The darkest days of the year have always asked something of us.

Long before we strung electric lights and gathered around brick fireplaces, people across cultures marked the winter solstice — the darkest day of the year. We do so still, not with despair, but as a moment of deliberate action, of invitation. We bring greenery indoors. We light candles in the windows and fires in the hearth. We gather, sing, feast, celebrate. We tell stories about the sun’s return, even though the bulk of winter lies heavy ahead.

Why We Bring Life and Light Indoors

The solstice is neither the end of winter nor its harshest nadir. It is the turning point, the time when decline stops and reversal begins. The days will begin, imperceptibly, to lengthen again. There seems to be some universal human impulse to mark the deepest darkness with light of our own making, and to gather in the good things that sustain us through lean times.

By the second century BCE, Roman households decorated their doors with holly, sacred to the god Saturn. Its red berries and vibrant green foliage set the season’s signature color scheme. Around the same time, Druids were decorating holly trees (though cutting one down would bring bad luck) and bringing in red-and-white speckled fly agaric mushrooms to dry by the fire. Further north, the Norse were hanging mistletoe, with its tiny white berries, under which couples would stop to kiss. Celts and Germanic tribes cut boughs from the evergreen plants around them — ivy, fir, laurel — to symbolize enduring life. 

As Christianity crept across the continent, these cultural practices were absorbed by new narratives. The decorated tree was eventually brought indoors and adorned with ornaments, migrating from Germany with Prince Albert and Queen Victoria. It was subsumed into the Christmas tradition and subsequently across the Anglosphere, including the southern hemisphere. 

But indigenous midwinter celebrations of fire, music, and revelry were already observed there, in June. The Mapuche of southern Chile and adjacent Argentina celebrate We Tripantu around the June solstice as a new year and renewal of the natural cycle. Each recognizes that midwinter is not a time of death, but of quiet hibernation, preparation, and anticipation.

Why We Light the Dark

In Scandinavia, a giant oak log, the Yule log, was burned to symbolize strength and endurance, its light defying the darkness and promising regrowth and rebirth. A fragment was saved each year to start next year’s fire.

And that, perhaps, is the enduring lesson of these solstice ceremonies of renewal.

Evergreens remain visibly living when deciduous plants appear dead, so they become symbols of continuity, rebirth, and eternal life. But neither are really dead. They are storing away energy, waiting for the light and opportunity to grow to return.

The embers of the Yule log, saved for next year; the hard-won sugars stored up in evergreen boughs. Human beings have always marked the darkest economic and seasonal moments not by denial, but by deliberate acts of renewal — bringing light and living things indoors as a vote of confidence in the future.

Discipline in Dormancy

Human capital works the same way. Periods of stagnation and loss can be times of preparation — if we take responsibility for them. Skills can be sharpened. Habits can be examined. Character can be rebuilt. But none of this happens automatically. Winter only becomes preparation if we choose to treat it as such.

The first signs of recovery are often invisible: better decisions, renewed discipline, a willingness to accept responsibility for one’s future. These do not immediately produce abundance, but they change the trajectory. Compounding works quietly at first.

In economic life, downturns, stagnation, and personal failure function as winter solstices. In the moments when progress is slowest, we might not notice that reversal has already begun. Prosperity does not return automatically — it returns because people act as if it will. We conserve capital, tend embers, make plans, and orient ourselves toward the future. We honor the natural cycles by preparing ourselves to grow again.

Prosperity depends not only on policies or institutions, but on the daily choices of individuals who conserve, invest, and prepare. It depends on people willing to tend embers rather than curse the cold.

In a time when economic anxiety is widespread and faith in the future often feels thin, the solstice offers a bracing reminder. Darkness does not mean directionlessness. Dormancy does not mean decay. And renewal does not require grand gestures — only the discipline to preserve what still lives and the courage to believe that patient effort matters.

The people who celebrated the “longest night” were not naïve. They knew months of cold still lay ahead. They knew crops would not sprout for a long time. Yet they marked the moment anyway, because direction mattered more than speed. After the solstice, as in recession and personal loss, progress begins before comfort returns.

President Trump has accused virtually every country, including those inhabited only by penguins of ripping us off when it comes to trade. But there’s one region that the President has neglected to protect us from: the North Pole. By every metric that the Trump administration has used, Good Saint Nick should really be considered an economic terrorist. Consider the following:

North Pole Trade Deficit

Santa operates out of the North Pole which is (as of yet) not part of the United States; everything that he brings into the country is considered an import. Meanwhile we export nothing to the North Pole annually, giving us an entirely one-sided trade deficit with the North Pole. But just how much does Santa actually import into the United States each Christmas?

With just under two-thirds of Americans identifying as “Christian,” that gives us about 200 million people eligible for gifts from Santa, of which about half would be considered children. A recent survey finds that parents are anticipating spending about $521 per child on Christmas presents, which equates to $52.1 billion worth of Christmas spending. Obviously, parents and other family members will contribute the bulk of these presents to the kids. If we assume that only a quarter of the gifts that children receive on Christmas morning are “From: Santa,” that means that Santa must be importing $13 billion worth of Christmas presents on Christmas Eve.

Using the same methodology that the President’s Council of Economic Advisors has used, we can calculate the devastation that this pile of presents would bring upon our nation. At an average wage of $36 per hour, Santa’s imports are the equivalent of 180,555 manufacturing jobs that are destroyed by him deciding to spread his “good cheer.” 

Of course, if Santa were to contribute more than a mere quarter of the Christmas presents per year, this number would only rise.

Unfair Trade Practices

Worse still, is Santa’s practice of dumping gifts on the American economy. “Dumping,” according to US law, is when a foreign producer sells goods in America below the cost of production. Previous administrations have solved this in the past through the use of antidumping duties, sometimes exceeding 200 percent of the product’s value.

But Santa does not merely sell below cost. He gives his goods away for free. This is dumping at a price of zero, which is completely indefensible under US law. Even China, often referred to as the worst trade offender in the world, has the decency to charge us something for their harmful production. 

Using standard methodology to calculate the appropriate response is simple: take the value of the good, divide it by the price the importer is selling, and multiply it by 100 to arrive at the appropriate percentage penalty to apply. Since Santa charges us nothing, the appropriate response is therefore an infinite tariff rate applied to any and all goods imported from the North Pole.

Unfair Production Processes

We must also consider the means by which the North Pole produces its wares: intellectual property theft. Santa does not produce his own merchandise, but rather creates facsimiles of products readily available on shelves of stores around the country. This is intellectual property theft at its finest, which by some estimates costs the US up to $600 billion annually. Is it possible that all of those “elves on the shelves” are really spies, seeking to steal trade secrets through corporate espionage? After all, they apparently return to the North Pole every evening to “report to Santa.” Just what is in those reports? Has anyone seen them?

And how does Santa build these gifts? Through the use of what can only be considered child and slave labor, no less. Watching 1994’s The Santa Clause with the eyes of a trade representative reveals just how abhorrent Santa’s labor practices are as Santa has been using child elf labor since the beginning of his operation. Worse is 2003’s Elf, which reveals that when an elf does manage to escape, none other than Santa himself will descend from his throne and seek to collect the escapee. And should an elf wish to be anything other than a toymaker, he is berated and faced with serious pressure to conform, as the 1964 Rudolph the Red-Nosed Reindeer shows with the plight of Hermey and his desire to become a dentist.

“And what are these elves paid with?” you ask. That’s easy: candy canes, hot cocoa, and “Christmas spirit.” This is currency manipulation at its finest. Meanwhile, these workers live in a region with no significant thermal activity and average temperatures of about -40°F, six months of darkness, and zero compliance with standard OSHA practices. Still, Santa reports that his elves are “merry.”

National Security Threat

Finally, we must consider the national security threat that Santa presents. President Trump has secured the border against illegal crossings. So why has nothing been done against Santa? Has he been vetted by national security advisors? Does he have visa paperwork or asylum status? Does he enter through a designated port of entry, submit to customs inspections, or declare the goods he is importing? It appears that the answers to all of these questions are a resounding “no,” which means that if any border is in need of a wall, it’s our northern border. Good luck building one tall enough to stop reindeer flying at over 650 miles per second.

Either Condemn Santa—or Thank Free Traders 

To his credit, the President has tried to convince parents that they should give their children fewer Christmas presents. At his affordability rally in Pennsylvania just a few weeks ago, he pointed out very clearly that “you don’t need 37 [dolls] for your daughter. Two or three is nice.” This isn’t the first time the President has derided excess consumption in the name of national security: he said as much back in May as well.

The reality is that the American people understand full well that Santa is no “economic terrorist.” While we may bemoan having to clean up the mess of wrapping paper, find ourselves unprepared for the sheer number of toys that need (but do not include) batteries, and perhaps find frustration that after a late night, we have to get up absurdly early, we still see Christmas Day not as a sign of us being taken advantage of, but as a day of celebration and good cheer.

But if we really stop and think about it, foreign producers have a degree of “Santa” in them. While they do not sell us their wares at zero price, they still charge lower prices than our domestic counterparts can match. This means more access to goods and services that allow us to live healthily and wealthily, however we choose to define those terms. Unlike Santa, foreign producers sell their “gifts” to everyone regardless of age or religious affiliation and they do so year round. 

So what we should really be after here is consistency: either condemn Santa as the job-destroying, IP-stealing, border-flouting menace he is — or thank foreign producers for enriching our lives with their gifts of specialization. You cannot have it both ways.

For decades, pundits have declared that Americans shouldn’t have to save for retirement in the casino of the stock market. They argued that individuals saving for themselves was too risky and that only a strong collective safety net could provide a secure retirement. 

Those pundits have been proven wrong. 

A recent Wall Street Journal story highlighted the hundreds of thousands of “401(k) millionaires” just at the Fidelity brokerage. Far from being a refuge just for the wealthy, individual retirement accounts have become a widespread and secure way to save for retirement. They have also become one of the main reasons for America’s national wealth.  

In the decades after World War II, federal tax policy encouraged employers to offer what are known as “defined benefit” retirement plans, where companies promised to pay set amounts to their former employees after retirement. But in 1974 the government began allowing people to open individual retirement accounts (IRAs) for themselves, with no tax on the contributions. More importantly, in 1978, Congress added what would become the famous Section 401(k) to the US tax code, giving employers the option to support individual retirement accounts.

Around the time of the 401(k) tax code change, there were about 30 million defined benefit plan participants in the private sector, an all-time peak. That was nearly double the total in “defined contribution” or individual retirement plans, such as the 401(k).

Today, the number of active participants in defined benefit plans is down to about 10 million, but there are almost 90 million in defined contribution plans. Thanks to 401(k)s, the total number of workers with any retirement plan is at an all-time high, even accounting for population growth.  

While many have lamented the decline of the defined benefit package, in one sense the market has spoken. People have moved away from stodgy jobs with strict defined benefits packages. One reason is that the government allows companies to wait up to five years before any of their defined benefits are vested, and companies often choose to vest such plans slowly, because the plans are quite risky for the companies themselves. Since the median length of a job in the US is about four years, defined benefit plans can leave employees at these companies without any savings at all.  

The riskiness of defined benefits packages is demonstrated by the long history of their bankruptcies. The only reason those plans are not even rarer today is that they are supported by a government corporation that came along at the same time the IRA was created, the Pension Benefit Guaranty Corporation. Due to plan bankruptcies, the PBGC was tens of billions of dollars in the hole until an American Rescue Plan bailout in 2021 salvaged it.  amer

In 2025, Americans held  $13 trillion in defined contribution accounts, mainly 401(k)s, and another $18 trillion in individual retirement accounts not directly attached to employers. Most of those individual retirement accounts, though, came from “rollovers” of previous employer accounts into IRAs, showing the flexibility that comes from individual savings when people move or change jobs. In total, almost a quarter of all household financial wealth in America is in individual retirement savings. 

Despite periodic cries about a retirement crisis, people with the option to save for retirement are saving a lot. Fidelity estimates that people with 401(k)s are saving over 14 percent of their income in them, including both employer and employee contributions. The median retirement savings for the recently retired is $200,000, which helps explain the all-time record net worth for this group. The amount of savings will go up as more people retire who only know of defined contribution accounts. The number of people with individual accounts at middle age is actually higher than it is for older groups.  

Beyond the benefits to individuals, there are social benefits to individual retirement accounts. In countries with more expansive collective safety nets and social security, most people don’t have to save as much for retirement. Although for some individuals that could work out fine, for society as a whole, it can be devastating. Retirement is one of the main reasons people save, and savings are the main reason businesses can invest, and investment is the main reason economies grow.  

Decades ago, economist Martin Feldstein showed that the Social Security system in the US reduces personal savings by anywhere from a third to more than half. Although the precise magnitude of this effect is debatable, the broader point is not: an even more expansive social safety net would further depress savings.

The proliferation and success of 401(k)s is one reason political pressure to expand Social Security has remained muted. Social Security is a necessary provider for those with limited savings or options, but there is broad agreement that the program requires reform. One sensible approach would be to limit payouts for individuals who already have substantial incomes in retirement—and here, again, 401(k)s will be central. Many Americans are entering their later years with sizable holdings of stocks and bonds in 401(k)s, and modest reductions in Social Security benefits for these groups would not be devastating.

The success of tax-advantaged savings accounts has arrived and should be celebrated. Yet that success has gone too far in one respect. The federal government now has not just tax-advantaged retirement accounts, but tax-advantaged savings accounts for higher education, accounts for K-12 education, accounts for health care expenses, accounts for funds spent on people with disabilities, and, most recently, accounts for the expenses of “emergencies” more generally.  

The surprising proliferation of tax-advantaged savings accounts is moving much of the population into a system where their savings are not taxed at all, which is much to the good. But now families have to navigate how much money to put into each bucket and for how long, and what will happen if they don’t spend the funds or if funds from one bucket are needed for other expenses. 

Ideally, the system could just stop taxing people’s savings and focus on taxing consumption.  

In the meantime, believers in individual liberty should celebrate the success of the 401(k) and pray for more successes to come. 

For three months at the peak of COVID-19, I treated some of New York City’s sickest patients at Bellevue Hospital, the city’s historic public hospital. There, extraordinary clinicians delivered heroic care to the most at-risk patients. While there, I couldn’t help but compare Bellevue to the gleaming NYU Langone Tisch Hospital — a nonprofit private facility almost next door where patients with robust insurance predominantly received care. The hospital even maintained a quasi-VIP room in its emergency department, a feature that had ignited controversy in 2022 for symbolizing stratified care.

Rich and poor patients receive starkly different treatment in New York City — and nationwide. It’s exactly these types of disparities that infuriate newly elected New York City Mayor Zohran Mamdani, who vows to eradicate them in the name of equity.

The mayor-elect wants to increase access to healthcare. His administration has prioritized affordability and expansion of public services, building on a campaign that mobilized young voters and progressives toward a vision of universal rights.

Democratic socialists champion healthcare as a universal right, yet this vision confronts an intractable barrier: will the government compel physicians, nurses, or hospitals to participate? Insurance coverage, however robust, remains meaningless without actual access and delivery. Expanding coverage alone does not guarantee providers will accept patients, especially when financial realities favor higher-paying private plans.

A concrete example is joint arthroplasty, such as hip or knee replacement. Abundant data confirm that, for appropriate candidates, surgery dramatically enhances quality of life and functional status. Studies consistently show improvements in mobility, pain reduction, and overall patient-reported outcomes, making it a benchmark for assessing equitable access to elective procedures.

Countries with socialized medicine, like Canada, treat healthcare as a positive right and provide universal coverage — yet they falter on universal access. Canada sets a national benchmark of 26 weeks for hip replacement; according to the Fraser Institute, only 66 percent of patients undergo surgery within that timeframe. Wait times also reflect resource allocation challenges in single-payer systems, where rationing occurs through queues rather than price, often delaying care for non-urgent but life-improving interventions.

In the United States, Medicaid patients — covered by the government’s safety-net insurance — are less likely to receive arthroplasty and face longer surgical waits than those with commercial insurance. Research from national databases reveals that Medicaid enrollees not only access these procedures less frequently but also experience barriers in specialist referrals and pre- and post-operative optimization.

Surgeons struggle to treat Medicaid patients for several reasons, chief among them reimbursement. Medicaid pays far less for identical work: if Medicare reimburses a physician $1.00 per procedure, private insurance averages $1.43, while New York Medicaid pays just 76 cents.

To achieve equity, Mayor Mamdani will have to lobby Governor Hochul and the federal government to increase Medicaid reimbursement rates.

Medicaid patients also experience higher rates of complications, readmissions, prolonged hospital stays, and worse patient-reported outcomes. They face 81.7 percent greater odds of emergency department visits compared to privately insured patients.

The new city administration campaigned on a pledge to “expand access” and “lower costs for everyone.” To achieve this, Mayor Mamdani will need to substantially increase physician and provider participation in safety-net hospitals and insurance.  What if physicians don’t want to participate?

The uncomfortable (and usually unspoken) reality is this: Achieving true healthcare equity will require the forcible appropriation of physicians’ property — their time, expertise, and professional autonomy.

At its core, the conflict pits positive rights (entitlements to goods and services) against negative rights (freedoms from coercion), inseparable from the foundational principles of property ownership. Philosophically, positive rights demand active provision by others, potentially infringing on individual liberties, while negative rights protect against interference — a tension central to debates on mandatory service or quotas.

This is the fundamental challenge posed by positive rights. For example, the European Union recognizes a right to education, yet someone must actually provide that education. Similarly, the EU acknowledges a right to healthcare, but someone must deliver that care. Even more critically, these positive rights can come into direct conflict with one another. The EU, for instance, guarantees workers certain work-life balance protections, including a minimum of four weeks of paid vacation per year. Physicians, however, are a scarce and finite resource. What happens when physicians exercise their mandated vacation time and there are not enough doctors available to meet patient demand?

In NYC, in the name of Mamdani’s equity, will the city compel physicians to accept every insurance plan? Should it mandate minimum patient quotas? Should it outlaw tiered care — framed through the lens of oppressor and oppressed — to enforce uniform outcomes?

If a city government can conscript doctors in these ways, what else can it command them to do?

“Was the government to prescribe to us our medicine and diet, our bodies would be in such keeping as our souls are now.” -Thomas Jefferson

Let me introduce you to Sam. Sam has obesity, Type 2 diabetes, heart disease, and high blood pressure. His diet consists mostly of refined grains and trans fats. He’s got cabinets full of dirt-cheap junk food and sky-high healthcare costs to address its effects. He takes home $27,000 a year, but spends $36,000. He’s in debt up to his jaundiced eyeballs, and he wants his niece to foot the bill for weight-loss medication.

As a real-life niece of my Uncle Sam, I’m concerned about his diet. Some 56.2 percent of the daily calories consumed by US adults come from federally subsidized food commodities: corn, soybeans, wheat, rice, sorghum, dairy, and livestock. While these calorie-dense foods once made sense for a government preparing for famine or total war, in recent decades they’ve instead helped make us fatter and sicker. 

Obesity is a top driver of healthcare costs. One study compared the health of people who eat mostly foods the federal government subsidizes to those who eat fewer. Those who follow the revealed preferences of what the government subsidizes (rather than the diet it consciously recommends) are almost 40 percent more likely to be obese and face significant diet-related health issues. Those with the highest consumption of federally subsidized foods also have significantly higher rates of belly fat, abnormal cholesterol, high levels of blood sugar, and more markers of chronic inflammation. All these are increasing contributors to the most common causes of death in the developed world.

The negative impact of subsidized crop consumption on health — while it can’t be called causal — persists even after controlling for age, sex, and socioeconomic factors. But life does not control for those factors.

The Great Grain Giveaway

The federal government recommends one diet to Americans, and subsidizes another. The Dietary Guidelines for Americans from the USDA and HHS promote eating fruits, vegetables, whole grains, protein, and moderate dairy, while limiting saturated fats, sugars, salt, and refined grains. According to data compiled for Meatonomics, American agribusiness receives about $38 billion annually in federal funding, with only 0.4 percent ($17 million) going to fruits and vegetables. Just three percent of cropland is devoted to fruits and vegetables, despite USDA guidelines’ insistence that they should cover half of your dinner plate. Just 10 percent of Americans consume the recommended amount of fresh produce, and the poor consume the least. (Fruit and vegetable producers’ exclusion from the federal direct payments program provides a valuable example of a food industry thriving without significant subsidies. They do, however, rely heavily on migrant labor to lower costs.)

Instead, the US spends tens of billions annually to subsidize seven major commodities. The three largest farm subsidy programs contribute 70 percent of funds to producers of just three crops — corn, soybeans, and wheat. Approximately 30-40 percent of US corn, over half of soybeans, and nearly all sorghum feed livestock, heavily discounting high-fat, lower-nutrition meat and dairy (especially compared to grass-fed options). The prevalence of grain-fed livestock generates demand for commodities used to feed them, completing the circle. 

Subsidies also contribute to our consumption of refined grains, sugary drinks, and processed foods. About five percent of corn becomes artificially cheap high-fructose corn syrup (which allows it to compete with tariffed natural sugars), and half of soybeans are processed into oils, which also contribute to obesity.

My Uncle Sam is sick because he eats the food the government makes artificially more affordable. Those foods are poorer in quality and more harmful to health than their unsubsidized alternatives. We are paying to make ourselves sicker.

Diet-Related Health Issues Fuel Healthcare Costs

For more than 20 years, the FDA has known that trans fats and refined grains harm health, damage metabolism, and cause disease. Diet-related illnesses like obesity, Type 2 diabetes, and high blood pressure are increasing, while heart disease remains the leading cause of death. These epidemics are intertwined at the artery level, and both contribute hugely to rising US health care costs.

In an economic order awash with subsidies and regulation, agricultural policy is health policy. Government subsidies for agricultural products have shaped the current American nutritional environment, and they are exacerbating obesity trends.

An article in the American Journal of Preventive Medicine confirms: “Current agricultural policy remains largely uninformed by public health discourse.”

Johns Hopkins physician (and current Commissioner of the US Food and Drug Administration) Marty Makary called out the disconnect clearly. “Half of all federal spending is going to health care in its many hidden forms,” he told an interviewer in October, but Americans continue “getting sicker and sicker… Chronic diseases are on the rise. Cancers are on the rise. And we have the most medicated generation in human history.”

We’re getting more medicated every day — and more of it is at taxpayer expense. 

A Better Answer Than Ozempic?

Government spending on healthcare now exceeds the entire discretionary budget. Excess weight is a significant risk for older Americans, who are also the most likely to both have high healthcare costs and to rely on government health care. Forty percent of Americans over 60 are classified as having obesity, which is a contributing or complicating factor in diseases that kill older Americans: cancers, heart disease, infection, stroke, and cirrhosis.

Late last year, the Food and Drug Administration approved the weight-loss drug Wegovy as a treatment for people at risk of heart attack or stroke. Medicare is forbidden by statute from covering prescription drugs for weight loss alone, but in 2021 regulators approved Wegovy for reducing weight-related risks in patients with diabetes. Medicare Part D plans spent $2.6 billion last year on related compound Ozempic to keep 500,000 patients with diabetes stable. Wegovy’s list price is around $1,300 per month, but that’s still small compared to the $1.4 trillion Americans spend on direct and indirect costs from obesity.

It has a certain economic logic. Instead of waiting for a patient to develop a cascade of expensive comorbidities like heart failure or diabetes, we could consider asking Medicare to pay for anti-obesity meds on the front end. That wouldn’t work as well as lifestyle changes, but all our health and activity messaging over the past several years doesn’t seem to have moved that needle, and significant evidence suggests our efforts are counterproductive. 

The Tangled Web of Farm Subsidies

To understand the insanity of American agricultural and health policy, it’s hard to do better than comedian-illusionists Penn & Teller, who in characteristically salty style (really — you’ll want headphones and a sense of humor to watch the video) explained it this way 15 years ago: 

High fructose corn syrup is a dirt-cheap way to add sweetener and extend shelf life. And why is it so cheap? Because we subsidize corn farmers! Our government gives about 10 billion of our tax dollars to corn farmers every year so they can produce more corn than we need. They then sell the corn at artificially low prices. They spend our money to make corn syrup cheap, and now the same government that uses our tax money to keep soft drinks cheap wants more of our tax money to make soft drinks more expensive. Does anyone else think this is incredibly f—d up?

Yes, Penn. We do. And since that clip aired, obesity rates have worsened 50 percent, and rose 78 percent in children. Medical spending on the consequences of obesity doubled. Over the same period, subsidies to corn growers (which includes disaster aid and insurance) have tripled. 

Rather than cut back on his terrible diet, Uncle Sam wants us to pony up for weight loss drugs — to undo what our food policy has done.

Reports in early December indicate that President Donald J. Trump is preparing to sign an executive order that would block state-level laws regulating artificial intelligence and replace them with a single federal standard. According to early descriptions, the order would bar states from enforcing their own AI rules on safety, transparency, data, or algorithmic accountability.

The administration’s stated goal is to prevent a “chaotic patchwork of state AI laws” that, it argues, would burden interstate commerce and undermine the nation’s competitiveness. The justification is familiar: when the states cannot agree, when new technologies cross borders too easily, only a uniform national standard can provide stability. 

At one level, the reasoning is plausible. Yes, California, Colorado, Texas, Florida, Vermont, New York, and a dozen others have enacted or proposed conflicting approaches to regulating AI. Yes, this makes compliance difficult. But that does not justify a federal takeover of the entire domain of artificial intelligence, especially when the order reportedly envisions not merely preemption of state law, but the creation of a national regulatory framework enforced by federal agencies. The question that should precede any such action is the oldest one in the American political tradition: what powers does the government require in order to protect liberty — and what powers will compromise it? 

I write as someone now completing a book titled “A Serious Chat with Artificial Intelligence,” an extended reflection on the human mind in dialogue with its own creation. That work has made me especially sensitive to a paradox now unfolding: at the very moment when AI is expanding the reach of our intelligence, we risk shrinking the scope of our freedom. The challenge is real, the choices difficult. But the temptation to answer complexity with centralization — the temptation that now animates the push for a single federal rule for AI — has almost always led to stagnation. 

State regulation of AI is not, by itself, an ideal situation. We are indeed seeing 50 variations of concern, from the merely paternalistic to the openly fearful. Some states worry about algorithmic bias, others about deepfakes, still others about data privacy or labor displacement. Several are experimenting with rules requiring disclosure of training data, transparency of model decision-making, or permission requirements for models above certain compute thresholds. This is confusing. It is also federalism working as intended. The states are laboratories of democracy, not subordinate offices waiting for federal consolidation. 

The administration’s answer — federal preemption followed by federal regulation — is not a remedy. It is a cure worse than the disease. The premise behind it is philosophically wrong: that a central authority can foresee the risks of an emergent technology better than the distributed knowledge of millions of actors operating within a free market. That premise was wrong when applied to railroads, radio, electricity, telephony, airlines, and nuclear power. It is even more disastrously wrong when applied to artificial intelligence. 

Yes, government regulation is justified in cases where AI demonstrably is being used as a weapon of war or is modified specifically for crime. Governments successfully regulated nuclear weapons for three-quarters of a century. When state governments turned to regulating nuclear power to satisfy fears and doomsday fantasies, the nuclear power industry froze. Only now are we realizing that had its growth continued, the entire (dubious) “catastrophe” of climate change might instead have been stillborn.

The historical analogy that looms largest is the regulation of the airwaves. For decades, federal licensing of broadcast frequencies created a rigid, centralized, and stagnant media environment dominated by three giant networks. Only when cable television emerged — outside the FCC’s jurisdiction — did that system collapse and innovation resume. The market corrected the government’s mistake. It did so not through national uniformity, but through decentralization. What was true of the airwaves is true of AI: innovation is born at the periphery, not the center.

‘Regime Uncertainty’ 

The deeper economic argument against a single, national AI rule is the one articulated by the historian and economist Robert Higgs, who coined the term “regime uncertainty.” 

Higgs examined why private investment collapsed in the late 1930s even as the Great Depression was easing. The answer: business owners no longer trusted that the rules governing their property, contracts, and earnings would remain stable. With each new intervention, tax, or regulatory threat of the New Deal, the future became unpredictable. And when the future is unpredictable, capital retreats.

That insight perfectly describes the present moment in AI. Innovators are already facing a barrage of unpredictable interventions worldwide: the European Union’s AI Act, which classifies models by risk and bans categories of algorithmic use; China’s “Generative AI Measures” requiring adherence to state ideology; Congress floating licensing schemes for large models; the proliferation of state laws in the United States with incompatible compliance burdens; and now, a looming federal plan to centralize authority over the entire sector. To paraphrase Higgs, when government insists on being the co-author of every technological step, innovation freezes in anticipation of the next decree. 

The Higgs argument is only half the story, however. Higgs tells us why government intervention discourages innovation. Hayek tells us what regulates innovation when the government does not. 

Spontaneous Order 

For Friedrich Hayek, the central lesson of economics was that no single decision-making body — no panel of officials, no federal agency — could ever match the distributed intelligence of a free society. The knowledge required to understand a complex market is not held by any single mind. It is dispersed in millions of judgments, preferences, price signals, reputational cues, and feedback loops operating simultaneously. Out of this decentralized coordination emerges what Hayek called spontaneous order: an evolving, self-adjusting system far more responsive than regulation. 

Applied to artificial intelligence, Hayek’s argument is decisive. AI is not a static technology. It evolves weekly, often daily. It is shaped by user feedback at scale: billions of queries, millions of corrections, and innumerable signals of trust or distrust. When an AI product errs, offends, misleads, or harms, the market reacts immediately. Companies patch vulnerabilities, revise guardrails, withdraw faulty features, or lose customers. The constraint is real. It is continuous. And it is informed by vastly more data than any federal oversight board could ever obtain. 

If a teenager becomes obsessed with an AI avatar and suffers emotional fallout, public outcry registers instantly across social media and news cycles. Every user of the platform casts an implicit vote — continue using it, abandon it, or demand change. The company involved must respond or perish. That is regulation — regulation by consent, not compulsion. And it is the only kind of regulation agile enough to match the speed of AI. 

In other words, Hayek answers the most important question that arises from Higgs: if government does not restrain innovation, will innovation run wild? No. Because the free market restrains it — not by freezing it, but by continuous mid-course corrections. 

However, the push for a single federal rule for AI often implies that only uniformity can protect the public. History suggests the opposite. Uniformity is a great danger when officials do not know what they do not know. A rigid national standard, especially one drafted at the dawn of AI’s development, will inevitably reflect the fears, preferences, and misconceptions of a small political elite. It will enshrine those views long after they have been discredited by experience. Regulators will be tempted to err on the side of caution — of prohibition, delay, or excessive reporting — because no one at a federal agency is ever criticized for being too cautious. They are only blamed when something goes wrong. 

But when regulators overreact, the harms are invisible: the startup never launched, the medical breakthrough delayed, the scientific tool never invented, the small firm unable to afford compliance, the innovative business pushed offshore. These losses are real, even if they are unseen. 

One of the most telling developments in recent months is that some leaders of the AI industry itself are calling for regulation. At a Senate hearing in 2023, OpenAI CEO Sam Altman openly encouraged the creation of a federal licensing regime for advanced models. Senators were delighted. But smaller competitors were alarmed. The CEO of Stability AI warned that such regulation would entrench incumbents and “crush innovation.” The founder of Hugging Face noted that requiring federal permission to train a model would be like requiring a license to write code. These concerns are not abstract. Regulation tends to protect the powerful and eliminate the weak. 

Hayek would have recognized this immediately: when industries embrace regulation, it is often because regulation will serve them. It will not serve the future competitors who would challenge them. It will not serve the young minds with new ideas. It will not serve the yet-unknown innovators who cannot hire a team of lawyers and lobbyists. 

Critics of AI regulation often are asked: “But without government, how do we address the real risks?” The question assumes that centralized regulation is the default condition of order, and freedom the dangerous alternative. That assumption is historically and philosophically backward. 

The real alternative is not government versus chaos. It is government as a centralized overseer versus the spontaneous order of free participants responding to incentives, information, and feedback. The rigid mind versus the adaptive mind. Foreclosing the future versus learning from it. 

Artificial intelligence is a domain uniquely suited to the latter. Its risks are evolving. Its errors become visible instantly. Its user base provides rich data on whether features are helpful, harmful, or somewhere in between. The companies building it are extraordinarily attentive to public trust; reputational failure is death in this field. Where harms arise — fraud, impersonation, privacy breaches — existing law already provides remedies. Where harms are novel, civil courts can adjudicate responsibility, creating precedents rooted in real cases rather than speculative fears. 

Risk Is Inevitable, But Not the Risks of Regulation 

To demand comprehensive regulation now is to demand answers in advance to questions not yet understood. It is to regulate the unknown. And to regulate the unknown is almost always to prohibit it. 

No one denies that AI presents risks. So did electricity, the printing press, the automobile, the telephone, aviation, antibiotics, nuclear power, and the internet. Every one of these technologies was met by prophets of doom who were certain that catastrophe was imminent. The Swiss physician and naturalist Conrad Gessner (1516-1565) feared an “overwhelming abundance of books” would corrupt the human mind. Early critics of the telephone warned that it would annihilate privacy and eliminate face-to-face interaction. President Benjamin Harrison refused to touch the electric switches installed in the White House. Radio was denounced for corrupting children. In every era, fear accompanied invention.

Sometimes the fears were reasonable. But preemptive restraints would have prevented the very learning process that revealed how to use the new technologies safely. A muggy household without air conditioning would have seemed less dangerous to some than a building wired with electricity. But electricity ultimately became safer and more indispensable than anyone predicted. What mattered was not fear, but adaptation. 

The difference between the fears of the past and the fears of today is that today we are tempted to freeze innovation before it teaches us anything. That temptation is strongest in the political class. Bureaucracies do not benefit from rapid change; they benefit from stability, scope, and control. Innovation threatens all three. 

And now, under the proposed federal AI order, we are at risk of taking the first step toward nationalizing the evolution of intelligence itself. It would be an irony worthy of Swift if the American government — long the champion of free enterprise, experimentation, and engineering boldness — became the agent of technological paralysis.

The inevitability of a “single federal standard” is a myth. The United States does not need a national rule for AI. It needs national protection of the freedom to innovate, and national restraint upon those who would regulate prematurely. The problem of state-by-state inconsistency is real. But the proper federal role is to enforce the constitutional principle that states may not obstruct interstate commerce, not to impose a federal regulatory regime in the name of uniformity. 

Federal Deregulation Can Defeat State Chaos 

If the administration wishes to prevent states from impeding AI innovation, it has a simple tool: federal deregulation, not national regulation. Congress can preempt states from restricting AI deployment or training while simultaneously refusing to give federal agencies new regulatory powers over the technology. That would be the correct application of federal power: not central planning of innovation, but protection of the freedom to innovate. 

In my own conversations with AI while preparing “A Serious Chat with Artificial Intelligence,” I found myself returning to a single question: who will protect us from our protectors? It is easy to imagine dangers from unrestrained technology. It is harder to imagine dangers from unrestrained regulation. Yet the latter has done far more damage throughout history. Every great technological leap has been delayed, distorted, or nearly destroyed by those who feared its consequences more than they valued its promise.

The greatest danger is not that AI will escape our control. It is that we will surrender our control of our own minds — our capacity to imagine, invent, experiment, and err — in exchange for the illusion of security. If the federal government adopts a single national AI rule, that illusion will become law. 

The alternative is more demanding, but far more hopeful: trust the spontaneous order of a free society. Trust the judgment of millions of users. Trust competition to discipline excesses. Trust courts to address real harms. Trust innovation to solve the problems innovation creates. Trust, above all, the human mind — the free, adaptive, self-correcting engine of progress. 

Higgs teaches us why not to freeze innovation. Hayek teaches us what will regulate innovation when we refuse to freeze it. Together, they answer the demand for regulation not with anarchy but with confidence. Confidence in liberty. Confidence in knowledge dispersed. Confidence in evolution through experience. 

Artificial intelligence will not destroy us. But fear-driven regulation might. If we lose the courage that built our civilization, we will lose the future AI promises to create.

Dallas Fed President Lorie Logan recently proposed ditching the federal funds rate target as the Fed’s main policy tool. Her proposal would ensure that the Fed can continue to effectively implement monetary policy, but it fails to address one of the main flaws of the post-2008 monetary system.

The Fed’s Operating Target

In order to explore the merits of Logan’s argument, it helps to consider the context of what the Fed tries to do and how it tries to do it. The Fed’s job is to achieve maximum employment and price stability. To do that, it influences borrowing costs across the economy. Everything from mortgage rates to credit card APRs is affected by Fed policy. But it can’t set those rates directly. Instead, it tosses a small pebble into the financial pond—a change in its operating target—and counts on ripples through the financial system to spread outward towards its macroeconomic objectives.

Throughout its history, the Fed has used different pebbles to start those ripples: the quantity of bank reserves, the money supply, and, since the mid-1990s, the federal funds rate – the overnight rate on money that banks lend to each other.

Before 2008, targeting the federal funds rate worked smoothly. The Fed hit its target by adjusting the supply of money in the banking system. When banks were short on money, they would look to make up the shortfall in the federal funds market. Reducing the federal funds rate target made it cheaper for banks to obtain funds, which allowed them to pass lower rates on via their own lending. The ripples eventually reached households and businesses through cheaper loans and easier credit, stimulating spending and investment.

At the moment, adjusting the federal funds rate still produces the Fed’s desired ripple effect. But Logan is raising the alarm: it might be time to reach for a new pebble.

A Fragile Link

Before the Global Financial Crisis, the federal funds market was vibrant. Banks with excess reserves lent to those with shortfalls. The interest rate on those overnight loans is what we call the federal funds rate. 

The financial landscape changed dramatically after the crisis. The Fed flooded the banking system with money through quantitative easing and began paying banks interest on the funds held on deposit at the Fed. Suddenly, money in the banking system was no longer scarce, and banks had little need to borrow from one another. With trillions of dollars now sloshing through the system, both borrowers and lenders largely disappeared.

The market didn’t vanish entirely. A few players, most notably the Federal Home Loan Banks (FHLBs), continue lending because they cannot earn interest on their balances at the Fed. On the demand side, foreign bank branches in the US stepped in to exploit small arbitrage opportunities between the federal funds rate and the Fed’s interest on reserves.

That narrow participation keeps the market alive, but only barely. It now sees about $100 billion in daily volume, compared to trillions of dollars in secured repo markets. As Logan warns, with so few participants, the connection between the federal funds rate and broader money markets is fragile. If the FHLBs were to pull back—say, during a crisis like the Silicon Valley Bank episode in 2023—the market could dry up.

And, if that happens, the Fed could toss its pebble into the pond…and find that no ripples follow.

A New Pebble?

What should replace the federal funds rate? Logan argues that the Fed should consider targeting a Treasury repo rate, such as the tri-party general collateral rate (TGCR).

Repo markets are where borrowers obtain short-term funding by pledging high-quality assets, like Treasury securities, as collateral. Logan describes a number of advantages in moving to a Treasury repo rate target. The most obvious is the size and breadth of the market. TGCR transactions account for more than $1 trillion in daily volume across a broad set of financial institutions. This makes it unlikely to be affected by the behavior of individual institutions, which stands in sharp contrast to the influence of the FHLBs in the federal funds market.

There is also a strong link to other money markets. Since TGCR represents the marginal cost of funds for a meaningful segment of the financial system, changes to it will almost certainly pass through to other short-term interest rates. This again stands in contrast to the federal funds rate, which primarily results from the arbitrage activities of a small number of foreign banks. The possibility of throwing a TGCR pebble and not getting the desired ripple effect is slim.

Notably, the Fed is already trying to influence repo markets by encouraging use of its Standing Repo Facility (SRF). The SRF is designed to keep market repo rates – like the TGCR – in sync with the federal funds rate. Financial institutions appear hesitant to use the SRF. Targeting TGCR directly would be a more straightforward path to achieving the Fed’s goals. 

From Pond to Pool

Logan’s proposal addresses a legitimate concern – the fragility of the federal funds rate – but it doubles down on a bigger problem with the post-2008 monetary system: the financial pond has been transformed into a Fed-controlled pool.

Prior to 2008, the contours of the financial pond were largely determined by market forces. The Fed would toss its pebble in, and the desired ripples would be produced by its interaction with the supply and demand for money in the banking system. In other words, the Fed could control the federal funds rate, but it had to account for existing market conditions to achieve its target range.

After 2008, the Fed massively increased the amount of money in the banking system, to the point where banks no longer borrow and lend to each other. Under this system, the federal funds rate ceases to be a market-clearing price reflecting supply and demand – instead, it becomes a fixed price arbitrarily set by Fed decision makers. The price signals that result from banks trading funds with one another are suppressed, and the Fed becomes the dominant supplier of short-term funding. The financial pond is transformed into a pool requiring the Fed’s regular maintenance.

Logan advocates keeping the current system – that is, keeping a large supply of money in the banking system – even after moving to a repo operating target. This is where her proposal runs into trouble. Maintaining the Fed’s outsized role in the financial system weakens market mechanisms that help to allocate credit efficiently and discipline bank risk-taking. It also raises political concerns: the more interaction the Fed has with the financial system, the greater scope it has for influencing credit allocation and picking “winners” and “losers”.  

In contrast to Logan’s proposal, two other Fed officials – Governor Michelle Bowman and Kansas City Fed President Jeffrey Schmid – have recently advocated shrinking the Fed’s role in the financial system. In a November 13 speech, Schmid noted this could “promote a more efficient allocation of liquidity, an allocation influenced by price signals and market forces.” 

Treasury Secretary Scott Bessent has made similar critiques of the Fed’s current framework.   

Conclusion

Reducing the Fed’s role in the financial system – letting the pool evolve back into a pond, with market forces directing the ebb-and-flow – would be a step in the right direction. This evolution will take time, though. 

Logan’s proposal has the virtue of highlighting that the link between the federal funds rate and the broader financial system may break down before that evolution is complete. A well-rounded reform should address both issues – finding an effective, new pebble while also facilitating the evolution back towards a pond.  

Inflation was lower than expected in November, the Bureau of Labor Statistics (BLS) reported yesterday, in the first official inflation release since October following the extended government shutdown earlier this fall. Over the two months from September to November, the consumer price index (CPI) rose 0.2 percent, down from a 0.3 percent increase in September alone. On a year-over-year basis, headline inflation edged down to 2.7 percent in November from 3.0 percent in September.

Core inflation, which excludes food and energy prices, also rose 0.2 percent over the two-month period, unchanged from September. Core inflation, measured year-over-year, eased to 2.6 percent in November from 3.0 percent in September.

Energy prices were the main driver of inflation over the period, rising 1.1 percent. Food prices also increased modestly, up 0.1 percent, along with prices for household furnishings and operations, communication, and personal care. By contrast, prices for lodging away from home, recreation, and apparel declined.

Tariffs continue to put upward pressure on prices, but their effect appears to be easing, consistent with Federal Reserve Chair Powell’s view that tariffs are likely to result in a one-time increase in the price level. Combining September’s 0.3 percent increase with the modest rise in prices over October and November implies inflation is running at roughly a two-percent annual rate late in the period, though the absence of October data warrants caution.

Recent core CPI data tell a similar story. Core prices rose 0.2 percent in September and increased just 0.2 percent over the two months from September to November, implying a slower pace late in the period.

Taken together, these readings mark a notable shift from the late-summer pattern. In the July–September data, inflation was running at roughly a 0.3 percent monthly pace — equivalent to an annual rate near 3.7 percent — well above what the year-over-year figures suggested at the time. The most recent readings, by contrast, indicate a materially slower pace of price increases, with both headline and core inflation now running much closer to the Fed’s two-percent target, though again, the lack of October data complicates this assessment.

Although the Federal Reserve officially targets the personal consumption expenditures price index (PCEPI), CPI data remain a timely and relevant gauge for policymakers. The two measures generally track one another closely, though CPI tends to run somewhat higher than PCE inflation. As a result, the latest CPI readings provide a useful — if slightly overstated — signal of the inflation environment facing Fed officials as they assess the stance of policy.

Although the recent data suggest that inflation may be easing, the BLS relied on certain methodological assumptions when calculating the November CPI to account for the missing October data. Some analysts have raised concerns that those assumptions may have temporarily biased measured inflation downward. If that is the case, the apparent slowdown in inflation may be due to measurement error rather than a genuine change in the underlying momentum.

Still, financial markets appear to be interpreting the data favorably. Major stock indices rose and bond yields fell following the release. While the CME Group’s FedWatch tool suggests that markets expect the Federal Reserve to hold rates steady at its next meeting, the relative likelihood of a rate cut ticked up modestly after the November CPI report. That shift is consistent with the view that inflation is moving closer to target and lends support to Chair Powell’s recent claim that monetary policy is close to neutral.

Despite the uncertainty surrounding the data, the November CPI report is welcome news on the inflation front. After remaining stubbornly elevated for several years, inflation now seems to be moving back toward target. Even so, upcoming releases of the personal consumption expenditures price index and next month’s CPI should clarify whether the apparent cooling reflects a genuine slowdown in price increases or a temporary measurement distortion.