U.S. LNG Exports to the World’s Rescue

Ten years ago, Cheniere Energy began an export boom that is saving the world economy today

WSJ editorial. Excerpts:

"the boom in shale fracking that began in the mid-2000s unleashed cheap and abundant natural gas. Cheniere Energy took the risk of converting what had been an LNG import facility into an export platform in 2016."

"The U.S. now boasts eight LNG export terminals"

"America has surpassed Australia, Qatar and Russia to become the world’s top LNG exporter."

"Trump lifted the [LNG export permitting] pause upon retaking the White House" 

"U.S. LNG exports surged nearly 40% last year"

"The U.S. now exports about as much gas to Europe as Russia did before the war"

"The reality is that prices rose last year from a near-record low in 2024. Prices last week averaged $3.13 per million BTU—about the same as in 2017"

"Limiting LNG exports won’t reduce domestic energy prices, though it could suppress natural gas production" 

A Climate Manual Bait and Switch

The Federal Judicial Center’s biased crusade lives on

WSJ editorial. Excerpts:

"the Federal Judicial Center’s retraction of its biased chapter on climate science"

"the environmentalist portion of the manual for federal judges, the chapter lives on, published by the National Academy of Sciences (NAS)."

"The Fourth Edition’s climate chapter relies on the views of progressive climate lawyers and partisan “experts.”"

"As long as the FJC and the NAS receive taxpayer dollars, Congress should question the funding for polemical texts pretending to be neutral reference guides." 

Retiring the Nation’s Doctor

Congress should dissolve the office of the surgeon general

Letter to The WSJ. 

"I watched the surgeon general confirmation hearings and couldn’t help but wonder why, in the 21st century, we still rely on an 18th-century relic to play the nation’s doctor (“A Vaccine Skeptic for Surgeon General,” Review & Outlook, Feb. 26).

The office of surgeon general has drifted far from its original role as an apolitical supervisor of medical personnel. Successive administrations have transformed it into a political megaphone opining on gun control, social media, housing and other contentious issues only tangentially related to public health.

Meanwhile, the surgeon general oversees the more than 6,000-member Public Health Service Commissioned Corps—a uniformed service whose deployment is slower and more costly than civilian alternatives. A 2010 Health and Human Services report found corps officers cost roughly 15% more than comparable civilian employees.

Congress should dissolve the office of the surgeon general and the Commissioned Corps, transfer legitimate public health functions elsewhere and end the politicization of public health.

Jeffrey A. Singer, M.D.

Senior fellow, Cato Institute"

Why Johnny Can’t Read Anything Other Than Pronouns

Schools have become laboratories for esoteric ideological projects, not centers of learning

By Jason L. Riley. Excerpts:

"One of the few bright spots in our education system has been selective-enrollment public high schools, which use standardized tests and other objective measures to determine admissions. Examples include Boston Latin School in Massachusetts, Stuyvesant High School in Manhattan and Thomas Jefferson High School in Alexandria, Va., all of which boast long and proven records of providing a rigorous education for students from all backgrounds. Yet even this successful model is increasingly under attack, and its future is uncertain.

A new study from the Manhattan Institute details efforts in Chicago to eliminate selective public high schools. Much of the Chicago public school system is in shambles. Wirepoints, a government watchdog group, reported last year that the Chicago Public School system operated 53 schools in 2024 where not a single student tested proficient in math, and 17 schools in which no student tested proficient in reading. Mayor Brandon Johnson and other Democrats blame these outcomes on a lack of resources, but spending per pupil has almost doubled since 2017, and teacher pay in the Windy City is among the highest in the nation for large school districts after adjusting for cost of living."

"Critics of selective public schools claim that they serve too few minority students, divert resources from traditional schools, and exacerbate racial and economic achievement gaps. Yet the Manhattan Institute’s assessment found that at least a third of the students at selective high schools in Chicago come from low-income families, and Chicago Public Schools spend thousands more per student on nonselective schools."

Gavin Newsom’s Climate Tax Hike

His regulators are cutting allowances for his tax-and-cap policy

WSJ editorial. Excerpts:

"California’s cap-and-tax policy requires refiners and manufacturers to reduce their CO2 emissions . . .[and] caused manufacturers to shift operations out of the state and raised gasoline prices by an estimated 24 cents a gallon."

"Chevron warned Tuesday that CARB’s (California Air Resources Board) plan (to slash the supply of allowances) could add $1.21 a gallon to California gas prices, which are currently $1.54 higher than the national average."

"plan would cost in-state refineries $5.5 billion to $9 billion over the next decade and “eliminate a significant portion, if not all, of California refiners’ future annual net earnings.”" 

Tech Has Never Caused a Job Apocalypse. Don’t Bet on It Now.

Neither theory, history nor the latest data suggests a recession driven by AI job dislocation is likely  

By Greg Ip. Excerpts:

"Technological advancements always cost some people their jobs—those whose skills can be easily substituted by tech. But their loss is more than offset through three other channels. The new technology enhances the skills of some survivors, who become more productive and better paid; it helps create new businesses and new jobs; and it makes some stuff cheaper, increasing consumers’ incomes, adjusted for inflation, which can be spent on other stuff, generating yet more jobs."

"The ranks of software developers, widely assumed to be acutely vulnerable to AI, are up 5% in January from a year earlier, a pace largely consistent with the past 23 years."

"The number of computer programmers, who assist developers in ensuring code runs properly, was down slightly in the last year, in line with a secular decline in place for decades. Neither trend shifted much after ChatGPT’s arrival in late 2022."

"In 2024, the median young computer science graduate earned 63% more than the typical young graduate, up from 47% in 2009"

"business spending on software leapt 11% in the fourth quarter of last year from a year earlier, the fastest in nearly three years"

"This . . . is in line with previous technological advances that drive prices down and demand up enough to offset direct job displacement"

"examples include textile manufacturing in the 19th century, and the spread of ATMs in the 1980s."

"As the number of bookkeepers shrank with the introduction of spreadsheet software in the early 1980s, the number of accountants and financial analysts newly empowered by Lotus 1-2-3 and Excel rose even more."

"Employment of 22- to 25-year-olds in the most AI-exposed occupations such as software developers and customer-service agents fell 6% in the three years after the introduction of ChatGPT"

"Radiologists were supposed to lose their jobs to offshoring, and then to AI. They didn’t, because patients and providers like having humans around to explain their medical images. Since Google Translate launched in 2006, the number of human translator and interpreter employees in the U.S. has risen 73%."

"The money employers or consumers save as AI eliminates jobs doesn’t disappear; it gets spent on something else." 

Easter Island environmental degradation was due to colonial intruders not ecocide

See Island at the End of the World’ Review: Faces of Rapa Nui: European explorers landed on Easter Island in the 18th century. Disease and emigration soon followed by Adam Kuper. He is a fellow of the British Academy. He reviewed the book Island at the Edge of the World: The Forgotten History of Easter Island by Mike Pitts. Excerpt:

"Mr. Pitts summarizes the new apocalyptic parable that emerged: “Society collapsed in a fit of war and cannibalism.” Some commentators, such as Jared Diamond, the author of the popular “Guns, Germs, and Steel” (1997), saw a deeper meaning: Could this be our own future if we don’t take care?

Scientists have since established that the degradation of the island was in fact gradual, taking centuries, caused largely by drought, volcanic eruptions and the arrival of the Polynesian rat. Ancient skeletons show no sign of injuries due to war or cannibalism. Mr. Pitts dismisses this ecocide narrative and places the blame for environmental degradation where it belongs: with colonial intruders."

Related posts:

The Mysterious 'Ecocide' Collapse of Easter Island Never Really Happened 

The truth about Easter Island: a sustainable society has been falsely blamed for its own demise 

Was Easter Island (Rapa Nui) The Victim Of Ecocide? Maybe Not 

Resilience, not collapse: What the Easter Island myth gets wrong

New evidence upends contentious Easter Island theory, scientists say 

More People Are Inheriting Their Homes

See In California, About the Only Way to Get a House Is to Inherit One: Nearly one out of every five property transfers last year was made through inheritance, a record for the state and double the national share by Nicole Friedman and Veronica Dagher of The WSJ. Excerpts:

"About 18% of all property transfers in the state last year, representing nearly 60,000 homes, were made through inheritance"

"That share is a record for California in data going back to 1995, up from 12% in 2019. It is also roughly double the national share of 8.8% last year."

There are "tax policies that encourage owners to avoid selling their houses before they die."

"The people who inherit these houses . . .  can sell them and keep the proceeds without having to pay capital-gains taxes."

"Longtime owners pay taxes based on decades-old valuations. New buyers are taxed at much higher current market valuations."

"Federal law allows a $250,000 exclusion ($500,000 for couples) for homeowners selling their primary residences. With many California homes now worth millions, homeowners often have gains that far exceed these limits."

"If the home is inherited, its value for tax purposes resets to its market price on the date of death. For a home that appreciated from $200,000 to $2 million, the heir could save more than $500,000 in federal and state taxes" 

A Defense of Landlords as Financial Intermediaries

By Jonathan Hofer, Christopher J. Calton, Kristian Fors, Caleb Petitt of The Independent Institute. Excerpt:

"A persistent misconception is that rent simply equals the cost of ownership plus a profit margin. A crucial economic principle is that input costs do not determine prices; the value of outputs determines them. Input costs are important insofar as they affect supply. In a market, rent is determined by supply and demand for housing services, not by a landlord’s costs. The landlord’s cost structure is largely irrelevant to the market-clearing price. 

The difference in monthly costs between owning and renting in large cities can be great. For instance, the typical monthly rent for a two-bedroom apartment in San Francisco can be a few thousand dollars less than the monthly mortgage payments, including principal and interest, for a similar property. This trend is observed in many areas across the United States, especially in regions experiencing rapid growth or facing macroeconomic conditions in which interest rates rise quickly. 

Characterizing landlords as reaping significant profits oversimplifies the situation by failing to account for the broader financial context and the risks landlords face. Successful landlords may make great gains nominally, but the typical yield on a unit is actually quite low. In some states, yield (income generated by the property expressed as a percent of the asset’s cost) can be around 6-7%, but large cities tend to have a lower yield, typically around 2-5%—an amount insufficient to change a renter’s ability to generate wealth. 

While tenants pay a fixed rent, landlords bear unpredictable, non-negotiable costs, such as maintenance. Maintenance can include routine wear and tear, as well as catastrophic repairs or the replacement of costly appliances. Landlords are contractually and, oftentimes, statutorily obligated to maintain the unit’s full “output” value. If the property depreciates, that is another cost absorbed by the landlord and not the tenant. They also have to bear the financial risks of legal compliance, which can include costs related to having tenants, such as rent controls, or general risks, such as insurance. When landlords have negative carry (when monthly rental income falls below the combined costs of debt service, maintenance, and taxes), landlords are effectively subsidizing tenants. That latter point might be obvious, but what may be less obvious is how common negative carry actually is. According to a report by DoorLoop, only “35% of landlords say their rental properties are profitable year after year. This percentage held steady from 2023 to 2024 even as rental prices rose sharply.” and “38% of landlords say their rental properties break even financially (mortgage and expenses) but don’t generate consistent profit.”

A significant and underappreciated advantage for renters is the ability to benefit from a landlord’s historical investment. A landlord who acquired a multi-unit building a decade ago operates on a cost basis, and likely a mortgage interest rate that is no longer available in the current market. Due to the lower entry price, the landlord can accept a lower yield (rent as a percentage of the current property value) than a new buyer could achieve. For those familiar, this can be illustrated by the standard supply-and-demand model: landlords who bought at different prices shift the supply curve to the right, resulting in lower equilibrium rent than if units had to be financed at current prices. 

This creates what might be called a travel-back-in-time effect. Renting from an established landlord allows tenants to access housing at a price point anchored to historical costs, effectively insulating them from the full impact of rising interest rates and price appreciation. For individuals seeking to maximize net worth, the cost of paying a landlord’s overhead can be substantially lower than the opportunity cost of committing a large down payment to an illiquid, concentrated asset.

Economies of scale

Beyond historical cost advantages, scale matters. Landlords, particularly those managing multi-unit developments, generate value through operational efficiencies that single-family homeowners cannot replicate. Research on rental housing economies of scale demonstrates that costs per unit tend to decrease as the number of units increases, due to shared infrastructure, bulk purchasing power, and specialized management. This scale efficiency manifests in several ways. By pooling costs, landlords can lower the price of housing services for tenants. The development costs of new or renovated housing can be reduced through bulk orders with suppliers and vendor consolidation. Renters in multi-unit buildings benefit from shared infrastructure, such as roofs, foundations, and HVAC systems. These shared resources, when calculated per square foot, are significantly more efficient than those in single-family homes.

Creating a Buffer for Renters

By leveraging the historical cost advantage borne by the landlord, renters effectively gain a competitive financial buffer. Renters can secure a similar consumption good, i.e., shelter, at a discount relative to the current frontier cost of a mortgage. The delta between the market rent and the counterfactual homeownership scenario allows renters to use different wealth-generation vehicles. 

That means that renting is not “throwing money away”; rather, it is the purchase of a thing without the attendant risks of over-leverage, illiquidity, and concentrated asset exposure. By assuming the risks of property devaluation, legislative changes, physical depreciation, and liability, landlords enable tenants to allocate capital toward other potentially liquid uses, including seeking higher returns on capital. When that occurs, landlords are not barriers to wealth, but rather, providers of financial flexibility and absorbers of real estate volatility, enabling tenants to maintain optionality. If renters allocate the capital intended for a down payment to a diversified portfolio of equities, they may often achieve returns greater than those of a single property.

Obviously, this relationship is not without trade-offs. Renters face the risk of eviction, rent increases, and limited long-term security. These vulnerabilities can have significant financial and emotional impacts. However, these challenges do not negate the fundamental economic function landlords serves.

Do Landlords Hoard Units? 

Some affordability activists make the claim that landlords are “hoarding” tens of thousands of unoccupied units, such as the oft-cited figure of 60,000–90,000 vacant homes in San Francisco. This is a curious argument and may imply some ignorance of how housing markets, and markets in general, function. Supply and demand never achieve perfect, instantaneous matching; some inventory is always in transition or needs to be called up. High rents and prices in places like San Francisco are the market’s clearest signal of insufficient supply relative to demand, not evidence of deliberate withholding.

Even still, the “vacant units” number is largely a mirage. Census and city data include short-term vacancies, units between tenants, in the process of being sold, renovated, or prepared for re-rental. Many others are unfit for habitation (e.g., severely dilapidated or in need of major repairs), or are simply not rentable or sellable at current market conditions without significant investment. Recent reports show San Francisco’s effective rental vacancy rate (units actually available and ready for occupancy) hovers around 3–5% in 2025–2026, among the lowest in the nation and well below a reasonable benchmark for smooth turnover. While overall reported vacancies include these transitional categories, they don’t represent “hoarded” stock. True long-term deliberate vacancies (e.g., vacation homes and luxury units held empty for speculation) exist but are a tiny fraction, not enough to suppress prices meaningfully.

Some of these activists have proposed an “empty homes tax” to penalize landlords who have vacant units. Such a scheme discourages investment because it erodes a landlord’s margin, as there will inevitably be durations when tenants churn. It may also discourage upkeep, as landlords may avoid taking time to renovate between occupants because that is a period when they would be taxed. 

Even if some curmudgeony owners were trying to “hoard” for profit, ironically, adding substantial new supply would undermine that strategy by increasing competition and capturing those potential gains for different landlords/developers and future residents instead. The real delusion is pretending that vacancies prove abundance when they coexist with skyrocketing costs, precisely because overall long-run supply has failed to keep pace with population and job growth in high-demand areas."

The Hidden Cost of Hard-to-Fire Labor Laws: Why European Firms Don’t Take Risks

By Alex Tabarrok.

"In our textbook, Modern Principles, Tyler and I write:

Imagine how difficult it would be to get a date if every date required marriage? In the same way, it’s more difficult to find a job when every job requires a long-term commitment from the employer.

In two new excellent pieces, Brian Albrecht and Pieter Garicano extend this partial equilibrium aphorism with some general equilibrium reasoning. Here’s Albrecht:

[I]magine there is a surge for Siemens products. Do you hire a ton of workers to fill that demand? No, you’re worried about having to fire them in the future but being stuck until they retire.

But it’s even worse than that…..[suppose Siemens does want to hire] where is Siemens getting those workers from?…Not only is it a problem for Siemens that they won’t be able to fire people down the road, the fact that BMW doesn’t fire anyone means you can’t hire people. 

Garicano has an excellent piece, Why Europe doesn’t have a Tesla, with lots of detail on European labor law:

Under the [German] Protection Against Dismissal Act, the Kündigungsschutzgesetz, redundancies over ten employees must pass a social selection test (Sozialauswahl). Employers cannot choose who leaves: they must rank employees by age, years of service, family maintenance obligations, and degree of disability, and then prioritize dismissing those with the weakest social claim to the job. If someone is dismissed for operational reasons but the company posts a similar job elsewhere, the dismissal is usually invalid.

Disabled employees can be dismissed only with the approval of the Integration Office (Integrationsamt), a public body. The office will weigh the employer’s reasons, whether they have taken sufficient steps to integrate the employee, and whether they could be redeployed elsewhere in the organization. Workers who also become caregivers cannot be dismissed at all for up to two full years after they tell their bosses they fulfill that role.

As a company becomes larger and tries to let more workers go at once these difficulties increase. In many European countries, companies with more than a certain number of workers – 50 in the Netherlands, 5 in Germany – are obliged to create a works council, which represents employees and, in some countries, must give its approval to decisions the employer wants to make regarding its employees, including layoffs or pay rises or cuts.

…Companies that are allowed to fire someone and can afford to pay the severance costs have to wait and pay additional fees. Collective dismissal procedures in Germany start after 30 departures within a month; once triggered they require further negotiations with the works council, a waiting period, and the creation of a ‘social plan’ with more compensation for departing workers. When Opel shut down its Bochum factory in Germany, it reached a deal with the works council to spend €552 million on severance for the 3,300 affected employees. This included individual payments of up to €250,000 and a €60 million plan to help workers find new jobs.

Now what is the effect of regulations like this? Well obviously the partial equilibrium effect is to reduce hiring but in addition Garicano notes that it changes what sorts of firms are created in the first place. If you are worried about being burdened by expensive dismissal procedures, build a regulated utility with captive government contracts, not a radical startup with a high probability of failure.

Rather than reduce hiring in response to more expensive firing, companies in Europe have shifted activity away from areas where layoffs are likely. European workers are for sure, solid work only. This works well in periods of little innovation, or when innovation is gradual. The continent, however, is poorly equipped for moments of great experimentation.

…Europe’s companies have immense, specialized knowledge [due to retained workforces, AT]. The problems happen when radical innovation is needed, as in the shift from gasoline to electric vehicles. The great makers of electric cars have either been new entrants, like Tesla and BYD, or old ones who have had their insides stripped, like MG.

..If Europe wants a Tesla, or whatever the Tesla of the next decade will turn out to be, it will need a new approach to hiring and firing."

Why Blaming Walmart and Amazon for Public Assistance Is Misguided

By Chris Freiman.

"With SNAP funding in the news, we’re seeing a revival of a familiar complaint against big business. The reason millions of Americans need public benefits like SNAP, critics say, is that their employers don’t pay them enough.

As one columnist recently put it, corporations “have taken advantage of Medicaid, food stamps, and other safety net programs for years to get out of paying their workers a living wage by sticking the taxpayers with the expense.” These corporations are to blame for people’s need for public assistance, and they should pay their workers more so that they’ll rely less on safety net programs funded by taxpayers.

But this complaint is morally confused. To see why, let’s start with a simple point: an employer is a buyer of labor. So when critics say that big corporations should raise their employees’ wages to the point where they don’t need public assistance, what they’re really saying is that corporations should pay more for what they buy. But we shouldn’t assume that merely buying something from someone obligates you to pay them so much that they never need public assistance, rather than simply paying them the mutually agreeable price.

Here’s an analogy. Scarlett likes to buy scarves from Wes on eBay. Whenever Wes lists a scarf for auction, Scarlett makes the highest bid. In short, she’s his best customer. But times get tough for Wes. He begins to struggle to pay rent and buy groceries. Scarlett keeps winning the auctions for Wes’s scarves and sending payments his way, but it’s not enough to keep him off SNAP.

Politicians and commentators learn about Wes’s situation and place the blame squarely on one person: Scarlett.

If only she had paid more than the auction price for his scarves, they argue, Wes wouldn’t need SNAP benefits. According to one columnist, “Scarlett is taking advantage of the government’s safety net to get out of paying Wes enough to live on and sticking taxpayers with the expense.”

The moral condemnation of Scarlett would be downright bizarre, and it’s not hard to see why. Remember, Scarlett is Wes’s best customer — she offers more for his scarves than anyone else. If anything, we should have the least complaint against her. She’s already given Wes thousands of dollars while other customers have given him less or nothing at all. Scarlett is doing more than anyone else to benefit Wes, so it’s strange to single her out for blame.

Now turn back to big businesses like Walmart and Amazon. Just as Scarlett is Wes’s best customer, so too is Walmart its employees’ best customer — that is, it made them the best offer for their labor.

We know this because if Walmart hadn’t made them the best offer, those employees would be working somewhere else instead. Workers accept the best offer for their labor just as weavers accept the best offer for their scarves. So, as with Scarlett, we should have the least complaint against Walmart, not the most. Other employers either made Walmart workers worse offers or made them no offer at all. Since Walmart is doing more than anyone else to benefit Walmart workers, it’s strange to single it out for blame.

You might reply that I’m overthinking things. The simple truth is that Walmart should pay its employees more because it can afford to pay them more. But this view assumes you’re obligated to pay more for something simply because you can afford to do so — and that’s a dubious assumption.

Think back to Scarlett. Suppose that she could afford to pay Wes more for his scarf than what turned out to be the winning bid. While it might be generous of her to do so, that seems more like charity than fulfilling an obligation. When someone sells you a scarf, a cup of coffee, a gym membership, or an hour of labor, you don’t thereby incur a duty to pay them whatever it takes to fix their personal finances. You simply owe them the agreed-upon price.

And that agreed-upon price isn’t arbitrary — it reflects supply and demand in the case of labor just as it does for anything else. A scarf sells at a price where someone is willing to buy it and someone else is willing to let it go. Labor is no different: wages settle where workers are willing to offer their time and employers are willing to buy it. If the wage is set too high, people will be less likely to hire workers; if it’s too low, people will be less likely to work.

Even if you insist that rich customers like Scarlett do have a moral obligation to pay Wes more for his scarves, it doesn’t follow that government officials should force her to do so. The mere fact that you should do something — be it paying more for a scarf, driving a good friend to the airport, or visiting your sick sibling in the hospital — doesn’t establish that it’s the government’s job to make you do it. Plus, forcing Wes to raise his prices would likely backfire: if the government required Scarlett and other customers to pay more for his scarves, they’d be less likely to buy them, leaving Wes even worse off than before.

The parallel to employers is clear. Even if you think that buyers of labor should pay more if they can afford to do so, it doesn’t follow that the state should make them. And here again, the proposed policy would probably backfire: by making workers costlier to hire, it would discourage employers from buying their labor at all — leaving them not with higher wages, but with no job. At the bare minimum, we should ensure that any policy intended to benefit workers doesn’t harm the very people it aims to help."

Immigration, Innovation, and Growth

By Stephen J. Terry, Thomas Chaney, Konrad B. Burchardi, Lisa Tarquinio & Tarek A. Hassan. From The American Economic Review.

"Abstract

We propose a novel identification strategy to isolate exogenous immigration shocks across US counties, by interacting quasi-random variations in the composition of ancestry across counties with the contemporaneous inflow of migrants from different countries. We show a positive causal impact of immigration on local innovation and wages at the five-year horizon. The positive dynamic impact of immigration on innovation and wages dominates the short-run negative impact of increased labor supply. A structural estimation of a model of endogenous growth and migrations suggests the increased immigration to the United States since 1965 may have increased innovation and wages by 5 percent."

For-Profit Teacher Training

By Jeffrey Miron.

"Many public schools face persistent teacher vacancies. Lacking fully certified candidates, they often hire uncertified teachers instead.

Evidence from Texas shows that expanding certification to for-profit teacher training programs

reduced schools’ reliance on uncertified teachers. … [T]he lower-cost training routes [also] brought new types of certified teachers into the profession.

Teachers from for-profit programs

were of lower quality than standard-trained teachers as measured by turnover rates and … the average increase in their students’ standardized test scores … [But] they were significantly better on both metrics than uncertified teachers.

Also,

the main effect of the policy for teachers was to reduce the time and cost of training[,] … [suggesting] that the reduction in teacher training requirements was a net positive for public education in Texas.

Yet again, having fewer government rules facilitates more efficient outcomes."

The Elevator Problem: How Rent-Seeking and Regulation Make Modern Life Unaffordable

By Patrick Carroll of AIER.

"On July 8, 2024, a guest essay by Stephen Smith on elevator policy was published in The New York Times. Though this may seem like a rather dry topic at first glance, Smith’s essay quickly dispelled that notion. The piece immediately went viral and has sparked a considerable amount of commentary from across the political spectrum. 

In the essay, Smith summarized the findings of a lengthy report on elevators that he had authored in May of that year for a think tank, the Center for Building in North America, which he founded in 2022. Prompted by a personal struggle with a lack of elevator access, Smith conducted a comprehensive review of the global elevator industry with the goal of answering a very specific question: Why are there so few elevators in North America compared to the rest of the world? 

“Despite being the birthplace of the modern passenger elevator, the United States has fallen far behind its peers,” he writes in the report. 

While the US has more than 1.03 million elevators — one of the highest totals in the world — it has fewer elevators per capita than any other high-income country for which data can be found, and Canada’s position on a per capita basis is similar. 

“…Part of this absence is due to the dominance of freestanding single-family houses in North America,” Smith acknowledges, “but even apartments in the United States are less likely to have elevators than those in much of Europe and Asia.” He points out, for example, that while New York City and Switzerland have similar populations, and a greater percentage of New Yorkers than Swiss live in apartment buildings, New York only has half the number of passenger elevators. 

“No matter how you slice the numbers,” he says, “America has fallen behind on elevators.” 

Smith’s findings all pointed to cost as the major factor. In Canada and the US, he says, new elevator installations cost at least three times as much as in Western Europe — roughly $150,000 compared to $50,000. What is driving this cost differential? Smith spends the majority of the report outlining three main culprits: mandatory minimum cabin sizes, labor issues with elevator installers, and technical codes and standards, which are harmonized for practically the whole world except the US and Canada. 

He writes: 

The North American approach is one of extremes. American and Canadian elevators have the largest cabins, the strongest doors, the most redundant communication systems, the best paid workers, and the most diversity of codes on the one hand. And in exchange, Americans and Canadians have the highest prices, the most limited access, the most uncompetitive market for parts, and the most restricted labor markets.

‘One of the Most Powerful Construction Unions in North America’ 

Smith’s comments on the labor point have attracted particular attention, because the inefficiencies are so glaring. As he wrote in The New York Times: 

Architects have dreamed of modular construction for decades, where entire rooms are built in factories and then shipped on flatbed trucks to sites, for lower costs and greater precision. But we can’t even put elevators together in factories in America, because the elevator union’s contract forbids even basic forms of preassembly and prefabrication that have become standard in elevators in the rest of the world. The union and manufacturers bicker over which holes can be drilled in a factory and which must be drilled (or redrilled) on site. Manufacturers even let elevator and escalator mechanics take some components apart and put them back together on site to preserve work for union members, since it’s easier than making separate, less-assembled versions just for the US. 

National Review economics editor Dominic Pino has noted, along with City Journal contributor Connor Harris, that this is a textbook example of what’s known as featherbedding, a practice in labor relations where unions obtain “make work” rules so that more union workers can be employed. 

The main elevator union in Canada and the US is the International Union of Elevator Constructors (IUEC), which Smith points out is “one of the most powerful construction unions in North America.” A 2011 comment from its General President, Dana Brigham, is revealing. 

“We can’t afford to sit back and see our trade dumbed down through factory prefabrication and preassembly to a point where all our members will have to do on the job is simply uncrate the elevator, set it, and plug it in,” Brigham said. Responding to this quote, Pino quips: “Heaven forbid elevators be easy to install.” 

It’s no wonder that featherbedding has a bad reputation. As Leonard Read observed in 1960, these practices are “as obviously absurd to the layman as they are disgusting to the economist.” 

In modern jargon, the economist’s disgust is often expressed by characterizing these practices as a kind of rent-seeking. Indeed, Alec Stapp, co-founder of the Institute for Progress, recently cited the elevator union rules that Smith uncovered as a good example of this concept. 

The notion of rent-seeking comes from the public choice school of economics, specifically the work of economists Gordon Tullock and Anne Krueger. Developed in the ‘60s and ‘70s, rent-seeking refers to any practice where you are trying to increase your wealth by changing the rules of the game, as compared to profit-seeking, which is trying to increase your wealth by being more productive. 

Common examples of rent-seeking include lobbying for tariffs or subsidies — or, in this case, union featherbedding. Profit-seeking, on the other hand, would include activities such as research and development aimed at creating new products to sell to customers. 

The word “rent” in this context refers to the old economic definition of rent, which is about the excess returns yielded by a factor of production, and not the colloquial definition of a payment made for the use of property.

Elevators Are Just the Tip of the Iceberg 

The other two factors that Smith discusses — minimum cabin sizes and technical codes and standards — are a classic case of government regulations making things considerably more expensive than they need to be (and regulation, particularly licensing, no doubt contributes to the labor issues as well). 

Now, if the mandated wastefulness that we find in the elevator industry were unique, it would still be cause for alarm, but the absurd truth is that regulations like this are everywhere. 

“When most people go through their daily lives, they don’t think about the ways in which government regulations are making their lives more difficult,” writes economist Scott Sumner, reflecting on Smith’s elevator story. “In almost every case I come across with systematic inefficiency, the root cause is counterproductive regulations.” 

It feels like every few months, a story like this comes along that grips the public’s attention. Calls for reform are heard, a public outcry fills the airwaves, maybe legislation is introduced. But it rarely occurs to people that these stories form a pattern. As such, we’ve fallen into this routine where our news feeds periodically become dominated with the latest absurd regulation story, and then at best we play whack-a-mole with legislation designed to address the Current Thing. 

Perhaps, if we can focus on the bigger picture, we should consider trying a different approach. Maybe there will come a point where we realize that news-driven piecemeal deregulation isn’t particularly effective, and more fundamental changes, such as blanket limits on government intervention in the economy, must be considered."

Adam Smith on markets and their potential to benefit the poorest in society

Ginny Seung Choi & Virgil Henry Storr. From the journal Constitutional Political Economy.

"Abstract

Revisiting Adam Smith can be a useful way to resurface key aspects of how markets work that are underemphasized in current scholarship. This is especially fruitful when Smith’s claims have strong support within the political economy literature. This article focuses on Smith’s various arguments about the impact of markets on the least advantaged, and whether there is support for his claims in the contemporary literature. Despite advances in the last several decades, and indeed since the Industrial Revolution, poverty remains a worrisome problem. Additionally, inequality between countries and inequality within countries remain social challenges. Adam Smith, especially in The Wealth of Nations and The Theory of Moral Sentiments, has highlighted the potential of markets to improve the material conditions of the poorest in society."

Excerpts:

"Thus far, most global efforts to address the problems of poverty and inequality (perhaps unsurprisingly) have tended to be top-down. In 2015, for instance, all the members of the United Nations adopted 17 Sustainable Development Goals. These goals meant to serve as a call to action for member states and drive an agenda aimed at eliminating poverty, reducing inequality, encouraging economic growth, and promote inclusion and sustainability. It is unclear, almost a decade later, that this top-down effort has been successful. And, although the strategies members agreed to adopt called for expanding trade and promoting markets, they instead encouraged aid, and the focus was on countries adopting certain regulations and pursuing interventions that would ensure that the “right” kind of development occurred. Arguably, markets are frequently viewed as the cause rather than the cure for inequality and poverty." 

"In this article, we argue that markets are the best way out of poverty and toward more equal societies. Despite poverty and inequality still being problems, the evidence suggests that markets are not the problem but are part of the solution. Indeed, the potential of markets to reduce poverty and inequality is a lesson that we arguably should have learned from Adam Smith. More importantly, however, Smith encourages us to focus less on inequality and more on the conditions of the poorest."

The warmth of collectivism (illustrated by all the countries that have passed Venezuela in per capita GDP)

Tweet From Eyal Yakoby. 

 

Philadelphia’s Avenue of the Arts 2.0 Is a Risky Revival

A $150 million campaign to restore the run-down street that is host to many of the city’s performing-arts institutions is noble—but could well backfire

By Michael J. Lewis of The WSJ. Excerpts:

"The sad truth is that Philadelphia’s commercial streets have been ailing for some years. Online shopping has ravaged retail in Center City (true Philadelphians do not say “downtown”), and it is not as if there is a surfeit of boutiques searching for fashionable new quarters. One of Jane Jacobs’s other insights is that a city’s most vibrant neighborhoods have a mix of new and old buildings, because it is the low-rent older ones that let the entrepreneur take risks and try something new." 

"A city is an infinitely complex organism, where commerce, urban amenities, street traffic and pedestrian life interact in mysterious ways. Decisions made with the noblest of ideals can have unintended consequences. Philadelphia has been here before. In 1975, on the eve of another national anniversary, the city created the Transitway, a sweeping transformation of Chestnut Street—then the city’s most successful commercial corridor. It would be closed to automobile traffic during working hours, with the exception of buses, turning it into a pedestrian mall by day. After an initial flourish of activity, commercial life declined. Ultimately, it succeeded only in shifting business a block south. A few decades later, the Transitway was abandoned, traffic resumed, and the concrete planters with their shriveled pear trees and ginkgoes were quietly removed." 

In the Western world all forms of pollution, other than greenhouse gases, are in decline

See ‘The Powerful Primate’ Review: An Energetic Evolution: From early on, what has set the human species apart from all others is the ability to direct ever-increasing power toward our ends by Gregg Easterbrook. He reviewed the book "The Powerful Primate: How Controlling Energy Enabled Us to Build Civilization" by Roland Ennos. Excerpts:

"In the Western world all forms of pollution, other than greenhouse gases, are in decline. U.S. emissions of greenhouse gases peaked in 2007 and have declined since, regardless of who’s in the White House. Last year the United Nations’s Intergovernmental Panel on Climate Change projected that total global greenhouse-gas emissions will peak in the next five to 10 years and enter long-term decline as solar, nuclear and natural gas come to dominate power production.

Air pollution in Beijing is down by about half compared to a decade ago. The notoriously smoggy air of Mexico City has gotten much clearer. Hannah Ritchie, the University of Oxford data scientist and author of “Not the End of the World” (2024), notes that China is “deploying clean energy technologies at home far faster than any other country.”"

"Nature is not a fixed permeance that we are, as he says, “damaging.” Nature is dynamic and ever-evolving. Many of its aspects would have changed whether we were here or not."

"already the trends are toward renewable power and less waste, including in mines and factories." 

There was more to the slums than abject poverty. For a large number of immigrants life in the tenements was an improvement over their old lives

See ‘A Slumless America’ Review: Helping the Other Half Live by Howard Husock of AEI. He reviewed the book In “A Slumless America: Mary K. Simkhovitch and the Dream of Affordable Housing” by Betty Boyd Caroli. Excerpts:

"Like other reformers, including Catherine Bauer and Edith Elmer Wood, Simkhovitch saw slums through the narrow prism of their deplorable physical conditions, such as overcrowding. She overlooked what Tom Buk-Swienty, a biographer of Jacob Riis, a 19th-century reformer, has observed: “There was more to the slums than abject poverty. For a large number of immigrants life in the tenements was an improvement over their old lives. They worked, paid rent, fed their children and had hopes and dreams.”

By 1930, Wald noted the large number of “empties” on the Lower East Side; immigrants had moved up and out to Brooklyn. Simkhovitch and her fellow housing activists viewed slums through what can be called a reformer’s gaze, certain they would not want to live in one—but they overlooked the slums’ dynamism, thanks to shops, churches, synagogues and mutual-aid associations, none of which would be found in the public housing soon known as the projects.

It would have been a lot to ask that Simkhovitch, idealistic and self-sacrificing, predict that immigrant poverty and its housing conditions would be ameliorated with time. Or that the public housing she championed would itself deteriorate so badly that, by 1990, the federal government would label much of it as “severely distressed”—and demolish it for having become a latter-day slum."

"But it would seem a serious oversight for Ms. Caroli not to mention that Simkhovitch’s housing triumph was not an unalloyed improvement. By 1957, even Bauer, arguably more influential in promoting public housing, had changed her mind, labeling it “dreary” and unpopular." 

Section 122 Can’t Carry Trump’s Tariffs

It requires a balance-of-payments deficit—a problem that has become obsolete

By Phillip W. Magness. Excerpts:

"The U.S. has run trade deficits for most years since the mid-1970s. But Mr. Trump’s reading of Section 122 is erroneous. The relevant statute allows only tariffs that “deal with large and serious United States balance-of-payments deficits,” “prevent an imminent and significant deprecation of the dollar,” or facilitate an international agreement to correct a “balance-of-payments disequilibrium.”"

"While the U.S. current account is in deficit, the capital account runs a large surplus, effectively balancing it out. Under this full accounting, the current U.S. balance-of-payments deficit is close to zero."

"the problem Congress had in mind when it crafted Section 122 in the early 1970s vanished shortly thereafter." 

"A balance-of-payments crisis could happen when sustained demand for a particular currency depleted the U.S. government’s official reserve holdings, thereby threatening the stability of the peg."

"Records from 1973 show that Congress had this exact scenario in mind when it drafted Section 122. The committee report for the bill noted that a “large decline in the U.S. net international monetary reserve position would be evidence of a serious balance-of-payments deficit.”"

"America eventually settled on the floating exchange system we have today. And so we left behind any possibility of a problem that would trigger Section 122. As Milton Friedman explained in 1967, “a system of floating exchange rates completely eliminates the balance-of-payments problem.”"

"Solicitor General John D. Sauer [said] . . . that Section 122 tariffs aren’t a viable substitute for IEEPA, because “trade deficits . . . are conceptually distinct from balance-of-payments deficits.”" 

A Global Minimum Tax Means Price Fixing

We punish anticompetitive behavior in the private sector but permit it in the public sector

Letter to The WSJ.

"Kevin Brady’s “An End to Double Taxation” (op-ed, Feb. 12) is right to applaud the U.S. exiting the global minimum tax on companies. The U.S. should go even further, fostering agreements that institute antitrust enforcement for governments, not only companies.

The U.S. Sherman Act of 1890 made it illegal for competing companies to engage in horizontal price fixing, potentially punishable by prison time. Private antitrust enforcement occurs even though customers can voluntarily not buy at the higher prices upon which they’ve colluded.

Yet price fixing among governments, like that of Pillar 2 (the Organization for Economic Cooperation and Development’s global minimum tax proposal), is legal and common. In contrast to the private sector, government collusion is legal even though customers are mandated to pay the colluded-upon prices. Citizens can’t opt out of the national taxes charged. It’s a striking contrast: In the private sector, the price-fixers may face jail time; in the public sector, the customers not paying the publicly fixed prices do.

Bureaucrats including Janet Yellen, Joe Biden’s Treasury secretary, advocate for Pillar 2. They justify government collusion to avoid a “race to the bottom” in taxation. I’m sure private companies would also prefer to avoid competition in pricing their goods and services, but for consumers, that race is desirable. Should companies colluding on price-fixing be allowed to use the Yellen defense?

Only self-serving bureaucrats view rising after-tax incomes as a negative. It’s not a race to the bottom; it’s healthy price competition. Such tax competition among U.S. states protects local taxpayers from California’s and New York’s levels of taxation and cuts individual and corporate income taxes. Ireland’s lower tax serves the same competitive role in Europe. ​

One may argue that other foreign governments charging higher taxes benefits the U.S. if we can opt out unilaterally. That’s short-sighted. If other countries have high taxes, wealthy customers abroad will have less money to spend on buying American goods and services.

The U.S. should take the lead in pushing for more price competition, not only in the private sector but also in the public one.

Tomas J. Philipson

The University of Chicago" 

America’s Trade Deficit Is a Sign of Strength

A country runs trade deficits whenever it attracts more global capital than it repels

Letter to The WSJ.

"I hope that President Trump will read Joseph Sternberg’s column describing the economic doldrums inflicted on Europe by the European Union’s economic interventions (“Hurrah! Europe Is Fighting Over Economic Policy,” Political Economics, Feb. 13). Should he do so, the president might rethink his assertion that the EU has been “screwing us on trade”—a faulty conclusion that Mr. Trump grounds on the fact that the EU has consistently run annual trade surpluses with the U.S.

To describe real per capita gross domestic product growth in the EU as strong since 2009 would be generous and far from accurate; it has hardly grown. In the U.S., by contrast, real per capita GDP rose over these same years by about 32%. And yet in each of these years the U.S. ran a trade deficit with the EU, as well as with the rest of the world, while the EU, with the exception of 2022, ran a trade surplus with the rest of the world.

These data point to a reality that Mr. Trump refuses to acknowledge—namely, a country or region runs trade deficits whenever it attracts more global capital than it repels, and it runs trade surpluses whenever it repels more capital than it attracts. The EU consistently runs trade surpluses and the U.S. trade deficits not because the EU is cheating or besting America at trade but rather because the EU’s growth-stifling policies repel global investors while America’s more market-oriented policies are attractive to investors.

Mr. Trump’s obsession with putting an end to U.S. trade deficits will make America repel global investors.

Donald J. Boudreaux

George Mason University" 

Newsom’s Climate Policy Backfires

As refineries close, California is importing more foreign oil

WSJ editorial. Excerpts: 

"California has lost roughly a quarter of its refinery capacity since Mr. Newsom became Governor in 2019."

"the state’s burdensome regulations—e.g., its cap-and-trade program, low-carbon fuel standard and threatened tax on “excessive” gross margins—make it uneconomic to operate older facilities."

"California’s refined fuel imports have increased by more than 30% compared to late 2019"

"the state’s anti-fossil fuel regulations is higher CO2 emissions from all that transport to get the oil to California."

"Californians are paying $1.67 a gallon more for gasoline than the national average." 

The Economics of Illegal Drugs

As a teenager I saw the war on drugs up close. Then I studied it as an economist and saw it differently

By Roland Fryer. Excerpts:

"When demand for a drug is inelastic—meaning users don’t reduce consumption much even as prices rise—supply-side enforcement doesn’t starve traffickers. It enriches them."

"When enforcement raises costs, the street price goes up. If demand is elastic, consumers cut back, total spending falls, and less money flows to traffickers. But if demand is inelastic, as decades of evidence suggest it is for hard drugs, consumers cut back only modestly, total spending increases, and more money flows into the drug trade."

"legalize and tax. When demand is sufficiently inelastic, an excise tax on a legalized drug . . . reduces consumption more than any “war” on the drug. With legalization, producers prefer paying the tax to going underground, and enforcement costs collapse."

"in the 1980s and ’90s. With the rise of crack, homicide rates doubled among black males 14 to 17 while fetal deaths among blacks sharply increased. Yet even as crack use persisted at 60% to 75% of its peak level through 2000, the violence almost disappeared. The initial violence was driven not by drug use but by the struggle to establish property rights in illegal markets. Once those rights were established and crack prices fell, the violence subsided."

"Portugal and Switzerland represent partial steps: decriminalizing use while keeping supply illegal, or medicalizing supply for the most dependent users."

"Portugal decriminalized all drugs in 2001 and redirected resources to treatment. Annual drug-related deaths fell from 76 to 16 by 2012; HIV infections among users fell more than 90%; drug use didn’t spike."

"Switzerland began prescribing pharmaceutical-grade heroin to its hardest cases in the 1990s. Muggings by participants dropped 70%; opioid-related criminal cases nationally declined from 20,000 a year to 5,000."

"cocaine retails at 262 times its farm gate price—a markup attributable to the risk premium of illegality."

"addicts respond far more to permanent price changes than to temporary ones."

"In November 2025, the Congressional Budget Office’s director testified that he had no evidence the interdiction campaign has affected drug use or prices in the U.S. A classic RAND Corp. study found decades ago that treatment is 23 times as cost-effective as source-country control and 10 times as cost-effective as interdiction."  

Claims that government-funded centre-based daycare and pre-kindergarten programs promote positive early-childhood development unsubstantiated; research remains inconclusive

By Ben Eisen of The Fraser Institute.

The Impact of Daycare Participation on Children's Development: A Review of Recent Evidence

• In recent years, Canadian governments have made large financial commitments to expand access to and participation in formal daycare centres. One of the stated rationales for these expenditures is that they will have a positive impact on child development.
• This study examines that premise by reviewing recent empirical research on the effects of participation in centre-based daycare and pre-kindergarten programs on child development.
• The review is illustrative rather than comprehensive. We selected studies based on their prominence, methodological credibility (randomized, quasi-experimental, or meta-analytic designs), and policy relevance.
• The results from the studies examined here are mixed. One study from Boston shows significant positive effects from childcare participation on academic attainment. But other studies from New Haven and Ontario as well as a meta-analysis from across OECD countries show null or mixed effects on child development outcomes. Studies from Quebec and Tennessee show negative results.
• Taken together, the recent evidence remains inconclusive about whether participation in formal childcare has an effect on children’s well-being and by how much. On balance, the studies reviewed here support the long-standing reality that evidence about the developmental effects from participation in centre-based childcare are mixed, often modest, and contingent upon a wide variety of factors.
• Policymakers should therefore be modest about any claims they make about the developmental effects from government expenditures designed to expand participation in centre-based daycare.

Friedman on Immigration: Setting the Record Straight (or why the “keyhole solution” of allowing immigration with restricted access to government benefits might be a good idea)

Christopher Freiman. 

"Even people who are otherwise enthusiastic about a free market in labor can get cold feet about immigration once redistribution enters the picture. Some are fond of quoting Milton Friedman, who famously (or infamously) said:

“It’s just obvious you can’t have free immigration and a welfare state.”

On this view, immigration is fine under fully free market institutions, but in the actual world with its abundant government-provided benefits, immigration restrictions are justified to protect taxpayers from the added expense that could arise if immigrants consume these benefits. But this conclusion is too quick, and even Friedman’s position is more nuanced than people on both sides of the immigration debate tend to realize. 

An initial point, though: the concern about the fiscal cost of immigration is overstated. For one reason, in the United States, most welfare spending goes to the very young or the very old. Immigrants, by contrast, are disproportionately of working age.  

Setting that point aside, Friedman’s own view wasn’t that immigration as such is harmful. He argued that legal immigration is the problem, precisely because it allows immigrants to access government benefits. By contrast, he thought illegal immigration was beneficial. As he put it: “It’s a good thing for the illegal immigrants. It’s a good thing for the United States. It’s a good thing for the citizens of the country. But it’s only good so long as it’s illegal.” Friedman’s reasoning was that illegal immigration enables mutually beneficial market exchange while limiting immigrants’ access to government benefits.

Now, many fiscal conservatives balk at Friedman’s recommendation—namely, if the overconsumption of government resources is the problem with lawful immigration, the solution is to encourage people to break the law. I understand this reaction, but I admit I don’t share it. In my view, whether it’s okay for someone to do something doesn’t depend on whether lawmakers give them written permission. For instance, did you know that it’s against the law to drive on Cape Cod’s National Seashore’s beach if there’s not a tire-pressure gauge in your car?  Nevertheless, I have no moral objection if you drive on the beach gaugelessly. Regardless of whether government officials approve, this is just a peaceful activity that doesn’t violate anyone’s rights.

Maybe you disagree with me. Still, as others have suggested, there’s another way to accommodate Friedman’s general idea: admit immigrants as lawful permanent residents but restrict their access to certain government resources. Economists sometimes call this a “keyhole solution”—if the problem is immigrants’ consumption of benefits, then design a policy that narrowly targets that problem rather than restricts their freedom to immigrate entirely. 

The main objection to this sort of policy seems to be moral rather than economic. Indeed, Friedman himself was asked about it and he replied that he found the proposal unappealing partly because it’s not “desirable to have two classes of citizens in a society.” That’s a good point. It’s unfair for a government to give some citizens taxpayer-financed benefits but not others. If two people live, work, and pay taxes within a country, government officials should treat them equally, which involves giving them both equal access to government resources. 

Notice, though, that a policy of immigration restriction also treats citizens and prospective immigrants differently—it gives citizens, but not immigrants, access to domestic labor markets, private associations, educational opportunities, and more. Consequently, a principle of equal treatment actually seems to imply open borders. Given that Friedman rejects this option, the task becomes that of identifying the second-best solution. (Also, it’s not clear that Friedman can square his objection to keyhole solutions with his endorsement of illegal immigration, which would presumably also create two classes in a society.)

Why think that a policy of open immigration with restricted access to benefits is better than outright exclusion? The reason, in brief, is that admission with conditions treats prospective immigrants betterthan exclusion. A policy of open immigration with restricted benefits at least gives people the option to move, and it’s hard to see how giving someone a new option could make them worse off.

Here’s an analogy. Suppose John is entering the job market. One employer offers him a job with health insurance and a retirement plan. The next day, he receives another offer—this one comes with no benefits, but a much higher salary. Even if you think he should take the first job, it seems perfectly permissible to offer him the second. John is no worse off for having another option. If he doesn’t want to take it, he can simply decline it. And if he does prefer higher pay without benefits, he’s clearly better off for having the option.

John’s case is analogous to the case of a prospective immigrant who expects to earn significantly more by moving to a country where her access to government benefits is limited. If she prefers having access to a wider range of government-provided benefits in her current country to having higher earnings but fewer benefits in a new country, she can decline to move; in this case, she is no worse off for having the option. But if she prefers higher earnings with fewer benefits, the option makes her better off.  Just as it’s permissible—indeed, probably good—to offer John the extra option, so too is it permissible to offer prospective immigrants the extra option. 

It’s also worth highlighting another important aspect of restricting immigrants’ access to benefits rather than restricting their movement entirely. Admitting immigrants as lawful permanent residents removes the threat of deportation, among other consequences, that accompanies undocumented entry into a country. Even if you agree with Friedman (as I do) that the keyhole solution of admitting immigrants with reduced access to benefits isn’t totally fair, it’s still more fair than denying prospective immigrants the option of safely moving at all."

The Editorial Board of the Washington Post explains what shouldn’t – but, alas, what nevertheless today does – need explaining: Government-run grocery stores will fail to improve the lives of their customers

From Cafe Hayek.

"The economics of public stores are fraught. By lowering prices below the market rate, stores struggle to fulfill surging demand and shortages become inevitable. That was the case at Kansas City’s Sun Fresh Market, which closed last year after wasting $18 million of taxpayer money.

Sourcing and stocking perishable food products is a complex business with notoriously thin profit margins. Despite claims by progressives that grocery stores price-gouge, profit margins usually fall between 1 to 3 percent. Partly that is due to shoplifting. Finding good real estate will also be costly in a city with scarce availability. (Whole Foods is owned by Amazon, which was founded by Post owner Jeff Bezos.)

Promising free stuff sounded nice on the campaign trail, but someone needs to pay for it. When his predecessor tried to trim spending on libraries, Mamdani called it “cruel.” Now that he’s in charge, his preliminary budget plan calls for nearly $30 million in library cuts. Those and many other cuts are probably necessary to get the bloated city budget on a more sustainable footing.

…..

The mayor has said before that his grocery idea would be “political experimentation.” But as the Big Apple faces a $5.4 billion budget shortfall and Mamdani threatens a 9.5 percent hike in property taxes, it’s foolish to spend money studying a foregone conclusion."

Would Adam Smith Support the Jones Act?

Why The Economist is wrong about Smith’s stance on protectionist maritime laws.

By Caleb Petitt of The Independent Institute. 

"In an article in The Economist, it was claimed that Adam Smith would likely have supported the Jones Act because he supported the Navigation Acts. This claim is wrong on two counts. First, the idea that Smith supported the Navigation Acts is either overstated or entirely false. The Navigation Acts did not have a single aim or apply to a single sphere of commerce. Rather, they were seen both as promoting defence and opulence, and the clauses can largely be divided into those that apply to trade with Europe and those that apply to their colonies. There are four combinations of spheres of regulation and reason for regulating that could have been used to support the Navigation Acts: (Colonies, Opulence), (Colonies, Defense), (Europe, Opulence), and (Europe, Defense).

Smith clearly rejected support for the Navigation Acts for three of the four reason-sphere combinations. He advocated the relaxation or repeal of the Navigation Acts as regulations on the colonies, rejecting them as sources of defense and opulence. He also clearly stated that the Navigation Acts, as they related to European trade, were harmful to British opulence, leaving only European regulations for defensive purposes as the only possible justification for the Acts.

The European regulations were also meant to regulate trade specifically with the Dutch, not European trade generally. Smith acknowledged that the Navigation Acts were targeted at the Dutch, but also believed that they had not hindered Dutch trade, had not helped England in her wars against the Dutch, or reduced Dutch naval power. The Navigation Acts targeted the Dutch because the Dutch were the principal country engaged in the carrying trade, a country moving goods between two foreign countries, which was seen at the time as a uniquely beneficial manner of trade. That means Smith undermined a reason for supporting the Navigation Acts when he argued against the idea that there was anything special about the carrying trade.

Smith’s acknowledgment and emphasis of the point that the Navigation Acts were targeted against the Dutch also undermined support for the Navigation Acts further undermined support for them. The Dutch were strong rivals and dangerous enemies when the Navigation Acts were passed. But since then, Dutch and English interests were harmonized with the Glorious Revolution, which positioned France, not the Netherlands, as England’s chief rival. Even if Smith thought the European regulations in the Navigation Acts were effective, which appears unlikely, he certainly saw that the regulations against the Dutch were outdated in the wake of the Glorious Revolution. 

Second, regardless of Smith’s view of the Navigation Acts, Smith would be appalled by the Jones Act today because the empirically demonstrable impacts of policies shaped his policy views. You could not simply say a restriction on free trade was justified for national defense to get Adam Smith on your side; you had to show that it worked. 

For example, Smith was very critical of the herring bus bounty, which was said to improve Britain’s defense by increasing Britain’s sailors and shipping. He did not say that defense was a bad justification, but said that the bounty was too large, that it encouraged fraud, that it was not well adapted to the Scottish mode of fishing, and that it increased the price of a staple food. 

If Adam Smith looked at the impact of the Jones Act today, he would see that Jones Act vessels cost dramatically more to build than comparable foreign ships, they drive up prices, particularly in non-contiguous states and territories, and that the American ship-building industry is virtually non-existent. It would be easy for Adam Smith to see that the Jones Act has not established America as a ship-building nation, has not promoted its defense, and has done more harm than good."

Should Policy Restrict Share Buybacks?

By Jeffrey Miron.

"Many politicians believe that corporate share buybacks create “perverse” incentives for firms to prioritize short-term investments over future ones. The 2022 Inflation Reduction Act included a 1 percent tax on all buybacks, and President Trump recently issued an executive order to prohibit share buybacks for underperforming defense contractors.

Recent research, however, shows that

legalizing share repurchases increased investment by 8.0–9.8 percent among public firms … [and] improved public companies’ access to equity capital.

Moreover, the firms receiving these investments

tended to be younger, smaller, and higher-growth, and typically held less cash … suggest[ing] that legalizing share repurchases allowed capital to flow from cash-rich, mature firms to cash-needy firms with greater growth opportunities.

These results make sense: Shifting cash from firms that do not have immediate productive uses to firms that do is good for economic efficiency. Inhibiting this shift stifles corporate investment and growth."

Jason Furman on AI contestability

From Marginal Revolution.

"This ease of switching has forced companies to pass the gains from innovation on to users. Free tiers now offer capabilities that recently would have seemed almost unimaginable. OpenAI pioneered a $20-per-month subscription three years ago, a price point many competitors matched. That price has not changed, even as features and performance have improved substantially.

One recent analysis found that “GPT-4-equivalent performance now costs $0.40/million tokens versus $20 in late 2022.” That is the equivalent of a 70 percent annual deflation rate — remarkable by any standard, especially in a time when affordability has become a dominant public concern.

And this is only the foundational model layer. On top of it sits a sprawling ecosystem of consumer applications, enterprise tools, device integrations and start-ups aiming to serve niches as specific as gyms and hair salons.

Users aren’t the only ones switching. The people who work at these companies move from one to another, a sharp contrast to work in Silicon Valley during the era of do-not-poach agreements."

The Atlantic’s Critique of Homeschooling Ignores the Real Education Crisis

By Corey A. DeAngelis. Excerpt:

"The Atlantic recently ran a story headlined “He Was Homeschooled for Years, and Fell So Far Behind.” It profiles Stefan Merrill Block, who was homeschooled in his early years and later struggled to catch up once he entered traditional schooling. But one rough experience doesn’t invalidate an entire movement that is delivering superior results for millions of families across the country.

Homeschool students are outperforming kids in government schools by a wide margin. Brian Ray’s peer-reviewed systematic review in the Journal of School Choice examined dozens of studies on the topic. Seventy-eight percent of those studies found homeschoolers scoring significantly higher academically than their public school peers. They beat traditional school kids by 15 to 25 percentile points on standardized tests. These solid results hold up regardless of family background, income level, and whether the parents ever held a teaching certificate.

Government schools deliver exactly the opposite outcome. In Chicago alone, there are 55 public schools where not a single kid tests proficient in math. They spend about $30,000 per student each year and still fail to produce basic proficiency. The Nation’s Report Card shows nearly 80 percent of US kids aren’t proficient in math. That’s the real crisis staring us in the face, and it demands accountability from the system that claims to serve our children."