Quaaludes Might Be Back. The Iron Law of Prohibition Never Left.

This counts as progress in the war on drugs?

By Jeffrey A. Singer and Josh Bloom. Excerpts:

"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 Regulation, Construction Financing, and the Supply of New Housing

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.

By Sheridan Titman, Deheng Xu, and Yiyuan Zhang. 

"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.

Note
This research brief is based on Sheridan Titman et al., “Bank Regulation, Construction Financing, and the Supply of New Housing,” SSRN Working Paper no. 6425842, revised September 2026."

Typhoid Contamination and Self-Regulation of London’s Shellfish Industry

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 Vincent Geloso and Nicola Tynan. 

"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.

Note
This research brief is based on Vincent Geloso and Nicola Tynan, “Typhoid Contamination and Self-Regulation of London’s Shellfish Industry,” Social Science Research Network, June 25, 2025."

More billionaires are associated with less poverty

Tweet from Christopher Clarke.

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."

  

 

Government-Backed Lenders Tighten Mortgage Rules in Response to Mamdani’s Rent Freeze

Freddie Mac has paused new loans, and Fannie Mae is baking in the cost of the rent freeze, making it difficult for landlords to get financing, multiple real estate sources told The City Reporter. 

By Greg David of The City Reporter. Excerpts:

"The nation’s two most important buyers of mortgage loans have imposed new rules for New York City’s rent-regulated buildings in the wake of Mayor Zohran Mamdani’s rent freeze that are making it impossible or extremely difficult for landlords to get financing.

Government-backed Fannie Mae, which has become the lender of last resort for private rent-regulated buildings, has toughened its underwriting standards since the rent freeze passed in June. Freddie Mac, the other government-backed lender, has instituted a “pause” on new loans while it assesses the impact of the freeze.

The decision will have severe consequences for two groups of buildings. Older, almost entirely rent-regulated buildings that are already under severe financial distress will struggle to refinance their mortgages and face foreclosure. They could be taken over by their lenders or sold for a fraction of their value. Buildings composed of all affordable units built with city help whose finances are also deteriorating will need ever larger city subsidies to find financing.

“I don’t think the new underwriting standard should be a surprise or controversial to anybody, because underwriting anything other than operating in a rent-freeze environment wouldn’t really be factually accurate,” said Rafael Cestero, CEO of the Community Preservation Corp.

Cestero says that because the rent freeze will exacerbate financial pressures on nonprofit affordable housing projects, his organization will make 50% fewer loans in New York City to all-affordable projects than it did two years ago.

Fannie Mae’s new requirements assume that rents will not increase on rent-stabilized units for four to eight years, covering Mamdani’s current term and a potential second term.

Fannie Mae and lenders like Community Preservation Corp. are also assuming that expenses increase each year by at least 5%, which means the operating margin for buildings will decline by at least that amount each year.

Numerous landlords, advocates and nonprofit housing executives, some with direct knowledge of the current terms, confirmed the changes in the loan standards."

"Lenders have also increased the expected shortfall in collections, anticipating that more tenants do not pay their rent. Cestero’s group, for example, has doubled the expected loss to 10%.

The combination of increasing operating expenses and shortfalls on rent collection means that the amount that will be loaned for any property will be less. Even so, lenders are also lending a smaller percentage of the value of the property, requiring more equity to be put up." 

"Loans for rent-regulated buildings, which are usually for five or 10 years, were plentiful before the 2019 rent law changes made it uneconomic for landlords to renovate rent-regulated units as they became vacant and collect a much higher rent. Many buildings were purchased before 2019 because of the possibility of raising rents and because interest rates were at historic lows.

But as the impact of the 2019 law took hold, major lender Signature Bank collapsed, in part because its loan portfolio was concentrated in rent-regulated mortgages that were expected to become distressed.

Another major lender, New York Community Bank, was acquired and exited the business. Other small lenders have also been acquired and no longer are making these kinds of loans.

Fannie and Freddie thus became the lender of last resort for brokers who continued to arrange loans.

“I don’t know of any one [who] is making loans on private rent-regulated buildings,” Cestero said."

The unintended consequences of academic leniency

From Tyler Cowen. 

Education is widely recognized as the primary driver of human capital accumulation. However, policies designed to promote educational attainment often overlook students’ endogenous responses. This paper provides empirical evidence of the causal impact of relaxed academic standards on student effort and achievement. We find that academic leniency results in mechanical GPA increases, but significant reductions in effort among lower ability students based on lower attendance and lower numerical grades. These heterogeneous effects compound and exacerbate gaps in engagement and achievement throughout high school, ultimately worsening deficits in human capital accumulation as measured by ACT scores.

That is from a newly published paper, in AEJ: Economic Policy, by A. Brooks Bowden, Viviana Rodriguez, and Zach Weingarten.

Some Common Fallacies About American Health Care

See 50 Common Fallacies About American Health Care by Richard E. Ralston. Excerpt:

"Following are some of the most common arguments with suggested responses that apply the principles discussed above.

1. “The quality of health care in America is ranked lower than 36 other countries.”

When you hear this, always ask, “Ranked by whom and how?” In 2000 United Nations bureaucrats at the World Health Organization sent a survey to “officials and experts” selected by the U.N. Why should we be surprised to learn that government “officials and experts” in France thought that their government-run health care system was the best in the world? The scoring of these surveys also made them meaningless. For example, 25 percent of the scoring was weighted based on the assessment of how “fair” the financing was in each country. For “fair,” read socialist—the list was largely a ranking of how socialist each country’s system is.

2. “Medicare and Medicaid are far more efficient and less wasteful than private insurance, spending only three percent on administrative overhead.”

When you hear this, always ask, “Why is the administrative cost always given as a percentage?” One reason is that, due to the age of covered patients, the average Medicare and Medicaid reimbursements are higher than those of private insurance—and administrative costs are therefore a lower percentage of the larger amount paid. Another reason is that the huge cost of contending with 130,000 pages of Medicare regulations is pushed onto the providers. The cost of the more than 100,000 employees of the Internal Revenue Service who collect Medicare taxes are also omitted from Medicare’s “administrative overhead.” But the biggest reason is that the government programs make no effort to minimize expense or fraud. Fraud counts for about $50 billion in Medicaid expenses every year—as high as $18 billion in New York alone. Total spending has been going through the roof for more than 40 years, but the government’s administrative cost of burning money is quite low. That does not prove that the government is efficient or prudent. Private insurance companies, on the other hand, need to keep fraud and expenses down or go out of business.

3. “Government or universities develop most new medications and then just hand them over to pharmaceutical companies to manufacture and make all the profits.”

When you hear this, mention that the National Institutes of Health (a government agency) reports that the pharmaceutical companies—who spend about $60 billion each year on research—develop more than 90 percent of new drugs.

4. “Advertising of drugs is bad because it increases the price of medications.”

When you hear this, ask, “Why does any business advertise any product? Because they just want to add to their costs and increase the price?” Manufacturers of computers and other technological products who spend a lot on research need to find their market. A pharmaceutical company, spending an average of $800 million to develop a major new drug, has a few years of patent protection to bring the drug to the attention of physicians and patients who need it. This allows them to spread research costs over a much larger customer base and reduce unit cost—which lowers the price.

5. “Private corporations are wasteful and bloated bureaucracies. Government-provided health care is lean and efficient.”

When you hear this, you might want to laugh. Then ask, “So you think that the 20th Century proved that communism and fascism work?” Is the Department of Motor Vehicles or the purchasing practices of the Defense Department our best models of administrative efficiency?

6. “People live longer in some countries because of their socialist health care systems.”

When you hear this, ask if the people in those countries didn’t live longer before they nationalized their health care systems. Ask how many people in those countries died on their highways, were killed in combat, shot by criminals, addicted to drugs, were severely overweight or in poor health when they arrived as illegal immigrants."