Evaluating the free market by comparing it to the alternatives (We don't need more regulations, We don't need more price controls, No Socialism in the courtroom, Hey, White House, leave us all alone)
Today, let’s focus on a negative feature that is becoming less negative. And not just for a handful of years.
Using IMF data, here’s a look at what’s happened to the burden of government spending over the past three decades. Sweden has been complying with my Golden Rule.
It may not seem overly impressive to have government grow 3.5 percent annually, especially when compared to Switzerland.
But what matters most is that 3.5 percent spending growth is lower than 4.3 percent GDP growth.
And even though that may not seem like a big gap, what’s key is that the gap has existed for 30 years.
To see how modest amounts of annual progress can translate to major long-run improvements, here’s the same chart, but modified to show what’s happened to the overall spending burden and overall debt burden.
As a libertarian, I’m horrified that government is consuming 49 percent of GDP in Sweden. But that’s a huge improvement compared to having 60 percent of the economy being diverted to government.
And because the burden of government spending is declining, it’s no surprise that government debt has dramatically declined. And those are the numbers for gross debt. Net debt has declined even more, dropping from 46 percent of GDP to less than 14 percent of GDP.
To get where it needs to be, Sweden needs to maintain current levels of spending restraint for…well…um…another 100 years or so. But a journey of a 100-plus years begins with the first three decades.
P.S. I started my analysis in 1996 because the IMF had debt data starting that year. Looking just at spending data, Sweden started moving in the right direction a few years earlier.
P.P.S. For a look at overall economic policy developments in Sweden, feel free to peruse my four-part series (here, here, here, and here)."
"According to Census Bureau and United Nations data, the immigrant share of the US population (14.8 percent) ranked 54th worldwide among 206 countries in 2024. Among the 51 wealthiest countries—nations with a GDP per capita PPP greater than $50,000—its ranking has fallen from the 43rd percentile in 2000 to the 24th percentile in 2024. Its ranking for per capita growth in its immigrant population since 2015 was similarly low: the 29th percentile. The US accounted for most of the net increase in the worldwide immigrant population in the 1990s but accounted for only 17 percent of it since 2020."
"Australia is slightly above the trendline and is roughly where the United States would be expected to be based on its GDP per capita. The United States is about 76 million immigrants short of Australia’s share of immigrants."
"Fears that machines will eat all the jobs are nothing new. In a recent Substack essay, “Technological Progress and the Meaning of Work,” economists Soumitra Shukla of the Burning Glass Institute and Alex Imas of Google DeepMind outline the history of worker anxiety from the Luddites in the early Industrial Revolution to Hollywood creatives here in the early days of the AI Revolution.
Let us journey back to a tech-optimistic period I call Up Wing 1.0, from the mid-1950s through the early 1970s. So basically the Atomic Age and the Space Age. But all that obvious progress had a downside. In February 1961, Time magazine reported that the “rise in unemployment has raised some new alarms around an old scare word: automation. How much has the rapid spread of technological change contributed to the current high of 5,400,000 out of work?”
Time returned to the theme witha 1965 cover story on computers: “At least for now, the computer seems to raise almost as many problems as it solves. The most pressing and practical one is, of course, displacement of the work force.”
Washington took note. On August 19, 1964, President Lyndon Johnson signed a bill creating the National Commission on Technology, Automation, and Economic Progress. In his remarks on the commission, Johnson didn’t seem all that worried about technological unemployment as long as government planned for the inevitable disruption it would cause. Keep in mind that this was a peak period of policymaker confidence in government’s ability to manage the American economy through fiscal and monetary policy:
Automation is not our enemy. Our enemies are ignorance, indifference, and inertia. Automation can be the ally of our prosperity if we will just look ahead, if we will understand what is to come, and if we will set our course wisely after proper planning for the future. . . . The techniques of automation are already permitting us to do many things that we simply could not do otherwise. Some of our largest industries, some of our largest employers would not exist and could not operate without automation, and some of those employers are here this morning. . . . We could not provide our great shield for the security of this country and the shield for the security of the free world if we did not have automation in the United States. If we understand it, if we plan for it, if we apply it well, automation will not be a job destroyer or a family displaced. Instead, it can remove dullness from the work of man and provide him with more than man has ever had before.
Others wanted a more vigorous response. The left-wing Ad Hoc Committee on the Triple Revolutionwarned Johnson that “cybernation” had produced “a system of almost unlimited productive capacity which requires progressively less human labor.” The capability of machines, it argued, was rising more rapidly than the capacity of many human beings to keep pace. It wanted federal action such as a guaranteed income and government licensing power “to regulate the speed and direction of cybernation to minimize hardship.” Martin Luther King Jr., philosophically in tune with the group,warned of “automation and cybernation” in his final Sunday sermon on March 31, 1968.
Oddly, this was all happening during a time when productivity and pay were tightly linked—and both were rising. The jobs alarm was being sounded at the very same time a fast-growing economy was grinding down joblessness to levels not seen again until the 1990s tech boom. (When unemployment finally rose in the 1970s, it coincided with a productivity slowdown.)
Here again, we are at a time of low unemployment and spiking fears about automation. Maybe history has a lesson for the automation worriers."
"In 1984, lawmakers passed legislation ordering methaqualone moved to Schedule I, the category reserved for drugs deemed to have "no currently accepted medical use and a high potential for abuse." Congress bypassed the Controlled Substances Act's normal scheduling procedures and ordered the Food and Drug Administration (FDA) to withdraw its approval."
"Reports of renewed interest in methaqualone are now accompanied by another development: the emergence of methaqualone analogs, chemical cousins that may differ in potency and toxicity. The pattern resembles what we're seeing today with fentanyl analogs. A 2026 review reported that some methaqualone derivatives were roughly 100 times as potent as the original drug, while researchers still know little about their risk in human beings."
"In April 2026, the Center for Forensic Science Research and Education reported detecting 2-methoxyqualone, a structural analog of methaqualone, in illicit drug material collected in Pennsylvania and California.
Small changes to a drug's chemical structure can profoundly alter its pharmacological properties. In the case of 2-methoxyqualone, essentially nothing is known about its effects, potency, or toxicity in humans, as is the case with many illicit fentanyl analogs. From a synthetic chemistry standpoint, producing a virtually unlimited variety of methaqualone analogs is trivial, requiring relatively simple chemistry and readily available starting materials.
A 2026 scientific review identified five newer methaqualone analogs reportedly 100 times more potent than the original drug, although those potency estimates remain preliminary. Meanwhile, Australian drug-checking researchers identified a pill submitted as a Quaalude that actually contained methylmethaqualone. An earlier American clinical case report documented a patient who believed he had ingested methaqualone but had actually taken another analog, SL-164.
This emerging market offers another example of what drug policy analysts call the iron law of prohibition. As enforcement raises the risks and costs of supplying prohibited drugs, illicit suppliers have incentives to favor more potent substances that are easier to conceal and transport. Prohibition also encourages underground chemists to develop more potent chemical substitutes or to adulterate existing drugs with other substances to intensify their effects, exposing consumers to products of uncertain composition, potency, or toxicity.
The appearance of methaqualone analogs is consistent with that pattern. Although it is too early to establish that prohibition caused their development or that they are widely used, it's a pretty sure bet."
Bank regulations introduced after the 2008 financial crisis reduced construction lending and new single-family home sales, contributing to higher house prices and increased market concentration among home builders.
"In the years after the 2008 financial crisis, the United States built relatively few new single-family homes even as the housing market recovered. This shortfall has contributed to concerns about housing affordability and higher house prices. Many explanations have focused on local land-use rules, labor shortages, and rising construction costs. Our research examines another potential cause: changes in bank regulation that may have reduced the financing available to home builders.
Construction loans are especially important for small- and medium-sized home builders. Unlike large public builders, which can raise money through bond markets and outside investors, smaller firms generally depend on local banks to finance land purchases and construction. These relationships can be difficult to replace because construction projects require specialized monitoring and local knowledge. If banks withdraw from this market, builders may be unable to obtain comparable financing elsewhere.
We studied two major regulatory changes that took effect in 2013: the phased implementation of Basel III capital requirements and stress tests required under the Dodd–Frank Act. Both policies were intended to make large banks more resilient after the financial crisis. However, since construction loans are relatively risky and require substantial capital under these rules, the policies may have encouraged the largest banks to reduce this type of lending.
Our research uses deed records that track the financing and sales activity of nearly 18,000 US single-family home builders. From these records, we identified the banks that financed each builder and examined how lending changed after 2013. We classified banks as stress-tested if they participated in at least one federal supervisory stress test between 2013 and 2019. Before the reforms, these large banks originated roughly 42 percent of bank-originated construction loans between 2010 and 2012. Their share fell from 43 percent in 2011 to 19 percent in 2019. The decline reflected not only lower loan volumes but also a retreat from several local markets. Across the 500 most populous counties, the average market share of stress-tested banks in construction lending fell from 36 percent in 2011 to 14 percent in 2019, and there were approximately 600 instances between 2011 and 2019 in which a stress-tested bank exited a county. Nonbank lenders did not replace the lost credit—perhaps because they lack the expertise to closely monitor the construction projects—indicating that the decline in lending from stress-tested banks led to an overall decrease in construction credit.
We then compared home builders that had borrowed from stress-tested banks before the reforms with those that had borrowed only from other lenders. After 2013, builders with prior relationships with stress-tested banks experienced a 31.5 percent decline in borrowing and an 11.0 percent decline in new home sales relative to the comparison group. We observed similar patterns when comparing builders operating in the same metropolitan area and accounting for differences in builders’ size and geographic reach.
The evidence suggests that the reforms disrupted banking relationships rather than simply reducing lending across the board. Among builders that had relationships with both types of banks, relationships with stress-tested banks were 12.4 percentage points more likely to end after the reforms than relationships with other banks. After 2013, builders that had previously relied on stress-tested banks experienced a 29.4 percent increase in borrowing distance relative to builders that had borrowed only from other banks. In addition, after 2013, construction loans originated by stress-tested banks were 11.3 percentage points less likely to be secured by vacant land (generally considered the riskiest collateral), reflecting these banks’ need to reduce risk.
We also considered the effects of these banking regulations by comparing counties with different levels of exposure to stress-tested banks during 2004–2007, before the financial crisis. We compared changes before and after 2013 between more-exposed and less-exposed counties within the same broad regional housing market. Counties with greater exposure experienced larger declines in construction lending and new home sales. An increase in exposure equal to the difference between the 25th- and 75th-percentile counties was associated with a 17.5 percent decline in construction lending and a 5.6 percent decline in new single-family home sales.
Greater exposure to stress-tested banks was also associated with higher house prices. More-exposed counties experienced a 1.5 percent additional increase in house prices by 2017 relative to less-exposed counties in the same regional market. Consistent with larger home builders facing fewer financing frictions and therefore being less affected by the credit supply shock, our research finds that they gained market share: By 2017, the combined share of new home sales accounted for by the five largest local builders was 1.5 percent higher in more-exposed counties relative to less-exposed counties in the same regional market.
While a complete evaluation of bank regulation is beyond the scope of this study, our findings indicate that the increased capital requirements and stress tests had unintended consequences that affected the housing supply and may have contributed to the recent decrease in housing affordability. Although these policies may have strengthened the banking system, they constrained lending in markets that depend on local relationships and specialized knowledge. In the long run, we expect the market to adjust—for example, our research finds that the market share of public home builders, which are less reliant on construction loans, has increased substantially in the past decade. However, our evidence suggests that the reduction in housing construction during the transition was substantial.
Industry-led efforts to mitigate contaminated shellfish reduced typhoid deaths in London from about 1.5 to 0.1 per 10,000 people between 1900 and 1920.
"By the late 19th century, London had reduced its typhoid mortality rate more quickly than most other cities in England and Europe, and by the early 20th century, its mortality rate was lower than that of many cities in the United States. Improvements in water and sanitation infrastructure addressed the main source of typhoid transmission. However, most of these improvements were implemented by the end of the 1880s, after which death rates plateaued until 1900 before declining again. The causes of both the plateau in typhoid mortality and the subsequent sharp decline between 1900 and 1910 remain unclear.
Our research argues that the mortality rate initially plateaued rather than decreased due to a lack of information about shellfish quality. British consumers have historically been fond of consuming shellfish and other seafood, such as eels. Around 1880, shellfish in Britain were harvested close to the coast in estuaries, tidal flats, and nearshore zones, often after importing young oysters and fattening them on coastal beds. These beds were usually near urban areas and their wastewater discharges. This was dangerous because shellfish near wastewater are noxious for human consumption. Shellfish feed by filtering large volumes of water, accumulating pathogens, toxins, and pollutants from contaminated environments, including human waste. Shellfish near cities acted as vectors for waterborne diseases, and as cities grew (partly because water treatment facilities made them more livable), the problem of contaminated shellfish worsened. At the same time, shellfish became cheaper in British cities as transportation improved and shipping costs fell.
Before the mid-1890s, foodborne transmission of typhoid was not well understood. Initially, the medical community considered milk the main culprit, but in 1895, attention shifted to shellfish. By the early 1890s, the American and British public became aware of the connection between wastewater, shellfish, and typhoid and began changing their consumption choices.
Once the connection was understood, consumers alone could have substantially reduced typhoid deaths by consuming far fewer shellfish, but this would have decimated the shellfish industry. This decimation did not occur; rather, an institutional intervention maintained consumption and reduced typhoid deaths. The response did not come from the government but from industry-led efforts. Most prominently, the Worshipful Company of Fishmongers (WCF) stepped in to secure a substantial and sustained reduction in typhoid mortality while preserving the shellfish industry.
Knowledge of the connection between wastewater, shellfish, and typhoid created the classic “lemons problem” in economics: Consumers were unable to distinguish between high- and low-quality shellfish, so they were unwilling to pay a price high enough to keep high-quality products on the market. This contracted the market and could have led to its collapse without intervention. However, the WCF oversaw London’s central fish market—Billingsgate—and thus had some degree of market power, even though it had long lost its legalized monopoly over London’s retail fish trade. The WCF used the Billingsgate market to help high-quality sellers signal the quality of their products by sampling and testing harvest sites, banning sales from known contaminated areas, and requiring vendors to purchase shellfish cleaning services. Self-regulation through Billingsgate allowed the shellfish market to become segmented by quality: Consumers who were willing to risk their own quality control could purchase shellfish for a lower price from traders who did not transit through Billingsgate, while those willing to pay a premium for third-party quality control purchased shellfish through Billingsgate (or retailers who sourced from Billingsgate). This prevented the lemons problem and the collapse of the shellfish market, and typhoid deaths in London fell from about 1.5 to 0.1 per 10,000 people between 1900 and 1920. The WCF was the primary source of quality regulation for shellfish markets serving London and other parts of Britain for over 30 years. The company provided a model of best practice for subsequent legislation and continues to inspect food quality at the Billingsgate market today.
1. More billionaires are associated with less poverty. 2. Increasing billionaires per capita by ten fold lowers poverty by 43 percentage points. 3. Sweden has more billionaires per 10M people than the U.S. (34 vs 30) 4. Correlation is fairly strong (R-squared of 0.6 for two variable cross-section data)
He does mention "the graph is only a correlation."
