Access to federal student loans can reduce welfare for some young adults

See Optimism about Graduation and College Financial Aid by Emily G. Moschini, Gajendran Raveendranathan & Ming Xu.

American Economic Journal: Macroeconomics

vol. 18, no. 2, April 2026

(pp. 148–87)

Abstract

"In the United States, college dropout risk is sizable. We provide new empirical evidence that beliefs about the likelihood of earning a bachelor's degree predict college enrollment, and that the distribution of these beliefs exhibits widespread optimism. We incorporate this distribution of beliefs into an overlapping generations model with college as a risky investment that can be financed via federal loans, grants, family transfers, or earnings. We then examine the welfare impact of access to federal student loans. We find that access can reduce welfare for young adults who are low-skilled, poor, and optimistic, due to their mistaken beliefs."  

 

The Economics of Oil Prices

David R Henderson. Excerpt:

"The World Market

While I was waiting to play pickleball a couple of weeks ago, a friend who knows I’m an economist asked me a question: “Given that we in America produce almost all the oil we use, why does a reduction in supply of other countries’ oil lead to a price increase here?”

I loved the question because I occasionally raised exactly this question when I taught at the Naval Postgraduate School.

Here’s how I answered.

Because of low transportation costs per barrel of oil, which are a small fraction of the price of a barrel of oil, the market for oil is global. A reduction in the supply of oil anywhere in the world reduces world supply. For a given world demand, therefore, the price oil will increase everywhere.

My friend thought for a minute. He seemed to get it.

Then the next question occurred to him. “What,” he asked, “if a domestic refiner is sitting on a large inventory of oil that it had bought weeks earlier for over $20 less than the current price? How can it justify pricing its refined products as if it had paid the current higher price of oil?”

I sensed a certain upset at gasoline companies and so I decided to take an indirect route to answer. I was pretty sure this guy, who is close to my age, had lived in the area a long time. I asked him if he owned a house. He said he did. I asked him if his house is worth a lot more than what he paid for it. He said it is. Then I asked, “If you decided to sell your house, would you price it at what you paid for it or would you price it according to current market conditions, which would imply a much higher price?” He answered that he would price to the market.

He got it.

By the way, when I wrote my Wall Street Journal piece in August 1990 arguing that you couldn’t justify war in the Middle East based on Saddam Hussein’s probable impact on the price of crude oil, I of course put no consideration on how much oil we got from Iraq or Kuwait—it was a small amount but the amount was irrelevant. Remember that it’s a world market."

Recent papers make airtight case against socialist growth

By Justin Callais. He the Chief Economist with the Archbridge Institute. Excerpts:

"Recent work by JP Bastos, Jamie Bologna Pavlik, and Vincent Geloso shows that Cuba severely underperforms “synthetic Cuba,” or what Cuba’s growth trajectory would have been if not for the socialist policies post-Revolution. Notably, they conduct their analysis based on reported GDP per capita numbers, adjusted (to account for fabricated data) GDP per capita, and adjusted for aid from the Soviet Union."

"Using the corrected data, Cuban GDP per capita was 48.3% below the synthetic counterfactual by 1972, and 44.3% below by 1989. When Soviet subsidies are stripped out, the picture is even grimmer: by 1972, Cuba’s GDP per capita fell 55.5% below the counterfactual, with that gap persisting through 1989.

Is this really just the US’s fault because of embargos? The authors account for this with specifications that are generous to inflate the embargo’s damage. Even so, the verdict is clear: the embargo can account for at most 8% to 10% of the difference between Cuba’s actual GDP and the counterfactual, a trivial share of the Revolution’s total effect."

"Before the Revolution, Cuba (much like Venezuela, which is covered in another great paper by Kevin Grier and Norman Maynard) was one of the wealthiest countries in Latin America. In just four years after the Revolution, Cuba returned to roughly the same living standards it had in 1937, effectively erasing more than two decades of economic growth."

"Louis Rouanet studies the impact of François Mitterrand’s 1981 election, who ran on a platform of “rupture with capitalism.” The findings are drastic: by 1996, France’s GDP per capita was roughly 26% lower than that of the synthetic counterfactual, a gap of about $7,300 in constant 2017 dollars. Investment collapsed relative to the counterfactual, and the employment rate underperformed by more than two percentage points."

"Even though Mitterrand somewhat reversed course after 1983, Rouanet argues that the policies persisted. The policies that expanded welfare spending, created hundreds of thousands of public sector jobs, and restructured the labor market were not reversed, and they locked in institutional arrangements that outlasted the President himself. France’s centralized, bureaucracy-dominated politics made bad policies stickier than they would have been elsewhere.

It is important to note that this wasn’t the type of social democracy (large welfare state complemented with a market economy) that exists in Scandinavia. The French Socialist Party in 1981 openly declared its goal to be the “socialization of the means of investment, production, and exchange.”"

"The broadest of the three, this paper by Andreas Bergh, Christian Bjørnskov, and Luděk Kouba, asks the question most directly: what does socialism do to economic growth, across countries and time? The authors draw on a dataset covering 192 sovereign countries from 1950 to 2020 and focus on the 22 countries that made a decisive transition to socialist planned economies after independence, countries like Tanzania, Zambia, Vietnam, Sudan, and Venezuela.

They use neighbor comparisons (China vs. Taiwan, Czechoslovakia vs. Austria, Yugoslavia vs. Greece) as a first cut, then apply more formal panel methods. The neighbor comparisons are striking:

Taiwan’s annual growth rate between 1950 and 1990 was on average 2.7 percentage points higher than China’s, Austria’s was 1.6 percentage points higher than Czechoslovakia’s, and Greece’s was .7 percentage points higher than Yugoslavia’s despite Greek instability, coups and a period of military dictatorship.

The results are consistent across every specification: adopting socialism is associated with a decline in annual growth rates of approximately two percentage points during the first decade after implementation. That sounds modest, but compound it over decades and it’s the difference between prosperity and stagnation. Let’s make a simple comparison. Assume two countries both have GDP per capita of $10,000. One goes socialist and grows at 2 percentage points less than the non-socialist country (assume 1% versus 3%). After 10 years, the socialist country has a GDP per capita of $11,046; the non-socialist one has GDP per capita of $13,439. After 20 years? Just $12,202 versus $18,061, a nearly $6,000 per capita difference!" 

Spain’s Rent Control Is Failing—Argentina Shows a Better Way

By Marcos Falcone of Cato.

"On Friday, March 20, in light of the Iran war, which has pushed up energy and other prices, Spanish Prime Minister Pedro Sánchez announced measures to lower the cost of living. Rent control was included among those measures, even though it is already failing in Spain. 

Reportedly under pressure from one of its left-wing coalition partners, Sánchez decreed a nationwide contract extension at current prices for rentals about to expire, effectively amounting to a rent freeze. He has also instituted a 2 percent annual cap on rent increases through the end of 2027, which will apply to existing contracts currently indexed to inflation.

Ironically, a report published by the Instituto Juan de Mariana the same week as Sánchez’s announcement shows the extent of the harm that various forms of rent control are already causing in Spain. Following the introduction of rent caps in the region of Catalonia in 2024, the supply of rental housing has declined by 23 percent. Even more dramatically, the city of A Coruña and the region of Navarra saw rental supply fall by 44 percent and 51 percent, respectively, only six months after they designated certain areas as “stressed” housing markets and also imposed rent caps. In a country with an estimated deficit of 700,000 housing units, rent control is making things even worse.

Rent control in Spain not only cuts supply but also fails to improve conditions for renters. As the Instituto Juan de Mariana shows, wherever rent control has recently been introduced, average rental unit space has decreased, and prices per square meter have either stayed the same or increased—in Barcelona, for example, prices reached a record high in the third quarter of 2025.

The Spanish experience contrasts sharply with Argentina’s, which has adopted the exact opposite approach since Javier Milei became president in December 2023. Before then, listings had plunged by 53 percent following the passage of a rent control law in 2020. But after Milei repealed it ten days after taking office, supplies rose by a staggering 180 percent less than a year and a half later. (My colleague Ryan Bourne and I documented that extensively here). As of December 2025, rentals in the city of Buenos Aires were still almost 30 percent down in real terms from two years before, and supply has not declined.

Rent control does more harm than good, as Ryan Bourne explains in The War on Prices. Hopefully, Spain will correct course as Argentina did before things get much worse."

Democrats for Energy Disarmament

They add AI data centers to their anti-fossil-fuel target list

WSJ editorial. Excerpts:

"critical minerals required for wind, solar and batteries are mostly processed in China using coal power and leach toxic byproducts."

"Permitting delays and litigation hinder the buildout of transmission lines, pipelines, housing, factories, data centers and more. They are also one of America’s biggest liabilities against China."

"They want to expand transmission to connect more solar and wind to grids in Democratic-run states with renewable mandates—and then pass the costs of these projects onto people in other states."

"why are electric rates so much higher in green-energy beacons like California (30.3 cents a kilowatt hour), Massachusetts (31.2 cents) and New York (28.4 cents) than in states like Missouri (11.8), Arkansas (12.4) and Utah (12.9) that rely principally on fossil fuels?" 

The time price of a family meal at McDonald’s is 25% lower than in 1958

Letter to The WSJ.

"Mr. Greene (Bob Greene’s op-ed “When McDonald’s Was an Inexpensive Treat” (March 21)) notes that his family’s entire meal—six hamburgers, four cheeseburgers, four orders of fries and three milkshakes—cost only $2.66 in 1958. With entry-level wages around $1.12 an hour at the time, that put the time price—the amount of labor time required to acquire a good or service—at two hours and 23 minutes.

Today, that same meal costs about $33.47 at my local McDonald’s. But wages have risen too. With average hourly earnings at limited-service restaurants around $18.69, the time price is now only one hour and 48 minutes. That’s a 25% decline in the time price. In other words, for the same amount of time, a worker today can buy 33% more from McDonald’s than in 1958.

McDonald’s isn’t a more expensive treat—it’s a more abundant one.

Gale L. Pooley (he teaches US economic history at Utah Tech University)"

The Social-Media Shakedown Begins

The verdict against Meta and YouTube is a victory for the plaintiffs bar, not for children or society

WSJ editorial. Excerpts:

"Section 230 of the 1996 Communications Decency Act protects internet platforms from being held liable for harm caused by user-generated content."

"the link between youth mental health and social media is complicated. Take the 20-year-old plaintiff identified by the initials K.G.M. in the Wednesday case. She said she started using YouTube at age six and Instagram when she was nine. Both require users to be at least 13 years old, so she broke platform rules and bypassed controls."

"are platforms supposed to prohibit users from posting photos that might make someone feel depressed or insecure?"

"She was also exposed to domestic abuse as a young child"

"parenting plays a critical role in mediating and mitigating the impact of social media. Most children who use social media don’t experience severe problems."

"it’s hard if not impossible to prove that social media caused any given individual’s troubles"

"The evidence presented at trial that executives purposefully designed the platforms to be addictive was weak."

"companies aren’t required to design products to prevent abuse or excessive consumption."