A report in the Financial Times indicates that Mexico is in the process of eliminating the checks and balances in its political system: But the bills passed in the past two weeks ultimately implement key elements of the former president’s agenda, including eliminating autonomous regulators and replacing them with ones under greater central government control. “It’s a step back,” said Carlos Ramírez of political risk consultancy Integralia. “It’s the end of the era of the autonomous institutions and now we’ll start a new era where these institutions are where they were 30 years ago: in the executive’s hands.” The other new laws implement further key aspects of López Obrador’s agenda, such as strengthening state companies and cementing military control of an empowered National Guard. The changes came weeks after a controversial election to replace the country’s judges resulted in a supreme court where all nine members were put forward by Sheinbaum or her coalition. “It’s an attempt to dismantle the old Mexican state,” said political analyst Sabino Bastidas. In the very same issue of the Financial Times we see the following story: In an interview with the Financial Times, [Abbe] Lowell expressed alarm at the president’s use of executive power to target law firms and the authority of courts, suggesting it could put unbearable strain on the judicial system. . . . Trump’s broader campaign has included executive orders blocking access to federal buildings for some law firms — a threat to their businesses — prompting splits between litigators willing to fight the government and more commercially minded colleagues. A form of coexistence that had existed for decades was now breaking under pressure from Trump, Lowell suggested.  It seems to me that the rise of a unified executive is one of the most important stories of the past decade.  In one country after another, we see executives gaining power at the expense of other parts of the government.  Examples include China, Russia, India, Turkey, Hungary, Poland and many other places.  In the US, we’ve recently seen the president gain the right to fire the head of independent agencies. Under previous administrations, the president was not allowed to fire independent agency officials other than for reasons of malfeasance.  Some might argue that this is a return to first principles: In an interim order in May concerning the leaders of two other agencies, the Supreme Court appeared to agree. The majority wrote that Mr. Trump could remove officials who exercise power on his behalf “because the Constitution vests the executive power in the president.” Of course, it’s equally true that the Constitution vests the tariff power in Congress.  Also the power to declare war.  So I believe that what we are seeing is much more than a return to traditional modes of governance. During the 20th century, vast new powers were given to the federal government, under the implicit assumption that no executive would abuse those powers for personal gain.  But what would happen if a president used those powers to go after individual people and companies that he viewed as disloyal?  Perhaps it is already happening. Why are we experiencing a global rise in authoritarianism?  In my view, that’s the most important unanswered question of the 21st century. PS.  On the plus side, Mexico does seem to allow its residents to buy the world’s best electric cars.  I saw this SUV parked outside my hotel on a recent visit to Tucson, Arizona: Sadly, those cars are not available to American motorists.  (For privacy reasons, I blurred the license plate number.) (0 COMMENTS)

One of the questions that animated Musa al-Gharbi’s investigation into the causes and consequences of wokeness was why highly successful elites seem so eager to portray themselves as otherwise. As he puts it, Why is it that the “winners” in the prevailing order seem so eager to paint themselves as helpless victims, as marginalized, as vulnerable, and as allies of the same? If it is a genuine disadvantage to be a woman, or a minority, or LGBTQ, or disabled, then why are elites so eager to identify themselves as these very things, or to publicly associate themselves with people who can—even to the point of bending the truth in order to accomplish these goals? This is striking because it used to be the case that people in general, and the successful in particular, actively sought to avoid associating themselves with narratives of helplessness, victimhood, and vulnerability: For instance, to be pitied by others used to be humiliating, and to be “victimized” by others was a source of shame. People were encouraged to directly (personally) confront those who wronged them. If they were unwilling or unable to stand up to aggressors, they were supposed to be stoic; to be proudly defiant; to not let those who harmed them see them broken. Respect was accorded to those who demonstrated themselves as capable and powerful, who were resilient to suffering and hardship, who were brave in the face of risk and danger, who were collected and confident in response to challenges and uncertainty. These values still prevail in much of the world, and indeed in many U.S. subcultures. However, sociologists Bradley Campbell and Jason Manning argue, a different moral culture has taken hold among contemporary symbolic capitalists – a “victimhood culture.” Rather than status being achieved by facing hardship with poise, determination, and refusing to let adversity keep one down, this victimhood culture produces incentives to present oneself as being as weak, fragile, and vulnerable as possible – thus deserving of special protection by institutional power: For instance, rather than directly confronting or negotiating with adversaries (settling things “between ourselves”), the norm in a victimhood culture would be to appeal to third parties to adjudicate conflicts, intervene one’s behalf, or offer support and validation. In order to enlist these third parties, harm is discussed in hyperbolic ways. People attempt to paint themselves as weak, vulnerable, helpless or damaged – especially relative to their adversaries. The wrongs done to oneself are are tied to historical and ongoing injustices affecting others. An awkward racially inflected comment, for instance, is not describe as an isolated remark made by a particular person within a specific context – instead, the comment is tied to America’s history of slavery or Jim Crow, or contemporary tragedies like the murder of George Floyd. Localized or otherwise trivial incidents are recast as fronts in cosmic struggles that others have a perceived stake in. This creates additional incentives for people to gain status by bending over backwards to affirm every allegation of wrongdoing they encounter, no matter how little evidence there is to support the accusation. As an example, al-Gharbi describes how the actor Jesse Smollett claimed to have been the victim of a racist and homophobic attack, in a story that seemed to be wildly unrealistic in every detail: Although virtually every part of his story seemed implausible, even ridiculous, many celebrities and political figures immediately rushed to signal that they believed Smollett. Indeed, the fact that the story was so absurd on its face created an opportunity for status competition. It provided a chance for people to distinguish themselves by demonstrating just how committed they were to trusting purported victims relative to their peers. And so, despite the rather obvious problems with Smollett’s narrative, many immediately rushed to condemn the ostensibly racist and homophobic attack against him, exerted major pressure on the authorities to identify and punish the perpetrators, and viciously targeted those who expressed skepticism about the actor’s claims. But this general desire to present oneself as weak and helpless, like many aspects of woke culture, is generally shunned by the actual populations the woke seek to uplift. Instead, this struggle to paint oneself as weak and helpless is almost entirely done by people who are privileged, wealthy, and well-off: For instance, those who are genuinely marginalized and disadvantaged in society are much less likely to perceive or describe themselves as victims of identity-based bias and discrimination than highly educated and relatively affluent liberals. And there’s a reason for that. Although virtually no one wants to be genuinely victimized by others, many status seekers are nonetheless interested in presenting themselves as victims and being perceived as victims—especially in contexts where “victimhood culture” prevails (such as most symbolic capitalist spaces). Some go so far as to reorient their whole identity around having been victimized in order to enjoy the benefits that come with perceived victimization indefinitely. Others find creative ways to capitalize on victimhood they didn’t personally experience at all. Of course, many of these people are genuinely convinced of the truth of their own victimhood narratives. But there’s a catch – adopting a victimhood mindset leads people to treat others around them worse, to take advantage of them, and to feel justified in doing so: For instance, research has found that people who understand themselves as victims often demonstrate less concern for the hardships of others; they feel more entitled to selfish behavior; they grow more vicious against rivals—not just against the people who victimized them but against anyone who stands in the way of their goals or aspirations. Yet even as they grow more likely to engage in immoral behaviors—and often victimize others who did them no wrong—they also gain a sense of moral superiority relative to everyone else… The more frequently they evoke their victimhood, the more ethically dubious behaviors they feel entitled to engage in—confident that they will not be held responsible, morally or practically, for their actions. But not all potential sources of hardship are treated equally by the woke: Only certain types of victimization tend to be honored in a victimhood culture. First, in order to reap the benefits associated with being recognized as a victim, one’s victimhood has to be a product of malevolent actions by others. That is, one cannot merely be a victim of circumstances – there must be someone who can be blamed (and, ideally, punished) for one’s victimized status. Second, one’s victimization should appear to be a result of factors outside of one’s control. This makes poverty only conditionally a source of victimhood, because poverty is often thought of as something ones actions can at least influence to some degree. Thus, “The most compelling forms of victimhood are tied to immutable elements of a person’s being rather than changeable aspects of their present circumstances.” This also creates an incentive for people to describe the sources of hardship they face as insurmountable – something in the face of which they are utterly powerless: Women, racial and ethnic minorities, sexual minorities, those with disabilities, trauma survivors, certain persecuted religious minorities—these are identities that are especially respected in symbolic capitalists’ victimhood culture. Being poor, or coming from poverty, can enhance one’s moral standing if one also bears some other marginalized identity. However, there is very little sympathy for impoverished “cishet” whites. Indeed, they are often viewed as being not just responsible for their own suffering but deserving of it—and their struggles, frustrations, and concerns are widely mocked or dismissed. This remains true despite the fact that white Americans are not the most successful racial or ethnic group in America, or even at the upper end. Most outcomes for whites tend to be about average overall for racial groups, and whites tend to do worse on most measures than Americans of Asian, Middle Eastern, or Indian descent, and even compared to Black Americans of Caribbean descent or African immigrants (as distinct from native born Black Americans). But people who fail to have the proper characteristics of victimhood can still try to find a way to get in on the action: For elites who cannot directly claim affiliation with the “right” kind of stigmatized identity, engaging in the culture wars often allows them to experience something like “victimhood by proxy”: progressive whites are keen to broadcast their status as “allies” and tell stories about how their unyielding commitments to social justice put them at odds with “other” whites. Insofar as they manage to alienate themselves from white peers (or even family members) on the basis of social justice advocacy, they often portray themselves as being “in the same boat” as minorities. For instance, receiving pushback from whites for their approach to antiracism allows them to paint themselves as fellow victims of racism. Constantly “struggling” with (other) whites about racial issues makes them feel like they understand the experience of being a minority. People are often strikingly explicit in making associations like these. Wealthy symbolic capitalists find other ways to try to claim victimhood identities to gain cultural capital.  For example, al-Gharbi points out that while symbolic capitalists are objectively the “most physically fit and cognitively sophisticated people in America,” they are also vastly disproportionally more likely to identify themselves as suffering from physical or mental impairments. Even the ability to make use of a possible victimhood identity is itself an activity that favors wealthy and privileged elites rather than genuinely vulnerable people: One irony, as sociologist Lauren Rivera noted in her landmark study of hiring at elite firms, is that the people best positioned to spin compelling narratives of this nature tend to be those who hail from relatively advantaged backgrounds. People who were or are genuinely underprivileged, abused, or stigmatized often try to conceal these facts rather than broadcast them. And even to the extent that they are aware that it would be advantageous to spin a story about their social mobility, and are willing to do so (often, they think it would be harmful or shameful to talk about what they’ve been through), people from genuinely disadvantaged backgrounds are generally less effective at producing the kinds of accounts that resonate with elites, as compared with people from more advantaged backgrounds. All of these elements of victimhood culture create another form of symbolic capital beyond the political, academic, and cultural capital discussed previously – something al-Gharbi calls totemic capital. We will look at what this is and how elites seek to cultivate it in the next post.   (0 COMMENTS)

Counterfactuals are a necessary part of any scientific analysis: If X didn’t happen, then Y would have.  But counterfactuals, by definition, can never be known.  They never occurred, so we can never truly know if the counterfactual would have happened.  For example, there was much debate in the Truman Administration and the US military during World War 2 over whether or not to drop atomic bomb(s) on Japan.  Some argued that the bombings were necessary to end the war: conventional warfare would cost significantly more American and Japanese lives and continue to drag on the war.  Others argued the Japanese were close to surrender and that the bombings were going to cost more innocent lives.[1]  The debate continues to this day.  But the American military did drop the bombs, with estimates upward of 200,000 lives lost. What we can never know for certain is what would have happened if the US military had never dropped those bombs. Of course, just because a counterfactual can never be known does not mean that every counterfactual is reasonable.  Counterfactuals have to be justified.  A good theory and model help us justify our counterfactuals.  If I were to say, “without dropping the atomic bomb, the Japanese military would have unleashed Godzilla upon our soldiers, devastating our military, and then invaded San Francisco,” I’d rightfully be laughed out of the room.  That’s a goofy B-movie plot, but not a reasonable counterfactual for historical discussion.  There’s simply no evidence that Godzilla was a tool of the Japanese military. In international trade discussions these days, the focus is often on the counterfactuals…at least, after protectionists make empirical claims that are easily debunked by the data.  A famous counterfactual revolves around the (oft-cited-never-read) China Shock paper.  If not for China joining the WTO, protectionists claim, the US would be a thriving place, rather than the devastated hellhole it is now. University of Central Arkansas economist Jeremy Horpedahl recently explored the metro areas hit heaviest by the China Shock (as identified in the original China Shock paper), and he found something surprising to everyone except economists: [A]ll of the MSAs hit hard by the China Shock still managed to have significant and positive real wage growth across the distribution since 2001…Wage gains in several of these places, in fact, are better than the national trends. And, except for the Hickory, North Carolina MSA[2], all MSAs have more jobs now than before the China Shock. Austin, Texas has doubled the number of jobs.  The overall economic changes in these areas are rising real wages for all income levels, more jobs, and a growing economy. These changes suggest that trade has been good for the region: newer, higher-paying jobs have entered to compensate for the lower-paying jobs that were lost (as trade theory predicts). If trade were restricted, these better, higher-paying jobs would likely be lost. But what of the individuals laid off?  Do they lose their well-paying factory jobs and have to take low-paying service sector jobs?  The evidence indicates “no.”  In his 2025 book Crushing Capitalism, Cato Institute economist Norbert Michel provides evidence that displaced workers were not necessarily made worse off.  Using data from the BLS, Michel found that about 43% of workers displaced between 2001 and 2003 earned as much or more than their previous job.  Between 2015 and 2017, that figure was 51% (pg. 70 of the Kindle Edition).  During the China Shock, displaced workers found it easier to find new jobs that paid the same or better.  Looking even further back, in 1991–1992, only about 1/3rd of reemployed workers had pay at or higher than their previous job (ibid).  Furthermore, over two-thirds of people displaced were finding jobs quickly (within a year), and again, those jobs were paying at or better than previous wages.  Since NAFTA and WTO,  it has become easier for displaced workers to find employment at or better than their previous jobs. So, the relevant counterfactual to compare against increased trade is not that, the US with a thriving economy and protectionism in place.  Instead, the data indicate that higher-paying jobs would be lost in favor of lower-paying, less productive jobs.   — [1] There are other arguments, such as retribution for the heinous war crimes the Japanese committed during the war, but this post is about counterfactuals, not retribution, so I won’t be dealing with those arguments. [2] Hickory could have fewer jobs because the town is becoming a retirement hotspot.  Retired people don’t work. (0 COMMENTS)

These tweets caught my eye: I suspect that it would be possible to create some sort of argument that the AI boom is hurting the job market, but at the risk of being unserious I don’t find this one to be particularly persuasive.  Suppose I made the following argument: Interest rates would be lower if we went into recession, which would help employment.  “Economic booms don’t hurt the job market” is an unserious view. Long time readers have probably guessed that I’d view this hypothetical claim as an example of the fallacy of “reasoning from a price change.” In some respects, it is surprising that the labor market is so strong.  We had a period of high inflation during 2021-23, and unemployment often rises sharply when the Fed uses a restrictive monetary policy to bring inflation back down.  Why has unemployment merely edged up from 3.4% to 4.2%?  I’m not certain, but perhaps because the disinflation policy was gradual, and even today inflation remains above the Fed’s 2% target.  Nonetheless, if the labor market is currently a bit subpar, it is probably due to the lingering effects of the Fed’s anti-inflation policy, not the AI boom. I certainly agree with claims that unemployment might rise if the Fed pushed interest rates above their natural rate.  But an AI boom tends to raise the natural rate of interest.  Other things equal (including the Fed’s target interest rate), a higher natural rate of interest is actually expansionary—likely to lead to faster NGDP growth.  Of course other factors such as the lower rate of immigration tend to reduce the natural rate of interest, so I’m agnostic on the question of whether monetary policy is currently too tight.  (As an aside, TIPS markets are currently pricing in about 2.5% inflation over the next 5 years, which doesn’t suggest that money is particularly tight.) Perhaps there’s an argument that AI spending crowds out more labor intensive industries, although in principle the Fed should offset that effect.  Of course monetary policy is not perfect, but the internet boom of 1999-2000 doesn’t seem to have hurt the labor market.  In 2000, unemployment fell to the lowest level since the 1960s. We eventually did have a mild recession, after the Fed engineered much slower NGDP growth in 2001. (0 COMMENTS)

The August 29 planned abolition of the de minimis customs exemption in the United States may come as a shock to those who believe that, as the physical universe is made of visible matter and dark matter, the political world is made of Democratic and Republican stuff, “the Left” and “the Right.” The restriction of de minimis was launched under Democratic rule and is pursued under Republican rule. (See “End of De Minimis Alarms E-Commerce Sellers, Consumers,” Wall Street Journal, August 5, 2025; “Crackdown on Tariff Exemption Snares U.S. E-Commerce Retailers,” Wall Street Journal, January 30, 2025; and “Biden Takes Aim at China’s Temu and Shein With Trade Crackdown,” Wall Street Journal, September 13, 2024.) The use of the Latin expression de minimis (de means “about” and minimis is “small things”) is inspired by the Roman maxim De minimis non curat praetor, that is, “the praetor does not concern himself with trifles.” Under the Roman Republic, the praetor was a sort of judge who administered civil justice in Rome and its foreign territories. The maxim is often interpreted as saying that the law is not concerned with insignificant things or breaches. De minimis is used notably to describe an exemption to customs duties (tariffs). In the case of the US, goods imported from abroad and worth less than $800 are exempted from tariffs, if not restricted by other laws. The legal source of this exemption is 19 U.S.C. § 1321(a)(2)(C), part of the famous Smoot-Hawley Act of 1930 as amended. Accordingly, until now, when you order goods worth below the threshold from a foreign country, you do not have to pay the tariff as a condition for putting your hands on your package. De minimis on goods from China has already been terminated in May. The benefit of this exemption has become more important as American tariffs have much increased—from a weighted average of 2.2% last year (WTO figure) to a range of between 10% and 50% today. They want, as they say in collectivist circles, to “close the loophole.” The abolition of the little freedom allowed by de minimis is more significant than one may think. For the government, the exception had the benefit of keeping “the people” quiet by hiding some tariffs. When goods are imported by commercial intermediaries, the tariffs are a hidden tax in another way: past the importer, they are silently incorporated in prices. When a consumer wants something and a supplier offers it at an agreeable price from wherever it is, only coercion can prevent a trade. Suppliers are very entrepreneurial in their efforts to serve the consumers. Platforms such as Shein, Temu, or Etsy discovered that they could connect an American consumer and a foreign supplier who will ship the ordered product directly to the consumer, allowing the latter to avoid tariffs through the de minimis exception. These trades have grown rapidly over the past few years, from 637 million shipments to Americans in 2020 to 1.36 billion in 2024. These are not billionaire trades: the average package is worth $54 (in 2023). The platforms in question are often used by small American entrepreneurs who fill their orders with goods made in, and shipped from, foreign countries. Aren’t the American producers and consumers involved part of “the people”? This question reminds us of a central thesis of Anthony de Jasay: “governing” means harming some individuals in order to favor others. In the case under consideration—the suppression of de minimis—some workers and shareholders in American manufacturing are the main beneficiaries, at the cost of American consumers and shippers among others. Note that when trade is restricted—when, for example, the state takes a cut on what its subjects order from abroad—the consumer’s freedom and habit of ordering is partly replaced by the capacity of some domestic producer (say, a manufacturing shareholder or worker) to order the patronage of a domestic consumer. More generally, all this reminds us of some fundamentals of social, economic, and political life. We must reframe the fundamental fault line in politics as the distinction between the primacy of collective (and political) choice and the primacy of individual (and private) choices. The primacy of individual choices means that a collective choice is an exception, possibly justified by a requirement of theoretical unanimity as explained by the school of constitutional political economy; while the primacy of collective choices means that individual choice results from a loophole. This way of looking at the situation parallels the distinction between a social arrangement where everything not explicitly forbidden is allowed and a political system where everything not explicitly permitted is forbidden. Anthony de Jasay justifies the first alternative partly with the epistemological argument that the second one would, in practice, require a nearly infinite list of what is permitted. A companion argument is that forbidding everything would cancel the benefits of life in society for most people (except the forbidders). We are thus led to discover that in a collectivist political system, liberty is a loophole that the collective can close at will, i.e., at the pleasure of its rulers. That collectivism and individualism are a matter of degree, at least on the border between them, does not void the argument for a general presumption in favor of individual choices. (0 COMMENTS)

Question: Suppose the demand for fentanyl is perfectly inelastic, and that the users of fentanyl steal from others to acquire the money to pay for it. In an effort to crack down on fentanyl use, the government imposes harsher penalties on suppliers of fentanyl, reducing its supply. How will this policy affect the amount of stealing by fentanyl users?   Solution: Students sometimes resist the idea that the law of demand applies to addictive drugs. I understand why: if something is addictive, it seems like people will consume it no matter the price. While that isn’t strictly true, let’s follow the assumption in the question that demand for fentanyl is perfectly inelastic. What does that mean? Perfectly inelastic demand means the quantity consumed does not change when the price changes. Graphically, the demand curve is a vertical line. Users consume the same amount regardless of price. Now consider what happens when the government cracks down on suppliers. The reduced supply does not change the equilibrium quantity consumed, since demand is perfectly inelastic. Instead, it raises the market price of fentanyl. Here’s the important step: because users continue to buy the same quantity but at a higher price, their total spending on fentanyl rises. Since they finance their purchases through theft, this means the amount of stealing increases. A simple numerical example makes this clear. Suppose a user buys one unit of fentanyl each week at $100, stealing $100 to do so. If supply restrictions raise the price to $150, the user still consumes one unit per week but now must steal $150. Stealing rises one-for-one with the higher price. So, when demand is perfectly inelastic, reducing supply does not lower consumption. Instead, it raises prices—and in this case, leads to more stealing. If the assumption of inelastic demand were true, a more effective policy would target reducing demand rather than supply. (0 COMMENTS)

Cold plunges. Exogenous ketones. Pu-erh tea–but hold the breakfast: it’s all par for the morning routine, at least if you’re entrepreneur, self-experimenter, and king of the lifehacks, Tim Ferriss. From how he manages the challenges of his celebrity to how he manages to stay in great shape; how he does–and when he doesn’t–harness the power […] The post Tim Ferriss on Tim Ferriss (and much much more) appeared first on Econlib.

  Government Should Experiment with Eliminating Patient Barriers, Not with Covering Ozempic by Akiva Malamet, Bautista Vivanco, and Michael F. Cannon, Cato at Liberty, August 11, 2025. Excerpts: While Ozempic and other GLP‑1 drugs are great at helping patients lose weight(among many other promising uses), these impressive medications come with an impressive price tag. For those paying out of pocket, a month’s supply can cost around $1,000. Congress prohibits Medicare from subsidizing anti-obesity medications but allows GLP‑1 drugs for the treatment of diabetes and cardiovascular disease (a particularly vulnerable subset of its beneficiary population). The Congressional Budget Office studied the budgetary impact of authorizing Medicare to subsidize anti-obesity medications. It concluded that subsidizing GLP‑1 drugs for obesity would have a net cost to taxpayers of $31.5 billion between 2026 and 2034. And: More recently, our colleague Jeffrey Singer argued that Congress can and should eliminate FDA barriers for compounding pharmacies. Singer also emphasized the benefits of removing prescription requirements. Combined, these reforms would significantly increase competition and render GLP-1s more accessible. In a competitive market, price-sensitive patients put downward pressure on the prices of the medical goods and services they need or want. Medicare, Medicaid, and the tax exclusion for employer-sponsored health insurance create multiple levels of separation between patients and the price of medical goods and services. The more insensitive patients are to the price of care, the less pressure they put on providers to reduce prices. This makes health care more expensive and less accessible for everyone.   Employer-Sponsored Green Card Processing Takes 3.4 Years, All-Time High by David J. Bier, Cato at Liberty, August 11, 2025. Excerpt: Immigrant workers seeking a green card—which denotes legal permanent residence in the United States—now face almost a three-and-a-half-year wait to make it through the government’s regulatory morass. Paying a $2,805 fee could reduce this wait to “only” 2.8 years. Since 2016, the government has added over 18 months to the average green card process. This needs to change to keep America competitive. The processing delays come on top of the time to wait for a green card cap slot to become available under the annual green card caps (which is often many years). They also don’t include the time spent complying with regulations prior to the first filing step. This prefiling period can take months. DRH comment: I’m so glad I got my green card in 1977, when it took only a few months.   The Price of Pragmatism: How the Court’s Retreat from the Constitution Fueled Mass Incarceration by Mike Fox, Cato at Liberty, August 11, 2025. Excerpt: NYU Law Professor Rachel Barkow has written an extraordinary new book, Justice Abandoned: How the Supreme Court Ignored the Constitution and Enabled Mass Incarceration. It is a damning indictment of our judicial system’s complicity in the dramatic expansion of incarceration over the past several decades. Judge-made changes in the law have created a new status quo: The United States—with five percent of the world’s population—now contains 25 percent of its prisoners. Barkow’s central thesis is that the Supreme Court has failed to execute its core function: to safeguard individual liberties against the encroaching power of the state. Even worse, it has cloaked this failure in the guise of public safety. As Barkow explains, the Court has refused to “police the police.” When supervision of government fails, egregious abuses of authority go unchecked. The Court’s failure to enforce constitutional guarantees has enabled mass incarceration to metastasize.   DRH Note: I didn’t notice until I started posting, but 3 out of 3 of my weekly highlights are from one source: Cato at Liberty. Good for them. So would be the 4th, so I’ll refrain from posting it and, instead, post a link to an excellent forum held by the Independent Institute.   What If Everything You’ve Heard about the 1619 Project Is Wrong? by Jeff Hummel and Phil Magness, Independent Institute, August 13, 2025. Jeff does an excellent job of questioning and Phil knocks it out of the park with his answers. Truly amazing how low the New York Times sunk. I recommend listening at 1.25 speed. You won’t miss much by skipping Q&A, which starts at about the 42:00 point, although there is an interesting question (and an informative answer) about how Abe Lincoln thought of getting slaves to emigrate. Even if you have little time to listen, check out the story of the New York Times fact checker at 15:14. My favorite line, though, which gave me goosebumps, is at 12:34.   (0 COMMENTS)

Most advanced countries are democracies. In most cases, these countries impose heavy taxes, with total revenues often falling between 30% and 50% of GDP. And yet, most people don’t like paying taxes. How can we explain this seeming contradiction?The mainstream view of both the economics profession and the general public seems to be that a fairly high level of tax revenue is desirable, say at least 25% of GDP.  In this post, I’ll take as a given that the institution of taxes is beneficial to the general welfare. My own view is that the world would be better off if most countries reduced the size of their governments to well below 25% of GDP (as in Singapore). But even I am in favor of governments raising a substantial amount of money via taxes. Thus, for the purpose of this post, I’d like to bypass the issue of whether taxes are too high and consider why democracies are able to enact large tax regimes despite the fact that most voters don’t like paying taxes.   I think it’s fair to say that the typical voter has a sort of “not in my back pocket” attitude toward taxes. They would prefer than someone else pays for government services. If they are poor, they might prefer taxes on the rich, and if they are non-smokers they might prefer taxes on cigarettes. My local government in Mission Viejo does not vote to tax local residents and then send the money to Washington DC to fund the military. It is assumed that the federal government will raise taxes for that purpose. Mission Viejo raises taxes for local services like schools and police.  But despite this NIMBP attitude, governments in democratic countries raise vast sums of tax revenue. The implication of this is clear, the unpopularity of taxes does not prevent high tax rates, even in democratic countries.  The key is the raise taxes at the same level as the benefits that will be delivered.  Local taxes for local services and federal taxes for federal programs. Matt Yglesias was recently asked this question: It seems probable to me that a major obstacle to YIMBYist goals is that they are unpopular. How do you square your advocacy for YIMBYism with the philosophy of popularism? He gave an extensive answer, which included these observations: There are some people who sincerely welcome new development very close to their home, but they are a minority. Most folks, if they could have their way, would like to see lots of construction jobs and plenty of affordable housing and a growing economy and tax base, but also for all that construction to be happening somewhere else. That’s why it’s called Not In My Backyard, not Principled Hostility to Housing. The problem with NIMBYism in this sense is that it’s literally not a policy that can be done. If a state government could achieve housing abundance, but with none of the abundance occurring in your backyard, you might love that. But their actual options are “give every locality a veto so nothing gets built” or “reduce local ability to veto so some stuff gets built.” For a long time, politicians seem to have felt that “everyone gets a veto” was the best way to approximate what voters want. Over time, though, the problems with systemic housing scarcity have started to pile up and become more and more obvious, and more and more people are becoming convinced that “less veto everywhere” would actually be a better outcome. In my view, the biggest barrier to higher living standards is housing (with health care a close second).  Food and clothing comprise an ever smaller share of consumer budgets.  Cars have become so good that the vast majority of Americans drive what once were regarded as luxury cars.  (My Nissan Maxima is vastly better that the Cadillacs and Mercedes of the 1970s or 1980s.)  The real price of home appliances has fallen so much that people often just throw them out rather than call a repairman when they have problems. People eat out much more often.  For many people, the type of house they can afford is the key determinant of how well they are doing.  NIMBY regulations have pushed up the real cost of housing in many areas.  Kyla Scanlon recently observed that this was making people unhappy: John Burn Murdoch points out that young people are extremely unhappy in the Western world because society broke its promise of a home them – there is no faith in the future of the system, so people turn to ripping each other apart. Housing abundance is highly popular with the public, just as Social Security, Medicare, policemen, firemen and the public schools are popular.  But just as most people don’t like paying taxes, most people don’t wish to see new housing built right next door.  From this perspective, both government services and housing abundance are collective action problems, which are hard to solve at the individual level. (Once again, I’m giving the standard view, which I only partly accept.) However, there is one important sense in which this analogy breaks down.  Unlike the provision of various government services, housing abundance does not require any affirmative government action.  Rather it would require certain types of governments (i.e., state and local governments) to cease engaging in actions that restrict housing construction.  The most local level of all is the individual homeowner.  At that level, YIMBYism suddenly becomes much more popular.  Do I wish to sell my home for $5 million to a developer who wishes to put up a tall apartment building in Mission Viejo?  Yes!! Proponents of local zoning rules will often cite an “externality” argument for government regulations restricting housing construction.  But as Yglesias points out, that sort of NIMBYism is internally inconsistent. A homeowner who freely chooses to sell to a developer imposes negative externalities on their immediate neighbors.  A town that restricts housing construction imposes negative externalities on other residents of the state.  A state that restricts building imposes negative externalities on the rest of the country.  A country that limits immigration imposes negative externalities on the rest of the world.  “Popularity” is a tricky concept.  A policy regime that is popular at the local level may be unpopular at the state of national level.  Just as peoples’ aversion to paying taxes doesn’t mean that democracies will fail to enact substantial taxes, peoples’ aversion to an apartment building going up next door doesn’t mean that YIMBYism will fail in a democracy.  Yglesias points out that Yimbys are achieving wins in a wide variety of both blue and red states.  His post provides this figure: PS. A recent study suggests that Los Angeles’ large budget deficit could be closed by building more housing near transits lines. (0 COMMENTS)

I have for many years argued that Anne Krueger and Jagdish Bhagwati should be awarded the Nobel Prize in economics for their work on trade, protectionism, and economic development. Indeed, they should have shared the 2008 Nobel with Bhagwati’s student Paul Krugman. The extensive interview of Krueger in the latest issue of the Journal of Economic Perspectives supports my view of Krueger’s importance. I strongly recommend the whole interview. One of the most striking things is that Krueger dug around in the data in other countries by actually talking to the players. She learned a lot and that’s how she came up with the idea of rent seeking: when government officials have discretionary power, other people lobby to get special permission. Of course, we never see that happening in the United States. I started to excerpt it for my Weekly Reading Highlights for next Sunday, but there are so many nuggets that it deserves a post of its own. Thus this post. The interviewer, Dylan Matthews, is a correspondent for Vox.   Lawyers and Economists on Free Trade KRUEGER: Lawyers who do trade law are more pro free trade than economists, because they know how badly protection works. A distorted economy is terrible. Not just a little bad—import substitution probably cut growth rates in half of what they could have been.   Confessions of Corruption KRUEGER: In both countries, I had a number of encounters with people who talked a great deal about black markets and that kind of thing, and I got interested that way, in part. I had a friend in India from graduate school who was working in Delhi at one time when I was there, and he knew I was interested in this, so he invited several of his friends to dinner. He was well connected and invited ministers and vice ministers. At the end of the dinner he sat back and said, “Because Anne is interested in this, and you can trust her, I want each of you to tell exactly how much more you’ve taken than you should legally have taken in your job.” And they did it! One said, “I only took enough to get my three daughters each an adequate dowry. And that was ₹12 million” [about $1.6 million in US dollars at that time]. One of my very able Indian friends, then a graduate student in India, was forced to leave India because he was so honest. He couldn’t take the money. One of his sons got sick, so he had to work in the States to take care of his son. The corruption had all kinds of human effects that you don’t think about.   Would Helping the Poor with Mortgages Work? MATTHEWS: You left the Fund before the global financial crisis in 2008–2009. Did you have a sense that that was brewing toward the end of your time there? KRUEGER: Well, at the Jackson Hole meetings in 2005, Raghuram Rajan (2005) gave a talk where he described what the vulnerabilities were, why helping the poor with mortgages is not going to work. Why are we sitting on a bombshell? I think it was Larry Summers who said we were Luddites.   Industrial Espionage Goes Both Ways KRUEGER: Let me answer half a question you didn’t ask: the Chinese have on occasion tried very hard, I think, to oblige [the United States]. And I think we have missed the signal completely. I think their system is not a good system, and I think they themselves are not quite capable of understanding why it is not a good system, but this idea that they’re always stealing from us, that we never steal from them is silly. I mean, the idea that there’s no industrial espionage in this country! When I was in Silicon Valley, nobody would send a piece of equipment to any of the electronics fairs, even the big one in Las Vegas, without making sure there was some employee 24 hours a day watching the machinery to make sure nobody could reverse-engineer it. Now we’re so mad at the Chinese that they tried to do the same thing. Meanwhile, we’ve had more than one CIA agent arrested [in China] and pretty much caught dead to rights.   Why “Market Failures” Are Not Enough of an Argument for Government Intervention KRUEGER: Some of these arguments about the market assume that if there are market failures, then whatever the government will do will be better. Maybe the market failures are huge, but that does not persuade me that government failures will not automatically be as huge. That’s the part that’s wrong. I still think that when you’re talking about lots of economic activities, you want to just look at incentives. If there’s something wrong with the market, get the incentives right. Giving bureaucrats the incentive to regulate is not the incentive that will work best in most cases.   The Problems with Economists and Graduate Education Today KRUEGER: Gradually, I think the technique guys took over, theory and econometrics. It weakened the field in several ways, one of which, it set the bar so high that some people just couldn’t do it or didn’t want to do it. Some, who were good, got out, even though they could do it, because they didn’t want [that focus]. In a sense, you’ve gotten the idiosyncrasies of that group. If the price of milk doubled, they wouldn’t even begin to wonder why. That’s a big part of it. The fact that we have supercomputers sets everybody in awe, and all I can see is higher caliber regression, maybe. And I still think you need some theory before you do it. I think at some point it has to reverse a bit. Part of the way it’s reversing is, in my view, a bad way. Namely, the public policy schools are doing economics without enough analytical underpinning. So you get things like the advisers supporting industrial policy in the Biden administration and stuff like that, precisely because they haven’t learned what happened. One thing that the Chicago school, for instance, was so good at was making everybody think in terms of, “What’s the alternative? What’s the opportunity cost? What are the incentives that are created?” One of my eureka days was when Milton Friedman was visiting Minnesota sometime in the 1960s, around when the first law came in restricting auto emissions for new cars, making them more expensive. Milton’s argument was, well, that would mean more pollution. Why? Because, obviously, then people keep their cars longer. To him, it was so obvious. But to me, until he said it once, it wasn’t obvious. [DRH note: Probably because I was educated at UCLA, Friedman’s point would have been obvious to me.] There was so much of that in Chicago. Students learned to think that way. The rest of us had to figure it out the hard way. But Chicago often got it right.   Advice for Young Economists MATTHEWS: I think a lot of the people reading this interview might be in grad school or early in their careers, and want to have an influence in policy. You managed to have a long career in both academia and in policy, and I think had a very positive impact in both places. What advice do you have for someone who wants to follow a similar path? What are the skills to develop, or the opportunities they should take? KRUEGER: I really do think that depends on the individual and what they want, but I certainly am a very strong believer in having a good analytical frame-work. That to me is essential, and that means learning what questions to ask, which is often, “Why are people behaving as they are?” and then looking for where the incentives are. Finding out “why” is the important thing first. In the 1960s, the first answer in development economics was “peasants are irrational.” But of course, Ted Schultz (1964) put paid to that very fast.   My one disappointment: Although rent-seeking is a prominent part of the Krueger story and she definitely deserve credit for the term and for her evidence of its importance, neither Krueger nor Matthews points out that it was actually Gordon Tullock, in a 1967 paper, who came up with the idea of rent-seeking even though he didn’t call it that. [Editor’s note: Bhagwati is also the author of the entry for Protectionism in The Concise Encyclopedia of Economics.] (0 COMMENTS)