AI Leaders Are Asking to Be Regulated. This Is Nothing New.

By Christopher J. Calton of The Independent Institute.

"After Dario Amodei, CEO of the AI company Anthropic, penned an open letter calling for AI regulation, Rahm Emanuel took to X. “I’ve served in two White Houses and in Congressional leadership,” the former Chicago mayor wrote, “and I can tell you when the last time a CEO or an industry at large asked to be regulated: never.” 

Emanuel’s statement reflects the commonly held progressive myth that conniving Robber Barons do everything they can to impede the state’s noble effort to regulate them, but nothing could be further from the truth. 

Business leaders have long lobbied to have their own industries regulated. In fact, an entire body of historical scholarship is devoted to that phenomenon. Historians such as Gabriel Kolko, Robert Wiebe, and James Weinstein spent their careers detailing how Big Business allied with progressive reformers and politicians to construct the federal regulatory apparatus.

What does Big Business have to gain from regulation? More than anything else, to suppress economic competition and avoid cutting prices. 

“Competition was unacceptable to many key business and financial interests,” Kolko wrote in his landmark history of the Progressive Era. “As new competition sprang up, and as economic power was diffused throughout an expanding nation, it became apparent to many important businessmen that only the national government could rationalize the economy.”

Railroads were the first major industry to face widespread regulation, and the champions of the movement were railroad tycoons who had grown weary of the competitive pressure to cut prices. One railroad president endorsed the proposed Interstate Commerce Commission as the solution to “the prevailing contagion of depression and loss, from the effects of ruinous rates, which were uncontrollable from a lack of adequate protection of railroad interests.” Attempts to cartelize the railroads under the leadership of J. P. Morgan predictably failed owing to the strong incentives to offer discounts to shippers in the hope of generating enough traffic to cover the high fixed costs of building track networks. 

Business leaders in other sectors adopted the same strategy for suppressing competition. The public-school narrative of American history teaches that Upton Sinclair’s The Jungle, an entirely fabricated account of Chicago’s meat-packing industry, triggered the onset of economic regulation. In reality, twenty years beforeThe Jungle was published, the so-called Beef Trust was already lobbying for inspection laws to protect them from European competition. 

The corporatist state reached its apex during the New Deal, when President Franklin Roosevelt invited executives from the nation’s largest companies to Washington to draft their own protectionist regulations under the ultimately unconstitutional National Industrial Recovery Act. Mammoth corporations were in a better position to absorb regulatory costs than their competitors, and price controls made it impossible for smaller operations to undercut them. In one instance, the National Recovery Administration even jailed a businessman for charging customers five cents less than his industrial code allowed. 

Today, large companies are reluctant to explicitly acknowledge their desire to suppress competition when they lobby for regulations, but the playbook is essentially unchanged. When Apple publicly endorsed California State Senator Scott Wiener’s bill to require California businesses to disclose their greenhouse gas emissions, the company insisted that “fighting climate change” was one of its top priorities. Apple boasted that it had already been measuring and reporting its climate emissions, implicitly acknowledging that its business model would be unaffected by the burdens the new rule imposes on its smaller competitors.

The nascent AI industry is already enormously competitive, and rivalry has contributed to rapid advancements in the quality and availability of the technology. Dario Amodei’s plea for regulation sounds the alarm about “cyberattacks,” “bioterrorism” and “serious economic disruption,” but underlying all of those concerns is a fear of market competition. “A race to the bottom, spurred by commercial incentives,” he writes, “can make these risks more acute.” 

More likely, he fears that Anthropic cannot win a marketplace contest that rewards quality and affordability. Like so many business leaders before him, Amodei views the regulatory state not as the protector of consumers, but as the guardian of his own self-serving corporate interests."

Household debt as a share of GDP is hovering around some of the lowest levels of the past three decades

Tweet by Gunjan Banerji of The WSJ.

 

America Became Rich Because of Liberalism

By Peter J. Boettke.

"March 9, 2026, was the 250^th anniversary of the publication of Adam Smith’s An Inquiry into the Nature and Causes of the Wealth of Nations. July 4, 2026, was the 250^th anniversary of the signing of the Declaration of Independence. These two documents are pillars of the great liberal tradition: free trade and economic freedom, the natural rights of each individual, and political freedom. Given the timing of publications, one cannot draw a direct line of influence from Smith’s scientific tract to the practical political demands of the Declaration. However, there is a great deal of evidence that the founding fathers knew of Adam Smith and the Scottish Enlightenment and drew inspiration from their works. My task here is not to revisit this question of influence, but to seek to find the common ground between the two documents we are celebrating this year, and to suggest how that common ground influenced the development of liberal political economy in the 20^th century in the hands of F. A. Hayek and Milton Friedman, the latter who won the Nobel Prize for Economics 50 years ago.

The great historian of the American Revolution, Gordon Wood, argued in The Radicalism of the American Revolution that what is most overlooked in discussions is the radical transformation of society that resulted. Colonial America was a society of status, of privileges, of station. Patronage and personal favoritism by those with power played a major role in social mobility—to the extent that it existed. This social system would all be transformed by the Revolution.  One prominent example of the legal transformation was the abolition state by state of the practice of primogeniture between 1777 to 1798.  Not only did this change the laws of inheritance, but transformed the meaning and use of property, encouraged entrepreneurship, credit markets and social and geographic mobility. Legal distinctions based on rank disappeared, and economic opportunities were based in interest, aptitude and talent rather than birth. Certainly not perfectly, it must be acknowledged. But in a far more sweeping nature than anywhere else in the world, ordinary individuals were enabled to “give it a go,” as the historian Deirdre McCloskey likes to stress about the ascendancy of the Bourgeois Era. Almost overnight, Wood argues, Americans became “the most liberal, most democratic, most commercially minds, and most modern people in the world.”

As a result, America became the richest country in history over the next 250 years. It did so without an aristocracy, and without central planning or a comprehensive blueprint by the governmental authorities. The Revolution succeeded because it created the institutional conditions for commercial civilization. It unleashed the creative powers of a free people to a greater degree than had ever been experienced before. As Hayek would stress, the transformation for a society of status to one of contract is critical to experiencing modern economic growth. And this is only possible if the governing system seeks to eliminate privileges and instead binds itself to the rule of law.

The American Constitution, democratic self-governance, geographic advantages, and abundance of resources all played a role, but it was the transformation of society that drove progress. The system of social hierarchy, deference, patronage, and inherited privileges was transformed into a system of equality before the law, civil society consisting of voluntary association, social mobility, entrepreneurship and dignity and respect for ordinary work. Commercial activity ceased being morally suspect and the marketplace was characterized by entrepreneurs, shopkeepers and independent participants rather than clients dependent on the good graces of the privileged and powerful elite.

It might make sense to pause for a minute and reflect on Smith’s choice of words for the title of his great treatise: “An Inquiry,” not “The Theory,” followed by “Into the Nature and Causes of the Wealth of Nations,” not merely “Into the Wealth of Nations.” Smith’s work was no doubt concerned with material abundance, but not exclusively so. The division of labor, as reflected in Adam Smith’s depiction of the production of a common woolen coat, wasn’t merely about productive specialization, but the establishment of peaceful social cooperation among strangers. Rather than the traditional society of domination, commercial society is based on mutually beneficial exchange. Commerce rewards prudence, trustworthiness, reliability, reputation, and self-command. The market process in this regard is a civilizing influence by taming the passions and encouraging cooperation with others of great social and physical distance. Trading, not raiding, characterizes commercial life; just as making, not taking, is recognized as the way to generate wealth.

Smith was writing at the dawn of liberty. The American experience in the centuries after that Revolution is the realization of that liberty. Again, it has never been perfect and is still not perfect, but it always strives and bends toward that Smithian liberal plan of liberty, equality and justice. In the 20^th century, the two most important political economists pressing these Smithian points and the exemplary importance of the American project were Hayek and Friedman, perhaps most importantly in their works The Constitution of Liberty and Free to Choose.

My choice of books to link these two together is somewhat unusual because most writing an article such as this would focus instead on the relationship between Hayek’s The Road to Serfdom and Friedman’s Capitalism and Freedom and the intimate connection between economic freedom and political freedom. These works, of course, are foundational to any discussion of the liberal principles of political economy and justice. But I chose The Constitution of Liberty and Free to Choose because both can be read as making significant contributions to the field of constitutional political economy (most associated with another University of Chicago product and fellow Nobel Prize winner, James M. Buchanan).

Critical to this specialized field of inquiry is how the establishment of general rules creates the conditions conducive the progress. To Hayek, America’s uniqueness was in creating a constitution and embracing institutions that formed the “machinery of government,” where millions of economic and social experiments could be going at the same time. America—however imperfect—embodied the principles of an open commercial civilization where individuals will discover opportunities, tinker and innovate, and develop new technologies. Economic freedom is not merely permission to give it a go, but a discovery procedure to learn what is worth going for in a way that nobody can know outside of the market process itself.

Friedman rightly contrasts the power of the market with the tyranny of control. The maintenance of commercial society requires limits on political power, competition to limit coercion, and choice to preserve and protect liberal pluralism. Economic freedom is not only efficient, it disperses power in society. It erodes privileges. It creates space for ordinary individuals to achieve extraordinary things. Economic freedom results from the security of property rights, freedom of contract and association, stable money and fiscal responsibility, all embodied in the rule of law.

This to me is the enduring lesson in political economy that we should derive from reflecting on the twin 250^th anniversaries and allow to guide us through our contemporary debates which too often seem to have forgotten these. Let me add one other aspect that is too often overlooked. When Hayek founded the Mont Pelerin Society, one of the names he toyed with was the Acton-Tocqueville Society. This was rejected by the original group for a variety of reasons, but it does reflect Hayek’s thinking. In the context of this article, I think we can argue that Alexis de Tocqueville provides a bridge between Wood’s historical account of the American Revolution and Hayek and Friedman’s theoretical accounts of economic and political freedom. Tocqueville observed what Wood described as the transformation of American society: a social order characterized by vibrant civil society of voluntary associations, social mobility, local initiative, and unbounded energy. Hayek explains to us why this decentralized dynamism is a source of discovery and continuous learning how to better pursue productive specialization and realize the gains from peaceful social cooperation. Friedman explains how the constitutional structure of government, by limiting power and privileges, preserves the open society and its properties of creativity, innovation and social and material progress.

Both the left and right in our current political and intellectual culture have abandoned these principles, at least in their rhetoric. New York Mayor Zohran Mamdani and Vice President J. D. Vance have recently gone out of their way in respective speeches to dismiss the ideas of Hayek and Friedman. Critics of neoliberalism repeatedly target Hayek and Friedman without seemingly any sense of understanding the subtleties and nuances in their arguments. Post-liberals are even worse. Thinkers like Patrick Deneen argue that free market policies result in the erosion of community, destroy the social fabric, and increase inequality.  The individual becomes isolated and lacks any great purpose as a result. The remedy offered is the abandonment of the free market system with its emphasis on material growth and the adoption of public policies that stress virtue, local obligations, and the moral community.  Scholars under the New History of Capitalism movement see the coercion and abuse of corporate and state power as attributes inherent in capitalism. To both groups of critics, support for capitalism must either elide over these abuses or even justify them as the lesser evil to growth.

These criticisms are grounded in a misunderstanding of the argument for the liberalization of markets from David Hume and Adam Smith to F. A. Hayek and Milton Friedman.  Markets are no doubt vehicles for efficiency in exchange and production and the creation of great material abundance, but that isn’t the side of markets that was stressed by Hayek and Friedman, let alone Smith. Smith was a champion of the doux commerce thesis that commerce civilized. Thomas Paine, of American Revolution fame, wrote that: “If commerce were permitted to act to the universal extent it is capable of, it would extirpate the system of war…” Commercial life civilizes people. Peaceful social cooperation among strangers replaces violence and conquest. Montesquieu wrote that “wherever the ways of man are gentle, there is commerce; and wherever there is commerce, there the ways of men are gentle.”

And certainly, by solving the violence trap, humanity was able to generate the wealth of nations, and this has been a boon to the flourishing of people everywhere that should be celebrated, but which capitalism’s critics so often seem to overlook or read as evidence of rapacity. In recent history, capitalism and trade has led to the great escape from abject poverty. When I was first learning economics in the 1980s, around 40% of the global population lived in extreme poverty (less than $2/day). Today that number is under 10%. Again, there is still work to be done to achieve Smith’s liberal plan of liberty, equality and justice for all. But we are farther along the path to that achievement than at any time in recorded history. The arguments of the great classical liberal economists from Smith to J. S. Mill, as well as the refinements that were made by great liberal economists of the 20^th century such as Frank Knight, Ludwig Mises, F. A. Hayek and Milton Friedman, are critical to our scientific understanding and our practical appreciation of freedom and free enterprise. These ideas of property, contract and consent are embedded deeply in the American Project, and the promise of that project is one of the Open and Opportunity society.  The direction forward is not to turn our backs on the American Project and reject the principles of free markets and entrepreneurialism, but to encourage the principles on which our democracy was founded and that, for all of its imperfections and momentary regressions, has created one of the wealthiest, free, and, yes, egalitarian nations in the history of civilization."

How ancient Athens benefited from international trade

See What Rubio Missed in Athens by Don Boudreaux.

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

Editor:

Marco Rubio rightly defends western civilization and acknowledges debts owed to the ancient Athenians (“The Birth and Rebirth of Western Civilization,” October 9). But he omits an essential feature of ancient Athens – a feature that he, President Trump, and all Americans would do well to recall: Athens’s rise and excellence were rooted in its openness to, and reliance upon, international trade. As Will Durant explained in The Life of Greece (1939),

Foreign commerce advances even faster than domestic trade, for the Greek states have learned the advantages of an international division of labor, and each specializes in some product; the shieldmaker, for example, no longer goes from city to city at the call of those who need him, but makes his shields in his shop and sends them out to the markets of the classic world. In one century Athens moves from household economy – wherein each household makes nearly all that it needs – to urban economy – wherein each town makes nearly all that it needs – to international economy – wherein each state is dependent upon imports, and must make exports to pay for them….

[I]t is this trade that makes Athens rich, and provides, with the imperial tribute, the sinews of her cultural development. The merchants who accompany their goods to all quarters of the Mediterranean come back with changed perspective, and alert and open minds; they bring new ideas and ways, break down ancient taboos and sloth, and replace the familial conservatism of a rural aristocracy with the individualistic and progressive spirit of a mercantile civilization. Here in Athens East and West meet, and jar each other from their ruts. Old myths lose their grasp on the souls of men, leisure rises, inquiry is supported, science and philosophy grow. Athens became the most intensely alive city of her time."

America’s Affordability Problem Is Government

By Dan Mitchell.

"I have a series of columns (2021, 2024, 2025, and 2026). documenting that Americans are getting richer.

And here’s a chart that adds additional evidence. More and more households over time are high income (over $100k) and fewer and fewer are low income (under $35k).

And, yes, these numbers are adjusted for inflation.

The chart was included as part of an article by Max Borders for the Advocates of Self-Government.

He asked why people feel economically anxious even though incomes have increased.

The answer is that some important purchases have become relatively more expensive. And the reason, unsurprisingly, often involves bad government policy.

Here are some excerpts.

In 1967, only 16.5 percent of households earned the equivalent of $100,000 or more in today’s dollars. Today? Nearly 45 percent. The middle-income group really has shrunk—from 54 percent of households to 36 percent. …The disappearing middle class didn’t simply tumble into poverty. Millions of households graduated into higher real incomes, despite persistent inflation. And the percentage at the bottom fell, too. …We’re richer. Many of the things we buy have become dramatically better and cheaper. But some of the things we cannot easily do without have become painfully expensive. …Start with housing. Why don’t developers just build more homes where people want them? Often because it’s illegal. Zoning restrictions and building codes are costly. Minimum lot sizes consume land. Parking requirements increase costs. Permitting adds delays. NIMBY opposition prevents construction. Then we all express shock that restricting the supply of something makes it more expensive. Or consider health care. Whatever else American health care is, it is not some laissez-faire free-for-all. It’s a labyrinth of government subsidies, third-party payments, occupational licensing, insurance regulation, patent protections, insurance mandates, in-state monopolies, and restrictions on competition. …And then there’s college. For decades, our solution to expensive higher education has been to give people more money with which to buy increasingly expensive higher education. This has created a tuition spiral: Loans. Grants. Subsidies.

The article includes another chart from Mark Perry.

It shows how prices for some items have increased much faster than inflation while others have declined. In some cases by large amounts.

And notice that prices seem to go up the most in the areas where government has a big footprint.

I’ll close with a few more passages from the article.

…not every red line on this chart is caused by government. But officials can make an intrinsically expensive problem considerably worse. …If your diagnosis is that “capitalism” has made ordinary life unaffordable, your solution will probably be more subsidies, more controls, and more regulation. But what if the diagnosis is backward? What if competitive markets are actually doing remarkably well in much of the economy—and our worst affordability crises are concentrated in sectors where competition, supply, and productivity are tightly regulated and unusually constrained? …we’ve constructed bottlenecks to accessing some of the most important things in life. Housing. Health care. Education. Childcare.

Amen. To make life more affordable, we need free enterprise, not subsidies, intervention, protectionism, and third-party payer.

Government is the problem, not the solution."

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."

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." 

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."

  

 

Median Family Income for Married Couples With Children Is Probably Higher Than You Think

By Jeremy Horpedahl.

"In 2024, median income for married couples with children at home was $143,400 in the US. That’s an almost 80 percent real (inflation-adjusted) increase since 1974, the first year Census reports comparable data. Is there some selection bias in who chooses to get married and have kids? Yes. Has there been an increase in dual-income families? Yes, but probably much less than you think (the median family of this type already had two earners by the late 1970s).

With those caveats, this is still pretty impressive:"

 

Revenue over reason: A case for home distilling

By Ben Semark of CEI. 

"Want to distill spirits at home? Congress says you can’t. This ban from the Reconstruction era was not instated for health or public safety reasons. Rather, the prohibition arose from the inability to accurately tax home-produced alcohol. This reasoning does not justify such a restrictive practice. Distilling is a historically significant process with deep ties to the culture of this nation. Depriving Americans of this liberty in their own home undercuts a storied American tradition.

Creating home-brewed spirits was not a niche or commercial practice in early America; it was an everyday routine. Alcoholic beverages were a staple of the early American diet and were often much safer than local water sources. Wives were often responsible for the process and used various crops distilled into safe beverages to quench the thirst of their households. Stills were treated as ordinary kitchen appliances, like a butter churn or wood oven. In the late 18^th century, 25 percent of households in Augusta County, Virginia owned and operated home stills.

Distilling was not just a household chore; it was also a primary source of income for many farmers. Common crops, such as barley, corn, apples, and peaches, were all vulnerable to spoilage even across short distances. Where travel was especially difficult, distilling these crops provided a more resilient product and a steady source of income for many.

After the Revolutionary War, Alexander Hamilton proposed an excise tax on distilled spirits to tackle the extreme debt the country had accumulated. Excise taxes operate by taxing the manufacture of a targeted good rather than the income generated from sales. Many farmers reacted in outrage, sparking the famed Whiskey Rebellion, during which George Washington led a militia of 13,000 troops to quell the unrest.

The rebellion represented the first violent domestic challenge under the new American Constitution. Hamilton’s enforcement of the tax required every still, no matter how small, to be registered with the federal government. The upheaval underscored the importance of distilling culture in early America. Citizens felt betrayed by their newly formed government, not only due to the tax, but also government intrusion into routine household activities.

Distillation remained common in the home despite the tax, and Jefferson later repealed it, much to the delight of many Americans. Soon after the distilling culture exploded. The early 19^th century came with many advancements in distilling, making the practice accessible to non-farmers. An author at the time noted “we find men of science, men of capital, lawyers, doctors and merchants abandoning other pursuits to learn the art of extracting spirit from grain.” Distilling was no longer merely a household chore or a farmer’s practice; it had become a hobby.

The Civil War marked the second excise tax on spirits. Lincoln had to finance the war, and since stills were so common, spirits were the obvious choice for a tax. Once the war was won by the North, the tax extended to the southern states. The agriculturally dependent South hated the tax, often flouting federal collection officers. In fact, during the early days of the policy, nearly seven out of every eight distilled spirits went untaxed.

This led to a federal clampdown on spirits. In 1868, in order to “secure the revenue” of the spirit excise tax, Congress passed sweeping reforms on enforcement. Distillers were instructed by statute to turn over the keys to their distilleries, allowing inspectors to enter the premises at all times. If they were denied entry at any point, congress authorized them to use any force necessary to gain access.

Because of the obvious hurdles involved in enforcing this surveillance, home distilleries were banned outright. Taxing home distilled spirits would be nearly impossible. In order to further dissuade home distilling, Congress attached harsh penalties to the activity. From that point onward, operating a still in or near a home resulted in a felony, up to five years in federal prison, and, in some cases, forfeiture of their property. Home distilling, once the task of the homemaker and the fun of the hobbyist, was now strictly illegal.

The Treasury was not passive in its enforcement either. The 1880 annual report of Internal Revenue declared “the day of the illicit distiller” over with 4,061 illicit distilleries seized and 7,339 people arrested on account of the new enforcement techniques. Distillers were pushed into the forest under moonlight to avoid internal revenue officers, earning them the now infamous name “moonshiners.”

Around this time social perception of distilling was soured by its close association with violent criminal activity. Moonshiners would clash with enforcement officers, often leading to shootouts. The alignment of some moonshiners with the Ku Klux Klan damaged their reputation as well. Once the 18^th Amendment and Volstead Act were passed, illicit distilling, including home distilling, had firmly cemented itself as a stigmatized practice.

However, the Prohibition would not stand for long. Due to enforcement problems, the propagation of organized crime, and the loss of revenue from the excise tax, the 21^st Amendment repealed the 18^th Amendment, decriminalizing the production and sale of alcohol. However, this liberty remained limited to heavily regulated commercial breweries, wineries, and distilleries. The government was seeking an easily taxable commodity to pull itself out of the Great Depression.

1978 marked the first meaningful restoration of home production of alcoholic beverages. With extensive advocacy efforts from the hobbyist brewing lobby, H.R. 1337 was signed into law. It amended the tax code exempting home-brewed beer and wine from taxation and legalizing their production for personal use. Notably, home distilling was neither decriminalized nor exempted from the tax.

Legalizing home distilling is the next logical step. The prohibition was a step too far, and ever since the regulation of alcohol has been trending downward. For such a common practice during the founding, it is shocking that home distilling carries such steep penalties. The federal government picked this fight, not frontier farmers. The ability to produce spirits in your home for personal consumption should not be infringed. It is what George Washington, with his own home distillery, would have wanted."

The Enclosures and the Industrial Revolution

By Don Boudreaux.

"Here’s a letter to someone who (I boast) reports that he’s greatly enjoying reading Phil Gramm’s and my book, The Triumph of Economic Freedom.

Mr. M__:

Thanks for your email and for your kind words about Phil Gramm’s and my book. They’re much-appreciated.

Our book’s chapter on the industrial revolution prompts you, understandably, to write:

A critique may say that one reason why people left rural areas to go to the cities was due to Britain’s enclosure laws that forced rural workers off their traditional land (which they presumably wished to stay on), causing them to have nowhere else to go except the cities and factories. This undermines the argument that rural people voluntarily left rural areas for the cities and factories due to the latter being more appealing than rural life.

Sen. Gramm and I did not explicitly address this particular point, although we should have done so. Had we done so, we’d have simply summarized the work of the eminent economic historian Deirdre McCloskey. In her remarkable 2010 volume, Bourgeois Dignity, McCloskey writes on page 154 that, in attempting to explain the industrial revolution, Karl Marx

instanced enclosure in England during the sixteenth century (which has been overturned by historical findings that such enclosure was economically minor) and in the eighteenth century (which has been overturned by findings that the labor driven off the land by enclosure was a tiny source of the industrial proletariat, and enclosure happened then mainly in the south and east where in fact little of the new sort of industrialization was going on, and where agricultural employment in newly enclosed villages in fact increased).

A few pages later (pages 172-173), McCloskey adds:

By now, though, several generations of agricultural historians have argued (contrary to the Fabian theme first articulated in 1911, which followed Marx) that eighteenth-century enclosures were in many ways equitable and did not drive people out of the villages…. Contrary to the pastoralism of [Oliver Goldsmith’s 1770] poem – which as usual reflects aristocratic traditions in poetry back to Horace and Theocritus more than evidence from the English countryside – the commons was usually purchased rather than stolen from the goose. One can point with sympathy to the damaging of numerous poor holders of traditional rights without also believing what appears to be false – that industrialization depended in any important way on the taking of rights from cottagers to gather firewood on the commons. Industrialization, after all, occurred first in regions to the north and west, mainly enclosed long before, such as Lancashire or Warwickshire, and especially (as Eric Jones pointed out) in areas bad for agriculture, not in the fertile East Midlands or East Anglia or the South – the places where the parliamentary acts of the eighteenth century did transform many villages, though non “deserted.” In such freshly enclosed areas, I repeat, the local populations increased after enclosure."

Yes, Americans Probably Are About 46 (or Maybe 65) Times Richer Than in 1776

By Jeremy Horpedahl.

"My post and chart from last week showed the phenomenal growth of average income in the US since the Founding. Using GDP per capita historical estimates and adjusting for inflation, this figure is about 46 times greater today than right around the time we declared independence.

It will probably not surprise you that some folks were skeptical. Could this really be true? Two major objections were raised to using GDP per capita. First, wouldn’t it be better to use a median income value rather than a mean (simple average)? Second, wouldn’t a measure of wages be better than GDP per capita?

I really would like to show you an annual series of median income data back to 1776, but unfortunately it just doesn’t exist. Good median income data are hard to find much before the 1950s, much less the 1770s. However, while median values are often better for showing levels, the growth rates of median wages and mean wages aren’t that different for periods when we have comparable data. Consider the following chart, which compares median wages (as calculated by EPI using CPS data) and mean wages (from BLS’s series for non-supervisory workers) since 1973. I have stated these in nominal terms, so don’t take this as real growth rates, but rather it is a raw comparison of two series (we could apply the same inflation adjustment to both, but that won’t change the picture, only the numbers).

 

Median wages increased by 667% and mean wages increased by 657%, almost identical. Again, these aren’t inflation adjusted, but that’s not the point of this exercise. The point is that whether you use mean or median wages, at least since 1973, the growth rates are the same. Was this true if we went back another 200 years? We can’t say for sure. But many people have this same skepticism about mean wages in recent decades. I think it is better to use median values when you have them, but we shouldn’t throw up our hands and claim we know nothing if all we have is mean wages.

Next, consider the following chart. It begins in 1790, but instead of using GDP per capita, as I did last week, it uses a measure of average wages from economic historian Lawrence Officer. This measure is for “production workers in manufacturing,” and it is a total compensation measure, meaning that it will include the value of fringe benefits as well — though these aren’t noticeable in the data until the 1930s. This is still an average value, but because it is for manufacturing laborers, it won’t be distorted by the wages of managers and owners in that industry, and it won’t be affected by the growth of new industries that might require more years of education (indeed, manufacturing wages are lowering than overall average wages today, so this is taking the hard case). I have also included a second line, which only includes manufacturing wages (not benefits) that I have blended with Officer’s compensation series starting in the 1930s, in case you think including benefits is somehow “cheating.” (Note the log scale again, as in last week’s chart.)

 

The trends here are very much in the ballpark from the GDP per capita chart I created last week. Using total compensation, wages are 65 times higher than in 1790. Using only wages, they are 49 times higher. Notice that these are both better than the 46 times multiplier using GDP per capita. How is that possible, since I am using the same price deflator in both cases? First, average hours of work have fallen significantly since the 18th century, so incomes haven’t risen quite as much as wages. Second, there was a bit of a decline in GDP per capita during the Revolutionary War, and if we use 1790 as the baseline for GDP per capita, the multiplier is 63. But again, these numbers are all in the ballpark: whether the true figure for a typical American is 46x, 49x, 63x, or 65x, this is a tremendous amount of economic growth.

If you want to look at that chart pessimistically, you will see that there is some reduction in growth rates in the past few decades. That’s true whether we use wages or compensation. This is a well known issue, and has been discussed endlessly in academic papers and on social media. I don’t want to glaze over it here, but I mostly will: the long-run trend of growth in the US is amazing. That’s true whether you use GDP per capita, or wages or compensation for production workers.

So once again, Happy 250th Birthday to the USA and all of you living in the wake of that amazing 250 years of economic growth!"

The China dish industry claimed it was a militarily strategic good in 1951

Tweet from Daniel J. Smith.

"A representative from the fine China dish industry lobbying for protectionism as a militarily strategic good during congressional testimony in 1951"

  

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."

Human aspiration is a disposition, not an exhaustible resource. Mokyr showed that civilizations which honor that aspiration grow, and those that suppress it stagnate

See The Lump of Labor Fallacy in the Age of AI by David Hebert.

"In conclusion, the problems with the lump of labor fallacy were settled long before AI arrived. Smith understood that human aspiration is a disposition, not an exhaustible resource. Mokyr showed that civilizations which honor that aspiration grow, and those that suppress it stagnate. The lump of labor fallacy gets the economics wrong because it makes fundamental errors in human nature and economic history.

But wrong ideas with organized constituencies do not stay defeated. The longshoremen’s contract shows what happens when the fallacy wins a political victory. If AI policy follows the same template, the damage will be measured not in port fees but in trillions of dollars of foregone growth and millions of jobs that never get created. The fallacy is intellectually bankrupt. Whether it remains politically solvent is the question that actually matters."

‘How to Win a Trade War’ Review: The Times of Tariffs

Germany before World War I provoked backlash because of its rise in exports and overproduction, similar to China today.

By Theodore Bunzel. He is the head of Lazard Geopolitical Advisory. He has worked in the political section of the U.S. Embassy in Moscow and at the U.S. Treasury Department. Excerpts:

"“How to Win a Trade War” shows us that, even in the age of Trump, many of today’s trade tensions are a historical rerun. Germany before World War I provoked backlash because of its sharp rise in exports and overproduction, similar to China today. Its cornering of an “extraordinary 90 percent of global production” of chemicals and dyes sparked fears of dependency among the Allies. Even the White House’s coercive Liberation Day tariffs have an echo in history: 1870s France hiked tariffs 24% on its neighbors and demanded they negotiate more favorable trade deals within six months, a gambit that—like Mr. Trump’s—largely succeeded in forcing trade partners to submit to new treaties.

With protectionism becoming more fashionable, Ms. Keynes and Mr. Bown provide a helpful reminder that tariffs are, generally speaking, economically destructive and rarely achieve their stated goals. Such policies impede growth, chill investment and—outside of commodities—are overwhelmingly paid for by the importing country. Even on trade deficits, the authors remind us, tariffs have historically had largely insignificant effects. While the evidence on tariffs and their effects on industrialization is more mixed, for every Japan or South Korea—which used barriers to turbocharge manufacturing in the postwar era—there are the smoldering examples of Brazilian personal computers or Indian autos."

Hamilton’s Economic Vision Had One Crucial Blind Spot

Hamilton recognized the importance of manufacturing but overlooked the market processes that create lasting prosperity

By Donald J. Boudreaux. 

"Speaking in January at Davos, US Trade Representative Jamieson Greer said that President Trump’s protectionism revives the policy first proposed by Alexander Hamilton. Like countless attempts to justify US protectionism and industrial policy, Greer’s effort praises Hamilton’s Report on Manufactures (“Report“). 

More recently, Scott Bessent, now holder of a job first held by Hamilton — US Treasury Secretary — also boasted of the administration’s Hamiltonian creed. Given the fame of Hamilton’s Report, and Hamilton’s key role in America’s founding, a close look at his Report is warranted.

Impetus for the Report

Requested by the US House of Representatives in January 1790, Hamilton submitted his Report on December 5, 1791. It was the longest and most famous of four major reports submitted to the House by Secretary Hamilton.

According to Hamilton, the House requested that he devote attention to “the subject of Manufactures; and particularly to the means of promoting such as will tend to render the United States, independent on foreign nations, for military and other essential supplies.” He complied.

America’s Economy Should Have a Strong Manufacturing Sector

The Report opened by making the case that America would benefit from a larger manufacturing sector despite America being unusually rich in land. Without naming Thomas Jefferson, the Report‘s opening was a challenge to Jefferson’s conviction that America should remain a nation mostly of yeomen farmers.

Offering this challenge, Hamilton relied on Adam Smith (also without naming him) to expose the errors of physiocracy — that is, the belief that net economic value is produced only by agriculture. Yet Hamilton went further, arguing that manufacturing can be more productive than agriculture. In making this argument, Hamilton was impressive; one might even sense in it an anticipation of some insights revealed by economists’ marginal revolution of 80 years later.

Regardless of how much or little Hamilton intuited of marginalism, he deserves credit for emphasizing the reality and significance of opportunity costs. To produce some increment of agricultural output requires that some increment of manufacturing output not be produced. And that increment of agricultural output is worthwhile to produce only if its value exceeds that of the foregone manufacturing output. Thus did Hamilton defuse the arguments of persons who believed that, to establish the case for keeping America an agricultural nation, it’s sufficient to point to the positive market value of agricultural output.

In this way, and some others, Hamilton revealed a keen ability to think insightfully about economic matters. Nevertheless, on a full assessment, Hamilton in the Report got more wrong about economics than he got right. Not content to support only the removal of artificial barriers in the US against domestic manufacturing, Hamilton argued strenuously that the government must actively promote American manufacturing. That promotion should consist chiefly of subsidies (“bounties”) supplemented by protective tariffs.

Hamilton Respected But Rejected Adam Smith

The renown of Smith’s Wealth of Nations obliged Hamilton to try to refute Smith’s argument that, in Hamilton’s summary, “industry, if left to itself … without the aid of government will grow up as soon and as fast, as the natural state of things and the interest of the community may require.” For Hamilton, what Smith called “the obvious and simple system of natural liberty” was too simple, at least for a young country without much industry. Here’s Hamilton:

Against the solidity of [Smith’s] hypothesis … cogent reasons may be offered. These have relation to — the strong influence of habit and the spirit of imitation — the fear of want of success in untried enterprises — the intrinsic difficulties incident to first essays towards a competition with those who have previously attained to perfection in the business to be attempted — the bounties premiums and other artificial encouragements, with which foreign nations second the exertions of their own Citizens in the branches, in which they are to be rivalled.

The first-mentioned impediment to American manufacturing was Americans’ alleged lack of entrepreneurship. Habit-bound and excessively risk-averse, too many Americans would stick with familiar agricultural pursuits and refrain from launching new manufacturing endeavors. Further discouraging Americans from venturing into manufacturing were the established competitors abroad who would out-compete upstart rivals. 

For Hamilton, simply being long-established was, in free markets, a nearly insurmountable competitive advantage. But in addition, foreign manufacturers might also practice what we today call “predatory pricing,” as well as enjoy their own subsidies. Therefore, Hamilton believed that manufacturing would arise and thrive in America only if the rates of return on these enterprises were boosted by the government.

Hamilton here forgot his own counsel to attend to opportunity costs. He simply presumed that whatever additional manufacturing activities were encouraged by the government would increase the net value of US economic output. He also ignored both the knowledge problem (How do politicians know which particular industries to encourage?) and the public-choice problem (With subsidies and protection being doled out by politicians, what prevents this doling from being distorted by interest-group politics?).

Hamilton also had a cramped understanding of economic competition. (In fairness, this understanding still infects economics textbooks today.) For him, competition consisted of firms producing a largely given set of outputs with largely identical technologies. Although he can’t be faulted for not reading Joseph Schumpeter’s 1942 work on creative destruction, even in 1791 evidence was growing that the major source of economic growth was entrepreneur-driven creative destruction. Such innovation introduced not only new products, but also completely new and improved means of producing existing products. 

In such an innovative economy, being long-established wasn’t the great advantage that Hamilton assumed it to be. Just ask, for example, the American millers whose traditional manner of milling flour was rendered obsolete starting in the 1780s in Delaware by Oliver Evans‘s automated flour mill.

Hamilton’s Curious Evidence

Attempting to augment his case for active government encouragement of manufacturing, Hamilton offered curious evidence. Responding to opponents who insisted that America’s economy was unfit for manufacturing, he boasted that America’s economy was already demonstrating an impressive ability to support manufacturing.

Writing about the prospects of profitable investment in manufacturing, Hamilton said that “it is certain that the United States offer a vast field for the advantageous employment of capital; but it does not follow, that there will not be found, in one way or another, a sufficient fund for the successful prosecution of any species of industry which is likely to prove truly beneficial.” He continued: In addition to America’s “multiplying” banks, another ready source of funding for manufacturing was foreign capital, which he wisely welcomed as “a precious acquisition.” Indeed, “the attraction of foreign Capital for the direct purpose of Manufactures ought not to be deemed a chimerical expectation. There are already examples of it.”

Question for Hamilton: If it was certain that the US offered vast opportunities for profitable investments in manufacturing, and if such investment was already occurring, why did such investment need to be further stimulated by the government? Hamilton’s inconsistency is evident.

Another example of Hamilton’s inconsistency is worth mentioning. When he argued for subsidies and protective tariffs for goods produced with iron, his evidence for the worth of such government assistance was the fact that such manufacturing had significantly grown in the US since the American Revolution and was flourishing. His argument was that this industry deserved protection precisely because it had proven itself capable and successful. Presumably, Hamilton would defend this inconsistency by maintaining that, without government assistance, this industrial growth — and that of other critical manufacturers — would stop short of its optimal point.

Here’s where Hamilton-as-economist faltered most seriously. He made the incorrect presumption that markets fail to generate optimal economic growth because, in the end, he didn’t appreciate just how effectively resources are allocated by market signals and incentives — by competitively determined prices, profits, and losses. 

At least for fledgling nations with relatively little industrial capacity, he believed that intervention from the top was required.

The Lasting Lesson

Studying the Report on Manufactures makes clear that Hamilton, contrary to the assertions of Greer and Bessent, was far from being a protectionist in the mold of Donald Trump. 

Not only was Hamilton’s case for protection confined to the need to stimulate industrial capacity in a country lacking such capacity, he also preferred subsidies over tariffs (because tariffs, unlike subsidies, reduce supplies of targeted goods), and he welcomed, rather than bemoaned, net inflows of foreign capital. 

Nevertheless, Hamilton ultimately had too little confidence in free markets. The late Gordon Wood’s assessment of Hamilton-as-economist is accurate:

Hamilton was so wedded to a hierarchical view of society that he could only imagine industrial investment and development coming from the top down. Thus he was incapable of foreseeing that the actual source of America’s manufacturing would come from below, from the ambitions, productivity, and investments of thousands upon thousands of middling artisans and craftsmen who eventually became America’s businessmen. Hamilton’s historical reputation as the prophet of America’s industrial greatness therefore seems somewhat exaggerated. He certainly wanted a powerful and glorious nation, but he was no more capable of accurately foretelling the future than the other American leaders."

Private Property, Liberalism, and Human Flourishing

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

By Alexander William Salter. Excerpt:

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

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

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

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

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

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

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

Work and leisure over time

 Tweeted by Vincent Geloso.

 

Can De-Regulation of Branch Banking Improve Capital Allocation?

Evidence from the Great Depression

From Jeffrey Miron.

"The Great Depression led to dramatic increases in bank regulation.

One study looks at an instance of bank deregulation during this period: state-level sanctioning of

bank branching, which allowed banks to operate multiple offices within a state. … [S]tates with extensive branching in 1940 … experienced long-run gains in manufacturing productivity.

The study also

assessed the role of capital reallocation using bank and branch-level balance sheet data from 1937. … Branch offices located in capital-constrained counties … were twice as likely to receive funding on net from other banks and branches than comparable stand-alone banks in the same areas.

In addition, the new

branch networks improved capital allocation by directing funds to where they were most scarce, a function that stand-alone banks could not perform.

All in all, these

findings provide evidence that the institutional structure of branching—rather than simply expanded banking access—improved capital allocation and integrated financial markets to fuel manufacturing productivity growth, especially in underserved areas."