“I took my money/ And bought a donut/ Hole the size of this entire world” — Sleater-Kinney
Here’s a very short, oversimplified history of modern economics. In the 1960s and 1970s, a particular way of thinking about economics crystallized in academic departments, and basically took over the top journals. It was very math-heavy, and it modeled the economy as the sum of a bunch of rational human agents buying and selling things in a market.
The people who invented these methods (Paul Samuelson, Ken Arrow, etc.) were not very libertarian at all. But in the 70s and 80s a bunch of conservative-leaning economists used the models to claim that free markets were great. The models turned out to be pretty useful for saying “free markets are great”, simply because math is hard — it’s a lot easier to mathematically model a simple, well-functioning market than it is to model a complex world where markets are only part of the story, and where markets themselves have lots of pieces that break down and don’t work.1 So the intellectual hegemony of this type of mathematical model sort of dovetailed with the rise of libertarian ideology, neoliberal policy, and so on.
A lot of people sensed that something was amiss, and set out to find problems with the story that the libertarian economists were telling. These generally fell into two camps. First, there were people who worked within the 1970s-style mathematical econ framework, stayed in academia, and tried to change the dominant ideas from inside the system. They came up with things like public goods models, behavioral economics, incomplete market macroeconomics, and various game-theory models in which markets fail. When the computer revolution made it a lot easier to do statistical analysis, they started to do a lot more empirical work, and a lot less theory:
These changes also moved the field more to the left politically. To take just one small example, you can see a lot more economists writing about inequality in recent years:
But there was also a second group of people who fought against the intellectual hegemony of the libertarian economists. They rejected the 1970s-style math models that the profession insisted on using — either because they didn’t think it made sense to model an economy using that sort of math, or because they couldn’t personally handle the math — and instead sought insight in alternative disciplines like ecology, sociology, history, etc. These folks — who often called themselves “heterodox” — tended to lean even more strongly to the left, and often unabashedly mixed their methodological critiques with socialist or other leftist politics.
The heterodox folks had a problem. They had a huge grab-bag of critiques, but nothing really tied those critiques together. There was no new paradigm — no simple new way of thinking about economics. Marxism had provided that idea for much of the 20th century, but Marxism was defunct. That lack of a unifying framework weakened the heterodox cause, because it still seemed to leave 1970s-style free-market economics as the “base case” — the simple core idea that people kept returning to. It’s relatively easy to explain to a bright 21-year-old how supply and demand work in a simple competitive “Econ 101” model; it’s a lot harder to explain two dozen ways in which that model fails.
So for years, the heterodox people have been writing versions of the same old list of critiques, while searching for someone who could synthesize this list into a simple new paradigm.1 This call was answered by Kate Raworth, a British researcher who has worked for international development agencies and for Oxfam before getting various posts at European universities. In 2017, Raworth wrote a book called Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist, which promised to replace the old neoclassical economic paradigm with something newer and better.
Although this book is now eight years old, a number of friends have recently asked me to read and review it. So here is that review.
Doughnut Economics is based around an important insight: Diagrams are powerful marketing tools. Raworth, seeing how the basic supply-and-demand graph and the circular flow diagram had helped popularize neoclassical economics2, set out to create a diagram that was as simple and as powerful as those. She writes:
[T]his book aims to reveal the power of visual framing and use it to transform twenty-first century economic thinking…Visual frames, it gradually dawned on me, matter just as much as verbal ones…[N]ow is the time to uncover the economic graffiti that lingers in all of our minds and, if you don’t like what you find, scrub it out; or better still, paint it over with new images that far better serve our needs and times…The diagrams in this book aim to summarise that leap from old to new economic thinking.
Most importantly, Raworth came up with something she calls the Doughnut — a set of concentric circles that illustrates the tradeoff between the environment and human prosperity:
Going towards the center of this diagram represents more human poverty; when you go inward beyond the dark green band, you deprive and impoverish humans. Going outward represents more human prosperity; when you go out beyond the dark green band, you despoil the environment.
In fact, this tradeoff is very real. Natural resources are plentiful, but not infinite; produce too much in the present, and you’ll leave little for future humans (and other animals) to enjoy. Furthermore, plenty of industrial activity creates negative externalities, like when burning fossil fuels emits carbon and disrupts the climate. So the Doughnut depicts something that we really do need to think about.
In fact, mainstream economics already has a simple way of depicting this in a memorable picture — a production possibilities frontier. A PPF illustrates society’s tradeoff between two things. You can draw a PPF that illustrates the tradeoff between production and the environment; in fact, introductory econ courses do this all the time:
You could label this diagram with every single one of the items that Raworth puts in her Doughnut — food, housing, biodiversity, climate change, and all the rest. You could label one part of the curve “the safe and just space for humanity”. It would be easier to read. But Raworth is interested in intellectual revolution, not evolution; the humble PPF is disqualified because of its association with the existing mainstream, and so she never even mentions it in her book.
Raworth presents the Doughnut as an alternative to the idea of infinite exponential economic growth, which she sees mainstream economics as supporting. I suspect that this explains the book’s popularity. In recent years, the idea of degrowth has gained popularity, especially in the UK and North Europe. But on some level, people realize that degrowth is very bad for developing countries, since economic growth — not foreign aid or remittances — is the only thing that has ever been able to durably raise people out of desperate poverty. So even lefty intellectuals in the UK or Sweden realize that the idea of degrowth, applied across the world, would be a monstrous crime against humanity.
Raworth is sympathetic to the degrowthers, but she is not one of them. She spends a lot of time discussing the limits of GDP as an economic goal, talking about the tradeoff between growth and the environment, and arguing that exponential growth has to end eventually. But she also recognizes the importance of material prosperity for people in poor countries:
In many low-income but high-growth countries…when that growth leads to investments in public services and infrastructure, its benefits to society are extremely clear. Across low- and middle-income countries…a higher GDP tends to go hand-in-hand with greatly increased life expectancy…far fewer children dying before the age of five, and many more children going to school. Given that 80 percent of the world’s population live in such countries…significant GDP growth is very much needed, and it is very likely coming. With sufficient international support, these countries can seize the opportunity to leapfrog the wasteful and polluting technologies of the past.
This is my view as well, and it’s the only reasonable conclusion for anyone who has worked in international development (as Raworth has). A lot of people who are dissatisfied with GDP as a measure of human flourishing have spent a lot of time creating alternative measures, like the Human Development Index. These always end up being very strongly correlated with GDP. For example, here’s HDI:
It looks like the correlation flattens out a bit at the top, but that could just be because the index can’t go higher than 100; if you let it go higher, the correlation might persist even at high levels of income.
They’re all like this. Googling around, I found something called the Social Progress Imperative, which makes some index of “social progress”. I’ve never seen this index before, and I didn’t even need to look3 to know at the country level it’s going to be strongly correlated with GDP:
As with HDI, the apparent flattening at the top of the curve might just be due to the fact that the index is capped at 100, and rich countries tend to be placed near 100.
Now, these are just correlations. There’s no guarantee that making a country richer will solve all its social problems. Americans are way richer than Europeans, but this hasn’t yet solved our crime problem, our mental health problems, our drug problems, and so on. We need more than GDP growth to make a good society. Yet at the same time, GDP continues to be a great rough-and-ready benchmark for how well a society is doing. And as Raworth wisely points out, for poor countries, material deprivation is the main problem, and that does get solved by economic growth.
So Raworth strikes a balance between the trendy lefty idea of degrowth and the obvious need for poor-country development. She recognizes that growth is important for poor countries, but that it isn’t the be-all and end-all of a good society. And she recognizes that there’s a fundamental tradeoff between economic growth and the environment. So she recommends that rich societies focus less on growth and more on fixing their other problems.
So far, so good. That is a reasonable thing to argue. There are reasons to argue against it, including:
Rich-country growth drives technological progress more than poor-country growth does, and technological progress is often necessary both to save the environment and to improve society.
Rich-country growth creates demand for poor-country exports, and leads to investment in poor countries, thus helping them grow.
If rich democracies don’t grow economically, they may be conquered by countries like Russia that don’t care about the environment or about social progress.
Raworth doesn’t consider these benefits of rich-country growth. But if she had stuck to the core message of environmental tradeoffs and the inadequacy of GDP growth, it would have made for a very good, tight, focused book.
But Doughnut Economics is not a tight, focused book. Instead of delivering a simple, powerful message, Raworth tries to intellectually overthrow the entire edifice of modern economics. And in this task, she fails.
First of all, Raworth doesn’t seem to fully understand the value of the things she criticizes. Of course she’s right that simple pictures like supply-and-demand graphs make great marketing devices, but they’re also much more than that.
For example, you can also use those pictures to do thought experiments. If you model the market for oranges with a supply-and-demand graph, you can think about the effects of a hurricane in Florida as a negative supply shock — you can shift the supply curve to the left, and the graph will tell you that A) fewer oranges get sold, and B) the price of oranges goes up.
In principle, you could do that with Raworth’s Doughnut this way, too. For example, consider an advance in green technology — suppose someone invents a way to make cheap zero-carbon cement. You could model this with the environmental PPF that I illustrated above. This technology loosens the tradeoff between growth and the environment — it shifts the PPF outward, allowing us to have more human wealth for the same amount of environmental degradation:
You could just as easily draw this as an expansion of Raworth’s donut. The outward ring of the donut would expand, and the “safe and just space” for humanity would become more capacious, illustrating the benefits of green technology.
But although she could, Raworth never actually uses her Doughnut like this. Instead of a predictive analytical tool, she simply uses it as a laundry list of every possible good thing that she would like humanity to have. It’s less of a doughnut than an Everything Bagel.
Indeed, Raworth generally rejects the notion of economics as a predictive, analytical tool at all. Like many heterodox types, she argues that economics should be not a positive but a normative discipline — a branch of political philosophy focused on telling us what goals we ought to have for our society, rather than an analytical tool for predicting how economies work. She writes:
In the twentieth century, economics lost the desire to articulate its goals…[John Stuart] Mill began a trend that others would further: turning attention away from naming the economy’s goals and towards discovering its apparent laws…[T]he discussion of the economy’s goals simply disappeared from view. Some influential economists, led by Milton Friedman and the Chicago School, claimed this was an important step forwards, a demonstration that economics had become a value-free zone, shaking off any normative claims of what ought to be and emerging at last as a ‘positive’ science focused on describing simply what is. But this has created a vacuum of goals and values[.]
But in her desire to turn economics back into a philosophy of values, Raworth essentially abandons its use as a tool of prediction and analysis. For prediction and analysis, she turns to other disciplines — climate science, ecology, and “complexity science”. But there are many questions that these disciplines are not set up to answer — and which modern economics can answer.
For example, Raworth would probably agree that well-functioning public transit is an important function of government and society. If the government is considering building a new train extension, it’s important to be able to predict how many people will use it; otherwise, you may end up wasting Earth’s scarce resources. Ecology may give you metaphors to think about humans riding trains, and complexity science may simply tell you that a system of transit is complex. That’s not very helpful.
But with economics, you can actually estimate a demand curve for transit ridership, and use that estimate to make accurate predictions about how many people will ride the train, as Dan McFadden won a Nobel prize for successfully doing in the 1970s. You can’t do that with a Doughnut!
In fact, there are plenty of other “positive” questions that modern economics is set up to answer. The electromagnetic frequency spectrum is a commons that must be allocated in order for people to hear each other over a cell phone network; economics can predict the results of various spectrum auction mechanisms. Allocating kidney transplants is important in order to save lives; economic theory can successfully tell you how to get the most kidneys to the most recipients, thus saving the most lives. There are many other examples.
Raworth doesn’t seem very aware of these predictive successes of modern economic theory. Nor does she seem to have a firm idea of what would replace them if the theories of supply and demand, equilibrium, etc. were thrown out the window.
Part of the problem is that Raworth’s understanding of the mainstream economic paradigm she wants to overthrow seems limited. For example, in Chapter 5, she argues for keeping interest rates low by making loans with state-owned banks:
State-owned banks could…use money from the central bank to channel substantial low- or zero-interest loans into investments for long-term transformation, such as affordable and carbon-neutral housing and public transport. It…would shift power away from what Keynes called ‘the rentier…the functionless investor.’
But in the very next paragraph, she denounces quantitative easing, which was a central bank program to keep interest rates low during the Great Recession:
[C]ommercial banks used that money [from QE] to rebuild their balance sheets instead, buying speculative financial assets such as commodities and shares. As a result, the price of commodities such as grain and metals rose, along with the price of fixed assets such as land and housing, but new investment in productive businesses didn’t.
First of all, this misunderstands what it means for a bank to rebuild its balance sheet. It doesn’t mean for a bank to buy stocks and houses and commodities. It means for a bank to hold cash. Banks took the money from QE and essentially stuck it in a vault, holding what’s known as “excess reserves”:
Raworth also seems to misunderstand how asset prices work. When interest rates go down, the time value of money goes down, which raises the price of assets like stocks and houses. When Keynes talked about the “euthanasia of the rentier”, he meant that investors wouldn’t be able to earn a bunch of free money from keeping their money in bank accounts or government bonds; he didn’t mean that the rate of return on risky assets like stocks and houses would fall. In fact, rate cuts give a permanent boost to the price of those assets, creating a windfall for the rich people who own them.
Raworth doesn’t appear to understand this at all. She also advocates for central banks to print money and give it directly to people — a proposal she calls “People’s QE”, though the more common term is “helicopter money”. But beyond whatever inflation issues this would cause, it would also raise asset prices, because people would use some of that money to buy houses and stocks. That would give a windfall to asset owners, just like regular QE did.
Later, in Chapter 7, Raworth argues that the environment would benefit if cash lost value over time — in other words, if the economy had negative nominal interest rates. She writes:
What kind of currency, then, could be aligned with the living world so that it promoted regenerative investments rather than pursuing endless accumulation? One possibility is a…small fee for holding money, so that it tends to lose value the longer it is held…Today the…effect could be achieved…by electronic currency that incurred a charge for being held over time, so curtailing use of money as a store of ever-accumulating value…It would transform the landscape of financial expectations: in essence, the search for gain would be replaced by the search to maintain value.
This gets the effect of depreciating currency exactly wrong. If your cash is losing value, what do you do? You go out and spend it as quickly as you can!4 In fact, my PhD advisor, Miles Kimball, has long advocated for depreciating electronic money as a way to stimulate consumers to spend more! Raworth is proposing something that she thinks would limit consumption, but which would actually supercharge it.
The whole book is littered with these misconceptions. This is sadly typical of heterodox econ critics, who are so sure that they want to throw out all of modern economics that they often can’t be bothered to understand what they’re trying to overthrow. If you’ve decided that a bag contains nothing but trash, why look inside it before you toss it in the dumpster? And yet for all its flaws and limitations, modern economics has succeeded in uncovering some real insights about how the economy works, and a heterodox takeover would throw these out.
Another big problem with Doughnut Economics is its epistemology. When facts seem to support Raworth’s desired conclusions, she doesn’t question them; when they seem to run counter to her ideas, she often dismisses them. For example, in Chapter 6, Raworth discusses the idea that past a certain point, as countries get richer, they pollute less.5 She cautions us not to believe that this correlation represents real causation:
Grossman and Kruger…pointed out that an observed correlation between economic growth and falling pollution didn’t demonstrated that growth itself caused the clean-up.
But then on the very next page, she discusses the correlation between economic equality and environmental quality, and interprets it as causation:
Mariano Torras…and James K. Boyce…found that environmental quality is higher where income is more equitably distributed, where more people are literate, and where civil and political rights are better respected. It’s people power, not economic growth per se, that protects local air and water quality.
And yet although Torras and Boyce (1998) propose a causal mechanism from political power to environmental quality, they don’t have a way of testing that linkage; it remains a hypothesis.
And earlier, in Chapter 5, Raworth writes:
Richard Wilkinson and Kate Pickett…discovered that it is national inequality, not national wealth, that most influences nations’ social welfare. More unequal countries, they found, tend to have more teenage pregnancy, mental illness, drug use, obesity, prisoners, school dropouts and community breakdown, along with lower life expectancy, lower status for women and lower levels of trust…More equal societies, be they rich or poor, turn out to be healthier and happier.
These are all just observed correlations, but Raworth interprets them all as causation without questioning whether other factors might be at work.
The issue clearly isn’t that Raworth fails to understand the difference between correlation and causation; she obviously does, because she uses it to question results she doesn’t like, like the finding that higher incomes are correlated with less pollution of certain types.6 But she fails to apply this stringent, critical intellectual standard to correlations between economic equality and various positive outcomes. Causation for me, mere correlation for thee.
Other times, Raworth simply seems uninformed. For example, in Chapter 7 she says that Canada has “failed to achieve any absolute decoupling” between emissions and growth. That’s just wrong; in 2017, when Doughnut Economics went to press, Canada’s emissions were down from their 2007 peak, while GDP was up by 17%. The absolute decoupling was even stronger if measured in consumption-based terms (i.e., adjusting for offshoring of emissions), and in per capita terms.
Later in the chapter, Raworth cites the Easterlin Paradox as evidence that higher incomes don’t make countries happier. But while income certainly has diminishing returns in terms of happiness, the Easterlin Paradox itself was debunked with better data long before Doughnut Economics was published; as far as we can tell, the correlation between income and happiness never breaks down as countries get richer.
Raworth is generally so eager to overthrow modern economics that she will turn to any and every ally that seems to offer an alternative way of doing things. She gushes over blockchain technology, envisioning that Ethereum will help communities go green. She cites Steve Keen’s “Minsky” project as an alternative way to do macroeconomics, despite the fact that this project has produced no useful results whatsoever, and Keen is generally not seen as a credible figure among heterodox economists.
And at times, Raworth seems to cite no evidence beyond her own authority. In Chapter 6 she writes that artificial intelligence “is displacing people with near zero-humans-required production”. Even Daron Acemoglu wouldn’t make so bold a claim. Raworth provides no citation.
This is not to say that everything in Raworth’s book is wrong; far from it. In fact, many of the critiques she levels at mainstream economics are perfectly valid and reasonable — even some of the ones where her supporting evidence is weak. But the book is so eager to launch every possible missile at the discipline of economics that it comes off more as a polemic than a scholarly analysis.
And in doing so, Doughnut Economics fails at the central task it sets out to complete. It does not offer a coherent new paradigm for doing economics. Instead, it offers a hurricane of unrelated critiques and a laundry list of policy goals. It vividly demonstrates that the “heterodox” economics project has not escaped its fundamental dilemma — its relevance is still entirely dependent on the continued intellectual hegemony of the paradigm it was created to challenge.
A big problem for the heterodox movement was that most of the really brilliant thinkers who tried to create alternative models — people like Joe Stiglitz, Thomas Piketty, Esther Duflo, Richard Thaler, Dani Rodrik, Paul Romer, and so on — had been co-opted into mainstream academia. That left the heterodox movement mostly headed by people with very strong leftist politics but with only a weak grasp of the ideas they were critiquing.
Both of these diagrams are actually much older than the Paul Samuelson-style mathematical economics that came to prominence in the 1960s/70s, and against which the heterodoxers typically rail.
In fact, their index has 57 different indicators!! It’s incredibly comprehensive and complex, and yet at the end of the day it’s highly correlated with good old GDP.
This is known as the Environmental Kuznets curve. Despite its limited domain of applicability, I’m especially fond of it, because a long time ago, my family changed their name from Kuznets, which means “Smith” in Russian.
Actually, there is now some causal evidence on this. For example, Colmer et al. (2025) find that rising incomes do result in less air pollution at the local level.
I am a well-known proponent of the YIMBY movement, which wants to build more housing in America. Essentially all of the economic arguments against greater housing density are wrong; it really just comes down to personal preference. And the United States would be far better served by having a variety of different urban landscapes — dense Manhattan-like cities for people who want to live in dense cities, leafy sprawling suburbs for people who like suburbs, and then everything in between. Right now we have only one real dense walkable big city (NYC); this deprives much of the country not just of the opportunity to live how they like, but also of the economic benefits that come with density.
The big question about denser housing development is not “Should we do it?”. The answer to that question is “Yes.” The question is: How can we get it done, politically speaking?
As things stand, there’s a broad understanding that the obstacle to building more housing is local control. A few NIMBYs who don’t want to build housing show up to planning meetings and zoning board meetings, bring lawsuits, and otherwise make a bunch of noise and punch above their weight, resulting in the tyranny of the local minority. For example, Einstein, Palmer, and Glick (2018) look at who shows up to local meetings, and find that NIMBYs are very overrepresented:
[W]e compile a novel data set by coding thousands of instances of citizens speaking at planning and zoning board meetings concerning housing development. We match individuals to a voter file to investigate local political participation in housing and development policy. We find that individuals who are older, male, longtime residents, voters in local elections, and homeowners are significantly more likely to participate in these meetings. These individuals overwhelmingly (and to a much greater degree than the general public) oppose new housing construction.
Most YIMBYs have a simple solution to this problem: Make authority over housing less local. A few NIMBYs might be able to dominate each local planning board, but even all together they’re less capable of bullying a state legislature. The notion here is that individuals simply have outsized power at the local level, where showing up is what matters most, while the silent pro-housing majority can simply vote to overrule the loudmouth NIMBYs at the state or national level.
The political theory behind this strategy is that by taking the campaign to a larger arena, advocates can draw in a vast and rarely assembled coalition: displaced and would-be urban residents, affordable housing providers, major employers and unions, chambers of commerce and economic development agencies, and advocates for everything from racial and social justice to economic opportunity to climate sense to private property rights to transit improvement to children’s health to homelessness services. These interests have a lot to gain from abundant housing, but they lack enough incentive to expend political effort in thousands of jurisdictions in countless local land-use planning processes. Only the obstructionists are widely distributed enough to engage in that conventional process. By enlarging the fight, pro-housing forces can dilute the excess influence that these housing-shortage deniers and home-building obstructionists hold in city politics.
Here’s a schematic of what this looks like. Suppose a state is divided into four cities. Each dot represents a citizen, and each red dot represents a local NIMBY:
Since showing up to local meetings is effective at the city level, none of the 4 cities in this diagram gets any housing, because each city has 2 NIMBYs. But now remove the lines, so that we’re looking at things at the state level:
At the state level, housing is decided by majority-rule elections rather than by showing up to meetings. So the normal folks (the black dots) easily overrule the less numerous NIMBYs, and housing gets built throughout the state.
There is some evidence that this approach can work in the real world. For example, Mast (2022) finds that when city council members are selected by citywide elections rather than at the neighborhood level, a city gets substantially more housing permits:
I study how increased local control affects housing production by exploiting a common electoral reform—changing from “at-large” to “ward” elections for town council. These reforms…shrink each representative’s constituency from the entire town to one ward. Results from a variety of difference-in-differences estimators show that this decentralization decreases housing units permitted by 20%[.]
Anecdotally, countries where the national government exerts a lot of control over housing rules often tend to build more housing. For example, Japan’s nationalized zoning rules are often credited with that country’s tendency to build more dense housing. And France’s national government forced cities to build more housing in the 2000s:
France is a unitary state, where all power resides in the national government unless specifically delegated elsewhere…Consequently, the French President and Parliament exert much more control than their North American counterparts. The French Parliament, for example, sets building and land-use codes…
Twelve years ago, then-President Sarkozy proposed encircling every new Grand Paris subway station with a mile-wide neighborhood of taller apartment buildings. Although the audacious proposal was rejected by Parliament, most localities are now implementing it anyway. Thus, 70,000 new homes are slated for construction within Sarkozy’s mile-wide station circles.
Centralization allows France not only to mandate housing rules but also to hold localities accountable for achieving housing goals. It can and does bring the hammer down on obstructionism. Local representatives of the national government can impose fines on localities, overrule local zoning plans that are too restrictive, or even seize land and transfer it to developers for additional housing construction. Such actions are rare, but the threat of them keeps most municipalities in line.
YIMBYs in America have tried to do something similar, only at the state level instead of the national level. In California, for instance, Governor Gavin Newsom has used a law called RHNA — which requires cities to submit feasible plans for building more housing, and threatens them with deregulation if they don’t — to force cities to accelerate approval of housing. And the California state legislature has passed a number of laws — most recently, a bill called SB79 — to force cities to allow more housing near transit hubs.
The approach is promising, and it may yet work. But so far, local obstructionism has won out. Local governments have a huge variety of tools at their disposal to block new housing, and the state government often finds itself playing whack-a-mole. Progressives have also larded down the housing bills with “everything-bagel” contracting requirements, which often make it prohibitively expensive and difficult to build housing even if it’s legally allowed. And national factors like high interest rates have been unhelpful. As a result, California isn’t building more new housing:
YIMBYs and state legislators should definitely double down and keep trying. But it may be time to develop a second approach in parallel.
In recent years, some cities like Houston, TX and Arlington, VA have succeeded in building more housing even without state intervention. There have been two really good articles in Works in Progress about these successes. Anya Martin writes about how Houston did it:
[O]ver the last 25 years, without the rest of the world noticing, things [in Houston] have been quietly changing…The city has become a little more walkable. Pleasant rows of townhomes have appeared in the suburbs, alongside amenities like new parks, restaurants and entertainment, and light rail. Housing has remained remarkably affordable and accessible, even as the wider economy boomed and the population rose drastically…
It’s sometimes said that Houston has ‘no zoning’…but it is not strictly true… Houston’s Code of Ordinances – its planning rulebook – sets limitations like minimum lot sizes (how big a plot of land must be used for each residential property), how far the building must be set back from the street, requirements for the number of parking spaces that must be included with the development, and much else. Historically, this set of regulations, which require a lot of land for each property, combined with the city’s permissive attitude to building outwards, led to Houston’s characteristic sprawl…
In 1998, a major change was made to the Code of Ordinances. The minimum lot size of a plot within the I-610 motorway which circles Houston’s inner suburbs was dropped from 5,000 square feet…to 1,400. This allowed landowners to divide (or ‘replat’) existing lots into much smaller parcels….[N]ow [landowners] could build three homes, for three times as many families…The reforms have survived to this day…
The immediate impact of these changes was a boom in a new style of development that has transformed some of Houston’s inner neighbourhoods: Houston townhomes…Emily Hamilton estimates that almost 80,000 townhomes have been developed owing to the changes; all using previously developed land, and in the types of central locations where it is usually most difficult to build…Some of Houston’s neighbourhoods were totally transformed. Rice Military…built up rapidly and is now a vibrant area known for attracting young creative types and having good walkable access to restaurants, bars, and parks…Houston, synonymous in many people’s minds with car-centric America, is now mid-ranked among American cities on the Foot Traffic Ahead walkability ranking, with its substantial improvement acknowledged in the latest report. In the 1990s it was the only major city in the United States without a rail system; it now has three light rail lines operating and two more planned.
This sounds like a victory for centralized government. But that leaves the question of why Houston’s government was able to go YIMBY so easily, without provoking a NIMBY backlash. Martin argues that Houston defused the NIMBYs by allowing NIMBY neighborhoods to opt out of the citywide upzoning:
[G]enerally, existing homeowners form a powerful interest group who apply pressure to their local governments not to permit more building in their area…So why was Houston able to pass these reforms?…What most makes Houston different is that it had an in-built system to allow residents of small geographic areas to opt out of citywide zoning rules, and of changes to those rules. This opt-out system may explain why city-wide reforms were able to pass, and why they have had the staying power to last several decades relatively uncontroversially…
[M]any rules around land use [in Houston] are set within private ‘deed restrictions’. These are private agreements between landowners within blocks or small areas…Houstonian homeowners [have always] had an institutional mechanism if they wanted to prevent new types of development near them…If they didn’t want smaller lots to be permitted in their area, they could agree collectively…to add new deed restrictions…In 2001, new legislation was passed to make opting out even easier, by allowing local homeowners to petition the city to introduce a special minimum lot size (SMLS) even without going through the legal process of altering the deed restrictions. These are restrictions which limit new developments to the prevalent lot size, by block or by area. For example…5,000 square feet can be established as the minimum lot size, keeping new developments in the area restricted to large detached homes…
As a result, Houstonian homeowners whoreally don’t want new homes built near them don’t need to worry as much about the overall citywide rules. They have a much easier route nearer to home: they can agree with their neighbours in the HOA to alter the deed restrictions, or they can petition for a special minimum lot size…This opt-out system is probably the main reason the 1998 reforms were able to pass in the first place…Houston’s system allows homeowners to opt out without bringing housing supply in other areas down with them. [emphasis mine]
In other words, Houston made local control even more local. If a neighborhood doesn’t want to densify, it doesn’t have to. NIMBYs who wanted quiet, leafy neighborhoods full of single-family homes didn’t have to go to city planning board meetings and block housing throughout Houston; they could just block housing in their little local neighborhoods, and be satisfied. Meanwhile, the neighborhoods without many NIMBYs just built more housing, because nobody was trying to stop them.
Here’s a diagram of what this hyper-local control looks like, using our example of the grid of dots from above:
Here, every little square is a neighborhood. Every square without a red dot builds housing, and every square with a red dot blocks housing. As a result, housing gets built in half of the neighborhoods.
That’s not as good as forcing housing to be built in every neighborhood, but it’s not bad! It basically fulfills the dream of Americans being able to choose which kind of place they live in — even if they live in the same city. And it may be much more politically palatable than trying to use the hammer of big government to force every city to allow density in every neighborhood at once.
In another Works in Progress article, Emily Hamilton describes Arlington, Virginia’s successful attempt to build more housing. Although it doesn’t have the formal neighborhood opt-out mechanism that Houston has, Arlington basically made a bargain with some neighborhoods not to densify them:
In Arlington, the leafiest and quietest parts of the county remain reserved for single-family zoning…[T]he county carved out some single-family neighborhoods where residents didn’t want to see land-use changes from upzoning…And the [upzoning] plan wasn’t carried out universally: the area around the county’s westernmost Metro station, East Falls Church, is zoned exclusively for low-density development.
Largely this is due to reluctance among local homeowners. But Arlington planners have been careful to work with the grain of homeowner interests where possible…By generally limiting upzoning to areas without homeowners, unless those homeowners have consented, Arlington has permitted much more development than other expensive cities without huge blowback from homeowners.
In fact, hyper-local control may even be a factor in Japan’s willingness to build housing. In a third Works in Progress article, Anya Martin writes about how Japan’s government generates local buy-in for “land readjustment” plans that divide land up into smaller parcels and create greater density:
There are two core mechanisms inside land readjustment, both of which work by generating public legitimacy for major change. The first is sharing the proceeds of the redevelopment evenly. The second is requiring that a large majority of affected residents support the change…If two thirds of affected landowners agree to the scheme, then it is sent up to the governor of the prefecture, which almost always gives approval when a large majority of land- and homeowners support the scheme…
Land readjustment illustrates a general rule of political economy: it is possible to build legitimacy for massive changes, including demolishing many people’s homes and dramatically changing the character of an area, if the benefits of doing so are shared, and if those most affected are seen to have opted for the change.
In other words, Japan may not be an example of big government simply generating the political will to crush the prerogatives of locals and force them to accept density, as some Western urbanists have assumed. Instead, it may be another example of hyper-local control — not quite the same as Houston or Arlington, but sharing the basic feature of giving control over housing to small neighborhoods.
Hyper-local control blends attractive features of both individualism and collectivism. It frees many landowners to build on their properties without being vetoed by faraway NIMBYs on the other side of the city. But it allows the residents of each small neighborhood to come together to decide what the character of that neighborhood should be.
“Local control” has understandably become a dirty word among YIMBYs. But anyone who wants to build more housing throughout America should take a look at hyper-local control as an additional way of getting around the political obstacles to densification. It may be possible to win bruising battles at the state level and force cities to accept density, and I don’t think that effort should be abandoned. But in the end, devolving decisions about density from the city level to the small neighborhood level may be a quieter, more effective path to achieving the same objective.
Cuttner et al. (2024) do argue that this NIMBY overrepresentation can actually help housing get built, by allowing developers to identify the NIMBYs so that they can politically marginalize them.
The other day, I was invited to a dinner with some foundation people, technologists, and journalists, to talk about AI. At dinner, the topic of AI-powered disinformation came up, and someone suggested that AI itself could provide a solution. One of the guys at the dinner thundered: “We can’t just tech our way out of the problem!”.
Until then I had hung back and stayed out of the conversation, preferring to listen to the arguments of people who knew more about the topic than I did. But the bald assertion that there’s no technological solution to the disinformation problem bothered me, especially because it was presented without any supporting evidence or rationale. I reminded him that Costello et al. (2024) found that just talking to an AI helped reduce belief in conspiracy theories:
Widespread belief in unsubstantiated conspiracy theories is a major source of public concern…Here, we…ask whether it may be possible to talk people out of the conspiratorial “rabbit hole” with sufficiently compelling evidence…
Across [our] two experiments, 2190 Americans articulated—in their own words—a conspiracy theory in which they believe, along with the evidence they think supports this theory. They then engaged in a three-round conversation with the LLM GPT-4 Turbo, which we prompted to respond to this specific evidence while trying to reduce participants’ belief in the conspiracy theory (or, as a control condition, to converse with the AI about an unrelated topic)…
The treatment reduced participants’ belief in their chosen conspiracy theory by 20% on average. This effect persisted undiminished for at least 2 months; was consistently observed across a wide range of conspiracy theories, from classic conspiracies involving the assassination of John F. Kennedy, aliens, and the illuminati, to those pertaining to topical events such as COVID-19 and the 2020 US presidential election; and occurred even for participants whose conspiracy beliefs were deeply entrenched and important to their identities. Notably, the AI did not reduce belief in true conspiracies. Furthermore, when a professional fact-checker evaluated a sample of 128 claims made by the AI, 99.2% were true, 0.8% were misleading, and none were false. The debunking also spilled over to reduce beliefs in unrelated conspiracies, indicating a general decrease in conspiratorial worldview, and increased intentions to rebut other conspiracy believers.
In fact, this is just one possible way that AI could help fix the disinformation problem. AI could also act as a scalable content moderator — what I’ve referred to as a “Digital Walter Cronkite”. Or AI assistants could help people figure out when someone online is lying to them.
Of course, we don’t yet know if those solutions will work at scale, especially if AI gets leveraged to produce more disinformation in the first place. Nor do we know how to get regular people to use the AI solutions in the real world — you can’t just order everyone to talk to ChatGPT every time they hear a conspiracy theory. But while technological solutions are still speculative, the research literature is encouraging, and it makes absolutely no sense to dismiss the possibility that AI will eventually function more as an engine of truth in our society than as an engine of lies.
In fact, I’ve been hearing versions of that guy’s assertion — “We can’t just tech our way out of the problem!” — applied to any number of problems over the years. Whether it’s climate change, Covid, obesity, traffic accidents, or drug overdoses, smart people — usually on the political left — keep telling me that the problem will only be fixed by social change, political activism, and wise policymaking, rather than by mad scientists and greedy techbros inventing some nifty new gadget.
And again and again, they’ve been wrong. Take Covid, for example. Early in the pandemic, a lot of people were adamant that the solution would come from non-pharmaceutical interventions like lockdowns, social distancing, frequent testing, and masking. I myself was enthusiastic about this effort, and even made a website to encourage contact tracing, in the hopes that this could help contain the virus. That effort failed, for many reasons that I won’t go into now. Overall, NPIs slowed the rate of transmission, but this was only a temporary solution, since NPIs were unable to stamp out the virus anywhere. The actual long-term solution was a technology — namely, vaccines, especially mRNA vaccines.
This experience deeply affected me. It made me less optimistic about the “let’s all get together and make change happen” type of solution to social problems, and more optimistic about the “let’s invent a technology that just fixes it” kind. Here’s what I wrote back in late 2020, while the pandemic was still raging:
In the last decade, we’ve basically been taught to deride “solutionism” — while Silicon Valley techbros were bending their genius toward figuring out ways to sell more ads or lower taxi drivers’ wages, inequality was running rampant and parents were struggling to feed their kids. Instead of trusting wizardry to solve the world’s problems, we were supposed to place our faith in politics, in mass action, and in cultural change.
So it’s small wonder that when COVID hit, I got tweets like the following:
Except then consider what happened with COVID. Our leaders failed to fight the virus effectively, and the President actively sabotaged containment efforts. Culturally, we screeched our heads off about masks and herd immunity and “just the flu” and beach parties and school closings and bar closings and restaurant closings and dorm closings and so on and so forth. We didn’t implement strict lockdowns and we protested against lockdowns and we didn’t even obey the half-assed lockdowns we did implement. We became one of the planet’s worst-hit countries, despite having the planet’s most expensive health care system. We died in the red states, we died in the blue states. We died in droves, in hundreds of thousands. Collectively, as a society, we wrung our hands and ran in circles and screeched and died and screeched and died and screeched and died until scientists made vaccines against the virus.
So I guess what I’m saying is, sometimes technological solutionism has its merits. Even if you aren’t ready to embrace that idea, this COVID episode should at least make you question the 2010s consensus that technology is a sideshow compared to social movements.
That post was about climate change, which is another critical problem where technological solutions are going to win where social solutions failed. Climate politics has been marginally successful in northern Europe, but has basically failed (or hasn’t even been tried) everywhere else in the world, resulting in only very minor emissions reductions. Americans simply don’t take the climate issue very seriously at all.
And yet thanks to advancements in solar power, batteries, and other technologies, clean energy is now generally cheaper than fossil fuel energy. Now China, out of pure economic self-interest, is making and selling those technologies to the whole world:
Thanks to innovation in solar, wind, and batteries, China — the world’s biggest emitter of greenhouses gases by far — is now seeing its emissions fall. That’s a far more impressive accomplishment than anything that climate politics has been able to achieve in the UK, Germany, and the other smallish countries that have heeded its call. In fact, if climate activism did have a big effect, it was by raising the salience of the issue back in the 1980s and 1990s, and convincing technologists to spend their time and money on developing green energy tech.
So technology beat Covid, is on its way to stopping climate change, and may end up helping to solve the problem of online misinformation. What else can tech fix? In fact, there’s a good chance that tech may soon end up solving America’s life expectancy problem.
Tech can fix obesity, car accidents, and possibly drug overdoses
The other day I gave a talk at a conference in Canada about industrial policy. When we came to the inevitable question of which specific industries Canada should target, I had an answer ready: “the Electric Tech Stack”.
The fact that I had an answer ready surprised some people in the audience. The traditional criticism of industrial policy is that it’s all about “picking winners”, and that winners are very hard for even the smartest person to pick. But in some cases it’s actually very easy to pick winners. In the 19th century, every country knew they needed railroads, both for national defense and for transporting goods. In the 20th century, many countries knew they needed an auto industry, because those same assembly lines and supply chains could be quickly repurposed to make tanks and other military vehicles in case of a war. In the early 20th century, countries knew that having a steel industry was crucial for creating most of the important military equipment, while in the later century, the U.S. correctly guessed that having a powerful semiconductor industry was crucial for dominance in precision weaponry.
In all four of these cases, there were arguments about the economic benefits of promoting the industries in question, but in the end it was military necessity that tipped the balance decisively in favor of industrial policy. As I told the folks in Canada, a similar thing is true in the 2020s.
In the mid 19th and early 20th centuries, railroads won wars by letting countries move supplies rapidly to the front. In the mid 20th century, wars were won by the countries that could produce lots of military vehicles like tanks and planes. In the early 21st century, the ability to win wars relies on being able to produce lots of drones.
Just a few years ago, my amateurish prediction that drones would dominate the modern battlefield was often met with a combination of amusement and scorn. Then the Ukraine War came along, and what had seemed like a crank prediction became conventional wisdom in just a few years. Every serious observer now recognizes that drones are the essential weapon of modern warfare. These little battery-powered toys are defeating infantry and armored vehicles alike. IFRI reports:
[T]he Russian invasion of Ukraine has become the theater of a massive drone-driven transformation of military operations. This phenomenon is unprecedented, both in quantitative terms—with several million drones now produced and destroyed each year—and in its influence on the dynamics of operations and the structure of forces. For context, the most drone-intensive conflict prior to 2022 was the war over Nagorno-Karabakh, where drones were responsible for around 45% of all losses in armored vehicles, artillery, and air defense systems. In Ukraine, by 2025, drones are estimated to account for 60 to 70% of all losses across all categories.
For both belligerents, drones have thus become the primary sensors, relays, and [weapons]. They constitute a robotic and increasingly automated nervous system that shapes fire support and movement coordination across all domains and operational environments…[D]rones serve simultaneously as binoculars, grenades, and mortars for infantry, who continuously reconfigure them to adapt to the enemy. They have also taken a central role in counter-battery fire, deep reconnaissance, and battlefield interdiction—roles traditionally reserved for Army aviation. At a strategic depth, they are reshaping methods of penetrating air defenses and, through cost-effective mass deployment, they are enabling maneuvering salvos against critical, economic, and political targets central to the adversary’s war effort.
More fundamentally, drones have allowed both the Ukrainian and Russian armies to maintain coherence and combat effectiveness under extreme attrition in personnel and heavy equipment. They provide the shock element needed for offensive thrusts and the stopping power required to hold or retake positions. In this sense, drones saturate the front lines like a permanent grapeshot or a reactive shield against enemy breakthroughs. They infiltrate and prowl the rear areas, hunting fire support assets and logistics, posing a constant threat to any troop or equipment rotation. They also conduct long-range raids against infrastructure and troop concentrations. [emphasis mine]
So if you want to be able to defend your country against attack in the 21st century, you really need to be able to either make large amounts of drones yourself, or reliably procure them from a country that you know will sell them to you at a reasonable price during wartime. And if you want to be able to make drones, you also need to be able to make or reliably source the materials and components that go into a drone. In fact, drones aren’t very hard to assemble, so controlling the supply chains for those materials and components is actually the whole ball game.
What are the parts that make up a drone? Some of it is stuff like injection-molded plastic, but that’s easy. If you look at a diagram of what goes into a drone, like the one at the top of this post, you can see what the actually important components are. They are:
1. A lithium-ion battery, to power the drone
2. Some permanent-magnet electric motors, to make the propellers move
3. Some power electronics in the power distribution board and the electronic flight controllers — to turn power from the battery into a form the motors can use
4. Some trailing-edge computer chips, in the receiver, the telemetry module, the flight controller, etc.
Everyone already knows about the importance of the chip industry, and chips have been militarily important for a very long time now. But the importance of the first three — batteries, electric motors, and power electronics — is new. I now refer to these three items as the Electric Tech Stack.
If you want to be able to defend your country, you simply have no choice but to secure the Electric Tech Stack. And this includes securing the minerals that are necessary to create the Stack, especially rare earths like neodymium and other minerals like gallium. If you don’t do this, you are perpetually at risk of having your drone supply cut off, which will cause you to rapidly lose any modern war.
This is the first key fact about the Electric Tech Stack. The second key fact is that if you can master it, you can master a wide variety of modern manufacturing industries as well.
The Electric Tech Stack is the key to modern manufacturing
A few months ago, I interviewed Sam D’Amico, the founder and CEO of Impulse Labs,1 about how the U.S. can win back manufacturing:
Sam — who is one of the best engineers I’ve ever met — argued that there is now a suite of just a few core technologies that are the key to manufacturing an increasingly wide array of products. In the past, manufacturing industries were very differentiated — making a car, an airplane, a telephone, a TV, and a stove all involved very different production processes and very different supply chains. Being able to manufacture cars didn’t really make you able to manufacture TVs, or vice versa.
According to Sam, that’s changing as we speak. Electric motors are overtaking combustion engines as the fundamental technology that makes machines move. This means that the same supply chains and production processes that allow you to make electronics will now also allow you to make cars, drones, motorcycles, robots, appliances, and a bunch of other products.
This is why a company like Xiaomi, which makes phones and other electronics, was able to become one of China’s top EV manufacturers in short order — making a phone is no longer that different from making a car. And it’s why BYD is now arguably the world’s #1 manufacturing company. The more different products you make that use the Electric Tech Stack, the more you can harness economies of scale and drive prices lower, thus securing market dominance.
Kyle Chan had a great post about China’s top companies back in January, in which he drew a helpful diagram:
The list of technologies that these companies target corresponds very well to the Electric Tech Stack.
In recent weeks, more people from the tech world have begun vocally recognizing the importance of the Electric Tech Stack. Ryan McEntush of Andreessen Horowitz wrote a great post about it:
[We] need a bridge that truly connects bits to atoms.
That bridge is the electro‑industrial stack — the technologies that enable machines to behave like software: minerals and metals processed into advanced components, energy stored in batteries, electrons channeled by power electronics, force delivered by motors and actuators, all orchestrated by software running on high-performance compute…
The electro-industrial stack is changing how we build and run machines…Electrified systems, built on batteries, power electronics, and high-torque motors, are more efficient, more precise, and more responsive to software. They can be tested in simulation, updated over the air, and improved continuously as telemetry feeds back into design…In other words, with the electro-industrial stack, physical machines are beginning to behave like software…
The electro-industrial stack is the bridge between software and the physical world, the foundation animating the machines that will ultimately shape the future…No company illustrates this power more clearly than BYD. What began as a Chinese battery maker now dominates the global EV market and extends into cargo ships, trains, buses, and industrial equipment. BYD even supplies more than half of DJI’s drones, by some accounts. This breadth is possible because its products share the same core technologies in which BYD has built deep expertise — mineral sourcing and refining, batteries, motors/actuators, power electronics, compute, and final assembly.
We should not aim to build an “American BYD”, but we must create its equivalent through an ecosystem of integrated suppliers and OEMs[.]
McEntush makes an excellent point that I had missed, which is that electric tech products interface with software more easily than did old combustion-engine or analog technologies.
Back in May, Daan Walter, Sam Butler-Sloss, and Kingsmill Bond wrote a great post arguing that Western countries have been slow to embrace the Electric Tech Stack because they’ve insisted on seeing it as a climate issue rather than being about national defense, manufacturing industries, and cheap power:
And the best (and longest) post about the Electric Tech Stack was written by Packy McCormick, who worked with Sam D’Amico to produce an epic explainer about modern electric technology and why it’s taking over:
This “post” is basically a short book, but it’s worth reading. It explains:
How each piece of the Electric Tech Stack works, and why it will inevitably take over more and more industries
Why AI dominance will also depend on mastering the Electric Tech Stack
Why China now controls most of the Electric Tech Stack, even though the key technologies were mostly invented in America or Japan
Some ideas for how the U.S. can build the Electric Tech Stack domestically
Packy makes another key point that I left out above, about the connections between electric tech and AI. AI takes a huge amount of electric power; solar and wind are the cheapest power sources, but they require batteries to smooth out their intermittency. In other words, supremacy in the software industry in the 21st century will probably require a strong presence in (electric) physical industry as well.
I’ll talk more in a later post about the specific industrial policies that countries can take in order to build up their Electric Tech Stack. For now, I just want to emphasize two key points:
Drones are the key to hard power in the early 21st century. If your country can’t make drones, you’re in trouble.
If you have the ability to make drones domestically, you can also manufacture an increasingly large percentage of everything else.
These two points make it clear what kind of industrial policy government should be pursuing right now. Promoting the Electric Tech Stack is crucial for national defense. Fortunately, it’s also helpful for growing new manufacturing industries.
In this situation, we don’t need to tear our hair out asking which industries the government should promote; as in the era of the railroads, the answer is bleedingly obvious. A core set of “winners” has already been picked for us — it’s just batteries, electric motors, power electronics, and chips.
This is a lesson China has learned, and the West has not yet learned.
In the past, if you asserted that the Republican party is anti-immigration, someone would always pop up to angrily retort that the GOP is only against illegal immigration. Occasionally, someone would say that what conservatives really want is to shift our immigration mix from low-skilled to high-skilled.
If this were 1995 or 2005, perhaps conservatives really would be satisfied by policies that curbed illegal immigration while preserving the legal kind. But the Trump administration has made it crystal clear that it’s opposed to all immigration, including of the legal high-skilled variety that the right used to claim to want.
Just yesterday, Trump issued an executive order slapping incredibly harsh restrictions on the H-1B visa program. According to the order, and to clarifying remarks made by Commerce Secretary Howard Lutnick, anyone who employed an H-1B worker would have to pay $100,000 to the government every year that worker was employed:
An uproar immediately ensued. It wasn’t clear whether the order would hold up in court, but if it did, it would effectively kill the entire H-1b program. $100,000 a year is simply too onerous.
Killing the H-1b program would cause huge disruption to much of the U.S. tech industry and to the university system as well. The tech industry is very international; often the people who bring key ideas to a startup are at first only able to come work in America via H-1b. A lot of universities initially depend on H-1b visas to bring over faculty and researchers. In general, critical knowledge workers will eventually get employment-based green cards,1 but this takes a lot of time and effort; usually, they have to come on H-1b first, and apply for green cards while working in America.
As a result, a lot of very successful and famous Americans needed the H-1b to get their start in the country:
Cut off H-1b, and you cut off much of the pipeline of skilled legal immigrants to the U.S.A.
Whether or not the Trump administration was aware of the ramifications of the order will probably never be known. But the size of the uproar — which was probably assisted by some frantic behind-the-scenes maneuvering by the “Tech Right” — caused the administration to do one of the hasty backtracks for which it has become famous. Within a day, U.S. government agencies were tweeting that the new rule is only a one-time fee rather than a repeating one, and that it doesn’t apply to existing visa holders. There was an instant wave of relief.
If the $100,000 fee holds up in court, it’ll still place a significant burden on H-1b employers and workers,2 but not an insurmountable one. And it looks like foreign students may be exempted from the fee, which would bias the visa program toward people who study at U.S. universities and away from people who are hired directly from overseas. That would actually be good, since the former are especially desirable.
But in any case, the order, in whatever form, is still a significant attack on skilled immigration. And it wasn’t the most egregious one we’ve seen in recent weeks. A couple of weeks ago, ICE raided a Hyundai battery factory in Ellabell, Georgia, arresting hundreds of South Korean workers:
A sprawling Hyundai manufacturing plant in a quiet southeast Georgia community became ground zero on Thursday for one of the most extensive immigration raids in recent US history. The operation, months in the making, ended with 475 arrests, most of them Korean nationals…[N]early 500 federal, state and local officers poured into the sprawling battery production facility, still under construction…The high-stakes raid…was the result of…a meticulously coordinated investigation involving multiple federal and state agencies and weeks of intelligence gathering…marking the largest sweep yet in the current Trump administration’s immigration crackdown at US worksites…
Federal agents descended on the Hyundai site Thursday morning like it was a “war zone,” a construction worker at the electric car plant told CNN…All 475 people taken into custody were illegally in the US, said Steven Schrank, a Homeland Security Investigations special agent in charge. Some crossed into the US illegally, some had visa waivers and were prohibited from working, and some had overstayed their visas, he said.
The raid on the South Koreans, by all accounts, was very harsh and brutal, with various medical incidents among the detainees, and frequent threats of violence by the federal agents.
The raid wasn’t illegal, of course, or even against the letter of the law. These workers were not working legally (except for one who had a valid visa and was detained anyway, for some reason). Most of them were in a legal gray area — their temporary permits allowed them to do certain kinds of work but not others. But they certainly possessed skills that were important to the build-out of a critically important U.S. manufacturing industry.
Both of these actions were very bad, and will be detrimental to America’s wealth and power. The negative impact of the raid on the Hyundai factory is obvious — the mass arrest has caused an international incident, inciting rage among the Korean populace, and prompting some Korean politicians to demand an official apology from the U.S. Meanwhile, an absolutely massive amount of planned Korean investment into the U.S. is now being reconsidered or put on hold, threatening Trump’s dreams of reindustrialization.
As for the H-1b case, the program has a variety of problems. Some companies that abuse the system — hogging H-1b slots for low-value outsourcing workers, or treating H-1b employees like indentured servants. I wrote about these problems, and how to fix them, in a post back in 2022:
Let me just quote myself a bit:
[C]oncerns over the H-1b program…deserve serious consideration…If some employees can’t change jobs, they won’t have much leverage to negotiate for raises. H-1b visas are not hard to transfer, but if a worker is in the process of applying for a green card, that transfer (which is really a cancellation and reapplication) can be a lot more difficult. And if visa workers desperately fear losing their jobs — an H-1b worker who gets laid off has to leave the country if they can’t find work in 60 days — they’ll accept lower wages. These two effects will tend to put downward wage pressure on other workers, who have to compete with the H-1b holders…
As it happens, there’s…some direct evidence against [this] common fear. Mithas and Lucas (2010) studied compensation of H-1b workers compared to their native-born colleagues, and found that after controlling for observable determinants of skill, the visa holders actually earned more…This is exactly the opposite of what you’d expect if H-1b workers were forced to accept low wages because they’re yoked to their employers…
In fact, H-1b workers do lots more than just compete with [native-born workers]. They boost the economy in at least two important ways.
First, having more skilled workers in an area enhances clustering effects…H-1b workers increase the size of [the] pool [of skilled workers in American cities], and so they make a whole city a more attractive destination for investment. That will tend to raise both employment and wages — including for native-born workers in the same industry!
In fact, there are multiple studies showing that either this effect, or some other benefit of H-1b workers, dominates any competitive pressure when it comes to the effects on the native-born.. For example, Peri, Shih and Sparber (2015) find that “increases in STEM [H-1b] workers are associated with significant wage gains for college-educated natives.” Kerr, Kerr, and Lincoln (2015) find “consistent evidence linking the hiring of young skilled immigrants to greater employment of skilled workers by the firm”…
The second way H-1b workers help the U.S. economy…is through innovation…Lincoln and Kerr (2008) find that increases in H-1b levels increase patenting (without decreasing patenting by the native-born). Khanna and Lee (2018) find that when a company is lucky enough to get more H-1bs, it introduces more new products and its revenue goes up. Dimmock, Huang and Weisbenner (2019) find that startups that win the H-1b lottery get more VC funding and have more successful IPOs. Though it’s hard to measure, these innovative activities probably generate economic activity far from the city or company where the H-1bs work, and so they boost wages and employment for native workers in addition to the ones found in the earlier studies.
The idea that the main effect of immigrants is to compete with native-born American workers is incredibly seductive, simple, and persistent. It is also, generally speaking, wrong.
Mayda et al. (2017) found that when national H-1b numbers were restricted, employment for similar native-born workers didn’t rise…
Mahajan et al. (2024) found that companies who won the H-1b lottery didn’t hire fewer “H-1b-like” native-born workers. They conclude that “lottery wins enable firms to scale up without generating large amounts of substitution away from native workers”.
Glennon (2023) also finds evidence that when we do restrict H-1bs, it leads to more offshoring; if companies can’t hire tech workers here in America, they will hire them elsewhere. This is because A) tech workers earn even less when they’re working overseas, so the wage competition is stiffer, and B) when they’re overseas, tech workers don’t spend their money in America and stimulate local economies.
On top of all that, there’s evidence that the H-1b program is great for startups. Dimmock et al. (2019) found that startups that win the H-1b lottery end up getting more VC money, patenting more, and having more successful exits.
So there’s a ton of research showing that the H-1b program is very important and good for Americans. In my experience, opponents of H-1bs tend to just dismiss this research without even looking at it, or impugn the motives of the studies’ authors. They almost never seriously engage with the literature. Occasionally one will search around and dig up a rare paper saying that H-1bs do compete down the wages of U.S. workers — usually Bound et al. (2017). But Bound et al. (2017) is a structural estimation paper — it concludes that H-1b workers reduce native-born wages because it assumes away the induced investment demand mechanism by which those workers increase native-born wages. Of course, the people pulling up the paper rarely if ever realize that.
The almost religious zeal with which people attack the H-1b program tells me that there’s something else going on here. Oftentimes, that “something” is anti-Indian racism. Around Christmas of last year, there was a huge battle on X between the Tech Right and the alt-right over Indian immigration. The alt-right unleashed a fiery attack on Indians, much of it directed at H-1b workers (who are about 70% Indian these days):
The Tech Right won the battle thanks to Elon Musk — himself a former H-1b worker — who threatened to “go to war on this issue the likes of which you cannot possibly comprehend”. But the alt-right won the war, because anti-Indian hate became widespread on X. Some of the hate-posts were opportunistic trolling from Pakistan, but most were homegrown;3 the alt-right simply found Indians an easy target. Despite Musk’s attempt to protect them, Indian-Americans went onto the hard right’s list of targeted groups. Once you’re on that list, it’s very hard to get off of it.
In fact, that shift was probably in the works for a while. During Trump’s 2016 campaign, alt-right influencer Steve Bannon said the following:
In response to Trump actually arguing that we need to keep some immigrants in the country, Bannon says, "When two-thirds or three-quarters of the CEOs in Silicon Valley are from South Asia or from Asia, I think... A country is more than an economy. We're a civic society."
Bannon’s argument here is that even the highest-skilled immigrants from Asia are suspect, because they’re unlikely to have America’s best interests in mind.
And in 2022, right-wing law professor Amy Wax attacked Asians for leaning toward the Democratic party:
Maybe it’s just that Democrats love open borders, and Asians want more Asians here…But as long as most Asians support Democrats and help to advance their positions, I think the United States is better off with fewer Asians and less Asian immigration.
So there was probably a roiling undercurrent of negative sentiment towards Asians, and Indians in particular, on the political right for many years. Now, with the right’s political ascendance and the weakening of progressives’ cultural power, the submerged anti-Indian sentiment is boiling to the surface.
To some degree this is to be expected. Indian Americans are stunningly successful — they’re the country’s most elite minority, with the highest income, the most education, and plenty of representation in science, politics, entrepreneurship, and upper management. It was inevitable that some people in the U.S. would envy that success, and that some would fear it.
A similar thing happened with Jews a hundred years ago. Some incumbent elites tried to shut Jews out of the Ivy League and the upper echelons of business. Others believed that Jews would not understand American values or have America’s interests at heart. And still others feared that Jewish people would support each other in the business world to the exclusion of others.
You can see all of those reactions happening with regards to Asians today — and especially to Indians. Famously discriminatory practices at the Ivies have worked to keep Asian numbers down (something that right-wingers have actually fought against). The alt-right thinks of Indians as resident aliens, conspiring for their own profit at the expense of the nation.
And as for self-dealing and ethnic exclusivity, I’m starting to hear this charge thrown around a lot as well, on social media and even in some San Francisco parties.4 The X user “Power Bottom Dad”, a harsh critic of H-1bs, has identified at least two lawsuits in which a big American company was accused of preferentially hiring Indians or discriminating against U.S. citizens. Whether that is a general pattern, as Power Bottom Dad asserts, or a couple of isolated incidents that could be found from time to time among any ethnic group in America, is probably irrelevant to the politics of the issue; what matters is that there is a portion of Americans out there who see Asian immigrants, and particularly Indian immigrants, as a clannish self-dealing cartel.
The other notorious backlash against an immigrant elite in America, of course, was the Japanese internment during World War 2. Although officially about preventing Japanese Americans from turning traitor, the internment also allowed opportunistic white California farmers to push their Japanese competitors out of the market. We haven’t seen anything like that yet with Indians, Koreans, or other Asian groups, but if there’s a conflict with China while Trump is President, we could see persecution of Chinese people.
But anyway, while figures like Amy Wax and Steve Bannon are odious, I’m actually slightly sympathetic to the fear of a demographic turnover among the elite. The number of slots for elite politicians, businesspeople, and academics in America is fairly constant, so it does become a zero-sum competition. It’s natural to be afraid of getting pushed out of that elite by hard-charging immigrants who were selected for their genius — and also by ethnic cartelization to monopolize the elite.
The price of that fear, however, is simply very high. This is not the 19th century; America has low birthrates among its elite (and in general), so it can’t replenish its elite through reproduction. Instead, if we want to keep having the world’s best engineers and researchers and such, we need to import some of them. Cut off that flow, and Americans will discover why a country with only 4% of the world’s population can’t remain the center of global research and development without a lot of skilled immigration.
On top of that, Trump’s poor treatment of Indian H-1b workers and Korean construction workers will end up weakening America’s alliances — and economic relationships — with those two Asian countries. Weakened alliances in Asia will make it nearly impossible for the U.S. to effectively resist the encroachment of Chinese power.
So right-wing fears of an Asian-led America are going to end up making the actual America poorer and less globally relevant. Personally, I don’t think that tradeoff is worth it. Demographic change among the elite can be unsettling, but not as unsettling as a collapse of America’s global power and domestic economic dynamism. We’ve dealt with a changing elite before, and it worked out fine; we can do it again.
I even heard a second-hand anecdote about a rich right-wing guy who maintains a huge army of anti-Indian hate bots to post on X and other social media sites.
“If the freedom of speech is taken away, then dumb and silent we may be led, like sheep to the slaughter.” — George Washington
“Our liberty depends on the freedom of the press, and that cannot be limited without being lost.” — Thomas Jefferson
“Why should freedom of speech and freedom of press be allowed? Why should a government…allow itself to be criticized? I would not allow opposition by lethal weapons. Ideas are much more fatal things than guns. Why should any man be allowed to…disseminate pernicious opinions calculated to embarrass the government?” — Vladimir Lenin
Donald Trump returned to power promising to restore freedom of speech in America. In his inaugural speech on January 20, he declared:
After years and years of illegal and unconstitutional federal efforts to restrict free expression, I also will sign an executive order to immediately stop all government censorship and bring back free speech to America.
Our own government encouraged private companies to silence people...Under Donald Trump's leadership, we may disagree with your views, but we will fight to defend your right to offer it in the public square.
And in a now-deleted tweet from 2019, Brendan Carr, whom Trump would later name to lead his FCC, offered similar sentiments:
Why were the MAGA folks talking so passionately about freedom of speech? Because for years, conservatives felt as if that freedom was under attack by the progressive movement, and later by the Biden administration.
Since the mid-2010s, progressives on social media had tried to ruin the reputation and careers of people who said things they considered racist, transphobic, or otherwise problematic. Social media platforms were successfully pressured to “deplatform” various figures on the right, including Donald Trump himself after the January 6th attacks. Some rightists were even cut off from bank accounts and other essential services.
Progressives argued that none of this was a violation of freedom of speech. They claimed that freedom of speech is entirely defined by the First Amendment, and involves only government restrictions on speech. If private companies took away your bank account or kicked you off of the country’s main social media platforms, that was merely social ostracism, not a violation of any freedom. Conservatives retorted that if private companies have the ability to make modern life unlivable for people whose speech they don’t like, that takes away their freedom of speech.
I agree with the conservatives on this one; government is not the only organization that has the power to restrict freedom. I thought the centrist liberals who signed the Harper’s Letter in support of free speech — and were pilloried by progressives for doing so — were pretty heroic.
Anyway, then came the Biden administration’s war on disinformation. The administration tried to pressure social media companies into taking down certain posts, and was eventually halted from doing this by the courts. Biden’s Department of Homeland Security created a “Disinformation Governance Board” that conservatives feared would become a propaganda ministry. (I side with the Biden administration on this latter example; having the government contradict things people say is not a violation of free speech.)
After years of this, conservatives and rightists started to think of themselves as the guardians of free speech, fighting back against a smothering progressive orthodoxy. For many, this belief was sincere. But for the Trump administration, it proved to be nothing more than a cheap slogan.
In the days since the assassination of Charlie Kirk, the administration has encouraged companies to fire people who celebrated the murder. JD Vance said: “When you see someone celebrating Charlie's murder, call them out — and, hell, call their employer.” And in fact, many employers have been firing people for saying the wrong thing about Kirk. Trump and other GOP politicians have echoed the call for people who insult Kirk to be fired.
This is a right-wing version of “cancel culture”, and it’s perfectly legal, just like it was when progressives did it. I do believe this is a restriction on freedom of speech, but it’s not a violation of the First Amendment.
But that was only the beginning. Over the last few days, the Trump administration has begun to use government power to persecute people for saying things it doesn’t like. Jimmy Kimmel, a late-night comedy show host, accused the MAGA movement of trying to make political hay out of Kirk’s murder (which appears to be true), and claimed that the killer was actually a rightist (which appears to be false). In response, Brendan Carr, Trump’s FCC Chair, threatened ABC and its local affiliates:
FCC chairman Brendan Carr has threatened to take action against ABC after Jimmy Kimmel said in a monologue that “the MAGA gang” was attempting to portray Charlie Kirk‘s assassin as “anything other than one of them.”
Appearing on Benny Johnson’s podcast on Wednesday, Carr suggested that the FCC has “remedies we can look at.”
“We can do this the easy way or the hard way,” Carr said. “These companies can find ways to change conduct and take action, frankly, on Kimmel or there’s going to be additional work for the FCC ahead.”
ABC and the local stations, worried about retaliation from the administration, immediately cancelled Kimmel’s show.
The government forcing a private company to cancel a comedy program it doesn’t like already constitutes the most significant attack on press freedom in a generation. But the Trump administration has signaled that this is only the beginning of a much broader, deeper government campaign to stamp out opinions it doesn’t like.
Attorney General Pam Bondi declared that freedom of speech doesn’t extend to “hate speech” — something radical progressives have long argued, and conservatives have long resisted.
President Donald Trump on Thursday suggested that the federal government might revoke the licenses of broadcast television networks that are “against” him…“They give me only bad publicity, press. I mean, they’re getting a license,” Trump said, according to audio from a press gaggle provided by the White House.
“I would think maybe their license should be taken away,” Trump said…The president said that the decision “will be up to Brendan Carr.”…Trump specifically referred to criticism he has gotten from Kimmel and CBS late-night talk-show host Stephen Colbert…
“Look, that’s something that should be talked about for licensing, too,” Trump said…“When you have a network and you have evening shows, and all they do is hit Trump,” he said. “That’s all they do. If you go back, I guess they haven’t had a conservative on in years or something, somebody said.”…“But when you go back, take a look, all they do is hit Trump. They’re licensed. They’re not allowed to do that. They’re an arm of the Democrat party,” he said.
Carr earlier Thursday told CNBC’s “Squawk on the Street” that “we’re not done yet” with changes in “the media ecosystem” that are consequences of Trump’s election.
Trump isn’t even making it about Kirk anymore; he’s simply using government power to threaten private companies that criticize him. He also called for other late-night comedians to be fired, despite the fact that they haven’t said anything about Kirk that offended conservatives. He called for jail time for people protesting against him, and threatened a reporter for questioning him about “hate speech”.
In fact, some Republicans who consider themselves defenders of unfettered speech are getting more comfortable with limiting it. Sen. Cynthia Lummis, R-Wyo., told Semafor that “an FCC license, it’s not a right. It really is a privilege.”
“Under normal times, in normal circumstances, I tend to think that the First Amendment should always be sort of the ultimate right. And that there should be almost no checks and balances on it. I don’t feel that way anymore,” Lummis added.
“I feel like something’s changed culturally. And I think that there needs to be some cognizance that things have changed,” she added. “We just can’t let people call each other those kinds of insane things and then be surprised when politicians get shot and the death threats they are receiving and then trying to get extra money for security.”
For all the concerns about the First Amendment, the First Amendment… what about all the amendments Charlie Kirk lost, because Charlie Kirk has no amendments right now.
This is all incredibly bad. Even many conservatives and some rightists agree that it’s incredibly bad. Freedom of speech, and of the press, is the most bedrock freedom that Americans possess — the core value that divides us not just from authoritarian states, but even from other democracies like the UK and Canada who see the freedom as less absolute. It is no coincidence that the First Amendment is the first.
Why is freedom of speech so essential to American civilization, and to democracy? Because once freedom of speech is eliminated, it becomes far easier for power-hungry regimes to cancel other freedoms as well, since no one will be able to speak out in opposition. You don’t need any vague slippery-slope arguments to realize that freedom of speech is the first and most essential bulwark against the abrogation of all freedoms.1
And there is a reason why we go to so much greater lengths to protect people against government restrictions on speech. Government has a monopoly on the use of force; the danger of being fired or debanked for saying the wrong thing definitely makes people feel less free, but it’s nothing compared to the danger of being thrown in a dungeon. If Trump and his people had stuck to “cancel culture” after Kirk’s death, I would have stuck to making snide comments about their hypocrisy. But now that they’ve declared their intent to leverage the power of the government against anyone who opposes them, it’s a five-alarm fire.
Is there anything interesting to say about this issue other than “free speech is good, and we should defend it”? In fact, I think there are at least two additional points to make here.
#/media/File:Doughnut_(economic_model).jpg){kind=link}
,_California_Street,_autonomes_Fahrzeug_(Waymo)_--_2022_--_2925.jpg){kind=link}
