The Dangers of Economic Populism

 Last week I wrote about Zohran Mamdani, an…. unorthodox… primary candidate in the New York mayoral race.  Since then, Mamdani has won.  Whether or not this win was due to New York’s ranked choice voting system is open to debate.  I read two statistical analyses of the effect of RCV on the primary, and each claimed the system unfairly threw the election, but since neither report agreed on who benefitted nor did either show me its math, I have no idea it either is correct.

And it’s beside the point.  What’s really important is that economic populism looks like it is here to stay.

Which, of course, triggers the question, “What is economic populism?”  Economic populism is a political and economic approach that emphasizes the needs and interests of the "common people" over those of elites, of large corporations, or of financial institutions.  It often includes policies aimed at reducing inequality, at protecting domestic jobs, and at expanding government support for working- and middle-class citizens. 

Water, salt, oxygen, caffeine, vitamin A, and acetaminophen are all more or less good for you… And all of them in large doses will kill you.  Economic populism is exactly like that.

America has had several brushes with economic populism—FDR’s New Deal, any policy proposed by Elizabeth Warren or Bernie Sanders, and several of the economic proposals of President Trump are good examples.  In and of themselves, these policies are not bad things:  remember, too, that economic populism isn’t strictly left or right-wing, but is a style of economic politics that can appear across the spectrum.  Left-wing politicians focus on wealth redistribution, unions, healthcare, and taxation while right-wing politicians focus on tariffs, nationalism, and national job protection.

Economically, these measures lead to inflation, loss of jobs, and a shortage of the goods subject to the price controls.  The real danger lies in the political costs.  Economic populism starts off like a potluck dinner with a promising host.  “Come one, come all!” cries the candidate.  “Free healthcare!  Low rent!  Jobs that pay actual money!  And pie for dessert!” It’s music to the ears of anyone who’s been burned by recession or inflation, or who just got screwed over by the local cable company.

And honestly?  It’s hard not to cheer.  Economic populism is often a genuine human response to real pain.  If wages are stagnant, factories are shuttered, and billionaires are launching themselves into orbit, while you’re still trying to afford putting braces on your kid’s teeth, when a leader steps up and says, “Let’s take care of the people, not the elites,” it’s tempting to shout “Hallelujah!” and hand them the keys to the car.

But here’s the thing: sometimes the person you gave the keys to not only drives you home... they change the locks, reset the GPS, and push your saintly old grandma out the window.

First, a champion emerges, who begins with economic populism with an agenda focused on helping ordinary folks over the wealthy or well-connected.  (Think stimulus checks, rent control, union support, anti-monopoly crackdowns, or nationalizing things like utilities, grocery stores, or Wi-Fi.  (Because Wi-Fi should be a human right, obviously.)

This leader gets elected on the promise that they’ll take on “the system.” And, at first?  They do, as they slash bureaucratic red tape, defund the police, pass spending bills, and make Wall Street sweat a little.  People cheer.  Approval ratings soar.  The pigeons get off the park statues long enough to salute.

But soon, the populist leader realizes something uncomfortable: governing is harder than campaigning, and the realities of economics soon show you that numbers are too sharp to juggle.

When inflation creeps up or foreign investors get nervous, economic populists often find a convenient answer—just blame the “usual suspects”.  These include the media (“fake news!”), the judiciary (“corrupt judges!”), or the Federal Reserve (“saboteurs with calculators!”).  Instead of saying, “We need to fine-tune our policies,” the populist says, “We would’ve been perfect if it weren’t for those meddling institutions!” 

This is where the slide begins, because, now, the leader isn’t just fighting inequality—they’re fighting accountability.

Next comes the DIY phase—attempts to fix the system. But these measures are not designed to make it better, but to make it easier to control.  The courts?  “Far too slow or biased.”  Better pack them with friends.  Election laws?  “Too biased.”  Better replace them.  Independent media? “Unpatriotic.”  Better buy them out or shut them down.  Civil service? “Uncooperative.”  Better fire the lot and hire cousin Jimmy.

All of it is justified under the banner of “protecting the people’s will.”  The populist starts governing not for all citizens, but for “real” citizens (i.e., their base).  And dissent inevitably becomes treason.  This, of course, is much easier if you have state-owned and controlled media. 

By this point, the original economic populist dream—to create a more just economy—is buried under red flags and loyalty oaths.  Inflation is inevitably climbing.  Business investment has fled.  The budget may be bloated from all the free pie served by insolent civil servants.  But instead of changing course, the populist doubles down: more controls, more slogans, more enemies, and more free programs to be paid for by taxing what remains of the wealthy.

What has happened?  The inevitable.  All too easily, economic populism turns to authoritarian populism—where power is centralized, dissent is punished, and freedom is optional.

By now, citizens realize they’ve traded bread and butter policies for bread and circus politics.  There might still be subsidies and slogans, but transparency is gone.  The economy wobbles.  Institutions weaken.  And the charismatic leader who once promised fairness now rules by decree.

While some try to resist, others say, “Well, at least they’re not the other guys.” But deep down, everyone knows: the system’s not the same.

Well, since I’ve given you the sermon, I might as well reveal the moral of the story.

Economic populism doesn’t necessarily go authoritarian, but it usually does.  There are populist policies that uplift the working class without burning down the courthouse.  But if the leader you elect blames the courts, or says all economic woe is the fault of the rich, or promises services that are magically free—you may not be on the road to fairness.  You might be on the shortcut to autocracy, instead.

So enjoy the pie and cheer for the underdog—but keep an eye on the locks.  And if your grandma mysteriously vanishes from the passenger seat… it’s time to grab the wheel.

One last note, Dear Reader:  I was not talking about the other political party, I was talking about yours.

Bread, Circuses, Mamdani

New York City is pretending to have a primary election for mayor.  I say “pretending” because the metropolis switched to a “ranked choice” voting system four years ago.  Ranked choice voting is fine in competitive races, but anywhere a single party holds a large lead over a minority party, computer modeling shows that it almost always results in a majority party victory by minimizing the effects of a third party splitting the ballot.  Which is usually the reason the majority party imposed the new system of voting.

With ranked choice firmly in place and Democrats outnumbering Republicans 7 to 1in NYC, I can reliably predict that a Democrat will win, but which one?  If you believe the polls, the race is a toss-up between former Governor Andrew Cuomo and State Assembly member Zohran Mamdani.  Cuomo’s candidacy proves there is political life after public death and the Mamdani’s is a perfect example of why watching politics is better than viewing any television show.  Currently, Mamdani has strong backing among younger voters and progressive constituencies, while Cuomo maintains support from older and more moderate demographics.  The primary is set for June 24, so we will learn the winner shortly.

Thirty-three year-old Zohran Mamdani was born in Uganda and moved to the US at the age of seven.  After earning a bachelor’s degree in Africana Studies, he became a US citizen in 2018.  Two years later, he was elected to the New York State Assembly.  Apparently, Mamdani has never held a management job in the private sector.  Now, just five years after that, he is running to become the mayor of the largest city in the nation, on a platform that is…well…unique.

Mamdani, a Democratic Socialist running as a Democrat, wants to enact some sweeping economic reforms that would change New York City forever.  Here are some of his more striking proposals:

Rent Freeze: He proposes an immediate freeze on rents for all rent-stabilized apartments in NYC, impacting over 2 million tenants.  He plans to appoint members who support this initiative to the Rent Guidelines Board.

City-Run Grocery Stores: He advocates for establishing one municipally-owned grocery store in each borough that would offer affordable food options, especially in underserved areas.  These stores would operate without profit motive, aiming to reduce overhead costs and pass savings to consumers.

Free Public Transit: He aims to make all city buses fare-free and improve service by expanding bus lanes and reducing delays.

Universal Childcare: He plans to provide no-cost childcare and to increase wages for childcare workers to match those of public-school teachers.

Tax Reforms: He proposes raising corporate taxes from 7.25% to 11.5% and implementing an additional 2% flat income tax on millionaires to fund his programs, aiming to generate approximately $9.4 billion annually.

Let’s tackle each of these points individually.

Rent controls, like all price controls, simply do not work, and we have more than 2000 years of economic data to prove it.  If property owners cannot raise rents to align with rising costs, they either turn the apartments into salable condominiums or take the property off the market, creating a housing shortage that inevitably leads to rising prices. 

I could give you the well-established arguments and facts on rent control, but perhaps, it would be better to just relate what happened when the Argentine President Javier Milei repealed rent control in Buenos Aires in December 2023.  The effects have been both dramatic and aligned with free-market predictions.  Landlords who had exited the market promptly reentered it, increasing the number of available units by more than 170%.  More supply meant landlords competed on price—especially after allowing dollar-denominated contracts—resulting in a drop in rents by approximately 40%, adjusting for inflation.  Both of these conditions led to a “rental-market-boom” which gave prospective tenants more choice and bargaining power.

City-run grocery stores might sound nice—like a public library with bananas—but economically, they’re a recipe for wilted lettuce and financial indigestion. 

First, the government isn’t exactly known for its retail instincts.  If you’ve ever been to the DMV, imagine that vibe—but in the frozen food aisle.  Want a cart?  Fill out Form 27-B and return it to Window 3.  Prefer bagels over bureaucracy?  Too bad—the state has decided rice cakes are better for you.  My local store carries two dozen types of olives—the city-owned store will offer one type.  Thankfully, I’ll never have to shop at the only store left in a New York borough, since I like olives stuffed with anchovies.

Second, these stores would be funded by taxpayers, meaning everyone from grandma in Queens to a kid in the Bronx is helping subsidize Chad’s organic turmeric habit.  And if the store loses money (which, if they pride themselves on being non-profit, they absolutely will), the city just raises taxes or cuts funding to pothole repair.  Either way, the avocado hits the fan.

Private grocery stores already compete fiercely to bring you arugula at midnight and 87 flavors of hummus.  Government grocers would have no incentive to improve—because when profit doesn’t matter, neither do customers.  They won’t improve service or selection for you, but the competition will close some of the private stores, meaning you will have fewer choices, while the city is still open but receives less in taxes.

And let’s not forget politics.  One council member demands more kale, another wants a beef boycott, and someone inevitably proposes a tax on Pop-Tarts and Coca-Cola.

So, while the idea of city-run groceries might sound noble, the reality is more freezer-burn than fresh produce.  When it comes to stocking shelves, it's best to let the people who know a cantaloupe from a meatball do the shopping.  If that pothole has been sitting in the street in front of your house for the last three years, why would you want them to pick your pot roast.

Free and expanded public transit services and universal childcare sound good, but the New York Pension Service is already $177 billion in debt.  Dramatically increasing the number of people receiving those benefits will only make the problem worse, even if those services are run well.  How will the city pay for these new services?  It sure as hell won’t be with the profits from those grocery stores.

Which brings us to higher business taxes and a special tax on the rich.  In the last 20 years, 160 major financial firms headquartered in New York collectively managing $1 trillion in assets has left New York City, primarily because of existing taxes.  Let’s put that another way:  New York City has already lost the business equivalent of the entire economy of Switzerland. 

Many businesses have already left New York for New Jersey where the business taxes are already roughly 6% less.  If Mamdani can implement his tax proposal, New Jersey business taxes will be more than 10% less than New York City.   Currently, 22% of Manhattan commercial property is empty, the equivalent of 90 million square feet of property.  If Mamdani gets his way, a hell of a lot more buildings are going to become empty.

As for that additional tax on high earners, Mamdani believes this will result in a tax revenue increase of $9 billion, a figure he needs to fund all the progressive measures he has proposed.  Multiple cities and numerous countries have tried to pass punitive taxes on the rich only to discover that capital flight is always the result.  The rich simply move their riches where they will be left alone.  The cost of enforcing those draconian taxes frequently cost more than the new revenue produced. 

Well, in only four days from now, we will see who the voters of New York City select to be their new mayor.  Well, then technically, he will only be the winner of the Democratic Primary, but as I have already explained, that’s a minor detail. 

The Hidden Cost of Highway Construction

Back in the early seventies, while I was a student at the University of Houston, the local newspaper ran a joke front page on April Fools’ Day.  Set fifty years into the future, the headline was “Two Cyborgs Killed in Laser Car Crash on Soon-to-be-Completed Gulf Freeway.”

The joke wasn’t about cyborgs or laser cars, but about the idea that the Gulf Freeway Project, begun in 1952, would still be under construction in the 21^st Century.  Sadly, that bogus newspaper story was printed more than fifty years ago and the freeway project is still under construction. 

I was reminded of that old newspaper story as I drove between Las Cruces and El Paso yesterday.  Though the two cities are only about fifty miles apart, the trip took considerably longer than it should have because twenty miles of Interstate 10 was still under construction.  When the highway was last modernized, it desperately needed three lanes per side and they built only two, so now it needs four and they are only building three.  Long before they finish the three, there will be cyborgs driving laser cars.

It was the middle of the afternoon, and if there was anyone working along that long stretch, I missed them.  None of the heavy machinery was moving and the whole site looked shut down.

Highways can be completed much faster:  half a century ago, between Puebla and Mexico City, I saw more than a half mile of highway constructed in a single week.  I’ll grant you that it was flat land and the Mexican authorities were not hindered by such niceties as legal rights-of-way or environmental impact studies, but the highway was certainly finished.

Why do American highway jobs take so much longer to complete? 

Delays result from multiple reasons.  First, the projects are divided into multiple stages, frequently, with different contractors responsible for each stage.  Ignoring the companies that plan and design the construction, there may be multiple companies responsible for relocating utilities (water, gas, electric, and fiber), for roadbed prep and drainage, for paving and surfacing, and for installing signage and barriers.  If any of the companies responsible for any of these tasks is late, it creates a chain reaction of ever-increasing, subsequent delays. 

Next is the problem of funding.  State departments of transportation (like NMDOT and TxDOT) often don’t get all the money needed at once.  Projects are split into fundable phases that may be spaced out over years.  Politicians frequently divide the funding over years to lessen the “sticker shock” of the project cost.  (Ever notice that politicians spread the cost or the income of a proposal over ten years?  They assume you can’t do simple math.)  Delays in federal or state budget cycles can push projects back months or years.

Getting all the required permits frequently delays projects, too.  On just the fifty-mile trip I took yesterday, I crossed through two states, two counties, federal lands, and several small townships.  The route passed through both areas of archaeological interest and endangered species zones.  Even if a permit is acquired, special interest groups frequently challenge those permits in court, producing even more delays.

In addition, there is a nation-wide shortage of skilled highway construction workers.  General construction workers can make $40K a year, with skilled heavy-construction workers bringing home three times as much.  Along with a shortage of workers, there is a growing shortage of contracting companies bidding on the jobs. 

The last two reasons for delays are a little unusual.  First, there is a problem with safety barriers.  I complained to my wife that the orange barrels were positioned such that they created very narrow lanes even though there was obviously nothing going on behind the barriers for at least twenty more feet.  It turns out that if the barriers are only needed, for example, in phases 2 and 5 of a project, they leave them up for phases 3 and 4 to save money and to prevent driver confusion.  The contractors are afraid that if they took down the barriers after the completion of Phase 2, you would ignore them when they went back up for Phase 5 ad thus endanger construction workers.  This doesn’t actually delay construction, but the longer period of driving inconvenience makes us think it takes longer.

The last general cause of construction delay is the project bidding process.  By law, the government must take the lowest bid.  A contractor can save money by lengthening the construction project to the maximum time in order to shuffle construction crews and heavy machinery among multiple job sites and multiple projects.  This approach keeps overhead low, maximizes equipment usage, and enables profit—even if the work proceeds slowly. 

The contractor wins the bid, even though his completion time is much longer than that of other competitive bids.  Public projects that are put out to bid rarely penalize a bid on the basis of the time to complete a project.

However, this “lowest cost” does not take into consideration several factors.  Businesses along the proposed route suffer financial losses from the loss of customers," resulting in lower sales and hiring fewer employees.  The government then loses both sales taxes and income taxes.  Many businesses—particularly restaurants—end up closing along construction routes because their customers avoid the inevitable delays caused by traveling through construction sites.

Nor is the added cost from delayed highway construction strictly financial.   Highway workers are seventeen times more likely to die on the job than office workers are, with the vast majority of those deaths due to accidents involving motorists.  A motorist traveling through a mile of road construction is four times more likely to be involved in a fatal accident than while making the same trip on a completed highway.  What is the estimated cost of a human life?

When calculating the cost of highway construction, U.S. government agencies, particularly the Department of Transportation (DOT) and the Federal Highway Administration (FHWA), use a monetary value for a human life to assess safety measures and cost-benefit analyses.  This value, known as the Value of a Statistical Life (VSL), represents the economic cost of preventing a fatality, not the intrinsic worth of an individual.  Currently, that number is between $10 and $12 million.  Needless to say, that pitifully low number is not factored into the cost of highway construction bids.

There is an alternative method of bidding that voters should insist our government use: it’s called A+B bidding.  And no, it’s not a math quiz—it’s a way to keep bulldozers and construction workers from vanishing into thin air for six months at a time.

In the world of government construction contracts, “A” stands for the amount of money a contractor wants to be paid.  That’s pretty standard—everyone wants the best deal, and the government usually picks the lowest bidder.  But here's the twist: “B” stands for time—how many days the contractor says they'll take to finish the job.  Each day has a price tag attached, called a "road user cost," representing the financial loss caused by traffic delays, detours, and donut spills.

So instead of just saying “Hey, we’ll do it for $4 million,” a contractor using A+B bidding says, “We’ll do it for $4 million in 100 days.”  The government adds the money (A) and the time cost (B × daily delay cost), and whoever has the lowest total wins.  This means a slightly more expensive bid that finishes faster will beat a slower, cheaper one.

A+B bidding flips the usual system by rewarding speed and efficiency, not just bargain-basement pricing.  It’s good for taxpayers, great for commuters, and just might mean fewer orange cones decorating the freeway for years at a time.  And fewer accidents. 

There are a few other things that government could do to cut down the delays.  Don’t award contracts until enough funding to finish the project has been allocated.  Insist that contractors have bonds to ensure the cost of penalties imposed by delays.  Pass legislation that allows businesses to sue contractors for business losses resulting from those delays.  Currently, many government contracts explicitly waive consequential damages, limiting what can be claimed.

I could go on, but that is enough for you to think about the next time traffic is not moving and you have nothing to do but stare at the orange barrels and wonder why the cars in the other lane always move faster.

Who Owns Your Kindle Books?

If you walk even five feet into my house, it is rather obvious that my wife and I like books.  There are bookcases and stacks and piles of books in every room of the house save the kitchen (and I have my eye on those pantry shelves).  Reading is my favorite holiday—one that occupies many hours of every day, and far, far too many hours while I should be sleeping.

Not surprisingly, I also own and regularly use a Kindle.  While I prefer to read from a real hardback edition, I must admit that the ability to keep a small library of books on a small handheld device is seductive.  I read about 20% faster on a Kindle than with a hardback book, and I have found the ability to search for a word or phrase useful during a classroom discussion.  As much as I love a Kindle, after I finish a book that I really like, I still go on and buy a print version of that book.  

There is one very real drawback to Kindle books:  Despite your “buying” them from Amazon, you cannot lend them, resell them, or print them out.  If I buy a real book from Amazon, I can loan it to a friend, resell it at the used bookstore, or even donate it to a library.  But if I buy an eBook, I can’t do any of those for one simple reason—I didn’t really buy it. 

Yes—Amazon does have a limited “loan program” via which I can share books with a friend.  The operative word in that sentence is “limited”.  So far, I have found that not one book that I wanted to share with a friend has been eligible, and I “own” hundreds of Kindle books.  (I strongly suspect that you can only “loan” books that no one wants to read!)

Imagine you walk into a bookstore, buy a hardcover novel, read it, and then lend it to your friend.  Maybe later you sell it to someone else for coffee money.  Totally legal, right?  That’s thanks to the First Sale Doctrine — a fancy name for a simple legal idea:  Once you buy a copyrighted work (like a book, CD, or DVD), you own that particular copy and can lend, sell, donate, or use it to prop up a wobbly table.  The author still owns the copyright, but your copy?  That’s yours to do with as you please.

But here’s where it gets weird:  When you click “Buy Now” on a Kindle book, you’re not actually buying it — at least not in the way you think.  You’re only licensing it.  Legally speaking, Amazon is saying, “We’re letting you read this under certain conditions… but you don’t own it.”  It’s like a high-tech book club where Amazon is the fussy librarian who can take the book back if you break the rules (or even if they just feel like it).

You might have noticed that I said that Amazon, the fussy Librarian, can take the book away from you if they want.  That is correct—if Amazon decides that you are violating the terms of the fine print that no one ever bothers to read, they can not only erase a book from your online library but can reach down the internet and remove the book from your Kindle device.   The most infamous case occurred in 2009, when Amazon deleted copies of George Orwell’s 1984 and Animal Farm from customers’ Kindles without warning because the third-party seller who uploaded the books didn’t have the rights to distribute them, so not only did Amazon “have to” pull them, it also showed that Amazon  could (and did) reach into users' devices to delete files.  Amazon later apologized, issued refunds, and promised more transparency, but the technical ability remains.

So why doesn’t the First Sale Doctrine apply?  Because that rule only kicks in when you own a copy.  If you have just a license, you don’t get those rights—no lending, no selling, and no donating.  Your Kindle book is like a hotel room: you’re allowed to stay and enjoy it, but try reselling it and someone’s going to knock on your door with legal papers.

In short: First Sale is great for real books, yard sales, and lending to friends.  But for Kindle books?  You’re just borrowing (indefinitely)…from a very polite robot librarian with a lot of lawyers.

The First Sale Doctrine for printed books is firmly established law, which was affirmed by the Supreme Court in Bobbs-Merrill Co. v. Straus (1908) and strengthened by later cases and the Copyright Act of 1976.  Unfortunately, it does not apply to your Kindle book because transferring a digital file involves making a new copy, which violates the reproduction right under copyright law.  This was a key point in Capitol Records v. ReDigi (2018), in which the court ruled that the First Sale Doctrine does not apply to digital music resales because each "resale" creates a new copy.

If you shop at Amazon, these legal distinctions are not very apparent.  The company advertises “sales” and allows me to put an eBook into a “basket”.  Phrases such as “Your Library” seem to indicate that I have a permanent collection, yet Amazon can delete my purchases without my approval.  Amazon’s practice of labeling your eBook acquisition “purchased” when you’re actually licensing it under restrictive terms is deliberately legally murky, linguistically misleading, and ethically questionable. 

Amazon’s language is deliberately misleading:  It markets eBooks using the language of ownership, but gives you only a license. That contradiction isn’t just semantic — it shapes your legal rights.  The only way to truly own an eBook is to buy DRM-free files from the few publishers or stores that don’t restrict usage after download.  DRM is a set of technologies used by publishers and platforms to restrict how digital content—like eBooks—can be accessed, copied, shared, or used.

U.S. courts have generally upheld Amazon’s position, because consumers agree to the license terms when they make a purchase — even if they haven’t read them.  Consumer protection advocates argue this is a deceptive business practice because the word "buy" implies ownership under normal usage.  A court in Germany ruled against Amazon in 2014 for exactly this issue, saying they couldn't advertise eBooks as “purchased” if they weren’t owned outright.  In the U.S., regulators haven’t taken strong action—yet.  But some legal scholars argue this runs afoul of basic consumer expectations and may already be in violation of some states’ consumer protection laws.

A few publishers, like TOR (they typically publish science fiction, including the excellent Old Man’s War series by John Scalzi) offer DRM-free publications.  And there are eBook readers available from companies other than Amazon, such as Kobe or Boox.  These are not great options since Amazon has the largest eBook store in the world.

The only real chance we have to see this change is to hope that legislation will be passed that extends First Purchase rights to digital material.  However, Amazon is headed by Jeff Bezos—the world’s third-richest man—who not only has an army of lobbyists pandering to every politician’s slightest wish but also owns the Washington Post…. Don’t hold your breath.