The US is Building a Lot More Data Centers Than Five Years Ago, But We Are Still Building More Warehouses

By Jeremy Horpedahl.

"Data centers seem to be popping up everywhere. And based on the value of current construction, the US is indeed building a lot more data centers than we were in 2020 or 2021, about four times as much data center construction (inflation adjusted).

But… did you know that we build a lot more good-old manufacturing than data centers? Almost four times as much in recent months. And that’s even after a decline in manufacturing construction over the past year and a half.

The US also builds about the same amount of warehouses and chemical plants as we do data centers. Data centers may exceed those two categories in a few years, but for now they are pretty similar.

Keep in mind that manufacturing and chemical facilities also use a lot of electricity and water, and have plenty of local negative externalities! Warehouses probably have a lot less resource consumption and external effects, but it’s not zero either.

Are data centers popping up everywhere? Well, people are certainly noticing them. But so are lots of other types of buildings, which rarely register more than a peep from concerned citizens and local media, unless there is some clear and obvious external effect."

 

 

The Railway Safety Act would shift freight from safer rails to deadlier roads

By Steve Swedberg of CEI.

"More than 36,000 Americans died on US roads in 2025. Fewer than 1,000 died on the rail system. Yet while highway fatalities rarely attract sustained attention, a single freight-train derailment can dominate national headlines for weeks.

The 2023 East Palestine derailment has remained in the news for years and has helped prompt Congress to make another attempt to pass the Railway Safety Act (RSA). As previously illustrated, the RSA’s major provisions have not been shown to meaningfully improve safety outcomes. However, beyond the merits of individual mandates lies a broader problem.

Washington repeatedly treats transportation modes as isolated silos rather than parts of a unified transportation network. The result is a fixation on safety within one mode while ignoring how freight, costs, and risk shift across the system as a whole. The RSA fits squarely into that pattern. In reality, freight is allocated across competing systems based on relative cost, reliability, and regulatory friction.

As I have previously argued in the context of the recent TSA security delays, constraints on one mode of transportation do not reduce overall passenger demand. They shift some travelers onto highways, where risks are significantly higher.

A similar substitution effect exists in freight transportation, although it is not uniform across all categories of freight. Bulk commodities, for example, are often rail-captive because trucking them is typically cost-prohibitive.

When rail does compete, it does not compete against an idealized version of itself under perfect safety conditions. It primarily competes against trucks. And trucking is often the default alternative when rail becomes more expensive or operationally constrained.

For the sake of argument, let us assume that this substitution effect applies only to intermodal. Intermodal accounts for a quarter of rail ton-miles, which would be 375 billion ton-miles for intermodal in 2025. The next question is how shippers might react to these regulatory burdens.

For a conservative illustrative estimate, I apply a cross-price elasticity of 0.5 drawn from the Congressional Budget Office (CBO) freight demand modeling to the intermodal share of rail traffic. The CBO example typically reflects policies that increase trucking costs relative to rail, inducing diversion toward rail.

Here, I assume symmetry in cross-price elasticities and apply the inverse relationship. While actual elasticities vary by route, commodity, distance, service quality, and trucking capacity, this assumption implies that a 10 percent increase in rail shipping costs would divert roughly 5 percent of price-sensitive freight toward trucking.

Other rail regulations illustrate how sweeping safety mandates can impose multi-billion-dollar shocks. Positive Train Control (PTC) ultimately exceeded $10 billion. The RSA’s prescriptive wayside bearing detectors alone are projected to cost up to $2.2 billion.

Unlike those one-time capital expenditures, however, the RSA’s operational mandates, such as the prescriptive inspection protocols, would impose recurring compliance and labor costs, thereby creating sustained upward pressure on shipping rates. Taken together, these examples suggest a low- to high-single-digit increase in rail shipping rates over time, depending on the degree of cost pass-through.

Applying a cross-price elasticity of 0.5 consistent with CBO freight demand modeling to the intermodal baseline yields four illustrative diversion scenarios under 5, 10, 20, and 30 percent cost increases, plus a long-run compounded case, ranging from 2.5 to 15 percent diversion rates from rail to highways (9.38 to 56.25 billion ton-miles).

To evaluate the net safety impact of this modal shift, federal transportation data can be normalized by ton-mile exposure. Because the relevant question involves systemwide safety externalities, the numerator includes all fatalities in crashes involving large trucks in order to capture risk to all road users from increased truck exposure. Dividing 5,340 large-truck-involved fatalities by 2.4 trillion highway ton-miles yields a commercial motor carrier fatality rate of 2.23 deaths per billion ton-miles.

Ton-mile normalization provides a useful first-order approximation of exposure, though actual risk varies with vehicle-miles traveled, road class, congestion, payload, and operating conditions. These factors are held constant for purposes of this illustrative comparison.

By contrast, rail had about 1.5 trillion annual ton-miles in 2024. Excluding trespassers, rail recorded 111 rail deaths that year. This adjustment with trespassers ensures consistency with the trucking measure, which captures systemwide crash externalities from freight activity instead of unrelated fatalities outside the transportation function.

Trespasser deaths are not typically affected by marginal changes in freight volumes, which makes operational rail fatalities the more comparable measure for assessing risk from modal shifts.

On this basis, rail exhibits a fatality rate of approximately 0.07 deaths per billion ton-miles. Freight trucking is thus roughly 32 times riskier than freight rail on this ton-mile measure, a result that is directionally consistent with federal data showing that freight trucks are responsible for 84.4 percent of freight fatalities despite moving 44.9 percent freight ton-miles.

This implies a net risk premium of 2.16 additional deaths per billion ton-miles. Under the 2.5 percent diversion scenario, this translates into roughly 20 additional fatalities per year, rising to more than 120 under the 15 percent scenario. These estimates likely understate the effect because they assume no diversion of manifest or other carload freight.

Regardless of the specific baseline assumptions one chooses to employ (see Appendix below for more detail), the structural conclusion remains as clear as it does ironic: policies that reduce rail competitiveness and shift freight onto highways impose transportation risks of their own.

Freight diverted from rail does not disappear. A significant amount ends up on America’s highways. More truck traffic and greater exposure to trucking risk necessarily imply more fatalities relative to rail. Paradoxically, a bill intended to improve rail safety will likely leave the transportation system as a whole more dangerous."

 

Personalized Pricing Isn’t All Bad for Consumers

By Christopher Gardner and Juan Londoño of Cato. Excerpts:

"The novelty of IDP (individualized dynamic pricing) lies in the ability to autonomously set prices by using an individual’s data to infer how much they are willing to pay for a product. Many industries, from car sales to higher education, practice some sort of individualized pricing. The primary distinction for IDP is that it can adjust prices cheaply, autonomously, and without bias. This arrangement allows companies to increase profits while offering lower prices to consumers."

"Dynamic pricing can best be understood as the adjustment of prices in response to changing market conditions."

"Algorithmic pricing’s recent turn in the spotlight is not a function of its increased use. Rather, technological advancement, which has enabled greater speed and individualization, has made the reality of those price changes more apparent to the average consumer."

"individualized pricing. This practice has been around since the dawn of commerce, when merchants and customers haggled over the price of a given product."

"A common example of individualized pricing is buying a car."

"IDP can be less subjective than a human salesperson."

"the practice has been in use for years across an array of industries, from insurance to retail. Each instance represents an effort to increase company profits, but it also helps allocate goods and services more effectively to those who need them."

"Most of the time, businesses use these tools as an extra nudge to lure in potential customers who are on the fence over a product. 

An example of how businesses commonly use IDP, particularly in online retail, is to combat “cart abandonment,” a term for when a user adds a product to their virtual shopping cart but ultimately decides not to buy it. When the website realizes that the customer is wavering in their resolve to buy a product or is browsing a competitor’s website to compare prices, it might “sweeten” the deal by offering a personalized discount hoping that the deal might convince the customer to complete the purchase."

"the best protection for consumers is a competitive market. In competitive markets with no supply constraints, IDP has proven to largely benefit consumers. Any time a firm uses IDP to raise prices for a given consumer, that automatically allows a competing firm to undercut those prices and take that consumer away. The nature of these structural protections is borne out as new technologies are implemented, such as electronic shelf labels. In spite of regulatory concern, there is virtually no evidence that electronic shelf labels are intended or used for surprise price increases."

"certain definitions of dynamic or personalized pricing would lump in popular pro-consumer discounts such as happy hours."

"Existing regulations often provide consumers with ample protection, given that the conduct underlying IDP is not novel despite technological advances. Aside from antitrust law covering concentrated markets, existing regulations on deceptive pricing directly address concerns about fictitious high baseline prices."

The Bitter Lessons of Sugar Control in World War I

By Daniel J. Smith. He is a Professor of Economics at Middle Tennessee State University.

"As German forces launched what would become their final major offensive on the Western Front in March 1918, President Woodrow Wilson’s Food Administrator, Herbert Hoover, identified what he called “one of the most vital problems confronting the nation”: a shortage of sugar. Demand had surged. Soldiers needed sugar in their rations, while producers and civilians relied on it to preserve and can food for the war effort. At the same time, supply had collapsed due to Europe’s engulfment in war, the disruption of Cuban cane fields during the 1917 Chambelona War, and German U-boats threatening Atlantic shipping.

What followed became one of the clearest examples in American history of price controls spiraling into creeping interventionism — and a textbook demonstration of why such schemes fail, even when administered by capable and patriotic officials pursuing a common wartime goal.

Hoover was commissioned as Food Administrator of the United States on August 10, 1917. A successful mining engineer and humanitarian, he seemed the ideal public servant for such an important task. He wasted little time, setting out to “assure to the American consumer a fair and just price” of sugar. Blaming rising prices on speculators rather than on underlying economic conditions, he ordered the suspension of trading in sugar futures on August 16 until “further notice.” And, by the end of the month, he had pressured American beet sugar producers “to limit the price of their product” with an expected savings of $30 million within the next year.

But replacing the flow of information and the structure of incentives supplied by the price system was far more difficult than Hoover, a graduate of Stanford University, imagined. Hoover’s attempts to adjust the system to unexpected changes in economic conditions were frustrated by the sugar industry’s attempt to divert the program to their own benefit. Hoover ultimately created a tripartite bureaucratic apparatus: the Sugar Division of the Food Administration, the International Sugar Committee, and the Sugar Distributing Committee. He set prices by signing agreements with producers and refiners under the threat of revocation of their license if they charged “excessive” prices.

But artificially low prices did exactly what economics textbooks predict: they encouraged consumption while discouraging production. Pre-war per-capita consumption stood at roughly 85 pounds annually, much of it in candy, soft drinks, condensed milk, canned goods, ice cream, and ketchup. Even at the beginning of the program, administrators acknowledged the predictable difficulties of holding prices low by urging consumers to limit consumption in the face of increased demand and decreased supply. By mid-October, a sugar famine was already causing sugar-using factories to shut down, and Hoover was forced to order cuts in candy production. The low price of sugar discouraged retailers from stocking it, especially given that it would not cover the increasing costs of transporting it from refineries. 

Under Hoover’s informal price ceilings, demand stayed high while beet growers watched competing crops become more profitable. As economist Joshua Bernhardt (1919) noted, mounting production costs and unregulated prices for other foods made sugar beets progressively less attractive. In desperation, Hoover tried to enlist schoolchildren and boys’ and girls’ clubs in sugar production, offering families an allotment of sugar in exchange for planting an acre of sugar beets. Pledge cards, circulars, and monetary incentives were deployed with patriotic fervor.

Hoover also formed local commissions to investigate spiraling production costs, producing thousands of pages of testimony from planters, nearly all of whom recommended higher prices. Testimonies from over 100 planters in California alone filled nine thick volumes (Bernhardt 1919). Planters rejected a flat price because it gave an advantage to low-cost producers, especially foreigners. Cuba could deliver sugar for about 5.5 cents per pound, while domestic beet sugar planters required nine cents and Louisiana cane sugar planters needed ten. Hoover’s political solution to these competing special interest groups was to buy cheap foreign sugar, along with domestic output purchased at higher prices, and then resell it to American refiners at an average price.

Price controls on sugar gradually expanded the scope of intervention. Transportation priorities, refinery allocations, export quotas, and distribution zones were imposed. Louisiana sugar failed to reach New England refineries because regulated prices made it more profitable for Louisiana mills to sell lower-grade sugars directly to confectioners than to ship to Atlantic refiners. Centrally prioritizing sugar allocation without market prices led to accusations of misallocation. While households went without sugar for canning and baking, Hoover argued in Senate testimony that the candy industry employed 250,000 Americans and that further diversion of sugar would put them “entirely out of work.” Yet, as Blakey (1918) notes, the knowledge problem cuts the other way: candy might have deserved a higher priority “in view of the national campaign for prohibition,” given its potential as a substitute for alcohol.

The Food Administration proudly claimed it had saved consumers millions. Yet as Roy Blakey (1918) observed, gratitude evaporated when sugar simply sporadically disappeared from tables in regionalized shortages. Senator Henry Cabot Lodge’s mocking refrain captured the public mood: “What comfort is there in a low price when no sugar can be obtained?” Searches for “Sugar Famine” on Newspapers.com yield over 20,000 matches during the years 1917-1920, the years Hoover’s sugar programs were operative, yet only 284 in 1916 and 370 in 1920.

The dilemma Hoover faced was classic: he needed “capable and informed representatives” who inevitably had skin in the game, or “uninformed ones who were disinterested.” Neither produced efficiency. Instead, the plan spawned a clerical army, including state-level certificate systems classifying industrial sugar use into five categories (A through E), population-based allocations, and transportation zones, which required a system of prioritization as well, designed to match supply to “equitable” demand. As Frank Rutter (1902) earlier recognized about attempts to regulate the sugar industry, any regulation would pit the concentrated interest of producers against the dispersed costs faced by consumers, “Opposed to these demands [of the sugar industry] there is only the diffused interest of the consuming public, with no detailed knowledge concerning trade conditions or the inner workings of the tariff, and without organization….”

The sugar episode was not an isolated wartime curiosity. It was a microcosm of the broader logic of Ludwig von Mises’ interventionism. Regulate the price of one commodity and you must regulate its inputs, its substitutes, its transport, and its distribution. “From the few instances cited,” Blakey wrote, “as well as from one’s daily observation, it is easy to see that the regulation of the price of one thing involves the regulation of the prices of all constituent factors and competing commodities, which in the last analysis means the regulation of wages, as well as the regulation of the prices, the supply and the distribution of everything else.”

Today’s policymakers would do well to revisit this forgotten chapter before reaching for price controls, “equitable allocation” schemes, or industrial policy boards. Price ceilings create shortages, which in turn necessitate rationing. Rationing requires bureaucracy, which opens the door to lobbying and favoritism. The consumer — the very citizens Hoover was commissioned to serve — ultimately pays in empty shelves and higher overall costs.

Herbert Hoover was a brilliant engineer and a sincere public servant. He believed he could “stabilize” markets through expert administration. The sugar famine suggested otherwise. Markets are not problems to be solved by committees; they are discovery processes that coordinate millions of decisions without central direction. When governments try to override that process, even with the best of intentions and the full powers of wartime emergency, the result is not order but the very chaos they sought to prevent."

The corporate tax rate really matters (improvements in aggregate tax competitiveness are positively and significantly associated with real GDP per capita growth)

From Tyler Cowen.

"Three findings emerge. First, improvements in aggregate tax competitiveness are positively and significantly associated with real GDP per capita growth, robust to a wide range of controls. Second, this aggregate effect is driven entirely by the corporate tax pillar; no other component displays a significant growth effect. Third, the corporate tax effect materializes contemporaneously and accumulates over time, with a statistically significant three-year cumulative effect of approximately 0.16 percentage points per one-point improvement in the corporate tax score. These results suggest that the full architecture of the corporate tax system, not merely the headline statutory rate, is what matters for growth.

That is from a recent paper by Michael Christla and Monika Köppl–Turyna." 

Do Immigration Quotas Benefit Natives?

From Jeffrey Miron.

"In 1921 and 1924, Congress set nationality-based quotas for immigration.

Recent research looks at the impact

on the intergenerational mobility of US-born men. [The authors use] county-level measure[s] of exposure to the quotas … [and] census data … to link US-born sons to their adult outcomes and trace family background, geographic location, and occupational status over time.

Outcomes differed by race:

[T]he quotas slowed intergenerational mobility among US-born white men. … For [them] the negative effects of the quotas were smaller for sons of wealthier fathers. … US-born white men from more exposed counties [also] earned substantially lower wages in adulthood.

Alternatively,

[f]or black men, quota exposure was associated with increased intergenerational mobility, although [the results] … cannot rule out the possibility of no effect. [T]he quotas may have reduced competition for lower-skilled urban jobs, modestly improving occupational prospects for black men.

The most likely explanation for the quotas’ effects

is that immigrants complement native workers by raising their productivity and enabling them to specialize in higher-quality tasks. … [Indeed,] the negative mobility effects were nearly twice as large for white men living in counties with more reliance on non-English-speaking immigrant workers."

Research even shows that closing down nuclear plants increase local emissions by 6-8%

A tweet from Justin Callais.