Isegoria

On his way to India last year, Bryan Caplan connected through Abu Dhabi, the capital of the United Arab Emirates (UAE) and toured its sister-city, Dubai, too. He shares his reflections on the United Arab Emirates:

In cleanliness and crime, UAE rivals Japan.

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The key ingredient of Emirati success: 88% of UAE’s population is foreign-born. That’s the highest share of any country on Earth.

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I chatted with workers from both Zimbabwe and Sierra Leone. Yes, would-be migrant workers face a government approval process, so the border is not 100% open. But if you want to work hard to make a better life for yourself, your prospects of landing a work visa are decent no matter how humble your credentials.

Abu Dhabi and Dubai are living proof that Michael Clemens’ “Trillion Dollar Bills on the Sidewalk” is literal truth. Both cities look like Coruscant from Star Wars. They are absolute marvels: Gleaming cities of the future where humanity gathers to produce massive wealth. And without mass immigration, almost none of this could have been built!

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In a country where everyone is rich, rich people would have to hire other rich people to clean their homes, cook their food, and watch their kids. In a nativist UAE, the only way to get good value for your money would be to leave the country!

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A typical demagogue would have objected, “We don’t want to become a minority in our own homeland,” but Zayed boldly forged ahead — and created a cruise ship the size of a country. Since 1971, UAE’s population has grown from 280K people to 9.5 million. A miraculous multiple of 34x.

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Most observers glowingly describe UAE’s overflowing welfare state. In a sense, they’re right.

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In a more important sense, however, the UAE’s welfare state is admirably austere, because these lavish benefits are limited to Emirati citizens — and these citizens are a tiny minority of the population. If 88% of the residents of Sweden were ineligible for redistribution, no one would call it “a generous welfare state” — no matter how high the benefits for the remaining 12% happened to be.

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Instead, the UAE has decisively Westernized two initially un-Western populations: native Arab Muslims and Third World migrants. How? By creating an economy dominated by Westernized multinationals. Though the Western population is low, their “soft power” has slowly but surely taken over the soul of the UAE. Verily, Western culture is a hardy weed.

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“What about businesses withholding their workers’ passports?” That’s now illegal, and locals tell me the new law is well-enforced. But either way, it’s a rounding error. Foreign workers have phones, so what do you think they tell their friends and family back home? “Don’t come; they’ll confiscate your passport”? Or, “Definitely come; in five years you’ll return a rich man”?

Ponder this: If a foreigner causes problems in the UAE, the standard punishment is deportation. So how dire could the problem of withholding passports have ever been? The main function of the new UAE law is not to protect foreign workers from employers but to protect the UAE’s reputation from international muckrackers.

Bryan Caplan argues that the so-called “cultural costs” of immigration would have to be astronomical to outweigh the tens of trillions of dollars of gains we’re forfeiting every year from restricting it:

And they’re clearly not. If natives really cared so much about their cultures, they would be migrating en masse to low-immigration areas of their countries. They aren’t.

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Since they almost never do, we should infer that their cultural attachment is weak.

This first comment, from Torches Together, offers a British perspective:

The first point seems incredibly poorly thought through.

People very clearly do move away from high-immigration neighbourhoods! This is well documented in the UK and France at the population level.

White Britons tend to move to majority-white (95%+) areas in their 30s when having kids.

We also see macro-level shifts in the classic “white flight” cases: Bradford, Saint-Denis, Southall, Blackburn, Tower Hamlets. Entire neighbourhoods that were 99% White in the 1950s are now over 90% minority.

And the answer to the question “Why don’t people move across the country?” is already in the preceding paragraph. “Somewheres” are defined by attachment to place, not race or nation or ethnicity. If you’re from south London and you’re uneasy about the pace or nature of demographic change, your options typically look like:

1) Stay put – keep your attachment to place, with less attachment to the area’s shifting ethnic profile. Quite common.; 2) Move nearby to somewhere whiter but still kinda “your area” (Essex is the classic example) – also common. 3) Move across the country to somewhere 99+% white – this is less common because you have no attachments there!

Living near productive people is attractive to other productive people and to parasites.

Bryan offers the straightforward economic solution no one seems to consider:

If the problem is negative externalities, then the usual Pigovian logic applies: Governments should measure these negative externalities — remembering to subtract any positive externalities — then impose an immigration tax of equal magnitude. Anyone who pays the tax gets in.

A tax on work visas would resolve many issues — as would stricter enforcement of ordinary laws:

I keep “gushing” [about the United Arab Emirates] because it’s living proof that “trillion dollar bills on the sidewalk” is not silly blackboard economics. Emirates is a cruise ship the size of a country, where the world’s poorest and richest come together for the betterment of both. The West is demonstrably missing a golden opportunity to enrich their citizens and humanity by tens of trillions of dollars.

The US lacks the will to enforce the rules that would make mass immigration feasible.

The Mamdani Moment, Peter Turchin argues, perfectly illustrates the “credentialed precariat”:

Ten years ago the political landscape in the US was dominated by two parties: one of the “1 percent” (wealth holders) and one of the “10 percent” (credential-holders). Both parties focused on advancing the interests of the ruling class, while ignoring those of the 90 percent. I am, of course, simplifying a lot here; for a more detailed and nuanced explanation see End Times.

In 2016 Donald Trump channeled growing popular immiseration to begin reformatting the Republicans into a right-wing populist — “MAGA” — party. This process is quite incomplete.

Meanwhile, the Democrats had effectively controlled the left-wing populists in their party, by a combination of suppression (think Bernie Sanders) and cooptation (think AOC). As a result, by 2024 the Democratic Party evolved into the sole party of the ruling elites.

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Many pundits commented on the observation that Mamdani enjoyed support among younger voters. Indeed, 78% of the youngest cohort (18-29 years old) voted for him and only 18 for Cuomo, for the Mamdani advantage of 60 points.

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Let’s first look at credential-holders. Astonishingly, the proportion of people, voting in this election, who had at least “some college” experience is 80%. 31% have earned a Bachelor’s and fully 27% hold an advanced degree, with both groups giving Mamdani an advantage of 19 points (57% for Mamdani, 38% for Cuomo).

To tell the truth, I first didn’t believe these numbers. Such concentration of credentialed individuals is amazing. But according to the NYC government survey in 2023, two years ago the proportion of New Yorkers with a bachelor’s degree or higher was 43%, increasing from 33% in 2010. Of the White adults (25 or older) two-thirds completed college. Talk about degree overproduction…

Next, income. Here the relationship is nonlinear. The poorest (earning less than $30,000 per year) and the richest ($300,000 or more) gave more votes to Cuomo, while those in between preferred Mamdani. Thus, the richest 8%, earning $300k or more, preferred Cuomo by 29 points. The problem for Cuomo was that those in the middle category comprised 77% of voters. The biggest degree of preference for Mamdani compared to Cuomo — 20 points — was among those earning $50-99k. This was also the largest group (27% of voters). The next group, $100-199k, were close behind: 18 points for Mamdani.

It may seem strange to call those earning 50-100k “precariat,” but one must take into account that NYC is a very expensive city. The median rent for two-bedroom apartments in New York City increased 15.8% over the past year and is now $5,500 per month (see Zohran’s Park Slope Populists by John Carney), or $66,000 per year. In other words, you will spend two-thirds of your $100,000 income just to keep a roof over your head.

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Still, these numbers provide strong support for the idea that Mamdani’s win was largely propelled by the young credentialed precariat: the youth with college degree, or higher, earning just enough to live on the edge.

Patrick Fitzsimmons has been mulling a paradox:

U.S. GDP keeps going up, yet it seems like we make less stuff and that most of the smart people I know work fake jobs. Growing up in the nineties, most of my toys and clothes had tags saying “Made in Hong Kong” or “Made in Vietnam.” But the high-skill, high-tech goods—the washing machine, the car, my computer—were often made in America. Now? From my e-bike to my laptop, from my refrigerator to my mattress, very few goods I own, high-tech or low-tech, were made in the USA.

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Sometimes there are discrepancies between your real-world observations and the data. But this goes far beyond just being a discrepancy: the data is saying the complete opposite of what we see with our own eyes, hear from our acquaintances in the job market, and deduce logically from our knowledge of demographics, technology, industry, and trade. How is this possible? The answer is actually very simple: the data is completely wrong. But you can only figure this out if you go line-by-line into the hundreds of pages of government GDP calculation methodology documentation. Which is exactly what I did.

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I challenge anyone who believes in these statistics to tell me what in the real world happened so that raw tonnage of steel was down, real gross output of steel was flat, usage of inputs was up, but “real value-added” was also up, and up hugely. Nobody can explain these numbers. The BEA cannot—I have asked them! If the raw data still exists, nobody has access to it because it was confidential.

The basic problem is that real value-added calculations only work if there are no quality adjustments and there hasn’t been any substitutions in the inputs. If those assumptions do not hold, you can get wild and nonsensical results. Since those assumptions do not actually hold in the real world, those nonsensical results are mixed into the overall calculation in ways that are impossible to account for, thus making the entire number bogus.

My guess is that what happened with steel production is that factories have moved from using raw iron ore to scrap metal as an input. The scrap metal is actually closer to a final good and requires much less energy to turn into steel. But GDP calculations do not know that scrap metal is closer to a final good. What the GDP calculations see is that materials have become more expensive and that energy inputs are less, so it seems like the steel factories are maintaining output with much less input, and thus value-added is greater. The reality, though, is that the United States is not producing any more steel out of factories, the United States is not producing a greater percentage of the steel value chain than in 1997, and the 125% increase in real value-added is a spurious result that represents neither making more stuff nor making better stuff.

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This is not just my critique: a former deputy chief at the BEA, Professor Doug Meade, has sharply criticized real value-added as a metric. In a 2010 conference paper, he wrote, “more than 60 years after it was first introduced, there is still no fundamental agreement on the meaning of real value added, or its price. Most who use it for the study of productivity loosely describe it as a measure of ‘real output’ although strictly speaking it is not that.” He continues to argue that comparing real value-added between years only works under the conditions of no quality adjustments, no input substitutions due to price changes, and no changes to the terms of trade. If those conditions do not hold, then, he says diplomatically, “it would be unclear what [real value-added] is measuring” Or as economist Thomas Rymes, observing the same issues, put it more directly: “a fictitious measure of output with no meaning.”

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Since nominal value-added is not adjusted by price indexes, it avoids all the problems we discussed with real value-added.

But, once again, the problem with the nominal value-added comparison is that it is not a comparison of actual things—it is a comparison of sales receipts. Thus a given quantity of products that is produced by a bloated cost structure will count as more “GDP” than the same number of products produced by an efficient factory. This is not just a theoretical problem—we know for a fact that the Chinese company BYD produces an equivalent to the Tesla Model 3 for half the price. Thus, $30,000 of manufacturing value-added in the U.S. might represent one car being produced, while for China it might represent two cars, and thus is actually double the output. In general, the China-U.S. dollar exchange rate is not a market rate and thus the conversion does not reflect in any meaningful sense the value of products.

Worse, many U.S. products are more expensive not because they are higher-end and better quality, but because they are protected from competition by tariffs, patents, regulation or national security requirements. For instance, Purism makes an all-in-the-USA phone for $2,000—the phone is no better than a $500 Chinese or South Korean phone, but sells at a premium for the U.S. security market. Others in procurement tell stories of getting quotes for printed circuit boards that cost $5,000 from China but $50,000 in America, thus only government and regulated industries buy American circuit boards. American-made municipal buses can cost three times the price as those made in China, but cities often face rules requiring them to buy American. For a particularly egregious example, thanks to the protections of the Jones Act, American ships cost an astounding ten times as much to build as their foreign counterparts.

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Which is more “output”—one million drones sold for a total of $2 billion dollars, versus one B2 stealth bomber for the same price? A $2,000 custom-made dress for the Met Gala, or one hundred pairs of denim work pants? Nominal value-added comparisons treat them as equivalent.

Nominal value-added cannot tell the difference between a country like 1790s Spain, a manufacturer of luxury goods with inflated nominal prices thanks to New World gold, and 1790s England, a ruthless manufacturer of inexpensive goods that is on its way to world domination. A comparison between countries that simply looks at sales revenues—not at the actual amount of ships, phones, and things produced for that revenue—is simply not a useful comparison.

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When we read a headline saying GDP data shows “car output has increased,” we think the U.S. has made more cars. We then apply our own views as to whether the quality of the car has changed. When we sneak quality into a measure but still call it “output,” we are double-counting and embedding the subjective in the objective, and we lose track of the hard numbers. We are not making more quantity of cars per person like the data says, we are making fewer cars, but with Bluetooth and crumple zones.

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While the BLS provides general information about the quality adjustment process, the specific methodology and the actual decisions are not documented. At the heart of GDP we find this subjective, bureaucratic black box. When we see that “output” of cars has increased since 1997, it is impossible for any commentator to know how that increase in “output” breaks down between actual number of cars, horsepower boosts, safety features, durability improvements, convenience features, blue tooth, power locks, and on and on.

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The point is not that any of these methods is right or wrong. The point is that if you have a half-dozen plausible ways of adjusting for quality, none of which from first principles is more objective than another, and you rule out one method for giving ludicrously low results, and one method for ludicrously high results, and just choose a middle route that feels reasonable, then the result of this adjustment is not an objective measure of output. All you have done is launder vibes into something that has the appearance of an objective number.

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The point is not that any of these methods is right or wrong. The point is that if you have a half-dozen plausible ways of adjusting for quality, none of which from first principles is more objective than another, and you rule out one method for giving ludicrously low results, and one method for ludicrously high results, and just choose a middle route that feels reasonable, then the result of this adjustment is not an objective measure of output. All you have done is launder vibes into something that has the appearance of an objective number.

Brian Albrecht explains why you can’t just compare tax rates between, say, income taxes and tariffs:

Double a tax rate, and you quadruple the deadweight loss. This is a standard result in public finance, and it suggests we should spread our tax burden across many bases rather than concentrate it in one place.

Here’s the intuition. When you impose a small tax, you only kill off marginal transactions—deals that barely made sense in the first place. The buyer was almost indifferent about purchasing, or the worker was almost indifferent about working that extra hour. These marginal transactions don’t create much surplus, so losing them doesn’t cost much.

But as you increase the tax rate, you start killing off transactions with larger and larger surplus. Beyond eliminating the deals that barely made sense, you’re now eliminating deals where both parties really wanted to trade, where there were substantial gains from the exchange. The surplus lost from these inframarginal transactions is much larger.

This is why deadweight loss grows with the square of the tax rate. Double the tax, and you lose transactions that had twice the surplus. The effect multiplies. A 10% tax might eliminate deals that create $1 of surplus each, but a 20% tax eliminates deals worth $1 and deals worth $2. The total loss is 4x, not 2x.

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If you want to compare across markets, you need another basic idea from taxation: deadweight loss depends on elasticities.

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Some supplies are essentially fixed—you can’t create more of them no matter how high the price goes. Other goods can be produced in unlimited quantities at constant cost. Some demands are highly elastic (people readily substitute to alternatives), while others are inelastic (people need the good regardless of price). These elasticities determine how much distortion a given tax rate creates. The tax rate alone tells you nothing.

More elastic demand or supply curves generate larger deadweight losses. The flipside is the classic Ramsey result: tax less elastic goods more heavily.

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Consider taxing a good with a perfectly inelastic supply—say, land in a specific location. The supply curve is vertical. No matter what price landowners receive, they supply the same amount of land because they can’t create more of it. By definition, there is no deadweight loss. The tax doesn’t change behavior.

What happens when we increase the tax rate on land? The tax raises revenue, but it generates no deadweight loss. Landowners absorb the entire tax through lower prices, but the quantity of land traded doesn’t change. There’s no distortion in the allocation of resources. You could tax land at 100%, and the deadweight loss would still be zero.

This demolishes the idea that you can look at tax rates in isolation. There is no nice connection between tax rate and deadweight loss that transcends the specific good being taxed.

Now compare this to a tariff on imported goods, where supply and demand are both elastic. The tariff creates a wedge between what consumers pay and what producers receive. This wedge distorts both consumption decisions (people buy less than they would otherwise) and production decisions (domestic producers make more than they would in an undistorted market). We get the classic deadweight loss triangle.

And it’s not just that imports aren’t perfectly inelastic. They’re very elastic! Estimates vary but one recent paper puts the long-run elasticity at 14, implying a huge deadweight loss.

The formula that deadweight loss increases with the square of the tax rate applies to both taxes. It tells us doubling tariffs with quadruple the deadweight loss. But it tells us nothing about which tax we should increase and the deadweight loss across the two markets. The land tax, even at a 100% rate, might generate zero distortion. The tariff, even at a 2.5% rate, creates real costs because of the huge elasticities. Elasticities matter. You can’t compare tax rates across different bases without accounting for how responsive behavior is to each tax.

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But tariffs are worse than general consumption taxes because they tax only some goods—and imports are a small share of total consumption.

In the US, imports are roughly 10% of consumption. This means tariffs apply to a base that’s one-tenth of a general consumption tax would. When Lott compares a 2.5% tariff to a 40% income tax, he’s ignoring that these rates apply to completely different denominators.

Think of it this way: if you want to raise $100 from a tax that applies to everyone’s $1,000 of consumption, you need a 10% rate. But if you want to raise that same $100 from a tax that only applies to $100 of imports (10% of consumption), you need a 100% rate. The narrow base means you need a much higher rate to raise equivalent revenue.

This logic applies to any narrow excise tax.

In the United Kingdom, one-quarter of the working-age population is currently out of work:

(For comparison, in the United States, a similar statistic finds that only 16.6 percent of people in prime working ages are out of the labor force.) Once someone becomes economically inactive due to health reasons, their chances of ever reentering employment within a year drop to 3.8 percent. Up to 3,000 new people per day are writing off work and being approved for sickness benefits, now totaling around 4 million people.

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A National Health Service (NHS) Confederation report showed that in 2021–22, over 63,000 people went straight from studying to being economically inactive due to long-term sickness. In 2002, mental and behavioral problems were the main condition for 25 percent of claimants. In 2024, that figure rose to 44 percent. More than half of the rise in disability claims since 2019 was due to mental health or behavioral conditions, according to the Institute for Fiscal Studies.

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About 69 percent of those who apply for sickness benefits mention depression, anxiety, or some other kind of mental or behavioral disorder. Mental illness is now being cited by 48 percent of disabled working Brits, making mental health the single biggest problem.

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According to data collected by the TaxPayers’ Alliance, a total of 1.75 million people in England received enhanced personal independence payments (PIP) in April 2025, an increase from 734,136 in January 2019. PIP is just one of many types of social security available to working-age claimants, intended to help them deal with the extra costs of disability. It is available to those in work. However, only one-sixth of PIP recipients are working. Some are receiving these benefits for seemingly minor ailments, including acne, constipation, obesity, “old age,” irritable bowel syndrome, writer’s cramp, and food intolerances.

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In 2019, the number of PIP claimants for autism was 26,256, and by April 2025, this number had jumped to 114,211. For anxiety and depression, it went from 23,647 in 2019, to 110,075 in April 2025. For ADHD, in the same period, it went from 4,233 to 37,339.

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As ludicrous as this sounds, approximately 80 percent of PIP claimants are not in work at all. A person getting incapacity benefits and PIP could be getting 23,899 pounds (roughly $32,250), which is already more than the minimum wage. Someone with children is entitled to even more. When PIP is combined with housing benefits, universal credit, and other offerings, someone could be entitled to 27,354 pounds (roughly $37,000) without paying taxes.

People who follow the news often claim to be surprised or even shocked by current events, Bryan Caplan notes, but that’s rarely his reaction:

Sure, I can’t predict the details of the latest happenings. But the broad outlines of the news are tiresomely familiar. Heinous domestic murders. War in the Middle East. Blatant violations of the plain English reading of the Constitution. Chaotic socialist tyrannies in Latin America. Pampered First Worlders blaming their horrible plight (?) on hapless refugees. Civil wars in Africa.

And always, people screaming at each other.

He goes on to list some actual surprises:

The collapse of the Soviet bloc. I expected that all reformism would ultimately be constrained by Soviet tanks. Instead, the Soviet Union let its satellites go, then shattered into 15 separate countries two years later.

9/11. As the vehicular rammings of the mid-2010s show, any motivated midwit can carry out a major terrorist attack. Since major terrorist attacks are very rare, motivated midwits must be in short supply. QED. Yet one far craftier team of terrorists still managed to carry out this world-shaking attack. (Note: I was not surprised that nothing comparable has happened since).

After Obama won, I laughed at a colleague who predicted that complaining about racism in America was finally over. But I was still shocked a few years later when complaining about racism — and renewed “anti-racist” activism — massively multiplied.

In mid-2015, I laughed at the idea that Trump would win the Republican nomination. Once he got the nomination, though, I was only moderately surprised that he won the election.

I was shocked that transgenderism became so common that I personally know multiple people with trans children. Darwinian evolution just tells us less about human sexuality than I imagined.

In 2020, I was not surprised by the emergence of a new, moderately lethal virus. Such things happen a handful of times per century. But I was completely stunned that serious limits on in-person activity lasted more than two weeks in the United States. Indeed, my jaw dropped simply when Disneyland first shut down. I never expected a reasonable policy response, but I counted on ADHD to save us. ADHD did not save us.

I was not surprised that Trump refused to concede the 2020 election. Indeed, one premise of my 2016 election bet was that even if Trump lost, he would not admit it. I was however surprised that he managed to come back from January 6, especially at his age.

I was surprised that Putin tried a full invasion of Ukraine. I thought he would limit himself to annexing de facto independent territory in Donetsk and Luhansk.

I was amazed that AI went from mediocre to excellent so quickly. But not surprised that it’s taking so long for AI to actually replace human workers, even when it conceptually seems easiest.

Trump’s Liberation Day tariffs shocked me. I figured he would limit himself to symbolic outrages, but instead he eagerly terrified the stock market for weeks. While he mostly backed off and the stock market more than fully recovered, there’s almost nothing he could do on foreign trade that would shock me at this point.