As the United States approaches its semiquincentennial (that is, half of 500 years) July 4, the McKinsey Global Institute offers a report that reads to me as a meditation on long-run US economic growth in “At 250, sustaining America’s competitive edge” (March 9, 2026). The US became the world’s largest economy in 1860, and has kept that lead since. In my reading, a major theme running through the report is the US leadership in originating and applying new technology.
Nowadays, especially as people are fretting about AI taking their jobs, and wondering what can be done to address “growing inequality,” and the “hollowing out of manufacturing,” some pundits wonder whether it is time to re-imagine capitalism. This sort of thinking is visible on both sides of the political spectrum – in that respect, Donald Trump and Bernie Sanders have more in common than either would have us believe.
But instead of re-imagining capitalism, I’d say we need to un-forget the facts about it that we should have known for many years, and un-learn some new non-facts that have crept in to our collective consciousness through a combination of malicious prevarication and lazy learning. As Mark Twain said: “The trouble with the world is not that people know too little; it’s that they know so many things that just aren’t so.’’
I’ve been blessed by friendships with three great scholars – Deirdre McCloskey, the late Allan Meltzer, and Phil Gramm – who have devoted much time and effort to defending capitalism by keeping the factual record straight and getting us to see which facts are most important. All three wrote influential books on the big questions about capitalism. Let’s un-forget and un-learn with them for a moment.
Our amnesiac journey begins with Deirdre McCloskey, who takes us through more books than you can shake a stick at, including her magisterial “Bourgeois Trilogy” (The Bourgeois Virtues: Ethics for an Age of Commerce; Bourgeois Dignity: Why Economics Can’t Explain the Modern World; Bourgeois Equality: How Ideas, Not Capital or Institutions, Enriched the World) and the much shorter and more accessible book written with Art Carden, Leave Me Alone and I’ll Make You Rich: How the Bourgeois Deal Enriched the World.
McCloskey focuses our attention on the great hockey stick of economic history: Prior to the Industrial Revolution, for thousands of years, humans suffered through miserably impecunious lives, with only very few people living at a standard above subsistence (the flat part of the hockey stick). Then, all of a sudden, in the late-eighteenth and early-nineteenth century, we see an increase in average human living standards, first in Britain and Western Europe, and later in other countries, and that improvement (the sloped part of the stick) displays an improvement that is not just permanent, but one that is perpetually growing. Classical economists like Adam Smith, David Ricardo and Karl Marx could never have imagined that this sort of permanent growth was possible, which is a large part of the explanation for why Marx was so pessimistically wrong about the future of capitalism.
The Editorial Board of the Washington Post reports that “amid an immigration crackdown, restaurants and hotels are struggling to provide quality service.” Here’s the conclusion:
But temporary tweaks won’t solve the imbalance in a country where the national unemployment rate edged down to 4.3 percent in March. America needs an orderly border, and the best way to reduce illegal immigration is to create easier legal pathways for people who want to fill jobs that otherwise sit vacant.
Chris Freiman decries government policies that restrict the supply of housing in the U.S. A slice:
The reason why we don’t see developers building more housing in response to higher prices isn’t because they’re not interested in making more money. Rather, it’s because their ability to build is heavily restricted in much of the United States. For instance, large portions of many cities are zoned exclusively for single-family homes. Apartment buildings are prohibited in areas where developers might want to build them. Even when building is permitted, lengthy approval processes can delay projects for years. In San Francisco, it takes an average of 523 days to secure permits for a housing project. In New York, a lawsuit challenging the 2018 Inwood rezoning — intended to allow roughly 1,800 new housing units — held up the first project in the area for approximately three years before it was able to secure final approvals. And height limits, parking requirements, and other regulations can also make construction prohibitively expensive. Recent analysis estimates compliance and fees comprise 24 percent of new home prices.
In short, the root of the problem isn’t primarily increased demand for housing, though demand pressure is present. Rather, the problem is government-imposed restrictions that make it difficult, if not impossible, to adequately increase supply in response. Consequently, prices rise and stay high. Even if every institutional investor disappeared tomorrow, the housing shortage would remain.
Richard Reinsch isn’t favorably impressed with the “abundance” movement. A slice:
As Veronique de Rugy and Adam Michel argue at Civitas Outlook, a movement serious about increasing the supply of housing and infrastructure—the Abundance movement’s most important goals—would also outline a tax policy that is neutral across all economic activity, taxes each dollar only once, and treats income and savings equally. At a minimum, it would question demand-side incentives like the mortgage deduction, and ensure that investments in real estate are not taxed or hindered at higher rates than, say, the production of goods. Abundance advocates at present do not do this. One cannot help but wonder whether such a comprehensive regulatory and fiscal approach is overlooked because it would shift Abundance outside the respectable liberal camp and into the conservative spectrum, removing its appealing allure to the liberal political class that desires both growth and equality.
@USTradeRep’s Section 301 case says “systemic overcapacity” abroad causes trade surpluses that harm US manufacturing. As @stanveuger @KyleLHandley show in new comments, there’s no relationship bt low capacity utilization & big trade surpluses – if anything it’s the opposite.
More generally, it will pay the landlord to include in the lease contract any terms that are worth more to the tenant than they cost him – and adjust the rent accordingly. Given that he has done so, any requirement that he provide additional security (or other terms in the contract) forces the landlord to add terms to the lease that cost him more than they are worth to the tenant. The ultimate result is a rent increase that leaves both landlord and tenant worse off than before.
Competitive firms have no property rights or titles to a market share, and certainly none to profits. In a market with free entry and no restrictions on competitive practices (e.g., no advertising bans), past market shares yield no ex ante guarantee of future market performance. Observed market shares are ex post outcomes. Absent a secure property right, they tell us little about future market shares.
Under the law of nature, all men are born free, every one comes into the world with a right to his own person, which includes the liberty of moving and using it at his own will. This is what is called personal liberty, and is given him by the author of nature, because necessary for his own sustenance.
In a sense, the public-choice outlook at politics was meant to mirror the way welfare economists looked at markets. Just as the latter diagnosed real-world markets to be plagued by “failures” when compared with the ideal of perfectly working markets, public-choice economists insisted that real-world politics likewise “failed” when measured against its ideal image. Yet, unlike welfare economists, who considered such diagnosis of “market failures” a sufficient basis for recommending government intervention, public choice scholars did not draw symmetric conclusions. Rather, the point they sought to make was that measuring either real-world markets or real-world politics against unrealizable ideal standards is of no help whatsoever for answering the question of how problems a society faces ought to be dealt with. The only meaningful way to seek answers to such questions is, from a public choice perspective, to compare and evaluate feasible institutional arrangements, both in markets and in politics.
