Nearly ten years ago, I wrote what I thought was a provocative essay about polygamy and the state. Specifically, I claimed that the state acts like a polygamist, enforcing a cruel and explicitly patriarchal regime on single mothers. Perversely, the justification for this repressive regime is compassion, even “social justice.”  

One of the most corrosive aspects of patriarchy is that it treats women as objects, rather than active moral agents in their own right. It is certainly true that, given the weak bargaining position women are often placed in, in traditional societies, women appear to accept inferior roles. But as Gerry Mackie famously argued, even the worst institutions — footbinding and infibulation, for example — have a “rational element” from the perspective of women trapped in these systems. Lisa Tessman has a theory of contingency and virtue, about the struggle of women to preserve a space for virtue in lives circumscribed by sexist rules.

In the years since I wrote the first version, the performance and repression of our welfare system has, if anything, gotten worse. The “privilege” of being raised in a two-parent household is being denied to more and more children. We can’t ignore the truth: the state is a small-minded polygamist, outlawing marriage to anyone except the welfare system and — worse — insisting that the women stay at home rather than finding jobs.

About eight million US families are headed by single mothers, and of those nearly three million live below the poverty line defined by the government. Many sustain this tenuous existence with “assistance,” ranging from subsidies on housing and food to childcare and education grants. The state is no Puritan, and does not enforce a rule of exclusivity on the sex lives of these women. But it has an iron-clad rule that if a woman gets married, or gets a job, she loses her benefits. 

This so-called “benefits trap” has been commented on by both the left and right as an odd policy. Brittany Birken, director of community and economic development at the Federal Reserve Bank of Atlanta, testified before a joint oversight committee here in North Carolina about a proposed consolidation of welfare programs known as the “One Door” policy.

Birken used an anecdote to illustrate the problem: she had talked to a single mother in Florida who had been offered a 10-cent per hour raise, and more hours, in her part-time job. The woman said (according to her calculations) if she accepted the promotion she would lose her benefits through the childcare subsidy program.

“We confirmed her math. For that $200 a year increase, she was going to lose access to $9,000 in childcare subsidies,” Birken said. “The real dilemma that families can face is advancing in their career or making financial ends meet.”  Women who find themselves in this no-win situation are not lazy; they are rational, because they have to accept the situation as it is.

Of course, that’s not how the architects of the welfare system think about it. These program heads no doubt see the system protecting women who are otherwise defenseless, with no other means of raising their children. The problem is that these “benefits” are contingent, and the contingencies — no jobs, no marriage — are detrimental to women long term, and disturbingly similar to the restrictions a polygamist would impose.

Some people in the US are poor. They aren’t poor by world standards, perhaps — a minimum wage job in the US puts you in the top 30 percent of the world income distribution — but by US standards, they are poor. Welfare state logic insists that if you are a good person, you care about people who are (especially through no fault of their own) poor. Therefore, we (the state) should do something. 

Passing those programs requires some political compromises, and intentionally creating obstacles to access, or means testing. Contingencies and guard rails are erected to limit fraud, and direct money only to those “who really need it.”  But those conditions trap recipients in a cycle of poverty from which escape is very difficult. Get a job, lose your benefits. Get married, lose your benefits. 

Astonishingly, the effective marginal tax rates for poor people with children can approach, or in some cases exceed, 100 percent. As the Center for Hunger Free Communities put it: “Families that successfully increase their earnings should not find themselves worse off due to the consequent loss of benefits…. While a higher income can be an important step in a family’s progress towards self-sufficiency, the increased child food insecurity in this group suggests they may be experiencing the ‘cliff effect.’ This occurs when an increase in income causes an overall reduction in total resources due to a loss of benefits or increased tax liability.”

Welfare policies are, for the most part, well-intentioned. But their perverse effect is real. Our welfare system traps women in hopeless lives, depending on a state that — like a small-minded polygamist — doesn’t really want them, but is too jealous to let them go.

ESG investing poses a grave threat to the principles that lifted billions out of poverty. It neither does much good nor performs very well. Therefore, it must end.  

So asserts Ending ESG, a collection of essays edited by Phil Gramm and Terrence Keeley. Gramm, a former Republican senator and economics professor, and Keeley, a former managing director at Blackrock, are well-suited to make the case. The book’s lengthy introduction is co-authored by Gramm and Keeley. It traces the Environmental, Social and Government (ESG) investment movement back to the United Nations. Not to the Kofi Annan era of the late 90s and early 2000s, that is, but all the way back to the 1948 Universal Declaration of Human Rights.  

The authors do not dwell upon this early history, but it is worth briefly unpacking. Eleanor Roosevelt chaired the drafting committee of the UN Declaration. She explained that many of its members “thought that lack of standards for human rights the world over was one of the greatest causes of friction among the nations, and that recognition of human rights might become one of the cornerstones on which peace could eventually be based.” This was a pressing priority in the wake of World War II.

Jacques Maritain, a French Philosopher who provided intellectual inspiration for the document, explained how consensus was achieved: “we agree on these rights provided we are not asked why. With the ‘why’ the dispute begins.” History has since tested the stability of agreeing not to ask why.

Over the next 75 years, the UN’s declaration of rights eventually led to ESG. Inspired by the declaration, the UN launched development goals (eradicating poverty, gender equality, environmental sustainability, etc.). Then, the UN released investment principles based on these goals, to be adopted by major asset managers, banks, public pensions, and regulatory bodies. To the shock of anyone familiar with other UN efforts, the UN’s work on ESG has paid off.  

ESG has been adopted by major institutions over the world, in word if not always in deed. The result is that “the private economy is increasingly being coerced into meeting a growing number of environmental and social goals that Congress never mandated.”  

The cost of such coercion is high. For one, it undermines the legal and ethical basis of economic progress. Whereas the economic Enlightenment was “founded on the principle that people own the fruits of their own labor and thrift,” ESG is a “throwback to the medieval concept of communal property.” Throughout 14 essays, mostly penned by Gramm and/or Keeley, Ending ESG argues against such an ESG-inspired return to medieval economics.

ESG might seem high-minded and noble compared to the hard-nosed alternatives of fiduciary responsibility and shareholder primacy. But appearances are deceiving. When it comes to results, the economic enlightenment enabled 128,000 individuals to escape abject poverty every single day. In contrast, it’s not clear if the ESG movement has accomplished anything of note, other than lowering the popularity of Wall Street and Corporate America among conservatives, contributing to the anti-business turn on the right.

And though the ESG movement claims to care about eradicating poverty and protecting the environment, we should not take these claims too seriously. Keeley cites a research finding that there is “no evidence that socially responsible investment funds improve corporate behavior.” Moreover, it’s difficult to even assess the impact of ESG strategies since “ESG scores among leading rating agencies correlated only 54 percent of the time.”  

The evidence is compelling, but it raises a puzzling question: if ESG does “neither much good nor very well,” why do so many people seem to believe it does both? Where did ESG critics go wrong? Why did it take nearly two decades for ESG to face substantial backlash?  

One problem is that the defenders of fiduciary responsibility failed to provide adequate moral foundations for their view. Keeley cites Milton Friedman’s classic 1970 New York Times piece, “The Social Responsibility of Business is to Increase Its Profits.” There, Friedman argued:

In a free‐enterprise, private‐property system, a corporate executive is an employee of the owners of the business. He has direct responsibility to his employers. That responsibility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while conforming to the basic rules of the society, both those embodied in law and those embodied in ethical custom.

Friedman, a committed positivist, did not found his concept of social responsibility on a universal ethical standard, other than the need for business executives to defer to shareholder desires. And, in his view, this will usually mean to seek profits while conforming to existing laws and customs. These laws and customs will vary from time to time, and from place to place. And so, apparently, will the social responsibilities of businesses.

In his essay “How Conservatives Can Get ESG Right”, Keeley endorses Friedman’s analysis. Yet it suffers from two major flaws, flaws that also weaken Keeley’s arguments. First, businesses and investors are not just passive recipients of laws and ethical customs. Business leaders are norm-makers, not just norm-takers.  

The most successful business leaders are able to cast a compelling long-term vision, one that includes but goes beyond making money, and to persuade their investors to remain focused on the long-term. That is, business leaders lead their investors, they don’t merely respond to investor preferences. Further, policymakers depend on the counsel of industry to respond to technological innovations, as we are now seeing with artificial intelligence. And business leaders seek to influence both the law and public opinion, such as through lobbying, public relations, media, and publishing their own thoughts.  

This is understandable. To survive, businesses cannot merely conform to the basic rules of society — they must influence them. But how, and in which direction? For example, should they oppose crony subsidies and regulations, which may help their profits, at least in the short term, but undermine economic dynamism and the very legitimacy of their businesses? Friedman’s positivism does not provide much guidance here.  

After all, the ethical customs and laws of a society may grow increasingly hostile to private enterprise. Indeed, they seem to be doing so now. Business leaders cannot be expected to stand by as activists assault the legal and ethical foundations of economic progress, or as government agencies violate their constitutional rights. While Ending ESG recommends that business leaders “keep politics out of the boardroom,” this is no longer an option for major corporations, if it ever was.

Moreover, activist shareholders increasingly are advancing shareholder proposals that are harmful to the long-term interests of the very corporations in which they own shares. This means businesses increasingly have to defend themselves against their own shareholders. Complicating matters further, the nature of business ownership has radically changed since 1970, with the rise of passive index investors and pension-fund activism. It’s no longer safe to assume that major investors will all agree on maximizing the long-term value of a particular firm, especially if that firm is engaged in ESG-unfriendly lines of business. What most investors do, and should, prioritize is very much up for debate.

Keeley claims “there is no practical alternative to shareholder primacy.” But clearly, there is. For one, many American states now have the option of “benefit corporation,” an option that replaces shareholder primacy with responsibilities to an array of stakeholders. And in Europe, the concepts of double materiality and co-determination override any commitment to shareholder primacy.  

Now, it’s true that such stakeholder governance often comes at a cost. On the other hand, stakeholder advocates will claim the cost is worth it, whether to save the planet, or to advance “equity.” It’s incumbent, therefore, upon ESG critics to advocate an alternative vision, not merely to fall in line with convention.

Without casting a bold vision for the future of free enterprise, there is no hope of ending ESG. Keeley himself recommends that “Republicans need a road map that would enable society to get all the good out of ESG without the bad.” He also refers approvingly to “growing numbers of shareowner resolutions seeking lower carbon emissions or increased workforce diversity.” But why defer to the United Nations, of all institutions, as a moral authority? Why grant any moral worth to counterproductive Western divestment from fossil fuels? Why pay even lip service to skin-deep diversity metrics?  

Just as Friedman recommended business leaders “conform” with convention, Keeley accepts ESG’s goals, while challenging its methods on pragmatic grounds. This is not a sustainable division of labor. It makes no sense for capitalists to legitimize the NGOs, global institutions, and academics working to delegitimize capitalism and advance the “religion of humanity.”

In the words of Argentine President Javier Milei,

Milton Friedman used to say that the social role of an entrepreneur is to make money. But that’s not enough. Part of their investment must include investing in those who defend the ideals of freedom, so the socialists can make no further advances. And if they don’t do it, they [the socialists] will get into the State, and use the State to impose a long term agenda that will destroy everything it touches. So we need a commitment from all of those who create wealth, to fight against socialism, to fight against statism, and to understand that if they fail to do so, the socialists will keep coming.

Fortunately, there are reasons for hope. 

Some business leaders are taking a more active role in advocating for the principles of economic enlightenment. In 2023, prominent Silicon Valley investor Marc Andreesen published the Techno-Optimist Manifesto. Andreesen’s manifesto defended free markets and attacked ESG as part of a “mass demoralization campaign.” Tech founder Brendan McCord launched the Cosmos Institute. Cosmos is bringing together philosophers with technologists in an Oxford University seminar, to discuss how technology can promote human flourishing. Elon Musk, of course, been scathingly critical of ESG, calling it a scam. And Liberty Energy CEO Chris Wright releases an annual Bettering Human Lives report that argues for prioritizing the elimination of energy poverty over ESG goals.

Beyond business leaders themselves, the Alliance Defending Freedom recently released a “Statement of Principles on the Purpose of a Corporation.” The statement declares that “the proper purpose of business is to advance human flourishing by creating economic value through excellence in the provision of goods and services.” And the Abundance Institute has been making the case for “long-term tech optimism.”

To be sure, no particular one of these efforts is definitive. Nor, combined, will they be sufficient to defend the “economic enlightenment” against illiberal assaults. Yet if more affirmative visions for free enterprise are paired with reasonable, evidence-based critiques of ESG, such as those offered by Gramm and Keeley, ESG’s days might, indeed, be numbered.

Tariffs, often promoted as a tool to protect American jobs and industries, are a hidden tax that disproportionately burdens consumers and producers alike. Both the Trump and Biden administrations have embraced these protectionist policies, and future administrations may likely do the same. But these policies do more harm than good, undermining the very people they are designed to protect.

Recently, protectionist policies have been championed by the Trump-Pence administration, continued by the Biden-Harris administration, and likely doubled down upon by Trump-Vance or Harris-Walz. Tariffs may seem like a good way to shield domestic industries from foreign competition by making imports more expensive, but the reality is starkly different. Tariffs are taxes on imports; like all taxes, the costs are inevitably passed down to the consumer. When the federal government imposes tariffs, it raises the prices of goods that many American businesses rely on, leading to higher costs. This isn’t just an abstract economic concept — it affects every American who buys a car, electronics, groceries, or other everyday items.

In 2023, the US imported over $3.8 trillion of goods and services while exporting $3.05 trillion. This nearly $7 trillion in trade volume highlights how imports and exports play a role in the US economy, supporting millions of American jobs, but is a relatively small share of the $27.3 trillion economy. While the US ran a current account deficit as imports exceeded exports by $773.4 billion in 2023, this amount doesn’t tell the whole story. 

For instance, the US had significant trade surpluses with regions like South and Central America ($54.9 billion) and countries like the Netherlands ($43.7 billion) and Hong Kong ($23.6 billion). Conversely, it recorded deficits with China ($279.4 billion), the European Union ($208.2 billion), and Mexico ($152.4 billion). Notably, while substantial, trade with China represents only 8.4 percent of the total US international trade volume, even as it accounts for 36 percent of the current account deficit. This deficit and the total trade deficit are met with a capital account surplus, with funds flowing into the US, including investments that help finance the national debt, support lower interest rates, and support capital to businesses.

International trade provides mutually beneficial exchanges between people in different countries, supporting peace and prosperity.

The Real Economic Impact of Tariffs

Proponents of tariffs often argue they are necessary to rebuild America’s manufacturing sector, but the problem isn’t foreign competition — it’s at home. US manufacturers’ core issues stem from excessive government spending, high taxes, inflated minimum wages, overregulation, and a lack of right-to-work laws. Instead of addressing these root causes, tariffs exacerbate the problems by acting as an additional tax on American businesses and consumers.

When tariffs are imposed, the costs of imported goods rise. These goods are finished products, raw materials, and components that American producers rely on in their supply chains. This increased cost of production ripples through the economy, making American goods more expensive both domestically and internationally and hurting US businesses’ ability to compete.

Take, for example, the tariffs on steel, which were implemented to protect US steel producers. While they may have helped some steel manufacturers, they raised costs for industries that depend on steel, such as the automotive and construction sectors. These industries were forced to pass on these costs to consumers, making American-made goods more expensive and less competitive. Rather than revitalizing manufacturing, these tariffs hinder growth, slow job creation, and harm consumers.

Moreover, tariffs fail to address the real reasons behind the loss of manufacturing jobs. Automation and technological advances have displaced many jobs, allowing US manufacturing output to reach record highs with fewer workers. The Rust Belt’s loss of manufacturing jobs is less about foreign competition and more about the evolving nature of the global economy, tariffs do nothing to solve these domestic challenges.

When tariffs increase, they tax what we purchase from other countries. This tax directly affects producers and consumers who rely on foreign goods. The process reduces the demand for foreign currencies to purchase foreign goods while raising demand for the dollar, especially when the federal government runs deficits that result in higher interest rates. This results in an appreciated dollar by roughly the size of the tariff itself. This currency appreciation helps keep the cost of the taxed goods from rising too quickly, but it simultaneously disrupts the supply chain and other factors of production. As the dollar appreciates, US exports become more expensive for foreign buyers, leading to fewer exports and more imports. This dynamic undermines the goal of balancing or reducing the trade deficit with the targeted country or others.

Moreover, foreign countries often respond with retaliatory tariffs, raising costs for their producers and consumers while driving a wedge between trade relationships. This creates direct costs and increases economic and political uncertainty — something businesses dread when planning for the future. Although tariffs don’t directly cause inflation — an issue controlled by the Federal Reserve’s monetary policy — they raise prices on specific goods through the added tax. These increased costs can ripple through the supply chain, affecting many products. International trade is complex, and protectionist measures like tariffs only exacerbate the complexities, worsening the situation.

The current account deficit with other countries is balanced by a capital account surplus, where foreign savings flow into the US, helping finance our national debt and keeping interest rates lower than they would otherwise be. However, the flow of funds is slowing as some countries shift away from the US dollar, opting for gold and other assets. This trend poses a risk to the US economy by potentially restricting our ability to trade with other countries and raising the cost of borrowing as interest rates rise. This shift from the dollar, known as de-dollarization, underscores the importance of maintaining strong international trade relationships and avoiding protectionist policies alienating trading partners. As global confidence in the US dollar wanes, the economic benefits of foreign investment could diminish, leading to higher costs for Americans.

Tariffs Worsen Broader Problems at Home

As noted above, the broader economic problems facing the US stem from high taxes, overregulation, and government policies that make it more expensive for businesses to operate. Tariffs worsen these problems by raising costs for American businesses and consumers. By taxing imports, tariffs increase the prices of goods that US producers need to remain competitive. This adds to the burdens already imposed by high taxes and government mandates, effectively taxing Americans twice — once through tariffs and again through the costs of domestic overregulation.

Rather than addressing the domestic policy environment that has hindered US competitiveness for decades, tariffs only complicate matters. US companies struggle with excessively high corporate taxes, incentivizing them to move operations overseas. Before the Tax Cuts and Jobs Act of 2017, the US had the highest corporate tax rate in the developed world. While the Act lowered the federal corporate tax rate to 21 percent, proposals to raise it to 28 percent would once again make US companies less competitive globally.

Like Texas, right-to-work states in the South have demonstrated how pro-growth policies can attract manufacturing jobs by creating a business-friendly environment. These states have attracted jobs lost from the Rust Belt by fostering lower taxes and fewer regulations. On the other hand, tariffs stifle economic growth by driving up costs, making it harder for these states to sustain their competitive advantage.

In sum, tariffs don’t solve American businesses’ real issues — they make them worse. Instead of protectionist measures, the US needs to focus on reducing domestic costs by lowering taxes, cutting red tape, and fostering an environment that encourages innovation and growth.

Protectionism: A Failed Policy

The economic data between 2016 and 2021 highlight the failure of protectionist policies, including raising tariffs that began in 2017. 

Consider that global manufacturing output was $14.1 trillion in 2016, with China leading at $4 trillion and the US following at $2.3 trillion. In 2021, it rose to $16 trillion, with China’s part increasing to $4.9 trillion and the US’s to $2.5 trillion. Global manufacturing output grew by 13.5 percent. While China’s manufacturing surged by 22.5 percent, the US had a more modest increase of 8.7 percent. Of course, this period had significant initial and retaliatory tariffs between these countries and lockdowns in response to a global pandemic.

Since 2017, the Trump and Biden administrations have imposed $79 billion in tariffs as part of protectionist policies meant to shield domestic industries. Despite these efforts, global manufacturing continued to grow, and the economic pie expanded — but China captured a larger slice, increasing its share from 28.3 percent to 30 percent. The US trade deficit with China continued to widen, undermining the asserted goal of protectionism. Meanwhile, US manufacturers struggle with higher production costs, passed down to American consumers through increased prices on specific goods.

The Case for Free Trade

The US should abandon protectionism and embrace free trade policies that foster innovation, improve efficiency, and lower costs for consumers and businesses. When countries engage in free trade, all parties benefit from the specialization of labor and resources. Protectionist measures like tariffs distort markets, raise costs, and create uncertainty, hurting American consumers and producers.

Free trade doesn’t mean ignoring unfair trade practices by bad actors like China. However, the best way to address these challenges is not through blanket tariffs but by expanding trade with allies and non-hostile nations. For example, the Trans-Pacific Partnership (TPP) offered an opportunity to strengthen economic ties with 12 countries, pressuring China to play by the rules or risk losing access to major markets. Unfortunately, withdrawing from the TPP in 2017 was a missed opportunity to enhance American competitiveness while holding China accountable.

Conclusion

Tariffs are not the right tool to address the challenges facing American industries. They are a tax on imports, raising costs for consumers and producers while failing to tackle the real issues at home: excessive government spending, high taxes, overregulation, and outdated domestic policies hinder US competitiveness. By embracing free-market solutions — eliminating tariffs, reducing spending, reforming taxes, and cutting regulations — the US can create an environment where American businesses can thrive without relying on harmful protectionist measures. The path forward lies in pro-growth free trade efforts — unilaterally or through agreements with other countries — and domestic reforms, not in tariffs that hurt those they aim to protect.

Anyone who engages in business experiences transaction costs. Many of these costs are natural “frictions” in a world of imperfect knowledge, uncertainty, and scarcity. Governments, however, tend to multiply transaction costs artificially. Sometimes these artificial transaction costs are pure revenue grabs in the form of fees and taxes. Sometimes they are indirect subsidies or handouts to “accredited” groups or industries whose services are mandated. And sometimes they are simply artificial transaction costs that benefit no one in particular.

My recent sale of a house in New Jersey provides examples of all these different kinds of transaction costs. An inherent transaction cost of selling a property involves finding a buyer. It’s rarely as simple as posting the house for sale online. Besides staging the house and taking pictures, as well as making repairs or improvements, there is also the matter of showing it to interested parties. Then there is the negotiation of price and terms. None of these steps is rocket science, but they add up and tend to require particular skills and knowledge as well as time. And so we have professional realtors.

Yet just because professionals provide a valuable service doesn’t mean they can’t create extra transaction costs themselves. There was a landmark legal case decided earlier this year about anticompetitive practices among realtors. Like most professional associations, the National Association of Realtors (NAR) found a variety of ways to insulate their profession from competition while restricting new entry. NAR settled antitrust charges in court by paying hundreds of millions of dollars in damages and changing many of the restrictions on who can list properties, set realtor commissions, etc.

Despite certain anticompetitive impulses, realtors help reduce natural transaction costs. They also help reduce artificial transaction costs – which brings us to my story. Finding a buyer and negotiating an offer were only the first (and easiest) part of selling my house – though also the most expensive part. New Jersey also requires something called “attorney review” for all real estate transactions. 

The attorney process is not terribly expensive relative to the transaction – just under two thousand dollars total. Then there is title insurance and title company costs. There are state taxes and document fees (~$4000). But then, in my area of New Jersey, the town has other requirements for the sale: a smoke inspection and a certificate of occupancy inspection.

For the smoke inspection, we had to have a smoke detector on every floor with a ten-year sealed battery – which meant buying and installing new detectors. They also required a fire extinguisher to be mounted in the kitchen. The certificate of occupancy (CO) inspection had their own list of requirements ranging from replacing flexible piping under a sink with solid piping (though my plumber told me that flexible pipe was allowed by code), replacing a missing patch of driveway with concrete, and, most infuriatingly, that there was too much brush and debris in the back yard and that I needed to have my tree and shrubs dramatically trimmed back.

Besides adding almost two grand in costs to fix as well as the headache of finding people to do the work, there were also additional transaction costs of extra bureaucratic inspections. One inspection was scheduled between 9 AM and 12 PM. I was told that they would just show up sometime in that window. And though taking my phone number and the phone number of my neighbor who agreed to be present during the entire time window, the inspectors who showed up only knocked on the door and then left without calling either of our numbers. 

We then had to reschedule, which actually led to two different appointments because there were two different inspectors with different schedules. Although we ultimately passed the final CO inspection, the town had to generate a document and send it to the attorneys – which required us to delay closing by almost two weeks.

These transaction costs hurt buyers and sellers. Sellers see fewer dollars from their sales while dealing with time-consuming headaches. Buyers see higher home prices. While some of these dollars make their way into government coffers, and even more into various services and industries (lawyers, plumbers, landscapers, etc.) much of the cost is deadweight – benefiting no one.

The closing ALTA document is complicated because there are all kinds of credits and debits regarding insurance, electricity, sewer, prepaid interest for the month, town taxes, etc. But looking at it, the buyer paid over $6000 in fees for title, lawyer, and survey services – not counting financing fees which were thousands of dollars.

At the end of the day, the transaction costs came to almost 10 percent of the sale. That is to say, the money I received was 10 percent less than the money the buyer brought to the transaction.

And all this was simply to sell an existing habitable house without any major construction or additions. New building has a host of other transaction costs from permitting to environmental impact studies to zoning restrictions to utility hook-ups, and more. Permitting and inspections add billions of dollars annually in explicit monetary costs to residential building projects. Delays add billions more in cost.

Local building codes and permits can easily be influenced by professional associations of plumbers and electricians. In the name of higher quality and greater safety, these associations will push for more restrictive rules about who is allowed to do work and what kinds of methods and materials may be used. But as Milton Friedman famously said: “There Ain’t No Such Thing As A Free Lunch.”

Often these rules seem reasonable on the surface – safety, standardization, orderliness, and the like, but they make it more expensive to build housing. They impose quality improvements at the expense of affordability. Americans need to ask themselves whether the higher prices are worth the “peace of mind” provided by all these requirements.

A recent Wall Street Journal article quoted former New England Patriots Head Coach Bill Belichick commenting on the team’s struggles to recruit talent, especially free agents. The main problem is taxes.  “That’s Taxachusetts,” Belichick lamented, “Virtually every player, even the practice squad, even the minimum players are pretty close to $1 million. Once you hit the $1 million threshold, you pay more state tax in Massachusetts.” It’s difficult to compete with teams in states that have flat income taxes 

It’s not just the New England Patriots that are struggling to get talent. The Commonwealth of Massachusetts had a net outflow of over 26,000 taxpayers, costing the state $3.87 billion in 2022 alone. Research from Boston University shows that the number one reason taxpayers are fleeing is healthcare costs. 

The good news is that it does not have to be this way. Massachusetts can become what John Winthrop once envisioned, “that we shall be as a city upon a hill — the eyes of all people are upon us.” Massachusetts can once again become a place that draws Americans instead of chasing them out by getting government out of the way and properly prioritizing spending. 

How Massachusetts Became Taxachusetts  

Any student of American History will learn that Massachusetts was an epicenter of the American Revolution. The colonists in Massachusetts were pushed to Revolution because the British Empire had taxed them to ruins and blocked their ability to freely trade with the rest of the world. 

It would pain the men who fought at Lexington and Concord in 1775 to know that their home earned the moniker “Taxachusetts” 200 years later. Daniel Flynn comments that the Bay State’s history of tax policy has been a story of “legislators forever indulging the appetite and never prescribing a diet.” The state instituted the first income tax in 1915, which, according to Harvard economist Charles Bullock, would be “a substitute, complete or partial, for the existing tax on personal property.” As Flynn notes, neither the income tax nor the property tax was eliminated. Instead, both were solidified. Policymakers in Boston continued spending, especially after World War II. Two of the most notable expansions of state spending were the state’s takeover of the Boston Elevated Railroad in 1947 and the growth of state-funded higher education.  

Boston did not stop with income and property taxes. The state also levied a sales tax in 1966 (which was promised to end in 1967 but is still in place today) as well as a state lottery the following year. to The Massachusetts Budget and Policy Center found that by 1977 that taxes in the Bay State made up 13.8 percent of state personal income, higher than all other states except Alaska and New York. 

The tax revolts of the late 1970’s and early 1980’s brought a brief respite to lowering tax rates. In 1980, voters approved Proposition 2 ½, which limits the amount of property tax revenue a municipality can raise through real and personal property taxes. In 1989, the legislature increased the personal income tax rate from 5 percent to 5.75 percent (promised as a temporary increase), but the rate was raised to 6.25 percent in 1990, then fell to 5.95 percent in 1992. The legislature cut the rate again in January 2000 to 5.85 percent. In November of that year, voters approved a ballot measure Question 4, which reduced the personal income tax rate from 5.85 percent to 5.6 percent for tax year 2001, 5.3 percent for tax year 2002, and 5 percent for tax year 2003. In 2002 (Question 1) and 2008 (also Question 1), Bay States had the opportunity to amend the state constitution and eliminate the personal income tax, but both attempts failed. 

The appetite for spending in Boston continued when Governor Romney signed Chapter 58 of the Acts of 2006 into law, also known as “Romneycare.” This mandate, a precursor to Obamacare, “promised to achieve universal health insurance coverage while controlling costs.” Romneycare ended up failing to cut costs. Much like its successor Obamacare, Romneycare placed immense financial stress on the state due to above-projection enrollments and healthcare costs. 

In November 2022, Bay State residents voted to amend the state constitution to change from a flat income tax of 5 percent to a graduated income tax, which would levy a “4 percentage point surtax on the portion of people’s income in excess of $1 million.” That same year, five states would switch from a progressive income tax to a flat income tax, with 10 other states cutting personal income tax rates in 2023.  

To add insult to injury, in 2023 Massachusetts also placed an extra payroll tax on employers to replenish its unemployment insurance trust fund after massive unemployment caused by the lockdowns in 2020. That tax hike, however, hurts everyone. The money that paid toward the additional payroll tax could have gone toward growing their businesses, hiring new employees, and/or increasing compensation for current employees, known also as deadweight loss. 

Ultimately, a complex tax code breeds tax avoidance. As the tax code becomes more complex and tax rates become more progressive, taxpayers (especially high earners like professional athletes) will look for creative ways to avoid paying high tax rates such as changing how they’re compensated such as being paid through an LLC rather than directly to the taxpayer or receiving employee paid health insurance. Those who do not have the time or the means to find loopholes in the tax code leave for states with lower costs of living.  

Tax Policy Chases Out Residents 

By moving to raise taxes at a time when other states were making cuts, it’s no wonder that residents are fleeing by the thousands. Since 2000, Massachusetts has ranked middle of the pack in economic freedom and tax policy, consistently, spending well above the population and inflation growth.  

Massachusetts has also seen a consistent net outmigration of both people and adjusted gross income over the past 30 years with brief exceptions from 1998-1999, 2001, and 2009. From 1993-2022 Massachusetts lost over 300,000 taxpayers and an estimated $32.88 billion. 

The Bay State lost people and income to every bordering state except Connecticut in 2022. Among the Northeast states, New Hampshire gained the most residents and income from Massachusetts. Nationwide, the only state that gained more residents and income from Massachusetts than New Hampshire was Florida.   

To make matters worse, research shows that 68 percent of taxpayers leaving Massachusetts are age 26-54, with the largest category leaving by volume age 26 to 34. As younger workers leave for opportunities elsewhere, the more difficult it becomes to sustain the state’s massive budget in the future. If changes are not made, Massachusetts will suffer a fiscal crisis. 

A Path to Becoming a City Upon a Hill (And Maybe Some Championship Wins Too) 

The best path forward is for Massachusetts to restrain state government spending. The name “Taxachusetts” was earned by enabling an insatiable appetite for government spending. The Bay State can become a “City Upon a Hill” by reining in spending and simplifying the tax code. 

Tax and spending reforms takes more than “electing the right people.” It must be politically profitable for the wrong people to make the right choices. What does that look like? Let’s return to the example of the New England Patriots. Attracting talent (and possibly more Super Bowl wins) could be as simple as reducing tax rates and simplifying the tax code. Improving the tax code would also mean tackling the number one reason taxpayers are fleeing the bay state. At the same time, these tax code improvements could also increase revenue due to the increase in economic growth. Everyone would win. 

These tax changes would also need to be paired with spending cuts. If Boston lawmakers had constrained spending to the growth rate of population plus inflation starting in 2018 (the last season the Patriots’ won the Super Bowl) it would have saved taxpayers a total of $7.5 billion (just over $1,000 per resident).  

By reducing taxes and spending, Massachusetts can become the “City Upon a Hill” once again, where families and businesses will want to live and work. Other states look will look to replicate Bay State success (and maybe the Patriots will win a few more Super Bowl rings too). 

The American Institute for Economic Research’s Everyday Price Index (EPI) declined 0.13 percent to 290.9 in August 2024, the same level it held in both April and May 2024. This is the second monthly decline the index has seen this year, with the previous coming in June.

AIER Everyday Price Index vs. US Consumer Price Index (NSA, 1987 = 100)

Among the twenty-four EPI constituents, seven declined, one was unchanged from the prior month, and sixteen rose in price.

On September 11, 2024, the US Bureau of Labor Statistics (BLS) released Consumer Price Index (CPI) data for August 2024. The month-to-month headline CPI number rose by 0.2 percent, meeting surveyed predictions. The core month-to-month CPI number increased by 0.3 percent, higher than the forecast increase of 0.2 percent. 

In August 2024, shelter costs increased by 0.5 percent, contributing significantly to the overall rise in the all-items index, while food prices saw an 0.1 percent increase, following a 0.2 percent rise last month. Food consumed away from home rose 0.3 percent, while prices for food at home remained stable. Energy costs saw a notable 0.8 percent decline after remaining unchanged in the prior month. 

Excluding food and energy, the month-to-month core index saw an 0.3 percent uptick in August, slightly higher than the 0.2 percent increase recorded in July. Contributing were gains in many of the expected areas, some of which fall within the Fed’s closely watched “supercore” category:  shelter, airline fares, motor vehicle insurance, education, and apparel. On the other hand, categories like used cars and trucks, household furnishings, medical care, communication, and recreation saw declines, all of which reflecting a mixed landscape for consumer prices.

August 2024 US CPI headline & core month-over-month (2014 – present)

In year-over-year data, headline CPI rose 2.5 percent, which met forecasts. Year-over-year core CPI rose 3.2 percent, meeting the 3.2-percent prediction.

August 2024 US CPI headline & core year-over-year (2014 – present)

Over the 12-month period ending in August, the all-items index rose by 2.5 percent, marking the smallest year-over-year increase since February 2021, while the core index (excluding food and energy) increased by 3.2 percent. Energy prices saw a significant 4.0 percent decrease over the past year, contrasting with a 2.1 percent increase in the food index. 

Over the past 12 months, the index for all items excluding food and energy rose by 3.2 percent. The shelter index rose by  5.2 percent, contributing to more than 70 percent of the total rise in the index for all items except food and energy. Other significant increases over the past year include motor vehicle insurance (up 16.5 percent), medical care (up 3.0 percent), recreation (up 1.6 percent), and education (up 3.1 percent).

While disinflation in goods remains persistent (despite rising freight costs through much of the last year) housing rents and auto insurance prices remain elevated. Historically, changes in freight prices lead price changes in core goods inflation by six to twelve months. Given that freight costs have been climbing since mid-2023, we would expect them to be reflected in core goods prices by now. That does not seem to have happened yet, which suggests that firms are absorbing those rising costs, and may explain why S&P profit margins have been declining for the past quarter or two. If true, the willingness of private companies to eat higher freight costs would indicate that inflation expectations are well-anchored — at least in corporate board rooms and on loading docks. If that is the case, though, it suggests that going forward firms will have a limited ability to pass on increased costs. With the US savings rate approaching an all-time low and consumer distress ticking up, the pricing power of US companies may be also at or near a low. 

Looking at persistent inflation in auto and home insurance, one is best reminded that these sectors are only marginally impacted by the business cycle. Even if unemployment were to rise substantially over the next 12 months, inflation in those categories is likely to remain robust. Compounding this, Medicare service costs, which are also acyclical, are anticipated to rise next year.

While there was good news in the August CPI release, two tentative conclusions of a somewhat somewhat less positive character may be drawn. First, in light of today’s numbers, the likelihood of a 50-basis-point rate cut at the September 18 meeting of the Federal Open Market Committee (FOMC) has dissipated almost completely. And second, that inflation in the United States will end 2024 above the Fed’s target range. Justifications for easing the monetary policy stance over the next quarter or two are therefore likely to come from worsening labor market conditions alone. 

Price growth was moderate in August, the Bureau of Labor Statistics reports. The Consumer Price Index (CPI) rose 0.2 percent last month and 2.5 percent over the past year. On a continuously compounded basis, prices grew at an annualized rate of 2.24 percent in August. Core CPI, which excludes volatile food and energy prices, grew slightly faster at 0.3 percent per month and 3.2 percent per year. The continuously compounded annual rate was 3.37 percent in August.

Inflation rose slightly over the past two months, but not by enough to undermine the general disinflationary trend. Dollar depreciation is back within a steady range. The Federal Open Market Committee (FOMC) will likely infer from this data that it’s time to loosen monetary policy.

Current monetary policy remains tight. Both interest rates and money supply data tell us that it’s appropriate for the Fed to ease up. Because monetary policy usually works with a lag, if the Fed waits until inflation falls all the way to 2-percent before loosening, it may sow the seeds for an unnecessary downturn. The time to adjust policy is now.

Let’s start with interest rates. The federal funds rate target range is 5.25 to 5.50 percent. Adjusting for inflation using the prior month’s continuously compounded annual rate, we get a real interest rate range of 3.01 to 3.26 percent. As always, we need to compare this to the hypothetical interest rate that brings supply and demand in capital markets into balance. Economists call this the natural (or neutral) rate of interest. 

We can’t observe the natural rate directly. But we can estimate it based on economic fundamentals. One popular set of models from the New York Fed put it somewhere between 0.74 and 1.22 percent in Q2:2024. Actual market interest rates are significantly above the natural rates. In fact, they’re between two and three times as high. This strongly suggests monetary policy is restrictive.

Monetary data tell a similar story. The M2 monetary aggregate, which is the most commonly cited measure of the money supply, is 1.7 percent higher today than a year ago. Broader aggregates, which weight money supply components based on liquidity, are up 1.10 to 1.80 percent on the year. But money growth by itself doesn’t imply loose money.

It’s normal for the money supply to grow when the economy (GDP) and population are growing. In fact, to keep monetary policy on track, the money supply should grow at about the rate of economic and population growth summed together, which would keep cash balances per person roughly equal.

Real GDP grew at an annualized rate of 3.15 percent in Q2:2024. In 2023, the most recent year we have data, the US population grew 0.5 percent. Hence it would be appropriate for the money supply to grow around 3.65 percent. Actual money growth is much slower. In other words, the conclusion one should draw from the monetary data is the same as that from interest rate data: policy is too restrictive.

Unfortunately, the shadow of the presidential election hangs over Fed decision-making. If they loosen, Team Trump will throw a fit. If they don’t, Team Harris will. That’s just how it goes. The Fed should ignore the political noise and follow the data. Central bankers failed to curb inflation, but that doesn’t mean they should deliberately make the opposite mistake now. The economy is signaling it’s ready for looser money. Let’s hope the FOMC delivers.

There’s an aging silver cup on my bookshelf. If you look closely at it, a faded imprint reads “eSpeed: We Are Markets.” I received it at a securities industry trade show in the summer of 2001 after a friendly conversation with a gentleman at a booth display. On September 11, 2001, that man and over 650 of his colleagues were murdered, along with thousands of other people.

I’ve dreaded this day for a while now. Two decades* is a lot of distance. But the higher the anniversaries’ number, the stronger my worst memories of my experience at the World Trade Center that day become.

Today, a feeling that has simmered for years will rise to a fever pitch. The nation will honor New York City firefighters, police officers, Port Authority employees, medical personnel and first responders, and military servicemen killed in the Pentagon. There will be some mention of Flight 93 and the passengers who died in Shanksville, Pennsylvania. There will be no shortage of salutes to the soldiers, sailors, airmen, and Marines killed in the global war on terror which, launched in Afghanistan shortly after 9/11, also came to involve action in Iraq, Syria, the Philippines, Mali, Pakistan, Yemen, Libya, Cameroon, Ethiopia, Somalia, Kenya, and other nations.

There’s a reminder that always accompanies these ceremonies: “Never forget.” While understandable, it is untrue to suggest that the aforementioned groups have been neglected. A host of parades, charity events, fundraisers, monuments, and ceremonial namings and renamings have arisen in their honor over the last decade or so. And that is to say nothing of the retail discounts, higher levels of service, and other commercial benefits those groups receive. There are also the informal, unspoken distinctions, like the social reverence that has made a near-imperative out of thanking anyone who has ever worn a uniform in any capacity for any amount of time for their service. (Thirty-something years ago, someone’s military service was more likely to be met with a “Couldn’t afford college?” quip than fawning appreciation.) This writing has nothing to do with those people –– however honorable they may be –– nor the accolades afforded them.

Instead, I write this to celebrate the truly forgotten. There are no elegies for them; no concerts, flags, or bumper stickers. The closest thing they have to monuments are the random sections of beams from the Twin Towers that were distributed to town and county parks nationwide after the attacks.

Those beams, twisted and deformed, once supported floors. And 23 years ago today, at about the time that this article is published (8 am Eastern), those floors were already alive with the footsteps of traders, brokers, portfolio managers, accountants, tech workers, customer service representatives, and administrative personnel engaged in the lifeblood of global commerce: finance. 

It can be easy to forget the people who were actually targeted in the World Trade Center attacks. It’s increasingly customary to do so, in fact. Many Americans link intrinsic value with visible toil. Individuals dealing in financial markets, negotiating transactions, and managing great amounts of capital are often assumed to be wealthy, corrupt, or engaged in elaborate and ultimately unproductive activity, or some combination of the three. None of those labels invite much sympathy –– even considering the horrors that so many people in these scrutinized fields faced on that day.

Nationwide, on this 20th anniversary of September 11, 2001, more will be said about the Army, Navy, Air Force, Marines, NYPD, NYFD, EMS, and scores of other groups than about the thousands of hardworking, productive people killed in downtown Manhattan that day.

Some argue that the Twin Towers were targeted because of their prominence; they were among the most recognizable man-made structures on Earth. Others maintain that, going back to the 1993 truck bomb attempt, the two towers represented the best “bang-for-the-buck” opportunity for saboteurs to inflict massive casualties with minimal effort. But the prevailing explanation for the repeated attempts to assault and destroy the World Trade Center complex, which could easily engulf the nearby New York Board of Trade, New York Mercantile Exchange, and New York Stock Exchange, is its tremendous economic significance. It was a choice lucidly indicating that America’s attackers understood more about the roots of American prosperity and the wellspring of human prosperity than most Americans do.

What tens of thousands of men and women in the North and South towers of the World Trade Center did all day, every day, was not simply “push pieces of paper around.” They were not opportunistic, cleverly positioned middlemen. Their work did not simply create inconsequential, flashing numbers on computer terminals. What they did was nothing less than lay the foundation upon which the modern world sits and functions. 

For time immemorial, human beings have struggled to determine the best means of producing goods and services. At one time, that effort centered on crafting spears and shelters; today, it focuses on such ends as nanotechnology and selecting composites for space travel. Among competing means of production, regardless of the proposed output, there is some combination of inputs and processes that is the most economically efficient. Only prices, generated in market exchange, fulfill that calculation function adequately. Those prices, by reflecting the current consensus valuation of producers and consumers, allow planning. They send signals to all other market participants regarding scarcity, abundance, and shifts in the overall appraisal of countless resources.

Prices are also the means through which profitability is determined. Today, profitability is increasingly treated as a profane term and concept, but there are no other means of adequately determining where and how resources are being combined into the most customer-satisfying goods or services. Profits draw in competition, which results in the amazing diversity of products available in market economies.

Market-derived prices affect billions of people. They do not, and could not, come from governments. Only seasoned financial professionals, employing knowledge and experience from trading, designing transactions, or advising on business deals can discover prices. They frequently assume risk on behalf of strangers, bring together far-flung counterparties, and smooth out otherwise “lumpy” flows of money and capital in ways that make the completion of long-term projects possible. The coordination of the numerous stages of producing complex goods, the funding of innovation, and the transfer of risk via hedging or synthetic products would not be possible without modern finance. 

William N. Goetzmann, professor and director of the International Center for Finance at Yale University, puts the birth of financial concepts at the root of civilization itself, crediting it with the early development of language and the apprehension of time beyond the crude demarcations of seasons or lunar cycles. Financial practices, building off of the social technology of money and private property rights, forged and continue to govern virtually our entire world. But those practices are not automated, which is why financial professionals ranging from asset managers and speculators to algorithmic developers, accountants, and clerical personnel are so critical.

The tablet or monitor you are reading this on, the house or building you are doing so in, and the furniture, appliances, and vehicles you might happen to own would either not exist, or would be far more expensive, without the institutions and practices of finance. Finance is to economics what engineering is to physics and chemistry. 

Money and finance are the font and essence of modernity.

And so, 20 years after one of the most awful days of my and countless others’ lives, I honor and praise the memory of the people who worked in the World Trade Center. I honor those who were slaughtered that sunny, blue, and virtually cloudless Tuesday morning. When they perished, most of them were still at their desks, donning headsets or handling phones, squawking our arcane language of growth and prosperity. I remember those who were injured, and those who escaped unharmed, but were by no means unaffected. 

To the 12 or 13 dealers, traders, brokers, and other individuals based in the towers with whom I transacted and developed a rapport for years, who were gone in a flash: I remain grateful for your service, skills, and friendship.

To my friend B, killed 20 years ago today, enduring esteem.

I was privileged to work with and among all of you. Many of the things I learned from you set me on the path I am on today. None of you are forgotten, nor will I let you be.

*This article first appeared at The Daily Economy on September 11, 2021.

As Jonah Goldberg recently noted in the Los Angeles Times, “All presidential candidates vow to unite Americans.” He provided recent examples. Many more could be found if we look back in time. In contrast, “nearly every pundit and public intellectual laments the lack of unity.” He sees that gap as evidence that unity is “the single most abused, misused and misunderstood word in American politics.” 

Goldberg’s analysis is insightful. He recognizes that current political appeals to unity are really appeals to power (“If you people would just get on board with me, we could achieve what we are united about”), so that such unity’s goodness “depends entirely on what you do with it.” What do we tend to do with it? Partisans try to “steamroll political opponents with forced unity and power not granted by the Constitution.”

That recognition leads me to ask, is real unity, as opposed to political unity of 50 percent plus one against a minority (as with James Bovard’s assertion in Lost Rights that “Democracy must be something more than two wolves and a sheep voting on what to have for dinner”), even possible today, or is it a chimera whose allure leads us into a great of trouble?

The answer turns on precisely what we are trying to agree upon. When we talk in broad generalities and aspirations, we appear to be unified. We may agree, for example, that we all want people to have food, clothing, housing, medical care, education, etc. But that seeming agreement falls apart as soon as we consider specifics. We differ on almost every aspect of almost every specific good. 

In other words, we want different types, qualities and quantities of all of those goods and services, provided in different ways, at different times and places, for different people. Given the vastly varied specific desires and tradeoffs that characterize us, not to mention whom we think should pay the bills, this means our specific ends and goals will conflict rather than align.

When discussing this issue in my classes, I like to use the example of breakfast. Are students’ families unified about breakfast? Does everyone agree it is “the most important meal of the day”? Does everyone even eat breakfast? Do they all drink the same thing, or do people choose a wide gamut running from coffee to tea (sometimes decaffeinated) to colder forms of caffeine like soda and energy drinks, to milk and a variety of juices? Are all agreed on when, where, what, or how much to eat? Who should have to pay for it, cook it, and clean up afterwards? Do we agree on the dress code that should apply, either at breakfast or afterward?

Now multiply by the uncountable number of decisions that must be reached in society every day, and our fundamental disunity becomes clear. And rather than disappearing when we get to public policy, that disunity can grow further. Public policies that take from some to give to others, for a start, create inherent disagreement from those whose pockets are involuntarily picked. And such efforts have increasingly become the central focus of government policy, so much so that reducing what we take from some also triggers disagreement, because it would entail giving less to others than they are currently given now. When government focuses on such issues, real unity is very unlikely, and coercion will be part and parcel of policy.

That makes the central concern not that of implementing specific ends we agree on, but how best to mutually achieve our different and conflicting ends. It is whether we can find a way to “disagree better” than the political hash we make of things now. And doing so requires us to recognize that we share far greater agreement about what all of us want to avoid for ourselves than about specific things we want. 

In contrast with political “successes” which consist in taking others’ resources, there is one area in which we could agree if we were given the chance — all of us want freedom to peacefully pursue our own goals. Each of us wants ourselves, our rights and our property defended against invasion. You see this in the traditional functions of government which, in a nutshell, are to protect us from violations by foreign powers and by our neighbors. As Lord Acton put it, “liberty is the only object which benefits all alike, and provokes no sincere opposition,” because freedom to choose for ourselves is always the primary means to our ultimate ends, and that liberty requires “the limitation of the public authority.” But we are incredibly far from agreement on that today.

Despite vast differences in our personal circumstances, preferences and goals, all individuals gain from “the mutual preservation of their lives, liberties and estates,” as John Locke put it, for our “pursuit of happiness,” in Jefferson’s words in the Declaration of Independence. This means defending people’s personal freedom, property rights, and rights to trade and contract.

David Hume put it this way:

The convention for the distinction of property, and for the stability of possession, is of all circumstances the most necessary to the establishment of human society …after the agreement for the fixing and observing of this rule, there remains little or nothing to be done towards settling a perfect harmony and concord.

In other words, once property rights are clearly established and uniformly defended, all subsequent arrangements are voluntary. No one can impose his will by violating others’ rights. The traditional definition of justice — “to give each his own” — is met, and all of us in society (except for predators who would be denied prey) would gain. Well-established property rights and the voluntary market arrangements they enable let individuals decide for themselves, limiting each of us to persuasion rather than coercion. Except in the very unusual case where we must all make the same specific choices, this allows us to better match our choices to our abilities, preferences and circumstances. And defending our rights is within the competence of government, unlike when it goes further.

As Herbert Spencer summarized this point, “To guard its subjects against aggression, either individual or national, is a straightforward and tolerably simple matter; to regulate, directly or indirectly, the personal actions of those subjects is an infinitely complicated matter.” That is, because we disagree on our specific ends, when government overrides people’s choices instead of protecting their ability to make their own choices, it imposes domination rather than allowing cooperation and mutual consent. That is also why claims of political unity generally mean the imposition of injustice on some to feather others’ nests.

In sum, respecting all of our property rights reduces the risk from predation for each of us, allowing us all greater freedom to pursue our own particular goals. That is, we can “disagree better.” But our current binging to add rights and privileges for some at the expense of others’ equal rights and privileges cannot bring real unity. It does, however, make government potentially the most dangerous predator of all, needing to be controlled (as with the Bill of Rights, which Justice Hugo Black described as the “Thou shalt nots” to be applied to government) even when who is in charge is determined by majority vote.

In contrast, most of the appeals to, or promises to bring, unity we currently hear on behalf of politicians really amount to saying “those of us in this group are unified in what we want, and we mean to get our way, regardless of others’ desires.”

We disagree on a vast panorama of specific ends. So when “unity” means government policies will substitute for choices we would make for ourselves, it means domination, even though we do not want to be dominated. That kind of unity is not good. In contrast, if it means coming together in a common commitment to honoring one another’s rights and the liberty and social cooperation it allows, it advances our common interests. The unity of such peaceful and productive disagreement is good because it provides the greatest unity actually possible towards our often-inconsistent ends.

Bloomberg reported recently that “Kroger Co. said it plans to lower grocery prices by $1 billion” if federal regulators approve the proposed $25 billion merger with Albertsons. While antitrust litigation slows the merger’s progress, that leaves the company with plenty of time to unpack that promise. 

What does it mean to lower total future prices by a set amount? Does that mean $1 billion lower than this year’s levels, or lower than projected price levels for next year? Given the complexity of the sheer number of products on offer, different locations, and constantly shifting costs, it is unclear what this announcement means. How can Kroger promise to lower prices when the future costs of inputs are unknowable? At best, the outcome of this promise would be impossible to measure. To do that, we would need to compare it to a hypothetical of what the price levels would have been without this commitment.

The facts are more complicated than what was reported. When I reached out to Kroger for comment, a spokesperson said, “We can confirm this number is correct and consistent with what we continue to share with regulators. As we’ve prepared for integration since announcing our planned merger nearly two years ago, we continued our ongoing work to confirm and increase opportunities to generate efficiencies to invest back in customer prices, associate wages and store experience. After the merger closes, Kroger will invest $1 billion to lower Albertsons’ prices, consistent with Kroger’s track record of fighting inflation and providing value to customers.” (emphasis added)

This statement reveals a different promise than simply lowering prices by $1 billion, as reported. Kroger plans to invest $1 billion dollars to lower prices. This statement makes more sense, as the company wouldn’t be able to guarantee the price levels at some future time. It could however, pledge a set amount to increasing efficiencies and improving its supply chain. The result of that investment on prices is unclear. 

The original article in Bloomberg, which has been widely cited, including by Reuters, does not link to a source, so we don’t have the exact wording of the original announcement. At least one outlet has used the exact same language the Kroger spokesperson gave me, so it is possible that Kroger is giving the same statement to every journalist who inquires. The author of the original Bloomberg article did not respond to my requests for the source of the original story, so I don’t know whether the author re-worded the commitment or whether there are multiple statements circulating.

Putting the wording of the statement aside, antitrust litigation creates strange debates over prices — debates which are often disconnected from market realities. Kroger had previously committed to investing $500 million to lower prices, but has now raised the number to $1 Billion without providing an explanation of the underlying reasoning. You can picture the executives and consultants sitting in a room making up numbers, debating the $500 million or $1 billion announcements. The antitrust argument compels companies to make these types of assertions.

Kroger’s more convincing case is that the merger will lower prices based on economies of scale. In line with its statement above, it plans to “generate efficiencies” by merging the supply chains of the two grocery chains. CEO Rodney McMullen said in a statement to Supermarket News, “We believe the way to be America’s best grocer is to provide great value by consistently lowering prices and offering more choices. When we do this, more customers shop with us and buy more groceries, which allows us to reinvest in even lower prices.”

As I have written elsewhere, a key part of the debate over antitrust litigation centers around anticompetitive behavior. Pricing strategies are often used as evidence of such behavior. The problem that quickly arises is that, as it pertains to pricing, competitive behavior looks a lot like anticompetitive behavior. Lowering prices could unfairly hurt rival companies, but raising them looks like harming consumers. Given enough choices, consumers will gravitate towards the options with the best combination of price and quality to fit their needs. Were the Kroger-Albertsons merger to proceed and result in higher prices, that would give space for Aldi, Walmart, or other budget-friendly options to capture market share.

Regardless of the outcome of antitrust cases, it is nonsensical to say that Kroger will lower grocery prices by $1 billion. Prices reflect complex market realities of supply and demand over time, myriad constantly shifting factors. Only time will tell whether it follows through with the commitment to invest $1 billion to lower prices. Consumers would be better served if companies could spend more time on improving their services and less on fending off litigation. 

So far, Kroger and Albertson have spent more than $800 million on merger fees, as reported by Bloomberg. The high costs Kroger faces reflect the cases seeking to block the merger. Other than the many lawyers and consultants booking extra hours, the public are not served by these outlays. Gimmicks and commitments to regulators are immaterial compared to market innovation.