Does Easier Alcohol Access Affect Road Safety?

From Jeffrey Miron.

"Over 30 people die per day in drunk driving crashes, according to national estimates.

One mechanism for reducing these deaths might be restrictions on the kind of business that can sell alcohol. Researchers studied such laws in Texas, where

cities can use local option elections to decide whether to permit particular types of alcohol sales [e.g, at on-premise locations like restaurants versus off-premise locations like liquor stores].

The findings suggest that

[l]egalizing alcohol sales increased retail access but did not measurably change traffic crashes in Texas cities, suggesting that the consequences of alcohol liberalization depend on where alcohol is purchased and consumed.

This expanded access was location-dependent:

The findings are consistent with a possible shift toward off-premises purchases but do not establish that increased retail purchases replaced purchases at bars and restaurants. … Because the Texas elections mainly expanded off-premises retail access, they may have increased convenience without increasing the form of alcohol consumption most closely associated with impaired driving.

All in all, the

findings challenge the assumption that making alcohol easier to purchase necessarily increases drunk driving."

Manufacturing Surged When Tariffs Were Lifted

Tariffs raised costs and manufacturing jobs disappeared. Now, the administration is declaring victory for partially filling the hole it dug. 

By David Hebert of AIER. 

"The New Right is taking a victory lap. Treasury Secretary Scott Bessent says that manufacturing is “roaring back at its fastest pace in years.” He followed that up, calling this a “manufacturing renaissance.” And when the August payroll data showed factories adding jobs, the White House called the report “explosive” and proof that the tariff agenda is working. Checkmate, economists.

Not quite. An honest comparison of 2025 and 2026 reveals the economists were right.

In 2025, the US ran what can only be described as the largest, most aggressive tariff experiment in nearly a century. The average effective tariff rate peaked at 22.4 percent in April, which was the highest since 1909. By comparison, that figure was about 2.4 percent in 2024. But the worst part of 2025 was not the increase in the tariff rate; it was the chaotic manner in which trade policy shifted. Rates could be announced one week, doubled the next, paused a few days later, and then reinstated at an altogether new number months later. They could be imposed due to trace amounts of fentanyl crossing a border, other countries not buying enough of our products, or because President Trump didn’t like a person’s tone during a phone call. Americans were told that tariffs were going to apply to countries with which the US ran trade deficits in order to reduce those deficits. But then tariffs were imposed on the UK and Australia, with both of which the US runs trade surpluses.

Unfortunately, this wasn’t even the beginning of the uncertainty. Americans were told by Commerce Secretary Howard Lutnick that tariffs were “here to stay,” but later that same week, President Trump himself said that he was ready to negotiate with affected countries. In another instance, President Trump said that tariffs would be deployed to create jobs, but then Lutnick said that the jobs brought back would be automated. 

“The army of millions and millions of human beings screwing in little screws to make iPhones — that kind of thing will come back to the America,” Lutnick said, “it’s going to be automated, and great Americans, the tradecraft of America, is going to fix them, is going to work on them.” 

Likewise, Americans were told that tariffs would bring in trillions of dollars in revenue. But at oral argument before the Supreme Court, Solicitor General John Sauer said, “these are regulatory tariffs. They are not revenue-raising tariffs. The fact that they raise revenue is only incidental. The tariffs would be most effective, so to speak, if no person ever paid them. They achieve their goals and so forth.” Here, Sauer is pointing out that if a tariff is generating revenue, then it is not blocking imports and, by extension, not leading to domestic consumers shifting to buying domestically made products. Thus, the goal, according to Sauer, was to not raise revenues at all. 

Others associated with the Trump administration saw things differently. 

In a lengthy post on X and in The Wall Street Journal, Stephen Miran — formerly the chair of the Council of Economic Advisers and Federal Reserve board member — wrote that “it would have interfered with the legal case if I had said that tariffs were good for revenue and tax purposes, even if that’s not actually the reason we gave in law for the tariffs.” In other words, the tariffs were about revenue, except they weren’t, but really they were.

In 2025, Scott Bessent described tariffs as a “gun [that] will always be loaded and on the table, but rarely discharged.” The reality is that in 2025, there was no clear explanation of why the US was using tariffs, nor was there any clear indication of what the tariffs were ultimately trying to accomplish.

The combination of high tariffs with uncertain start dates and unclear goals proved disastrous for firms looking to make long-term investments. As a result, the manufacturing sector shrank. The ISM’s Manufacturing PMI fell into contraction and stayed there for ten months. Factory payrolls fell for eleven straight months, resulting in a loss of about 92,000 manufacturing jobs. Economists had predicted these outcomes and warned that the tariff agenda would produce them.

2026, by comparison, has brought the exact opposite: tariff relief. In February, the Supreme Court struck down the IEEPA tariffs. The White House immediately replaced these with a 10 percent tariff under Section 122. At the same time, the White House announced Section 301 investigations were beginning. While the findings of those investigations were almost certainly predetermined, they resulted in tariff rates of between 10 and 12.5 percent, which were (again) still lower than those in 2025. In other words, tariff rates in the US fell in 2026 compared to 2025.

But the remarkable thing about 2026 is how stable tariff policy has been compared to 2025. If anything, the uncertainty surrounding 2026 is characterized more by which tariffs the president is going to reduce, not impose. When beef prices rose, President Trump lowered tariffs to help ease the burden on households. When the price of steel, aluminum, and copper threatened domestic industry, the president lowered tariffs to “more effectively address national security threats, spur investment in American agriculture, housing, and manufacturing, and facilitate US production of related products.” Certain provisions of the Big Beautiful Bill, such as full expensing even for construction, took effect. Where 2025 can only be described as “raising taxes,” 2026 is a paragon of lowering taxes.

And what happens when taxes, especially those that affect manufacturing formation and expansion, are lowered? Manufacturing expands. And that is exactly what has happened in 2026. The ISM’s Manufacturing PMI crossed into expansion in January and has stayed there for eight months. Factory payrolls, which bottomed out in December 2025, have grown by 58,000 jobs. What’s more, the manufacturing job growth is concentrated in the very industries that are less exposed to tariffs.

None of this should surprise anyone who has sat through an economics course. A tariff is a tax. It makes Americans poorer by forcing us to pay more for less. Given the composition of US imports, tariffs land disproportionately on two groups: low-income households and manufacturers, since roughly half of all US imports are either raw materials or intermediate inputs used in American production. Tariffs make those goods more expensive. Take steel as an example. US steel prices have increased dramatically as tariffs have priced out foreign suppliers. As a result, manufacturing (which uses steel) becomes more expensive, too. It doesn’t take an economist to understand that when the cost of production rises, production slows down. 

The manufacturing renaissance that is happening right now is not because we imposed tariffs on the rest of the world. It’s because we lowered tariffs and made it easier for American workers to get access to the materials they need to produce. 

That the New Right would rush to claim this moment as a victory was not hard to foresee. Last December in The Wall Street Journal, I wrote that “When tariffs don’t deliver the promised renaissance, administration officials push back the timeline. First it was weeks, then months. Now, we need ‘the right timeline’ and must not grade policy ‘on a news cycle.’” I argued that they were “buying time until the economy improves despite tariffs, at which point the administration will claim victory.”

This is exactly what is happening. The timeline was stretched from weeks, to months, to “don’t grade us on a news cycle.” The economy, and specifically the manufacturing sector, improved the moment the tariffs were lowered. The officials who spent a year explaining away the damages their policies were causing are now taking bows after mitigating the harms of their own policies.

So let’s just be clear. Manufacturing shrank when tariffs were high and erratic. Manufacturing rebounded when tariffs fell and became more stable. Far from being tariff-induced, the “manufacturing renaissance” is what happens when you lower taxes on steel, chips, and components. None of this takes a crystal ball. Ironically, all of this matches exactly what the standard economic textbooks — the very textbooks that the New Right insists are wrong and in desperate need of updating — have been saying all along. All that the administration has done is dig a hole and then partially fill it back in. 

If we want to see manufacturing continue to rebound, we need to be cutting tariffs even further and making sure that they are stable and predictable."

 

Average Canadian family spent 42% of income on taxes—more than on housing, food and clothing combined (and the share has grown over time)

By Grady Munro and Jake Fuss of The Fraser Institute.

Taxes versus the Necessities of Life: The Canadian Consumer Tax Index, 2026 Edition

• The Canadian Consumer Tax Index tracks the total tax bill of the average Canadian family from 1961 to 2025. Including all types of taxes, that bill has increased by 2,928% since 1961.
• Taxes have grown much more rapidly than any other single expenditure for the average Canadian family: expenditures on shelter increased by 2,349%, food by 952%, and clothing by 526% from 1961 to 2025.
• The 2,928% increase in the tax bill has also greatly outpaced the increase in the Consumer Price Index (946%), which measures the average price that consumers pay for food, shelter, clothing, transportation, health and personal care, education, and other items.
• The average Canadian family now spends more of its income on taxes (41.9%) than it does on basic necessities such as food, shelter, and clothing combined (36.0%). By comparison, 33.5% of the average family’s income went to pay taxes in 1961 while 56.5% went to basic necessities.
• In 2025, the average Canadian family earned an income of $121,111 and paid total taxes equaling $50,721 (41.9%). In 1961, the average family had an income of $5,000 and paid a total tax bill of $1,675 (33.5%).

AI Leaders Are Asking to Be Regulated. This Is Nothing New.

By Christopher J. Calton of The Independent Institute.

"After Dario Amodei, CEO of the AI company Anthropic, penned an open letter calling for AI regulation, Rahm Emanuel took to X. “I’ve served in two White Houses and in Congressional leadership,” the former Chicago mayor wrote, “and I can tell you when the last time a CEO or an industry at large asked to be regulated: never.” 

Emanuel’s statement reflects the commonly held progressive myth that conniving Robber Barons do everything they can to impede the state’s noble effort to regulate them, but nothing could be further from the truth. 

Business leaders have long lobbied to have their own industries regulated. In fact, an entire body of historical scholarship is devoted to that phenomenon. Historians such as Gabriel Kolko, Robert Wiebe, and James Weinstein spent their careers detailing how Big Business allied with progressive reformers and politicians to construct the federal regulatory apparatus.

What does Big Business have to gain from regulation? More than anything else, to suppress economic competition and avoid cutting prices. 

“Competition was unacceptable to many key business and financial interests,” Kolko wrote in his landmark history of the Progressive Era. “As new competition sprang up, and as economic power was diffused throughout an expanding nation, it became apparent to many important businessmen that only the national government could rationalize the economy.”

Railroads were the first major industry to face widespread regulation, and the champions of the movement were railroad tycoons who had grown weary of the competitive pressure to cut prices. One railroad president endorsed the proposed Interstate Commerce Commission as the solution to “the prevailing contagion of depression and loss, from the effects of ruinous rates, which were uncontrollable from a lack of adequate protection of railroad interests.” Attempts to cartelize the railroads under the leadership of J. P. Morgan predictably failed owing to the strong incentives to offer discounts to shippers in the hope of generating enough traffic to cover the high fixed costs of building track networks. 

Business leaders in other sectors adopted the same strategy for suppressing competition. The public-school narrative of American history teaches that Upton Sinclair’s The Jungle, an entirely fabricated account of Chicago’s meat-packing industry, triggered the onset of economic regulation. In reality, twenty years beforeThe Jungle was published, the so-called Beef Trust was already lobbying for inspection laws to protect them from European competition. 

The corporatist state reached its apex during the New Deal, when President Franklin Roosevelt invited executives from the nation’s largest companies to Washington to draft their own protectionist regulations under the ultimately unconstitutional National Industrial Recovery Act. Mammoth corporations were in a better position to absorb regulatory costs than their competitors, and price controls made it impossible for smaller operations to undercut them. In one instance, the National Recovery Administration even jailed a businessman for charging customers five cents less than his industrial code allowed. 

Today, large companies are reluctant to explicitly acknowledge their desire to suppress competition when they lobby for regulations, but the playbook is essentially unchanged. When Apple publicly endorsed California State Senator Scott Wiener’s bill to require California businesses to disclose their greenhouse gas emissions, the company insisted that “fighting climate change” was one of its top priorities. Apple boasted that it had already been measuring and reporting its climate emissions, implicitly acknowledging that its business model would be unaffected by the burdens the new rule imposes on its smaller competitors.

The nascent AI industry is already enormously competitive, and rivalry has contributed to rapid advancements in the quality and availability of the technology. Dario Amodei’s plea for regulation sounds the alarm about “cyberattacks,” “bioterrorism” and “serious economic disruption,” but underlying all of those concerns is a fear of market competition. “A race to the bottom, spurred by commercial incentives,” he writes, “can make these risks more acute.” 

More likely, he fears that Anthropic cannot win a marketplace contest that rewards quality and affordability. Like so many business leaders before him, Amodei views the regulatory state not as the protector of consumers, but as the guardian of his own self-serving corporate interests."

Household debt as a share of GDP is hovering around some of the lowest levels of the past three decades

Tweet by Gunjan Banerji of The WSJ.

 

How The No Surprises Act worsened the problem of surprise bills

By Jeremy Nighohossian of CEI. Excerpt:

"Next week, Sen. Bill Cassidy (R-LA) will convene a roundtable to discuss adjustments to the 2020 No Surprises Act, which has come under increased criticism for shifting costs away from patients while driving up overall costs without addressing the underlying problem.

The theoretical market failure

The No Surprises Act was meant to address a legitimate health care problem based on fundamental economic principles. While the claim that healthcare is incompatible with a free market and needs to be managed by government is a vast overstatement, that doesn’t mean certain interactions don’t suffer from true market failures. They’re just much rarer and narrower than critics argue.

For a market to function well, participants need information and agency over their decisions. Both can fail when decisions must be made instantaneously by third parties. This principal-agent problem has been deeply studied in economics and is relevant to government actors. These problems occur when a third party makes a decision on behalf of someone whose interests or preferences differ from its own. Economists try to develop ways to avoid that issue.

How it relates to health care

This is one of the primary complications in emergency health care. The principal, the person who needs care, may be incapacitated or unable to choose their own provider. Moreover, the insurance-based health care system means the principal has ceded much of their decision-making power. But in the case of hospitals and healthcare, the situation is even more complicated. Hospitals  also use third-party providers, such as anesthesiologists. The hospitals are therefore acting as an agent for the insurance company and the patient, without the incentives to choose providers based on quality and costs that are aligned with the preferences of the insurance company or the patient.

Prior to the No Surprises Act, if a hospital chose an anesthesiologist that was not covered by the patient’s insurance, the patient could be stuck with an enormous bill for a provider they had never agreed to.

As the problem grew larger, Congress decided to fix the issue and passed the No Surprises Act at the end of 2020. The No Surprises Act effectively transferred the financial onus away from the patient, but instead of transferring it to the hospital, which was ultimately the decisionmaker, the bill created a process in which an arbiter would choose between the practitioner (the anesthetist) and the insurance company. Both would submit their view of what the payment should be, and the arbiter would choose one or the other.

To give the legislators some credit, I don’t think anyone could have predicted the eventual way this process would fail. They assumed that arbiters would choose each side’s offer about half of the time, giving both sides incentives to make reasonable bids. Basically, the legislators assumed the arbiters would be absolutely objective and fair.

That assumption turned out to be incorrect. Arbiters consistently sided with the practitioners. Even when insurance companies raised their offers, it seemed to have no effect on the probability of winning. Consequently, practitioners raised their bids. And because the process became so profitable for them, they brought more claims into the process.

Consequently, the costs of out-of-network health care boomed. The system has not yet reached an equilibrium, but when the new system settles, providers will be much better off, and patients will not only still be paying for the original size of the Surprise Bills via their premium, but they’ll be paying higher prices for these services and they’ll be paying for more of them, too. All that money will come from the insured."

A Great Nobel (for Mike Woodford and Bob Hall who are more in line with Milton Friedman and Bob Lucas, not Keynes)

John H. Cochrane. Excerpt:

"As you may have heard, Mike Woodford and Bob Hall won the 2026 Nobel prize.

This is a great prize, honoring two superb and highly influential economists.

What their work has to do with Keynesian stabilization is more of a head scratcher. This prize lives a lot more in the shadow of Milton Friedman and Bob Lucas than Keynes.

Hall’s most famous paper (my review here) was a brilliant extension and test of Milton Friedman’s permanent income model of consumption, which undercut the whole Keynesian fiscal stimulus business. Hall’s approach is also the cornerstone of all subsequent macroeconomics. Keynesian economics thinks about each year in isolation. In modern economics people think about the future in deciding what to do today. That is also a central part in Bob Lucas and Ed Prescott’s justly famous Nobel contributions. And Woodford.

Woodford’s monumental work (Interest and Prices is a capstone) was centrally about monetary policy, what the Fed can and should do. Keynesian economics famously said monetary policy is ineffective so the government should pursue fiscal stimulus. There isn’t much fiscal stimulus in Woodford’s book, and what little there is in subsequent work has very little to do with the Keynesian story. Again, this is the shadow of Friedman, not Keynes. But Friedman needed the money supply. The Fed sets interest rates and ignores money supply. Woodford shows how the Fed can affect the economy by setting interest rates. The core proposition is John Taylor’s rule: the Fed should aggressively raise interest rates to tame inflation. Woodford credits the idea to Wicksell and Taylor, and the Fed discovered on its own in the 1980s. But if you don’t have equations you don’t really know anything, and that’s what Woodford (leading a pack of many others) did.

I have been a little critical of new-Keynesian economics. But mostly as I see unfinished business. I think FTPL repairs a hole in new-Keynesian economics, and finishes the job. (“Expectations and the neutrality of interest rates” sums that up best.) Indeed, my main criticism is that Woodford went through contortions to leave out fiscal policy and inflationary fiscal stimulus, and give the Fed too much (complete) power over the economy.

Even Brad de Long called new Keynesians the “triumph of monetarism.” So, really, this is one more prize for Milton Friedman and Bob Lucas, not Keynes. Woodford set out to do something “Keynesian,” but by Lucas rules: people optimize in their behavior, they can’t be fooled systematically, and we write a proper model based on people and firms and budget constraints and markets that clear. (Woodford has been looking at more complex expectations recently, but not in the original work.) Policy consists of rules, either explicit or inferred from repeated behavior, not actions. I think that Woodford and other new-Keynesians set out to rewrite “Keynesian” economics under Lucas rules. But when you read the actual equations of what they came back with, it has very little to do with Keynes. (A recent article making that point.) That’s only now becoming clear.

Hall ranges broadly over labor, investment, money, and many parts of macroeconomics. He is always innovative. I had given up hope of a Nobel for him, because he’s not the type who bangs away on one idea. I am glad to be wrong.

Reporters have asked “who else?” This has been a very productive few decades for macroeconomics, and there are a dozen or so economists who could easily have shared this prize. There isn’t that much common between Mike and Bob’s work, actually, so it’s really a generic prize for macroeconomics. I would hate to be on the committee that has to pick just two or three per year. Perhaps more macro prizes will come."