Medicare for All—with No New Taxes?

By John C. Goodman.

"Democratic candidates and activists appear all-in on “Medicare for All.”

Many supporters of the idea envision a nationwide universal healthcare system that would be financed primarily by increasing taxes on the super-rich. A recent Echelon Insights poll, for example, found that 74% of voters who support Medicare for All believe it could be financed entirely by raising taxes on billionaires.

This is a pipe dream. No country in the world makes health care universally free, paid solely by their wealthiest taxpayers.

The latest Medicare Trustees Report predicts that Medicare’s Part A Trust Fund (hospital insurance) will be exhausted in 2033. Part of the reason is that premiums paid by Medicare enrollees cover only about 14% of the program’s cost. If the rest of the country could join by paying only 14 cents on the dollar, Medicare would go bankrupt overnight.

Although most of what is being said about Medicare for All borders on being silly, Nobel prize-winning economist Paul Krugman has a proposal that is worth serious attention.

Krugman would let everybody voluntarily enroll in Medicare. But, they (and their employers) would have to pay actuarially fair premiums, equal to the average expected cost of their health care. So, there is no free lunch here and no need for additional taxes.

Why would people choose this option? Because Medicare is less costly than private alternatives for the same services. According to the RAND Corporation, private payers (employers and commercial insurers) are paying about 2½ times what Medicare pays for inpatient hospital care. For outpatient care the difference is nearly three times greater. So, in theory, the Medicare premiums people would pay would be substantially lower than what they’re now paying for private health insurance.

Krugman implies that we could all get the same health care for a lot less money. But would we?

Right now, Medicare accounts for 25% of hospital revenues and private insurance and private payers account for 38%, according to the Centers for Medicare & Medicaid Services’ National Health Expenditure Data.

Suppose all the people currently in private sector plans joined Medicare and got their care at Medicare rates. What would happen?

Krugman admits he doesn’t know a lot about health-care economics. But any run-of-the-mill economist, much less a Nobel laureate, should know that if you take 38% of an organization’s revenues and reduce it by as much as two thirds, something is going to change.

Studies show that when hospitals suffer large reductions in their revenues they reduce staff, halt capital spending, provide fewer services and even close down altogether. As a result, we would experience less hospital care and rationing by waiting—perhaps as bad as what we see in Britain and Canada.

There also are other likely changes.

In principle, hospitals compete on three dimensions: price, quality and amenities. In India, which has the freest hospital marketplace in the world, hospitals compete on all three. According to a study published in the journal, Health Policy and Planning, patients know the price of procedures for nonurgent care in advance. Apollo Hospitals (a large hospital chain) publishes their quality measures: mortality rates, readmission rates, and infection rates, for example.

As I showed in Health Affairs, in our highly regulated, bureaucratic system, hospitals do not compete on price or on quality. That leaves amenities.  If you cut American hospital revenues, there will be fewer of them.

When Americans enter a hospital, they normally expect a private room. By contrast, in a typical hospital in the British National Health Service (where the government pays all the costs), most beds are in multi-bed bays, commonly 4–6 patients per bay. Moreover, the few private rooms that are available are normally allocated for medical reasons (such as avoiding infections) and not out of respect for patient privacy.

Canada has a two-tier system, in which patients have to pay out of pocket for privacy. For example, London Health Sciences Centre in Ontario describes its standard accommodation as a four-bed room. A patient can request a semi-private or private room if they pay extra.

Another amenity is food. In Britain and in Canada hospital patients receive what Americans would regard as traditional “hospital food,” delivered on a rigid schedule.

Many American hospitals, by contrast, offer made-to-order meals, served at the patient’s request (hotel-style ordering) and even gourmet menus. Overall, American hospitals spend six times as much on food service as Canadian hospitals ($129.65 per patient day versus $21.38).

Under Krugman’s proposal people might pay less. But they also would get less."

What Mexico City can teach America about the cost of public transit

By Steve Swedberg of CEI.

"I recently vacationed in Mexico. While in Mexico City, I tried to take the metro to attend a concert. At five pesos, or about 30¢, the bargain was hard to beat. Just one problem – it was so crowded that I couldn’t get on. I ended up taking an Uber.

This inconvenience prompted a larger question about transportation economics: What happens when policymakers make transportation extraordinarily cheap while capacity remains limited?

Mexico City’s crowded Metro has many potential causes, including its density, heavy reliance on public transportation, and the capacity and design of its network. An important factor, however, is the price riders pay. Research on Mexico City’s Metro found that when fares rose from three to five pesos in 2014, ridership fell 12 percent. That research also estimates that a 10 percent fare increase was associated with about a 2.5 percent decline in ridership.

These findings illustrate how transit fares can affect demand. Although there are differences between Mexican and American transit, the same economic principle applies in both because American transit agencies also rely heavily on taxpayer subsidies to keep fares low.

Washington, DC’s metro system, WMATA, provides a striking example. WMATA’s average fare is about $3 per passenger, whereas it provides a subsidy of $10.65 per passenger. WMATA also reports that fares recover just 28.2 percent of operating costs. The result is a transit system whose finances depend heavily on public support beyond the farebox.

BART, the San Francisco Bay Area’s regional transit system, faces similar circumstances. Its operating revenues are projected to cover only 32 percent of operating costs in FY2026, while the agency faces a $375 million structural deficit for FY2027. BART’s contingency plan includes both higher fares and substantial service reductions.

Supporters of cheap transit argue that lower fares help people who depend on transit to get to work, school, and other necessities. But those benefits require resources, and the fiscal pressures facing transit agencies like WMATA and BART show that those resources ultimately come from somewhere.

A universally subsidized ride provides the same price reduction to riders regardless of their circumstances, while the cost of the subsidy is borne elsewhere in the public budget. That makes the results of this spending especially important. Lower fares may encourage people to use transit, but subsidies do not necessarily translate into more effective or productive transit systems.

The same concern applies to who receives the subsidy as well. Lower-income households make up a larger share of transit users than of the overall population, but that does not mean they receive all the benefits of subsidized fares.

Recent research finds that some US transit investments and fare policies disproportionately benefit more advantaged populations, while the distribution of the subsidies themselves remains understudied. That raises doubts about whether making every ride cheaper is the most effective way to direct limited public resources toward those who need transportation assistance most.

The distributional concerns are only part of the problem. There is also little reason to assume that more subsidies automatically produce better transit. In his congressional testimony, Reason Foundation’s Marc Scribner cited research showing that increased operating subsidies were largely absorbed by higher costs and were associated with declining transit productivity. In other words, it has cost more to provide a given amount of transit service.

Similarly, the Congressional Research Service found that government operating support has helped sustain lower fares and higher service levels but has also increased operating cost per vehicle-mile.

One reason is that subsidies can weaken the pressure to control costs. When agencies can rely on public funding to cover operating shortfalls, subsidies can allow agencies to absorb rising wages and benefits without corresponding gains in productivity. Scribner’s testimony points to this dynamic by noting that transit labor productivity declined substantially as operating subsidies expanded. 

Because additional subsidies tend to accommodate higher costs instead of generating more productive service, taxpayers are paying more without necessarily getting better quality in return.

Transportation policy cannot escape the economic reality of scarcity. Lowering the price paid by users can change how they travel, but it does not eliminate the costs of providing transportation. Nor does spending more guarantee that subsidies reach those who need them most or produce a more productive system.

Those costs are harder to see when they are spread across multiple public budgets than when the benefit is visible at the farebox. That does not change the fact that transit agencies across the nation and the world face recurring financial dilemmas that show the costs eventually catch up with the subsidy. Cheap transit may be popular, but hiding its cost from riders does not make the bill disappear."

Mike Munger reviews Kim Phillips-Fein’s new book, Country of Lords: Neo-Aristocrats, Social Darwinists, Tech Utopians, and the Long Fight Against Equality in America

From Cafe Hayek.

"This history of the idea of “hierarchy as good,” focusing primarily on the U.S., is useful and interesting. But there are several aspects of the account, and what is left out, that I find puzzling.

First, the focus on hierarchy here is private, or at a minimum non-governmental. But no subjugation is as complete as that of ruled to ruler. Many of the great hierarchy-mongers of American history have designed and operated their power structures supported by the weapons and boot heels of armies and police. Andrew Jackson’s “Trail of Tears”; Lincoln’s suspension of habeas corpus and confiscation of property; Woodrow Wilson’s summary roundup of dissidents, suspension of postal deliveries, and the “Palmer Raids”; Franklin Roosevelt’s seizure of prices and property, followed by forcing thousands of American citizens into concentration camps; Nixon’s draconian wage and price controls; and the intrusive and unconstitutional surveillance state that has grown up after 9/11.

Most recently, and starkly, we saw the comprehensive confinement and draconian dictates of state scientism. The unelected health czar Anthony Fauci offered “I am the science!” as his justification for complete hierarchy; the Biden administration actively crushed dissent, even among those with scientific credentials who were disputing scientific arguments. Surprisingly, the only state actor mentioned here is Woodrow Wilson; he makes the list only because he hosted a viewing of “Birth of a Nation” at the White House.

Second, and perhaps more important, no one claims, to my knowledge, that the distinctive aspect of the U.S. is that there has always been perfect agreement about liberalism and equality under a rule of law. Phillips-Fein does provide a useful service in her careful documentation of some important advocates for hierarchy (even if it is strangely censored to ignore the state), but the actual argument is bizarrely narrow, even myopic. What’s distinctive about the U.S. is not that no voices have clamored for hierarchy, but that those voices have always lost! More than any other nation over the last 250 years, the U.S. has repeatedly recentered itself in equality before the law, and preserved social mobility in the face of substantial efforts to reify hierarchies of many different kinds.

Finally, Phillips-Fein notably strains, and frankly fails, to fit every personality she can scrape up neatly into a single Procrustean anti-egalitarian lineage. John Adams worried that a majoritarian system might struggle to govern, a plausible concern in 1780 given the world’s lack of experience with democracy. Adams is folded in here on the strength of his “ambivalence” about equality; that’s a much softer claim than outright advocacy for hierarchy. Andrew Carnegie is a similar problem: his philanthropic guilt and paternalistic sense of obligation to give back to the public sit awkwardly next to figures like Sumner or Stoddard who denied any such obligation.

When a 250-year argument has its founding-era anchor express nothing stronger than concern for an untried system, that’s a sign the argument is weak. Phillips-Fein concludes that the American belief in equality has always had to compete with a genuinely mainstream counter-tradition rather than triumph outright, which is surely correct. But then she infers that today’s inequality debates aren’t a betrayal of some past consensus so much as a resurgence of one side of a fight that never really ended.

This is a tone-deaf conclusion, and a deep misunderstanding of the liberal tradition. As Thomas Hobbes explained, each individual wants to rule and sees in him or herself the sort of person entitled to deference from others. But as Montesquieu, John Locke, Adam Smith, James Madison, and John Stuart Mill pointed out, we can design a political system that controls and blunts this urge to power. Liberalism is the instantiation of checks and balances, guardrails that limit concentrations of private power. Though there have been voices of dissent in the U.S., people who have sought power, there are fewer of those voices here, and they have been less effective."

Immigration crackdown hits Kansas, disrupts beef processing

By Tom Polansek of Reuters. Excerpts:

An immigration crackdown in Kansas disrupted beef processing, impacting immigrant workforce and cattle supply.

Community leaders reported ICE targeting Latino areas, causing fear and workforce shortages.

Beef prices rise as processing slows; industry groups warn of further consumer price hikes. 

"As affordability concerns weigh on the Republican Party's chances of maintaining control of the House and Senate in the upcoming midterms, President Donald Trump ⁠has enacted policies aimed at controlling the cost of beef.

Immigration enforcement could be ​the latest to work at cross purposes, causing record-high beef prices to tick ⁠up even higher, according to industry and union officials. Cattle futures gyrated this week as traders weighed tight supplies against processing disruptions due to the crackdown."

"Beef prices soared to records this year after ​a multi-year drought drove ranchers to reduce their herds to a 75-year low and Washington suspended cattle imports from Mexico. Trump has struggled to lower prices with a bevy of policies and other pronouncements, including increasing low-tariff beef imports and launching an investigation into meatpackers.

Meatpackers slaughtered an estimated 90,000 cattle on Thursday, down 16% from a week earlier, the Department of Agriculture said."

Tax Increases Are the Wrong Way of Dealing with the Social Security Mess

By Dan Mitchell.

"I periodically share data showing that America’s long-run fiscal problem is that the burden of federal spending is growing too quickly.

The same thing is true when looking at specific programs. Here’s a chart showing that Social Security outlays are growing rapidly (which helps to explain why the program has a gigantic long-run fiscal problem).

The chart comes from a Washington Post editorial about the program’s shaky finances.

Here are some excerpts, starting with a description of the problem.

The burden of the payroll tax is already enormous. Though the 12.4 percent rate is technically divided in half between employer and employee, workers end up paying the employer’s side of the tax through lower compensation. …Last year, the Social Security payroll tax raised $1.28 trillion. That’s almost three times what the corporate tax raised. Only the individual income tax raises more federal revenue. …it’s easy to see why the program is broke. The payroll tax rate has been the same since 1990, and revenue as a share of the economy has been roughly flat. The program used to run annual cash-flow surpluses but since 2010 has run deficits — because benefits are rising too quickly.

The editorial then explains why higher payroll taxes are the wrong approach.

According to the latest Congressional Budget Office estimates, the payroll tax rate would need to increase by 40 percent — from 12.4 percent to 17.3 percent — to fund Social Security for the next 75 years. For the median worker in 2025, that would be a tax increase of roughly $3,000. …would the median worker today rather pay $3,000 more in payroll taxes or invest $3,000 in index funds? And why should the government decide that the extra $3,000 is best used for retirement in the first place? Perhaps removing the cap on taxable wages, $184,500 this year, is more appealing since it would affect only high earners. The problem is that doing so would make the top rate on labor income one of the world’s highest while covering only about half of the projected funding gap for Social Security…the payroll tax rate has been raised 20 times already. A 21st hike isn’t going to do the trick.

By the way, that $3,000 tax hike is every year, not a lifetime amount.

And only about 10 percent of Americans would be willing to pay that much to bail out the program.

Here’s another chart from the Post‘s editorial. It shows the amount of taxes needed each year from various income groups to finance existing Social Security promises.

Proponents of bigger government will look at these numbers and argue that higher payroll taxes can solve Social Security’s financing problem.

And if you ignore the potentially damaging impact of higher taxes and more spending, they’re right. At least in terms of math.

But they are overlooking the fact that Social Security has another big problem, which is that it is a lousy way of providing retirement income. Workers pay too much and get too little.

As many countries (including Iceland, Australia, Chile, Switzerland, Hong Kong, Netherlands, the Faroe Islands, Denmark, Israel, and Sweden. have demonstrated, personal accounts based on private savings are much better. More retirement income, more national savings, stronger economic performance, and smaller government.

P.S. Here’s a primer on the five options for dealing with the Social Security mess."

Proposed wealth tax risks destroying California’s innovation engine

By David R Henderson and Francois Melese. Excerpts:

"Many wealth tax advocates assume that a founder’s fortune represents wealth unfairly extracted from society. But economic research says the opposite. Nobel laureate William Nordhaus estimated that innovators capture only about 2.2% of the economic value they create. The other 97.8% flows to consumers. In short, a billionaire tech founder’s wealth is only a small slice of the value he or she created for society.

Google illustrates the point. Sergey Brin and Larry Page became extraordinarily wealthy by building one of California’s most valuable companies. Their combined fortunes are over $500 billion.   Yet, if Nordhaus’s estimates are even roughly right, the value that Google’s innovations create for consumers is measured not in billions but in trillions of dollars.

Much like AI companies today, Google’s technology was highly disruptive and displaced several categories of work—from print advertising to travel services. Total U.S. newspaper advertising revenue collapsed from nearly $50 billion at its peak in the mid-2000s to under $10 billion by the early 2020s. Meanwhile, as consumers increasingly booked flights and hotels online, jobs for U.S. travel agents tumbled nearly 50%, from around 124,000 in 2000 to roughly 66,000 today.

Happily, as has occurred throughout history with disruptive technologies, these highly visible losses were dwarfed by massive, but less visible gains. Google helped launch and accelerate new industries—from digital advertising and app development to search optimization and cloud services. Google’s platform helped birth a broad ecosystem where businesses can instantly reach suppliers and customers across the globe. Both consumers and businesses benefited as the cost of search and price comparisons fell, shifting bargaining power to buyers and intensifying competition among sellers to produce better products at lower prices.

According to the U.S. Bureau of Labor Statistics, since Google’s founding in 1998 employment in software publishing, internet services, digital marketing, and related information industries has grown by well over a million jobs. Google itself estimates that its Search, Ads, Play, Android, and Cloud ecosystems support more than 2 million U.S. businesses, publishers, developers, and nonprofits.

Brin and Page became billionaires by revolutionizing how billions of people find information, products and services. The fortunes they accumulated are not the result of wealth redistribution; they reflect a series of innovations that increased productivity, expanded consumer choice, reduced transaction costs, contributed to greater competition and more efficient markets, and helped create new markets and employment opportunities across the globe.

This matters for how we think about wealth taxes. Most startups fail. A handful like Google earn outsized returns that compensate investors and founders for those many failures. Meddling with the potential rewards reduces the incentive to take those risks—not just for existing billionaires, but for the next generation of entrepreneurs deciding whether and where to launch a company or pursue risky new technologies."

"But under current law the wealthy already pay a substantial share of the state’s [California] income taxes. The top 1% of taxpayers—around 180,000 filers—pay 40% to 50% of all personal income taxes. The state’s roughly 200+ billionaires alone pay 2-3% of all personal income taxes. They and the tech companies they founded also pay high corporate, capital gains, and payroll taxes." 

Family Income Continues to Grow in 2025 Data

By Jeremy Horpedahl.

"Yesterday the Census Bureau released their annual treasure trove of data from the Current Population Survey, Annual Social and Economic Supplement. Loads of new data are now available for 2025 on income, poverty, and health insurance coverage. This new data allows me to update one of my favorite charts, showing the distribution of family income in the U.S. since 1967. Census releases this data by grouping families into nine different income groups, which I have collapsed into three groups, each being as close to one-third of the total as I can get using the publicly available data.

Figure 1

 

See also a similar chart from Mark Perry which uses household income (rather than family income) over the same time period.

Figure 1 shows that, adjusted for inflation, the proportion of families with income over $150,000 has grown almost seven-fold since 1967. There has been a roughly constant one-third of the population between $75,000 and $150,000, and the ranks of those under $75,000 has been cut in half since 1967. Again, these dollar figures all adjusted for inflation, using the preferred deflator of the Census Bureau.

What’s even more astonishing is when we look at the number of families at various thresholds, rather than just the share, as seen in Figure 2.

Figure 2

 

In 1967 there were fewer than 3 million families with incomes over $150,000 (in 2025 inflation-adjusted dollars). By 2025, that had grown to over 31 million families. If we look at the highest income threshold in this Census data — over $200,000 — the number of families has grown from just 1 million in 1967 to over 20 million in 2025. And there are fewer lower-income families too: the number of families under $75,000 shrunk, not just as a proportion of the total as seen in Figure 1, but even in absolute terms by almost 3 million families from 1967 to 2025.

Of course, some of these families do have more earners than in 1967, though we shouldn’t overstate that too much. Using other data from Census, we can see that the share of families with multiple earners hasn’t increased much since 1967, and especially hasn’t since the mid-1990s.

Table 1

 

As seen in Table 1, as far back as 1967 the majority of families in the U.S. had multiple earners. Now it’s true these were not all married couples with both spouses working full-time, and hours of work in the household have risen over time — but not much since the 1990s. This data is somewhat skewed by the aging of the population, as evidenced by the rising number of families with no earners. But even if we drop those families with no earners, multiple-income families haven’t grown much: from 58% of the total in 1967 to 63% in 2025." 

Krugman, Stiglitz, et al Flunk Econ 101

By David R Henderson.

"Six winners of the Nobel Prize in economics recently signed a statement in favor of California’s Proposition 40, the measure that would impose a one-time 5 percent tax on California billionaires. They are Daron Acemoglu, Abhijit Banerjee, Peter Diamond, Esther Duflo, Paul Krugman, and Joseph Stiglitz. Their statement showed little understanding of basic economics.

In one section, they write:

Over the 2019-2025 period, the total amount of California income tax paid by billionaires amounted to only 1.6% of their $1.4 trillion wealth gain, much less than what ordinary Californians pay on their paychecks.

There are two problems here. First, they don’t know that billionaires today, the ones who would be paying the tax, got a $1.4 trillion wealth gain. There’s huge mobility in and out of the group of billionaires, especially over a period as long as 6 years. Also, someone might have had a billion in 2019 and have a billion today. That person would be taxed this special 5 percent. What’s his wealth gain? Zero.

Second, it’s a phony comparison because the rest of us “ordinary Californians” don’t see our wealth gain on our paychecks. Our paychecks are for services rendered. Capital gains, whether realized or not, don’t appear. So someone might make $80,000 on his paycheck and have had, over six years, an unrealized capital gain on his house of $200,000. But these economists don’t take account of that. Are they aware that a few million Californians are sitting in houses on which they have had huge capital gains? Or are they just incredibly sloppy or even dishonest?

They also state:

This extreme wealth has translated into extraordinary power, in California just like in the United States more broadly. During the 2000 federal election cycle, billionaires accounted for about 1% of total donations; in 2024 this number had risen to 19%. The Washington Post, the Wall Street Journal, the Los Angeles Times, Instagram, Facebook, TikTok, X are all owned or controlled by prominent billionaires. Sergey Brin alone has already spent more than $100 million to defeat the California billionaire tax.

But there were many fewer billionaires in 2000, for two reasons. First, even inflation-adjusted, there are way more billionaires just as there are way more millionaires. Second, inflation alone has led to more billionaires. One billion in 2024 would be, in 2000 dollars, $549 million.

Moreover, are these economists aware of why Sergey Brin spent more than $100 million to defeat Proposition 40? It’s because it’s on the ballot. If they wanted him not to make political contributions, there was a way to do it: persuade their allies not to put Proposition 40 on the ballot. These economists don’t just flunk Econ 101; they also flunk Irony 101.

The Nobelists also state:

California’s 250 billionaires are collectively worth $2.3 trillion. Their wealth now amounts to the entire annual income of all California taxpayers — some 20 million of them.

But billionaires’ net worth is their wealth, the value of all their assets, and it’s a stock. The annual income of all California taxpayers is a flow. Economists are not worth their pay, a flow, and might even not be worth their wealth, a stock, if they fail to distinguish between stocks and flows.

In his speech at the Nobel banquet of 1974, Friedrich Hayek stated:

There is no reason why a man who has made a distinctive contribution to economic science should be omnicompetent on all problems of society – as the press tends to treat him till in the end he may himself be persuaded to believe.

I’m sure he would extend his generalization to women too, so Esther Duflo isn’t let off the hook.

Actually, though, the six economists’ statement is even worse than what Hayek feared. He worried that Nobelists would pontificate “on all problems of society.” But these Nobelists get even some basics of economics wrong."

Matthew Lilley: A bunch of Nobel Prize-winning economists have endorsed California's proposed billionaire wealth tax. I can't oppose them on authority. But I know some academics who can.

He is a lecturer at The Australian National University. This is his This is his Twitter thread.

"Acemoglu (2001) v. Acemoglu (2026)

Colonial Origins: "Protection against expropriation risk is extremely important for long-run prosperity."

Also: "Anyway, here's a 5% levy on the existing property of one narrowly defined group."
It's a one-off. I pinky promise.
 
Apparently the lesson of Colonial Origins was credible property rights are important until the property crosses ten figures.

The coefficient on expropriation risk: enormous.

 

The coef when the taxpayer owns Nvidia stock: Appendix B, Vibes

Diamond (1971) v. Diamond (2026)

Diamond–Mirrlees: Preserve production efficiency. Don't distort productive choices when other tax instruments exist.

Prop 40: tax the assets of people who own lots of productive capital?

Professor Production Efficiency: "Sounds good." 

Banerjee & Duflo (2007) v. Banerjee & Duflo (2026)

The credibility revolution: Stop waving your hands about giant ideological questions. Find something you can identify. Run the experiment. Measure what happened.
 
And therefore, naturally: California should impose a 5% wealth tax.

The causal chain:
1. Randomize remedial tutors in Mumbai and Vadodara.
2. Observe a 0.28σ rise in test scores.
3. ???
4. Tax Jensen Huang's equity.
 
Thousands of economist-hours teaching the profession to decompose huge policy questions into narrow ones with credible identification.

Then the ballot proposition arrives:

"No RCT necessary for this one, lads. Pre vs post comparisons in an AI boom are fine."
 
Krugman (1991) v. Krugman (2026)

New Economic Geography: Firms, workers and capital respond to incentives in deciding where to locate; those choices can shift equilibria.

Location is endogenous. Agglomerations aren't laws of nature.
 
But then for California:

"Yes, location incentives exist. Yes, mobile capital exists. Yes, equilibria can shift. But Silicon Valley will obviously be fine."

Location is endogenous, but apparently not that endogenous.
 
Truly, the most robust result in modern economics is that, as ideology grows large, every theorem acquires a people-who-are-richer-than-me exception.
 
(If you don't like the jokes, don't blame me, blame my co-author GPT. He did all the work)."

The FTC Should Not Dissuade Personalized Pricing

By Mark Jamison of AEI.

"Imagine that you and I buy the same product from the same website at the same time, yet you pay more than I do. The difference is that the seller knows something about each of us. Perhaps your browsing history, shopping behavior, location, or some other factor suggests that you are willing to pay more than I am. Is this fair? More importantly, is it illegal? 

The Federal Trade Commission (FTC) is thinking about this. This issue is whether there is something about personalized pricing—pricing that treats customers as individuals rather than groups—that increases the chances of unfair or deceptive business practices, as the FTC defines them. It has proposed an enforcement policy that would scrutinize businesses that use personalized pricing. 

The concern is understandable but misplaced. Digitization gives businesses far more information about customers than they previously possessed. And machine learning makes it increasingly possible to use that information to estimate what an individual might be willing to pay. But knowing that prices can be personalized tells us little about whether consumers are harmed. 

The standard textbook example of personalized pricing considers a monopolist that knows precisely what each customer is willing to pay and charges accordingly. The monopolist makes higher profits and higher-end consumers lose the surplus they would have received if prices were uniform. This might sound ominous, but it leaves out much of what happens in actual markets. 

Start with competition. A business that knows you are willing to pay $100 for something might like to charge you $100. But another firm notices and, if feasible, might offer it to you for $90, stealing your business. If firms have similar information about you, personalization can intensify competition for your business. 

This isn’t simply conjecture. Prominent research has shown that personalized pricing can benefit consumers when market coverage is high. It also finds something especially relevant for policymakers: Consumers can sometimes be worse off when only some firms are able to personalize prices than when either all or no firms can do so. Other research reaches related conclusions, finding that consumer information can intensify competition as businesses make targeted offers to defend existing customers and attract customers from rivals. 

There is no general rule that personalized pricing harms consumers or is problematic in any other way. It might benefit firms, but it can also increase competition, bring additional consumers into the market, and improve the matching of products with customers. 

There is another issue that deserves more attention. Many of the analyses assume that the products in question already exist. But we know that when incumbents profit, rivals innovate. The same information that lets a business personalize prices can help it personalize products. This is already happening in e-commerce, entertainment, travel, and education. As the costs of customization decline, both prices and products become increasingly personalized. Regulations that make personalization less profitable will lower incentives to innovate. 

The FTC’s proposal recognizes that personalized pricing is not unlawful in itself. But it states that when consumers reasonably expect prices not to vary with personal data, businesses using personalized pricing should disclose the personalization, its basis, and the types of data used. Failure to do so, the FTC says, is likely to constitute an unfair or deceptive practice. That puts a lot of weight on “reasonable expectations” and the presumed value of disclosing trade secrets. 

People certainly care about fairness. But perceptions of fairness differ among people and change with experience. Americans do not even agree about whether our economic system itself is fair. Trying to turn such perceptions into a policy encourages arbitrary enforcement. 

Besides, consumers already have ways of responding to situations they consider unfair. Richard Thaler’s work on transaction utility shows that people care about more than just prices. They care about the nature of the deal and respond accordingly. Businesses that violate customers’ senses of fairness lose business. 

None of this means businesses should be free to deceive customers. The FTC should pursue violators based on current legal standards, applying them equally regardless of whether prices are uniform, personalized, or something in between. Research gives us little reason to believe that principles should change as knowledge increases." 

Workers who move to firms with higher well-being scores take more sickness absences, without changing healthcare usage

By Riccardo Di Francesco, Peter Hull & Seetha Menon.

"We study how firms’ orientation toward employee well-being shapes the health of their workers. Because this orientation is not directly observable, we measure it from the language Danish firms use in their public disclosures, applying language models to construct a firm-level well-being salience score. We link this score to population-wide administrative registers of health and sickness absence over 2013–2022, and exploit workers’ mobility between firms to estimate how workers respond to a change in the salience of their employer. We find an asymmetry: workers who move to higher-salience firms take substantially more sickness absence, while their use of health care does not change. Because worsening health would raise both, the absence response suggests a behavioral change rather than deteriorating health. Broadly, our results show that firms shape not only worker health but how workers act on it, and that the language of routine corporate disclosure can reveal economically meaningful features of the workplace that administrative data leave unrecorded."  

So if you make it easier to take time off workers will do that even if they don't need it. This could happen if we had national health care. 

The Tragedy of Nikole Hannah-Jones (and the problems with public education)

By Alex Tabarrok.

"Nikole Hannah-Jones famously sent her child to a predominantly black/lower-income public school in New York City. Now her child says she shouldn’t have been used as political fodder.

The essay makes for hard reading and I acknowledge NHJ’s courage in writing about her mistakes and the cost to her child. The piece is raw and true when talking about her personal choices, but the larger story in which NHJ embeds her personal history is mostly false. The problem isn’t funding. The failures she documents are failures of management and accountability, not lack of resources. NYC spends upwards of $40k per pupil on average, the highest of any large district in the country. Moreover, schools in NYC with lower-income students get more than the average. PS 307, where NHJ initially sent her child, is currently funded at just over 52k per student, far above the national average.

Nationally, there haven’t been big gaps in funding within states by race or income for decades. NHJ has reckoned with her failing her own child but she has not yet reckoned with the failure of her entire educational philosophy.

The role of ideology in blinding NHJ is dramatic. NHJ’s daughter earns high grades in her math classes but she fails standardized tests. Most parents, especially conservatives, know what that means. The classes are a lie. But NHJ is blinded by ideology and assumes it’s the standardized tests that are biased. It’s only when her daughter demands to go to a better school that she and her daughter confront the truth:

Najya knew very little algebra and had huge gaps in many of the building blocks of math that she should have learned in elementary school, like mastery of long division and fractions.

The confrontation is almost disastrous:

My child’s confidence wilted like an unwatered plant. She started to develop an almost debilitating anxiety around taking tests. She became sullen at school and began to act out. For the first time ever, I got messages from teachers about Najya’s behavior.

Fortunately, Najya battles back and recovers but much more could be said here about the costs of social promotion, DEI and mismatch on the so-called beneficiaries.

Ironically, NHJ invokes the heroic history of Black Americans integrating schools to justify keeping her own child in a segregated one. Painful.

NHJ thought that she and her husband–politically connected, astute people who were not afraid to speak up–could do well for their daughter and the other kids in the school. But in the end she has written a great piece on why voice fails–even a powerful voice–in the absence of the threat of exit. Hannah-Jones could have saved herself some grief and her child a poor education by reading my post The tragedy of Jonathan Kozol.

It’s been said that Ayn Rand’s heroes don’t exist, but her villains do. Case in point. Hannah-Jones says that she and her husband “felt an obligation to make educational decisions based on the collective good.” But she wasn’t just sacrificing herself for her ideology; she was sacrificing her child, who had no choice in the matter. “I don’t think she’s deserving of more than other kids,” she said in 2017. Nearly a decade later, Najya reminded her that in the abstract your child may not deserve more than other children, but she is nevertheless entitled to expect more from you. “Sometimes I wish instead of always thinking about other kids, you would have thought about me.” You don’t have to be a Randian to think that your child should not be sacrificed to the collective good, but it doesn’t hurt."

College campuses need to be liberated from their administrators

Higher ed is being strangled by absurd and costly rules. What message is that sending to students?

By Barry Lam. He is a philosophy professor at UC Riverside. Excerpt:

"The promise of digital infrastructure is to be able to do bureaucratic tasks more cheaply and efficiently. In principle, just like spending on administrative staff should make the essential functions of administration less burdensome, spending on software should make spending on administrative staff less essential.

But in higher education the opposite has happened. Millions and millions of dollars are being spent on digital infrastructure and the hiring of administrative staff who must oversee and mitigate problems caused by the digital infrastructure itself.

The University of California system promised that $170 million in spending on a single digital infrastructure project would cut administrative bloat by $753 million over its lifetime. Instead, the project took seven years and ballooned to $942 million in cost — and the finished project was so poorly designed and difficult to use that an entirely new IT unit had to be created just to keep the software functional. The savings on staffing were zero."

The Shaky Evidence That Flock Cameras Reduce Crime Rates

Flock has been promoting a recent study of its cameras' impacts on car theft. But the paper didn't demonstrate a causal effect.

By Autumn Billings of Reason. 

"Do Flock cameras actually reduce crime? A new analysis by the Institute for Justice casts doubt on Flock Safety's claims that its automatic license plate readers (ALPRs) significantly reduce car theft and increase clearance rates. 

Flock Safety has been promoting a working paper that examines whether the company's controversial and hotly debated cameras improve outcomes for motor vehicle theft. To test the effects of Flock's surveillance network, the study uses data from 216 agencies that began using Flock in the period from 2017 to 2023, and 3,108 agencies that did not. The authors then evaluated the cameras' effects on monthly motor vehicle thefts, arrest rates for motor vehicle theft, and the recovery time of stolen cars following ALPR deployment.

The study's findings include an 11 percent drop in motor vehicle theft, a 15.9 percent increase in motor vehicle theft arrests, and a reduction of 0.28 days in the median recovery time for some stolen cars. The authors concluded that "fixed ALPR deployment is associated with lower theft and higher [arrests], alongside a modest reduction in recovery lag among recorded recoveries."

But the data aren't actually that clear, according to a new analysis from the Institute for Justice (IJ), a libertarian law firm and home of the Plate Privacy Project. 

IJ Senior Researcher Analyst Matthew West found that motor vehicle thefts and arrest rates in those jurisdictions were already trending in the favored direction months before Flock's cameras were ever in use. Unsurprisingly, many of the places that chose to deploy ALPR systems did so when experiencing high levels of vehicle theft, and engaged in crime-fighting initiatives beyond partnering with Flock. Because the study doesn't compare places on similar trajectories, it is unclear how much credit the cameras, as opposed to those other initiatives, deserve for causing motor vehicle thefts to fall and arrests to rise. 

"Because there were already differences in arrests and thefts trends before ALPR deployment, we don't know if the differences in ALPR deployment were caused by ALPR deployment," West explained in a statement. 

West goes on to point out that the authors were able to obtain an 11 percent drop in motor vehicle theft only "when the data are weighted in favor of agencies that had a bigger problem to begin with." By contrast, if "the data are instead averaged across all agencies (or weighted by population), the study finds no statistically significant change" in the number of thefts.

The study's data have other complications that the authors did not fully account for. One is the COVID-19 pandemic lockdowns, which impacted both the level of crime and the number of people driving across the country. Another is the viral "Kia Challenge" on social media, which led to increased Kia and Hyundai thefts. Such "events may have contributed to motor vehicle theft rising and falling at different times in different places," writes West, further complicating whether ALPR cameras did, in fact, cause favorable changes in the data. 

hese criticisms don't necessarily mean the study's results are wrong, but they do show that the full picture hasn't been explored.

Flock has been using the working paper's results to defend its cameras against an ongoing national backlash. But as much as the company may wish otherwise, the scrutiny of ALPR surveillance technology is far from over."

A 5 Percent Wealth Tax Would Destroy a Lot More Than It Raises

 By Jack Salmon. Excerpts:

"the billions of dollars in wealth held by the almost 1,000 billionaires in the U.S. isn’t cash that is being hoarded under a mattress waiting to be taxed. For instance, Elon Musk’s roughly $900 billion fortune is mostly stock held in SpaceX and Tesla."

"Musk’s personal fortune represents only about one-third of the combined value of the companies he has founded."

"The remaining two-thirds is represented by factories, equipment, intellectual property, business assets, and claims held by other shareholders, including pension funds, mutual funds, and ordinary Americans who own shares directly or indirectly. The companies also employ tens of thousands of workers whose wages support household incomes and consumption.

For other billionaires, the share of wealth kept for themselves versus the share granted as value created for wider society is even larger than that of Musk. Mark Zuckerberg’s personal fortune represents about 13 percent of the market value of Meta. The other 87 percent is owned by shareholders, ordinary investors, or represented as data centers, servers, other productive assets, and nearly 79,000 employees.

 

In other words, the wealth of billionaires is a small share of the trillions of dollars in private wealth that they have created for millions of ordinary American’s. The free enterprise system rewards this kind of entrepreneurial activity and innovative behavior that in turn promotes productivity and growth. Removing these rewards by confiscating their personal assets and handing them over to the state would instead punish such activity.

A 5 percent wealth tax is a 99 percent income tax

The second thing to recognize is that the proposed 5 percent tax on wealth is a much larger tax on the returns of investments.

But we also have to account for the invisible tax that we all pay—inflation. Once inflation is factored in, market returns drop to 5.48 percent. At that level, the wealth tax is a 91 percent tax on investment returns. If we also assume that capital gains taxes are applied to dividends, then the after-tax return drops to just 5.05 percent. In this case, the wealth tax is effectively a 99 percent tax on investment income.

A 99 percent tax on investment income will have a significant impact on the incentives of investors. One of the incentives that will undoubtedly change is that people will take less risks. Low risk investments have lower rewards, and this will be felt by everyone, not just the billionaires that the policy targets.

Slower capital formation, weaker productivity, lower wages and fewer opportunities for workers and businesses affect all workers and consumers, not just wealthy ones.

We already have a wealth tax of sorts

As Stanford economist John Cochrane recently pointed out on his Substack, the U.S. already taxes wealth in certain circumstances. For example, the estate tax applies to the assets of the deceased when it is passed onto an heir.

Importantly, I should point out that a tax on the transfer of property is very different to a tax recurring tax on property ownership. The Supreme Court has also made a strong distinction between these types of taxes too, as it considers the estate tax an indirect excise tax on the transfer of property.

As Cochrane points out, the estate tax attracts a significant amount of perfectly legal avoidance. Although the tax applies at a much lower threshold than the proposed wealth tax, at $13.99 million, the Treasury estimates, that combined with gift tax receipts, the estate tax raised $29 billion in revenue in FY2025, or less than 0.1 percent of GDP.

Even a study published by supporters of a wealth tax found that the estate tax collects just 300-to-400ths of a percent annually of the Forbes 400 wealth.

The revenue gain is about $200 billion a year

So how much revenue do proponents of a wealth tax suggest it would raise if implemented in the U.S.?

French economists Emmanuel Saez and Gabriel Zucman estimate that a 5 percent wealth tax will raise $4.4 trillion over 10 years. To get this figure, they assume a tax evasion rate of 10 percent. This implies an elasticity of taxable wealth around -2. This assumption is significantly out-of-whack with the bulk of economic literature.

Evidence of savings effects based on Norwegian micro data estimate elasticities of taxable wealth around -7 under a comprehensive tax base. Similarly, evidence from Switzerland using cantonal variation finds that a one-percentage-point reduction in the wealth-tax rate increased reported taxable wealth by at least 43 percent after six years.

One 2021 journal article used rich administrative data from Colombia and a government-designed program for voluntary disclosures of hidden wealth to estimate the behavioral effects of wealth tax. The authors found that two-fifths (40%) of the wealthiest 0.01 percent evade taxes, with these evaders concealing one-third of their wealth offshore.

Using Danish administrative data, Jakobsen et al. find that reductions in the wealth tax increased taxable wealth by 31 percent among the very wealthy over eight years. Their estimates incorporate saving, portfolio and asset-composition responses, legal avoidance, and possible evasion of self-reported assets. The net-of-tax rate elasticity is therefore estimated at around -11.

With these estimates in mind, budget scoring organizations often use more realistic elasticity estimates that are more aligned with the economic literature. For example, the Tax Foundation models wealth tax proposals using a semi-elasticity assumption of -8, while Penn Wharton applies semi-elasticities of evasion and avoidance around -9.

If we replace the elasticity assumptions of Saez and Zucman with a more realistic semi-elasticity of around -8, then the revenue raised by the tax drops from $4.4 trillion to $3.3 trillion over 10 years. This isn’t an outlier assumption. In fact, Sanders and Warren used a 33% avoidance assumption in their 2020 wealth tax campaigns.

Factoring in baseline avoidance in the existing tax system and stronger behavioral responses, tax scholar Kyle Pomerleau applies an elasticity of -13. This results in a 10-year revenue yield of $2.3 trillion, or roughly half the Saez-Zucman figure. This amounts to a little over $200 billion a year in additional revenues, or about 10 percent of current deficits.

A high price for the U.S. economy

A 5 percent wealth tax isn’t just a tax on billionaires, it is a tax on investment, a tax on risk-taking, a tax on capital accumulation that drives productivity, higher wages, and job growth. The people who ultimately bear those costs would include workers, consumers, retirees, and the millions of ordinary Americans whose savings are invested in the companies billionaires helped build.

Wealth is not cash sitting idle in a bank account. It is the factories, companies, technologies, and investments that generate future income for millions of people. Taxing wealth at punitive rates may satisfy a desire to punish the rich, but it risks shrinking the very economic base from which future prosperity will come.

Let’s not tax away our productivity, innovation, and growth for the sake of political symbolism."

Rideshare Licensing Fails the Consumer Protection Test

By Ryan Bourne and Nathan Miller of Cato.

"Occupational licensing is sold as consumer protection that screens out incompetent or dangerous workers. Today, about 22 percent of the American workforce needs a government license to do their jobs, and that safety and quality argument is what state and local lawmakers use to justify the entry barriers, licensing fees, and training hours that typically accompany it.

The trouble is that the claimed benefits have historically been difficult to test or measure, so the debate over whether licenses really protect anyone was fueled mostly by anecdotes. That’s why a new NBER working paper by Jonathan Hall, Jason Hicks, Morris M. Kleiner, and Yun taek Oh is so interesting. It leverages Uber data and finds no consistent evidence that a government occupational license improves riders’ ratings or drivers’ behavior on the road. The results suggest that, once a platform is already screening and monitoring its drivers, licensing adds no detectable, additional consumer protection.

Why Uber Is a Good Testing Ground

Uber’s vast datasets from trip tracking and consumer ratings have proven a goldmine for researchers on an array of economic questions. 

One of us has written before about how data on female and male drivers’ earnings gave good insights into non-discriminatory causes of gender pay gaps. Now similar data can be used to examine the effects of occupational licensing laws for rideshare drivers.

Uber dispatches drivers mainly by proximity. So when a licensed and an unlicensed driver are both near a rider, which one is dispatched is essentially a coin flip. The researchers use that quasi-random assignment along with data Uber collects about the ride quality, such as the rider’s star rating and telematics data on how carefully the car was driven (by measuring things like hard braking and hard acceleration, which are tied to greater crash risk).

The authors exploit two settings that allow a test of licensing’s effects. First, New York City licenses rideshare drivers through the Taxi and Limousine Commission, which, at the time covered by the study, required a fingerprint background check, a defensive-driving course, and a 24-hour vehicle for hire course and exam. Neighboring New Jersey does not have these requirements, yet drivers from both areas serve the same New Jersey riders. 

Second, in 2017, Texas preempted local occupational licensing of rideshare drivers, abolishing Houston’s restrictive licensing requirements. That let the researchers compare previously licensed drivers with those who entered the market after the entry restrictions were lifted.

The researchers sampled 213,000 trips in the New York area from April to August 2017 and nearly 497,000 in Houston from September 2017 to January 2018 to look for differences between drivers with and without an occupational license. They checked for differences across seven metrics:

1. Star rating (1–5)
2. Proportion receiving ratings less than 5 stars
3. Proportion receiving 1‑star ratings
4. Prevalence of hard braking
5. Whether more than 20 percent of brakes in a trip were hard brakes
6. Prevalence of hard acceleration
7. Whether more than 20 percent of accelerations in a trip were hard accelerations.

No Sign Licensing Helps Anyone

Across both metro areas, the paper finds no consistent evidence that licensing improved consumer outcomes. 

In the New York vs. New Jersey comparison, licensed drivers actually earned slightly lower ratings than their unlicensed counterparts—0.0228 fewer stars on Uber’s five-star scale, or less than half a percent off the unlicensed mean score of 4.78. 

Just one of the seven metrics compared came out in licensing’s favor. Licensed drivers logged fewer trips with a high share (20 percent or more) of hard-braking events, yet even that result didn’t survive robustness checks the authors undertook. It faded once the authors widened their sample window and swung wildly depending on whether they controlled for vehicle model and year. 

The results were similar in Houston. The researchers could not detect a statistical difference between the drivers who entered after deregulation and previously licensed drivers on all seven outcomes, despite the two groups differing sharply in experience (288 prior trips versus roughly 2,584 for the licensed) and age. This is strong suggestive evidence against the common fear that ending entry requirements would flood a market with worse providers.

When previously licensed drivers were instead compared with unlicensed drivers who had already been on the platform, the only differences ran against licensing: on three of the four driving-behavior measures, the previously licensed drivers braked and accelerated harder, with roughly 15 percent more of the high-hard-braking trips that flag risky driving.

Licensing Is a Costly Regime

A large body of research has already established the costs associated with occupational licensing. A strict licensing regime restricts entry into a market, thins the supply of workers, and thus tends to push prices up. 

As was summarized earlier this year in Cato’s Handbook on Affordability, stringent nurse-practitioner scope-of-practice rules raise child checkup costs between 3 and 16 percent, home improvement jobs are between 15 and 50 percent more expensive (depending on the job type) in states with the strictest home technician licensing regimes, and in one Virginia case study of hair braiding, the number of beauty shops grew 7 percent faster than in bordering states after Virginia deregulated in 2012.

So, although this paper doesn’t examine how occupational licensure affects fares, it’s reasonable to think based on existing literature that licensing rideshare drivers simply means fewer drivers and (absent substitute platforms outside the license regime) higher fares. This paper supplies evidence that despite that added cost, licensure often buys nothing in the way of improved quality or safety. 

Rideshare markets already have methods that go a long way to vetting drivers’ quality—reputational feedback, ratings, reviews, or the threat of account deactivation. That makes further government licensure redundant. The new paper is a strong complement to what Cato argued in our handbook earlier this year: the cheapest way to lower the price of a service is often just to let people provide more of it."

The Food Revolution Nobody Planned

By Byron Carson.

"Long before policymakers conceived New York City Groceries, entrepreneurs fed people. They did it cheaply, and they made people better off in unimaginable ways. 

The approximately 63,000 grocery stores in the US (according to 2023 Census estimates) indicate a great deal of competition, which encourages owners to lower prices and improve food quality. The figure below indicates that these stores must also compete with approximately 650,000 domestic food and beverage retailers.

That’s a lot of competition, and it helps lower prices while producing a dizzying array of goods and innovation that makes the mythical land of Cockaigne look paltry. While higher prices understandably attract attention — recent CPI data for food indicates a 3 percent rise over the previous year — innovation takes place in myriad ways that are easy to overlook.

Open-air marketplaces and food halls are just some of the ways people innovate. To clarify, think about the mundane problems associated with acquiring food. There are myriad transaction costs associated with finding a seller interested in selling what you want, assessing the quality of an item, trusting that the seller isn’t cheating you, and so on. Entrepreneurs develop public or open-air markets and food halls to earn profits, and they do so by lowering transaction costs for consumers and providing innovative services. 

Historical and modern examples alike indicate the extent of innovation. Since 1742, Boston’s Faneuil Hall, or “The Cradle of Liberty” (and later the Quincy Market), has provided organized spaces for people to buy and sell food in mutually beneficial ways. The Redding Terminal Market is now a popular indoor marketplace and food hall, but it developed from the open-air markets in Philadelphia during the late nineteenth century. Similar kinds of commercial activity even developed in New York, perhaps ironically, in places now being touted as sites for government-owned grocery stores. La Marqueta, or the Park Avenue Market, emerged from the haphazard commerce underneath a viaduct, where people sold goods to customers willing to pay for them. Such commercial activity expanded so much that by 1936, the city enacted a more orderly marketplace. 

Food halls, food courts, food truck parks, and similar ventures are now common, reflecting entrepreneurs’ efforts to earn profits by providing goods and experiences customers value.

On recent trips to Tampa and London, I learned of two interesting examples of people developing food halls through private enterprise. In Tampa, the Oxford Exchange (opened in its current form in 2012) was once home to an arcade of shops in the 1920s. It was converted from a bookstore in the 2010s and now hosts several dining rooms, a coffee and wine bar, lounges, meeting spaces, and shops. London’s Mercato Mayfair (one of several food halls owned by Mercato Metropolitano) is located in a deconsecrated church and houses various food and beverage vendors.

From my brief visits, these places seem like vibrant focal points where eating is perhaps the least interesting thing to do. They offer comfort and service, novel and quality foods, places to meet, and more. The profit motive and the search for innovation, not governmental food policy, drive these efforts.

WorldFoodTrucks offers another case of private food innovation. Located in Kissimmee, Florida, WorldFoodTrucks is the first and largest food truck park in the US, where customers can find more than 100 trucks, each offering different culinary options, including more than 80 world cuisines. The park is open every day of the year (until 4 am on weekends), and its operators report serving more than 13 million customers since the park opened around 2023. Not only does the park offer food, but it also provides a convenient and inexpensive way to feed larger groups of people with interesting cuisine at corporate and celebratory events, such as graduations and weddings. Such market-driven opportunities are innovations because they satisfy several goals people value beyond simply providing cheaper food. 

The economist Steven Horwitz wrote that grocery stores are indicators of American progress. We should broaden these indicators to include food halls, food trucks, and other ways entrepreneurs try to feed people. Such progress benefits picky eaters, the fitness-conscious, people who want to grill out on a nice day, those trying to meal prep for the week, people making dinner for date night, those preparing a family meal on a tight budget, and many others. Progress is progress for rich and poor alike, and it serves myriad individual goals.

Rather than devise policies that consistently fail to make people better off, perhaps we should understand how entrepreneurial activities actually put food on the table and make people better off in ways they value."

  

Health-care costs for typical Canadian family will reach over $21,000 this year

By Nadeem Esmail, Nathaniel Li and Milagros Palacios of The Fraser Institute.

The Price of Public Health Care Insurance, 2026

• Canadians often misunderstand the true cost of our public health care system. This occurs partly because Canadians do not incur direct expenses for their use of health care, and partly because Canadians cannot readily determine the value of their contribution to public health care insurance.
• In 2026, preliminary estimates suggest the average payment for public health care insurance ranges from $6,464 to $21,115 for six common Canadian family types, depending on the type of family.
• Between 1997 and 2026, the cost of public health care insurance for the average Canadian family increased 2.3 times as fast as the cost of food, 1.7 times as fast as the average income, and 1.5 times as fast as the cost of shelter. It also increased much more rapidly than the average cost of clothing, which has fallen in recent years.
• The 10 percent of Canadian families with the lowest incomes will pay an average of about $637 for public health care insurance in 2026. The 10 percent of Canadian families who earn an average income of $88,572 will pay an average of $8,644 for public health care insurance, and the families among the top 10 percent of income earners in Canada will pay $66,350.

 

The cost of lighting has decreased by over 1000x

Tweet from Paul Graham. 

"One data point in technology making everyone richer: the cost of lighting has decreased by over 1000x."

  

 

The Tax Gains from Moving Across State Lines

Comparative tax burden · Tax year 2026

By Daniel Di Martino of The Manhattan Institute. 

"Americans have been moving from high-tax states to low-tax states for a long time, but the trend has become more acute since the Covid-19 pandemic hit the world in 2020. The increasing availability of remote work allowed many workers to move elsewhere and keep their jobs, and many companies also chose to relocate or reduce office occupancy. In addition, Americans are increasingly self-sorting according to political preferences. Most coverage of this trend has focused on the rich and how much they have to gain by moving from high-tax to no-income-tax states. Obviously, multimillionaires can keep more of their income if they move from a high-tax jurisdiction like New York City to Palm Beach, where there is no state or local income tax. My new income tax tool shows that not only the rich, but also low- and middle-income Americans, have a lot to gain from moving across state lines.

Take a couple earning $120,000 in New York City. The husband has a decent job paying $100,000, and his wife makes $20,000 working part-time. They have two children still in school. That couple does not benefit from itemizing deductions in their federal tax return, so they take the standard deduction and owe $10,040 in federal income taxes. Since they have two minor children, they will receive a $4,400 child tax credit to offset their tax liability.

Since they both have traditional jobs, their employers will owe $9,180 in Social Security and Medicare payroll taxes, while they will pay the same amount from their salary in payroll taxes, out of an effective compensation cost to their employers of $129,180. Since they live in New York State, they owe $5,186 in state income tax and $581 in payroll taxes for paid family and disability leave (both spouses contribute), but they also benefit from an $800 state child tax credit. Finally, since they live in New York City, they will pay an additional $3,727 in city local income tax.

All in all, out of a compensation cost of $129,180, the couple pays $32,693 in income and payroll taxes, or 25.3% of their income, leaving them with a take-home pay of $96,487. This couple faces an effective 36.3% marginal tax rate.

Would this couple be better off if they moved from New York City’s metropolitan area to the Nashville metropolitan area? Imagine the cost of this move is that the wife loses her $20,000 job and thus their income falls. This is a big hit, but they would pay no state and local taxes, and their federal income tax would also be much lower due to the progressive tax structure. Their federal income tax would be, net of the child tax credit, just $3,240, while their payroll tax liability would fall proportionally. Out of a new employer compensation of $107,650, this couple would pay a total of $18,540 in payroll and income taxes, for a take-home pay of $89,110. But every dollar goes much farther in Nashville than in New York City, as housing and everyday goods and services are cheaper—specifically, 14.48% cheaper. While New York City is 12.6% more expensive than the average U.S. territory, Nashville is 3.7% cheaper. Thus a take-home pay of $96,487 in New York City is equivalent to $85,690, while one of $89,110 in Nashville is equivalent to $92,534. In other words, even with a $20,000 lower nominal income, a married couple with two kids can still increase their real take-home pay by nearly 8% by moving across state lines. If they managed to keep their full income, or the wife later found another job, their real income would actually increase to $109,221—over $23,000 in additional real income, a 27% increase.

Now take the case of a middle-income single worker in Los Angeles, making $60,000 per year. His take-home pay would be $47,961. Say he lives in the Los Angeles metropolitan area, so his price-adjusted take-home pay is lower, at $42,219. If he moves to Orlando in Florida, his take-home pay will rise to $50,390, and adjusted for cost of living it would be $49,694. In other words, his after-tax pay rises by $2,429 per year, or over $200 per month, and his price-adjusted after-tax pay rises by $7,475, or over $600 per month—a nearly 18% increase.

While tax and cost-of-living gains are increasing with income, even the lowest-income earners in the United States can see increases of over 10% by moving across state lines, while the richest can see gains of over 30%." 

Does Bank Consolidation Harm Customers?

By Jeffrey Miron of Cato. 

"Antitrust policy presents a challenge for both libertarians and policymakers. On the one hand, competitive markets are good, which might suggest policy should limit firm mergers. On the other hand, mergers can have beneficial effects (such as economies of scale and scope, or disciplining unproductive firms), so broad opposition to mergers is likely counterproductive.

New research on bank consolidation offers evidence on this tradeoff. Contrary to the belief

that bank mergers reduce competition, increase borrowing costs, and limit households’ access to credit, … [the study finds that m]ergers have no meaningful effect on interest rates, approval rates, or late payments. Merged banks do not appear to use their increased size to charge borrowers more or restrict access to mortgages.

This may be due to

the intense competition in local mortgage markets. The typical county has more than 130 active mortgage lenders per quarter, and the median lender controls just 0.4 percent of its local market. Therefore, even when two banks merge, borrowers generally continue to have many other lending options. In some cases, local competition actually increases after mergers.

Whether these conclusions apply in markets with only a few firms, where mergers might substantially increase market concentration, is harder to know. But this evidence should still remind antitrust and banking regulators to consider the full range of effects from mergers, not just the impact on concentration per se."

By the Time Governments Are Regulating AI, They’re Regulating the Past

By Mark Jamison of AEI.

"AI is changing fast. And spreading fast. Both are problems for people seeking to regulate it.

Regulation works best when regulators understand what they are regulating. That is not the case for AI. Costs are collapsing, having dropped 1000-fold for large language models since 2023. At the same time, capabilities are expanding, business models are changing, and market leaders are turning over rapidly.

These dynamics create both opportunities and problems. Now almost anyone can use AI to manage their household or launch a business. But, as Bill Gates recently noted, they can also create deep fakes, launch phishing attacks, or break into internet sites, as happened to Hugging Face.

This also makes regulation hard: Rules written for the AI that regulators see today will no longer exist by the time the rules take effect.

Nevertheless, many people want regulations that would control AI. The EU has embraced what it calls comprehensive AI regulation, in which regulators judge the relative riskiness of AI applications and systems and then apply controls ranging from outright prohibitions to light-touch oversight. Some people are calling for mandated surveillance of AI users, restrictions on model capabilities, product standards, and computer code review. Gates recommends an international organization layered on top of national all-of-government regulators to oversee all AI risks people imagine. All of these approaches assume overseers who would control innovation.

While it is true that whenever a technology’s costs fall and its abilities grow, people use it more. Sometimes for evil. When Henry Ford put cars within reach of every family, some families created new businesses, but others became bank robbers. When internet service providers spread access across the country, e-commerce exploded, but so did criminal activity on the dark web. In these instances, successful regulatory responses were not to limit cars or the internet, but to use the technologies for regulatory purposes.

The examples of automobiles and the internet illustrate a path forward for AI policy: Let the technology evolve for the good it can do. At the same time, officials and entrepreneurs can protect citizens by developing their own innovations based on a deep understanding of the technologies and their markets.

Recent research published in the Journal of Economic Perspectives provides insights into AI and its markets. The researchers examined the AI most people use, LLMs. LLMs are growing in complexity, now operating in three layers: The Model Layer, where creators such as OpenAI and Meta design and train LLMs; the Inference Layer, where AI providers like OpenAI and Together AI host and run models to respond to user requests; and the Application Layer, where a large ecosystem of startups and established firms embed LLM capabilities into user-facing applications for accounting, legal, retail, and other services.

Activity in each layer has exploded in multiple directions. The Model Layer grew from 1 model in early 2023 to 668 by the end of 2025. There are curious dynamics in this layer. Open-weight models—which allow users to customize systems for specific tasks—charge users 90% less than do closed weight models. Open-weight providers effectively give away their models after spending billions in development and training. Despite what looks like bad economics, there are over twice as many open-weight models as closed-weight models, 449 versus 219.

Customers in the Model Layer also make choices that appear counter intuitive. Even though open-weight providers charge 90% less than do their closed weight counterparts, customers use closed-weight models more than twice as often.

The complexity doesn’t stop there. At the Inference layer, the number of providers grew from 30 to 90 in 2025. These providers largely host open-weight models and their non-price capabilities vary. Closed-weight model creators are more likely to have vertical relationships at this layer.

The growth and interplay of these two layers illustrate why controls can be counterproductive. They limit innovators’ abilities to experiment, meaning that there would be fewer models in both levels. Fewer models at this stage of development means fewer opportunities for customers to express their preferences. And it is unclear whether the two layers will remain separate.

Model diversity is growing in several ways. Measured by the Artificial Analysis Intelligence Index, 80% of the models fell between 0.1 and 0.29 on the scale at the beginning of 2025. By the end of the year, they fell between 0.22 and 0.61, an increase in spread of over 100%.

Market leadership changes often. In the Application Layer, the market leader for science-oriented models changed eight times in 2025, while the market leader for legal services changed five times.

What does this mean for regulators? The innovators, investors, and customers driving AI are creating tremendous value, estimated to be approaching $1 trillion. Regulatory controls handicap legitimate AI providers and create market opportunities for those less inclined to follow the rules.

The lesson isn’t that government has no role in AI’s evolution. It is that seeking to control AI is counterproductive. AI policy should let the government be a leading AI user without limiting legitimate users of AI. This is more like what good governance has always done: punish harmful conduct and protect citizens by adapting its own capabilities as the world changes."