In November, South Korean President Lee Jae-myung launched a crackdown on so-called hate speech online, claiming that such speech “crosses the boundary of freedom of expression.” Punishments can include fines and up to seven years in prison. 

Unfortunately, South Korea’s not alone in its push to police what ordinary people can say on social media. Other countries that have recently passed laws to curtail citizens’ speech include Belarus, China, Turkey, Russia, Poland, Thailand, Brazil, Syria, and India. Like South Korea, these countries punish such speech harshly: in Turkey, citizens can face imprisonment of up to three years for a retweet, and in Poland prison sentences can run up to five years for an online insult. 

Even countries that have historically respected freedom of speech and individual rights are backsliding: Germany recently cracked down on hate speech online, France has fined citizens for insulting its leaders, and the United Kingdom—once a bastion of Enlightenment ideals—now arrests 30 citizens per day for making offensive posts or comments online. In 2024, British subject Jordan Plain was sentenced to eight months in prison for filming himself making racist gestures and comments.

Even the United States is starting to backslide. When Larry Bushart posted a meme about a Charlie Kirk vigil in Perry County, Tennessee, local law enforcement arrested him. He spent 37 days in jail. 

As the Foundation for Individual Rights and Expression (FIRE)’s Matthew Harwood argues, we are entering a “global free speech recession.”

In one sense, the global crackdown on online speech is understandable. Most people support freedom of speech, but balance this support with their support of other priorities, such as their desire to cultivate a culture that respects the rights and dignity of minorities. In the last decade, social media has shocked many of us with evidence of how heinous the views of some of our fellow citizens are. It’s understandable that someone might see a post on X with thousands of likes that implies that black Americans are genetically inferior to white Americans, and conclude that the government ought to do something to punish this kind of hateful speech.

But for all that the impulse to censor can be noble-hearted, it’s also wrong-headed. In practice, attempts to punish so-called hate speech run into several big problems.

First, these laws are written and implemented by flawed human beings in power, and history shows that people in power tend to prioritize their own interests. Advocates may intend these laws to support the dignity of downtrodden minorities, but somehow the people in power always decide that their own dignity is the highest priority. In Germany, for instance, politician Renate Künast supported punishing online speech on the grounds that some of her political opponents attributed a fake quote to her. “This harms my reputation,” she said, also complaining that she received online insults such as “You’re looking so ugly” or “You are an old woman.” 

These insults surely sting. But Künast is also one of the most powerful and successful people in the country. Surely prosecutors ought to have higher priorities than protecting her from the affront of some constituents calling her ugly online?

It’s not just Künast. In France, a woman was arrested in 2023 and fined 12,000 euros for the crime of insulting French President Emmanuel Macron. Lèse-Majesté laws (which punish “an offense violating the dignity of a ruler”) are some of the oldest laws against free speech in the world, for the simple reason that the politicians who enforce censorship laws tend to prioritize punishing people they feel have insulted them personally.

In some countries, the intention of these laws to protect those in power is even made explicit. In 2019, for instance, Russian President Vladimir Putin signed a new law which would allow police to punish citizens for spreading information that the government feels presents “clear disrespect for society, government, state symbols, the constitution and government institutions.”

A second big problem with laws against so-called hate speech is that “hate speech” is a nebulous concept. One person’s hate speech is another person’s righteous indignation or fiery truth-telling. Consider the case of Trump suing CNN on the grounds that the network compared him too much to Adolf Hitler. Is such a comparison hate speech and disinformation, or is it a fair comparison? That probably depends on your opinion about the president. What is clear is that if Trump gets to determine the answer to that question, then a lot of honest criticism might get stifled as a result.

Or consider the case of racial slurs. Many proponents of bans on so-called hate speech want use of the n-word to be banned. But what about when it’s said by a professor while he’s reading verbatim from a James Baldwin essay?

These are just a couple of the legions of edge cases that would have to be adjudicated by any law that purports to punish hate speech.

And in the absence of clear-cut rules about what speech is and isn’t allowed, citizens can find themselves fined and even thrown in jail over vague and nebulous laws that are enforced ad hoc by judges. What one judge decides is legal today might cross the line into “hate speech” tomorrow.

If we want to fight the spread of disinformation and hate speech, there’s a much more effective way than nebulous laws that set out to punish online speech: counterspeech. The idea behind counterspeech is that extremist views and conspiracy theories are riddled with errors and faulty logic, and as such are ripe for debunking. Arguing against hateful ideas is a powerful way to dissuade people from adopting them and so limit their reach. A report from the United Nations puts it well: “As the key means to counter hate speech, the United Nations supports more speech – not less – and holds the full respect of freedom of expression as the norm.”

As a free society, we can also practice prebunking: that is, preemptively pointing out the arguments against a certain hateful idea, so that when people encounter said idea in the wild, they are less likely to fall for it. As counterterrorism expert Elizabeth Neumann argues in Kingdom of Rage, prebunking is a powerful way to combat political extremism.

One of the more promising findings in recent years is that we can build immunity to conspiracy theories and extremist ideologies much like we vaccinate against disease. While we cannot argue someone out of their ideology once they are radicalized, if we introduce a person to the manipulation techniques used and small amounts of the ideology framed in a negative way, it reduces the likelihood they will support the extremist ideology if they are ever exposed to it ‘in the wild’ in the future.

Some folks see the abuses of laws against so-called hate speech, but still support these laws on the grounds that we have to do something to combat hate speech and political extremism. But the truth is, there’s no tradeoff between supporting free speech and combating hate speech.

The more we empower citizens to speak freely and to point out the flaws in hateful ideologies, the less power those ideologies have.

You can’t build a castle on sand, and you can’t build a city on assumptions. Saudi Arabia unveiled The Line in January 2021 as a perfect, linear utopia stretching 170 kilometers across the desert. Three years later, the castle is already sinking.

When Crown Prince Mohammed bin Salman announced The Line on January 10, 2021, he promised a radical reimagining of urban life. “We need to transform the concept of a conventional city into that of a futuristic one.” 

Tucked into the upper corner of the kingdom’s Tabuk province, the city would run like a ruler through the Neom region, housing nine million people, the population of Austria, within just 34 square kilometers, all powered by renewable energy. It imagines a world where every need sits within a five-minute walk, yet one can cross the entire city in twenty minutes. But even in a country wealthy enough to seed rain clouds and bankroll vast infrastructure, reality is colliding with ambition. The city that promised to “deliver new wonders for the world” is struggling to deliver its own foundation.

By 2030, only 2.4 kilometers of the 170-kilometer project will be completed, with the rest delayed as the government prioritizes energy infrastructure and scrambles for funding. The project’s leadership has been reshuffled, with the head of the sovereign wealth fund, The Public Investment Fund, now steering the effort amid deepening financial uncertainty. This is unsurprising. The Line was imagined as an engineering object, an architectural marvel, rather than a city that must grow from real human demand. The economic foundation beneath that vision is equally unstable. Saudi Arabia’s fiscal fortunes depend on oil, a commodity that swung from over $110 a barrel in 2012 to $42 in 2020 and now hovers near $70. The financial bedrock for this trillion-dollar city is, like the desert beneath it, shifting.

As urban planner and George Mason scholar Alain Bertaud reminds us, cities are foremost labor markets, not works of art. “Planning,” he argues, “is based on the illusion that a city is a complex building that needs to be designed in advance by competent professionals.” 

While the glossy Neom videos present a pristine, drone-filled future, they do so without answering the most basic question: who will live here? There is no target population beyond the slogan of “nine million,” no industries identified, no international firms committed to office space. The Line sells a vision of technological abundance while omitting the people needed to make a city function. Additionally, the BBC reports that construction has already displaced local communities, some labeled as rebels, and that Saudi authorities justified lethal force against those resisting eviction. The Line lacks the basics, let alone the advanced futurism it advertises: no jobs lined up, no residents committed, and human rights violations overshadowing its image.

For years, Saudi Arabia has attracted foreign workers with the promise of zero income tax and a reputation for safety. But these incentives, however appealing, are not in and of themselves a foundation for long-term economic growth. As Nobel laureate Daron Acemoglu argues, it is institutions, not tax perks or security guarantees, that sustain prosperity. On this front, Saudi Arabia functions less like an open society and more like a modern caste system, granting its citizens far broader rights and protections than the millions of residents, roughly 40 percent of the population, who live and work there. Citizens benefit from public goods such as public schools, where non-Saudis are capped at just 15 percent of enrollment, as well as welfare programs universally free for nationals. Foreigners, by contrast, are routed into private institutions and face sharply limited paths to citizenship waiting 10 years to apply, and even then nothing is guaranteed. This is a separation not only of services, but of ideas and talents. Even the labor market reflects this hierarchy. 

Saudization quotas ensure that nationals are favored for desirable jobs: in many sectors, at least 30 percent of employees must be Saudi, and entire professions are reserved exclusively for citizens. A system built on quotas and exclusion cannot produce genuine meritocracy; talent competes at a disadvantage when citizenship, not ability, is the deciding factor. But the clearest institutional divide is not economic, it is political. Freedom of speech, the most fundamental inclusive right, remains unavailable to citizens and residents alike. The fate of journalist Jamal Khashoggi underlines the risks of dissent in a system built not on participation, but on silence. 

History has shown that governments cannot simply erect structures and call them cities. In China alone, dozens of newly built towns stand largely empty. Anticipating rapid growth, the country produced more cement between 2011 and 2013 than the United States did during the entire twentieth century. One showcase city in China’s interior was designed to house more than one million people, but “currently houses less than 100,000, and it is still less than halfway toward the district’s goal of housing 300,000 people by 2020.” Government planning and reality rarely align.

Yet China’s ghost cities illustrate only the surface of the problem. The deeper issue lies in what a city fundamentally is. 

Aristotle taught that a city requires three things: a functioning politeia, citizens capable of ruling and being ruled; autarkeia, an economic base that allows people to sustain themselves; and koinōnia, a shared conception of the good life that binds people into a community. The Line satisfies none of these conditions. Its residents will not form a politeia, because most will be non-citizens without political rights. It lacks autarkeia, with no industries, no labor market, and no economic ecosystem. Furthermore it cannot produce koinōnia, a communal life, in a system where people remain transient workers rather than members of a civic community. The Line attempts to design a polis without the very ingredients Aristotle believed made a city possible.

Aristotle reminds us that “the city exists by nature,” and that “man is by nature a political animal.” A city, polis, he taught, may come into being for the sake of living, but it endures for the sake of living well. Yet there can be no such good life in The Line without a community capable of shaping its own future, deliberating, dissenting, and holding its leaders accountable. 

Cities grow from freedom, choice, and bottom-up demand, not from architectural decree. Saudi Arabia confronts an irony of its own making. A nation whose modern borders were once drawn from afar now seeks to draw a perfect line of its own. Yet it overlooks the oldest lesson in the desert: drawing lines is easy; living within them is not. Steel and glass can build walls, but they cannot build a city where the foundations of civic life are forbidden to take root.

This week marks five years since the passing of Dr. Walter E. Williams. He had the elegance to die, at 84, minutes after teaching the last class of the semester — and the wisdom to go before he had to grade finals.

Search for “Walter Williams” on The Daily Economy website, and you will find numerous tributes to Dr. Williams and his towering intellect. We mark the solemn milestone with humor and encouragement he offered to his students, inviting you to explore (or revisit) the treasure trove of his syndicated columns, articles, books, speeches, and media appearances. 

The following is a selection of AIER staff’s personal memories of Dr. Williams and the graduate microeconomics classes he taught at George Mason University. 

David Hebert, PhD, Senior Research Fellow 

My relationship with Walter was unique in two ways. First, I was his successor (after Pete Boettke) in teaching “Economics for the Citizen,” a survey course for non-majors that Williams had designed himself. He humored my hundreds of questions, mentoring me patiently and quietly. When I later became department chair at Aquinas College, we modeled the intro course after it, right down to the name. I also have a tattoo of a graph from his course, which he hand drew for me to take to the tattoo parlor. It has deep meaning for my career (even profiled in Troy University’s student newspaper while I was on faculty there). 

Walter’s passion for teaching was obvious. He used to state that, “on the day I die, I’d like to have taught a class.” Walter got his wish, passing about an hour after he taught his microeconomics class. There couldn’t be a more perfect ending for such a great man. 

William J. Luther, PhD, Director, Sound Money Project 

Walter Williams had an unrelenting smile. He would look you dead in the eye, explain precisely why you were wrong, and smile the whole way through. But apparently it wasn’t always that way. Early in his career, Williams received a call from Milton Friedman, who had seen him on TV. As Williams recounted in my first-year Microeconomic Theory course at George Mason University, Friedman said: “You were great, Walter. But you need to smile more.” It seems he took the advice. 

Paul Mueller, PhD, Senior Research Fellow 

Walter Williams believed that to understand the world, you had to get basic economic theory right. His microeconomics class was not fancy or sophisticated in terms of equations, data modeling, or econometrics. But it was rigorous and focused on understanding price theory. Dr. Williams himself was a warm, humorous, and at times eccentric, instructor. He was fiercely independent, yet he made time for students with questions or who were genuinely struggling. He was also uncompromising in his economic ideals and would apply them relentlessly, in the classroom and in print. The world, and the economics profession, are poorer without him. 

Thomas Savidge, Research Fellow 

For Dr. Williams, correct explanations were concise and clear. Anyone who tried to outsmart Williams with jargon-loaded filibusters was quickly humbled. In the few instances where Williams was asked about a subject that he wasn’t familiar with, he’d say “Let me get back to you on that.” It was a breadth of fresh air from my studies of those in government, where one has strong incentives to “fake it ‘til you make it.” 

In my research and policy work now, I often introduce folks to the ideas which I learned in Williams’s ECON 811. To be an effective ambassador of these ideas, I rely on Williams’s advice: focus on the fundamentals, use humor, and have confidence in yourself and the knowledge you seek to impart. 

Julia Cartwright, PhD, Senior Research Fellow 

Dr. Williams taught my first microeconomics course in graduate school, and truly honed my thinking and taught me how to think like an economist. He taught us not just what economists know, but, much more importantly, how economists reason. He was never impressed by jargon or a wall of equations; he wanted clear, elegant, precise explanations of how the world works through an economic lens. Many of us who arrived with a more mainstream or mathematics-heavy background (myself included) found his approach uniquely challenging but invigorating. He pushed us to rely on logic and economic theory to explain phenomena rather than simply compute them. His emphasis on microeconomics as price theory gave us a framework we could apply to almost any real-world situation.

Dr. Williams shaped my thinking as an economist, and modeled a rare blend of intellectual rigor and human generosity. I remain deeply grateful to have been his student.

Nikolai Wenzel, PhD, Senior Research Fellow

Walter Williams taught microeconomics at 7 am. And he terrified me. When he handed back our midterms, he asked, “Who’s Wenzel?” I raised my hand. “I had to grade this twice,” he said, pausing. “Because nobody gets a perfect score, except me and God.” He’d even put one of his cheeky gold star stickers on the blue book. I still have it.

There are many more outrageous stories — his wife improbably going out on a date, fat cigar-smoking men, sexy secretaries and compensating differentials, almost starting a race riot in the Jim Crow South. But we learned our price theory. May I be half the teacher he was. May all your gains be marginal. Suffer no fools.

In Fond Remembrance 

Walter E. Williams often quipped that the “E.” in his name “stands for ‘Excellence’.” Anyone who knew him knew that was true. We hope to carry Walter’s legacy forward by cherishing the memories we had of his class and using the lessons we learned as his students. 

The United States recently emerged from the longest government shutdown in its history, one that halted operations, froze budgets, and led to 1.4 million federal employees being either furloughed or working without pay for forty-three days. The most noticeable economic damage this time around, though, was not in closed museums or perhaps even the saga surrounding SNAP benefits. This time, it was in the sky. 

By the end of October, the Federal Aviation Administration (FAA) reported that over twenty major air-traffic control facilities were operating below minimum staffing levels. This staffing shortage increased as unpaid controllers reached their limits. In an attempt to ameliorate the crisis, the FAA ordered up to ten percent of scheduled flights to be cut at more than forty major airports. Expectedly, this led to cascading delays, supply-chain disruptions, cargo backlogs, and stranded travelers. 

This shutdown, then, was not just some political stalemate, as purported enemies in DC fought over the direction of the federal government. It was a live demonstration of how fragile the institutional infrastructure of our modern interventionist economy is — and why economics remains indispensable for understanding these moments of systemic stress. 

Ostensibly, there is no mystery to air travel. Planes take off; planes land. Of course, any minor reflection upon the matter reveals that it must be — and in fact is — much more complicated. Our air travel network comprises one of the most elaborate coordination systems in human civilization, with millions of moving parts (both literally and figuratively) synchronized across time and space. This should not surprise us, for every economic system contains a coordination system. 

The shutdown, however, revealed how fragile that coordination is, especially when the government is responsible for such a system. When the FAA ordered airlines to reduce flights, other areas of the economy were also affected. You cannot turn one dial and expect nothing else to change. Not only were passengers affected, but cargo schedules were disrupted, supply chains were backed up, manufacturers had to halt production, and perishables risked spoiling — just to name a few. 

This is because the structure of production is temporal. Economic goods are not immediately made available once entrepreneurs decide to create them. No, goods must be concocted, produced, shipped, and delivered in order to reach customers. All of this, of course, takes time. The production structure spans a multitude of stages, and it relies on stable expectations. When the FAA’s operations broke down, so did these time-sensitive production processes. Entrepreneurs could not coordinate their plans because the institutional framework they relied on — in this case, flight schedules, shipping availability, and travel routes — suddenly became unreliable. Markets cannot function when the institutional infrastructure required to coordinate production collapses. 

One of the challenges of economic life, as F.A. Hayek pointed out, is the coordination of knowledge that is dispersed among millions of people, not just the allocation of resources. To even begin considering allocation, consumer preferences must be ascertained. Prices do this beautifully — when institutions let them, that is. Even ignoring the fact that government control of the entire apparatus means that much of the network operates without price signals (thus rendering it incapable of accurately reflecting consumer preferences), the price signals that are in place were weakened during the shutdown. Prices become unstable when air-traffic capacity changes by the hour. Which cargo firm can coordinate deliveries efficiently when ground stops are issued with little warning? Imagine manufacturers trying to use air freight to receive their inputs while major airports are throttled. 

Even where the market is allowed to operate regarding the use of air travel, government actions rendered those mechanisms less effective. The knowledge problem reared its ugly head, as institutional breakdown prevented information from flowing through the market, meaning prices could not accurately coordinate plans. The shutdown did not just create idle government employees — it degraded our economy’s ability to accumulate and process key economic data. The result was not just uncertainty regarding travel, but uncertainty about production itself. 

Entrepreneurs must commit capital today for goods that will only be finished months or years later. To make this type of temporal commitment, stable expectations are imperative, especially in sectors that depend on complex logistical coordination. Any hiccup can be massive — a hiccup like the shutdown. Without guaranteed staffing, air travel became too unpredictable, which in turn made the production structure unpredictable. This is no small matter. Yes, a cancelled flight is massively inconvenient. A missed input delivery can also be quite costly. A missed production window, however, can destroy a business operating on tight profit margins. 

What the shutdown did was depreciate institutional capital, what we might call the rules of the game. More than just reducing government “services”, the shutdown increased entrepreneurial uncertainty. The marginal entrepreneur is now more likely to find it unprofitable — at least in his expectations — to begin a business venture. The marginal business owner may have just missed the shipment of materials or goods that would have kept him afloat. Even the super-marginal business owner who will remain in business has to recalculate his entire model. This depreciation will continue to impact coordination long after the shutdown ends. Every missed market exchange is a missed opportunity for our society to be made better off. We are, quite literally, poorer because of this shutdown, and it has increased the possibility of being made poorer still in the future. Institutional capital, and capital in general, cannot be turned on and off like a light switch. 

Shutdowns are often discussed along political lines — which party “won” and which party “lost.” The economic impact is often only discussed in terms of its immediate consequences. The long run, though, is seldom considered. The 2025 shutdown did more than just inconvenience travelers. It exposed the fragility of our institutions due to their close connection to the government. A private, decentralized air travel network would be far less prone to the type of shock we saw recently. Our current system creates a single point of failure, both in funding and technology. When the FAA’s NOTAM system crashed in 2023, the entire country’s airspace went offline. Meanwhile, decentralized private systems — like Canada’s Nav Canada — show that decentralized distribution of control is better capable of containing disruptions instead of allowing them to cascade throughout the country. This is because polycentric governance increases resilience, as entities have stronger incentives to upgrade technology, and more importantly, introduces redundancy that can keep the system running if one touch point fails. 

A shutdown is a corrosive solvent for planning, coordination, and trust. Knowledge flows are disrupted or destroyed. Time horizons are shortened. The conditions necessary for a properly functioning economy should not be played with. We are made poorer by every missed opportunity to trade. The solution here is not more politics, but to notice how fragile our economy has become. 

The United States recently emerged from the longest government shutdown in its history, one that halted operations, froze budgets, and led to 1.4 million federal employees being either furloughed or working without pay for forty-three days. The most noticeable economic damage this time around, though, was not in closed museums or perhaps even the saga surrounding SNAP benefits. This time, it was in the sky. 

By the end of October, the Federal Aviation Administration (FAA) reported that over twenty major air-traffic control facilities were operating below minimum staffing levels. This staffing shortage increased as unpaid controllers reached their limits. In an attempt to ameliorate the crisis, the FAA ordered up to ten percent of scheduled flights to be cut at more than forty major airports. Expectedly, this led to cascading delays, supply-chain disruptions, cargo backlogs, and stranded travelers. 

This shutdown, then, was not just some political stalemate, as purported enemies in DC fought over the direction of the federal government. It was a live demonstration of how fragile the institutional infrastructure of our modern interventionist economy is — and why economics remains indispensable for understanding these moments of systemic stress. 

Ostensibly, there is no mystery to air travel. Planes take off; planes land. Of course, any minor reflection upon the matter reveals that it must be — and in fact is — much more complicated. Our air travel network comprises one of the most elaborate coordination systems in human civilization, with millions of moving parts (both literally and figuratively) synchronized across time and space. This should not surprise us, for every economic system contains a coordination system. 

The shutdown, however, revealed how fragile that coordination is, especially when the government is responsible for such a system. When the FAA ordered airlines to reduce flights, other areas of the economy were also affected. You cannot turn one dial and expect nothing else to change. Not only were passengers affected, but cargo schedules were disrupted, supply chains were backed up, manufacturers had to halt production, and perishables risked spoiling — just to name a few. 

This is because the structure of production is temporal. Economic goods are not immediately made available once entrepreneurs decide to create them. No, goods must be concocted, produced, shipped, and delivered in order to reach customers. All of this, of course, takes time. The production structure spans a multitude of stages, and it relies on stable expectations. When the FAA’s operations broke down, so did these time-sensitive production processes. Entrepreneurs could not coordinate their plans because the institutional framework they relied on — in this case, flight schedules, shipping availability, and travel routes — suddenly became unreliable. Markets cannot function when the institutional infrastructure required to coordinate production collapses. 

One of the challenges of economic life, as F.A. Hayek pointed out, is the coordination of knowledge that is dispersed among millions of people, not just the allocation of resources. To even begin considering allocation, consumer preferences must be ascertained. Prices do this beautifully — when institutions let them, that is. Even ignoring the fact that government control of the entire apparatus means that much of the network operates without price signals (thus rendering it incapable of accurately reflecting consumer preferences), the price signals that are in place were weakened during the shutdown. Prices become unstable when air-traffic capacity changes by the hour. Which cargo firm can coordinate deliveries efficiently when ground stops are issued with little warning? Imagine manufacturers trying to use air freight to receive their inputs while major airports are throttled. 

Even where the market is allowed to operate regarding the use of air travel, government actions rendered those mechanisms less effective. The knowledge problem reared its ugly head, as institutional breakdown prevented information from flowing through the market, meaning prices could not accurately coordinate plans. The shutdown did not just create idle government employees — it degraded our economy’s ability to accumulate and process key economic data. The result was not just uncertainty regarding travel, but uncertainty about production itself. 

Entrepreneurs must commit capital today for goods that will only be finished months or years later. To make this type of temporal commitment, stable expectations are imperative, especially in sectors that depend on complex logistical coordination. Any hiccup can be massive — a hiccup like the shutdown. Without guaranteed staffing, air travel became too unpredictable, which in turn made the production structure unpredictable. This is no small matter. Yes, a cancelled flight is massively inconvenient. A missed input delivery can also be quite costly. A missed production window, however, can destroy a business operating on tight profit margins. 

What the shutdown did was depreciate institutional capital, what we might call the rules of the game. More than just reducing government “services”, the shutdown increased entrepreneurial uncertainty. The marginal entrepreneur is now more likely to find it unprofitable — at least in his expectations — to begin a business venture. The marginal business owner may have just missed the shipment of materials or goods that would have kept him afloat. Even the super-marginal business owner who will remain in business has to recalculate his entire model. This depreciation will continue to impact coordination long after the shutdown ends. Every missed market exchange is a missed opportunity for our society to be made better off. We are, quite literally, poorer because of this shutdown, and it has increased the possibility of being made poorer still in the future. Institutional capital, and capital in general, cannot be turned on and off like a light switch. 

Shutdowns are often discussed along political lines — which party “won” and which party “lost.” The economic impact is often only discussed in terms of its immediate consequences. The long run, though, is seldom considered. The 2025 shutdown did more than just inconvenience travelers. It exposed the fragility of our institutions due to their close connection to the government. A private, decentralized air travel network would be far less prone to the type of shock we saw recently. Our current system creates a single point of failure, both in funding and technology. When the FAA’s NOTAM system crashed in 2023, the entire country’s airspace went offline. Meanwhile, decentralized private systems — like Canada’s Nav Canada — show that decentralized distribution of control is better capable of containing disruptions instead of allowing them to cascade throughout the country. This is because polycentric governance increases resilience, as entities have stronger incentives to upgrade technology, and more importantly, introduces redundancy that can keep the system running if one touch point fails. 

A shutdown is a corrosive solvent for planning, coordination, and trust. Knowledge flows are disrupted or destroyed. Time horizons are shortened. The conditions necessary for a properly functioning economy should not be played with. We are made poorer by every missed opportunity to trade. The solution here is not more politics, but to notice how fragile our economy has become. 

Objections to income inequality are commonplace. We hear these today from across the ideological spectrum, including, for example, from the far-left data-gatherer Thomas Piketty, the far-right provocateur Tucker Carlson, and Pope Leo XIV. 

Nothing is easier – and, apparently, few things are as emotionally gratifying – as railing against “the rich.” The principal qualification for issuing, and exulting in, denouncements of income inequality is first-grade arithmetic: One billion dollars is a larger sum of money than is ten thousand dollars, and so subtracting some dollars from the former sum and adding these funds to the latter sum will make incomes more equal. And because income is what people spend to achieve their standard of living, such ‘redistribution’ would also result in people being made more equal. What could be more obvious?

Countless careful researchers have convincingly shown that popular accounts of the magnitude of differences in monetary incomes are vastly overstated. But let’s here grant, for the sake of argument, that differences in monetary incomes within the United States are indeed vast. And then let’s pose some probing questions to proponents of using the state to tax and ‘redistribute’ high incomes.

• Do you teach your children to envy what other children have? Do you encourage your children to form gangs with their playmates to ‘redistribute’ toys away from richer kids on the schoolyard toward kids less rich? If not, why do you suppose that envy and ‘redistribution’ become acceptable when carried out on a large scale by the government?

• Suppose that Jones chooses a career as a poet. Jones treasures the time he spends walking in the woods and strolling city streets in leisurely reflection. His reflections lead him to compose poems critical of capitalist materialism. Working as a poet, Jones earns $40,000 annually. Smith chooses a career as an emergency-room physician. She works an average of 60 hours weekly and seldom takes a vacation. Her annual salary is $400,000. Is this “distribution” of income unfair? Is Smith responsible for Jones’s relatively low salary? Does Smith owe Jones money? If so, how much? And what formula would you use to determine Smith’s debt to Jones? What, in short, is the “fair” amount by which Smith’s income should be lowered in order to raise Jones’s income?

• While Dr. Smith earns more money than poet Jones, poet Jones earns more leisure than Dr. Smith. Do you believe that leisure has value to those who possess it? If so, are you disturbed by the inequality of leisure that separates leisure-rich Jones from leisure-poor Smith? Do you advocate policies to ‘redistribute’ leisure from Jones to Smith – say, by forcing Jones to wash Smith’s dinner dishes or to chauffeur Smith to and from work? If not, why not?

• Nobel-laureate economist William Nordhaus found that entrepreneurial innovators in the US from 1948 through 2001 captured, on average, only 2.2 percent of the total social value of their technological innovations. As Nordhaus put it, nearly 98 percent “of the benefits of technological change are passed on to consumers rather than captured by producers.” Does the fact that market competition obliges entrepreneurs to share the vast bulk of their wealth creation with consumers give you pause in your demands for ‘redistributing’ the wealth that these entrepreneurs manage to retain for themselves?

• Surveys show that Americans in general are not as bothered by income inequality as are academics and media pundits. Are the many Americans who don’t suffer searing envy of others’ monetary incomes stupid, naïve, or uninformed? Do the professors and pundits who agonize incessantly over income inequality know something that most Americans don’t? If so, what?

• You allege that great differences in incomes are psychologically harmful to relatively poor people even if these poor people are, by historical standards, quite wealthy. How, then, do you explain the great demand of very poor immigrants to come to America, where these immigrants are relatively much poorer than they are in their native lands?

• Do you believe that someone to whom government gives, say, $100,000 annually, year in and year out, simply because that person is a citizen of the country, feels as much psychological satisfaction as that person would feel if he learned a trade or a profession at which he earns an annual salary of, say, $80,000?

• Would you prefer to live in a society in which everyone’s annual income is $50,000 or in a society with an average annual income of $75,000 but in which annual incomes range from $30,000 to $3 million, and in which no occupation is obstructed by government-erected barriers to entry? And regardless of the choice you would make, do you believe that others who choose differently from you are in error?

• You often speak of income inequality as being a market failure. Can you identify an economic theory that predicts that every well-functioning market economy generates incomes that are equal or close to equal? I’m an economist and have never encountered such a theory, so I’d be delighted if you expand my intellectual horizons.

• You also warn that large differences in incomes make society unstable – or, as Paul Krugman insists, jeopardizes “the whole nature of our society.” Can you point to historical evidence in support of this claim? But remember: To be valid, the evidence must be from market economies in which the great majority of people – rich and not rich – earn their incomes through voluntary market activities and where the size of the economic pie isn’t fixed.

Evidence of social unrest in pre-industrial and nonmarket societies doesn’t count. Economic arrangements in such societies are fundamentally different than in our own. And unlike in our market economy, the amount of wealth in nonmarket economies is largely fixed. Therefore, in nonmarket economies, more wealth for some people does indeed mean less wealth for other people. Our economy differs categorically: Because the amount of wealth in market economies isn’t fixed, people get rich by creating more wealth rather than by seizing the wealth of others. In market economies, more wealth for rich people means, not less, but more wealth for other people.

• When you describe growing income inequality in the United States, you typically look only at the incomes of the rich before they pay taxes and at the incomes of the poor before they receive noncash transfers from the government such as food stamps, Medicare and Medicaid. You also ignore noncash transfers that the poor receive from private charities. Why? If you’re trying to determine whether or not more income ‘redistribution’ is warranted, doesn’t it make more sense to look at income differences after the rich have paid their taxes and after the poor have received all of their benefits from government and private sources?

• Have you considered that greater income inequality might result from demographic changes that reflect neither weakness nor injustice in the economy, nor any increasing differences in economic well-being? For example, do you account for the fact that retirees rely heavily on consuming their capital – for instance, by selling their expensive large homes, moving into less-expensive smaller homes, and using the differences in sales proceeds to fund some of their living expenses? People’s annual incomes are typically lower when they are retired than when they were working, but their wealth – their ability to maintain their standard of living – isn’t necessarily lower.

• Do you not worry that creating government power today to take from Smith and give to Jones – simply because Smith has more material wealth than Jones – might eventually be abused so that tomorrow the government takes from Jones and gives to Smith simply because Smith has more political influence than Jones?

• Do you disagree with Thomas Sowell when he writes that “when politicians say ‘spread the wealth,’ translate that as ‘concentrate the power,’ because that is the only way they can spread the wealth. And once they get the power concentrated, they can do anything else they want to, as people have discovered – often to their horror – in countries around the world.” Asked differently, if you worry that abuses of power are encouraged by concentrations of income, shouldn’t you worry even more that abuses of power are encouraged by concentrations of power?

Americans love a garage, but we don’t park cars there. We store old bikes with bent wheels, parts of beds and dressers, and a wide variety of tools and old clothes. Personally, I have a box of old electronic parts and cables that I’m sure I’ll use…. someday.

It was not always like this. People had only a few things, and shared by allowing reciprocal borrowing. Often there was some communal arrangement for bigger things, as with the neighborhood bread ovens of medieval Europe.

Today, though, separate private ownership is the norm. To understand why, one has to understand transaction costs. Of course, I would say that, since I think the answer to almost every question in economics is “transaction costs.” But in this case, it’s actually true.

Coase’s Other Question: Why Do We Own Instead of Rent?

Ronald Coase famously asked, “If markets are so great, why are there firms?” His answer was “transaction costs.” Using markets is costly. Prices are important signals at broad levels, but for many small and routine choices, it’s much cheaper to “internalize” the costs of using markets. Firms arise to bypass markets and reduce transaction costs.

If Coase were alive today, he might ask a different question: If renting is cheaper and more efficient for most durables, why do we own almost everything?

Different question, but the same answer: transaction costs. Ownership internalizes the costs of using rental markets or sharing arrangements. The transaction cost of renting a ladder, a car, a spare room, or kitchen appliance wildly exceeded the value to the potential user, or the revenue an owner could hope to earn.

To share any asset or tool, you must account for certain costs:

1. Triangulation – finding someone who wants to rent it to you.
2. Transfer – moving the item or coordinating access and payments.
3. Trust – ensuring the renter will not damage, steal, or misuse the asset.

Ownership was a workaround for high transaction costs. We purchased goods we barely used because we wanted reliable access to them without depending on others.

But what if dependence and sharing were easy, and as cheap, even invisible?

Platforms as Middlemen Selling Reductions in Transaction Costs

Transactions “take place.” That means exchanges happen, but they also require a “location.” That place was once a physical market, or a mall. Today, the “place” can be virtual, on a platform. A platform’s true output is not a product but a service: the reduction of transaction costs that make commodifying excess capacity expensive. Amazon, Uber, Airbnb, and thousands of other platforms sell connections. If I have a car, and a few minutes, and you need a ride, we can now transact at low cost. Platforms are factories that produce reliable cooperation between strangers. The result is that the idle time of durable assets becomes legible to markets. What was once an expensive object to be stored becomes an income-producing asset.

We buy durable goods only for the stream of services they provide. I don’t actually want a power tool; what I want is two holes in this wall, now. The lowest solution (to triangulate, transfer, and trust) to that problem has been ownership. But that comes bundled with idle storage time: a drill may be used for 10 minutes a year, yet occupies physical and financial space for 365 days.

The same is true for cars, guest bedrooms, clothing, tools, musical instruments, and row after row of kitchen equipment quietly rusting under our sinks. We “store to renew” future access: we want the option to use the thing immediately when we need it. But for most of our lives, we are simply paying a two-part tax — the opportunity cost of capital tied up in stuff, and the costs of storage — for the privilege of being able to get these two holes in this wall, right now, or for two extra chairs used only when company visits.

It’s not just garages being used to store stuff we don’t use. The US has more than 23 million individual storage units in 50,000 facilities, with annual revenues of nearly $45 billion. Well over 10 percent of US households rent at least one storage unit; many rent several.

Two-Sided Markets

In two-sided markets, a person can be both buyer and seller, as suits them. Consider an example: A person who is normally a consumer of housing is leaving town for two weeks. She is now a seller or producer of housing services, renting out her flat on AirBnB. When she drives her car to the airport, “buying” transport services from herself, she parks in the Turo lot. The car is then rented out for 10 days, and is available for her when she returns from her trip. She both saved the costs of parking the car in the airport lot, and made money from renting the car out when it was otherwise idle. Overall, between renting her flat and renting out her car, she makes more than $4,000: enough to pay for most of her vacation expenses.

The bright-line distinction between producer and consumer, a relic of the Industrial Revolution, dissolves in platform space. This has consequences for policy, taxation, labor regulation, and even our intuitions about property. When excess capacity is commodified, ownership becomes less a categorical state and more a bundle of transferable rights that can be partitioned and sold temporarily.

In this sense, the “sharing economy” is poorly named. Nothing is being shared in the gift-exchange sense. What is being shared is temporary access. What is being commodified is excess capacity. Fifty years from now, observers will look back on our era with incredulity. Why did people buy all their own tools? Why did cities devote up to 30 percent of their usable road area to storing empty cars? (In Manhattan, it’s more than 40 percent!) Why did we allow trillions of dollars of capital to sit idle for 95+ percent of its lifespan?

The answer we will give — “Well, transaction costs were too high!”— will seem quaint.

Platforms are revealing that much of what we think of as “ownership” is really just expensive access insurance. Once platforms reliably provide that insurance, the original rationale for owning evaporates.

The commodification of excess capacity is not a fad. It is the natural consequence of entrepreneurs discovering that the most valuable thing they can sell is not a product or a service, but the reduction of friction that once made sharing impossible.