Abundance

by Ezra Klein

The result is a housing crisis of staggering proportions. Almost 30 percent of American adults are “house poor”—spending 30 percent or more of their income on housing.7 But that understates the problem. Housing costs are highest in the superstar cities that now drive the economy. Millions endure multi-hour commutes, or far worse jobs, in order to live in a far-flung city where they can afford a home. These choices are missed in raw estimates of affordability, but they are a drag on the economy and an anchor on people’s lives.8 To immerse yourself in analyses of American housing is to drown in data. But sometimes a number stands out. Here is one: The economist Ed Glaeser calculates that, prior to the 1980s, wages in New York City were unusually high even after correcting for the local cost of living.9 The city had its problems, but most people would make more money by moving there. But that flipped. By the year 2000, moving to New York meant, for most people, taking an effective pay cut. That’s not because paychecks have shrunk but because housing costs have risen. People now pay to live there; they aren’t paid to live there.

In much of San Francisco, you can’t walk twenty feet without seeing a multicolored sign declaring that Black Lives Matter, Kindness Is Everything, and No Human Being Is Illegal. Those signs sit in yards zoned for single families, in communities that organize against efforts to add the new homes that would bring those values closer to reality. San Francisco’s Black population has fallen in every Census count since 1970. Poorer families—disproportionately nonwhite and immigrant—are pushed into long commutes, overcrowded housing, and street homelessness. Texas has been the single largest beneficiary of California’s housing crisis. And that is, in part, because Texas is California’s mirror image on housing. The Austin metro area led the nation in housing permits in 2022, permitting 18 new homes for every 1,000 residents. Los Angeles’s and San Francisco’s metro areas permitted only 2.5 units per 1,000 residents.31 In our political typologies, it is liberals who embrace change and conservatives who cling to stasis. But that is not how things work when you compare red-state and blue-state housing policies.

So what does explain homelessness? The availability and cost of housing. When Colburn and Aldern begin testing these variables, their charts, which had just been masses of disconnected bubbles, coalesce into lockstep lines. As the cost of rent rises, so too does the number of homeless. As the vacancy rate plummets—meaning that the housing market is tight, with too many buyers and too few sellers—homelessness rises. The way to think about homelessness, they write, is to imagine a game of musical chairs. With ten chairs and ten people, everyone will find a chair when the music stops. That will be true even if one of the players is on crutches. With nine chairs, someone will inevitably be left out. That’s when individual life circumstances begin to predict homelessness. If you live in a city with too few homes, poverty and drug abuse and unemployment and mental illness make it likelier that you will be among those who end up without a home. But the cause of homelessness isn’t the poverty or the addiction or the unemployment. All those conditions are far more prevalent in, say, West Virginia than in California, and yet California has six times the per capita homelessness of West Virginia.

In the ’70s, rising inflation and slowing home building turned the homes people did own into the center of their wealth. But how do you protect the value of that asset? You can insure a home against fire, but you can’t insure it against rising crime rates or local schools slipping in quality or a public housing complex being built down the block. To manage those risks, you need to control what happens around your home. You do that through zoning and organizing. You do it through restricting how many homes and what kinds of homes can be built near you. You do it by making the minimum allowable lot sizes bigger and the parking requirements more expansive because both those rules ensure that only wealthier people will be able to buy into your community. You do it through organizing at planning meetings to defeat proposals for apartment buildings—they’ll change the character of the neighborhood, and think of the traffic!—and refusing to expand sewer systems to areas where developers might want to build new homes.

It is hard, now, to imagine how quickly the built environment of America changed in these years. In 1900, there were scarcely 8,000 cars in the entire country.62 By 1970, 118 million cars sluiced through a nearly completed Interstate Highway System. In 1900, no one had ever flown in an airplane. By 1970, millions of passengers boarded wide-body jetliners like the Boeing 747 to travel across the oceans to thousands of airports around the world. To a previous generation, this technology would have been indistinguishable from sorcery. As every reader of fantasy novels knows, great magic carries a terrible price. In 1943, Los Angeles residents woke up to air so dark and noxious that they feared the Japanese had launched a gas attack.63 Five years later, a lethal smog in Donora, Pennsylvania, caused by industrial pollutants from zinc-smelting plants and a temperature inversion that trapped toxins in the air64 killed twenty people and sickened thousands.65 In New Hampshire, the Merrimack River, lined with textile mills in Manchester and Nashua, ran in different colors by the day, as dyes and chemicals dumped into the river tinged the water red, then green, then yellow.66 In Cleveland, Ohio, on June 22, 1969, oily waste and debris were ignited, possibly by a flare thrown onto the Cuyahoga River, sparking a fire as tall as a four-story building.67 In Pittsburgh, midcentury drivers had to use their windshield wipers to clear away the soot so they could see the road.68 America in th...

We did not always know how to power economies without using fossil fuels. We do now. This is the technological miracle of our age. The cost of solar energy fell by about 90 percent from 2010 to 2020. The cost of wind power fell by nearly 70 percent.16 Solar power does not choke the lungs. Wind power does not sting the eyes. Neither of them warms the planet. Two decades ago, it was not possible to imagine that modernity was compatible with renewable energy. Now we need not imagine it. The world installed more solar power in 2023 than it did between 1954 and 2017. We have seen repeated periods in California and Texas of “negative energy prices”—moments where consumers are, mind-bendingly, paid to consume electricity because there is more of it than the system needs. The cost of solar is falling so fast that for much of the day it will be effectively free, in much of the world, by 2030.

The Rise and Decline of Nations is a classic economics text. But time has exposed gaps in the theory. Japan has gone from economic poster child to growth laggard. Olson’s argument would seem to imply that the United States, with its geographic protection against invasion and its long history of continuity, would be far more sclerotic than Germany, but it isn’t. And Olson has no real answer for why so few countries that fall into crisis subsequently grow into affluence. Olson’s biggest error is his assumption that groups organize around redistribution. Olson almost completely missed the post-materialist turn in the politics of affluent countries. Some groups seek to fill their coffers, but others organize to protect the environment, to increase safety standards, to preserve the feel of their communities, or to express their values. These kinds of groups have been engines of social progress. Their existence is a gift of affluence, not a disease of affluence.

The big government–small government divide is often more a matter of sentiment than substance. Neither side focuses on what scholars call “state capacity”: the ability of the state to achieve its goals. Sometimes that requires more government. Sometimes it requires less government. But it always requires a focus on what the state is trying to achieve and what is in its way. In the absence of that focus, absurdity reigns. Across Europe, government-administered health-care systems negotiate down the prices of drugs and treatments. In America, our fear of socialized medicine has led to a hodgepodge of private and public insurers who do not coordinate and do not effectively negotiate. The weight-loss drug Ozempic, for instance, costs about ten times as much in America as it does in Britain or France.9 Those countries have national health-care systems that restrict what pharmaceutical companies can charge, and we do not. As a result, taxpayers in Europe spend less on health care, as a percentage of GDP, than taxpayers in America. And then Americans have enormous private bills atop our public spending.

The outsourcing “proved to be a foundational error in the project’s execution—a miscalculation that has resulted in the California High-Speed Rail Authority being overly reliant on a network of high-cost consultants who have consistently underestimated the difficulty of the task,” reported Ralph Vartabedian in the Los Angeles Times.34 California is one of the richest polities in the world. It was building one of the most ambitious rail projects in the world. But it did not hire the best rail designers and engineers to provide in-house expertise and manage the project. California was financing and overseeing a program it did not have the capacity to plan, manage, or even truly understand.

Modern liberal politics is made possible by invention. Almost every product or service that liberals seek to make universal today depends on technology that did not exist three lifetimes ago—or, in some cases, half a lifetime ago. Medicare and Medicaid guarantee the elderly and poor access to modern hospitals, where many essential technologies—such as plastic IV bags, MRI and CT scan machines, and pulse oximeters—are inventions of the last sixty years. It is tempting to say that, with these essentials already in existence, it is time for society to focus at last only on the fair distribution of existing resources rather than the creation of new ideas. But this would be worse than a failure of imagination; it would be a kind of generational theft. When we claim the world cannot improve, we are stealing from the future something invaluable, which is the possibility of progress. Without that possibility, progressive politics is dead. Politics itself becomes a mere smash-and-grab war over scarce goods, where one man’s win implies another man’s loss.

Beyond merely regulating technology, the state is often a key actor in its creation. An American who microwaves food for breakfast before using a smartphone to order a car to take them to the airport is engaging with a sequence of technologies and systems—the microwave, the smartphone, the highway, the modern jetliner—in which government policies played a starring role in their invention or development. Federal science spending is so fundamental to the overall economy that a 2023 study found that government-funded research and development have been responsible for 25 percent of productivity growth in the US since the end of World War II.18 “There is widespread agreement that scientific research and invention are the key driver of economic growth and improvements in human well-being,” the Dartmouth economist Heidi Williams said. “But I think researchers do a poor job of communicating its importance to lawmakers, and lawmakers do a poor job of making science policy a major focus.”19

When a good idea is born, or when the first prototype of an invention is created, we should celebrate its potential to change the world. But progress is more about implementation than it is about invention. An idea going from nonexistence to existence—from zero to one—introduces the possibility of change. But the way individuals, companies, and governments take an idea from one to one billion is the story of how the world actually changes.

As American firms pulled back from solar power, other countries picked up the slack. In the 1990s, Germany subsidized solar technology from both sides—paying companies to make panels and paying consumers to buy them.31 The solar market took off. Between 2001 and 2011, German employment in the industry surged alongside rooftop solar installations.32 If the US invented solar energy in the 1950s, and Germany made it a market in the 1990s, China made solar energy cheap in the 2000s.33 Without sufficient oil and gas resources to power a billion-person economy, China has had existential motivation to develop its own domestic energy technology. In the 2010s, Beijing got serious about building out a solar energy business, lavishing subsidies, loans, and free land to upstart solar-panel makers. Recognizing this lasting commitment, Chinese solar companies invested for the long run. Whereas America whiplashed between “boom and bust cycles” in solar policy that have “surely slowed down its progress,” Nemet wrote that China’s consistent policy has allowed its firms to build more, faster, and cheaper.34

Wright’s law echoes loudly in the history of China’s solar energy revolution. Drawing from the country’s expertise at making cheap textiles and shoes, Chinese firms gradually learned how to make solar panels more efficiently. In one case, a Chinese company bought a saw from a Swiss company that could cut thinner and thinner silicon wafers, which meant more panels from the same crystal ingot.39 They built machines to automate production lines. As they figured out what worked, they scaled up their lessons to build more production lines and larger factories. In 2000, China had barely enough solar energy to power a small town. By 2020, the nation was making 70 percent of the world’s photovoltaic panels.40 As China ramped up manufacturing, the cost of solar panels in the last fifteen years has declined by about 90 percent.41

The smartest question, then, is not if the government should intervene in markets, but how to do so. Nearly one hundred years ago, the economist John Maynard Keynes offered an elegant answer in his 1926 book The End of Laissez-Faire. “The important thing for government is not to do things which individuals are doing already, and to do them a little better or a little worse; but to do those things which at present are not done at all,” he wrote. If technological progress requires money or resources that are beyond the scope of any one company, and government does nothing, progress slows down. This is exactly what we saw after 1980 in the solar industry. As the private sector lacked the resources to scale solar production, Washington slashed its support, and the industry went cold. The highest purpose of a pro-invention government is to make possible what would otherwise be impossible. No private company could orchestrate the national production of penicillin in World War II, so OSRD did it. No private companies were close to putting a man on the moon in the 1960s, so NASA did it.48

In all, the US government spent less than $40 billion to develop, produce, and buy mRNA COVID vaccines.63 It might be one of the best bang-for-buck policies in US history. COVID vaccines prevented up to 20 million64 excess deaths worldwide, with several million of those saved lives directly attributable to the acceleration of the Pfizer and Moderna vaccines. Tens of millions of hospitalizations were prevented by the further prevention of severe disease. One analysis by three US economists estimated that the lives saved in just the eight months of the vaccinations were worth $6.5 trillion.65 Stacked up against more popular American programs, such as the Apollo program, Warp Speed’s accomplishment shines even brighter. For all the wondrous drama and exploratory genius of touching a human foot to moon dust, the Apollo missions did not directly save any lives or unveil any new technologies, even as they accelerated the development of computer chips and related fields.

If push funding pays for effort, pull funding pays for success.72 Warp Speed used both. With push funding, it covered the early expenses of several vaccine makers. With pull funding, it promised to buy a certain number of vaccine doses, provided that the therapies received FDA authorization. Pull funding is efficient because it only pays out if the technology pans out. It’s effective, because it solves a common bottleneck in new technology: demand uncertainty. Some companies are rightly concerned that consumers cannot afford the early, expensive versions of a product. These companies need more certainty about future profits to invest in the final stages of invention.