What you never learned in school about Thanksgiving

Peter Klein gives us the story of the first Thanksgiving that you never learned in school:

In 1620 Plymouth Plantation was founded with a system of communal property rights. Food and supplies were held in common and then distributed based on “equality” and “need” as determined by Plantation officials. People received the same rations whether or not they contributed to producing the food, ... Because of the poor incentives, little food was produced.

Faced with potential starvation in the spring of 1623, the colony decided to implement a new economic system. Every family was assigned a private parcel of land. They could then keep all they grew for themselves, but now they alone were responsible for feeding themselves. While not a complete private property system, the move away from communal ownership had dramatic results.

 This year I am giving thanks for private property. 

Related:  Good short video on the how private property saved the Pilgrims, China and Vietnam from our friends at MarginalRevolution University

Argentine Rental Market Natural Experiment

One of Argentine President Milei's radical reforms was to "take a chainsaw" to rent control laws. Argentina had had some of the most restrictive rent control regimes ever. All of that was abandoned almost over night. Many media outlets noted with glee that rents fell dramatically. Even most economists were surprised by how much supply had been withheld from the market.

Now a more systematic analysis by Elfert and Thomsen that compares trends just before and after the repealing laws confirms the initial impressions. Supply of rental units skyrocketed.

 When the supply curve shifts out, we move down the demand curve resulting in prices falling. 

Could this be a lesson for New York's new mayor?

A friend reads the Meta Opinion so I don't have to

Background:  The FTC’s case against Meta rested on a familiar monopolization narrative: Meta supposedly dominates “personal social networking” and preserved that dominance by buying Instagram and WhatsApp before they could blossom into competitive threats. For the theory to hold, users must be trapped on Meta’s platforms despite wanting something different, and Meta must be quietly degrading quality because—secure in its monopoly—it can.

After a full trial, the court found none of this matched the evidence. A friend of mine, who celebrated the opinion’s release with a glass of single malt, sent along a set of remarks that form the basis of this post.  

The European regulators required Meta to offer an ad-free Facebook and Instagram for €5.99 per month. Fewer than 0.01% of users subscribed. If consumers were truly desperate to flee the “oppressive” ad-supported model, one might have expected more than statistical noise. As my friend put it, this was not exactly the behavioral evidence one hopes for when arguing that users are crying out for an alternative.

Europe contributed another natural experiment when regulators mandated a choice screen for search engines on Android. Under the FTC’s theory, Google’s dominance stems largely from being the default—the search engine pre-selected for users who supposedly never bother to change it. So regulators removed the default entirely and required every user to make an active choice. Yet when presented with a perfectly neutral menu, over 98% still selected Google. It was a useful reminder that consumer preferences sometimes favor the incumbent for reasons unrelated to default settings.

The profits evidence fared no better. The FTC treated Meta’s high profits as proof of monopoly power, but did not rule out the more mundane explanations—efficiency, innovation, or providing products people actually like. Since Meta’s returns do not look unusual relative to other successful tech firms, the court concluded that “monopoly” was doing more work in the FTC’s theory than in the real world.

Then there was the “quality degradation” argument. The FTC suggested Meta raised its “quality-adjusted price” by making its apps worse over time. The record instead showed steady feature additions and billions in R&D investment. If Meta is secretly degrading its products, it is doing so in a very expensive and user-pleasing way.

Finally, the court noted that one FTC expert had previously urged the agency to bring this exact case. As my friend observed, this made the testimony feel less like neutral analysis and more like a very committed book report.

In the end, the court’s conclusion rested on the distance between the FTC’s theory and the evidence. The agency described a world in which consumers were effectively captive and Meta behaved like a textbook monopolist; the record pointed to something far less dramatic. Confronted with the gap, the court went with the evidence.

HT:  My friend supplied the irony. 

Tax Avoidance in Norway

The Laffer Curve, made famous by supply-side economic policy in the 1980s, is alive and well. It shows that higher taxes can reduce tax receipts if enough people stop engaging in the activity that is being taxed. In this case, that activity is owning wealth in Norway. Like all tax implementations, it's complicated, but it seems that various increases in tax rates on the wealth of the super rich has led to their exodus.

The recent wealth tax increase in Norway was expected to bring in an additional $146M in yearly tax revenue.

Instead, individuals worth $54B left the country, leading to a lost $594M in yearly wealth tax revenue. 

 Switzerland looks to gain from this wealth flight.

 

Europe at a crossroad

The Constitution of Innovation

The continent faces two options. By the middle of this century, it could follow the path of Argentina: its enormous prosperity a distant memory; its welfare states bankrupt and its pensions unpayable; its politics stuck between extremes that mortgage the future to save themselves in the present; and its brightest gone for opportunities elsewhere. In fact, it would have an even worse hand than Argentina, as it has enemies keen to carve it up by force and a population that would be older than Argentina’s is today.

Or it could return to the dynamics of the trente glorieuses. Rather than aspire to be a museum-cum-retirement home, happy to leave the technological frontier to other countries, Europe could be the engine of a new industrial revolution. Europe was at the cutting edge of innovation in the lifetime of most Europeans alive today. It could again be a continent of builders, traders and inventors who seek opportunity in the world’s second largest market.

HT: Mike

How not to grow: lessons from India's poorest and youngest state

Economist:

Lately Bihar’s leading parties have been talking about expanding the system of “reservations”, which provides preferential access to jobs to members of castes that are deemed to need a leg-up. ...

Only about one-third of 15-to-29-year-olds are in the labour force, among the lowest rates in the country. ... Growth would transform lives in Bihar, more than anywhere else in India. If only politicians would spend more time debating how to make the pie bigger—and less time fighting over how to slice it up.