Billionaires are consistent with the institutions that underlie economic prosperity.

See Billionaires by Tino Sanandaji & Peter T. Leeson.

"Existing studies of entrepreneurship focus on entrepreneurs whose individual contribution to wealth creation is typically trivial: self-employed persons. This article investigates entrepreneurs whose individual contribution to wealth creation is enormous: billionaires. We explore the relationship between economic development, institutions, and these contrasting kinds of entrepreneurs. We find that the institutions consistent with self-employed entrepreneurs differ markedly from the ones consistent with billionaires. Further, only the latter are consistent with the institutions that underlie economic prosperity. Where well-protected private property rights and supporting, market-enhancing institutions flourish, so do billionaires. But self-employed entrepreneurs do not. Where private property rights are weakly protected and interventionist institutions flourish, so do self-employed entrepreneurs. But billionaires do not."

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." 

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."

  

How to Escape the Productivity Slump

Removing policy barriers can unleash a new era of productivity and abundance. 

By Jeremy Horpedahl. 

"Summary: For the past half-century, much of the developed world has experienced a puzzling slowdown in productivity growth—the rate at which workers and businesses become more efficient over time. While digital technologies have advanced at a remarkable pace, innovation in the physical world has slowed considerably. The problem is not a lack of scientific breakthroughs or a shortage of good ideas. Rather, it is a failure to translate discoveries into products, infrastructure, and services that improve everyday life. This slowdown is largely the result of policy choices. By reforming outdated permitting systems, using innovation incentives such as R&D prizes and Advance Market Commitments, and reducing barriers created by protected local monopolies, we can accelerate the spread of new technologies and usher in a new era of prosperity.

---

In a previous exploration of the housing affordability crisis, I observed a sobering reality: artificial scarcity is often a policy choice. We have placed arbitrary limits—mostly through local governments—on our ability to build homes, driving up costs and restricting opportunity. But this pattern of self-imposed constraint does not stop at the edges of our neighborhoods. It extends into the institutions and policies that shape economic growth. It is one of the primary reasons why, despite living in an age of extraordinary digital innovation, we remain stuck in a decades-long productivity slump.

Economists often measure technological progress using a concept called Total Factor Productivity (TFP). In simple terms, TFP measures how efficiently an economy turns labor, land, and capital into goods and services. When TFP rises, society discovers better ways to produce more with the same resources.

From the 1920s through the early 1970s, TFP in the United States and much of the developed world grew at more than 2 percent per year. This was the era that gave us commercial aviation, widespread electrification, antibiotics, and the Apollo program. The physical world was transformed in a single generation.

Since the early 1970s, however, productivity growth has slowed dramatically to less than 1 percent in most years. As investor Peter Thiel famously quipped, “We wanted flying cars; instead, we got 140 characters.” Digital technologies have advanced rapidly, while progress in energy, transportation, infrastructure, and advanced manufacturing has been far slower. We can send vast amounts of information across the globe in milliseconds, yet we often struggle to build major infrastructure projects on time or on budget.

A 2020 paper by Nicholas Bloom and co-authors argues that good ideas are getting harder to find – that is, more investment in research and development has become necessary for each new patentable idea. However, more recent research by Teresa Fort and co-authors (currently in working paper form) suggests that this is not the case. The Bloom et al. result may, in fact, be an artifact of focusing on manufacturing firms, which were dominant from about 1970 to 1990. Fort and her co-authors show that patenting and innovation have shifted in recent decades, becoming dominated by firms in information, management, and professional services.

Because manufacturing is a physical process, it is much more likely to be subject to, for example, environmental regulations, whereas an IT firm operates in a much less regulated sector. So, our relative stagnation may not be the result of a scientific drought after all. Universities and research laboratories continue to produce remarkable discoveries. We are not failing at invention; we are failing at diffusion, the process of turning new discoveries into widely used products and services.

The Diffusion Deficit and the Permitting Veto

Innovation does not benefit society until it escapes the laboratory and enters the marketplace. The journey from a peer-reviewed paper to a consumer-ready product is long, expensive, and uncertain. Over time, policymakers have added layer upon layer of regulatory complexity to that journey.

Physical innovation requires physical construction. New technologies need testing facilities, advanced laboratories, semiconductor fabrication plants, energy infrastructure, and transportation networks. Yet building almost anything of significance in the modern West often requires navigating years of environmental reviews, public-comment periods, and multi-agency approvals.

Laws such as the National Environmental Policy Act (NEPA) and state-level counterparts such as the California Environmental Quality Act (CEQA) were originally intended to prevent environmental harm. Over time, however, they have increasingly become tools for the delay of progress. Because these laws frequently allow opponents to challenge projects on procedural grounds, they have contributed to what political scientist Francis Fukuyama calls a “vetocracy”—a system in which many actors can block decisions but few can make them. Average NEPA environmental impact statements now take almost four years to complete, with many extending far beyond a decade. Thankfully, the median is a bit shorter, but still about 2.5 years.

Consider the recent push to reshore semiconductor manufacturing. While the government has allocated billions of dollars in subsidies to build these vital factories, the physical construction is bottlenecked by years of permitting and environmental reviews. A state-of-the-art fabrication plant (commonly called a “fab”) that takes 18 months to build in Taiwan or South Korea can take three to five years just to obtain a permit in the United States.

The result is predictable: projects take longer, cost more, and become less attractive to investors. Even when governments provide subsidies for strategic industries such as semiconductor manufacturing, years of permitting can slow implementation. Time is money, and prolonged regulatory uncertainty discourages investment in capital-intensive industries.

The solution is straightforward, even if politically difficult. Critical infrastructure, advanced manufacturing facilities, and research laboratories should face streamlined approval processes. If projects satisfy clearly defined environmental and safety standards, they should be approved in months rather than years.

Pull Mechanisms: R&D Prizes and Commercialization

Reducing regulatory barriers is only part of the solution. We must also rethink how innovation is encouraged and financed.

In addition to corporate financing, most governments try to support innovation through “push” funding. Researchers receive grants to conduct experiments, purchase equipment, and explore new ideas. This model, some economists argue, can be effective for basic science, especially when commercial applications may be years away.

Commercialization presents a different challenge. Many promising technologies fall into what innovators call the “Valley of Death” – the difficult period between a successful laboratory demonstration and a commercially viable product. At this stage, development costs rise sharply while uncertainty remains high.

That is where “pull” mechanisms become valuable. Instead of paying for research inputs, policymakers reward successful outputs. An Advance Market Commitment (AMC), for example, guarantees that a buyer will purchase a product if it is successfully developed. Rather than funding every possible approach, the sponsor commits to paying for results.

Economist Michael Kremer helped pioneer this approach through vaccine development programs. More recently, Operation Warp Speed demonstrated its effectiveness. The government did more than fund vaccine research; it guaranteed large future purchases for successful vaccines. By reducing market risk, policymakers encouraged firms to accelerate development and manufacturing simultaneously. The result was one of the fastest vaccine-development efforts in history.

Consider other approaches. Throughout history, prizes have also stimulated innovation. The Longitude Prize helped solve a critical navigation problem for maritime trade, while the Ansari X Prize helped launch the private spaceflight industry. Pull mechanisms align private incentives with public goals by rewarding success rather than political connections or grant-writing skill.

Breaking Local Monopolies and Regulatory Capture

When people hear the word “monopoly,” they often think of large technology companies. Yet some of the most significant barriers to innovation exist at the local level.

The electric utility sector provides a clear example of how regulatory design shapes technological adoption. Because most utilities operate as regulated monopolies with government-guaranteed rates of return on capital investments, their business model relies on continuous, large-scale infrastructure growth. 

Put simply, utilities make more money the bigger power plants and power lines they build, so they usually prefer huge projects over things like rooftop solar panels that let people generate their own power without the utility having to build as much infrastructure.

Decentralized energy technologies—such as local battery storage, micro-grids, and advanced management software—directly threaten this model by optimizing the existing grid and reducing the need for new capital projects. As a result, studies from the MIT Energy Initiative and industry financial analysts indicate that utilities frequently leverage legacy regulatory processes to delay or block these decentralized innovations from integrating into the wider network.

Similar dynamics exist elsewhere. State dealership franchise laws frequently restrict direct-to-consumer automobile sales, making it more difficult for new manufacturers to enter the market. Occupational licensing requirements now affect roughly one-fifth of American workers and can create barriers to entry that limit competition and labor mobility.

Innovation depends on what economist Joseph Schumpeter called “creative destruction” – the replacement of older, less efficient business models with better ones. When established interests use regulation to shield themselves from competition, they slow technological adoption and reduce future productivity growth. Encouraging competition and reducing regulatory barriers at the state and local level would help accelerate the diffusion of new ideas throughout the economy.

Choosing Abundance

The productivity slowdown is not an immutable law of nature. It is, at least in part, the consequence of policy choices. Human ingenuity remains as powerful as ever. We have more scientists, more capital, and better tools than any previous generation. The challenge is not generating ideas; it is allowing those ideas to spread.

By streamlining permitting processes, expanding the use of R&D prizes and Advance Market Commitments, and reducing barriers created by protected local monopolies, we can accelerate innovation in the physical world.

An additional one or two percentage points of annual productivity growth may sound insignificant. Yet when compounded over decades, the effects are transformative. Higher productivity means higher incomes, better health outcomes, more abundant energy, and greater opportunities for future generations. The ideas already exist. The question is whether we will allow them to flourish."

Marian Tupy disabuses American socialists of their economically ignorant belief that successful entrepreneurs steal their wealth from workers and consumers

From Cafe Hayek.

"Marian Tupy disabuses American socialists of their economically ignorant belief that successful entrepreneurs steal their wealth from workers and consumers. Two slices:

Early economists, such as James Mill and David Ricardo, theorized that the physical labor exerted to create a good is the real measure of its value. Karl Marx took the concept to its extreme: If labor creates all value, then profit must require unpaid labor, making every employer an expropriator and every fortune a crime.

Then, beginning in 1871, economists countered the labor theory of value. Carl Menger, William Stanley Jevons and Léon Walras demonstrated independently that value resides not in hours of toil but in the judgments of consumers. Writing a 500-page novel takes the same amount of physical labor as typing out 500 pages of the word “banana” repeatedly. Only the novel commands a price. Value is created whenever someone rearranges the world into a shape that others want. It is measured by the buyer, not the worker.

Entrepreneurs are the arrangers. Economist Israel Kirzner argued that entrepreneurship is alertness — noticing an opportunity that nobody else has found. The entrepreneur sees that resources combined in a certain way and priced at a certain level can be recombined into something consumers will value even more. The gap between the two is profit. Nothing is taken from workers, who are paid the wage they agree to, or from customers, who buy the product only when the purchase leaves them better off.

…..

A movement that believes wealth is stolen will tax it, cap it and make everyone poorer. Ideas drive growth, and ideas come from people who can profit from them. A world that cherishes entrepreneurs will enjoy advanced chips and revolutionary cures. A world that punishes its innovators will at least enjoy plenty of slogans."

Keeping Cool: The Air Conditioner That Changed America

The time price of air conditioning has fallen 98.6 percent since 1952. That ordinary luxury saves lives every summer.

By Gale L. Pooley. He teaches US economic history at Utah Tech University. Excerpt:

"One of the great triumphs of entrepreneurial capitalism is how quickly air conditioning traveled the familiar path from luxury to necessity. What began as an expensive convenience for a tiny elite became, within a generation, affordable to ordinary families. The market did not merely invent comfort — it democratized it.

In their report Time Well Spent: The Declining Real Cost of Living in America, Michael Cox and Richard Alm found that a 5,500-BTU air-conditioning unit cost about $350 in 1952. At the time, entry-level workers earned roughly 83 cents an hour, putting the time price at 422 hours.

Today, Walmart sells a far more efficient 6,000 BTU air-conditioning unit (with a remote control) for only $115. The current hourly wage for limited-service restaurant workers is around $19 an hour, putting the time price at six hours.

The time price has decreased by 98.6 percent. For the time it took US workers to earn the money to buy one unit in 1952, they get 70 today.

If air conditioning saves lives, why don’t more Europeans have it?

Europe’s electricity prices are typically much higher than the US, driven by higher taxes, network costs, renewable energy mandates, and energy import dependence. Customers in the US pay 17 to 19 cents per kilowatt-hour (kWh) compared to 25 to 32 cents in Europe. This means Europeans pay roughly 47 to 68 percent more per kWh than US customers.

Americans are also much richer than Europeans. According to World Bank data, American gross domestic product (GDP) per capita was $84,809 in 2024, while the European Union’s was 25 percent lower at $63,585. That $21,224 difference could buy a lot of comfortable cooling.

The European Union also prioritizes environmental targets over human comfort by imposing strict regulations for heating and cooling, making these amenities much more costly. The commission encourages citizens to use fans instead of air conditioning. Imagine the government doing that in Phoenix and Atlanta in July. Italy, Greece, and Spain even announced temperature limits in public spaces during the 2022 heatwave in an effort to meet these environmental objectives. Spain limited air conditioners to be set no lower than 80°F. No wonder European productivity is 38 percent lower than the US.

Historic preservation laws and strict landlord rules frequently ban exterior window units to maintain aesthetic uniformity.

While air conditioning ownership increases households’ electricity consumption, it may be a small price to pay for comfort and avoiding death.

The problem is not the climate but the policy mindset. Too many European regulators approach energy and technology through the ideological lens of scarcity rather than creative innovation and human flourishing. One reason such policies persist is that the officials who design them are largely insulated from the consequences of their decisions and rarely experience their costs directly. Instead, those costs are borne by millions of ordinary citizens.

Air conditioning is not ultimately a story about cooling. It is a story about knowledge. It transformed oppressive heat into comfort, inhospitable regions into thriving communities, and summer misery into year-round productivity. Coal, copper, and electricity become valuable only after humans discover how to harness them. The history of air conditioning is the history of knowledge triumphing over nature’s constraints.

The ultimate resource is neither energy nor matter. It is the infinite capacity of human beings to learn, create, and discover."

AI is making it easier for one worker to do tasks that once required a small team

See Me, Myself and AI by Liya Palagashvili of George Mason University’s Mercatus Center. Excerpts:

"AI is making it easier for one worker to do tasks that once required a small team."

"Since early 2024, solo business applications have risen nearly 27% in professional services, information, education, finance and insurance—sectors the that have among the highest AI-adoption rates. In construction and wholesale trade, where AI is less likely to enable independent work, solo business applications have been essentially flat."

"In 2022 and 2023, solo applications moved similarly in sectors with both high and low AI exposure. The divergence emerged after 2024 and then took off."

"Business applications with payroll intent fell by 6.4% in AI-exposed sectors, while applications unlikely to hire employees rose by 26.8%."

"Among occupations most exposed to AI, solo self-employment rose about 20% from 2022 to 2025. In the least AI-exposed occupations, it barely moved."

"it’s becoming cheaper to operate as a one-person business" 

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."

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" 

Jeff Bezos Earned His Fortune

The Amazon founder’s innovations save customers 22 hours a year on average, giving them the gift of time

By Marian L. Tupy. Excerpts:

"Amazon didn’t become valuable by force. It became valuable because hundreds of millions of people chose to use it."

"Amazon saved them [consumers] time, money, effort or uncertainty. Sellers weren’t forced to use Amazon’s marketplace. They did so because it gave them access to demand."

"The value Amazon created is harder to see because it is dispersed. A mother who doesn’t drive to a store to buy diapers doesn’t appear in an economic headline. A small business that reorders supplies in two minutes doesn’t make the evening news."

"Suppose an hour of labor is worth about $64, roughly the average gross domestic product per hour worked in the countries in which Amazon operates. If Mr. Bezos’ fortune corresponded to the total value that Amazon created, his $275 billion would represent about 4.3 billion hours of saved time. Divided among Amazon’s more than 300 million active customers, the saving comes to about 14 hours per customer over Amazon’s life."

"entrepreneurs don’t capture all the value they create. The Nobel Prize-winning economist William Nordhaus estimated that innovators keep only a small share of the social value—roughly 2%—produced by their innovations."

"A single avoided trip to a store can save 30 minutes. Finding a product online instead of driving to three retailers can save an hour. Reading reviews can reduce the chance of buying the wrong product."

"Amazon Web Services lowered the cost of starting and scaling companies. It gave firms computing capacity without the old capital expense."

"Amazon also forced competitors to improve." 

The compound interest of innovation: Wi-Fi and the power of unlicensed spectrum

By Brian A. Rankin of CEI.

"Investors understand the power of compound interest. Over time, small gains accumulate into exponential growth.

Innovation often works the same way. One breakthrough creates the foundation for the next, which enables another. Over time, innovation compounds, producing transformative economic and technological change.

Few technologies better demonstrate the compound interest of innovation than Wi-Fi.

In 1985, the Federal Communications Commission (FCC) took a novel and consequential step. It opened three spectrum bands for unlicensed use. At the time, these spectrum bands were dismissed as “junk bands.” Yet those supposedly worthless bands were put to many productive uses, including Wi-Fi.

While exclusive-use licensed spectrum forms the core of modern mobile networks, Wi-Fi relies on portions of unlicensed spectrum that anyone can use on a nonexclusive basis. This spectrum is also decentralized: there are no license payments or centralized control for users, though Wi-Fi devices remain subject to FCC certification and certain technical requirements.

This openness allowed Wi-Fi to proliferate and drive affordability. Coffee shops, hotels, airports, hospitals, libraries, and countless other locations routinely offer Wi-Fi at no cost. And a single residential broadband subscription can serve an entire household with many connected devices. The average home now has more than 21 connected devices, each connected at no incremental cost.

The result is extraordinary consumer value and affordability.

In 2020, when the FCC opened an additional 1,200 MHz of spectrum within the 6 GHz band for unlicensed use, the agency found that unlicensed devices relying on Wi-Fi and other technical standards had “become indispensable for providing low-cost wireless connectivity in countless products used by American consumers.”

The educational benefits alone are substantial. In a survey of more than 16,000 undergraduate students across 71 US institutions, 96 percent said that Wi-Fi was the most important technological feature for studying. Wi-Fi has transformed how teachers and students communicate, allowing them to safely share homework, documents, and files over a school’s network.

Business applications are also significant. A recent report by ABI Research shows an increase in Wi-Fi usage across business and enterprise environments. The report found that “virtually all business, from sprawling multinational enterprises to independent mom and pop shops, depend on Wi-Fi for daily communications and commerce.” It concluded that Wi-Fi serves as a “key enabler” of the disruptive innovations that will define tomorrow’s economy.

Health care is another example. Wi-Fi-enabled telehealth services allow medical professionals and patients to communicate more efficiently and conveniently, saving both money and time. A recent study found that 71 percent of Americans are comfortable receiving virtual care for the treatment of common mild illnesses, while that 66 percent are comfortable using it for chronic disease management.

These innovations emerged because policymakers created an environment where entrepreneurs and technologists could experiment freely. One innovation led to another, and then to another – compounding over time into a communications ecosystem that has transformed modern life.

The lesson for policymakers is straightforward.

Innovation flourishes when government creates space for experimentation. The success of Wi-Fi and unlicensed spectrum demonstrates the extraordinary economic and consumer benefits that openness, flexibility, and light-touch regulation can produce.

That is the compound interest of innovation."

Entrepreneurs Flocked to Colorado. Now Red Tape Is Driving Some Away

Proposed AI bill has many wondering whether state’s regulations killing its entrepreneurial spirit

By Owen Tucker-Smith of The WSJ. Excerpts:

"A widely circulated report last month from the state’s chamber of commerce reported a loss of publicly traded companies based in the state, estimating that Colorado had lost workers from some 98 firms to relocations or failed site-selection opportunities since 2019."

"Companies’ latest complaint is over a landmark state bill regulating artificial intelligence. A previous version of the bill would have required companies to take steps to reduce the risk that AI-based algorithms used for high-stakes decisions such as employment or healthcare discriminate against users."

"The state added half a million jobs in the mid-2010s as startup culture and domestic migration drove explosive growth, but the economy has recently grown sluggish."

"Blake Scholl, chief executive of the Denver-based aviation company Boom Supersonic, moved to Colorado a decade ago, inspired by its thriving business climate, but said the pileup of regulations has delayed his construction projects."

"the AI bill would add compliance costs and distract attention from companies when they need to focus on winning the AI race." 

What Happens When Europeans Find Out How Poor They Are?

The Continent trails far behind U.S. economic output. Politics is bound to catch up sooner or later

By Joseph C. Sternberg. Excerpts:

"per capita gross domestic product: $94,400 in the U.S., according to the International Monetary Fund, compared with $65,300 in Germany, $61,000 in the U.K. and $52,000 in France."

"From a fairly narrow edge throughout the 1980s, the gap widened a bit in the 1990s. Since 2007, however, European per capita incomes have more or less stagnated while the U.S. has enjoyed another growth spurt."

"Switzerland amps up its per-capita GDP to $126,000 by attracting finance and pharma."

"The wealth skewing American per capita economic data is a result of innovation and entrepreneurship. Europe lacks America’s per capita output not because it lacks American tech companies and billionaires but because it lacks American-style productivity growth capable of creating tech companies and billionaires in Europe."

"On average, [British] respondents thought that if the U.K. were a state, it would be the seventh-richest in terms of per-capita GDP, behind the likes of New York and California. The reality is that Britain is toward the bottom of the table, roughly on the level of Mississippi." 

"Using the PPP metric, U.S. GDP per capita is $94,400, Germany’s is $76,800, Britain’s is $67,600, and France’s is $68,600."

"That means, broadly, that a nominal per capita income of $61,000 in the U.K. allows a Briton to consume the same amount of goods and services that would cost $67,600 in America. But that’s merely a different way of stating Europe’s problem. Europe’s economies look healthier in PPP terms to the extent a lower price level allows households to stretch their euros and pounds further. Those lower prices reflect Europe’s lower productivity. Meanwhile nominal GDP expresses Europe’s ability to consume global resources, which is lagging." 

America’s Productivity Pop Has a Startup Backstory

By James Pethokoukis. Excerpt:

"There is, however, a less obviously tech-centric explanation for the recent productivity uptick: a rebound in business formation. After decades of declining dynamism, new-business applications have surged since the pandemic and remain well above pre-2020 levels, according to the new short note “Application Accepted: Business Formation Boom Continues” by John O’Trakoun of the Federal Reserve Bank of Richmond, analyzing US Census Bureau data. Because applications tend to translate into actual firm creation, the recent pickup points to continued startup activity. And importantly, much of that activity is showing up in sectors that have historically added jobs at a faster pace—hinting at a “tailwind for future job creation.” 

Added growth, too. Startups function as the economy’s trial-and-error engine: Most don’t last, but the ones that do introduce new ideas, challenge incumbents, and shift workers and capital toward more productive uses.

The relationship between business dynamism and productivity growth is both well understood and underappreciated, at least by non-economists. In the 2024 Aspen Institute analysis “The Recent Rise in US Labor Productivity,” economist Luke Pardue points to the post-pandemic surge in new-business creation as a likely key driver of recent productivity gain. He also notes that earlier declines in startup activity imposed a measurable drag on productivity—suggesting that the recent rebound could provide a meaningful continuing boost if it proves durable.

And by the way, there may be an AI kicker to this dynamism story in how the technology can help entrepreneurs do their thing. “The surge in new US business formation is being fueled by AI and large language models that are dramatically reducing the cost and complexity of launching a company,” says Torsten Slok, chief economist at investment firm Apollo. “As these firms scale, they will create jobs, underscoring that AI is likely to strengthen, not disrupt, the US labor market.”"

Opinion: No matter how good AI gets, it won’t beat markets

The economy isn't a vast set of equations. It's a complex discovery process done in real time. Even the best computers aren't up to that

By Peter Boettke. 

"Whenever we see big leaps in computation, would-be central planners come out of the woodwork, claiming this finally makes it possible to organize the economy better than markets do — optimizing tax rates, producing enough to meet our needs, and allocating resources in a way that maximizes well-being for all.

Such arguments gained theoretical prominence in the early 20th century, saw a resurgence with the mid-century advent of modern computing and operations research, and have emerged again with the impressive advance of artificial intelligence (AI).

But this line of thinking rests on a false premise: that an economy is nothing more than a computational problem to be solved with accurate equations and enough data and processing power.

As I argue in a recent paper for the Montreal Economic Institute, this error was understood as far back as the 18th century by Adam Smith (1723-90). In his Wealth of Nations, which just had its 250th birthday, Smith observed that producing even simple goods requires the co-operation of so many different hands that the full network of exchanges would “exceed all computation.” Even the making of a woollen coat, for instance, required farmers, spinners, dyers, merchants, shippers, and so on just to get from raw materials to market.

Such complexity doesn’t stop the coat from being produced. But Smith’s point is that there is no single mind directing every step of production, from raising the sheep to selling you a brand-new peacoat. Instead, it is through the spontaneous co-operation of the many hands and minds that make up the “invisible hand” of the market that such production is possible.

In the late 19th century, Italian economist Vilfredo Pareto (1848-1923) expanded on this point, observing that co-ordinating even a modest economy and matching resources to uses and preferences would soon cause an explosion in the number of equations to be solved. But today’s computers can handle quintillions of computations per second, more than Pareto could possibly have imagined. Doesn’t that make a difference?

This is where Nobel laureate economist Friedrich Hayek (1899-1992) comes in. Hayek explained that the problem is not merely that the relevant knowledge is decentralized — spread out across millions of individuals — but that it is often tacit. Local shopkeepers’ understanding of their customers’ buying habits cannot be translated into one data point to feed into an AI or any other kind of model. Nor can we predict the emergence of an entrepreneur dreaming up a product that did not exist before.

Most important of all is the phenomenon of prices — indispensable signals that guide our decision making. Prices are neither set in stone nor arbitrarily fixed. Instead, they emerge from real exchanges. When the price of wheat rises, it is because buyers and sellers are competing for a limited supply. This price increase signals something about relative scarcity. It also provides an incentive to adjust consumption and conserve the resource, to look for a substitute, to increase production and to innovate.

In short, prices are not lying around in the wild, waiting to be harvested and fed into an algorithm. Rather, they are the result of constantly evolving discovery. Without this process of discovery, the knowledge embedded in a price simply doesn’t come into existence.

Hayek called the price system, with its ability to generate knowledge in the market, a “marvel.” He described competition as a “discovery procedure” that does much more than allocate resources. When entrepreneurs bring new products to market, for instance, they are making informed bets. If they’re wrong, they bear the cost. If they’re right, they reap the rewards. Through this process, we all learn a little more about what is possible, what is valued and what works.

As for AI, it can process truly vast quantities of historical data to detect patterns, forecast trends and optimize within given parameters. But it can only look backward to find data, whereas economic life is forward-looking and creative. The growth of the social-media influencer market, to choose but one example, could hardly have been predicted by an algorithm 20 years ago. In the same way, today’s algorithms can’t accurately predict what or how much we’ll consume tomorrow, since much of what will matter tomorrow hasn’t been imagined yet.

As powerful and helpful a tool as AI can be to improve logistics, better manage inventories and analyze markets, it remains just that, a tool. It can help us gain a better understanding of markets but only markets themselves can predict and co-ordinate the results of the billions and billions of voluntary exchanges that take place every day."

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

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

By Michael J. Lewis of The WSJ. Excerpts:

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

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

Small Businesses Can’t Escape Price Controls

The Biden administration’s legacy is choking off tomorrow’s small-business breakthroughs before they leave the lab, writes Casey Mulligan.

Letter to The WSJ. 

"Tomas Philipson ably details how “Biden’s IRA Is Harming Cancer Patients” (op-ed, Dec. 1). Those who had a bit of economics training would have seen that coming. It doesn’t matter whether it’s rent control, groceries or healthcare—government-imposed price ceilings curtail investment in maintaining and improving the quality of consumer products. In the pharmaceutical industry, that means fewer new drugs to improve health and longevity, and fewer discoveries of how to use existing medicines better.

Small businesses drive innovation because they are less bureaucratic and have fewer worries about protecting existing products. They are the least able to survive a policy that shortens effective patent lives and caps prices as their discoveries approach the market. According to the 2023 Business Enterprise Research and Development survey, about 2,970 small firms are engaged in U.S. biotechnology research and development. Their business models depend on a handful of potential “home run” projects. When price caps truncate the payoff window, many of their projects never get financed or are abandoned.

The Biden administration’s legacy not only harms cancer patients; it’s choking off tomorrow’s small-business breakthroughs before they leave the lab.

Casey B. Mulligan

Washington

Mr. Mulligan is chief counsel for advocacy at the Small Business Administration." 

Regulation and entrepreneurship in the U.S. child care market

By Anna Claire Flowers.

"Abstract

This paper examines how regulations affect entrepreneurial activity in the U.S. child care industry. By analyzing research on child care affordability, availability, and quality, I contrast the regulatory process against the entrepreneurial market process to identify key sources of market dysfunction. State-level regulations for formal child care aim to resolve information asymmetries and establish standards for measuring quality. In practice, they produce at least three significant unintended consequences that hinder entrepreneurship and innovation in the child care market: regulations create barriers to entry, disrupt essential feedback loops between consumers and providers, and generate profit opportunities for entrepreneurship outside the regulated sector. These effects directly undermine the stated policy objectives for licensed child care by inhibiting transparency, availability, and affordability for families."

The Constitution of Innovation: A New European Renaissance

"The regulatory bicycle is pedaling at full speed. But it is pedaling towards a wall of bureaucracy created by its own policies." 

 "To face the great transformation ahead, Europe needs both an innovation system and creative destruction." 

By Luis Garicano, Bengt Holmström & Nicolas Petit. Holmström is a Nobel Prize winning economist. Excerpts:

"While the United States maintained a remarkably constant 2 percent growth rate in average income, the European core economies decelerated, slowly and then sharply. Since 1995, Europe’s average annual growth has been just 1.1 percent; since 2004, it has been a mere 0.7 percent – all while the United States has continued on its steady track. By 2022 the relative gap in output per head has returned to where it was in 1970. Decades of convergence were surprisingly wiped out" 

 

"Last year, Enrico Letta found the European market critically fragmented, while Mario Draghi concluded that Europe’s competitiveness had fallen so far it now required ‘radical change’ just to survive."

"The European Union does not need a new treaty or powers. It just needs a single-minded focus on one goal: economic prosperity."

"The European Union currently pursues a long list of goals, including (as given by the Commissioner titles): promoting the ‘European way of life,’ ‘health and animal welfare’, ‘environment, water resilience and a competitive circular economy’, ‘intergenerational fairness, youth, culture and sport’ or ‘social rights and skills, quality jobs and preparedness’. Meanwhile, the internal market has become so fragmented that, according to recent IMF analysis, internal trade barriers are equivalent to a 44 percent tariff on goods and 110 percent on services."

"With peace secured, the European institutions began to look for new problems to solve."

"From the 1980s Europe began legislating on topics with little to no connection to economic integration or peace – the amount of fruit in marmalade, the conditions under which a piece of clothing could be considered sustainable, or what constitutes appropriate political advertisement. What started as functional integration – removing barriers to trade – morphed into the superstition of regulation for the sake of integration. Each new regulatory text justified the next"

"This regulatory overkill has culminated with the response to the digital and environmental challenge, which led to an avalanche of rules"

"the General Data Protection Regulation (GDPR), favors US tech giants which can shoulder the burden of massive compliance costs but undermines European startups. A recent study shows that GDPR reduced European Union technology venture investment by 26 percent relative to the US."

"These rules raise the cost of innovation and slow the dissemination of digital technology across the European Union."

"it must work with the Member States to complete the internal market.

The internal market has only one definition: the free movement of goods, services, capital, and workers. It is against these standards that it should be judged, exclusively and fully."

"The European Union needs to stop wading into new policy areas like housing or animal welfare and get serious about enforcing basic internal market rules."

"To face the great transformation ahead, Europe needs both an innovation system and creative destruction. We lack in both areas, but we are particularly weak in creative destruction. The ECB has pointed out repeatedly that Europe’s failure to kill zombie firms crowds out credit for healthy firms.¹⁵ We must stop defending legacy assets and build a system that accepts both market entry and exit as the basic conditions for innovation."

"we must actively seek and eliminate barriers to entry that favor incumbents, such as special rights, subsidies, or skewed regulations from banking to telcos, from energy to agriculture. We must support market exit through streamlined bankruptcy laws and flexible labor rules. Market exit is not failure; it is how we reallocate assets, people, and resources from old businesses to new ideas."

"supported by secure property rights"

"If a product is safe enough to be sold in Lisbon, it should be safe enough for Berlin. We should not burden traders with the task of removing local barriers to trade through judicial remedies in the target country"

"European Union law in reality allows Member States freedom to restrict imports of goods and services and only forces them to demonstrate why imports are not good enough for the home market under a specific procedure. Traders are therefore subject to ‘an unstable litigation-driven trading environment of inter-State regulatory diversity’.¹⁷ The business of business is business, not litigation."

"We must create simple and clear rules that free competition instead of centrally planning our economy by regulatory fiat."

"Europe’s frenzy of regulation has been predicated on the existence of free lunches. For instance, climate laws have been sold as leading to job creation and innovation (the ‘green deal for jobs’) not just as the solution to climate change. Citizens were asked to swallow make-believe propositions, like the idea that fighting global warming would be free of economic cost.

Similar Nirvana fallacies have been observed in other domains, like migration, trade policy or digital regulation."

Legal reforms

1.  Eliminate the usage of directives

[A court in 1979 ruled that] "goods lawfully produced and marketed in one Member State must flow freely to all others."

"Member States cannot enforce their own domestic laws to bar imported goods."

 "businesses must still comply with a maze of national barriers. France imposes unique carbon tests on imported diesel. German Länder require separate fire safety certifications for construction materials already approved elsewhere in the European Union."

"The solution is to abandon directives entirely"

"Businesses end up facing 27 different versions of supposedly ‘common’ rules."

2. Specialized Commercial Courts

"The internal market’s main weakness is enforcement. When Italian regulations illegally block a French trader, that company faces only bad options. It can file a complaint with the Commission and wait years for action that may never come; sue before Italian courts only slightly familiar with European Union law; operate illegally and hope to reach the European Court of Justice through proceedings brought against it; or simply give up."

"We propose that the European Union create Specialized Commercial Courts with exclusive jurisdiction over internal market violations by Member States."

3. Federal field preemption

"traders face a regulatory thicket, which only gets denser as more national, regional, and local regulations are introduced. Right now, banks answer to European supervisors, national central banks, and local regulators simultaneously. According to the Draghi report, there are over 270 digital regulators in the European Union, each interpreting “common” rules individually."

"The solution is that when the European Union regulates in areas of exclusive competence and internal market legislation, all national, regional, or local rules in that specific area cease to apply."

4. A 28th regime that is appealing to businesses

"give up on harmonizing 27 different corporate systems"

"In practice, Portugal would not need to adopt German corporate law or vice versa, as there would be a European alternative that companies can embrace if it serves them better."

"statutory conditions for the formation of SEs require businesses to incur high set-up costs and follow time-consuming and complex procedures for incorporation. This has tended to favor large firms.²⁸ Moreover, the law embodied a high number of referrals to national law and burdens in terms of employee participation.²⁹ This forced companies and investors to navigate a complex web of rules"

"This self-inflicted flaw stripped the SE of its core utility: giving small and medium-sized firms scale through simple and swift pan-European incorporation."

The US demonstrated the power of this solution when it allowed companies to bypass state securities laws by being regulated at the federal level – late-stage firms became four times more likely to attract out-of-state investors.³¹ The European Union could achieve similar results by letting businesses opt into European rules rather than forcing all Member States to abandon their national systems. This would also go some way towards unifying capital markets.

Countries that wish to maintain their legal traditions can keep them. Businesses seeking European scale can bypass them.

5. Rely on existing institutions when possible

"much of the European Union’s expansion has taken place in areas where existing institutions already operate."

"a worthwhile policy would consist of systematically determining which other existing institutions the European Union could use to discharge some of its core missions." 

6. Reform legislative practice

"Many temporary law and policy programs have become permanent. New regulatory structures entrench interests and are hard to dismantle. National regulatory authorities (NRAs) in network industries like telecoms illustrate this problem. Created to open monopolistic markets, they were supposed to hand over their powers to national competition authorities (NCAs) following liberalization. Decades later, the European Union has both NRAs and NCAs, adding compliance costs to industries no longer in need of market opening reforms."

"review clauses should be replaced with sunset clauses. Unless evidence shows a persistent market failure requiring maintenance or reform of a regulation or directive, the presumption should be that once a set period has elapsed, the instrument is no longer useful."

"the European Union fails at submitting new rules to a rigorous analysis of their costs and benefits. The Commission does have the duty to run an initial cost and benefits analysis of draft legislation. However, the Parliament and the Council, when they rewrite the law, often in private meetings (called ‘Trilogues’), are not required to check the costs and benefits of their own changes." 

"Whenever a change is proposed to a law that alters its purpose, key terms, or costs, the team must produce a short, public report on the effects."

"Whenever a change is proposed to a law that alters its purpose, key terms, or costs, the team must produce a short, public report on the effects."

[there were] "13,000 legal acts between 2019 and 2024"

"Poland entered the millennium at 47 percent of the European Union average income and today stands at 93 percent."

[that was not] "achieved through the competencies that have been layered on in the last twenty five years." 

[it was because of] "economic integration and solid European institutions."