Daron Acemoglu won the Nobel Prize in economics in 2024 and is the third most cited economist of all time. Thus, the paradox of his new book, What Happened to Liberal Democracy?, is that its most serious analytic failures are economic. He provides a sincere and serious consideration of modern liberalism’s estrangement from the working class. But when he moves from description to solutions, the basic building blocks of economic analysis disappear. Imperfect markets are compared with an idealized government. Expansive agencies are proposed while the risk of their capture—well known in public-choice theory—is ignored. And while Acemoglu is known for integrating institutions into economics, he sometimes celebrates democratic consensus without attention to the elite institutions that formed it.
Acemoglu “pitches his tent” on the left side of liberalism, arguing that it “has historically been an engine of material and social progress.” Today he believes tradition should give birth to “working-class liberalism,” which means, for him, creating a more level economic playing field and technological change that complements rather than displaces labor. The book is well-intentioned. He recognizes that elites cannot be trusted to direct culture. But he never explains why they can be trusted to direct technology, redistribution, and the administrative state.
Acemoglu argues that the postindustrial economy puts a premium on cognitive skills useful in fields such as elevating finance, health, and education, while reducing the importance of manufacturing. He claims that automation “severs the link between mass production and shared prosperity” and has resulted in “the disappearance of good jobs for workers without a college degree.” Acemoglu thus endorses the economic explanation for populist discontent popular among left-liberals.
What is original about his account is his willingness to also highlight the contribution of left-liberals to working-class alienation. As in my own book, Why Democracy Needs the Rich, he sees the class of educated liberals as attracted to social engineering because it “confers on them greater status and social influence.” Acemoglu recognizes that this class then abused its power by imposing cultural values without democratic buy-in, further alienating the working class. He rues the fact that many on the contemporary Left became “convinced that protecting minorities and vulnerable groups and building a fairer economy required silencing those with opposite viewpoints.” This is a welcome admission, but Acemoglu is selective in his political economy. His distrust of elites largely vanishes when they administer the economic policies he favors, and he also fails to consider the influence of other powerful interest groups.
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Again, Acemoglu understands in the abstract that “community-level experimentation is vital for social adaptation in a changing world” and that “experimentation is powered by variation.” But he does not make sufficient use of federalism as the constitutional mechanism that enables such variation and, over time, helps build democratic consensus. Federalism permits different jurisdictions to have different policies. Our national guarantee of free speech then allows people to talk about the consequences, facilitating debate. That is how national consensus, if one is to be had, is best reached. When people have their say without it being preempted, they are much more likely to accept the result. Federalism is to political knowledge what competition is to economic knowledge—a process of decentralized discovery.
The book’s failures have some general lessons for left-liberals. Like classical liberals, they cannot avoid answering comparative institutional questions. Do ideas like nondomination actually empower state domination? What are the specific market failures that prevent the market from boosting welfare over the long run? What mechanisms prevent redistribution and new regulatory agencies from being captured by special interests? What protects pluralism when elites want to use courts or agencies to facilitate an elite consensus on the nation? Acemoglu is right to worry that elites can turn left-liberalism into an instrument of domination. But he never explains why the new AI agency he wants to empower would not become the next instrument of elites and interest groups.
Pandering politicians routinely promote expensive ideas in the months before elections. Usually they’re offering new programs, more subsidies or tax cuts that won’t be paid for. The electorate has become habituated to promises of “free” buses, “free” child care and “free” medical coverage, as well as student loan debt cancellation. Trump’s checks-for-votes scheme is just more explicit.
Let us start with the obvious moral problem that the money in question does not belong to those to whom Trump is promising it. Explaining his idea, the president described it as a “dividend.” But, of course, it is no such thing. A dividend is money a company pays to its shareholders, usually from its profits. The United States is not a company; the voters are not its shareholders; and, to put it lightly, there are no profits to be shared. There is no reason whatsoever that each adult in America should be sent money from the federal government; there is no reason that, if it is to be sent, that money should be equally allocated; and there is no reason to condition such a payout upon the Republicans winning the midterms. This isn’t tax policy or fiscal policy; it is a reckless, shapeless, irritable spasm, divorced from the nature and purpose of our government and from the Constitution that created it.
Practically, the idea is deeply irresponsible. “Dividend” would remain the wrong word if the United States had no debt, a budget surplus, and 5 percent annual growth. But now? We are $40 trillion in debt. This year’s federal budget deficit will exceed $2 trillion. Sending $5,000 checks to every adult would cost around $1.3 trillion — more than the entire federal discretionary budget for 2026, and equivalent to about ten years of revenues from the tariffs that Trump’s feckless vice president insists will pay for this latest foray. Last year’s tax bill corrupted the sensible reforms of 2017 by adding a patchwork of irrational exemptions and special treatments: deductions for people who live in fiscally profligate states; preferences for workers who earn some of their income from tips; an expansion of the entitlements that are bankrupting us; and more. Trump’s checks-for-everyone gambit would corrupt our already corrupted budget in a similar — and considerably more consequential — manner.
Politically, the act would confirm for all time that the second Trump administration has been a failure. Trump was returned to office because a majority of voters believed that he could get inflation under control and thereby lower prices. Instead, Trump has publicly called for aggressive interest-rate cuts and imposed tariffs on all sectors of the economy. Adding another $1.3 trillion in stimulus would without doubt make the status quo worse. The populists are fond of insisting that the choice is between them and the socialists. This morning, that contention seems preposterous. Leaving to one side that the deliberate stoking of inflation by a president who defines himself as an anti-socialist is likely to lead to a thermostatic increase in the socialists’ support, one must ask the obvious question: If this is populism, what need is there of socialism at all?
Or as the Wall Street Journal‘s Editorial Board puts it: “Trump has a $5,000 bridge to sell you.” A slice:
Mr. Trump is resorting to this because voters are unhappy about inflation and don’t think his economic policies have helped them. His tariff tax increases are a big part of the reason. If he repealed those, he’d give the country an economic dividend without spending a dime.
“Republicans have been fighting fraud, waste, and abuse in a lot of the mandatory programs,” Representative Andy Harris of Maryland, head of the conservative House Freedom Caucus, told National Review. “We should probably take half of those savings, apply half to the deficit, and then send the other half to citizens as a dividend check.”
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“I think the point he’s making and the point Republicans are making is that, with a growing economy, you cut the tax burden, you cut the regulatory burden, you get investment, you grow the economy, you get rising wages, and we are more about making sure people control their dollars and not hand all their dollars to government,” Senator John Hoeven of North Dakota told reporters.
About J.D. Vance’s outlandish attempt to justify Trump’s $5,000-per-adult-American vote-buying scheme, Brit Hume tweets: (HT Scott Lincicome)
What Vance is saying here is rubbish and he’s smart enough to know it. Politicians have been, in effect, bribing voters with their own money forever, but this takes it to a new level, not least because the tariff money wouldn’t come close to covering the payouts.
