First from Alex Chalmers and Rob Wiblin at The Works in Progress Newsletter where they write “Just bury your trash”:

Every child is taught that landfill is the worst place our trash can end up. It is the sad consequence of a failure to recycle: a mountain of waste leaking chemicals and smells, blighting the land forever.

What if that picture is wrong? What if landfill, properly done, is actually one of the cleanest, cheapest, and most environmentally sensible things we can do with our waste? It turns out that for much of what we throw away, the humble landfill beats the recycling bin.

Single-use is often better

The case against landfill has two parts. The first part is that there are efficient, cheap, or environmentally friendly ways to practically reuse or recycle materials, rather than landfilling, meaning that there is a reasonable alternative. The second is that landfill itself is unsustainable, or environmentally unfriendly, meaning that we need an alternative. Both are false.

It’s natural to assume that reusable always means better. But this intuition treats different materials as interchangeable and ignores the cost of making them in the first place. Once we account for energy, labor, and other inputs, reuse pays off only in selective cases.

As Michael Munger likes to say (paraphrasing), "Stop washing your trash."

Next is from the paper, “Compulsory Schooling as a Form of Captivity: A Polemic,” by Cevin Soling and Kathryn Burrows in the journal Educational Studies as referenced by here Peter Gray.

Every weekday morning across America, millions of children are required by law to report to designated institutional facilities where they will spend much of their waking hours under systematic surveillance, movement restriction, and behavioral control. This phenomenon—compulsory schooling—has become so normalized that questioning its fundamental structure appears radical, even though the conditions it creates would be considered unacceptable in any other context involving free citizens.

Surprised, challenged, or perhaps flummoxed by either of these? Maybe your time in the institution of compulsory school included a steady stream of conditioning leading you to believe without question in both. I invite you to click through the links to learn more.

Substacks mentioned:

I. Oil

The current bump notwithstanding, Gale Pooley reminds us that the real price (cost) of oil continues on a long-run decline.

The true price of oil is measured in time, not dollars. In 1900 oil was only $1.19 a barrel, but blue-collar workers were only earning 14 cents an hour, putting the time price at 8.5 hours. In 1900 oil cost less in dollars, but much more in hours. The time price eventually fell to just 0.46 hours in 1970. Then OPEC showed up and pushed the price to over four hours by 1980. The price fell back to 0.7 hours in 1998 and then back up to 4.14 hours in 2011. Today the time price is barely over two hours, nearly half the 2011 peak.

Almost no one falls for the mistake of thinking something like oil was actually cheap in one’s grandfather’s day. “In my day a gallon of gas was a quarter . . .” is almost always followed by, “Yeah, but what is that adjusted for inflation?” As Pooley’s post and larger body of work shows, that is just half the battle. The better way to look at it is adjusted for wages.

While grandpa’s complaint is rightfully brought into perspective, how many would realize gasoline today is still about half as expensive as it was 15 years ago?

II. Housing

America’s housing market does not have good news to share. Not too surprisingly but still a surprising statistic, is shared by Joey Politano:

In 2025, Americans spent more money on home improvements and renovations than on building new single-family homes — a historical first, excepting a brief period during the Great Recession. Total renovation spending now exceeds $430 billion per year, an increase of 36% in inflation-adjusted dollars over just the past decade.

The entire piece contains many shocking stats.

III. The DSA’s Proposal for Government

Adam Michel offers a stat two-for-one:

In the US, federal, state, and local governments spent almost 40 percent of GDP in 2024. The average across the European Union is 49 percent, ranging from 58 percent in Finland to 22 percent in Ireland.

Using the lower-bound estimates, the DSA agenda would raise US spending to more than 57 percent of GDP. Among large, industrialized countries, only Finland would have a larger government. France comes in a third of a percentage point under the US’s low estimate. Add the high-end estimates, and US government spending would reach 92 percent of GDP.

No comparable country on Earth spends anywhere close to that amount. The DSA agenda’s spending could give the government a claim on national output much closer to estimates of state control under Soviet-style communism than to today’s European welfare states.

And:

The DSA suggests that the richest Americans and corporations will pay for all these new outlays. The problem is, there simply aren’t enough resources at the top to make this plan work.

The 400 wealthiest Americans were worth a record $6.6 trillion in 2025. Confiscating all of their wealth would cover only about 9 percent of the low-end revenue requirement and 3 percent of the high-end estimate. Their wealth could be seized only once, and attempting to liquidate trillions of dollars in assets would, in turn, drive their value down.

Domestic corporate profits after federal taxes are projected to be about $35 trillion over the next decade. Seizing every additional dollar of corporate profits would fund half of the low-end estimate and 17 percent of the high end. This also assumes that firms continue operating normally while the government takes every cent of profit. Without a profit motive, businesses would cease to exist.

The tie-in for these is that oil is more expensive than it has to be as a result of the war in Iran, but fortunately free-market capitalism has provided cushion from this blow.1 Housing markets have not been allowed to function freely. As a result we have perverse outcomes like those Politano illustrates. And if you like what government intervention into oil and housing markets has created, you’re gonna love what the DSA has in store for us.

Substacks mentioned:

Jeremy Horpedahl shows how high is median family income for married couples with children.

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:

Again, this is his entire, short post. I encourage you to follow his work at EWED and on X. He doesn’t disappoint.

Another great X follow is Jesús Fernández-Villaverde. He recently posted there on the growth in median human consumption:

In 2028, the median person on Earth will live on more than $10 a day for the first time in history (figures adjusted for inflation and for differences in purchasing power across countries). In the last decade alone, the share of people above this threshold has risen from 41.3% in 2016 (3.11 billion) to 48.7% in 2026 (4.03 billion). Think about that for a second: we have pushed nearly 900 million people over this threshold in ten years, around 90 million people a year (slightly above the population of Turkey).

Make no mistake about it (all too important in light of today’s infatuation with socialism), this is completely attributable to free market capitalism. When allowed and to the limited extent it has been allowed, the much maligned and misunderstood big C is the benefactor here.

Suppose that apples sell for more than oranges and Parliament in it’s wisdom decides that, at last, apples and oranges must be compared. Not by shoppers — shoppers are biased, they merely reveal what they are willing to pay — but by a tribunal, which will determine whether apples and oranges are of truly equal value and thus must sell at the same price.

What would the tribunal need to know?

. . .

An employer who defrauds his workers, an employee who steals from the till, a product sold under false pretenses — condemn them, take them to court. But the pattern of prices that emerges from millions of voluntary trades is nobody’s conduct. No one chose it, no one designed it, no one can be guilty of it. The constellation of prices is, in Ferguson’s phrase, the result of human action but not of human design. Demanding that prices be just is a category error, like suing the weather. Prices don’t grade our merit; they guide our actions. Ask them to do the first and they can no longer do the second.

And of course there are unintended (but not unforeseen) consequences:

Here’s the problem, which contributed to Birmingham going bankrupt in 2023. The council employs roughly 400 binmen and something like 6,000 women in comparable graded roles. Every extra pound paid to a binman therefore implied about fifteen pounds owed to the cooks and cleaners. The council simply didn’t have the money to pay everyone binman wages so they cut the binmen’s wages. But the market wage for collecting rubbish is what it is, so when Birmingham finally deleted the premium in January 2025, the binmen went on strike — and they are still on strike, nearly eighteen months later. The rubbish piled up, 17,000 tonnes of it, and the city declared a major incident.

Here’s the most amazing part. The council hired an outside contractor to take over its rubbish collection and it now pays roughly triple its pre-strike outsourcing bill–more than it was paying its own employees. So much for sexism. Apparently the premium wasn’t a favor to men; it was the price of the job. If you want your rubbish picked up and your graves dug, you must pay the market wage. This was pure regulatory arbitrage, of course. Because the new binmen were contractors they legally had a different employer than the Council’s female caregivers and the Act’s comparator rules stop at the employer’s nexus.

I suffer no fools when it comes to people who want to second guess market prices in this manner and to these ends. I’m sorry, but it is so stupid that I cannot be charitable here. Reasonable minds cannot disagree. To say this is child-like is an insult to children who themselves wouldn’t often make such mistakes.

More forgivable yet still a somewhat elementary mistake is what David Friedman points out in criticizing CNBC’s quality of life rankings for states and the actual behavior of people moving to the low-rated states. He writes,

The CNBC authors were confusing characteristics of a state with characteristics of its population, implicitly assuming that the reason A’s residents were rich was that they lived in A instead of that the reason they lived in A was that they were rich, and similarly for the residents of B. Of the ten states that CNBC rated with the lowest quality of life, five were, measured by average income, among the ten poorest states.

There is actually a lot going in in CNBC’s confusion. Part of it is overlaying particular biases (CNBC’s preference bundle) with that of others. In economics this is a confusion of normative versus positive analysis. In layman’s terms the evaluation of “what should be” (normative) versus “what is” positive.

Additionally, there is a confusion of income effects and substitution effects. It is not or should not be a mystery as to why the entire U.S. steakhouse segment has total revenues less than half of what McDonald’s (a single fast food firm) generates in the U.S.—about $20B versus about $55B. Don’t people know those steakhouses are higher quality than MickeyD’s?1

A more subtle, nuanced confusion is discussed by Arnold Kling in his post comparing the Web of the 1990s and AI today. The implicit bad comparison is how people make one a strong analog for the other. He writes,

Until now, human progress has come from our collective brain. Individually, nobody knows how to make a pencil. But when we can cooperate, whether in small groups, large organizations, markets, or computer networks, we can expand knowledge in all sorts of directions.

AI as it operates today truncates this learning process. Claude and I can have a chat in which I propose a theory of the Great Depression that is outside of the consensus that Claude usually works with. And during the conversation Claude may concede the merits of my approach. But when it leaves the conversation, Claude will have learned nothing from me. When the next person asks it about the Great Depression, it will revert to its previous stance.

So the AI labs are trying to do away with the what Joseph Henrich called The Secret of our Success. Implicitly, they are assuming that we no longer need to share ideas with one another and to contest ideas with one another. They just have to throw more data and computer resources at problems.

I find this distinction insightful. AI has a lot of promise and makes greater promises still. Those hopes are largely around improvements to personal (individual or firm) efficiencies. There is a natural siloing at play here. Part of it is a disconnection from social exchange (will we someday long for the “toxicity” of today’s social media?), and part of it is a disconnection in additions to social knowledge (the AIs may learn an accumulation, but one would have to know what to ask them to extract what was added by another user).

Substacks mentioned:

@

David Friedman’s Substack

Texas vs CNBC

People keep moving to Texas. CNBC says they should think twice…

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2 months ago · 34 likes · 11 comments · David Friedman

@

In My Tribe

The 1990s Web vs. today's AI

I am old. I was in my forties when the Web led the Internet breakthrough of the 1990s. Because I got very excited and involved with the Web, my model for thinking about AI comes from that era…

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2 months ago · 43 likes · 47 comments · Arnold Kling

Latesters leave 21 minutes before the meeting. And they will actually wait around, sitting on their ass at home, watching videos on the ‘Gram, so they won’t “waste time being early.”

They assume they will make up time by driving fast, there will be no traffic or school buses, and that they can park right beside the elevator. And then, when that is not true (again, because it is never true and they are always late) they say, “You wouldn’t believe the [{thing} that everyone already knows, because everyone else was on time because they accounted for {thing}].”

David Friedman on Hotel Breakfasts [emphasis added]:

I have been unable to find clear evidence of whether the explanation is true but it fits a general pattern: Anything odd on the market is either tax evasion or price discrimination.

This is a great general principle to remember when encountering something that seems at first blush to be at odds with logic and then continues to be odd once more fully understood. The last step is crucial, though, because so much of what appears odd to a casual onlooker is actually quite reasonable once particular details and nuances are taken into account.

So maybe the more generalized principle is this:

... If a practice by a person or firm seems strange much less “stupid”, consider first if you simply do not understand what is actually going on (i.e., assume you are the stupid one). This is the price discrimination explanation.

... Upon further investigation and if the oddity remains, consider if it is truly a bad practice (rarely will it be) or the consequence of poor or malicious incentives (one of these being much more often the case). Poor incentives would be what government actors and non-profit actors suffer under as well as to a much lesser degree for-profit actors. Malicious incentives are the tax evasion explanation in many specific circumstances, but it also includes more general cases such as the principal-agent problem (of the intentional variety).

Roger Pielke, Jr. on Energy Transition:

First, global climate policy does not drive decarbonization as the decrease in carbon intensity of the global economy long pre-dates the climate movement (which started as coordinated global policy in 1992 with the Rio Earth Summit); economies growing wealthier and using more energy more productively have driven that trend.

Second, and less comfortably: since the climate-policy era began in 1992 the background rate shows no acceleration. Hitting deep-decarbonization targets requires this straight line to bend down. It has not done so.

Decarbonization continues its long, improving trend despite not because of climate policies much less sensational worrying.

Three surprising stats for last month’s celebration.

I. You’ve come a long way, baby. From Jeremy Horpedahl:

II. You contain multitudes. From Daniel Fetz:

[A]bout 642 million people have lived in the United States since it became independent in 1776.

III. Isn’t it about time you grew up and put away your childish things? From Colin Grabow:

From 2020 to 2025, 16 countries have outbuilt the United States, including the Netherlands, Norway, and Singapore (the last two of which each have populations smaller than the metro Atlanta region). Such numbers underscore the Navy’s fiscal year 2025 shipbuilding plan, as cited by the Government Accountability Office, that US commercial shipbuilding has experienced a “near-total collapse.”

The reason for our dismal performance, of course, is the Jones Act and its unattended unintended consequences of protectionism.

This one starts as a surprising stat and then transitions into a pithy quotable.

Today about a quarter of the US workforce are required to have a license to work in their chosen profession, up from just 5 percent in 1950. Almost always the trend has been to add occupational licensing over time, but in 1983 Colorado did something unusual: it delicensed funeral service workers such as funeral directors. Brandon Pizzola and I analyzed what happened in our 2017 paper, Occupational licensing causes a wage premium: Evidence from a natural experiment in Colorado’s funeral services industry.

What we found was that delicensing reduced wages, reduced prices, and caused a shift towards cremation rather than the more expensive mortuary services preferred by funeral directors.

. . .

But that is not the end of the story. In 2023 a series of gruesome abuses came to light involving the sale of body parts, rotting bodies, and worse. Newspapers repeatedly noted that Colorado was the only state not to license funeral service workers. As a result, Colorado is relicensing funeral service workers as of 2027.

The problem is that there is no evidence that abuses were worse in Colorado. It’s easy to find similar abuses—including sexual abuse of corpses—in states with heavy licensing.

. . .

People want what cannot be guaranteed: good behavior in all circumstances. And they will reach for a licensing regime if it promises that, even when such promises are empty.

Next comes a positive story of improvement from Innovate Animal Ag (HT: Human Progress):

Original research conducted by Innovate Animal Ag shows that as of June 1, 2026:

• 40% of the EU’s commercial egg layer flock was sexed with in-ovo technology–a 6-point penetration increase from April 1, 2025.

• Since 2021, over 281 million male embryos have been removed before hatching globally.

• In Europe, in-ovo sexing technology has reached a production rate of 100 million female chicks per year, climbing from 500k chicks per month in 2021 to well over 8 million female chicks per month by the publication of this report, a CAGR of over 75%.

• In-ovo sexing is beginning its market-based rollout in the US with over 4% of the country’s commercial layer flock having publicly announced a transition to use the technology as existing flocks are retired.

• In Switzerland, where in-ovo sexing technology kicked off in 2025, in-ovo sexing penetration climbed rapidly and now sits at around 85 to 100% of the country’s layer flock. In Norway, in-ovo sexing has hit a 52% market penetration.

• The global penetration of in-ovo sexing is forecasted to continue its sharp growth in the next few years, led by expansion in the US, continued strength in Europe as a consequence of Italy’s ban on male chick culling, growth in markets where the technology has recently entered such as Australia and Brazil, and potential penetration into greenfield markets like Canada and China.

This is a very significant and morally-relieving trend. For those who don’t know, for both layer chickens, those used for egg production, and broiler chickens, those eaten for meat, males hold no value. Hence, they are culled at hatching—billions each year. Often this involves tossing the newly emerged baby chick into a shredder. By being able to sex-determine the chicks before hatching, the male embryos are removed before developing.

While you might not have known that baby chickens were being brutally slaughtered like this, you probably do “know” that AI datacenters use lots of electricity—and are worried about that. Good news, a little bit of perspective courtesy Our World in Data might alleviate your concerns:

So unless you’re ready to go to the barricades to protest hot showers, TV viewing, and microwaving popcorn, you should probably relax regarding AI electricity use.

Finally, this from Jeremy Horpedahl regarding the cost of air travel doesn’t surprise me, but it may surprise some [emphasis added]:

In 1970, a roundtrip flight on Pan Am from New York to London was $420. First class was $750. To put those numbers in context, the average wage in 1970 was $3.40, meaning it would have taken 124 hours of work to buy the coach ticket, and 221 hours to buy the first class ticket. The average wage today is $32.31, meaning that the coach ticket is the equivalent of almost $4,000 today, and the first class ticket is over $7,000.

A theme throughout this post is that things are getting better if we let them. Encouragement takes a delicate, nuanced touch, however. Just simply trying to legislate it often fails as in the case of licensure (first link above) or regulation (hidden implication in the fourth link since removal of regulation led to this improvement). So too might it in the case of animal welfare (second link). Forcing change upon the food industry could simply lead to supply chain changes to even worse conditions, which would be bad for animals,1 or reductions in food supply, which would be bad for humans and maybe bad for animals considering the substitution decisions that might result.2 And do we really want to retard the innovation that promises medical advances previously only dreamed of (the third link)?

Consider the arithmetic. Suppose an hour of labor is worth about $64, roughly the average gross domestic product per hour worked in the countries in which Amazon operates. If Mr. Bezos’ fortune corresponded to the total value that Amazon created, his $275 billion would represent about 4.3 billion hours of saved time. Divided among Amazon’s more than 300 million active customers, the saving comes to about 14 hours per customer over Amazon’s life. That’s nothing. Many customers save that in a month.

But entrepreneurs don’t capture all the value they create. The Nobel Prize-winning economist William Nordhaus estimated that innovators keep only a small share of the social value—roughly 2%—produced by their innovations. Under that assumption, Mr. Bezos’ $275 billion fortune implies that Amazon created about $13.8 trillion in total value for society.

Alas, wealth envy is yet again all the rage. John Cochrane isn’t buying it:

The recent Piketty-Saez-Stiglitz revival of wealth taxes, ostensibly to improve the lot of the poor, makes many mistakes. I’ll focus on one: the difference between wealth and consumption. The poor wish consumption. Turning capital into consumption must destroy the capital that produces consumption. Taxing wealth in the name of inequality will make the world, including the poor, much poorer.

The fact that wealth taxes won’t work out as desired is counterintuitive to many. Speaking of counterintuitive, check out David Friedman on how preventing divorce might raise marriage rates in his larger post on “How to Raise Birth Rates” (this one took me a second):

Marriage is a serious, often life changing, step; some people might be unwilling to take it if the other party was free to back out later; willingness to marry is a stronger signal of intent to stay married if divorce is not an option, one reason eliminating or restricting divorce might result in more people getting married. If that seems wrong to you, consider the effect on the mortgage market of a legal change that made it easy for borrowers to default.

A through line in these is that it takes two to tango. There is always a counterparty. In trade it is win-win (consumers and producers) where the consumers almost always make orders of magnitude more than the producers. In taxing wealth generation it is lose-lose-lose (wealthy, society, and the state taxing the wealthy)—killing the golden goose. In marriage it is obviously the two getting married where an easy out for either means reluctance to commit (especially for the one more committed in the first place).

Substacks mentioned:

The Grumpy Economist

Wealth tax equilibrium accounting

The recent Piketty-Saez-Stiglitz revival of wealth taxes, ostensibly to improve the lot of the poor, makes many mistakes. I’ll focus on one: the difference between wealth and consumption. The poor wish consumption. Turning capital into consumption must destroy the capital that produces consumption. Taxing wealth in the name of inequality will make the…

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4 months ago · 168 likes · 62 comments · John H. Cochrane

David Friedman’s Substack

How to Raise Birth Rates

I had a post on the subject a few months ago; a recent online discussion started me thinking about it again and I have some new ideas. One was due to a poster whose list of ways government could reduce the birth rate included banning divorce. I suspected he had it backwards. The obvious reason to think that is that modern societies have both easy divorc…

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4 months ago · 25 likes · 74 comments · David Friedman

I. China vis-à-vis Ireland

There are now more foreigners in Ireland than in China in absolute terms, despite having a population that is 260 times smaller.

II. & III. Brazil

Brazil has more unused arable land than any country on earth.

And,

A single farm in Mato Grosso can be more than twice the size of the state of Rhode Island. A literal fact.

Wow, wow, and wow!

I. Matt Zwolinski writes,

California has the most underfunded public pension system in the country. CalSTRS, the fund that pays the retirements of the state’s teachers, carries an unfunded liability of more than $100 billion—larger than California’s entire annual K–12 education budget. CalPERS, the parallel system for non-teaching public employees, brings the combined liability to roughly $136 billion. Between 2013 and 2021, the share of a California teacher’s salary that school districts had to send to CalSTRS more than doubled, from 8.3 percent to 19.1 percent, and roughly forty percent of recent increases in school budgets have been absorbed by pension costs rather than reaching classrooms. Three California cities—Vallejo, Stockton, and San Bernardino—have declared bankruptcy in the last two decades, with police and firefighter pension obligations as one of the largest drivers in each case. Cities that have not gone bankrupt have responded by cutting parks, libraries, road maintenance, arts programs, and, in some cases, the very police staffing levels their pension obligations were originally meant to support.

The superior force here is the market (reality) against a union (desires). The union is powerful in its ability to set ambitious goals that have the force of law to be met, but it is powerless against a reality that will not allow those desires to be met in actuality.

The piece is a cautionary tale for taxpayers.

II. The Wall Street Journal reports,

On Polymarket, the Journal found, 67% of profits go to just 0.1% of accounts. That means less than 2,000 accounts netted a total of nearly half a billion dollars. The Journal analyzed 1.6 million Polymarket accounts that have traded since November 2022. There are at least 2.3 million total accounts on the site.

The superior force here is better informed people on the other side of trades. It is not all insider information, but that is an important component. Emotion-driven bets are easy prey for the sharps.

The piece is a cautionary tale for bettors specifically and investors generally.

III. Marc Porter Magee on X.com posts (HT: Tyler Cowen),

University of Vermont projects 15% drop in freshman class.

The superior force here is demographics. This is mixed news. For UVM and universities at large, it is bad news. We are deeply into the Great Shrinking of college. For society, it is not so bad. More international students would alleviate the decline and be good for all. Yet, we've been through a period of too much college and for too many people. The reduction was inevitable, and it has good downstream effects. However, the fact that our population is declining due to falling birth rates is bad, bad, bad—a canary in the coalmine.

The piece is a cautionary tale for higher education specifically and both Social Security and the economy generally (population decline).

There are also some good ones. The second group fails not on pure fallacy. Rather, these work on their face at least, and in some cases they rise to a level deserving strong response.

One response in either case is that an argument might be assuming too much. That is the case for capital-C “Culture” as a catchall explanation for differences and as a premise fundamental to the argument being made.

Alex Nowrasteh makes the case that culture is a crutch. His subtitle says it all, “How lazy social scientists and commentators use the c-word to avoid doing their jobs.”

Culture is human behavior that is socially learned and transmitted rather than genetically inherited or individually discovered. In Substack and online debates, culture means whatever the person invoking it needs it to mean. Values. Beliefs. Norms. Attitudes. Customs. Work ethic. Family structure. Trust. Time preference. Cuisine. Music. When someone says “culture explains X,” they’re gesturing at a black box the size of human civilization and calling the gesture a theory.

Keep that definition of culture in mind as I explain how unsatisfying using the word “culture” is as an explanation. You notice a spike in unemployment. Curious what could be causing it, you ask your economist friend why unemployment is rising. He says it’s because of “the economy” and then sits back as if he’s explained something when he has done nothing of the sort. That’s how everybody sounds to me when they say that culture explains a behavior or outcome.

. . .

If you’re going to claim that culture has an effect, you should be able to do four things. First, pinpoint exactly what cultural characteristic you mean. Don’t be vague, be specific by describing the type of behavior. Second, prove that cultural behavior actually exists as a measurable trait. Don’t rely on stereotypes, do the hard work. Third, demonstrate that the cultural behavior differs meaningfully across the groups being compared. Wow, that culture likes food a lot. Which culture doesn’t? Fourth, rule out that the real cultural trait isn’t caused by an exogenous economic force like high real estate prices, rising wages, or different institutions that incentivize behavior. Almost nobody who invokes culture does any of these four things. Culture is endogenous to everything. That’s why you have to do the work to isolate it. That’s also why almost nobody bothers.

Here is the heart of the problem:

Culture is endogenous to everything. Claiming culture causes an outcome without first ruling out that the outcome’s causes also produced the culture is circular reasoning. Every cultural explanation must first survive a price, incentive, and institutional audit. Few of them do, but those that do are extraordinary findings, which is perhaps another explanation why so many claim it. Nobody would let economists get away with explaining a recession of high unemployment with the explanation, “It’s the economy.” We shouldn’t let others get away with the equally lazy non-explanation of “it’s the culture.”

As he says in his conclusion:

The culture-as-explanation discourse is largely anti-intellectual. These are faux explanations for social behavior and outcomes that have real explanations. Think harder. Read the literature on a topic yourself or ask AI to search for you. Other researchers have probably already written about the issue you claim is just caused by culture. Before you write the word “culture” in a causal sentence, search for the price. Search for the institution. Investigate the incentives. Search for the constraints. If you exhaust those and culture is still standing, then maybe you’ve found something. But you probably just didn’t look hard enough.

Throwing up your hands claiming “it’s cultural differences” is another way of saying “I don’t know!” Watch out for this dodge and beware falling for its slight of hand.

Next, Bryan Caplan offers two other responses to weak and strong arguments. Both come in the form of live debates.

The first is from the SoHo Forum where Caplan debated Simon Hankinson on the resolution: “Immigration and Customs Enforcement (ICE) should complete its mandate to deport all illegal aliens currently residing in the United States.”

From his opening statement:

While I’ve done many debates on immigration, this is the first time that you can figure out the correct side without knowing anything about immigration. The resolution states: “Immigration and Customs Enforcement (ICE) should complete its mandate to deport all illegal aliens currently residing in the United States” — and all means all. Which is a crazy view about the enforcement of even the best law imaginable. If we were debating “The NYPD should complete its mandate to imprison all murderers currently residing in New York City,” every person here should still vote nay.

How can I say such a thing? This is the basic economics of crime. Solving and prosecuting all murders would be astronomically expensive. Some murders virtually solve themselves, others require the proverbial 48 hours, others require years of police work, and others might remain unsolved even if the entire NYPD indefinitely focused 100% of its attention on the crime. About 70% of murders committed in NYC currently end in a conviction, but the NYPD couldn’t get to 100% even if they had 100% of the city’s GDP to deploy.

Astronomical expense aside, however, stricter enforcement means more false positives. The easiest way to punish every murderer is to lower the burden of proof. But the lower the burden, the more innocent people you end up punishing.

. . .

Deporting all illegal aliens currently residing in the United States has exactly the same insuperable problems. The cost would be astronomically high, probably exceeding total GDP because the goal is impossible to achieve. And even if it could be achieved, there would be massive collateral damage along the way. You can also think about it like this: To deport every illegal alien, you would have to deport everyone with a 50%, a 10%, or even a 1% chance of being an illegal alien. Otherwise, you will miss some.

Once you accept these two obvious-once-you-think-about-them facts, you really are obliged to vote nay. You’re obliged to vote for me even if you think that an illegal immigrant is as bad as a murderer! But since I have ten minutes left, I’m going to add a bunch of extra arguments to reinforce the conclusion. And along the way, I’m going to tell you exactly what I really think.

. . .

[A] law that forbids a person from living in the United States and having a job is, at minimum, mildly stupid. Why should anyone on Earth need permission from the U.S. government to wash dishes, clean toilets, or take care of kids? Work is good. Production is good. No one should need the permission of any government to work, to produce. If you think it’s OK to break a law against driving 56 mph in the desert, you should think that it’s OK to break a law against mowing grass for money.

On further reflection, though, laws against foreigners living and working here without government permission are worse than mildly stupid. Even unreasonably strict speed limits are only a minor inconvenience. Immigration laws, in contrast, are a terrible burden on everyone without the good fortune to be born a citizen of the First World. Standard estimates say that moving from the Third World to the First World multiplies migrants’ incomes by a factor of 5x, 10x, or 15x. The flip side is that successfully enforcing immigration laws divides migrants’ incomes by a factor of 5x, 10x, or 15x. That is a terrible thing to do to another human being just for doing a normal job without proper paperwork. Imagine if the U.S. government passed a law that divided your income by a factor of 10. It would be a massive harm, and almost everyone — not just libertarians — would demonize not people who broke this law, but those who enforced it.

. . .

What should be done about illegal immigration? Simple: We should make it legal. A massive apology would also be nice, but I don’t ask for miracles. What about all of the problems caused by mass immigration? They’re minor compared to the massive gains of moving hundreds of millions of workers from countries where their productivity is low to countries where it is high. If you’re still worried, then adopt the massively successful immigration policies of countries like the United Arab Emirates, almost 90% foreign-born, which welcomes immigrants of all skill levels to live and work, but not to receive government benefits or participate in politics.

Caplan was brilliant in this debate despite “losing” (I’m certain the audience was stacked). The fallacy-filled arguments by the opponent demonstrated that the anti-immigration side is filled with emotion and devoid of reason or morality.

I do think the opponent, Hankinson, is a reasonable person who could be constructive in a less-absolutist position that he otherwise agreed to take. To wit: During the debate they agreed they could come up with a sensible compromise policy if selected as co-dictators tasked with solving the problem. Unfortunately, as I’m sure Caplan would agree, this is because any compromise would be preferable to the situation we have now.

Still, the crux of the case against immigration relies on emotion-filled hypotheticals that are highly implausible. The task is mighty as I’ve pointed out before.

The second is from his UATX debate with Garett Jones, a truly strong opponent with strong arguments.

From Caplan’s opening statement in that debate:

Estimated magnitude: If everyone on Earth moves to the United States, average IQ falls from 98 to 87, reducing U.S. GDP per-capita by 49%. But on closer examination, this does not show that the immigration is a net negative! On these assumptions, total Gross World Product still rises by 81%, roughly the same as the Clemens calculation that open borders would double the production of humanity.

What would this mean in practice? Specialization and trade between higher- and lower-IQ people. Higher-IQ people — disproportionately current citizens of the First World — would specialize in high-skilled work, especially management and entrepreneurship. Lower-IQ people — disproportionately current citizens of the Third World — would specialize in low-skilled work, especially basic services. This is the same logic as any well-run business: Google doesn’t hire college grads as janitors — but it has plenty of janitors.

. . .

There’s no time to respond to the countless other complaints about immigration, but here’s my general approach. I dismiss all vivid anecdotes as demagogic distractions. If you hear a story so juicy you’re dying to repeat it to “prove your point,” don’t. In contrast, if you’ve got ugly numbers, I’m happy to hear them. But before we act on these numbers, we should always remember the truly massive economic gains of immigration. Immigrant crime, welfare dependence, and so on are sometimes notable problems, but they’re rounding errors compared to the gains. There’s more to life than GDP? Sure, but GDP and almost everything else good go hand in hand.

Both debates are highly recommended. They offer the best in response to the worst and best arguments made by immigration opponents.

Substacks mentioned:

Laissez-Faire, Laissez-Passer w/ Alex Nowrasteh & David Bier

The Culture Crutch

I bumped into a conservative acquaintance in the green room at Fox News several years ago. He was obsessed with falling fertility. Knowing that I worked on immigration policy, he said that immigrants assimilate too rapidly to America’s “low-fertility culture” and we have to find a way to slow assimilation to boost the birthrate. I disagreed. “They’re no…

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6 months ago · 122 likes · 25 comments · Alex Nowrasteh

Bet On It

Immigration Laws Are Made to Be Broken

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4 months ago · 56 likes · 36 comments · Bryan Caplan

Let’s start down this path with a video.

In this interview by John Stossel, Don Boudreaux succinctly explains the case for economic freedom. It is a very accessible explainer inviting those interested to learn even more from Boudreaux's recent book with Phil Gramm, The Triumph of Economic Freedom. Send this video to those in your life confused by the current economic-political landscape.

Now let’s go a little deeper touching on something that shallow critics of economics love to latch on to—the idea that economics rests on a bad assumption of a rational actor.

Josh Hendrickson demonstrates in his post “Panhandlers and Price Theory” that this is a mistaken accusation. Using panhandling and dovetailing off of his other recent posts on drug use he provides a great example of why price theory does not rely on the critic’s strawman version of rational actor. Rationality emerges from even “irrational” people. Chicago market economics for the win!

I also like examining topics like this precisely because they highlight what price theory is and is not. Price theory is a framework for understanding, explaining, and predicting human behavior. Price theory is not a theory of mind.

. . .

Suppose that you wanted to test this idea that, all else equal, competition tends to equalize rates of return on particular types of investments or activities. How could you do it?

. . .

For example, think of a situation in which there is (a) free entry, but (b) some reason to believe that the competitive model might not apply. If one finds evidence in favor of the competitive model under those conditions, then that is pretty strong evidence in support of the model.

One such example is that of panhandlers. It seems pretty clear that there are places in which panhandling is perfectly legal and there is no restriction on panhandling. The absence of those restrictions suggests that anyone can show up and panhandle. As a result, if panhandling turns out to be quite lucrative, we would expect to see people switch to panhandling from some alternative use of their time. In fact, competition in panhandling should drive down the rate of return on panhandling until it reaches the opportunity cost of the marginal panhandler.

. . .

Setting aside whether competition equalizes rates of return across different stations, one simple test would be to see if panhandlers follow basic economics incentives. For example, one would expect that there would be more panhandlers at the busier stations and the friendlier stations. One would also expect that there would be more panhandlers where the barriers to entry are low, such as at stations where there is a shuttle stop for the homeless nearby.

This is precisely what [researchers Peter Leeson, August Hardy, and Paola Suarez in their recent paper] find for the full sample.

He concludes:

Critics of economics generally, and price theory in particular, tend to argue that we assume that everyone is a hyper-maximizer, only concerned with self-interest and that the world is more complicated than that. People aren’t walking around all day solving utility- and profit-maximizing problems in their head. Not everyone is a rational calculator.

I think that we can reject these criticisms. I am not saying that we should reject them on the grounds that they are false characterizations of the real world, but rather that they are a false characterization of price theory. As I wrote in my previous posts, price theory is about providing rational frameworks to understand, explain, and predict human behavior. It is about rational frameworks, not rational people.

Going deeper still I share two from Scott Sumner. In the first post he explores the usefulness of tautologies examining six.

I don’t know how many times I’ve heard the news media attribute a sharply decline in stock market indices to a “selling wave” hitting Wall Street: The Dow fell 800 points as investors sold 15.4 billion shares of stock. Yes, but investors also purchased 15.4 billion shares of stock.

At one time, the stock market was closed at night and yet market indices often changed dramatically, even without a single share being traded. A hundred years ago, the Dow might close one day at 243 and open the following morning at 227, reflecting bearish overnight news. In that case, it is fairly obvious that the market moves on new information, not trading activity. To the extent that trading activity has any impact on prices, it is due to what the trading reveals about information held by various participants in the market.

In these examinations of tautologies he highlights wisdom that can be obtained from understanding them including organizing our thinking to see causal connections. This includes rejecting bad reasoning such as reasoning from a price change.

I’ll give two slices. The first is using the tautology that savings = investment:

Unfortunately, many people misinterpreted Keynes’s “paradox of thrift” as a claim that more saving is bad for the economy. That’s not what Keynes said! Keynes argued that a decline in aggregate demand (basically nominal spending or NGDP) is bad for the economy, and that this sort of decline might be caused by an increase in the public’s desire to save. But Keynes never said that more saving is itself a bad thing, as he understood that in equilibrium there is an equality between saving and investment. And since Keynes was very much pro-investment, that means he was also very much pro-saving.

The second is using the tautology that aggregate supply = aggregate demand coupled with Say’s Law:

Here’s AI Overview:

Say’s Law, often summarized as “supply creates its own demand,” posits that the production of goods generates the necessary income (wages, rent, profit) to purchase that total output. It implies that general overproduction or widespread “gluts” are impossible in a market economy, as total demand always equals total supply.

When defined this way, Say’s Law is true. The Great Depression was not caused by overproduction (as Franklin Roosevelt believed), rather it was a case of too little production. On the other hand, Say’s Law does not mean that we need not fear a situation where nominal spending is falling. Even if aggregate supply equals aggregate demand in a Depression, the equilibrium may occur at a undesirably low level of output and employment:

[Graph courtesy of ChatGPT]

Much of the confusion is due to the use of the term “aggregate demand”. I wish the model were called the nominal spending/real output model, not the AS/AD model. It has nothing to do with “demand” in the ordinary sense of the term as used in microeconomics.

The second post from Sumner is his take on the Committee for a Responsible Federal Budget’s (CRFB) plan to save Social Security, which he both praises and laments as politically implausible.

In praising and explaining the implications of the CRFB's proposal, Sumner effectively works the body on two separate fronts. He makes the case that the reform is essentially a progressive consumption tax with the economic and fairness benefits that policy change would imply while also demonstrating wealth and charity aren't well understood by the common man.

Starting with the tax part:

The CRFB’s proposal is essentially a progressive consumption tax, although it won’t look like that to the average person. I cannot teach an entire course in public finance theory in a blog post, but the essence of a consumption tax is as follows:

Imagine a world where people can either spend $6000/month on consumption today, or $12,000/month on consumption in 20 years, by saving their incomes. Now assume you impose a 33.3% tax in that world, which takes away a third of the public’s resources for consumption. With a pure consumption tax, your choice is now $4000/consumption today or $8000 consumption in 20 years.

Notice that the “terms of trade” have not changed, in both cases, the opportunity cost of a dollar spent on consumption today is foregoing two dollar’s consumption in 20 years. A consumption tax is a tax that does not change the relative price of current and future consumption. In a sense, all taxes are consumption taxes, as the burden of any tax is its impact on a person’s lifetime consumption. However, economists use the term “consumption tax” to refer specifically to taxes that treat current and future consumption equally. An income tax punishes savers and hence is not a consumption tax.

I’m pretty sure that most people don’t understand this concept, as I often see commenters say things like “we should tax consumption, not labor.” Actually, a labor tax is a consumption tax. Indeed, these three taxes are all equivalent consumption taxes, in the long run:

1. A 20% VAT

2. A 20% payroll tax on wages

3. A 20% income tax with unlimited ability to put savings into a 401k plan, and no mandatory date of withdrawal from the 401k. (Funds borrowed for consumption are also taxed.)

Note: Although I think I usually say something like “we would tax consumption rather than capital,” I’m sure I’ve made the sloppy mistake he points out of saying “we should tax consumption rather than labor.”

After fully describing how the CRFB’s plan is desirable, he turns to the implausibility basing his case on how people misunderstand wealth and charity.

Unfortunately, the CRFB plan seems too good to be true, and I expect Congress to implement something far worse. In order to understand why, consider two neighbors that both spent their careers in upper-middle class jobs making close to the Social Security taxable maximum (currently $184,500). Both retire as single people entitled to roughly $50,000/year in benefits. Both would see their benefits capped in nominal terms, which means their real benefit levels would decline over time.

But these two neighbors differ in one very important way. Smith was a high spender who would buy the latest BMW, while Jones was a high saver who always bought used cars. Smith saved very little while Jones maxed out his 401k plan.

Now Smith starts whining to his congressman that the proposed cap is unfair. It should only apply to “the wealthy”. His neighbor Jones is now pulling $100,000/year out of his 401k and doesn’t “need” his Social Security benefit to rise with inflation. “Please make the cuts depend on income levels, not benefit levels.” Because America has far more grasshoppers than ants, Congress listens to the whiners and applies benefit cuts only to those with high current incomes, not those with high lifetime wage incomes. They punish savers and reward spendthrifts.

. . .

People focus on the fact that those who are currently wealthy have more resources than the less wealthy, even when the gap is 100% due to the less thrifty person choosing to spend at an earlier stage of their lives. In my thought experiment, the two neighbors were equally wealthy in the only way that matters—they had equal lifetime resources to allocate to consumption and simply choose to do so at different points in time. Smith consumed when he was young enough to enjoy it, and Jones foolishly waited until he was old, wrongly imagining that he could still get a thrill out of life at age 70.

. . .

There’s an ongoing debate over how much money billionaires ought to donate to charity. Unfortunately, most people miss the point. The issue isn’t charity vs. investment; it is consumption vs. non-consumption. A charitable person is an individual that doesn’t consume much relative to his or her wealth. If you wish to consider heirs, you might say a charitable person is someone who ensures that he or she and all their future heirs consume only a modest portion of their current wealth.

But you can also argue that a charitable person is someone that maximizes their wealth, given the share of that wealth that they intend to use for consumption (both they and their heirs.) A wealthy person can become more charitable by reducing long run family consumption of wealth from 40% to 30%, but also by increasing their total stock of wealth and keeping the consumption share at 40%.

. . .

As Matt Yglesias recently pointed out, those billionaires that consume a large share of their wealth are the actual problem.

. . .

To be altruistic is to forego consumption for you and your heirs. That’s it.

[emphasis in the original in all cases above]

He ends with two great quotes. One is favorite of mine from Steven Landsburg that I have referenced before about misers being the ultimate philanthropists. The other is Bastiat's greatest insight, “That which is seen, and that which is not seen.” Another from Bastiat came to my mind while reading the post: “The State is the great fiction by which everyone seeks to live at the expense of everyone else.”

P.S. As if right on cue, Landsburg brings in another with this post making the same essential point about people confusing money transfers with wealth transfer:

I doubt very much that Mr. Musk plans to spend a trillion dollars before he dies. Suppose instead that he plans to spend, say, a hundred million. Now suppose he gives away all his money (or we confiscate it) and he reduces his lifetime consumption to zero. That leaves an extra hundred million dollars worth of food, clothing and fuel for the rest of us. Divide a hundred million dollars among three hundred and fifty million Americans and you get not $2800 per person, but 28 cents. That’s how much extra stuff the average American can now buy.

Whatever Elon gives to John, Paul and George must ultimately come from Elon. What’s available to others is capped by what he sacrifices.
In fact if you confiscated, say, half of Elon’s wealth and he chose to go right on consuming at the same rate, then the total value of what you could redistribute would be exactly zero.

What if you ignore all that, take Mr. Musk’s trillion dollars and redistribute it anyway? Or what if Elon himself ignores all that and decides to give a bunch of money away? The answer, in either case:: We all get $2800 checks, we all feel richer, we collectively try to buy an extra trillion dollars’ worth of stuff, there’s only an extra hundred million dollars’ worth available, so prices and/or interest rates adjust to the point where your $2800 check can purchase only about 28 cents worth of goodies.

Substacks referenced:

Economic Forces

Panhandlers and Price Theory

In my previous two posts (here and here), I focused on the role of price theory in explaining drug use. One reason that I wrote those posts is that I wanted to illustrate that price theory has explanatory power beyond the standard examples. I’m a firm believer that price theory is useful for understanding any decision that involves costs (which is essen…

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5 months ago · 42 likes · 4 comments · Josh Hendrickson

The Pursuit of Happiness

The beauty of tautologies

Tautologies have a bad reputation. They are often dismissed as mere definitions. People get scolded for trying to draw causal implications from tautologies. They are viewed as being simplistic…

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5 months ago · 48 likes · 42 comments · Scott Sumner

The Pursuit of Happiness

Too good to be true

The Committee for a Responsible Federal Budget (CRFB) has put forth an excellent plan to save Social Security, featuring a $100,000 benefit cap. The plan is so good that I see almost no prospect for it ever being enacted by our Congress, an institution that has fallen to a sadly dysfunctional state. In this post, I’ll discuss why I like the plan and t…

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6 months ago · 53 likes · 52 comments · Scott Sumner

Remember also, again importantly, that in some cases CCW leads to truth and solutions.

Along those lines, here are two posts to ponder. Each will challenge certain constituencies: one more left centered and the other more right centered. Yet in both cases these are positions that come from a high-safety value set. Like any bias, prioritizing safety comes with downsides . . . no solutions, only tradeoffs.

In the first case is Judge Glock writing a Works in Progress. The title of the post says it all: “American water is too clean.”

I imagine your first reaction is dismissal followed by consideration only allowing this in a technical sense.

Today, the average urban household in America pays about $1,300 a year for water and sewers, close to the $1,600 they spend on electricity. In San Francisco, even before the new sewer mandates went into effect, water rates were about $3,600 a year. Local governments spend more on building and maintaining their water and sewer systems than they do on policing.

The main reason for high water charges is federal mandates. The US, largely through federal mandates and subsidies, has spent about $5 trillion, in contemporary dollars, to fight water pollution since 1970, about 0.8 percent of the annual GDP in that period. This effort makes clean water ‘arguably the most expensive environmental investment in US history’, according to one study, far more than air pollution regulations.

Yet the EPA finds that the one category of environmental regulation where estimated costs exceed benefits is surface water regulations. The EPA does say that most of its drinking water mandates have benefits that exceed the costs, but, as one study showed, ‘these determinations were unsupported by the Agency’s own regulatory impact analyses’. The EPA analyses found that for many of the regulated dangers ‘the risks may be as low as zero’, but argued that potential risks should be treated as probable ones.

Technology and local governments have worked wonders over the decades to make drinking water and water systems incredibly clean. But that desire for progress has now become excessive. Mandates from the EPA are demanding water become too clean. It is important to remember that the optimal level of pollution is never zero and there are always important trade-offs to consider. The ironic knock-on effect is that these mandates have actually become environmentally negative on top of being economically destructive.1

He ends the article with suggestions about balancing the costs and benefits including this:

There is an old joke about a boy who said that he knew how to spell the word ‘banana’ but that he didn’t know when to stop. Officials in control of water today know how to get cleaner water but don’t know when to stop. Local voters already face the problems of balancing costs and benefits and the more distant the regulators, the less likely they are to get the balance right themselves.

Now turning to the second case we have Benjamin Nadelstein suggesting a way to abolish prisons.

Prisons can be viewed as an overall bad deal for society. They are expensive, inefficient, and often counterproductive. Prisoners live in dehumanizing conditions, the legal system groans under inefficiency, and taxpayers have to pay an average of $30,000 per year for every inmate.

The total price tag for U.S. prisons exceeds $80 billion annually, while the economic cost to incarcerated individuals in lost earnings exceeds $500,000 per person over a lifetime.

Prisons generally fail any purported goals of rehabilitation, failing to provide adequate educational opportunities or career programming. Prisons also tend to create overcrowded spaces with heightened violence, that often makes people more criminal, not less, by surrounding them with antisocial values and criminal networks.

That introduction lays out the scope of the problem. Here is his CCW proposal:

Instead of sitting in a prison cell at taxpayer expense, governments could auction off their prisoners’ future tax payments to private investors in exchange for more flexible confinement and rehabilitation arrangements.

These investors—let’s call them “prison career agents”—would assume full responsibility for their prisoner’s security and reintegration into society.

Crucially, these career agents could also be on the hook for their prisoners’ negative tax receipts. That means if a prisoner fails to earn income or returns to crime and is imprisoned, the career agent eats the associated costs and not the taxpayer.

After listing what he believes would be the win-wins, he anticipates pushback ending the post with a hypothetical Q&A. The quote he references from Bob Murphy probably hints at how opponents to this idea might retreat from a “it won’t work!” reaction to one of “but that’s not what I want.”

Economist Bob Murphy has pointed out that market forces would naturally regulate the private provision of prisoner security:

“No insurance company would vouch for a serial killer unless he agreed to live in a secure facility. These facilities, akin to hotels, would compete for prisoners by offering better conditions, as inspectors ensure safety. Undue cruelty would disappear because prisoners could switch providers, just as travelers switch hotels.”

PTAs would introduce competition into incarceration for prisoners, just as Airbnbs compete with hotels for travelers, Uber competes with taxis compete for riders, and UPS competes with the Post Office.

It is hard for people to get past the idea of prison as pain where any alleviation of pain is repugnant. For them there is a ratchet effect. They might not think they want it worse for prisoners at each step in it getting worse, but they refuse to think about it moving backwards from where it happens to be even though previously (before it got worse) they weren’t prepared to advocate for it being worse.

I’m not ready to endorse this as THE solution (aptly, Robin Hanson comments). But I am ready, stand always ready, to think outside the box. This idea has merit in direction and spirit if not exact specification.

Substacks mentioned:

The Works in Progress Newsletter

American water is too clean

The European Union spends more on science each year than America’s National Science Foundation, but European scientific output trails the US. What can it do to fix this? To answer this question, Works in Progress is hosting an event in Brussels on 2nd March. Sign up…

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8 months ago · 98 likes · 38 comments · Works in Progress and Judge Glock

The Invisible Foot

How to Abolish Prisons by Using Career Agents

Prisons can be viewed as an overall bad deal for society. They are expensive, inefficient, and often counterproductive. Prisoners live in dehumanizing conditions, the legal system groans under inefficiency, and taxpayers have to pay an average of $30,000 per year…

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8 months ago · 5 likes · 6 comments · Benjamin Nadelstein

I freely confess: Very few of my personal friends are low-skilled workers. I’m a professor and a nerd, with decidedly high-brow tastes. If I tried sharing my feelings with any particular low-skilled worker, my outreach would no doubt come off as awkward and condescending. But I still declare before the whole world that I am deeply, sincerely grateful for low-skilled workers’ ubiquitous life-sustaining and life-affirming contributions. Contrary to popular insinuations, you are not charity cases. You keep us alive. You put roofs over our heads. You care for our children and our elders. You pick up the slack of life, taking care of the troubles others are too frazzled to handle. You deserve respect and appreciation, not casual disdain. Elites who talk as if you’re a massive burden aren’t merely rude. They are massively, blatantly, grotesquely wrong.

And ChatGPT writes in the second:

The nobility of low-skilled work is not that it is romantic. Much of it is tiring, repetitive, boring, and unpleasant. The nobility is that people do it anyway because other human beings value the result. That is enough. More than enough.

The economic case is overwhelming. Low-skilled workers expand output. They lower prices. They let higher-skilled workers specialize. A surgeon with a clean operating room, an economist with childcare, a CEO with a functioning supply chain, a parent with takeout dinner, and a tourist with a made bed are all more productive because someone else handled tasks that needed handling.

This is the division of labor. It is not glamorous. It is glorious.

And here is the ode:

To the janitor who makes the office usable before the office workers arrive.

To the dishwasher who saves the evening after the diners depart.

To the roofer under the August sun.

To the cashier who absorbs a hundred tiny indignities and still says, “Have a nice day.”

To the hotel maid who restores order after strangers leave chaos.

To the delivery driver who turns my laziness into dinner.

To the immigrant with poor English, little money, and a heroic willingness to start at the bottom.

Thank you. You are not a problem to be solved. You are fellow builders of civilization.

The least we can do is stop getting in your way.

Truly beautiful, as is the work he praises—directly and through AI prompting.

Neil Hacker explains how ASML makes the essential chips that run our world:

The most advanced version of this technology, extreme ultraviolet lithography, is used to make the very smallest chips. The smallest in 2025 were marketed as three nanometers, roughly 25,000 times thinner than a human hair.

To make them, a droplet of liquid tin is released into a chamber and hit with a single pulse of light, which melts and flattens it. As the droplet continues to fall, a second, more powerful pulse vaporizes the tin, creating an extremely hot plasma that emits light at the narrow wavelengths needed for extreme ultraviolet lithography. The light beam is then concentrated by reflecting it across a series of slightly concave mirrors so flawless that, if scaled to the size of Germany, their imperfections would be measured in millimeters. [emphasis added]

Dan Williams argues that the idea of speaking truth to power is misguided:

A simple heuristic that power and truth systematically collide doesn’t get you anywhere. Powerful people often speak the truth; the powerless often speak nonsense; and very often nobody—neither the powerful nor the powerless—has a clue what is going on, which is why we need rigorous, trustworthy, truth-seeking epistemic institutions in the first place.

Substacks referenced:

I.

Here’s a proposed list of the top 100 technological innovations in products, systems, and technologies over the past 250 years. (I confess that I am a total sucker for mulling though lists like this.) The entries highlighted in dark blue were US-led; the entries in light blue were US-involved. In a broad sense, consider the dominance of US technological leadership since around 1900.

That is from Timothy Taylor referencing a McKinsey report on America’s competitive edge.

II.

Another recent analysis published in The Economist finds that global inequality in consumption spending is falling. In 2000, the richest 10% of humanity spent 40 times more than the poorest 50%. In 2025, they spent around 18 times more. Using data from World Data Lab, they find that the poorest 50% now out-consume the richest 1%, breaking from past trends.

That one is from Chelsea Follett writing “A Reality Check on the Inequality Panic”. It is a short summary of how much better the world has gotten for the poorest relatively when compared to the wealthiest. By extension, the poorest enjoy a much better world today in absolute terms, which is what really matters.

III.

And now for the uglier news . . .

The economic costs of this complexity are enormous. For starters, there’s simply the time and money we have to spend complying with an ever-growing and always-changing tax system. According to the Tax Foundation, compliance with the federal tax code cost Americans roughly $536 billion in 2024–2025—or nearly 1.7 percent of 2025 gross domestic product. They conservatively derive this number from two sources: First, there’s $148 billion in out-of-pocket costs for software, tax preparers, and accountants. Second, there’s time: Using a reasonable hourly wage, the 7.1 billion hours Americans spent complying with the tax code translates to roughly $388 billion in lost productivity.

To put these figures in context, $536 billion is more than the corporate income tax will generate this year, around twice as much as Trump’s tariffs will raise, and more than 43 times the IRS budget. The 7.1 billion hours spent complying, meanwhile, is the equivalent to 3.4 million full-time American workers—almost the population of Los Angeles—doing nothing but tax paperwork for a full year. The National Taxpayers Union puts the total compliance burden at $464 billion for 2024, with the average filer spending 13 hours and $290 just to pay his taxes. For many Americans (including me—sigh), tax filing demands multiple spring weekends doing unpaid labor just so we can cut the government another check. (Yes, I am bitter.)

That is from Scott Lincicome reporting on how much Tax Day cost Americans besides what they paid in taxes. Sadly unsurprising to me, and yet we don’t have the political will to change it. I’m bitter too, Scott.

We are never in “normal” times where normal means no worry about the future and the path we are on. But from time to time it is worse (heightened).

Here are two items that I read recently that offered some hope amongst the fear.

I.

Derek Thompson continues in a recent post:

The results were remarkable: On an independent test set of 493 scans, REDMOD detected the invisible signature of future pancreatic cancer with significant accuracy at a median lead time of 475 days before diagnosis. In other words, this AI program could detect cancer 40 months before the best doctors. Most importantly, REDMOD didn’t cheat. The team prevented the AI from cheating in several ways by making it impossible for the AI to use electronic records to identify scans where a mass was determined to be “present but overlooked.”

Before AI kills us all, it appears that it will give us meaningfully reduced mortality.

II.

Yes, China builds. Some of that building is impressive. Some of it is surveillance infrastructure and junky apartments sitting on top of a brittle political model with an aging, shrinking population. This is not a superior civilization. It is a ruthless machine that can be highly efficient at specific things while being deeply warped at its core.

Meanwhile, what does America still have?

The lead in AI.

The world’s best universities.

The deepest capital markets.

The most creative entrepreneurial culture.

The most important alliance network.

The reserve currency.

The most capable military.

The greatest ability to absorb talent from everywhere.

The broadest ecosystem for turning ideas into dominant global companies.

This is what the America declinists never understand. America’s strength has never come from looking neat on a high-speed rail brochure. It comes from combining freedom, talent, capital, scale, ambition, and military reach in a way no other country has matched. China can manufacture very effectively. America still invents the future.

That is from Lee Bressler. I love the last line of that quote from his post, “America still invents the future.”

While we need to work to make that continue to be true, it is worth pondering how enduring that truth is despite the headwinds—some of our own making.

Substacks referenced above:

Of course, Fungi also can be deadly—some mushrooms will kill you dead and AI has analogous risks.

I.

You would be surprised to learn that almost 69% of the US mushroom production occurs in the borough of Kennett Square, Pennsylvania. It is a small town of about 6000 people, but mushroom-growing facilities around town produce almost 451 million pounds of mushrooms annually (2024). 451 million pounds of mushrooms would occupy about 45 American football fields or 35 soccer fields. The dollar value of mushroom production in the US is roughly $ 1 billion per year.

China is the undisputed leader in mushroom production. China accounts for 93% of the world’s global mushroom production.

That is from Software is Feeding the World’s post “The case of missing American mushrooms”. The missing-American-mushroom angle centers on how immigration restrictions are introducing major supply-side problems.

II.

Imagine I told you that AI was going to create a 40% unemployment rate. Sounds bad, right? Catastrophic even. Now imagine I told you that AI was going to create a 3-day working week. Sounds great, right? Wonderful even. Yet to a first approximation these are the same thing. 60% of people employed and 40% unemployed is the same number of working hours as 100% employed at 60% of the hours.

…

Nor is this argument purely theoretical. Between 1870 and today, hours of work in the United States fell by about 40% — from nearly 3,000 hours per year to about 1,800. Hours fells but unemployment did not increase. Moreover, not only did work hours fall, but childhood, retirement, and life expectancy all increased.

That is directly from Alex Tabarrok at MR. The implied lesson is that AI-caused job loss, while likely disruptive and painful in the short term, would be greatly beneficial in the long run (for everyone) if history is any guide.

Consider both stat links food for thought.

Substack mentioned:

We are not on the brink of apocalypse. The world has continued to warm, due to accumulating carbon dioxide emissions. Of course, catastrophists are still with us, and surely always will be, but research has not supported the claims that humanity faces an existential threat. Most significantly, the most extreme climate scenarios that have dominated climate science and policy are not plausible. As a consequence, estimates of 2100 warming under “current policies” have declined from ~4°C to ~2.5°C. No one need take that from me, take it from the IPCC and UN FCCC.

Most types of extreme weather have not become worse. Floods, drought (hydrological and meteorological), tropical cyclones, and tornadoes have not had detectible changes according to the IPCC’s Sixth Assessment Report. Some signals have emerged — heat waves have become more frequent and heavy precipitation has increased in some regions. However, the fire and brimstone of AIT remains far from reality.

Those are just two of several points Roger Pielke makes in examining how Al Gore’s thesis in An Inconvenient Truth and the famous speech (a.k.a. sermon) he gave at the American Association for the Advancement of Science’s annual meeting have not held up in the 20 years hence.

Pielke explains that he, Pielke, misunderstood the problem with what Al Gore was doing and how he was doing it. Having thought of it as a science-understanding problem, he missed that it was actually akin to a religious movement of a apocalypticism. Thus, the reason Pielke calls it a revival sermon.

Continuing with another from Pielke, he appeared on The Human Progress Podcast this past week. Here are a few of snippets from the transcript:

Marian Tupy: Very good. So in this podcast, I want to spend most of our time talking about climate change and global warming and where we are. But I think probably the best thing to do is to start with the two extremes in the climate change debate. I don’t like to use the word denialist, but let’s look at that side first. So people who are critical of the dominant view that climate change is a crisis or even a problem will say things like CO2 concentrations in the atmosphere are much lower than what they were in the distant past of the planet. CO2 is vital for life, it is plant food, and it has led to global greening, which is a good thing. So nothing to worry about. What is wrong with that point of view?

Roger Pielke Jr.: Yeah, I mean, there’s a lot of what you say the science supports global greening and the fact that CO2 levels were higher in the past but where that goes away from scientific understanding is the “nothing to worry about” part. Anyone who claims to have certainty about the future, either we’re headed for the apocalypse or “don’t worry, be happy,” that’s not consistent with understandings of how humans are affecting the climate system. It always was and always will be a risk management problem. The late Steve Schneider, who was a famous climate scientist and climate activist I have this in my book he said at one time, the fundamental challenge of climate change is that outcomes could be very benign or they could be very serious and consequential, and we won’t know the difference during the time that we need to prepare. So both sides, I think, on both extremes the apocalyptics and the “don’t worry, be happy” folks are guilty of selectively interpreting evidence in a way that they think is favorable to whatever cause they want to advance. And the reality is that they’re both in that spectrum of possibilities, but smart decision-making has to consider that entire spectrum, not just one tail of the distribution on either end.

And then later:

Marian Tupy: We’ll get to the other side very soon. But the trade-off would be something like this. By emitting more CO2 into the atmosphere, we are making the world much richer so that even if we do have more CO2 in the atmosphere and it leads to some climatic problems down the line, the society is going to be so technologically advanced and so rich that we’ll be able to take care of it. Is there any evidence for that or is it mostly wishful thinking?

Roger Pielke Jr.: So humans are a fantastically inventive species. A lot of your work and a lot of the stuff I read that you put out emphasizes the progress that’s been made in making our material environments that much better off. And it’s absolutely true that fossil fuels, which have the side effect of emitting carbon dioxide, have been central to all of that progress. One data point, a trend that I think many people aren’t aware of, is that the carbon dioxide intensity of economic activity so technically it’s carbon dioxide per unit of GDP that has been steadily going down for as long as we have records, 60, 70 years. So as we’ve become wealthier, we’ve also become much less carbon intensive. And there are good reasons for that, and we could go into that, but it turns out that as a species we really like getting more output for less input, and that includes fuels. And we like cleaner burning fuels in terms of particulates in the atmosphere and other metrics. And so if that trend were to continue, then at some point we do go over the hump of increasing carbon dioxide emissions and it starts going down.

Roger Pielke Jr.: In fact, right now over the last decade, emissions have plateaued in the sense that there are small increases, but they’re within the margin of error measurement. And if you look to 20, 25 years ago, emissions were really going up fast, particularly due to coal consumption in China. So there is a background force that has nothing to do with climate policy that our economies have been decarbonizing. And so for those people on that side of the debate who really love CO2, we would have to intentionally take action to pump CO2 into the atmosphere because the long-term economic trends are in the other direction. I know it’s not as fast as some would like and it could be faster, but the decarbonization of the economy is just a fundamental reality of life on planet Earth.

And then later still:

Marian Tupy: Extreme weather events, especially hurricanes, cyclones, wildfires, and droughts.

Roger Pielke Jr.: Yeah, so I always say we gotta take these one by one. I’ve studied tropical cyclones for 30 years, which includes hurricanes, and the IPCC gets this one right also. There is not any convincing evidence that there’s more hurricanes, more intense hurricanes over the period of record. The IPCC is clear on that. The National Oceanic and Atmospheric Administration in the US, very clear on that. Hurricanes have become kind of a poster child. They’re very photogenic. Al Gore had one coming out of a smokestack in his famous movie. And hurricanes are probably one of the worst places to look for any signals of climate change. Simply, the numbers are small. There’s only 60 to 80 hurricanes on planet Earth in any given year. That’s a small number of events when you compare it to the millions and millions of temperature measurements we have everywhere every year. And the more measurements you have, the easier it is to detect small signals. Flooding, as I said, no detection or attribution. Drought, for most metrics of drought, again, no detection or attribution. The one distinction that the IPCC makes is soil moisture deficits, so think of dry land, which is associated with warming more than it is with precipitation. Winter storms, again, no detection or attribution there. What other events…?

The entire interview is definitely worth a listen. It is filled with his insightful (certainly not inciteful) perspective that brings careful balance and thoroughness to what is so often the fraught climate discussion. The message I always get from Pielke is: The climate is warming (and changing), humans are partially the cause, the implications are complicated and often misunderstood—the devil is in the details.

Here are a few examples.

Occupational licensing is where we’ll begin. Ritz Penaranda writes,

Today, an estimated 25 percent to 30 percent of Americans require a license – permission from the government (typically the state, rather than federal) – to engage in their occupation. Examples range from the unobjectionable to the eyebrow-raising.

Her article, “Permission to Earn a Living: History, Economics, and the Ethics of Occupational Licensing,” is a succinct look at the history, current state, and political economy of occupational licensing including a balanced analysis of its costs and benefits—both pragmatic and philosophical.

On the pragmatic, I found this part noteworthy:

Indeed, the supply-side theory highlights serious flaws in the demand-side argument. First, occupational licensing drives up prices. It decreases competition. And it leads to market inefficiencies, such as forum-shopping (whereby states attract professionals through higher salaries or lower regulatory burdens) or decreased economic mobility (as professionals licensed in one state will face higher transaction costs, in the form of repeat licensing, if they wish to move to another state.) It’s hard to see how any of these outcomes benefit consumers.

Second, occupational licensing appears to function as a polite form of incumbent protection. A recent Cato Institute report finds that “data on state associations for nine major occupations reveal that the probability of an occupation becoming regulated increased by 20 percentage points within five years of… [the] founding in that state [of a trade association representing that occupation].” Further supporting the supply-side, or lobbying, thesis, the Institute for Justice finds that licensing burdens disproportionately affect low-income occupations.

Third, a study by the Center for Growth and Opportunity at Utah State University identifies three counter-arguments to the public interest (consumer protection) approach: 1) technological advances over the past 30 years have reduced information asymmetries, so, if the consumer [protection] theory is correct, we should see a decline — not a rise — in occupational licensing (see the discussion of alternatives below); 2) consumer protection cannot explain the wide variation in licensing across states; and 3) consumers do not lobby for occupational licensing, but professional associations do, lending credence to the theory that licensing is motivated more by incumbent protection than by consumer protection.

On the philosophical, I highlight this excerpt:

Twentieth-century champions of liberty such as F.A. Hayek, Milton Friedman, and James M. Buchanan – who were all deeply concerned with individual rights and the rule of law – called for public support (if not provision) of such things as primary education, mosquito control, the earned-income tax credit, or even a minimum basic income. Super-minimalists would, naturally, rely first on voluntary market and reputational mechanisms; second, on legal action by the state to prosecute contract violations and fraud; and only then, as a last resort, on positive state action to protect consumers in cases of information asymmetry. They are careful to avoid policies that encourage incumbent protection or rent-seeking. Their approach involves gradually intrusive levels of enforcement: mandatory bonding or insurance could be a first step, followed by mandatory registration or disclosure, and only in extreme cases would they propose occupational licensing — and only for the most critical occupations.

Turning next to unionization, Liya Palagashvilli writes [emphasis in the original],

In 2023, the contract between UPS and the International Brotherhood of Teamsters, one of the world’s largest private sector unions, was widely described as historic. The agreement delivered large pay increases, expanded benefits, and introduced new work rules governing how labor is scheduled, deployed, and compensated. It was heralded as a turning point for workers in the shipping and logistics sector. For many observers, it appeared to demonstrate that aggressive bargaining could reverse years of stagnant wages and restore labor’s leverage.

Two years later, UPS is in the midst of a sweeping restructuring.

Since that contract, the company has eliminated 48,000 operational jobs, announced plans to cut another 30,000 positions, and closed or consolidated more than 100 facilities. Executives describe the effort as a necessary “right-sizing” of the business, driven by lower package volumes, higher operating costs, and a strategic shift away from less profitable delivery segments.

…

It is true that the 2023 contract delivered meaningful gains. Many UPS workers now earn higher pay and enjoy improved benefits. But that is rarely the end of the story.

The question, then, is not whether the gains are real, but how the trade-offs unfold. Why do headline-grabbing contracts so often coincide with downsizing, automation, and job losses in sectors governed by exclusive, monopoly bargaining arrangements? When short-run wage gains are secured through monopoly bargaining power, where do the adjustments occur—and who ultimately bears the costs?

The evidence suggests that this pattern is not accidental, but a structural feature of monopoly bargaining. Our recent study (with Revana Sharfuddin), Do More Powerful Unions Generate Better Pro-Worker Outcomes?, helps explain why the sequence now unfolding at UPS is not an anomaly. Drawing on 147 studies, the paper shows how monopoly union power tends to shift costs into the future, where they often appear as reduced employment, lower investment, and faster automation—often to the detriment of workers over time. This suggests that improving long-run worker outcomes requires rethinking not worker voice itself, but the monopoly structure through which it is exercised.

She uses the UPS example to draw broader points made in the referenced paper. Continuing she adds,

Research on the decline of Rust Belt manufacturing from 1950 to 2000 finds that powerful unions and frequent labor conflict played a significant role in the region’s employment losses—more so than globalization in the early decades. Wage premiums persisted even as investment slowed and firms gradually shifted operations elsewhere. When labor costs significantly rise without corresponding productivity gains, firms adjust over time. The Rust Belt shows this dynamic unfolding over decades; UPS illustrates it in real time.

The ironic twist is that, as argued in the paper and this piece, it is union monopoly that is at the heart of the problem. Whereas unions theoretically fight a monopolistic power (known as monopsony in this case, a single demander), the union itself poses an anti-market power threat to well-functioning markets.

Lastly, let’s look at a knock-on effect from immigration restrictions. Obviously immigration is a key component of well-functioning labor markets—all the more important in an aging, high-skilled economy like the United States. Less obvious, though, is what the downstream effects are from tampering with immigration flows. David Bier writes,

From 1994 to 2023, immigrants generated roughly $100,000 more in taxes per capita than the average US-born person—about 17 percent more over the entire period. In 2023 alone, immigrants paid $1.3 trillion in taxes while receiving $761 billion in benefits—a net fiscal surplus of over half a trillion dollars in a single year.

Here in the 250th year of Adam Smith’s The Wealth of Nations we are still suffering the effects of people of the same trade conspiring against the public and the conceits of the man of system.2 Will we ever learn? . . .

Substack referenced above:

Richard Hanania writes,

I want people to stop giving younger generations names. Except in articles like this where you deconstruct the concept, there is rarely any reason to use terms like “Generation Z” or (God help us) “Generation Alpha.” For cohort analysis, you can just split people up by the decade they were born and get all of the same benefits without the drawbacks. The names of generations used to mean something, and were applied retroactively. Today, we simply assign young people to arbitrary letter cohorts. This is pathological, and likely has had harmful downstream effects.

A thousand times YES! I've always hated and resisted the stupidity that is labeling generations after an arbitrary and fluid defining of what constitutes them and then drawing (jumping to) conclusions. Generation analysis that depends on these labels is not science; it is hokum used by shallow minds parroting real social science.

That said, Boomers suck, Gen X rulz!!!

II.

Greg Lukianoff writes,

All of this is why I resist the very modern expectation that the best speech is somehow gentle, hygienic, and emotionally pre-approved. No. Free speech is valuable in part because it gives us a way to fight without using fists. Self-government is deadly serious business. Historically, disputes over power, humiliation, injustice, and corruption have often been settled with blood, prison, or both. Speech offers another route: jokes, chants, songs, satire, mockery, sermons, pamphlets, editorials, and sometimes gloriously juvenile acts of public ridicule. It is not always pretty or kind, and only a certain kind of Victorian mind would expect it to be.

The lesson he’s teaching is that being polite isn’t always best. This is important to take to heart especially as it pushes back against what is otherwise a good practice, manners. I preach and attempt to practice the mantra of pleasant honesty—disagreement done with grace.

I don’t think Lukianoff contradicts that mantra, but it does suggest that it can certainly be overdone. Not only is there a risk of communication failure by overly disguising one’s position. There is also the risk of insufficient protest. As Lukianoff makes clear: when voices of opposition are stifled, the oppressed are made to suffer. The upshot eventually is even more violence in rebellion.

To put an exclamation on Lukianoff’s topic, Afroman is everything good about America. And whether you like it or not is my point.

Substacks referenced above: