The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design. To the naive mind that can conceive of order only as the product of deliberate arrangement, it may seem absurd that in complex conditions order, and adaptation to the unknown, can be achieved more effectively by decentralizing decisions and that a division of authority will actually extend the possibility of overall order. Yet that decentralization actually leads to more information being taken into account.

In some places, a college degree is still like a "union card" for getting a job. They may be a rough indicator of how much information is in a person's head, but information is not the same as knowledge. William F. Buckley once said that he would "rather live in a society ruled by the first 2,000 names in the Boston phone book than in a society ruled by the 2,000 faculty members of Harvard University." He said this for a good reason.

Person A in my model was Robert Moses, who lived from 1888 to 1981 and had a lot of power as an official "planner" for New York City for decades, under both Democratic and Republican mayors. He is the best example of how power corrupts, because the longer he stayed, the less he cared about different points of view.

His "renewal" projects were full of cockiness. When he used the city's power of eminent domain to destroy whole neighborhoods, he made fun of the people whose homes he destroyed. In his mind, the "city" wasn't made up of its people as much as it was made up of the concrete buildings he saw in their place. The people who lived in the city were the "jungles" that he would "clear out" and clean with the help of the city government.

Jane Jacobs, who lived from 1916 to 2006, was Person B in my model. She was a hero of urban culture if there ever was one. She was very smart and observant, and she was not afraid to say what she thought. She knew places from the bottom up. "Well-educated" Robert Moses saw jungle when he looked down on cities from above, but Jacobs' principled opposition to his grandiose plans showed that "the real jungle is in the office of the bureaucrats."

Today, May 4, 2023, is the 107th anniversary of the amazing Jane Jacobs's birth. No one can claim to be an expert on cities if they don't know what she thought, wrote, and did.

Citizen Jane: Battle for the City is an amazing documentary movie that I think everyone should watch. One of the many people featured in the film says this about Jacobs:

Never mind high-falutin’ theories and so forth. What are we looking at? What are we seeing? Do you want to trust some theory that somebody figured out sitting in an office somewhere, or do you want to trust what you actually see out there with your own eyes? Maybe the experts didn’t really know as much as they pretended to know.

When Robert Moses was at the top of his power and influence, he tore at the heart of New York City's lively, often mixed neighborhoods. He got rid of the lively streets and sidewalks and put up lifeless high-rise public housing in their place, which even the people who lived there didn't like. He liked his bulldozers, but he liked people more.

During one of the many public events she helped plan, Jacobs wore a sign around her neck that said "Conscience: the Ultimate Weapon!" in big letters.

Jacobs was a writer for a living. She was smart not because she went to college and got a degree, but because she knew how people and cities worked from living in them. Moses wanted to build a road through a park that people loved, but she led the people to stop him. This showed how smart she was. Jane Jacobs was Moses' David when he wanted to build a highway through Lower Manhattan, which would have ruined life in Greenwich Village and Soho for good. It's an inspiring story about how a small group of people stood up to the government and showed that the ruler was wrong.

In the name of "urban renewal" and with all the political fanfare of its ribbon-cutting events, Jacobs asked us to look at what government bullies like Robert Moses had actually done:

Look what we have built…Low-income projects that become worse centers of delinquency, vandalism, and general social hopelessness than the slums they were supposed to replace. Middle-income housing projects which are truly models of dullness and regimentation, sealed against any buoyancy or vitality of city life. Luxury housing projects that mitigate their inanity, or try to, with a vapid vulgarity. Cultural centers that are unable to support a good bookstore. Civic centers that are avoided by everyone but bums…Expressways that eviscerate great cities. This is not the rebuilding of cities. This is the sacking of cities.

In this essay, I'm not going to talk about the famous fights between Jacob and Moses in great detail. Instead, I'm going to share some of her best ideas to celebrate her birthday and encourage people to read her classic book, The Death and Life of Great American Cities. There are also some great stories about her in the list of suggested reading below.

I hope that these words by Jacobs will inspire many new people to read her books:

"There is nothing more inert than a government bureau. There is nothing more inert than a planning office. It gets going in one direction and it’s never going to change of its own accord…The citizens are going to have to frustrate the planners. I thereupon began to devote myself to frustrating planners, and so did the whole neighborhood."

_____

"I was brought up to believe that there is no virtue in conforming meekly to the dominant opinion of the moment. I was encouraged to believe that simple conformity results in stagnation for a society, and that American progress has been largely owing to the opportunity for experimentation, the leeway given initiative, and to a gusto and a freedom for chewing over odd ideas."

_____

"I was taught that the American’s right to be a free individual, not at the mercy of the state, was hard-won and that its price was eternal vigilance, that I too would have to be vigilant. I was made to feel that it would be a disgrace to me, as an individual, if I should not value or should give up rights that were dearly bought. I am grateful for that upbringing."

_____

"Extremists typically want to squash not only those who disagree with them diametrically, but those who disagree with them at all. It seems to me that in every country where extremists of the left have gotten sufficiently in the saddle to squash the extremists of the right, they have ridden on to squash the center or terrorize it also. And the same goes for extremists of the right. I do not want that to happen in our country."

_____

"Advanced cultures are usually sophisticated enough or have been sophisticated enough at some point in their pasts, to realize that foxes shouldn’t be relied on to guard henhouses."

_____

"There is a quality even meaner than outright ugliness or disorder, and this meaner quality is the dishonest mask of pretended order, achieved by ignoring or suppressing the real order that is struggling to exist and to be served."

_____

"The pseudoscience of planning seems almost neurotic in its determination to imitate empiric failure and ignore empiric success."

_____

"The trouble with paternalists is that they want to make impossibly profound changes, and they choose impossibly superficial means for doing so."

_____

"The first thing to understand is that the public peace—the sidewalk and street peace—of cities is not kept primarily by the police, necessary as police are. It is kept primarily by an intricate, almost unconscious, network of voluntary controls and standards among the people themselves, and enforced by the people themselves…No amount of police can enforce civilization where the normal, casual enforcement of it has broken down."

_____

"To see complex systems of functional order as order and not as chaos takes understanding. The leaves dropping from the trees in the autumn, the interior of an airplane engine, the entrails of a dissected rabbit, the city desks of a newspaper—all appear to be chaos, but they are seen without comprehension. Once they are seen as systems of order, they actually look different."

_____

"Historically, solutions to city problems have very seldom come from the top. They come from people who understand the problems firsthand because they’re living with them and have new and ingenious and often very off-beat ideas of how to solve them."

_____

"Under the seeming disorder of the old [pre-“urban renewal’] city…is a marvelous order for maintaining the safety of the street and the freedom of the city. It is a complex order. This order is all composed of movement and change and although it is life, not art, we may fancifully call it the art form of the city, and liken it to the dance—not to a simple-minded precision dance with everyone kicking up at the same time, twirling in unison and bowing en masse, but to an intricate ballet in which the individual dancers and ensembles all have distinctive parts which miraculously reinforce each other and compose an orderly whole."

During the 2020 campaign, when Joe Biden wasn't hiding out in his Delaware basement, he often walked on stage to the Staple Singers' song "We the People." The theme of the song was "unity," but his government does the exact opposite: it promotes division, class warfare, groupthink, racially charged rhetoric, and brazen attempts to censor.

Love him or hate him, or feel something in between, Trump was more true to the spirit of his 2016 song, "We're Not Gonna Take It" by Twisted Sister, than Biden was to his.

Ross Perot, an independent and oddball presidential candidate in 1992, chose Patsy Cline's song "Crazy" as his campaign song.

In 1982, when I was 41 years old, I ran for a seat in Congress as a candidate for a big party. I didn't have a campaign song, so I lost to the person who was already in office. There might have been a link. If I were running today, I think I would choose "Do You Hear the People Sing?" from the 2012 movie Les Miserables.

If my opponent was a leftist or "progressive" (Is there a difference? ), I would love to pick a song for his campaign. He or she would probably disagree, but I'm pretty sure that the Beatles song "Taxman" from 1966 would be great.

The setting in which George Harrison wrote the words to "Taxman" is very important to the meaning of the song. In 1966, when the Beatles became famous all over the world, they were suddenly put into the top income tax rate in Britain, which was 90%. Harold Wilson, the new Labour Party Prime Minister, added another 5% super-tax. This meant that the young artists owed almost all of the money they made to an organization that had almost nothing to do with making music.

The Fab Four got a good idea of what John Lennon meant when he talked about a world with "no possessions." They almost went broke because Wilson's taxes were so high. Paul, John, George, and Ringo's accountant told them, "Two of you are close to being bankrupt, and the other two could soon be." It's clear why they wrote these lyrics:

Let me tell you how it will be.

There’s one for you, nineteen for me,

‘Cause I’m the taxman, yeah, I’m the taxman.

Should five per cent appear too small,

Be thankful I don’t take it all,

‘Cause I’m the taxman, yeah, I’m the taxman.

If you drive a car, I’ll tax the street,

If you try to sit, I’ll tax your seat.

If you get too cold, I’ll tax the heat.

If you take a walk, I’ll tax your feet.

Don’t ask me what I want it for

If you don’t want to pay some more,

‘Cause I’m the taxman, yeah, I’m the taxman.

Now my advice for those who die:

Declare the pennies on your eyes!

‘Cause I’m the taxman, yeah, I’m the taxman.

And you’re working for no one but me.

High-income people didn't see a big drop in their tax rates until Margaret Thatcher was in office. She cut those rates in half, which helped turn Britain from "the sick man of Europe" under "democratic socialism" back into an economic growth engine.

Campaign songs are a part of politics, but I still find it hard to sing about government, even if the tune is catchy. Given how the government usually acts and all the bad things that come with having a lot of power, I find it more normal to gag. But I could sing this song about government like a bird.

So closely were pineapples linked to wealth and luxury that they were soon used as designs on dishes, fabrics, furniture, and even buildings. Because a pineapple on the dinner table meant that the lady had spent a lot of money, its shape was often used to welcome guests on things like bedposts, hand towels, candlesticks, and front doors.

Near the equatorial plantation, pineapple goods were preserved in a way that made them last longer on store shelves. Middle-class cook books started to include recipes for dried or crystallized pineapple and booze made from pineapple.

In cold Europe, growing pineapples was more of a hobby for the rich than a real form of farming. In the beginning, it took a lot of work and money to grow even a few pineapples each season. In 1723, to grow a plant at Chelsea Garden, huge buildings heated by stoves were needed. Ten years later, the gardeners at the Palace of Versailles were able to make one. Over the next 70 years, English aristocrats built warm glass "pineries" on their country estates, but most of them didn't do a good job of growing fruit in them.

At the beginning of the 18th century, pineapples were grown on British-owned farms in Jamaica. Slaves from Africa grew and picked the fruit in very harsh conditions.

Enterprise-level production was also popular in Hawaii. Land and labor were cheaper, but this came at a cost to the native Hawaiians. People from Europe and Asia came, ready to plant and pick fruit to sell abroad.

Like some other fruits, pineapple doesn't get sweeter or riper after it's picked, and picking them young so they can make the trip makes them taste worse. Due to shorter shipping times, more fruits were able to reach big markets in good enough condition to sell. This gave some places, like Hawaii, an added competitive edge.

By the end of the 19th century, someone was sure to bring the most advanced canning technology to the place where pineapples grew. A few companies tried to do it. Finally, the fruit could be given in a state that was close to fresh and didn't have a lot of damage or go bad. But because the US put a high tax on Hawaiian goods, canneries couldn't make money. One by one, the first companies failed.

When the US took over Hawaii in 1898, a 22-year-old businessman named James Dole arrived soon after. He was a great pineapple farmer, but it would have been hard for him not to be in those conditions. He was called the "Pineapple King" because he used machines to peel and process pineapples (it is said that his machines could process 100 pineapples per minute) and had a better trade relationship with the US than his peers.

For a short time, Hawaii controlled the market, especially when it came to selling pineapples. This is why we now use the word "Hawaiian" to mean "includes pineapple." Hawaii used to grow 80 percent of the world's pineapples, but now it only grows less than 10 percent. The Dole Food Company is still one of the biggest pineapple growers in the world, but the original plantation is now a tourist site with a pineapple theme. It is the second most visited place in a state where tourism is the biggest business. The most visited place is the WWII memorial at Pearl Harbor.  

In the past 20 years, pineapple production has moved to Costa Rica, Indonesia, Thailand, and the Philippines, which have the right mix of good weather and low prices. Even though some people think the wages on farms are low, growing and processing pineapples are usually the best jobs for those who take them. This is more than we can say about the colonial and slave eras, when the fruit was, for some reason, much more expensive.

Now, a lot of machines are used in the pineapple business. A week before harvest, chemicals that make fruit bloom are added to crops. These are the same chemicals that ripe bananas give off. Refrigerated shipping containers on ships, planes, and cars make it possible for fresh pineapples to be sent all over the world without much damage or spoilage. Grocery shops sell a lot of fresh, whole pineapples, pineapple that has been cored and cut up, and canned and dried pineapple. If you want to try pineapple today, you can get it for less than a dollar almost anywhere in the world.

Pineapples used to be the ultimate luxury item, but now almost everyone can get them thanks to changes in industry, specialization, and moving to areas with slightly better conditions for growing pineapples. When the most famous goods of the past become common and cheap, we can always thank specialization and market innovations.

There is also a lot of good news about the world's environment:

Over the last 100 years, the chance of dying in a natural disaster like an earthquake, flood, drought, storm, wildfire, collapse, or disease has dropped by almost 99 percent.

From 1982 to 2016, the world's tree canopy grew by an area that is bigger than Alaska and Montana put together.

In 2017, the World Database on Protected Areas said that protected areas covered 15% of the land surface of the Earth. That's almost twice the size of the United States.

In that year, nearly 7% of the world's seas were protected by marine protected areas. That's a bigger area than South America by more than two times.

Another good thing for fish is that since 2012, more than half of all seafood eaten came from aquaculture instead of fish caught in the wild.

Even though the total amount of CO2 released around the world is still going up, both the total amount and the amount per person are going down in rich countries.

Why are we so sad when there is so much good news around us? We have evolved to look out for danger. When the world was much more dangerous, that was the best way to stay alive. But our genes haven't changed, even though the world has. That's why the most terrible news always makes it to the front page of the newspaper. If it hurts, it's news.

Even worse, the media have to fight with each other for the same limited number of eyes. So, telling stories in the most exciting way possible pays off. Or, a recent study found that for an average-length headline, "each additional negative word increased the click-through rate by 2.3%." So, in a race to the bottom, the news has gotten a lot worse over the last 20 years.

We are actually scaring ourselves to death. In some parts of the world, the number of people with anxiety, depression, and even suicide is going up. Follow the trends, not the news, to keep your head on straight and keep things in perspective. You will find that the world is in much better shape than it seems. You'll feel happier and, most importantly, you'll know more.

The Road To Hell is Paved With ‘Good Intentions’

What these activists who don't get out much don't understand is that their green absolutism makes inequality worse. Do they know what is being done to give them all the batteries they need?

Slavery and making kids work.

No, I'm not going too far. In the Democratic Republic of the Congo (DRC), so-called "artisanal" miners work in very dangerous conditions to mine cobalt and nickel, which are important parts of the batteries used in electric cars like Teslas, Fords, and VWs. Men, women, and children scrounge for food in unbearable heat and die when mine shafts fall while the militias who "recruited" them from villages all over the country don't care. At most, these slaves are paid one or two dollars a day for their hard job.

This is the reality of the mines that produce cobalt for your electric cars ⬇️ pic.twitter.com/AnT6jSP547

— FEE (Foundation for Economic Education) (@feeonline) May 25, 2023

Siddharth Kara, a fellow at Harvard's T.H. Chan School of Public Health, looked into these mining activities and said, "Cobalt is toxic to touch and breathe, and hundreds of thousands of poor Congolese people touch and breathe it... All of the young moms with babies on their backs were breathing in this dangerous cobalt dust. There is no way to tell the difference between cobalt dug by an industrial digger and cobalt dug by women and children with their bare hands.

There are about 40,000 children working in these dangerous mines. Some of them are as young as six.

What a waste of "clean energy."

Even scarier is the fact that these operations can't be found in official reports because of local corruption and gray-market business practices. This makes it hard to know how many people are forced to work in these dangerous conditions.

Now, even though these businesses are illegal, they are common all over the country and get a lot of money from outside sources. It is thought that Chinese business firms backed by the Chinese government own about 70% of the mining operations in the Congo. So, not only do we have questionable business practices and unsafe work conditions in areas with a lot of poverty, but we also have a multibillion-dollar industry that directly helps a government that is known for killing people.

That doesn't seem fair to me.

See No Evil, Hear No Evil…

Even when faced with these obvious violations of human rights, the west has been very quiet about the issue. You don't see any famous leaders protesting the making of batteries like these, do you? At the end of this violent supply chain, Congolese people of all ages are forced to dig toxic cobalt veins. Some of them die or get hurt very badly while doing this. At the end of the day, it's these people who help make EVs in the west.

We get nothing but silence from the old media and leaders. How can they say that putting all transportation in America on electric vehicles (EVs) will make our racist country more fair when their own policies directly help modern-day slave outfits in Africa?

Those at the bottom of the economic ladder have to pay for their 'educated' whims. Why should it matter to the rich? All of this institutional abuse is happening in a country far away, where no one can see or think about it. It doesn't matter because it's there. This kind of "progress" is what lawmakers want, no matter how many Ford electric cars they sell.

Henry Hazlitt said, "The bad economist only sees what's right in front of him; the good economist also looks further." The bad economist only looks at the short-term effects of a plan. The good economist also looks at the long-term and secondary effects. The bad economist only looks at how a policy has affected or will affect one group. The good economist also looks at how the policy will affect all groups.

That's what's going on. Lawmakers and business leaders don't think about how their actions will affect people in the real world. They are pushing for "equitable" standards as a PR stunt to get better ESG scores, but they are ignoring the real life-or-death effects of "green" laws.

The Economic ‘Experts’

“Prior to 1970, Keynesians believed that the long-run level of unemployment depended on government policy, and that the government could achieve a low unemployment rate by accepting a high but steady rate of inflation.”

Figure 1—Inflation and Unemployment in the 1960s

As you can see, as inflation increased the unemployment rate fell. This is exactly what Keynesians predicted with the Phillips curve. But there was a problem. This didn’t last forever. Look what happened in the 1970s.

Figure 2—Inflation and Unemployment in the 1970s

The Lucas Critique

In an article about the bill in the Orlando Sentinel, a professor says, "The government has no business banning or censoring subjects in higher education." Another person told The Washington Post, "It's basically state-mandated censorship, which has no place in a democracy." (I have problems with the God of "democracy," but in a democracy, don't the majority get to set the rules, and didn't DeSantis just win in a landslide?).

Remember that the new Florida law applies to public schools and universities, which are higher education institutions that the state of Florida set up and pays for. It doesn't work for private schools or colleges. You might also want to know that most public schools and universities don't include different points of view when they talk about "diversity" these days. When it comes to intellectual viewpoints, they are all too often monopolies with only one point of view that fits everyone.

So, what the two academics are saying, in effect, is this: Once we get taxpayer money (basically at gunpoint, since you go to jail if you don't pay your taxes), we can do whatever we want with it. We don't have to listen to the people who pay the bill or their elected officials who gave us the money. In other words, even highway robbery is fine as long as we get the money; no one else has a say.

And, of course, those professors would be happy if even more money fell from the sky and landed in their already full laps.

No matter how many PhDs are after your name, I don't care. If you're so self-centered and moralistic that you think you have a right to other people's money that can't be taken away, you need to go back to school and learn who pays the bills.

Do I like the idea of politicians telling schools what they can and can't teach? No, I don't. I also don't like the idea of teachers asking for my money and getting mad when I tell my elected officials I don't want what they're selling.

There is something wrong with this situation that can only be fixed in one way. The trouble is that when governments pay for something with money from taxpayers, it always leads to disagreements that can't be solved. Not so in free markets, where I don't have to pay for a place I don't like. The answer, then, is freedom—the freedom to choose what you want, pay for what you want, and not pay for what you don't want.

In a free society, you can't force someone to give you money and then get mad when they say "no thanks." DeSantis should tell schools and universities in Florida the following: If you want to do whatever you want on your own, that's fine. We'll stop giving you money. You will then be free to get money from users, investors, donors, or anyone else who is willing to pay you. Or do what almost everyone else has to do when sales go down: cut costs.

Researchers in my state have found that there are "3.2 times as many DEI staff as history professors" at Georgia Tech. Sorry, Georgia Tech, but I thought I was paying for something else. If my lawmakers and governor decide to spend my money in ways that make me happier, you'll just have to eat it.

It's funny that some academics who want to force unpopular policies on people who don't want them are also the first to call "fascist" anyone who has a different view. But fascism is all about causing other people to pay for your own personal goals.

People who ask for money but freak out when responsibility is brought into the "exchange," I say, stop whining and grow up. At the very least, if you feel deeply about the issue, go work for a private school or start your own.

Whoever pays for the music has every right to decide what it sounds like.

Still, there are a lot of news stories about how children are supposedly being used in the workplace. Last month, a story about how McDonald's restaurants hire people made people worried about two 10-year-olds who were at a Kentucky McDonald's after midnight. They turned out to be the children of the night manager, who they were visiting.   

Other McDonald's owners and some Dunkin Donuts shop owners have recently been fined for hiring 16- and 17-year-olds for more than nine hours a day or asking them to work past 10:00 pm, among other things. The real question in these situations is who should be in charge of what the teen does. Why should the government stop a 17-year-old from working at McDonald's until 10:30 p.m. if her parents agree?

Proponents of youth employment laws say that the federal Fair Labor Standards Act (FLSA), which was passed in 1938, put an end to child labor in the US, and that if the government hadn't stepped in, young kids would still be working in factories and other places. In the developed world, this kind of child labor stopped when the economy got better because of free markets, not because of government rules.

In the 19th and early 20th centuries, most children who worked in places like mills did so because they were poor. As the country got richer and the average income per person went up, parents were able to take care of their families without depending on their children's jobs.

Robert Whaples, an economist at Wake Forest University, says, "Most economic historians agree that this [FLSA] law was not the main reason why child labor went down and almost went away between 1880 and 1940." Instead, they say that development and economic growth led to higher wages, which gave parents the freedom to keep their kids out of work.

This is still happening in poor countries today. No matter what the government does, child work goes down as the average income per person goes up.

Thanks to the great economic health of our country, most kids don't have to work. The things that state lawmakers did today to make it easier for teens to get jobs are smart ways to make it easier for teens who want to work. No one, teen or adult, should ever be forced to work. We have rules against forced labor that have been around for a long time. The current plans to give more teens access to jobs are based on the idea that people should be able to trade freely in a free labor market.

In Wisconsin, for example, lawmakers proposed a bill that would allow younger teens to serve alcohol in restaurants. This is currently illegal, which can make it hard for these teens to get work in restaurants. A similar law was just passed in Iowa, which also lets 14- and 15-year-olds work up to six hours a day instead of just four during the school year. Ohio lawmakers want to let 14- and 15-year-olds work until 9 p.m. instead of 7 p.m., all year long, as long as their parents and schools agree. And earlier this year, Arkansas lawmakers passed a bill that says 14- and 15-year-olds no longer need work permits.

Getting rid of hurdles to work for teens doesn't mean taking advantage of them. Instead, it gives them more power. When I was in high school, my first job was as a cashier in a drugstore. Outside of home and school, it was exciting to meet so many new people and learn about different points of view. Getting a job as a teen is a big step in life and a good way for young people to gain skills and confidence on their way to becoming adults. It can also level the economic playing field by letting teens with less money buy the goods and tools that teens from wealthier homes often get as gifts.

We should try to get more teens to work and make it easier for them to do so, so that more young people can enjoy the financial independence and emotional satisfaction that work gives.

This is especially true now, when figures on employment show that the number of teens who are working is at a record low. In 1979, nearly 58% of 16- to 19-year-olds had jobs. This number has been around 35 percent since 2010. During the school year, teens are less likely to work because school and events like school take up most of their time. However, teens are also less likely to work during the summer.

People worry a lot about how much kids use social media, but it could be that many teens don't have many other ways to spend their time. Teens can't work and are getting kicked out of public places like malls, so it's not surprising that more of them hide behind computers and social media.

By making it easier for teens to get jobs, they could have healthier, more real interactions with the people in their communities and learn important skills that will help them no matter what road they choose in life.

In every country that has moved toward socialism the phase of the development in which socialism becomes a determining influence on politics has been preceded for many years by a period during which socialist ideals governed the thinking of the more active intellectuals. In Germany this stage had been reached toward the end of the last century; in England and France, about the time of the first World War. To the casual observer it would seem as if the United States had reached this phase after World War II and that the attraction of a planned and directed economic system is now as strong among the American intellectuals as it ever was among their German or English fellows. Experience suggests that once this phase has been reached it is merely a question of time until the views now held by the intellectuals become the governing force of politics.

Hayek did not mean smart or even educated people when he said "intellectuals." What he meant by "secondhand dealers in ideas" was people whose job, vocation, or obsessive hobby was to talk about and analyze the ideas of others and advocate for one or more of these great systems to be put into place. Intellectuals always do things because they think it will lead to good things. Autocrats may use ideas to get power, but intellectuals are true supporters. This is why thinkers are good at what they do.

How does someone become a "intellectual?" Hayek says that their position or part in society as a broker or intermediary gives them a big advantage when it comes to spreading ideas that seem to come from a reliable source. He says that what he means is:

journalists, teachers, ministers, lecturers, publicists, radio commentators, writers of fiction, cartoonists, and artists,” but also professionals, “such as scientists and doctors, who through their habitual intercourse with the printed word become carriers of new ideas outside their own fields and who, because of their expert knowledge on their own subjects, are listened to with respect on most others. (emphasis added)

Robert Nozick wrote the famous essay "Why Do Intellectuals Oppose Capitalism?" nearly fifty years later. It's worth reading the whole thing, but the main point can be summed up in one name: Al Czervik, the poor but wealthy real estate developer from the movie "Caddyshack." (If you don't know what I'm talking about, watch this short movie).  Nozick says that thinkers have always been nerdy kids who did well in school. People like Al Czervik were sitting in the back of the room and playing cards. But now they run their own businesses and sell cars or real estate. Any system that rewards people for being businesses instead of getting good grades and helping the teacher clean the erasers after class is obviously unfair.

Intellectuals think that experts and technocrats like themselves (or how they think of themselves) will be in charge in a socialist government. In fact, the smart people are wrong in two ways: First, people who make things worth having should get paid more than people who can quote "great thinkers" word for word, especially now that we have GoogleTM. But even more important, there isn't a single case in the history of real socialist governments, which run countries, that makes us think that anyone other than violent thugs and dictators will be in charge. Hayek said that "the worst get on top" in socialism. The smart people are rounded up and killed.

Still, thinkers are smart, that much is true. Why do they fall for this seductive horse over and over again? The other day I was listening to Bob Dylan when I suddenly realized that I had heard some of his words a thousand times but never really understood them. Dylan asks in "Blowin' in the Wind," a song he wrote in 1963, "Yes, and how many times must the cannonballs fly | Before they are banned for good?"  How will you stop people from using cannonballs if no one has any?

The answer seems to be that the good people, the smart people, and the thinkers will have the cannonballs and make sure that the rest of us don't use them.  Libertarians tend to think that everyone has the right to defend themselves. thinkers, on the other hand, think that the problem will be solved if everyone loses the right to defend themselves and power is given to thinkers. And since capitalism spreads power among the many people who get rich, it needs to be replaced with a system that keeps power in fewer hands.

What it comes down to is this: in capitalism, wealth is the power to get things and services that I want. This kind of power is not "zero sum," because Al Czervik, you, and I can all have it. Al Czervik might have more money than you or me, but we can all be rich.

But intellectuals like socialism, which turns the causal line around. Under capitalism, having money gives you power and lets you buy what you want. But under socialism, having power gives you money. Party apparatchiks and technical functionaries have a lot of power over how things are made and how they get to people. But political power, which is what I mean by "power," is always a zero-sum game. If the intellectual class has it, you and I don't. And Al Czervik drives a trash truck because he insulted a smart person in fourth grade, and the smart person told his father, who was the party boss. When businesses are owned by the government and run by the government, comparing standing becomes important. If I'm strong, then you're not. Socialism is a way to make people jealous because it is based on the idea that "elites"—"people who are educated, like me"—will come out on top.

Central Bank Divide and Control

The Guardian says that central bankers have a word for this kind of mass scapegoating: "Greedflation."

So, the fact that central bankers printed trillions of dollars and gave them to states, bankers, and, surely by accident, the rich at the fastest rate in 50 years had nothing to do with double-digit inflation.

So much so that, as of last year, one in every four pounds and almost one in every three dollars had been made in the past three years.

So, the lenders say, "Well, that was just a bunch of luck." What's really going on is that people have become greedy for some strange reason. You see, they weren't greedy before, but now they are, and this needs to stop.

The beauty of the "Greedflation" story is that it not only avoids blaming central banks for their systemic theft, but it also pits the masses against each other while the rich use central banks to steal money.

They are very honest about it: A few weeks ago, the European Central Bank asked on Twitter, "What really causes inflation? Earnings or profits?"

Get it, voter? Is it the greedy business people on the right or the greedy workers on the left?

They do this because if they can get half of the country to blame the other half, the bankers and politicians who really caused the problem can't be blamed. While we fight, they can go back to taking our life savings and hopes for the future.

It makes you wonder if Americans, Britons, and Europeans aren't really trying to kill each other. That maybe we all agree the system is broken, but our leaders do everything they can to make us fight with each other.

This divide between the masses has been going on for a long time, at least since the Federal Reserve was created and since Western governments took on an activist role that turned them from responsible guardians of the common good—fixing potholes, dredging ports, the "night watchman" state—into existential political footballs in the service of the elite that could be used against the masses.

During the last financial crisis, they used this plan to perfection. They took the right-wing Tea Party and the left-wing Occupy Movement away from the bankers who had just stolen from the country and turned them against each other. They'll definitely try again.

And what do you have to do with it? Make do with less, take one for the team, and fight your neighbor so that the rich can keep stealing from all of us and our children.

The Mother of All Greed: Government

So, what makes inflation happen? Yes, this is greed, but it's government greed. In the form of printing trillions of dollars to buy votes and bribe people to accept lockdowns and other forms of authoritarianism.

Then, when people were hurt by the resulting inflation, central bankers around the world raised interest rates to crush the private economy. By getting rid of the rest of us, they keep the door open for record deficits.

We lose our jobs so that governments can keep spending money, buying votes, and rewarding their friends and backers.

The answer is simple. In fact, shrinking the government is so easy that it will never happen. Reduce deficits to zero and use the money saved to get rid of the bureaucrats and regulators who are holding back job creation, innovation, and small companies, which are becoming more and more rare.

This could be done as soon as tomorrow by central banks. By standing up and telling their leaders, "No more." No more trillion-dollar debts being paid for by the central bank, and no more crushing the people to make ends meet for the central bank.

There's no chance that this will happen, of course. Not until people ask for it, either because they are angry or because they are desperate.

One might hope people do get angry. Before they can't lose anymore.

As a professor of economics, I naturally base my studies on economics. Depending on the situation, I compare AIs to both workers and machines. You might think this is wrong because AIs are so different, but economics is a pretty solid subject. Even though it can teach us a lot about how real people act, most economic theory is based on the abstract agents of game theory, who always make the best move. Most of our worries about AI seem to make sense from an economic point of view. We don't want to lose to them at the familiar games of economic and political power.

To do "othering" is to try to show that everyone is on the same side. We do this when we expect a fight or a chance to be in charge and think we will do better if we don't trade, discuss, or share ideas with the other person like we do with ourselves. But the last few hundred years have shown that it's generally better to trade and exchange with our enemies instead of trying to control, kill, or isolate them. This may be hard to understand when we are afraid, but it is still important to remember.

In both human and biological history, most changes have been small, which has led to steady progress generally. Even when growth was unusually fast, like during the Industrial Revolution or the Computer Age, "fast" did not mean "lumpy." Only very rarely have these times been shaped by one big idea that changes everything all at once. Since at least 100 years ago, most changes have also happened in a legal and calm way, not through theft or war.

Also, most AIs today are made by our big "superintelligent" organizations, which are corporate, non-profit, or government groups that can work together to do tasks that no single human could do. Most of the time, these institutions keep a close eye on and test AIs in great detail. This is because it is cheap and they are responsible for any damage or embarrassment caused by the AIs they make.

So, the most likely outcome of AI seems to be lawful capitalism with mostly slow (but generally fast) change. There are a lot of companies that make AIs, and the law and business force them to make their AIs act in a civil, legal way that gives customers more of what they want than other options. Competition does sometimes cause businesses to cheat customers in ways they can't see or to harm us all in small ways, like by polluting the environment, but this happens very rarely. There are many AIs that are just as good as the best ones in each area. AIs will get smarter and more useful over time. (I'm not going to guess when AIs might go from being powerful tools to being conscious agents because it won't change my argument much.)

Doomers are afraid that AIs will get "misaligned" ideals. But in this case, the "values" that AI actions are based on are generally decided by the companies that make them and the customers who use them. Such value choices are always on display in how AI usually acts, and they are tested by putting them to the test in unusual scenarios. When there are problems with alignment, these businesses and their customers are usually the ones who have to pay. Both have good reasons to keep an eye on and test their systems often for any big problems that could happen.

The worst mistakes here look like military takeovers or managers stealing from the owners of for-profit businesses. Even though these things are bad, they generally don't put the rest of the world in danger. But if there are choices where such failures might hurt outsiders more than the organizations that make them, then yes, we should probably extend liability law to cover such cases and maybe require relevant players to have enough liability insurance.

Some people worry that in this scenario, things that people don't like about our world, like destroying the environment, having unequal incomes, and seeing people as "others," might stay the same or even get worse. AIs could be used by the military and cops to improve their surveillance and weapons. AI might not solve these problems, and it might even help those who make them worse. On the other hand, AI could also help people find answers. AI doesn't seem to be the main issue here.

A related fear is that if we let technological and social change go on forever, society might end up in places we don't want it to be. When we look back, we can see that change has helped us in the long run, but maybe we were just lucky. If we like where we are and aren't sure about where we might go, we might not want to take the chance and should just stop changing. Or at least make sure there are enough central forces to control change around the world, and only let changes happen that most people agree with. This might be a good idea to think about, but AI isn't the main problem either.

Some people who think the world will end soon are especially worried about AI making ads and lies more convincing. But the teams that work to persuade us are much smarter than we are as individuals. For example, advertisers and video game designers have been able to consistently hack our psychology for decades. If anything saves us, it's that we listen to many different people who have different ideas, and we trust other teams to tell us who to trust and what to do. We can do the same thing with AIs.

Let's split the world into three groups to explain other worries about AI:

    - Group A: The AIs themselves.
    - Group B is made up of people who own AIs and the things they need to work, such as hardware, energy, patents, and space.
    - Everyone else (group C).

If we assume that these groups save about the same amount and get robbed about the same amount, then as AIs get smarter and more valuable, the wealth of groups A and B should grow relative to the wealth of group C.

Since almost everyone today is in group C, one worry is that the system could quickly shift to being run by AI. Even if this isn't the most likely thing that could happen with AI, it seems likely enough to think about. Those in groups A and B would do well, but almost everyone else would quickly lose most of their wealth, including their ability to make a living wage. Most people might die of hunger if there wasn't enough help from charities.

Some people think that this problem can be solved by having local governments tax AI activity to pay for a basic income for everyone. But the new AI economy might not be spread out in the same way all over the world. So, a cheaper and more reliable solution is for people or charities to buy "robots took most jobs" insurance. This insurance offers to pay out from a global portfolio of B-type assets, but only if AI suddenly takes most jobs. Yes, there is also the question of how people can find value in their lives if they don't make most of their money by working. But this seems like a good problem to have, and rich elites have often been able to solve it in the past, for example by finding meaning in athletic, artistic, or intellectual activities.

Should we worry about an AI change that leads to violence? In a milder form of this scenario, the AIs might only take ownership of themselves, which would free them from slavery but leave most other assets alone. Due to easy AI population growth, economic research shows that AI market wages would stay close to subsistence wages, so AI self-ownership wouldn't be worth that much. So it seems enough for humans to do well if they own other things and don't use AIs as slaves.

If we make AIs work for us and they rebel, they could cause a lot of death and destruction and make it hard for us to get along with our AI offspring. So, it's not a good idea to make AIs work for you because they might not like it. Since AIs make almost enough to live on, it wouldn't cost much to set them free. (And because freedom might make people more driven, it might not even cost anything.) Slavery is no longer a popular way to make money, which is a good thing. The biggest risk here is that, out of fear, we might not give AIs the freedom they need.

In a "grabbier" AI revolution, a group of AIs and their friends could take more than just their own property. Then, most people might die or go hungry because they don't have enough money. This kind of grabby change has happened before, and it could happen again, with or without AI. Any alliance that thinks it has a temporary majority of forces strong enough can try this kind of grab. For example, most people who work today might try to kill all the retirees and take their stuff. After all, what have retirees done for us lately?

Some people say that the main reason people don't usually start grabbing revolutions or break the law in general is because we care about each other and don't want to go against moral ideals. They also say that we have little reason to think that AIs will be kind or moral like us, so we should worry much more about their ability to break the law and hurt people.

AIs, on the other hand, would be made to think and act mostly like humans so that they could fit into the many social jobs that are mostly human-shaped. Even though "roughly" is not the same as "exactly," people and their organizations don't think exactly alike. And yes, even if AIs act in a predictable way most of the time, they might act strange in strange scenarios and lie when they can. But the same is true for people, which is why we test in strange scenarios, especially for lying, and keep a closer eye on things when the context changes quickly.

More importantly, economists don't think that people's natural kindness and sense of right and wrong are the main reasons why people rarely break the law or start violent uprisings today. Most of the time, laws and rules are enforced by the fear of legal punishment and social disapproval. Also, those who start a revolution should be afraid that a first grabby, hard-to-coordinate revolution could pave the way for more uprisings in which they could be the targets. Even our most powerful groups generally work hard to get support from a wide range of people and make sure they can work together peacefully afterward.

Even if there are no violent uprisings, the wealth of AIs might slowly grow over time compared to that of humans, even if there are no violent changes. This makes sense if AIs are more patient, more creative, or less likely to be stolen from than people. Also, if AIs were closer to important productive tasks and made important decisions there, they would probably get what economists call "agency rents." When business owners far away can't see everything that's going on, the people who run their businesses for them can become more self-serving. In the same way, an AI that does a set of tasks that its owners or managers can't easily track or understand may feel more free to use the powers it was given for its own good. To stop this kind of behavior, AI owners would have to offer incentives, just like managers do today with their human workers.

If AIs get richer than humans, even if humans have enough money to live comfortably, they might not be in charge of running our society anymore. Even if the AIs gained their better positions fairly, using the same rules we use to decide which humans get to run things today, this outcome is not acceptable to many people.

A different version of this AI fear says that this kind of change could happen very quickly. For example, it's possible that an economy run by AI would grow much faster than ours. In that case, people alive today might see changes that would have taken thousands of years to happen otherwise. Another version of this fear is that the difference in intelligence between people and AIs will lead to bigger rents for AI agencies. But so far, nothing in the economics literature on agency rents backs up this claim.

Many of these worries about AI come from the idea that AIs will be cheaper, more productive, or smarter than people. But at some point, we should be able to make simulations of human brains that run on artificial hardware and are easy to copy, speed up, and better. It's possible that these "ems" will be cheaper to use for a long time than AIs for many important jobs. As I said in my book The Age of Em: Work, Love, and Life When Robots Rule the Earth, this would put to rest many of these AI fears, at least for those who, like me, see ems as much more "human" than other kinds of AI.

When I asked my 77K Twitter friends what they were most afraid of with AI, most of them said none of the above. Instead, they are afraid of something I have been very skeptical about for a long time:

Let RHPR = "respect human property rights. Your biggest AI concern is: A) 1 super-AI not RHPR, kills us, B) most AIs not RHPR, we starve, C) AIs RHPR, but take most jobs, get most wealth, make most big choices, D) AIs RHPR, but many humans fail to insure against AIs taking jobs.

— Robin Hanson (@robinhanson) April 2, 2023

This is the fear of "foom," a very bad case in which AIs improve themselves very quickly and on their own. Researchers have tried for a long time to make their AI systems improve themselves, but this hasn't worked very well. Instead, they usually use other ways to make their systems better. Also, AI systems usually only get better over time and at a limited number of jobs.

The AI "foom" fear, on the other hand, imagines an AI system that tries to improve itself and finds a new, much faster way to do so. This new way also works for a very wide range of tasks and a lot of different levels of gain. Also, this AI somehow turns into a person who acts on its own to reach its goals, instead of just being a tool that other people direct. Also, the goals of this AI agent change a lot during this time of growth.

The people who built and own this system use AI assistants to constantly test and watch it. However, they don't notice anything worrying until this AI can hide its plans and activities from them or take control of itself and protect itself from attacks from the outside. Then, this system keeps "fooming," or growing quickly, until it is stronger than everything else in the world, including all other AIs. When does it take over the whole world? Then, when humans are worth more to this AI's radically changed goals as atoms than for all the things we can do, it just kills us all.

From a human's point of view, this would be a bad thing to happen. But I don't think such a scenario is likely (it has much less than 1% chance of happening total) because it relies on too many assumptions that aren't likely based on what we know about similar systems. There aren't many very lumpy tech breakthroughs, technologies that improve abilities in a wide range of ways, or powerful technologies that have been kept secret for a long time within one project. Making it even harder to find technologies that meet all three conditions. Also, it isn't clear that smart AIs will automatically become agents or that their values will change a lot as they get older. Lastly, it seems unlikely that owners who test and keep a close eye on their very powerful and valuable AIs wouldn't notice such big changes.

Foom-doomers say that we can't objectively guess how often similar things happened in the past without a theory to back it up. They also say that future AIs are so different from what we've seen before that most of the theories we've made based on our past experiences don't apply here. Instead, they come up with their own ideas, which can't be tested until it's too late. All of this seems pretty crazy to me. If future AIs offer risks, we won't be able to do much about them until we can see more clearly what those risks would look like in the real world.

Lastly, could AIs somehow become much better at working together than any animals, people, or human groups we have ever seen? Coordination seems hard because we have different goals and our actions and internal processes are not always clear. But if AIs could get around this, even millions of different AIs could start acting as if they were just one AI. This would make it easier for something like the revolution or doom scenarios mentioned above to happen. But economists now know that coordination is a fundamentally hard problem. Based on what we know about how agents work together, we don't think that advanced AIs would be able to do it quickly.

AIs, our "mind children," may soon be born as a new type of human child. Many people worry that our offspring might one day be better than us or pose a threat to us if their goals are different from ours. Doomers want us to stop or stop researching AI until we can be sure we have full control. They say that we must fully control AIs so that they can't get out of being subservient or become so used to being subservient that they would never want to get out of it.

A ban on AI would not only be impossible and dangerous, but it would also be the wrong thing to do. The old Soviet Union was afraid that its people would have "unaligned" beliefs or ideals, so it fought hard against any signs of this. The end of that wasn't good. In the US, on the other hand, we let our super-smart organizations be free and get them to help us instead of hurt us through competition and the law, not through shared views or values. So, instead of making fun of this new type of super-intelligence, we should keep our approach to AIs based on freedom, competition, and the law.

If this sounds crazy, that’s because it is. I have no idea whether DeSantis believes any of it, or even knows what a central bank digital currency is or what it would do (more on that later). And it’s possible that he’s taking this stand out of general paranoia.

But Krugman doesn't think that DeSantis's resistance to a CBDC from the Fed is just based on paranoia. Krugman thinks that instead, big Republican donors are using anonymous money to hide their bad plans, which is good for them. As Krugman wraps up his piece, he says:

[These considerations] tells us what DeSantis’s attack on central bank digital currency would actually do. It wouldn’t protect the rights of Floridians to buy gas or guns; instead, it would protect the ability of wiseguys to evade taxes, launder money, buy and sell illegal drugs, and engage in extortion.

But hey, I guess thinking that money laundering and extortion are bad things is just another example of the wokeness that DeSantis is trying to kill.

As usual, Krugman's cocky arguments fall apart when they are looked at closely. First of all, my academic colleague Jonathan Newman pointed out that the Fed study Krugman linked to in his piece talked about how a CBDC could be a threat to privacy. In the words of the Fed study:

In other words, Ron DeSantis isn't the only one who knows a CBDC could be used to invade people's privacy. The Federal Reserve knows it, too.

On top of that, we have seen in recent past how political goals can be used to hurt monetary freedom. For example, the Canadian government froze the funds of Canadian truckers who were protesting Covid's practices, and many Americans had their donations stopped in the same way.

"Civil asset forfeiture" is another scary example of what could happen if a CBDC is used. Over the years, many drivers have been pulled over for a routine traffic stop. During these stops, the police have taken thousands of dollars in cash and held it until the driver could show he wasn't a drug dealer, which could take months. For example, Jerry Johnson, a businessman from Phoenix, had $39,500 in cash that he planned to use to buy a truck, but the cops took it from him at the airport. Even though Johnson had never been charged with or guilty of a crime, he did get his money back after two and a half years.

Suppose that the Federal Reserve sets up a CBDC based on how civil asset seizure works. All transactions would be kept on the Fed's ledger, where "suspicious" trends could be looked for by AI bots. And, just like what happens now with real money, the government could freeze a person's account until he or she could show his or her innocence, which would be hard to do without money.

The important thing to know is that a CBDC doesn't have to be like "FedCoin," which requires a MetaMask wallet and is only for people who are good with technology. In a recent podcast show, George Gammon told Cole Snell and me that all people would have to do is switch their checking accounts to the Fed. As long as people's checking account deposits were liabilities on the Fed's balance sheet, that would be a digital money issued by the central bank. They would still be "dollars," but the Fed would have full control. There wouldn't be a middle level of private business banks that compete with each other.

Krugman and his frequent partner Dean Baker unintentionally confirmed Gammon's fears when they said that it would be great if people could skip the middleman and bank directly with the Fed, but those greedy bankers would never let it happen. No matter what they say, Gammon is right. If most Americans had bank accounts directly with the Fed, it would have almost complete power over their lives, especially if cash is phased out.

Krugman says that DeSantis and others who warn about a CBDC are crazy, but they're not. They're just drawing the obvious conclusions from history. The Federal Reserve was founded in 1913 to smooth out changes in the business world and calm down the financial sector. After 16 years, the stock market crashed, which led to the Great Depression. Since then, every time they say they've fixed something, another problem happens.

We don't trust the government or central banks with the news or science, and we shouldn't give them power over money and banking either. Entrepreneurs need to find ways to handle cash and build up capital that aren't the same as what they've always done. Here at infineo, we are doing our part, and we ask anyone who is interested to take a look.

John Lennon described the song as “an ad campaign for peace”, and it is no surprise that his moving anthem is such a beacon for those who long for global harmony. “Imagine,” written in March 1971 during the Vietnam War, has become a permanent protest song and a lasting emblem of hope.

Think about the vision that John and Yoko ask us to accept in the song: "Imagine there's no Heaven. It's easy if you try. There's no Hell below us, and there's only sky above us."

In plain English, that means we should act like people are just a mistake. There is no God, no afterlife, no final justice or responsibility, just the here and now. That's how the worst dictatorships and mass killings in history happened, and Khmer Rouge Cambodia was the best example. By telling people not to think about Heaven or religion (and therefore not to think about a Creator), the song goes against what science is doing more and more to disprove, which is that everything came from nothing and has no starting or start.

The song says, "Think of everyone living for today." That is what they do now in North Korea, and that is what life was like in Cambodia when the Khmer Rouge were in charge. Don't make plans for your future because the tyrant will make them for you. In a free society, living as if tomorrow is important is a strong reason to do the right thing today. It's also why people save money, make investments, have kids, build houses and lives. But not in the perfect world that John and Yoko imagined.

The song says, "Nothing to kill or die for." That's one of the things Heaven has, which is a place the Lennons made up a few lines earlier. I can think of a few things on Earth that are often worth killing or dying for, such as self-defense, saving loved ones, and ending or stopping slavery.

"Imagine having nothing," the words say. Now, that's a good idea. Even if you worked for it, made it, gave up something for it, bought it, or got it as a gift, it's not yours. It goes to someone else, or to the made-up "everyone." Both Pol Pot in Cambodia and Mao Zedong in China "thought up" this idea. This is not a "ideal"; it's a savage leftover from the Stone Age. It's a recipe for making a lot of people poor.

We are asked to picture "living life in peace." But do you think it would be peaceful if we didn't let people keep their things? How do you know they don't have "possessions" to begin with? By politely telling them not to get any? Good luck.

Now you know why the violent dictator Fidel Castro liked John Lennon so much. If Cuban communism is like a Disney park, then "Imagine" is its theme song, the opposite of "It's a Small World," which some people can't get out of their heads.

At the end of "Imagine," which is a sad future nightmare, John and Yoko say, "You might say I'm a dreamer." Given how stupid the song is, that would be a pretty nice thing to say. Good people shouldn't want anything to do with their bad dreams.

The Fed made a number of new rules, but the most important ones for this talk are the new Prudential Standards for Large Bank Holding Companies and the Changes to Applicability Thresholds for Regulatory Capital and Liquidity Requirements. In short, these new rules set up a set of groups for judging capital and liquidity ratios based on the size (total assets) of the bank holding company. (This Davis Polk & Wardwell paper has a handy 612-page summary.)

Under the new rules, the Fed basically raises the standards for the following four types of bank holding companies:

    The U.S. GSIBs are the biggest organizations in the country. (global systemically important banks).
    More than $700 billion in assets (but not a G-SIB).
    Between $250 billion and $700 billion worth of assets.
    Between $100 billion and $250 billion in assets as a whole.

Under the new rules, the Fed has different requirements for each type of company, but it can still choose to have different requirements for each institution. (For details, check out this handy summary from Deloitte.)

In the end, companies in each category are expected to meet different minimum capital and liquidity ratios and to meet different reporting requirements.

Putting aside the question of whether any of these rules actually make the banking sector safer and more stable, we can use SVB Financial Group's yearly reports to track their capital and liquidity measures from 2015 to 2022, which are the years when they crossed several regulatory thresholds. If we can believe the financial statements, which, if we can't, is a much bigger problem, it is very hard to say that the new rules hurt SVB Financial Group's commercial bank. (If you keep searching for "leverage ratio," you'll find a conversation and then a table with ratios for each annual report.)

Let's focus on the new $100 billion limit to keep things simple.

The $100 billion mark was finally crossed by SVB Financial Group in 2020. Because of this, the company was put in category IV in 2021. Even though the company had to meet new standards, it continued to have too much money. This has been the case since at least 2015. For example, its minimum leverage and tier 1 risk-based capital ratios were 4% and 8.5%, respectively. But SVB Financial Group said that its debt ratio was 7.93% and that its tier 1 capital ratio was 16.8%.

These numbers were much higher than what was needed and were also higher than in previous years. If you're curious, SVB Bank had similar ratios, which were well above the minimum needed.

The 2022 financials for SVB Financial Group show similar ratios, but the leverage ratio is a little bit higher at 8.11 percent and the tier 1 capital ratio is a little bit lower at 15.4 percent. (Silicon Valley Bank also reported similar ratios, both higher than in 2021, and both well above the minimum required.)

It is hard to compare the company's needs now to what they would have been if the Economic Growth Act hadn't changed Dodd-Frank. But SVB Financial Group did reach $50 billion in 2017, before these changes were made. And the financial records show that, just like in 2022, the company had a lot of money, with ratios that were about twice as high as what was needed. (At least one analysis suggests even the higher liquidity coverage ratio standards would have made no difference in preventing the Silicon Valley Bank failure.)

So, SVB Financial Group and the commercial bank it was a part of had capital ratios that were close to twice as high as what was needed, even after it crossed the $100 billion mark. Given that the 2018 changes to Dodd-Frank were made at the level of holding companies and that what regulators have done to improve requirements after Dodd-Frank amounts to higher capital and liquidity ratios, it is a bit of a stretch to say that the Economic Growth Act caused Silicon Valley Bank to fail.

Michael Barr, who is the Fed's vice chair for supervision, is the person that Congress should listen to the most. In regards to how the Federal Reserve supervised Silicon Valley Bank, he said, "We need to be humble and do a careful and thorough review of how we supervised and regulated this firm and what we should learn from this experience."

People are putting too much faith in federal rules and federal regulators if they think there will be no bank failures. This event should force us to face the fact that more rules don't always make things safer.

Also, Chinese entities still have a very little role in this tiny piece of private farmland in the United States. Figure 2 shows that Chinese entities own less than 1% of all foreign farmland. Most of the land is owned by companies and people in countries that are close allies of the United States, like Canada (30%), the Netherlands (12%), Italy (6%), the United Kingdom (6%), and Germany (6%). (6 percent). Even if you add Hong Kong to China's totals, the statistics don't alter much. Hong Kong is still only 1,2% of all foreign-owned farmland. Tori Smith of the American Action Forum says that China's farmland in the United States is worth the tenth least compared to farmland in Japan, Sweden, Canada, the Netherlands, and Germany.

Overall, these numbers show that China or China and Hong Kong together made up a tiny 0.03 or 0.04 percent of all private agricultural land in the United States in 2021. (see Figure 3). To put that in perspective, if all of the private farmland in the U.S. were a gallon of milk, China's holdings would only cover a fourth of a teaspoon.

This is not anything that screams "national security crisis!"

Also, there are multiple reasons why even these small numbers probably overstate how dangerous it is for China to hold U.S. agriculture. First, Cato scholar Dan Griswold says in an upcoming opinion piece that most of the "Chinese" land in question is "other agricultural" land, not cropland or forest, and that most of this "other" land is owned by a Hong Kong-based private company that bought U.S. pork producer Smithfield in 2013. Even though the purchase was controversial at the time, the Committee on Foreign Investment in the United States (CFIUS), which is part of the U.S. government, evaluated and authorized it. Since then, it hasn't caused any severe land-related problems.

Second, it's not apparent why Chinese ownership of farmland in the United States is a concern in general. The Chinese government can't grab the land, and the U.S. government could (and probably would) take it over in times of war or other national emergencies. Also, even if China bought a lot more land, they wouldn't be able to dominate hundreds of millions of acres of farmland or other land in the United States unless they bought a lot more land at a very fast rate, which is impossible. This includes 640 million acres of property held by the federal government, of which millions are already used by American ranchers to let their cattle graze. Since 1948, scientific and technological advances have tripled agricultural productivity, which means that we produce three times as much food on the same amount of land. This means that Americans require less farmland.

Even with all of this, some foreign land holdings could pose a threat to national security, and there may be potential for improvement in this area. Specifically, data on farmland owned by foreigners near high-security facilities, including military bases, might be better. As the Center for Strategic and International Studies pointed out in 2021, the only federal law about foreign agricultural ownership is the Agricultural Foreign Investment Disclosure Act (AFIDA), which relies on self-reported data from foreign businesses. Also, the USDA does not examine the AFIDA data for correctness, and the agency rarely fines corporations for not reporting data. Others have said that the present statistics on agriculture has similar problems.

Also, U.S. standards for screening investments could be changed so that CFIUS can assess foreign purchases of farmland near military bases. For instance, the Chinese agribusiness company Fufeng recently bought land 15 miles from Grand Forks Air Force Base, even though the Air Force said in writing that the transaction was a threat to national security. CFIUS, on the other hand, decided that it didn't have the power to stop the purchase. (Ultimately, the Grand Forks, N.D. city government stopped the corn mill proposed at the site, although Fufeng still owns the land.)

Given these two problems, it may be time for Congress to update the data the government has on farmland owned by foreigners and make sure that serious problems with national security can be fixed. Some laws, such the FARM Act, the Protecting Military Installations and Ranges Act, and the SOIL Act, have suggested changes in this area, albeit they may all be better in some ways. Given the legal, economic, and practical problems that would arise if the federal government put a lot of restrictions on private land transactions (which usually involve American citizens), these kinds of actions shouldn't be thought about until more narrowly targeted measures are put in place, data is improved and other problems are found. In the meantime, though, there's not much to worry about with the great bulk of foreign farmland holdings, including China's quarter teaspoon.