More on Government Ownership of Land, Wildfires, and the Advantages of Private Stewardship

By Lawrence J. McQuillan. He is a Senior Fellow at the Independent Institute.

"I recently published two commentaries on why private stewardship of land decreases wildfire risks compared to federal and state governments owning and managing the land: “Private Ownership of Forests and Land Reduces Wildfires” (published in 78 newspapers across the country, August 20, 2025), and “Rescue ‘Stranded’ Federal Lands by Selling It” (published in The American Spectator, September 8, 2025).

Since publishing those commentaries, I ran across two more scholarly journal articles that support my thesis that private stewardship of land tends to reduce wildfire risks compared to government ownership.

In 2024, Liang Diao and Huiqian Song published a paper in the Journal of Environmental Economics and Management titled “Does Improved Tenure Security Reduce Fires? Evidence from the Greece Land Registry.” The researchers found that strengthening private property rights for agricultural land in fire-prone Greece from 2014 to 2019 resulted in “large declines” in wildfires (17 percent), burned areas (39 percent), and associated air pollution (18 percent). Those reductions are significant.

The researchers found that “the observed reduction in fires is likely attributable to private landowners rather than public services, as it predominantly occurs in areas remote from local fire stations. This suggests that landowners are intensifying their efforts in both fire prevention and suppression. . . . [F]ires in Greece can be decreased through incentivizing land owners to reduce fuel loads and fire-prone landscapes.”

Diao and Song concluded, “Our findings indicate that strengthening property rights can lead to more sustainable farming practices and promote long-term land investment, thereby reducing fire hazards.” Part of that investment involved “stocking more fire-suppression equipment.” The study demonstrated that the benefits of more secure private property rights over land, particularly fewer wildfires, are not confined to the United States.

In 2018, Carlin Frances Starrs, Van Butsic, Connor Stephens, and William Stewart, all professors at the University of California, Berkeley, published a paper in Environmental Research Letters titled “The Impact of Land Ownership, Firefighting, and Reserve Status on Fire Probability in California.” The researchers examined average fire probability in California from 1950 to 2015 (involving more than 13,000 unique fires) and found that “federal ownership and [federal] firefighting was associated with increased fire probability,” and “the difference in fire probability on federal versus non-federal lands is increasing over time.” Those findings are worrisome.

Perhaps most importantly, federal ownership of land was found to have “much greater influence” on fire probability than climate factors such as temperature, precipitation, and topsoil moisture, a strong argument in favor of less federal control of land, especially in fire-prone California. Federal land ownership and federal firefighting decisions play critical roles in increasing wildfire probability in California.

Those two studies, and others, support the conclusion that private stewards are better incentivized than government bureaucrats to undertake the difficult work of fire-risk mitigation through active land management.

Private stewardship of land properly aligns incentives with effective, innovative, and cost-efficient fire prevention that saves lives, preserves property and restores forest health. Wildfires can’t be eliminated, but their incidence and severity can be minimized.

Below is a list of scholarly research supporting the thesis that private stewardship of land reduces wildfire risks and/or government ownership of land increases wildfire risks. I will update the list as I discover more papers:

Ana M. G. Barros, Michelle A. Day, Thomas A. Spies, and Alan A. Ager, “Effects of Ownership Patterns on Cross-Boundary Wildfires,” Scientific Reports v11, September 2021.

Carlin Frances Starrs, Van Butsic, Connor Stephens, and William Stewart, “The Impact of Land Ownership, Firefighting, and Reserve Status on Fire Probability in California,” Environmental Research Letters v13, February 2018.

Liang Diao and Huiqian Song, “Does Improved Tenure Security Reduce Fires? Evidence from the Greece Land Registry,” Journal of Environmental Economics and Management v127, September 2024.

Vibhu Vikramaditya, Free Market Environmentalism: A Market and Private Property-Based Approach to Environmental Conservation, MIT World Peace University (WPU) School of Economics, Pune, India, dissertation, 2022."

Is regulation killing American innovation?

Christine Hall.

"The federal government micromanages American businesses and citizens through excessive and costly regulations. These rules stifle innovation, limit competitiveness, and hinder job creation, while also making it harder for ordinary people to build financial security and improve their quality of life. CEI President Kent Lassman and Neil Bradley of the US Chamber of Commerce discussed problems and solutions in a September 22 online event titled Free Enterprise Exchange: Is regulation killing American innovation?

Key takeaways include…

Regulation goes too far. Instead of setting standards for the private sector to meet (such as health, safety, and the environment), too many regulations are aimed at coercive control, dictating how resources are used.

Regulation costs too much. Regulations cost over $2 trillion annually–about a third the size of federal taxation, spending, and borrowing combined.

Regulation is a hidden tax on homeowners–as are tariffs. Red tape, mandates, and now tariffs needlessly add thousands of dollars to the cost of buying or building a home, buying or replacing appliances, and re-roofing a house, for example. These burdens accumulate during everyday life.

Regulations are hardest on small businesses. Compliance costs fall disproportionately on small firms and new entrants. Big firms can spread costs across many operations, but regulations can shut out startups before they begin.

Regulations undermine our global competitiveness. US businesses now face regulatory environments so burdensome that some companies report it is faster to get permits in Europe than in the US.

Government ownership of businesses is a problem. Business leaders will start making decisions not in the best interests of the customer or their business but in the best interests of the government ahead of the next election. Control of private enterprises by the state is the death knell of dynamism.

Congress has regressed. It’s become less effective at its core mission of developing and adapting our legal code to the way Americans live, which is another way of saying ‘they can’t do anything up there.’

Congress must hear from the business community. Lawmakers need to hear from business leaders, such as members of the US Chamber of Commerce, in favor of bills to deregulate, increase regulatory transparency, and eliminate burdensome, unneeded commissions, bureaus, and boards.

1970s era deregulation was an example of success we can emulate. Deregulation of airlines, trucking, and rail in the 1970s (led by bipartisan figures like Ted Kennedy, Alfred Kahn, and Steve Breyer) showed that lifting heavy regulation produced cheaper prices, better service, and more safety.

View the full discussion with Neil Bradley and Kent Lassman on YouTube."

Poverty IN America

By Art Carden.

Book Review of Poverty, By America, by Matthew Desmond

"I had not planned to read this book. I found the author’s essay on the history of American capitalism for the New York Times Magazine‘s 1619 Project badly wanting, so I passed over Poverty, By America, until one of my students (a sociology major) asked me about it because he was reading it for his Sociology of Poverty course. Matthew Desmond is a passionate writer, but verve and fervor are poor substitutes for sound arguments backed by carefully interpreted data. Desmond’s conviction and moral certitude are clear on every page—a reviewer for The New Yorker writes, “Its moral force is a gut punch”—but his argument is ultimately unconvincing.

He comes out swinging, beginning his prologue for Poverty, By America with “Why is there so much poverty in America? I wrote this book because I needed an answer to that question.” The word “By” in his title suggests that poverty isn’t just something in America. It’s in America because of America. But as John F. Early explained in his review for the Cato Institute’s Regulation,2 Desmond is never clear on what he means by “so much,” particularly given that the Organization for Economic Cooperation and Development’s reported poverty line changes by country. Its “poverty rate” is the fraction of the country’s population at or below half that country’s median income, which means comparing countries’ poverty rates using the OECD’s headline measure compares apples to oranges. If we measure every country by the same standard, either the U.S. Federal Poverty Line or half of the U.S. median income, the United States goes from having one of the highest poverty rates in the OECD to having one of the lowest. I doubt, however, that a book titled Poverty, By Scandinavia would have been one of the New York Times’ Notable Books of the Year.

Nonetheless, I found myself nodding my head in agreement regularly. Desmond rightly draws attention to where we have earned blame. We pay far too little attention to policies and programs that redistribute income and wealth upward. We don’t think of economically and morally suspect tax breaks and credits (like the mortgage interest deduction) as government benefits, even though there might not be an economic difference between a tax break and a subsidy, despite the linguistic difference. And so, he points to a way Americans “spend” a lot on welfare for the well-off without it looking like we’re doing so. As scholars have pointed out, Americans run many of our social and redistributive policies through special provisions in the tax code. If, for example, you pay $50,000 in taxes and then get a check from the government for $10,000, you’re out $40,000. If you calculate a $50,000 tax bill and then get a $10,000 tax credit, you’re still out $40,000. The money is the same, but the language is different.

I think we might be able to agree on welfare reform because the system we have right now is pathological in terms of the incentives it creates, and what’s more, it is more upwardly redistributive than we are inclined to think. Replacing the dog’s breakfast of sometimes self-contradictory welfare programs with an expanded Earned Income Tax Credit would win the hearty applause of most economists. Even if we couldn’t do that, there are plenty of places where we can remove clogs and chokepoints in a dysfunctional system. We part ways on the economic incidence of the Earned Income Tax Credit, which Desmond thinks is subsidizing employers and allowing them to pay lower wages. He’s right, to a point, but if this source is correct and the pass-through is at most 36% of each EITC dollar,3 then workers are still getting the lion’s share of the benefit. And besides, it’s a staple of introductory economics classes that the economic incidence of a tax or subsidy depends on the elasticities of the supply and demand curves, so it’s not clear we can subsidize work without at least some of it going into employers’ pockets.

That brings us to the minimum wage, which Desmond thinks should be raised but is at best a very poorly targeted antipoverty program. In a 2015 paper, Thomas MaCurdy shows how higher minimum wages are, if anything, regressive insofar as they transfer income from low-income consumers to low-income workers.4 Desmond repeats the old trope that economists believed the minimum wage caused unemployment because the theory said so before David Card and Alan Krueger blew up the profession by looking at the data. However, empirical studies of minimum wage predate Card and Krueger by decades. Desmond seems to believe the minimum wage is a free lunch, at least for workers. While he cites work by David Neumark and William Wascher, he doesn’t give the criticisms of the minimum wage their due. I don’t expect him to get into the weeds of debates about identification strategies and the like. However, I’m still confident enough that labor demand curves slope downward. Labor supply curves slope upward, meaning higher minimum wages reduce employment and induce people to waste resources searching harder for jobs that are harder to come by. I don’t lose sleep over teaching this. Economists Jonathan Meer, Jeffrey Clemens, and many others have shown that, for example, higher minimum wages mean fewer non-wage benefits and more effort expended searching for work.

Desmond rightly takes his fellow progressives to task for displaying Black Lives Matter flags and those “In this house, we believe…” signs while also fighting tooth and nail to maintain exclusionary zoning in the name of protecting the “character of the neighborhood.” Having written an earlier book called Evicted about the trials and travails of getting kicked out of an apartment for not paying your bills, it’s no surprise that Desmond finds housing policy so important. He should be able, I hope, to make common cause with libertarians like Bryan Caplan, who are working to identify and reduce the regulatory burden on new housing construction. Unfortunately, he endorses “inclusionary zoning,” which requires new projects to include a set-aside for “affordable housing”—a nebulous term, to say the least–that acts as a tax on any new construction and that requires builders to gravitate toward units that will generate enough revenue to pay for the below-market “affordable” units.

Desmond is also correct about the folly of scapegoating immigrants for all that ails us. Growing empirical research shows that foreigners (whether over here or over there) aren’t taking our jobs. Foreigners over here aren’t bankrupting the welfare state or turning our cities into criminal wastelands. Indeed, the data suggest that even illegal immigrants have lower crime rates than natives. Blaming immigrants is a venerable American (indeed, human) tradition with ugly manifestations during the Progressive Era, where eugenicists and racists thought it necessary to control immigration lest the immigrants pollute the gene pool.

Unfortunately, however, Desmond blames the usual list of suspects: corporations, speculators. Republicans, Ronald Reagan. The familiar scapegoats are well-represented, as is the usual hero: government, but this time, a government that does the Will of the People.

First, Desmond asks why the richest country in the world has “so much poverty.” It’s a fair question, but it’s unclear exactly what would no longer be “so much poverty.” He doesn’t contextualize some of his numbers and slips back and forth between incommensurate definitions when he wants to make international comparisons. Domestically, he uses the federal poverty line and is aghast that there were some 38 million people in the United States who lived below the federal poverty line as of 2021. It’s a “country” larger than Venezuela and Australia (and, I would add, richer than Venezuela). Any decent person, I suspect, would say that’s 38 million too many, but it’s about 11% of the population–and over the long run, it’s headed in the right direction.

Crucially, the story you can tell depends on which endpoints you pick. In Desmond’s book, Ronald Reagan gets a lot of blame, but what is Reagan’s record on poverty? When Reagan took office in 1981, 14% of the population lived in poverty. It had fallen to 12.8% by the time he left in 1989. Should Reagan get credit for this? It increased to 15.1% in 1993 (when Bill Clinton took office) before falling to 11.7% in 2001, when Clinton left office. It was 14.3% when George W. Bush left office in 2009 and then went back down to 12.3% after Obama left in 2017. By the end of Donald Trump’s first term, it was 11.6%. The fraction of the population in poverty has remained stubbornly stuck in the 11-15% range since the late 1960s. Desmond is eager to credit the Great Society with falling poverty; these lower poverty rates reflect the continuation of trends that started earlier. As Early explains, “Had poverty merely maintained its pre-1964 trend, it would have been 9.2 percent in 1974, not 11.2 percent.”

Desmond reports many facts, but as Steven Landsburg has explained, nothing is less interesting than a fact unilluminated by a theory. And Desmond’s theory doesn’t go beyond “employers/corporations/landlords/Republicans are mean.” Maybe so. Mr. Potter in It’s A Wonderful Life and pre-conversion Ebenezer Scrooge in A Christmas Carol had rotten souls. But at the risk of sounding condescending, incentives matter much more than intentions, and too often, Desmond makes claims that, if true, imply that the profit-obsessed sociopaths he excoriates are systematically overlooking opportunities to make gobs of money by hiring armies of “underpaid” workers. It’s Schrodinger’s Corporation: simultaneously blinded by the profit motive and blind to the enormous profits they could enjoy by offering better pay and benefits to other firms’ “underpaid” workers and pocketing the still-enormous difference between this slightly higher pay and what the workers produce.

We can say something similar about Desmond’s poverty victims suffering “exploitation,” a word he uses loosely. Desmond claims that housing is more expensive in low-income neighborhoods than in higher-income neighborhoods, which means landlords are exploiting the poor. But why don’t the poor who are overpaying for housing in the bad part of town lower their housing costs by moving to the nice part? Desmond’s explanations for why they don’t, which include poor credit histories and episodes of non-payment that mean they get turned down for apartments in the nice parts of town, suggest that what he has identified is a risk premium and not “exploitation.” As he explains, landlords take home profits for many years because bad things don’t happen every year, but all it takes is one large enough riot or natural disaster to turn years of profits into a single year of catastrophic losses.

Desmond illustrates his argument with tragic and frustrating anecdotes that raise obvious but unanswered questions his “exploitation” argument can’t answer satisfactorily. He tells the story of Julio (not his real name, obviously), who worked two full-time jobs to support his family and collapsed from exhaustion in a grocery store. Later, he doesn’t have to work as hard due to the higher minimum wage in Julio’s California town. Good for Julio. What we don’t see, however, is the people who can’t supply the hours they want to supply (or get a job at all) because they aren’t productive enough to be employable at the minimum wage.

Furthermore, Desmond explains that Julio wouldn’t have the problem of low wages and a porous social safety net if he lived in Denmark. So why doesn’t Julio move his family to Denmark, where he would have higher wages and greater security? The answer is that Denmark wouldn’t have him. Denmark is a lovely place where I’ve spent more time than I’ve spent in any other country save the United States, but it’s also a difficult place to move to legally. The Scandinavian welfare states “work” in part by keeping non-Scandinavians out and maintaining a homogeneous culture of “we’re all Danes (or Swedes, or Norwegians), and we don’t cheat our fellow Danes (or Swedes, or Norwegians).” The Danes are lovely people, Denmark is lovely, and I wear my FC København jersey proudly. However, if the entire world were a large American city, the Scandinavian countries would be the exclusive, highly regulated suburbs with rules written to keep the riffraff out.

Some of Desmond’s anecdotes seem calculated for minimum sympathy. There’s the story of a father snorting speedballs at work that doesn’t lead to the obvious conclusion, “don’t snort speedballs at work.” He tells the tragic story of Crystal, who bounced around in the foster care system. It’s a tragic origin story, of course, but it seems like it was at least possible for her to have avoided homelessness and prostitution. She quit high school at 16. She “met a woman at a homeless shelter and secured another apartment with her new friend” (page 12). Great! But then we read the next sentence: “Then Crystal put that new friend’s friend through a window, and the landlord told Crystal to leave” (page 13).

So, Crystal lost her apartment for throwing her roommate’s friend through a window. Unless it was a first-floor apartment, this seems like a pretty credible case for an attempted murder charge, not just eviction. Are we to be surprised that this isn’t the sort of tenant a landlord wants? But fortunately, Crystal had a network to fall back on as she “spent nights in shelters, with friends, and with members of her church” (page 13). Great! But a bit later, we learn that she “burned through the remaining ties she had from church and her foster families” (page 13). How, exactly? Poverty, By America is a short book for a general audience, but these seem like obvious questions a general audience would want answered. Desmond at least concedes (perhaps inadvertently) that Crystal isn’t wholly bereft of agency, noting that “Crystal had never been an early riser, but she learned that mornings were the best time to turn tricks, catching men on their way to work” (page 13). That raises another question about the economics and sociology of poverty: how many of her clients would suffer less if they weren’t in the habit of paying for sex en route to work?

Desmond criticizes the “success sequence,” touted by conservative think tanks and which says that your probability of living in poverty is very low if you simply finish high school, work full time (at any job, not just a “good job,” as Desmond suggests), and don’t have children out of wedlock. Desmond says, “we might as well be asking that person to just get a different life” (page 40), but presumably, we study poverty and make policy to alleviate it because poor people want different lives. It’s not clear what to do about people like Crystal, who have, it seems, exacerbated poor choices by burning bridges, but it seems like a can’t-miss message for young people who still have time to make “success sequence” choices. And one has to wonder: would Crystal herself advise teenage girls to drop out of school at 16, get evicted for throwing someone through a window, and burn through the remaining ties they might have from church, family, and other relationships, no matter how tenuous? Would she look back and say, “This was inevitable? There is literally nothing I could have done to avoid this?” I doubt it.

But here, Desmond’s message to the rock-ribbed and presumably hard-hearted conservative should resonate, at least slightly. If we’re all honest with ourselves, we can all look back at times when something random could have led to very different life outcomes. Think back to when you either made or barely avoided a poor choice. How different would things be had that gone the other way? A sober assessment of our lives should show us that things could be much better, but could also be much worse.

But what do we do with that? I walk our dog in Birmingham’s Avondale Park every morning and most evenings. We live in a checkered-but-gentrifying neighborhood where many buildings are empty thanks to city rules and permitting processes making it hard to do anything with them (which helps explain Desmond’s invocation of Birmingham’s apartment vacancies on page 65). Several homeless people live in the park and on the streets surrounding it, and when I want to get annoyed, I just tell myself, “There but by the grace of God go I.” But what do I do about it? I don’t have a good answer. Service and outreach organizations (government and private sector) that provide health care, job training, food, and other services are within easy reach of Avondale Park. Why aren’t they using these services? I don’t know.

At the beginning of the book, Desmond writes that “some lives are made small so that others may grow” (page 8). He’s correct, up to a point, and for most of history, the way to get rich was to steal, kill, and destroy. High real estate values are a product of exclusionary zoning and rules that make it difficult and costly to build new housing, but that doesn’t mean Jeff Bezos earns a lot because Amazon workers don’t. As Deirdre McCloskey and I argued in our 2020 book Leave Me Alone and I’ll Make You Rich, the best thing we can do for people is to get out of their way. Stop expecting them to ask permission to try new things, innovate, buy low, and sell high.

Desmond wants to outlaw low wages, but while this might mean some people like Julio feel better off, he is silent on the people who will not be able to work if the jobs they can actually do are outlawed. He wants people to boycott companies that offer low wages and lousy working conditions, but would he suggest boycotting U.S. women’s soccer because the U.S. women’s team doesn’t earn what the U.S. men’s team earns? I doubt it. Should we have a more generous welfare state? Once you account for private and government welfare spending, U.S. and Nordic welfare institutions are comparable, and we didn’t get European-style welfare states not because of some sinister conspiracy but because mutual aid societies and industrial sickness funds worked well (Davie Beito’s book From Mutal Aid to the Welfare State and John Murray’s Origins of American Health Insurance make these points clear).

He also wants to strengthen labor cartels, known as unions, but unions increase their incomes by shutting out competitors. Unions are great for insiders and not so great for outsiders. It’s not clear that the distributional consequences are desirable. Desmond is right that we would make things much better by eliminating exclusionary zoning and making it possible to build housing more densely, but he doesn’t devote a lot of attention to licensing laws that severely restrict the flexibility of the labor market. I would have been encouraged to see Desmond draw on economics’ work on housing markets, occupational licensing, and immigration to propose radical economic liberalization, but he doesn’t.

Poverty, By America is an interesting but ultimately unnecessary and fundamentally flawed book. You can it skip safely if you want to understand poverty and prosperity. To borrow a cliche, what is original in the book is incorrect, and what is correct is not original. Poverty bothers Matthew Desmond to his core; this is commendable. However, anyone who picked up this book and used it as a manual for poverty abolition would be sorely disappointed."

Trump's Tariffs Have Already Hurt the Economy—and the Pain Is Only Beginning

The OECD just published its projections for American growth, and they're grim

Jack Nicastro of Reason. Excerpt:

"Relatively stable consumer price inflation and lower producer price inflation—excluding and including imports—under Trump are surprising. After all, the president has more than tripled the average effective tariff rate to 11.6 percent on approximately $2.2 trillion worth of imports, according to the Tax Foundation. Therefore, all things being equal, CPI and PPI should be elevated. So, why aren't they? The answer lies in the delayed implementation of Trump's tariffs: Although "Liberation Day" was April 2, the "reciprocal tariffs" announced then were postponed for months, finally taking effect on August 7, meaning "the full effects of tariff increases have yet to be felt," as the OECD explains.

While most Americans have not yet felt the tariffs' full effects, businesses have started to. An August survey administered by the Dallas Federal Reserve found that 60 percent and 70 percent of Texas retailers and manufacturers, respectively, said that Trump's tariffs were negatively affecting their businesses. Earlier this month, The New York Times reported that Section 232 tariffs on imported steel and aluminum have cost John Deere "$300 million so far, with nearly another $300 million expected by the end of the year." The company has already laid off "238 employees across factories in Illinois and Iowa." While anecdotal, John Deere's struggles are reflected in the 48 percent lower growth in total nonfarm employment from January 2025 to August 2025 (598,000 jobs added) compared to those months last year (1.1 million jobs added)."

From 1990 to 2010, rising numbers of H-1B holders caused 30–50 percent of all productivity growth in the US economy

See Michael Clemens on H1-B visas from Tyler Cowen.

"From 1990 to 2010, rising numbers of H-1B holders caused 30–50 percent of all productivity growth in the US economy. This means that the jobs and wages of most Americans depend in some measure on these workers.

The specialized workers who enter on this visa fuel high-tech, high-growth sectors of the 21st century economy with skills like computer programming, engineering, medicine, basic science, and financial analysis. Growth in those sectors sparks demand for construction, food services, child care, and a constellation of other goods and services. That creates employment opportunities for native workers in all sectors and at all levels of education.

This is not from a textbook narrative or a computer model. It is what happened in the real world following past, large changes in H-1B visa restrictions. For example, Congress tripled the annual limit on H-1B visas after 1998, then slashed it by 56 percent after 2004. That produced large, sudden shocks to the number of these workers in some US cities relative to others. Economists traced what happened to various economic indicators in the most-affected cities versus the least-affected but otherwise similar cities. The best research exhaustively ruled out other, confounding forces.

That’s how we know that workers on H-1B visas cause dynamism and opportunity for natives. They cause more patenting of new inventions, ideas that create new products and even new industries. They cause entrepreneurs to found more (and more successful) high-growth startup firms. The resulting productivity growth causes more higher-paying jobs for native workers, both with and without a college education, across all sectors. American firms able to hire more H-1B workers grow more, generating far more jobs inside and outside the firm than the foreign workers take.

An important, rigorous new study found the firms that win a government lottery allowing them to hire H-1B workers produce 27 percent more than otherwise-identical firms that don’t win, employing more immigrants but no fewer US natives—thus expanding the economy outside their own walls. So, when an influx of H-1B workers raised a US city’s share of foreign tech workers by 1 percentage point during 1990–2010, that caused7 percent to 8 percent higher wages for college-educated workers and 3 percent to 4 percent higher wages for workers without any college education.

Here is the full piece."

U.S. Health Care: The Free-market Myth

By Michael Cannon. Excerpts:

"In truth, among wealthy nations, the United States may have one of the least-free health-care markets." 

"in the United States, government controls 84% of health spending. In fact, government controls a larger share of health spending in the United States than in 27 out of 38 OECD-member nations"

"Direct government price-setting, price floors, and price ceilings determine prices for more than half of U.S. health spending, including virtually all health-insurance premiums. Moreover, government pushes all medical prices and health-insurance premiums upward through tax laws and regulations mandating that people purchase excessive levels of health insurance."

"More often, however, federal and state governments push health-care prices higher than they would be in a free market. U.S. health-care prices are excessive because government controls them."

"Government-set prices control more than half of U.S. health spending. Medicare, Medicaid, and other government programs account for 48% of such spending"

" Each year, Medicare sets prices for 10,000 distinct physician services across 112 different "payment localities," whose borders federal regulators also draw."

"More than 50% of eligible Medicare enrollees, 75% of Medicaid beneficiaries, and all who enroll in Obamacare have government-subsidized "private" coverage."

"Medicare routinely sets different prices for identical items depending solely on who owns the facility."

"When a hospital gives a lung cancer patient a dose of Alimta, its fee is about $4,300 larger than a doctor with an independent practice would receive."

"When a hospital purchases a physician practice or other facility, Medicare increases the prices it pays for the same people to provide the same services to the same patients in the same location."

"As these examples suggest, Medicare routinely sets prices well above cost. The U.S. Department of Health and Human Services admitted as much in 2018. "The Medicare program," it reported, "pays nearly twice as much as it would pay for the same or similar drugs in other countries.""

"The U.S. Federal Trade Commission and the Department of Justice have complained about Medicare's "site-of-service" pricing errors for at least two decades. In 2018, Medicare's price-setting advisory panel — the Medicare Payment Advisory Commission — confessed it has a "long-standing concern" that Medicare sets prices for procedure-based specialists and radiologists too high relative to primary-care physicians."

"One 2006 study estimated that Medicaid's drug-pricing rules increased private-sector prices by 15%."

"One study in 2017 estimated that "a $1.00 increase in Medicare's [physician prices] increases corresponding private prices by $1.16."" 

Free Buses Are a Recipe for Disaster

By Charles Lane of AEI. Excerpts:

"In April, Kansas City, Missouri, announced that it was reinstating fares—five years after becoming the first major city to eliminate them. Kansas City’s program had run out of the federal Covid-19 relief dollars it had relied on to cover foregone annual fare revenue, which had amounted to $9 million in 2019, the last year before zero fares. Other sources of revenue are not sufficient and, facing competing budgetary demands, local authorities plan to impose a $2.00 per ride fare."

[there] "was an increase of “loop riders”—passengers who, when offered a free ride, would occupy bus seats for hours, sometimes all day, as they refused to get off at the end of a given route. Many of these were homeless people, and they often clashed with ordinary commuters. Assaults on drivers fell after zero-fare began, but this was partly offset by new violence among passengers, and vandalism.

The city had to increase security, including bringing in new officers, at an eventual cost of $6 million per year. When the Kansas City area transit system surveyed its bus drivers in April 2024, 92 percent who had worked before zero-fares were instituted said that safety had deteriorated. Bus operator morale suffered, causing absenteeism and turnover.

Passengers complained—loudly."

"Kansas City’s system had an operating budget of about $114 million when it initiated zero fares, 8 percent of which came from fares. New York City’s buses, by contrast, derive about twice that percentage of their operating budget from fares"

"What, exactly, is progressive, or socially just, about shifting the entire burden of funding bus transit to taxpayers, including many who don’t use it, when many of those who do use the bus are willing and able to chip in? Like modest co-pays for doctor visits, bus fares (which are already subsidized) ensure that consumers of a public service have “skin in the game”—an incentive to use as much as needed, but no more."

"As it happens, the MTA has already run a one-year free-fare pilot program, under a bill Mamdani co-sponsored in the state legislature. Completed in August 2024, the plan created one free-fare bus route in each of the five boroughs. The results were decidedly underwhelming. Ridership grew significantly—no surprise there—but only 12 percent of the growth came from new riders. The rest were existing riders taking more trips—and picking them up caused bus speeds to fall by 4.3 percent. It cost the MTA $16.5 million in foregone fare revenue."

"the new riders enjoying the free fares were a bit more likely to be earning above $100,000 per year than the pre-pilot clientele: 11 percent vs. 9 percent."

"The Soviet Union used to charge a few kopecks to ride the bus or the subway in Moscow. Mamdani’s idea of socialism doesn’t have room for even that much individual responsibility—or realism."  

California’s Great Climate Backfire

Sacramento Democrats allow dirtier air to avoid gasoline price spikes

WSJ editorial. Excerpts:

"California’s war on fossil fuels is backfiring in spectacular fashion, as gasoline prices, imports of foreign oil and CO2 emissions all increase. The response in Sacramento? Allow more oil drilling and dirtier blends of gasoline in the state."

"California’s gas prices average $4.65 a gallon, about $1.45 more than the national average and nearly two bucks more than in Texas."

"the state’s burdensome climate regulations have reduced drilling. The result: California produced only 23% of the crude its refineries used last year."

"More imports have increased CO2 emissions and smog-causing pollutants from tankers docking at the state’s ports."

"the infrastructure to handle more imports." 

Newsom Falls for the ‘Red Moocher State’ Myth

A simplistic look at federal finances gives the false impression that blue states subsidize everyone else

By Steven Malanga. He is senior editor at City Journal and senior fellow at the Manhattan Institute. Excerpts:

"Some of the biggest categories of “spending” aren’t discretionary programs that help finance state budgets, but cash sent by Washington to people and businesses that earned it. That California and other states come up short in receiving this money can be a function of their own failings rather than any funding bias."

"The biggest category these studies measure is direct payments from the federal government to individuals, principally via Social Security and government employee pensions. A big chunk is money that people have worked for and that the feds send them where they retire."

"Only 16% of California’s population is over 65."

"California is one of the most expensive places to retire."

"Federal contracting dollars constitute another huge spending category. This is money that businesses and other private entities earn for work performed for the government—especially for national defense—not money Washington disperses based on a state’s population or tax “contributions.”"

"California does quite well is in receipt of federal grants, some of which clearly represent spending that bolsters state budgets."

"In the 2024 balance-of-payments study, California received 18% more per capita than the average among states."

"California and New York, home to high-flying industries like technology and finance, send more on average because residents earn more"

"The difference is exacerbated by the progressive nature of federal taxes"

"Moynihan . . . realized there was little to be done to change the payment imbalances because of the complexity of federal funding." 

"he proposed in his 1999 report a “grand compromise” between the parties to pare spending and taxes by Washington and leave more money in the states."  

The Pope and Trillion-Dollar Elon Musk

Is the CEO worth the compensation package Tesla is dangling?

WSJ editorial. Excerpts:

"Mr. Musk says he wants to shift to manufacturing robotics and driverless robotaxis. The board’s aim with the pay package is to align Mr. Musk’s incentives with those of shareholders, who include Tesla’s employees. Mr. Musk has boasted that Tesla pays workers in stock grants to motivate and retain them.

That’s the goal of Mr. Musk’s pay package too. His stock compensation won’t fully vest unless he increases the market value of Tesla shares to $8.5 trillion (currently $1.3 trillion) and achieves $400 billion in annual earnings. The company earned only $16.6 billion last year. The company will also have to put one million robotaxis in operation, as well as deliver 20 million electric vehicles and one million robots."

 

Reef Madness: A Baseless Coral Panic

The Great Barrier shrank over the past year but was bigger than ever in 2024

By Bjorn Lomborg. Excerpts:

"Australian scientists have meticulously tracked the reef’s coral cover since 1986. For many years, they published an annual average coral cover figure. The data show that the reef was mostly stable until 2000, then began declining, and by 2012 it had shrunk to less than half its original cover.

But then the reef started growing. It rebounded spectacularly. The scientists stopped publishing their reef-wide average, perhaps because it didn’t further the climate-change narrative. But they continued publishing regional and sectorwide averages, making it possible for anyone to effectively recreate the reef-wide average.

By 2021 coral cover was higher than it had been since measurements began. It increased further, staying at unprecedentedly high levels in 2022 and 2023. The coral grew more still in 2024."

"CNN: “Australia’s Great Barrier Reef devastated by worst coral bleaching on record, new report finds.”"

"Never mind that the reductions came off the record high of 2024, or that large year-to-year variations are typical."

"there are very little data before systematic tracking began in 1986."  

Why Do So Many Young Americans Justify Political Violence?

Ninety-three percent of baby boomers think it’s never acceptable. Only 56% of Gen Z agrees.

By Kevin Wallsten. He is a professor of political science at California State University, Long Beach and an adjunct fellow at the Manhattan Institute. Excerpts:

"more than one-third of students now say “using violence to stop a campus speech” can be acceptable."

"While 93% of baby boomers and 86% of Generation X say violence is never acceptable, only 71% of millennials and 58% of Generation Z do. And, there’s no meaningful difference between the attitudes of 18- to 26-year-olds who are and who aren’t enrolled in college."

"Several forces have converged to lead us here: a youth moral culture guided by an impossibly expansive definition of “harm” and that elevates emotional safety above all other values, social-media dynamics that amplify outrage and feed the perception that the “other side” is “getting away with it,” and a political climate that encourages people to treat their opponents as threats that need to be neutralized rather than fellow citizens to be persuaded."

"As former White House press secretary Ari Fleischer tweeted, “Academia cannot be a no go zone for conservatives. . . . It will help heal the country if the liberal left that dominates colleges actively reaches out and peacefully welcomes the right.”" 

Charlie Kirk’s murder demonstrates how the credentialed class keeps itself ignorant

See The Left’s Vast Lack of Knowledge by Barton Swaim. Excerpts:

"A day later the Times issued a correction: “An earlier version of this article described incorrectly an antisemitic statement that Charlie Kirk had made on an episode of his podcast. He was quoting a statement from a post on social media and went on to critique it. It was not his own statement.”"

"Progressive commentators insisting, days after his assassination, that his killer was a Republican"

"A columnist at the Washington Post, meanwhile, was let go this week after (among other things) posting a quotation of Kirk, the sentence slightly rewritten to make it look as if he were claiming black women generally aren’t as smart as whites. Kirk expressed his views abrasively, but common sense and love of country should have told the columnist that the exponent of such a view wouldn’t attract a mass following in 21st-century America."

"Mr. Haidt recalls conducting a study with two other researchers on how accurately liberals, conservatives and moderates identify one another’s views. The study’s liberal subjects, unsurprisingly, performed the worst. My favorite sentence, on page 287: “When faced with questions such as ‘One of the worst things a person could do is hurt a defenseless animal’ or ‘Justice is the most important requirement for society,’ liberals assumed that conservatives would disagree.”" [Jonathan Haidt, author of the book “The Righteous Mind” (2012).] 

Exaggerated computer predictions of climate change promote overly-stringent and economically damaging government policies in Canada

By Kenneth P. Green. Kenneth P. Green is a Fraser Institute senior fellow. 

• Over the last two decades, Canadians have been subjected to ever-greater regulation and taxation in the name of combatting man-made climate change.
• The justification has been the claim that climate change is a severe threat to the well-being of Canadians as well as a rapidly growing global threat.
• This justification, in turn, is based on computerized models of the climate generated or relied upon by the United Nations Intergovernmental Panel on Climate Change (IPCC), the pre-eminent voice on the issue of manmade climate change since its founding in 1988. These models assume that Earth’s atmosphere is highly sensitive to, and easily warmed by, the addition of greenhouse gases from human activities such as energy use, manufacturing, agriculture, forestry, and essentially all industrial activities.
• While the IPCC’s estimate of climate sensitivity for a doubling of atmospheric CO2 levels over the near term is 1.8°C of warming, with a likely range of 1.4°C to 2.2°C, more empirically based estimates suggest that this Transient Climate Sensitivity is around 1.20°C, with a likely range of 1.1°C –1.65°C, and possibly lower.
• A review of similar disjunctions between high-sensitivity computer-model projections of “extreme weather” stemming from man-made climate change and empirical measures of change to date also suggest that high estimations of climate sensitivity may be in error.
• These disjunctions have likely led governments to implement policies to suppress GHG emissions that are more stringent than necessary, imposing costs beyond likely attainable benefits, and imposing regulations on Canadians that grossly compromise their economic freedom and the benefits they would gain from a stronger, less regulated, and over-taxed Canadian economy. 

Trump Shouldn’t Impose a $100,000 Fee on H‑1B Visas

By David J. Bier. 

"President Trump is imposing a $100,000 fee to obtain an H‑1B visa, the primary visa for skilled foreign workers. To be clear, this $100,000 fee is in addition to the salary, lawyer fees, and other costs of hiring an H‑1B worker. This fee would effectively end the H‑1B visa category by making it prohibitive for most businesses to hire H‑1B workers. This would force leading technology companies out of the United States, reduce demand for US workers, reduce innovation, have severe second-order economic effects, and lower the supply of goods and services in everything from IT and education to manufacturing and medicine.

President Trump also banned new H‑1B workers in a similar presidential proclamation in June 2020, claiming that they hurt US workers during the pandemic-induced economic crisis. Fortunately, a court found in October 2020 that the action was illegal, and the statutory authority did not exist for the president to rewrite US immigration law to micromanage the US labor market. This helped businesses retain jobs during the pandemic as IT workers aided the shift to remote work.

Adjusting the H‑1B visa fee, which is established by regulation, would require a notice and comment rulemaking, not a presidential proclamation. Even so, except for specific statutory fees, the only basis for the government to issue fees is to recover costs of adjudicating applications. Trump’s $100,000 fee has no statutory basis for fees. Given the vague authorities in immigration law, however, there is some reason for concern that the courts would uphold this action.

The president is also planning to mandate an increase in the prevailing wage, or mandatory minimum wage, for H‑1B workers, which is another action that his administration attempted in 2020. In that case, the Department of Labor did attempt to issue a formal regulation for this in 2020. That rule contained many factual and legal errors that I identified at the time, and was also blocked for failing to abide by the Administrative Procedure Act (as this current presidential proclamation is also failing to do). It was ultimately not implemented.

Illegally distorting the prevailing wage would prevent even the most highly skilled H‑1B workers from being hired. That’s because the prevailing wage has four different levels depending on experience, skill, and management responsibilities for the job. The rule would have raised the wage so high that even senior managers with years of experience would have been priced out.

President Trump’s reported plan to undermine the H‑1B visa is at odds with his remarks during the intra-conservative debate over the visa in December 2020, when he said, “I’ve always liked the visas. I have always been in favor of the visas. That’s why we have them. I’ve been a believer in H‑1B. I have used it many times. It’s a great program.”

Perhaps someone should remind the president of his words on this and other immigration issues."

The weight of research opinion against minimum wage hikes continues to shift

By Tyler Cowen.

"This piece is by DuckKi Cho and is titled “Downward Wage Rigidity and Corporate Investment”:

Firms reduce investment when facing downward wage rigidity, the inability or unwillingness to adjust wages downward. To document this behavior, I exploit staggered state-level changes in minimum wage laws as an exogenous variation in downward wage rigidity. Following a 1-standard-deviation increase in the minimum wage, firms reduce their investment rate (the ratio of capital expenditure to capital stock) by 3.08 percentage points. The negative impact is more acute for firms with a higher fraction of minimum wage workers, stronger employment protections, or higher labor intensity. The investment reductions cannot be explained by labor adjustment under capital-labor complementarities. Rather, I identify the aggravation of debt overhang and increased operating leverage crowding out debt financing as two mechanisms by which downward wage rigidity impedes investment. The findings highlight the unintended consequences of minimum wage policies on corporate investment.

From the Journal of Law and Economics.  I fear that for the next thirty years people still will be claiming that Card and Krueger showed that minimum wage hikes do not damage employment.  After numerous recent revisions, many of them catalogued here, that is no longer such a plausible belief."

Those who seek to control what people buy and sell must also control what people think and say

Tweet from Matthew Mitchell. 

 

Bad Policies Breed Bad Policies

By Jeffrey Miron , Siddharth Pakalapati , and Rishan Jaheer.

"Grocery bills are climbing again—up 3.2% over the past year—and nearly half of Americans say food prices are their biggest source of financial stress, beating out gas, rent, and utilities. Instead of fixing what caused those higher costs, Washington strangles farm labor with immigration enforcement and hikes input costs with trade barriers—and then throws farmers taxpayer money to survive. It's the government setting the fire and then selling the water.

Take the labor market. In Oxnard, California, ICE raids cut the agricultural workforce by 20–40%, leaving billions of dollars’ worth of crops to rot. Farmers had to bid up wages to keep the remaining workers, raising costs, which were passed to consumers as higher food prices. Rather than freeing up labor supply, politicians now propose to subsidize farmers with taxpayer dollars to offset the damage from the very policies that caused it.

The pattern is wider than agriculture. In Houston, construction and food service industries report the same squeeze: fewer workers, slower projects, higher wages, and ultimately higher prices for households. Meanwhile, trade barriers continue to raise input costs for farmers and manufacturers alike. Rather than removing those barriers, proposals like Trump’s industrial-policy plan double down—spending billions to patch a wound that the government itself inflicted.

This is the real cost of policy layering: inefficiency compounded by redistribution. The government creates the shortage, consumers pay higher prices, and then taxpayers pay again to “fix” the shortage."

Climate turning point

By John Cochrane. He summarizes recent work by Koonin and Lomborg. Excerpts:

"Koonin

There is a disconnect between public perceptions of climate change and climate science—and between past government reports and the science itself.

Koonin’s stock in trade is reading the actual science. Not the “summary for policymakers,” the tables and charts. Koonin, past president of Cal Tech and undersecretary for science in the Obama Department of Energy, is not easy to dismiss as a partisan crank.

Koonin reminds us that there are some benefits as well as costs from carbon dioxide emissions

Elevated carbon-dioxide levels enhance plant growth, contributing to global greening and increased agricultural productivity.

Greenhouses use 1,000 ppm CO2; the atmosphere has 420, up from 280 in pre-industrial times. It is interesting that CO2 reduction is called “green,” as despite its many other potential effects, literal green is not among them.

Koonin reminds us that in the actual science,

• Data aggregated over the continental U.S. show no significant long-term trends in most extreme weather events. Claims of more frequent or intense hurricanes, tornadoes, floods and dryness in America aren’t supported by historical records.

The claim repeated over and over that climate impact is here now in the form of more severe weather (also including wildfire) is simply not scientifically true.

• While global sea levels have risen about 8 inches since 1900, aggregate U.S. tide-gauge data don’t show the long-term acceleration expected from a warming globe.

The units are millimeters per year.

• The use of the words “existential,” “crisis” and “emergency” to describe the projected effects of human-caused warming on the U.S. economy finds scant support in the data.

And, moving to economic policy,

• Overly aggressive policies aimed at reducing emissions could do more harm than good by hiking the cost of energy and degrading its reliability. Even the most ambitious reductions in U.S. emissions would have little direct effect on global emissions and an even smaller effect on climate trends.

If the problem is 5% of GDP in 100 years, don’t spend 10% of GDP on it now. More generally, the policy decision to subsidize battery powered EVs, windmills, and photovoltaics does not help at all. Every gallon of petroleum not burned by you is burned by someone else over the next decades. See corn ethanol, switchgrass and biofuels for the last generation of such enthusiasms.

****

Lomborg

Bjorn Lomborg serves up a steady diet of uncomfortable truths, also coming from actually reading the science and deconstructing how it is misleadingly spun. For this month’s trio, check out his New York Post oped.

It’s a nice summary of how the extremes of the enviromental movement have been catastrophising and fear mongering for 50 years. While, on the other hand

Sensible, life-improving environmental policies over recent decades were rarely sold with fearmongering. Rich countries have dramatically reduced air and water pollution through technological advances and then through regulation. Poorer countries are starting to do the same thing, as they emerge from poverty and can afford to be more environmentally concerned. Forests have expanded globally, with this growth clear in rich countries and increasingly across the world.

Instead,

The first well-known environmental scare story was the 1968 book “Population Bomb.” which warned that the global population was out of control, and argued for widespread, forced sterilization. Given the inevitability of hundreds of millions of hunger deaths, the book also argued we should just stop food aid to basket-cases like India.

Thankfully, the world mostly ignored this misanthropic and amoral advice. Instead, scientists spearheaded the first Green Revolution that led to much higher crop yields and more than a billion more people being well fed. Today, India is the world’s leading rice exporter.

In 1972, “Limits to Growth” projected that food scarcity and pollution would cause global collapse. …

This was the mood that shaped the world’s first UN Environmental Summit in 1972, when chairman Maurice Strong declared that the world had only 10 years to avoid environmental catastrophe. He became the first director of the UN Environment Program and argued that Doomsday was “very probable” unless we ended destructive economic growth. Thankfully, we didn’t heed his advice.

Instead, persistent economic growth means more than 3 billion people — 41% of the world’s population — don’t live in extreme poverty….

The simplistic, alarmist predictions of the 1970s set the tone for decades… Climate change is definitely a real challenge, but just like before, the scares are exaggerated.

… despite fearmongering about weather disasters, the hard data shows that the death toll from floods, droughts, storms and wildfire has declined dramatically over the past century from half a million each year in the 1920s to less than 9,000 annually over the past decade — a 98% reduction….

It is striking to note that the fearmongers’ proposed solutions today are much the same as they were in past decades: repent and turn away from progress. Ivory tower, rich world academics advocate degrowth even as the vast majority of the world is dependent on economic growth to get out of grinding poverty.

…Climate economics clearly tells us that the most effective and cost-efficient approach to climate change is to invest significantly in research and development for low-CO₂ energy. By boosting innovation, we can achieve technological breakthroughs that will eventually make green energy more affordable than fossil fuels. Instead of just rich countries buying expensive green energy to feel virtuous, that can help the whole world to eventually switch because green is cheaper"

Accounting for City Size, Minimum Wages Reduce Jobs Almost Everywhere

By Priyaranjan Jha, Jyotsana Kala, David Neumark and Antonio Rodriguez-Lopez. Excerpt:

"in larger cities, wages are higher and, as a result, minimum wages are binding for fewer workers. Furthermore, larger cities also have less competitive labor markets. Once we account for city size, there is much less evidence that a higher minimum wage can increase employment in less competitive labor markets. Conversely, research that ignores city size leads to considerable exaggeration of how higher minimum wages can boost employment in non-competitive labor markets.

Measuring labor market frictions

In theoretical models of non-competitive labor markets, the key feature reflecting market power over workers is how frequently workers get job offers from different firms. When there are more job offers, it is easier for workers to move between employers and hence firms have less market power over workers—that is, labor markets are more competitive. We therefore use data on job market fluidity—such as hiring and separation rates—to measure how competitive local labor markets are. A more fluid labor market, with higher rates of hiring and separations, is more competitive.

Our data come from the Quarterly Workforce Indicators (QWI) and Job-to-Job (J2J) datasets, and we use “city” as a short-hand for core-based statistical areas, which consist of one or more counties with an urban core, linked by strong commuting patterns. Our use of fluidity measures differs from past work, which relies on concentration metrics, such as the Herfindahl-Hirschman Index (HHI) or the number of employers per worker. These latter measures stem from the idea that when there are fewer firms competing to hire workers, workers have fewer job opportunities aside from their current employer, which gives employers monopsony power in that labor market. However, despite its use in prior work, concentration can be a poor proxy for monopsony power. In job search models, an increase in the rate at which workers get job offers—which reflects greater labor market competition—can lead to higher concentration as larger, more productive firms attract and retain a disproportionate share of workers, making HHI an invalid measure. Similarly, when there is some differentiation between jobs, firms can be small yet still possess significant power to set wages. Nonetheless, to connect with past work we also show results using concentration measures constructed from the National Establishment Time Series (NETS).

Following recent work that allows the employment effect of the minimum wage to depend on local labor market power, we estimate regression models that capture the overall effect of a higher minimum wage on employment, but also an “interaction” that measures how the effect of the minimum wage varies with measures of monopsony power in local labor markets. We study the United States restaurant industry from 2001 to 2019 using data on employment and earnings from the QWI and state-level minimum wages. The restaurant industry has been the focus of many studies of minimum wages in the U.S. because of the large share of low-wage workers in the industry.

City size, wages, and labor market competition

 

A key issue for the study of the effects of minimum wage on employment in the U.S. is that researchers may not be able to reliably answer how minimum wage effects vary with local labor market power if other important differences across cities influence the impact of the minimum wage. In particular, wages are higher in larger cities—a phenomenon attributed both to the movement of higher-skilled people into larger cities and higher productivity of workers and firms in more dense areas. It turns out that minimum wages vary less across cities than wage levels, implying that minimum wages will have less “bite” in large cities (they are binding for fewer workers). Previous research on variation in minimum wage effects with local labor market competition has failed to account for this.  

The higher wages in large cities imply that minimum wages, which generally vary at the state level, are less binding in large cities. As shown in Figure 1, there is a strong positive relationship between city size and hourly earnings. In addition, the gap between hourly earnings and the minimum wage is wider, and hence the bite of the minimum wage is lower, in large cities.

 

We first ignore city size—like the recent research does. When we do this, the evidence suggests that minimum wages reduce employment in more competitive labor markets, but the analysis suggests that there are many markets where labor market power is sufficiently high that minimum wages have no effect on jobs or even increase jobs. We then show, however, that the empirical importance of this variation, and its implications for the employment effects of minimum wages, is overstated in research that ignores city size. 

The key fact is that labor market fluidity as measured by our hiring/separation measures is lower in larger cities. (Across the fluidity measures we use, the correlation with log working-age population is always negative and averages −.21.) Because minimum wages are less binding in larger cities (Figure 1), past research may have mistakenly concluded that minimum wage effects in larger cities are weaker or even positive because of labor market power, when in fact all that is going on is that the minimum wage is less binding in these cities. In the latter case, of course, even in the competitive model a higher minimum wage would not reduce employment.

When we estimate models that account for how both labor market power and city size influence the impact of minimum wages, the role of variation in labor market competition is substantially reduced. Even more important, from a policy perspective, is that adverse effect of the minimum wage on employment becomes much more consistent—and consistently negative—across cities. That is, even though we find evidence of some non-competitive labor market behavior after accounting for city size, the new estimates imply that minimum wage effects on employment are generally negative. This is illustrated in Figure 2.

 

Figure 2 illustrates this. The leftmost estimate (for “0” on the horizontal axis), shows the baseline estimated minimum wage elasticity without monopsony power interactions. The vertical figures (“boxplots”) plotted after that point show the estimated median minimum wage effect across cities (the black symbol) and then distributions of estimates, with the thicker line displaying the 25^th to 75^th percentiles of the estimates, and then thinner lines showing the fuller range of estimates (without outliers). (The symbols on the horizontal axis represent different labor market competition measures and are defined in Table 1 of the paper.)

The left-hand side of the figure is for estimates ignoring city size, while the right-hand side accounts for it. The figure indicates a clear bias against finding job loss from higher minimum wages when ignoring city size (the left-hand side of the figure), as the median estimates are closer to zero, and the ranges of estimates include more positive values. In contrast, the boxplots that account for city size, on the right-hand side of the figure—are shifted down, indicating that even after accounting for monopsony power, minimum wage effects are negative in most places.

Thus, the key result is that estimates that do not account for city size suggest that minimum wage effects are near-zero or positive in many places, which would imply that the effects of minimum wages vary substantively with labor market power. In contrast, once we account for city size—and avoid confounding its effects with those of monopsony power—although minimum wage effects vary, they are negative almost everywhere.

Conclusions

Our research does not say that labor markets are perfectly competitive. Indeed, our evidence that the minimum wage has more adverse employment effects where job market fluidity is higher points to labor markets for low-skilled workers exhibiting deviations from the competitive model. However, minimum wage proponents have over-emphasized the small minority of studies of minimum wages that fail to find job loss, and have latched onto evidence suggesting that there are many local labor markets where deviations from perfect competition imply that a higher minimum wage won’t reduce jobs and may even increase them.

A foundational essay on economics by Milton Friedman argues that the “test” of a model is not whether it is a completely accurate characterization of reality, but rather whether it makes accurate predictions. Our research shows that the evidence does not support jettisoning one of the fundamental predictions of the competitive model of labor markets: that higher minimum wages reduce employment of less-skilled workers."

GAO Report Finds 'Shrinkflation' Was Fake News

The Government Accountability Office says shrinkflation accounted for just 0.06 percentage points of inflation from 2019 to 2024.

By Eric Boehm of Reason. Excerpts:

"Shrinkflation had a minimal impact on overall inflation from 2019 to 2024," the Government Accountability Office (GAO) concluded in a report published last month. "This is because items that were downsized made up a small percentage of goods and services tracked in inflation measures."

Over the five years included in the GAO analysis, overall prices rose by 34.5 percent, as measured by the consumer price index. Product downsizing, meanwhile, was responsible for just 0.06 percentage points during that same period, according to the GAO.

Even in product categories, such as household goods and packaged foods, where shrinkflation was relatively more common, it hardly had an impact on overall inflation during the Biden years. "The contribution of size changes to inflation ranged from 1.6 percentage points for cereal to 3.0 percentage points for household paper products," the GAO reports.

Many other products were not subject to shrinkflation because of how they are sold. A gallon of gas, for example, can't be resized when you pull up to the pump. Utility bills, rent payments, and clothing can't be shrinkflated, either. Even for many items sold in stores, the cost of resizing and redesigning packaging is simply too high for the amount of savings that could be realized.

The GAO's report seems to confirm what a pair of economists at the Cato Institute concluded last year after looking at pricing and product size data from roughly the same period of time. That report, published in June 2024, found that product downsizing occurred with about the same frequency during 2022 and 2023 (the years when inflation took off) as it had during the preceding years.

Even if shrinkflation were a real, major economic phenomenon, it would not be something that demands governmental intervention. The resizing of product packaging is a normal business practice that might occur due to changing input costs, consumer demands, or any of a number of other reasons.

But it was not real. Shrinkflation was a political messaging strategy by the Biden administration and an attempt to scapegoat private corporations for higher prices created by misguided government policy."

Top Ten Most Dangerous US Jobs and Percent Male

Tweet from Mark Perry.

 

‘Listening to the Law’ Review: A Humbler Reading

Justice Amy Coney Barrett, an ‘originalist’ in the mold of her onetime boss, Antonin Scalia, makes the case for the Constitution

By Barton Swaim. Excerpts:

"how difficult it is to fashion a constitution that is both practicable and secures the esteem of the governed. The framers achieved both, she argues, by giving the people the ability to alter the Constitution—the amendment process in Article V—and by quickly amending it with the Bill of Rights. By adopting the first 10 amendments, Justice Barrett argues, “the founding generation made the Constitution a more morally laden document.”" 

"On judicial humility, Justice Barrett makes the case for a conservative or restrained version of “substantive due process.” Judges have sometimes deemed laws unconstitutional because they violate some unenumerated right, i.e., a right not named in the Constitution. Their argument is that certain fundamental though unenumerated rights are protected by the “due process clauses” of the Fifth and 14th Amendments, which forbid federal and state governments from depriving persons of their liberty “without due process of law.” The Court struck down laws banning interracial marriage partly on that basis in 1967."

"The trouble, Justice Barrett explains, is that “judges can easily slip into naming fundamental rights based on the values of people they know and respect rather than the value of the vast and diverse American citizenry.” The standard for invoking an unenumerated right, she contends—quoting two phrases Chief Justice William Rehnquist borrowed in Washington v. Glucksberg (1997)—is that such rights must be “deeply rooted in this Nation’s history and tradition” and “implicit in the concept of ordered liberty.”"

"The only justices still routinely arguing as if from a “living constitution”—i.e., that the law must mean this or that because what its authors really wanted was some alleged happier outcome—are Justices Sotomayor and Jackson. Justice Elena Kagan, a liberal, often bases her arguments on the text’s original public meaning, as do leading liberal law professors such as Yale’s Akhil Reed Amar."

" It is plainly impossible to know the intention behind a law written, debated, amended and voted on by scores or hundreds of people. Moreover, “a judge who tweaks the text to improve its fit with statutory purpose risks undoing the very compromises that made the passage of legislation possible,” she writes. “There is no way for the judge to know whether its new, supposedly improved version would have made it into law.”" 

Florida’s Citrus Growers vs. H-2A Red Tape

Without serious immigration reform, they could be put out of business

Letter to The WSJ. Excerpts:

"Sierra Dawn McClain captures the problems attending the H-2A guest-worker program in Washington state (“Red Tape Is the Biggest Crop on Some Farms,” op-ed, Aug. 29). Florida, which uses the highest percentage of such workers in the nation, knows this all too well.

The program is the source of the most frequent complaint I heard from 36 Florida citrus growers I interviewed for my book, “The Rise, Fall, and Future of Florida’s Citrus Industry.” In administering the program, the Labor Department wrongly assumes that a guest farm worker may take away a job from an American. It thus requires hourly wages 15% to 20% higher than the prevailing minimum and hours of cumbersome paperwork for employers.

Kyle Story, a Lake Wales grower and president of Florida Citrus Mutual, told me, “Fifteen years ago, the domestic labor market started going nonexistent. If I could hire the domestic employees we had 15 to 20 years ago, and if they were available, I would completely do that. But we don’t have that availability, and it’s not going to come back.” In the past decade, he says only one American has applied for a harvesting job with his company.

Paul Meador, owner of Everglades Harvesting Inc., flies in 2,000 guest farm workers every season for approximately 80 Florida growers, never knowingly hiring an undocumented worker. He told me the domestic labor market began shrinking after the housing boom started in the early 2000s. “Our domestic workers started working for landscape and construction companies and hotels and resorts, where they could get full-time employment with the benefits. We advertise in newspapers and in employment services. But we just don’t have any domestic workers applying for seasonal jobs.”

Without serious reform, the H-2A program’s expense and bureaucratic red tape are helping put Florida citrus growers out of business.

Em. Prof. David E. Sumner

Ball State University" 

Another K-12 Education Disaster

High school seniors score record lows in reading and math on the NAEP test

WSJ editorial. Excerpts:

"In 2024, 45% of twelfth-graders performed “below basic” in math, and 32% in reading. Eighth-grade science scores were hardly better: 38% rated below basic." [National Assessment of Educational Progress or NAEP]

"In all three exams, students scored on average lower than on the most recent exam in 2019. Reading scores were about 10 points lower than when the exam was first administered in 1992."

"Scores at charter schools mostly didn’t fall."

"While schools nationwide have received hundreds of billions of dollars from the feds and states to address pandemic learning loss, a record number of eighth-graders can’t read."

"reading and math scores have been sliding since 2013."

"An emphasis on “equity” has led some school districts to adopt no-grading and no-homework policies in lower grades."

"High-school graduation rates increased by some 14 percentage points from 1991 to 2023, even as students are less prepared for college." 

Is it dangerous to say that entrepreneurs are heroes?

Back in the early 1990s, I wrote a paper called "The Creative-Destroyers: Are Entrepreneurs Mythological Heroes?"  

A reviewer at a journal said "The conclusion that entrepreneurs are heroes seems to be very dangerous!" That was in 1993.

There is a picture of this review below. After that is a link to where I posted this paper here on my blog. Then there are also links to the many people have said that entrepreneurs are heroes.

 

"The Creative-Destroyers: Are Entrepreneurs Mythological Heroes?" (Part 1). I posted it in several parts and all of the parts are linked at Part 1. For a short, one page version see An Essay In Honor Of "Small Business Saturday" And Entrepreneurs Everywhere.

Many people over the years have said that entrepreneurs are heroes.

Are we confounding heroism and individualism? Entrepreneurs may not be lone rangers, but they are heroic nonetheless by Jeffery S. McMullen in 2017.

See The Entrepreneur on the Heroic Journey by Dwight R. Lee & Candace Allen in 1997.

See Kirzner’s Entrepreneur and the Hero’s Journey by Amir Iraji in 2025.

See Towards a mythic process philosophy of entrepreneurship by Lauri J. Laine & Ewald Kibler. 

See  Who Says Entrepreneurs Are Heroes? (Remarks prepared for the first HERO'S JOURNEY ENTREPRENEURSHIP FESTIVAL, March 31st, 2007 at Pepperdine University). You can also read it here. This has even more people who have said it.

See Does It Matter If We Call Entrepreneurs Heroes? This also has more people who have said it.