Marginal effects are why your economic analysis is wrong

Rent control is like burning money AND apartments

This is going to be disjointed and streamsofconscious-y as usual, but here goes

The economic concept of the “marginal” is a bit difficult to explain in part because our word “margin” already has a number of definitions that people are more familiar with. I’m not an economist, and the dictionary definition doesn’t get across everything I want to say about this, but I want to give you an intuitive reason for why there are so many domino effects with any economic policy change.

Let me start with rent control. It is a truism, even most of the internet knows it, that rent control is Bad. While good “in theory” for helping current tenants make their rent payments, it is bad in theory (and practice) for the housing market as it depressed the supply of new housing leading to higher prices in non-controlled apartments. It’s also bad for non-current tenants (such as teens who need to move out of their parents houses soon) because they have to pay the much higher starting price for an apartment, not the reduced rate their parents pay thanks to decades of rent control.

But socialists still want to make rent control work, and still want to defend it saying that rent control isn’t the problem, greedy landlords are. Nevermind that landlords don’t build the buildings, they rent them out, let’s see why rent control makes builders less likely to build.

Some people have suggested that even in a rent-controlled apartment, the landlord is making a profit, just not “as much” as he could be. Thus rent control isn’t making his business unprofitable, and since it isn’t unprofitable there’s no reason for rent control to be decreasing the supply of housing this way. But let’s look at this:

So the landlord is making less profit, that means he has less money to buy a *new* apartment with, and also other investors looking to be landlords know they’ll make less profit and will be less willing to spend their own money on new apartments. This decreases the sale price for new apartment buildings.
This also decreases the likelihood of an empty-nester deciding to fix up their nest, rent it out, and move elsewhere, as their rent income is capped. Again this decreases supply, increases cost.
- But let’s focus on apartment towers for simplicity.
So the price of new apartment buildings is down, that means builders know they can’t make as much money as they want.

Now here’s where a socialist might get heated: the builders *can still make a profit building a new apartment complex*, the landlord *can still make a profit buying that complex and renting it out*. They just make *less* profit thanks to rent control, but if they *choose not to make that profit*, they’re just being spiteful and greedy. Rent control isn’t the problem here because apartments are still profitable!

But here’s the thing: nothing ever happens in a vacuum.

So the price of an apartment building is down because of rent control, but the price of an office building is unchanged, because no rent control.
The builders don’t have infinite money to build with, each building project has to make the choice to build one or the other.
More builders will shift towards office buildings instead of apartment buildings because we’ve reduced the price of apartment buildings through rent control.
Less apartment buildings means less supply of apartments, meaning higher rent if demand stay the same.

So while rent control kept apartments profitable, it still depressed the building of them. On the margin, every builder is making a choice between building an apartment or an office complex (or a supermarket, or a warehouse, or whatever). And reducing the profit you can make off an apartment building reduces the marginal investment into apartments. You don’t have to make renting *unprofitable* to decrease investment, making it *less profitable* is enough.

Rent control increases the cost of housing for everyone except current tenants who never, ever move. This is true even if it doesn’t reduce profitability to zero.

Let’s talk about another, even more controversial application of margins: taxes. Wealth taxes on the rich, raising income taxes on the rich, these have become popular policy proposals for populist parties preaching the perishment of deficits (I really strained on that alliteration and still couldn’t stick the landing). Populists argue that rising taxes *doesn’t* drive off the wealthy at all, because no one would pack up their whole life and move just because of a measly 2% of their income or wealth. This is especially true when the district raising the tax (such as California or New York City) already has such a phenomenal pull on top-dollar jobs. Silicon Valley and Wall Street aren’t just going to move to Austin or Atlanta, are you crazy!?!

But again, we need to think of the *margins*. Think not about the 20-year Silicon Valley veteran, with 2 kids in middle school and a 30-year mortgage, grumbling about an extra 2% of their paycheck every fortnight. Think instead about the fresh grad juggling jobs offers and trying to find the best one. Silicon Valley pays a lot more than Austin, but this grad plugs the incomes into a tax-and-cost-of-living-calculator (plenty of free online) and finds that the extra 2% bumps Silicon Valley down below Austin in after-tax disposable income. The fresh grad takes the Austin job and California loses a high-income resident to tax.

Or think about the Silicon Valley empty-nester with less ties to the city. Their friends may still be here, but their children and families may be in other states. They may be juggling competitive job offers and wondering about where they’d like to retire too. They may want to live in Austin so they can be near their aging parents, and an extra 2% tax on their income might be enough to push them to make the jump and take the job offer in Texas. Again, California loses a high income resident.

How often do these types of anecdotes happen? How much do these anecdotes outweigh the people who are faced with an extra 2% tax, but still move to California or New York anyway? Well, that’s the whole reason we should be looking at the *data* on these things. The data suggests that rising income taxes really do result in marginally less high earners moving or staying in. Whether that outweighs the benefits is another conversation, but there *is still* an effect. And the data is *clear* that wealth taxes cause the wealthy to move *out*. Europe is littered with nations that instituted and the revoked their wealth taxes due to exactly this, in fact wealth taxes often *reduce* total taxation as so many high earners flee for foreign shores.

But again, the argument online ignores data and builds its own anecdotes. It’s often argued that *no one will ever leave California or New York, Wall Street and Silicon Valley have too much pull, no one would pack up their whole life and move out just for a measly 2% tax*. These arguments completely ignore the marginal tax-payer who is already pulled in two directions, that tax-payer may very well move out.

The final example I want to discuss is the most controversial of all: the marginal voter.

I’ll try to keep this generic: when a politician comes out with a policy that is popular in their party but very unpopular in the country at large, partisans often have an excuse up their sleeve:

“No one is going to change their vote over this, anyone who says they will is a liar was already voting for the other party to begin with.”

The partisans make another crucial mistake, they assume every voter is a strict partisan and aren’t taking the marginal voter into account. The marginal voter does exist, even if the strict partisan is too small-minded to comprehend such a person. There are people in this country who, for their own reasons, are torn each election between voting democrat and voting republican. Or voting for democrat and not voting at all. Or voting republican and not voting at all. Or voting third party vs voting for a main party, or writing in Mickey Mouse vs casting an actual vote.

A partisan may not understand these voters, or worse they may actively refuse to understand and simply throw up their hands saying “these people are all just stupid.” But our own small-mindedness does not change the reality of this world.

Many many voters cast their vote while wishing they had other options. And for many of those voters a controversial policy announcement, one beloved by the partisans but hated by most non-partisan voters, could be enough to make them switch sides or not vote at all. They could decide that that’s the last straw, the final thing they just won’t accept. They already didn’t like the candidate for many of the reasons the partisan loved the candidate, but were willing to vote for them anyway for whatever reason. But one more unpopular policy could just be a bridge too far.

So yes, voters *will* change their vote over this. Marginal voters. People the partisan doesn’t want to believe exist because partisans prefer to group the world into “righteous” and “evil” people, with elections being a game of turning out the righteous and discouraging the evil. Or worse, the partisan believes in a tripartide division of “righteous,” “evil,” and “stupid,” with the “stupid” not worth thinking or talking about, except as targets for advertisement demanding they choose “righteous” over “evil.”

But if you look at the data unemotionally, you will see that many many voters are already marginal, and your favorite policy proposal, if sufficiently unpopular, can turn off a hell of a lot of them and turn a winnable race into a lost one. It’s very hard to be objective about politics since it controls every aspect of our lives. But it was hard for our ancestors to be objective about say World War 2, since its outcome would also decide the lives of millions. Yet objective analysis was still required to defeat emotional flailing, so keep that in mind the next time you try to say that politics is too important to let analysts give their input.

Above: pencil-sketch version of the Downfall meme

RIP Bozo, Paul Ehrlich is dead

For those who didn’t know him, Paul Ehrlich was one of the founding fathers of the degrowth movement. A movement which has, since the time of Malthus and beyond, declared that there are Just Too Many People and they’ll all die out if we don’t kill some of them soon.

Oh the modern degrowthers aren’t quite so bloodthirsty, the recent ones say we’ll all have to have less medicine and amenities instead of food and water, but the trajectory is the same. The idea remains that earth has reached a “carrying capacity” for humanity and we all must cut back on our standard of living for good.

Like all degrowthers, Paul Ehrlich was proven wrong very quickly after he wrote his book. In 1968, he predicted that “hundreds of millions” would die of famine in the 1970s and 1980s. Yet despite the continued presence of famines (Ethiopia for instance), reality never measured up to Paul’s lofty predictions.

Nor did we avoid Paul’s predictions because we accepted his preferred interventions. The international community never sterilized as many Indian women as Paul would have liked, but despite India now being the largest nation in history by population, the people there have never been *less* food insecure.

Paul’s predictions came false for the same reason most degrowthers are wrong, he didn’t believe in markets and technology.

It may seem “lucky” that our species has continued to produce ever-more food thanks to timely inventions. Improved agriculture proved Malthus wrong. The Fritz-Haber process destroyed the expected fertilizer shortage. The Green Revolution was already proving Paul wrong while he wrote his book. But this isn’t luck at all, it’s prices.

Paul Ehrlich and Thomas Malthus aren’t the only people in the world who can see that a growing population will need more food. They aren’t the only ones who can predict this. But in a functioning market economy, prices signal a way out of such a dilemma.

When people predict there won’t be enough food, the future price of food rises, even though supply and demand *today* are unchanged. That’s why (even before the recent kerfuffle), the price of oil would rise with every rise in middle-east tensions. The *threat* of there being not enough oil in the future can raise the price of oil today.

But again, just like oil, this is a market signal that encouraged new technology. When the future price of food rises, farmers can expect to make more money, and the people who sell them their farming equipment can likewise expect a share of the profits. All these people are encouraged to invest in future food-increasing technologies, in the hopes of landing on some solution that will make them very wealthy.

And even though most of these people will be hobbyists tinkering in their backyard, never making anything of substance, some people will invent say the McCormick Reaping Machine, greatly increasing farm productivity. Or some people today will perfect modern fracking, greatly increasing oil well productivity.

In either case, it’s true that without any sort of intervention, ever growing demand will outstrip static supply. But markets provide a proven mechanism for signaling the oncoming shortage and preventing it, through the incentivization of new technology.

I’ve seen modern degrowthers admit that Paul was wrong, he was so badly wrong in 1968 that they’d look stupid if they didn’t admit this. But many ascribe his wrongness to his racialized policy proposals, he wanted Earth to have less Indians and Chinese, but thought there were the right amount of Americans, for instance.

But Paul wasn’t wrong because he was a racist. He was wrong because he was wrong. And modern, non-racially-motivated degrowthers are wrong for the exact same reason, and they cannot escape their wrongness by simply divesting themselves of Paul’s racism.

The degrowth movement is fundamentally wrong about incentives, about prices, about predictions, and about technology. Anything that can be predicted can be planned for, as I have long said. And if it can be planned for, prices create a mechanism that reward people for mitigating it. If the price of food is expected to be high, the man who can make a whole lot of it will reap many rewards. Thus the man who invents the *reaper* will reap many rewards (*chuckle*).

Despite how wrong he was, Paul Ehrlich somehow maintained his status as a professional predictor, to the point that I’ve seen newspapers claim he was “early” and not merely “wrong.” But the famines he predicted never happened, and show no sign of happening now. The modern dilemma is how to get people to stop eating until they’re fat, not how to grow enough food to feed them all. And Paul’s wrongness should serve as a wakeup call for every other half-baked predictor with a book.

Don’t predict the future by infinitely extending the present. That’s the way of fools and bozos.

Why European Capital Markets remain fragmented

Someone on twitter posted this clearly AI-generated image of burning money. See how many mistakes you can spot in the Euros. I think the one on the left is even an upside-down Bennie Franklin, although these are all supposed to be Euros.

I blogged a while ago about how Mario Draghi wants Europe’s capital markets to be more unified to spur growth. I outlined how this was not just a matter of putting ink to paper, unifying the capital markets means unifying EU investment laws. And since those laws involve things like property rights, worker’s rights, bankruptcy rights etc, some people are going to win or lose out if everyone suddenly has to have the same investment laws. Workers whose jobs were once guaranteed even during a bankruptcy won’t appreciate that protection being removed. Companies in jurisdictions which don’t guarantee workers’ jobs like that won’t appreciate the added costs and may even close up shop, leading to no jobs for those workers at all.

But I wanted to write more on this topic as it’s a subject that interests me. And rather than last time where I went deep into the weeds outlining how one specific regulation (bankruptcy) differed across the EU’s many member states, this time I’d like to take a more broad approach to the many ways the EU’s capital markets are fragmented. And I’d like to point out that overcoming this fragmentation and unifying the markets will involve some nations winning or losing out, which is why the markets haven’t unified yet, no one wants to be the loser.

First, let’s talk Central Securities Depositories. A Central Securities Depository (CSD) is responsible for making sure that when a buyer and seller trade a financial asset, whether that’s a stock or a bond or what have you, the buyer gets the asset and the seller gets the money. Ensuring that an agreed-upon trade actually *happens* is fundamental to a working financial market. You wouldn’t go to the store if there was a chance you’d pay your money and the cashier would keep your groceries, same thing with financial markets.

The USA has a single CSD. It’s a private company but with heavy government oversight. The EU has dozens of CSDs, structured very similarly. But with dozens of CSDs to work with rather than just one, buying and selling of assets becomes a hassle. “Settlement” is the term used in finance for when the buyer and seller actually exchange money for assets, and there is a small cost associated with settlement to make sure everything is legal and on-the-level. The EU having dozens of CSDs instead of just one raises those settlement costs substantially, that in turn increases friction in the financial markets and decreases investment.

The EU wants to unify their capital markets and have just one single CSD. But will it be the French CSD, thus bringing more jobs to France? Or the Italian CSD, bringing jobs to Italy? Everyone wants their CSD to be the European CSD, and no one wants their country to lose all the high-paying jobs and high-status institutions that a CSD brings with it.

Now let’s talk about IPOs. European financial leaders have bemoaned that America has way more high-valued startups than Europe, and that European startups often flee to America rather than staying home. IPOs have at least something to do with this.

When a startup IPOs, they sell ownership of their company in exchange for investors’ money. This is a powerful way for the startup to get needed cash, and for investors to get in on the ground floor. But while Europe may have almost as much money floating around as America does, that money is in dozens of different national silos split up by regulation. You need to just adhere to 1 set of regulations to get access to all of America’s investment money, you need to adhere to dozens of sets of European regulations to get access to European money. Is it any wonder then that companies IPO in America?

But say you purchase stock in an IPO, only to lose everything because the executives were overpromising and hiding the company’s problems. Can you sue the company to recover your lost investment? Well, it heavily depends on which country you bought the stock in. Countries with strict investor protections won’t enjoy losing those protections if the EU unifies its capital markets. Countries with more lax protections generally want to prevent frivolous lawsuits from investors, who may have been well aware of the risks of a stock but still want to blame the company for their investment going south. Those countries won’t appreciate new investor protections that encourage ever more investor lawsuits.

Then thinking about IPOs, there are a lot more rules about how the shares must be structured. If you are the CEO and founder of a company, you want to IPO to get money, but you may want to keep holding all the power and control over your company. How can you sell off ownership of your company without losing any of the power and control that ownership brings?

One way is to only sell a small portion of your company’s value. You can sell off 10% or 15% or 25% of it to raise money but keep the rest for yourself. This makes you a huge majority shareholder who can never be outvoted in matters of corporate governance.

This structure poses risks to the minority shareholders, both in terms of shareholder rights and in terms of stock value. This structure, where one person owns a large part of the companies, is part of why the Adani companies collapsed so spectacularly in value back in 2023. Adani owned 75% of his companies outright. Some shareholders though this protected them “Adani will never sell, so the value cannot drop.” But actually it didn’t protect them at all, Adani would never sell, but he could also never buy.

The value of the companies wasn’t based on what Adani himself would do, his 75% ownership was locked in and unchanging. Rather the value was based on what a small minority of investors thought, the other 25% owners. If some of those investors started selling, and if no other participants in the market were willing to buy, then the price would collapse *fast* because there’s a lot less buyers and sellers available than what it may seems. Adani and his 75% ownership could not be a buyer or seller, so the market for Adani shares was 1/4 as large as it seemed to be based on the listed value of his companies.

So anyway, minority shareholders can get washed by a majority shareholder keeping all the shares to himself and ignoring their rights. Different EU companies have different rules about how much of a company a majority shareholder can retain, and what the rights of minority shareholders are. Someone is going to lose out if those rules are unified across the EU. Some companies will find their ownership structure is no longer legal, and their majority shareholders will be forced to sell. Or if majority shareholders end up being able to have a *larger* stake, some market watchers will decry that this keeps too much power in the hands of rich majority shareholders, rather than in the hands of the small minority shareholders (aka “the people”).

Then there’s taxes. Say you are a German living in Germany, but you own shares in France’s Francis Frances (FFF), incorporated in the Netherlands. Your shares in FFF pay a dividend to you, which you receive as income.

Now, the Netherlands wants you to pay tax on that income, so they tax your dividend as the money leaves their country. Germany also wants you to pay tax on that income, so they tax your dividend as the money comes into Germany. You pay dividend taxes twice, while if you’d just invested in a Germany company and ignored the Netherlands entirely, you’d have only been taxes once.

But OK, there are EU rules that are supposed to prevent this double-taxation, which should encourage cross-border investment and help unify the capital markets. But those rules are often a mess of red-tape and delays. In theory, either Germany or the Netherlands or both should give you a tax credit to pay you back for what they took out of their dividend. In practice, they may hold your money for years, or require you to jump through arbitrary hoops to get it back.

And so in the end many investors *don’t invest outside their own country,* not because they are small-minded or don’t want to, but because they’d pay twice as much tax as if they just invested in their own country. This again fragments capital markets, but governments are loath to unify the tax code like this because they still want to maintain full sovereignty over their taxes and budgets. And besides, if they unified the tax code, what would the rate of dividend tax be? 30-40%, like in Denmark and France? Or 0%, like in Slovakia and Slovenia? Everyone has arguments on what the rate should be, and no one wants to budge because there are good reasons for each argument.

In the end, I think a lot of online commentators undersell the difficulty of unifying Europe. Unification of the capital markets isn’t held back by small-minded nationalists, or sclerotic bureaucrats, it’s held back by the need for trade-offs which no government wants to make. No government wants to come to the people and say “we’re changing the laws on stocks and taxes, and we’re moving all the CSD jobs across the border.”

Leftists in France would revolt at any fall in capital gains tax, rightists and investors would do likewise for any rise in such tax in the EU’s many many low-tax jurisdictions. Emerging economies like Slovakia and Slovenia would cry foul at having to remove their competitive advantage in taxes to appease Denmark and the developed economies, Slovakia might think the only way they can attract investment is by having lower taxes than the more advanced economies of Europe.

So once again, trade-offs *exist*, and they are the reason Europe still hasn’t unified its capital markets.

Everyone’s a reactionary in their own backyard

I’ve blogged before about Ezra Klein’s abundance agenda. To recap: Ezra Klein asks the following questions:

Why are so many people moving out of blue states and into red states?
Why do red states grow faster than blue states?
Why do blue states have so many problems with homelessness?
Why can’t blue states build train lines and green infrastructure on time and on budget?

Klein concludes that liberals being maligned as “bad on the economy,” is not entirely unfair, and that Blue State policies have in many cases reduced growth and made people’s lives materially worse off. A fixation on bureaucracy is a hamstring to business. For liberals to win, Ezra wants them to not just be “not as bad” as conservatives, but he wants them to embrace a pro-growth mindset and pro-growth policies. These policies would deliver more energy, more housing, and more jobs without ever-increasing government expenditures.

I feel I can conclusively say that Klein has lost the argument, at least in online left-leaning circles. Instead, Bernie Sanders and the anti-growth crowd are winning people over to the idea that we need to *further* restrict businesses, further increase government bureaucracy, and thereby further reduce growth.

Bernie doesn’t want to fix electricity prices by improving generation and transmission like Klein does, he wants a moratorium on building datacenters.

Bernie doesn’t want to fix housing by allowing private companies to build more of it like Klein does, he wants to prevent companies from buying houses.

Bernie doesn’t want to grow the economic pie like Klein does, he wants to shrink and reslice it.

But Bernie wouldn’t have a microphone if people weren’t willing to listen to him, and in online left-leaning circles, Bernie is listened to, not Klein.

I think it’s because fundementally, people are reactionary in their own backyards. It’s all well and good to say we should encourage economic growth. But new businesses compete with old residents for land, water, and electricity. And so old residents complain that new businesses push up prices, and demand that new businesses be stopped completely. This pattern is universal and as old as civilization itself. But the modern American left is now overwhelmingly urban, and urban areas are where new businesses want to build, so the American left is now overwhelmingly anti-business.

I just want to rattle off a few arguments I’ve seen online about building, why these arguments don’t hold water, and why I think Klein will not manage to bring his Abundance Agenda into prominence.

Bernie has recently called for a moratorium on new datacenters, to protect consumers from increased electricity prices. I’ve seen a lot of the online left that considers itself “pro-growth” defend this, on the principle that:

“Data centers produce economic growth, but not for the people who pay the higher electricity prices.”

Because data centers are “different,” it’s Good to ban new ones, it’s not anti-growth at all it’s just anti-“bad”-growth. To which I’d say:

“________ produce economic growth, but not for the people who pay the higher electricity prices.”

Insert factories, electric trains, mass transit, a new University campus, or literally *anything else* and this argument is the same. This isn’t an argument against data centers, it’s an argument against any economic growth whatsoever. When things change there will always be winners and losers. When economies grow, some individuals don’t get the full benefit of that growth. But the idea of the Abundance Agenda was that the losers need to suck it up for the greater good, the price of your house isn’t worth blocking new housing and increasing the homeless rate of the wider city.

When it’s “other people” blocking housing and causing problems, it’s easy to demonize them and say they’re small-minded, wrong-headed, etc. But suddenly when it’s your back yard, and its your electricity bill, then the same people who demonized NIMBYs become NIMBYs themselves.

Of course it’s different, because THOSE OTHER people didn’t have reasonable concerns, they were motivated solely by greed and stupidity. WE however are smart and reasonable, all our concerns are well-thought out. This is how everyone thinks, but a lot of online liberal spaces are incredibly insular, and so don’t realize that their “reasonable” complaints are nothing new, but are just part and parcel of the NIMBY handbook going back decades.

If you say that new homes aren’t needed, and developers are just greedy, then there’s a reasonable amount of the online left who will dogpile you for your stupidity. New homes ARE needed, homelessness proves that there aren’t enough homes for everyone. Building new homes reduces home prices and increasing housing.

But if you say data centers aren’t needed, suddenly you’re on the 60 side of a 60/40 issue. A minority of the online left has no issue with data centers. But there are enough anti-AI people, anti-Silicon Valley people, anti-everyone rich (which therefor means anti-AI because rich people own and are the face of AI companies), and just plain closeted NIMBYs that being against new data centers is a “reasonable” belief in these spaces, where being against new housing wouldn’t be.

A few years ago, Silicon Valley and techies in general were seen as a staunch bastion of liberalism, proof that LIBERALS were actually the economically smart ones and not conservatives. A single election was all it took to change that, with a few techies siding with Trump, and with others not being sufficiently *anti*-Trump, the Tech sector has lost its shine and is now placed by many liberals in the same bin as the steel sector, the automotive sector, or even the oil and gas sector. These are just “bad people” who make money by making the world worse. So if they want AI, some people will reflexively oppose them, and supporting AI comes at a social cost in these spaces, even if you strenuously state how much you oppose the techies and the wider Silicon Valley elite.

With this shift, Silicon Valley can now be railed against in liberal spaces in just the same way as Ford or US Steel. These idiots want to build a new thing? It won’t bring any real jobs, it will dirty up our town, it will raise our prices, and they’re just making money by being evil anyway.

So blocking any new silicon valley thing becomes a socially defensible position, where 4 years ago it wasn’t. This is how coalition politics shake out on a local scale, people don’t weigh up the real-world costs and benefits of a position, they weigh up the *social costs* and the *social benefits* of a position. Supporting AI carries a social cost, opposing it carries a social benefit. That decides how the coalition reacts to AI much more strongly that the real-world economics of the situation.

Because simply put, a data center moratorium is a dumb as a factory moratorium. I, personally, won’t be enriched by a new factory being built. And most modern factories are so automated that they provide vanishingly few direct jobs, they aren’t the assembly lines with workmen that people think about, they’re honestly about as automated as a data center these days.

But my area will benefit from the increased investment, prices will go down as supply of goods increases, and I think other people should be allowed to make money by investing just as I’d like to be allowed to make money by investing myself. I wouldn’t want my dream restaurant to be blocked by NIMBYs who don’t want me bringing traffic to their part of town, so I don’t think it’s right to block other people’s economic activities even though a new data center will bring more electricity demand to me.

Some try to argue that data centers don’t produce anything real, that all AI is a bubble. That still isn’t a reason to block data centers. YOU DO NOT KNOW how the AI race will shake out, nobody does. The point of capitalism is that everyone makes their bets, and we find out later who won. If you want to bet against AI, short NVIDIA, or short Microsoft, Google, and Meta. You can bet against them and make money if you’re right, but you don’t know you’re right, and if the AI boosters are right and you block them from building datacenters, you’re impoverishing us all just like when you block housing, or a new factory, or a new University campus. You’re reducing economic growth because you think you know better but won’t put your money where your mouth is by shorting the stock, instead taking the easy way of blocking the business.

But this has been a rambly post about my opinions. The point is that these are the arguments I’ve seen all over left-leaning online spaces. The arguments are overwhelmingly anti-capitalist, anti-business, and anti-growth. Any sector that is not seen as explicitly left-leaning becomes a socially acceptable target for attack and NIMBY policies. This is antithetical to Klein’s abundance agenda. This is why I thought his agenda would not win in the left-of-center mind space, and I’m even more confident of that prediction now.

Coalitions aren’t build by reasoned argument, they are build by the social costs and benefits of holding a specific position. Techies have been etched with the scarlet letter (T for Trump, natch), and so opposing anything and everything they do has a social cost in left-of-center spaces, regardless of the reasoned arguments that growth is good for the people’s prosperity. Basically all businesses are etched with the scarlet C for conservative, and so opposing business is generally in vogue as well. Klein’s agenda relies on allowing businesses to get their way, to improve all our lives by letting business do business. That isn’t going to fly in the modern left, and I doubt Klein can change it.

Revealed Preference, Revealed Belief

Revealed preference is a very important economic concept because quite simply: talk is cheap. You cannot poll people on what they economically most want, because humans are want to lie about ourselves so that we appear more noble, more virtuous, and so on. You cannot poll people, instead you have to look at what people *do*.

To explain revealed preference in simple terms: actions speak louder than words. People like to claim that they eat healthily, that they care about what they’re putting into their bodies. But many of those very same people fill their shopping cart with junk food at the expense of all else. So while they claim to eat healthily, they are revealed to eat junk food. Their revealed preference is that they prefer the taste of junk food over the benefits of healthy food, but you wouldn’t know it by talking to them.

At a societal level, revealed preference also shows up whenever popular causes force people to put their money where their mouth is. Reducing plastic waste polls really well, and large segments of society claim that they would happily pay more for a biodegradable option rather than pay less for a plastic option. But the data from supermarkets doesn’t bear this out, with nearly all consumers continuing to prefer a cheaper plastic option when available compared to a more expensive biodegradable option.

So when economists try to understand what drives people’s economic activity, whether it’s what they buy, where they work, or how they commute, one cannot rely on what people *say* they do, you must instead find out what they *actually* do. Because the gap between words and actions is massive and we all want to appear more noble than we truly are.

With revealed preference comes the tantalizing, but tricky prospect of studying *revealed belief*. Revealed *preference* is just showing what *actions* people take that are contrary to their statements. But revealed *belief* would be about showing *the reasoning behind those actions*.

To give an example, lets dissect the junk food vs healthy food choice. You might find people who adamantly claim that they eat healthy food *not just* for their health. They may claim that healthy food tastes better, is more convenient, and is even cheaper than junk food. But if that same person is revealed to mostly eat junk food, we can surmise that their stated beliefs about healthy food vs junk food (that it tastes better, is more convenient, and even cheaper) are also wrong.

Such a person who claims to eat healthy food but only eats junk food clearly has significant cognitive dissonance, or is just *lying* in order to seem healthier. It isn’t just that their actions belie their beliefs, rather their *revealed beliefs* are contradictory to their *stated beliefs*. They probably don’t actually believe healthy food is tastier and cheaper, they just say that to try to further the lie that they eat only healthy food. Their real belief is that junk food is tastier and cheaper, that’s why they buy it and eat it.

This *revealed beliefs* thing is tricky though because there could be several confounding factors. Say someone *only states* that they believe healthy food is tastier than junk food. If they are then revealed later to be buying junk food, is it because they actually don’t think healthy food is tastier? Or is it because the cheapness of junk food and the expensiveness of healthy food outweighs taste considerations? There can always be some other reason that people take their actions, outside of their stated reasons.

But with recent events, I do think I’ve seen a mass example of revealed beliefs. And it’s with tariffs.

When Trump was coming on the scene, first in 2016 and again in 2024, economists and political commentators from both sides of the Atlantic argued passionately against his tariffs on every conceivable level. Trump’s tariffs weren’t just a good idea taken too far, rather *any tariffs at all* would harm consumers and depress the American economy to unimaginable levels. Even tariffs against geopolitical foes like China should be avoided, as such tariffs harmed America a lot more than they harmed China, and so ultimately would be counterproductive.

Yet today in 2026 I see *many of those exact same people*, primarily from the European and Canadian parts of the Atlantic, argue passionately that the EU and other nations *must respond in kind* to Trump’s tariffs. That Europe and Canada should raise massive counter-tariffs against Trump, equal or greater in value to whatever he is levying against them, and specifically targeted at America’s major industries. When Trump’s team met EU officials and agreed to a “deal” whereby the US would raise tariffs and the EU would not respond in kind, this was seen as a disaster, a surrender, and a damning indictment.

It seems clear that there is a revealed belief going on here. These transatlantic thinkers claim that tariffs hurt America more than they hurt the tariffed countries, but if that were the case, then counter-tariffs would hurt the EU and Canada more than they’d hurt America. The “solution” to Trump’s trade war would then be to do nothing at all. LET Trump tariff every nation to high heaven, he’s primarily hurting America after all, and don’t respond in kind under any circumstances. Don’t tariff American products, don’t go after American businesses, don’t do anything differently than you’d normally do, because any such anti-trade measure would harm your own countries more than it harms America.

But the revealed belief here is that Trump’s tariffs *do* harm other countries more than they harm America, because counter-tariffs and other trade barriers are being called upon, on the assumption that they will harm America more than they’ll harm other nations. It seems that many transatlantic thinkers are revealing that all the rhetoric around tariffs was a Noble Lie. All the claims about how tariffs are ineffective and self-destructive were lies meant to dissuade the public from supporting tariffs in the first place. But now that the tariffs are out of the bag, the Noble Lie has no more use, and the Awful Truth about tariffs, that they are harmful to one’s own nation, but are effective at countering trade imbalances, has come to the fore.

Noble Lies such as this beclown the person saying the lie. They reveal the liar to be a hypocrite and untrustworthy. If you found that the person who goes on and on about healthy food was actually eating nothing but junk food, you’d probably never again trust their recommendations to you about healthy eating. And likewise, a lot of poli/econ commentators have lost a lot of credibility in my eyes by going back on their pre-Trump claims about tariffs. By revealing that they never believed those things in the first place, they reveal (to me at least) that I should never trust them again going forward.

“GDP is bullshit”

Transcription: “GDP is also a bullshit metric. If I buy $100 of flouride, add water, buy some bottles, repackage it as Crest Mouthwash, and sell it for $15/bottle, I’ve generated like $1500 of GDP. That’s not really adding value, that’s enriching shareholders at the cost of people who don’t realize they’re being robbed.”

Response: my guy, that’s literally the definition of adding value.

Now to be fair, this comment was downvoted when I found it, meaning more people disagreed than agreed, but still, this sentiment about “adding value” is something I see all over the internet in anti-capitalist spaces. People will literally explain adding value, then say something adds absolutely no value.

Even a marxist would agree that the labor required to add water, buy bottles, and package something adds value to the product. And a capitalist would say that if this poster successfully created mouthwash that people would buy for $15/bottle, then they’ve added value to that $100 of fluoride. And if this poster actually did this experiment, and made money off of it, they could quickly start a company and become rich.

But they can’t do this, because it’s actually quite difficult to create good, quality fluoridated mouthwash, and they have no skills besides complaining on the Internet.

Still, they have explicitly defined a process in which a low-cost good is turned into a highly desirable product, a process which both a labor-obsessed marxist and a capital-obsessed capitalist would say has “added value” to that good, and have said that it isn’t “real” value. They extend this to say that GDP is bullshit.

“GDP-is-bullshit”ism has seemed to take hold in some spaces. I can see why, people’s personal situations don’t always track the wider economy, so the economy as a whole (measured by GDP) can go up massively while some people or some sectors are struggling. It may not matter to you than millions of people have more time, money, and leisure because you personally lost your job as say a factory worker. In this case GDP can seem like a false measurement because people have a hard time looking outside themselves.

But in another way, it is true that some politicians laser-focus on GDP to the expense of all else. It is a basic truism that when a metric becomes a target, it ceases to be a useful metric. GDP is a *metric* of economic health, but once voters realized this they started grading their politicians on the GDP measurements they saw in the news. That in turn made GDP into a *target* for politicians to point at and say “look, I’m making things better!”

In that case, GDP can go up (because it’s being targeted) while people’s actual situation is going down. This is exactly what happened during the tail end of the Trudeau administration in Canada, Trudeau focused solely on rising GDP as his target, but GDP-per-capita went down. People’s living situations in Canada were not really improved at all despite Trudeau raising the national GDP.

Still, GDP is a good measure of what it measures: productivity. And what is productivity? It is the turning of low-value things into high value things.

The above poster blithely described it as “bullshit,” but think of this: everything we as a society need and want requires someone else to use their time, money and effort to make it for us. If there isn’t enough food for all of us, our lives are measurably worse off. Increasing the production of food requires the labor of a farmer, requires the cultivation of land, requires the creation of irrigation and of transport infrastructure and warehouses for the food and inspections to ensure the food is clean. The creation of all those things is captured in GDP.

GDP directly captures when something of value is created, whether it’s food, or irrigation to make the food, or warehouses to store the food, or even Crest Mouthwash made from raw fluoride. YOU may not think the thing created has value, maybe you don’t wash your mouth. But the beauty of capitalism is that OTHER people get to decide for THEMSELVES what they think is valuable, and if they want mouthwash, they’ll happily pay for it, and thus creating new mouthwash to sell to those people raises GDP.

This is a small post, it’s mostly meant to dunk on a single Internet commentator, and by extension dunk on an entire subculture of “GDP-is-bullshit”ists. But I want to make clear: GDP is NOT bullshit. It is a measure of goods and services created. Those goods and services have VALUE, maybe not to you, but to SOMEONE ELSE. If they didn’t have value to someone else, they wouldn’t raise GDP. And so complaining that some people’s goods and services add value, even though you don’t think they’re useful, is like complaining that other people are having fun with a game you don’t like.

The Great Disruption Part 2: A laundry list of failed predictions

I wrote earlier about The Great Disruption by Paul Gilding, a book which claimed to be an unerringly scientific prediction of the future of our climate’s future, but was in reality a pseudo-religious call to action in favor of degrowth ideology, with every counter-argument ignored without even a retort. I’ve meant to write for a while but all I have is a laundry list of grievances against the book. This is the streams of my consciousness, so let’s go.

The author understands a tiny bit of economics, and understands that technology does not destroy jobs but rather lowers costs. The powered loom didn’t destroy jobs in the clothing industry, more people work in this industry today than before it’s invention. Rather the powered loom lowered the price of clothes such that all of us can afford many more pairs of clothes than could our ancestors. Lower prices, more efficiency, more consumption.

But he considered our human drive for technology to be a “pathology” because “it doesn’t work” (in what way?). He seems to claim that our lives are not tangibly better than our predecessors, we just have “more stuff.” I strongly disagree, I live a life of much more comfort an ease than did my parents on the 20th century, and I can even point towards tangible benefits since he wrote his book in 2008. The ability to call my family no matter where either of us are has greatly eased my mind when my family are taking a long cross-country trip. I no longer worry that they may be stuck or stranded without help, or that they’ve taken a wrong turn and gotten lost. Both of those are impossible as long as smart phones exist.

Furthermore, Paul believes that we reached the limits of resource extraction in *2005*, and that the 2008 crash was proof of this. This is again laughable, US oil production has nearly tripled since 2005, China has increased its demand for coal and iron, even food production has continued to increase. There is no way in hell to defend the idea that 2005 was the point where we reached maximum resource extraction, we’ve easily breached that mark every year since 2010. In 2008 when he wrote his book, the global economy was in a recession, and his thesis may have been believable. But with 20 years of growth since then, his claim is clearly bunk.

He claims that he predicted the 2008 crash by looking at resource constraints and ecological changes. Desertification, bleaching of corals, global warming, these were all signs that humanity was reaching the limits of growth and our economy would eventually crash.

But since 2020 our economy has boomed, even if the bottom 99% haven’t felt it. So question for Paul: have those ecological changes stopped? Because if desertification, coral bleaching, and global warming all predict an economic crash, then the only way to account for our economy *not* crashing is to say that those things are no longer happening. Or perhaps Paul’s prediction was bunk and ecological changes *do not* predict economic ones.

Paul also falls into what I call the Paradox of the Evil Billionaire. On the one hand, Paul claims that we all know how billionaires don’t have a shred of patriotism in their bodies, and would gladly sell out their own countrymen to make a quick buck. On the other hand, Paul and others claim that Foreign Billionaires will buy up American farms and send all the food back to their home countries, even though they’d make much more money by continuing to sell that food in America. Note that American food prices are *much much much higher* than in places like China or India, food is worth a lot more here than it is there.

So why are these Evil Billionaires, who *only* care about making more money and *definitely* will sell out their own countrymen for a buck, suddenly being secret patriots by taking a loss in order to send American food back to their home countries instead of selling it for a profit in America?

It’s because Paul (and others) believe in conspiracies more than facts, and the conspiracy that “foreigners are out to get us” is a much more powerful one than “all rich folks are amoral bastards.”

So Paul has this fantasy that in the future, countries will be forced to enact harsh laws on who can own farmland, because there won’t be enough food to go around and people will be sending food to their homelands instead of selling it for the highest price. In reality, farm production has continued to increase and food is still affordable for most Americans. Egg prices for one have crashed in 2025, making them much more affordable than last year.

Paul brashly contends that “2008 was the year that growth stopped.” LOL. LMAO even.

Paul contends that 2008 was only the beginning of a sustained economic downturn and global emergency which would last decades. Here’s some of his predictions, and the results of the past 20 years:

Food demand will increase but agricultural output will decrease, causing skyrocketing food prices. Hasn’t happened
Fresh water, fisheries, and arable land will run out leading to sky-high prices for food and water. Nope, hasn’t happened.
“Sustained and rapid increases in oil prices as peak oil is breached.” LMAO, no.
He does claim that “there could be” a global pandemic which shuts down air travel, so he weasels his way into one correct prediction. Still, the pandemic is over and air travel is back, so it didn’t lead to any lasting effects like he claimed.
He also puts the global pandemic right alongside “terrorists attacks wiping out a major city,” so I think clearly he was just making shit up that sounded scary. Again no, terrorists haven’t wiped out any major cities.
He claims there will be a “dramatic drop in global [stock] markets and a tightening of capital supply.” Again, no.

So basically all of his predictions are bad. He’s a degrowther, after all.

He essentially predicted a mass global crisis because we’d run out of oil and coal. He wasn’t really an environmentalist either, he didn’t think renewables could ever bridge the gap. Rather he just wanted the economy to be *smaller*, and so he created a bunch of fanciful predictions that proved it would become smaller in the future. He was wrong of course, the global economy has never been larger.

Here are also some of the changes he thinks society must make, and WILL make, to stave off the catastrophe, along with my commentary:

He thinks the societies that will best cope with the catastrophe will be the ones that start to “ration electricity.” In reality, rationing electricity is a sign that your society is *failing*, not succeeding, at coping with the present.
He wants to “erect a wind turbine and solar plant in every town.” This is just stupid on top of everything else. Not every town is suitable for wind or solar power, and besides power generation is done best using *economies of scale*, where lots of power is generated all in one place and then distributed to the markets far away. His idea would be inefficient and bad, so of course it hasn’t happened.
He wants to “ration the use of ICE cars,” “ground 1/2 of all aircraft,” “shop less, live more.” No, no, and no. And what does he mean by “live more?” People buy things they want because they think it will improve their lives. When he says “live more” he just comes across as a boomer complaining that society is too fast-paced for his old back to handle, and that he doesn’t like how women wear so much makeup these days. Most of his complaints come across as cultural rather than economic, and these are severely *conservative* cultural complaints at that.
He thinks we must (and therefore WILL) stop using fossil fuels by 2024. Hasn’t happened.
He thinks that as of 2008 there is “no significant future for coal or oil, short of some surprising breakthrough technology.” Was fracking really all that surprising?
“The market hasn’t priced in that all coal and oil companies will be worthless.” LMAO, nope. I’m sure he’s moved the goal-posts by now, but these companies have continued chugging along regardless.

Paul also says “I talk to people all the time who understand this *common sense*, they know that despite so-called “experts” saying their lives are improved these past few decades, they don’t feel any better off.” He has just discovered nostalgia, and thinks he’s the only one who understands. Again, he is fundamentally a cultural conservative, things were better in the “good old days.”

Anyway these are just my thoughts on Paul’s book. It really is not worth a read as anything other than blog fodder. It is badly written, badly argued, and hasn’t stood the test of time. I’m glad I didn’t pay for it, I got it at the library instead. But they should really discard it and put something better on their shelves.

EDIT: one final aside: when I posted this post, WordPress suggested I add additional tags to increase it’s reach. They suggested “faith” and “Jesus” as appropriate tags. Why?

Amazon will not be part of the “Resistance”

I wanted to write this half a year ago, but with Trump’s tariffs back in the news, I figured I’d give it another go.

When Trump first enacted his so-called “Liberation Day” tariffs, many experts (mostly partisan experts though) predicted the apocalypse. It was bad enough that many news sources started educated their readers on the Smoot-Hawley tariffs, which anyone who watched Ferris Bueler’s Day Off will know were the tariffs enacted during the Great Depression. These tariffs have been blamed for contributing to the depth and intensity of the Great Depression, and naturally partisans wanted voters to make that connection to Trump’s Tariffs.

I myself also started watching out. I live in a major city with a major train hub, and as I commute past it I like to look out and check how many boxcars are being loaded and unloaded by trains. Earlier this year it seemed the tariffs might have actually been apocalyptic, the train yard was empty on some days. But despite partisans stoking fears of COVID-level shortages, tariffs have seemed to have a marginal effect on the US economy. Growth has remained strong in 2025, with the US well ahead of pretty much every advanced economy on earth in terms of growth rate. The EU may be a massive free trade area, and the USA may have become an increasingly protectionist autarky throughout the Trump-Biden years, but that hasn’t been enough to make the EU more competitive or the US less.

It’s likely because the tariffs are indeed marginal. Tariffs are a tax on imports, but like any other tax they can be avoided and mitigated by changing behaviors. Companies have shifted to sourcing their products from areas with lower tariffs, changing their production line to build more things in America, or in some cases are simply accepting lower profits and not passing the cost of the tariffs onto consumers because they need to maintain market share. In other cases the tariffs *are* leading to a rise in prices, but consumers still have the chance to substitute tariffed goods for other goods or just stop buying alltogether.

The tariffs have likely contributed to inflation remaining well-above target, and have likely made certain consumers much poorer without realizing it (as they purchase tariffed products and can’t find substitutes), but the tariffs have not had nearly the destructive effects that I and many others believed they would.

But the biggest problem for Trump’s detractors is highlighting the adverse effects of Trump’s tariffs. Remember that the American people seem to broadly like tariffs: Biden expanded Trump’s tariffs, Bernie surged in the Democratic Party by denouncing Clinton’s pro-corporate policies (which were usually also pro-trade policies) and Trump has completely remade the GOP into a protectionist party. America’s two parties are dominated by protectionists, and many free-trade Democrats have been furious that 2028 hopefuls have mostly denounced Trump’s tariffs as being “too high, too broad,” rather than hitting out that “tariffs are just plain bad and shouldn’t be used.”

It seems that Americans really do like tariffs, so trying to attack Trump for his tariff policy doesn’t hit as well as it “should.” This is a big problem for free-trade Democrats because to them it’s patently obvious that Trump’s tariffs have led to higher inflation and lower growth, but Americans aren’t necessarily buying it.

Enter Amazon. As the foremost distributor of direct-to-consumer goods, Amazon is acutely sensitive to trade policy. Any raise in tariffs will cause a raise in prices for imported goods, causing consumers to purchase less and that hurts Amazon’s bottom line. Amazon has every reason to lobby as strongly as possible *against* tariffs, and as a consumer-facing company that everyone knows, free-trade Democrats thought they’d found their edge.

The idea went like this: what if Amazon *shows consumers* how much higher their prices are because of tariffs? What if every time a consumer buys a 100$ imported product, Amazon shows its base cost but then hits them with a “+15$ because of tariffs” fee at the checkout? Consumers would be furious at these hidden costs, but their fury would be directed at Trump and his tariffs. The tariffs would become unpopular, Trump would become unpopular, the free-trade Democrats and Amazon would be the big winners in 2026 and 2028 when (hopefully) less protectionist Democrats would be swept into power on a wave of consumer backlash.

It all seemed so perfect, leaked reports even claimed that Amazon was openly considering this idea.

But then Amazon made an official statement that they would not under any condition display tariff prices. Their statement said that while such a move was considered, it was never approved, which isn’t unusual as companies are constantly considering many thousands of moves that are never approved. Furthermore Amazon spokesmen pointed out that the company had never shown consumers the cost of tariffs during the Biden administration, even though Biden had hiked tariffs to their highest point since Jimmy Carter.

Amazon felt the move would damage its own brand, worsen its political position, and bring basically no benefit. If Amazon was an arm of the Democratic party, then maybe it would make sense. But as a profit-maximizing entity, pissing off your customers with hidden fees *and* wading into the political arena with a nakedly partisan endorsement of the opposition (by blaming the current administration for high prices) just doesn’t make sense.

So Amazon will *not* be part of the Anti-Trump Resistance. As Michael Jordan once said, Republicans buy sneakers too, and most profit-maximizing companies find it best to *not* piss off half the country by taking overtly partisan stances. They may try to take political stances, but they will always present themselves as non-partisan to consumers, because they don’t want to lose business from angry voters. And directly blaming Trump’s Tariffs for high Amazon prices, after 4 years of never doing such for Biden’s Tariffs would indeed be an overtly partisan act, because it’s an attempt to blame Republicans for high prices and push consumers towards supporting the Democrats.

This then made Amazon a target of April’s 2-minute-hate in the eyes of free-trade democrats. These Democrats don’t see “showing the cost of tariffs” as partisan at all (because people always believe their own beliefs are just “the obvious truth,” and not a partisan stance). Rather, when Amazon *refused* to show the cost of tariffs, it was blamed for kowtowing to a “fascist” government, comparisons to 1930s German companies were ever-present, and Bezos himself was derided as a coward and a collaborator, rather than the profit-maximizing businessman that he is.

The simple fact is that obviously no multinational company is going to want to lose half its customers, so no multinational company is going to make their storefront an advertisement for the Democrats and against the Republicans. I’m sure Amazon is lobbying the administration on reducing tariffs, it was widely reported that tech giants did this exact same lobbying last time Trump was in power. But just because Amazon doesn’t like tariffs doesn’t mean they want to torch their credibility with Republican consumers. Because Republican consumers might angrily ask why Amazon is sourcing products from overseas (and showing people a tariff) rather than sourcing *American* products like Trump (and Joe Biden, and Bernie Sanders) would prefer they be doing.

Anyway I’ve found a dozen ways to restate this one point: Amazon is not going to become part of the Resistance, it will not show consumers what the price of Trump’s tariffs are in part because that would be a partisan move that would invite blowback and boycotts from Republicans: “why isn’t Amazon buying American instead, and why didn’t Amazon do this stunt during the Biden administration?”

But I wanted to note one additional reason Amazon won’t be showing consumers the price of tariffs, and it’s isn’t because of what Amazon wants, it’s because of what their suppliers want.

The relationship between Amazon and its legion of medium-sized suppliers is a tricky one. On the one hand some random clothing store like Shoes&Shirts LLC (fake name) probably likes that Amazon gives them a massive amount of customers to sell to. Amazon’s global consumer base makes it easier to scale up by just having a single contract with Amazon, rather than having to negotiate multiple deals with brick-and-mortar stores in every single country.

On the other hand, Amazon’s dominance of the market gives them a lot of power over their suppliers, they can negotiate a large cut of the proceeds, demand suppliers abide by Amazons rules and regulations, and overall an agreement with Amazon can be like a pair of golden handcuffs. If you’ve seen how indie developers complain about Steam, you’ll understand how small and medium suppliers complain about Amazon.

The situation can be even worse, since Amazon competes directly with its own suppliers. Say Shirts&Shoes LLC has a new style of Comfy Sweater that is flying off the digital shelves. Amazon can see this, and see that another company makes a nearly identical sweater for a fraction of the cost. Amazon can then source their own Comfy Sweater from this other company and try to undercut Shirts&Shoes LLC on price, fulfilling the orders themselves and taking Shirts&Shoes’s business out from under them.

Amazon suppliers are therefore very very cautious with what information they give to Amazon. They do *not* want to tell Amazon the price it costs them to make something, they only want to reveal the price they’re selling it for. Giving away the price to make something makes it even easier for Amazon to undercut them.

If Shirts&Shoes’s sweater is selling for 100$, and you can source it for 60$, you still don’t know for sure if you can undercut them. Maybe Amazon lists their own sweater for 75$, but Shirts&Shoes responds by cutting the price down to 50$ because they can actually make it for even less than that. Amazon would be putting a lot of money into a failed attempt at capturing new market share, Shirts&Shoes would be furious at the attempted betrayal, AND both would now be making less money because the shirt is selling for less so both sides get less of a cut. The only winners would be the consumers.

So Amazon’s suppliers DO NOT want to give Amazon any information more than they need to. And that by the way includes the price of tariffs.

When Shirts&Shoes brings a shirt into America, customs charges them a tariff based on the declared value of the shirt. Shirts&Shoes then has to set the sale price at a level high enough to cover not only the cost of the shirt, but also the cost of the tariff. If the value of the shirt is 20$ and there’s a 100% tariff, then they can’t sell the shirt for less than 40$ without taking a lose.

But they may be selling the shirt for 100$ anyway and taking 60$ of profit. Now, the shirt’s price may have gone up because there used to be no tariff and now there’s a 100% tariff. So the free-trade Democrats would love if the shirt was listed on Amazon for a price of 80$, but had an extra 20$ “tariff tax” at the checkout that would be directly blamed on Donald Trump.

But Shirts&Shoes doesn’t want to reveal that the base cost of their shirt is 20$ with a 20$ tariff on top. Because at that point if Amazon can source the same shirt for 35$, then they can undercut Shirts&Shoes and steal their business, and both sides know it. Instead, Shirts&Shoes would like the costs going into the shirt to be as obfuscated as possible.

They’d probably like their customers to think that it costs them 90$ to make a shirt and they’re selling it for 100$, because that way they don’t seem to be making “too” much profit. If customers knew Shirts&Shoes had such a high mark-up, customers might think they were getting ripped off, and would make nasty posts on the internet to complain about Shirts&Shoes’s prices. This could harm Shirts&Shoes’s brand.

And they’d probably like Amazon to think that it costs them 5$ to make a shirt and they’re selling it for 100$. Because they don’t want Amazon to attempt to undercut them and either steal their business or initiate a price war which harms their profit margins.

So ambiguity is entirely in Shirts&Shoes’s interests, and so they don’t want to reveal any tariff information to Amazon. That in turn means that even if Amazon wanted to, it wouldn’t be able to reveal tariff information on any third party products, only on products it sources itself. That could backfire if Amazon even decided to reveal tariff prices, as *only Amazon’s own goods would show the tariff as a hidden cost*. Buy a good sourced by Shirts&Shoes? What You See Is What You Get. Buy a good sourced by Amazon? You have no idea WHAT the real price will be.

To summarize, Amazon (and other profit-seeking companies) will NOT be part of the resistance, as they do not want to damage their brand in the eyes of partisans. Likewise, it’s not even a simple thing for Amazon to JOIN the resistance and reveal to customers the true price of tariffs. They’d be pissing off their own customers by making customers feel like the price is a bait-and-switch, they’d be demanding information from their suppliers that the suppliers don’t want to reveal, and if the suppliers DON’T reveal that information, then only Amazon-sourced products would show a tariff anyway, meaning Amazon gets all of the blowback for “high prices” while their suppliers can claim “Same Low Prices As Ever,” even if prices everywhere are actually rising.

Partisans think everyone should join their fight, and that the only reason not to is base cowardice. They’re usually wrong.

What exactly is Ezra Klein’s “Abundance Agenda?”

Answer: it’s neoliberalism. But if that answer fills you with disgust, fear, or just confusion, please read on as I promise the explanation will be worth it.

In the wake of the 2024 election, Ezra Klein and buddies published a book called “Abundance,” and in talks and interviews they have been trying to sell it as a way forward for the defeated Democrats. The key question of the book is this: if liberal policies are so great, why do blue states have the most homelessness? Why do they have the highest overruns on their infrastructure projects? Why do they have the most difficulty building renewable energy?

These are difficult questions because they cut at the heart of the liberal/progressive promise for America. There was a half-century long political touchstone (within the American media sphere) that the Democrats were who you voted for if you cared about social issues, but you voted Republican if you cared about economics. Never mind that this misses the many socially conservative/economically re-distributive voters who saw things the opposite way, this “vote Republican for the economy” belief was one that Democrats wanted to push back on.

For my entire adult life, Democrats have been making the argument that no, “Republicans are actually bad for the economy, vote Democrat if you care about economics.” In the wake of the Financial Crisis, this message resonated, but after 4 years of inflation it seems voters no longer bought it.

Worse still, Ezra Klein’s “Abundance Agenda” argues that *you can’t blame voters for coming to this conclusion*. Blue states may be the *richest states*, but it is the Red states that are *growing*. They are building housing, they are building infrastructure, and in the next census it is predicted that Blue States (California and New York especially) will lose electoral votes to Red states (such as Florida and Texas). People are literally voting with their feet, moving from Blue states to Red states when every part of the liberal mindshare says that’s insane, and that all migration should be happening in the *other direction*. The only explanation is that people believe they’ll have higher quality of life in these Red states than what they have in the Blue states, how can that be?

Ezra Klein’s answer is that Democrats haven’t lived up to their economic promise, and they need to embrace Abundance if they are going to do so.

Much of his suggestions are things I myself have blogged about, land use should be deregulated, housing and energy should be made easier to build, and the free market should at times be deferred to to bring down prices for consumers. Government bureaucrats can’t run markets.

In this sense, Ezra Klein is making a (small) break with Bidenism. Tariffs on solar panels make it more expensive to build clean energy, tariffs on lumber make it more expensive to build houses.

When it’s more expensive to build things, then the supply is lower. When the supply is lower, the price is higher. If we want consumers to enjoy low prices, we should encourage higher supply by making it less expensive to build, this is the core of the Abundance Agenda. “Build what?” you ask? Everything. Housing needs houses to be built, energy needs power plants to be built, jobs need companies and factories to be built, and the Abundance Agenda encourages policies that make it cheaper to build all those things.

In essence, the Abundance Agenda is deregulation.

See, Biden is actually a pre-Carter Democrat, recall that he was elected to the Senate in 1972. The New Deal consensus at that time included a lot of skepticism of markets, and a certain degree of autarky in which the government should step in to ensure the economy is making the things it “needs” to make. So if car companies are struggling, we need to give them subsidies or protect them with tariffs, because cars are so important. Same with solar panels, microchips, and steel.

Biden’s economic record is actually reminding me a lot of Jean Jacque Servan-Schreiber, who you may remember from previous posts. Like JJSS, Biden seemed to be trying to use government power to “direct” the economy, and my criticisms of JJSS apply just as well here: governments can’t predict the future and so don’t actually know what the best investments are. Companies can’t predict either, but at least companies have price signals and the profit motive directing them towards the best bets, governments are immune from both by their sovereign nature.

JJSS wanted the Europe of the 1960s to invest heavily in supersonic planes, but we now know that those bets were quite wasteful as the fruits of their labor (Concorde) were outcompeted by the private sector (Boeing) who had already abandoned supersonic travel entirely. Will Biden’s chip foundries built in Arizona stand the test of time? Or will they be like Concorde, an unprofitable venture held up solely by the demands of national prestige, until such time as prestige becomes to expensive to maintain?

While Ezra still sees a need for government “leadership” (which I don’t, but more on that later), he is more comfortable in the post-Carter consensus, stating that governments should cut back the regulations which prevent companies from giving us cheap goods and services. Housing is expensive because governments don’t let us build houses. Energy and infrastructure are expensive because solar farms and railroads get blocked by environmental review. Even healthcare and education are burdened by over-regulation which prevents competition and protects the current megacorporations that dominate the market.

So Ezra Klein could be most accurately described as a “left-capitalist.” He is solidly on the left with regards to all social and moral issues, but does not have the skepticism of profit and corporations that Bernie and Biden do. In other words, he’s a neoliberal.

Now that is a *very* loaded term, because my time around the Internet has shown me that many people define neoliberalism as “anything I don’t like.” But philosophically neoliberalism *was* a thing, and in many ways did represent a real ideology. It was a break with the New Deal consensus on governments directing the economy, while still accepting a government role in social welfare and poverty reduction. Carter and Clinton both governed this way, and so are usually considered “neoliberals” by people who don’t consider it a slur.

Ezra Klein is therefore arguing that this “neoliberalism” should be part of the way forward for Democrats and America at large. California and New York should take more cues from Texas and Florida, at least economically. But to do so means touching a lot of third rails within the liberal coalition:

To deregulate housing, you need to remove the ability of local residents to block new housing. This can easily be reframed as “removing local control” and “overturning democracy” if the neighborhood votes against a new house and you let it be built anyway. This deference to localism is hard to overcome politically when it’s framed in terms of gentrification and “Residents vs Corporate Developers”
To deregulate energy and infrastructure, you need to end a lot of environmental regulations. You need to get acceptance from the coalition that sometimes we’ll have to cut down a meadow to build a solar farm, or pave over a creek to build a railroad. And if there’s a species of animal or plant that *only lives* in that meadow or creek, then you have to get buy-in that biodiversity is less important that fighting climate change.
Energy and infrastructure also touch on “local control” and activist veto. Ezra Klein wants to make it easier for companies to get environmental lawsuits dismissed, and would likely applaud the recent supreme court decision on NEPA. But in any fight between “corporations” and “climate activists,” the coalition is inclined to side with the activists, and that will be hard to overcome
To deregulate schools and childcare, you need to remove laws that were put there in the name of “safety.” Many states have very low caps on child-to-adult ratio in daycares, as low as 1:3, as well regulations that the workers must have a degree in childcare and training in a wide variety of emergency medical scenarios. When a certain democrat suggested raising the child-to-adult ratio to 1:4 in one city, I saw comments that “this change will kill babies,” which is a thought-terminating incitement intended to protect regulations by force of emotion, rather than reason. If 1:4 will kill babies, then isn’t 1:3 already killing babies, since we could instead be having a 1:2 ratio? Or 1:1? At some point you have to weigh up the costs and benefits, even in cases of life and death.
And to deregulate any of these things, you need to overcome the cries that “every regulation is written in blood,” ie no deregulation should ever happen. This is yet another thought-terminating cliche but it’s one that has a lot of power on the left-side of the political spectrum.

So will Abundance succeed? Will Ezra Klein and the new “Abundance Caucus” make New York and California as affordable as Texas and Florida? Will they reverse the migration trends and made New York lose so many of its electoral votes? I don’t know, but I have more to say on this later. Now that I’ve defined what abundance is, I’d like my next post to discuss what it isn’t. Stay tuned…

Protectionism wears the skin of health and safety

Trump is an unusual figure among the world’s politicians. It is not that he is a nativist and a protectionist, but that he is open and direct about his nativist and protectionist beliefs. Trump says that foreign companies are harming American companies by undercutting on price, and that foreigners are stealing American jobs by working in America.

There are many reasons to attack these beliefs and to tell Trump he’s wrong. Here are some reasons give on the left or the right, maybe you agree with one of them:

If foreign companies sell for cheaper, than that means blocking foreign goods raises prices. And raising prices (aka inflation) directly harms all American consumers way worse than foreign goods harm a single American company
“Oh your company can’t compete? Sounds like a skill issue. Your company deserves to go bankrupt, free market in action.”
Foreigners do jobs Americans don’t want to do
It’s unethical to prevent foreigners from moving to America to look for a better life
“Oh you can’t compete against foreign workers? Sounds like a skill issue. You deserve to go bankrupt, free market in action.”
Trade barriers will wreck the economy by driving up prices, and any claims of fairness are necessarily secondary to this single overriding truth: trade barriers are bad for the economy

Politicians in and out of America have made each of these arguments in turn as they argue against Trumps new tariffs. But the single-minded opposition to tariffs hides something deeper: almost every politician globally throws up trade barriers just like Trump, but they have different excuses.

“Those goods contain chemicals that harm our health”
“Those goods contain chemicals that harm our environment”
“For national security or data privacy, we cannot allow foreigners to hold our market or buy our data”
And the old reliable: “those goods and services don’t comply with our regulations.”

This last one is pernicious because of how vapid and all-encompassing it is. It only works because people have a knee-jerk reaction against deregulation, but as I have pointed out, there’s a lot of anti-consumer regulation out there raising our prices and harming our economies. Regulation doesn’t actually mean “good,” but enough people believe it does that politicians can hide all their protectionist bullshit behind an aegis of “regulations.”

I say all this because I’m bashing the EU again today. A former EU minister of parliament put out a post which demonstrates a lot of this BS EU protectionism. I had already known that the EU uses “regulation” to protect its market from foreign goods, what is commonly termed “protectionism.” What I did not know is how much EU countries use this to protect their national markets from the single market itself.

The whole idea of the single market is free trade and free movement. If a company is allowed to sell goods in one country, it should be allowed to sell goods in all of them. If a person is allowed to work in one country, they should be allowed to work in all of them. This reduces barriers, brings countries closer together, and is much more efficient economically than a world of barriers and tariffs. It should bring everyone prosperity.

But the countries of the single market still want to “protect” their national markets and their national workers, just like Trump does. But unlike Trump, EU countries are legally forbidden from erecting tariffs. So they use health, safety, and regulation instead to do their dirty work. Here’s some examples from the article:

Denmark claiming that adding vitamins and nutrients to breakfast cereal “could be toxic,” with absolutely no justification whatsoever. The cereals are consumed EU-wide, and one would think the burden of proof would be on the accuser in that case. But no, a baseless “could be toxic” claim is enough to ban a product in Denmark unless the company making it is willing to go through a long court battle against a national government.
Spain and Italy trying to force foreign chocolate (consumed in every EU state, legally chocolate by EU law) to be explicitly marketed as “not true chocolate” even though every law says its chocolate.
France forcing Dutch biodiesel to comply with expensive testing that is waived for French biodiesel.
Germany forcing foreign professionals to undergo expensive “equivalence checks” before allowing them to work in the country. This is just more BS occupational licensing by the way, a horse-groomer shouldn’t need a license to begin with let alone an “equivalence check” to make sure their Italian license is valid in Germany.
Adding new national regulation that must be complied with *on top* of any EU regulation. This is the most pernicious, because most EU regulations explicitly mention that they are there to “harmonize” the market, make goods acceptable in every country. But EU regulations in the past decade have not decrease trade barriers, because countries have learned to add a new national regulation on top of every EU one, forcing foreign companies to increase their compliance cost if they want to break into a national market.

For years and years, Europe was indeed a continent of decreasing trade barriers. While they continued to be strongly protectionist against the outside world (erecting anti-GMO laws primarily as protectionism for EU farms), they were at least reducing barriers within the block. But Europe is not immune to the anti-globalization sentiment that has swept across Britain and America since 2016. It’s just that much like Biden, European politicians are caught between maintaining their appearance as internationalists while still wanting to be protectionists and nativists.

So rather than erect tariffs, the EU countries have recently relied on “soft” barriers, barriers which don’t *technically* forbid entry of foreign goods, but which do place onerous costs on anyone who wants to enter the market. And a supposed internationalist has to justify their protectionism somehow, they don’t have Trump’s luxury of just honestly stating their beliefs. So they rely on their old faithful excuses: health and safety.

Biden claimed that foreign goods were a national security issue. China was the security threat that we were supposedly countering, but we countered China in part by banning Vietnamese solar panels, Mexican cars, and Canadian lumber.

And for the EU countries health, environmentalism, and data privacy are paramount. They’re part of what separates Europe from America after all. So who cares that added calcium isn’t unhealthy, or that Dutch companies are making biodiesel the same way French companies do, if it’s foreign we can claim it’s unhealthy and unsafe by default. And then we ban it until they comply with our expensive tests, or until they start making the product in our country, or until they stop being foreign and sell themselves to locals.

This is exactly what Biden and Trump wanted: American goods instead of foreign goods. But the EU countries use regulation to achieve this goal since they can’t tariff the single market.

And this is one of the main reasons I push back against regulation. I’ve said over and over, regulation is not intrinsically good or bad. Good regulation is good, bad regulation is bad. But I’ve seen over and over how politicians hide their protectionism behind a coat of regulation. And I’ve seen how most people have an intrinsic distrust of deregulation, meaning whenever I point this protectionism out I’m accused of wanting to destroy health and safety.

“Foreign cereal is unhealthy,” “foreign biodiesel is bad for the environment,” “foreign Tech companies will steal our data,” it’s very easy to just claim this without evidence and get people on board with you. And it’s *surprisingly* easy to do when “foreign” just means another country in the EU, wasn’t Europe supposed to have solidarity?

And it’s impossible to prove a negative, so proving that the cereal is no less unhealthy, the biodiesel is no different, the foreign Tech has the same policies as the native Tech, this is a losing proposition and expensive to boot. So protectionism goes on unabated, and then people wonder why the EU is still falling behind economically. Well Mario Draghi told you why, it’s because even before Trump the EU was putting tariffs on itself.

I write this in part out of frustration and in part as an attempt at education. People are negatively polarized against Trump, and so even people who never heard or cared about tariffs are deciding that tariffs are bad and we shouldn’t do them. Some neoliberal Democrats are hoping that this lets them finally remake the coalition, and kick out the protectionists like Biden and Sanders in favor of rebuilding the Clinton-Bush-Obama consensus of free trade.

But even if this happens, I’ve seen way too much evidence that this will not be a radical remaking of ideology. Protectionism will, as it has in the EU, simply become the purvey of health and safety. Even the neoliberals of the party have trouble arguing against health and safety, especially when Democrats as a whole are so negatively polarized against deregulation.

So that’s what I really wanted to say: regulations are not always good. They are not always bad, but they are not always good. Don’t assume that just because the government banned something, it was right to do so. Be open to the possibility that they’re protecting their markets just like Trump is.

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