Chevron Deference Is Gone. Where Is Kagan’s ‘Massive Shock’?

Loper Bright isn’t without costs, but it has benefits too—and it hasn’t proved particularly disruptive.

By John Chisholm. He is a trustee of the Santa Fe Institute and of the Foundation for Economic Education. Excerpts:

"When the Supreme Court ended Chevron deference, one of the most consequential doctrines in American law, Justice Elena Kagan warned in dissent that it would “cause a massive shock to the legal system.” Two years later, that hasn’t happened.

In Loper Bright Enterprises v. Raimondo (2024), a 6-3 majority discarded a 40-year-old rule for interpreting “ambiguous” statutes. Under Chevron v. Natural Resources Defense Council (1984), judges were obligated to defer any time a federal agency made a “reasonable” interpretation of the law. Loper Bright was the last in a series of cases in recent years narrowing Chevron. Now courts, not agencies, must determine the best reading of the law."

"Two economic lenses bring those benefits into focus, revealing why Loper Bright is the sounder doctrine in the long run."

"The first lens is regulatory stability."

"The second lens is cognitive diversity. Social scientist Scott Page has shown that for hard problems, a diverse group of decision-makers tends to outperform a homogeneous group of higher-ability experts."

"public debate and cost-benefit analyses systematically overweight Loper Bright’s costs—the same bias that drove Chevron’s centralization in the first place."

"Two years on, no “massive shock” has materialized. Agencies still prevail in most challenges. Empirical studies put their win rate at roughly 75% when courts applied Chevron and near 60% on established rules since Loper Bright." 

One City Might Have Just Cracked the Housing Crisis

By Binyamin Appelbaum of The New York Times. Excerpts:

"The Canadian government has returned 10 acres in the middle of Vancouver to the Squamish, the First Nation whose ancestors lived there. On that land, the Squamish are building the densest residential neighborhood in the country."

"Cities have largely lost the power to say yes to construction. To prevent officials from acting against the public interest, we have drained them of the power to act in the public interest. Every decision can be appealed, every complaint must be heard, every objection weighed. We are so committed to fairness that we have lost sight of the unfairness of doing nothing."

"Freed from Vancouver’s rules, the Squamish are providing the city’s residents with a chunk of the housing they so desperately need."

"Vancouver, like most cities, prioritized the interests of homeowners at the expense of everyone else"

"It works hard to prevent the replacement of houses with apartment buildings. Sometimes it even replaces apartment buildings with houses. There is an eight-unit apartment building a few blocks from Senakw on the verge of falling down. Under the city’s land-use laws, however, it cannot be replaced by a new eight-unit apartment building. A developer has proposed building three mansions instead." 

"The current generation of Squamish, raised on stories of the old Senakw village, now had the chance to build anew. They could have built single-family homes. They could have built office towers or a shopping mall. They ultimately decided to build a better version of Vancouver."

"The result was a project with more than 6,000 housing units in towers as high as 58 stories"

"Senakw “is literally what the market wants,” said Thomas Davidoff, a professor of real estate finance at the University of British Columbia who supports the project."

"The nation’s leaders frankly acknowledge that money was their most important motivation. The project was a chance for the nation to participate in Vancouver’s pre-eminent industry: real estate development. That is exactly how the economy is supposed to work. To paraphrase Adam Smith, it is not from the benevolence of real estate developers that we expect our housing, but from their regard for their own self-interest. The Squamish are going to make a lot of money, and Vancouver is going to get a lot of new housing."

"Vancouver has moved to reduce its parking requirements and to allow larger buildings in some areas."

"“Restrictive zoning has been pushing people farther and farther away from the communities that they love,” said Christine Boyle, a former Vancouver city councilor who is now housing minister for British Columbia." 

A Roundup Supreme Court Victory

A 7-2 majority stops a mass tort attempt to evade federal law on regulating a Monsanto pesticide

WSJ editorial. Excerpts:

"the Federal Insecticide, Fungicide, and Rodenticide Act (Fifra) . . . establishes a regulatory scheme for the Environmental Protection Agency to review and approve pesticides. It also expressly bars states from imposing requirements “for labeling or packaging in addition to or different from those required” by the agency."

"“For the more than three decades since, EPA has repeatedly re-evaluated glyphosate and has repeatedly concluded that glyphosate is not likely to cause cancer,” Justice Kavanaugh writes. “As a matter of federal law, Monsanto legally must use a label without a cancer warning unless and until EPA approves or requires a change.”"

"Only “if EPA determines that a given warning is necessary for a pesticide’s label and the manufacturer then proceeds to sell the pesticide without that warning, the manufacturer might face liability for misbranding,” Justice Kavanaugh explains." 

 Also see Bayer Wins Supreme Court Challenge Over Roundup Litigation: The 7-2 decision will help the company in its battle to resolve thousands of claims that the popular weedkiller caused cancer by Lydia Wheeler and Patrick Thomas of The WSJ. Excerpts:

"a federal regulator—the Environmental Protection Agency—didn’t require the product to carry a warning label"

"federal law requires it to use the EPA-approved label without a cancer warning, Justice Brett Kavanaugh wrote for the court. The goal of the federal law—to create a uniform labeling system—“would otherwise be impossible to achieve,” he said."

"The EPA has repeatedly determined that it isn’t likely to be carcinogenic in humans and doesn’t need a label that includes a cancer warning."

The Myth of Alan Greenspan as the ‘Maestro’

The longtime Fed Chairman had many successes but he fed the credit mania that led to the 2008 financial panic

WSJ editorial. Excerpts:

"The bad turn came in the 2000s after 9/11 and the dot-com bust. Influenced by then Fed Governor Ben Bernanke, Greenspan became preoccupied with the risk of deflation. In June 2003 Greenspan cut the fed funds rate to 1% and kept it there for a year, though the second Bush tax cut had passed Congress in May and the economy had begun to surge.

Greenspan tightened money slowly after that, despite rising oil and other commodity prices. Thus was born the great credit mania of the mid-2000s. These columns warned consistently in that era that the Fed was too easy for too long, and Greenspan let us know in often contentious phone calls that he didn’t like our then-lonely warnings.

Only in 2005 did Greenspan finally say publicly that housing prices had become “frothy.” But by then the credit mania and housing bubble were already long building."

"Congress pressed Fannie Mae and Freddie Mac to guarantee subprime mortgages and “liar loans.” To his credit, Greenspan in the 2000s was an ally of the George W. Bush White House in pressing Congress to shore up the capital standards of Fannie and Freddie."

"Greenspan never admitted the failure of monetary policy or of the regulators at the time who had allowed Citigroup and other banks to create the off-balance-sheet vehicles that failed." 

Chuck Schumer’s Chip Shortage

A Micron plant in New York is years behind schedule for all the reasons you’d expect

WSJ editorial. Excerpt:

"Consider Micron’s massive fabricator project in upstate New York, which it announced in October 2022. “With the CHIPS and Science bill I wrote and championed as the fuse, Micron’s $100 billion investment in Upstate New York will fundamentally transform the region into a global hub for manufacturing,” New York Sen. Chuck Schumer boasted."

"The 2022 Chips Act provided some $53 billion, plus a 25% investment tax credit, to subsidize U.S. chip-making."

"Congress in 2024 passed a law exempting some semiconductor projects from the National Environmental Policy Act’s stringent environmental reviews. But the exemptions don’t apply to Micron’s project."

"it includes hundreds of acres of wetlands and forestland that are nesting areas for endangered bats. This makes permitting and building more complicated. Trees can only be chopped down when bats aren’t nesting—i.e., from November to March."

"Construction was supposed to start two years ago, but tree clearing didn’t begin until this past January"

"environmental impact statement numbered more than 700 pages" 

The Trump Administration Gets Civil Rights Back on Track

With ‘disparate impact’ theory, the EEOC long ago departed from its mission to prevent discrimination

By Jason L. Riley. Excerpts:

"Hubert Humphrey, the liberal Democrat from Minnesota who shepherded the bill through the Senate, insisted the act didn’t “provide that any preferential treatment in employment shall be given to Negroes or to any other persons or groups.” If anyone can find “any language which provides that an employer will have to hire on the basis of percentage or quota related to color, race, religion, or national origin,” he said, “I will start eating the pages one after another, because it is not in there.”"

"Supporters noted repeatedly that Title VII’s language was unambiguous. Racial discrimination on the part of the employer had to be intentional and couldn’t be inferred from disproportionate outcomes in the hiring and promotion of minorities."

"within three years EEOC staffers began redefining “discrimination,” sidestepping the statutory language of the bill and ignoring the legislative history. They determined that statistical disparities could be used as evidence of hiring bias and that employers could be held liable for racial imbalance in the workplace, even if it was unintentional. Alfred Blumrosen, the EEOC’s first compliance chief and one of the people who drafted its initial disparate-impact guidance, later admitted that the agency’s power didn’t “flow from any clear congressional grant of authority” and that it “required a reading of the statute contrary to the plain meaning.”" 

"the EEOC’s rogue actions were endorsed by an activist judiciary. In Griggs v. Duke Power Co. (1971), the Supreme Court said hiring practices that were “neutral on their face, and even neutral in terms of intent” could be unlawful if they resulted in racial imbalances. The decision gave employers an incentive to use racial preferences in hiring to avoid being sued for discrimination." 

Zohran Mamdani, Slumlord

He wants to build more public housing when there’s no natural gas in many current buildings

WSJ editorial. Excerpts:

"New York Attorney General Letitia James, Brooklyn Borough President Antonio Reynoso and New York City Council member Crystal Hudson on Monday issued a press release condemning a months-long natural gas outage at a New York City Housing Authority (Nycha) complex in Brooklyn." 

"Perhaps the Democratic leaders could file a complaint with the city about this slumlord."

"Nycha says it needs $78 billion to bring every apartment up to standard. That’s $439,275 per unit"

"Mr. Mamdani last month proposed that the agency finance new housing projects"

"His plan would require construction workers on these projects to be paid at least $40 an hour in wages and benefits. Such wage mandates are why it cost Nycha $1,973 per apartment to install LED lights"

"Washington already covers two-thirds of Nycha’s operating budget" 

Trump Can Restore Standards to Federal Hiring

Restoring the civil-service exam would bring fairer selection and a more competent workforce

By Charles Murray. Excerpts:

"the testing component is a joke. About 25% of government job applicants take no test at all. The other 75% take the USA Hire Standard Assessment, which assesses a variety of cognitive skills. Applicants take the test online wherever they prefer and use their own unmonitored devices."

"With many candidates to choose from, no feasible enforcement mechanism can prevent hiring officials from choosing applicants they prefer because of their politics, sex, ethnicity or any other personal reason"

"84% of civil servants who donated to the 2024 presidential campaign donated to Kamala Harris, and 99% of political donations by the Servi, which represents federal workers, support Democrats"

"If the federal government could administer proctored tests in the 1950s, it can do so now." 

The Surprising Truth About Reagan’s Tax Cut

It widened the deficit—not by cutting the top rate, but purely by relieving families from automatic increases through bracket creep

By Phil Gramm and Michael Solon. Excerpts:

"Since the top 40% of income earners in America pay some 90% of income taxes, reductions in tax rates would be expected to give a larger dollar-value tax cut to people who pay the most taxes. But data from both the Internal Revenue Service and the Joint Committee on Taxation show that when Reagan took office in 1981, the top fifth of income earners paid 64% of all federal income tax, the next-highest fifth paid 21%, and the bottom three-fifths paid 15%."

"By 1985, the 1981 tax cuts, including inflation indexing of the tax brackets, had been fully implemented. The share of the individual income-tax burden had increased to 67% for the top fifth and dropped to 19% for the next fifth and 14% for the bottom 60%. By 1988, Reagan’s last year in office (and after the 1986 tax reforms), the figures were 71%, 17% and 12%.

Incredibly, by 2022, the top fifth paid 88% of income taxes, the next fifth 13% and the middle fifth 4%. That adds up to 105%, but the arithmetic works because the bottom 40% received checks from the Treasury thanks to refundable credits like the earned-income tax credit, on net paying them a total of 5% of all income-tax collections."

"Federal revenue as a share of gross domestic product grew twice as fast from 1973 through 1980 as it had grown to that point in the postwar period—reaching 19.1% in 1980, a peacetime record. Bracket creep had become bracket gallop."

"In the 1970s inflation-adjusted social welfare spending—entitlements and means-tested welfare programs—nearly tripled, but much of the cost never showed up in the federal deficit."

"both political parties supported major tax cuts in 1981"

"When inflation plunged to 3.2% in 1983, a year for which CBO had projected a 9% inflation rate, bracket-creep revenues collapsed and the deficit soared to 5.9% of GDP. By 1985 income-tax rates had been cut by a quarter, and the tax brackets had been indexed to eliminate bracket creep. The economy was in its third year of rapid growth."

"The day Reagan left office, the American economy was one-third bigger than when he arrived. Tax rates had been cut and tax brackets indexed to eliminate bracket creep. Nondefense spending was 2.5% of GDP less than it had been the day Reagan took office, and defense spending was 0.9% bigger."

"the entire increase in the deficit during the Reagan presidency resulted from the abolition of bracket creep which by definition doesn’t help anyone rich enough to be already paying the top rate"

"Even though the level of general prosperity has improved dramatically since 1988, sending real per capita income up by 80%, real means-tested welfare spending has more than quadrupled" 

Chronicle of Cuba’s Ruin Foretold

Little has changed since a leftist writer described the disaster on the island in 1970

By Mary Anastasia O’Grady. Excerpts:

"The basic creature comforts she (Alma Guillermoprieto) had taken for granted in New York, where she lived before departing to teach dance in Havana in 1970, were hard to come by"

"Cuban blackouts and brownouts date back decades. Even when fuel was readily available, a decrepit electrical grid caused regular power outages and daily life was consumed by the search for necessities."

"the ruling elite’s corrupt military conglomerate (Gaesa) controls the hard currency that comes into the country."

"Even the government isn’t allowed to audit those accounts."

"Fidel Castro had seized private property, instituted price controls, ended judicial certainty and imprisoned, executed or exiled the island’s most valuable human capital."

"The confiscation of farms, haciendas and ranches triggered an immediate contraction of the food supply. By 1960 there was a meat shortage"

"Per capita consumption of meat in 1958 was 112 pounds per year. The collectivization of the cattle industry created such disruption that not even a meager ration of 0.75 pounds of meat per week (39 pounds per year) could be met. This also applied to dairy products such as milk, butter, and cheese.”"

"in Castro’s utopia some pigs were more equal than others. Foreign guests of the regime enjoyed a privileged diet of fruits, vegetables and cheeses while in the school cafeteria she and her students met with “starch, grease and gruel.”"

"In June 2005 the national electricity system (SEN) was working at half capacity and blackouts lasted from 7 to 12 hours daily" 

Socialist economists used to say that rent control was the most efficient way to destroy a city—except for bombing

See Rent Control is Worse than Bombing by David Henderson. He goes on to explain why it might be worse. Excerpt:

"[Gunnar] Myrdal stated, “Rent control has in certain Western countries constituted, maybe, the worst example of poor planning by governments lacking courage and vision.” His fellow Swedish economist (and socialist) Assar Lindbeck asserted, “In many cases rent control appears to be the most efficient technique presently known to destroy a city—except for bombing.”" 

Live Free and Prosper

Socialists claim they haven’t experienced American prosperity. All you have to do is look around

By Andy Kessler. Excerpts:

"Last month’s trial results of Lilly’s one-time gene-editing therapy showed it can lower LDL, “bad cholesterol,” by almost two-thirds. Could this be a heart-attack vaccine? It’s certainly a sign of a prosperous society." 

"Columbia University researchers successfully demonstrated base editing of “early human embryos” to replace specific genetic letters."

"the ability to identify and eliminate debilitating diseases—for example, hereditary blindness—is nothing short of amazing."

"GLP-1s may also help stroke, kidney and fatty liver diseases as well as sleep apnea, and research is under way to treat substance abuse, psychiatric and even neurodegenerative disorders."

"women 45 to 80 “who took GLP-1 medications were about 30 percent less likely to develop breast cancer"

"Palantir tapped AI to lower early death rates from sepsis at Tampa General Hospital by more than two-thirds." 

Don Boudreaux on Miran on Tariffs

See Musing on Miran. 

"Here’s a letter to the Wall Street Journal.

Editor:

Stephen Miran attempts to justify Trump’s tariffs by insisting that these levies will shift much of Americans’ tax burden onto foreigners and thus enable significant cuts in distortionary domestic taxes (“The Low-Tax Case for Tariffs,” June 27). His case, alas, is a string of howlers.

Consider, for example, his mention of the Congressional Budget Office’s estimate that Trump’s tariffs will raise $4 trillion over the next decade (and overlook the fact that this average annual amount of revenue is a paltry 5.4 percent of current U.S. government spending). Not only does the CBO’s estimate ignore the tariffs’ negative impact on economic growth, most of those tariff revenues will be paid by Americans. Mr. Miran conveniently leaves unmentioned the overwhelming amount of empirical research showing that foreigners are paying only a tiny fraction of Trump’s tariffs – by one credible estimate only four percent.

It must also be said that the greater the burden of the tariffs that is shifted to foreigners, the lesser are the price increases that Americans pay for imports and, hence, the more muted are the tariffs’ protective effects. Yet these protective effects are ones that Mr. Trump and other tariff supporters, including Mr. Miran, routinely cite as core justifications for the tariffs.

This inconsistency in his case for tariffs is itself sufficient to discredit all that Mr. Miran says on the matter."

The FDA Can’t Manage Its Own Risk Problem

By Raymond J. March. He is a professor of economics at North Dakota State University.

"Risk management is the leading reason the Food and Drug Administration cites medical device makers for failing to meet quality requirements, which makes it all the more striking that when companies look to the agency for guidance on how to do it, the answer is not very helpful.

Keisha Thomas, associate director for compliance at the FDA’s Center for Devices and Radiological Health, told attendees at a recent industry conference that risk management should be “fluid, living, breathing, moving, evolving constantly” and “in a state of continuous improvement all the time.”

Talk about a non-answer.

Private companies—whether making medical goods or anything else—flourish or fail by assessing risk well. The FDA doesn’t face that discipline. The agency’s only real power is to remove products from the market or stop them from entering it. That is a blunt instrument applied to an incredibly dynamic market for medical goods.

More importantly, accepting risk is a matter of personal preference and available alternatives—circumstances that differ for every patient and cannot be aggregated into a one-size-fits-all standard without discarding what makes medical treatment effective in the first place.

The incentive structures are simply different, leading to different outcomes. Public regulatory bodies tend toward over-stringency—making compliance costly and difficult while also pushing patients toward less-safe alternatives. Private entities may set imperfect standards, but they better preserve the patient-physician relationships that make treatment work. When directly compared, private efforts often outperform their public counterparts.

The case of Accutane illustrates this well. Before the FDA intervened, Hoffman-LaRoche privately managed the drug’s serious risks—including its potential to cause birth defects—through a voluntary physician registration system and patient consent protocols. From 1989 to 1998, pregnancy rates among female Accutane users nearly halved under this private program. The FDA considered it a failure anyway and replaced it with its own program, SMART, in 2002.

SMART was so burdensome that many physicians stopped prescribing Accutane. Prescriptions fell 23 percent in a single year, while pregnancy rates went up. The FDA then replaced SMART with an even more stringent program, iPLEDGE, which produced similar results: more paperwork, more patient lock-outs, and no meaningful reduction in pregnancies. Patients responded by purchasing Accutane online without prescriptions—precisely the outcome the FDA’s intervention was meant to prevent.

Accutane is a drug, but the FDA’s record on medical devices is, if anything, worse. The agency approved a Swedish fertility app called Natural Cycles as the first FDA-cleared contraceptive app in 2018, years after the market had already produced dozens of similar apps, roughly three-quarters of which accurately predicted fertile days without any FDA involvement. Natural Cycles itself was under investigation in Europe for unintended pregnancies shortly after receiving its FDA blessing. It is not clear that the agency’s approval added anything the market hadn’t already sorted out—and the evidence suggests it may not have raised the bar at all.

Then there is the Owlet Smart Sock. After five years on the market, monitoring the pulse and oxygen levels of over 600,000 infants with 90 percent accuracy, the FDA sent Owlet a warning letter in 2021, declaring the product a medical device requiring agency approval. The sock was pulled. No FDA-approved alternative that monitored both pulse and oxygen existed.

As I noted at the time, the cost was the hundreds of thousands of infants who went without a reliable monitoring device. By 2022, with RSV sweeping the country, the cost of over-caution fell on the parents and infants the FDA aimed to protect.

There is a clear reason the FDA struggles to provide effective risk-management guidance and seems to flounder when asked to manage risk for others: it can’t.

Risk is best addressed by markets, not regulations or federal guidelines. The FDA’s incentives run toward removing products and avoiding blame, not toward preserving patient access and physician judgment. Ironically, it’s a real risk to our health and the healthcare sector to imagine otherwise."

New Data Lay Bare the Jones Act’s Broken Shipbuilding Bargain

By Colin Grabow of Cato. 

"The Jones Act rests upon a tacit bargain: Americans pay higher costs because of the law’s prohibition on foreign-built and internationally flagged ships transporting goods within the United States, and in exchange, they receive what the Shipbuilders Council of America describes as a “robust and competitive” domestic shipyard industrial base. But new data from the United Nations Conference on Trade and Development reveal how thoroughly that bargain has been broken.

In 2025, the United States ranked 19th in commercial shipbuilding output, accounting for just 0.03 percent of global gross tonnage delivered. The shipbuilding output of the world’s second-largest manufacturing country is measured in the hundredths of a percent. The United States was not just behind the shipbuilding powerhouses of China, South Korea, and Japan, but also far smaller countries. It was outproduced by Poland, Romania, and the Iberian Peninsula (Spain and Portugal combined). It delivered only 6 percent more gross tonnage than Croatia.

This snapshot is not an anomaly. In 2024, the United States also ranked 19th, with 0.04 percent of global output. So far this decade, the figure stands at 0.08 percent. From 2020 to 2025, 16 countries have outbuilt the United States, including the Netherlands, Norway, and Singapore (the last two of which each have populations smaller than the metro Atlanta region). Such numbers underscore the Navy’s fiscal year 2025 shipbuilding plan, as cited by the Government Accountability Office, that US commercial shipbuilding has experienced a “near-total collapse.”

There is no mystery behind this performance. US shipbuilding costs are so far out of line with global prices that demand has shriveled accordingly. Energy infrastructure company Kinder Morgan estimates that a US-built medium-range tanker would cost at least $240 million — a hypothetical, since no such vessel has actually been delivered by an American shipyard since 2017 — compared to $51 million abroad. Three containerships currently under construction in Philadelphia for Matson Navigation are running over $335 million apiece, against a maximum of $75 million to build the same ships overseas.

Such staggering cost premiums mean little demand for US-built vessels, not only for export but even within the captive domestic market. Rather than purchase new ships, for example, Jones Act carrier Pasha Hawaii has dispatched both of its 1980-built containerships to China to have their engines upgraded from steam to liquefied natural gas. The company points out that its ship, George II, was the first vessel in the world to undergo such a conversion. That distinction exists only because, in any other country, the ship would have been scrapped long ago and replaced with new construction (the average age of containerships in the global fleet is around 14 years). George II’s 1980-built sister ship, Horizon Spirit, was towed from California to China last year for its own conversion.

Overseas Shipholding Group tells a similar story. Rather than building new ships, the company is pouring over $60 million into repowering its Alaska-class tankers — the newest of which dates to 2006 — to keep them running well into the future. The US Maritime Administration places the nominal service life of a tanker at 20 years, and the Wall Street Journal recently noted that 15 is the age at which tankers begin to see their parts breaking down. Yet OSG’s chief operating officer has indicated that the company intends to run its tankers until age 40. 

The pattern extends beyond cargo ships, with the offshore wind sector and ferry services likewise opting to repurpose aging vessels rather than order new ones.

The Jones Act’s protectionist logic holds that shielding the US commercial shipbuilding industry from foreign competition ensures its strength. The evidence is an unambiguous refutation. At 0.03 percent of global output, the notion that the United States would somehow fare even worse without the Jones Act requires believing that a country home to the world’s largest economy and long renowned for its dynamism and innovation would have no commercial shipbuilding at all. It is a proposition that strains credulity.

By any objective standard, the Jones Act has failed. The shipyard industrial base is neither robust nor competitive. Forbidding Americans from using vastly cheaper foreign-built vessels in domestic commerce in exchange for shipbuilding that hovers barely above zero does not make sense. The bargain is broken, and American consumers and businesses — and even the maritime industry the Jones Act ostensibly exists to promote — are paying for it."

Works in Progress: Grid Connection Auctions

From Alex Tabarrok.

"The latest issue of Works in Progress is superb. Every article is interesting.

Chris Gillett points out something surprising: the US has plenty of electricity generation capacity ready to go, the problem is connecting it to the grid. Grid connection is complicated because on the grid, supply must equal demand at every moment in time. Even without speeding the process, however, we could get more power connected to the grid if we rationalized the ordering of connections.

The main flaw of the interconnection process is that it uses a first-come, first-served queue. This means that high-priority requests can spend years stuck at the back of the line behind other less important ones.

In essence, we have an airport congestion problem in which small Cessnas can bump 747s. Auctions for connection rights are the solution, as pointed out for airports by Vickrey and the classic paper by Rassenti, Smith and Bulfin. Gillett also emphasizes that some loads should be allowed to connect on a flexible basis: if a data center can disconnect or use backup power during the few peak hours each year, it should not have to wait years for firm service.

Gillett also has a very nice explanation of how market prices balance electricity from different sources:

Market prices signal to power plant developers about levels of supply and demand. In the same way, prices balance different energy sources based on the strengths and weaknesses of each. For instance, as more solar panels are built, the value (and therefore price) of power during the middle of the day, when the sun is shining most, adjusts downward. From December 2020 to September 2025, maximum solar output in ERCOT increased from 4 to 29.8 gigawatts. And from 2020 to 2025, the value of power at 1pm relative to the highest-priced hour decreased from 92.9 percent to 38.7 percent. As one technology type becomes overbuilt, prices reflect that and developers react accordingly.

The evolving daily price shape in response to the abundance of solar energy was a signal that the grid needed storage capacity, and power plant developers responded. From 2020 to October 2025, ERCOT went from having almost no battery storage to a combined battery discharge of 8.6 gigawatts. The same process has played out in California and many European markets."

Is Entrepreneurialism Bad?

By David R. Henderson. Excerpts:

"Imagine a product that costs $1.80 to make and sells for $2. Imagine also that the average household in America buys one of these items per week. There are approximately 134 million households in America. That means that in a given year, US households will buy 6.968 billion units and will spend $13.936 billion on this product.

Then along comes an innovator who has figured out how to produce the item at a cost of only $1.50 per unit. The innovator would ideally like to have a patent and might well get a patent. But even if he doesn’t, it will take time for competitors to notice his innovation, figure out how it works, and implement it. Let’s say it takes a year. For products with a complicated production method, that could well be an underestimate.

What will the innovator do during that year? Cut price? Maybe a little but not much. For one year, all his competitors are using a method that costs $1.80 per unit and are charging $2.00. What the innovator could do is cut the price to, say, $1.90 per unit and take a large share of the market. Let’s say he takes half the market. Then 67 million households will buy 3.484 billion of his units and will spend $6.62 billion on his product.

On each unit, the innovator makes 40 cents, the difference between the price of $1.90 and the cost of $1.50 per unit. For that year, therefore, he will make $1.394 billion. Voila! He’s a billionaire."

"Starting a successful startup is the most common way to become a billionaire"

a 2004 study he (Nobel prize winner William D. Nordhaus) wrote for the National Bureau of Economic Research, Nordhaus wrote:

Only a minuscule fraction of the social returns from technological advances over the 1948–2001 period was captured by producers, indicating that most of the benefits of technological change are passed on to consumers rather than captured by producers.

How minuscule? 2.2 percent. The remaining 97.8 percent of the gains from innovation go to consumers."

"Once other competitors imitate the innovator, the price falls and the unusual gains to the innovator go away. Consumers then get the benefits from the innovation year after year." 

Ozempic Sat Unused for Decades Because Invention Is Not Enough

Pfizer knew GLP-1s worked in 1990, but didn’t see their potential. The 30-year detour shows entrepreneurship matters as much as raw invention.

By Per Bylund. 

"Led by Ozempic and Wegovy, glucagon-like peptides (GLP-1s) have become a global phenomenon, with one in eight US adults currently taking one. Those two branded compounds, both made by Novo Nordisk, emerged from attempts to develop a diabetes drug. It effectively lowers blood glucose, slows gastric emptying, and reduces hunger, leading many patients to experience profound weight loss. In a world plagued by increasing obesity, the drugs’ utility extends far beyond diabetes treatment. So why did the formula sit untouched for 30 years after it was licensed?

Ozempic is a story of pharmacological success, but also of entrepreneurial failure. The tale provides a strong reminder that inventions and discoveries mean little unless they are combined with sound entrepreneurial judgment.

According to a paper published in the Perspectives in Biology and Medicine, a startup produced a GLP compound in the late 1980s, and pharma giant Pfizer sponsored human trials that confirmed the drug’s efficacy in reducing blood glucose levels and slowing gastric emptying. One member of the startup team, Jeffrey Flier of Harvard, explained what happened next:

I was shocked when told that senior Pfizer leadership had concluded that there would never be another injectable therapy for diabetes other than insulin. What led them to this conclusion was never explained….I had been deeply impressed by their rapid decision to invest in our company, and I was equally dumbfounded by their decision to end their investment despite convincing early evidence of the program’s success.

Confident in its own conclusions, Pfizer pulled the plug on the drug in 1991. The startup folded.

Under the terms of Pfizer’s agreement, the license remained with the Boston hospital where researchers discovered GLP-1’s mechanism and conducted the human trials. It was then acquired by Novo Nordisk in 1992, where scientists used it to develop what eventually became semaglutide, the pharmaceutical sold as Ozempic and Wegovy. While it is unclear whether, as Max Marchione put it on Twitter, the GLP-1 agonist data simply “sat in a filing cabinet for 30+ years,” Pfizer’s decision to abandon the project likely delayed its development.

While it is unclear whether, as Max Marchione put it on Twitter, the GLP-1 agonist data simply “sat in a filing cabinet for 30+ years,” Pfizer’s decision to abandon the project certainly delayed its development. Had the company continued investing in the research, it might have brought the drug to patients years earlier—and captured a significant share of what has become a $190 billion market.

Clearly, mistakes were made in the development of Ozempic, but what’s notable is that the product’s success required far more than the idea. Even a great idea is not a product and may never become one — much less a successful one. Business history is filled with cases in which inventors appear to have been deprived of the rewards of their discoveries. Many great inventions were, in some sense, stolen ideas commercialized by someone other than their inventors. George Westinghouse bought patents from Nikola Tesla, and undertook illuminating the nation while Tesla, the lone genius, struggled with poverty. Elias Howe invented the sewing machine but lost most of the revenue to Isaac Singer, who was only later compelled to pay the inventor royalties. Antonio Meucci invented the telephone but couldn’t afford to secure or defend patents from Alexander Graham Bell’s enthusiastic dissemination of the device. 

Inventors frequently failed to recognize the full market potential of their ideas. Entrepreneurial outsiders notice the discovery, develop it into a desirable technology or product, and implement strategies for manufacturing, distributing, and marketing the invention. 

Some unethical behavior, fraud, exploitation, and outright stealing certainly does exist in these stories. But it would be a mistake to reduce this entrepreneurial instinct to taking advantage of or free-riding on a mistreated genius who would otherwise have realized the great benefit, himself. In a very real sense (as GLP-1 development demonstrates), what actualizes the value of an idea is the execution: operationalizing a discovery into a product or service that people find valuable. The idea has relatively little value, compared to the scalable solution built upon it. 

We typically do not learn about it much in school, but there is such a thing as second-mover advantage. This phenomenon (that the first mover is not profitable but the second mover is) is often explained in terms of avoiding the costly mistakes that the first mover makes. But cost is not the true story. Second movers recognize — imagine — a new idea’s utility to some market segment. Like Novo Nordisk and George Westinghouse, they strive to make the implementation of the idea as valuable as possible, positioning it as valuable to potential customers. The creation may be every bit as valuable as the idea, and often more so. 

Henry Ford, for another historical example, was not the inventor of the automobile, but the innovator of the affordable car. Existing manufacturers of automobiles did not recognize the potential appeal of their horseless vehicles. Henry Ford did — and made it happen. Far from the first mover, or even the second mover, he was the first to recognize what a mass market of ordinary people wanted from a car. The other producers did not. Ford transformed a toy for the wealthy into practical transport for the ordinary.

The same type of story can be told about many successful innovations. The invention (the new thing) might have limited value, until its utility is captured, marketed, and made available to people. Entrepreneurs and investors look for the value proposition in new ventures: what would make buyers want this new thing? They ask not “is this a new thing?” but “is this new thing generating value someone is willing to pay for?” The questions may have the same answer but often do not.

The story of Ozempic is one of failed entrepreneurship, but also of its eventual success. Pfizer, judging from how the story has been told, did not recognize the value of the drug. Viewing GLP-1s as a treatment for diabetes, and nothing else, Pfizer execs failed to imagine how other consumers might value these clinical effects. 

Perhaps they were right — from the perspective of treating diabetes, another injectable may not be necessary. But they were wrong regarding the value of the drug, which arises from a different use by a different market segment. 

The Ozempic craze of today is not driven by diabetics seeking to manage their disease, which Pfizer viewed as its only potential application. Millions of non-diabetics now choose the compound for other reasons. Pfizer completely missed that value proposition."

Industrial Policies

By Jeffrey Miron and Emily Bronckers.

"Industrial policy — government effort to favor certain sectors, technologies, or firms — has a long history. Far from a fringe idea, politicians across the spectrum have promoted such policies for centuries. But the results are far more problematic than its current popularity suggests.

The pattern appeared early. Federal land grants built the transcontinental railroad and delivered real economic development — alongside spectacular corruption, fraud, and overbuilding. That combination has recurred often. Republican administrations have imposed tariffs and subsidized fossil fuels; Trump’s 2018 steel tariffs protected a narrow producer class while raising costs across industries that use steel, on net destroying jobs. Democratic administrations built the Tennessee Valley Authority — which brought electricity to rural Appalachia but became a major coal-burning polluter — and invested in green energy under Obama, producing high-profile failures like Solyndra alongside modest successes at considerable taxpayer cost. Biden’s CHIPS Act commits hundreds of billions to semiconductors; it is too soon for a full verdict, but early reports show significant cost overruns.

Proponents point to South Korea, Japan, and Taiwan as proof that industrial policy can work. But for every South Korea there is a Brazil or India, where decades of protection have produced inefficiency rather than competitive industries. Some economists question the Korean case even more directly: the industries the government subsidized were not the ones most correlated with growth, suggesting the policy may have been targeting the wrong sectors. Economists also debate how much credit belongs to government direction versus stable macroeconomics, high savings rates, and openness to foreign technology.

It helps to place industrial policies on a spectrum, with targeted subsidies and trade protection at one end, and fully planned economies at the other. The Soviet Union and Maoist China were the paradigmatic examples, and their failures were catastrophic — chronic shortages, misallocation, and collapse. Defenders of modern industrial policy argue that targeted interventions are different from central planning, and formally that is true. But the underlying problem — that officials lack the information markets generate and face political pressures that distort allocation — does not disappear because the intervention is more modest."

China’s Last Moonshot

China’s ghost cities are like a mocking glimpse of the Chinese century we were told to expect, and for which we are still waiting.

By Aaron Sarin at Quillette.

"Our rockets can find Halley’s Comet and reach Venus.
But our fridges don’t work.
~Mikhail Gorbachev 

In the hills of northeast China, the “State Guest Mansions” sit empty and silent, like the well-preserved ruins of some lost civilisation. There are 260 of these mansions, huge but tediously uniform, each of them close to completion. The project was abandoned a couple of years after launch in 2010. Now local farmers plough the surrounding land. Cattle roam the villas, along with the occasional feral dog. Inside, urban explorers climb through the open jambs and fly their drones down marble hallways, creating creepy home movies.

Similar sights can be seen all over the country, of course, in China’s famed “ghost cities” (or sometimes “ghost districts”). The skyscrapers in Tianjin’s Binhai New Area may rise no higher than in any other major city, but the silence and emptiness of the surrounding neighbourhood makes the buildings feel truly enormous: looming, forbidding, watchful. In his 2024 book Vampire State, Ian Williams describes a “ghostly conurbation” on the other side of the country, near Dongguan, that boasts the world’s largest shopping mall:

Cavernous dusty halls, layer upon layer of meandering marble-lined walkways beside the shells of hundreds of shops, but not a soul to be seen. Wires hung from ceilings like an infestation of snakes. An artificial river wound through the complex, its water stagnant and dark green.

These vast monuments to state folly provide an apt picture of the Chinese economy: the speed and scale, the single-minded vigour, and then the waste left behind. The latter feature is partly due to China’s modern problem (communists with their central planning) and partly due to China’s ancient problem (a kowtowing mandarin culture that rewards impressive visible display over efficiency).

The rot spreads far beyond the ghost-city phenomenon. Georgetown professor Ning Leng carried out research in fifteen cities across China. She found that local governments had prioritised the building of expensive wastewater treatment plants over the construction of underground sewage pipes and drainage systems. They had focused on big treatment facilities because these looked more impressive to their bosses in Beijing. Without a vital subterranean root system of pipes and drainage, the treatment plants were operating far below capacity, and pollution was pumping into rivers and lakes.

And so on, and so on. China’s vaunted high-speed rail network piled up a trillion dollars in debt; most lines now run at a loss. In 2024, 90.6 percent of the country’s regional airports had fewer than one flight per day on average. Something similar is even happening in the wake of China’s protracted real-estate downturn, as the CCP tries to rescue the Chinese economy by pouring billions into a small handful of strategic industries—AI, robotics, chips, green energy.

This bold strategy is the Communist Party’s last great moonshot (itself actually the name of a major Chinese AI startup). The fear is that if Beijing can’t dominate in these industries then it will become technologically dependent on foreign powers. The hope is that high-tech sectors can replace the fallen giant of real estate and together constitute a new driver for the Chinese economy, while simultaneously enabling Beijing to “seize the commanding heights of technological competition and future development,” leapfrogging Washington into the position of global hegemon."

Poland's GDP took off when they adopted economic freedom

Tweet from Alex Stapp.  

 

When Schools Try to Cover Up Their Failures

Social promotion and efforts to ban standardized tests are ways of shielding adults from accountability

By Jason L. Riley. Excerpts:

"Among 13-year-olds in nearly every demographic group, test scores in math and reading were flat (since 2022). And most youngsters continue to lack proficiency in both subjects."

there is "pressure on teachers to pass students regardless of classroom performance or even attendance"

"The result is a school system full of children unable to perform academically at even the most basic level."

"many teachers said that they were discouraged or forbidden by their principals from flunking students, or that they have given out failing grades that were overridden. Others said failing students was permitted if justified, but the administrative burden to rationalize failure, even for students who did not show up to school, is onerous or impossible.”"

"An Education Department study in 2024 found that 1 in 4 young adults are functionally illiterate, even though more than half received high-school diplomas."

"many of today’s high-school grads function at or below a middle-school level of education. Eliminating standardized tests wouldn’t change that reality"

"it isn’t expensive to teach children reading and arithmetic, something that was done competently for many decades on budgets much smaller than what educators have at their disposal today." 

"empirical studies have shown that smaller class sizes have minimal effect on student learning. Countries that consistently outperform the U.S. on international tests, including Japan and South Korea, have larger classes on average. So do many high-performing charter schools."

"the best-performing students in the U.S. tend to be of South Asian and East Asian heritage. They are among the groups least likely to be taught by someone who looks like them." 

Have market forces eroded Apple's monopsony power for chips?

To see how monopsony works graphically, see the Wikipedia article. Monopsony means one buyer (whereas monopoly means one seller). Similar to what happens in monopoly where the price is higher than in competition and the quantity produced is lower, in monopsony less is produced and sellers get a lower price because the one buyer has market power.

And that is something that Apple has been accused of. See Apple Is America’s Semiconductor Problem. Excerpt:

"Apple’s sheer size as a buyer puts this into perspective. In 2022, Apple bought $67 billion of semiconductor chips, a full 11% of the global market for chips across all industries. Apple buys a far larger share of smartphone and computer semiconductors, given that it accounts for half of global smartphones sales and earns 85% of all smartphones profits. Apple’s supply agreements with U.S. mobile operators demand that Apple products get the deepest subsidies and the largest share of sales."

But the recent increase in demand for chips for AI purposes means that there are many more buyers and it looks like Apple's influence is decreasing. See Apple to Raise Prices Due to Memory Chip Crunch, Tim Cook Says: The CEO tells the Journal in an exclusive interview that soaring costs make price increases ‘unavoidable’ by Rolfe Winkler of The WSJ. Excerpts:

"Apple plans to raise prices on its products to offset the surging costs of memory and storage chips, Chief Executive Tim Cook said"

"“There’s less supply at a time when consumers want devices and the memory guys are passing along huge price increases,” said Cook. “We definitely need memory pricing and supply to return to reasonable levels for consumer products. That’s the bottom line.”" (there is less supply for Apple)

"Memory companies are building more factories: Morgan Stanley forecasts that production capacity for DRAM wafers, the silicon discs on which chips are patterned, will grow 30% by 2027. Yet as suppliers prioritize the specialized AI memory, wafers for consumer tech will fall up to 15% short of demand, Morgan Stanley estimates." (so if there is more demand now with more buyers more will be produced meaning the monopsony power is being reduced)

"Companies that make PCs, game consoles, smartphones and more have raised prices"

"Morgan Stanley estimates a 15% bump for prices of smartphones and PCs in the U.S. this year."

"It is unclear how Apple could match, let alone beat, the deal terms that AI hyperscalers are offering to lock up supply. Those companies are signing three-to-five year agreements with huge cash prepayments that Apple is unlikely willing to match"

"Historically it has used its heft to wring the lowest prices out of suppliers, playing them off each other and leaving them little profit. As AI companies have stormed into the market, suddenly Apple has to wait in line." 

This last passage shows that Apple had some monopsony power that is decreasing since they used to be able to play suppliers off each other with little profit (meaning a low price as monopsony predicts) but now they have to wait in line because there are more buyers they have to compete with. 

‘Communion’ Review: The Veep’s Progress

JD Vance recounts his conversion to Catholicism and explains what he calls a ‘Christian approach to economics.’

By Barton Swaim. He reviewed the book Communion: Finding My Way Back to Faith.

"You might have thought the esteem in which he holds working folk, together with his disdain for elites who presume to know what other people need, would have led Mr. Vance to appreciate laissez-faire economics, presuming as it does that ordinary people generally know how to use their own resources more wisely than faraway eggheads. And maybe he almost did plump for free markets at one time. Early in the book, in a passage I’m tempted to think he forgot to cut, he makes the point that religious questions often involve hidden complexities. Mr. Vance draws a comparison with minimum-wage laws, which, he notes, seem like a great idea but “could do more harm than good” by dissuading employers from hiring more workers. His lesson: “The complexity counsels some humility in the face of difficult questions.”

That bit appears in Chapter 2. By Chapter 11, “A Dismal Science,” Mr. Vance has cast humility aside. Straw men populate the book’s later chapters, particularly on economic questions. He equates the free-market outlook with amoral indifference to anything apart from abstract economic-growth numbers. Reciting stories of people trampling one another to buy new tech products on Black Friday, Mr. Vance observes that “from the view of classical economics, they’re doing something far more ‘productive’ than reading a book or spending time with their children.”

Having several years ago read Leo XIII’s 1891 encyclical “Rerum novarum,” in which the pope sought to enunciate an economic outlook that avoided both socialism and capitalism, Mr. Vance attempts to express his own “Christian approach to economics,” which amounts to little more than the prescription that economic actors should exercise kindness, mercy and generosity. Employers, Mr. Vance accordingly thinks, should pay workers a fair or living wage. He doesn’t say who would define “fair” and “living”—Labor Department bureaucrats?

In one passage of egregious sloppiness, Mr. Vance quotes a paper by Vanessa Brown Calder, formerly of the Cato Institute, in which she explains the perverse effects of mandatory parental-leave benefits. “A review of states and countries with government-mandated paid leave programs indicates they harm young women,” Ms. Calder writes. “This is because parental leave policies are associated with an increase in leave-taking and childbearing, which leads to lost labor or increased health care costs for companies.” Mr. Vance fulminates: “Never have I read a purer distillation of our worship at the altar of commerce.” If he had read the paper more carefully, or even the next sentence, he would have noticed Ms. Calder’s argument: that mandated parental-leave laws discourage companies from hiring women at all, and that a host of other reforms would give them the freedom to start families without encouraging firms to penalize them."

When Food-Stamp Fraud Crosses State Lines

Since 2024, Michigan has paid more than $4 million in food-stamp funding to people with out-of-state addresses

Letter to The WSJ. 

"The Journal’s editorial board is right to celebrate the decline in food-stamp enrollment due to work requirements and efforts to combat fraud ("The Food Stamp Rolls Decline—Hurray,” Review & Outlook, June 8). To put a finer point on the fraud that the Trump administration is trying to root out, consider what my organization recently discovered in Michigan.

We found that since 2024 Michigan has paid more than $4 million in food-stamp funding to people with out-of-state addresses. That’s despite a law requiring that program recipients live in-state. The problem has grown worse each year. Out-of-state payments rose from $1.6 million in 2024 to $1.9 million in 2025. The number of out-of-state recipients is on track to rise from nearly 3,200 last year to 3,700 this year.

Under Democratic Gov. Gretchen Whitmer, Michigan has refused to share food-stamp data with the Trump administration. When will states like Michigan finally get serious about protecting taxpayers from waste, fraud and abuse?

Jarrett Skorup

Mackinac Center" 

Who Wants to Be a Trillionaire? The SpaceX IPO is a credit to Elon Musk and American capitalism

WSJ editorial. Excerpts:

"The company raised $75 billion in its public debut, nearly three times more than the previous largest IPO (Saudi Aramco in 2019). It will need that money and multiples more to achieve Mr. Musk’s ambition of colonizing Mars and mining asteroids."

"Mr. Musk’s wealth largely consists of shares in SpaceX and Tesla."

"Mr. Musk’s wealth is a tribute to U.S. entrepreneurship and innovation, which are byproducts of its free-market system."

"Mr. Musk, an immigrant from South Africa, launched the rocket company in 2002 with money he made from his PayPal startup."

"NASA awarded SpaceX a contract to supply the International Space Station. SpaceX later developed reusable rockets that greatly reduce launch costs"

"Its success, which came through trial and failure, has ended U.S. reliance on Russia to transport astronauts to the space station and launch American satellites."

"In 2015 SpaceX launched Starlink, an internet satellite company that has helped Ukraine resist Russia’s invasion and dissidents living under authoritarian regimes like Iran to communicate."

"SpaceX has created thousands of jobs in working-class communities"

"Its workers . . . receive stock options, which has allowed them to share in the company’s success." 

"the IPO has made millionaires of 4,400 SpaceX current and former employees" 

The Deceptive Statistics Behind California’s Wealth Tax

Saez and Zucman have spent years using dubious assumptions to push the case for confiscation

By Phillip W. Magness. Excerpts:

"For years the pair (Emmanuel Saez of UC Berkeley and Gabriel Zucman of the Paris School of Economics) have relied on selective accounting methods and questionable assumptions to tilt the scales in favor of confiscatory wealth taxes."

"Under the U.S. system, taxes are generally assessed on income earned over the course of a year. Since 1920, federal tax law has followed the realization principle, meaning that income must actually be realized as earnings before it can be taxed. Messrs. Saez and Zucman instead propose taxing estimated changes in a person’s net worth—including unrealized capital gains that exist only on paper. If a billionaire’s stock portfolio rises in value, they want to tax the appreciation even if the assets are never sold."

"Unrealized gains are notoriously volatile and speculative. They can disappear overnight with a market downturn. Federal courts have long viewed taxes on unrealized gains as constitutionally dubious"

"The underlying wealth estimates are deeply unreliable. Because billionaire tax returns are private, Messrs. Saez and Zucman rely heavily on outside estimates of billionaire wealth. One of their favorite sources is the Forbes 400 list."

"wealthy Americans to exaggerate rather than minimize their fortunes"

"these estimates are systematically inflated."

"the pair has repeatedly asserted that the ultrarich pay a combined federal, state, and local tax rate of only 23%, supposedly lower than the 24% working-class Americans pay."

"Messrs. Saez and Zucman’s own earlier research told a very different story. In a 2018 paper published in the Quarterly Journal of Economics, their own data files showed that the top 0.001% pay an average combined tax rate of roughly 41%."

"they changed their approach and assigned the full burden of the corporate tax to shareholders alone."

"this maneuver dramatically lowers the apparent tax rate paid by billionaires." 

"they artificially inflate the tax burden borne by lower-income Americans . . . omit the EITC from their calculations."

"Jason Furman finds that the bottom 20% of Americans face an overall combined tax burden of approximately 11%"  

Mamdani vs. Bodegas

His socialist supermarkets could put New York’s little grocers out of business

By Faith Bottum of The WSJ. Excerpts:

"Many bodega owners say the mayor has betrayed them by pushing ahead with his plan to create city-owned supermarkets. The government “should be working with us,” says Francisco Marte, 59, owner of Green Earth Food in the Bronx and president of the Bodega and Small Business Association of New York. “That type of business run by the government, they never succeed. They always fail, and they fail big and with a lot of money that could have been used for something better.”"

"But five grocers are already within a two-block radius of that proposed Harlem store, with 10 more within five blocks."

Private Property, Liberalism, and Human Flourishing

Private property enables individuals to pursue happiness through their own free choices. It also shields our individual and institutional projects from arbitrary power

By Alexander William Salter. Excerpt:

"For thousands of years, human living standards were basically stagnant: in inflation-adjusted terms, world GDP per capita fluctuated around $1,500 per year. In the nineteenth century, commercial innovations, including widespread protection for private property rights, gave rise to the Industrial Revolution. This resulted in history’s only sustained reduction in human poverty. In the United States, for example, GDP per capita in 1800 had risen to approximately $2,500 per year. It more than tripled over the next century, to $8,000 per year. Near-continuous economic growth yielded a figure of nearly $50,000 per year by 2000, and nearly $70,000 today. 

Other western nations that embraced capitalism enjoyed similar increases in material prosperity. Asian nations, such as Japan, South Korea, and (more recently) China, have also benefited from embracing private property rights. These successes strongly suggest there is something universal about the relationship between private property and economic wellbeing. It’s not culturally contingent.

Our historically unprecedented level of wealth only exists because private property enables an extensive division of labor. Exponential gains in per capita GDP would be impossible, and indeed, they have never occurred in a sustained way without productivity-enhancing specialization and trade. This decentralized process for creating and exchanging wealth requires coordination. As Ludwig von Mises recognized, private property rights are vital. Without private property, trade and markets could not exist. And without markets, there would be no market prices—critical indicators of resource value in varying lines of production. Profit and loss accounting could not be meaningful without prices, meaning businesses would have no reliable way to ascertain whether they were satisfying consumer wants. It is the system of market prices, adjusting in response to supply and demand changes, that gives commercial society its unique power to create wealth. Private property is the keystone: it holds the whole market edifice together.

The greatest benefits of the price system often emerge during times of turbulence. When war between the United States, Israel, and Iran choked off shipping through the Strait of Hormuz in early 2026, the price of crude oil spiked. Refiners, shippers, and drillers across the world rerouted and searched for new supply, responding to the price shock without needing to know anything about geopolitical stakes or possible resolutions. The price carried the knowledge so that they did not have to. 

It may seem strange to use hardship to illustrate the importance of private property and prices. But in fact, it reveals why they matter. Oil became scarcer as a result of the war. That made everyone in the world poorer. Nothing can change that so long as the conflict continues. Instead, the price system allows economic actors oceans apart to find and pursue least-cost adaptations. Non-market and non-price rationing work poorly on this scale. At least with property and prices, we know where we need to change.

Private property buttresses the market process in several other ways. Building on Mises, F. A. Hayek realized that prices allowed households and firms to benefit from each other’s private and often tacit information. The price system, founded on private property, thus functions as a powerful communication and feedback system. Ronald Coase argued that market values for owned resources allowed conflicting parties to resolve their disputes by bargaining. Armen Alchian, William Allen, and Harold Demsetz pointed out that firms’ property rights to their residual income aligned the interests of producers with consumers, and that the firm itself, as an organizational form, was possible only because private property allowed for the necessary contractual structures. The immense productive capacity of contemporary capitalism, which we often take for granted, relies on practices rooted in private property.

Human flourishing obviously depends on more than material wealth. “Man does not live by bread alone.” Yet he does need bread to live. The material abundance created by markets keeps us fed, sheltered, clothed, literate, healthy, and entertained. It also provides the means for us to pursue meaningful artistic, intellectual, and moral projects. Private property is the reason we can have all of these things."

The house doesn’t always win: Why prediction markets aren’t gambling

By Steve Swedberg of CEI. 

"“If it talks like a duck and quacks like a duck, it must be a duck.” That phrase is not reserved for ducks. It is often invoked about prediction markets, where some view them as akin to gambling. Prediction markets, after all, are exchanges where participants buy and sell contracts tied to future events, including elections, economic data releases, and regulatory decisions.

The similarities to gambling are easy to see. Both involve risk and uncertainty. Both can result in gains or losses depending on whether participants correctly anticipate future events. People put money on uncertain outcomes, some participants are chasing profits, and winners collect at the expense of losers. To many, that sounds a lot like gambling.

If that were the full picture, calling prediction markets gambling would be reasonable. Indeed, that perception has fueled calls for greater scrutiny, including the Commodity Futures Trading Commission’s (CFTC) recently proposed framework to clarify the regulatory treatment of prediction markets.

At the same time, states including Nevada, New Jersey, and Maryland have argued that prediction markets must cease and desist or obtain casino-style gambling licenses to operate within their borders. Platforms such as Kalshi dispute that view and argue that federal regulation by the CFTC preempts state gambling laws, with courts so far issuing mixed rulings.

But stopping at the similarities obscures the features that matter most. The question is not whether prediction markets resemble gambling in some respects, but whether those similarities are their most salient features.

There is a reason why “the house always wins” is an adage for casinos: most gambling institutions are structured around a house that profits regardless of the outcome. The house acts as the counterparty to bettors and sets odds designed to ensure a profit margin, commonly known as the “vig.” This built-in advantage means the casino’s interests are fundamentally at odds with those of its customers.

Prediction markets operate differently because participants trade with one another in a peer-to-peer exchange, meaning that market participants take opposite sides of a contract instead of wagering against a bookmaker. While platforms may charge transaction fees, they do not take directional positions on outcomes or profit when users lose. Instead, they function as neutral marketplaces that match opposing views about future events.

Because of this structure, prices emerge from continuous competition among traders with differing information and beliefs. As new information arrives, participants can adjust or exit positions, allowing expectations to be rapidly incorporated into prices. In structure and operation, this mechanism more closely resembles a futures exchange than a casino floor — a distinction recognized in a CEI-led coalition letter on prediction market regulation.

The distinction between prediction markets and gambling becomes clearer when examining their economic function. Like most financial markets, they attract risk-takers who speculate on differences in expectations in search of profit.

That alone does not make prediction markets equivalent to gambling. These speculators play an essential role in stock, commodity, and futures markets by providing liquidity and improving price discovery. This structure shapes how prediction markets incorporate dispersed information.

Prediction markets can also serve a hedging function. Hedging is the practice of reducing exposure to risk by taking a position that gains value if an adverse outcome occurs. As CEI Director of Finance Policy John Berlau notes, businesses and organizations exposed to political, regulatory, or economic risks can use prediction markets to take positions that offset uncertainty in those areas, much like a farmer can hedge against crop failures or an airline can hedge against fuel price volatility.

In this respect, prediction markets more closely resemble other financial markets, such as futures, options, and foreign exchange markets.

Yet risk transfer is only part of the story. Unlike the recreational activity of gambling, prediction markets generate a powerful asset: real-time forecasting data. As Berlau has noted, prediction markets allow participants to translate dispersed knowledge about elections, sports, and other events into prices that reflect collective expectations.

Empirical research finds that these prices are as accurate as — and in many cases more accurate than — polls, expert judgment, and alternative forecasting methods in high-liquidity markets. The accuracy of these forecasts depends on the process of price discovery through which new information is incorporated into prices.

A London Business School study found that about 3 percent of traders account for most price discovery. That does not mean that the other 97 percent of traders are unhelpful. On the contrary, the remaining traders provide the liquidity necessary to maintain prediction markets and incorporate information into prices.

This structure closely resembles equity, foreign exchange, and commodity futures markets, where a small group of informed traders sets marginal prices while broader participation facilitates price discovery. By aggregating dispersed information into a single market signal, prediction markets can help traders, businesses, policymakers, and the public make better-informed decisions in the face of uncertainty.

The debate over prediction markets is not ultimately about wagering but about whether policymakers will regulate an institution according to its appearance or its function. Prediction markets transfer risk, aggregate information, and generate forecasts that can improve decision-making across society.

Treating them as gambling risks imposing regulatory burdens that could limit experimentation, forecasting innovation, and the development of new information markets. When regulators mistake a forecasting tool for a casino game, innovation becomes the first casualty."