concludes that the American belief in equality has always had to compete with a genuinely mainstream counter-tradition rather than triumph outright, which is surely correct. But then she infers that today’s inequality debates aren’t a betrayal of some past consensus so much as a resurgence of one side of a fight that never really ended.

This is a tone-deaf conclusion, and a deep misunderstanding of the liberal tradition. As Thomas Hobbes explained, each individual wants to rule and sees in him or herself the sort of person entitled to deference from others. But as Montesquieu, John Locke, Adam Smith, James Madison, and John Stuart Mill pointed out, we can design a political system that controls and blunts this urge to power. Liberalism is the instantiation of checks and balances, guardrails that limit concentrations of private power. Though there have been voices of dissent in the U.S., people who have sought power, there are fewer of those voices here, and they have been less effective."

Immigration crackdown hits Kansas, disrupts beef processing

By Tom Polansek of Reuters. Excerpts:

An immigration crackdown in Kansas disrupted beef processing, impacting immigrant workforce and cattle supply.

Community leaders reported ICE targeting Latino areas, causing fear and workforce shortages.

Beef prices rise as processing slows; industry groups warn of further consumer price hikes. 

"As affordability concerns weigh on the Republican Party's chances of maintaining control of the House and Senate in the upcoming midterms, President Donald Trump ⁠has enacted policies aimed at controlling the cost of beef.

Immigration enforcement could be ​the latest to work at cross purposes, causing record-high beef prices to tick ⁠up even higher, according to industry and union officials. Cattle futures gyrated this week as traders weighed tight supplies against processing disruptions due to the crackdown."

"Beef prices soared to records this year after ​a multi-year drought drove ranchers to reduce their herds to a 75-year low and Washington suspended cattle imports from Mexico. Trump has struggled to lower prices with a bevy of policies and other pronouncements, including increasing low-tariff beef imports and launching an investigation into meatpackers.

Meatpackers slaughtered an estimated 90,000 cattle on Thursday, down 16% from a week earlier, the Department of Agriculture said."