How the national debt works

When the federal government spends more than it collects in taxes, it covers the gap (deficit) by issuing Treasury securities. Mechanically, the buyer of these bond securities pay the face value of the bond and in turn receives a fixed dollar payment, called a coupon, usually twice a year. After a predetermined period, when the bond “matures,” the government returns the principal. The interest rate then is the ratio of annual coupon to face value.

The market for Treasury securities is the largest and most liquid bond market on the planet. In practice, though, almost no one transacts one bond at a time. The action starts with institutional bidding in the primary market, where the government auctions off new debt directly (wholesale) to a small group of primary dealers and other authorized bidders.

The secondary market — the main locus of liquidity — is where everyone else trades those securities afterward. It’s here where daily Treasury prices and yields are quoted, where the Fed conducts its Treasury-related open market operations, and where the vast majority of price discovery and trading volume occurs (including retail or ‘mom-and-pop’ buying and selling).

The final technical piece of information you need to know about is “the yield curve”, or the relationship between Treasury yields and time to maturity. The short end — T-bills ranging from 1 to 12 month maturities — tracks the fed funds rate closely. But the long end — Treasury notes and bonds with maturities ranging from 1 to 30 years — is a different beast. Long-dated yields reflect things the Fed may influence but does not actually set, namely market expectations of long-run inflation1 and, more generally, the balance of supply and demand for long-dated paper.

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Who holds it

The debt is mostly held by three groups.

The first is the government itself.2 The Social Security trust fund, the Civil Service and Military Retirement funds, Medicare’s trust fund, plus the Federal Reserve, together hold roughly twelve trillion dollars in Treasury securities.

The second is foreign investors, who hold roughly nine trillion dollars, nearly a fourth of the total outstanding debt. Most of this represents holdings by foreign central banks and sovereign entities that buy Treasuries as a safe, liquid store of dollar value. A world that trades in dollars needs a place to park them. This is the Hamiltonian case for the existence of federal debt.

The third group is domestic private holders — US banks, hedge funds, pensions, mutual funds, insurance companies, IRAs, 401(k)s, etc. Unsurprisingly, this relatively cleanly to the ownership distribution of assets in general, and so is extremely skewed toward the wealthy. Sandy Brian Hager’s Public Debt, Inequality, and Power documents this in a comprehensive empirical study of US bond ownership.

Why debt is “bad”

It isn’t. The US has always carried debt, and post-Bretton Woods, the global financial system is one big oroborus of the Treasury market. But it does involve a specific tradeoff that, although everyone seems to grasp in principle, is rarely openly discussed. If it were financing investments that raise future growth and productivity, it could be justified as an asset-building tool. It could also be justified on the grounds of “macroeconomic stabilization,” as it was nearly two decades ago in the wake of the Great Financial Crisis.

The problem, however, is that much of today’s borrowing is not going to growth-inducing public capital, but to financing the welfare state and current consumption, which leaves future taxpayers with the bill yet no corresponding productive return. And the sobering reality is that interest payments now consume 18.5 percent of federal revenue — nearly one in five dollars collected by the IRS goes to servicing coupon payments on government bonds. So regardless of whether there is some universally optimal debt load, every borrowed dollar commits the state to a stream of interest payments that displaces other spending.

You can see this clearly in the current US budget. The total deficit, at 5.8 percent of GDP, is abnormally high almost entirely because of interest payments, which run at roughly 3.3 percent of GDP. Strip those out and the primary deficit — the gap between revenues and non-interest spending — is 2.6 percent of GDP, a historically normal figure. Before the state can fund anything, it is obligated to pay bondholders out of tax receipts.

This phenomenon, where interest payments displace other government spending, restricts the state’s capacity to deliver the services it once delivered regularly: things like public works projects and investment in infrastructure. And this is only half the picture. The other half is that interest payments amount to an extremely regressive transfer from taxpayers to capital holders.

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Conclusion

The honest framing is this: every dollar of new debt is simultaneously a decision to fund something now and a decision to transfer tax revenue to bondholders for decades after. Politicians on the left argue in favor of funding transfers with debt the entire time committing to future transfers to the rich. And the right denounces spending while hypocritically presiding over exploding deficits. Something needs to change or soon we won’t be able to afford anything but redistributing taxpayer dollars to asset-holders, foreign and domestic.

We are very excited to be running our third sprint at the Boyd Institute, and want to thank everyone who has followed us into this new sprint on debt and deficits in America. As we laid out in the topic announcement and our recent piece, the fiscal pressures accumulating in this country are as urgent as anything we could be working on, and today wanted to open the floor to you, the reader, once again.

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With the success of our previous essay contest format in mind, we are running it back again this quarter with the same core structure but with one small change we’ll get to in a moment.

The question we are asking this time is:

“How does America escape its fiscal trap?”

This one is narrower than “problem-solving capacity,” but it is still plenty broad by design. You can come at it from any number of angles. Is the answer entitlement reform — and if so, what does a politically viable path look like? Is it tax policy, or the structure of the budgeting process itself? Would a fiscal commission with real teeth work where past ones have failed? Do we need constitutional debt brakes of the kind Switzerland and Germany have adopted? Or is the answer on the growth side — deregulation, immigration, productivity — such that we grow our way out rather than cut our way out? Is it something more radical still: a sovereign wealth fund, partial monetization, a rethinking of dollar privilege?

We’ll leave it to you to decide the angle you think is best. Many, many smart people have tried to address this problem before, and what we are looking for are bold, asymmetric ideas that actually move the needle — not another restatement of the CBO baseline.

One Small Change

As we did last quarter, we are asking people to publish their articles on their own Substacks as soon as they are ready, and we will reward the best essays at the end of the sprint. The reasoning is the same as before: information silos are bad, and publishing in public lets everyone iterate and learn from one another. As with last time, we will only allow one final submission per applicant, but if you want to update or even write an entirely new essay after reading someone else’s work — or for any other reason — you are encouraged to do so up until the deadline.

The one change this time: if you would genuinely rather not publish on Substack, you may instead submit your essay to us as a PDF via the submission form.

That said, we strongly recommend the Substack route. The whole point of the format is to turn the contest into something like an online salon rather than a black box, and a PDF sitting in our inbox doesn’t do that. Publishing in public is how you bring other people into the conversation, how you get feedback before the deadline, and frankly how you build your own audience around ideas you clearly care about.

It is our promise that, whichever route you choose, if you submit something, we will read it, internalize it, and judge it on its merits.

In our last iteration, we awarded a total prize pool of $6,900, meaning eight honorariums. We expect our final payout this time to be roughly the same, so there is real money to be made for participants.

If you have any questions, do not hesitate to reach out via DMs, and we will be sure to respond with clarifications. Best of luck, and may the best essay(s) win!

For attribution we ask you put the following blurb at the top of your article:

“This article is part of ’s quarterly policy sprint on the debt and deficit. To learn more about them and the work they do you or submit your own article click here".

Prizes and Recognition

• Grand Prize: USD $2,500 cash, re-publication and promotion on our Substack, and the honorary title of Boyd Fellow for one year.

• Second Prize (Runner-Up): USD $1,000 and re-publication/promotion on our Substack.

• Third Prize (Runner-Up): USD $1,000 and re-publication/promotion on our Substack.

• Additional Publication: We may offer a USD $300 honorarium to authors whose essays we choose to re-publish beyond the top three.

Eligibility

Human (not AI) entrants aged 18 or older are eligible — one essay per author.

The contest is open worldwide, but the focus of this contest is on identifying novel solutions for the United States.

Essays should either be (a) Published on the author’s personal Substack account, attributed to the Boyd Institute at the top of the submission, with the link shared via THIS Google Form; or (b) Submitted directly to us as a PDF attachment through the same Google Form. Substack publication is strongly preferred.

Submission Guidelines

Format: An article will be considered for the prize pool if it is either:

• (Preferred) Published without a paywall on the author’s personal Substack account before the deadline, with an acknowledgment at the top of the article that it was created as part of the Boyd Institute essay contest; or

• Submitted as a PDF attachment via the Google Form before the deadline.

In either case, the author must submit the Google Form HERE with a link (or PDF), acceptance of terms and conditions, and other contact information.

Language: Submissions must be in English.

Original Work: Essays must be original and authored by the entrant.

AI Assistance Disclosure: If you use AI tools to brainstorm or edit your essay, briefly describe how you used them in a note attached to your Google Form submission. Fully AI-generated essays are not permitted.

Deadline: 11:59 PM Eastern Time on Monday, June 15th, 2026. Late entries will not be accepted. We will announce the winners and award prize money at the end of July.

Evaluation Criteria

Our judges will evaluate submissions based on:

• Originality: How novel and creative is the idea? This is a gnarly challenge, and we need outside-the-box thinking!

• Potential for Impact: If your idea were implemented, would it meaningfully address America’s debt and deficit trajectory? We are looking for ideas that substantially move the needle.

• Actionability: Does the proposal offer a concrete and realistic path forward? Is it feasible within existing technological and/or political-economy constraints?

• Clarity and Quality: Is the essay well organized and easy to follow? Is the proposal articulated persuasively for the general public, policymakers, and experts? While polished prose helps, we care most about the strength of your ideas.

How to Submit

1. Prepare your essay following the guidelines above.

2. Either publish the article on your Substack, or prepare a PDF.

3. Complete the online submission form HERE.

4. Provide your contact details.

5. Link to your Substack post or attach your PDF.

6. Confirm that you have read and agree to the Terms and Conditions.

Ready to share your bold, asymmetric idea? Click the link below to submit your essay.

👉 Submit Your Essay 👈

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Federal budget deficit as % of GDP

The US has run a budget deficit in all but four of the past 45 years, with the lone surpluses appearing briefly at the end of the Clinton administration. The two largest gaps in modern history came during the 2008 financial crisis and the 2020 pandemic response, when deficits exceeded 10% and 14% of GDP, respectively. Post-Covid, the government has continued to run deficits in the high-single-digit % range — historically enormous.

Federal debt as % of GDP

Federal debt spiked to roughly 106% of GDP at the end of World War II, then steadily declined for three decades as the postwar economy grew faster than the debt stock. Starting in the 1980s the trend reversed, and today debt is approaching the WWII peak. CBO’s projections have it blowing past that record and heading toward 175% of GDP by the mid-2050s.

Treasury is in the midst of rolling through a maturity wall.

Publicly held Treasury debt1 totaled $31.41 trillion as of April 3, 2026. Of that sum, roughly 33% will be maturing within 12 months. Much of these maturities are ZIRP-era (lower-rate) issuances which must be rolled over at current rates in the spot market.

T-bills have become the path of least resistance.

Since the yield curve is currently sloping upward — meaning that current short-term rates lower than long-term bond yields — Treasury is electing to “refinance” the longer dated maturities by increasingly issuing Treasury bills (or “T-bills,” the shortest-term debt). But by replacing long-term funding with short-term rollovers, the US is effectively setting a policy where a large portion of its debt will have to be refinanced every few months on a go-forward basis.2 This probably helps explain the president’s urgency for a Federal Reserve in rate-cutting mode in the near term.

Still, the average interest rate the US pays on its debt has more-than doubled since 2021.

Even though T-bill rates have come off their 2023-24 peak as the Fed has eased, short-term rates are still considerably higher than the average coupon on the maturing debt. Thus the blended average rate on federal debt, which in 2024 climbed back above 3% for the first time in over a decade, could very well continue to climb as maturities continue to be rolled.

Up, up, and away!

And so the above explains why interest payments on federal debt have climbed back to roughly 3% of GDP, matching the previous peak set in the early 1990s. The difference is that the 1990s peak was followed by a long decline as rates fell and growth caught up to the debt; today’s climb is happening with a much larger debt stock and no obvious catalyst for rates to return to the zero-bound levels of the 2010s. Interest is now the fastest-growing major line item in the federal budget, and on current projections will soon be the single largest.

Mandatory spending and interest eats everything.

This may be the single most important chart in the deficit story. Starting next year, CBO projects that mandatory spending (Social Security, Medicare, Medicaid) plus net interest on the debt will, absent structural reform, permanently exceed all federal revenue. In practical terms, every dollar of discretionary spending — defense, infrastructure, research, federal agencies, i.e. everything but pure transfers — will be financed entirely with borrowed money.

We even spend more on interest than defense now.

Year-over-year spending is up across nearly every major category. Social Security led the increase at +$43B, followed by Medicare (+$33B), Health (+$31B), and net interest on the debt (+$30B). Defense rose modestly, and the only category showing a meaningful decline was “All Other” — the catch-all bucket for the rest of the federal government, which includes almost all investments (the type of spending that actually carries a meaningful economic multiplier).

Who pays our taxes?

The federal income tax is steeply progressive in practice. The top 1% of earners took home 22.4% of all adjusted gross income but paid 40.4% of federal income taxes, while the bottom half of filers earned 11.5% of income and paid a small single-digit share of the total. The top 10% of earners collectively cover roughly 75% of the federal income tax bill. This concentration is worth keeping in mind in any debate about raising or cutting rates — the revenue base is heavily dependent on a small group of high earners.

Our deficit is driven by increased spending.

Over the past 50 years, federal outlays have averaged 21.2% of GDP and revenues 17.3%. But as revenues have remained near historical average, outlays have systematically crept up.

It’s basically just income (and payroll) tax.

Washington's revenue base is less diversified than many people assume. Individual income taxes supply 51% of federal revenue and payroll taxes another 33%, meaning about five of every six federal dollars come directly out of workers' paychecks. Corporate income taxes contribute just 9%, with customs duties and miscellaneous receipts splitting the remaining 8%.

We spend much more on the elderly than the young.

Americans' relationship with the federal balance sheet shifts dramatically over the life cycle. People under 25 and over 65 receive substantially more in government spending than they pay in taxes, while working-age adults (roughly 35 to 54) are net contributors. The imbalance is especially pronounced for Americans over 75, who receive tens of thousands of dollars more per year in benefits than they pay in.

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Debt and Deficits

For decades the question of US federal debt has come and gone politically, but it is now — when, ironically, there is the least political capital to deal with it — that we are truly beginning to pay the price. The simple reason is that under the Zero Interest Rate Policy world following the 2008 financial crisis, the federal government accumulated enormous levels of debt at very low prices. Now that interest rates have moved up again, and plausibly could move higher, we are beginning to pay the price for that policy decision. Today nearly 14% of all federal spending — roughly $970 billion in FY2025 alone — is consumed by interest payments, making them the third-largest line item in the entire federal budget, behind only Social Security and Medicare.

This is to say nothing of our impending entitlement crisis. Both Social Security’s primary trust fund and Medicare’s Hospital Insurance trust fund are projected to run dry in 2033, at which point we will be forced either to shift those expenses into the general fund — out of their arithmetic fantasy — or to accept the statutory cuts: a 23% across-the-board reduction in Social Security benefits and an 11% cut to Medicare hospital payments.

Our accumulating debt burden is creating a fiscal cliff and crowding out government investment, all while undermining confidence in the US dollar as a safe haven and so jeopardizing our exorbitant privilege. Figuring out how to solve it, then, is one of the most important questions we face. Many people, including many think tanks, have tried to address this problem before, and so what we are looking for are really bold, asymmetric ideas on how we can begin to get ourselves out of this mess.

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The Essay Contest is Back

The single best thing we did last sprint was the essay contest format, and we’re running it again the same way: you will publish on your own Substack as you go, iterate in public, learn from each other, and submit your best work by the deadline.

We will be publishing another article with the full rules, prize pool, and submission instructions later this week, but you should start thinking now.

Onwards and Upwards!

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During the summit, I also took over 10,000 words of notes, many of which were messy. Therefore I had ChatGPT neatly organize them into a dossier for those interested:

Prospera Libacc Report

166KB ∙ PDF file

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And now, some takeaways and themes from the lib/acc summit and my experience in Próspera.

Próspera: A Shining City in a Hill

To get to Próspera from the island’s main artery, you leave behind the tourist-facing strip and wind your way up a half-paved road through lush, jungle-covered hills. Then, after a few minutes of switchbacks and scrub, what suddenly appears is an improbable little enclave nested into the tropical canopy, overlooking the Caribbean Sea.

At first glance, it feels like equal parts White Lotus and techno-optimist. It’s certainly unique. But what’s most striking, with context, is not what you see but what you do not: nothing about it suggests a project that has spent years under existential political and legal threat. It looks, instead, like the early innings of a place that assumes it will play the full nine — and win.

That confidence is part of what makes Próspera interesting. It did not emerge simply because a few Silicon Valley libertarians had money and a taste for exit. Rather, it sits inside an older ambition: the charter-city idea associated with the economist Paul Romer’s work, and the attempt to build jurisdictions that compete on rule of law, predictability, and administrative quality rather than merely on low taxes.

The problem with the original idea was that it was basically like, let’s say, Canada running a jurisdiction in Zimbabwe — this inevitably leads to political issues and disputes. The critical change was around zones being run by private investors instead of other sovereign nation states. Honduras’ ZEDE framework (Zone for Employment and Economic Development), first legislated and constitutionally ratified in 2013, was one of the boldest efforts to operationalize this ambition. Since then, and since Próspera’s 2017 launch, the project has been battered by repeal efforts, court rulings, and arbitration battles. Yet through all the political hostility, on the ground, it keeps building.1

Some healthy candor before diving in: I fully expected, coming into this trip, to encounter a preponderance of rigid “individualism good, statism bad” dogma — basically a bunch of anarcho‑capitalist separatists hiding from the big bad state. This was not quite my experience. Granted, a surefire way to accrue social capital ‘round these parts is to quote Atlas Shrugged. But the vast majority of the network-state folks I encountered weren’t self-deluded purists. The prevailing sensibility was, instead, pragmatism.

Indeed, what I found in Próspera was something more interesting and, in some ways, rousing for anyone who cares about reforming institutions inside the United States. And that was a community of open-minded tinkerers — builders trying to treat governance itself as something that can be redesigned, iterated on, and improved.

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Governance as an Industry

A central frame at the summit was treating government as the largest and least competitive sector of the global economy, characterized by massive firms (nation states), high switching costs, and enormous barriers to entry. “The best lose money, and the worst kill their own citizens,” argued Patri Friedman. Fundamentally, whereas most industries improve under competition, government quality stagnates or degrades because citizens face monopolistic providers with limited exit options and little feedback from price signals.​ Boyd definitely cosigns these contentions.

“Governance as a service” (GaaS) then reframes jurisdictions as platforms competing on regulatory quality, dispute resolution, and ease of doing business, rather than as monopolistic territorial providers. In this model, governance is the business, law is the source code. SEZs like Próspera aspire to export legal and regulatory infrastructure — offering menus of regulatory regimes, insurance‑priced risk, and digital residency — to firms and individuals globally, much as cloud providers export computing. Dubai’s financial free zones and their open‑sourced, common‑law‑inspired rulebooks are a key intellectual reference; so are the Free State Project in New Hampshire and various special economic zones in Asia, like Shenzen.​

From this, juxtaposed with current systems of governance, looms “a tale of two regulatory regimes.” On one side is governments that have effectively outlawed progress through a tangle of process, overlapping mandates, and impossible evidentiary standards. Cited examples familiar to those of us thinking about proceduralism and the vetocracy in the US included:

• Multi‑decade permitting timelines

• Places like Boston and NYC where the majority of existing housing stock is now technically illegal

• Nuclear projects that must spend half a billion dollars and millions of staff hours just to file an application

• An FDA pathway in which most cost and delay sits in efficacy phases rather than genuine safety testing

On the other side is what Próspera is prototyping: a regulatory choice architecture where firms can select among accredited regulators, where insurers internalize both downside and upside risk, and where the “Better than the Beatles” standard2 that kills merely good innovations is replaced with a more incremental, portfolio‑style approach to risk. That is less a philosophical revolution than an industrial one aiming to re‑engineer the production function of law.

Concretely, Próspera offers a system where residents in regulated industries make a “regulatory election” to operate under Honduras rules, operate under a “peer country” regime, or propose an approved alternative. The enforcement novelty is that baseline insurance, supplemental regulated-industry insurance, and enhanced liability are positioned as the practical compliance engine. Here the underwriters, incentivized to price risk fairly, are the day-to-day regulators in lieu of bureaucratic agencies.

Lib/Acc: from Layer Zero to Application

The summit itself was explicitly organized as a march up the “governance stack,” borrowing the ‘stack’ metaphor from software and crypto architecture, where layers of infrastructure enable higher‑level applications. The organizers’ own framing is worth taking seriously because it’s basically a diagnosis of why “innovation policy” fails in mature states: app‑layer goals like faster drugs or more housing are downstream of the deeper underlying substrate of authority, legal permissioning, and institutional incentives.

In this model, Layer 0 enables politics and law, Layer 1 is the jurisdictional form factor, Layer 2 is real-world buildout and service delivery, and the app layer is comprised of ventures that exploit the new rule environment.

Layer 0 talks focused on the politics and law that made Próspera possible in the first place, such as the years of Honduran public‑choice maneuvering that produced ZEDE legislation, the five‑plus layers of legal protection woven through statutes, constitutional amendments, bilateral treaties, and stability agreements, and the painful lesson that any such project will eventually face a hostile administration determined to unwind it. Christian Betancourt, a Honduran attorney who helped draft the law, described how the designers tried to anchor ZEDEs in supermajority legislation, constitutional text, and international obligations precisely to survive the kind of backlash they recently faced under the previous socialist (and quite hostile!) administration in Tegucigalpa.

Layer 1 sessions were about jurisdictional form factors. walked through his own path from seasteading — “fantastic as a meme,” in his words, but terrible in terms of the capex-to-opex ratio. Talks on various SEZ jurisdictions ranged from, of course, the ZEDEs in Honduras like Próspera and Morazán, to a 7km stip of unclaimed land between Serbia and Croatia where the Free Republic of Liberland was settled. Joseph McKinney talked about composing “legal primitives” inside “hacked zones” that leverage tribal sovereignty in the US to create special economic regimes within existing reservations to spin up digital‑first SEZs with their own company law, banking rails, and digital‑asset frameworks, then later compacting or ratifying them with state and federal authorities.​ Others included Floripa in Brazil, sold to the local government as an opportunity to reverse the country’s brain drain, as well as OurWorld, a full-stack digital free zone — “cyber city” — just launched in Zanzibar by Florian Fournier, the former Marketing Director at Apple.

At the center of the Layer 2 build‑out is , the longevity‑focused city district that CEO Niklas Anzinger is building on top of Próspera’s legal substrate.3 His pitch throughout the summit was that Infinita is a “full‑stack” environment for biotech and DeSci founders — bringing them to the island, giving them labs and housing, wiring them into Próspera’s regulatory menu, and wrapping the whole thing in a village‑like social fabric so that serious work on aging and medicine “feels almost inevitable.”

If Infinita is the Layer‑2 on‑ramp, the app layer is where you see whether any of this matters. A few early “proof points” helped crystallize what a functioning governance startup can actually enable:

• Biotech: Companies like Unlimited Bio, PopVax (funded by Vitalek, founder of Ethereum), and Herasight are using Próspera’s regulatory choice and arbitration mechanisms to run faster, cheaper trials on aging and cancer, including combination therapies that are nearly impossible to approve under current US protocols.​

• Finance: Niko Klein’s Próspera‑based bank — The Network Bank — pitched itself as the financial backbone for zones, offering multi‑currency accounts, custody, and crypto‑friendly services under a streamlined regulatory regime.​ Joey Langenbrunner’s Nomad Layer is laying the groundwork for Próspera to become a tax-residency locale for both individuals and corporates.

• Education: Experiments with AI‑intensive “alpha schools,” where avatars handle dense instruction and the rest of the day is reserved for project work and mentorship, aim to turn the zone into a talent‑production engine.​

Whatever else you make of the broader project, it was refreshing to hear pie-in-the-sky thinkers obsess over nuts‑and‑bolts institutional design at a conference that could easily have been a wall‑to‑wall exercise in libertarian political philosophy or crypto metaphysics.

Pragmatists, not Pirates

Centuries ago, ground zero for “Pirates of the Caribbean” was right here in the Bay Islands off the coast of modern day Honduras. Today this region is home to a new ground zero, one for institutional pragmatists.

Almost everyone that spoke at the summit or that I spoke with personally were, first and foremost, dedicated to building something that will last. The level of dissatisfaction and even disgust with the state of governance in the developed world was palpable, yes. But I found the lib/acc crowd to be overwhelmingly clear-eyed about the sacrifice and compromise instituting new governance paradigms requires.4 After all, the broader SEZ movement has undergone decades of failed experiments and political strife from which to learn what doesn’t work.

, who has been chasing new‑country projects for decades, since the days of Tonga’s libertarian micro‑state schemes, offered another pragmatic heuristic: define a prize that governments want badly enough to compete for — jobs, infrastructure, prestige — and then use that competition to get policy reform. His stories of Uruguay’s ZoneAmerica, Israeli tech‑zone legislation, and African free‑zone pilots all sounded less like revolution and more like meticulous coalition‑building, including with multilateral institutions not typically seen as libertarian allies.

An important caution drawn from the broader SEZ literature is that zones succeed less by slogans and mantras than by integration — credible governance, infrastructure, and linkages to the host economy and reform agenda. The World Bank’s cross-regional stocktaking emphasizes that outcomes are heavily shaped by initial institutional design choices and by whether zones are built as pilots within a broader reform strategy versus isolated enclaves. The UN Conference on Trade and Development, similarly, warns that governance and sustainable-development fit determine whether zones become catalysts or cul-de-sacs.

echoed this as he talked about “near enemies”: those giving in to the temptation to substitute vibes and LARPing and branding for hard, slow, legitimacy‑building work. It is much easier, in Patri’s view, to launch a “pop‑up city” for digital nomads than to negotiate an actual zone that delivers material outcomes — housing, safety, and schools — for people who are not just on Twitter.

Erick Brimen, Próspera’s CEO, also emphasized that for zones to be competitive, you need a special relationship with the host government, and you need the entity to feel “of the country”, not merely “in the country.” One way to bridge this is by having local money on the cap table, which is easier said than done. He described Próspera’s own posture as “MAYA”: most advanced yet acceptable — that is, whereas a lot of people interested in participating in this movement are antagonistic towards “the state,” if you want your zone to survive, you need to look less like a secessionist cult and more like an aggressive but plausible public‑private partnership in the eyes of the host government and, importantly, its citizens.

The pirates of this era, in other words, are more likely to survive and thrive by showing up with rev-share agreements and term sheets than with cannons and flags.

Corollaries to US Problem-Solving Capacity

The most interesting part of all this is not whether Próspera “wins.” On a personal level, yeah, I really fucking want it to “win.” I think tinkering is cool, and Próspera was made by tinkerers of institutions, for tinkerers of all kinds — longevity biohackers, crypto developers, fintech innovators, you name it. I like quirky people who just do things, irrespective of norms.

But I also want there to be serious competition in the market for governance, such that it creates more pressure for reform in the US. So the most interesting part, to me, is what the existence of Próspera and its peers across the broader movement reveal about the bankruptcy of mainstream institutions in the developed world — and what, if anything, should (or could) be copied in the US.

As I broached previously, on diagnosis, there is substantial overlap. The litany of institutional failures flagged at the summit — outlawed housing, decarbonization bottlenecked on nuclear phobia and permitting, an FDA that prices out prevention, a criminal justice system swollen by the drug war — could have been lifted straight from a policy wonk luncheon in DC. The through‑line is that centralized, one‑size‑fits‑all regulators with weak feedback loops are structurally incapable of keeping pace with technological and social change.

Where the SEZ and network‑state milieu diverges from those of us keen on finding workable solutions to US-based problems is on strategy. They want to increase the effective contestability of governance by:

• Lowering exit costs for high‑agency individuals and firms.

• Creating new providers — zones, tribal SEZs, digital free zones in places like Zanzibar — that can credibly offer alternative bundles of rights, taxes, and services.​​

• Using jurisdictional arbitrage to run around legacy constraints: intrastate securities exemptions, tariff gaps, digital‑asset rules in small states, and so on.

For a small, open country — or even a tribal nation inside a federal system — that approach might be both realistic and welfare‑enhancing. For a continental‑scale democracy like the United States, it’s more complicated. Exit is an option for a thin slice of people and capital; most Americans are rooted in place by family, jobs, and assets. The question for those of us concerned with institutional reform in the US is therefore: how do we import the discipline of exit and the modularity of these experiments without assuming that 300 million people can or should move to Próspera?

The most promising US analogue, to my mind, is bounded institutional experimentation with guardrails. That is, regulatory sandboxes, special-purpose districts, and sovereignty-adjacent niches (including tribal commercial-law regimes). The OECD’s sandbox work emphasizes controlled experimentation as a way to test innovation that doesn’t fit legacy rules without abandoning consumer protection; and US examples like the Catawba Digital Economic Zone show how differentiated commercial codes can be created within America’s constitutional patchwork.

The relevant question then is whether we can build similar structures without making exit the only lever — and while keeping evaluation and democratic legitimacy in the loop. A few design patterns seem especially promising:

• Legal containers at smaller scales: The idea that you can start with a single building, a district, or a sector‑specific sandbox, and expand only if it works, is powerful. It suggests that US reformers should fight harder for narrowly scoped, time‑limited exemptions in areas like biotech, housing, and energy, with clear outcome metrics and sunset clauses.​5

• Stability as a first‑order input: Listening to Próspera’s lawyers walk through their stability agreements and stacked legal protections drove home how much investors will trade lower taxes for predictable rules. US permitting and licensing reform could borrow from this by offering longer‑term, harder‑to‑reverse commitments — paired with higher standards and clear clawback mechanisms if projects underperform or abuse the rules.

• Insurance‑priced risk: The notion that insurers, not solely agencies, can underwrite certain categories of risk is worth exploring — particularly where current processes are mostly about evidentiary overkill rather than genuine safety. Instead of specifying every contingency in advance, regulators could set guardrails and let underwriters price within them.

• Outcome‑linked bureaucracy: A panelist’s aside about Singapore’s flex‑wage system — linking civil‑service compensation partly to economic performance — was a sharp contrast to US public‑sector incentives, which are almost entirely decoupled from outcomes. There is room to experiment with similar mechanisms in specific agencies or city departments.

None of these require ZEDE‑style autonomy. Yet all require political craft and coalition‑building that looks, frankly, more like what Mark Frazier described in Uruguay or Israel than like anything happening in Washington today.​ That contrast was top of mind for me as the summit concluded and as our problem-solving sprint draws to a close.

Came for the Summit, Stayed for the Vibes

I was originally slated to head back to the States Sunday, 3/29, the day after the summit wrapped up. I wound up extending my stay another six days not only because of how pleasant and beautiful the place was (the island vibes were immaculate), but also because I was curious to meet more people and experience Próspera in its steady state once the hubub from the lib/acc summit had abated. Flying out over the reef now, I found myself of two minds.

On one hand, it is hard not to be impressed by the sheer audacity and persistence on display: a decade‑long legal and political grind in Honduras, a summit full of people willing to negotiate with messy governments instead of retreating into pure cloud politics, and a portfolio of real projects trying to solve real problems under experimental rules.​

On the other hand, there is an uncomfortable selection effect. If the only people willing to pioneer new governance paradigms are those who leave — or those who design governance explicitly for the “rootless” — then exit becomes a privilege for the mobile few, while the institutions that govern most citizens are left to ossify without their most ambitious reformers. A world of many Prósperas and OurWorlds and Liberlands might be better than our current equilibrium, but it does not automatically solve the problem of a large, aging democracy with tens of millions of people who cannot or will not move.

Nevertheless, these “Pragmatists of the Caribbean” are valuable precisely because they force this tension into the open. They show that “governance startups” are possible; that law can be treated as source code; that housing, biotech, finance, and education can be re‑bundled under different institutional assumptions. The task remaining for those of us who care deeply about American problem-solving capacity is to import these design patterns without outsourcing our responsibility — to ask, with some urgency, how to make our own institutions faster, more modular, and more accountable, so that fewer people feel the need to sail for the governance frontier in the first place.​

1

As I write this on 3/31, I am sitting on a balcony overlooking an excavator that broke ground less than twenty-four hours ago on another residential building development.

5

This is adjacent to ’s essay-contest-winning proposal:

Sol Hando

Eight Months, Under Budget, In Complete Secrecy

This is my entry into the Boyd Institute’s essay contest on how America can improve its problem-solving capacity…

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a month ago · 48 likes · 20 comments · Sol Hando

Unlike our previous contest, we shifted this into an online salon-style format where we asked people to publish submissions on their own Substack pages. Frankly this was something we had mixed feelings on going in, but the result has been an absolute success. 34 people submitted to our essay contest in total, and these submissions reached ~30,000 subscribers, collected ~600 likes and ~350 comments, and total views were most likely in the high tens-of-thousands range. So we’re extremely pleased with the reach we had this time and plan on sticking to this model going forward.

This contest has also reaffirmed something for us: there is a large, latent pool of people who want to share their policy insights but who lack a platform to do so. By bringing together and highlighting the proposals of such individuals, our hope is to inject more heterodoxy and fresh thinking into a policy space dominated by settled dogma and partisanship. The question of how we achieve spectacular abundance is the one we’re devoted to solving — and we think it’s best done by bringing together “Let’s Fucking Go” Americans who are thinking about solutions rather than doom-scrolling or culture war-maxxing.

Before getting into the winners: if you have the capacity and you believe in our mission of reshaping the think tank frontier, please consider donating directly or signing up for a founding membership. We’re in the early stages of building this organization, so now is the best time to contribute and help shape our path. If you become a paid subscriber (or win the essay contest), you’ll effectively have a seat on our intellectual board.

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With that, here are the winning essays along with a quick blurb on each. We recommend checking them all out and subscribing!

First Place

— “Eight Months, Under Budget, In Complete Secrecy”

This essay uses the development of the Lockheed U-2 as a case study, arguing that America’s declining problem-solving capacity is a function of institutional structure, not necessarily public vs. private ownership. The key differentiator is organizational design: small, mission-driven teams with high autonomy, minimal oversight, and existential stakes outperform large bureaucracies encumbered by process and precedent.

We appreciated this line of thinking because the author rejected simplistic privatization narratives, instead identifying deeper pathologies like layered decision-making, risk aversion, and institutional inertia. Effective problem-solving organizations, whether public or private, share common traits: tight feedback loops, clear objectives, and insulation from political or procedural drag. The implication is to not replace government but reconstitute it embedding “skunkworks”-style structures within the state to restore accountability and creative capacity — and speed!

Second Place

— “Scales Skewed”

This essay reframes America’s stagnation through the lens of risk: not regulatory overreach per se, but a legal system that systematically amplifies loss aversion. The author introduces the concept of a “social supercomputer” — the decentralized network of individuals and firms whose experimentation drives progress — and argues that the US legal environment is increasingly hostile to its operation.

Through mechanisms like contingency fees, asymmetric litigation costs, and the absence of “loser pays” rules, the system incentivizes excessive lawsuits while discouraging productive risk-taking. The result is a de facto “litigation tax,” suppressing entrepreneurship and distorting capital allocation. The essay proposes targeted reforms — expanded bench trials, mandatory mediation, and fee-shifting — to rebalance incentives. At its core, the argument is Hayekian: progress depends on distributed experimentation, and America’s legal architecture is quietly suffocating it.

Third Place

— “Fixer of Problems”

This essay locates America’s declining problem-solving capacity in a breakdown of incentive alignment between voters and policymakers, not in a failure to identify problems or solutions. The core dysfunction, he argues, is informational: politicians are not rewarded for solving problems because voters lack clear, credible signals linking policy decisions to outcomes.

Historically, this feedback loop was mediated by institutions like the press. Today, those channels are fragmented, distorted, or untrusted — leaving even obvious solutions politically inert. The author’s proposal is strikingly concrete: construct a publicly trusted “national dashboard” of key metrics, paired with prediction markets that translate policy decisions into measurable expectations.

By making outcomes legible (and politically salient) the system would re-anchor democratic accountability. The goal is not better leaders, but better signals: a world where doing the right thing is once again the winning political strategy.

Honorariums

— “The Scale of Discovery”

This essay’s key distinction is between discovery and scale. Large institutions are not portrayed as stupid or malicious; they are structurally optimized for compliance, standardization, and stability, which makes them poor engines of open-ended discovery. Novel solutions instead emerge from small, cross-disciplinary teams under existential pressure. The essay’s concrete policy answer follows from that premise: lower the cost of experimentation by redirecting capital away from buybacks and toward early-stage payroll support for small employer firms.

— “Problem Solving the Problem Solving Problem”

Rather than asking how to solve more problems, this essay questions whether the modern problem/solution frame is itself distorting our priorities. Drawing on examples like meat-processing regulation, Ellul’s critique of “technique,” and MacIntyre’s account of practices and virtue, it argues that technocratic optimization often solves what is measurable while corroding local knowledge, craft, and moral purpose. Its deeper claim is that problem-solving capacity depends on recovering humane ends, not just more efficient means.

— “The Insulation, Habituation, and Incentive Crisis”

This essay offers a three-part diagnosis: elites are insulated from the consequences of their decisions, the public has been habituated into passive spectatorship, and the range of politically thinkable solutions has been artificially narrowed. Its remedies are unusually operational: tie compensation and reelection to outcome scorecards, force structured civic exposure to break elite bubbles, and make performance legible through public local metrics and revived media visibility. It is less a plea for virtue than a design for enforced accountability.

— “Telos, Thymos, and the Work of Self-Government”

This essay places America’s weakness upstream of bureaucracy, in a civilizational malaise: the loss of a shared national telos, the weakening of spirited civic striving, and the erosion of local associational life. Its proposals therefore aim at moral and civic reconstruction — curricular reform, broader talent identification beyond elite metros, and grants and networks for local problem-solvers. The core wager is that societies solve problems better when citizens know what they are for.

— “Elites Are Like Fissile Material”

This essay reframes “elite overproduction” as a mismatch between social elites and elite human capital. The problem is not simply that too many people wield influence, but that elite roles have expanded faster than the supply of genuinely high-capacity people fit to occupy them, producing nonlinear declines in group performance. Its remedies are deliberately radical: better matching, easier removal of high-status underperformers, AI-assisted education, and even biotech interventions to raise elite human capital itself.

— “Americans Can Have a Little Fascism, as a Treat”

Provocative and openly tongue-in-cheek, this essay nonetheless makes a real argument: accumulated law, judicial supremacy, and procedural clutter have made ordinary democratic problem-solving too weak to govern. Its proposed cure is to shift more discretionary authority to elected executives — through retroactive veto-like powers, harder-edged public-order authority, and ways of bypassing or removing obstructive judges. The essay’s provocation is that Americans may accept a measure of illiberalism when liberal procedure no longer delivers order.

— “A Practical and Ugly Way to Fix America”

This essay is less about technocratic reform than about political coalition. It argues that high-capacity “open-access” states are governed by coalitions that permit growth, while “closed-access” states are dominated by public-sector unions, proceduralists, and veto players who block it. From that premise follows the “ugly” answer: durable reform will not come from white papers or bipartisan workshops, but from defeating the governing coalition and rolling back the rules and staffing structures through which it governs.

— “Human Capital Is The Solution”

This essay treats state incapacity as a talent-allocation problem. America’s public sector is “brain-drained” by the private sector, while geographic sorting and dysgenic fertility further thin the pool of capable people available to govern. Because conventional schooling has diminishing returns, the author looks instead to more controversial levers: high-skill immigration in the short run, paired with longer-run efforts to alter the underlying human capital distribution itself. It was the starkest human-stock argument in the field.

Kudos to all the winners, and a massive “thank you” to everyone who submitted an essay. We’re very excited to share what the Boyd Institute has in the hopper for Q2 2026 in the coming days!

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I first encountered the terms in Dan Wang’s Breakneck: China's Quest to Engineer the Future, which Peter and I both read in January. Wang borrows from a broader literature — most notably Francis Fukuyama’s work — and uses the pair of concepts as a diagnosis of why the American state (and many of its once-productive institutions) has drifted into something of a failure mode, where it is excellent at blocking but poor at building.

In today’s article, the first in a two-part series, I intend to pull on the “dismantle the vetocracy” thread by: 1) adding some color on what proceduralism and the vetocracy actually are, 2) explaining how they interact to form collective action problems, and 3) outlining the roadmap YIMBYs used to overcome NIMBYism, which may be a solid template for overcoming the vetocracy.

Proceduralism

At a high level, proceduralism is the ideological and cultural layer of the problem.

In Wang’s telling, it is not simply the existence of procedures in the rule-of-law sense, but the gradual prioritization of process over outcome that has effectively hamstrung US state capacity. He describes decision-making across US institutions as having become dominated by a thicket of checklists and reviews whose original purpose, in all fairness, was well-intentioned and even prudent.1

But these compliance rituals have transformed from means-to-ends into, themselves, ends. In America’s “lawyerly society,” success has invariably become defined by whether every procedural box is ticked resulting in a risk-averse, growth-stifling equilibrium where failure happens, but no one is actually “responsible” for it because everyone follows the rules. Proceduralism, in other words, confers legitimacy to the state through legal process rather than through the ultimate delivery of material outcomes beneficial to the public.

Wang treats this “lawyerly society” as a cultural and elite configuration, not just a quirk of administrative law. The robust pipeline through elite law schools into government, he contends, means that American high-status talent is disproportionately socialized into a worldview where the primary civic act is to write rules, file lawsuits, and craft sanctions — establish “legalisms” — instead of designing bridges, factories, or power plants.

Now, the reason proceduralism matters is not simply because it exists as a societal configuration. Lots of worldviews that are fashionable yet arguably detrimental to American exceptionalism exist. But proceduralism, as a managerial class worldview matters in that it has been instantiated across governance frameworks, systematically reshaping institutional imperatives and incentives. The result, this instantiation, constitutes the “vetocracy.”

The Vetocracy

If proceduralism is the cultural layer, the vetocracy is the structural one.

It is the institutional design that, over the past half-century, has metastasized through a proliferation of agencies, review bodies, litigation pathways, stakeholder processes, and ideologically-funded thematic NGOs, with courts increasingly serving as the ultimate veto point. With authority fragmented across such a dense ecosystem of institutional actors, it has rendered the public works pipeline increasingly disjointed, riddled with chokepoints.

From this abundance of institutional levers that can stop a project cold — “productivity killswitches” — power has accrued to those with the authority to say no, producing a fundamental asymmetry. On one side, vetoes are cheap and easy to deploy, where any sufficiently motivated actor can stall a project or kill it outright. On the other side, coordination has become expensive and rare. Almost anyone can block action, and no one actor has the incentive nor the superseding authority to decisively move a project forward.

And even when a project isn’t blocked outright, exhaustive impact studies, public comment rounds, stakeholder engagements, and formal litigation risk assessments all serve to meaningfully delay. The pattern is visible across multiple domains in the physical economy:

• Major infrastructure projects can spend four to ten years in environmental review under NEPA before construction even begins.

• California’s high-speed rail project has spent over a decade and tens of billions navigating lawsuits, permitting disputes, and land-use challenges.

• Interstate transmission lines capable of expanding the electric grid routinely die in a maze of state-level permitting vetoes.

Far from just public sector projects that fall victim, the vetocracy is equally stifling of productivity in private market settings:

(Say what you will about Chamath being a perennial grifter, or the All In guys perhaps being politically captured; this is a valid take.)

In any event, whether we’re looking at productivity in the public or private sector, the same structural pattern appears: veto power is cheap while coordination is prohibitively expensive. It is this perverse coordination paradigm — the stark asymmetry between the low cost of saying no and the high cost of organizing a durable yes — that needs shifting.

Collective Action Problems

The state capacity framework distinguishes between states that can act, and those that are constrained from acting. Wang’s core premise in Breakneck is that the “engineering state,” China, constitutes the former while America, the “lawyerly state,” doubtlessly the latter.

In this sense, it is the cheap-veto / expensive-coordination dynamic that can be thought of as the pattern that the two layers — proceduralism and the vetocracy — produce to hamstring US state capacity. Fundamentally, this pattern is a classic collective action problem reflecting several well-established paradigms in political economy.

First, as Mancur Olson famously argued in The Logic of Collective Action, small groups with concentrated interests organize far more easily than large groups with diffuse benefits. A neighborhood association opposing a housing development has clear incentives and a manageable number of participants. The beneficiaries of that development — future renters, workers moving to the city, or commuters who would benefit from lower housing costs — are numerous, dispersed, and poorly organized. The result is structural asymmetry: blocking coalitions form quickly while building coalitions struggle to materialize.

Second, political scientists describe institutional gridlock through what George Tsebelis calls veto player theory. As the number of actors with blocking authority increases, the set of policy changes acceptable to all parties shrinks nonlinearly. In the US, major projects now require alignment across federal agencies, state regulators, local governments, courts, and other stakeholders on the margin. The existence of each of these additional veto players dramatically narrows the path to action.

Third, as Ronald Coase and Oliver Williamson emphasized, institutional arrangements that inflate transaction costs can subtly yet meaningfully suffocate otherwise productive activity. Importantly, coordination itself carries transaction costs. Negotiating among many actors requires time, bargaining, information, and consulting and legal fees (not to mention interest expenses to the extent a project is financed but not yet approved). Each permitting requirement, environmental review, and litigation risk increases the number of negotiations — the transaction costs — required for a project to even get off the ground.

Finally, public choice economists have long noted that institutional incentives reinforce these collective action problems. For regulators, judges, and agencies, blocking a project carries little reputational risk. Approving a project that later attracts controversy or litigation can be career-damaging. Therefore, even in the event some project is socially desirable or beneficial, the rational bureaucratic posture tilts toward risk aversion: caution, delay, require an additional review, etc.

Then there’s the idea that political will sits downstream of material conditions. In a country that is, on many important dimensions — wealth, technology, security, economic stability — still delivering pretty damn favorable outcomes, it becomes enormously difficult to mobilize political energy around the counterfactuals: the roads not built, the mines not opened, the transmission lines never constructed. Alas, this ain’t China. There isn’t really anything akin in Washington to the Beijing Decree, where multi-year or even multi-decade national strategy is centrally-mandated, its execution directed to be carried out across provinces.

Mere consensus in Washington rarely exists, and is seldom successfully instantiated through edict or executive fiat even when it does.2 The New Deal and a few other industrial policy wins over the years were exceptions to the rule that, in a liberal democracy, the legislative process reigns supreme. As Justice Neil Gorsuch recently wrote in a ruling against Trump’s use of executive tariff authority,

“Most major decisions affecting the rights and responsibilities of the American people… are funneled through the legislative process for a reason. Yes, legislating can be hard and take time… but the deliberative nature of the legislative process was the whole point of [America’s] design.”

Indeed, absent pandemic or war — or, as suggests in his recent essay contest submission, something of an industrial policy approach where “purpose-built” public sector entities are commissioned with a preordained shelf life — structural shifts in governance overwhelmingly require a different kind of political economy force: coalitions.

The YIMBY Coalition Roadmap

Simply calling for the vetocracy to be dismantled — even if the sentiment is widely shared — amounts to little more than punching air. Asked what, concretely, should change, most critics discover they are implicitly calling for the adoption of a new philosophy of governance: in this case, one that prioritizes the delivery of tangible outcomes over procedural legitimacy. This is much easier said than done. To every lawmaker, policy wonk, or bureaucrat in Washington, the definition of “good governance” differs slightly. Persuasion is slow, status quo governance sticky, and the bipartisan support required to rewrite institutional rules rarely materializes on its own.

Machiavelli wrote of this impossibility of reforming a system from within. Those who benefit from the existing order resist change, while the beneficiaries of reform remain uncertain and diffuse. Institutional equilibria therefore tend to persist long after their usefulness has faded. In the case of the vetocracy, more veto points amounts to more people with a strong incentive to preserve their authority. To overcome these headwinds, however, one powerful mechanism does exist: coalitional cross-pollination.

The modern YIMBY movement offers a useful illustration, and its archnemesis, the NIMBY, shares a similar ~energy~ to the vetocracy. Today YIMBYs comprise a strange-bedfellow, purplish overlap of several ideological traditions — pro-market neoliberals (concerned about supply constraints), social Democrats (focused on affordability), libertarians (strong-property-rights advocates), climate advocates (favoring transit-oriented development), and Jane Jacobs deciples (urbanists who just want denser, more vibrant cities) — all pulling in roughly the same “we should just build more housing” direction.

It’s producing real outcomes. YIMBY legislative victories are piling up across major states and metros from Los Angeles to New York, where pro-supply housing bills have been passing in rapid succession. Many of the reforms may appear niche or marginal on their face. Indeed, legalizing ADUs on its own is not the silver bullet to solve housing affordability. Yet taken together they represent a substantial rewrite of the rules governing how housing gets built. And as a result of the movement’s success, legislative environments in many major jurisdictions now reflect a new consensus about how housing policy ought to function. Deep blue territories are no exception — even the quasi-communist NYC mayor, Zohran Mamdani, publicly embraced YIMBYism.3

At any rate, the obvious question is how the hell such a strange-bedfellow coalition comes to pass in the first place.4 Sure, Ezra Klein and Derek Thompson’s 2025 best-seller Abundance catapulted the movement into national relevance. But long before the “A” in abundance was ever capitalized, the YIMBY movement had already done several things exceptionally well — things that widened its tent and made its eventual policy breakthrough basically inevitable.

A few key ingredients stand out.

Concrete Demands

First, rather than calling vaguely for “more housing,” the YIMBY movement articulated a concrete, legible set of demands.

Ask any YIMBY and without hesitation they’ll rattle off the movement’s demands: legalize ADUs; eliminate parking minimums near transit; enable permitting shot clocks and by-right approvals; upzone around rail stations and transit; lower minimum lot sizes; eliminate staircase requirements; etc. Making these proposals for legislative reform clear and portable has allowed them to be carbon-copied across jurisdictions, in effect developing a national template for pro-supply housing legislation. Without this level of policy coherence and concretization, it’s unlikely a coalition with such ideological heterogeneity could have held together.

Empirical Support

Second, the movement’s imperatives rested on a solid intellectual foundation.

The empirical support for supply-side housing reform began forming decades earlier. Beginning in the early 2000s, economists such as Ed Glaeser and Joseph Gyourko documented the relationship between restrictive zoning and rising housing costs. Their research transformed what had long been treated as a parochial local issue into a measurable economic constraint with national implications. By the time YIMBYism emerged as a political force, the intellectual groundwork had already been laid.

Namecraft

Third, the movement successfully labeled the pathology it opposed.

“NIMBY” — Not In My Back Yard — became a shorthand, a pejorative term, for a style of hyperlocal politics defined by obstruction. The term is mimetically powerful and carries moral weight as it reframes opposition to housing development not as civic caution, but self-interested resistance to change by wealthy incumbents. This may sound trivial, but language matters enormously in politics — and naming the pathology made it easier for YIMBYs to organize against it.

Issue Salience

Finally — and arguably most importantly — the issue of housing itself became salient.

For years, housing scarcity remained largely invisible to the broader public. Prices rose gradually and the causes were poorly understood outside academic circles. That changed during the 2020s. Pandemic-era fiscal and monetary stimulus — “helicopter money” — produced a powerful demand shock, housing prices surged, rates later rose off the zero bound, and affordability collapsed across much of the country. What was previously an abstract policy debate suddenly became a lived economic problem.5 Because of these emergent pain points, and the political will that followed, a movement like YIMBYism could finally escape policy wonk circles and translate into legislative action.

Applying the Roadmap to the Vetocracy

If the YIMBY movement offers a case study in altering the trajectory of housing policy, its roadmap is a useful template for thinking about how vetocratic paralysis might be reduced more broadly.

To reiterate: the core challenge posed by the vetocracy is that veto power has become cheap while coordination has become prohibitively expensive. Institutional actors across government, civil society, and the courts possess abundant tools for blocking projects, yet few possess the superseding authority or incentive to push them decisively forward.

So, if overcoming that asymmetry requires the same key ingredients that made the YIMBY coalition successful, here’s what those ingredients might look like.

Concrete Demands

The challenge here is that we’re not only talking about institutional reform across jurisdictions, but also across economic sectors. Nevertheless there are at least four high-level, broadly applicable reforms:

1. Create a single lead decision‑maker for each major project or regulated action, subject to firm, enforceable timelines and “deemed approved if no decision” backstops.

2. Reform legal processes and the courts by narrowing who can sue, when they can sue, and what remedies they can get. This could mean requiring concrete, non‑diffuse injury claims and limiting serial suits over the same project or rule, which would channel challenges into a single consolidated proceeding in a designated court. Challenges could also be time-limited.

3. Impose a cross‑government “rule cap” or regulatory budget threshold, with one‑in‑one‑out (or tighter) requirements at the level of requirements or compliance costs, not just headline rules, such that agencies must remove or simplify old obligations to add new ones.

4. Use time‑bounded participatory processes when setting general plans, standards, or zoning equivalents for projects; once those are in place, individual projects that comply are approved administratively with no new veto points beyond basic technical checks. AI could certainly help with implementation of this.

Empirical Support

The costs imposed by vetocratic regulatory environments are fairly well-documented.

Djankov et al. (2006) showed that improving business regulations, from the worst quartile to the best, increase the annual growth rate by 2.3 percentage points. Coffey et al. (2020) identify sectors affected by the regulations and concluded that economic growth in the US has been dampened by federal regulations by 0.8% per annum. Bailey and Thomas (2017) showed that the industries that are more intensively regulated experienced lower enterprise birth rate and slower employment growth. And Chambers et al. (2019) concluded that, in the case of the US, a 10% increase in the effective federal regulatory burden increases the poverty rate by 2.5%.

Then there’s Cato’s survey of state and local barriers to startups, which emphasizes that overlapping permitting, zoning, and licensing rules particularly deter small or innovative businesses, while large incumbents can more easily absorb compliance and lobbying costs. Further empirical work on federal occupational licensing and certificate‑of‑need laws finds higher prices and reduced entry in affected sectors, without commensurate gains in quality or safety, reinforcing the view that these procedural barriers mainly operate as entry vetos.

Further, Prosperity’s 2026 survey of 30 stalled projects in six states attributes at least 50,000 lost or delayed jobs and nearly $75 billion in economic benefits to permitting obstacles, with canceled projects alone accounting for $4 billion in lost benefits and 38,000 jobs.

And finally, a 2025 McKinsey study combining multiple federal datasets estimates that $240-280 billion in infrastructure capital expenditures enter the federal permitting process each year, with each dollar taking on average 4-5 years to clear, implying $1.1-1.5 trillion of capex is currently stuck in permitting. The study estimates that this backlog translates into $100-140 billion in unrealized returns on invested capital annually and $1.7-2.4 trillion in cumulative unrealized GDP from induced effects, alongside 24-30% cost inflation over project timelines due to labor, materials, and overhead.

Namecraft

This is straightforward — those looking to dismantle the vetocracy are, in essence, “growthers.” And the anti-term already exists: “degrowther.”

It is mimetically powerful, sounds derogatory, and could be an apt label for convincing folks to morally object to proceduralists and their vetocratic pathologies. Those six people who sued to block the Micron fab? Degrowthers.

Issue Salience

This is key to coalitional cross-pollination — that is, the tackling of an issue that a broad majority of Americans commonly face.

The challenging part here is that objections to “the vetocracy” can seem niche and technocratic to ordinary voters, whereas housing costs are directly part of their lived economic experience. Nevertheless it is true that every year we delay, e.g., grid upgrades and new generation, families pay higher power bills so a handful of degrowthers can feel virtuous. Moreover, when degrowthers sue to block domestic fabs and transmission, they are voting for higher prices on everything that depends on chips and electricity.

Essentially, degrowthers are inflationists for the poor — every procedural delay is a stealth tax on the people with the least margin. So the reality is that everyone experiences the costs of the vetocracy through higher prices and fragile supply. And polling does show that a broad, cross‑partisan public already wants to unclog the system6 and that degrowthers are the minority faction defending a status quo people already dislike.

Part II: Identifying Specific Sectors to Reform

Finally, since “the vetocracy” is such a broad, systemic phenomenon, targeting specific economic sectors individually is paramount to chipping away at its chokehold on productivity. This can be best determined through assessment: in which domains is the binding constraint on social surplus primarily procedural — reviews, overlapping jurisdictions, litigation leverage, etc. — rather than technological or fiscal?

Part II will take this assessment framework seriously in identifying a few specific sectors where procedural choke points dominate, and ask: 1) what it would mean, concretely, to reprice the veto in these sectors; and 2) which coalitional levers could plausibly be pulled to cross-pollinate support and achieve productive reform?

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The conversation opens with Peter introducing his recent article on public sector unions. Jeff praises the piece for combining rhetorical force with actionable policy proposals, and Peter walks through three findings that surprised him during research.

First, public sector co…

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Discussing public sector union rent-seeking can be complex for a couple of reasons. First, often the most powerful unions are powerful precisely because the services they provide are essential. Police and teachers unions are good examples: both wield enormous policy influence because their members are seen by the public as tasked with providing a difficult-to-deliver, essential service.

Second, most union rent-seeking doesn’t come in the form of unusually high wages. Studies find collective bargaining raises public sector pay by maybe 2–5%, but instead through their ability to veto unpleasant reforms and layer on expensive entitlements such as outsized pensions.

And third, public unions form a powerful spoils machine in the US, and they defend this vigorously with propaganda and media outreach. If someone, in particular a politician, is too actively vocal against a public sector union, the pro-union lobby will bring hellfire down upon their heads.

But the difficult-to-discuss problems created by public sector unions are unambiguous. They inflate long-term liabilities through pension obligations that crowd out present-day services; they insulate underperforming employees from accountability; they distort the labor market for public goods like education and policing; and they exercise political influence grossly disproportionate to their economic role, effectively allowing the state to bargain with itself.

These problems loom largest at the state level — particularly in blue states because of how closely most unions align with the Democratic Party. But it also creates problems at the federal level, such as through a defense of the seniority-biased GS system. If we ever want to reform our government, crushing the unions will need to be step one.

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How Did We Get Here?

For most of post-industrial American history, the very concept of public sector collective bargaining was anathema. FDR, for example, wrote in 1937 that collective bargaining “cannot be transplanted into the public service” because the employer is “the whole people”. George Meany, who would go on to lead the AFL-CIO, shared this view, writing in 1955 that it was “impossible to bargain collectively with the government.”

This changed in the euphoric twilight years of the postwar boom. Wisconsin’s Governor Gaylord Nelson moved first when, in 1959, he signed the first state law granting public employees collective bargaining rights. He was followed three years later by JFK with Executive Order 10988, which extended this to federal employees. From there, a policy cascade ensued. Let it also be emphasized that this was a broadly bipartisan policy consensus at the time, with Governor Reagan signing California’s public employee bargaining law in 1968.

When Republicans began to sour on labor policy in the late 20th century, such as in the case of President Reagan’s firing of 11,359 striking air traffic controllers in 1981, the main effect was to drive public sector unions fully into the Democratic camp. Their size exploded — even as private sector unions largely declined.

Most people probably don’t know this, but as of 2025, public and private sector union membership is nearly identical in absolute terms — roughly 7.3 million and 7.4 million members, respectively — despite the public sector workforce being relatively tiny. In rate terms, the gap is staggering, fully 32.9% of public sector workers are unionized versus just 5.9% in the private sector.

Why Are Public Sector Unions Bad?

In order to understand the problem clearly, it’s worth taking a moment to consider what differentiates private and public sector collective bargaining. In the private sector, management is accountable to owners, who are focused on enterprise profit maximization, leading to their genuinely adversarial relationship with labor, a fundamental cost driver for the enterprise.

By contrast, in the public sector, “management” comprises elected politicians who depend on winning elections. Despite these elections seldom being decided on the basis of niche union demands, union dollars comprise a massive portion of campaign contributions, and union endorsements continue to mobilize large swaths of highly active voters. In other words, public sector union political power far outstrips its economic importance.

As Daniel DiSalvo framed it, public sector unionism is “basically the government bargaining with itself,” since both sides of the table share the same basic incentive to expand the state. What this creates is, as the political scientist Terry Moe describes it, a dual veto: unions are able to both shape institutions from the bottom up, through direct negotiation and employee action, as well as from the top down, through influence on elected officials and by proxy legislation.

To further complicate the issue, unions have become masters at obscuring their rent-seeking, hiding it in low-salience expenditure that often doesn’t even show up immediately on the balance sheet. Take the example of public sector pensions, which have, in many localities, resisted the transformation into an employee contribution model that is the default in the private sector. Instead, prominently in the cases of Chicago and NYC, structural fiscal pressures have compounded due to what is, at this point, a virtually unfundable pension obligation to their past employees.

Other forms of rent-seeking take the form of functionally isolating employees from termination or even merit-based promotion, fundamentally undermining how efficiently public sector labor can be allocated. Civil service protections, originally designed to prevent patronage, have been co-opted by unions into near-absolute job guarantees. Disciplinary procedures can stretch over months or years, requiring exhaustive documentation and multiple appeals before any adverse action can be taken. The result is a workforce where the gap between the best and worst performers is enormous, but the consequences are negligible and where managers, knowing the futility of the process, simply stop trying to hold low performers accountable.

Is This Supported by Reality?

Yes.

We were recently given an example of how teachers unions can derail reform efforts when, in 2024, the California Teachers Association killed AB 2222. The purpose of this legislation was to shift the state towards evidence-backed learning methods, specifically the use of phonics. But the union resisted it largely because teaching phonics is unpleasant and boring. In their own words, they were protecting “professional autonomy.”

In 2011, Scott Walker, then-governor of Wisconsin, stripped most public employees of collective bargaining rights, giving districts de facto autonomy over compensation and leading to roughly half of them adopting performance-based pay. Barbara Biasi found that in this instance, the flexible-pay districts attracted better teachers while pushing out weaker teachers, leading to a significant improvement in student outcomes. Biasi and Sandholtz also looked at the same reform and found that after five years, test scores increased by 0.17 standard deviations, with these results particularly concentrated in poor students.

There is broad academic consensus around the negative effects of public sector unions, so we need not belabor the point. But people often underestimate exactly how large the effect size is. Lovenheim and Willén, for example, found that exposure to duty-to-bargain laws depressed male earnings by roughly 4%, with effects reaching 9.4% for Black and Hispanic men. This equates to an implied annual cost of $213.8 billion for the privilege of allowing our government workers to unionize.

Furthermore, the issue is, of course, not solely concentrated in education. In 2003, the Florida Supreme Court granted collective bargaining rights to sheriffs’ deputies — but not to municipal police. When Dharmapala, McAdams, and Rappaport examined this natural experiment, they found a roughly 35–40% increase in violent misconduct incidents at newly unionized agencies.

Finally, beyond the direct effects on service quality and institutional performance, both private- and public-sector unionization channels a macro pressure rarely discussed in the same breath as labor policy: inflation. Economists, including Harvard professor and former IMF chief Ken Rogoff, have observed that powerful wage-bargaining structures can make inflation more entrenched and persistent once expectations become embedded, because they rigidly reinforce wage-price spirals (i.e., the feedback loop between wages and prices that make bouts of inflation persistent).

While it may be true that inflation “is always and everywhere a monetary phenomenon,” and thus falls under the purview of monetary policy, Milton Friedman himself would have likely conceded that wage-price spirals can help perpetuate it.

So What Can We Do?

The goal is, of course, to crush them. And doing this does not require reinventing the wheel. I’ve broken my plan down into three items.

1. Public sector unions should be banned from political lobbying of any kind. The fact that they can currently directly lobby politicians is a national shame. They should at minimum be held to the same standards as 501(c)(3) nonprofits with respect to political advocacy. This is the single most important reform and if enforced it would effectively decapitate their political power.

2. Every state should adopt the Wisconsin model where bargaining, if it is to exist at all, is limited to base wages and there is no payroll deduction of dues.

3. Trump’s March 2025 executive order revoking collective bargaining for federal workers at agencies with national security missions should be codified into law, and extended to the entire federal workforce.

The gold standard would be to strip public sector unions of all collective bargaining rights and statutory privileges, but the three reforms above would go extremely far in removing their ability to manipulate the state and impose negative externalities on the public.

00:00–07:00 | The “Dianne Feinstein Problem” and Institutional Gerontocracy

• The conversation opens with a discussion of Peter’s new essay, “We Have a Dianne Feinstein Problem,” which critiques the role of seniority systems across the federal government. The central claim is that leadership selection in many American institutions privileges tenure and age…

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Seniority

Take the General Schedule (GS) pay scale for example. The federal government employs about 1.5 million people under the GS system and under it advancements are governed almost entirely by time served.

Within a single grade, step increases follow a fixed time schedule. You can move up a grade after serving a minimum of 52 weeks at the grade below. And you rise up the steps automatically as long as you have at least a “Fully Successful” performance rating.

What this means in practice is that the median analyst and the absolute best analyst at, say, the Department of Energy, share roughly identical compensation trajectories. The only notable exception to this is that people who achieve ‘exceptional performance’ are moved up one step, in a 150‑cell pay grid.

This structure also exists in the military where, under the Defense Officer Personnel Management Act (DOPMA), officers are promoted in cohorts by year of commission. You make captain around year four to six, major around ten, and lieutenant colonel around fifteen. There is some variation at the margins: if you aren’t selected for promotion twice you’re discharged (the “up or out” rule). But what does not exist is the ability for a brilliant officer to rapidly climb the ranks. The economist Tim Kane, who has written extensively on military talent management, called DOPMA “the root of all evil” in how the armed forces handle their human capital.

Ultimately, these seniority protections survive because insiders have captured the system, especially public‑sector unions inside the bureaucracy.

But what this rent-seeking accomplishes primarily is chasing away the most capable people from a job in the government and staffing many of the public sector’s most important management positions with the mediocre.

The obvious counter to what I’m saying is that seniority protections exist for a reason; namely, protecting lifetime bureaucrats from political capture and pressure, as well as allowing people with the most experience to run our institutions. The system was built after the spoils era, when incoming presidents would fire entire agencies and replace them with loyalists, a problem the seniority system was supposed to solve.

But today the primary friction is not that public service incumbents are being thrown out too regularly. Instead, these seniority protections leave our institutions increasingly sclerotic, with the very people who benefit from the status quo empowered to block any meaningful reform.

An exception to the seniority system is the Federal Reserve, which sits outside the GS pay scale and can set its own compensation and promotion schedules. The Fed has meritocratic hiring and advancement based on ability — and for someone working there, such work experience grants them an enormous amount of private sector employment capital (regardless of which White House administration coincides with that work experience). As a result, the Fed is able to compete with top Wall Street firms for top economists and rising analysts.

The Fed is also, in my opinion, and by way of reputation and results, the most competent institution in the federal government — a status that flows directly from its freedom to hire, fire, and pay on merit.

I want to be clear, the issue is not that average pay for federal employees is too low. On average, they earn about $101,000 a year, well above the national median household income of $83,700, and although DC is expensive this is largely the product of high salaries chasing a limited housing pool. The problem is that the range is compressed to the point that the most hyper capable workers cannot be retained, much less hired in the first place. Contrast this with the private sector, where there is often wide variance in the compensation of any two given employees in the same market tier with the exact same job code. (This is especially true in finance.)

Moreover, contrast America’s civil service with Singapore’s, where public sector employees are recruited from the tops of graduating classes through competitive scholarships, and where promotions are based exclusively on performance. Top government salaries are designed to be directly competitive with the private sector, with the benchmark for an entry-level cabinet minister being set at the median income of the top 1,000 earners in the country, discounted 40%. In practice, they will earn about $1.1 million a year. In the U.S. a GS-15 step 10 — the ceiling of the normal federal pay scale — tops out at about $162,301.

Cognitive Decline

All of this would matter less if the seniority system did not also undermine congressional oversight of the executive branch. This monitoring, in theory, should be done through the committee system, since committee chairs have subpoena power, control hearing agendas, and can direct investigations. But these roles are seldom filled by members with the cognitive sharpness the work actually requires.

The current chairman of the Senate Foreign Relations Committee, Jim Risch, is 82; it is fair to ask genuine questions about his ability to monitor the Trump administration, especially during a period of abounding active military operations. Last week when the US struck Iran, the Gang of Eight — the congressional leaders and intelligence committee chairs who receive the most sensitive national security briefings — got an hour-long briefing from Secretary Rubio beforehand. Schumer, a spry 75, was in the room and said the briefing was “completely and totally insufficient.”

Effective oversight of military operations requires people who can process classified intelligence with quickness and rigor, and ask precise, pointed questions in a time-pressured setting. Does anyone think that this ability is mostly determined by time served in Congress? Even if it is, the issue of aging monitors has real national security ramifications. A significant body of research confirms that, once a person reaches their 60s and 70s, their cognitive faculties reliably and steeply decline. To the surprise of no one, a RAND report found that officials in cognitive decline have inadvertently compromised classified information in the past.

The late Dianne Feinstein sat on the Senate Intelligence Committee — the body that oversees the CIA and NSA — at the same time that multiple reports described serious cognitive decline. She did not leave her seat before passing away in 2023, and there existed no reliable mechanism for removing her.

Even in settings where formal seniority doesn’t exist, our political culture has a tendency of deferring to politicians who have been around the longest. This is true in both parties, but the Democratic presidential primaries in recent years have shown it at its worst. In 2016 there was a strong sense that Hillary should be the nominee because it was “her turn.” Then in 2020 Biden was elected in no small part due to his role as an elder statesman in the party, a fact that led directly into his aborted attempt to run again in 2024 when most people close to him knew he was not in fact “sharp as a tack.” In both cases the informal system that produces nominees operated on the logic of seniority rather than meritocracy.

I want to be precise, because obviously experience matters. A person with twenty years on the Armed Services Committee, or decades of experience in the bureaucracy, knows things a neophyte doesn’t and can’t. Boards of directors in the private sector are primarily staffed by veterans for a reason. But experience is only a heuristic — one we should use, among many — for determining who is most capable.

So, what do we actually do about this?

Three fixes.

First, replace the GS system with a compensation structure that resembles the private sector. A much steeper pay curve, a much wider range, and promotion based on performance rather than time-in-grade.

Second, remove all seniority-based systems in Congress. Committee chairs should not be awarded based on length of service but instead on their ability to serve.

Third, wherever possible, the government should hire by open competitive examination. This should be modeled off of the Foreign Service Officer Test, which already does an exemplary job of selecting new employees — about 20,000 people sit for it each year and roughly 2-3% end up with an offer.

We’ve talked before here at Boyd about how America is in a state of “managed decline”; structural seniority is perhaps the purest case in point. It is a system designed to lose slowly and resist change at any cost. If we want to accelerate our ability to solve problems, dismantling structural seniority in the public sector is a fantastic place to start.

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• The discussion opens with a candid assessment of Boyd’s organizational inflection point: the launch of paid subscriptions as a core funding mechanism. While fundraising is acknowledged as inherently uncomfortable for a nonprofit, all three participants argue it is necessary to s…

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You’ve been reading and engaging with us because you think something is broken and worth fixing. Today we’re asking you to go a step further. We started Boyd because we think the institutions meant to solve America’s problems have stopped trying.

I joined the Boyd Institute last August because I saw a path to actually solve things, to build a future I want to live in, and eventually raise a family in. Jeff is a Gen-Xer raising a young child into an unsustainable future America. Will and I are 90s babies with aspirations of someday having families of our own and being leaders in our communities. We each have serious skin in the game. So do a lot of you.

One of the things wrong with American policy is that it’s largely made by people who won’t live with the consequences. When Jeff asked me to lead this thing, my reaction was exactly what you’d expect: “Let’s fucking go.”

Hence we call our audience “Let’s Fucking Go Americans” and we mean it as a term of genuine respect and endearment. Smart, frustrated people who want to engage with hard problems, who believe “you can just do things,” and who have something real to contribute. They just haven’t had a place to go.

We’re trying to build that place.

Will, Jeff, and I have been grinding this out brick by brick. Since last fall we’ve grown from roughly 600 subscribers to nearly 1,500. Our first essay contest surfaced eleven genuinely novel housing policy proposals from people entirely outside the normal think tank world. Our second contest is already drawing compelling submissions, including one that rejects the premise entirely. We’re proud of what we’ve built. And we’re just now hitting our stride.

The traditional think tank model is dead. It was built on the assumption that credentialed insiders produce the best ideas, and that change flows from Washington outward. We think that’s backwards and produces group think. The best ideas are already out there, in people who live with the problems and have thought hard about them. Our job is to find those people and pull them into the conversation. Our housing sprint didn’t surface substantive, heterodox ideas because we hired experienced analysts and consultants. It surfaced great ideas because we asked you, the reader, to engage and submit your proposals.

We want Boyd’s funding to come from core supporters who want to be part of the conversation. For that to work, we need people like you to step up now, while it’s still early.

Here’s what we’re offering:

• Supporter ($10/month) and (Annual $120/year): Access to our private Discord community, where you can talk directly with us and other members. This is where we share early thinking, debate ideas, and start building the network this space is missing. Think of it as a Boydian chat room: smart people, no nonsense.

• Founding Partner ($1,000/year): Everything above, plus a quarterly one-on-one call with us. You’ll engage directly with how we’re building the organization, what’s working, what isn’t, and where we go from here. This is for people who want a real role in building Boyd from the ground up.

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The Boyd Institute is a 501(c)(3). All contributions are tax-deductible. If you’re able to give through a Donor Advised Fund or make a direct donation beyond a subscription, it would meaningfully extend what we can do. Reach out to peter@boydinstitute.org.

And if a paid subscription isn’t possible right now, the most valuable thing you can do is share this with someone who fits. You know the person: they’re always saying that no one in politics is serious, that there’s no way for someone like them to actually contribute. Send them here. Our whole bet is that people like that exist everywhere, they just need to find each other.

We believe something like Boyd is essential. Come help us build what comes next.

— Peter

P.S. I’m putting my career and future on the line — and so is Will. This is our generation’s shot at building something that matters. Help us take it.

Democracy is rule by the majority. But what does it mean when the majority is dissatisfied with how democracy works? Across advanced democracies, that is now the case.1

In the U.S., roughly six in ten say they are dissatisfied with the way democracy functions.2 Trust in the federal government hovers around 17 percent.3 Meanwhile, longitudinal polling shows trust in China’s central government above 80 percent, with similarly high figures for several other authoritarian states.4 These regimes aren’t free, yet they command more public confidence.5

At the same time, AI is reshaping markets, education, and warfare. Hiring is adjusting to automation.6 Tools are replacing established workflows.7 The underlying technology keeps advancing.8 It is unrealistic to assume governments will remain insulated. The question isn’t whether AI will reshape governance, but how deliberately democracies respond to it.

For many, AI looks like a threat to liberal democracy. That was my first instinct. I care deeply about freedom and limited government, and AI seemed inherently authoritarian. But as I’ve watched the technology mature and considered the structural pressures facing democracies, I have come to a different conclusion: embracing AI is our best path to renewal.

This is not an argument that technology will solve everything. AI can’t fix aging populations, polarization, or bad leadership. But it can help address three pressures constraining democratic success: institutional capacity, geopolitical competition, and fiscal sustainability.

#1: Institutional Capacity

Francis Fukuyama has warned that democracies decay when they can no longer execute. That sounds abstract until you look around. Permitting drags on for years. Infrastructure projects stall. Regulatory frameworks accumulate with no systemic review. The California high-speed rail project begins to feel less like an outlier and more like a metaphor for diminished state capacity.

AI offers a way to upgrade what you might call “bureaucratic cognition” — the state’s ability to process information and move decisions through complex systems. In Austin, Texas, AI-assisted planning tools have reduced zoning review times by roughly half.9

Extend that logic to energy permitting, defense procurement, public health approvals, even passport renewals. AI can compress these loops, improving speed and responsiveness without sacrificing oversight. If democracies are to regain public confidence, they cannot ignore a tool that substantially increases their competence and execution.

#2: Geopolitical Competitiveness

In the twentieth century, liberal democracies prevailed not just because of their values but because of their technological and economic superiority. That link between technology and power remains. Authoritarian regimes are rapidly incorporating AI into their industrial base and military platforms, while expanding their economic and military weight. China produces roughly 30 percent of global manufacturing, graduates far more STEM students each year than the U.S., and commands shipbuilding capacity that dwarfs our own by hundreds of times.

As Palantir CEO Alex Karp recently warned, the race for AI supremacy is a “winner-take-all” struggle between the U.S. and China. “The country with the most powerful AI will determine the rules,” he noted.

Democracies cannot compete in the global order without aggressively embracing intelligent systems — full stop. This does not mean trying to “out-autocracy” China or abandoning oversight. Rather, protecting liberal democratic values should motivate us to advance AI with urgency. Just ask Ukraine, where drones and autonomous systems have become existential. If democracies lean back on AI — mired in “safety” debates while rivals build — they will find themselves reacting to a world shaped by others.

#3: Fiscal Sustainability

From Japan to Italy, advanced democracies are trapped between aging populations, shrinking labor forces, and exploding healthcare costs. The math is unforgiving. In the U.S., the CBO now projects that by 2026, interest payments on the national debt will eclipse the entire defense budget.10 On the current course, the West’s fiscal model is not sustainable.

Productivity growth is the most powerful lever to change that trajectory. And AI is the most promising engine for increasing productivity since the steam engine. Goldman Sachs estimates that AI-driven productivity gains could lift global GDP by roughly 7 percent over the next decade and meaningfully increase productivity rates.11 Compounded, that matters enormously.

Fears about labor market disruptions are valid. Technological transitions are rarely smooth. Yet previous waves of automation, from mechanized agriculture to the internet, ultimately expanded output and living standards. The alternative is slower growth, tighter budgets, and escalating distributional conflict. Democracies do not stabilize under those conditions. AI-driven productivity offers a path toward renewal.

Other Considerations

Let me be clear: AI is not a cure-all. It can’t solve gerontocracy, elite corruption, or polarization. It’s not a substitute for the thymos — spiritual resolve — required for renewal. Embracing it is necessary but not sufficient.

Some argue that keeping AI at bay is the “safer” path, even if it means gradual decline. But that assumes the status quo is stable. It isn’t. Democracy is already under strain. Excessive safetyism may feel responsible, even virtuous, but in a competitive world it becomes self-sabotage. Choosing stagnation in the name of caution weakens democracies further.

The most serious concern is that embracing AI will lead to a “rule by algorithm”—a techno-fascist surveillance state. This fear is legitimate. But the dual-use nature of AI is precisely why democracies must lead its development proactively with pro-democracy design principles: maintaining human control, embedding transparency and accountability, ensuring oversight, and allowing agile course correction.12

AI will reshape governance whether democracies design for it or not. Procedural excess, nostalgia, and degrowth are luxuries democracies cannot afford. Renewal requires embracing the AI era deliberately and strategically. It is the only credible path forward.

As Secretary of State Marco Rubio recently noted, “decline is a choice, and it is one we should not make.”13 The children of democracies deserve renewal. That renewal begins with adapting institutions to the AI era.

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This deterioration corresponds to a phenomenon Americans experience daily: institutions that retain formal authority and vast resources increasingly struggle to translate decisions into outcomes.

America still has everything a high-functioning state should need. It remains rich, technologically dominant, and stacked with elite universities, engineers, and financiers. Venture capital flows and the IPO market have remained remarkably stable, even in the valleys of the past few business cycles, and as the Fed has transitioned away from ZIRP and QE. And despite the current administration’s efforts to thwart research funding, academic visas, and the rest, the US continues to host a surplus of scientific and technical talent. It is clearly not a human- nor a financial-capital problem.

But the symptoms are visible across myriad domains. Housing is built in chronically suboptimal quantities and locations. Infrastructure projects stretch across decades and are routinely overrun with costs. Energy projects are often face death by permitting. And industrial policy arrives late, partisanly packaged, or not at all. The US commands the most powerful navy the world has ever known yet lacks the shipbuilding capacity required to replenish or expand it at scale.

Part of the problem lies in what author Dan Wang, in his recent book Breakneck, calls the “lawyerly state.” In contrast to China’s “engineering state,” the lawyerly state evolved as a response to the excesses and negative externalities of growth. Over time, the state’s governing logic shifted from enabling production to minimizing risk — empowering litigation, procedural review, and regulatory vetoes. “The mission became to stop as many things as possible.” On those terms, it has succeeded.

Today, major projects in the US are treated like a future lawsuits waiting to happen. Environmental reviews have expanded in scope, regulatory checklists have multiplied, and the easiest way to halt progress is to demand another study. By structuring governance around procedural veto points, every decision is treated as a potential tort — transforming bridges, roads, and rail lines into legal liabilities rather than public goods. In the end, little gets built as the state becomes Leviathan by proxy and procedure.

This is not an argument against law. Rule of Law is a civilizational achievement of the West, and lawyers exist for good reason. It is (and they are) the mechanism behind the enforcement of codified norms. But when the legal process becomes the organizing principle of the state — rather than a constraint within it — the system tilts backward. Legal reasoning is inherently fault-seeking. It punishes visible failure while offering little reward for timely success.

You can see this in most regions across the US. A new transmission line is technically easy to build but might take a decade because it must survive an endless gauntlet of procedural challenges and diffused accountability. Even when everyone agrees that something should be built, and even when we have the technical know-how, projects move forward at a glacial pace.

China offers a revealing contrast not because it is virtuous but because it is coherent. What Dan Wang calls the “engineering state” is forward-looking and risk-tolerant. Infrastructure is often built ahead of demand — “bridges to nowhere” — under the assumption that physical access itself generates value.

This coherence is made possible by a kind of federalism — rule by law as opposed to rule of law — that is basically untenable in the US. State-owned banks, overseen by the central bank, provide the credit. Capital markets are tightly managed, so debt circulates inside the system. When Beijing decides to build, it issues new KPIs for provincial leaders to optimize toward.2 Then credit is made available through tightly-controlled channels. Coordinated buildouts inflate surrounding asset values and then value is recaptured through land sales to private developers — and then recycled into more new projects.

This system functions because property rights in China are intentionally incomplete. The state ultimately owns the land, allowing it to effectively tax growth directly without voter approval or bond referenda. The system depends not on broad public trust or buy-in, but on central planning and coercion (and achieving a very minimal threshold of public compliance).3

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Are we simply at a structural disadvantage to China? Sure, China has been able to rapidly (and however frequently the Politburo chooses) pivot its industrial and technological trajectory — via Beijing decree, executed through its “mayorial economy” — without having to mind downstream political economy implications. This works in tandem with a robust, highly-centralized social engineering apparatus designed to foil even the most basic civil liberties.

But the point is not that this model should (or even could) be emulated wholesale in America. The point is that the US seems to have lost even the capacity to act decisively within its own institutional constraints.

America once had a different way of mobilizing resources to achieve outsize positive-sum results. New Deal era federalism reengineered the country’s physical substrate4; DARPA seeded entire critical industries; the jointly-funded SEMATECH consortium helped rescue the domestic semiconductor sector, which, at the time, was a major going-concern risk due to the dominance of Japan’s heavily-subsidized chip manufacturing sector. These wins were well-organized, technocratic efforts carried out inside, structurally, the same liberal society we live in today.

One can still observe more recent remnants of technocratic brilliance in how the US uses its financial prowess and heft to maintain international order. Why is there still such a strong global bid for Treasuries despite the spiraling (and well-documented) trajectory of debt and deficits? It is in no small part due to the fact that we engineered the hidden plumbing undergirding the vast majority of international trade and finance.5 Neither is it in small part due to the fact that our navy, engineered to move armaments and ass around the world at a breakneck pace, patrols and protects shipping lanes to keep commerce flowing.6 The US controls the global chokepoints, full stop. Dollar hegemony — America’s “exorbitant privilege” — is in no small part an engineering feat.

That same kind of technocratic lineage is visible in the evolution of the Federal Reserve, arguably the most technocratic non-defense institution in US history. The Fed was not always the credibility-anchored, independent authority it is today. The Arthur Burns Fed of the 1970s was openly subordinate to White House pressure, with hyper-inflationary consequences that eroded public trust. But that credibility was rebuilt — deliberately and painfully — under Paul Volcker, who reasserted institutional independence and imposed discipline through tethering monetary policy to aggregates, and signaled a willingness to truly optimize for price stability by hiking rates to unfathomable levels.

Since then, the Fed has operated less through command than through expectations management, anchoring markets by demonstrating competence and restraint. Central bank independence, now standard across advanced economies, was in this sense an American institutional innovation — one that illustrates what liberal technocracy looks like when authority is given to engineering-brained leaders (top economists).

What has made such efforts possible in America was not coercion but legitimacy — consent of the governed and a shared belief that institutions and the state ought to operate with some meaningful level of autonomy. People once trusted that leaders and administrators purporting to be acting in the public interest were telling the truth. That trust made it politically feasible to move fast and take risks (and tolerate failure). But it has eroded meaningfully — trust is at an all-time low, grievances are high, and when people are agrieved they increasingly harbor a zero-sum mindset:

Trust in institutions seems to be a first-order determinant of America’s problem-solving capacity. In a productive, high-trust society, projects move forward at a reasonable speed and when damages are incurred, they are adjudicated accordingly. In my mind, the key difference between a high-trust environment and a low-trust one is that the lawyer machine is mobilized after the fact in the former but preemptively in the latter. This functional shift in the lawyerly state, I believe, is why America has entered an emergent era of institutional sclerosis.

The tradeoff that I think most Americans would rather not change — vis-à-vis China’s autocratic (quasi-capitalist) system, or “socialism with Chinese characteristics” — is that we demand representation in our government with the risk that that government may become paralyzed by an unconsenting populace. That is, the risk that the US becomes a vetocracy.

So my contention is that we should be aiming to dismantle the vetocracy. We should be aiming for something like an engineering state within liberal constraints: institutional frameworks that restore decisiveness, tolerate risk, and earn trust through performance rather than process and legalized preemption. The challenge then becomes galvanizing people to legitimately “trust the experts,” and “trust the science,” which became memes because that very trust was demanded rather than earned.

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The Boyd Institute is currently running an essay contest with a top prize of $2,500 to answer the following question: “How can America improve its problem-solving capacity?” If, after reading this article, you feel inspired to tackle that question, please go check out our article with more information. Submissions close March 15th.

Rather than offering a single diagnosis, the discussion moved across institutions, information, culture wars, immigration, China, and AI — circling one recurring question: whether modern societies still have the ability to identify real problems and coordinate durable solutions in a fractured political and media environment.

(00:00–06:30) What does “problem-solving capacity” even mean?
The conversation opens with skepticism about the premise itself. Hanania argues that outcomes are mixed: some problems improve (crime, overdoses), others persist, and it’s hard to separate policy success from social cycles. Both discuss whether America often creates problems first and then congratulates itself for partially fixing them.

(06:30–14:30) Trump as a stress test for institutions
Peter and Hanania debate whether Trump shows institutional decay or institutional resilience. Hanania sketches both an optimistic story (markets, courts, and incentives still constrain bad leadership) and a pessimistic one (Trump may be the least irrational node in a much worse populist information ecosystem).

(14:30–21:30) America vs. Europe: dynamism, stagnation, and tail risk
They compare U.S. volatility with European consensus politics. Europe appears better at avoiding extreme outcomes but worse at reform and growth; America looks more innovative but with higher risk of political breakdown. Energy and nuclear policy become a focal example of frozen priors versus adaptive systems.

(21:30–27:30) China and state capacity: solving problems at scale — and solving the wrong ones
China is discussed as the high-capacity counter-model: strong at executing infrastructure and pandemic policy, but potentially brittle on deeper social problems like fertility decline. They debate whether AI and automation could offset demographic collapse, or whether population still fundamentally matters.

(27:30–33:30) Why culture war dominates: disgust, status, and movement momentum
Hanania explains the right’s obsession with trans issues as a deep, historically rooted disgust response around sex and gender. The puzzle is the left’s persistence: after gay marriage succeeded, advocacy energy, organizations, and status incentives carried forward into a new cause.

(33:30–38:30) Institutional overhang and reform movements that never die
Peter raises the idea that reform institutions linger after solving their original problems, expanding into mission creep (tenant protections, civil rights enforcement, environmental regulation). Both discuss safetyism and diminishing returns as pathologies of mature democracies.

(38:30–42:30) Immigration as an unsolvable political equilibrium
Hanania argues comprehensive immigration reform is effectively blocked. The right has become absolutist against any compromise; the left has more flexibility but little incentive to push legislation. The likely future is continued executive toggling rather than statutory reform.

(42:30–46:30) Media, curation, and the collapse of gatekeeping
They turn to the information environment: social media rewards the loudest and least responsible voices, while legacy media curation has collapsed. Hanania predicts a split future — “smart discourse” in curated spaces like Substack, and increasingly chaotic mass discourse on platforms like TikTok.

(46:30–51:00) AI as a partial fix for information and productivity
The conversation closes on AI as a cognitive tool. Hanania describes using AI for writing, summarizing news, and running data analysis, arguing that non-use by writers and analysts is becoming irrational. Both note the promise and risks of outsourcing first-pass judgment to machines.

Frankly, of everything we did last quarter, I viewed the essay contest as the single largest success. The level of enthusiasm I saw in many of your submissions was deeply touching and confirmed my hypothesis that there exists, dormant in America, a deep desire to participate in the process of improving this country. Our current sprint topic deals with that directly — and asks the following:

“How can America improve its problem-solving capacity?”

Admittedly, this is a broad topic — much broader than “housing” — and that is by design. As we continued to think about the role of the Boyd Institute and the problems America faces, it became increasingly clear that at the heart of everything is a breakdown in our country’s ability to actually solve its problems.

There are thousands of interesting ideas for every issue imaginable, and yet there appears to be no reliable mechanism to actually reform anything. As a result, at least from where we stand, it seems like our country is slowly atrophying.

I’ll leave it to you to decide the angle you think is best to approach this from. Is our electoral system broken? Have we become too reliant on the state in general to do things? Is there a federal–state incentive mismatch? Is the problem that we have too many lawyers and not enough engineers, à la Dan Wang’s Breakneck? The goal here is to spark a conversation that gets at what we see as the core of the problem.

To facilitate this goal we have decided to alter the structure of the essay contest relative to how we ran it last sprint. Rather than running it like a traditional essay contest, where people submit their essays privately to a black box and at the end we announce winners.

We have opted to ask people to publish their articles on their own Substacks as soon as they are ready, and we will reward the best essays at the end of the sprint.

I’ll get more into the details of what this looks like later in the article, but the change stemmed from two primary frictions with the traditional model.

First, and most importantly, we received far more award-worthy articles than we could possibly hope to give prizes to, and this resulted in many of the submissions literally never seeing the light of day. Out of our 39 submissions, only 11 — less than a third — were published by us. Of those 11, 8 were put into an anthology as pdf attachments, meaning they were seen by only a fraction of the audience they should have reached.

Second, the central purpose of an essay contest, in our eyes, is to bring subscribers and engagers into the conversation around our topic. To the extent people put their ideas out early and often, it allows everyone to iterate and learn from one another. As with last time, we will only allow one final submission per applicant, but if you decide you want to update or even write an entirely new essay after reading someone else’s work — or for any other reason — you are encouraged to do so up until March 15th, when the essay contest closes. Information silos are bad, and we want to open the windows wide.

It is our promise that if you submit something, we will read it, internalize it, and judge it on its merits. The hope is that this format will transform the essay contest from a black box into something of an online salon.

In our last iteration, we wound up awarding a total prize pool of $6,900. I would expect our final payout this time to be around the same, so there is real money to be made for participants.

If you have any questions, do not hesitate to DM me here, and I will be sure to respond with clarifications. Best of luck, and may the best essays win!

Prizes and Recognition

• Grand Prize: USD $2,500 cash, re-publication and promotion on our Substack, and the honorary title of Boyd Fellow for one year.

• Second Prize (Runner-Up): USD $1,000 and re-publication/promotion on our Substack.

• Third Prize (Runner-Up): USD $1,000 and re-publication/promotion on our Substack.

• Additional Publication: We may offer a USD $300 honorarium to authors whose essays we choose to re-publish beyond the top three.
  

Eligibility

• Human (not AI) entrants aged 18 or older are eligible. One essay per author.

• The contest is open worldwide, but the focus of this contest is on identifying novel solutions for the United States.

• Essays need to be published on the author’s personal Substack account. They must attribute the post to the Boyd Institute at the top of the submission, and they must share the link to the article and contact information via THIS Google Form.

Submission Guidelines

Format: For an article to be considered for the prize pool, it must be:

• Published without a paywall on the author’s personal Substack account before the deadline.

• Acknowledge at the top of the article that it was created as part of the essay contest.

• The author must submit a Google Form HERE with a link, acceptance of terms and conditions, and other contact information.

Language: Submissions must be in English.

Original Work: Essays must be original and authored by the entrant.

AI Assistance Disclosure: If you use AI tools to brainstorm or edit your essay, briefly describe how you used them in a note attached to your Google Form submission. Fully AI-generated essays are not permitted.

Deadline: 11:59 PM Eastern Time on Friday, March 15th, 2026. Late entries will not be accepted. We will announce the winners and award prize money at the end of March.

Evaluation Criteria

Our judges will evaluate submissions based on:

• Originality: How novel and creative is the idea? This is a gnarly challenge, and we need outside-the-box thinking!

• Potential for Impact: If your idea were implemented, would it significantly improve America’s ability to solve its problems? We are looking for ideas that substantially move the needle.

• Actionability: Does the proposal offer a concrete and realistic path forward? Is it feasible within existing technological and/or political-economy constraints?

• Clarity and Quality: Is the essay well organized and easy to follow? Is the proposal articulated persuasively for the general public, policymakers, and experts? While polished prose helps, we care most about the strength of your ideas.

How to Submit

• Prepare your essay following the guidelines above.

• Publish the article on Substack.

• Complete the online submission form HERE

• Provide your contact details.

• Link to your Substack post.

• Confirm that you have read and agree to the Terms and Conditions.

Ready to share your vision? Click the link below to submit your essay.

As we head into the New Year, the Boyd Institute is doubling down on a simple idea: America needs to get better at solving real problems. That belief has guided our work from the beginning, and now we’re naming it explicitly. We want to shift our political culture away from performative noise and back toward serious, solution-oriented work.

To that end, I have some exciting announcements to share.

But first, a quick reflection.

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2025 in review

Over the past year, we completed three policy sprints, each aimed at critical strategic issues.

• Strategic minerals in Africa, where we proposed the Congo Corridor as a practical framework for securing critical supply chains while supporting regional development.

• Drone warfare and autonomy, which led to the American Autonomy Initiative, a concrete proposal to lean into automation and radically increase productivity.

• Housing affordability, our most recent sprint, introduced two under-explored perspectives: the effect of crime on housing, and housing as it relates to middle-class family formation. This sprint also included our first-ever essay contest, which surfaced smart solutions from outside the usual policy bubble. In an essay called The NIMBY Buyout Plan, contest winner advocated turning land-use vetoes into tradable rights.

Along the way, a few important things happened.

First, we strengthened the team. Peter Banks joined us and led the housing sprint, alongside William Miller, bringing both rigor and focus to our work. Their impact was immediate, and I’m deeply grateful.

Second, we broadened our focus from national security-related issues to other big issues that shape America’s long-term vitality. Housing made that shift unmistakable. Peter and William helped me realize that you can’t talk seriously about America’s future without addressing issues that materially affect everyone.

Finally, and most importantly, we sharpened the institute’s core identity. Boyd exists to help America get better at solving real problems — full stop. The core capability we’re developing isn’t focused on any specific policy domain; it’s about problem-solving itself, taking inspiration from McKinsey, DARPA, and IDEO.

What’s new

With that context, here’s what’s coming next….

1. Our next sprint topic (drumroll please…)

As many of you know, the Boyd Institute operate policy “sprints” in which we focus on a core topic for several months, usually a quarter of the year and sometimes longer. Although we’re still tinkering with our business model, we find that time-boxing our focus forces fast action and keeps things interesting.

Our next sprint goes to the heart of our mission: How can America improve its problem-solving capacity?

We all sense something is off. America talks endlessly about its biggest problems — housing, infrastructure, healthcare, energy, national security — yet even when there’s broad agreement, progress is slow or nonexistent. Nothing quite gets fixed. That’s why we’re digging into this topic.

We view this topic as uniquely leveraged. It’s a meta issue, but not an abstract one. It sits upstream of nearly every issue we care about. And unlike most meta problems, it’s tangible, diagnosable, and actionable.

In this sprint, we’ll examine:

• Where America does solve problems well and where does it not

• Where and why we fall short

• The cultural, institutional, and political dynamics that block progress

• Practical ways to shift incentives and norms toward solution-oriented politics

The sprint will include our usual mix of ground-truth research, another essay contest, and concrete proposals. We’ll also experiment more with town-hall style conversations to bring people into the process, not just present finished ideas.

And yes, we’ll be rolling out some Boyd swag. Partly for fun, partly because culture matters, and partly because “solve real problems” deserves to become a meme in our political culture.

Depending on how this sprint unfolds, it may also seed a book or a short doctrine. No promises yet, but we’re open to where the work leads.

2) Leadership update

As we prepare for this next phase, I am grateful to solidify the roles of Peter Banks and William Miller in the organization.

Peter Banks is being promoted to President, responsible for running sprints and managing day-to-day operations. I have complete confidence in his leadership and judgment.

William Miller is joining as Fellow, heading up research, events, and other sprint-related activities.

These moves reflect growth, not retreat. I’ll remain Founder & Executive Director, focused on vision, strategy, and external relations. As we build a post-boomer America, Peter and William have skin in the game as young people. Working with them gives me great confidence in Gen Z.

3) Funding our future

Finally, a candid note on resources. Our funding runway is solid for the next 6–12 months, but if we want the Boyd Institute to exist — and matter — beyond 2026, we need support.

To be honest, until recently, I haven’t had enough conviction to aggressively ask for funding. Now I do. That’s thanks to Peter and William, a sharper focus, and a clearer value proposition — even as we recognize we’re still small and figuring it out. As an investor myself, I see Boyd as ready for “early startup capital” to take the next steps.

So, we are actively raising money, with a particular interest in major donors who believe America’s problem-solving capacity is worth investing in. We’re also exploring bringing on a part-time fundraiser to pursue grants and institutional support, in case you know of anyone.

If you’re interested in supporting the work, partnering with us, or just want to learn more, I’d love to hear from you directly. Email me at jeff@boydinstitute.org. I’d love to share our deck and speak with you.

A final note

Thank you for being part of this journey. If you’re new, welcome. And if this mission resonates, I hope you’ll stay close — 2026 will be a meaningful year for Boyd.

Special thanks to our advisors, board, and Substack friends who continue to engage, challenge, and support the work.

Onward.

Below, you’ll find a brief description of each essay, along with a link to the full PDF and the author’s Substack—please go subscribe.

Taken together, these submissions reflect a wide range of thinking, yet each remains practical and grounded in reality. We’re grateful to everyone who submitted, read, and shared their work with us this quarter, and we look forward to building on it in the year ahead.

Wishing you all a great 2026.

How Cities Can Solve Housing Affordability for Young People — Tenement Housing, SROs, and the legalization of ultra-dense development

Young adults are being priced out of high-opportunity cities not only by raw underbuilding, but by the disappearance of small, cheap, tightly managed units that historically served them—most notably single-room occupancies (SROs) and modern micro-studios.

The author proposed legalizing and actively encouraging modern SROs and micro-units by: allowing much smaller minimum unit sizes; permitting higher internal density; piloting buildings with a share of micro-studios; creating tenant-management standards for SRO-style housing (shared kitchens/baths); and adjusting tenant-protection regimes (e.g., higher income-to-rent ratios instead of rigid eviction barriers) so small, safe units can be operated profitably and responsibly.

How Cities Can Solve Housing Affordability For Young People Sol Hando

386KB ∙ PDF file

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The NIMBY Tax: A Madisonian Approach

Structural NIMBYism allows incumbent homeowners to hoard land-value gains while externalizing the costs of undersupply onto renters and newcomers. A targeted property-tax surtax can realign these incentives.

The author proposed a state-enabled NIMBY tax: a property-tax surcharge in jurisdictions whose housing production persistently lags population and job growth, and reductions where construction outpaces a target band. The formula automatically penalizes anti-growth locales and rewards those that permit abundance.

The Nimby Tax A Madisonian Approach

117KB ∙ PDF file

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How Municipal Land Leasing Spurs Housing Production — Cutting Through the Gordian Knot of Local Land Use

Local governments often face fiscal incentives that bias them against housing (retail > apartments, NIMBY tax-base fears). Municipal land leasing can flip these incentives so cities actively want more housing.

The author proposed having cities retain ownership of strategic parcels (e.g., school sites, underused public land) and ground-lease them to private developers, capturing land appreciation and recurring lease payments. These revenues could then be channeled into public goods and fiscal stability so that new housing becomes a budgetary asset rather than a liability. This would serve to propagate best-practice models (e.g., Falls Church, VA) and standardize development authorities.

How Municipal Land Leasing Spurs Housing Production Jeff Fong

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Universal Building Exemption — Unlocking housing supply with property tax reform judo

Current property-tax systems often penalize building and improvement while letting land speculation ride. A Universal Building Exemption (UBE) — exempting buildings from property tax and taxing land value only — would reward construction, punish speculation, and support families.

The author proposed replacing (or phasing out) existing homestead and building-focused exemptions with a universal exemption for improvements, keeping budgets whole by shifting the tax base to land value. This would require adjusting millage rates accordingly and framing UBE as both tax relief for young working families and a pro-growth, pro-natal policy.

Universal Building Exemption

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The Three Point Turn — A three-step process for solving the housing crisis

The housing crisis is fundamentally an incentives problem: local zoning, misaligned property taxes, and redevelopment risk together lock in undersupply. A “three point turn” can reset those incentives.

The author proposed: (1) Centralizing and standardizing zoning at the state level, using Japanese-style inclusive zones that default to “yes”; (2) Implementing a politically palatable “backdoor” land value tax via state-mandated property-tax refunds tied to land value, nudging owners toward efficient use; and (3) Creating a Land Redevelopment Fund with large-scale government loan guarantees for converting underused parcels (parking, obsolete offices) into housing.

A Three Step Process For Solving The Housing Crisis

55.9KB ∙ PDF file

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It’s time to build — Housing, and prisons

Voters rationally associate density with crime, and will keep blocking upzoning until cities feel safe. Housing and crime must be addressed as a joint equilibrium, not separate debates.

The author proposed a federal Cities Are Safe and Affordable (CASA) Act that conditions generous housing funds on two state actions: (1) Tougher sentencing and expanded prison capacity for serious and repeat offenders and key quality-of-life crimes; and (2) Substantial upzoning and multi-family legalization in high-demand areas or proof of already-ample supply.

Its Time To Build Housing And Prisons

199KB ∙ PDF file

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The Hidden Demand: Why the Housing Crisis is a Crisis of Care

Much of the visible housing crisis — street homelessness, encampments, public disorder — reflects a care deficit for adults with serious mental illness and comparable impairments, not just a shortage of ordinary units.

The author proposed creating a new class of Certified Therapeutic Residential Facilities (CTRFs) funded via reformed Medicaid IMD rules so they count as healthcare, not forbidden institutions. CTRFs would then be scaled nationally and tightly linked to homeless-services pipelines.

The Hidden Demand Why The Housing Crisis Is A Crisis Of Care

118KB ∙ PDF file

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Solving for the US Housing Affordability Crisis

The US mortgage-finance system and construction cost trends together drive a wedge between house prices and underlying costs; to restore affordability, we must rewire mortgage capital so each home purchase helps pay for new construction.

The author proposed adjusting mortgage pricing (e.g., small interest-rate premiums or one-time origination charges) and channeling the proceeds into a dedicated new-build fund that subsidizes or directly finances construction. Additionally, MBS structures would be tweaked so that global demand for safe housing debt is harnessed to expand supply rather than just bid up existing homes.

Solving For The Us Housing Affordability Crisis

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In this essay, which placed first in our Essay Contest, Nathan argues that housing is expensive because land-use rules have turned property rights into an opaque, non-tradable tangle — blocking the Coasean bargaining that could reconcile externalities without central planning — and proposes “Coase-ification”: a federal Land Rights Map, state Homeowners’ Bills of Rights, and local pilots that make development vetoes explicit and tradable so growth can proceed by buying out opposition rather than fighting endless political battles.

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Why has housing become so expensive? Why does it take years to secure permission to build a few homes, when cities once expanded street by street? Why does every new apartment building become a political battleground? Why have major infrastructure rollouts become rare, with broadband standing as the difficult exception that proves the rule? What reforms could unlock a 21st-century version of the rapid, ongoing transformation that once reshaped the American built environment?

The answer lies in the insights of Nobel laureate Ronald Coase. In his landmark 1960 paper, The Problem of Social Cost, Coase explained how to reconcile market failure with market efficiency. He recognized that externalities are real—especially in land use, where one person’s choices can affect the value, enjoyment, or safety of others’ property. Zoning and other land-use controls arose as political solutions to these problems, but they substitute centralized, bureaucratic decision-making for decentralized bargaining. Coase argued instead for defining these externalities as rights and rendering them transparent and tradable, so that markets—not administrative discretion—can reconcile competing interests. Rather than bulldozing opposition to development, the Coasean approach is to buy it out.

Yet rather than adopting that logic, modern governments have layered a dense thicket of administrative rules atop the built environment. Property rights have become increasingly unintelligible as regulations accumulate. Zoning codes, utility easements, setback rules, wetlands protections, and myriad environmental and design standards form a fog of overlapping permissions and prohibitions. In that fog, no one can see very far. Firms stay small because navigating the system requires hyper-local expertise rather than scalable competence.1 Regulations do have beneficiaries—neighbors shielded from noise, or citizens protected by environmental standards—but these protections are bundled, implicit, and non-negotiable. They operate as a kind of dysfunctional paternalism: people hold valuable interests without knowing it, cannot trade them, and cannot adapt them to circumstances. The result is a property system that suppresses innovation, prevents efficient compromise, and blocks the kind of growth we once took for granted.

Zoning solves a real problem by prescribing where residential, commercial, and industrial land use will occur, mitigating certain negative externalities, such as industrial eyesores blighting the view from residential front porches, or busy shopfront traffic becoming a nuisance to a quiet neighborhood. But it does so in a way that creates new problems, and ultimately that cure is worse than the disease. Zoning is a form of central planning, and it has held American cities back for the same reasons that the Soviet Union lost the Cold War. Central planning bureaucracies are less clever, nimble, and creative than markets are. This is where Coase’s insight shines, because if only property rights could be defined in more nuanced ways, to include protections against negative externalities, and then rendered tradable, then externalities can be tamed without losing market nimbleness. Economists have long recognized this as in theory the best way to fix the market failure.

Yet for decades, despite the great success of Coase’s paper in the ivory tower– Coase (1960) has long been the most cited paper in the social sciences, and a “Coase Theorem” has been derived from his work and taught in economics classes– Coasean schemes of tradable property rights in externalities have largely been treated as utopian where the built environment is concerned. Coase himself keenly appreciated the problem of transactions costs, and treated his insights more as a theoretical construct than a practical program.

But modern computing, the internet, AI, and geospatial data have altered the frontier of the possible. Comprehensive “Coase-ification” of land use rights, as a fix for the stagnation of the built environment, is no longer a prohibitively difficult informational problem.

My proposal is a three-step roadmap:

1. Federal: Create a Land Rights Map to reveal the full structure of property rights nationwide. Such a federal map could build on existing academic efforts such as the Wharton Residential Land Use Regulatory Index, the Zoning Atlas and a 2023 national mapping effort by Gupta et al.2, but federal government resources would yield a more robust and sustainable map.

2. State: Enact state-level Homeowners’ Bills of Rights that clarify the default freedoms of landownership and sunset unrecorded restrictions.

3. Local: Encourage tradability in property externalities through pilot projects with federal incentives.

Together, these steps would partially “Coase-ify” land use, replacing bureaucratic opacity with market clarity, and empowering communities to reconcile growth, fairness, and freedom through transparent exchange rather than remain stuck in political stalemate.

For “NIMBYs,” who want development to happen but “not in my backyard,” Coase-ification would function as a buyout plan. The system would recognize a lot of rights to block development, but would make them tradable. Many former NIMBYs would make a tidy bundle selling off their rights to block development. Then, when the way is cleared for infill, they might find they liked it, or if not, they could use their profits to move.

I. The Problem: Complexity Without Clarity

Early American landownership was simple. To own land was to control its use, bounded only by nuisance law and basic rights of neighbors. That simplicity was a huge economic advantage: it allowed fast settlement, flexible adaptation, and a fluid market in opportunity.

Modern prosperity, however, has multiplied the interdependencies of land. Three broad forces have layered new complexity atop the old principle of simple landownership:

1. Urban externalities. In dense communities, one person’s land use inevitably affects others’ enjoyment and safety. A pleasant garden, a noisy workshop, a tall building, or a traffic-drawing business all impose externalities. The web of local ordinances meant to manage these externalities—zoning codes, setback rules, parking requirements—has grown immense and unintuitive.

2. Infrastructure dependence. Modern life relies on networked utilities—electricity, water, broadband, roads, mail, and soon, if all goes well, new networks like delivery drone corridors or driverless-vehicle grids. Property value depends on being plugged into these systems, which creates rights and obligations that extend far beyond any individual parcel.

3. Environmental stewardship. Since the 1960s, society has rightly added layers of protection for air, water, and wildlife. Yet these protections further entangle property rights. Land is now simultaneously a private asset, a node in public networks, and a vessel of ecological duties.

Each of these changes has real benefits. But the opacity of the system—the absence of a single transparent registry of what rights and restrictions actually exist—creates paralysis. Developers and homeowners must navigate thousands of pages of local ordinances and discretionary reviews. Regulators themselves often lack visibility into overlapping jurisdictions. Novel projects, which don’t fit existing categories, are presumed guilty until proven permissible.

Our property system has become too complex and opaque to leave room for the permissionless innovation that is the fount of progress. The economic creativity that Coase described—the spontaneous bargaining that solves problems—cannot happen because it’s too hard to figure out who holds what rights, and many of them aren’t tradable anyway. Coase-ification would illuminate that structure and unleash markets to improve it.

II. Federalism as Framework

Land use has always been governed locally, but housing scarcity is a national concern. The U.S. Constitution divides responsibility neatly but imperfectly: municipalities control zoning under state authority, while the federal government can shape incentives through funding and information. That balance makes the federal government the best catalyst for Coase-ification: it can build the informational infrastructure and create incentives for reform without dictating outcomes. The legal changes that drive most of the impact will need to occur at the state and local levels, but federal changes can supply the framework.

A rough analogy for this kind of “cooperative federalism” is the Broadband Equity, Access, and Deployment (BEAD) program, launched by the Infrastructure Act of 2021, which is on track to solve most broadband coverage gaps. The federal government set a national goal—universal broadband—and provided mapping, standards, and grants, while states designed local solutions. Coase-ification could follow a similar model: a national mapping initiative state-level codification of rights, and local experimentation with tradability.

III. Step One: The Federal Land Rights Map

The first step is purely informational. The federal government, ideally through HUD, should create a National Land Rights Map: a comprehensive, publicly accessible database of property rights and restrictions.

The Map would synthesize existing data sources—county parcel records, state zoning databases, environmental overlays, utility service territories, floodplain and habitat maps—into a unified, standardized, queryable interface. Resembling the FCC’s National Broadband Map, it would display who can do what, where, under which rules.

At first, the Map would be explicitly non-regulatory: a research and transparency project. It would not override local law but would compile and cross-reference it. Citizens could use it to see, for example, that their property is zoned single-family, lies within a wetlands buffer, and is entitled to electric and broadband service under specific regulatory regimes. Developers could compare jurisdictions and identify opportunities for infill or reform. Policymakers could quantify how many parcels are legally eligible for new housing, and how many are not.

Crucially, the Map should also attempt to infer who benefits and who bears burdens from each restriction. If a rule prohibits chickens in backyards, the affected neighbors are the presumed beneficiaries. If an easement guarantees access for a utility, the utility and its customers are the beneficiaries. Identifying these relationships transforms anonymous red tape into a network of accountable rights and duties, the precondition for eventual bargaining.

AI tools could make such a map practical for the first time. Modern language models can parse zoning codes and environmental ordinances, extract constraints, and align them spatially. Geospatial data standards like GeoJSON and open-source platforms like QGIS make integration feasible. The result would be an evolving digital twin of America’s land-use regime: legible, searchable, improvable.

Once created, the Land Rights Map would exert quiet but powerful pressure. Like the broadband map, it would quickly become a focal point for debate. Localities would discover inconsistencies; homeowners would question anomalies; state governments would see patterns of exclusion. Transparency is not neutral. Often, information is power, and many land uses would be unlocked by mere ease of discovery that they are already allowed. But transparency also creates demand for reform.

IV. Step Two: State Homeowners’ Bills of Rights

As transparency grows, the next step is clarification and standardization. States should adopt Homeowners’ Bills of Rights: clear statements of what property owners can presumptively do unless an explicit, duly recorded exception applies.

A Homeowners’ Bill of Rights would function as a default constitution for land use. It might include, and elaborate on, rights such as:

• The right to build or expand one or more homes.

• The right to operate businesses.

• The right to grow food.

Localities would then be tasked with explicitly registering and codifying exceptions—zoning, historic districts, setbacks, environmental protections—in a standardized digital format compatible with the Land Rights Map. Unregistered restrictions would sunset after a grace period, perhaps five years.

This step transforms zoning from a patchwork of invisible constraints into an explicit catalogue of exceptions to a known baseline of rights. It rewards localities that maintain clear, consistent data and dispels informal or discretionary controls that are inefficient and undermine the rule of law. Because each state would craft its own Bill of Rights, variation could reflect real differences in geography and culture, but federal leadership and state-to-state learning would inhibit the emergence of unhelpful variations arising from merely accidental features of legacy code.

Participation would be voluntary but incentivized. As with BEAD, the federal government could offer planning grants and data-modernization funds to states that enact compliant frameworks, while fostering pressure for transparency through the Land Rights Map. Eventually, it might be appropriate to condition federal housing or transportation funding on laggard states’ compliance with mature land rights transparency norms, but a deliberate rollout—say, ten years—is desirable. It takes time for datasets to mature, for bureaucratic capacity to be built, and for frontrunner states’ experiences to ripen as models for laggards to follow. Over time, early success would feed adoption, as Coase-ification bears fruit in efficient, innovative and dynamic land use economies.

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V. Step Three: Local Experiments in Tradable Property Externalities

Transparency and standardization set the stage for the final, most ambitious phase: enabling tradability in property externalities. This is where the NIMBY buyout process gains momentum. In places where potential value creation from urban development is high, local interests would tend to recognize the opportunity and act.

Specifically, once everyone knows who holds which rights and restrictions, communities can begin experimenting with ways to allow them to be bought, sold, or leased—transforming bureaucratic vetoes into negotiable claims. Local experiments might initially involve the same kind of theoretically participatory but practically cumbersome citizen voice that NIMBYism has often captured, but they would proceed to splinter barriers into individually-owned rights that could be traded and assembled to allow development to proceed. As local tradability regimes mature and spread, diffuse consultations with notional stakeholders would give way to efficient negotiations with parties directly and significantly impacted.

Consider three illustrative scenarios:

1. The corner shop. A homeowner wants to open a small store on a residential lot. A few neighbors object, but their disutility is modest—say $5,000 each. The entrepreneur expects $100,000 in value from the shop. Under current rules, the variance is denied. Under a Coasean regime, the entrepreneur compensates the neighbors, and everyone benefits.

2. The remote homestead. A rural utility is legally required to maintain expensive electric service to a single distant property. The owner could install solar and batteries for less. The utility buys out its obligation; the owner pockets the difference; both win.

3. The backyard chickens. Local rules forbid small livestock. Neighbors actually enjoy the idea and agree to waive their rights. The owner keeps a few hens, sells eggs, and community welfare rises.

All these scenarios have their pitfalls, but they illustrate the principle: make externalities negotiable rather than absolute. Theoretical objections– for example, I might abuse my neighbors’ permission to grow chickens by doing it at an industrial scale that becomes a neighborhood nuisance—may lack practical traction, but that’s why local experimentation is important. Because innovation here generates national learning, federal incentives and technical assistance—HUD might, for instance, fund competitive grants for local “Coase Labs”—make sense. And local experimentation would also allow communities to tailor safeguards for vulnerable groups, ensuring tradability does not become exploitation.

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Conclusion: The Coasean Trick for Unlocking Development by Buying out the NIMBYs

Coase-ification is not a utopian blueprint but a politically feasible modernization of property rights. By buying out the NIMBYs, rather than simply overriding them, it can smooth the political path. Each stage of reform can attract a broad coalition, because it begins with information, and then benefits varied stakeholders. A Land Rights Map requires no ideological leap—only the belief that citizens deserve to know what rules govern their own property. It is a transparency project, a digital public good, like the broadband maps that have already shown how powerful visibility can be. The State Homeowners’ Bills of Rights that follow would likewise appeal across party lines: conservatives can see in them a reaffirmation of property freedom and local control, progressives a leveling of access and accountability, and technocrats an overdue data modernization. Finally, local experiments in tradable externalities would embody subsidiarity—diverse communities testing new arrangements without top-down mandates—while at the same time bringing the national interest in housing abundance to bear through HUD grants and technical assistance. Coase-ification does not need to start from consensus on values, only consent to clarity. From there, it proceeds through local experimentation along a path of approximate Pareto-improvement.

Beneath the politics lies an economic promise. Housing’s stagnation is not due to a lack of technology or capital but to the friction of uncertainty. When every project requires bespoke negotiation with opaque authorities, firms cannot scale; construction remains fragmented into countless small operators who survive by local familiarity rather than innovation. A transparent, standardized, tradable regime of land rights would lower transaction costs, making it possible for homebuilding to industrialize as agriculture, manufacturing, and information services did before it. Standardization would no longer mean monotony but interoperability: a market in which architects, builders, and homeowners can plug into the same visible framework of rights and responsibilities. Productivity would rise naturally from the emergence of larger firms and replicable models—what Coase would recognize as the economy discovering its efficient boundaries anew.

Ultimately, Coase-ification is a modest reform with radical implications. It replaces bureaucratic opacity with market clarity, partisan stalemate with exchange, and paralysis with learning. A nation that once surveyed the continent with chains and compasses can now remap its freedoms in code. If Coase-ification were achieved, America in the late 21st century might look back on a century of zoning from the 1920s to the 2020s as an unfortunate sojourn in a fog of central planning, before land use re-emerged into the capitalist daylight. And some of the innovative dynamism to which we’ve become so accustomed in the virtual environment would spill over into the built environment.