The Steam page for Capcom’s Pragmata on launch week, April 2026. A million copies in two days. “Overwhelmingly Positive” user reception. Reviewers calling it “the next great Dad game.” The top user review reads: “You will want to have a daughter after this game, so be aware!” A father-blogger writing about My Neighbor Totoro mentions, almost in passing, that he and his wife used Mei’s name as their daughter’s middle name. A culture-transmission event captured in a sentence. The apparatus, visibly, is working.

The game itself: Hugh Williams, a spacefarer stranded on a lunar research station, finds an android girl named D-I-0336-7 and, in the first cutscene the studio considered important enough to bring its voice actors together for a table read, names her Diana. She points at herself, then at him. The relationship starts there and grows from there. The Guardian’s Tom Regan gave it four stars and noted the father-daughter bond is pulled off “with surprising deftness.” Kotaku’s reviewer called it “a Dad Game for fathers who actually like their kids” and observed that Hugh “subverts the usual angry video game dad trope by never once treating Diana like a burden.” The Gamer was sharper: in a triple-A prestige landscape where fatherhood has spent fifteen years being depicted as trauma expulsion (The Last of Us, God of War, BioShock Infinite), Pragmata “celebrates the positives surrounding fatherhood” rather than treating it as an elaborate working-out of one’s own grief. The gameplay itself is built around the relationship: Diana can hack enemy robots to reveal their weak points, Hugh covers her while she does, neither can progress without the other, and the base-camp mechanic has him hanging her drawings on the wall between missions. The game’s director, Chou Yonghee, described the theme directly in a March 2026 4Gamer interview: 「何を基準として人と呼べるのか」がテーマとなります。人間のヒューはアンドロイドのディアナを、どこまで友達や自分の娘として感じられるかを物語として描いています。The theme is “on what basis we can call something a person,” and the story is about how far Hugh can come to feel that android Diana is his friend, his daughter. Asked whether the relationship evokes something familial, Chou answered that what matters is not 「どこで生まれたのか、何でできているか」, “where you were born or what you are made of,” but 「どのような存在で、どんな考えをしているか」, what kind of being you are and what you think. Producer Oyama Naoto added that the game depicts, across many lines of dialogue, Diana learning 普遍的な愛情, universal love, from Hugh. The Japanese interview language is worth lingering on: Chou and Oyama are articulating, in their own terms, that kinship is not a function of biological lineage. They are not speaking to Japan’s fertility statistics. They are describing a thesis about what a family is. Asked specifically about Diana’s design, Chou told AUTOMATON that the most important thing in building the character was 「リアルな子供らしさ」, realistic child-like qualities, rather than an anime-style bishōjo character or a romantic interest (アニメ的な美少女キャラや恋愛相手としてではなく). The goal was a child the player would instinctively want to protect and feel attached to. Oyama added that the team aimed for ナチュラルな子供らしい可愛さ, natural child-like cuteness, explicitly rejecting あざとい可愛さ, manipulatively cute design. The distinction matters: the creators were aiming at the protective-parental response, not the sexualized one, and they said so in the interview. Fans have nicknamed the game “Dad Space” in English and spontaneously produced a parallel 自認お父さん (”self-identified dads”) phenomenon on Japanese Twitter, with players of both languages tweeting “俺がパパだ” (I’m the dad), “娘が欲しい” (I want a daughter), and the English “this is what having a daughter is like.” The cross-linguistic pattern is part of what is interesting about the phenomenon: the response is running the same way in two languages, on two continents, among players who have very little in common culturally apart from the game itself. The game peaked at nearly 60,000 concurrent players on Steam over its launch weekend and settled at a 92% positive user rating on a base of 2,000 reviews. Those are strong numbers for a single-player experience and a new IP.

You are tempted to say, it’s a game that doesn’t include the more “delightful” side of rasing a child. That a more realistic simulator wouldn’t provide the same results. Well, a high school in the Perth metropolitan area, 2003. The Virtual Infant Parenting program is in its third year. Fifteen-year-old girls are carrying home weighted dolls that cry at random intervals through the night, stop crying only when fed, burped, or rocked, and log each interaction for review by the teacher the following Monday. The curriculum wraps the weekend in workbooks on the financial and social costs of early motherhood. The program ran in 89 countries by various estimates, built on the intuitive theory that a weekend of simulated infant chaos would deter teenage pregnancy. In the only serious randomized trial ever run, across 57 schools and roughly 2,800 girls, the intervention group was 36% more likely to become pregnant by age 20 than controls. The designers were trying to deter teenage pregnancy and produced more of it instead.

Two interventions, both low-cost, both cultural, both producing measurable behavioral effects. One designed to celebrate family life and apparently succeeding. One designed to deter teen parenthood and apparently failing by exactly producing more of it. If media this cheap can jiggle fertility intentions up and down, either the channel the signal runs on doesn’t read cognitive framing, in which case no one knows what they are aiming at, or something else is doing the structural work and the media is a sideshow.

生まれてきてよかった / It’s Good to Have Been Born

The question matters because the fertility gap in rich countries is a misallocation problem, not a preference problem, and the two diagnoses imply very different policy responses.

Americans’ ideal family size sits at 2.7 children, roughly unchanged since the 1970s. Actual U.S. total fertility is around 1.6. Across 22 European countries, approximately 60 births occur for every 100 intended. Every single cohort of women born in the early 1970s across 19 European countries and the United States ended their reproductive years with fewer children than they had wanted at age 20–24. The demographic clock is not metaphorical. Cohort fertility locks in over a roughly twenty-year window and cannot be recovered by later policy. Getting the diagnosis wrong costs a cohort.

If the diagnosis is that preferences shifted, that young people no longer want children or no longer want them at replacement rates, the policy follows: restore the family-affirming culture and fertility recovers. If preferences held but execution failed, if young people want children but cannot get the conditions to have them, the policy follows differently: fix housing, labor-market entry, workplace architecture. The two prescriptions point at different institutions, different budgets, different coalitions, different timelines. Political incentives to pick one over the other have little to do with which one is right.

Pragmata is where the question gets compressed. If media can sell family to young men who are supposedly refusing it, the cultural diagnosis is at least partially vindicated and the structural diagnosis is overblown. If it cannot, if its observed effect is marginal and depends on conditions the media itself does not produce, the weight lives further down the stack. Most of the “discourse” arrives already certain which answer it wants. Outside the “discourse”, a small number of voices, Hayao Miyazaki most notably and also the team that made Pragmata, hold both positions at once and have done so for a long time, and noticing what they say when asked is a more useful starting point than trying to resolve the question through survey data alone. The evidence, when assembled, points in a specific direction and does not flatter the louder voices on either side.

The Fake New York

Before proposing an alternative, clear the field. Each of the four commentators discussed below was reacting, in the weeks around Pragmata’s launch, to either the game itself or to the wave of positive reception around it. Morgan’s thread quoted at length below was explicitly about the game and the response to it. Piker’s line about “unfuckable losers in the gaming sphere” was a reaction to a specific cultural moment that Pragmata had produced. Andrews and Yglesias hadn’t written about Pragmata by name but they were writing in the same weeks into the same fertility discourse that Pragmata was suddenly, unexpectedly, the center of. This is worth flagging because the familiar shape of this kind of argument is to use a cultural object as a door into a bigger conversation and then abandon the object. Pragmata didn’t invite itself to a fertility conversation. The commentary brought it there and then proceeded to make claims about its audience, its designers, and what the audience reaction meant. The takes below are the specific form that bringing took. Each makes an empirical claim. Each collapses on contact with the data, and the particular ways they collapse are worth reading.

The right-structural variant, associated with Helen Andrews, holds that “the girlboss lifestyle would not exist if it were not massively subsidized,” and that removing women’s economic options would restore fertility. I went through the empirical problems with this position at length elsewhere; the compact version is that the relationship between women’s income and completed fertility has been shifting from negative to positive across rich-country cohorts, which means the women with the resources to have larger families are increasingly the ones who do. Removing their options would redistribute the deficit, not close it.

The leftest variant, exemplified by Hasan Piker’s line that “unfuckable losers in the gaming sphere always talk about starting families, and stuff. And I don’t understand why this has become a thing that they care about,” holds that young men’s stated interest in fatherhood is either inauthentic, regressive, or both. The underlying cousin-claim, that Korean 4B-style political refusal is the productive feminist response to fertility conditions, has the same shape. The scale problem is severe. The Korean 4B movement had roughly 3,400 online members at its peak against a Korean birth collapse in the 25–29 age group of 87% between 2000 and 2023. The timeline doesn’t work; 4B post-dates most of the decline. The survey data doesn’t work either. Pew’s 2024 survey of U.S. adults aged 18–34 finds 57% of childless young men want to be parents someday, versus 45% of childless young women. Canadian GSS data has tracked a higher male pro-natal rate for three decades. The young men Piker is mocking for wanting fatherhood are, on the data, the majority of their demographic cohort. The joke lands on the median, not the edge case.

The center-left/technocratic-cosplay variant, associated with Matthew Yglesias, diagnoses that the binding constraint on marriage formation sits on the male side and then concludes that “someone needs to tell them to either stay in school or else take some other conscientiousness-demonstrating path.” Tell who, through which institution, with what sanction, on what timeline that matches the demographic clock.

The alt-right variant comes from Tim Pool’s Mary Morgan, whose viral thread was a direct response to the reception around Pragmata and the men publicly enjoying the father-daughter relationship it depicts. “Childless men do not have paternal instincts the way that childless women have maternal instincts… men first experience paternal instincts once they have their own children… if a man wants to possess a child for any reason other than it being a product of his own lineage, he is likely a predator.” This variant is the cleanest to falsify because it makes a direct neurobiological claim. The claim is that the circuitry the empathy-channel literature measures does not exist in men who are not fathers, or exists only for biological offspring. The specific trigger for the claim, it should be remembered, was male audience enthusiasm for a fictional androidic daughter who is not anyone’s biological lineage, which makes the position self-defining: any positive male response to Diana is, on Morgan’s logic, evidence of predation, because Diana is definitionally outside any player’s lineage.

The literature says otherwise. Ruth Feldman’s work on oxytocin and caregiving measured the response in fathers, in alloparents, and in unrelated adults; the neuroendocrine response to infant contact does not key on genetic relatedness.Kringelbach’s Oxford group clocked the orbitofrontal response to infant faces at roughly 140 milliseconds. Pre-conscious, graded by infantile features, present in both sexes regardless of parental status. Glocker’s 2009 fMRI work found reward-circuit activation in childless women viewing infant photographs; subsequent work extended the finding to men. The Galiani and Sosa 2026 NBER paper calibrates the empathy channel at 3–33% of observed fertility decline across rich countries, baseline 13.4%. The mechanism operates at population scale in both sexes. It would be unmeasurable if Morgan’s claim were correct.

Alloparenting (adult investment in non-offspring children) is a species-typical reproductive strategy in humans, documented across every culture in which it has been studied. A theory in which male interest in children outside direct lineage is coded as pathology would need to explain how any society ever staffed a classroom. Or a coaching bench. Or an uncle or godfather role. It would also need to explain the Pragmata phenomenon itself: a million-plus men engaging positively with a simulated father-daughter relationship and describing it as something they would want. Chou Yonghee, the director of that game, said the same thing the literature says, in plainer language, when an interviewer asked him about the theme: what makes someone a person, or a daughter, or a friend, is not 「どこで生まれたのか、何でできているか」, where you were born or what you’re made of, but 「どのような存在で、どんな考えをしているか」, what kind of being you are and what you think. The director of the game Morgan’s commentary is reacting to was making, in a games-press interview, the alloparenting argument her position denies is possible. Morgan treats the audience response as evidence of dysfunction. The neuroscience and the creator both treat it as evidence that the circuitry is working as designed.

Four takes, four failure modes, same pattern. Each variant solves for “who is to blame” and then reasons backward. None of the four tests its blame assignment against the available neurobiological, survey, economic, or demographic data. When the data is consulted, preferences are approximately where they have been for decades, the instinct is present in both sexes, and the gap between desired and actual fertility is large, persistent, and not produced by any of the mechanisms the commentary proposes. Something else is doing the work.

Shelter

The cleanest way to see what that something else is, is to run two parallels side by side and let the controlled comparison do the argumentative work.

The first parallel is Japan versus Korea. Nearly everything is held constant: East Asian cultural substrate, near-identical levels of Ghibli-and-K-drama family-affirming media saturation, similar education systems, similar gender-role trajectories, similar post-industrial development paths. If cultural messaging were load-bearing, the two should track each other. They diverge by a factor of nearly two.

Between 2000 and 2023, Korea’s TFR fell 51% while Japan’s fell 12%, and nearly all of that divergence concentrates in women aged 25–29, where Korean births collapsed 87% against Japan’s 35%. The age-banding rules out slow-moving explanations like value change or secularization, which would move all cohorts together. I walked through the full Han-Uchikoshi decomposition in a prior piece; the short version is that the variable that separates Korea from Japan in the 25–29 age band is male economic inactivity, which nearly tripled in Korea (from about 10% to about 30%) and barely moved in Japan (3.6% to 5.5%). Inactive Korean men drop out of the marriage market because Korean social norms still require men to clear an economic threshold (stable employment, housing resources, typically a substantial jeonse deposit) before marriage, and missing marriages translate almost directly into missing births in a society where out-of-wedlock birth is rare.

What the comparison does for the argument here is rule out the cultural-messaging candidate. Korea and Japan are saturated with similar quantities of family-affirming media, yet one collapsed and the other didn’t. 4B exists in Korea and has no Japanese analog, but 4B is three orders of magnitude too small to carry the divergence and post-dates most of it. Female labor-force participation rose in both countries at broadly similar rates. The only candidate variable that tracks the divergence is young male economic exclusion, which is a labor-market architecture problem, not a cultural one. Neither Ghibli nor 4B is doing significant work.

The second parallel runs a different comparison at smaller scale. The Australian VIP trial was designed to move fertility intentions downward via a simulated negative experience of infant care. The 2016 Brinkman et al. Lancet paper, reporting results from a cluster-randomized trial of 57 schools and approximately 2,800 girls (1267 actually receiving the class vs 1567 in control) in Perth, found the intervention group was 36% more likely to become pregnant by age 20 than controls. Brinkman’s hypothesis, as reported in The Conversation: the girls were “embraced with family support and positive attention” during the weekend; the social context made early motherhood feel manageable and socially affirming rather than punishing.

The channel the signal ran on read the inputs (infant-coded stimulus, positive social context, increased infant exposure in an age-group already near the relevant decision threshold) rather than the designers’ intent. This is exactly what the empathy-channel framework predicts. Glocker’s fMRI subjects, Kringelbach’s 140-millisecond response, and Feldman’s oxytocin measurements all identify a pre-deliberative system that reads environmental inputs regardless of the cognitive framing accompanying them. The VIP designers assumed they were operating on a deliberative system that would weigh a stated cost and avoid it. They were operating on a pre-deliberative system that registered another infant in the environment.

The same channel carries Pragmata and Totoro. These works do not convince anyone of anything. They add infant-coded and family-coded exposure to the ambient environment of players and viewers, which feeds a system that runs beneath deliberation and tracks environmental frequency. The effect is real, the mechanism is documented, and the magnitude is small, one input among thousands.

What’s worth noting about Pragmata specifically, and about the commentary around it, is the posture it takes against the dominant treatment of fatherhood in its own medium. For roughly fifteen years, the prestige triple-A game canon has rendered fathers as men processing grief: Joel in The Last of Us working through the death of his biological daughter by reluctantly taking on another, Kratos in the God of War reboot distant with Atreus because rage is the only mode he has, Booker DeWitt in BioShock Infinite constructing an elaborate metaphysical reason to fail at fatherhood. Fatherhood-as-trauma-expulsion is the shape the form settled into. Pragmata does not do this. Hugh names Diana in the first minutes of the game, asks her to keep telling him about whatever she is thinking about, hangs her drawings on the wall of their base camp, and promises to show her Earth. The Gamer’s review described the point directly: Pragmata understands that “sometimes it’s okay to spin a yarn that isn’t heavily defined by the trauma of bringing another soul into this world.” That a game with this posture, released into the most crowded AAA calendar in living memory, sold a million copies in two days and produced a spontaneous fan nickname (”Dad Space”) and a spontaneous meme-genre about the game inspiring parenthood, tells you something about what the audience was hungry for and wasn’t getting. The hunger is not evidence that media will move fertility. It is evidence that the audience’s stated preference for family-coded content exists, is broad, and was not being served.

Miyazaki himself has been unusually explicit about what he is doing. In a 2005 Guardian interview with Xan Brooks, he put it this way: “Personally I am very pessimistic. But when, for instance, one of my staff has a baby you can’t help but bless them for a good future. Because I can’t tell that child, ‘Oh, you shouldn’t have come into this life.’ And yet I know the world is heading in a bad direction. So with those conflicting thoughts in mind, I think about what kind of films I should be making.” At his 2013 retirement press conference, he compressed the same idea: “I wanted to convey the message to children that this life is worth living. This message has not changed.” In a Hiroshima Peace Media Center interview from 2009, asked about the “power of children,” he described the daycare next to his studio. アトリエの隣にある保育園の子どもたちは僕に力をくれます。泣き声や笑い声、叫んでいる声が聞こえてくると、僕は幸せな落ち着いた気持ちになります。年寄りを勇気づける力を幼い子たちは持っています。The children at the daycare give him strength; their crying, laughter, and shouting voices produce a happy, settled feeling; small children have the power to encourage the elderly.

Note what Miyazaki is saying. He is a pessimist. He believes children understand intuitively that the world they have been born into is not a blessed world. He makes the films anyway, as a deliberate act of pro-natal blessing in a civilization he thinks is failing. The taglines of his late films respond to a worsening environment in increasingly direct terms: 生きろ (”Live.”) for Princess Mononoke, 生まれてきてよかった (”It’s good to have been born.”) for Ponyo, 生きねば (”We must live.”) for The Wind Rises. He is not making the films under the illusion that they will fix the conditions. He is making them because, in his view, the gesture of blessing is the correct response to an environment the children did not choose and cannot yet change. This is the opposite of what the loud commentators are doing. They deny or weaponize the conditions. Miyazaki acknowledges the conditions and contributes the marginal exposure he can, understanding its limits. Totoro and Ponyo and the rest are not propaganda for a culture that has already succeeded. They are one specific artist’s offering against an environment he believes is depleting, delivered through a channel he understands from watching children out his window.

Both parallels converge on the same finding. In the Korea–Japan case, the deliberative/cultural frame underperforms and the structural/economic frame predicts. In the Pragmata–VIP case, the deliberative/persuasive frame underperforms and the pre-deliberative/environmental frame predicts. The channel carrying the fertility signal does not read intent. It reads conditions. The conditions are built in labor markets, housing, and marriage-formation norms, not in the cultural products that sit on top of them. Cultural products make marginal adjustments on top of conditions someone else set.

Mechanics

Zoom out. The specific cases are instances of a template I developed at length in a prior piece; the compressed version has three interlocking components.

First, Stephen Shaw’s 2025 decomposition across 314 million mothers in 33 countries shows that TFR is two independent numbers multiplied together. The share of women who become mothers at all (TMR) falls in discrete shocks and ratchets down; the average family size among mothers (CPM) stays roughly flat for decades. Most of the rich-country fertility decline over the past three decades has been TMR decline, not CPM decline. The problem is not, primarily, that mothers are having fewer children than they want. It is that a growing share of women who wanted to become mothers never reached the family-formation threshold in the first place.

Second, Galiani and Sosa’s 2026 NBER paper calibrates the empathy channel at a baseline 13.4% of observed fertility decline across rich countries, range 3–33%. The channel is dormant at high fertility and steeply active at low fertility, which means each cohort’s TMR produces the ambient infant environment of the next cohort, and each TMR shock depletes the exposure environment of the cohort behind. The trap closes itself without any cultural change required. Preferences can remain stable; the outcomes worsen because the inputs worsen. This is what Miyazaki was describing from his studio window when he said the children at the daycare next door gave him strength. He was noticing, without the vocabulary for it, that his own empathy-channel response was being sustained by an environment that a younger Japanese worker in a newer neighborhood with fewer children and fewer daycares would no longer receive. His instincts about what was happening to the society around him tracked the mechanism Galiani and Sosa would later put a coefficient on.

Third, Uchikoshi and colleagues’ 2026 Population and Development Review finding on child-driven marriage. Uncertainty about wanting children cuts the annual marriage transition rate by 30–50%, controlling for the stated desire to marry. The arrow runs opposite to the standard model: marriage does not cause children; the prospect of children causes marriage. Between 30 and 39 percent of never-married Japanese adults in their twenties and thirties report they are uncertain whether they want children. Not opposed. Uncertain. That uncertainty blocks marriage, which blocks births, which depletes ambient infant exposure in the next cohort, which feeds the uncertainty in the cohort after that. The three components chain together into a single propagating mechanism: the fertility gap is a TMR problem, running on a depleting empathy-channel amplitude, interrupted at the margin by child-driven marriage uncertainty, propagated cohort-to-cohort by environmental depletion.

Pragmata, for all that I have so far been using it as a headline fact about sales and reception, is also a fairly literal fictional rendering of this third mechanism. Hugh does not know Diana exists when the game begins. He encounters her, in the first minutes of play, as a small dependent being whose safety becomes a project he organizes the rest of his actions around. The naming scene is the game’s declaration that a relation of this kind can start from nothing and become the structure the rest of a life runs on. The reader does not have to agree that Hugh and Diana’s specific arrangement is a template for human reproduction to notice that the game is staging, in its opening cutscene, the phenomenon Uchikoshi’s paper names: a person’s relation to the possibility of a small being in their care, and the way that relation reorganizes their other decisions. That the staging worked on the audience at the scale it did is the piece of evidence Section I led with. That it worked cross-culturally, on Japanese and English-speaking audiences who had very little in common except the game, is mechanism-level evidence that the third component of the template runs on a channel that does not require cultural priming to activate. The mechanism and the game are describing the same thing. The game does not prove the mechanism; the mechanism explains why the game lands.

One observation before the pattern is complete. Darby Saxbe’s work on what gets called “the male loneliness crisis”notes that the loneliness pattern is not primarily gendered; it is generational, with young women tracking similarly to or slightly worse than young men on most measures, a finding corroborated by Richard Reeves’s American Institute for Boys and Men analysis of American Time Use Survey data. This is consistent with the empathy-channel depletion story. Fewer strollers, fewer playgrounds, less incidental contact with children and infants, fewer social occasions to form the kinds of relationships that produce such contact: all of it hits both sexes’ pre-deliberative priming equally. The youth-wide cohort effect is a symptom of the same environmental depletion the empathy channel measures. The gender-war framing of the fertility problem is looking at a shared symptom and calling it an asymmetric disease.

Infrastructure

Name the architecture that sustains the template. No villains here; the problem is structural precisely because everyone involved is behaving rationally. The load-bearing components are the ones where the fertility pattern emerges as the predictable response to an incentive structure nobody designed on purpose.

Housing markets. The supply constraint on family-sized housing is where family formation gets priced out. In Korea, the jeonse deposit architecture concentrates the threshold into a single lump-sum barrier; in the U.S. and U.K., exclusionary zoning compresses family-sized housing supply in the family-formation window. Doepke and Kindermann’s “bargaining over babies” model formalizes the downstream effect: when housing tightens, the lower-desire partner wins the intra-household bargain. The bargaining outcome trends toward fewer children than either partner’s stated ideal. Nobody is lying about what they want. The architecture pushes the realized outcome below both of their ideals.

Labor markets. We all know about the impacts of labor markets on men. What about women and “girl bosses” especially? Caregiving is professionally expensive because workplace architecture treats it that way. analysis of 1972–2024 Current Population Survey fertility supplements finds that women in the top decile of occupational status average approximately 1.4 children while working in those roles. That’s a real finding. The framing it often travels with, that demanding careers are a preference young women should revise downward, is a separate claim Stone himself rejects: “the path forward on the debate between work and family is not to ‘blame’ the girlbosses, nor is it to ‘white knight’ for them, or blame men for being unmarriageable.” The 1.4 number is telling us something about the workplace, not about what women want. The highest-status career tracks treat multi-year caregiving breaks as professional demotion, which is a choice downstream of labor-market conditions. When labor is abundant and workers are interchangeable, employers treat any extended break as a credibility problem. When labor is scarce and workers are hard to retain, employers build accommodations. Same firm, different market tightness, different workplace architecture.

This is where family-leave legislation runs into its ceiling. Parental leave laws exist on the books across most rich countries and in many U.S. states; actual uptake, and the career consequences of uptake, track local labor-market conditions more closely than the legal text. A law on paper is only a real protection to the degree that tight labor markets make it costly for employers to retaliate against workers who use it. The same logic extends to education: the extension of pre-career training pipelines from the early twenties into the early thirties (required master’s degrees, credential inflation, unpaid internships, extended postdoctoral chains) is itself a labor-market-slack phenomenon, which pushes family formation past critical biological windows for women and past the economic-threshold window for men. The Korean jeonse case is this at extreme intensity; a gradient of the same effect operates across the rich world. Aspirational media in a slack labor market is a drop of water on concrete. Aspirational media in a tight labor market lands in an environment where the ambient conditions for family formation are actually executable, and the marginal push the media provides can be acted on. Media sits on top of the conditions. It does not build them.

Recent examples illustrate the pattern, with a particular irony: the firms most aggressively penalizing women for family formation are often the same ones that promoted “girlboss” ideals. Deloitte Consulting faces a 2026 class-action lawsuit alleging the firm penalized employees for taking protected pregnancy and parental leave by scoring their annual performance evaluations against colleagues who worked the full year, without adjusting for protected absences. It means lower compensation and promotion prospects for those who used parental leave. The same firm announced plans to slash family benefits for non-client-facing staff, cutting parental leave from 16 weeks to eight and eliminating a $50,000 adoption/surrogacy/IVF benefit starting in 2027. Meta, Google, and other tech companies also have a rich history laid off employees while they were on medical and maternity leave. These same companies who promoted empowering women and “leaning in.” MrBeast’s companies face a lawsuit from an employee who alleges she was fired three weeks after returning from maternity leave, having been told during her pregnancy that she needed to “continue to grind” to have a job to return to.

Notably, these penalties occur even when benefits are government-funded rather than company-paid: in a weak job market, employers find ways to retaliate against leave-taking regardless of who bears the cost. Each case follows the same script: formal policies exist, workers take legally protected leave, and career penalties follow through mechanisms the law does not prevent without a labor market that can effectively punish bad actors.

Dating markets. The traditional meeting-and-sorting infrastructure has collapsed into dating apps, credential mismatches, geographic sorting by education, and the disappearance of workplaces and third spaces as matching venues. The Bodin et al. Swedish study of 191 men found men uncertain about fatherhood were three times more likely to cite concerns about a potential co-parent relationship than confident ones. The uncertainty propagating through Uchikoshi’s child-driven marriage mechanism is partly produced by a matching infrastructure that no longer reliably matches.

The commentary economy. Blame attribution is a product that can be manufactured cheaply and sold at scale. The cluster of takes identified earlier (Andrews, Yglesias, Piker, Morgan) isn’t a coincidence of four separate commentators having similar bad takes; it’s a structural equilibrium produced by the engagement architecture of online discourse.

cites NYU social psychologist Jay Van Bavel’s research showing that in real-life political-opinion surveys, belief distributions are approximately bell-shaped, with most people holding moderate views on most issues. Online, 97% of political posts on Twitter/X come from roughly 10% of the most active users, the most extreme end of the belief distribution on any given issue. The underlying distribution is a bell. The visible distribution is a U. The algorithm amplifies engagement and engagement is produced at the extremes, so moderate views become invisible while extreme views become the observed consensus.

This is the architecture that makes the equilibrium rational. A pundit who names a demographic scapegoat (the girlbosses, the unf*ckable gamers, the women who “waited too long”, the men whose paternal instincts “prove” they are predators) captures the 10% that produces 97% of posts. A pundit who walks through the Korean male-inactivity rate rising from 10% to 30% between the mid-1990s and early 2020s and interacting with the jeonse housing architecture to collapse the 25–29 marriage rate by 89% captures a polite nod and a small audience. The commentary market rewards the first; it neither rewards nor punishes the second; it simply does not amplify it. The market does not care whether a take moves fertility, because fertility movement is not the product. Attribution of blame is the product, and blame is a renewable resource.

Miyazaki is the useful control case. He has held roughly the same position for thirty years, pessimist about the world and maker of blessings for children anyway, through four decades of changing discourse environments, without converting it into a brand or a niche. He says the same thing when the Guardian asks him in 2005, when the Hiroshima press asks him in 2009, and when he retires in 2013. The commentators identified above have to generate fresh takes because the engagement function decays. Miyazaki can repeat himself because his position was never optimized for engagement in the first place; it was optimized for whatever he believes the actual problem is. The four takes, whatever their ideological differences, converge on the same architectural behavior: treat the demographic group whose life conditions are most constrained by the problem as the cause of the problem, propose no delivery mechanism, harvest engagement, move on. The commentators are not stupid. They are responding to an incentive structure that rewards this specific behavior regardless of intent. The underlying distribution of views in the general population, which the real-life surveys find, is a bell of shared concern and ambivalence. The visible discourse is a minority-opinion product with outsized distribution.

Let’s go outside

Let me step out of the formality for a minute, because I’ve been at this for a while now and the register I’ve been writing in, architecture and channel and threshold and depletion, has a way of making the actual thing I care about sound “cleaner” than it is. Apologies in advance if the gear shift feels abrupt. It is.

The actual thing is this. I know men (young, old, Gen Z, and millennial) who want to be dads and are starting to think they won’t get to be, and I know women who want to be moms and are starting to think they won’t get to be, and the reasons in every case are specific and boring and heartbreaking. The rent. The job. The partner who wanted different things. The degree that took too long. The loneliness that wouldn’t break. The year, and then the next year. None of them are stupid (well, they are still human and humans are stupid to a degree). None of them are selfish (that’s not true, we are all selfish to a degree). None of them are refusing anything. They are a generation of people who have been told in one register that they should want this, in another register that wanting it is suspect, and in a third register that the conditions under which the wanting could be acted on are, at present, beyond the scope of anybody’s concern.

The reason I wrote thousands, if not tens of thousands, of words on this isn’t that I find demographic dilemma interesting, though I do. It’s that there is a specific kind of grief that comes from wanting a life the world won’t arrange itself to let you have, and the people I care about are starting to carry that grief, and I don’t want to watch them be lectured about whose fault it is when what they need is for somebody to notice the weight.

Miyazaki watches children from his studio and decides to make something for them anyway, knowing the world is heading somewhere bad, a take I very much agree with despite recent innovations. Chou and Oyama spent six years building Hugh and Diana and told an interviewer, when asked, that what makes a family isn’t biology, it’s what kind of being you are and how you treat the ones who need you. The artists, when you ask them, say the simple thing. Most of the commentary, when you ask it, says something else. I’ve tried in this piece to say the simple thing in the register the commentary accepts, which is a long walk to take to get to a place any honest parent could have described in a sentence. The walk was necessary because the room is loud, and the architectural vocabulary is what lets the argument survive inside the room.

If anything here was useful to you, use it. If something was wrong, tell me. I am not trying to convince anyone to want a family they do not want. I am trying to clear some air around the people who do want one, so that the work of actually helping them, which is real work, doable work, and work that a small number of places have been quietly doing for decades, has somewhere to land that isn’t already occupied by a take. The wanting is there. The loud voices have been misdescribing it. That is most of what I came here to say.

The game I started this essay with ends, like all games, with the credits rolling and the player putting down the controller. The father-daughter relationship the million-plus players spent their weekend inside goes back into storage on the console. The players go back to their lives. Some of those lives contain daughters and some don’t, and some of the ones that don’t would, under different conditions, contain them. A game cannot build the conditions. A few of my fellow pronatalists like Lyman would say games and media like cartoons are bad. Others like myself takes more joy at modern media. A game can, at most, let the players know that the conditions are the problem, by briefly showing them what it feels like when the conditions aren’t there and the relationship is allowed to exist anyway. Some people call it escapism, but the lack of choice people have it’s a gift.

That is the specific gift Chou and Oyama made, and Miyazaki has been making some version of it for forty years, and the people with children to protect or children to want have been receiving those gifts and using them to sustain themselves through an environment that is, as Miyazaki keeps saying, heading somewhere bad. The gifts are not a substitute for changing the environment. They are a reason to keep going until someone does.

Why does Jiangsu build and California can’t?

In November 2013, six months after Xi Jinping announced the Belt and Road Initiative at a podium in Astana, the Jiangsu Provincial Development and Reform Commission stood up a dedicated leading small group to handle implementation. The group had a budget and full-time staff. Within three years, Jiangsu had launched 47 infrastructure projects across partner countries worth USD 8.3 billion, formed 23 international partnerships, and sent its senior leadership on 15 overseas promotional trips. The province’s 13th Five-Year Plan, adopted in 2016, treated the initiative not as a directive from Beijing but as an opportunity Jiangsu intended to shape around its own industrial priorities.

In January 2008, five years before Jiangsu even heard of BRI, California voters approved Proposition 1A, a $9.95 billion bond issue to build a high-speed rail line connecting San Francisco to Los Angeles. Governor Schwarzenegger signed the authorizing legislation the following year. The line was projected to open in 2020 at a total cost of $33 billion. As of February 2026, not a single train operates on any portion of the California High-Speed Rail system. The projected cost has risen to approximately $135 billion. The current governor, Gavin Newsom, announced in 2019 that the full line would not be built, pivoted to a partial segment in the Central Valley, and then in 2025 claimed credit for entering the “track-laying phase” of that reduced segment. In the same state, over the same period, over $37 billion has been spent on homelessness programs; California now has more unhoused residents than any other state in the country. Newsom ran for governor in 2018 promising 3.5 million new housing units by 2025. The actual total is 640,873 homes built across seven years, less than a fifth of his target.

Both of these happened. Both are the work of senior sub-national officials in major economies, operating under democratic or authoritarian institutions as the case may be, given large budgets and clear mandates.

One set of officials built things. The other set did not.

Which half is the West copying?

The misdiagnosis of why this gap exists is already shaping Western policy, and the policies being produced will make Western economies worse rather than better.

In September 2024, former European Central Bank president Mario Draghi delivered his report on European competitiveness to the European Commission. The report is now the official economic doctrine of the EU, endorsed by every member state and the European Parliament, with Renew Europe minister Stéphane Séjourné declaring that “everything proposed since has been aligned with it.” Draghi’s diagnosis: Europe is falling dangerously behind the United States and China, its productivity growth has collapsed, its firms are too small to compete at global scale, its fragmented markets prevent the emergence of European champions. Draghi’s prescription: relaxed merger rules, industrial consolidation, capital market integration, the construction of “European champions” in key sectors, €800 billion per year of investment partly financed by joint EU borrowing.

Consider how specific this gets. The EU currently has 34 mobile network operators compared with 3 in the United States and 4 in China. Draghi treats this as a self-evident problem, blaming “overly cautious competition authorities” for the “plurality of players.” The Commission’s Competitiveness Compass, released in January 2025, goes further than Draghi himself in loosening merger rules to support European champion creation. The telecoms sector is the first target. Defense is next. Automotive is in the queue.

American commentators make the same pattern-match. Jennifer Lind’s Foreign Affairs essay from February 2026, drawn from her book Autocracy 2.0, frames China’s rise as a story of “smart authoritarianism” in which the CCP adapted its tools of control to foster innovation while preserving central command. The Washington Monthly in October 2025 praised China’s “state-managed capitalism” for combining “political repression with a coherent economic plan.” The American Compass, on the right, characterizes China as a state-controlled economy whose successes flow from CCP direction over industry. The implicit lesson across these accounts, regardless of whether the author approves or disapproves, is that China is winning because of central command, and that Western states must therefore either copy the command or wall themselves off from its results.

Chinese centralization is real, and in specific domains it is valuable. Beijing directs state bank credit into strategic sectors at scales the West has never matched. Beijing holds industrial electricity prices below market through state-set benchmark tariffs. Beijing disciplines its own billionaires when they step out of line, most famously when Jack Ma criticized financial regulators in October 2020 and saw Ant Financial’s IPO suspended within weeks. These are desirable uses of state power. A Western observer who looks at Chinese success and concludes that the center’s strategic capacity matters is not wrong.

What that observer is wrong about is which uses of central power the West will actually copy.

The EU is not about to cap industrial electricity prices. It has spent the last five years deliberately raising them. The IEA’s 2025 analysis shows EU industrial electricity prices at roughly twice US levels and 50% above China’s in 2025, up from 50% above the US and 20% above China in 2019. The gap doubled in half a decade, driven by EU ETS carbon pricing, deliberate phase-out of domestic generation, and LNG dependence. Germany shut down its last operational nuclear reactors in April 2023 while importing LNG at roughly three times pre-2022 prices. By country, industrial rates run roughly 18 US cents per kWh in Germany, 16 in Japan, 12 in France, and 7 in China. The EU has the formal authority to hold industrial electricity prices low through state aid, cross-subsidization, or domestic production mandates. It refuses to use it.

The United States, which has the world’s largest shale gas reserves, imposed a moratorium on new federal oil and gas leases in January 2021 through Executive Order 14008. A Louisiana federal judge ruled the moratorium exceeded presidential authority, but lease sales kept falling by orders of magnitude through the rest of the term. The blocked Q1 2021 Wyoming sale covered 476,000 acres across 383 parcels; the Q1 2024 sale covered 13,417 acres across 30 parcels.

The leasing freeze was the visible half; the financial architecture was worse. The Net-Zero Banking Alliance launched in April 2021 under UN auspices with JPMorgan, Citigroup, Bank of America, Morgan Stanley, Wells Fargo, and Goldman Sachs as founding members committed to align lending portfolios with a 1.5°C pathway by 2050. Reserve-based lending to small and mid-cap independents dried up. Institutional LPs backed away from oil and gas private equity under ESG pressure. When Russia invaded Ukraine and WTI peaked near $130 in March 2022, US producers with breakevens around $60 still could not grow. The Dallas Fed Q1 2022 Energy Survey found nearly 60% of executives cited investor pressure to maintain capital discipline as the primary reason they were not drilling; 29% said growth was not dependent on oil price at any level. Big integrated producers returned cash to shareholders. Biden’s response was historic SPR releases, pressure on OPEC to pump more, and Russia sanctions that pushed prices higher.

Four years later the pattern repeats with the rhetoric inverted. The 2026 Iran war closed the Strait of Hormuz on March 4, pushing Brent past $120 and OPEC production down a record 7.56 million barrels per day that month. Trump’s response is the same playbook: SPR release structured as a loan from a reserve still at 58% of capacity a year after he pledged to fill it to the top, pressure on Saudi Arabia and OPEC to ramp output, and deregulation of LNG export terminals whose first shipments arrive in 2029-2030. Small and mid-cap producers remain capital-starved. Marshall Adkins of Raymond James says Trump’s push for lower prices is bad for US producers; the EIA now predicts US production will fall to 13.5 million barrels per day in 2026, the first annual contraction since 2020. The Net-Zero Banking Alliance dissolved in November 2025; institutional capital remains absent anyway, because the alliance was the visible surface of allocation preferences that persist without it.

Biden had $130 oil, a producer base with $60 breakevens, and the full federal toolkit: Defense Production Act loans, Treasury loan guarantees, SPR floor-price purchases, bank regulator guidance. He deployed none of it. Trump inherited the same toolkit, inverted the rhetoric toward deregulation, and is producing the same outcome: falling domestic production during a price shock, capital-starved small and mid-cap producers, strategic dependence on OPEC goodwill. When Beijing’s strategic sectors need capital, state banks lend and municipal guidance funds take equity. When American producers needed capital during two separate price shocks in four years, the federal response across both parties has been to release the emergency reserve and ask OPEC for help.

These are not limits on Western central authority. These are exercises of Western central authority, in directions opposite to what Beijing chose. Both Berlin and Washington possessed the formal tools to do what Beijing did and refused. The EU could direct state aid at industrial energy costs; it preferred carbon pricing that raises them. The US could have directed capital to domestic producers through multiple price shocks across two administrations; it preferred emergency reserve releases and calls to OPEC.

Now consider capital direction. Beijing routes strategic capital through state banks and guidance funds into semiconductors, batteries, renewables, and EVs at scales the West has never matched. The CHIPS Act of 2022 authorized $52 billion in US semiconductor funding; Chinese state guidance funds deployed around $1.52 trillion into strategic sectors between 2015 and 2021 alone, with state-bank lending pushing the total substantially higher. The EU’s Important Projects of Common European Interest framework has cumulatively spent less than €40 billion since 2018, compared with €190 billion in uncoordinated national aid in 2023 alone. Scale matters. Direction matters more.

Now consider discipline of incumbents. When Jack Ma criticized regulators, Beijing suspended Ant Financial’s IPO, launched antitrust investigations against Alibaba, and ultimately extracted multi-billion-dollar fines and structural changes. Similar discipline hit the private education tutoring sector (essentially dismantled in 2021), online gaming (forced time limits and new-game approval moratoriums), and real estate speculation (forced deleveraging through the “three red lines” policy). Contrast this with the West’s relationship to its own incumbents. The EU has issued antitrust fines against US tech firms totaling well over €10 billion since 2017, and none of these have produced structural change. The US Department of Justice’s antitrust case against Google, decided in 2024, has yet to produce remedies. The political will to discipline incumbents does not exist in Western systems at the level Beijing routinely exercises.

These are the categories where Chinese central authority acts decisively against commercial incumbents on behalf of strategic priorities: cheap energy, directed capital, and disciplined platforms. These are also the categories where Western states consistently refuse to exercise their own authority. Subtract those three and look at what remains. The one category where Chinese central authority routinely fails (forced industry consolidation, as the Dongfeng-Changan merger collapse of June 2025 will show) becomes, in Western discourse, the primary lesson to copy. Draghi wants fewer telecom operators. The Competitiveness Compass wants looser merger rules to build champions. American commentators want scale through consolidation. The West is about to import the single habit that even Xi cannot fully execute, while refusing to import the habits where Beijing excels.

Western centralization without the political will to hold energy prices, direct capital at scale, or discipline billionaires will produce the costs of centralization without the benefits. It will leave the West with the worst possible combination: fewer competitors, none of them strategically directed, all of them protected.

Is China really a command system?

The monolithic picture rests on real evidence. China is a Leninist party-state. The Central Organization Department appoints every senior official in the country. Xi has spent a decade consolidating personal power: abolishing term limits, enshrining “Xi Jinping Thought” in the party constitution, purging hundreds of thousands of officials through anti-corruption. Lind is not wrong that the regime has maintained rigid control while achieving innovation. Fang, Li, and Lu’s analysis of 3.7 million policy documents confirms real recentralization after 2013: the central share of local policy portfolios rose from roughly 30% to above 40%.

The monolithic story is not wrong to identify central strategic capacity as part of what makes China hard to compete with. What it misses is that central strategic capacity does not execute itself, you still need people and subsystems. Every directive Beijing issues must be translated into operational activity by sub-national administrations. The center sets the strategic direction; the provinces and municipalities build the semiconductor fabs, finance the battery makers, run the tech regulatory investigations, and implement the benchmark industrial tariffs. Remove the deep provincial bench and Beijing’s strategic directives become press releases. This is exactly what they become in Qinghai.

The sharpest recent empirical work on the gap between central directive and provincial execution is a 2026 study by Zheng Gong and Tim David in the Journal of Chinese Political Science, Provincial Governance and Variation in China’s Belt and Road Initiative. Gong and David assemble panel data on BRI implementation across all 31 Chinese provinces from 2015 to 2019 and run a hierarchical linear model to decompose the variance in implementation effectiveness. Their finding: about 34 percent of the variation sits between provinces rather than within them over time, and provincial characteristics explain 58 percent of that between-province variance. The single strongest predictor, even after controlling for GDP per capita, population, coastal location, and distance from Beijing, is provincial bureaucratic capacity.

This is not what a pure command system produces. In a pure command system, the same directive produces comparable outcomes, with variation attributable to geography or noise. Gong and David find something else. The same directive produces radically different outcomes across provinces, tracking each province’s administrative depth. The center is the senior partner, not the sole actor. Take away provincial capacity and the center has authority with nothing to point it at.

The second piece of evidence is the Dongfeng-Changan merger collapse of June 2025, which reveals what happens when central direction confronts provincial resistance on a policy where Beijing itself is ambivalent. In February 2025, the State-owned Assets Supervision and Administration Commission, reporting directly to the State Council, announced a plan to merge Dongfeng Motor Group and Chongqing Changan Automobile into a single central state-owned automaker with roughly five million annual vehicle sales, a scale competitive with BYD. Xi Jinping’s Central Financial Affairs Commission had made industrial consolidation an explicit priority.

116 days later the merger collapsed. Caixin‘s reporting identified the cause as intervention from the municipal government of Chongqing and the provincial government of Hubei, each refusing to accept the terms on offer. The companies, with that political cover, walked away. Analysts had predicted this before the announcement was even official, noting that auto consolidation in China “has failed to happen due to reluctance by government stakeholders to give up control of such important contributors to their local economies.” The fiscal architecture makes the refusal rational rather than obstructionist. If Chongqing loses Changan’s headquarters, it loses the tax revenue, the employment numbers, the cadre credit, and the center’s willingness to tolerate the province’s LGFV debt. No local leader who wants promotion acquiesces to that without extraordinary compensation.

The monolithic story cannot accommodate this without contortion. The distributed-competence story explains it immediately, and it also explains why Beijing wins on some domains and loses on others. Where central strategic priorities align with provincial incentives (strategic capital allocation, cheap industrial electricity, disciplining outside-system incumbents like Alibaba), the center wins. Where central priorities cut against provincial fiscal interests (consolidating automakers means some provinces lose their local industrial base), the center loses, even to Xi. The distributed structure is not a bug in the Chinese system. It is a feature whose costs and benefits are distributed unevenly across policy domains.

What happens when three provinces get the same directive?

Three provincial cases, same directive. Gong and David study Jiangsu, Henan, and Qinghai, selected to represent high, medium, and low bureaucratic capacity respectively. All three provinces receive the same BRI directive in 2013. All three face the same central policy intensity over 2015-2019. All three are subject to the same Central Organization Department appointment system, the same nomenklatura, the same target-responsibility evaluation framework. The variable that differs is provincial administrative capacity. The outcomes track that variable with almost embarrassing clarity.

Jiangsu is the high-capacity case. Its Provincial Development and Reform Commission moved within six months to stand up the dedicated BRI leading small group mentioned at the opening of this piece. The 13th Five-Year Plan of 2016 treated BRI as an opportunity to align provincial industrial policy with overseas market expansion. Jiangsu’s execution figures cited at the opening (47 projects, $8.3B, 23 partnerships, 15 overseas promotional trips) came from a deep SOE bench in construction and engineering that allowed the province to assemble consortia for overseas tenders. The mechanism Gong and David describe is “bureaucratic entrepreneurship,” in which provincial officials do not merely implement the central directive but actively shape it around what their province is organizationally capable of delivering. Jiangsu was not told to do any of this specifically. It chose to, because its administrators could.

Henan is the medium-capacity case, and the most instructive of the three. It is inland. It has no obvious BRI advantages. Its economy is smaller and less internationally integrated than Jiangsu’s. By the logic of the monolithic story, Henan should have either followed Jiangsu’s template (if Beijing imposes uniformity) or done very little (if provincial resources determine outcomes). It did neither. Henan’s administrators negotiated. They identified aviation logistics as the province’s one potentially BRI-relevant asset, then spent three years lobbying the National Development and Reform Commission to designate the Zhengzhou Airport Economy Zone as a regional BRI hub. They drafted feasibility studies. They bargained with central agencies. They did not ask for permission to participate on standard terms; they asked to participate on terms their province could actually meet. By 2019, Henan had launched 23 BRI projects worth roughly USD 3.1 billion, less than Jiangsu but more than any low-capacity Western or interior province. The province got there through policy entrepreneurship, deployed by officials most foreign observers could not name, in a province most foreign observers could not place on a map.

Qinghai is the low-capacity case. It issued an official BRI framework in 2016. It established coordination bodies similar to those in Jiangsu and Henan. It incorporated BRI into its provincial work reports. It launched eight projects worth roughly USD 0.4 billion by 2019, less than 5 percent of Jiangsu’s volume. Gong and David document that many of these were pre-existing provincial programs relabeled as BRI initiatives without new resource commitments. The monolithic story would predict either uniform execution (which did not happen) or principled refusal (which also did not happen). What happened instead was symbolic compliance: the forms of participation, without the substance, because the substance exceeded the province’s administrative capacity.

Same directive. Same national context. Same five-year window. Three outcomes, each tracking the administrative capacity of the receiving province rather than the intensity of the central directive. I don’t know about you, but this clearly does not look like the centralized command system we were told.

The point becomes sharper in Gong and David’s cross-level interaction analysis. The authors estimate that central policy intensity interacts with provincial bureaucratic capacity at γ = 0.187, p < 0.01. When Beijing pushes harder on BRI, high-capacity provinces deliver substantially more, while low-capacity provinces barely respond. A one-standard-deviation increase in central pressure produces a 0.44-unit change in implementation effectiveness in high-capacity provinces and only a 0.09-unit change in low-capacity ones. Central pressure is an amplifier of provincial capacity, not a substitute for it. When Beijing leans on Jiangsu, Jiangsu builds more. When Beijing leans on Qinghai, Qinghai issues more press releases.

Beijing’s willingness to hold electricity prices low means nothing without provincial grid operators executing the tariff structure; state-bank credit directed to semiconductors means nothing without municipal guidance funds co-investing and local SOE managers building the fabs; discipline of Alibaba means nothing without provincial and municipal regulators who can run the investigations and enforce the remedies. The center is the senior partner, not a substitute.

Who actually writes Chinese industrial policy?

The BRI case is not an anomaly. It is the operating system.

Fang, Li, and Lu’s 2025 NBER analysis, summarized accessibly by VoxDev, identifies 768,000 documents as industrial policy, roughly a quarter of all government policy output. Of these, 13 percent come from the central government. 45 percent come from provinces. 39 percent come from cities. 3 percent come from counties and townships. Eighty-seven percent of Chinese industrial policy, by document count, originates below Beijing. A 2025 Stanford SCCEI brief puts the figure for Chinese policy overall at more than 80 percent originating locally. The authors attribute this to tournament competition among officials seeking promotion through growth-oriented policy innovation, the same incentive structure that Li and Zhou described in their 2005 analysis of political turnover and economic performance.

Provincial capacity drives not just policy volume but policy quality. Wang and colleagues, writing in Management and Organization Review in 2024, examine industrial specialization choices by all 31 provincial governments and find that provinces with greater organizational efficacy, measured by access to better-resourced local SOEs in their focal industries, make smarter specialization decisions. The finding mirrors Gong and David’s finding for BRI: capacity predicts both the quantity and the intelligence of provincial policy output.

The theoretical framework that organizes all of this is Chenggang Xu’s 2011 Journal of Economic Literature article, which names the Chinese system “regionally decentralized authoritarian.” Xu’s formulation: the center controls personnel and sets strategic direction, subnational governments run the bulk of economic execution. The personnel pipeline is centralized. The policy machinery is not. What looks from the outside like a single commanding intelligence is actually several thousand provincial, municipal, and county-level administrations running their own industrial strategies, competing with each other for growth, and negotiating with Beijing over the terms on which they participate in centrally-branded initiatives.

The same pattern appears in finance. The 1994 tax-sharing reform centralized most tax revenue with Beijing but left local governments responsible for the bulk of public expenditure. Local revenue fell below 40 percent of the national total; local expenditure now approaches 85 percent. The instruments developed to bridge that gap are themselves evidence of distributed administrative sophistication. The Local Government Financing Vehicle, pioneered in Wuhu, Anhui in 1998, became ubiquitous after 2008. By 2023, total LGFV debt reached roughly 50 trillion yuan, or 41 percent of GDP; Victor Shih’s UCSD analysis puts the total including shadow credit at 75 to 91 percent of GDP. More than twelve provinces now carry LGFV debt exceeding half their own provincial GDP. Revealingly, CKGSB reportingconfirms that LGFV financial distress is concentrated precisely where Gong and David’s paper identifies low-capacity provinces: Guizhou, Inner Mongolia, Ningxia, Liaoning, Qinghai.

Since around 2014, Chinese industrial policy financing has also flowed through Government Guidance Funds, public-private investment vehicles combining state capital with private VC and PE expertise. Georgetown’s CSET reportprovides the authoritative English-language overview. Between 2015 and 2021, roughly 2,000 guidance funds deployed around £850 billion; they now account for about 30 percent of all PE and VC capital raised in China. The architecture is deliberately tiered, as Boston University’s Global Development Policy Center explains. Beijing sets broad strategic priorities. Provincial and municipal authorities refine them with local specificity. Sub-funds typically invest primarily within their own jurisdictions.

The Hefei municipal guidance fund apparatus is the case that best illustrates the pattern. Hefei, the capital of Anhui province, is not a Tier-1 Chinese city. It does not have the fiscal resources of Shanghai or Shenzhen. Its guidance fund nevertheless took early equity stakes in both NIO and BOE Technology before either was a dominant firm, and helped transform Hefei into a national center for electric vehicles and display technology. It was not Beijing that picked NIO. It was municipal officials in Anhui, making allocation decisions with enough sophistication to pick winners that national-level funds had passed on, operating within a strategic framework Beijing had set but Beijing had not executed.

The answer has two parts. The center sets strategic direction, holds input costs low through state-set tariffs, directs credit at scale toward priority sectors, and disciplines incumbent commercial interests that threaten strategic coherence. The provinces and municipalities execute, competing with each other under a tournament incentive structure, financed through a tiered capital-allocation system that places real decision-making at the sub-national level. Remove either half and the system stops working. What looks like authoritarian command is the interaction of strategic central authority and deep distributed execution.

What makes it hold together?

The architecture that sustains this pattern is not a conspiracy and does not require anyone in it to be virtuous. It is a set of incentive structures that make both strong strategic center and distributed provincial competence the rational equilibrium.

Start with personnel. The Central Organization Department controls appointment and promotion for every senior cadre in the country. Pierre Landry’s 2008 book Decentralized Authoritarianism in China documents the core mechanism: officials are selected young, rotated deliberately across jurisdictions and functional portfolios, and promoted on the basis of measurable performance in their current posts. Li and Zhou’s 2005 Journal of Public Economics article shows that provincial leaders’ promotion probabilities track GDP growth in their provinces, creating a tournament in which officials compete for advancement by delivering measurable outcomes. Jia, Kudamatsu, and Seim (2015) find that competence and factional connections operate as complements rather than substitutes. Both performance and political reliability are rewarded, but the performance component is real.

Forty years of rotation-and-promotion tournament, operated at continental scale with real career consequences, produces a population of senior administrators who have run multiple jurisdictions, handled multiple portfolios, and been selected repeatedly for their ability to deliver results. The system’s pathologies are real: statistical falsification (Wallace 2014), anti-corruption purges that disproportionately target factional rivals, metrics gaming that produces visible outputs while obscuring substantive failure. But even the pathologies operate within a machine that has built administrative capacity at the provincial level. That is why Jiangsu can stand up a BRI leading small group in six months and why Hefei can pick NIO before anyone else does.

The fiscal architecture reinforces this. The 1994 tax reform created a structural imbalance between local revenue (below 40 percent of national) and local expenditure (now approaching 85 percent). Local governments had to develop financing mechanisms or default on their obligations. The LGFV system layered on top of state-bank lending is essentially a parallel municipal-bond market routed through land collateral, land-use-rights capitalization, and implicit central guarantees. It is not elegant. It has produced the distressed-LGFV crisis concentrated in the lowest-capacity provinces. But it works because the incentives reward local governments that can finance and deliver infrastructure, and punish those that cannot. The guidance-fund system layered on after 2014 does the same for industrial equity: reward provincial and municipal administrations that can identify and back winners, disadvantage those that cannot.

Put together, the deep provincial bench plus strategic central authority willing to act against incumbents is what produces results. Western attempts to copy Chinese centralization consistently pick the wrong half.

The United States consolidated its auto industry decades ago into the Big Three (GM, Ford, Chrysler) and has spent forty years losing global market share, punctuated by repeated bailouts, the most recent in 2008-2009 when two of the three required federal rescue. Japan, by contrast, kept its industry fragmented. Toyota, Honda, Nissan, Mazda, Subaru, Suzuki, Mitsubishi, Daihatsu, and Isuzu all still operate as independent firms, with cross-shareholdings but no merger pressure from Tokyo. Japan has dominated global auto markets for most of the last fifty years. China’s current EV industry structure (BYD, Geely, NIO, Xpeng, Li Auto, Zeekr, all operating as distinct competitors backed by different provincial coalitions) looks structurally closer to Japan than to Detroit.

The EU’s response to Chinese EV dominance is to propose consolidating its own fragmented auto sector into fewer, larger European champions. This is moving from the Japan model toward the Detroit model while citing Chinese success as the justification. The direction is inverted. China is not winning because of consolidation. China is winning because its center holds strategic input costs low, directs capital to strategic sectors, disciplines platforms that threaten strategic priorities, and its provinces compete intensely on execution within that strategic framework. Remove the provincial competition and you do not have China. You have Detroit in the 1970s, plus some extra paperwork.

The American side of the misreading is worse, because it is domestic. US commentators across the ideological spectrum praise Chinese centralization while their own sub-national governments are visibly failing. California is governed by Gavin Newsom, whose record includes the high-speed rail debacle described at the opening, $37 billion spent on homelessness while California’s unhoused population remains the largest in the nation, and an Employment Development Department that lost $33 billion to unemployment fraud during the pandemic. Texas is governed by Greg Abbott, whose tenure includes the February 2021 power grid failure that killed hundreds after the Public Utility Commission under Abbott’s appointees dismantled oversight mechanisms that could have required winterization, followed by a years-long political posture of claiming to have fixed a grid that independent assessments still find vulnerable. These are not minor officials. California is the world’s fifth-largest economy. Texas is the second-largest US state by GDP.

Compare this to the governors of Jiangsu and Guangdong. You almost certainly cannot name them. They run provincial economies larger than most OECD countries, coordinate tens of billions of dollars annually in guidance-fund equity, anchor overseas infrastructure initiatives that span continents, and do so within a tournament structure that would remove them from office if they failed to deliver. The anonymity is the tell. The American system does not produce provincial executives of comparable depth, and the commentators praising Chinese centralization are praising the theater visible to foreign observers while ignoring the machinery that actually does the work.

What is the West getting wrong?

China’s industrial performance comes from two machines running in combination, not one. The first is a personnel and fiscal architecture that produces a deep provincial administrative bench: rotation across jurisdictions, promotion by tournament on measurable outcomes, local fiscal autonomy routed through LGFVs and guidance funds. The second is a political economy in which central authority is willing to use its power against powerful domestic commercial interests when strategic priorities require it: industrial electricity prices held below market, state-bank credit directed to strategic sectors at scale, billionaires disciplined when they step out of line. The 87% of Chinese industrial policy that originates below Beijing implements the 13% that originates at the center, and neither half works without the other.

The Western mirror lacks both halves. It lacks deep provincial and municipal competence not because it needs a CCP-style cadre tournament (it doesn’t), but because Western parties reward factional politics over governing results. A party that actually wanted to deliver housing, trains, and grid capacity would produce competent provincial executives within a decade. None has tried in a generation. It lacks the central strategic will because its incumbent commercial interests are wired into the political coalitions that make central authority legitimate. US oil majors and European Green coalitions each hold veto power over their respective energy policies. The formal toolkit exists; the political economy prevents its deployment.

The inversion matters. When the West “centralizes” in response to Chinese success, it centralizes in the one category where even Xi regularly fails (forced consolidation, champion-building, merger liberalization), while refusing to centralize in the categories where Chinese centralization actually delivers. The EU’s Competitiveness Compass wants to consolidate 34 mobile operators into fewer champions while industrial electricity prices have widened to nearly double US levels and Apple and Google remain untouched. American industrial policy advocates want national champions while the US has not passed serious antitrust reform in a generation and has reduced rather than expanded domestic hydrocarbon production across two administrations.

The Western failure is not a missing Xi. Centralizing without both halves produces only protected inefficient monopolies like the American car industry, a political class slightly more empowered to defend them, and an industrial electricity bill that keeps going up. If you want the benefits of centralization, you need to govern and focus on cutting energy prices and the costs of capital. If you will not do those things, centralization will make you weaker, not stronger. This is what the West is about to learn, and the learning is going to be expensive.

Cities around the world keep losing their commercial cores. In America, suburban malls make the news when Macy’s announces another closure. In the United Kingdom, high streets bleed quietly, one boarded shopfront at a time, until the council notices that the business rates projections have gone hollow. In France, the cœurs de ville of mid-sized towns lose their merchants to out-of-town retail parks. In Japan, shotengai vacancy accelerates faster than municipal budgets can respond. In Korea, second-tier cities watch their downtowns empty while national urban-regeneration funding rises and falls with each election cycle.

The standard response in every country is familiar: do a very limited rezone the site (if we are lucky), subsidize the developer, build something maybe mixed-use (or luxury apartments with a brewery), declare victory, move on. This usually fails (in part not aggressive enough). When it works, as it did in Lakewood, Colorado, or in Margate, Kent, or in a growing list of French communes that have taken Action Cœur de Ville seriously, it works for reasons that have almost nothing to do with zoning and everything to do with the thing that is hardest to talk about: whether the local government involved is actually capable of executing a complex multi-year project with discipline. Most are not.

The reframe this piece turns on: commercial decline is a governance problem just as much it is a zoning/urbanist problem, which means it is also the best opportunity most cities will ever have to build real state capacity. Not a nuisance to be managed. A (dangerous) gym to build up local institutional muscle. We’ll come back to why.

Zoning reform (or just get rid of it) is necessary, and more than likely the prerequisite. Spend five minutes with the evidence on parking minimums, mixed-use prohibitions, and discretionary review timelines and the case becomes obvious. But zoning reform increases the number of attempts without changing the survival rate of each one. At the end of the day, businesses are probabilistic, not deterministic. A perfectly deregulated commercial district with great foot traffic and cheap rents will still see roughly half of its new restaurants fail within five years.

Which is bad for you, the policymaker, because you need tax revenue and visible results. Churn undercuts both: the storefront that closes after eighteen months doesn’t show up in the ribbon-cutting photos, and every visibly empty window is ammunition for the less development-friendly opposition you just beat to pass the reform in the first place.

So, if the odds are bad, can policy move the probability distribution: make more attempts possible, improve the survival rate of each attempt, catch the survivors before they fail for reasons unrelated to their underlying viability. What policy cannot do is make the distribution disappear.

What do YIMBYs and urbanists get from caring about what happens after a unit gets built? Everything. Both movements came out of substantive goals (affordability, jobs, quality of life) not procedural ones, and better local governance is what makes hard-fought reforms survive the next administration. Carmel (for urbanists) and Austin (for YIMBYs) didn't happen by accident.

The stakes are fiscal, not just about aesthetic

Before going further: this actually matters, and not for the reasons people who write about urbanism usually give.

Consider two shapes the damage takes. One fast, one slow.

The fast version is Pittsburgh Mills, in Frazer, Pennsylvania. One analysis documents assessed value falling from $148 million in 2018 to under $15 million by 2024. A 90% collapse of a local property tax base, from a single asset, in six years. Each dying lower-tier American mall also removes something in the range of $1.8 to $3 million in annual sales tax revenue from its host municipality. For some cities where one mall represents 20 to 30% of the local tax revenue. This is not a rounding error, and it’s clear that malls and downtowns are slow motion fiscal emergencies.

The slow version is Detroit, the case in any advanced economy where downtown and urban-core decline produced outright municipal bankruptcy, the largest in U.S. history, filed in 2013. By the mid-2010s, 23% of housing units were vacant, 36% of commercial parcels were vacant, and the property tax delinquency rate had skyrocketed to 54%. The bankruptcy was the visible event; the governance crisis had been developing for fifty years. Yes the city went bankrupted, and the main reason is the Great Recession. But before the recession, Detroit has a property tax base eroded to the point that even extraordinarily high rates cannot fund basic services, commercial vacancy that becomes structural rather than cyclical, and a fiscal situation that makes it easy for the Great Recession to break the city.

Detroit is an extreme example, but the mechanism is not unusual. In the UK, a high street with 30% vacancy generates substantially less in business rates than a healthy one, and the rates system punishes retail while exempting online commerce, so the distressed physical property pays more per pound of turnover than its online competitors. In France, communes rely on taxe foncière and the Cotisation Foncière des Entreprises; both erode with vacancy, and the TaSCom layer adds further exposure to peripheral retail that draws revenue away from the center. This is part of why the Opération de Revitalisation de Territoire framework, which lets participating communes block peripheral commercial permits, exists at all. In Japan, the fixed asset tax and city planning tax erode as shotengai vacancy accelerates, compounded by population decline and aging demographics that raise per-capita service costs. In Korea, property tax and local income surcharges follow the same curve, which is part of why the Urban Regeneration New Deal was framed as an emergency response to municipal fiscal deterioration rather than as ordinary urban policy.

The consequences are concrete. Schools, police, roads, transit, all funded from tax bases that this decline is dismantling.

The damage spreads outward. Cleveland research found that residential properties within 500 feet of tax-delinquent or foreclosed commercial sites experienced a 9.4% value loss between 2004 and 2009. We do not have Cleveland-grade contagion studies for every jurisdiction, and we want to be honest about that, but the qualitative pattern is consistent across UK high street research and Japanese shotengai work: a commercial core in visible decline depresses nearby residential desirability, slows new household formation, and accelerates the outflow of those who can leave. The residential tax base follows the commercial one, on a lag.

When a commercial district collapses, private service density collapses with it: not just retail, but clinics, pharmacies, banks, post offices, grocery stores, childcare. Residents still need these services, and local government either accepts degraded access or backfills at public cost from a tax base that’s simultaneously shrinking. Meanwhile the vacant properties themselves impose costs with no corresponding revenue: code enforcement, fire calls, policing, utility maintenance, planning department time absorbed by proposals that come and go. Across a high street with 30% vacancy or a downtown with more boarded plywood than open signage, staff time gets absorbed into reactive management rather than proactive anything.

Finally, the thing hardest to measure but that may matter most: when a city cannot keep its main commercial core functional, residents stop believing the local government is competent at anything else. That perception is downstream of the fiscal failures and upstream of everything the government wants to do next. A mayor trying to pass a transit bond, build affordable housing, expand school funding, or raise any tax for any purpose is negotiating from a weaker position if the commercial core of her city is visibly dying. A functioning commercial core is evidence of a functioning government. A dead one is evidence of the opposite, regardless of whose fault it actually was. Politics does not grade on fairness.

So why bother? Because this is the best forge you have.

Commercial decline is a serious governance crisis. It is also, paradoxically, an opportunity, and one most cities do not recognize while they are standing in the middle of it.

Three reasons.

First, the results are visible. A mayor who builds a pension fund’s long-term solvency is doing essential work nobody will ever thank her for. A mayor who revitalizes her downtown is doing work that every voter, every local business owner, every visiting relative can see and touch. The political economy of state capacity is usually cruel: the boring work that matters gets no credit, and the flashy work that does not matter gets all of it. Commercial revitalization is the rare case where the political incentive and the substantive outcome point in the same direction.

Second, the problem forces you to build capacity across every front at once. Most governance problems build one muscle. Passing a transit referendum builds lobbying capacity and not much else. Running a successful summer youth program builds contracting and program-management capacity in a narrow domain. Commercial revitalization is different. To do it well, a city has to build planning capacity (diagnostics, rezoning, urban design), financial capacity (grant writing, tax-credit stacking, developer negotiation), land-holding capacity (land banks, community land trusts, legal tools for moving hostile owners), business development capacity (the thing Singapore builds and almost nobody in the West has), and coalition capacity (anchor institutions, community organizations, state and national partners, successor administrations). This is the broadest-spectrum institutional workout any mid-sized city is ever going to encounter. And the capacities built here transfer. A land bank built to handle commercial properties can be retooled for housing. A coalition built to align hospitals and universities around commercial procurement can be redeployed for neighborhood health work. Anchor relationships outlast the specific project.

Third, if you fail, you still learn. The honest truth is that many cities will not fully succeed even when they try. The probabilistic nature of business formation, the hostility of absentee owners, the vagaries of national economic conditions, and the simple slowness of institutional change mean that perfect success is rare. But attempted revitalization produces institutional learning even when the specific project underdelivers. A city that tries and partly fails at a mall redevelopment has a planning department that now knows how to negotiate with developers, a finance office that has learned to work with CDFIs, and a place manager who understands retail. A city that does not try has none of those.

One caveat. This argument applies to cities that already have the problem. A city without commercial decline should not manufacture a commercial project to build state capacity. Different problems make different forges.

One more thing worth naming: the ownership asymmetry

Before turning to what the conventional response gets wrong, one structural observation that runs underneath everything else.

American enclosed malls typically have one owner. Downtowns, high streets, Singaporean strata malls, and most European commercial districts do not. This changes the problem fundamentally, and not in a simple direction.

A single-owner commercial district with an aligned owner is the fastest-moving case in the entire revitalization literature. One negotiation produces site control. No 80% strata consent. No hundreds of individual landlords to chase. One counterparty, one term sheet, one closing. When that alignment exists, nothing in the distributed-ownership literature moves as fast.

A single-owner commercial district with a hostile or indifferent owner is among the hardest cases any mayor faces. A REIT holds the mall through bankruptcy. A successor lender takes it back in foreclosure. An absentee investor holds it for tax loss, or for the option value of eventual land appreciation, and has decided that doing nothing is the most profitable choice. The city then finds itself with one very powerful stakeholder who cannot be moved by any land-use tool the American system currently provides. Eminent domain exists in theory but is politically radioactive and legally uncertain for commercial property. The UK’s High Street Rental Auctions do not exist in America. French préemption commercial does not exist in America. The city is stuck.

A downtown, a high street, or a shotengai is neither: always a collective action problem, slower than the aligned-owner case and more workable than the hostile-owner case. Slower because coordinating many owners takes time, and the tools for forcing coordination are weak in most jurisdictions. More workable because the city can build coalitions with owners who want to cooperate even when others refuse to engage. Progress is incremental but not blocked.

The tools that work in one case often don’t work in the others. Land banks, HSRAs, préemption, community land trusts: these are distributed-ownership tools that consolidate what the market cannot. At a single-owner mall they are largely beside the point; the question there is whether the counterparty can be moved, and if not, whether the city has the legal and financial staying power to make inaction more expensive than cooperation over time. Conversely, the kind of negotiation discipline that makes single-owner mall redevelopment work is not the skill a downtown revitalization actually needs. A downtown needs coalition capacity, patience, and the ability to hold many small wins together long enough to add up to something.

Much of what makes mall redevelopment look successful in the American literature is selection bias: the cases we read about are the ones where the single owner was eventually aligned. The cases where the owner was not aligned do not become cases. They become permanent vacancy, because nothing in the toolkit can move them.

Why the conventional response doesn’t work

The standard move (rezone, subsidize, build mixed-use, attract tenants) has two problems. First, it treats the upstream cause as if it were the downstream symptom. Second, it assumes that someone competent is going to execute.

Commercial decline is downstream of institutional failure, not upstream. Fragmented ownership, absent governance, thin planning capacity, weak business development, disinvested social fabric: these produce the vacancy, not the other way around. Fixing the buildings without fixing the institutions produces what the UK High Streets Task Force, after working with 149 English high streets over five years, honestly called activity without transformation.

The evidence on delegated private management is not subtle. Between November 2020 and June 2021, three major publicly traded mall REITs filed for Chapter 11: CBL & Associates, Pennsylvania Real Estate Investment Trust, and Washington Prime Group. CBL alone was managing 107 properties totaling 66.7 million square feet across 26 states. PREIT filed for bankruptcy a second time by 2024. Mall management firms are doing exactly what they were designed to do. That is the problem. Their obligation runs to investors and creditors, which translates into optimizing net operating income. No accountability to the municipal tax base, the surrounding neighborhood, or the small businesses that depend on foot traffic. And when one entity owns 100-plus malls and its financial model fails, the whole portfolio fails at once: fast, visible, bankruptable. The cities hosting those malls also lose control at once; bankruptcy reorganizations are slow, and cities that had been negotiating with CBL suddenly found themselves negotiating with a lender, then with a creditor committee, then with whichever entity emerged from reorganization. Each handoff reset the relationship. A city without sustained capacity across years loses the thread entirely.

The downtown equivalent is less visible because it rarely produces a single failure event. Instead, you get the slow distributed version: hundreds of absentee landlords making individually rational decisions that collectively produce vacancy, decay, and no one to hold accountable. The principal-agent problem is harder to name when it is distributed across consultants, developers, and BIDs rather than concentrated in a REIT. It is the same problem, less legible.

Business Improvement Districts are the institutionalized version of the delegation move, and the evidence is more differentiated than either side of the BID debate tends to allow. The NYU Furman Center found that large BIDs in dense Manhattan predicted a 15% commercial property value gain over ten years, though Ellen, Schwartz, and Voicufound the gain disappears when a third of the BID budget goes to the executive director, and mid-sized and smaller BIDs showed no discernible effect at all. The deeper critique, from a fifty-year reappraisal of BID scholarship: BID governance excludes renters, workers, and residents, so BIDs optimize for what property owners value (security, cleanliness, brand attractiveness) rather than what communities need (affordable space, diverse business mix, support for incumbent independents). Our point is narrower. BIDs can clean streets. They cannot improve the survival probability of a merchant whose business model has been disrupted.

Japan offers the most instructive cautionary tale. The machizukuri sanpo, a package of three laws enacted between 1998 and 2000, was Japan’s attempt to address commercial core decline at national scale. The research is sobering: these laws did not revitalize city centers. An MIT study found Town Management Organizations made negligible contributions, largely because TMO boards were dominated by commercial stakeholders, funded by government without performance pressure, and participated in by residents only nominally. This is, almost exactly, the accountability failure of American BIDs translated into a different national context. When the same institutional design fails in two countries for the same reasons, the design is the problem.

The conventional response fails because the conventional framing is wrong. The question is not how to fix this mall, this downtown, or this high street. It is what capacities the decline is asking us to build.

What the reframe implies

If commercial decline is a capacity problem rather than just a simple real estate one, then the question becomes: what, concretely, does a city have to build?

Five things. They are not a toolkit. A toolkit implies the tools are the point. They are not. The capacities are. Each of these capacities, once built, transfers to every other hard problem a city faces. Zoning reform sits inside the first capacity. It is necessary. It is also one part of one capacity.

Capacity 1: Planning, with urbanism as a cross-cutting layer

Planning capacity is the ability to diagnose, design, and execute changes to the built environment that survive legal challenge and political turnover. Urbanism (how blocks, streets, uses, and transit interact to generate foot traffic) lives inside this capacity. It is one lever among several, or even the prerequisite for all other levers. Foot traffic is necessary for commercial activity; foot traffic alone produces tourists, not functioning commercial districts.

What the capacity actually includes: the ability to run a commercial district diagnostic, with every vacant property, every owner, every vacancy duration, and every business quality assessment tracked. The ability to execute rezoning that survives legal challenge: upzoning, mixed-use overlays, form-based codes, all of which most cities in every jurisdiction we examine have to relearn. The ability to reform (or eliminate) parking minimums, which in most jurisdictions is administrative rather than legislative and yet remains one of the most underused year-one levers available. And the ability to steer public facilities to where they do the most commercial good.

That last one is the Japanese contribution, and most planners outside Japan haven’t absorbed it. Field research returns to a simple finding: concentrating city hall offices, hospitals, clinics, libraries, and kindergartens in or adjacent to the downtown core creates the resident demand commercial activity requires. When institutions relocate to peripheral sites, they take their customers with them. Japan has built this into planning law through the Location Optimization Plan under the 2014 revision of the Law on Special Measures for Urban Revitalization, which requires municipalities to designate urban function concentration zones and residential guidance zones. Toyama City is the best-documented case. Its “dumplings and sticks” concept (residential areas as dumplings, transit lines as sticks connecting them to the core) has concentrated population and commercial activity around downtown. A mayor anywhere can borrow the discipline without borrowing the statute: think about where public investment locates, what it draws around it, and how transit ties the result together.

Villa Italia Mall in Lakewood, Colorado closed in 2001 with over 50% vacancy, and was rebuilt as Belmar: 80 shops, 20 restaurants, 300,000 square feet of office, 3,500-plus residents, nine acres of parks. It now generates roughly $17 million annually in tax revenue, more than four times what the old mall produced. Three things made this work, none of them zoning alone. The city acted early, before the tax base had collapsed. It recruited the developer rather than responding to a developer proposal, which preserved negotiating leverage. And it broke the 104-acre site into 22 city blocks with a conventional street grid, which turned the urban design into its own governance discipline.

Chattanooga, Tennessee is the downtown equivalent, over forty years rather than ten. By the 1980s, Chattanooga had a deteriorating downtown and an industrial pollution problem that had earned it the label of America’s dirtiest city. What followed (a ULI panel in the mid-1980s, the Vision 2000 initiative, the River City Company seeded with $12 million from foundations and banks, the Tennessee Aquarium, the pedestrianized Walnut Street Bridge, a 22-mile riverwalk) produced downtown retail vacancy below 2% by 2016 and 23% downtown residential population growth from 2000 to 2015. Belmar and Chattanooga are not copies of each other. They share a deeper pattern: accountable governance with political stakes, simultaneous attention to container and content, and sustained institutional commitment across election cycles rather than within them.

When this capacity is absent, it looks like Youngstown. Youngstown, Ohio lost 60% of its 1930 population and in 2005 adopted planned contraction as its governing strategy, the first major American city to formally accept that it would be smaller going forward. The plan was visionary. MIT research found it was only partially implemented as zoning, because of political, legal, social, and economic resistance. The gap between the plan and the zoning is the capacity gap. It is common, and it is expensive.

Capacity 2: Financial capacity

Financial capacity is mostly an administrative problem, not a money problem. The federal toolkit exists. Most small cities cannot access it. The same logic applies, with different specifics, across the OECD.

The most underused lever we found is the Federal Historic Tax Credit. Since 1976, it has leveraged $257.8 billion in private investment and produced 3.4 million jobs. Half of all projects are in neighborhoods at or below 80% of area median income. The National Trust reports a $1.20 return in tax revenue per dollar invested. For a mayor with an eligible historic building at risk of demolition (a downtown hotel, a Main Street bank, a former department store), the HTC is often the most powerful tool available, because it makes private rehabilitation financially viable without requiring public capital. No new legislation needed. The State Historic Preservation Office is already staffed to walk developers through the certification process. The reason the HTC is underused is not policy; it is that most municipal planning departments do not know it exists. European and Asian equivalents (UK Historic England grants and Architectural Heritage Fund loans, French monuments historiques fiscal advantages, Japanese and Korean cultural property designations) are narrower in scope but exist.

Community Development Block Grants are the most flexible U.S. federal program for commercial revitalization, and Iowa’s Downtown Revitalization Fund is a well-documented state deployment. The catch is that accessing CDBG requires a Consolidated Plan, HUD compliance, and reporting capacity; for smaller cities, the first investment is often staff, not projects. New Markets Tax Credit offers a 39% federal credit over seven years but requires a CDFI partnership most cities do not have. Both tools are real; both require partner capacity that is itself the thing to invest in.

TIF deserves honesty about its record. It is authorized in 49 of 50 U.S. states, with at least 10,000 districts nationwide, and David Merriman’s Lincoln Institute review of 30-plus studies concluded that in most cases, TIF has not accomplished the goal of promoting economic development. The “but-for” test gets gamed. Retail TIFs shift activity without creating it. In Chicago, roughly $660 million (nearly a third of all city property taxes) flows to TIF districts, shielded from standard budget oversight. TIF is defensible when paired with a specific project and rigorous “but-for” discipline, as in Belmar. It is least defensible as a general downtown subsidy program. The capacity question is whether your city can run the “but-for” test with integrity. If the answer is no, TIF is not the right tool, regardless of what neighboring cities are doing with it.

Main Street America remains the most evidence-backed template for downtown commercial district management in the U.S., though its reported statistics are self-reported by participating communities rather than independently evaluated. The $115 billion reinvested, the 815,000 net jobs, the $18.03 per dollar return: treat these as pattern evidence rather than causal estimates. The finding that holds up across independent research bodies is narrower and more important: Texas Main Street is explicit that effective downtown revitalization requires paid staff. Volunteer management underperforms paid management. This appears in the Main Street literature, the BID literature, and the UK High Streets Task Force findings. When three independent bodies of research agree on something this specific, it is worth believing.

Capacity 3: Land-holding capacity

Land-holding capacity is the ability to acquire, hold, and redirect distressed commercial properties when private markets will not, whether those properties are dead anchor stores, vacant downtown blocks, or individual high street shops an absentee landlord refuses to lease. Fragmented ownership is the single largest structural barrier to adaptive reuse we encountered in every jurisdiction, and it is also where the international evidence diverges most sharply. Different countries have given their local governments very different powers to act on it.

The American tradition is the land bank, where state enabling legislation permits it. Dan Kildee’s Genesee County model has inspired over 250 similar efforts nationwide, and land banks have done particularly important work in legacy-industrial cities with large downtown and near-downtown vacant inventories, including Detroit itself, where the land bank is now one of the largest landowners in the city. Where enabling legislation is absent, advocating for it at the state level is a medium-term investment. The Champlain Housing Trust, seeded with a $200,000 city grant under then-Mayor Bernie Sanders, now stewards 3,000-plus housing units and 160,000-plus square feet of nonresidential space, and over 200 other CLTs have followed the Burlington template. Commercial CLTs are a newer and less-evaluated model. The Dudley Street Neighborhood Initiative in Boston’s Roxbury, uniquely granted limited eminent domain authority, now stewards over 30 acres including commercial buildings. Systematic evaluation of commercial CLT outcomes is essentially absent; the case rests on governance logic and on the stronger housing CLT track record.

The French tools are the ones Americans and British mayors should genuinely envy. The droit de préemption commercial, codified in 2005, lets a commune designate a périmètre de sauvegarde, receive automatic notification of any sale of a fonds de commerce within that perimeter, and exercise preemption within two months. The commune must then rétrocède the property within two years to a merchant whose activity preserves commercial diversity. A 2023 Conseil d’État ruling clarified that this has to be used for a genuine development project, not as a blocking mechanism. The constraint is that the commune needs capital to buy and manage until rétrocession. The program is embedded in Action Cœur de Ville, literally Action for the Heart of the City, which since 2018 has mobilized more than €5 billion across 244 mid-sized communes. Phase 1 results include a 15% footfall increase and 91% elected-official satisfaction. The Opération de Revitalisation de Territoire framework lets signatory communes suspend peripheral commercial permits that undermine the center. A direct anti-peripheral mechanism. No Anglo-American equivalent exists.

The UK’s new power is High Street Rental Auctions, operational since December 2024. A property vacant for 365 or more days in a 24-month window can be designated, noticed, and, if the landlord fails to let within eight weeks, auctioned for a 1-to-5-year lease. Early adopters include Bassetlaw, Darlington, Mansfield, and Rugby. Industry analysis flags real capacity constraints around surveying, legal fees, and judicial review risk. In Broxtowe, the threat alone was sufficient to prompt a landlord to act without the council completing the process. The carrot-and-stick effect is real.

The most reproducible move in the distributed-ownership case is activation before renovation. Japanese field research consistently finds that creating reasons for people to come to the commercial center (farmers markets, festivals, concerts, whatever) before investing in physical improvements works without large capital budgets. The related move is cheap space for new entrepreneurs, removing the financial barrier to entry; the MAD City project in Matsudo subleased nearly vacant buildings cheaply without restoration obligations. Germany arrived at the same insight under harder conditions: Leipzig’s population fell from 700,000 to under 500,000, housing vacancy hit 20%, and Stadtumbau Ost, launched 2002 with €2.7 billion in federal and state funding, allowed demolition as a legitimate tool while managing interim vacancy through Zwischennutzungen: community gardens, artist spaces, green infrastructure. Leipzig was growing again by 2008.

Returning to the single-owner mall question. When the owner is aligned, none of this matters. Land-holding capacity is beside the point, because the city can negotiate directly for site control. When the owner is not aligned, none of this works either, because the distributed-ownership tools assume fragments to consolidate. What the city needs instead is a different set of tools: receivership frameworks that can take properties from negligent owners, mandatory maintenance codes that create holding costs, land-value taxation that makes sitting on vacant commercial property expensive, and legal staying power across multiple administrations to pursue these remedies to their conclusion. Few cities have built these well. This is among the largest gaps in municipal capacity anywhere, and one of the hardest to close, because most of the fixes require state or national legislation that varies by jurisdiction. We return to this in the advocacy agenda.

Capacity 4: Business development capacity

Business development capacity is the ability to improve the survival probability of the businesses operating in a commercial district, not just to rehabilitate the buildings around them. This is the most underbuilt capacity in every Western city we examined, and it is where international comparison yields the clearest transferable lessons. Physical rehabilitation creates the conditions for commercial improvement. It does not produce it. A renovated storefront occupied by a low-quality business is still a low-quality business.

The institutional state of the art is Singapore’s Heartland Enterprise Centre, established in 2019 and fully funded by Enterprise Singapore. HECS assisted more than 2,000 heartland enterprises in 2024 alone. The Heartland Enterprise Placemaking Grant funds merchants to organize promotional events. The Enhanced Visual Merchandising Programme helps shops refresh storefronts. The Heartland Innovation and Transformation programme places selected merchants in incubator spaces (Sprout@AMK in Ang Mo Kio is the first) for twelve months of mentorship and concept testing, after which graduates can apply for subsidized HDB shop space. The 2026 Singapore budget expanded the program further as a deliberate instrument of neighborhood commercial quality uplift. This is not generic small business advice. This is the machinery of moving the survival probability distribution.

Two of HECS’s four components are within reach of most mid-sized Western cities within a mayoral term, a third requires foundational land-holding work first, and the fourth is probably not coming. Placemaking grants for merchant-organized events are fully transferable: any Main Street organization or chamber of commerce can administer something equivalent on a modest budget. Visual merchandising technical assistance is partially transferable with one dedicated hire paired with an existing place-management program. Incubator space with subsidized post-graduation retail depends on public ownership of commercial space (HDB, in Singapore’s case), which requires a commercial CLT, a land bank, or structured public-private leasing to replicate. And the coordinated inter-agency support across planning, housing, and heritage (Enterprise Singapore acting with URA, HDB, and the National Heritage Board under a single ministry) is the component that genuinely requires Singapore-level state capacity. No American or British analogue exists. Planning around its absence is more useful than pining for it.

Seoul’s Sewoon Sangga project shows the same dual-capacity pattern at a different scale, in a downtown megastructure rather than a neighborhood heartland. When Mayor Park Won-soon reversed the demolition decision in 2015, the plan attended to both container and content. The Suri Cooperative Association linked Sewoon’s craftspeople to new customers: business development organized explicitly to protect existing commercial ecology during regeneration. Per Brookings: visitors tripled, vacancy fell from 30 to 18 units, and the new tenant mix (VR, robotics, CNC manufacturing alongside traditional electronics repair and printing) reflects deliberate ecology-preservation strategy. The caveat is obvious: Seoul Metropolitan Government has professional staff that Daejeon, Gwangju, and Changwon do not, but the institutional move is portable even if the scale is not.

Can’t we just simply regulate businesses? Well, San Francisco’s formula retail ordinance is the closest the Western literature gets to moving the distribution through regulation (which is going as well as you can expect). In controlled neighborhood commercial districts, 10% of businesses are formula retail, versus 25% elsewhere, though the causal attribution is genuinely contested and the Planning Department itself recommended raising the threshold from 11 to 19 locations. Formula retail restriction works best in high-demand markets where vacant storefronts fill quickly; in struggling districts with chronic vacancy, it may leave you with empty storefronts rather than local ones. It does not improve the odds of the individual business.

Capacity 5: Coalition capacity

Coalition capacity is the ability to convene, align, and sustain the institutions whose cooperation determines whether any of the other four capacities produce durable outcomes. Anchor institutions. Community organizations. Business associations. State and national partners. Philanthropic funders. Successor administrations who will inherit whatever you leave behind.

The most documented American template is the Cleveland Greater University Circle model, which is a near-downtown case, not a mall case. Cleveland Clinic, University Hospitals, and Case Western Reserve University (convened by the Cleveland Foundation) aligned hiring, procurement, housing, and transportation commitments across seven surrounding neighborhoods. The outcomes: 859 new housing units, the Evergreen Cooperatives with 225 employees in worker-owned businesses linked to institutional supply chains, $44 million in transportation infrastructure. The Affordable Care Act requirement that nonprofit hospitals conduct community health needs assessments every three years created a policy lever U.S. mayors did not previously have. European equivalents exist but are patchier; the UK’s NHS Integrated Care Systems and the French contrats locaux de santé framework both open convening opportunities that local governments underuse.

Margate shows sustained council commitment at the UK scale: a Victorian seafront town with a decaying core rather than either a mall or a classic downtown, but structurally the same problem. The Turner Contemporary gallery, opened 2011, plus Thanet District Council’s compulsory purchase and restoration of Dreamland, plus more than a decade of partnership between Thanet and Kent County Council. Reported outcomes: 3.9 million gallery visits, 19% tourism sector growth between 2013 and 2015, £47 million added annually, 300 jobs at the two anchors, £22.2 million in Levelling Up funding. Disentangling Turner Contemporary from concurrent Kent tourism trends is genuinely hard, and the gallery itself acknowledges that not all benefits have been shared by local residents; pockets of deprivation remain. Margate generates visitors and property investment. It does not, by itself, reduce incumbent-resident poverty. The institutional lesson is the sustain itself: more than a decade of coordinated council commitment, not a flagship intervention.

Chattanooga works at this level too, the same case from Capacity 1, doing different work. The coalition half of the Chattanooga story is the 40-year commitment: ULI panel, Vision 2000, the River City Company with its seed capital from eight foundations and seven banks, held together across administrations. Critics reasonably note the benefits flowed unevenly, and this is not a poverty-reduction case. But the institutional sustain is real, and it was produced by coalition capacity, not any single tool.

What happens without this capacity is summarized most clearly by the UK High Streets Task Force. The task force engaged 149 high streets over five years. Its final finding: the main barrier to high street revitalization was the lack of suitable local governance structures. Not ideas. Not funding. Not expertise. Governance. 40% of places visited needed stronger partnerships before any substantive work could begin. You can recommend as much as you like, but it often does not make any difference if the resources aren’t there to deliver. That is the single most important sentence in the five-year task force report.

Korea institutionalizes this well in principle. The Urban Regeneration Special Act 2013 requires each designated urban regeneration area to have a Support Center, a local technical assistance body staffed by planners, designers, and community organizers, with a five-year local activation team that keeps projects alive. The institutional structure is sound. Korea’s problem is that national funding has fluctuated sharply across political cycles, and coalition capacity at the local level is the only thing that partially protects against that.

A (admittedly cliché) call to action

Most cities are not short of space. They have enormous amounts of it. Dead mall pads. Hollow downtown blocks. Half-empty high streets. Vacant shotengai. Shuttered cœurs de ville. What they are short, is ideas, which at the institutional level means capacity. For the cities that have this problem (and hundreds across every country in this piece do), the commercial district is not just a crisis to manage. It is the best opportunity those cities will ever have to build the state capacity they need for everything else. The results are visible, which means voters will reward the work. The problem demands five capacities at once, which means the institutional muscle transfers to housing, transit, climate, and whatever comes next. Even partial success produces real learning.

A mayor who thinks she is fighting to save a mall is fighting the wrong war. A mayor who thinks she is building the institutions her city will need for the next thirty years is fighting the right one, and using the mall as the forge.

Every dead mall, every hollowing downtown, every emptying high street, every struggling shotengai, every shuttered cœur de ville, these are the training ground for every other hard problem a city will face.

The question is not whether to intervene. The question is whether the intervention leaves the city more capable than it found it.

Appendix: the five-minute country cheat sheet

For practitioners who want the jurisdiction-specific starting point.

• United States: Main Street America, Center for Community Progress (land banking), LISC (CDFI and financing), NPS Technical Preservation Services (HTC), Democracy Collaborative (anchor institutions), National League of Cities.

• United Kingdom: Institute of Place Management, High Streets Task Force legacy, Power to Change, BID Foundation.

• France: ANCT (Action Cœur de Ville, Petites Villes de Demain), Banque des Territoires, CEREMA.

• Japan: Cabinet Office Urban Revitalization HQ, MLIT.

• South Korea: MOLIT, URIS, Seoul Solution.

• Singapore (reference model): URA, Heartland Enterprise Centre

• The desire gap is the opportunity. People already want more children than they’re having. The job isn’t persuasion; exposure to kids alone increases fertility ideals, it’s building environments where existing desires can be acted on. Moralizing about young men needing to shape up or young women not having the right values doesn’t close the gap and won’t close the gap.

• Build the coalition and infrastructure subnationally Local governments can move completed family sizes; national governments control entry into parenthood. Stop waiting for national reform. Build working ecosystems at the municipal and provincial level now, capture the gains available there, and assemble the political coalition of places that have actually delivered.

• This is a product/service delivery problem, not a culture war Every place that sustained above-average fertility built an integrated system, held it across administrations, and made it visible in everyday life. They didn’t change anyone’s values. They built an environment where existing values could be executed on. Integration and constancy of purpose are the product. Everything else is downstream.

The mothers in Nagi who arrive with plans for one child and leave with plans for two aren’t being persuaded of anything. They wanted more children before they got there. The previous environment didn’t let them have them. Nagi did. The wanting was already there. The system finally caught up to it.

Hold that in mind. It’s the shape of the argument.

When Steve Jobs walked on stage in January 2007 and introduced the iPhone, he wasn’t selling a device. He was selling a proposition: that the Mac would still work with it, that the App Store would be stocked next year, and that whatever Apple announced in 2012 would still run on the thing you bought in 2007. And then there was always “one more thing.” The phrase was pure theater, but it worked because there was always actually one more thing, and the one more thing always connected to every other thing he’d already shown. The showmanship and the system were the same act. But the showmanship only sold because underneath it was an obsessively integrated system. Hardware talked to software talked to services talked to retail, and every seam was somebody’s job. The phone was worth more because the App Store was stocked. The App Store was worth more because the phone was in your pocket. The Mac was worth more because both synced to it. None of the components did much alone; together they produced something that felt like magic to the customer, and the magic was real because the machinery underneath it was real. People who didn’t know they wanted a smartphone discovered they wanted one because the environment made smartphones feel like a thing to have, and concentration of early adopters changed what the next wave of customers could imagine.

Apple is the one widely understood case of what an ecosystem does. The ecosystem isn’t the Mac, the App Store, the iPhone, or the repair network. It’s the way each piece makes the others more valuable. It requires both: the razzle & the dazzle that makes people want to enter the system, and the tick-tick-tick of a system that actually delivers once they’re inside.

Fertility policy has almost no equivalent. It has components: baby bonuses, parental leave, childcare subsidies, housing grants. Most countries spend real money on some of them. The aggregate numbers keep falling. But here’s the thing: the components mostly work. Korean baby bonuses produce babies. German parental leave reforms produce conceptions. Italian childcare expansions, above a threshold, produce births. Evaluated individually, the programs do what they’re designed to do, with some doing much better than others. Evaluated as a system, they produce the world’s lowest fertility rates. The reason is that nobody designed the system.

A baby bonus that lands in a city with affordable family housing, available childcare, and neighbors who used the same bonus last year is not the same intervention as a baby bonus that lands in a city without those things. Same check. Same amount. Completely different product. The check didn’t change. The environment it landed in changed everything about what the check could do. That’s the alchemy, and it’s the same alchemy Apple was selling: the pieces make each other work, and the felt experience of the pieces working together is the thing that actually shifts decisions.

But alchemy that works has machinery underneath it. The baby bonus lands right because someone built the housing, someone staffed the childcare, someone made sure the programs talked to each other instead of each department optimizing its own line item while the family fell through the gaps between them. The central government runs cash transfers. The province runs its own programs. The city runs still others, with funding from local taxes. No one is responsible for whether they cohere. Each layer optimizes its own components. The family doesn’t experience the components. The family experiences the gaps.

On top of this, the whole arrangement has to survive an election, and a new mayor/governor/president/PM, and a budget cycle, and the moralist on the op-ed page who thinks the problem is that young people have the wrong values (oftentimes the right accusing women, the center/left accusing men, and sometimes the inverse), and the minister who wants to announce something visible before the next vote rather than sustain something invisible that compounds over fifteen years. The alchemy requires the machinery. The machinery requires the politics. A few places have figured out how to hold all three within the layer they control, and the difference shows up in fertility numbers that sit two to five times apart under identical national laws.

Same country, same laws, five times the children. Why?

Two young Korean women, same age, same income, same education, same national fertility policy. One lives in Yeonggwang County. One lives in Busan’s Jung District. Yeonggwang’s fertility rate is 1.71. Busan Jung’s is 0.32. Economic models don’t predict this. Cultural models don’t predict it. Ideological and religious models don’t predict it. What’s the variable nobody is measuring?

In 2009, a research group put childless women in fMRI scanners and showed them photographs of infant faces. The women’s reward circuitry (the nucleus accumbens, the part of the brain that fires when someone you love walks into the room or when you eat a perfect peach) lit up before they consciously processed the image. Later work using EEG clocked the response at roughly 140 milliseconds. The women didn’t decide to find the babies cute. The brain had already responded by the time the deciding part woke up. The response was graded: more infantile features produced stronger responses, in women who had never been pregnant, who weren’t thinking about pregnancy, who in some cases didn’t want to be pregnant. Something in them was keeping score of how many babies they had encountered. They didn’t know they were keeping score.

The women didn’t decide (she did, but you get the point). That’s the part I keep coming back to. The empathy response is decision-making before the deliberation, the part that runs on perception before the reasoning wakes up. It’s hard to build policy around a 140-millisecond response. It’s also hard to build policy while pretending it isn’t happening.

And the 140-millisecond response doesn’t stop at desire. It reaches all the way into marriage. In Japan, somewhere between 30 and 39 percent of never-married adults in their 20s and 30s say they are uncertain whether they want children. Not opposed; uncertain. brought my attention to Fumiya Uchikoshi and colleagues at Harvard, Princeton, Tokyo, and Gakushuin’s paper. They tracked what those uncertain adults did over the following years, in a paper published this year in Population and Development Review. Controlling for whether they wanted to marry (which in conventional models would be the variable doing the work), they found that uncertainty about fertility cuts the annual marriage transition rate by 30 to 50 percent. People who don’t know whether they want children marry later, or don’t marry.

The arrow runs the other way. Marriage doesn’t cause children; the prospect of children causes marriage. They call it child-driven marriage, and the reframes where the causation you assumed was backward tend to be where the actual leverage lives.

So the woman in Yeonggwang and the woman in Busan aren’t just in different policy environments. They’re in different neurological environments. The woman in Yeonggwang walks past children in playgrounds, parents pushing strollers, neighbors visibly managing two and three kids. Her brain is accumulating 140-millisecond responses before she deliberates anything, and the accumulation shapes her fertility desires, and the desires shape whether and when she marries. The woman in Busan walks past convenience stores and study cafés. Same brain. Same circuitry. Different inputs. The variable nobody is measuring is the density of the environment the circuitry is responding to.

What if TFR isn’t really one number?

The density is measurable, but the measurement most people use throws the signal away. When Stephen Shaw decomposed the Total Fertility Rate across 314 million mothers in 33 countries, he found that what looks like one number is actually two numbers multiplied together, and the two don’t move together. He checked it three ways (breakpoint co-occurrence, wavelet coherence, mutual information) and confirmed statistical independence. The share of women who become mothers at all (call it TMR, the Total Maternal Rate) drops in sharp shocks and doesn’t recover between them. The average family size among mothers (CPM, Children per Mother) stays roughly flat for decades. TFR averages them together and throws away 49% of the information in the process. A single TFR value of 1.5 corresponds, on average, to thirteen distinct combinations of the two underlying numbers. The thing every fertility paper for sixty years has been measuring is half a measurement, and the half that’s missing is the half that tells a mayor what to do.

Here’s the simplest way to hold it: TFR is an average of two different decisions made by two different people at two different life stages. The 27-year-old deciding whether to become a mother at all is deciding TMR. The 33-year-old mother of one deciding whether to have a second is deciding CPM. Policies that work for one often don’t work for the other. Forces that move one often don’t move the other. Sixty years of policy has been optimizing against an aggregate that hid both failure modes.

Shaw’s shock pattern has the right time signature for an environmental mechanism, with a wrinkle the smooth-decline reading misses. TMR doesn’t drift downward; it drops in discrete shocks and ratchets down. Italy, Japan, and the UK all show sharp TMR falls around 1974. The US shows the same shock pattern in 1971 and again in 2008. Shaw’s prefecture-level analysis of Japan is the cleanest single piece of evidence: TMR fell in all 47 Japanese prefectures simultaneously between 1974 and 1975, with a probability under the null of less than 0.0001, as improbable as flipping a coin 47 times and getting heads every time. The breakpoint cluster in monthly birth data begins in October 1974 and peaks in November, which, accounting for conception and gestation, lines up almost exactly with the Japanese Oil Shock of October 1973. CPM stayed roughly flat across the same period. The shock altered who became a mother at all. It barely touched how many children mothers ended up having.

This gives the transmission mechanism its time signature. A shock (economic crisis, labor-market upheaval) disrupts fertility-desire formation in the cohort experiencing it. That cohort’s lowered birth rate depletes the next decade’s ambient infant exposure. The empathy channel runs at lower amplitude on the following cohort. Their fertility desires form against a thinner environment. Their TMR ratchets down again at the next shock and doesn’t recover between shocks because the environment never refills. CPM stays stable because it’s a different decision, made by people already inside parenthood, responding to local rather than national conditions. The smoothness of the aggregate decline was an artifact of TFR aggregation.

Put Shaw’s ratchet together with Uchikoshi’s child-driven marriage, and East Asia’s marriage collapse stops being mysterious. Atoh’s work and recent estimates by Tan, Cui, and Uchikoshi attribute 40 to 70 percent of TFR decline in Japan, Korea, Taiwan, and Singapore to falling marriage rates. The conventional reading is that fewer people are marrying, so fewer children are born. The better reading is that an earlier generation’s TMR shock depleted the ambient infant environment of the next cohort, which produced uncertain fertility desires in unmarried young adults, which depressed their marriage rates, which produced still fewer children (the next TMR step down), which further depleted the environment for the cohort after that. The marriage collapse is downstream of a fertility-desire collapse, which is downstream of a depleted environment, which is downstream of TMR shocks the previous generation absorbed and never recovered from. The trap closes itself.

Is the whole problem just economics?

None of this is to say the empathy channel is the only thing going on. Rising education costs, women’s labor-market opportunities, contraception, the genuine economic burden of raising children: all do real work in the fertility decline. Galiani and Sosa are explicit that the empathy channel is one mechanism among several, additive to economic pressures rather than replacing them. Shaw is similarly careful that his shock-and-ratchet pattern shows association rather than definitive causation. What the combination makes visible, and what sixty years of TFR-anchored policy never had to confront, is that one of the actual drivers of the decline has an environmental leverage point that fiscal instruments cannot reach. The economic factors still matter. They are not the whole picture, and the part they don’t cover is the part where felt environment compounds over generations.

TMR and CPM respond to different forces and require different interventions. In most developed countries both have been declining, meaning the aggregate decline reflects two different decisions made by different people at different life stages. The 27-year-old deciding whether to enter parenthood at all is a different customer from the 33-year-old mother of one deciding whether to have a second. Any policy portfolio that works has to work for both, and most don’t. Most serve the existing-parent customer through benefits that escalate with each child. The prospective-parent customer, who doesn’t yet have a child to trigger any of them, is served by cash she hasn’t yet decided to earn.

Who can actually reach any of this?

The two customers’ frictions live at different scales, and this matters for what work can be done now. The split is rough. Most frictions sit at one layer, but individual frictions cross between them. TMR’s binding constraints are mostly national, and Shaw’s shock pattern shows why: TMR moves with national-scale disruptions that hit cohorts simultaneously, and the disruptions ratchet rather than reverse. Whether a 25-year-old can form the fertility desires that drive her marriage decision depends on whether she has stable employment, whether her education will complete on a reasonable timeline, whether her labor market will penalize her 66 percent in maternal earnings, whether her employer will force her to sign an illegal contract promising to resign if she becomes pregnant. No mayor can fix any of these. CPM’s frictions are mostly local, consistent with Shaw’s finding that CPM stays flat across periods of national turbulence; it’s not insulated from the national environment, but it’s tracking something more local. Whether a mother of one has a second depends on whether local childcare works, whether her neighborhood contains other families managing two or three children in ways that shift what a livable family size feels like. A mayor can absolutely reach these.

Housing is the clearest friction that refuses the split. A young couple that wants to marry and start a family can’t if there’s nowhere in the city they can afford a family-sized unit. That’s a TMR friction, and the lever is overwhelmingly municipal: zoning, parking minimums, permitting timelines, all decided at the city and sometimes state level. The federal government has essentially no direct authority over what gets built where. Housing is also a CPM friction at the same layer (the mother of one in a two-bedroom can’t have a second if the three-bedroom doesn’t exist because zoning prevents it from being built) and it’s the substrate the empathy channel runs on (a neighborhood of family-sized units near transit puts families in walkable range of each other; a neighborhood of studios above retail doesn’t). Three jobs, one lever, one layer. The political coalition for this already exists in YIMBY organizing across the English-speaking world, which has proven that cross-ideological housing coalitions are buildable at the municipal and state level in a way that almost no other pronatalist intervention can claim. Pronatalists who aren’t already in that coalition should be.

The local cases below do most of their measurable work on CPM (higher concentrations of families with children raising completed family sizes among residents who were going to become mothers somewhere) while also producing TMR effect through two channels: concentration raising ambient infant exposure for residents who weren’t already fertility-minded, and housing-stock decisions directly enabling household formation for couples who currently can’t start one. But the bulk of the TMR problem is national and isn’t being reached by any of the local work.

Yeonggwang. What the young couple sees walking through their county is most of this argument in concrete form. Children in the playgrounds, parents pushing strollers, neighbors who took the same marriage incentive the county offers, used the same baby care package, claimed the same child-raising subsidy. Six consecutive years as Korea’s highest fertility rate, more than double the national average, in a rural county with no subway, no university, and no tech industry. Busan Jung-gu, three hundred kilometers away under the same national framework, has none of the visible design and none of the children. Same country, same laws, more than five times the children per woman in Yeonggwang. Section I returns to what Yeonggwang actually does.

A skeptical reader will say: much of this is selection. Fertility-minded families move to Yeonggwang. Haenam County, also in South Jeolla, once held Korea’s top TFR and then lost it. (Section I returns to Haenam as the anti-case.) The critique is real and applies in varying degrees to most cases below. It’s also less damaging than it looks once the chain is in hand. Families moving into Yeonggwang aren’t reshuffling a fixed stock of fertility; they’re concentrating in a place where they are visible to each other and to everyone else who lives there. Concentration does CPM work directly, by raising completed family sizes among residents who were going to become mothers somewhere, and it does some TMR work indirectly, by raising infant exposure for residents who weren’t already fertility-minded and letting the empathy channel run on them before the child-driven marriage mechanism shifts their decisions. Concentration is one of the channels through which production happens.

What the local cases are showing

Don’t people already want more children?

The Nagi pattern, wanting already present and the system finally catching up, is the shape of the problem almost everywhere. Korean women, surveyed across multiple cohorts, say their ideal is between 1.8 and 2.16 children. They produce 0.72. Italian women say their ideal is around 2; under “ideal living conditions” they say 2.3. They produce 1.18. Across 27 EU member states, 87% of women say two or more children is their personal ideal, and a third of women aged 40 to 54 report having fewer children than they wanted. The desired-actual gap is enormous and it is not closing on its own. People want children. The system isn’t delivering on the wants people already have.

This is the first-order claim, and it belongs in front of every other one. Most of the available fertility recovery in the next decade lives inside this gap. Closing the gap doesn’t require convincing anyone of anything. It requires building the environment in which the children people already say they want become plannable. Cash transfers, ecosystems, and moral exhortations all bid for the same job. They are not equally good at it, and the reasons they differ matter.

What makes this more than a one-time transfer is what happens after the gap closes. Children produced by gap closure don’t just exist. They occupy the environment: playgrounds, sidewalks, train platforms, supermarket aisles. The 22-year-old commuter who hasn’t formed a family preference yet now lives in a denser child environment than her older sister did. Her brain is keeping score in 140-millisecond increments, before she consciously deliberates anything at all. By the time she’s deciding, she’s deciding on top of accumulated unconscious priors that were shaped by the previous round’s gap closure. Her ideal number of children, when she’s surveyed, will be slightly higher than her sister’s was at the same age, because the environment that formed it was slightly denser.

This is what Sebastian Galiani and Raul Sosa formalize as the empathy channel in their April 2026 NBER paper. Each child in an environment generates a positive externality on the desired fertility of surrounding adults, mediated by the reward circuitry that fires before conscious processing. Konrad Lorenz identified the underlying baby schema in 1943; Glocker and colleagues confirmed in 2009 that infant faces with high baby-schema intensity activate the nucleus accumbens in women who have never been pregnant. Kringelbach’s group established that the response runs within roughly 140 milliseconds. Ruth Feldman’s research showed that oxytocin tracks infant contact regardless of whose child it is, in fathers and alloparents and unrelated adults. The channel is dormant when fertility is high, where additional infants barely move the signal, and steeply active when fertility is low, where each additional infant (or its absence) shifts the operating point. Galiani and Sosa calibrate the channel at between 3 and 33% of the fertility decline, with 13.4% at baseline.

The implication is that gap closure compounds. Closing the desired-actual gap for the current cohort puts more children into the environment, which lifts desired fertility in the cohort behind them, which means the next round of gap closure operates on higher desires, which puts still more children into the environment. The same loop ran in reverse for fifty years and produced the trap. Fewer children meant less exposure meant lower desired fertility meant fewer children. The local ecosystems that work are running the loop forward.

This is the difference between a cash transfer and an ecosystem, and it explains why Korea’s modest cash-transfer gains don’t compound. Cash arrives at the moment of birth in a household already inside parenthood. It does some gap-closure work for that household, but it doesn’t densify the environment in concentrated, visible ways. The 22-year-old commuter sees nothing she didn’t see before. The next cohort’s desired fertility is unmoved. Each year’s transfers do roughly the same work as the previous year’s, and the base doesn’t grow. Local ecosystems concentrate. Yeonggwang’s higher fertility produces a denser child environment, which lifts desires in residents who weren’t already family-oriented, which produces still more children, which densifies the environment further. Same gap-closure intent. Very different long-run trajectory.

Whose preferences have to change?

Two recent thought leaders clarify why the frame matters by getting it wrong. Helen Andrews, on the right, argues that the “girlboss lifestyle would not exist if it were not massively subsidized” and treats the removal of women’s economic options as the implicit pronatalist program. Something that doesn’t match the research on the topic, especially with a greater correlation of income and CPM.

Matthew Yglesias, from the center-left, identifies that the binding constraint on marriage formation is on the male side (educated women marry at higher rates than working-class women, and the men who aren’t getting college degrees are the weak link). He then concludes that “someone needs to tell them to either stay in school or else take some other conscientiousness-demonstrating path.”

At time of Ygelsasis’s writing, the unemployment rate for college graduated young men and non college grades are at the same, alongside the fact that post 2008. Men saw persistently higher unemployment rates than women. On top of that, learn to plumb is a dismal failure as blue collar job market collapse.

Tell who, with what mechanism, through what institution, on what timeline that matches the demographic clock. The prescription doesn’t survive contact with the question of who would deliver it.

I find both arguments frustrating (well, disgusting and repulsive) in similar ways. Both are about whose preferences need to change. The data says preferences don’t need to change for the first-order gain. The preferences are already there, in the form of a desired-actual gap that no amount of moralizing will close, as if moralizing haven’t been tried. Andrews wants women to revise downward what they want from their lives so they will accept what the current system delivers. Yglesias wants working-class men to revise upward what they expect of themselves so they will become deliverable to women whose preferences would then be met, regardless of current economic realities.

Neither asks what environment would let the preferences people currently hold actually be executed on, or what the same environment would do to the next cohort’s preferences as a compounding effect. Andrews is comfortable making women bear the cost of a transition she isn’t responsible for designing. Yglesias is comfortable making working-class men bear the diagnosis without offering them anything that resembles a path. Both treat the people whose lives are at stake as objects to be hectored or modified, rather than as people responding rationally to an environment that someone built and someone could rebuild.

Research like Han and Uchikoshi that Yglesias gestures at without naming deserves direct treatment, because the talk about economics being the reason why men are the binding constraint. Among Korean men aged 25 to 29, the share neither working nor seeking work nearly tripled between the mid-1990s and the early 2020s, from roughly 10% to 30%; in the same Japanese age group, the rate barely moved.

The study attributes about a third of Korea’s fertility decline in this age group to that rise. Male economic inactivity is a national-scale TMR friction that excludes the inactive from the marriage market almost entirely, and no mayor can fix it. Naming it doesn’t change who can act on it. It does change what a thinkpiece is supposed to do.

Where can we see the chain working?

Sarah Hrdy’s cooperative-breeding research adds the historical dimension: girls in traditional societies arrived at first pregnancy with hands-on experience caring for younger siblings and neighbors’ children, which exposed the neurobiological systems that generate maternal desire to the stimulus they evolved for. Modern societies dismantled that apprenticeship by age-segregating residential life and privatizing childcare. Local ecosystems that concentrate children in visible public space are partly rebuilding what age segregation took apart.

The population-level test is clean. A quasi-experimental study of Italian municipal childcare expansion found that municipalities starting with childcare coverage above 20 percent and expanding further showed measurable fertility gains over four years. Municipalities starting below 10 percent and expanding just as aggressively showed nothing. The authors attribute this to a minimum cultural threshold for using educational services; below it, expansion doesn’t register as a meaningful option for couples making family decisions. The shape is exactly what the compounding loop predicts. Visibility has to cross a threshold before additional supply registers in decisions, because what registers isn’t the supply but the normalization of using it. Same population, same selection, different births.

How do you build an ecosystem in a rural county?

Yeonggwang. What the young couple sees walking through their county is most of this argument in concrete form. Six consecutive years as Korea’s highest fertility rate, reaching 1.71 in 2024 against a national 0.75, in a rural county of 52,000 people with no subway, no university, and no tech industry. What Yeonggwang has is a dedicated Population and Jobs Policy Office (인구일자리정책실) established in 2019 as the first such department at Korea’s basic-local-government level, and more than 80 lifecycle support programs running across marriage, pregnancy, birth, childcare, and youth retention. The county frames itself as a saenghwal-miljakhyeong dolbom dosi, a “life-embedded care city,” and uses the older Korean phrase “from cradle to grave” (요람에서 무덤까지) to describe the setup: every child is enrolled in the support network from birth and the services follow them through school, marriage, and eventually their own children.

The individual programs are unremarkable as components. A ₩5 million marriage grant, rent-interest support for newlyweds, a ₩30 million transportation card for expecting mothers, neonatal support scaling from ₩5 million for a first child up to ₩35 million for a sixth, fertility-treatment subsidies, and a monthly birth allowance of ₩200,000 payable for 216 months until age 18 (₩43.2 million in total). More unusual is the father’s parental leave subsidy (아빠 육아휴직 장려금), which pays men who take leave and which the county frames as a tool for both gender equality and paternal bonding. Most unusual is the adjacent infrastructure: e-mobility manufacturing at Daema Industrial Complex, Hanbit Nuclear Power Plant employment, and Neulpum Village young-professional housing that makes Yeonggwang a place a young person can both move to and stay. Marriages jumped 40 percent between 2023 and 2024 (from 177 to 248), which will feed the TMR of the next cohort. Mayor Jang Se-il describes the sequence directly: youth support, marriage, birth, child-rearing, in that order, as the chain the county is trying to operate on. The design is the ecosystem. The specific programs are the visible pieces.

Sejong, Korea’s purpose-built administrative capital established in 2012, operates on a different principle. Sejong held Korea’s highest TFR at the metropolitan level for seven consecutive years starting 2015, peaking at 1.89 and still at 1.03 in 2024 even as the national figure fell to 0.75. Sejong didn’t layer subsidies. It assembled three things at once: stable public-sector employment as central ministries relocated from Seoul, relatively affordable new housing (a local policy choice enabled by Sejong’s being built without legacy zoning politics), and public kindergartens accounting for 93 percent of early-childhood provision against a national figure closer to a quarter. The housing did TMR work directly: it was what let young government workers form households. The childcare did CPM work: it was what let those households have second children. The employment anchored both. Concentration raised infant exposure for everyone else who lived there. The empathy channel activated. Fertility desires formed.

Lee Sang-rim, a demographer at the Korea Institute for Health and Social Affairs, puts the principle directly:

“We need to approach fertility from the perspective of the youth life course, independence, employment, housing, family formation, child-rearing, rather than through fertility-boosting subsidy programs.”

When the first three work, the fourth and fifth can happen. Sejong’s advantage is narrowing as neighboring Daejeon competes for the same newlyweds with its own ₩300,000-per-month subsidy, which illustrates how fragile municipal success is when the national framework doesn’t recognize and protect what works.

When does a train-station daycare beat a cash bonus?

Nagareyama, a Tokyo commuter town that elected Yoshiharu Izaki mayor in 2003, ran a formal SWOT analysis of the city before taking office, picked dual-employed households with children as the target customer, and built infrastructure around them. The headline intervention was train-station childcare: at Nagareyama-Otakanomori and Minami-Nagareyama stations, parents drop children between 7 and 9 a.m., staff bus them to participating daycares across the city, and the buses return them by 6 p.m., at 100 yen per day. The logistical problem it solved was real. The less obvious thing it did was put parents and children together in the most visible public space in the city twice a day, for years. Nagareyama reached a fertility rate of 1.50 in 2022 against a national 1.26, and was Japan’s fastest-growing city for six consecutive years.

Matsudo runs a similar model with different instruments. The city has won or placed in the top three of Nikkei’s dual-career-friendly cities ranking every year since 2018, and has achieved 10 consecutive years of zero waitlist by building 121 small-scale childcare facilities positioned at all 23 train stations in the city. Matsudo treats the commuter-parent as the customer: every station has childcare within walking distance of the fare gates. The insight travels within a prefecture willing to organize around it.

Akashi, in Hyogo Prefecture, demonstrates what happens when a city government chooses what it is. Mayor Fusaho Izumi raised the child-policy budget from 125 billion yen to 297 billion yen while the overall budget stayed flat, and tripled the staff on child policy, recruited lawyers and welfare specialists onto the municipal payroll, consolidated kindergartens and libraries under a new Children’s Future Department, and moved authority over preschool policy from the school board to the mayor’s office. The visible “five free things” for children rested on organizational restructuring that took years and that no one outside city hall noticed. The reorganization was the intervention; the free services were its downstream expression. Akashi hit a TFR of 1.7 in 2018 against a national 1.42 and ran nine consecutive years of population growth. Critics point out that much of the gain is in-migration from Hyogo municipalities that didn’t match the policy. Right, and it matters less than they think. In-migration concentrates families in an environment where they’re visible to Akashi’s existing residents, and concentration activates the chain.

Two smaller cases extend the pattern. Hinode-machi in western Tokyo produced the largest TFR improvement of any Japanese municipality in Nikkei’s survey, +0.57 from 1.02 to 1.59, through coupons and allowances. Furubira-cho in Hokkaido raised its TFR by 0.47 to 1.62 on a retention logic its mayor stated plainly: “Childcare support has a defensive aspect against out-migration. It’s worth the cost.”

What happens when you get the numbers without the ecosystem?

Haenam County, in the same South Jeolla province as Yeonggwang, is the story of success that wasn’t. Haenam held Korea’s top TFR for seven years running, peaking at 2.46 in 2015. In 2017 it became the only Korean region to exceed 2.00 since Korean below-replacement fertility set in. The county received a Presidential Award on Population Day in 2016. It was the global poster child for municipal fertility success, until it wasn’t. By 2022, Haenam’s TFR had fallen to 1.04. Annual births fell from 839 in 2015 to 295 in 2021. The Korean press coined a term for what had happened: 먹튀 출산, “eat-and-run birth.”

There’s something bleak about a town winning a Presidential Award for something it wasn’t actually doing. Neighboring counties started offering bigger cash subsidies. Fertility-minded families moved for the subsidies, collected them, and moved on. The design Haenam had was transactional, not ecological. There was nothing to stay for after the cash arrived. A 2023 analysis by the Korea Institute for Health and Social Affairs showed the deeper mechanism: Haenam’s “high fertility” years corresponded to a low share of women aged 15 to 49 in the population (28 to 35 percent), compared to 44 to 54 percent in genuinely growing high-fertility places like Jinju, Asan, and Dangjin. Haenam had a small denominator that cash could inflate temporarily. It did not have an ecosystem that shifted desires in the next cohort. When the cash moved elsewhere, so did the numbers.

Is there a single variable that matters most?

Kasuga, a Fukuoka commuter town of roughly 115,000, is the exemplar of the scale-of-commitment principle. Kasuga allocates approximately 41 percent of its municipal budget to child welfare spending (児童福祉費), roughly triple what comparable Japanese municipalities allocate. The town positions itself as family-friendly for Hakata-area commuters, operates six train stations connecting to Fukuoka’s center, and pushed its child-focused investment at a level that a recent analysis of all 1,741 Japanese municipalities by Kawasaki and Morimoto identified as the single most powerful municipal-level predictor of desired birth rates, with a coefficient of 0.47 that dwarfs density, transit access, income, facility counts, and commute patterns. The point isn’t that every municipality should allocate 41 percent. The point is that the share of the budget going to children is the most consequential variable any municipality controls, and most municipalities don’t know this because nobody has told them.

Can a province do what a country can’t?

Bolzano, Trentino, and Vorarlberg sustain fertility meaningfully above their national averages over decades at the provincial scale, and they do it through three different designs.

Bolzano (Alto Adige / Südtirol) is the consumer-facing brand. Italy’s national fertility has fallen to 1.13 in 2025; Bolzano holds 1.55 and is the only Italian province whose fertility rate actually rose between 2024 and 2025. The province runs an 8.7-billion-euro annual budget, with roughly 200 million euros going to family policies specifically, split across direct transfers, the 0-to-3 childcare network, and employer incentives for work-family conciliation. The visible elements are the Family+ card giving retail discounts to families with three or more children, retailer partnerships, trilingual welcome backpacks for newborns, and the Tagesmütter system of certified home-based childcare that covers rural valleys where centralized daycare would be uneconomic.

The institutional elements are more load-bearing than the visible ones. A single unified Department for Family has coordinated the work since 2013, an Agency for the Family acts as the policy interface with municipalities and employers, a Consulta per la Famiglia of 19 members shapes direction, and every municipality and district community has a family-referent in its executive council. This is the organizations-don’t-optimize-separately principle in action: the province broke down the barriers between departments that would otherwise each run their own family program badly. The housing component is equally important and usually overlooked: Bolzano builds more housing per capita than Milan or Rome (roughly 0.22 square meters per capita in 2022 against 0.14 in Milan, and 0.31 against 0.11 pre-Covid), which means a young couple can actually find a family-sized apartment. And the Audit certification for family-friendly workplaces now covers 55 certified companies, bringing the employer into the ecosystem rather than leaving the conciliation problem to households alone.

Trentino, just south, runs a more institutional setup. Provincial Law No. 1 of 2011 established an integrated family system with a dedicated agency run by Luciano Malfer since its founding. The province runs a Family Audit certification for employers, a “Comune Amico della Famiglia” designation for municipalities, a network of Distretti Famiglia (family districts), and 93.4 percent municipal coverage of early-childhood services. Regional TFR for Trentino-Alto Adige combined is 1.39 against the national 1.18, with Trentino’s own number somewhat below Bolzano’s but well above the Italian baseline. The contrast with Bolzano is instructive: Bolzano does consumer-facing branding backed by services; Trentino does institutional structure backed by a provincial statute. Different instruments, same outcome.

Vorarlberg, Austria’s westernmost Land, runs a third model with almost no centralized brand. Vorarlberg’s 2023 TFR was 1.50 against Austria’s 1.32. The province offers a Familienpass that every Vorarlberg family automatically receives, good for discounts at over 200 partner businesses and reduced public transit fares, renewing automatically until children turn 18. On top of this sit the familieplus program recognizing family-friendly municipalities, and Vorarlberg lässt kein Kind zurück (”Vorarlberg leaves no child behind”), a comprehensive child-welfare framework coordinating federal and provincial supports. Municipalities administer most services; the province provides the shared infrastructure; the brand is almost invisible compared to Bolzano’s. This matters because Vorarlberg demonstrates that the specific visibility design is substitutable. What isn’t substitutable is sustained institutional commitment to families as the unit around which other provincial decisions orient themselves. (Vorarlberg’s trajectory is fragile: the regional family association reports a 9.4 percent birth-rate decline between 2021 and 2023, reflecting Austria-wide housing and cost-of-living pressures. Even strong provincial ecosystems don’t insulate against national-scale shocks.)

Malfer puts the shared principle in his own words:

“Money isn’t what counts. In these policies the winning card is a management model that conceives of the family as a resource for society.”

The management model is the product. Everything visible downstream is just the management model becoming visible. Michela Morandini, Bolzano’s director of Social Cohesion, Family, Elderly, and Cooperatives, says the same thing from the other province:

“There is broad consensus across all local parties on maintaining these policies, which have lasted for years and are not continually changed like national ones.”

A family pulling out the Family+ card today has reasonable confidence it will mean the same thing in ten years. That confidence is the product. The card is its visible manifestation.

What does twenty years of commitment actually buy?

Nagi, a rural town of roughly 5,700 people in Okayama Prefecture, is the closer on commitment. Nagi’s TFR climbed from 1.41 in 2005 to 2.81 in 2014, then to a peak of 2.95 in 2019, which the town built and sustained for more than two decades through ordinary interventions any municipality could copy: cuts to its own council seats and staff to free up child-policy budget, volunteer aiiku-iin delivering personal gifts to newborn families, and a suite of supports sustained long enough that residents learned to plan around them. Eighty-five percent of Nagi’s child-rearing households have two or more children; 48 percent have three or more. That’s a CPM distribution: completed family sizes shifted upward by an environment that made second and third children plannable.

A young couple in Nagi believes the support will still be there in five years because it has been there for twenty. That belief is part of the product, and it can’t be manufactured through a single visible intervention. It’s the cumulative output of a town that kept doing the same thing long enough that the doing became part of what the town is. Call it constancy of purpose. Institutions that change direction every administration cannot build the trust that lets families plan around them, which is the failure mode every municipality trying the visible interventions without the underlying commitment eventually demonstrates: a mayor announces, the press covers, fertility ticks up, the next administration arrives with different priorities, the budget tightens, the program disappears. The customer base that had started to believe the city was committing learns that institutional commitments cannot be trusted.

What the municipal cases share isn’t generosity. None of them spent dramatically more than comparable places. What they share is the alchemy and the machinery held together long enough that the compounding started, and the politics to keep it running across administrations. Visibility shapes desires, which shape marriage decisions, which shape fertility. Each link is now empirically established.

Why the national conversation is stuck

What if the French exception isn’t fading evenly?

France is the case Shaw’s framework reframes most sharply. The conventional reading is that France’s century-long fertility exception is fading: French fertility is closer to European averages than a decade ago and falling. The decomposition says something more specific. Between 2013 and 2023, France’s CPM remained stable between 2.3 and 2.4 children, while TMR fell from 85.0% to 72.8%.

French mothers are still having French-sized families. What’s collapsing is entry into motherhood at all. This matters because French policy has been organized for a century around the CPM side: generous family allowances that scale with parity, school and childcare systems that make two and three children manageable for existing mothers, tax incentives (the quotient familial) that lower the marginal cost of additional children inside a family. These instruments still work for the population they reach, which is why CPM held flat through a decade when most of Europe saw it slipping. None of them do anything for the 27-year-old who hasn’t started. Whether she enters motherhood depends on whether she can form a household, whether the labor market will penalize her for doing it, whether the housing she can afford has room for a child.

The CPM-supporting ecosystem, the part that works locally on existing parents, is doing roughly what it always did. The TMR-supporting national conditions are deteriorating. The French exception isn’t fading in some general sense; it’s fading in one component while the other holds, and the failing component is the one that sits before any local ecosystem can reach.

This is the diagnostic payoff of the decomposition. A country can spend more, sustain the spending longer, build the most institutionally continuous family policy in the developed world, and still watch the aggregate number slip, because the aggregate hides which half is slipping. If you can’t see that France’s TMR is falling while its CPM is stable, you can’t see that French policy needs a different kind of intervention now than the one it has historically delivered well.

Why do cash transfers keep hitting ceilings?

Poland’s 500+ program raised fertility from 1.29 to 1.45 within two years through a near-universal cash transfer; Polish fertility has since fallen back. Germany’s 2007 parental allowance reform produced a measurable increase concentrated among highly educated women, but current German fertility is where it was before. Targeted components can move TMR for the segment they target. They don’t compound without an ecosystem around them. said it in 2020 with more directness than most pro-natal literature allows:

“Any pro-natal policy agenda will have to be about more than just a child tax credit. It’s vital that policymakers also think about how they can remove obstacles to marriage, facilitate access to decent housing, and accelerate completion of education, all vital elements in the modern economic life cycle leading up to childbearing.”

Cash at the moment of childbirth arrives after most of the consequential choices have been made.

What does x% percent of a national budget buy when the system is broken?

Korea is the anti-case, and Korea’s decline is heavily TMR. Korean marital fertility has been stable; the collapse is in whether people marry at all, which means the binding constraints are all the national conditions shaping whether young Koreans form fertility desires in the decade before marriage. The country spends roughly 6 percent of its government budget on fertility policy and has the world’s lowest national rate, which is what spending looks like when it’s flowing through a system that doesn’t work.

Korean policies, evaluated rigorously, have measurable effects in their domains. Kim’s analysis of Korea’s regional baby bonus variation finds Korean TFR would have been 4.7 percent lower without the transfers, equivalent to roughly 562,000 fewer children over the lifecycle of the 2015 female cohort, with elasticities from 0.34 to 0.58 depending on birth order. The same program dropped the third-child sex ratio from a counterfactual 124.7 boys per 100 girls to 105.3, cash reshaping a deeply embedded cultural preference. A 2011 reform expanding childcare leave subsidies for higher-earning mothers produced a 2.3 to 2.5 percentage point increase in conception rates with no significant effect on employment. These are real findings. Korean policies work in the places where they can reach; they do modest CPM work on families who were already going to have at least one child. What they don’t do is reach the TMR frictions producing the aggregate decline, because those frictions sit before any component-level policy can touch them. No marriage bonus reaches a 25-year-old whose employer will force her to sign an illegal contract promising to resign if she becomes pregnant, whose housing is unaffordable on non-regular employment, whose education ran six years past the age her mother was when she married, and whose ten-year earnings penalty for motherhood is seven times what a Swedish mother faces.

The vertical fragmentation makes this worse. Korea runs national cash transfers, metropolitan housing rules, ward-level childcare allocation, and a private hagwon market that none of those layers regulates. Each layer optimizes its own component. Nobody is responsible for whether they fit together for the family trying to use them. The principle that organizations fail when departments optimize separately applies equally across levels of government. The central, provincial, and municipal layers are running independent strategies on the same families.

The Korea Institute of Public Administration said substantively the same thing in 2023: current regional support policy “lacks long-term performance indicators and performance management systems; insufficient project identification and evaluation systems for the regional extinction response mission; and insufficient awareness and capacity at the local government level”. The country’s successful municipal outliers get no structural recognition: as National Assembly member Lee Gae-ho noted in August 2025, Yeonggwang has produced six consecutive years of top-ranking fertility and measurable net in-migration, yet “actual fiscal support is lacking” because the central government has no incentive system that rewards municipalities that succeed. The center can’t see what its own municipalities have built, which means it can’t amplify what works or replicate it elsewhere.

The scale of the TMR frictions deserves naming because the numbers are staggering. Korean workers put in 1,865 hours a year against 1,431 in Sweden. Raising a child to 18 costs $275,000, or 7.8 times GDP per capita, against 4.1 times in the US. Eighty percent of Korean children attend a hagwon, and Koreans spent $19 billion on shadow education in 2023. None of this is reachable by any subsidy a mayor can offer. This is what the environment looks like when the chain has been running in the wrong direction for a generation. The TMR shocks that drove the chain into this position arrived discretely and ratcheted down. Each ratchet depleted the next cohort’s exposure environment further.

Doesn’t Korea’s recent rebound change the picture?

Korean TFR rose slightly in 2024 and 2025: 0.72 in 2023, 0.75 in 2024, an estimated 0.80 in 2025, the first sustained increase in a decade. The rebound is structural timing. The echo-boom generation born in the early 1990s is entering peak childbearing age, and pandemic-deferred marriages are happening with the usual two-year lag before births. None of the structural conditions has changed. The aggregate moved without the environment moving, which is exactly the failure mode the decomposition was built to expose: TFR can rise on cohort timing while the underlying ratchet stays where it was, and the next cohort will discover the gain didn’t compound.

National-scale policy is mostly stuck. Multiple ministries with separate budgets, short electoral cycles, slow demographic feedback, and structural reforms that are politically contentious in ways component-level programs aren’t. France stayed the course for a century because institutional continuity held, and even France is now showing the TMR component slipping while the CPM component holds, which is what slipping looks like before the aggregate number tells you it’s slipping. Korea and Germany and Italy haven’t, and there’s no credible mechanism in their current political economies for them to start.

The local work is the infrastructure

What can’t a mayor reach?

The bulk of the fertility problem in most developed countries is TMR (fewer young adults entering the parenthood pathway at all), and the bulk of TMR’s binding constraints are national. No mayor can reach them. Housing is the major exception, and its politics are moving. Most of the others are not. Energy policy shapes the real cost of running a household and therefore the economics of forming one. Industrial policy determines whether the labor market absorbs young men at stable wages, which determines whether they become marriageable on the timeline their biology and their desires suggest. Education finance shapes both the direct cost of raising a child and the timeline on which a young adult finishes training and enters the family-formation window.

Each of these deserves careful work, close attention to political economy, and mapping of the coalitions that could move them. None of it exists yet in the form pronatalists need. Someone has to do it. This essay is not that essay. This essay is about what to do in the meantime. Shaw's ratchet pattern makes the stakes legible: the 1970s oil shock didn't just raise prices, it triggered the economic disruption that stamped an entire cohort's TMR down permanently and never let it recover. Energy and industrial policy are pronatalist policy, whether pronatalists treat them that way or not. That essay still needs writing.

The claim here is that while the national conversation remains stuck, useful subnational work should proceed now. The municipal and provincial cases do most of the achievable work on CPM (completed family sizes among women who were going to become mothers), direct TMR work on the frictions local authority can reach (housing the main one), and additional TMR work through local concentration raising ambient infant exposure for residents who weren’t already fertility-minded. None of this solves the national TMR problem. But together these build the infrastructure national TMR reform will need to land on if and when it arrives, and they’re the work doable inside the political constraints mayors and provincial administrators actually face.

What are mayors actually doing when they succeed?

A mayor building Nagareyama’s station childcare or Akashi’s Children’s Future Department isn’t building a scale model of what a prime minister should do. She’s doing two things at once: building CPM infrastructure, and working around the missing vertical coherence her national government won’t supply. The mayor can’t make the central government cohere with the city, but she can at least make the city cohere with itself. Akashi consolidated kindergartens and libraries under a new Children’s Future Department and moved preschool authority from the school board to the mayor’s office. Trentino passed Provincial Law No. 1 of 2011 to put a single agency in charge. Nagi cut its own council seats to free up child-policy budget. These are vertical integration moves inside the layer the actor controls.

The empathy channel runs in an environment. Environments are built locally, by entities small enough to act and sustained enough to hold. A country with no local ecosystems is a country where, even if national TMR reform eventually arrives, the young mothers it produces stop at one child because the local environment doesn’t make a second or third livable. A country with a hundred Nagareyamas is a country where national TMR reform, when it comes, has CPM infrastructure to land on. The local work complements national reform; it doesn’t substitute for it.

Yeonggwang and Sejong and Nagareyama and Akashi and the Alpine provinces aren’t demonstrations of what Korea or Italy or Japan should do at the center. They show what mayors and provincial administrators can do now, inside the political constraints they face. Every one of these places shifted ambient exposure, then desires, then marriage and fertility decisions, at the scale where they had authority to act. The aggregate numbers for their countries didn’t move much, because most other cities and provinces didn’t do the same thing and because the national TMR frictions continued to depress entry to parenthood across the full cohort. Building the ecosystem in your jurisdiction makes the national number movable when the center eventually turns, and captures the CPM gains available at your scale regardless of what the center does.

The Uchikoshi findings sharpen this in a specific way, and Shaw’s decomposition sharpens it further. If fertility desires shape marriage decisions rather than the other way around, and if marriage decisions drive fertility in East Asia, then the TMR leverage point is the environment shaping fertility desires in unmarried young adults. The bulk of that environment is national. But some of it is local: the ambient infant exposure a 25-year-old experiences in her actual neighborhood is a municipal-scale variable, and local ecosystems that sustain high exposure do activate the empathy channel for residents who weren’t already fertility-minded. This is the TMR work local ecosystems can do. It’s real but limited. What it isn’t limited on is CPM: the same local environments that produce some TMR activation are also the environments where existing mothers decide whether to have second and third children, and that decision is almost entirely a local question. National cash transfers, by contrast, deliver modest CPM effects and essentially no TMR effects because they don’t touch the binding national constraints that shape young adults’ fertility-desires environment. Uchikoshi’s own policy conclusion lands here, where the operational decision gets made: “policy efforts that increase fertility desires among young people contemplating family formation by reducing uncertainty around childbearing may also contribute to higher fertility via their positive effect on marriage.” Reducing uncertainty around childbearing is exactly what a local ecosystem does. It makes the environment clear enough that a young adult can see what her thirty-five-year-old self might plausibly live, and the empathy channel takes care of the rest.

One caveat. Some fraction of the fertility-desires shift is autonomous, genuine preference change that ecosystems cannot reach. A 25-year-old who has thought it through and concluded she doesn’t want a life that includes children isn’t going to be empathy-channeled back into wanting one. That fraction exists, and the ecosystem argument makes no claim on it. What the ecosystem argument claims is the fraction shaped by environment, which Shaw’s reading of the Fertility Gap puts at the center of the problem: the gap between desired and actual fertility stems less from mothers having fewer children than desired, and more from a growing share of women who hope to become parents but ultimately remain childless. That’s a TMR phenomenon, women who wanted to become mothers and didn’t, and it’s exactly the territory where ecosystems do work, because the fraction of TMR loss attributable to depleted environment rather than autonomous preference change is large, and it’s largest in places where the ratchet has been running longest.

So what should pronatalists actually do?

The pronatalist response to national policy stagnation shouldn’t be despair. It should be aggression at every layer below national, because that’s where the work that compounds is actually getting done. I am still going to write essays on why energy and industrial policy is pronatalist policy and vice versa at the end of the day, because no pronatalist policy is immune from oil shocks, as Shaw’s paper makes perfectly clear. Pronatalists need to think about this stuff, but we are still limited by the political economy.

Build the ecosystem where you have authority. Capture the CPM gains available at your scale. Start with housing, the YIMBY coalition already exists, the municipal authority is real, and the intervention does TMR, CPM, and empathy-channel work simultaneously.

The local work also builds the political capital and institutional expertise that pronatalists will need for national reform. A country with a hundred Akashis has a bench. A country with zero has a press release.

Jobs didn’t convince anyone they wanted a phone. He built the system, and the system delivered, and the delivering changed what the next wave of people could imagine wanting. The demographic version is harder and slower, but it’s the same thing: alchemy on top, machinery underneath, and the politics to keep both running long enough that the compounding kicks in. The jurisdictions that have figured out how to hold all three together are municipalities and provinces. The countries that end the next four decades with that infrastructure in place will be in a different position from the countries that don’t.

On March 26, 2026, the Austin City Council unanimously voted to legalize Accessory Commercial Units and Front Yard Businesses: small commercial spaces, up to 200 square feet, that homeowners can operate from residential lots. A bakery in a converted garage. A corner store stocking what surrounding blocks actually buy. A coffee window cut into the side of a bungalow. All now legal, by-right, in a major American city. The vote went almost unnoticed outside planning circles. It should not have.

Here is what Austin just did, in terms the real estate market will recognize. Walkable urban neighborhoods (the Georgetowns, West Villages, Pearl Districts, Beacon Hills) command price premiums of 50% to 200% over comparable non-walkable neighborhoods in the same metros. Christopher Leinberger’s research at George Washington has documented that walkable urban places occupy roughly 1% of land in major U.S. metros but capture disproportionate shares of office and retail rent premiums. Demand clearly exceeds supply. One of the most beloved things about Disney World, for what it’s worth, is its walkability.

And yet, in the entire 21st century, the U.S. has produced nearly zero new walkable neighborhoods, and even fewer through conventional development. The few exceptions don’t inspire confidence, even though urbanists and residents love them. Culdesac Tempe, the first car-free neighborhood built from scratch in modern America, required a startup, a zoning negotiation, and about five years to deliver one neighborhood. Carmel, Indiana required a 28-year mayoralty under Jim Brainard and hundreds of millions in public investment to produce one walkable downtown district inside an otherwise well-designed but still car-dependent suburb of cul-de-sacs and roundabouts. Walkability has a scaling problem.

Austin’s vote is the first serious attempt by a major American city to fix it through a different mechanism. ACUs are a refinement of what ADUs already proved with their alchemy. ADUs, at the end of the day, added housing to (mostly) desirable neighborhoods one parcel at a time, faster than any conventional project. ACUs do the same thing for the other half of the walkable-neighborhood equation: destinations.

The premium and the bottleneck

The walkable urban premium is well documented and routinely ignored by policy. The pattern is the same across markets. Office rents in walkable urban places run 75% above their drivable suburban equivalents. For-sale residential and retail command comparable premiums, with neighborhood retail sustaining rents big-box formats simply cannot match. A small fraction of the metropolitan footprint produces a disproportionate share of economic output and an even larger share of land value.

The supply side is the puzzle. American cities know how to build subdivisions, office parks, big-box retail, and strip malls. They don’t know how to build walkable neighborhoods, and the evidence is in the production stats. Two prominent new examples in the last quarter-century. One required a startup-backed developer and a desert. The other required a generational mayor and a downtown island floating in a sea of conventional suburbia.

Carmel is a real accomplishment. The few hundred acres of walkable urbanism it produced are valuable both as places and as proof that retrofit is possible. But even the modern gold standard of American suburban retrofit, run by the most committed mayor of his generation, produced walkability for a small fraction of the city’s footprint. If 28 years and a singular political career buys you one walkable district inside one suburb, the conventional pathway is in worse shape than the conventional praise of Carmel suggests.

The building across the street

Walk almost any older American neighborhood and you’ll pass it: a small commercial use operating inside a residential zone, legally, profitably, without complaint. A corner store. A neighborhood bakery. A barbershop in what used to be a front parlor. These exist because they were grandfathered when the zoning changed in the mid-20th century. Strong Towns documents these “clearly used to be a corner store” houses as architectural fossils: the chamfered corner, the slightly-too-large front window, the faded ghost-sign on the brick.

You can guess where this goes. An identical building, proposed today, three blocks over, would be illegal. Same footprint. Same use. Same neighborhood. Different answer. The grandfathered store doesn’t generate traffic chaos. It certainly doesn’t depress property values. The cities most celebrated for their charm (Portland, New Orleans, Charleston, older parts of Boston) are precisely the cities where these uses survived. The Bywater corner store profiled in Planning magazine is one of thousands of examples sitting in plain sight.

The control group and the treatment group sit across from each other on the same block. The grandfathered corner store anchors a neighborhood that, partly because of the store, commands a premium. The block with the store is worth more than the block without. We’re arguing to legalize a value-creation mechanism that already works in every major American city. You can see it in operation. You don’t have to speculate about it.

Two columns of math

The economic case for ACUs is clearest in two columns of numbers.

Column one is what an ACU bakery costs to launch, all in. A homeowner converting an existing garage or front room pays only for equipment and inventory: $10,000 to $25,000 per the standard home-bakery cost data, with some operators starting on as little as $5,000. A homeowner building a new accessory structure adds the shell cost. Austin ADU construction runs $80,000 to $150,000 for a full residential unit; a 200-square-foot commercial accessory structure without full residential plumbing should run materially less, maybe $20,000 to $50,000, though direct ACU construction data is thin. All in for new construction: roughly $30,000 to $75,000.

Column two is the alternative. A small leased brick-and-mortar bakery typically runs $26,600 to $36,700 at the low end before lease deposits, and that’s for borrowed space the operator doesn’t own. A medium commercial bakery, per Sharpsheets data from 1,600+ bakeries, requires $125,200 to $393,000 (leasing mind you). A franchised Panera runs nearly $1 million. This is all before ACUs.

You most likely aren’t going to build an ACU from scratch in this example (unless your neighbors really, really love your baked goods). So for the more realistic case, a garage-conversion ACU bakery launches somewhere between roughly one-third and near-parity with a small leased bakery, depending where you land in each range. Against a medium commercial format, though, even the high end of the garage conversion comes in at a fraction of the cost. The new-construction ACU bakery is messier: its top end ($75K) overlaps with the bottom end of a medium commercial build ($125K), so the savings are real but not dramatic at the margin. And critically, in both ACU cases, the operator owns the asset rather than renting it, which changes the long-run economics entirely. Add lease deposits and monthly rent to the column-two numbers and the gap widens over time.

But the more interesting number is the one that doesn’t appear on the bakery’s books. The bakery is not just selling coffee (well, it probably is selling coffee, alongside the baked goods). It’s producing value, and almost none of that value shows up on its P&L. The operator captures the coffee margin and builds equity in a small commercial structure. The neighborhood captures the bigger prize (if you run a good business): amenity capitalization, because people genuinely do want to grab a fresh bagel or croissant or whatever before heading out to work. Leinberger’s work and the broader literature on amenity capitalization suggest the value uplift on surrounding parcels from successful neighborhood-serving commerce is measurable and significant. Direct ACU-specific studies don’t yet exist. The inference rests on the broader walkable-premium evidence, but it’s a strong one.

That’s the point of the ACU as a policy instrument. It lets a small operator produce a large public good, financed by their own willingness to run a business and own a small structure. The city writes one ordinance and gets a value-creation engine in return.

What a storefront is for

There’s a question worth asking before we go further: in an age of Amazon next-day delivery and ghost kitchens, why does the visible storefront matter at all? (Besides the fact that Amazon didn’t really kill retail. Private equity did. RIP Joann Fabrics.) Why not just let the bakery operate from a hidden production kitchen and ship?

Because the storefront is the product, not just a delivery mechanism for goods. A residential block punctuated by a hand-painted bakery sign, a corner store’s chalkboard listing today’s tacos, a coffee window with two stools tells a passerby this is a place where things happen. It tells them it’s reasonable to walk here. The grandfathered corner store on a Boston side street is photographed by tourists. The identical-on-paper block four miles out is not. The difference shows up in property values, in tax base, in the simple fact of people choosing to live there.

Austin’s resolution rejected the existing legal preference for what it called “hidden” commerce and embraced “the active, visible neighborhood engagement that defines Austin’s character.” Visible commerce is a public good, and the public pays for it in rent, home prices, and neighborhood premiums.

This is also why ACUs can’t be replaced by their digital substitutes. Walkability isn’t a market for goods. It’s a market for the presence of small commerce within walking distance, and presence requires visibility.

ACUs were only possible because of ADU normalization and the demand for denser housing (for whatever reason, people want to live near each other). The 2010s and the HOME initiative’s three-units-per-lot reform created the cultural and procedural baseline. The 2026 ACU vote arrived on top of a decade of that work. Berkeley, Spokane, and Burien are following similar paths, and Texas H.B. 2464 and S.B. 541 already protect “no-impact” home businesses statewide.

The hardest objection

The objection that matters isn’t traffic, parking, or gentrification. If you’re reading this, chances are you’re on the urbanist or YIMBY side of things, so your real objection is probably this: a 200-square-foot bakery is a curiosity, not a policy. ACUs at this scale won’t move the needle on walkability or housing affordability at any scale that counts.

ACUs, like ADUs, are easier to set up despite being more expensive per square foot to build. And one corner store per residential block in a typical Austin neighborhood, plus a few specialty operators (the bakery, the coffee window, the bicycle repair) layered on top, would replicate the destination density that the grandfathered pattern already produces and that already commands a premium. It’ll take time. But like ADUs, which genuinely surprised everyone with how many units they ended up producing, ACUs may transmute neighborhoods in ways we don’t fully see yet.

Each successful ACU also makes the next one politically and culturally easier, the way each successful ADU did. The 200-square-foot cap is annoyingly low, but it’s a floor, not a ceiling. The trajectory of these reforms (visible already in Burien’s draft framework) is upward, toward 1,500-square-foot neighborhood corner stores.

I should also address Pomona, because it’s the most important counter-data point. Pomona legalized ACUs by-right and has not yet seen homeowners apply. The lesson is humbling. Legalization is necessary but insufficient. Cities serious about ACUs need to build the supply chain alongside the ordinance: financing pathways, pre-approved design templates, a permit concierge for the first wave of applicants, demonstration projects that show neighbors what a successful ACU actually looks like. Austin’s parallel investments in ADU lending pathways suggest the city has learned this lesson. Other cities should learn it before passing the ordinance, not after.

NIMBYs, at the end of the day, are going to NIMBY. But it’s going to be fun pointing out the grandfathered rebuttals. Traffic? Point across the street at the grandfathered store that hasn’t generated any. Property values? Point at the premium attached to the block with the bakery. Neighbor opposition? Point at the surveys showing that residents of blocks with small commercial spaces describe them, in Berkeley’s case, as the reason the neighborhood “feels like a community.” Revealed preference is what people pay premiums to live near. Strong NIMBYs, just like with ADUs, will always oppose the new whatever, but they also have a nasty habit of building out what’s good for them personally: some want their own ADU. All of them just don’t want others building one.

A note on what ACUs will and won’t do. A 200-square-foot homeowner-operated corner store is not about to disrupt 7-Eleven. The format will stock a curated selection because it has to. It’s small. That’s the point. The ACU corner store wins on walking distance and curation, not on selection. It fills a gap that convenience-store retail abandoned years ago: the half-block, daily-trip, recognize-the-owner gap. It doesn’t compete with the corridor formats. It complements them, or ignores them.

The production process for the premium

The reforms that change cities most are rarely the ones that cost the most. They’re the ones that remove a small obstacle to something people already want to do. ACUs cost a city nothing to legalize. They generate tax revenue, foot traffic, social capital, entrepreneurship, and the street-level texture no master plan can manufacture from above.

The next Georgetown won’t be built. It’ll be grown, parcel by parcel, by homeowners who were finally allowed to. Austin started growing one in March. Cities that legalize the growing will capture the premium. Cities that wait for the next Culdesac probably won’t get one.

If you’re a developer, treat ACU progress as a leading indicator for land acquisition. The amenity capitalization will accrue to surrounding parcels well before it accrues to the ACU operator. If you’re a mayor, write the ordinance now instead of waiting for a Brainard-grade political career to materialize. If you’re a franchise strategist, design the 200-to-1,500-square-foot neighborhood concept before your competitors do, the way Starbucks colonized commercial corridors a generation ago. And if you just care about the kind of neighborhood worth living in: the question isn’t whether the production process works. Austin proved it does. The question is which city builds the second one.

Tokyo, April 1, 2026. JOGMEC, the Japan Organization for Metals and Energy Security, publishes a news release on its website. New equity investment instruments for LNG projects. Revised debt guarantee fee schedules, with discounts calibrated to the volume of LNG destined for Japan. These are two distinct instruments with different risk profiles: equity capital for exploration and debt guarantees for development. The announcement follows December 2025 deliberations at METI’s Advisory Committee on Resources and Fuels and implements the 7th Strategic Energy Plan’s target of raising Japan’s self-development ratio (自主開発比率) to 50 percent by 2030 and 60 percent by 2040, up from roughly 37 percent in FY2023.

The bureaucratic language is unremarkable. The timing is certainly not if you are on the up and up with current events. While the largest energy supply disruption since the 1970s is actively unfolding, while Japan’s LNG reserves are measured in weeks, while the yen has lost more than a third of its value against the dollar since 2021, the institution responsible for Japan’s energy security is announcing revised guarantee fee schedules for upstream equity positions. This is the latest turn of a ratchet that has been clicking forward for six decades. The question we explore is whether the ratchet is turning fast enough. And whether it is turning in the right direction.

Midland, Texas. Same week. Rigs idle in stockyards. The Permian Basin frac crew count is down 20 percent from its January peak. The Q1 2026 Dallas Fed Energy Survey captures the other half of the paradox: business activity turned positive for the first time in nearly a year, driven by the crisis-induced price spike, but nearly 70 percent of large E&P firms reported they had not changed their 2026 drilling plans. Small firms were far more responsive; nearly 60 percent planned to increase drilling. But large firms control more than 80 percent of total production, and they are not moving. One executive’s survey comment distills the mood: “Oil prices are high but will fall dramatically as soon as the new government in Iran is announced.”

The world’s largest energy importer and the world’s largest oil producer are both failing to respond to the same price signal, for different reasons that turn out to be connected. Tokyo cannot secure supply at any cost. Midland cannot deploy supply at any price. Between these two failures sits a market structure that enriches a narrow group of aligned producers and imposes costs on everyone else.

Welcome to the cost that I call the discipline tax.

The Architecture of Capital Discipline

The mechanism has been well documented. The shale boom of 2010 to 2014 was, to a first approximation, a capital destruction event disguised as a growth story. Operators outspent cash flow for a decade. Saudis and OPEC responded with increasing their own production. Production kept climbing higher and higher until investors revolted. The 2014 to 2016 crash and the 2020 pandemic collapse cemented the shift: Wall Street demanded returns, not growth. We acknowledge, emphatically, that people need to make a profit at the end of the day and a correction was needed.

Our point is different.

The correction evolved into a production restraint regime that, whether by explicit coordination or structural convergence, aligns the behavior of publicly traded U.S. producers with OPEC+ output management. The FTC’s complaint against Scott Sheffield, Pioneer Natural Resources’ co-founder and former CEO, provided the documentary evidence: hundreds of text messages with OPEC officials discussing crude oil market dynamics, pricing, and output. Public and private communications aimed, in the FTC’s language, “to organize tacit (and potentially express) coordination of capital investment discipline and oil production levels in the Permian Basin and across the United States.” Sheffield’s own summary of the effort: “I was using the tactics of OPEC+ to get a bigger OPEC+ done.” The parallel Hess finding in the Chevron merger review documented similar communications and similar endorsements of supply restrictions. The FTC characterized Sheffield’s behavior as a “sustained and long-running strategy to coordinate output reductions”, not a one-off event.

The posture is now industry-wide and spans every major basin. In North Dakota’s Bakken, rigs have fallen from 217 at peak to 27, with frac crews dropping from 13 to 7, yet production holds near 1.17 million barrels per day because longer laterals substitute for activity. A HighPeak Energy SEC filing states the logic in plain English: “Although recent events in the world have caused a surge in near-term oil prices, we are committed to developing our assets at the appropriate cadence, one that reflects sustained market conditions, capital discipline and long-term value creation.” The worst supply disruption in fifty years, and the plan does not change.

Varied forms of the NOPEC bill, designed to strip OPEC’s sovereign immunity and expose cartel behavior to U.S. antitrust law, have been introduced some 16 times since 2000. In 2007, it passed the House 345 to 72 and the Senate 70 to 23, overwhelming bipartisan margins, only to die under a Bush veto threat. In 2022, it advanced through the Senate Judiciary Committee 17 to 4. Never brought to the floor. Who lobbied against it? The American Petroleum Institute and the U.S. Chamber of Commerce, representing the very companies whose production restraint aligns with the cartel’s output management. API explicitly urged a “no” vote.

The predecessor asked why the American industry doesn’t respond to price signals. We ask a different question: what does that non-response cost everyone else?

The international dimension is what the domestic debate almost always misses. When U.S. shale was growing at breakneck speed, adding 5 million barrels per day between 2010 and 2019, it was the only non-OPEC supply elasticity in the global market. The only counterweight to cartel output management. Discipline removed it. OPEC+ members now hold virtually all global spare capacity, roughly 3.5 million barrels per day, concentrated in Saudi Arabia and the UAE, the same countries currently absorbing Iranian missile strikes. The discipline regime didn’t just restructure the American oil industry. It restructured the global energy market, removing the only supply-side competition that importing nations could rely on.

To see who benefits from this arrangement, consider the IMF’s fiscal breakeven oil prices for OPEC member states, the minimum price per barrel each country needs to balance its government budget. For 2025, the IMF estimated Iran at $124.12, Algeria at $118.95, Iraq at $92.43, Saudi Arabia at roughly $91, Kuwait at $81.84, and the UAE at $49.95. The GCC median fiscal breakeven is projected at about $70 for 2025, declining to $62 by 2030 as diversification proceeds. Before the Hormuz crisis, Brent averaged $65 in 2025. That means even the discipline-elevated price was not high enough for most OPEC treasuries to balance their books. The war has, for the moment, solved their problem: Brent above $100 generates massive surplus revenues for Saudi Arabia and comfortably covers Iraq’s $92 threshold. The discipline regime and the cartel’s output management together hold prices in a range that serves OPEC fiscal needs and major-company shareholder returns simultaneously.

The tax this arrangement levies falls on everyone outside the aligned producer group: importing nations, independent operators, service companies, energy communities, and consumers. And it is paid not in a line item on a bill but in currency depreciation, trade deficits, inflation, and idled human capital.

But here is a question worth posing to every audience, including the producers who believe they benefit: do you really want structurally elevated oil prices as a permanent feature of the global economy? The importing nations obviously do not. But even for the producers, the math is less favorable than it appears. High prices accelerate the transition to alternatives. They incentivize every non-OPEC government to invest in renewables, nuclear, and efficiency. They drive Asian economies toward electrification at a pace that, over a decade, permanently destroys oil demand. China’s own state media has described the Hormuz crisis as a “historic opportunity” for its renewable energy industry, with analysts projecting solar export surges comparable to the 120 percent increase that followed the 2022 Russia-Ukraine shock. CNPC News, the outlet of China’s largest oil company, called for accelerating wind, solar, storage, and hydrogen development as the structural lesson of the crisis. The discipline regime extracts maximum rent today at the cost of accelerating the obsolescence of the asset base.

But the damage from structurally elevated prices is not only about accelerating alternatives. It is more immediate and more fundamental than that. Cheap, reliable energy supply is the foundation on which industrial economies are built. Korea’s steel mills, shipyards, semiconductor fabs, and petrochemical complexes do not run on renewables. They run on hydrocarbons, and they compete globally on margins that structurally elevated input costs erode quarter by quarter. Japan’s manufacturing export machine, already strained by a 37 percent currency depreciation, cannot absorb permanently higher energy costs and remain competitive with Chinese producers who have pipeline access to Russian gas and domestic coal-to-chemicals capacity. Every dollar added to the per-barrel cost of energy is a dollar subtracted from the capital budget of a shipyard in Geoje, a chip fab in Kumamoto, a petrochemical complex in Chiba. For economies whose global competitiveness depends on transforming imported energy into exported manufactured goods, the price of that energy is not a macroeconomic abstraction. It is the determining variable.

It is worth noting, in this context, that the shale boom of 2010 to 2019 was the only force in the global market that ever broke OPEC’s pricing power. Five million barrels per day of new U.S. production, brought online by independent operators funded by American PE and debt markets, drove prices low enough to strain every OPEC fiscal budget and force multiple rounds of production cuts. Capital discipline, enforced by Wall Street and aligned with OPEC+ output management, removed that force. The independent operators who created it are still there. Their acreage is still there. Their geological knowledge is still there. What is not there is the capital. And the capital that replaced American PE in the Haynesville, the $10 billion from Japanese trading houses, operates on a different logic: longer time horizons, lower return thresholds, willingness to fund through price cycles. The question of what that logic could do if applied beyond Tier 1 acquisitions, to the broader independent sector where the supply elasticity actually resides, is one that the current moment makes difficult to avoid.

Who Pays

The typical account of capital discipline treats it as an internal industry matter, a question of corporate governance and investor preferences. But discipline is not a closed system. It radiates outward. The restraint that enriches shareholders in Houston imposes costs on importers in Tokyo, locks independent operators out of capital markets, and liquidates the service infrastructure that any new supply response would need. Three groups. Three different kinds of damage. One structural cause.

The Import Bill

A Japanese trading company executive calculates the cost. His government’s fossil fuel import bill nearly doubled in a single year, from JPY 17 trillion in 2021 to JPY 33.7 trillion in 2022. The trade deficit hit a record JPY 20 trillion, roughly $155 billion, the largest since records began in 1979. The yen depreciated from 109.78 to the dollar in 2021 to 131.37 in 2022, to 140.5 in 2023, and past 150 in 2024, a decline of more than a third. The mechanism is straightforward: dollar-denominated energy imports feed current account deterioration, which drives depreciation, which raises the yen cost of the next shipment, which worsens the current account further. A vicious cycle with no natural brake.

The Bank of Japan spent an estimated $60 billion in currency interventions in September and October 2022, the first yen-buying interventions since 1998. The effect on the exchange rate trajectory was not lasting. GDP growth slowed to 0.9 percent in 2022 and just 0.1 percent in 2024. Government debt stands at 235 percent of GDP, the highest among advanced economies. Energy subsidies from 2022 to 2025 totaled JPY 13.4 trillion. IEEFA projects that a prolonged Hormuz closure could reduce Japan’s GDP by up to 3 percent in 2026, reversing the modest recovery underway.

The standard response, diversify suppliers and sign more LNG contracts, has reached its limits. Japan’s LNG import bill increased 98 percent in yen terms between 2021 and 2022 even as import volumes declined by 3 percent. Diversification of supply sources does not insulate against global price shocks. What would insulate is equity ownership of production capacity, the self-development ratio that JOGMEC exists to raise. The ratio stands at 37 percent. The 60 percent target for 2040 implies an enormous volume of new upstream investment. JOGMEC’s budget for oil and gas exploration and asset acquisition is expected to double in FY2026 to 108.2 billion yen, roughly $733 million. Japanese public institutions provided $93 billion in support for overseas oil and gas projects between FY2013 and FY2024, with 45 percent concentrated in upstream investments. The capital exists. The institutional infrastructure exists. The question is what it buys.

Korea’s exposure is, if anything, more acute. The country imports more than 95 percent of its crude oil from the Middle East and more than 20 percent of its LNG through routes that transit the Strait. The won lost 20 percent of its value in 2022, moving from 1,189 to the dollar in January to 1,428 by October. Energy imports consumed $145 billion in eight months. The depreciation constrains the Bank of Korea’s ability to cut rates, because cheaper money would accelerate the won’s decline, which in turn suppresses domestic demand. A macroeconomic trap in which energy import costs simultaneously cause inflation and prevent the monetary response to it. The Korea Institute for International Economic Policy (KIEP) projects that even in an early ceasefire scenario, oil prices will not return to the pre-war level of $63, with $90 as the floor and $117 if the blockade extends. The Korea Research Institute for Industrial Economics estimates that manufacturing costs would rise 11.8 percent if the blockade lasts three months or more. The OECD cut Korea’s 2026 growth forecast from 2.1 percent to 1.7 percent, the largest downgrade among major countries. Korean commentators describe the situation as a “triple trap” (삼중 함정): energy crisis, U.S.-China strategic competition, and the North Korean nuclear threat, all converging at once.

Korea has the institutional pieces to address this. KOGAS, the state gas monopoly, simultaneously functions as monopsony importer, pipeline operator, and regasification terminal owner, an organizational structure that gives it enormous latent buyer power and operational capability for managing an integrated value chain from wellhead to burner tip. KNOC, the national oil corporation, has operated upstream projects in 17 countries. Korea’s chaebols, Samsung C&T, SK Group, Hyundai, POSCO, frequently invest in overseas energy projects, funded by KEXIM, K-Sure, Korea Development Bank, and the sovereign wealth fund KIC. The downstream infrastructure is world-class. What is missing is the upstream half.

And unlike Japan, where upstream energy security policy has been pursued with institutional consistency across administrations, Korea has witnessed shifts in policy priorities with every change of government. As one comparative analysis noted, Japan’s consistent approach produced an upward trend in its oil and gas self-sufficiency ratio. Korea’s inconsistency produced a decline. KNOC’s debt-to-equity ratio climbed to 529 percent by 2016. KOGAS’s debt-to-equity exceeded 450 percent, with uncollected receivables reaching 14.5 trillion KRW by end-2024, the result of regulated domestic prices lagging global spot rates for years. Since 2013, Korean energy policy moved away from self-sufficiency targets altogether, focusing instead on reducing debt ratios at the state-owned enterprises. The Blue Whale project, Korea’s flagship offshore exploration in the East Sea with potential reserves of 3.5 to 14 billion barrels, was defunded by the government in September 2025 and BP was brought in at 49 percent to share costs that Korea could no longer bear alone.

The institutional capability exists. The financial capacity to deploy it does not. And the policy consistency to sustain a long-term upstream investment program has never been achieved.

The contrast with China is instructive, though not in the way Western commentary usually frames it. China imports more Middle Eastern oil than Japan and Korea combined: over 55 percent of its crude comes from Middle Eastern producers, with roughly 45 percent of total oil imports transiting Hormuz. Oil imports hit record highs in 2025 at 11.55 million barrels per day. Yet while Japan’s yen collapsed 37 percent and Korea’s won fell 20 percent, China’s currency and bond markets have been comparatively stable. Not because China is less exposed. Because it spent two decades building buffers that Japan and Korea did not. Overland pipelines from Russia and Central Asia that bypass maritime chokepoints entirely. Strategic and commercial reserves estimated at 1.3 to 1.6 billion barrels, covering three to four months of demand, well above the IEA’s 90-day recommendation. Domestic production at roughly 27 percent of consumption. And a preferential transit arrangement with Iran that has allowed Chinese-flagged vessels to continue passing through the strait, with the IRGC reportedly assessing fees in yuan.

But even China’s buffers have limits. A Renmin University economist quoted by Xinhua described the IEA’s record strategic reserve release as “a painkiller, not surgery” (止痛药, 不是手术刀): it can relieve symptoms but cannot solve structural supply dependence. If the closure extends beyond three months, even China’s reserves and pipeline capacity face serious strain. China’s advantage is not that it solved the vulnerability. It is that it diversified supply routes and built redundancy into the system while the strait was still open. Japan and Korea, almost entirely dependent on seaborne imports through contested chokepoints, did not build the equivalent on the supply side. The question is whether they still can.

The numbers, we think, speak for themselves. But the implicit question deserves stating: why is there no countervailing supply capacity? Why are these countries still price-takers in a market that is structurally organized to extract maximum rent from importers? And what does it mean that the country with the deepest buffers, China, is now resuming large-scale purchases of U.S. crude and LNG to resell into Asian markets as a tool of political influence, while the countries with the shallowest buffers have made no comparable move toward upstream equity ownership?

The Locked-Out Driller

A private operator in the Anadarko Basin has 200 undeveloped locations on Tier 2 acreage. Breakeven at his current cost structure: about $65 per barrel, the Dallas Fed survey average. Large firms average $61; small firms average $66. Compare that to Diamondback’s ~$37 per barrel breakeven. That $28 gap is not geology. You know it and I know the reason, it’s organization: the accumulation of longer laterals, automated drilling analytics, continuous pumping, microgrids, advanced water recycling, developed by well-funded operators with deep engineering benches. With those improvements, the operator’s breakeven could be $48. But the improvements require engineering teams, data systems, and capital the operator does not have.

PE firms are not interested: exit markets are frozen, and a Tier 2 independent does not offer the return profile that institutional LPs demand. The majors are not interested: they are buying each other’s Tier 1 inventory, not developing Tier 2. Bank lending has tightened. Thirty-nine percent of E&P firms expected capital expenditures to decline in 2026; among large producers, the figure was higher still. One Dallas Fed respondent captured it with the weariness of four decades: “I have never felt more uncertainty about our business in my entire 40-plus-year career.” Another put it more bluntly: “’Drill, baby, drill’ does not work with $50 per barrel oil.”

The operator is viable but capital-starved. The geology works. The problem is that every domestic capital source has either exited, consolidated, or tightened. The irony is that his Tier 2 acreage is viable at $48 with the right operational improvements. JAPEX paid $1.3 billion for Verdad Resources’ DJ Basin assets in December 2025, demonstrating that the rock in analogous basins works for buyers with different return expectations. But the only capital that would fund a multi-year development program through price cycles, without demanding a 20 percent IRR and a three-year exit, is the kind of patient, balance-sheet-backed capital that American PE structurally cannot provide.

And even if the capital appeared tomorrow, the operator would face a second problem. The engineering teams that could implement the operational improvements, the people who know how to run automated drilling analytics, optimize pad development, manage simul-frac completions, are being laid off by the service companies at the same time he needs them most.

The Idled Engineer

A completions engineer in Houston is experiencing the consequences. Her frac crew was laid off when the operator dropped a rig. The U.S. frac crew count is down roughly 15 percent year-over-year, with the Permian down 20 percent from its January peak. ConocoPhillips announced plans to eliminate up to 25 percent of its global workforce; Chevron cut 15 to 20 percent, roughly 8,000 people. Petroleum engineering graduates at U.S. universities collapsed from a peak of 2,615 in 2017 to roughly 623 bachelor’s degrees annually, a 76 percent decline. Some programs were nearly wiped out: Louisiana State down 89 percent, University of Oklahoma down 90 percent, Colorado School of Mines down 88 percent from their peaks. Her students are choosing software engineering, not because demand for energy is falling, but because capital discipline has throttled the demand for her expertise.

The techniques she knows, the ones that drove the best operators’ breakevens down by 8 percent in two years through ultra-long laterals, AI-driven well spacing optimization, continuous pumping, 90-plus percent produced water recycling, are transferable. The question is: transferable to whom?

If a different capital allocation logic were applied, the demand for petroleum engineers would not look like it does today. The total upstream workforce has shed 252,000 core jobs while producing substantially more energy. Those 252,000 people did not forget how to drill. But they are leaving the industry permanently, and the universities are no longer replacing them.

What’s Already Moving

It would be tempting, at this point, to conclude that the situation is simply stuck, that capital discipline has locked the system and no countervailing force exists. That would be a mistake. Something is already happening. Over the past twelve months, Japanese companies have deployed more capital into American shale gas than at any point in history. To understand what they have done, and more importantly what they have not done, we need to look carefully at the deals.

In twelve months, Japanese companies deployed more than $10 billion into American shale gas, part of a $550 billion investment framework between Washington and Tokyo.

JERA, Japan’s largest power generator, paid $1.5 billion for Haynesville assets in October 2025, closing in February 2026. Production of 500 MMcf/d, with plans to double to 1 Bcf/d through operational improvement. JERA holds 6.5 million tons per year of LNG offtake from U.S. projects due online by the end of the decade. JAPEX followed in December with $1.3 billion for Verdad Resources’ DJ Basin assets. Tokyo Gas secured positions in East Texas.

Then the capstone. In January 2026, Mitsubishi Corporation acquired Aethon Energy Management for $7.5 billion, the largest acquisition ever made by a Japanese trading house in the American upstream sector. Aethon’s Haynesville assets produce 2.1 Bcf/d of natural gas, equivalent to roughly 15 million tons per year of LNG. The sellers: Ontario Teachers’ Pension Plan and RedBird Capital Partners, PE backers exiting exactly the kind of independently managed, operationally excellent shale positions that discipline has rendered unfashionable for domestic capital. The new entity, Adamas Energy, will be a wholly owned Mitsubishi subsidiary, with Aethon founder Albert Huddleston’s son serving as CEO.

Mitsubishi’s stated rationale merits careful attention. The investment will “accelerate efforts to build an integrated value chain in the United States, from upstream gas development to power generation, data center development, chemicals production, and related businesses.” Mitsubishi’s North American energy platform already includes partnerships in Canadian shale gas, midstream operations via CIMA Energy in Houston, LNG exports through LNG Canada and Cameron LNG, and power generation via Diamond Generating. The Aethon acquisition was not a standalone bet on natural gas prices. It was the addition of an upstream position to a value chain that already stretches from wellhead to power plant.

These deals represent a genuine and, in some ways, unprecedented shift. Japanese firms historically preferred minority stakes in overseas E&P assets; the 2026 wave marked a pivot to full operational control. And the movement is not only Japanese. KOGAS signed a 10-year supply agreement with Trafigura for 3.3 million tons per year, mostly from U.S. LNG sources. POSCO signed a heads of agreement for 1 million tons per year from Alaska LNG over 20 years.Hanwha Aerospace signed a 20-year deal with Venture Global for 1.5 million tons per year. And in a development that received little English-language coverage, KOGAS and JERA, the world’s two largest LNG importers, signed a cooperation agreement for cargo swaps and coordinated supply management in direct response to the Hormuz crisis. A KOGAS official stated that they maintain “response preparedness including inter-country coordination such as planned cargo exchanges with JERA within the year.” The two biggest buyers in the global LNG market are already cooperating at the operational level, quietly, without fanfare.

And then there is Alaska. The Alaska LNG project, a $44 billion development led by Glenfarne, has secured preliminary commercial commitments from LNG buyers in Japan, Korea, Taiwan, and Thailand for 11 million tons per year, including agreements with JERA, Tokyo Gas, CPC, PTT, and POSCO International. POSCO is providing steel for the 807-mile pipeline and making an equity investment. The project’s stated competitive advantage: “short shipping distance to Asia, featuring canal-free routes avoiding contested waters.” That last phrase is the Hormuz hedge stated in six words. LNG from Alaska’s North Slope, piped to the Pacific Coast and shipped to Tokyo or Busan, never transits the Strait of Hormuz, the Strait of Malacca, or any other contested chokepoint. On the oil side, ConocoPhillips’ $9 billion Willow project is halfway to completion with first oil expected in 2029, producing conventional crude with decades of production life, and a record $163 million federal lease sale in the National Petroleum Reserve in March 2026 drew eleven interested companies. But we should note the caveats: Alaska state lawmakers have stressed that Alaska LNG has no binding gas sales agreements and no agreements for financing. As one senator put it, “You know you have a project when you have take-or-pay contracts and you have access to capital.” The preliminary commitments are real. The final investment decision is not.

That said, we should be precise about what these deals, across all the basins, are and what they are not.

They are acquisitions of already-operational assets from competent producers on proven acreage. They bought Aethon, “quietly the largest private natural gas producer in the United States”, not a struggling wildcatter on Tier 2 ground. Aethon was built by Albert Huddleston and his team over decades: veterans who understood the Haynesville intimately, who had assembled acreage positions through the bankruptcies and restructurings of the 2015 to 2020 period, and who had achieved operational results that justified the $7.5 billion price tag.

This is not an accident. It reflects a deep structural preference in the way Japanese trading houses approach upstream risk. They do not take geological risk. They buy operational assets after someone else has proven the geology, established the production history, and demonstrated the decline curves. This preference is rational, culturally embedded, and unlikely to change because the Strait of Hormuz closed. Mitsubishi bought Aethon because Aethon was already working, not because Mitsubishi suddenly became a wildcatter. And it is, in part, why the self-development ratio has remained at 37 percent after six decades of JOGMEC effort. The institutional machinery is designed to acquire de-risked assets, not to take the exploration risk that creates them.

We think this preference, however rational in its origins, requires re-examination in light of what it is actually buying and what it is leaving on the table. Because here is the part of the story that the preference obscures: the “risky wildcatters” that Japanese institutions have historically avoided are the people who built the assets they are now paying billions to acquire. Aethon was assembled from the wreckage of Chesapeake Energy’s bankruptcy. Verdad Resources, which JAPEX bought for $1.3 billion, was built by a PE-backed team that took the geological risk in the DJ Basin. Every de-risked asset in the current acquisition pipeline exists because an independent operator, funded by American PE or debt markets, drilled the wells, proved the reserves, and established the production base that makes the asset investable by risk-averse institutions. The wildcatter is not the opposite of the de-risked asset. The wildcatter is the person who created it.

And the wildcatter model did not fail because the geology was bad. It failed because it was too successful. The shale boom added 5 million barrels per day to U.S. production between 2010 and 2019. That surge crashed prices, triggered the investor revolt of 2014 to 2016, and produced the capital discipline regime that now prevents the independent sector from operating. The wildcatters drilled so much oil that they destroyed their own business model. The discipline regime is the scar tissue from that success. What it left behind is not a landscape of unproven geological risk. It is a landscape of proven basins, known formations, established production histories, and demonstrated well results, operated by hundreds of independent companies that lost their capital source, not their geological knowledge.

This distinction matters enormously for the risk calculus. The operators currently sitting capital-starved across the Permian, the Bakken, the Anadarko, the DJ Basin, and the Haynesville are not wildcats in any meaningful sense. They have drilled wells. They have production data. They have decline curves. They have breakeven calculations published in the Dallas Fed survey every quarter. Many of them have acreage positions that were assembled and high-graded over decades. What they lack is not geological proof. It is capital. And the capital they need operates on a time horizon and return threshold that American PE can no longer provide.

The risk of waiting for the next Aethon to appear, fully formed and ready for a $7.5 billion acquisition, is that inaction does not preserve optionality. It destroys it. Every month the discipline regime persists, the operators who proved up the basins shed staff, defer maintenance, let leases expire, and sell equipment at liquidation prices. The engineers who could optimize the assets leave the industry. The service companies that would support development programs downsize or close. The longer a risk-averse institution waits for the geological risk to be fully retired before deploying capital, the more the operational infrastructure required to realize the value of that geology degrades. What looks like a de-risked opportunity today will look like a greenfield rebuilding project in three years if nobody funds the operators in the interim.

The question is not whether Japanese or Korean institutions should become wildcatters. They should not. The question is whether they can recognize that the landscape they are surveying is already far more de-risked than their institutional memory suggests, that the people who de-risked it are available and identifiable, and that the window in which those people and their knowledge remain in the industry is closing.

The Efficiency Gap Nobody’s Closing

This brings us to the question that, in our view, ought to be central to the conversation about American energy production but almost never is. Not “should we drill more?”, a political question with no analytical content. Not “will OPEC cut?”, a geopolitical question beyond any single country’s control. But: why is the gap between the best operators and the rest so large, and who has the capability to close it?

The drilling productivity gap between the best operators and the rest is not small. Diamondback breaks even at $37 per barrel. The Dallas Fed survey average is $65. Large firms average $61; small firms, $66. That gap, roughly 43 percent, is not primarily geological. It is organizational. Diamondback’s CEO put it plainly: “Never underestimate the American engineer.” The techniques driving the gap are documented: ultra-long laterals exceeding 15,000 feet, AI-driven drilling analytics, continuous pumping, microgrids for power cost reduction, 90-plus percent produced water recycling. Coterra is installing microgrids in West Texas to reduce power costs. These are organizational capabilities, not proprietary physics. Data systems, workflow management, crew training, equipment standardization. They are, in principle, transferable.

But to whom? And by what mechanism?

The wildcatter we described earlier faces a specific operational problem. His breakeven is $65 because he independently contracts drilling, completion, sand supply, water management, and midstream transport without scale economies or standardized data systems. The engineering knowledge to solve each of these problems exists. It is the same knowledge that drove Diamondback’s breakeven down by 8 percent in two years. But it is embedded in organizational systems that the independent cannot access or afford to build from scratch.

In certain industrial traditions, this exact problem, how to transfer the operational capabilities of a lead firm to a fragmented supplier base, has been solved systematically. The lead firm embeds engineers in supplier operations. It teaches its production system from the inside. It shares cost savings. It builds relationships that last decades, not quarters. The result is not charity; it is a supply chain whose quality and efficiency reflect the standards of the lead firm rather than the baseline of the market. The same trading houses now buying U.S. shale assets, Mitsubishi and Mitsui among them, operate exactly such supplier networks in their manufacturing and logistics businesses.

The fragmentation runs deeper than any single operator’s cost structure. Three hundred or more Permian independents each independently negotiate OFS contracts, drilling schedules, sand procurement, water management, pipeline capacity, and marketing arrangements. The collective purchasing power represented by that fragmented base is substantial but unrealized. Each operator pays retail for services that, if aggregated, could command wholesale terms. Mitsubishi’s stated strategy, upstream development to power generation to data centers to chemicals, is precisely the kind of integrated value-chain organization that has historically solved this kind of coordination failure. Some industrial economies have built entire competitive advantages by wrapping value chains into single corporate ecosystems, eliminating the coordination costs that fragmented competitors cannot overcome on their own.

And beyond integration, there is another model worth noting: network-based industrial coordination. Dense clusters of specialized small firms sharing intelligence, pooling procurement, and collectively negotiating with larger counterparties. Not by merging, but by cooperating. This model drove rapid industrialization in parts of East Asia, transforming thousands of small manufacturers into globally competitive production ecosystems without requiring any single firm to achieve scale on its own. The 300-plus Permian independents represent exactly this kind of fragmented base: individually subscale, collectively formidable, lacking only the coordination mechanism that other industrial traditions developed decades ago.

We are not suggesting that any of these models should be imported wholesale into the Permian Basin. Industrial traditions are not modular components. But the gap we have documented, between the $37 breakeven of the best operators and the $65 breakeven of the rest, is an organizational gap. The engineer being laid off in Houston has the techniques to close it. The wildcatter in the Anadarko has the acreage where it could be closed. The trading houses in Tokyo have the organizational tradition of closing exactly such gaps across fragmented supplier bases. And the capital to fund the effort operates on a time horizon, decades rather than quarters, that the problem requires.

We are not assembling a blueprint. That is not our job. Our job is to document that the pieces exist, and that as of this writing they are scattered across three continents, in the hands of three groups that have not yet recognized each other as relevant to their own problems.

The Math

The predecessor article documented what $100 oil used to buy in Houston: 457,500 jobs, marriages, mortgages, children. It documented what $100 oil buys now: buybacks, dividends, and a fertility decline that shows up in the demographic data a decade later. The discipline tax is the gap between those two outcomes, paid not only by Houston’s roughnecks and their families, but by every importing nation whose trade deficit, currency depreciation, and inflation are the arithmetic consequence of a supply side that refuses to respond.

The numbers documented above require only one comparison. Japan’s fossil fuel import bill increased by JPY 16.7 trillion in a single year. The BOJ burned $60 billion in currency interventions that achieved nothing lasting. Against that: JERA’s Haynesville acquisition cost $1.5 billion. Mitsubishi’s Aethon deal cost $7.5 billion. Total Japanese shale investment over twelve months: $10 billion. JOGMEC’s cumulative upstream investment over six decades of operation amounts to less than what the Ministry of Finance spent in a single weekend trying to defend a currency collapsing under the weight of energy import costs it had no supply-side mechanism to reduce.

The discipline tax is paid every year. The alternative is a one-time capital deployment that, even in a worst case, costs less than a single quarter’s currency intervention.

Close

The Strait of Hormuz remains closed. Asia’s reserves are measured in weeks. Brent is above $100. Iran is now demanding sovereignty over the strait and proposing tolls on foreign shipping, potentially $800 million per month.

In Midland, Texas, rigs sit in stockyards. Nearly 70 percent of large producers have not changed their drilling plans. Equipment auctions run at steep discounts. A tool store owner, “this is my sixth boom-bust”, waits for customers who are not coming. But this is not a boom-bust. An engineer with twenty years of frac experience is updating her LinkedIn profile, and the petroleum engineering program that trained her has lost 88 percent of its enrollment since the peak. Across the basin, operators with viable acreage and manageable breakevens sit capital-starved, not because the rock is bad, but because the capital allocation regime sends money to buybacks instead of wells. A PE fund manager in Houston could produce a list of investable independents, with acreage maps, well results, and breakeven calculations, in a week. Anybody can find them. Nobody with the right capital structure has looked.

In Tokyo, a bureaucratic news release on a government website announces revised guarantee fee schedules for LNG investment. JOGMEC’s budget is doubling. The self-development ratio, after six decades of institutional effort, sits at 37 percent. The target is 60 percent by 2040, fourteen years away. Closing a 23-percentage-point gap in fourteen years would require a pace of upstream equity acquisition several times faster than anything Japan has sustained in the preceding six decades. The $10 billion deployed into U.S. shale over the past twelve months is the most aggressive burst in JOGMEC’s history. At that rate, sustained annually, the math might work. Whether the institutional machinery built for a slower tempo can operate at that speed is a question the news release does not address.

In Seoul, the situation is starker. The institutional debts and policy reversals documented earlier have produced no corrective response. Korea’s chaebols have the organizational capability to wrap entire value chains into integrated ecosystems. Korea’s state institutions have the downstream infrastructure and the procurement relationships. What they have not had is the political consistency to sustain an upstream investment program long enough for it to compound. Japan’s recent $10 billion burst shows what is possible when the institutional commitment is there. Korea has not yet had its $10 billion moment. The OECD’s growth downgrade, the largest among major countries, suggests that the cost of continued delay is no longer abstract.

The rigs, the engineers, the acreage, the geological knowledge, the organizational expertise, the patient capital, the institutional infrastructure: all of it exists. All of it is available. The operators are identifiable. The acreage is mapped. The breakevens are published in the Dallas Fed survey every quarter. The service companies holding the equipment and the skilled crews are listed in trade journals anyone can read. The information required to evaluate the opportunity is not hidden. It is sitting in public filings, investor presentations, and industry databases, waiting for someone with the right time horizon to act on it.

To understand what is being lost, it helps to understand what it costs. A drilling rig contracts for roughly $15 million to $20 million per year. A frac crew runs about the same. The equipment being auctioned at 30 percent discounts in Midland stockyards today was drilling wells last year. It does not need to be designed, manufactured, or shipped from overseas. It needs a contract. The engineers being laid off were, until recently, implementing the operational improvements that drove the best operators’ breakevens below $40. The formations they worked on have already been drilled, tested, and proved. These are not speculative costs for unproven capabilities. They are the current liquidation prices of a functioning industrial ecosystem. For context: retaining a frac crew for six months costs less than what the Bank of Japan spent in a single hour of currency intervention in October 2022. The entire annual cost of a drilling rig is a rounding error on a single weekend’s sovereign debt defense. The mismatch between what is being spent to treat the symptoms of energy dependence and what it would cost to maintain the operational capacity that could address the cause is, at this point, almost farcical.

But not forever. Every month that passes, another frac crew disperses. Another engineer leaves the industry. Another equipment auction clears at pennies on the dollar. Another university program shrinks. A rig that sits idle for six months needs refurbishment before it can drill. A frac crew that breaks apart takes months to reassemble, and the experienced hands do not come back from the construction job or the data center that hired them. The geological knowledge is published. The operational knowledge is embodied in people, and those people are walking away. The window in which the idle capacity described in this article remains available is not indefinite. It is closing, visibly, one layoff and one liquidation at a time.

Most of it is still idle. Not all of it will be there when someone finally comes looking.

Everyone agrees that a lot of new American buildings are ugly. Scan any neighborhood forum, any city council hearing, any urbanist Twitter thread, and you will find near-universal consensus on this point: the blocky five-over-ones, the black-and-white “gentrification buildings,” the unornamented apartment blocks that have colonized commercial corridors from Seattle to Charlotte. Nobody likes them. The “ugly is fine” YIMBYs concede the premise when they tweet “I don’t care if it’s ugly, people need homes.” The NIMBYs concede it when they invoke design review boards as the last line of defense against aesthetic ruin. Both sides agree on the diagnosis. Both sides are wrong about the cause.

The standard explanation for the ugliness of contemporary American development points to developer greed, architectural laziness, or the inevitable tradeoffs of building at scale. The more important answer is regulatory: zoning codes, parking mandates, setback requirements, use separations, and the discretionary design review process have collectively created a narrow corridor of permissible building forms, and most developers are rationally optimizing within it.

If the ugliness is a product of regulation, then the remedy runs in the opposite direction from what NIMBYs propose: abolish the zoning codes and design review processes that constrain form, invest in the urban systems that produce collective beauty, and let the emergent intelligence of thousands of small actors do what committees cannot.

I should be clear about my commitments. I want to abolishing zoning and discretionary design review, to the point that it makes some YIMBYs uncomfortable on that front. I also want to stress that we urbanists and YIMBYs, part of a tradition that stretches from Jane Jacobs through New Urbanism through Strong Towns, a tradition that has always cared deeply about what cities look like. The “I don’t care if it’s ugly” posture adopted by a vocal faction within the movement is a deviation from that tradition, and it is both empirically unsupported and strategically counterproductive.

I should be precise about what I am criticizing. YIMBYism is an internet-native movement, and that is one of its great strengths. As a commenter said before, the internet is what allowed people who experience the diffuse benefits of new housing, future residents, priced-out renters, to find each other and organize in a way that previous generations of social scientists assumed was impossible. The Minneapolis YIMBYs made memes. Online discourse built the coalition.

What I am objecting to is not online advocacy but a specific annoying rhetorical concession: the claim that aesthetics do not matter, that ugliness is an acceptable price for units. That concession is loud but not representative of the broader movement. , a professor at Soka University of America who writes the newsletter , offered us a better frame for the common enemy in our conversation with him: not “NIMBYs” as people, but “freezing our towns in amber and endless sprawl.” The aesthetics question is central to both halves of that formulation.

College Towns

College Towns, where urbanism meets higher education.

By Ryan M Allen

If you care about building more housing, you should care about what it looks like. Not because beauty is more important than shelter (it isn’t) but because the evidence suggests you don’t have to choose.

The tools designed to produce beauty are producing ugliness

Since 1994, Seattle has subjected most new apartment construction to “design review,” in which building proposals must win approval from a volunteer citizen board. Dan Bertolet of the Sightline Institute undertook an exhaustive analysis of how this process actually functions. What he found should trouble anyone who believes that committee oversight produces better buildings.

Seattle’s design review board postponed approval of a 400-unit, transit-oriented development with 168 subsidized homes, objecting to the color, the presence of a ground-floor daycare, and the shape of the building. The East Design Review Board delayed 110 affordable homes and a daycare above Capitol Hill Station because they considered the design “really good” but not “great.” An ECONorthwest analysis found that projects in 2018 took 84 percent longer to move through the permitting process than comparable projects in 2010.

These are not isolated anecdotes. Architects in Seattle report that developers routinely choose worse designs to avoid triggering the design review threshold. As one architect told Sightline: developers’ first question is whether they can avoid design review, and firms regularly see “good clients building indifferent projects because the ‘better’ idea that we are pitching triggers a requirement for design review.” The process does not merely delay good buildings. It actively incentivizes bad ones.

In New York, the Landmarks Preservation Commission rejected a proposal to replace a crumbling two-story brick building with a superior design featuring a glass-and-metal storefront and a delicate brick screen. The original building, the commission determined, was “reflective of the period of significance.” Housing that survives this pageant arrives in a diminished state: delayed, downsized, and bearing rents that reflect months or years of regulatory compliance rather than the cost of beauty.

Design review was built in good faith. The intuition behind it (that aesthetic quality matters to communities, that citizen input should shape the built environment) is not unreasonable. We take that intuition seriously. The problem is that the process does not deliver on its own premises. Jack Nasar’s research on urban design aesthetics identifies the formal variables that drive positive aesthetic responses: order, moderate complexity, and elements of familiar styles. But design review boards optimize for consensus, not for any coherent aesthetic principle. The result is architecture designed to offend no one, which is to say architecture that delights no one. As of the early 1990s, 83 percent of surveyed American cities had adopted some form of design review. We could not locate a single peer-reviewed study demonstrating that these boards produce measurably better aesthetic outcomes than unreviewed construction.

, an urban planner and the writer of , showed us what the alternative to committee review looks like. In our interview, he described Giralda Avenue in Coral Gables, Florida, a formerly struggling two-lane street with parallel parking that was pedestrianized through a design-driven process. “Each component of the project was considered a piece of art, from the planters to the pavers to the color of the tiles,” Brown told us. The street is now the most vibrant row of restaurants in the city. After construction, a rezoning allowed residential uses and balconies, further activating the space. The aesthetic success was not incidental to the project’s political success. It was the engine of it.

Car Free America

City Planning and Transportation Policy.

By Mark R. Brown, AICP, CNU

But Giralda Avenue was not produced by a volunteer design review board evaluating whether a building was sufficiently “great.” It was produced by a Business Improvement District and City Commission with a specific design vision and the professional capacity to execute it. Design vision works. Design-by-committee does not.

The zoning trap

The design review problem sits atop a deeper structural issue: the underlying zoning codes that constrain architectural form in ways that make individual buildings worse and urban systems ugly.

Parking minimums alone distort form dramatically: ground-floor parking podiums, setback requirements for surface lots, and the sheer volume of building dedicated to car storage rather than human habitation. Use separations prevent the mixed-use ground floors that give streets their vitality. Height limits in residential zones force density into narrow commercial corridors, creating the abrupt transitions between single-family homes and mid-rise apartment blocks that generate the most visceral opposition.

Adrian Pietrzak and Tali Mendelberg of Princeton have shown through survey experiments that people react negatively to buildings that are architecturally “out of place” relative to the height or style of surrounding buildings. They call these “contextual development preferences,” and they are real and consequential. But zoning itself creates the mismatches. By restricting height in some areas and concentrating density in narrow corridors, zoning forces the very contextual mismatches that generate opposition. The system produces the disease it claims to cure. Exclusionary zoning created the built form, the built form created aesthetic expectations, and those expectations now drive opposition to anything that departs from them.

Allen’s work on college towns confirms this at the ground level. He observed that the best urbanism in many American cities survived around universities, not because of design review, but because campuses accidentally preserved the pre-war built environment. “A lot of the best urbanism that we can see in some of the small towns comes from university towns,” he told us, “because they sort of act as a natural city.” Students don’t have cars. The campus maintained walkable density. Pre-war structures that were demolished elsewhere survived near universities because there were always people walking there, because you couldn’t easily sprawl students out.

The aesthetic quality that people love in college towns like Ann Arbor, Chapel Hill, and Madison was not produced by design review. It was produced by walkable density, mixed use, and the absence of parking-driven sprawl, and it survived despite the zoning regime that destroyed the same quality everywhere else.

Allen crystallized the absurdity with a single observation about Disneyland. Walt Disney, he told us, was “inspired by his hometown and his wife’s hometown, sort of these ideas of an idyllic version of a city or a town that was no longer existing.” So Disney built a replica. “What’s funny is it costs $120, $130, whatever it costs now... to go in and walk down this town. And that feeling used to be in every town across the country.” We regulated away the beauty. Now we pay to visit a facsimile.

Ugly buildings, beautiful city

Tokyo is filled with plain, unremarkable, even ugly individual buildings. The concrete is often bare. The facades are often flat. The signage is often cacophonous. And yet Tokyo is, by wide consensus among urbanists, architects, and ordinary visitors, one of the most beautiful and livable urban environments on earth. This paradox contains the most important lesson in the entire aesthetics debate: beauty in cities is an emergent property of urban systems, not a feature stamped onto individual buildings by review committees.

Jorge Almazán, a Tokyo-based architect and professor at Keio University, spent years studying what makes Tokyo work. His book Emergent Tokyo: Designing the Spontaneous City, written with Joe McReynolds and his Studiolab research team, identifies five distinctive urban typologies that produce Tokyo’s collective beauty from individually unremarkable parts. Yokochō alleyways: narrow lanes of micro-bars and restaurants, chaotic and cramped, that are among Tokyo’s most beloved spaces. Zakkyo buildings: mixed-use vertical structures stacking small businesses on upper floors in combinations that would be illegal under virtually every American zoning code. Dense low-rise neighborhoods of small wood-frame houses on tiny lots, where residents create micro-gardens on their doorsteps that beautify the streetscape emergently. The beauty arises not from any of these typologies in isolation but from the system that connects them.

In an interview on the Compounding Podcast, Almazán described how Tokyo’s street network creates what he calls “pocket neighborhoods.” Efficient arterial roads form the exterior boundary; inside is a dense maze of small streets that cars avoid because they are inefficient to navigate. “Without forcing people,” Almazán explained, “just because of the structure of the city itself, what you have is that basically people or cars crossing those areas tend to go slowly.” The result is naturally walkable, car-light neighborhoods, without any explicit pedestrianization or design mandate.

And the walkability generates beauty. When you walk slowly through a neighborhood, you notice: the micro-gardens, the shop fronts, the varied building forms, the textures and asymmetries that would be invisible from a car at 45 miles per hour. Almazán described residents contributing “a little bit to the community by putting small pots, even cultivating small trees... When you walk through many of these neighborhoods... you see the personality of everyone.” No committee mandated it. It emerged from thousands of individual decisions within a permissive regulatory environment.

Almazán himself cautions that the emergent urban spaces he documents cannot simply be dropped into other cities. Some of what makes Tokyo’s plain-building beauty work is culturally specific: the micro-garden behavior reflects norms of collective public stewardship that are not easily legislated, and the jijikai (neighborhood self-governance associations) operate through social consensus mechanisms that are not how Americans resolve land-use conflicts.

But the culturalist explanation can be taken too far. What is replicable is structural: Japan’s national zoning framework with 12 cumulative use categories, which constrains nuisance without constraining form; the small-lot structure that allows individual landowners to build at varied scales; the mixed-use permissions that make zakkyo buildings legal; the transit investment that creates walkable catchment areas; and the absence of mandated aesthetic review. No design review board evaluates whether Tokyo’s buildings are beautiful. The beauty emerges from the system.

The American comparison, and the Houston objection

The contrast that should trouble us is not between Tokyo and Kyoto, or Tokyo and Singapore. It is between Tokyo and American cities that have individually more beautiful buildings but collectively uglier urban environments, precisely because they police individual facades through design review while neglecting the urban systems that produce collective beauty.

San Francisco has some of the most individually beautiful residential architecture in the United States: the Painted Ladies, the Victorians, the Edwardian rowhouses. It also has one of the most aggressive design review and historic preservation regimes in the country. The result: a housing crisis so severe that median rent exceeds $3,000, tent encampments within sight of million-dollar homes, a city that has frozen its beauty in amber while the human cost mounts. San Francisco has beautiful buildings. It does not have a beautiful city, because beauty at the system level requires dynamism, affordability, and the presence of actual people, not just facades.

Santa Fe, New Mexico, mandates a Pueblo Revival aesthetic: every building in the historic district must conform to a specific adobe style. The result is not beauty but uniformity, a theme-park homogeneity that visitors find charming and residents find stifling. Meanwhile, outside the mandated zone, the city sprawls in the standard American pattern. The distinction between mandated local style (Santa Fe) and organic local style is crucial. The former produces uniformity. The latter produces genuine beauty.

Georgetown, in Washington, D.C., enforces historic preservation so strict that individual window replacements require commission approval. Meanwhile, the District’s housing affordability crisis deepens. The aesthetic preferences of existing homeowners have been codified into law, at the direct expense of people who need homes.

In every case, the pattern is the same: beautiful buildings in a small preserved zone, surrounded by sprawl, car dependency, and housing scarcity. Tokyo inverts this entirely. It prioritizes systemic qualities (walkability, mixed use, density, architectural freedom) and produces a city that is collectively beautiful even though most individual buildings are plain.

At this point a skeptical reader will raise the obvious question: What about Houston? Houston has no zoning ordinance, the closest thing to what we are proposing that exists in a major American city. And Houston’s aesthetic reputation is not Tokyo’s.

Houston eliminated the wrong half of the equation. The city removed use restrictions but did not invest in the system-level qualities that produce collective beauty. Houston has no comprehensive transit network creating walkable catchment areas. Its streets are engineered for automobile throughput, not pedestrian experience. And Houston retains extensive private deed restrictions that function, in many neighborhoods, as de facto zoning.

But Houston’s failure is not simply a matter of neglect. It is structural. The same fragmented governance that prevented Houston from adopting restrictive zoning also prevents it from building coherent systems: coordinated transit, competent water management, walkable infrastructure. And the Texas Department of Transportation operates as a parallel authority that widens highways regardless of what local residents want, actively degrading the walkability that our argument identifies as the aesthetic precondition. Houston didn’t just choose not to build the system. Houston’s governance makes system-level investment structurally difficult, and the state highway authority works against it.

This does not mean Houston’s freedom produced nothing beautiful. It did. The Beer Can House, the Orange Show, the folk-art vernacular that could never survive a design review board: these are exactly the kind of individual creative acts that architectural freedom enables. But they remain isolated curiosities you drive to, not part of a collective streetscape you walk through. Freedom produced the beauty. The missing system is what would have connected it.

The Houston case does not disprove the thesis. Eliminating restrictions on what you build is necessary but insufficient. You must also invest in the system around what you build, and you need governance capable of doing so: the walkable streets, the transit, the human-scale infrastructure that enables the emergent beauty we find in Tokyo, in college towns, in the pre-war American main streets that Disney had to replicate. Houston removed the zoning without building the system.

The beauty of working with what exists

The Tokyo case demonstrates this pattern at the city scale. But the evidence extends further, into adaptive reuse, local design revival, and the uncurated spaces that fragmented ownership produces.

Adaptive reuse, the repurposing of existing buildings for new functions, is one of the most reliable pathways to aesthetically successful development. It is also 15 to 30 percent less expensive than new construction and can be completed up to 30 percent faster. The World Economic Forum reported in 2025 that reusing built assets emits 50 to 75 percent less carbon. And multiple projections estimate that 90 percent of real estate growth within the next decade will involve adaptive reuse rather than new construction.

The aesthetic case is equally strong, though less often articulated. Reused buildings retain proportions, materials, structural details, and spatial relationships that took decades to develop, what we might call accumulated aesthetic capital. Older buildings predate modern climate control and were designed with thick walls, awnings, high ceilings, and large windows for functional reasons: temperature control and natural light. These features are also precisely the qualities people find beautiful.

Calvin Chua, an architect whose Singapore-based firm Spatial Anatomy works across challenging contexts in Asia, showed us how adaptive reuse operates in practice. In our interview, Chua drew a sharp distinction between high-capital “landmark” reuse (converting a power plant into a museum) and the community-focused reuse that he finds more compelling. An example that was brought up was Karl Bengs, a German architect who has spent years renovating abandoned kominka (traditional Japanese houses) in dying rural villages. Bengs is not building tourist attractions. He what he wants to do is building actual homes, based on local designs. He applies modern techniques to preserve traditional forms, embracing local design vocabulary honestly, not through committee mandate (the Santa Fe model) but through an architect responding to place, materials, and community need. The aesthetic quality is central to the project’s success: people move to these renovated villages partly because the buildings are beautiful, and partly because they are real.

Chua’s own research on Singapore’s strata malls revealed a different dimension of uncurated beauty. Strata-titled malls let individuals own shops outright, not rent them. Any building change requires 80 percent owner approval. “Because the ownership structure is so fragmented,” Chua explained, “it’s very hard to curate what shops get to exist in there. But at the same time, because of the lack of curation, this subculture or unique shops start to emerge in these strata malls.”

The uncurated interiors are among Singapore’s most culturally vibrant spaces. Some owners refuse million-dollar buyout offers because the malls function as what Chua describes as “retirement villages,” places with their own ecosystems, where the sense of purpose and community is embedded in the fragmented, unmanaged structure of the space. The spirit emerged because the space was uncurated. No property management company dictated what went where.

A comparison that you can draw between Singapore’s strata malls and American strip malls, both of which have fragmented ownership and eclectic tenants. But American strip malls are car-oriented and surrounded by parking lots, while strata malls are embedded in walkable, transit-rich neighborhoods. Same ownership structure. Radically different aesthetic outcomes. The variable, once again, is the urban system.

Why urban systems produces beauty

We have now surveyed the evidence across multiple contexts: Seattle’s design review failures, Tokyo’s emergent beauty, Japanese rural revival through adaptive reuse, Singapore’s uncurated strata malls, American college towns, and American cities that froze individual beauty in amber while their collective systems decayed. The pattern is consistent. The mechanism operates through five channels.

First, diversity of form. When thousands of individual actors build on small lots with minimal regulatory constraint, the result is a varied streetscape with different heights, materials, setbacks, and uses. Nasar’s research identifies moderate complexity as a key driver of positive aesthetic evaluation. Zoning and design review suppress complexity by mandating uniformity.

Second, walkability as aesthetic enabler. The aesthetic experience of a city requires pedestrian-speed movement. Walkability is not merely a transportation policy. It is an aesthetic precondition. Almazán’s pocket neighborhoods, Allen’s college towns, and Brown’s Giralda Avenue are all places where people walk, and therefore where people see.

Third, temporal dynamism. Tokyo rebuilds its average building every 30 years. The built environment constantly adapts to current needs and tastes; unsuccessful buildings get replaced, successful ones get imitated. A regulatory regime organized around preventing change is an aesthetic straitjacket.

Fourth, bottom-up curation. The most beloved urban spaces (Tokyo’s yokochō, Singapore’s strata malls, the pre-war American main streets) were not designed by committees. They were curated from below: individual shop owners, residents, and small builders making independent decisions that accumulated into coherent streetscapes. This is the process that Cozzolino (2021) describes as “the joint yet individual action of numerous actors on various scales” producing “rich, coherent and harmonious built environments.”

Fifth, existing structures as aesthetic capital. Adaptive reuse preserves proportions, materials, and spatial relationships that took decades to develop. Each generation builds on what the last created, rather than starting from zero under new regulatory constraints.

We can already hear the objection from the “ugly is fine” faction: that we are romanticizing Japanese farmhouses, backyard cottages, and micro-gardens over the thing that actually matters, which is units. The strongest test of this framework comes from the most unlikely source: Soviet commie blocks. Nobody romanticizes them. Gray prefabricated concrete panels, assembled like industrial Lego, repeated across thousands of sites from Budapest to Vladivostok. And yet, as urbanist Adam Something has documented, the residential areas built around these buildings routinely outperform brand-new private housing developments in livability. The reason is the system. Soviet-era planning placed kindergartens, schools, doctors’ offices, parks, supermarkets, and public transit within walking distance of every apartment. Street plans excluded through traffic. The buildings were ugly. The neighborhoods were livable. New luxury developments built nearby, with individually superior architecture but no investment in surrounding services, cannot match them.

If the system-level argument holds even for commie blocks, the ugliest mass-produced buildings on earth, it holds everywhere. Get the system right and even ugly buildings produce good neighborhoods. Get the system wrong and even beautiful buildings produce broken cities.

We are not arguing against units. We are arguing that the system around the units determines whether those units produce neighborhoods people actually want to live in. The commie blocks delivered massive quantities of housing, fast and cheap. But the achievement endured because the surrounding system was good. Units matter. The system around them matters more.

To be clear: we are not endorsing the political system that produced commie blocks. But the urban planning insight, that neighborhoods need services, walkability, green space, and transit within reach of every front door, was correct. The Soviets achieved it through authoritarian mandate. Our proposal achieves it through architectural freedom and capital incentives.

The political science: why this is urgent

Everything we have argued so far could be dismissed as an aesthetic preference. A wave of recent political science research makes that dismissal untenable. Aesthetic judgments causally determine whether people support housing development.

David Broockman, Christopher Elmendorf, and Joshua Kalla, political scientists at UC Berkeley, UC Davis, and Yale, published a working paper in 2025 demonstrating that aesthetic concerns about housing are, in their words, “widespread, not pretextual, and causally affect support for development.” Their experimental evidence shows that manipulating the aesthetic quality of proposed buildings changes support levels: ugliness reduces support even when it poses no threat to quality of life. These are not NIMBY rationalizations. They are sincere aesthetic judgments that drive real political behavior.

Their most striking finding cuts against the standard NIMBYism narrative. Homeowners in already-dense areas supportdense development in their neighborhoods, indeed more so than homeowners in single-family neighborhoods. People who live in collectively beautiful dense environments support more density. That is the Tokyo effect translated into American political science. The market confirms what the research suggests: walkable, aesthetically coherent neighborhoods command the highest property values in their cities. Poundbury’s home prices consistently run above the surrounding Dorset market. The pre-war college-town neighborhoods this essay celebrates are among the most expensive real estate in America. People vote with their wallets for pretty, walkable places. That is not sentimentality. It is revealed preference at scale.

Pietrzak and Mendelberg’s study, published in Urban Affairs Review in 2025, adds a crucial finding to the contextual preferences we discussed earlier: fit matters more than height itself. A taller building that matches its surroundings is often more acceptable than a shorter one that clashes. And buildings that don’t fit prompt intentions to engage in costly political behavior, like attending public meetings, pressuring officials, organizing neighbors. Support rarely mobilizes symmetrically. This asymmetry explains why public hearings skew toward opponents of new housing.

The strongest real-world test of whether beauty can overcome opposition is Poundbury, King Charles’s New Urbanist development on the outskirts of Dorchester in Dorset. Poundbury gets the system right in almost every way our argument demands. It is mixed-use, with over 260 businesses and 2,750 jobs integrated alongside housing. Thirty-five percent of homes are affordable, built to the same standard as market-rate units and indistinguishable from them on the street. There is no use-separation zoning; homes, shops, offices, and factories share the same streets. The architecture draws on local Dorset vernacular, designed by Léon Krier to create walkable density at human scale. Even The Guardian, which once ridiculed the place as “fake, heartless, authoritarian and grimly cute,” later conceded that “a growing and diverse community suggests it’s getting a lot of things right.” The Sunday Times named it one of the best places to live in Britain. Home prices have steadily risen, demand consistently outstrips supply, and the model has been replicated at Nansledan in Cornwall and Tornagrain in Scotland. On the merits, Poundbury is a success.

And yet. When the Duchy of Cornwall attempted to replicate the Poundbury model at South East Faversham in Kent, proposing 2,500 homes designed by the same architect (Ben Pentreath) to the same standards, the project was met with fierce local opposition. The Faversham Society called it “an existential threat to the very nature of the town.” National newspapers ran headlines about a local revolt. What is significant is what the objections were not about. They were not about aesthetics. As Building Design reported, design was barely mentioned in the objections; the opposition focused on traffic, loss of farmland, and strain on services. Even the original Poundbury was not immune: the Ramblers called it a “ghetto,” and existing Dorchester residents opposed its expansion. The British Social Attitudes Survey found that about seven percent of people are more likely to support new housing because it is better designed. In a fight decided by who shows up to the meeting, seven percent is not a rounding error. But it is not a majority, and it cannot do the work alone.

The Faversham case refutes the hypothesis, adopted as UK government policy under Housing Secretary Michael Gove, that “communities will welcome development when it is beautiful.” Beauty alone will not accomplish this. But notice what beauty did accomplish at Faversham: it took design off the table as an objection. Nobody at the public meetings complained that the buildings were ugly. The opposition had to find other grounds, and the grounds they found (traffic, services, infrastructure) are precisely the system-level failures our argument identifies as the real source of opposition. Beauty cleared one obstacle. It cannot clear them all, and treating it as a substitute for system investment is the error. Poundbury itself succeeded because it paired beautiful buildings with system-level investments: mixed use, walkable streets, integrated employment and affordable housing. But Poundbury also required thirty years of patient capital from a royal estate with no shareholders, a model its own estates director acknowledges volume housebuilders cannot deliver. And its beauty is enforced from above, not emergent from below: residents need Duchy permission to change their front door color. This is mandated beauty, closer to Santa Fe than to Tokyo. Strip the system and keep the facades and you get Faversham’s opposition. Build the system and let the beauty emerge and you get Tokyo.

Allen’s college-town observations confirm the dynamic at the local level. In Lubbock, Texas, neighbors fought a student housing development proposed across from the Texas Tech campus. The university is going through with it, Allen told us, but the opposition wasn’t really about the students. It was about the high-speed stroad between the neighborhood and the campus, which “looks like a highway drag strip.” The ugliness is in the infrastructure, not the building. Fix the system and the aesthetics follow.

The feedback loop that emerges from this research is the key to the entire argument. Zoning constrains building form, producing ugly buildings. Ugly buildings generate aesthetic opposition. Aesthetic opposition justifies more zoning. Around and around. But breaking the cycle requires understanding who is in it, because the research describes two distinct populations, not one.

The hardline NIMBYs, Allen’s “freezing in amber” crowd, will oppose any development regardless of what it looks like. Faversham proves this. These opponents are not making aesthetic arguments in good faith. They are using aesthetics as a socially acceptable wrapper for opposition that is really about preventing any change at all. You will never convince them. The BIMBY hypothesis (Beauty In My Back Yard, the idea that beautiful buildings will melt opposition) wastes political capital trying. And it hands the hardliners a new veto: “It’s not beautiful enough,” which is exactly the logic that let Seattle’s design review board reject affordable housing for being merely “good.”

Then there are the persuadable: people who are not reflexively opposed to development but who care sincerely about what their neighborhood will look like afterward. This is the population that Broockman’s research captures. Their aesthetic concerns are real, not pretextual. They respond to contextual fit (Pietrzak and Mendelberg). They are more supportive of density when they already live in attractive dense environments. For this group, aesthetics is a valuable tool in a larger set: not the argument that wins the fight on its own, but the one that tips the balance, clears design objections off the table, and builds places people will fight to protect once they exist.

The YIMBY who tweets “I don’t care if it’s ugly” is making a specific strategic error: handing the hardliners a weapon to use on the persuadable. The hardliner can now say, “See? They admit it’ll be ugly. They don’t care about your neighborhood.” The “ugly is fine” faction thinks they are being tough-minded and pragmatic. What they are actually doing is collapsing the persuadable into the hardliner camp by conceding the aesthetic premise. It is not a principled stand. It is an unforced error, and the hardliners are grateful for it.

What’s the idea?

The case for abolishing zoning and design review is well established in the YIMBY literature. We will not rehearse the standard arguments. What I want to focus on is what comes after abolition: the specific development forms and financing structures that can produce the emergent beauty we have been describing.

Accessory dwelling units and accessory commercial units

The closest thing to the emergent process in America already has a name. Two names: Accessory Dwelling Units (ADUs) and Accessory Commercial Units (ACUs). I know it’s not the same, but in practical terms, it’s what most communities can use.

ADUs (the backyard cottages, garage conversions, and above-garage apartments that cities from Portland to Los Angeles have begun to legalize) add architectural diversity at the lot level. A neighborhood of identical ranch houses with a scattering of backyard cottages and converted garages has more visual complexity, more of the moderate complexity that Nasar’s research identifies as a driver of positive aesthetic response, than the same neighborhood without them. The American Planning Association notes that research does not support fears about ADUs degrading neighborhood character; there are indications they do the opposite.

ACUs are the less familiar but arguably more transformative cousin. As the APA’s December 2025 Zoning Practicearticle defines them, ACUs are “small-scale, often homeowner- or tenant-operated businesses integrated into primarily residential lots”: corner coffee kiosks, backyard salons, garage bicycle repair shops. ACUs are the American re-legalization of what Tokyo’s zakkyo buildings already do and what American neighborhoods did naturally before use-separation zoning made it illegal. As Garlynn Woodsong wrote for the Congress for New Urbanism, “We used to build mixed-use neighborhoods in our cities that freely mixed the retail destinations people need with the residences where they live, in very close proximity.” Zoning ended this. ACUs would restart it at the smallest, least disruptive scale.

Both ADUs and ACUs produce collective beauty through the same channels we identified: diversity of form, bottom-up curation, and mixed use. They also avoid the “contextual misfit” problem that Pietrzak and Mendelberg show triggers political opposition. A backyard cottage fits because it is small-scale and owner-driven. A garage-front salon fits because it faces the sidewalk at human scale. These are not five-over-ones dropped into single-family zones. They are incremental, bottom-up, fine-grained additions that produce the closest thing to the Tokyo effect at the neighborhood level.

The cost paradox and the case for cheaper capital

Here is where the policy problem becomes acute. ADUs and ACUs are the cheapest total-cost form of new development. A detached ADU typically costs $150,000 to $350,000, a fraction of conventional multifamily construction. An ACU built from a converted garage or a prefab shed can cost as little as $10,000 to $30,000.

But they are also, paradoxically, the most expensive form of development per square foot. The reason is structural: every ADU, regardless of size, requires a kitchen, a bathroom, utility connections, a foundation, permits, and design work. These are fixed costs that do not shrink with the unit. When you spread them across 500 square feet instead of 2,000, the per-square-foot figure climbs steeply.

This cost paradox means that the development form with the greatest potential to produce collective beauty is also the form most punished by the current financing environment. Conventional mortgage products and construction loans are designed for conventional buildings on conventional lots. ADUs and ACUs fall into what one practitioner calls a regulatory liminal space: not quite a home, not quite a commercial building, not quite a renovation, and therefore not quite eligible for the financing products designed for any of those categories.

This is where the capital-incentive proposal becomes essential. The existing federal incentive structure already differentiates by policy goal: the Low-Income Housing Tax Credit makes capital cheaper for affordable housing (only in a permissive zoning environment); the Historic Tax Credit makes it cheaper for preservation; Opportunity Zones steer investment to low-income communities (whenever investment is effective is a different story). We propose two layers of capital reform.

The first layer: make capital cheaper for all small/mid-scale development. ADUs and ACUs are made possible because homeowners’ own access to capital. Adaptive reuse and incremental infill should have access to financing products designed for their scale. This means grants, low-interest construction loans, and tax credits specifically targeting the fixed-cost problem: subsidizing the permitting, design, and utility-connection costs that make small units disproportionately expensive per square foot. California’s $40,000 ADU grant and New York’s Plus One ADU Program are steps in this direction, but they remain piecemeal and underfunded relative to the scale of the opportunity.

The second layer: make capital cheapest for development that meets objective, system-level aesthetic criteria based on the fact that they is a premium created by said criteria. Not criteria evaluated by a committee, but criteria checkable by staff on a site plan: mixed-use ground floors with active frontage, pedestrian-oriented building placement (entrance on street, no setback parking), use of local or regionally sourced materials, adaptive reuse of existing structures, contextual height transitions, and green or activated public frontage. These criteria incentivize the system-level qualities that the research identifies as producing collective beauty, without requiring anyone to evaluate whether a facade is “good” or “great.”

We anticipate the objection that even “objective” aesthetic criteria add a compliance layer. The distinction is categorical, not cosmetic.

Design review is a veto gate. You cannot build until the committee approves. The standards are subjective. The process adds months or years. And because the gate is binary (approved or rejected) the rational developer minimizes risk by designing below the review threshold, which means designing worse.

A capital incentive is an optional bonus. You can build regardless of whether you meet the aesthetic criteria. Meeting them unlocks cheaper financing. Not meeting them imposes no penalty beyond forgoing the bonus. The homeowner who builds a standard ADU is no worse off than today. The homeowner who orients the ADU toward the sidewalk with an active frontage and uses local materials gets a lower interest rate or a larger grant.

Veto gates reduce housing supply. Optional bonuses do not. Veto gates concentrate power in committees. Optional bonuses distribute it to homeowners, small builders, and neighborhood entrepreneurs. The mechanisms are opposites. But the criteria must genuinely be objective and checkable by staff. “Mixed-use ground floor with active frontage” can be verified on a site plan. “Contextually appropriate massing” cannot. The moment the criteria require subjective judgment, the bonus becomes a gate. The line is real and it must be held.

Allen’s observation that the YIMBY conversation is too centered on New York and San Francisco has direct implications here. Smaller cities and college towns have lower development costs, more existing building stock suitable for adaptive reuse and ADU conversion, and neighborhoods where ACUs could reintroduce the walkable commerce that zoning eliminated.

What the evidence demands

Tokyo is not beautiful because its individual buildings are beautiful. It is beautiful because its urban system (walkable, mixed-use, human-scale, architecturally free) allows thousands of small decisions to compose into something collectively splendid. San Francisco has beautiful buildings and a broken city. Houston has freed its buildings but is limited by it’s fragmentation and being a plaything of TxDOT. Tokyo has plain buildings and a beautiful, functional, livable whole. The variable is the system. It has always been the system.

Every YIMBY who tweets “I don’t care if it’s ugly” is giving the hardliners ammunition to spend on the persuadable. Every NIMBY who invokes beauty to block all development is using aesthetics as a veto, not a value. Both positions are wrong, but they are wrong in different ways, and the difference matters. The hardliners cannot be converted and should not be catered to. The persuadable can be won, and aesthetics is one of the tools that wins them, but only as part of a larger set. The error is treating beauty as a substitute for system investment, not treating beauty as a tool worth using. The way to win is to build the systems that make beauty emerge: walkable streets, mixed use, architectural freedom, and cheaper capital for the small-scale development that produces it. The argument that collective beauty is an emergent property of free urban systems, not a product of committee oversight, is not a compromise between these positions. It is the position that makes both of them obsolete.

College Towns

College Towns, where urbanism meets higher education.

By Ryan M Allen

Car Free America

City Planning and Transportation Policy.

By Mark R. Brown, AICP, CNU

As Easter is coming up at time of writing, I decided to be a little festive with this article. Buckfast Abbey, founded in 1018 during the reign of King Cnut, dissolved by Henry VIII in 1539, and refounded in 1882 by exiled French Benedictine monks, is today best known to the British public for two things, neither of which the monks are entirely comfortable discussing in the same breath.

The first is Buckfast Tonic Wine, a caffeinated fortified wine (15% ABV, 281 milligrams of caffeine per 750ml bottle, roughly eight cans of cola) that the monks began producing in the 1890s as a medicinal tonic. I can personally guarantee that if you want to put a little pepper in a party, this wine/tonic does the job. Originally marketed with the charmingly antique slogan “Three small glasses a day, for good health and lively blood,” Buckfast has become, improbably and somewhat horrifyingly, one of the most crime-associated beverages in Scottish history. A BBC Scotland investigation found it mentioned in 5,638 crime reports in the Strathclyde police region between 2006 and 2009. The Scottish Prison Service reported in 2015 that Buckfast was a significant factor in over 40% of its inmates’ arrests. The drink has earned itself an extraordinary litany of folk nicknames: “Wreck the Hoose Juice,” “Commotion Lotion,” “Cumbernauld Rocket Fuel,” and, perhaps most evocative, “a bottle of What the Hell Are You Looking At.”

The second thing Buckfast Abbey is known for, or rather should be known for, is bees.

For seventy-eight years, the Abbey housed one of the most consequential applied-science programmes in the history of entomology: a breeding operation that produced a disease-resistant honeybee now raised in more than twenty-six countries. The man who ran it, a German-born Benedictine monk named Brother Adam, logged over 100,000 miles searching for breeding stock, kept pedigree records spanning half a century, and retired at ninety-three. He was awarded the OBE. He received honorary doctorates from Uppsala and Exeter. He is, by any reasonable measure, one of the most important figures in modern agriculture.

The public discourse around Buckfast Abbey has overwhelmingly focused on the wine. The bee work receives a fraction of the attention. That imbalance is this article in miniature. What happened to the bees at Buckfast is now happening to bee conservation writ large. The moral panics get the headlines. The practical work gets the results. And if you care about keeping bees alive, you have to understand why.

The Scope of the Crisis

In January 2025, commercial beekeepers across the United States began reporting something catastrophic. As they prepared their colonies for the annual migration to California’s almond orchards, the single largest pollination event on earth, they discovered that their bees were simply gone. Not dwindling. Not struggling. Gone. Colony after colony, dead or abandoned, at rates that dwarfed anything in the modern record. By the time the surveys closed, the numbers told a grim story: an estimated 1.6 million colonies lost, commercial operations absorbing average losses of 62%, and total economic damage exceeding $634 million.

The 2024–2025 U.S. Beekeeping Survey, conducted by Auburn University and the Apiary Inspectors of America, recorded estimated annual colony losses of 55.6%, the highest since annual tracking began in 2010–2011, and 14.2 percentage points above the fourteen-year running average of 41.4%. Winter losses alone hit 40.2%, exceeding all historical averages. State-level annual losses ranged from 34.3% to 90.5%. The triage survey administered by Project Apis m., which covers beekeepers managing roughly 68% of the nation’s colonies, found that commercial operations reported average losses of 62% between June 2024 and February 2025. Honeybees pollinate more than 70% of major global crops. Their pollination services are valued at roughly $15–20 billion annually in the United States alone.

One detail from the surveys deserves particular emphasis. For the second consecutive year, and contrary to the first fifteen years of survey data, commercial beekeepers experienced more severe losses than hobbyists. Commercial operations (those managing more than 500 colonies) lost an estimated 62%, compared to 51% for hobbyists. Commercial beekeepers have more resources, more experience, and more sophisticated management practices than most hobbyists. They are the backbone of pollination-dependent agriculture. When the professionals are losing more bees than the amateurs, something odd, something structural, has shifted.

And around these beekeepers, as they counted their dead and calculated their ruin, the internet did what it always does. Environmentalists blamed neonicotinoid pesticides. Agrochemical defenders blamed Varroa mites. Left-leaning commentators accused Big Ag of ecocide. Right-leaning commentators accused green activists of Luddism. On social media, the bees became, once again, a mascot for everyone’s priors.

How Bees Became a Culture-War Football

Left’s Story: Ban the Neonics and Punish Big Ag

We should be generous with this camp, because they identified something real. Neonicotinoid pesticides, a class of systemic insecticides introduced in the early 1990s typically applied as seed coatings, are toxic to bees. That is not in serious dispute. Laboratory studies have repeatedly demonstrated sublethal effects on navigation, immune function, and reproduction. Environmental organisations (Friends of the Earth, the Center for Food Safety, the Sierra Club, the Pesticide Action Network) identified a genuine stressor and pushed it into public consciousness at a time when the agrochemical industry was doing its best to minimise it. The EU’s 2018 ban on three neonicotinoids (imidacloprid, thiamethoxam, clothianidin) reflected genuine, if contested, scientific concern. These organisations deserve credit for sounding an alarm.

The trouble is what happened next. The narrative calcified into a monocausal story: pesticides are the villain, and a ban is the solution. The political campaign became an end in itself, disconnected from the messy, multicausal reality of bee decline.

The evidence for that disconnect is now substantial. More than a dozen large-scale field studies across North America and Europe have reached broadly similar conclusions: no conclusive observable adverse effects on bees at the colony level from field-realistic exposure to neonicotinoid-treated crops. The EU ban, now years old, has not demonstrably reversed European bee declines. Meanwhile, the campaign absorbed enormous political energy, media attention, and activist resources that might have been directed toward threats where the scientific consensus is considerably stronger. Varroa mites, the single most devastating parasite of managed honeybees worldwide, received a fraction of the public attention devoted to neonicotinoids, precisely because mites do not come with an easily identifiable corporate villain attached.

The politicisation dynamic is worth examining directly. Leaked documents reported by The Times of London described a 2010 meeting at which four senior European scientists discussed a coordinated plan to produce papers with predetermined conclusions and shepherd them through peer review with pre-selected reviewers, explicitly in order to obtain a ban. Whether one regards this as scientific manipulation or legitimate advocacy depends somewhat on one’s priors. But it illustrates a broader pattern: when environmental questions become political campaigns, the incentive structure shifts from “what is true” to “what is useful.”

Right’s Story: It’s All Mites, and Regulation Is the Real Threat

The opposing camp gets the entomology more right. Varroa destructor is, by broad scientific consensus, the single most significant threat to managed honeybee colonies worldwide. The mite feeds on developing and adult bees, transmits deadly viruses (deformed wing virus A and B, acute bee paralysis, chronic bee paralysis), weakens immune systems, and shortens worker lifespans. More importantly, Varroa has developed resistance to amitraz, the most commonly used miticide, a finding confirmed in the 2024–2025 USDA field sampling of failing colonies. If one had to point to a single proximate cause of mass die-offs, Varroa would be the strongest candidate.

But acknowledging Varroa’s primacy should not become a permission structure for dismissing all pesticide concerns or opposing all regulation. Here is where the right-wing version of the story becomes, in some ways, more dangerous than the left’s. Agrochemical industry actors have demonstrably invested in reframing the debate around mites precisely to deflect attention from legitimate pesticide questions. Internal corporate communications reported by The Interceptdescribe Bayer’s “Bee Care” programme as a crisis-PR strategy, with staff celebrating its success in shifting media coverage away from neonicotinoids. CropLife America compiled lists of search-engine terms to manipulate, and consulting firms worked to decouple Google results for “bee decline” from “neonicotinoids.” The mite narrative is scientifically stronger than the pesticide narrative. But it has also been instrumentalised by corporations with obvious financial interests.

And there is a worse problem. The left’s monocausal story is wrong about the mechanism but right that the situation is a crisis requiring public investment. The right’s version (”it’s just mites, stop regulating, let the market sort it out”) provides ideological cover for defunding the very research, extension services, and breeding programmes that are actually solving the problem. Every practical intervention we describe later in this article depends on sustained public funding: USDA research budgets, university grants, extension-service staffing, nonprofit operating costs. The conservative position, followed to its conclusion, eliminates the funding that makes the work possible. Misguided activism that directs resources to the wrong target is bad. A political movement that argues against directing resources at all is worse.

The right answer is not “it’s only mites” any more than it is “it’s only neonics.” Multiple stressors interact in complex ways: mites, pathogens, nutritional deficiency from habitat loss, climate disruption, pesticide exposure, and amitraz resistance. But acknowledging that complexity does not require another round of blame-assignment. It requires work, and it requires someone to pay for the work.

Neither side, through all its fundraising emails, congressional hearings, protest marches, op-eds, and viral social-media content, has bred a single Varroa-resistant bee, developed a nutritionally complete pollen substitute, trained a beekeeper in mite-monitoring technique, or kept one colony alive through a hard winter.

We should be honest, though, that the line between “activist” and “practitioner” is not always clean. Some organisations do both. Project Apis m., a nonprofit funded largely by the beekeeping and almond industries, is the clearest example: it funds applied research, coordinates the triage surveys that produced the loss data cited above, connects commercial breeders with USDA scientists, and advocates for federal research funding, all at once. The Inflation Reduction Act’s conservation funding, the USDA’s breeding programmes, the extension services that train beekeepers in mite monitoring: none of these exist without political advocacy. The question is not whether activism matters. It is whether the activism is pointed at something that will actually keep bees alive, or whether it is pointed at something that will generate donations and media coverage. Those are different targets, and most of the loudest voices in the bee debate have chosen the second.

Which brings us back to the monk.

Brother Adam and the Dartmoor Bees

In the early twentieth century, a mysterious epidemic known as the Isle of Wight disease, later identified as acarine disease caused by the tracheal mite Acarapis woodi, swept through the British Isles, devastating native honeybee populations. At Buckfast Abbey, 29 of 45 colonies were destroyed. The entire native British black bee (Apis mellifera mellifera) was effectively exterminated in the region. The only colonies that survived were headed by Italian queens (A. m. ligustica) crossed with native drones.

Karl Kehrle, the sickly German boy sent to the Abbey at age eleven, joined the Benedictine order, took the name Brother Adam, and in 1915 began assisting Brother Columban in the apiary. By 1919, aged just twenty-one, he was placed in charge of the entire bee operation. He would remain in that role for seventy-three years, retiring in 1992 at the age of ninety-three. He died in 1996, in his ninety-ninth year.

His approach was selective breeding carried out with exceptional rigour and patience, the same logic that livestock farmers had employed for centuries, applied with unprecedented discipline to insects. He established an isolated mating station on Dartmoor, a treeless, windswept moor where no feral bees could interfere with controlled matings. He inbred drone lines and headed drone-producing colonies with sister queens, ensuring the drones were near-genetically identical. Every queen, worker, and drone at Buckfast Abbey had a known descent on both the maternal and paternal side, with records spanning more than fifty years.

He operated on a three-year breeding cycle. Year one: produce and introduce at least thirty queens of each genetic combination, distributed across multiple apiaries for fair comparison. Year two: evaluate mature colonies under real-world field conditions using a standardised scoring system for swarming tendency, aggression, comb stability, and honey yield. Year three: graft larvae from the best-performing queens for the next generation.

Over his lifetime, Brother Adam logged more than 100,000 miles searching for breeding stock: Turkey, the Sahara, the Near East, East Africa, the Kilimanjaro region. He crossed Italian, Carniolan, Anatolian, Greek, and African subspecies into his programme. His selection criteria were precise and practical: low swarming tendency, lack of aggression, comb stability, and what he called “a boundless capacity for foraging work.”

Most importantly, he prioritised disease resistance, not through chemical treatment but through selecting for inherited traits. As he wrote in 1950: “We do not believe greatly in the various treatments generally recommended for bee diseases... by means of careful selective breeding throughout a period of twenty years we have overcome the inherent susceptibility to this disease to such an extent that it practically never occurs.”

That sentence, written seventy-five years ago, remains radical today.

The result was the Buckfast bee: productive, gentle, disease-resistant, and adaptable to diverse climates. In 1920, his colonies averaged 87 kilograms of surplus honey per colony; individual colonies exceeded 152 kilograms. A 1986 BBC documentary reported a single Buckfast colony producing over 181 kilograms, roughly 400 pounds. Today, Buckfast bees are bred across more than twenty-six countries. Norwegian and Finnish Buckfast strains have shown Varroa resistance, achieved through the same patient selection methods Brother Adam pioneered, extended to address a threat that emerged after his time.

He did not campaign for the banning of any substance. He did not write op-eds blaming the government. He identified the problem, formulated a principle (that resistance should be bred, not merely chemically suppressed), developed a rigorous method, executed it for seventy-eight years, and produced a tangible output that continues to benefit beekeepers worldwide.

The question is whether anyone is doing the same thing today.

The New Practical Frontier: Better Feed, Better Breeding, Better Practice

Brother Adam’s methods were brilliant but constrained by the tools of his era: phenotypic observation, physical isolation for mating control, paper record-keeping. What is encouraging about the present moment is not that we have abandoned his approach, but that we can accelerate and extend it. The most promising developments in bee health are practical improvements to the three things that have always mattered: what bees eat, how we breed them, and how we manage them.

Better Feed

Bees rely on pollen for essential lipids called sterols, six specific compounds (24-methylenecholesterol, campesterol, isofucosterol, β-sitosterol, cholesterol, and desmosterol) that are critical for growth and development. Climate change and intensive agriculture have reduced the diversity of available flowers, leaving colonies nutritionally deficient. Existing commercial pollen substitutes (protein flour, sugars, oils) provide calories but lack these sterols. The analogy one researcher offered: it is comparable to the difference for humans between eating balanced meals and eating meals missing essential fatty acids.

A team led by the University of Oxford, in collaboration with Royal Botanic Gardens Kew, the University of Greenwich, and the Technical University of Denmark, set out to close this gap. First, they figured out which sterols bees actually need by painstakingly dissecting individual nurse bees and analysing pupal tissues, identifying the six key compounds that dominate bee biology. Then they developed a way to produce those sterols at scale using precision fermentation: growing yeast (Yarrowia lipolytica) in bioreactors and drying the output into a powder that can be mixed into standard bee feed.

The results, published in Nature in March 2025, were dramatic. In controlled glasshouse trials over three months, colonies receiving the sterol-enriched diet produced up to fifteen times more larvae that reached the pupal stage compared with colonies on standard diets. Supplemented colonies continued raising brood throughout the entire study period; unsupplemented colonies stopped producing brood after approximately ninety days. The nutrient profile of larvae in the supplemented group matched that of bees feeding on natural pollen.

Why does this matter structurally? Because most of the specific sterols bees need do not exist in commercially harvestable quantities in nature. No amount of wildflower planting or pesticide banning could produce a nutritionally complete artificial feed. If field trials confirm the laboratory results, the supplement could reach beekeepers within two years. It would also reduce competition for limited wildflower pollen, indirectly benefiting wild bee species.

Better Breeding

What Brother Adam did by observation and paper records over seventy-eight years, modern breeders can do faster using molecular tools, not to modify bees, but to identify desirable traits more quickly and select for them more efficiently. The breeding is still conventional. The selection is informed by better data. This is the same logic as using a blood test to identify which cattle carry a trait for disease resistance, rather than waiting years to see which ones get sick.

The most consequential breeding work being done today centres on a trait called Varroa-sensitive hygiene (VSH): the behaviour of detecting and removing mite-infested brood from the hive. Bees with strong VSH behaviour can smell the mites inside capped brood cells, uncap them, and remove the parasitised pupae before the mites can reproduce. It is a natural defence. Asian honeybees (Apis cerana), which co-evolved with Varroa, possess it instinctively. The question is whether European honeybees, which did not co-evolve with the mite, can be selected to express it strongly enough to suppress mite populations without chemical treatment.

The answer, after a decade of work, is yes. And the evidence comes from three distinct programmes, operating independently, on two continents. No organism has been genetically modified in any of them. Bees have been selected, with better measurement tools and coordinated effort, for traits they already possess.

Arista Bee Research, founded in 2014 in the Netherlands, has coordinated a network of over 300 beekeepers across seven countries in a systematic VSH-selection programme. In their 2022 assessment, the first year they passed the milestone of 1,000 test colonies, 130 breeders across 31 groups evaluated 1,065 colonies. The results: 34% of these colonies (367 in total) were classified as high-VSH, meaning they can suppress mite populations without any chemical treatment. Of those 367, fully 43%, or 149 colonies, were 100% VSH: after researchers deliberately introduced 100–150 mites into each hive, not a single reproducing Varroa mite could be found in the brood. They opened 300 to 600 brood cells per colony to verify this. By their ten-year review in 2024, Arista could report that in their own hives, there is “no longer bee mortality due to Varroa, and this without any chemical treatment.” At their Luxembourg mating station, more than half of all colonies showed high levels of Varroa resistance.

Meanwhile, in the United States, the USDA’s Honey Bee Breeding, Genetics, and Physiology Research Laboratoryin Baton Rouge has been developing Pol-line bees since the late 1990s, a stock selected specifically for VSH behaviour. In head-to-head commercial trials across four states (Mississippi, California, North and South Dakota), Pol-line colonies that received no mite treatment in the fall had a winter survival rate of 62.5%, compared to just 30% for standard untreated colonies, more than twice as likely to survive. Even when both groups received treatment, Pol-line bees maintained a significant advantage: 72% survival versus 56%. They also showed significantly lower levels of deformed wing virus A, deformed wing virus B, and chronic bee paralysis virus. As the lead researcher put it: “We would like to replace reliance on chemical controls with honey bees that have high mite resistance of their own.”

And the breeding logic is now reaching the commercial sector. Wes Card in Louisiana and Ryan Lamb in Texas have been independently selecting for mite resistance in their production stock for years. In February 2025, during the worst colony-loss season on record, Project Apis m. and the USDA’s Bob Danka visited both operations to evaluate their potential breeder queens. Colonies untreated since April 2024, through an entire production season and a full winter, showed very low mite infestations in the brood. During a year when 62% of commercial colonies nationwide were dying, these bees were thriving. They were also among the top honey producers in their respective operations.

One of the selection methods used across all these programmes deserves mention for its endearing hands-on quality. Researchers collect mites from the hive floor, put them under a microscope, and count how many legs are missing or partially chewed off. High levels of mite damage indicate colonies where worker bees are actively grooming and attacking parasites, a heritable behavioural trait. By breeding queens from these high-grooming colonies, breeders develop more resistant lines.

This is Brother Adam’s vision, scaled and diversified. More breeders. Better measurement. Faster feedback loops. The same fundamental logic: observe, select, breed, evaluate, repeat.

Better Practice

The 2024–2025 triage surveys revealed something the culture-war narratives completely obscure: colony survival varied enormously depending on management practice. Differences in mite-monitoring frequency, protein and carbohydrate feeding schedules, miticide timing, and overwintering methods all correlated with significantly different loss rates. The headline losses are real and alarming. But they are not uniform. Some beekeepers, using the same stock in the same regions, lost dramatically fewer colonies because they managed better.

The single most impactful intervention, according to extension specialists, is regular Varroa monitoring: counting mites per hundred bees at scheduled intervals and treating when thresholds are crossed. This is not high technology. It is disciplined practice. Many beekeepers, including some commercial operators, do not do it consistently. The gap between best practice and average practice is wide, and closing it requires training, not legislation.

An increasingly significant management innovation is indoor cold storage: placing colonies in climate-controlled facilities (typically around 7°C and 25% relative humidity) during winter months. The practice, long used by some Canadian beekeepers, has been rapidly gaining adoption among U.S. commercial operations. Colonies in cold storage stop producing brood, which creates a “brood break” that prevents Varroa from reproducing. Bees that cluster indoors rather than flying age more slowly and consume fewer resources. USDA-funded research combining Varroa-resistant Russian bees with cold-storage overwintering found that the approach produced survival rates and colony sizes comparable to outdoor apiaries in warmer climates, at lower cost per colony. In an era when warmer autumns are extending Varroa’s reproductive window, cold storage is a practical adaptation to climate change that requires no new legislation, no bans, and no breakthroughs. It requires a shed, a thermostat, and good planning.

On the landscape side, hedgerow and habitat restoration near farmland has shown measurable pollinator benefits. One study found bee abundance increasing by 8% within a single year of growing hedgerows, with species richness continuing to improve over seven years. Programmes like the Pollinator Partnership’s Bee Friendly Farmingcertification and the Xerces Society’s farmland conservation work have begun translating these findings into practical guidance for growers: flowering cover crops during fallow periods, reduced-mowing regimes on field margins, retention of scrubby marginal land that costs more to farm than the pollination benefit it provides by being left alone.

Training infrastructure exists and is growing. In the UK, BeeBase has grown from 19,000 registered beekeepers in 2010 to 47,000 today. In the U.S., state extension services, university programmes, and nonprofits like Project Apis m. offer free or reduced-cost courses for both commercial and hobbyist beekeepers. The infrastructure for improving practice exists. What it lacks is the political sex appeal of a pesticide ban or a corporate takedown.

Why the Discourse Fails when Work Succeeds

Bee decline is multicausal. Political narratives require identifiable villains. The mismatch between the complexity of the problem and the simplicity demanded by activism generates a predictable pathology: each side selects the causal factor that best fits its pre-existing ideological commitments, amplifies it, and dismisses the rest.

Applied breeding programmes, nutritional research, and extension education operate on different incentive structures. They are optimising for measurable outcomes: larval survival rates, mite loads per hundred bees, overwinter survival percentages, honey yield per colony. The feedback loop between intervention and outcome is tighter, more honest, and more productive than the feedback loop between a Twitter campaign and bee survival. One better queen this year. A slightly more resistant line next year. A measurably healthier apiary the year after that.

We should be careful, though, not to let our own argument become a comfortable distortion. “Activists bad, practitioners good” is a satisfying story, and it has the same structural flaw as “neonics bad, Bayer evil”: it is too clean. The practical work we have described does not fund itself. The USDA Pol-line programme exists because Congress appropriated money for it. The Inflation Reduction Act’s $20 billion in conservation funding exists because advocacy organisations pushed for it. Extension agents have jobs because state legislatures decided to pay for them. The 2008 and 2014 Farm Bills expanded federal bee research funding partly because beekeepers showed up and made noise. If the takeaway from this article is “ignore the political process and just do the work,” we have failed. The work requires political support, and political support requires advocacy.

The real failure is not activism per se. It is activism that optimises for the wrong objective function, measuring success in media coverage, petition signatures, and corporate-villain narratives rather than in research funding secured, extension programmes staffed, and breeding networks supported. It is also, and perhaps more damagingly, a conservative counter-narrative that uses “it’s just mites” as a reason to cut public spending on the very programmes that are producing results. The worst outcome is not that we fight about pesticides. It is that we fight about pesticides instead of funding the USDA, and then cut the USDA’s budget anyway.

There is the question of opportunity cost, but it runs in both directions. Every dollar of activist funding spent litigating a neonicotinoid ban is a dollar not spent training beekeepers in mite-monitoring techniques. But every dollar cut from USDA research budgets in the name of fiscal conservatism is a dollar that could have funded the next Pol-line. Every news cycle consumed by “beepocalypse” rhetoric crowds out the unglamorous truth that better feeding schedules and community-based breeding programmes are producing concrete results right now. But the silence that replaces it is not better, because the public learns nothing at all, and the appropriations committees have no political reason to act.

Objections

“You’re dismissing activism.” I hope the preceding section made clear that we are not. Without advocacy, the practical work has no funding. Our problem is with activism that measures its success in headlines and petition signatures rather than in research dollars secured and extension programmes staffed. The energy is not the problem. The targeting is.

“You’re letting corporations off the hook.” Agrochemical companies have engaged in documented efforts to shape scientific discourse and deflect blame. That behaviour warrants criticism and, where appropriate, legal accountability. It’s not even dead and buried events that drive this distrust, just Roundup alone more than justifies distrust and hostility again and again. But corporate malfeasance, real as it is, does not change the entomological reality: Varroa mites are the single largest proximate threat, nutritional deficiency is a growing crisis, and the most effective interventions available right now are better breeding, better feed, and better management. Holding both truths simultaneously is not corporate apologetics.

“You’re letting fiscal conservatives off the hook.” This is the objection we take most seriously, because our essay’s rhetorical structure (”stop fighting and start working”) can easily be co-opted by people who want to stop fighting and stop funding. Every programme I have praised depends on public money. The USDA breeding lab, the extension services, the university research grants, the nonprofit networks: all of them require sustained appropriations from legislatures that are perpetually looking for things to cut. If this article provides ammunition for anyone arguing that bee conservation is a solved problem that no longer needs government support, I have written it badly. It is not solved. It needs more support, not less.

“You can’t scale a monk.” Brother Adam had institutional backing from a monastery, no family obligations, a lifetime tenure, and the personality of a single-minded obsessive. His story is inspiring but not reliably replicable.

Fair enough. And yes, we would happily fund more monks (even if they are making violence in a wine). Institutions that provide long-term stability and patient capital for multi-decade applied research are invaluable. Brother Adam’s monastic context was not incidental to his success; it gave him something almost no modern researcher enjoys.

But most of the work now being done to save bees is being done by non-monks. The Arista Bee Research network is three hundred amateur beekeepers in seven countries, sharing data in spreadsheets and checking mite-damaged legs under microscopes on weekends. The USDA Pol-line programme is government scientists working within constrained budgets. Wes Card and Ryan Lamb are commercial beekeepers running businesses, not contemplative orders. The Oxford nutrition team are university researchers on fixed-term grants. Extension agents across the United States and the UK are civil servants offering free courses to anyone who shows up.

The method is replicable. The discipline is replicable. I are not arguing for more monks, though I wouldn’t turn that idea away. I am arguing for more of what the monk did: systematic, patient, craft-based work, carried out by communities of practitioners who share methods and data. That is already happening. It deserves more support than it currently receives.

The Monk, the Moor, and the Powder

Brother Adam spent seventy-eight years on Dartmoor, in the wind and the cold, scoring queens and recording pedigrees. Today a network of amateur breeders across Europe checks mite-damaged legs under microscopes and shares data in spreadsheets. A commercial beekeeper in Louisiana carries untreated hives through a catastrophic winter because he selected the right queens. A team at Oxford dries yeast into powder that may keep colonies alive through pollen-poor winters. A shed full of bees in Idaho sits dark and cool at seven degrees, breaking the mite’s reproductive cycle while the beekeeper saves twenty-three dollars per colony.

None of them need a hashtag. They need time, rigour, funding, and the recognition that in environmental crises, as in most things, it is work, not outrage, that bends the curve.

A 2025 college graduate applies to forty jobs, hears back from three, gets ghosted after two rounds of interviews with each. Her LinkedIn feed tells her why: AI is coming for entry-level work. Dario Amodei predicts half of entry-level white-collar roles will vanish by 2030. Jack Dorsey fires 40 percent of Block’s workforce and says intelligence tools have changed what it means to run a company. She starts to wonder if her degree was a mistake.

Marc Andreessen, on the 20VC podcast last week, told her she is being lied to. Most large companies are overstaffed by 25 to 75 percent thanks to pandemic-era hiring binges, he said, and AI is “the silver bullet excuse” to clean house without admitting the real reason. “AI literally until December was not actually good enough to do any of the jobs that they’re actually cutting. It just can’t have been AI.”

He is mostly right. The evidence we lay out below supports him. But his version has a convenient blind spot.

If these companies are so bloated, where are the good products? Microsoft has over 220,000 employees, yet Windows 11 shipped with a Start menu that broke basic workflows, an ad-infested lock screen, and a Settings app that still cannot do half of what the Control Panel could in 2009. Google has 180,000-plus people and has been trying to fix Google Assistant for a decade. Apple spent years and roughly 165,000 employees on a Vision Pro that sold to almost nobody. These are not organizations with 50 to 75 percent surplus headcount. They are organizations where management layers, internal politics, and misallocation have made it hard to ship anything well. The people are not unnecessary. The structure wastes them.

There is also something Andreessen will not say, because it implicates his own industry. If cost of capital were still near zero, as it was from 2009 to 2022, Andreessen Horowitz would be writing bigger checks into more portfolio companies, each hiring aggressively to chase growth before profitability. Venture capital ran on that model for over a decade: fund companies, tell them to hire fast, grow into the valuation later. The people now called “bloat” were, three years ago, called “scaling.” What changed was the federal funds rate. When capital is expensive, every investor suddenly discovers their portfolio companies have too many people. Andreessen is diagnosing a symptom and calling it a disease.

Meanwhile the graduate’s problem is real, and it is worse than either narrative acknowledges. The share of unemployed Americans who are new workforce entrants hit a 37-year high in 2025, peaking at 13.3 percent in July, exceeding anything recorded during the Great Recession. It settled to 10.6 percent by February 2026, still worse than the worst of 2008-09. The New York Fed reports that the underemployment rate for recent college graduates climbed to 42.5 percent by the fourth quarter of 2025, meaning almost half the people who just spent four years and six figures on a degree are working jobs that never required one. Finance and information services, the traditional on-ramps for college graduates, have been shedding an average of 9,000 jobs per month since 2023. Before the pandemic, those same industries were adding 44,000 jobs per month.

She is right that the ladder is broken. She is wrong about what broke it. And Andreessen, for all his bluster, is wrong about why.

It is not AI. But it is not simply a correction of pandemic overhiring, either. The true culprits run deeper: a job ladder that has lost half its rungs over four decades, rising employer concentration, the quiet spread of noncompete agreements into low-wage work, and the sharpest monetary tightening cycle in forty years, now about to be compounded by an oil shock that will freeze what little entry-level hiring remains. The wrong diagnosis leads to the wrong treatment, and young workers cannot afford the delay.

Forty-Years of Collapse

To understand what is happening to the graduate, we need to go back much further than ChatGPT. Four decades further.

Labor economists have used the metaphor of the job ladder for so long that we sometimes forget it describes a real mechanism. The job ladder is not a metaphor for ambition. It is the institutional infrastructure through which labor markets allocate talent and distribute gains. A young worker enters the labor market and takes a job at a firm that may not pay particularly well. Over the next several years, she receives offers from competing employers. Some pay more. She accepts the better ones and moves up. Robert Topel and Michael Ward documented in 1992 that the average American worker has seven employers in the first ten years. That churn is not dysfunction. It is the mechanism by which wages grow. About 60 percent of the wage growth in the first decade of a career comes not from raises within a firm but from moving between firms toward better-paying employers.

That is how it is supposed to work. A March 2026 working paper from Niklas Engbom, Aniket Baksy, and Daniele Caratelli shows how badly it has broken down. Using Current Population Survey microdata from 1982 to 2023 and a job-ladder model calibrated to match the data, they estimate that employed workers today are roughly half as likely to receive a better-paying outside offer as they were in the 1980s. Net upward job mobility, their summary measure of ladder strength, fell by 51 percent between the early 1980s and the 2010s.

Half the rungs are gone.

The consequences for wages are severe. After more than doubling between 1940 and 1970, real hourly earnings in the United States have increased by only about 25 percent since 1980. If you hold the demographic composition of the workforce constant at its 1980s level, stripping out the effect of the shift toward older and more educated workers, real wage growth since 1980 is close to zero. Engbom, Baksy, and Caratelli estimate that the decline in the job ladder accounts for about one-third of that slowdown, reducing annual real wage growth by 0.68 percentage points. Over four decades, that compounds into a very large number.

Only about one-third of the wage effect is mechanical, meaning workers climb the ladder less often and therefore end up at lower-paying firms. The remaining two-thirds arises because firms choose to pay less when they face less competition for workers. We tend to think of the job market as a place where employers set wages and workers accept or decline. The Engbom paper shows that a large share of what determines wages is not the employer’s productivity or the worker’s skill but the threat of departure. When that threat recedes, as the Nobel laureate Peter Diamond predicted, firms converge toward offering the minimum workers will accept. The ladder is the invisible discipline that makes the whole system pay what it should. And the discipline has been quietly collapsing for forty years.

The decline is broad-based. Men and women, white and nonwhite workers, college graduates and non-graduates all saw large drops in upward mobility. But the decline is especially pronounced for young workers, whose net upward mobility fell from 1.286 in the 1980s to 0.482 in the 2010s. Women experienced a larger decline than men. Nonwhite workers fell from 1.099 to 0.423. There is no demographic group for which the ladder is working as it once did.

The graduate applying to forty jobs in 2025 would recognize the symptoms even without seeing the data. A Rezi.ai analysis of job postings found that 35 percent of positions labeled “entry-level” now require three or more years of experience. Entry-level roles requiring zero to two years have dropped by 29 percentage points. This “experience inflation” is what the collapsed ladder looks like from the ground. When firms face no competitive pressure to invest in developing junior talent, they redefine entry-level to mean mid-career. The label stays. The opportunity vanishes.

Engbom, Baksy, and Caratelli rule out several plausible alternative explanations. The decline is not driven by lower matching efficiency: job-finding from nonemployment has declined only modestly over forty years, while job-finding from employment has fallen sharply. If the matching technology or labor demand were the problem, both rates would have moved together. The decline is not driven by house lock-in: renters experienced larger declines in on-the-job search efficiency than homeowners. It is not driven by dual-career constraints: single-career households experienced larger declines than dual-career households. This is not a story about workers who stopped climbing. It is a story about an economy that pulled the ladder away.

Who Pulled the Ladder Away

Two forces show up consistently in the cross-state evidence: rising employer concentration and the proliferation of noncompete agreements.

States where employer concentration increased more between the 1980s and 2010s experienced larger declines in upward job mobility. States where a higher share of workers report being bound by noncompete agreements show the same pattern. A back-of-the-envelope calculation by Engbom, Baksy, and Caratelli implies that rising concentration and noncompete use together may account for roughly 60 percent of the national decline in the efficiency of on-the-job search.

The concentration story is about arithmetic. Fewer employers in a labor market means fewer competing offers for employed workers. Fewer competing offers means less pressure on wages. You can see the same mechanism in industry after industry. In oil and gas, as documented in a previous article, roughly $200 billion in mergers since late 2023 has consolidated half of the Permian Basin’s most productive formation under two companies. ExxonMobil acquired Pioneer for $60 billion, Chevron acquired Hess for $53 billion, and Diamondback merged with Endeavor for $26 billion. The wildcatter ecosystem that once converted price signals into production and employment, chaotically and wastefully but at enormous scale, was replaced by capital-disciplined giants that return cash to shareholders regardless of what prices do. The labor market consequences follow: fewer firms competing for workers, less upward mobility, lower wage pressure.

The same dynamic, less dramatic but more pervasive, operates across the broader economy. It does not require conspiracy. It requires only that the number of independent employers shrinks and that the remaining employers face less competitive pressure to bid for workers.

The noncompete story is more galling. Legal experts describe the period from 1990 to roughly 2010 as the golden age of noncompete enforcement in America. What started as a tool for protecting senior executives’ trade secrets metastasized into a blanket restriction applied to hourly workers, sandwich shop employees, pet cremation technicians. An estimated 30 million Americans, nearly one in five workers, are bound by a noncompete agreement. These agreements directly suppress the mechanism through which the job ladder operates: they prevent employed workers from accepting better offers.

The FTC, under the Biden administration, attempted a nationwide ban. The estimated effects were large and specific: $400 to $488 billion in increased wages over the next decade, $524 per worker per year in additional earnings, 8,500 new businesses annually, and 17,000 to 29,000 additional patents per year. The rule was struck down in federal court. The Trump administration formally vacated it in September 2025. The FTC has shifted to case-by-case enforcement, including a February 2026 consent order against a pet cremation company that had imposed blanket noncompetes on 1,780 employees, including hourly laborers and drivers. The bipartisan Workforce Mobility Act, reintroduced in June 2025 by Senators Murphy, Young, Cramer, and Kaine, would ban most noncompetes nationwide. It has been referred to committee. No further action has been taken. Over 150 bills have been introduced in more than 35 states, creating a patchwork that varies by jurisdiction. The patchwork is the opposite of the clear nationwide signal that would restore competitive dynamics.

The graduate scrolling LinkedIn is not competing against chatbots. She is competing against four decades of eroded mobility, in a labor market where the companies that might hire her face less pressure to do so than at any point since the data began. We all spent two years worrying that AI will trap young workers in obsolete careers, if they every get a career in the first place. Meanwhile, noncompete agreements have been legally trapping workers in underpaying jobs for decades, and we barely noticed.

AI Alibi

So if the ladder was already broken, why does everyone keep blaming AI?

Partly because there is a credible-looking academic case. Erik Brynjolfsson, Bharat Chandar, and Ruyu Chen’s 2025 working paper, aptly titled “Canaries in the Coal Mine,” finds a 16 percent relative decline in employment for early-career workers ages 22 to 25 in the most AI-exposed occupations since the public release of ChatGPT in November 2022. Brynjolfsson himself reiterated the finding at a Stanford panel in March 2026: about a 20 percent decline for entry-level software developers, about 15 percent for call center workers. Mid-career people are doing fine. Senior people are doing well. The narrative has cultural momentum. A Harvard survey found that 44 percent of young Americans believe AI will reduce job opportunities, while only 14 percent expect it to create more.

Let’s take this argument seriously. But taking it seriously means subjecting it to scrutiny.

The central weakness is the timeline. The “Canaries” paper documents an employment inflection point beginning in November 2022, immediately following ChatGPT’s public launch. By June 2023, roughly half of the total observed decline had already materialized. For this to be an AI story, we need to believe that within six months of a consumer chatbot’s release, firms across the economy decided that AI could replace junior staff, built the necessary enterprise infrastructure, redesigned complex workflows, ensured data security and regulatory compliance, and executed staffing changes at national scale.

That did not happen.

The OpenAI API, a prerequisite for building any custom application, only launched on March 1, 2023. ChatGPT Enterprise, which offered the data privacy guarantees that corporations require before touching sensitive operations, launched on August 28, 2023. The generative AI models available in late 2022 and early 2023 fabricated information freely enough that the term “hallucination” entered common use. U.S. Census data shows that fewer than 10 percent of large businesses were even planning to use AI in the next six months as late as the fourth quarter of 2023. By the third quarter of 2025, actual adoption among large businesses had only climbed to 12 percent. The tools that would have been necessary for the displacement story to work did not exist during the period the displacement supposedly occurred.

What did exist was a hiring freeze, and it started before the chatbot arrived. An analysis of job postings data from Lightcast, published by Zanna Iscenko and Fabien Curto Millet of Google’s economics team in their January 2026 paper for the Economic Innovation Group, shows that vacancies for the highest AI-exposure quintile of occupations peaked in March and April of 2022 and declined sharply throughout the rest of the year, a full six months before ChatGPT launched. The decline in employment levels starting in November 2022 is the predictable, lagged consequence of that earlier hiring freeze: when you stop bringing in new graduates, routine attrition is no longer offset by new hires, and the headcount of 22-to-25-year-olds mechanically shrinks.

Iscenko and Curto Millet illustrate this with a simple thought experiment. Take a hypothetical occupation that starts with an equal number of workers at each age from 22 to 65 and impose a complete hiring freeze but zero layoffs for one year. When you study this occupation a year later, entry-level employment for the 22-to-25 age band has shrunk by 25 percent. Employment for every other age group has not changed at all. The statistical pattern perfectly mimics targeted AI displacement. It is not AI displacement. It is arithmetic.

The job postings data also contradicts the AI story on its own terms. Within occupations most exposed to AI, postings for junior roles have not declined faster than postings for senior roles. Both fell roughly in parallel from their spring 2022 peak, with junior postings actually stabilizing faster. If AI were selectively automating entry-level tasks, the divergence between junior and senior postings would be the first place you would see it. It is not there.

Why, then, did AI-exposed occupations get hit harder than others? Because “AI exposure” and “interest rate sensitivity” overlap almost completely. Occupations in the top quintile of AI exposure are overwhelmingly concentrated in information, finance and insurance, and professional and technical services. Approximately 38 percent of workers in the most AI-exposed quintile are in these sectors, compared with less than 2 percent in the least-exposed quintile. These are the sectors most sensitive to capital costs and economic uncertainty. When the Federal Reserve began its most aggressive tightening cycle in forty years in March 2022, the timing lined up exactly with the decline in job postings across these sectors. Research by Zens, Böck, and Zörner has found that workers in tasks rated as easily automated are also disproportionately affected by conventional monetary policy shocks. The correlation is confound, not coincidence.

And the same differential pattern appears in the hiring slowdown of early 2020, when generative AI could not even theoretically be the explanation. If the same occupations decline relative to others during every downturn, AI is not required to explain the pattern. Monetary policy and sector sensitivity are sufficient.

The finding is not isolated. Gimbel, Kinder, Kendall, and Lee find no discernible break in aggregate U.S. employment trends since ChatGPT. Humlum and Vestergaard, using extremely detailed Danish microdata, find that AI’s impact on individual earnings and hours is “precise zeros,” with workplaces adopting AI showing no shifts in job creation or destruction. They do find a decline in early-career employment, but their difference-in-differences analysis shows AI is not driving it. A Yale Budget Lab report described the notion of AI roiling the job market as “largely speculative.” The Vanguard finding is the sharpest of all: their December 2025 economic outlook reports that the roughly 140 occupations most exposed to AI automation are actually outperforming the rest of the labor market in both job growth and real wage increases since the second quarter of 2023. If AI were displacing workers, these occupations would be the worst place to look for a job. They are not.

AI may yet reshape entry-level work in ways we cannot currently measure. But the claim that it has already done so at scale is not supported by the evidence. So why do companies keep saying it?

Because it works. The practice has acquired a name: AI washing. Of the 1.2 million job cuts U.S. companies announced in 2025, nearly twice 2024’s total, AI was cited in only about 55,000, or 4.5 percent, according to the research firm Challenger, Gray and Christmas. A January 2026 Forrester report found that “many companies announcing A.I.-related layoffs do not have mature, vetted A.I. applications ready to fill those roles,” describing the trend as companies attributing financially motivated cuts to future AI implementation that does not yet exist. Nearly 60 percent of hiring managers surveyed by Resume.org said they emphasize AI’s role in reducing hiring or cutting jobs specifically because it is viewed more favorably than admitting to financial constraints.

The cases are specific enough to be embarrassing. Amazon’s CEO Andy Jassy initially linked the company’s rounds of layoffs to AI and generative tools, then walked it back, saying the cuts were “not really AI-driven, not right now at least.” Jack Dorsey’s Block fired over 4,000 employees in February 2026 citing AI, but the company’s own filings show it had grown from 5,477 employees in 2020 to over 10,000 by 2025 during a pandemic-era hiring spree. The cuts brought headcount roughly back to where it was before the over-expansion. Meta reportedly planned to cut 20 percent of its workforce not because AI does those workers’ jobs, but to pay for the servers that run AI. As Bloomberg Opinion put it in March 2026: “Don’t blame AI for poor management decisions.”

The most telling datapoint is the simplest. Since March 2025, New York State has given employers the option to cite “technological innovation or automation” in the legally required WARN Act layoff notices they file before mass reductions. Of the 160 companies that filed notices since then, including Amazon and Goldman Sachs, companies that freely cite AI efficiencies in their investor communications, not one checked the box attributing layoffs to AI. When it matters legally, the AI explanation disappears.

Why would executives do this? Peter Cohan, a management professor at Babson College, told Built In that AI is “the least bad reason companies can use” for layoffs. Blaming tariffs risks political retaliation. Blaming revenue shortfalls spooks investors. Blaming pandemic over-hiring is an admission of strategic failure. Blaming AI sounds forward-looking and market-friendly. Shares go up.

The reputational cost, as Mercer’s Global Talent Trends 2026 report documents, falls on workers: employee concerns about AI-related job loss jumped from 28 percent in 2024 to 40 percent in 2026, and 62 percent of employees feel their leaders underestimate the emotional impact of AI on the workforce. When companies AI-wash their layoffs, they corrode the trust needed for workers to engage productively with AI tools. The wrong diagnosis does active damage.

The companies that ghosted our graduate after two rounds of interviews are, in many cases, the same ones citing AI efficiencies in their earnings calls. Not every company is following that script. In February 2026, IBM announced it was tripling entry-level hiring, including for software developers and other roles “we’re being told AI can do.” IBM’s chief human resources officer, Nickle LaMoreaux, explained the logic at the Leading with AI Summit: the entry-level jobs of two to three years ago can largely be performed by AI, so IBM rewrote the job descriptions. Junior developers now spend less time on routine coding and more time working directly with customers and building new products. The entry-level job description changed. The entry-level job survived. Her warning to competitors who are cutting instead was equally direct: companies that forego entry-level hiring will have to poach mid-level employees from competitors at a 30 percent premium, people who don’t know the internal culture and take longer to get up to speed. Axios called it a “narrative violation.”

The Oil Shock Will Finish What the Fed Started

That is the structural story: a ladder that has been losing rungs for four decades, weakened by concentration and noncompetes, with AI taking the blame for damage it did not cause. Now comes the cyclical crisis that will make all of it worse.

The proximate cause of the entry-level hiring collapse of 2022 to 2025 was the Federal Reserve’s tightening cycle, which began in March 2022, the exact month when job postings in those same rate-sensitive sectors began falling. The tightening was necessary. Inflation was running well above target. But the distributional consequences were predictable: the sectors where young, college-educated workers concentrate are the sectors most exposed to rising capital costs. As John Haltiwanger, Henry Hyatt, and Erika McEntarfer demonstrated in their 2018 research, the job ladder is highly procyclical, and more so for younger workers. When the economy tightens, hiring stops, workers stop quitting, and entry points to the market disappear.

Indeed’s Hiring Lab describes the current environment as “low-fire, low-hire.” Employers are not expanding but not cutting either. Comfortable for incumbents. Devastating for anyone trying to get a first foothold. ZipRecruiter data shows that employee turnover dropped from 177 percent in 2023 to just 50 percent in 2025. Workers are clinging to positions. Vacancy chains are frozen. The people who suffer most from a frozen market are, by definition, the people who don’t yet have a place in it.

There were, as of early 2026, cautious signals of a thaw. ZipRecruiter found that 63 percent of businesses plan to increase hiring, with emphasis on entry-level roles. Some forecasters saw rate cuts on the horizon.

Then the Strait of Hormuz closed.

On February 28, 2026, the war between the United States, Israel, and Iran began. Within 48 hours, tanker traffic through the Strait, which carries roughly 20 percent of the world’s seaborne oil, had collapsed by 81 percent. Seven of twelve major marine insurance clubs cancelled war risk coverage. Brent crude surged above $82, with JPMorgan warning of $120 and Deutsche Bank modeling a full closure at $200. European diesel futures jumped 23 percent in a single day.

We laid out in detail what this oil shock means for energy markets, inflation, interest rates, and fertility. What matters here is the implication for an entry-level labor market already hanging by a thread.

The transmission runs through a short chain. Higher oil prices feed into broader inflation. The SF Fed found in December 2025 that two-year Treasury yields now respond more than three times as strongly to oil supply news as they did before 2021. Markets are already pricing in no rate cuts this year and possibly further hikes. Each increment of tightening falls hardest on the sectors already hemorrhaging entry-level positions. An oil-driven inflation spike does not create new jobs for graduates anywhere in the economy. It guarantees that the interest rate environment remains hostile for the sectors that would otherwise absorb them.

In a prior era, an oil shock at least had a compensating mechanism. High prices meant pain at the pump, but they also meant a drilling boom in West Texas, the Gulf Coast, and the Intermountain West. Young men without college degrees could earn $80,000 to $120,000 on a rig crew. That income supported marriages, mortgages, and children. Between 2010 and 2014, Houston alone added 457,500 jobs.

That industry no longer exists. As we documented, capital discipline and consolidation have produced an oil sector that converts high prices into share buybacks rather than employment. The U.S. rig count fell from 750 in December 2022 to 550 by late February 2026, while production held near record levels. The total upstream workforce has shrunk by 252,000 from its peak while producing substantially more energy. Petroleum engineering degrees have collapsed 76 percent from their 2017 peak. When EOG Resources held its fourth-quarter earnings call the day before the Iran strikes, it committed to returning 90 to 100 percent of free cash flow to shareholders and keeping production flat. Scott Sheffield, formerly of Pioneer Natural Resources, said it as plainly as anyone: “Whether it’s $150 oil, $200 oil, or $100 oil, we’re not going to change our growth plans.”

So: the oil shock raises inflation, which delays rate cuts or forces hikes, which prolongs the hiring freeze, which extends the entry-level drought. The sectors that would historically have absorbed displaced workers are either structurally configured not to expand (energy) or exposed to diesel and input cost increases (construction, manufacturing). And the broader uncertainty, compounded by tariff escalation and immigration policy changes, ensures that employer risk aversion persists.

The graduate entering the labor market in the spring of 2026 faces a convergence with no close parallel in the postwar period. A ladder weakened over four decades. A tightening cycle that has frozen what remains. An oil shock extending the freeze. And a public conversation that remains fixated on a chatbot.

Compounding (Economic) Scars

If this were merely a matter of waiting a few years for conditions to improve, none of what follows would matter much. It is not.

The research on labor market scarring says that what happens to our graduate in the next two years will follow her for decades. Till von Wachter’s 2020 survey of the evidence in the Journal of Economic Perspectives documents what happens to young workers who enter the labor market during a recession. For a typical downturn, where unemployment rises by 4 to 5 percentage points, college graduates experience an initial earnings reduction of about 10 percent that takes 10 to 15 years to fade. High school graduates fare roughly twice as badly. Nonwhite entrants experience larger earnings losses, mostly driven by reductions in weeks worked in the first four years.

Schwandt and von Wachter (2019) study puts the cumulative cost in dollar terms: among all labor market entrants, entering during a large recession reduces the present discounted value of earnings over the first ten years by 9 percent, rising to 13 percent for those without a high school diploma and 11 percent for nonwhite workers. These losses amount to three-quarters of mean annual earnings for the average entrant over the first decade.

The effects go past paychecks. Adverse labor market entry persistently increases alcohol consumption, leads to higher obesity and more smoking in middle age. College graduates who entered during the 1980s recession showed higher rates of heart attacks decades later. By their late 30s, according to Schwandt and von Wachter (2020), unlucky entrants start dying at higher rates than their luckier peers, a gap driven by heart disease, liver disease, lung cancer, and drug overdoses. The gap keeps widening through their 40s.

We keep calling this a labor market problem. By their late 30s it is a mortality problem.

Unlucky cohorts have fewer children, divorce more often, and are more likely to live alone in middle age. Criminal activity rises for at least 15 years after entry, especially for men and high school dropouts. Self-esteem erodes. None of this is temporary. A young worker entering a weak labor market in the 1980s could still recover, because the structural machinery of upward mobility remained intact. Today that machinery is broken.

And the safety net was never designed for people at the start of their careers. Unemployment insurance, job search assistance, and retraining all require work history that new entrants, by definition, do not have.

The effects on family formation deserve particular emphasis, not least because they have downstream consequences that last generations. Drawing on Stephen Shaw’s 2025 analysis of 314 million mothers across 33 higher-income countries, that economic shocks suppress entry into motherhood rather than reducing family size among women who are already mothers. The oil shock of 1973 drove simultaneous declines in the Total Maternal Rate across all 47 Japanese prefectures. The 2008 financial crisis drove a sustained decline in U.S. first births that continued well after the economy recovered. Hungary’s TFR collapsed from 1.59 to 1.39 between 2021 and 2024 as the energy crisis erased a decade of pronatalist policy gains. Czechia’s fell from 1.83 to 1.37, the lowest since records began in 1806.

The mechanism runs through male employment. When young men cannot find stable work, marriages do not form, and first births do not happen.

A 2025 study in the Chinese Sociological Review found that approximately a third of Korea’s fertility decline in the 25-to-29 age group traces to a near-tripling of male economic inactivity. The collapsing job ladder is the slow-motion version of the same mechanism. And each successive shock operates on a lower baseline, which means the same-sized disruption does more damage.

When the graduate expresses cynicism about the economy’s capacity to reward her effort, that cynicism is rational. She is responding to an economy that has, in measurable and documented ways, stopped rewarding effort as reliably as it once did.

The Ladder Is the Point

We are drawn to dramatic explanations because they are legible and because they absolve us of responsibility. If a machine took your job, no human decision is to blame. Andreessen’s version is only slightly better: if pandemic overhiring is the culprit, the correction is mechanical and self-resolving. Neither account requires anyone to do anything differently.

But the evidence assembled here points to something less cinematic and more damning: policy choices, market structures, and institutional failures that have systematically weakened the mechanism through which young workers build careers and economies distribute prosperity. Consolidation eliminated competitive ecosystems and noncompetes legally prevented workers from climbing. Concentration reduced the pressure that made firms pay well. The Fed’s tightening cycle froze what remained of the ladder, and the oil shock will extend the freeze.

If the diagnosis is wrong, the prescription will be wrong too. If you believe AI is displacing entry-level workers, you prescribe AI literacy training, prompt engineering curricula, reskilling programs oriented around technology adoption. These may be useful in their own right. But they do not address a collapsing job ladder, rising employer concentration, or noncompete agreements that legally prevent workers from accepting better offers. Prescribing AI training to address a structural labor market crisis is like prescribing swimming lessons to someone who is living in a drought blighted area.

The structural diagnosis implies different interventions. On employer concentration, antitrust enforcement oriented not only around consumer prices but around labor market competition and the ability of workers to receive competing offers. On noncompete agreements, finishing what the FTC started. The estimated $524 per worker per year in additional earnings from a nationwide ban is not a theoretical exercise. Oregon’s 2008 ban on noncompetes for hourly workers raised job-to-job mobility by 12 to 18 percent. The mechanism works. On social insurance, programs that do not condition eligibility on prior work history, which new entrants by definition lack. On the oil shock, recognizing that monetary tightening in response to a supply-side price spike is, as Bernanke and Blanchard’s own research has shown, the wrong tool for the problem.

None of these are mysteries. The Workforce Mobility Act has bipartisan sponsors. It is stalled in committee. The evidence on labor market concentration has been accumulating for a decade. The scarring research has been published and replicated. The bill is written. The papers are cited. The data is not ambiguous.

And nothing is moving.

That is the part that is hard to write about calmly. Not the structural decline, which at least has the dignity of being a long process driven by large forces. The part that is hard to sit with is the gap between what we know and what we are doing about it. We know that the job ladder is broken. We know what broke it. We know what the scarring research predicts for the cohort entering the labor market right now. We have interventions with bipartisan support, proven track records, and detailed cost-benefit analyses gathering dust in committee.

The graduate we started with is not an abstraction. She is one of millions people who finished college in 2025 (not just in the US) and walked into the worst entry-level market in four decades. The scarring literature says that what happens to her in the next two years will shape her earnings, her health, her family, and her life expectancy for decades. That should bother us more than it does.

Here is a fact that should not be true.

A detached accessory dwelling unit in Los Angeles costs $200--$600 per square foot to build. A unit in a conventional apartment building costs $150--$250. On every metric of construction efficiency, the apartment wins. The ADU is a bespoke backyard project with fixed costs that barely budge whether you build 400 square feet or 800. The apartment is an industrial product: 200 identical units sharing one foundation, one elevator core, one set of plans. Any first-year real estate finance student could tell you which is the efficient way to house people.

And yet.

California permitted 1,269 ADUs in 2016. By 2019: 14,702. By 2023, Los Angeles County alone permitted more than 45,000. One in three homes now permitted in the city of LA is an ADU, in neighborhoods where apartments hadn’t been built in forty years. Meanwhile, national multifamily production has been stuck at roughly 350,000 units a year for four decades. Through booms and busts, through low rates and high. The line barely moves.

So the expensive, inefficient option is the one that’s actually scaling, while the cheap industrial product can’t get out of its own way. Understanding how this trick works is the key to understanding how housing actually gets built in America. And the YIMBYs reading this (who have spent years fighting zoning battles and are understandably impatient) may find the mechanism delightfully underhanded.

Are You Asking (The Right) Question?

It is easy for housing advocates to hyper-focus on this question: How do we reduce the cost of producing a housing unit? That question leads to debates about modular building, materials innovation, labor costs, and construction productivity. Reasonable debates, sometimes very fun and certainly very important, but almost entirely beside the point.

The key question: What does it actually take to get a unit built, occupied, and on the market?

Ask that, and something interesting happens (as we see in real life). A $300,000 ADU where the homeowner already owns the land, already has equity to finance it, and can get a ministerial permit in 60 days has a total cost to the system that is far lower than a $200,000-per-unit apartment that took 3 years to entitle, 12 months to secure a construction loan, 24 months to build, and required $50 million in institutional capital. The ADU’s construction cost premium is the price of bypassing every bottleneck that makes housing expensive to produce in America.

That premium turns out to be a bargain.

Paul Williams’s Raising the Housing Investment Level documents the bottlenecks with precision. FHA’s 221(d)(4) program, on paper one of the best construction financing products ever designed, takes 270--360 days to close versus 60--90 for conventional financing. Banks have tightened construction lending since 2022. And the result is visible in a single statistic: Williams estimates that roughly 750,000 multifamily units sit in a “shadow pipeline”. Entitled by local planning departments, having survived the multi-year gauntlet of public hearings and environmental review, but not yet applying for building permits because the financing isn’t there. Beyond that, another 117,000 units are formally authorized but haven’t broken ground. The pipeline is clogged at every stage. Multifamily starts fell 25% in 2024 to just 354,000 units, on top of a 14% decline in 2023, even as completions from the 2021--2022 boom continue to deliver, outpacing new starts by over 220,000 units in the past year. The pipeline is draining and not refilling.

ADUs skip all of this. The homeowner is the capital source (home equity), the decision-maker, and the developer. One person, one kitchen-table conversation, one HELOC application. 53% of California ADU builders paid cash. The average Massachusetts homeowner sits on $337,000 in tappable equity. There are 70 million owner-occupied single-family homes in this country. After legalization, each one is a pre-entitled development site with a pre-qualified capital source and a motivated builder.

A System Designed to Produce Nothing

Here is a sequence a typical apartment project must survive: land acquisition → discretionary zoning entitlement (public hearings, design review, political negotiation) → environmental review (NEPA, CEQA) → architectural design → construction financing (its own underwriting, appraisal, committee process) → building permit (plan review: 6--12 months) → construction (18--36 months) → certificate of occupancy → permanent financing takeout. Every stage involves different actors, different requirements, different timelines, and projects die in the handoffs between them.

Williams describes the FHA version: applications move through a fragmented chain, different specialists reviewing the appraisal, market study, cost estimate, sponsor financials, with no single person owning the deal. A 2016 Inspector General audit found the “single underwriter” reform was never actually codified. A 2024 follow-up found HUD still tracked assignments on manual spreadsheets across five regional centers. This program finances 10,000-15,000 units a year, roughly 4% of multifamily production, in a country short 3 to 4 million homes.

The ADU system: one decision-maker, one site, one ministerial permit, one contractor, one financing decision. Decision to occupancy: 6-12 months. The system is lean not by design but by accident. The unit of production is too small for complexity to accumulate. The homeowner feels every cost overrun and every rent check directly. No principal-agent problem. Especially in cities with pre-approved plan programs, fewer moving parts means fewer ways to fail.

The per-square-foot premium is an escape tax. You’re paying to leave a system so broken it can barely function.

It’s Not Housing Policy. It’s a Product.

A common theme among marketing and advertising is that value is perceived, not objective. A $2 cup of coffee becomes $6 in a ceramic mug with good lighting. Some marketers calls this alchemy.

In that sense, ADUs are alchemy.

The homeowner deciding to build one is not performing a pro forma. She’s thinking: Mom is getting older and I want her close but not in my kitchen. My daughter graduated and can’t afford rent. My property taxes went up and $2,500 a month would change everything.

It is a family decision, a retirement decision, a keeping-up-with-the-Joneses decision. The housing unit is a byproduct. FHFA data shows California properties with ADUs appraise at $1,064,000 versus $715,000 without, a gap growing at 9.34% annually since 2013. Homes with ADUs sell for 20-35% more. One study found a 40 to 60% average increase in property value. Rents run $2,000-$4,000 per month. And the land, the single largest cost in multifamily (often 30--50% of total project cost), is already paid for. She already owns it.

Her comparison isn’t “ADU versus apartment per unit.” It’s “ADU versus doing nothing and missing the rental income, the appreciation, or it’s a solution for Mom.” At almost any construction cost, the ADU wins.

I am puzzled by, well, actually I laugh at economists puzzled by the cost premium (yes, I am aware that some economists are aware of this, some just really want to stick with the purity of Econ 101 or just plain hate Econ 102 or 202 ie microeconomics). They assume all actors optimize on the same variable. The homeowner is optimizing on a bundle (financial, emotional, practical) that’s invisible to macro analysis. The premium looks irrational only if you ignore everything she actually cares about. Housing production is just a side effect.

The implication for YIMBYs, and this is the part that should make you grin, is that we have more ways on top of political advocacy to increase the number of units in a city. Once legalized, tactics like figuring out how to market ADUs are on the table or working with local and state-level developers and banks on something that can get units online ASAP.

Preying on NIMBY Self-Interest

Here is where the alchemy gets unsettling in the best possible way.

The NIMBY who opposes the apartment building on her block will never stop being a NIMBY. She will show up to every hearing, file every appeal, fund every lawsuit. NIMBYism is a political identity, not a misunderstanding, and she’s not going to grow out of it.

But that same NIMBY will build an ADU in her backyard without blinking. Not because she’s been converted (she hasn’t) but because what’s good for her is, in her mind, different from what’s good for everyone else. The apartment threatens her neighborhood and brings strangers she didn’t choose. The ADU enriches her property and houses Mom, or a tenant she screens personally, who pays $2,500 a month. Same unit of housing. Completely different calculus, because self-interest overrode principle.

People cheerfully exempt themselves from rules they impose on others when doing so is profitable. A crafty YIMBY can prey upon that (which is another article in itself!).

The play: make it as easy, as profitable, and as frictionless as possible for everyone , including NIMBYs to build ADUs after ADUs are legalized, knowing they’ll keep fighting every apartment, every triplex, every upzoning. The pitch is: Your home is your biggest asset. Here’s how to make it work harder for you. Here’s the pre-approved plan. Here’s the HELOC calculator. Here’s what your neighbor earns in rent. Here’s where Mom could live. The word “density” never appears, and the housing unit gets built anyway.

You don’t need converts, just to appeal to the more self-interested actors inside a permissive regulatory framework. The NIMBY builds her ADU for the same reason Willie Sutton robbed banks: that’s where the money is.

And every ADU she builds makes the next affordability fight easier. Not because she changes her mind, but because the neighborhood changes around her. One ADU on a block is invisible. Five normalize density. Ten make the “character of the neighborhood” argument sound ridiculous, because the neighborhood already has ADUs and I want one. Greed, not ideology, is the transmission mechanism. California ADU permitting grew 42-76% every year from 2016 onward, driven largely by neighbor-to-neighbor diffusion. She built one. I want one too.

Why the Battle Stays Won

ADU legalization is fought once, at the legislative level, and once it’s law, individual projects are ministerial: no hearing, no council vote, no neighbor veto. The YIMBY movement fights the one battle that matters, and then self-interest handles the rest.

Auburn, Maine proves this beautifully. Mayor Jason Levesque, “The YIMBYest City in America”, spent six years pushing ADU legalization, form-based code, and zoning reform. Permits spiked from 26 units in 2021 to 237 in 2022. Then in November 2023, he got crushed 62--38 by Jeff Harmon, a retired state police deputy chief who had literally sued a housing development near his property.

The NIMBYs won the election, but ADUs stayed. The ADUs are standing, the apartments are occupied, and the reforms were not repealed, because a new mayor can’t unbuild a house. Levesque lost, but the production outlasted his political career. And while Auburn is now certainly going after other types of housing, Levesque-era ADU regulations are left mostly alone.

(YIMBYs: if you take nothing else from this piece, take Auburn. Win the legislative fight. Let self-interest handle the rest. The housing survives the backlash.)

Jersey City: The Sophisticated Version

Auburn is the optimistic case: a blunt NIMBY who can’t unbuild houses. Jersey City under Mayor James Solomon, who took office in January 2026, is the worrying one.

Solomon is no Jeff Harmon. He doesn’t oppose development. He knows better. He concedes openly that “rents would be higher if a lot of those buildings hadn’t been built.” He understands supply and demand. He understands that Jersey City produced 13 homes per 1,000 residents in 2024, twice as many apartments as all of Queens, and that this production is why the city remains livable for working families. He is pursuing policies that will reduce future building anyway, and he knows it.

Within six days of taking office, Solomon signed an executive order auditing all 100+ active tax abatements in Jersey City, framed against a $250 million budget deficit he inherited. He campaigned on raising the inclusionary zoning mandate to 20% affordable units in all major new developments. He voted against every luxury tax abatement brought before him on the council, including what he called “the Pompidou, a $150 million giveaway to the Kushner family”(Kushner Companies, Jared Kushner’s family development firm, is a major Jersey City builder). The rhetoric is progressive, but he knows what the math does.

Jersey City’s current inclusionary zoning ordinance requires 10-15% affordable units. No project has yet broken ground at the 15% rate. Not one. Solomon wants 20%. An independent analysis by Better Blocks NJ, using the financials from an actual audited Jersey City project, calculated that making a universal inclusionary mandate work would require tax abatements for every covered project, costing roughly $184 million annually in foregone property tax revenue. The analysis concluded that the most probable outcome is “no affordable housing is built under the Solomon plan in the short run, while in the long run, housing development grinds to a halt.” Solomon has a Harvard public policy degree and can read a pro forma. He knows this.

The small-developer squeeze is where the cynicism becomes structural. Solomon’s proposals target “projects of 50 or more, 100 or more” units, with the exact threshold left deliberately vague. The PILOT audits, the inclusionary mandates, the compliance overhead: these are costs that Kushner Companies, with its legal department and government affairs team, can absorb. A small or mid-sized developer building their first 30-unit apartment project cannot. The large firm negotiates carve-outs and restructures deals around new requirements. The small firm looks at the regulatory uncertainty, the audit threat, the inclusionary math that doesn’t pencil, and builds in Hoboken instead.

Notice what is absent from Solomon’s housing platform: any mechanism to actually fund new housing production. No revolving construction loan fund like MassHousing’s $20 million ADU program. No state HFA acceleration fund like the ones Williams describes in Massachusetts, New York, and Michigan. No subordinate financing to unstick stalled projects. No streamlined permitting. His entire framework is extractive: audit existing abatements, mandate inclusionary units from developers, cap rent increases, collect development fees. Every policy takes from the production pipeline and none puts capital into it. For a man with a Harvard public policy degree who concedes that supply matters, that’s not an oversight.

The construction trades noticed. During the 2025 mayoral race, the Hudson County Building and Construction Trades Council endorsed Bill O’Dea, not Solomon. So did the Hudson County Central Labor Council, the Teamsters, and IATSE (the stagehands’ and technicians’ union). The workers who pour concrete and frame walls looked at Solomon’s platform and backed someone else. Solomon’s labor support came from SEIU 32BJ, which represents building serviceworkers (janitors, doormen, security guards), and the Working Families Party. The distinction matters. The people who clean finished buildings endorsed Solomon; the people who actually build them did not. They understood what his policies would do to their pipeline of work.

The effect is to consolidate Jersey City’s development market among the very “big developers” Solomon campaigns against, while squeezing out exactly the small and mid-sized builders who represent the farm system for housing production. The progressive posture produces a market that is more concentrated, not less. The man who rails against Kushner creates a regulatory environment that only Kushner can play in. We suspect this is the intended outcome, not merely the predictable one. Solomon is not stupid, and he is not confused about how development economics work. He told us so himself.

This matters for our argument because it illustrates the type of political risk that multifamily housing faces and that ADUs do not. Solomon doesn’t need to ban development or repeal zoning. He just needs to make the deal worse for every project in the queue. Higher inclusionary mandates. PILOT audits with a $250 million hole to fill. Vague thresholds that create uncertainty. Each lever individually sounds reasonable. Together, they freeze the pipeline.

ADUs are structurally immune to this. No abatement to audit, no PILOT to revoke, no inclusionary percentage to ratchet up. The homeowner’s HELOC doesn’t need the mayor’s approval. A city that chills its multifamily pipeline through regulatory accumulation cannot touch the ADU pipeline at all, because the ADU pipeline doesn’t run through city hall. It runs through kitchen tables, one self-interested homeowner at a time.

The irony, which Solomon knows perfectly well even if his supporters don’t: the homeowners building ADUs in Jersey City’s residential neighborhoods are adding housing supply in exactly the distributed, incremental, politically invisible way that his policies make impossible for apartment builders. If he succeeds in choking the multifamily pipeline, ADUs become not a complement to apartment production but its substitute. Less housing, produced less efficiently, at higher per-unit cost. ADUs because of ease of capital and distributed development are the sort of housing cockroaches we can learn from.

Where It’s Working, and Where It’s Going

Nationally, ADU permits hit 200,000+ annually, with 2.8 million cumulative permits tracked. Oregon (72% ADU-to-construction ratio), Washington (62%), Hawaii (54%) show California-consistent adoption. Massachusetts legalized statewide in 2024 and saw 1,600+ applications in year one, slower than California, but Governor Healey is pushing hard on design programs and financing. New York City’s “City of Yes” targets 80,000 ADUs, which would represent the largest single municipal ADU program in the country.

Austin: Where ADUs Meet Walkability

Austin is doing something nobody else has tried: layering ADU liberalization on top of a comprehensive density reform that already produced the steepest rent declines of any large U.S. city from 2021 to 2026.

The HOME Initiative allows three units per single-family lot, slashed minimum lot sizes to 1,800 square feet, and in year one, permits in single-family zones jumped 86%. Homeowners can build two ADUs per lot, on lots as small as 2,500 square feet, with zero parking. At Austin’s lower costs ($80,000-$300,000) and rental rates of $1,500-$3,000/month, the payback is faster than California.

But the genuinely interesting development isn’t housing. It’s commerce.

Accessory commercial units (ACUs) are the commercial cousin of the ADU: a small-scale business on a residential lot. A corner coffee kiosk. A backyard salon. A garage bike shop. The Congress for New Urbanism calls them a return to pre-Euclidean zoning, the streetcar suburb where a corner grocery was woven into the residential fabric before mid-century zoning laws banished retail to strip malls.

Ten ADUs on a block make a denser suburb. Ten ADUs plus three ACUs make a walkable neighborhood. The difference matters. And ACUs run on the same self-interest engine: the homeowner doesn’t open a kiosk because she read Jane Jacobs. She opens it because she can rent 400 square feet to a coffee roaster for $1,500 a month. The walkability is a byproduct. Each ACU makes nearby ADUs worth more (closer to amenities, higher rents). Each ADU makes nearby ACUs more viable (more customers walking distance). The whole thing is a self-reinforcing loop powered entirely by greed.

ACU startup costs can be as low as $10,000, an order of magnitude below conventional commercial rents of $20-$70/sqft. Austin, with its density reforms and transit-oriented overlays along the Project Connect light-rail corridor, is positioned to test ADU-plus-ACU neighborhood formation at scale. YIMBYs: push for ACU legalization alongside ADUs. The two together produce neighborhoods, not just bedrooms.

San Diego: When “ADUs” Had Elevators

San Diego tested what happens when you remove the ADU density cap entirely. The Bonus ADU Program (2020) allowed one market-rate bonus ADU for every affordable ADU. In Transit Priority Areas: no cap. Permits surged from under 500 in 2019 to over 2,700 in 2023. 20% of new homes built in the city were ADUs by 2024. Developers built 17-unit projects on single-family lots. Someone proposed 120 units in Pacific Beach. At a certain point you have to admire the audacity of calling a 120-unit development an “accessory dwelling.”

The council imposed caps in a 5-4 vote in June 2025. But three things matter:

One, the program proved the thesis stone cold. The Terner Center found developers chose Bonus ADUs over traditional multifamily because the pathway was faster, cheaper, and less encumbered. Rational actors picked the “expensive” unit type because total system cost was lower.

Two, the backlash shows you can’t shoehorn apartment-scale production into the ADU frame. ADUs get their political cover from being small, incremental, homeowner-controlled. At 17 units, that cover evaporates. Use the ADU pathway for what it does best (one to four units, distributed, homeowner-driven) and build a separate streamlined pathway for bigger projects. That’s Williams’s federal investment agenda.

Three, even after the rollback, San Diego remains more ADU-friendly than almost anywhere. The program overreached (not really, but you get the point), got slapped back, and still left the city with a permitting regime most metros would envy.

If a more straightforward approach fails, we may be able to take advantage of San Diego’s little experiment to help other cities “upgrade” their own ADU laws.

Trick’s Limits, & Why the Apartment Agenda Matters

ADU alchemy is real, it’s magical, but it has boundaries. 200,000 ADU permits a year won’t close a 3-4 million unit shortage alone. A third of ADU builders use them for family or personal space rather than rental housing. Production skews toward wealthy homeowners who can self-finance. You can’t build a 200-unit apartment with a HELOC.

Here is what the YIMBY movement needs to reckon with: the zoning fights are necessary, and they are not sufficient. We have spent a decade getting very good at legalizing housing. We have not spent nearly enough time figuring out how to fund the housing we’ve already legalized. The 750,000 units in the shadow pipeline, the 117,000 with permits and no shovels in the ground, the 25% drop in multifamily starts even as we kept winning zoning victories: these are not zoning failures. They are financing failures. We are legalizing units faster than the financial system can produce them.

This is the gap Williams’s Raising the Housing Investment Level fills, and I think every serious YIMBY should read it. It is the clearest articulation I’ve seen of what comes after the zoning fight. The proposals are not exotic: streamline FHA so it closes in 90 days instead of 360, match state revolving loan funds so stalled projects get subordinate financing, let the GSEs participate in construction lending, accelerate depreciation so the after-tax math improves for investors, redirect the FHLB system toward its original mission. Together they could add 230,000-355,000 units to annual multifamily production. Most cost the federal government little or nothing. Several require regulatory changes, not appropriations. And history says they work: the HUD boom of 1968-1973 produced 3 million units in four years; the tax relief boom of 1981-1986 produced 2.6 million in five. When the feds made apartments pencil, apartments got built.

For small developers and community banks, ADUs are the farm system. ADU lending is underexploited by community lenders. MassHousing authorized $20 million for ADU construction loans. The San Diego Housing Commission offers construction loans and technical assistance. A developer who delivers twenty ADU projects has the track record a community bank needs before underwriting a 30-unit apartment building. The on-ramp to the multifamily market runs through backyards. But if the multifamily market itself remains frozen because the financing system is broken, the on-ramp leads nowhere.

ADUs are housing cockroaches: they survive everything because of easy capital and distributed development. We should learn from them. But the lesson isn’t “just build ADUs.” The lesson is that capital access, having multiple developers on hand, and system simplicity produce housing, and their absence kills it. Apply that at the ADU scale and you get backyard cottages popping up. Apply it at the institutional scale, through the reforms Williams lays out, and you get the 500,000 multifamily units a year we need to actually end the shortage.

In June 2017, a small team from a Chinese biotech company that almost nobody in the West had heard of walked into a presentation hall at the American Society of Clinical Oncology annual meeting and showed their data. ASCO is the biggest oncology research conference in the world. The data were from an experimental CAR-T cell therapy for multiple myeloma. The response rates were near 100% in heavily pre-treated patients. The room noticed.

Within months, Johnson & Johnson’s Janssen subsidiary signed a worldwide collaboration, paying $350 million upfront. It was one of the largest payments ever made for a China-originated therapeutic asset. The company was Legend Biotech, a subsidiary of a gene synthesis company called GenScript, operating from limited space in Nanjing. The therapy would eventually become Carvykti, the first and only cell therapy to show a statistically significant overall survival benefit in multiple myeloma. By mid-2025, it was generating roughly $439 million per quarter.

That moment would have been nearly unthinkable five years earlier. It has since become routine. In 2024, China's innovative drug license-out transactions reached 94 deals totaling approximately $51.9 billion. In 2025, the numbers more than doubled: 157 cross-border outlicensing deals worth a record $135.7 billion. In the first quarter of 2026 alone, deal value hit $60 billion, a 73 percent jump from the same period a year earlier and nearly half of the entire 2025 total. GSK signed a $12 billion alliance with Hengrui. Novartis paid $5.36 billion for a deal with Argo Biopharmaceutical. AstraZeneca agreed to a weight-loss drug collaboration with CSPC Pharmaceutical worth up to $18.5 billion, with $1.2 billion upfront. The direction of pharmaceutical deal flow has reversed entirely. A decade ago, Chinese firms overwhelmingly licensed drugs in from the West. Now nearly half of transactions flow the other way.

But here is what the deal figures don’t capture: Unlike other aspects of Chinese industrial policy (like cosmetics), China’s medical industrial policy that produced this innovation may not be able to sustain it. China’s domestic venture investment in biotech peaked at $15.7 billion in 2021 and plunged to $4.2 billion in 2024, in spite of surging cross border deals. Only four biotech firms listed on Chinese exchanges that year, the lowest since 2008. The government’s own pricing regime compresses margins on innovative drugs so severely that every major Chinese pharma company now depends on Western licensing revenue to fund its R&D. And in December 2025, Congress passed the BIOSECURE Act, a law that restricts how U.S. pharmaceutical companies receiving federal funds can do business with designated Chinese biotechnology companies, putting new pressure on exactly the cross-border integration that makes the whole system work.

This is not a simple success story. It is a story about a system, built deliberately over decades, that moved a country from the periphery of pharmaceutical R&D toward the frontier, and that now faces contradictions rooted in its own design. Four companies illuminate different pathways through that system. A recent working paper from the National Bureau of Economic Research adds precision about which forces drove what. And the structural tensions reveal whether any of it can last.

Assembling the Machine

Before the companies, before the deal flow, before the insurance reform that everyone is now trying to understand, something more basic had to happen. China had to build the capacity to innovate. That took decades, and it was not an accident.

The most important infrastructure change was the August 2015 State Council policy document that restructured the Chinese drug regulatory system. Before 2015, the system was rigid, redundant, and slow. The reform overhauled the Drug Administration Law, introduced a new Vaccine Administration Law, and rewrote the core regulations. Then, in June 2017, China joined the International Council for Harmonisation, committing to align its regulatory standards with the FDA, EMA, and other leading agencies. The NMPA adopted all 71 ICH guidelines and compressed review timelines for innovative drug applications from roughly 14 months to approximately 30 working days. A reduction of more than 90%.

The physical infrastructure came alongside it. “Made in China 2025,” “Healthy China 2030,” the 14th Five-Year Plan, and the construction of more than 100 state-financed biotechnology parks built a physical R&D base at a scale few countries can match. Capital market reforms opened pathways for biotech firms to list and raise funds. The Hong Kong Stock Exchange’s Chapter 18A rules allowed pre-revenue biotech companies to list on the main board. Shanghai’s STAR Market attracted innovative drug makers seeking domestic investors.

Then there were the people. China’s biopharma boom has been driven substantially by returnee scientists: researchers trained at Western pharmaceutical companies and academic labs who went back to China, bringing expertise, networks, and institutional knowledge about how drugs actually get developed and approved. Government recruitment programs actively cultivated this talent pool. The sector now draws from 30,000 active AI researchers at the intersection of AI and drug discovery, and China produces roughly 5 million STEM graduates a year.

None of this was self-assembling. Regulatory reform, physical infrastructure, capital markets, human capital. Each was the product of deliberate state investment. This was industrial policy: the state building the preconditions for an industry to exist.

But supply-side capacity alone does not explain the timing. China’s scientific output and talent base grew steadily throughout the 2010s. The clinical trial surge didn’t. Something happened around 2016 that activated the capacity. To understand what, you first need to see how four companies rode the wave, and how each of them ran into the same wall.

The 30-year grind

In 1970, the Chinese government opened a small pharmaceutical factory in Lianyungang, a mid-tier coastal city in Jiangsu Province. For two decades, it produced pharmaceutical ingredients and generic copies of Western drugs. Exactly the kind of operation that confirmed the conventional wisdom: developing countries consume medicines invented elsewhere.

When Sun Piaoyang took over in the early 1990s, he had a theory. Generics were a commodity business with vanishing margins. The future was innovation. But you couldn’t jump to the frontier overnight. So Sun pursued what he called “secondary innovation”: me-too drugs that improved upon existing Western molecules. Critics dismissed it as generics with extra steps. Sun’s argument was different. Secondary innovation was scaffolding. It built the capabilities that genuine novelty would eventually require. The company listed on the Shanghai Stock Exchange in 2000 and began a long, deliberate pivot.

Three decades later, the scaffolding has produced a building. Hengrui’s R&D spending increased 33.8% year-over-year in 2024, with over 29% of revenue going to research. Innovative drug revenue rose 30.6% to roughly RMB 13.9 billion ($1.9 billion). In 2024, Hengrui overtook AstraZeneca as the most prolific clinical trial sponsor on earth. A state-owned factory in a city most Western pharma executives couldn’t find on a map, out-trialing a century-old British-Swedish multinational.

But Hengrui’s story also reveals the tension at the heart of this system. The government’s pricing regime subjects drugs to negotiated cuts of 50–63%. Those cuts compress domestic margins on innovative drugs. Hengrui’s response has been to license assets to the West: a $12 billion GSK alliance, three obesity drugs to a Bain Capital/RTW-backed startup for up to $6 billion. The company doesn’t license directly to Western pharma. It licenses into separately capitalized Western entities, receiving upfront payments while retaining equity. The structure de-risks geopolitical exposure. It has been widely copied. But it also means that Hengrui, the company that most fully embodies China’s pharmaceutical transformation, cannot sustain its R&D from its home market alone.

Luxury of Time: What patient capital makes possible

Drug development grinds against the clock of capital markets. Most VC-backed biotechs don’t have 15 years. HUTCHMED could.

The company was established in 2000 as a subsidiary of CK Hutchison Holdings, Li Ka-shing’s conglomerate. That parentage gave it patient capital and freedom from quarterly fundraising pressures. Fruquintinib, its flagship molecule, was discovered entirely in-house, a highly selective VEGFR inhibitor designed to deliver anti-tumor efficacy with fewer off-target effects than competitors. The development timeline is itself the point: well over a decade from discovery to NMPA approval in 2018, making it the first China-discovered novel oncology drug (for metastatic colorectal cancer) to receive full approval in China. Then the global FRESCO-2 trial across roughly 130 sites in 10 countries. FDA approval November 2023. European Commission approval June 2024. Projected global sales exceeding $1.5 billion.

HUTCHMED built a hub-and-spoke partnership model: discovery in-house, Eli Lilly for China distribution, AstraZeneca for savolitinib, Takeda for global commercialization. In 2025, it sold a 45% stake in its non-core drug distribution business for $608.5 million to concentrate on next-generation programs. But notice the same pattern. The revenue that sustains R&D runs through Western partners.

Raids, Breakthrough, crisis, and the fragility of partnership

Return to the ASCO moment. Now for the full story.

Legend grew from a small team inside GenScript Biotech, operating as the “Legend Project” starting in late 2014. The bet was specific: target BCMA in multiple myeloma using a novel dual-binding-domain CAR construct, leveraging GenScript’s genetic engineering expertise and China’s access to a large patient population. The 2017 ASCO presentation happened. The $350 million J&J deal followed. FDA approval came in 2022. NMPA approval in August 2024 based on a trial showing 87.9% overall response. Manufacturing at scale in Ghent, Belgium. Over 7,500 patients treated globally.

Then the crisis. In September 2020, three months after Legend’s $424 million Nasdaq IPO, Chinese customs raided GenScript and Legend offices. Founder Frank Zhang was detained and later arrested for suspected smuggling related to human genetic resources regulations. Legend’s stock plummeted more than 15%. The company survived because Ying Huang, a former Wall Street analyst with a Columbia Ph.D., stepped in and held the J&J partnership together.

Legend’s model exploited a division of labor: China for discovery and early clinical work, J&J for the rest. It reached the world faster and with less capital than vertical integration would have required. But it also exposed a kind of risk that Western biotech boards have never had to plan for, the political vulnerability of Chinese founder-led companies working at the intersection of genetic data, cross-border research, and state security.

A Swiss Passport and a New Name

The arc reaches its high point with the company that made the biggest gamble and won, and then had to reckon with what winning meant.

In 2010, John V. Oyler, an American serial entrepreneur, and Xiaodong Wang, a member of the U.S. National Academy of Sciences, set out to build a vertically integrated, globally competitive oncology company from China. Not a licensing shop. A company that would discover molecules, run global trials, build its own salesforce, and sell its own drugs in the United States and Europe. First-in-human study of zanubrutinib in Australia in 2014. Commercial infrastructure built across the U.S., Europe, and Asia, burning through cash for years. R&D at approximately 52% of revenue in 2024.

The moment that changed the narrative was the Phase 3 ALPINE trial, a direct head-to-head against J&J’s ibrutinib in CLL. A loss would have been devastating. Zanubrutinib won. Reduced the risk of progression or death by 75% vs. bendamustine-rituximab in treatment-naïve CLL. The first FDA approval of a new chemical entity discovered in China. From roughly $42 million in 2020 revenue to $2.6 billion in 2024. Approved in 70+ markets. 100,000+ patients. $30 billion market cap.

Then came the identity reckoning. In November 2024, the company announced it would rebrand as BeOne Medicines. It changed its Nasdaq ticker from BGNE to ONC. In May 2025, it redomiciled from the Cayman Islands to Basel, Switzerland, joining Roche and Novartis as a Swiss-domiciled pharma company. John Oyler called it a reflection of “who we are today as a leading global oncology company.”

That is one way to read it. Another: a $30 billion company that was built in China, on Chinese scientific talent, with Chinese regulatory pathways and Chinese patient data, concluded that its Chinese identity had become a liability. The BIOSECURE Act was advancing through Congress. U.S.–China tariff uncertainty was escalating. More than three-quarters of American biotech companies contract out services to Chinese firms, and the political environment around those relationships was shifting fast. BeOne’s redomiciliation was not a corporate address change. It was an acknowledgment that the most successful Chinese-origin pharmaceutical company in history believed its origin story was becoming structurally incompatible with its commercial future.

A system built to produce Chinese pharmaceutical innovation produced a company so successful that it needed to stop being visibly Chinese. That is the contradiction, and it is not incidental. It runs through everything.

The Same Great Wall

Hengrui, HUTCHMED, Legend, BeOne. Four very different strategies. All four drew on the supply-side preconditions that decades of industrial policy built. The reformed regulatory system. The talent pipelines. The research infrastructure. All four produced globally validated molecules: FDA approvals, head-to-head trial wins, tens of billions in licensing payments from the world’s most demanding buyers.

All four share a structural dependency. They need Western revenue. The Chinese domestic market, despite being the catalyst that activated their innovation, compresses the pricing needed to sustain it. That paradox, a market that simultaneously creates and constrains innovation, turns out to be the central mechanism of the story. The sharpest academic evidence available helps explain how it works.

Demand Side Policy is Industrial Policy

The supply-side preconditions grew steadily through the 2010s. More publications, more scientists, more infrastructure, year after year. But the clinical trial surge was not steady. Something happened around 2016 that converted latent capacity into an explosion of activity.

A working paper published this year by the National Bureau of Economic Research, “From Free Rider to Innovator: The Rise of China’s Drug Development,” by Panle Jia Barwick at the University of Wisconsin, Hongyuan Xia at Cornell, and Tianli Xia at the University of Rochester, provides the most comprehensive attempt so far to disentangle the competing explanations. The authors compiled a synchronized database spanning clinical trials, scientific publications, drug sales, and government policies across China, the U.S., and Europe from 2010 to 2024.

A few caveats before the findings. This is a working paper. It has not been peer-reviewed. The identification strategy is credible, an event-study framework with disease-by-country fixed effects, placebo tests, and multiple robustness checks, but the specific magnitudes will be debated, and the decomposition leaves a substantial unexplained residual. What follows should be read as the best available evidence on a specific question, not as settled fact.

The paper zeroes in on a specific policy: the National Reimbursement Drug List reform.

Before 2016, China had nearly universal health coverage, more than 95% of the population, but the national formulary prioritized low-cost generics and excluded innovative drugs. Patients paid full price out of pocket for novel therapies. The innovative drug market totaled just ¥66 billion ($10 billion) in 2015. A market of 1.4 billion people that was, for innovative drugs, effectively tiny.

Starting in 2016, the National Healthcare Security Administration launched centralized “price-for-volume” negotiations. Firms accept average price cuts of 50–60% in exchange for NRDL inclusion, which guarantees access to roughly 1.4 billion insured lives at low coinsurance rates. By 2024, 699 drugs had been included. Cumulative spending reached ¥460 billion ($67 billion) between 2016 and 2024. The inclusion criteria explicitly favor new molecular entities and reward clinical novelty and unmet needs.

The paper documents what happened to individual drugs after NRDL inclusion. Retail prices dropped roughly 50% (66% for oncology). But quantities sold increased 350% on average, and nearly ten-fold for cancer drugs. Net producer revenue increased about 100% on average and roughly 500% for oncology. Given low marginal production costs (the authors estimate about 18% of pre-negotiated price), these revenue gains flowed through to profits.

The timing evidence is clean. Benchmarking China against the U.S. at the disease-country-year level, the paper shows flat pre-trends before 2016 and a sharp divergence starting in 2016–2017. By 2024, China’s trial volume had expanded by 172% relative to the U.S. High-novelty trials increased 123%. And 88% of the post-2015 increase was driven by domestic firms, not multinationals relocating R&D.

The paper’s strongest finding may be the placebo test. Disease categories never exposed to NRDL expansion showed no systematic increase in trial activity after 2015. The diseases with the largest NRDL expansion, including non-small cell lung cancer, liver cancer, and renal cancer, saw the sharpest increases. The contrast is stark.

The decomposition exercise attempts to quantify relative contributions for oncology: 43% attributed to the NRDL reform, 24% to knowledge accumulation and talent flows, less than 1% to other government policies. About 32% remains unexplained.

Those numbers need careful reading. The less-than-1% figure for industrial policy does not mean industrial policy was unimportant. It means that within the paper’s framework, once you account for the NRDL, knowledge stocks, and talent, the additional explanatory power of counting policy documents is small. But the regulatory reforms, biotech parks, talent programs, and capital market infrastructure that industrial policy built over decades are preconditions baked into the base of the model. The NRDL would not have produced a clinical trial surge if no firms had been capable of running trials, no regulatory system capable of processing them, and no scientists capable of designing them.

The honest reading is that both were necessary. Industrial policy built the capacity over decades. The NRDL activated it by changing the expected returns. The paper’s contribution is to show that the demand-side market expansion was a larger factor than most observers had assumed, and that its design features (rewarding novelty, targeting unmet needs) shaped the direction of innovation, not just the volume. That is a genuinely important finding. It does not mean the supply side was optional.

One more result, and it may be the most consequential for anyone thinking about drug pricing. For 57 cancer drugs included in the NRDL, the short-term consumer surplus gain from expanded access is approximately ¥35.6 billion ($5.1 billion) per year. The long-run gain from roughly 60 additional oncology drugs induced by the reform is approximately ¥67.6 billion per year. If those estimates are broadly right (and they are one study’s estimates), the long-run gains from induced innovation are roughly three times the short-run gains from improved access.

The standard framing of drug pricing treats it as zero-sum: lower prices increase access but reduce innovation incentives. The NRDL evidence complicates that. Under specific conditions (massive population coverage, genuine monopsony power, inclusion criteria that reward novelty), a price-volume reform may be able to expand both access and innovation simultaneously. Whether that finding generalizes beyond China’s specific institutional context is a question the paper cannot answer. But the direction is suggestive enough that health system architects in other countries should be paying attention.

Strengths and Fragilities Are the Same Thing

So the system works. The supply-side capacity was built. The demand-side shock activated it. The companies produced globally validated drugs. The licensing revenue is flowing.

But the system’s contradictions are not footnotes. They are structural, and they are getting worse.

Start with the domestic funding crisis. The NRDL expanded the market for innovative drugs and activated the capacity that industrial policy built. It also compressed domestic margins. Average negotiated price cuts of 50–63% mean that Chinese companies cannot generate enough domestic revenue to fund globally competitive R&D from the home market alone. Meanwhile, China’s national priorities have shifted. Government subsidies that once flowed generously to life sciences are being redirected toward semiconductors and computing, leaving local venture capital firms with less support. Venture investment in Chinese biotech peaked at $15.7 billion in 2021 and collapsed to $4.2 billion by 2024. Cash-strapped Chinese biotechs are increasingly out-licensing assets not because they want to, but because they have to, selling molecules to Western buyers to stay solvent and fund their remaining programs. At JPMorgan Healthcare Conference 2025, industry observers reported that Eastern funds and biotechs arrived ready to sell, proactively showcasing portfolios, a reversal from previous years when deals had to be hunted.

This is not a healthy equilibrium. It is a fire sale dressed up as a licensing boom. The numbers look like acceleration, and they are. Deal value hit $135.7 billion in 2025 and is on pace to exceed that in 2026. UBS projects that China's innovative drug market will grow at an annualized pace of 20 percent between 2026 and 2030, with the broader pharmaceutical industry generating revenues of $2.1 trillion by the end of the decade. But those projections sit alongside a domestic venture market that has collapsed by 73 percent since its peak. The innovative drug market is growing. It is not growing fast enough to replace the funding sources that are disappearing. Every quarter of record-breaking outbound licensing is also a quarter in which Chinese biotechs are selling molecules to Western buyers because the domestic capital environment no longer supports carrying them to commercialization alone.

Then there is the geopolitical problem, which is not abstract. On December 18, 2025, President Trump signed the BIOSECURE Act into law as part of the FY2026 National Defense Authorization Act. The law restricts U.S. federal procurement and grants involving biotechnology products or services provided by “biotechnology companies of concern.” Any company on the Department of Defense’s 1260H list of Chinese military companies is automatically designated. A process led by the Office of Management and Budget will name additional companies, with annual updates.

The law’s reach extends deep into the pharmaceutical value chain. Its definition of “biotechnology equipment or services” covers sequencing tools, data-storage platforms, cloud-based bioinformatics, CDMO services, and certain reagents or diagnostic devices. Any U.S. pharma company that conducts federally funded research or manufactures products purchased by government programs would need to validate the provenance of its entire upstream infrastructure. Prominent contract research and manufacturing organizations like WuXi AppTec and WuXi Biologics are not currently on the 1260H list and are not immediately subject to the law’s restrictions. But more than three-quarters of American biotech companies contract out preclinical and clinical services to Chinese companies, and 30% depend on China-linked companies for manufacturing of approved medicines. The most significant consequence may not be the immediate prohibition but the gradual decoupling of federal biomedical programs from globally integrated supply chains.

BeOne’s redomiciliation to Basel. Hengrui’s NewCo structures. Legend’s J&J partnership. These are all corporate architectures designed to navigate decoupling. But they are navigating it from a position of dependency. The pharmaceutical supply chain between the U.S. and China is too integrated for clean separation. Chinese companies were 35% of announced pharma M&A targets in 2025. It is also too politically charged for business-as-usual. The result is an unstable middle ground where every deal, every trial, every licensing transaction now carries a geopolitical risk premium that did not exist five years ago.

And the pipeline itself faces concentration risk. Innovation remains heavily concentrated in oncology, where NRDL coverage went deepest. The PD-1/PD-L1 overcrowding, more than 80 molecules in China, is what demand-pull incentives look like when they cluster around a single validated pathway. China now accounts for 24% of the world’s first-in-class pipeline, and more than 40% of the pipeline is fast-follower or first-in-class. The composition is genuinely shifting. But data integrity remains a credibility issue. A peer-reviewed analysis of FDA inspections from 2016 to 2023 found no significant difference in clean inspection outcomes between Chinese and Western sites in multi-regional trials, which is reassuring. But transparency in disclosing inspection findings still lags, and perception matters for a system that depends entirely on Western regulatory acceptance.

Each of these problems traces back to how the system was designed. The price compression that drives the licensing boom is the flip side of the market expansion that activated innovation. The geopolitical exposure comes from the integration that commercializes the innovation. The concentration in oncology reflects the targeting that directed R&D toward unmet needs. You cannot have the strengths without the fragilities. They are the same thing.

The Factory in Lianyungang

In 1970, the Chinese government opened a pharmaceutical factory in a mid-tier coastal city. It made generic drugs. In 2024, that company overtook AstraZeneca as the most prolific clinical trial sponsor on earth.

Between those two dates, a system was assembled. Decades of industrial policy laid the regulatory infrastructure, the talent pipelines, the research parks, the capital markets. An insurance reform activated that system by changing the expected returns to innovative drug development. Four companies took four different paths through it and each produced globally validated molecules. The best available academic evidence suggests the long-run welfare gains from the induced innovation substantially exceed the short-run gains from expanded drug access.

But the system has a problem it has not solved. It produces world-class pharmaceutical innovation. It cannot pay for it at the prices needed to sustain the investment. Domestic venture funding has collapsed. Government priorities are shifting toward semiconductors. The companies that embody the transformation are licensing their assets to stay afloat, redomiciling to foreign jurisdictions to shed their identities, and navigating a law whose stated purpose is to decouple the supply chains they depend on.

The most successful Chinese-origin pharmaceutical company in history concluded that it needed a Swiss passport and a new name. The licensing boom that the deal tables celebrate is, in part, a funding crisis selling molecules at market. And the geopolitical environment on which this system’s commercial viability depends is tightening, not loosening.

Can the system that created the innovation learn to sustain it? That is the question, for the companies, for Beijing, and for every Western pharmaceutical executive trying to figure out whether the next check they write buys them a molecule or a geopolitical liability.

• Inverted incentives. Prevention is 6-to-14x cheaper, but savings take decades. Budget cycles run annual. Officials are going to defer.

• Remove/Reduce the ability to defer. Cities that implemented automated dispatch means a detected pothole triggers a repair order without a human deciding whether to act.

• Institutions compound, mayors don’t. NYC’s system over the past 20 years got better across four administrations because each inherited what the last built. The machinery survives the election.

On March 15, 2026, a Saturday, more than 80 New York City Department of Transportation crews fanned out across all five boroughs starting at 6 a.m. and filled 7,200 potholes before the day was over. That is roughly a full week’s worth of repairs compressed into a single shift. A second five-borough blitz followed the next weekend. By mid-March, the city had repaired over 66,000 potholes since Mayor Zohran Mamdani took office on January 1, maintaining an average response time of about two days. And they were doing it in the worst pothole season in recent memory: 311 complaints were running roughly 33 percent above the same period in 2025, driven by what Commissioner Flynn described as an extended cold spell that caused potholes to form “all at the same time” once conditions finally thawed.

The numbers are impressive. But the numbers are not the point (in this case). The point is the bet Mamdani is placing; one most American mayors never would (FOR SOME REASON).

The conventional (and cliché) political playbook says mayors earn capital from new things. Bridge openings. Park dedications. Groundbreakings with hard hats and oversized scissors. Economists have a name for this tendency: the “ribbon-cutting bias,” describing the documented preference of political systems for new construction over maintenance. The logic is straightforward. Maintaining existing infrastructure is invisible, unglamorous, and generates no ceremony. Building something new gets your name on a plaque.

Mamdani is running the opposite experiment. His framing, “no problem too big, no task too small, no pothole too deep,” is not subtle, and it does not need to be. Eighty crews at dawn is the ceremony. The Saturday deployment schedule guarantees local news coverage, or at least crew-members’ TikTok videos. The real-time 311 dashboard is that oversized ribbon. The pothole count is a metric every voter understands. He is making maintenance visible, making it fast, and betting that mundane competence generates more durable political loyalty than any groundbreaking ever could.

And if that bet pays off in New York City, the implication for every other American city is uncomfortable. If Mamdani’s DOT can hold a two-day average response time under historically bad conditions, the question for every other mayor is pointed: what’s your excuse? Can you beat the city that can’t get a building permit processed in under six months?

I think the answer, for most cities, is that they could. They just haven’t.

Before we explain why, a few things to note. A 2015 audit by the New York City Comptroller found that DOT’s tracking system contained duplicate and triplicate entries that inflated reported repair counts. Whether those data quality problems have since been corrected is not established in available documentation. Every pothole figure in this article, from every administration, should be read with that finding in mind. Beyond the counting question, more than a quarter of pothole service requests were still listed as open, pending, or in progress at the time of a recent review, and Queens alone accounts for nearly half of the city’s 11,300-plus complaints. The two-day average masks a distribution with real tails. And on March 9, Jaikarran Seenarian died after his electric scooter struck a pothole on Liberty Avenue in Richmond Hill, Queens. Like always, be very wary of aggregate statistics, they do not capture the distribution of failures. A single unaddressed pothole has killed.

His roughly two-day average sits slightly above the Adams administration’s benchmark of 1.8 days, but maintaining that level of performance under a 33 percent demand increase is arguably the harder achievement from an ops standpoint, especially how nasty the winter storms were.

The caveats are real. The improvement is also real. And the question this article sets out to answer is not simply “why are there potholes?” but something harder: why do cities that know potholes are coming, know how to prevent them, and have the technology to fix them still fail, year after year, to get the problem under control? The answer is institutional. And NYC’s trajectory from unmeasured chaos to two-day response is the proof.

But first: how big is the problem we are actually talking about?

How Big Is This (Pot)hole?

Pothole damage costs American drivers more than the GDP of Iceland. A 2022 AAA survey put the figure at $26.5 billion in vehicle repairs in 2021 alone, roughly $600 per affected driver, with one in ten drivers sustaining damage severe enough to require a mechanic. Earlier AAA estimates from a multi-year survey had put the figure at around $3 billion annually. The nearly ninefold jump reflects both worsening road conditions and the rising cost of vehicle repairs, but even the lower estimate understates the problem, because it counts only the direct cost to drivers and ignores the costs borne by municipalities, transit systems, and taxpayers.

In New York City alone, potholes and road defects cost the city nearly $138 million in legal settlements for pedestrian injuries and vehicle damage over a six-year period, on top of an additional $7.3 million the city allocated to DOT in a single winter to address an extraordinary volume of repairs. Multiply that pattern across thousands of American municipalities and the total dwarfs any individual city’s budget.

The 2025 ASCE Report Card for America’s Infrastructure gave roads a D grade. As the Report Card documents, 39 percent of major U.S. roads remain in poor or mediocre condition, an improvement from 43 percent in 2020 but still a failing grade by any standard that takes driving seriously. Poor road conditions cost the average driver an estimated $1,400 per year in vehicle damage and time lost to delays.

But the backlog is worse than the current snapshot suggests. The Pew Charitable Trusts, in a careful 2025 analysis of Bureau of Economic Analysis data, found that state and local governments have accumulated a deferred maintenance liability of nearly $105 billion on roads and bridges since 2004. That number represents the cumulative gap between what governments spent on preservation and the value of annual depreciation. Even with nominally increasing dollar figures, real, inflation-adjusted road investment actually declined over the first two decades of this century. ASCE estimates that an additional $2.9 trillion is needed across 11 infrastructure sectors to reach a state of good repair, with a $684 billion gap specific to roads over the coming decade.

And the damage is not distributed evenly. Research from Mavis Tire finds that the Northeast experiences 60 percent more pothole-related tire repairs per location than shops in the South and West. The reason is physics: freeze-thaw cycles are the primary mechanism by which potholes form. Water penetrates pavement cracks, freezes, expands, and then thaws, progressively destroying the pavement structure from within. The Northeast and upper Midwest are structurally disadvantaged by their climate, and no technology fully overcomes that.

Most people’s response (especially suburban voters with pavement princesses) to numbers like these is to say the country needs to spend more on roads. That is true, to a point. It’s more about the distribution of the money being spent, rather than spending a total amount.

The Money Problem Is Real. Also Not Real.

The funding argument is correct as far as it goes. The most structurally important fact about American road funding is one that almost never appears in local news coverage of potholes: the federal gasoline tax has been frozen at 18.4 cents per gallon since October 1993, and it is not indexed to inflation. According to the Peter G. Peterson Foundation, that 18.4 cents is now worth roughly 45 percent less in real terms than when it was set. Wikipedia’s fuel tax tracking datashows that inflation has risen more than 122 percent since 1993 with the rate unchanged, and construction costs for roads have risen faster still. The net result, as Transportation for America documents, is that annual gas tax revenue declined by roughly $10 billion per year in real terms from 2010 to 2025. Congress has been patching the Highway Trust Fund with general revenue transfers, $53 billion over a recent five-year period according to Tax Notes, rather than raising the underlying tax.

Why does no one raise it? Before the whole breakdown in the Persian Gulf, increasing a visible per-gallon tax is politically costly in a way that deferred road maintenance is not, at least not until the pothole blows out a tire and the driver calls 311. The result is a revenue system built on a 1993 assumption that has decayed in real terms by more than half, funding a network of roads that costs multiples more to maintain than it did three decades ago.

The Infrastructure Investment and Jobs Act, signed in November 2021, provides approximately $500 billion for roads and bridge programs over five years, a 34 percent increase in surface transportation funding. That is substantial. It is also, given the scale of deferred maintenance, not sufficient to close the gap. And the IIJA is set to expire in September 2026, with reauthorization most likely going to be a no.

All of that is true. But even the money we do have goes to the wrong places.

The Congressional Budget Office has documented this: in 2022, 96 percent of the $52 billion the federal government spent on highways went to capital investment, meaning new construction and major rehabilitation of existing structures, rather than to routine operations and maintenance. That allocation has been typical since the 1950s. The federal government builds. States and localities maintain. And CBO’s reauthorization analysis makes the structural mismatch explicit: federal highway funds are restricted to “federal-aid highways,” the Interstate system and other major roads, leaving most local streets and roads entirely outside the program. The neighborhood streets where potholes cause daily misery are, by design, ineligible for the bulk of federal road dollars. Local roads account for 99 percent of road length in the United States and carry the majority of pothole complaints, yet they are maintained by counties and municipalities from their own general fund revenues, with no systematic federal support.

Even if Congress doubled highway funding tomorrow, most of the increase would flow to state DOTs for state highways. The potholes on your street would remain your city’s problem, funded from your city’s budget.

But spending does not reliably predict outcomes. High-spending cities have persistently terrible pothole records. Lower-spending cities with better-designed systems sometimes outperform them. If money were the binding constraint, that could not happen. Something else is going on.

The way American cities maintain roads is shaped by a set of interlocking incentive problems that make individually rational people choose collectively expensive, irrational outcomes, repeatedly, predictably, and at every level of government. This makes road spending one of the few places where we can cut budgets, and quality can improve. Reducing the amount of roads built, redirecting the existing budgets towards deferred maintenance, or even making roads more manageable by shrinking them.

Why Cities Keep Choosing the Most Expensive Option on the Menu

Consider the math. The Federal Highway Administration has documented that every dollar spent on preventive pavement preservation can save up to six dollars in future reconstruction costs. Michigan DOT research found that proactive maintenance is 14 times cheaper than reactive maintenance, and estimated that the state could save $700 million over eight years through systematic preventive intervention. A widely cited 1996 FHWA report puts preventive treatments at four to five times more cost-effective than allowing pavement to deteriorate to the point of reconstruction. Research summarized by the IMF and FREE Network finds that one dollar of deferred maintenance generates over four dollars in future repair costs, with some industry estimates running as high as seven to one over five years.

The physics compound the economics. Pavement deterioration is non-linear. It begins with cracks. Water (in addition to making new cracks) infiltrates the old cracks, freezes, expands, and destabilizes the road’s base layer. Traffic then removes the compromised asphalt in chunks. Each stage accelerates the next. A crack that costs pennies to seal becomes a pothole that costs dollars to patch and eventually a structural failure that costs thousands to reconstruct.

This isn’t new; most civil engineers will tell you this. That means every transportation agency in America is fully aware. And yet cities systematically choose cold-patch repairs, which last approximately one year, over permanent repairs that require excavating and replacing the base material. The same pothole gets filled three or four times before it is finally reconstructed at five to seven times the total cost of a single proper repair. The math is unambiguous. The behavior is economically irrational. So why does it persist?

Because the people who pay for prevention are not the people who benefit from it. Preventive treatments yield savings over a 10-to-20-year horizon. Municipal budget cycles run annual. The official who authorizes a $50,000 crack-sealing program today will not be in office, and may not even be in the same job, when the savings materialize. The official who lets roads deteriorate and then funds a high-visibility pothole-filling blitz gets to take credit immediately, on camera, with a crew and a truck behind them. The incentive structure is inverted. The economically rational choice and the politically rational choice point in opposite directions, and politics wins every time.

The ribbon-cutting bias runs deeper than preference for novelty. The IMF and FREE Network research identifies four compounding reasons that governments systematically underinvest in maintenance: political economy, meaning officials prefer projects that generate visible credit; fiscal, meaning maintenance budgets are cut first in lean years; institutional, meaning capital and operating budgets are managed separately (with FHWA’s own guidance actually drawing a sharp bureaucratic distinction between “preventive” and “corrective” maintenance that reinforces the silo); and informational, meaning asset condition data is often simply unavailable. The Economic Policy Institute adds a further wrinkle: because most states operate under balanced budget requirements, infrastructure maintenance is discretionary spending that gets squeezed during recessions, exactly when potholes proliferate most as neglected roads face winter freeze-thaw cycles and revenue-starved cities defer even routine crack-sealing. Maintenance spending is procyclical. Conditions are countercyclical. The system is designed to fail at the worst possible moment.

Even if these incentive problems were fixed, the underlying math of American development patterns would still make the task harder every year. Since World War II, American municipalities have systematically extended road infrastructure to accommodate new development, accepting near-term tax revenue in exchange for long-term maintenance obligations that the new revenue stream rarely covers. Strong Towns, the nonprofit led by Charles Marohn, has built an influential body of work arguing that this pattern constitutes a fiscal Ponzi scheme: cities use revenues from new growth to service the maintenance obligations of previous growth, requiring ever-more growth to remain solvent. The “Ponzi” framing is contested — Market Urbanism and Better Cities Project note that the empirical evidence is uneven, and City Journal has found the analysis broadly credible while questioning the label. But the core insight, that municipalities routinely assume maintenance liabilities well in excess of the tax revenue new development generates, is well-grounded. The practical consequence: total lane miles grow; maintenance budgets don’t. Consider Tulare, California, which told the state legislature in 2017 that, forced to prioritize arterial and collector roads due to funding shortfalls, its residential street network had declined from a Pavement Condition Index of 61 in 2010 to 53 in 2016, and the cost to restore it was growing exponentially with each year of deferral.

Fragmentation compounds everything else. On any given urban road, responsibility for the pavement may be shared among city, county, state, and private utility companies. The Federal Highway Administration’s manual on pavement utility cuts documents how utility excavations, in Washington, D.C., alone more than 5,000 per year at peak, structurally weaken adjacent pavement and dramatically shorten road lifespan. Utility companies are typically required to patch their cuts temporarily, but permanent restoration is often delayed years due to funding gaps. When the resulting pothole appears, it is frequently unclear which agency is responsible, and each agency has an interest in pointing to the other. Cities like Cleveland explicitly disclaim responsibility for utility-cut repairs, referring drivers back to the contractor. The driver, meanwhile, does not care whose jurisdiction the hole is in. They want the hole filled.

Former New York City DOT deputy commissioner Lou Riccio, speaking to Crain’s New York Business, captured the structural problem with characteristic directness: “New York City streets, in particular, get cut so often it’s like continuous open-heart surgery.” Every utility repair, every underground pipe, every cable installation reopens the street and disrupts freshly laid asphalt. Riccio estimated that the city needs at least 1,000 lane miles of resurfacing per year just to maintain current quality, and more than 1,200 to actually improve conditions.

The result is a system where no one bears the cost of what they defer. Federal policymakers who set gas tax rates do not drive on the local roads that deteriorate when revenues fail. State legislators who cut transportation budgets during recessions are not accountable for the potholes that appear three winters later. City officials who defer crack-sealing this fiscal year have moved on by the time the road requires full reconstruction. Utility companies that cut pavements are not on the hook for the premature road failure that follows. The FHWA and the Pew Charitable Trusts are right that better data and asset management plans would help. But the deeper problem is not informational. It is incentive-structural. Until that changes, the potholes will persist.

So what does it look like when a city breaks this pattern? The answer has less to do with technology than you might expect, and more to do with closing the loop between knowing about a problem and doing something about it.

The Cities That Broke the Pattern

In Chicago (to most people’s surprise), the Department of Transportation filled approximately 143,000 potholes in the first two months of 2024. February alone: over 93,000 potholes, a 63 percent increase over February 2023 and a 100 percent increase over February 2022. But the volume is not what makes Chicago interesting. What makes Chicago interesting is the systems design behind the volume.

The city’s 311 portal feeds directly into the open data platform at data.cityofchicago.org, allowing both internal management tracking and public transparency. Service requests are generally completed within seven days. The design choice that matters most: when a crew arrives to repair a 311-reported pothole, they do not fill that one hole and leave. They fill every pothole on the block. This sounds obvious. It is not. Most municipal repair systems dispatch crews to specific complaints. Chicago’s system dispatches them to streets, which means each complaint triggers a sweep that catches unreported defects. It is a force-multiplier that prevents the whack-a-mole dynamic of returning repeatedly to the same location. And because progress is publicly visible on a real-time dashboard, elected officials have a political incentive to maintain performance, not merely to claim it. Transparency creates accountability.

Pittsburgh illustrates a different facet of the same principle: that data quality itself can be a form of governance. Through the Bloomberg Philanthropies What Works Cities initiative, the city’s Department of Innovation and Performance built “Dashburgh,” a public data dashboard presenting 311 data broken down by neighborhood, providing granular accountability the city had never had before. But the more consequential innovation was internal. Pittsburgh’s Department of Public Works built analytical tools that automatically link multiple requests for the same pothole into a single ticket, flag requests that lack precise location details, and, most importantly, identify street segments that have been patched three or more times in two months. That last flag is the key. A street segment patched three times in eight weeks is not a street that needs patching. It is a street whose underlying pavement needs rehabilitation. The data system recognizes the pattern that human decision-making, under the pressure of daily complaint volume, reliably misses. This is the shift from reactive to systemic maintenance in microcosm: using information to detect when a short-term fix is producing long-run waste.

In Memphis, the breakthrough came from an unlikely place: the city’s transit buses. Working with Google Cloud partner SpringML, Memphis equipped its buses, which were already running cameras for traffic monitoring, with an AI system that analyzes road footage to detect and classify potholes. The model was trained on existing images, refined with data from higher-quality cameras, and then integrated directly with the city’s 311 work-order system so that confirmed potholes automatically generate a repair ticket. No human triage step. No 311 call required. The results: a 75 percent increase in potholes detected compared to prior manual methods, an estimated cost saving of approximately $20,000 per year, and 63,000 potholes repaired in one year. The lesson from Memphis is simple: use what you already have. The city did not buy a specialized detection fleet or hire a team of data scientists. It leveraged buses already running existing routes, cameras already in place, and cloud tools developed for other purposes. The marginal cost of detection approached zero.

Tarrant County, Texas pushed the detection-to-dispatch connection even further. The county integrated reports from Waze, the navigation application with over 140 million users that already allows drivers to flag road hazards, directly into its work-order system. A Waze pothole report auto-generates a maintenance dispatch with no human triage step. No 311 operator, no supervisor review, no scheduling queue. The bottleneck that plagues most municipal repair systems, the chain of handoffs between someone knowing about a pothole and someone doing something about it, is eliminated entirely.

And in Kansas City, Missouri, a pilot program tried to go one step further: not just closing the loop between detection and repair, but getting ahead of the problem entirely. The program combines traffic camera data, weather data, traffic volume, and pavement condition assessments to predict where potholes will form before they appear, with the goal of applying preventive sealant while the road is still intact. Chief Innovation Officer Bob Bennett reported early successes, with fewer potholes reported the following spring, though the sample was small and the causal mechanism difficult to isolate from weather variation. The program comes closest to addressing the root cause: spending money today where data suggest it is needed, rather than where the public happened to complain yesterday.

Bennett also happens to have the best one-liner in the pothole policy literature. Telling Governing magazine: “If we fail to fill the potholes or pick up the trash, we’re going to hear about it. Potholes are one of those things people kvetch about.” He is right that potholes generate immediate, visceral political pressure. The problem is that the political energy they generate goes to reactive speed, not systemic prevention. People kvetch about the pothole in front of their house. They do not kvetch about the crack-sealing program that was cut from the budget eighteen months ago.

What connects Chicago, Pittsburgh, Memphis, Tarrant County, and Kansas City? It is not any particular technology. Chicago uses spray injection trucks. Memphis uses machine learning. Tarrant County uses Waze. Pittsburgh uses internal analytics. Kansas City uses predictive modeling. The technologies are different. The underlying design principle is the same: each city closed a feedback loop connecting detection to dispatch to performance measurement to public visibility. Each removed the discretion and the delay that normally sit between knowing there is a problem and acting on it.

The absence is equally telling. Pennsylvania DOT’s AI road survey program, which partnered with RoadBotics to survey over 2,500 miles using computer vision, found that standardized defect scoring improved regional coordination and reduced inspection costs. But translating condition data into repair schedules required sustained institutional commitment that not every participating municipality provided. Better cameras produced better-documented backlogs unless someone rewired the institution between the camera and the crew.

Technology transfers. Institutions do not.

When did New York start to do something right?

Considering how people feel about the city, this is a bit of a shock. Yet, no city proves the compounding power of institutional investment more completely than New York (in this case), and no city’s story makes clearer that the improvement belongs to the institution, not to any single occupant of the mayor’s office. What Mamdani’s crews did on that Saturday in March 2026 was possible because of decisions made in 2007, 2010, 2014, and 2022 by people who could not have known they were building a system together.

Start at the floor. A 2002 audit by the New York City Comptroller found that DOT lacked any useful operational standard for pothole repair. The agency’s informal target was merely to close 65 percent of repair orders within 30 days. The auditors noted that the 30-day threshold was set arbitrarily, with no operational rationale. DOT could not explain why 30 days rather than 15, the number that actually mattered, since NYC Administrative Code Section 7-201(c)(2)shields the city from civil liability only if potholes are repaired within 15 days of complaint. The tracking system was unreliable. Repair counts were inflated by duplicates and triplicates. There were no written policies or procedures governing the work. This was the institutional floor: roughly 100,000 potholes filled per year, by a count that could not be trusted, on a timeline the agency could not reliably measure.

Michael Bloomberg’s contribution to pothole management was primarily infrastructural rather than operational, and it is the kind of contribution that gets no credit at the time and turns out to be indispensable later. Three investments from his tenure shape everything that followed. First, the city had long operated one municipal asphalt plant at Hamilton Avenue in Brooklyn. Bloomberg opened a second plant in Queens in 2010, giving DOT the materials supply, and the independence from outside vendors, that makes large-scale blitz operations financially and logistically viable. NYC DOT is one of the rare urban agencies in the country that produces its own asphalt, and that structural asset remains central to every subsequent administration’s pothole story, including Mamdani’s. Second, in 2007 and 2008, Bloomberg launched the Street Conditions Observation Unit, or SCOUT, a team of inspectors deployed on three-wheeled scooters to traverse every one of the city’s 6,000 miles of streets at least once per month, reporting conditions via GPS-enabled devices linked directly to 311. As Gothamist reported at the time, Bloomberg’s framing was explicitly about shifting from reactive to proactive: “It’s government’s responsibility to find the problems and fix them, not to sit there and say ‘Duh we didn’t know.’” Third, Bloomberg’s DOT under Commissioner Janette Sadik-Khan launched “The Daily Pothole”, a public-facing blog tracking repair efforts in real time with maps and crew counts. Trivial by today’s standards. Significant at the time. It created a transparency norm around pothole performance that each subsequent administration has had to honor, escalate, or outrun.

And yet, for all of this institutional investment, the operational numbers barely moved during the Bloomberg years. A data science analysis by researchers at Lehman College examining 311 records found a mean repair time of approximately 4.7 days with a standard deviation of seven days, meaning the distribution had a very long right tail. The Adams administration’s own retrospective benchmarks Bloomberg at approximately 4.4 days average. By fiscal year 2015, a second Comptroller audit found the average at 5.6 days on local streets, with nearly 10 percent of complaints unresolved past the 15-day legal liability threshold. The infrastructure was better. The operations had not yet caught up.

Bill de Blasio came into office in a brutal pothole winter. By his own DOT’s count, 113,131 potholes had been patched by early 2014 before his comprehensive plan was even announced. But the move that mattered was not reactive. It was strategic. De Blasio shifted the city’s fundamental logic from patching potholes after they appeared to preventing them from forming in the first place. The centerpiece was a $1.6 billion commitment over ten years to resurface New York City’s streets. The theory of change was explicit: a freshly resurfaced street is less likely to develop potholes, meaning fewer complaints, fewer reactive repairs, and lower long-run costs. This is exactly the prevention-over-reaction economics that FHWA had documented for decades, applied at city scale for the first time.

It worked. Between 2014 and 2018, the de Blasio administration repaved 5,000 lane miles and drove pothole counts down by 44 percent. By the end of his tenure, DOT had resurfaced 8,356 lane miles total and filled more than 2 million potholes. He also invested in field operations technology: crews received tablets for one-touch, real-time tracking of work, replacing paper-based reporting with digital logistics that could route crews more efficiently. DOT introduced a warm-weather asphalt mix requiring less heat, reducing energy use and extending the paving season closer to year-round. Average response time fell from Bloomberg’s 4.4 days to approximately 3.4 days (though official 2021 releasesreport 3.83 days, suggesting the improvement concentrated in later years). But the 44 percent reduction in pothole formation arguably mattered more than the response-time improvement. Fewer holes means less demand on the repair system even at constant operational capacity.

Eric Adams inherited the prevention framework and operationalized it. By January 2025, his administration claimed an average response time of approximately 1.8 days, nearly a full day faster than de Blasio and more than twice as fast as Bloomberg. But the more revealing number was demand: 88,466 pothole complaints via 311 over the first three years of his administration, compared to 147,640 at the same point under de Blasio, a 40 percent reduction. The administration resurfaced an average of nearly 1,200 lane miles per year, right at the expert-estimated threshold Riccio identified, and consistently deployed 25 to 75 crews during pothole season. When Adams framed his 500,000th pothole milestone as filled “in half the time it used to take” because “proactive paving of 1,200 miles of lanes” cut pothole formation, that was the correct analytical framing. Improvement came from two compounding forces: faster dispatch and lower demand. Both were improving simultaneously.

Mamdani inherited a better system under harder conditions. Approximately two-day average response under 33 percent elevated demand. Over 66,000 potholes through mid-March. The blitz format itself, 80-plus crews in coordinated Saturday deployments, is not new; DOT’s own 2021 press releases from the de Blasio era describe the identical model. What Mamdani adds is not operational novelty. It is the political insight that maintenance, made visible and fast, can do the work that ribbon-cuttings do. Executive attention flows resources and accountability to operations that might otherwise drift. Whether that attention converts into structural improvement, specifically the 1,150 lane-miles resurfacing commitment for 2026 that represents the preventive investment rather than the reactive repair, is the unanswered question. And whether the response time can reach same-day is the unanswered dare.

Most of what drives these numbers is (again) institutional, not mayoral. Asphalt plants, crew systems, 311 integration, and resurfacing programs were built over decades and persist across administrations regardless of who occupies City Hall. The most important long-run metric is not response time but pothole formation rate, which is a function of resurfacing investment, utility excavation coordination, and pavement quality. Riccio’s description of “continuous open-heart surgery” captures a structural vulnerability that no blitz weekend can permanently fix. And all of this data is self-reported by agencies with strong incentives to report improvement. The one time an independent auditor looked carefully, in 2015, the numbers were inflated. We do not know if that problem has been corrected. The evidentiary gap we would most like to close is independent verification of DOT pothole counts, along with borough-level and complaint-source breakdowns that would let us assess the distribution of the response-time average, not just its mean.

What Works, What Is Coming, and the Gap That Is Not Technical

Every success story so far shares a principle: institutional design matters more than technology choice. But the technology is changing, some of it is promising, and understanding what is deployable now versus what remains speculative matters. The persistent question is whether any of it changes the institutional calculus or merely produces more polished documentation of the same dysfunction.

The most commercially mature technology is computer-vision road scanning. The basic model is straightforward: a smartphone or dash-mounted camera captures imagery at roughly 10-foot intervals as normal fleet vehicles run their routes. Images are GPS-tagged, uploaded to a cloud platform, and processed by neural networks that classify defects across a spectrum from hairline cracks to full-depth potholes, producing a color-coded condition map that feeds directly into maintenance management software. Vialytics, a German-American platform, now supports over 600 municipalities and recognizes 15 damage classes; case studies from municipalities including North Tonawanda and Metuchen document crews shifting from reactive patching to planned maintenance after a single survey drive. RoadBotics, now a Michelin company, partnered with the Pennsylvania Department of Transportation to survey more than 2,500 miles using AI-powered analysis, allowing 15-plus municipalities to adopt standardized defect scoring and compare conditions on a common scale. The program was expanded following strong results.

On the repair side, two methods significantly outperform the traditional throw-and-roll approach that remains standard in most cities. Infrared pothole repair uses infrared panels to heat existing asphalt to a workable state without burning it, allowing new hot-mix material to blend seamlessly with the old surface. The result is a seamless patch with no cold joints, eliminating the primary failure mode of conventional patching: water infiltration through seam edges. Repairs take under 20 minutes, and the recycling of existing asphalt reduces both material costs and environmental impact. Ohio DOT research comparing three patching methods found that infrared patches had significantly longer expected lifespans than throw-and-roll or spray injection, and proved more cost-effective for winter patching specifically. The limitation is not technical but organizational: the equipment requires upfront investment, the method demands trained operators, and it cannot address full-depth failures. It is most powerful as a preventive strategy, applied to developing cracks before they become potholes. Spray injection patching, which blasts debris with compressed air, injects asphalt emulsion, and covers with aggregate, is the workhorse for high-volume rapid response.

Better detection is valuable. Better repair methods are valuable. But both face the same institutional bottleneck. Does better detection actually produce faster repair, or does it produce better-documented backlogs? Memphis shows the connection working when detection is wired end-to-end into work-order dispatch. But Pennsylvania’s experience is the cautionary case: condition data improved coordination, but without sustained institutional commitment to translating data into schedules, the information sat unused in many participating municipalities. The technology is only as good as the institution it feeds into.

Further out, there is autonomous road repair. The ARRES PREVENT robot, developed by Robotiz3d in collaboration with the University of Liverpool and Hertfordshire County Council, passed its first live public road trial in Potters Bar, England, on March 6, 2024. The robot uses AI-powered imaging to detect cracks and road defects, then autonomously fills them with sealing material before they develop into potholes. Robotiz3d claims the technology could deliver a 90 percent cost reduction, a 70 percent increase in speed, and three times fewer CO2 emissions. These claims require heavy skepticism. They come from the developer, not from independent assessment. The trial was a single short demonstration, not a controlled evaluation. UK government funding amounted to just over 30,000 pounds. That said, the underlying concept, autonomous proactive crack sealing before pothole formation, directly addresses the root institutional failure we have been describing: the inability of reactive systems to intervene at the optimal moment in the pavement lifecycle. If the technology matures and costs fall, it could change the maintenance calculus. For planning purposes, it is not there yet.

A different approach comes from Professor Erik Schlangen’s laboratory at Delft University of Technology in the Netherlands: self-healing asphalt. The mix combines standard paving material with tiny steel wool fibers that make the asphalt conductive. When an induction machine passes over the road, the fibers heat up, melting the bitumen binder and allowing microscopic cracks to close and re-bond before they can propagate. The technology has been field-tested on a 400-meter stretch of the Dutch A58 motorway since 2010, and on 12 other Dutch roads by contractor Heijmans, including high-stress locations such as roundabouts and industrial estates. Laboratory research suggests road lifespan can be doubled if the treatment is applied approximately every four years. The material costs about 25 percent more upfront but is estimated to save the Netherlands up to 90 million euros per year if adopted nationwide. Delft’s team is also researching epoxy asphalt, which mixes epoxy resin with bitumen to create a surface less sensitive to temperature extremes, particularly relevant as climate change increases both peak summer temperatures and freeze-thaw frequency.

The limitations of self-healing asphalt matter, though. The process is not autonomous: the induction machine must be driven over the road on a schedule, which presupposes a systematic maintenance system capable of tracking when each segment was last treated. And the technology is most powerful on long-duration highway sections with infrequent disruption; urban roads that are excavated every few years for utility work gain little benefit from materials designed for 40-to-80-year lifespans. It has been in field trials for fifteen years and is still not standard practice even in the Netherlands. We would not bank on it for near-term planning.

Same Asphalt, Different Institutions

If American institutions are the problem, a natural question arises: do other countries actually do this better, or is road maintenance just inherently hard everywhere? Two countries offer useful answers.

Over 90 percent of Japanese road pavements are asphalt, the same material used in the United States. Japanese roads are notably smoother and better maintained, but not because of some exotic technology. Repair work is simply performed far more frequently, ensuring the road surface remains intact before deterioration can compound. Asphalt has a service life of roughly 10 years, but maintenance is applied on a rolling basis so that roads rarely reach the deteriorated state at which potholes form. Japan’s Ministry of Land, Infrastructure, Transport and Tourism mandates systematic periodic inspection, bridges and tunnels once every five years by close visual inspection, and applies the same preventive maintenance philosophy to pavement. Nighttime paving is common, allowing crews to work without traffic disruption and producing better compaction. Procurement standards enforce lifecycle cost thinking rather than lowest upfront bid. These practices are not secret. They are well-understood by American transportation engineers. What prevents their adoption is not knowledge but institutional structure: the fragmented governance of American local roads, the annual budget cycle, and the absence of performance-based procurement at the local level. MLIT documents that 30 percent of Japanese towns and 60 percent of villages have no civil engineering technicians in their workforce, and Japan still outperforms the United States on road maintenance, because the institutional system compensates for local capacity gaps in ways the American system does not.

The Netherlands tells a complementary story. Rijkswaterstaat, the national water and road authority, applies rigorous lifecycle cost analysis to pavement decisions and maintains strong data infrastructure for road condition monitoring. Dutch porous asphalt is designed to absorb both sound and water, reducing noise pollution and improving drainage, but its open structure makes it more vulnerable to raveling, which is why the Delft self-healing research is particularly relevant to Dutch conditions. And the Dutch case demonstrates the lesson most directly: even self-healing asphalt requires institutional infrastructure. The induction treatment every four years presupposes a systematic maintenance scheduling system capable of tracking when each road segment was last treated. Innovation without maintenance institutions behind it does not stick.

Neither country is doing anything technically exotic. They are just more institutionally disciplined: systematic preventive maintenance, funded predictably, implemented through performance-based procurement, and measured transparently. The United States has most of the technical tools needed to match their outcomes. What it lacks is the institutional structure to deploy those tools at scale and sustain them across election cycles.

The Feedback Loop Is the Fix

Which brings us back to Mamdani, and to what his administration actually proves, which is less than the press coverage suggests and more than his critics allow.

The Saturday blitzes are the reactive half of the equation; the half that matters less. Eighty crews filling 7,200 potholes in a day is operationally impressive and politically savvy, but reactive speed is not what separates good road systems from bad ones. Prevention is. The real test of the Mamdani administration is not whether it can fill potholes fast on camera. It is whether the 1,150 lane-miles resurfacing commitment for 2026 actually gets funded and executed; whether the preventive investment survives budget season, whether it compounds across the next administration the way de Blasio’s and Adams’s did. We do not know the answer yet. A man died from a Queens pothole during the blitz. A quarter of service requests were still open. The data has historically been inflated. The hypothesis that visible maintenance can generate political capital is interesting. We will see whenever Mamdani can prove it or not.

But if the famously dysfunctional government of New York City can build a two-day-average system over twenty years, the question for every other American city is a little uncomfortable and specific: what’s stopping you?

The honest answer, for most cities, is not that they lack the knowledge or the technology. That every incentive in the system (annual budgets, political time horizons, fragmented governance, frozen federal revenue) pushes against doing the thing that works. There are proven institutional models. The political economy is designed to prevent its adoption. Pretending otherwise is how you get another decade of cold-patching the same hole four times.

The cities that broke the pattern did not do it by wishing the incentives or the political economy away. They did it by building systems that made the right choice easier than the wrong one: automated dispatch that removes the discretion to delay, public dashboards that make inaction visible, data flags that catch repeat failures before they become structural collapse. They did not fix the politics. They routed around them.

That is the only honest prescription this article can offer. Not that your mayor should try harder (well, that mayor should; you still need political will at the end of the day). Not that the ribbon-cutting bias is a failure of imagination. It is a structural feature of American municipal governance, and it will outlast every mayor who tries to overcome it through sheer will. What does not have to outlast them is the institutional machinery (the asphalt plants, the 311 integration, the resurfacing commitments, the transparency norms) that makes the next mayor’s job easier whether they care about potholes or not.

• The permit office is a big bottleneck. Broken bureaucracy kills more projects than restrictive zoning by itself. Fix it first because it’s politically easy, helps everyone, and makes getting rid of zoning easier.

• The zoning code doesn’t match the city that exists. Mid-century standards make thousands of lots unbuildable and cut off mortgage access, trapping neighborhoods in decline.

• Big developers benefit from dysfunction. Complexity is a barrier to entry. The reform coalition may find better friends from smaller and mid level builders, not incumbents.

• Sequence reforms by political feasibility. Start with what kills the most projects and provokes the least resistance. Each win builds credibility for the next.

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The case against zoning has been made. It has been made well and repeatedly, with better data each time. I agree with it, and I made the case myself multiple times over. But telling a depopulated city to “just rezone” is about as useful as telling a broke person to “just earn more.” The city should, but unaccompanied by a strategy for implementation and state capacity that takes into consideration the local political economy, it’s not going to do well.

Brian Connolly and Noah Kazis’s Rezoning the Rust Belt does something more valuable than restating that diagnosis. Drawing on data and interviews across more than fifteen post-industrial Midwestern cities, they produce a detailed account of how land-use regulation actually impedes revitalization in weak markets: which rules bind, which processes break down, which political dynamics block reform, and which early efforts have worked. It’s an amazing piece of dense research/

I want to distill the paper’s findings into a politically realistic “outline of a playbook” for cities that want to grow but face real constraints: limited administrative capacity, fragile coalitions, and an entrenched development establishment that talks pro-growth but benefits from the status quo. Detroit’s experience shows what happens without sequence: its planning commission approved a package of reforms (lower parking requirements, four-unit buildings by-right in the R2 zone, small-lot flexibility) and, as of the article’s writing, the city council had stalled them.

The question, then, is strategic. If you cannot get everything at once, what do you do first? Where does each metaphysical dollar of political capital and administrative investment yield the most revitalization?

The Conventional Framing, and Its Limits

We should begin with why the Rust Belt has been left out of the conversation. Urban economics divides housing markets into three rough categories. First, supply-constrained powerhouses like the Bay Area and Greater Boston, where stringent regulations block construction and prices soar. Second, elastic Sunbelt markets like Atlanta and Phoenix, where housing supply keeps pace with demand. Third, low-demand post-industrial cities like Detroit, Cleveland, and St. Louis, where prices often fall below the minimum cost of producing new units.

Leading zoning reformers discuss “land use controls in our richest regions and cities.” When researchers call for more empirical work, they ask for studies of Raleigh and Montana, not Toledo or Buffalo. The third category is either ignored or invoked by skeptics who argue that zoning reform is a parochial coastal project of limited relevance. If deregulation does nothing for poor, post-industrial cities, these critics suggest, its advocates must be exhibiting an “extreme myopia,” offering a prescription for “two or three coastal cities” that are the “whole object of reform.”

Where nobody wants to build, zoning’s constraints obviously don’t produce the housing shortages and affordability crises that motivate action in San Francisco or Boston. If curing supply shortfalls were reform’s only purpose, the Rust Belt would indeed be irrelevant.

But that framing is too narrow. Connolly and Kazis reframe the question: not whether regulation caps aggregate housing supply (it plainly does not in Detroit) but whether it imposes unnecessary costs on whatever development does occur, blocks cost-effective building designs, and prevents cities from seizing limited opportunities for revitalization. We think that reframing is overdue.

What the Paper Shows

Before turning to strategy, we should lay out what Connolly and Kazis find. Their empirical approach combines a close look at Detroit (quantitative analyses of building permit data, variance dispositions, and rezonings, plus qualitative assessments of over thirty case studies and interviews with public- and private-sector participants) with a survey of more than fifteen cities across the post-industrial Midwest, from Buffalo to Milwaukee.

The authors are candid about limitations, and that candor matters. Their permitting data capture only approved projects, not those scrapped due to regulatory friction. They interview active developers, not those who never entered the market. They cannot estimate the magnitudes of the effects they identify. But we think the qualitative evidence is strong enough to establish the basic claim: land-use regulation meaningfully impedes some redevelopment in these places, especially given how consistent the pattern is across cities. The selection bias almost certainly means the article understates the problem, though we cannot say by how much.

Two scope decisions are worth noting. First, the article examines center cities, not suburbs; redeveloping vacant lots in depopulated cities is not greenfield development. Second, it addresses both residential and non-residential development, an important corrective to a national conversation that focuses almost exclusively on housing. In Detroit, commercial uses comprise nearly twenty percent of all new-construction permits, and industrial uses over eight percent.

A Taxonomy of What Is Actually Broken

A. The Permit Office Is the First Bottleneck

In multiple cities, building permitting was identified as more problematic than zoning itself. Detroit’s process was described by one developer as “like running into a brick wall.”

The numbers bear this out. Detroit’s median time from building permit application to approval for new construction was 124 days. For mixed-use multi-family apartments, the median was 271.5 days. For townhouses, 248 days. Twenty percent of new-construction projects took more than a year to permit. When we account for project size, 4,313 new residential units took over a year to permit, and 2,093 units (nearly twenty percent of all new units) took over two years. These timelines generally do not include discretionary or site-plan reviews that occur before permit submittal.

The system works tolerably for small projects. The median time to permit for all non-minor permits was just fourteen days, and the city issued same-day permits for over a fifth of non-minor projects, mostly minor renovations and exterior repairs. But for the new construction and substantial alterations at issue in land-use debates, the system is deeply broken.

The causes are not primarily regulatory. Inadequate staffing is the most common culprit. In St. Louis, a by-right project was delayed by nine months simply because there was nobody to review the permits. In Detroit, a four-month delay resulted because only one person handles right-of-way permits. In Flint, an interviewee recounted that the city “just had a woman, she was a nice woman, her name was Sherry, and she did zoning.”

Antiquated technology compounds the staffing shortages. Detroit’s Board of Zoning Appeals only moved to an electronic database in fall 2025. The previous system required physical stamps from office after office. One consultant described it with a memorable comparison: “the three of us aren’t creative enough to come up with a more convoluted system if we tried.” In Cleveland, Buffalo, and St. Louis, agencies cannot view each other’s documents. The St. Louis planners’ self-assessment was blunt: “We’re not modern.”

Applicants, meanwhile, can’t get clear answers. Detroit’s own analysis concluded that it is unclear, to applicants and the city itself, when site-plan review is required, which department conducts it, and how projects proceed when it is not required. In Cleveland, the absence of a checklist of required documents is partly to blame for the forty percent of applications for smaller projects that are submitted incomplete.

And inspections are their own mess. Interviewees across cities reported inconsistent inspectors demanding different standards, uncoordinated schedules causing months of delay over minor issues, and contractors leaving idle projects to work elsewhere, only for new inspectors to surface additional unforeseen problems upon return. One developer’s summary: projects require “whack-a-mole.”

These are problems of institutional capacity, the accumulated decay of cities that lost their tax base and could not invest in basic administrative infrastructure. Investing in development-permitting staff and technology when there is little growth is hardly justifiable when essential services are suffering. But those budgetary choices now impede revitalization, and in multiple cities where zoning barriers had already been meaningfully addressed, permitting delays undermined the progress. The binding constraint, in many Rust Belt cities, is not what the code says. It is whether anyone is available to process the paperwork.

B. The Code Does Not Match the City That Exists

Post-industrial Midwestern cities maintain restrictive zoning rules (lot-size requirements, parking mandates, single-family-only zones) designed for mid-century conditions and barely updated since. Interviewees across the region routinely described their zoning as “outdated,” “antiquated,” or “old.” Several officials said their codes intentionally impose “suburban” requirements on urban development.

The specific mismatches tell the story. Nearly forty percent of Detroit is zoned R1, where only detached single-family homes are permitted, on lots of at least 5,000 square feet. The city’s average vacant lot is 3,200 square feet. Another twenty-two percent of the city is zoned R2, where duplexes are technically allowed, but height and setback rules make it physically impossible to build two homes on a lot. In Akron, the city’s official land-use policy is titled “Planning to Grow,” yet over 6,000 vacant parcels are legally too narrow to redevelop. In St. Louis, roughly 10,000 vacant parcels fail the city’s minimum lot-size requirements, despite their consistency with the city’s historical development pattern. Even along a Cleveland light-rail line, where higher density should be expected, 41.5 percent of the land is zoned exclusively for single-family homes.

These standards render much of the existing built environment nonconforming. Nonconformities do not just block new projects. They reduce existing structures’ utility: homeowners in Cleveland must seek variances for any enlargement, like a new deck or mudroom. They diminish properties’ value to lenders, who cannot be sure that nonconforming buildings can be rebuilt after casualty damage. Cleveland’s chief zoning administrator reported conversations with lenders three times a week over this issue. An Akron official put it plainly: “When you have non-conforming, a good chunk of the banks will just not play around that. You’re leaving that piece to the cash buyer.”

Because lenders already avoid small-dollar mortgages (which are riskier and uneconomical given fixed lending costs) nonconformities exacerbate a scarcity of mortgage capital in low-property-value neighborhoods, which depresses prices further. This facilitates purchases by institutional investors with alternative capital sources, or pushes buyers into riskier land contracts, deepening disinvestment. In a growing city, nonconformities are a nuisance. In a depopulated one, they are a trap.

C. Parking and Dimensional Standards Force Bad Designs, or No Designs

Parking requirements emerged as the single issue most frequently driving projects into discretionary review across the region. One Detroit consultant captured it: “We joke… every project is a parking project that has another use.” Eliminating parking requirements in Detroit could allow a typical lot to be developed as apartments rather than townhouses, with hard costs roughly $200,000 less per unit. For a single urban surface parking stall, construction costs approximately $10,000 excluding land, with annual operating and maintenance costs exceeding $2,000. Structured parking more than doubles that figure.

Setbacks are nearly as bad. In Indianapolis, the code technically permits townhouses, but setback requirements make them unbuildable. In Detroit’s R2 zone, duplexes are allowed on paper but not in physical reality, given height and setback rules. On a vacant, transit-accessible lot in Indianapolis, a proposed three-unit building was deemed “wholly inappropriate.” Citywide, restrictive zoning has “delayed most apartments that want to develop by-right.”

In weak markets, these are the difference between a project that pencils and one that does not.

D. Discretionary Review Chills More Than It Blocks

Nearly a quarter of Detroit’s new-construction projects required at least one form of discretionary review. Add rezonings and planned-development requirements, and the figure rises further. Certain development types face much higher rates: 29.4 percent of two-family dwellings required BZA review; 52.5 percent of permitted townhouse units underwent BZA review. In the R3 zone near downtown, where the most revitalization activity is occurring, a full 64.4 percent of dwelling units permitted required BZA review.

The primary cost of discretionary review in these cities is not denial. Approval rates are generally high. Detroit’s BZA granted seventy-three percent of petitions, and of those, eighty-three percent were unanimous. Cleveland’s chief zoning administrator estimated that their BZA grants “99 percent” of variance requests. The cost is delay, uncertainty, required modifications, and the developers who avoid the process altogether.

One Detroit consultant described the BZA as the “absolute last, nuclear option.” Even seemingly beneficial projects face opposition: in Detroit’s trendy Corktown neighborhood, a “high-end duplex” project on a previously vacant “lot that was collecting trash” had to cut four units to gain BZA approval. The vote was 3-2, on a community appeal.

The effects on affordable housing are especially severe. Affordable-housing developers in Detroit tolerate the special land-use process. But they do not pursue variances or rezonings because funding timelines are incompatible with those processes. If affordable-housing projects do not meet base zoning, they die. Not “they get delayed.” They die.

E. Subsidies Add Layers

Most Rust Belt projects require tax abatements, low-cost public land, or direct financial assistance. Each program adds its own substantive requirements, misaligned timelines, and discretionary processes on top of the permitting and zoning barriers already discussed.

Detroit’s land bank requires additional discretionary design review for purchasers, including criteria like whether projects provide “interesting building typologies of varied architectural styles.” Akron applies higher standards to projects receiving public land or money as a “backdoor way of getting a form-based code.” Milwaukee, for many years, had an “unwritten policy” that homes on lots purchased from the city had to be at least 1,500 square feet, making affordable housing unviable on city-sold land. Federal environmental review applies to all HUD-funded development, and Cincinnati’s planning commission conducted more than 1,000 such reviews in 2024 alone. For mid-size subsidized housing projects, an environmental assessment takes between three and nine months and costs four figures for single-family and five figures for multi-family, not counting carrying costs. One Indianapolis developer reported a two-year difference in timelines between two identical projects, one publicly funded and one privately funded.

Because subsidies are ubiquitous in these markets, every dollar spent navigating regulatory friction is effectively a dollar of public subsidy diverted from construction. Reform in this context is not merely pro-developer. It is pro-fisc.

The Fair-Weather Friends: Why Large Developers Are Not the Allies You Think

Connolly and Kazis observe that complex, discretionary processes systematically advantage large, regional, repeat developers with resources and political connections. In Detroit, large-scale development activity is heavily concentrated in two firms. City officials usually accommodate their needs. These firms can call politicians to resolve code-interpretation disputes, obtain city land to address site-layout problems, or unstick slow permitting processes. One developer was candid about his competitive advantage: “I got a guy.”

Large, repeat players hire consultants, conduct formal community outreach, and are represented at hearings by architects, engineers, and sometimes lawyers. Meanwhile, smaller and non-local developers stick to by-right projects and rehabilitation. Little gets built in between. One large developer acknowledged the disparity: “I feel for small developers.” But feeling for them is not the same as advocating for changes that would let them compete.

The authors note, carefully, that these firms are “not absolutely benefited” by the current regime. Fair enough. But the practical implication is significant: because the most powerful stakeholders are least affected by restrictive regulation, they are least likely to advocate for change. They have adapted to the dysfunction. They have built business models around navigating it. The complex, relationship-dependent system does not merely inconvenience them less than it inconveniences their competitors. In some cases, that dysfunction is a barrier to entry that protects their position.

We’ve seen this before outside of the paper, with wealthy developers siding with the NIMBY Andrew Cuomo for New York Mayor, and again in research as highly consolidated markets in the UK produce less housing and highly NIMBY and consolidated markets produce the least. Not to mention, deed restrictions and suburban zoning are a favorite tool of suburban large developers in Texas.

Large developers in the Rust Belt are pro-growth in the same way that incumbents in any industry are pro-competition: enthusiastically in principle, selectively in practice. They want the city to approve their projects. They do not need the city to make it easy for everyone’s projects to get approved. They are, at best, fair-weather friends of reform.

Who bears these costs matters, and the racial dimension is hard to ignore. Most real estate developers in Detroit, as one Black developer observed, “don’t look like me.” Black-led developers tend to have smaller operations and less-ready access to capital. By advantaging larger firms, the complex system disproportionately burdens them. Individual homeowners and small entrepreneurs, who in Detroit are overwhelmingly Black, face the same barriers. The very people who would most benefit from incremental, neighborhood-scale infill are the ones most excluded from the process of providing it.

This has implications for coalition strategy. Reform advocates cannot rely on large developers to lead. They will rarely push, and even if they do they may push back. The natural constituency for reform is smaller developers, affordable-housing builders, neighborhood organizations tired of vacancy, and city staff who see the dysfunction daily. In Detroit, Black developers have formed a trade organization that has advocated for zoning reforms. That is the kind of coalition that gets results, and it is the kind of coalition that benefits most directly from the playbook we propose.

The Outline of a Playbook:

The governing principle: reform what kills the most projects and provokes the least resistance first. Build from there.

Play 1: Fix the Permit Office

Nobody’s identity is wrapped up in defending antiquated technology or chronic understaffing. Permitting reform does not require rezoning hearings, does not trigger neighborhood opposition, and does not empower or disempower anyone. It requires money and management, not legislative battles.

And it benefits the broadest range of projects, from small by-right renovations to large subsidized developments. It disproportionately helps small and new developers who lack the political connections to unstick processes. When Kalamazoo revamped its permitting, it brought more small developers into the city. The question is whether every applicant, not just the well-connected, gets a functioning system.

Staff up plan reviewers, inspectors, and technical specialists, with state or federal funding if local budgets cannot support it. Digitize the permitting system: electronic applications, cross-agency document access, online status tracking. Publish clear, applicant-facing requirements, so that forty percent of applications do not arrive incomplete. Assign project shepherds from intake to certificate of occupancy. Codify review timelines and consider deemed-approved provisions for straightforward applications. Standardize inspections so that two reviewers do not demand inconsistent standards on the same project.

This isn’t glamorous. But the evidence in Rezoning the Rust Belt strongly suggests it would do more to accelerate development than any single zoning change.

Play 2: Eliminate Nonconformities and Unlock Vacant Land

This sits between administrative reform and substantive zoning change. It’s technical enough to avoid triggering neighborhood politics, but it affects thousands of properties and homeowners.

As we described above, mid-century codes render existing lots and structures nonconforming across these cities, choking off mortgage access and leaving vacant land undevelopable. The solutions are mostly mechanical. Reduce minimum lot sizes to match actual lot inventories. St. Louis is doing this now. Kalamazoo already did, and officials report new developments across the city that “couldn’t have happened without the rezoning,” from homeowners expanding their homes to adaptive-reuse projects in neighborhood commercial areas. Adopt broad nonconforming-use provisions allowing expansions, rebuilding after casualty, and changes of use without variances, especially for structures predating a certain date. Create vacancy-specific rules liberalizing what can be built on long-abandoned parcels. Indianapolis, for example, allows additional uses on parcels vacant for over five years, at which point almost all residential uses are permitted in commercial zones and offices in industrial zones. The provision has had limited success so far, but the principle is sound: the rules should be most permissive where the status quo is already abandonment.

One particularly promising approach: proactively rezone land-bank properties before sale, as Detroit’s land bank is now planning. This smooths the politics before the developer enters the picture. The alternative (making the developer navigate a rezoning while simultaneously assembling financing and managing construction timelines) is precisely the kind of compounding friction that kills marginal projects.

The political framing matters. This is pro-homeowner and pro-neighborhood-stability. Residents whose homes are currently nonconforming benefit directly. Lenders willing to finance conforming properties expand mortgage access in neighborhoods starved of capital. This is about aligning the code with the neighborhood that already exists.

Play 3: Parking and Dimensional Reform, Led by Pattern Books

With permitting improvements and nonconformity elimination underway, turn to the substantive zoning provisions that most commonly force projects into discretionary review or prevent them from being built at all.

Parking comes first. It is the single issue most frequently cited as driving projects into BZA review, and the cost savings from elimination are large. Several peer cities have already eliminated or reduced minimums (Buffalo, South Bend, Toledo), providing political cover and early evidence. In Buffalo, half of larger projects built after the reform provided fewer parking spaces than previously required, some by 100 spaces. For smaller-lot and nonprofit development especially, the effect was “pretty revolutionary.” Separately, by allowing adaptive reuse without a variance, Buffalo’s reforms sparked the creation of dozens of new small businesses in residential districts, including in substantially depopulated neighborhoods.

Setback and dimensional reform follows logically: these are the provisions that make duplexes technically legal but physically unbuildable in multiple zones. Reducing setbacks is less politically visible than legalizing new uses, and it can unlock substantial infill development.

Lead not with the abstract policy argument but with the pattern book. Pattern books are catalogs of free, pre-approved housing plans designed to comply with local codes and fit the architectural context. They are spreading rapidly across the Rust Belt, and for good reason.

Most directly, using a pre-approved plan allows developers to avoid hiring an architect, saving $5,000 to $10,000 per home in South Bend’s experience. Because the plan is pre-approved, it clears all permitting processes quickly, preventing the delays and modifications that kill marginal projects. In South Bend, the plans have been used to build 79 new homes across 64 buildings between 2022 and 2025. That is a modest number, but a significant proportion of new housing starts in a small city without a growing population. More tellingly, affordable infill developers have shifted their work from Indianapolis to South Bend, where the easier process stretches their resources further.

But the deeper value of pattern books is diagnostic. As Kalamazoo’s officials explained: “You become the shopper or the permittee for the first time.” Working their plans through the permitting process helped staffers resequence approvals to generate fewer meetings and fewer contradictory comments across departments. It let them spot cost drivers, like whether a second unit could “daisy-chain” utility lines or needed separate infrastructure. It helped them rethink their fee structure and reorganize staffing. They felt that advertising a pre-approved plan committed them to efficient permitting: “If we’re throwing in extra steps… that’s a false promise to the person who purchased the plans.”

Pattern books are a reform delivery mechanism, not just a design tool. They make the abstract concrete, showing residents what attractive infill housing looks like under reformed standards. They bring new, smaller developers into the market: both South Bend and Kalamazoo reported that new developers “cut their teeth” on pre-approved plans. And pattern books require, as a precondition, the kind of zoning and dimensional reforms we have been discussing. First you legalize contextual infill development, then you can speed it through permitting.

The strategic implication: pair parking elimination and setback reduction with pattern book rollout, so that residents see what they are getting, not just what they are losing.

Play 4: Density and Use Liberalization

With Plays 1 through 3 underway, the political landscape is different. Permitting works better and vacant lots are being built on. New developers are in the market. Residents have tangible evidence that reform can improve their neighborhoods.

Now pursue the harder stuff: legalizing multi-family housing by-right in more zones, allowing mixed-use development, and adopting form-based codes in targeted neighborhoods. The evidence from peer cities is encouraging, if uneven.

Cleveland’s 2018 reform, eliminating notice and variance requirements for townhouses, produced twenty-five projects by 2022, many with dozens of units and some in neighborhoods where the city is focusing investment. Concerns about aesthetics subsequently spurred additional design requirements, potentially slowing development. But the city has continued pursuing reform, piloting a form-based code in three neighborhoods. Anecdotally, planners observed that the form-based code was most consequential in the Hough neighborhood, an extremely poor area growing thanks to its proximity to the Cleveland Clinic, where it pushed projects across the margin for both affordable-housing developers and first-time builders of small three-to-four unit buildings. It mattered less where development was already proceeding or demand was too low.

Not all reforms work everywhere. St. Louis adopted form-based codes in a few already-revitalizing neighborhoods, and “development just exploded… developers got the certainty.” But when the city increased permitted densities near transit, the results disappointed. More permissive regulations could not overcome continued low demand. Indianapolis’s mayor claimed that its transit-oriented development policy alone enabled 1,000 additional housing units in one year, but in many locations it “hasn’t had the effect we wanted” because it was mapped onto corridors that were not “market-ready.”

Rezoning cannot create demand where none exists. But as South Bend’s planners advised, describing reforms that worked and those that fell short: “You start. You start with one thing.”

The political difficulty here is real. This is where gentrification fears, racial distrust, and aldermanic privilege converge. Milwaukee’s opposition to its “Growing MKE” plan, which called for doubling the city’s population, was so strident that the city abandoned the plan’s name entirely. Cincinnati’s NAACP helped kill a 2022 citywide upzoning over gentrification concerns. In Indianapolis, duplexes get special resistance for their association with low-income renters, even when both units are offered for sale.

These fears are not irrational. Black Detroiters have been failed by urban renewal, illegal tax foreclosures, environmental harms, and the collapse of city services. That history produces a background distrust that undermines residents’ concurrent understanding that growth is needed, reinforcing the felt need for discretionary checks against unwanted change, even as those checks impose costs on the very development residents want.

Houston illustrates the inverse. There, Black and Latino communities resisted zoning adoption partly because they distrusted a city government they expected to wield it against them. Same distrust, opposite institutional conclusion. The variable is not whether communities trust their government (in the Rust Belt and Texas for that matter, they mostly don't) but whether the regulatory apparatus already exists.

I do not pretend to have a formula, nor does the paper’s authors, for resolving these tensions. But the sequencing matters. A track record of reforms that demonstrably benefits the local community and small developers builds the credibility needed for harder conversations about density.

Play 5: Subsidy-Process Reform and Exactions

This is the hardest to reform without appearing to attack community interests.

Detroit’s community benefits ordinance is the leading example. It requires formal negotiations between neighborhoods, developers, and the city for large projects or those receiving significant tax abatements. One developer called it a “Pandora’s Box.” Another described staying below the ordinance’s thresholds to avoid “a laundry list of particulars.” The process lasts ten to fourteen weeks, and the requirement to hire local contractors drives up construction costs in a city with an undersupply of qualified workers. Small developers find it especially difficult to navigate.

Beyond the community benefits ordinance, ad hoc exactions arise through discretionary approvals and incentive negotiations. A developer of a large, by-right industrial facility was asked to relocate a road to reduce truck traffic impact on a greenway. A developer of a mixed-use project, who had already included a community meeting space and paid for new streetlights to secure approvals, was then asked in the incentive process to add expensive new design features. There are, as the article dryly observes, “many instances of officials taking a ‘value capture’ approach in places where there is little value to capture.”

These provisions were hard-won by communities with legitimate grievances, and they are wrapped in equity language. Frontal assault is politically unwise and arguably unjust. But the costs are real, and as we noted above, they are ultimately borne by the public subsidies that make most Rust Belt projects viable. Whatever the merits of value-capture techniques in high-demand markets (and reasonable people disagree) they badly fit post-industrial cities.

Better approaches: raise the thresholds that trigger community benefits requirements, ensure that city-funded neighborhood planning gives residents genuine voice without project-level extraction, and make the fiscal math transparent. Show communities what exactions cost in forgone development versus what they actually deliver. When many contractors pay fees rather than hire locally, the employment benefits are questionable; when developers avoid triggering thresholds entirely, the community receives nothing.

What We Still Do Not Know

We should be honest about the limits of the playbook we propose.

The equilibrium effects of zoning in oversupplied markets are hard to assess: if a project cannot be built on one vacant lot, it may simply move next door. More sophisticated empirical analysis, akin to that conducted in high-demand places, is needed. The Rust Belt deserves the same quality of research that has informed land-use policy elsewhere.

Permitting reform also requires sustained investment, not one-time fixes. Digitizing a system is easier than maintaining staffing levels in cities with structural budget deficits. Without ongoing state or federal support, improvements will erode, and the cycle of institutional decay will resume.

Pattern books, meanwhile, have produced promising but modest results, and only in small cities so far. Their scalability to larger, more complex markets like Detroit is unproven. The fair-weather friends may prove outright opponents; reforms that lower barriers to entry threaten incumbents’ competitive advantages, and reform coalitions should plan accordingly.

And our sequencing assumes that early wins build political capital for harder reforms. That is plausible but not guaranteed. Cities may pocket easy improvements and stall before reaching the structural changes that matter most.

My point being?

Connolly and Kazis have provided an excellent foundation. Their evidence points clearly: start with the permit office, then unlock vacant land, then reform parking and dimensional standards using pattern books as the delivery mechanism, then push for density and use liberalization with the credibility those earlier wins provide.

At every stage, the constituency for reform is not the large developers who have adapted to dysfunction, but the smaller builders, affordable-housing developers, and YIMBY organizations who bear its heaviest costs. Build the coalition from the bottom, not the top.

One more thing. Every reform on this list is worth doing on its own, regardless of whether the next step follows. That is the advantage of a playbook over a manifesto. Fixing the permit office helps even if parking reform stalls. Eliminating nonconformities helps homeowners and lenders even if density increases remain politically impossible. Pattern books bring new developers into the market even if form-based codes are years away.

You start with what you can win, and you build from there.

• Remote work raises fertility among employed, partnered adults. Davis et al. (2026) estimate WFH accounts for ~291,000 U.S. births per year.

• Return-to-office is functionally anti-natalist policy beloved by “pronatalists”. A drop from 42% to 30% WFH among women implies ~100,000 fewer births per year.

• WFH delivers more fertility impact than the entire U.S. early childhood spending apparatus, at zero taxpayer cost.

• The loudest “pronatalists” (Musk, Andreessen) spent two years killing workplace flexibility while funding nearly a billion in elite fertility tech.

• The 2026 Strait of Hormuz crisis forced Asian governments to mandate remote work for fuel savings, accidentally reviving the arrangement corporate America just buried.

• One or two hybrid days per week capture nearly all the fertility upside. Companies are going after hybrid like they did with full WFH regardless

By early 2026, the return-to-office movement had won. Not gracefully (Amazon could not even find enough desks for the 350,000 corporate employees it ordered back five days a week) but decisively. JPMorgan Chase ended remote work in April 2025. Dell, AT&T, TikTok, Truist, and the Washington Post followed with five-day mandates. Instagram’s Adam Mosseri told staff a five-day office presence was needed for a “winning culture.” Microsoft began requiring Puget Sound employees three days minimum in February 2026. A KPMG survey found 83 percent of CEOs expected full return to office within three years; a ResumeBuilder survey reported nearly half of all companies demanded four or more in-office days by 2026, with 28 percent phasing out remote work entirely. Some companies used the mandates as quiet layoffs, hoping workers who valued flexibility would self-select out rather than commute.

And the workers complied. By December 2025, only 40 percent of employees said they would quit over a mandatory return-to-office notice, down from 91 percent who said the same in January. The job market had tightened: 2025 produced just 584,000 total job gains, the weakest outside a recession since 2003. The leverage belonged to employers, and employers wanted bodies in chairs.

The pandemic experiment was over. Remote work was being consigned to a brief, strange interlude, a concession to extraordinary circumstances that would not recur. The implicit premise of every return-to-office memo was clear enough: the exogenous global shock that created mass remote work was a one-time event. COVID-19 was the exception. Normalcy was the rule.

After all, what were the odds of another global shock that would force millions of workers home overnight?

In March 2026, the Strait of Hormuz closed, and the question answered itself.

We will not rehearse the geopolitics; the reader is more than aware. What bears noting is how governments responded. Thailand ordered all non-frontline public-sector employees home, set air conditioning to 26 degrees, told workers to take the stairs, and replaced travel with online meetings. The Philippines moved to a four-day government workweek. Pakistan’s Prime Minister mandated remote work for half of all government employees and shifted universities online. Vietnam urged all employers to allow remote work and encouraged citizens to ride bicycles. Bangladesh closed universities, stationed troops at oil depots, and turned off Eid-al-Fitr light displays. Nepal filled cooking gas cylinders only halfway to stretch supply.

These governments did not mandate remote work because they had read a working paper about fertility. They did it to keep the lights on. But in doing so, they resurrected the very arrangement that corporate America had just buried, and that a growing body of research now links to higher birth rates.

I want to be clear-eyed about what comes next. The commodity shock that forced these mandates will itself devastate birth rates by destroying the employment and economic prospects of young people, especially young men, across the region. No workplace policy can stand against that kind of destruction. But as we argue below, the remote work mandates these governments stumbled into are among the most effective interventions available for raising children per mother among those with the means to form families. And the loudest pronatalists in American life, the ones who claim declining birth rates are civilization’s gravest threat, are the same people who just spent two years dismantling it: Elon Musk, who has fathered at least fourteen children and called declining birth rates “a much bigger risk to civilization than global warming,” told tech workers on CNBC to “get off the goddamn moral high horse with the work-from-home bulls***.” Marc Andreessen, whose Techno-Optimist Manifesto declares “our planet is dramatically underpopulated,”testified before his local town council that he was “immensely against multifamily housing development.” The network around them (Thiel, Altman, Armstrong, Buterin) has poured some $800 million into fertility technology while the companies in their orbit dismantle the workplace flexibility that actually raises fertility.

Here is the core of our argument. A growing literature (Lu et al. 2025, using U.S. census data; Wang and Dong 2024, running experiments in Singapore; Bailey et al. 2023, on the COVID baby bump; Chong and Noguchi 2024, on Japanese pregnancy odds) converges on the same finding: remote work raises fertility. The latest and most comprehensive contribution is Davis, Aksoy, Barrero, Bloom, Cranney, Dolls, and Zarate (2026), drawing on original survey data from 38 countries and the U.S. Current Population Survey. The effect operates on what we call the intensive margin: more children per mother, among people already positioned to have families. It cannot solve the deeper economic preconditions for family formation. But the magnitudes are striking, the evidence is no longer tentative, and the policy it identifies is precisely the one that self-described pronatalists just finished destroying.

The evidence

Davis et al. (2026) draw on two original surveys. The Global Survey of Working Arrangements (G-SWA) covers 38 countries; its fourth wave, fielded November 2024 to February 2025, includes a new fertility module. The U.S. Survey of Working Arrangements and Attitudes (SWAA) is a monthly survey yielding 89,886 respondents aged 20–45 from 135,949 total usable observations (December 2022 to December 2025). Both samples are carefully constructed: respondents in the bottom 5 percent of completion times and the 17 percent who fail attention checks are dropped, and the SWAA data are reweighted via raking to match the Current Population Survey on age, sex, education, partner status, region, and employment.

The authors consider three fertility measures: realized fertility from 2023 to early 2025 (including children in gestation), planned future fertility, and lifetime fertility (children to date plus plans). The headline findings are large and consistent. When both partners work from home at least one day per week, estimated lifetime fertility is greater by 0.32 children per woman in the 38-country sample (14.3 percent of mean fertility) and 0.45 in U.S. data (17.5 percent of mean fertility). For realized fertility since 2023, women who work from home had 0.037 more children in the G-SWA (25 percent of sample mean) and 0.091 more in the SWAA (33 percent of sample mean). Planned fertility is also significantly higher. These patterns hold across all specifications, for men and women separately, with controls for age, education, marital status, pre-2023 children, own and partner employment status, and country or state fixed effects.

A complementary analysis using the Current Population Survey (approximately 137,000 respondents ages 30–45, 2023–2025) reinforces the findings by linking fertility not to individual WFH status but to occupation-level WFH shares, the fraction of job postings advertising remote work in one’s occupation, as classified by Hansen et al. (2026) using an LLM applied to half a billion postings with 99 percent accuracy. A one-standard-deviation increase in own-occupation WFH share raises one-year fertility by 7.3 percent of mean for women; adding partner’s occupation, the total effect reaches 14 percent. The results also hold in 2017–2019 data, before anyone could have chosen occupations with foreknowledge of pandemic-era WFH opportunities. Since nearly nine in ten people aged 30–45 stay in the same occupation year to year, reverse causation is implausible. Davis et al. also note a “missing intercept” problem: their cross-sectional estimates cannot capture aggregate effects of WFH prevalence on fertility norms, so the true effects are likely larger.

Davis et al. is not the first study to establish this link. It is the most comprehensive. Lu et al. (2025) find that the COVID WFH shock raised fertility, especially through higher-order births, second and third children, not first. Wang and Dong (2024) demonstrate a causal effect of flexible work on fertility intentions in a Singaporean experiment. Chong and Noguchi (2024) report increased pregnancy odds for Japanese women in high-WFH occupations. Bailey et al. (2023) show relative birth-rate gains among college-educated American women in 2021, the group that saw the largest WFH expansion. What Davis et al. adds is scale (38 countries, 135,000+ U.S. respondents), household-level analysis capturing partner effects, and a concrete national-level quantification: WFH accounts for an estimated 291,000 U.S. births per year, 8.1 percent of total fertility, as of 2024. Since U.S. WFH rates are now three to four times pre-pandemic levels, this implies roughly 200,000 extra births relative to a no-pandemic-WFH counterfactual. By comparison, Olivetti and Petrongolo (2017) find that U.S. government spending on early childhood care and education (0.4 percent of GDP) contributes an estimated 0.08 children per woman. The WFH contribution is 0.13. Remote work is delivering more fertility impact than the entire early childhood spending apparatus, at zero cost to taxpayers.

The debate is no longer about whether the relationship exists. It is about magnitude and mechanisms.

Two margins, two different forces

Before we go further, we need to draw a distinction that much of the fertility debate elides.

Birth rates reflect two things: how many people become parents (the extensive margin) and how many children those parents have (the intensive margin). These respond to different forces. Entry into parenthood is overwhelmingly driven by economics: stable employment, a partner with stable employment, a reasonable expectation of affording housing and children. When commodity shocks or recessions destroy the prospects of young adults, and especially young men, whose earnings remain disproportionately important to household formation decisions across cultures, fewer people form families. If young men in Bangkok or Karachi cannot find work, they do not marry, and births do not happen.

WFH affects the second margin. The Davis et al. results are conditional on age, education, employment status, partner’s employment, and marital status. The women and men in their regressions overwhelmingly have jobs and partners. For this population, remote work eases the time and coordination costs of combining employment with child rearing. It shifts the calculus from two children to three, or from “not yet” to “now.” The Lu et al. (2025) finding that the COVID WFH shock raised fertility mainly through higher-order births, not first births, reinforces this reading. Remote work is not making new parents. It is giving existing parents room for one more child.

This distinction is essential for everything that follows.

Return-to-office as anti-natalist policy that Elon Musk loves

If WFH raises fertility by these magnitudes, the corporate return-to-office wave is, functionally, an anti-fertility policy. Andy Jassy did not set out to reduce birth rates. But eliminating remote work for 350,000 employees in prime childbearing years removes a feature that workers value at roughly 5 percent of earnings, that parents value even more, and that is associated with significantly higher realized and planned fertility. Intentions are beside the point.

The distributional dimension sharpens the concern. WFH concentrates among college-educated, professional workers, precisely the groups with the lowest fertility and the most to gain from flexibility. Bailey et al. (2023) found that college-educated American women saw relative birth-rate gains in 2021, the group with the greatest WFH expansion. Davis et al. reveal a gendered pattern: women’s fertility is negatively associated with paid employment in their 38-country data, but this penalty is largely offset when the woman works from home. Return-to-office mandates restore the full penalty. And when companies use those mandates for indirect headcount reduction (as Resume Builder’s Stacie Haller notes, leaders are often aware that flexible workers will leave rather than comply) the workers who self-select out are disproportionately parents, the people managing school schedules and sick days and the thousand logistical demands of family life.

A rough estimate: if the U.S. WFH share among women drops from approximately 42 percent to 30 percent, the Davis et al. framework implies about 100,000 fewer births per year. These are births lost on the intensive margin, not fewer parents, but parents who lose the flexibility that made an additional child feasible. That is illustrative, not definitive. But the order of magnitude is sobering: a fertility reduction imposed by corporate fiat that exceeds the effect of many countries’ entire pro-natal policy apparatus.

The 2026 energy crisis: a cruel and clarifying test

The crisis-driven WFH mandates are analytically interesting for reasons Davis et al. could not have anticipated; their paper predates the conflict. The mandates are exogenous to fertility concerns (no country adopted remote work for fuel conservation to raise birth rates), they are massive in scale (millions of workers moved to remote arrangements within days), and they overlap geographically with the world’s lowest-fertility nations. Japan, with a TFR of 1.23, had the lowest WFH share in the Davis et al. sample at 21 percent. South Korea, with the world’s lowest TFR at 0.75, stood at 27 percent. Davis et al. estimate that raising WFH to the U.S./UK/Canada average of 45.3 percent would yield 31,800 extra births per year in Japan and 10,500 in South Korea. This is also not the first time it has happened: after Russia’s invasion of Ukraine disrupted European energy supplies in 2022, Germany encouraged remote work to reduce consumption, and a Freshfields analysis found it could cut national gas use by 5 percent. Crisis-driven WFH expansions are becoming a recurring geopolitical feature, not a pandemic anomaly.

But we must be honest about the savage arithmetic of commodity shocks. The same crisis forcing Asian governments to mandate remote work is simultaneously annihilating the conditions under which young people form families. Oil above $100 a barrel in import-dependent economies means surging costs for fuel, food, transport, and electricity; inflation eroding real wages; firms cutting back. South Korea, which imports 70 percent of its oil from the Middle East, has seen its Kospi index post some of the steepest market declines this month. The Economist Intelligence Unit projects elevated energy prices will raise inflation and lower growth across the region. Agriculture faces its own disruption: Gulf fertilizer supplies have been cut, Thai rice exports to the Middle East have stalled, Indian farmers are dumping supply at lower prices. When young men cannot find stable work, household formation collapses and births do not happen, regardless of whether office workers have been told to stay home on Fridays. The crisis-hit countries will almost certainly see birth rates fall, not rise, in 2026 and 2027.

The tragedy is that the crisis simultaneously expands WFH (good for the intensive margin) and contracts the economic foundations of family formation (catastrophic for the extensive margin). The net effect will be negative. But the longer-run story may be different. The oil crisis is temporary. The WFH habits it creates need not be. East Asian countries have spent billions on conventional pronatalist policies (cash bonuses, parental leave, childcare subsidies) with limited results. If crisis-induced remote work practices outlast the crisis, as they did after COVID-19, permanently higher WFH rates and the accompanying fertility gains could follow. We should not pretend that WFH can solve the fertility crisis in societies where the binding constraint is the economic destruction of young men’s prospects. If the shock lingers, it will do more damage to birth rates in one year than a decade of WFH expansion could repair. But on the intensive margin, the gains are real.

Even there, WFH is not a panacea. Kim et al. (2024) argue that status-driven competition in child education is a key driver of East Asian fertility collapse: parents locked in a positional arms race over schooling, spending enormous sums and time to secure marginal advantages. WFH makes it easier to drive a child to tutoring. It does not make the arms race less exhausting. Davis et al. acknowledge that these status externalities “could mute the potential impact of expanded WFH opportunities.” Fair enough. But status competition suppresses desired family size, while workplace inflexibility suppresses the ability to achieve even a reduced desired family size. WFH addresses only the latter. In East Asia, that may mean a lower ceiling on WFH-induced gains than in North America or Europe. But at TFRs below 1.0 in South Korea, every fraction of a child per woman matters.

Pronatalist paradox

I described the pronatalist contradictions above: Musk’s simultaneous championing of birth rates and disparagement of remote work, Andreessen’s planet-is-underpopulated manifesto paired with opposition to housing construction, $800 million in fertility technology from a network that is dismantling the zero-cost workplace policy that outperforms government early childhood spending. We do not need to redescribe the figures. We still need to diagnose the analytical failure.

The return-to-office case is that in-person collaboration fosters mentorship, company culture benefits from proximity, young workers gain from office exposure, and there are productivity costs to fully remote work. The research is shaky on all those points, and company culture is more affected by layoffs. Let’s take them at their word. Hybrid arrangements of one or two days a week capture a lot of the fertility upside while preserving the in-person collaboration that return-to-office advocates prize. Companies are still eliminating hybrid arrangements, let alone remote work.

The deeper problem is the distinction between techno-pronatalism and real world pronatalism. Techno-pronatalism (IVF, genetic screening, embryo selection, artificial wombs) is expensive, selective, and accessible primarily to elites. Real world pronatalism (workplace flexibility, affordable family size housing, child bonuses, etc) is (relatively) cheap, universal, and available to everyone. As the Heritage Foundation’s Emma Waters has noted, Silicon Valley pronatalists “tend to promote, in practice if not in speech, a selective pronatalism: more babies of a certain kind.” The WFH-fertility evidence is emphatically not selective; it operates across education groups, occupations, and countries.

And the pronatalists are not merely failing to support the intensive margin. They are attacking the extensive margin as well. Opposition to housing construction raises the cost of family formation. The use of return-to-office mandates as covert layoffs pushes parents out of employment. The tightening job market of 2025, to which tech layoffs contributed, made it harder for young adults to establish the economic footing that precedes family formation. They are undermining the workplace flexibility that raises children per mother while doing nothing to strengthen the economic foundations that determine who becomes a parent. That is not a contradiction in emphasis. It is incoherent.

What should be done

Davis et al. observe that “for societies faced with undesirably low birth rates, WFH can thus yield societal benefits that go beyond any direct benefits to employees and employers.”

Governments should stop discouraging remote work, especally if they received poor advice from certain “industry leaders”. The public sector is the obvious starting point: because the government is a large employer across many occupations, its workplace practices set private-sector norms.

For crisis-hit Asian economies, the immediate priority is economic stabilization: protecting employment, containing inflation, keeping young men in the labor force. No WFH policy substitutes for those preconditions. But once the crisis recedes, the governments that mandated remote work for fuel conservation should study making some version permanent. Japan and South Korea have low WFH rates, extremely low fertility, and have exhausted most conventional pronatalist options. Hybrid work incentives could complement existing policies at minimal fiscal cost; the Davis et al. estimates imply 31,800 extra births per year in Japan and 10,500 in South Korea if WFH rates reached the U.S./UK/Canada benchmark.

Employers should understand what the evidence implies for talent. Workers value WFH at roughly 5 percent of earnings; parents value it more. Firms offering hybrid arrangements will attract and retain workers with stable families and the lower turnover that follows. Davis et al. caution that “policy interventions that push for a one-size-fits-all approach to working arrangements are likely to yield unhappier workers and lower productivity.” The goal is expanding options, not mandating remote work universally. But expanding options is precisely what the return-to-office movement is not doing.

Beating Dead Horses

By early 2026, the return-to-office movement had declared victory. Then the Strait of Hormuz closed, and governments from Bangkok to Islamabad ordered workers home, not to build culture, but to save fuel. The arrangement corporate America had just buried was resurrected in days.

I am not romanticize what is happening in Asia. Again, commodity shocks will devastate birth rates by destroying the employment prospects of young people, especially young men. The binding constraint on fertility in crisis-hit Asia is whether young men can find work and young couples can afford a home, not whether they commute.

But for those who are still employed, partnered adults who do form families, the question of how many children they have are shaped by the logistics of combining paid work with child rearing. On this margin, the evidence is clear: the ability to work from home even one day a week is associated with 0.32 more children per woman across 38 countries, and 0.45 more in the United States, amounting to 291,000 births per year that would not otherwise occur.

Meanwhile, in Palo Alto, the play pretend pronatalist tech executive who tweets about civilizational collapse from declining birth rates is ordering his employees back five days a week. He has invested millions in artificial wombs and embryo selection. He has not invested a penny in the workplace flexibility that produces, at no cost to anyone, hundreds of thousands of additional births per year, not by creating new parents, but by giving existing parents room for one more child.

The CEOs said the pandemic was a one-time event. They asked what could possibly force remote work back. Now they have their answer, and it arrived not from Silicon Valley but from the Strait of Hormuz. The fertility intervention that works is not a moonshot. It is the ability to work from home at least one or two days a week. Now the question is whether the people who claim to care most about birth rates will read it before the next shock forces their hand again.

The Congressional Budget Office had projected a deficit of $1.9 trillion for fiscal year 2026. The federal government was spending roughly a third more than it collected in revenue. Then, on February 20, the Supreme Court ruled 6–3 in Learning Resources, Inc. v. Trump that the International Emergency Economic Powers Act does not authorize the president to impose tariffs, striking down the sweeping trade levies that had been a centerpiece of administration trade policy. The Tax Foundation estimated that the IEEPA tariffs, had they survived, would have raised $1.4 trillion over the coming decade. They did not survive.

One might expect, given the circumstances, that political leaders would pause before promising to return still more revenue. One would be wrong. At the state level, at least five states (Texas, Florida, Wyoming, Indiana, and North Dakota) were actively considering full or near-total abolition of the property tax. In California, Katie Porter, the progressive gubernatorial frontrunner, was campaigning on eliminating state income tax for anyone earning under $100,000. At the federal level, two Democratic senators, Cory Booker of New Jersey and Chris Van Hollen of Maryland, were rolling out major tax-cut proposals at the exact same moment. Booker’s “Keep Your Pay Act,” which would eliminate federal income taxes on the first $75,000 of household income, carries a price tag of $5.3 trillion over a decade, according to the Yale Budget Lab. Van Hollen’s “Working Americans’ Tax Cut Act” would exempt income below $46,000 from federal taxes entirely. Both parties looked at a $1.9 trillion deficit with its largest revenue tool just struck down by the courts, and decided the move was to promise more money back.

Eight days after the tariff ruling, the United States and Israel launched joint military strikes against Iran. Iran retaliated. Within days, the Strait of Hormuz, the narrow passage through which roughly 20 percent of global crude oil flows, was effectively closed to commercial shipping. Brent crude, trading around $71 per barrel the day before the strikes, surged past $94 within ten days, briefly touched $120, and settled above $100, where it remains. The IEA authorized the largest release of emergency oil stockpiles in fifty years. It was not enough. The fiscal floor was already cracking, and the commodity shock landed on it with both feet.

We want to be clear about the argument we are making. This is not a story about well-meaning politicians who couldn’t resist the easy play, the familiar framing of “short-term electoral math versus long-term fiscal solvency.” That framing is too generous. What we are watching, at both the state and federal level, is something more specific and more damaging: a politics of managed decay in which public services are defunded not by accident but by design, the resulting dysfunction is cited as proof that government doesn’t work, the revenue base is then cut further in response to that manufactured proof, and the savings are directed (through targeted tax exemptions, development subsidies, and contract arrangements) toward a specific political constituency.

Two floors, one country

The first floor is the property tax. It funds 90 percent of school budgets, provides 70 percent of local government revenue, and accounts for 25 percent of all aggregate state and local tax revenue. The Pew Charitable Trusts confirmsthat statewide property tax cuts already enacted in 2025 are straining local budgets in Indiana, Ohio, and Wyoming. For most local governments, the property tax is not one revenue source among many. It is the revenue source, the one that funds fire departments, public libraries, road maintenance, and, above all, schools.

The reason the property tax became that floor is not tradition or inertia. It is because the property tax is the most recession-resistant major revenue source in the American fiscal system, and we know this because it was tested. During the Great Recession, income tax collections collapsed by 17 percent and sales tax revenue fell 7 percent. Property tax receipts grew 5 percent in both 2008 and 2009. A Federal Reserve Board analysis concluded that property tax was “the sole source of strength in state and local tax revenue” during those years, and that without it, the overall decline in tax revenue would have been 30 percent worse. The sales tax, which is what Texas, Florida, and Wyoming now propose as a replacement, is the revenue source that cratered.

Texas knows this firsthand. The state’s housing market barely dipped during the crash: prices flattened for three years rather than contracting 21 percent like the national average, and Texas was the fastest state to recover to pre-recession price levels. The property tax base held. Meanwhile, Texas state tax revenue, which depends heavily on sales taxes, fell 17.5 percent once the broader recession hit. The floor that Governor Abbott now wants to demolish is the same floor that kept Texas school districts solvent in 2009.

The second floor is federal fiscal capacity, the ability of the national government to backstop states when revenues collapse. Historically, when recessions hit, federal transfers have filled part of the gap: stimulus payments, emergency education funding, Medicaid expansion, disaster relief. That backstop assumed a federal government with room to maneuver. The CBO’s projections show a government that has been systematically consuming that room for decades, with debt now on track to reach 120 percent of GDP by 2036.

Both floors are being dismantled at the same time, by different actors, for the same reason. And the Iran shock is the stress test that arrived before either demolition was complete.

The macroeconomic backdrop makes this worse. Revised Bureau of Labor Statistics data released in February 2026 showed that the economy added just 181,000 jobs in all of 2025, the weakest annual total outside of a recession since 2003, averaging a mere 15,000 jobs per month. The unemployment rate stands at 4.3 percent. Every significant oil-price shock in the modern era (the 1973 Arab embargo, the 1979 Iranian Revolution, the 2008 commodity spike) preceded or coincided with recession. Oxford Economics has modeled a scenario in which oil averages $140 per barrel for two months and concluded it would push the eurozone, the United Kingdom, and Japan into contraction, with an economic standstill in the United States. Goldman Sachs raised its recession probability to 25 percent even under their more moderate price assumptions.

Beyond oil, the commodity cascade is broad. The Strait of Hormuz carries crude but also liquefied natural gas, petrochemical feedstocks, and sulfur. Gulf countries supply a vast share of global sulfur, an input without which fertilizers cannot be made. Qatar’s LNG production was halted after Iranian drone strikes. Aluminum shipments from the UAE are disrupted. As Moody’s supply chain analysts have noted, inventories for many of these commodities cover only a few weeks, meaning shortages can materialize rapidly.

The states cut their floors assuming the federal ceiling would hold. The federal ceiling was already gone.

What’s being cut

We should begin by acknowledging that the populist case for property tax relief is rooted in a grievance (genuine or not depends on your point of view). Property values have risen almost 27 percent faster than inflation since 2020. In just two years, the average U.S. home sales price soared from $371,100 to $525,100, figures documented by the Tax Foundation’s review of property tax reform efforts across states. Americans feel squeezed, and some are squeezed (mostly younger homeowners). Gallup’s most recent polling finds that 50 percent of Americans now say their taxes are unfair, up from 39 percent in 2020, essentially matching the all-time low in perceived tax fairness first recorded in 1999.

Fair enough. But the proposed solutions are a windfall for the wrong people, and that is not an accident.

The homeowners who benefit most from property tax elimination are overwhelmingly Baby Boomers who already own high-value, fully paid-off properties. They are the largest property-owning cohort, the highest-turnout voting bloc, and (this is the point) many have already put their children through the public schools now being defunded. The political incentive is a near-perfect alignment: give the most powerful voting bloc the cut that benefits them most, let the next generation absorb the service loss, and let the local school board take the blame.

People would argue that this is just “populist” nonsense, I would like to point out that “centrists” have a rich history in doing the same thing. In Rahm Emanuel’s Chicago, the mayor closed 50 public schools, the largest single mass closure in American history, overwhelmingly in Black and Latino neighborhoods, citing budget necessity. Simultaneously, he proposed a $55 million TIF subsidy for a DePaul University basketball arena. The Tax Increment Financing program, which diverted roughly one-third of Chicago property taxes (a half-billion dollars annually) into what critics called a mayoral slush fund for favored developers, operated throughout.

Proceeds from the sold school buildings were used to build and expand schools that disproportionately served white, middle-class families in a district that was over 80 percent Black, Latino, and low-income. The pattern is: defund the services that poor (often times denser) communities use, redirect the savings to the constituency (in less dense and more costly areas) that votes, and frame the entire operation as “tough fiscal choices.”

Emanuel is not an outlier. He is the template. The same TIF abuse that funded his arena subsidies operates in cities across the country, and the single largest category of beneficiary is professional sports. Between 1970 and 2020, state and local governments spent $33 billion building stadiums and arenas, with taxpayers covering a median of 73 percent of construction costs. A 2017 survey found that 83 percent of economists said the public cost outweighs the economic benefit. The money comes from the same sources being starved: in Detroit, the Michigan legislature voted in 2012 to redirect school property taxes to subsidize Little Caesars Arena, a new home for the Red Wings and Pistons, while the city was in the largest municipal bankruptcy in American history. By 2051, $726 million in school property tax revenue will have been diverted to the project. The promised “District Detroit” development around the arena never materialized; HBO found nothing but parking lots and empty promises. Over the past decade, more than $347 million intended for Detroit’s public schools was diverted to development projects or wiped out by tax abatements. This is the thing that makes the “cut spending” crowd so toxic in practice: they are not cutting spending. They are moving it from schools to stadiums, from libraries to developer subsidies, from the public ledger to the private one, and calling the result fiscal discipline.

The state-level property tax abolition movement is this same pattern at scale. The proposed cuts are not marginal adjustments. In Texas, Governor Greg Abbott has made elimination of the school district property tax a centerpiece of his 2026 reelection campaign. In Florida, Governor Ron DeSantis has called for a constitutional amendment to eliminate homestead property taxes entirely, threatening a special legislative session if lawmakers do not put it before voters. Separate analyses by the Tax Foundation and the Florida Policy Institute concluded that replacing the lost revenue would require at least doubling the state’s general sales tax rate, which is to say, replacing an extremely stable tax (property taxes are stable even during recessions) with a deeply volatile one (sales tax revenues fall hardest during recessions). In Wyoming, the Legislative Service Office projects that eliminating property taxes would cost local governments and schools $644 million annually, while the proposed 2-percentage-point sales tax increase intended to fill the gap would raise only about $475 million, leaving a structural hole of roughly $169 million per year.

Several states that enacted property tax cuts in 2025 explicitly left it to local governments to make up the lost revenue, a fiscal shell game in which the popular announcement happens at the statehouse and the painful cuts happen at the school board. Indiana’s 2025 legislation gave homeowners $1.2 billion in tax relief over three years; the Pew Charitable Trusts reports that many localities now face budget shortfalls and are enacting cuts in response. In Ohio, new property tax restrictions, enacted over the governor’s veto, have school officials warning of teacher layoffs and cash-flow crises. The popular announcement happens in the capital. The pain happens in the neighborhood. That is the design.

What breaks

The damage from these cuts is not hypothetical. Things are breaking. In Wyoming, the revenue gap simply cannot be filled by the replacement mechanism on offer. The Association of Educational Service Agencies reports that property tax changes in Ohio have created complex new limits on local tax growth and added state-level veto points over school levies, squeezing districts’ revenue capacity from multiple directions at once. Across the country, ESAs warn that the most consequential changes are not the headline-grabbing elimination plans but the quieter caps, exemptions, and procedural barriers that steadily restrict how much local revenue can grow over time.

The structural problem deserves emphasis. Temporary surpluses, generated by the post-pandemic recovery and elevated asset prices, were used to fund permanent tax cuts. With budgets now strained, a commodity shock arriving, recession signals flashing, and a $1.9 trillion federal deficit growing, policymakers have no capacity to backfill the revenue they gave away. The fiscal cushion needed to absorb a crisis was spent performing fiscal-responsibility theater during the good years.

When state revenues slow (and they always eventually slow) school districts will be structurally exposed with no cushion and no backstop. That is not a prediction. It is arithmetic.

The Democratic turn

The Republican property tax playbook is by now familiar: cut visible taxes, leave invisible service cuts for local governments to absorb and take the blame for. The Democratic federal version is newer, and more alarming for what it signals about the state of the party’s political imagination.

Spooked by the cultural resonance of Donald Trump’s “no tax on tips” message, which, as Senator Van Hollen himself acknowledged, was the best-testing line in Trump’s State of the Union address, Democratic presidential hopefuls responded not with a defense of public investment but with their own tax-cut counterprogramming. Booker’s “Keep Your Pay Act” would make the first $75,000 of household income tax-free, reduce the median family’s federal income tax by an estimated 85 percent, and cost $5.3 trillion over a decade. Van Hollen’s “Working Americans’ Tax Cut Act” would eliminate federal income taxes for anyone earning below $46,000, or below $92,000 for married couples, paid for by a tiered surtax on income above $1 million. Both are branded as working-class relief.

The tells are everywhere. The Institute on Taxation and Economic Policy notes that the poorest 20 percent of households would receive nothing from Van Hollen’s plan; their federal tax liability is already zero. Booker’s working-class branding does not hold up under scrutiny either: a married couple earning a combined $300,000 with no children would save approximately $10,000 a year under his proposal, according to the tax calculator on his own website. And the cruelest irony: Booker himself was part of the coalition that championed the expanded Child Tax Credit in 2021, which cut child poverty in half. When Congress let it expire, 3.7 million more children fell below the poverty line in a single month. Booker’s own statement at the time: “We should have never allowed this critical program to lapse.” Now he is proposing a tax cut that costs fifty times as much per year and gives nothing to the families the CTC was reaching.

The deeper tell, though, is that neither proposal is designed to pass. When a prospective presidential candidate introduces a $5.3 trillion proposal in a Congress controlled by the opposing party, the goal is to advance a narrative, not enact a law. Booker is up for reelection in 2026 and widely rumored to be considering a 2028 presidential run. Van Hollen’s bill has nearly twenty Democratic co-sponsors, including Senator Mark Kelly of Arizona, another frequently mentioned presidential prospect. As CBS News noted, neither bill is likely to move forward with Republicans in control of both chambers. These are positioning documents dressed as fiscal policy.

The same performative logic governs Republican property tax cuts at the state level: announce the relief now, let the next school board deal with the funding gap. Both parties have converged on the same short-term move at the same moment. This Emanuelist formula (announce the benefit at the top, absorb the pain at the middle and the bottom via cut programs and services, let someone else take the blame) has become genuinely bipartisan.

A $1.9 trillion deficit before the first missile

The federal government’s fiscal position was dire before the crisis. CBO projected outlays of $7.4 trillion and revenues of $5.6 trillion for FY2026, a gap of $1.9 trillion, or roughly 6 percent of GDP. The Committee for a Responsible Federal Budget reports that the government had already borrowed $1 trillion in the first five months of the fiscal year. Interest payments on the national debt are on track to exceed $1 trillion annually and will surpass $2 trillion by 2036.

Then two shocks hit in rapid succession. The Supreme Court’s tariff ruling on February 20 eliminated a revenue stream that was generating well over $100 billion per year; the government had collected at least $133.5 billion in IEEPA tariff payments by mid-December 2025 alone, with total collections likely exceeding $160 billion by the time of the ruling. Eight days later, the Iran strikes triggered a commodity shock whose fiscal costs (reduced economic activity, increased military expenditures, potential recession) have not yet been fully priced into any budget model.

This matters because states have historically relied on federal capacity as an implicit safety net. When state revenues collapsed during the 2008 financial crisis and the 2020 pandemic, federal transfers filled a substantial share of the gap. That backstop assumed a federal government with some fiscal room to maneuver. Both parties are now competing to consume what remains of that room faster. The states cut their floors assuming the federal ceiling would hold. We keep returning to this formulation because it is the central fact of the current moment.

The doom loop, and the leaders who broke it

The anti-tax sentiment that dominates American politics was not born from selfishness or irrationality. Gallup first asked about federal income tax fairness during World War II, when 85 to 90 percent of Americans said what they paid was fair. That civic compact held for decades. Then the 1979 oil crisis triggered a decade of stagflation, rewired American politics permanently, and produced a legitimate grievance: government had stopped delivering. Reaganism and the anti-tax coalition it birthed were (in part) responses to a real experience of government failure.

This point is important and often lost in progressive commentary. To dismiss all anti-tax sentiment as mere greed or false consciousness is to misunderstand the problem and, worse, to guarantee that it persists.

But here is the trap, and it is one that both parties have fallen into: instead of rebuilding the case for public investment, instead of demonstrating that government can deliver, they competed to promise more money back. Each cycle of cuts erodes the services that justify the taxes, which erodes public trust further, which makes the next round of cuts more politically viable. It is a doom loop, and it has now run for nearly half a century.

The demographic engine keeps it spinning. Baby Boomers, the cohort most likely to say taxes are used inefficiently (and often were the ones who cut the most efficient parts of the government), with the highest voter turnout, the most to gain from property tax cuts, and many already through the schools now being defunded, are the perfect constituency for a political class that has adopted Emanuelism as its default mode. The short-termism ratchet locks it in: cyclical surpluses converted to permanent tax cuts by politicians who will be gone before the bill comes due. Put together, these forces form a self-reinforcing system that neither party has any incentive to disrupt.

Conservatives reading this should not assume the argument is only about what tax cuts do to services. The argument is also about what tax cuts do to the economy when the theory behind them is wrong. In 2012, Kansas Governor Sam Brownback slashed the top income tax rate by nearly a third and eliminated taxes on pass-through business income entirely, calling it “a shot of adrenaline into the heart of the Kansas economy” and “a real live experiment” in supply-side economics. The experiment ran for five years. It failed on its own terms. Kansas grew roughly 7.8 percent less than comparable states over the period, employment growth lagged, the state’s bond rating was downgraded three times, and revenue fell so far short that lawmakers gutted funding for roads, bridges, and schools. Businesses did not flood into the state; what flooded in were tax shelters, as earners restructured their income to exploit the pass-through loophole. In 2017, the Republican legislature overrode Brownback’s veto and repealed the cuts, raising taxes by $1.2 billion over two years. The lesson is not that tax cuts are always bad. The lesson is that a tax cut is a financial instrument, not an operating strategy. Cutting revenue does not make government more efficient, just as cutting a hospital’s budget does not make its doctors more skilled. If the goal is a government that performs better for less, the work is operational: procurement, staffing, systems, measurement. That is harder than signing a tax cut and far less photogenic. But it is the only version that actually works, and both La Guardia and Warren proved it.

But it has been disrupted before, and the two clearest examples are both Republicans.

La Guardia: how to build a government that earns trust

When Fiorello La Guardia took office as mayor of New York in January 1934, the city had recently been compelled to accept a bankers’ bailout to avoid default. Unemployment was roughly 25 percent. Tent cities sprawled through Central Park and Red Hook. The Tammany Hall machine that preceded him had converted the city’s administrative apparatus into a patronage operation: unclassified civil service positions, jobs handed out as political favors, numbered approximately 15,000.

La Guardia’s approach was the precise inverse of Emanuelism. He did not cut services to justify further cuts. He raised revenue and restructured government to deliver more, visibly better. In 1934, he secured enabling legislation from Albany to balance the city budget through structural reorganization and special taxes. As a congressman, when Herbert Hoover proposed a national sales tax, La Guardia’s response was “I am simply going to say soak the rich.” He preferred luxury goods taxes and graduated income taxes. As mayor, he was more pragmatic. He cut his own salary in half, slashed payrolls, levied business taxes, and, overcoming his personal opposition, passed a 2 percent city sales tax to fund relief. He raised revenue broadly, not selectively, and he did not pretend the city could balance its books by taxing only the wealthy. But his instinct about where the floor belonged was right: when the choice is between a graduated tax and a flat consumption tax, the consumption tax hits working families hardest. That is exactly the swap that Texas, Florida, and Wyoming are now proposing.

Then he did what no Emanuelist would ever do: he professionalized the government, not make some token noises. This is the distinction that the modern tax-cut debate almost entirely ignores. La Guardia did not improve New York by adjusting the revenue line on a spreadsheet. He improved it by changing how the organization ran. The number of unclassified civil service positions fell from 15,000 to 1,500 between 1933 and 1940. Civil service applications rose from 6,327 to over 250,000 by 1939. He replaced political loyalty with competence. The result was a city government that could actually execute, and then he gave it things to execute. His partnership with Roosevelt channeled enormous New Deal funding into parks, playgrounds, swimming pools, schools, bridges, highways, an airport, and 13 public housing projects by 1942. He completed the public takeover of the New York City Subway system. Every dollar was spent on things people could see and use and credit to government competence. The point is not that La Guardia raised taxes or cut taxes. The point is that he ran the government like someone who intended it to work.

La Guardia was reelected twice. A panel of 69 scholars in 1993 ranked him as the best big-city mayor in American history. When he left office, his estate was worth $8,000 in war bonds. The doom loop that now seems inescapable (”government doesn’t work, so cut taxes, so government works less, so cut taxes further”) did not run in La Guardia’s New York, because he broke the first link in the chain. He made government work. Trust followed. Revenue was sustained.

Warren: how to handle a surplus without destroying the future

Earl Warren served as governor of California from 1943 to 1953, the only governor in state history elected to three consecutive terms. He governed during the postwar boom, a period of extraordinary revenue growth. His approach to that surplus is the precise mirror image of what Republican (and now Democratic) governors are doing today.

In his first inaugural address, Warren acknowledged that California’s surplus had come “very largely from taxes upon war industry” and warned that it came “in trust, for it is the money of all the people of California.” Then he said something that every governor currently dismantling the property tax should be required to read: “This surplus, by its very existence, constitutes a constant temptation to everyone to spend it just because it is there. ... I hold to the conviction that this money must be lifted above the dissipating reach of grab-bag tactics.” He explicitly warned against converting cyclical windfalls into structural commitments, the exact error that every state currently eliminating property taxes is making.

Warren did not return the money. He invested it. He presided over massive expansions of California’s highway system, hospital network, and education infrastructure. He increased unemployment insurance, raised pensions for the elderly, subsidized child-care centers, reformed the prison system, and created the State Department of Mental Hygiene. And in his second inaugural address, he argued that any surplus beyond current requirements “should be conserved for two vital needs. One of these is to maintain adequate hospitals, educational and other institutional facilities. The other is to provide for the rainy day which sooner or later comes into the lives both of people and governments.”

The formulation that matters most, though, is this one: “It is not wise, under such circumstances, to blindly trade tax stability for temporary advantage.” That sentence, written seventy-five years ago, is the precise diagnosis of what Texas, Florida, Wyoming, and the rest are doing right now. They are trading the stability of a diversified revenue base for the temporary political advantage of announcing a tax cut. Warren saw this temptation and rejected it. California voters rewarded him three times.

Then California dismantled everything he built. In 1978, voters passed Proposition 13, which capped property taxes at 1 percent of assessed value, rolled assessments back to 1975 levels, and limited annual increases to 2 percent. Property tax revenue was halved overnight, from $10.3 billion to $5.04 billion in a single year. Before Prop 13, property tax accounted for 90 percent of all local government tax income. A year later, the same anti-tax movement passed the Gann Limit (Proposition 4), which capped per capita tax revenue spending at 1979 levels and required the excess be distributed to taxpayers in a rebate. Warren had said that surpluses must be “lifted above the dissipating reach of grab-bag tactics.” The Gann Limit legally mandates grab-bag tactics. When the state collects more than the cap allows, the constitution requires the excess be split between taxpayer rebates and school funding rather than invested in infrastructure, housing, or any of the other things Warren spent his surpluses on. In 2022, California redirected $48 billion in surplus funds and issued $9.5 billion in taxpayer refunds to stay under the ceiling. The rainy day fund that Warren insisted on? Constitutionally capped. The surplus investment he modeled? Legally prohibited above a threshold set in 1979. Two ballot measures, co-authored by the same anti-tax crusaders, converted Warren’s governance philosophy into a constitutional violation.

And now the irony has completed its arc. Katie Porter, the progressive frontrunner in the 2026 governor’s race, a former student of Senator Elizabeth Warren, is campaigning on eliminating California’s state income tax for anyone earning under $100,000. She has also opposed the billionaire tax ballot measure that would fund healthcare and education, arguing it could hurt the state’s ability to fund priorities. Earl Warren governed California for a decade on the principle that surpluses must be invested, not returned. His would-be progressive successor is running in his state, in the office he held, on a tax cut. The Washington Post noted today that the California governor’s race has become an experiment in how far tax cuts can take a Democrat in one of the bluest states in the country. Warren could have told them. He ran the opposite experiment seventy-five years ago. It worked.

The mutual reinforcement is what neither the state story nor the federal story captures alone. States cut their floors assuming federal capacity exists. The federal government cut its own capacity. Both assumptions failed simultaneously. The Iran shock did not create the vulnerability. It arrived at the exact moment both circuits closed, a stress test for an infrastructure that had been quietly failing for decades.

The price of civilization

The Iran commodity shock is not an interruption to the tax-cut story. It is its logical conclusion. The political class spent forty-five years dismantling the public investment infrastructure in the name of giving money back, and now faces a supply disruption that can only be absorbed by governments with strong revenue bases, working local services, and the fiscal capacity to respond. Instead: school districts that just lost their funding floor. Local governments told to figure it out. A federal government running a $1.9 trillion deficit before the first missile was fired. And the people most likely to be hurt are not the Boomers who voted for the cuts but the younger workers whose schools lost funding, whose libraries closed, whose local governments can no longer respond.

The “taxes are for suckers” feeling is not irrational. It emerged from a real failure of government to deliver. But both parties have now chosen to treat the symptom, the felt sense of being overcharged for underperformance, by cutting the revenue that funds the performance. It is the political equivalent of a hospital cutting its budget by eliminating doctors.

La Guardia and Warren already demonstrated the alternative, and the through-line in everything they did was operational, not financial. They did not govern from a spreadsheet. La Guardia replaced 15,000 patronage jobs with merit hires. Warren treated surpluses as a fiduciary obligation rather than a political opportunity. Both invested in visible infrastructure, funded it progressively, and refused to swap stable revenue for volatile alternatives. The contemporary political class treats government as a balance sheet to be optimized through cuts. La Guardia and Warren treated it as an organization to be run well. The difference is not ideological. It is the difference between a CFO who cuts headcount to hit a quarterly number and a COO who fixes the production line. One makes the next quarter look better. The other makes the next decade work. Both were WW2 era Republicans. Both won repeatedly.

The only novel element available now is cheap energy: for the progressives is that solar auction prices have fallen below two cents per kilowatt-hour, and driving energy costs down far enough would make the Strait of Hormuz less relevant and Americans wealthier without cutting a single tax.

For the conservatives, it’s just a matter of finding the willpower to finance the Wildcatters so that they can do what they love to do in times of high oil prices, drill baby drill. That would require pissing off Scott Sheffield, who conspired with OPEC before to keep oil prices high, and Wall Street though.

That both parties looked at this menu and chose the tax cut instead tells you everything about where we are.

The anti-tax feeling that has dominated American politics for nearly half a century was a legitimate response to a government that stopped delivering. The answer is not to cut taxes. The answer is to start delivering again.

The political class chose a different answer.

They chose the buyback.

This isn’t a normal Governance Cybernetics piece. No analysis, no data, just me talking to you directly for a minute, which I don’t do enough here, not write at you but talk to you. Apologies in advance if it feels like a gear shift. It is.

The world is currently invoking Force Majeure on what feels like everything at once. Qatar on gas contracts. South Korea’s largest ethylene producer on supply. Singapore petrochemical plants running at half capacity. Japan’s Mitsui and Mitsubishi cutting output. The Strait of Hormuz, through which a fifth of the world’s oil normally moves, is effectively a parking lot with mines instead of potholes.

And on the off chance you know your Venture Bros, you’ll appreciate that Force Majeure was also a Guild of Calamitous Intent council member who got killed by The Sovereign before anyone understood how important he was. Most of you won’t know what that means, and that’s fine. But the ones who do: I see you, I love you almost as much as my paid subscribers, and yes, the name fits the moment perfectly and the movie is peak. Keep reading either way.

Anyway. I’d been sitting on this housekeeping note for a while, been turning some of this over in my head long before the oil caught fire, hence the polish and unpolish of this post, and the chaos finally felt like a good excuse to show up a little differently here and say some things I’ve been meaning to say.

Take my work. Make it yours.

If something here is useful, remix it, reframe it, transplant it into whatever you’re working on. did this with a piece on fire survivors and the SB9 ban in California (https://yimbyaction.org/blog/fire-survivors-need-options-the-sb9-ban-takes-them-away/). That’s exactly what I write for, people finding some value and share it. Only ask: DM me, put the OG link in whatever fresh thing you made, and send the link. I want to see where it goes.

Pester me.

Questions, corrections, leads, “you got this wrong,” rotten tomatoes, any and all are welcome. Good research is collaborative and I’d rather be corrected early than stay confidently wrong. DMs are the best way to reach me.

What do you actually want from a paid membership?

Here's what I'm genuinely excited about: handwritten letters, office hours where you can actually ask the questions directly, voiceovers of favorite pieces for when reading isn't what you need. Things that feel like a real exchange between actual people rather than a content subscription. But I want to know what would make it worth something to you specifically, not just what sounds good in a list. I want to put the social in parasocial. Reply or DM. I'm asking because I want to know, not because it's the polite thing to put in a housekeeping post.

On pace

I like to step it up to five articles a week. Whether the world cooperates with that schedule is another question entirely. It’s clearly moving at its own pace right now and I’m mostly just trying to keep up.

What I’d ask: when something isn’t working, not just when it’s sloppy, but when it’s a little dry, missing something, not quite earning your time, tell me. This should be worth reading, not just worth filing away.

— Dave

Key facts

• 61% of young unmarried Japanese adults knew nothing about any of the 17 family benefits their government already provides. Telling them what existed raised strong marital intentions by 25% (Gong and Wang 2021).

• Across 216 European regions, a 1% increase in government quality is associated with an ~8% increase in fertility (Giannantoni and Rodriguez-Pose 2025).

• Fun Fact! Akashi City paid for their pronatalist programs, at first, with budget cuts in other areas, and later on with tax revenue from new residents moving in AND more births.

Here is a partial list of things a local government can do to raise birthrates at little or no cost: publish a single clear guide to every family benefit the city already offers. Enforce the familial status protections that have been federal law since 1988. Switch parking requirements from per-bedroom to per-unit so developers stop paying a penalty for building three-bedroom apartments. Announce the locations and timelines of planned daycare centers before they open, not after. Shorten permitting review for small residential projects from twelve months to 90 days. Audit the benefit application process and ask whether a 25-year-old first-time parent could complete it without help.

None of these require new legislation. None require new revenue. And the evidence we review here says they matter more than the expensive programs cities typically reach for first.

We want to make an argument that will sound, at first, like we are telling local officials to do nothing. We are not. We are telling them to do the thing that matters as more of a prerequisite/corequisite and costs the least, before they do the things will cost a lot of money.

The lowest cost investment (in the long term) a city can make to support family formation is not a new subsidy, a new program, or a new department. It is making the existing institutional machinery work as designed: delivering services reliably, communicating intentions clearly, and earning the trust of households deciding whether this is a place where they can raise a child. You will need to spend money in the mid-to-long term. Right now we are talking about the lowest hanging (and cheapest) fruit to a very complex and expensive phenomenon.

The same insight, two directions

Quality Theorist Joseph Juran argued that organizations waste 20-40% of their total effort on rework and correcting failures that should never have occurred. Quality is free, because the money is already being spent on failure. A government office that takes 45 days to process a childcare application is not saving money. It is spending money on confusion and abandoned applications while telling every household that encounters the process: this system does not work.

Rory Sutherland arrived at the same place from the demand side. The UK government spent £6 billion shaving 40 minutes off the London-to-Paris Eurostar. Sutherland’s counter-proposal: for a fraction of that cost, improve the onboard experience so passengers would ask the trains to slow down. People do not evaluate a service by its technical specifications. They evaluate it by how it feels to use.

These are not identical claims. Juran is talking about process efficiency; Sutherland about subjective experience. But they reinforce each other. Fixing how your system operates is not separate from fixing how your system is perceived. Treating them as two different departments is how cities end up with announcements nobody believes and services nobody knows about.

Akashi’s former mayor Fusaho Izumi understood this intuitively. In 2016, before introducing free nursery school for second children, he opened a children’s complex in front of Akashi Station: a play space, a library with four times the floor area, drop-in childcare, family counselors, a parenting hotline. He had evicted the pachinko parlors and consumer loan offices to build it (one sued; the case went to Japan’s Supreme Court; Izumi won). His logic, explained in multiple Japanese-language interviews: parents will not trust any sort of subsidy unless they can see the system it is embedded in. The library, the play space, the counselors were the trust infrastructure that made later financial benefits credible.

Why does this matter for fertility? Because having a child is not a transaction. It is a decades-long bet on the institutional environment. Will the schools function? Will the clinic be there at 2 a.m.? Will the childcare subsidy actually arrive?

The evidence

In a national survey experiment published in Demography, Gong and Wang (20212) found that 61% of young unmarried Japanese adults knew nothing about any of the 17 family benefits their government provides. Zero out of seventeen. After the treatment group was shown what the policies were, strong marital intentions rose by 25%. No new spending occurred. The effect was largest among highly educated women and both low- and highly educated men, the groups facing the highest perceived costs of marriage under traditional gender norms. The information changed what people thought the costs were.

Okamoto (2026) modeled Japan’s demographic trajectory in a dynamic lifecycle simulation and found that merely announcing a childcare subsidy reform one to five years before it takes effect increases the long-run stabilized population by up to 7.6%. Even granting the usual caveats about models, the logic is hard to dismiss: if households plan ahead, credible information changes outcomes independently of the policy itself. The marginal cost of a public announcement is, to a first approximation, zero.

Across 216 regions in 18 European countries, Giannantoni and Rodriguez-Pose (2025) found that a 1% increase in regional government quality is associated with an approximately 8% increase in fertility. The European Quality of Government Index is built not from spending data but from citizen surveys about perceptions and experiences of public services: healthcare, education, administration, corruption. Institutional quality and female employment were the two most consequential predictors. The contrast is stark at the regional level. Stockholm’s female employment rate is 81%; Campania’s is 27.7%. Italian regions like Sardegna (fertility rate: 1.09) do not lack family benefit programs. The money goes in; the experienced quality does not come out.

On that note, there is another finding from the same European data deserves particular attention. Temporary contract and gig work actually discourages childbearing. You cannot offer someone flexibility and insecurity in the same instrument and expect them to take a twenty-year bet on it.

Supporting evidence from the Japanese municipal data: municipalities where residents work locally show higher desired birth rates (0.19 SD). Car commuters outperform train commuters, not on speed but on flexibility for unexpected daycare pickups. Community festivals correlate with higher desired rates (0.13), likely through the informal childcare networks they sustain. Tokunoshima Town maintains Japan’s highest actual fertility rate at 2.25 largely through organic social support rather than formal programs.

A caveat: the Gong and Wang experiment measures stated intentions, not births, and the cross-sectional studies cannot rule out unmeasured confounders. But the pattern is consistent across three continents, five independent research teams, and radically different institutional contexts. At some point, convergent evidence earns the benefit of the doubt.

What cities can do Monday morning

The honest answer to “what should we do?” is simpler than you want it to be. Improve how your government operates and how it communicates.

This sounds circular. A city with weak institutions is not good at strengthening its own institutions. But the circularity breaks when you think of institutional capacity not as comprehensive reform but as a sequence of visible wins, each building credibility for the next. Some of you are going to go “I just don’t think the government can reform at any level”. Drawing on American History, former Treasury Secretary John Snyder, facing a corrupt IRS in the late 1940s, started by automating one calculation on one tax form in one office in Cincinnati. When that worked, other offices tried it. When those succeeded, he reworked the forms. When Congress saw results, they approved the structural reforms he could not have gotten on day one. We still have a lot of these super effective reform programs (or at least the documents and books). has documented this stuff, especially on how WW2-era Bureau of the Budget’s work simplification program applied these same methods across federal management. The approach is Juran’s and Deming’s, and it was built for government before it was exported to industry.

Nagareyama’s Mayor Yoshiharu Izaki did the same thing in a municipal context. His first moves in 2003 were not about children at all. On day one he halted a ¥1 billion over-budget recreational facility under construction. He required three competitive bids for all contracts above ¥1.3 million; previously, everything under ¥150 million had been sole-sourced. That single change cut the cost of equivalent projects by 40%. He compressed the city plan from 600 pages across four volumes to one volume. He froze new hiring for three years. None of this was family policy; it was operational triage that created the fiscal room for everything that followed.

We have spent several thousand words arguing against new programs and are now going to recommend four specific actions. Three are not new programs: enforcement of existing law, removal of existing regulations, and better planning of services already being provided. Only the fourth is genuinely new, designed as the smallest viable version of itself.

1. Enforce family protections already on the books.

In the US, we have the Fair Housing Act which prohibited familial status discrimination since 1988. Familial status complaints were the fourth most common type filed with HUD in 2021, roughly 7% of all complaints. A California property management company recently paid $3 million to settle charges for prohibiting children from playing outdoors. Landlords still deny leases because a child would share a bedroom.

Audit your complaint pipeline, and not just for housing. Routine testing, especially for fair housing. Publicize protections in plain language. Housing alone, attorneys report that much of this discrimination is not invidious; landlords assume children will be noisy or that siblings cannot share a room. Laws are most likely there. Someone has to turn it on.

2. Deregulate housing. Fully, if you can. Selectively, if you must.

My first-best recommendation is straightforward: abolish parking minimums, eliminate single-family-only zoning, liberalize floor area ratios, allow single-stair residential buildings up to six stories, and cut permitting timelines to 90 days for projects under 50 units. Let people build housing. The evidence that restrictive land use regulation constrains housing supply, raises costs, and drives families to the exurbs is overwhelming and does not need rehearsing here.

I recognize that full liberalization is politically difficult in most cities, especially in America and the UK. For cities that cannot get there in one move, a narrower version still helps: target the regulations that specifically penalize family-sized units.

Per-bedroom parking means every additional bedroom triggers additional land cost. Developers respond rationally: they build studios. The share of new apartments with three or more bedrooms has fallen from 7–11% in the 1990s to 5% today.* Switching to per-unit parking removes this penalty at zero cost. An FAR exemption for three-plus bedroom units expands the option set. Allowing single-stair buildings up to four stories opens the floor space a third bedroom would occupy. None require spending. All remove barriers. And each builds the political credibility for the next, larger reform.

3. Plan and communicate family-friendly amenity infrastructure, in sequence, with advance notice (or like Nagareyama advertise what you do have).

Choi et al. (2026) identified distance thresholds: public daycare within 400 meters, clinics within 200 meters, elementary schools within 820 meters. When your city sites a daycare it is already going to build, the decision should use distance-to-residential-concentration data, not merely coverage ratios. Planning with walkable distance costs no more. It requires a different map.

If your municipality will open three daycare centers over five years, announce the locations and timeline now. The announcement costs nothing.

Just to reference previous cases (I promise I will bring in a lot of fresh cases in future articles). Yeonggwang County in South Korea (population 53,000, no subway, no university, no tech industry) has sustained the highest total fertility rate in the country for six consecutive years, reaching 2.54 in 2019 and holding at 1.71 in 2024, more than double the national average. It began with the smallest necessary infrastructure: in 2015, recruiting a delivery-capable obstetrics clinic and establishing a public postpartum care center, eliminating ninety-minute “expedition births.” That first win funded the second. In 2018 the county created a dedicated population policy department, a national first among basic local governments, which enabled lifecycle programs with 94 support items documented in a single guide distributed to every resident.* Each phase was bigger than the last.

Akashi city in Japan hit 1.65 against a national 1.3 by reallocating budget from public works to child welfare. Izumi classified every municipal program into four categories: must, better-to-do-than-not, optional, and don’t. He halted public housing construction (the city had enough) and cut the sewer plan from ¥60 billion to ¥15 billion.** No new revenue. Freed budget went to children’s medical care first (the cheapest and most visible benefit), then the station-front children’s complex, then free nursery for second children, then free school lunches. Each phase was funded by the population growth the previous phase attracted; by 2019, Izumi had paid off ¥10 billion in city debt and grown reserves from ¥7 billion to ¥10 billion.**

Nagareyama reached 1.50 by solving one specific problem first: commuter parents could not physically get children to scattered nurseries and still make the train. The city built station-based transit childcare at two stations. Parents drop children off by 7 a.m.; dedicated buses collect up to 100 children per morning and distribute them to nurseries across the city. The process reverses by 6 p.m., with extension to 8 p.m. Cost to parents: ¥100/day.

4. Build a local partnership to ramp up family-sized apartment development.

The family-sized apartment market has a structural information failure that operational improvements alone cannot fix.

Developers are not building family-sized units despite strong demand because the industry’s financial assumptions are wrong. Stone and Fijan (2025) document the gap: studios have vacancy rates of ~8% versus 4-5% for three-bedrooms, higher rent-to-income ratios (32% vs. 25-26%), and shorter tenure (23.5 vs. 29.2 months). When these differentials are incorporated, effective rental returns on three-bedroom units are 29-50% higher than on studios. But the industry prices buildings using flat vacancy assumptions across unit types. A survey of over 6,000 Americans found bedroom count is by far the most important apartment feature for people considering children, more influential than 600-900 additional square feet or $1,500 in monthly rent.

The city’s role: publish vacancy and turnover data developers can cite in investor presentations. Convene a working group with developers, lenders, and municipal agencies responsible for childcare siting, benefit awareness, and permitting. Offer pre-approved design templates and expedited permitting. Start with one developer, one project, one neighborhood. Prove the pro forma works with accurate data. Fill it. Document the results.

Why cities get this wrong

Juran distinguished between the “breakthrough” mentality and the “control” mentality. Organizations love breakthroughs: new programs, new departments, press conferences. They are bored by control, the steady maintenance of existing processes at high quality. Fixing the online portal so parents can find benefits that already exist does not make the evening news. Yet the evidence here says the portal fix matters more.

There is also a tolerance problem. Every case in this article has a period where the inputs are happening but the outputs have not appeared. Akashi’s Izumi put it bluntly: “For the first five or six years, nobody evaluated what we were doing. It was a tough period.” Nagareyama’s Izaki lost his first mayoral election in 1999 and spent four years holding town meetings before winning on his second attempt.* Most governments abandon a strategy during the silent years. The ones that succeed are the ones that don’t.

Cities also organize as if operations and communications are separate functions. One department processes claims; a different office talks about policy; neither thinks about the other. Announcements without follow-through, delivery without visibility.

When you do spend: budget priorities and local targeting

Everything above is about making existing systems work before spending new money. But eventually you will spend, and when you do, two findings should govern how.

Across all 1,741 Japanese municipalities, Kawasaki and Morimoto (2025) found that the share of the municipal budget allocated to child welfare is the single most powerful predictor of desired birth rates. The coefficient (0.47) dwarfs density, transit access, income, facility counts, and commute patterns. Kasuga Town in Fukuoka allocates roughly 41% of its budget to child welfare, triple the comparable average. Tokyo and Osaka show large fertility penalties (-0.26 standard deviations); Nagoya, equally dense and wealthy, shows none. The difference is budget priorities. The urban fertility penalty is not structural fate but an institutional decision.

How much to allocate is the first question. Where to aim it is the second. Lee (2024) analyzed all 229 South Korean municipalities and found that the same national childbirth benefit produced significant positive effects in Jeolla and Gangwon provinces and zero measurable effect in Seoul’s 25 districts. Survey evidence showed that Jeolla and Gangwon had the highest demand for economic support around childbirth; cash addressed their actual constraint. In Seoul the binding constraint is housing cost or career interruption risk, which creates an incredible amount of leakage. The money did not fail, and cash benefits have a long and rich history of working against tailwinds. Cash benefits work best on a national level, and it’s your job on the local level to address constraints before giving local benefits.

The foundation before the edifice

Across every evidence base in this article, institutional quality, communication, and budget priorities predict fertility better than spending levels or program generosity. And Yeonggwang, Akashi, and Nagareyama demonstrate what happens when a municipality builds the operational infrastructure first and uses each success to justify the next: outcomes that diverge from national averages by a factor of two or more.

You will need to spend the money sooner or later, most likely sooner. But the return on that spending is determined by the operational quality of the system through which it flows.

If you run a city and you don’t know where to start, pick up Juran or Deming. Try out Work Simplification (we have an online copy right here!). Walk through your own processes. Find out what your city offers families, and find out whether families know it exists. Fix one thing residents will notice, and fix it completely. Then fix the next thing, and make it bigger. The operation is the message. Start there.

On February 28, 2026, war between the United States, Israel, and Iran effectively shut the Strait of Hormuz. Brent crude surged past $82 intraday; Barclays warned of $100, JPMorgan modeled $120, Deutsche Bank’s worst case reached $200. By Monday, South Korea’s KOSPI had suffered its steepest single-day plunge in history, eclipsing the post-9/11 crash. An economy that grew just 1% in 2025 absorbed another blow at precisely the moment the Bank of Korea had projected a fragile recovery to 2%.

Almost nobody (or at least on Substack besides myself) is discussing what this shock will do to births.

The pattern is by pretty familiar for long time readers: 1973, 2008, 2022. Each energy & economic shock collapsed total maternity rates (% of women who become mothers) across affected economies while CPM barely moved. The most expensive pronatalist programs in Europe could not withstand two years of energy-driven inflation. Hungary’s TFR, raised from 1.23 to 1.59 over a decade, collapsed to 1.39 by 2024. The Czech Republic’s fell from 1.83 to 1.37, the lowest since records began in 1806.

South Korea enters the 2026 shock from the lowest baseline on Earth. Its TFR stands at 0.72 nationally, 0.55 in Seoul. More than half of Korean women are projected to remain childless. The government has spent upward of $280 billion on pronatalist policy since 2006: subsidized housing, paid parental leave, cash bonuses for newborns, government-sponsored dating events. The TFR continued to fall. One study found that 74% of baby bonus disbursements went to births that would have occurred anyway. (Just to clarify: that’s still a 1/3rd increase, but money alone isn’t enough!)

And at these levels, every shock cuts deeper. A 5-point TMR decline from 90% leaves 85% entering motherhood. The same decline from 48% leaves 43%.

Countries cannot control energy shocks. They can control the physical structure of their cities: how far the daycare is, how long the commute takes, whether a clinic is walkable when a toddler spikes a fever at midnight. These spatial relationships are not linear. They exhibit thresholds and cliffs that most pronatalist policy ignores entirely.

A recent study by Choi, Lee, Jung, and Sohn (2026), published in Cities, maps these thresholds across Seoul. Daycare within 400 meters (1/4 of a mile) is associated with higher births; the effect vanishes beyond. Commuting past 65 minutes turns sharply negative. Neighborhood clinics within 200 meters (1/8th of a mile) are positive. Large hospitals within 1.5 kilometers (~1 mile) are negative.

What the study says

Method in brief

Most prior studies of residential environments and fertility rely on density-based indicators (hospitals per 1,000 residents, daycare centers per district). These capture quantity but miss physical accessibility. An area might have high hospital density on paper, but if the hospitals cluster in one corner of the district, residents on the other side face long travel times and effectively low access.

The deeper problem is the assumption that these relationships are linear. They aren’t. Tamefuji (2010) found that maternal employment drops sharply beyond 15 minutes from childcare, not gradually, but at a cliff. Chen et al. (2022) documented similar distance-decay patterns for subway access, with the premium confined to roughly 500 meters to 1.2 kilometers. Smith Jr. et al. (2013) found the relationship can reverse entirely: excessive hospital proximity suppresses fertility through noise and congestion. The terrain is cliffs, plateaus, and reversals. Linear models can’t map it.

The Choi et al. study adopts an N-minute city framework, evaluating accessibility by travel time rather than facility counts, across five functional categories: working, supplying, caring, learning, and enjoying. Its unit of analysis is the 250m × 250m grid cell, a resolution that aligns with actual walkable distances and mitigates the Modifiable Areal Unit Problem inherent in irregular administrative boundaries. Birth counts, available only at the administrative level, are distributed to grid cells proportionally based on women aged 20–39 (who account for 92.8% of Korean births). Independent variables measure network distance along actual road paths to the nearest facility in each category, with sociodemographic controls including age diversity, elderly ratio, young adult ratio, marriages, and average monthly income.

Among models tested, XGBoost achieved an R² of 0.8578, substantially outperforming linear regression at 0.7827. SHAP was applied for interpretability: feature importance rankings, summary plots for effect direction, and dependence plots for threshold identification. Geographically Weighted Regression then captures how relationships shift across Seoul’s geography. Together, these tools reveal that relationships are non-linear, where the inflection points fall, and how they vary across space.

Shorter Commutes Means Higher Children Per Mother

Commuting time exhibits the clearest threshold in the entire analysis. SHAP values are positive in the 50–65 minute range, then turn sharply negative beyond 65 minutes. Not a gradual decline. A cliff, a point at which the daily time budget for parenting appears to become unviable. The GWR results add texture: the negative association is most pronounced in Seoul’s southwestern districts (Gangseo, Yeongdeungpo, Dongjak) and the steep-topography areas of Changsin-dong, where transit bottlenecks compound the commuting burden. For the 46% of Korean households that are dual-income, every minute beyond 65 is a fertility disincentive that no cash subsidy can easily offset.

People Love Living Near Trains

Subway proximity reveals a different problem. Within 220 meters of a station, SHAP values are positive: extreme convenience supports work-family balance. Between 220 meters and 1 kilometer, values turn negative. Beyond 1 kilometer, the effect converges to zero.

The mechanism is housing prices. Transit-adjacent areas in Seoul command steep premiums. Young families, newly married, carrying education debt, facing the enormous costs of private tutoring, are precisely the households priced out of the 220m-to-1km zone. For them, the housing premium overwhelms the commuting benefit. That’s a spatial equity problem masquerading as a transportation one.

Daycare, clinics, and the hospital paradox

Public daycare shows the sharpest single threshold: SHAP values strongly positive within 400 meters, dropping off sharply beyond. The GWR confirms this effect is especially pronounced near central business districts (Seoul Station, Gwanghwamun) where dense office complexes make walkable childcare a critical lifeline.

The policy implication cuts against current practice. Childcare policy in Seoul has focused on quantity: more facilities, more slots. The data say placement matters at least as much. A daycare center 600 meters away, however well-staffed, falls outside the threshold. For a parent rushing between a morning shift and evening pickup, those extra 200 meters are the difference between a schedule that works and one that doesn’t. But here’s the equity problem: areas where daycare, clinics, and schools cluster within walkable thresholds tend to overlap with higher-income neighborhoods. The 400-meter radius doesn’t just correlate with higher fertility. It correlates with higher housing prices, which price out the young families who would benefit most.

Neighborhood clinics tell a similar story at finer scale: positive SHAP values within 200 meters, diminishing toward zero beyond 400 meters. Infants and toddlers visit clinics an average of 6.5 times per year, two to three times the frequency of other age groups. A walkable clinic isn’t a luxury for these families. It’s a near-daily necessity.

Large hospitals present the opposite pattern, and it is one of the study’s most striking findings. SHAP values are negative within 1.5 kilometers, positive between 1.5 and 3.5 kilometers, declining again beyond. The GWR confirms this around major institutions: Seoul National University Hospital, the National Medical Center, Korea University Anam Hospital. The mechanism is straightforward: sirens, congestion, transient populations erode the residential tranquility families seek. Different scales of healthcare infrastructure relate differently to residential life.

Education, leisure, and null findings

Elementary schools within 820 meters and private academies within 200 meters is associated with higher fertility. A notable GWR finding: educational infrastructure shows largely insignificant spatial variation across Seoul, implying that schools have reached spatial saturation. Fertility effects come not from regional disparities in supply but from whether individual cells fall within the walkable thresholds. The relevant planning unit is the neighborhood, not the district.

Cultural facilities within 780 meters are associated with lower fertility. This isn’t counterintuitive once you consider where cultural facilities cluster in Seoul: intense commercial zones where noise, congestion, and nightlife dominate. In Hongdae and Hyehwa, youth-oriented entertainment districts, fertility rises with distance from the cultural core. These aren’t family amenities. They’re signals of an environment oriented toward childless urban lifestyles.

Parks showed no consistent directional trend. Restaurants and grocery stores had no significant effect. The study’s authors think it’s likely because South Korea’s advanced food delivery infrastructure (72.5% usage, reaching 84–87% among twentysomethings and thirtysomethings) has decoupled food access from physical proximity.

Sociodemographic patterns

The sociodemographic controls largely confirmed expected patterns. Income shows positive SHAP values above approximately 3.27 million KRW, close to the national average wage of 3.64 million KRW, consistent with risk theory: economic insecurity leads people to delay or forgo childbirth. Areas with greater age diversity (entropy index above 0.94) show higher fertility, consistent with research on intergenerational childcare support networks. Marriage is the single most powerful predictor of birth counts, unsurprising given that only 2% of Korean births occur outside marriage, compared to the OECD average of 40%. The study appropriately conducted a secondary SHAP analysis excluding marriage to reveal the residential environment’s independent contribution.

“Family-friendly” is a luxury good

This is where the analysis becomes most consequential.

The thresholds identified above (400 meters for daycare, 200 meters for clinics, 820 meters for schools, under 65 minutes for commuting) are not distributed equally across Seoul. Areas that meet them are desirable. Desirable neighborhoods command higher prices. Higher prices push out young families. The infrastructure gap between neighborhoods that meet these thresholds and those that don’t isn’t just inconvenient. It’s a mechanism driving housing price differentiation, and through that, reproductive inequality.

In a city where the price-to-income ratio stands at 13.9 years, where average apartment prices have surpassed $1 million, where 82.6% of young people rent, this cycle is the operating reality for millions. A “fertility-friendly environment” has become a commodity accessible only to those who can already afford it.

The $280 billion in pronatalist spending has targeted reducing the private costs of children for individual families. Almost none has been directed at ensuring that the public infrastructure associated with higher fertility (walkable daycare, accessible clinics, manageable commutes) is equitably distributed across income levels and neighborhoods. The money targeted the wrong margin.

What this means for urban policy

The study recommendations below is grounded in an empirically identified threshold.

Childcare placement over quantity. The current approach increases facility counts per district. The evidence argues for a different standard: ensure every residential area falls within 400 meters of a public daycare center. Walkable distance, not per-capita ratio. This almost certainly requires more facilities in underserved neighborhoods rather than additional slots in areas already within the threshold.

The 65-minute commuting constraint. Land-use and transit planning should treat this as a hard ceiling for residential zones targeted at young families. This means integrating childcare and affordable housing into transit-accessible nodes, not merely building transit lines and hoping families benefit. The subway paradox underscores the point: access to transit is necessary but not sufficient. It must be paired with affordability measures that prevent young families from being priced out of the very zones where the commuting benefit exists.

Differentiated healthcare proximity. Neighborhood clinics should be sited within 200 meters of residential concentrations. Large hospitals require buffer planning, a recognition that their negative externalities within 1.5 kilometers may discourage family formation. Not an argument against hospitals. An argument for understanding that institutional scale matters for residential environments.

Threshold-based school placement. Educational infrastructure is spatially saturated in Seoul; fertility effects are driven by micro-level proximity, not district-level supply. Future placement should ensure individual neighborhoods fall within 820 meters of an elementary school and 200 meters of supplementary educational facilities.

Caveats

This study identifies associations, not causal effects. Families with children may sort into neighborhoods with better infrastructure, rather than better infrastructure causing higher fertility. Disentangling selection from treatment would require longitudinal data tracking neighborhoods before and after infrastructure changes, data not yet available at this spatial resolution. The dasymetric mapping used to distribute births to grid cells improves on raw administrative data but inevitably introduces estimation error. And the nearest-neighbor metric assumes residents use only the closest facility; a neighborhood with three daycare centers within 600 meters might offer more effective accessibility than one center at 350 meters. Future research using Two-Step Floating Catchment Area methods could capture these dynamics.

Several features of the Korean context (the 2% non-marital birth rate, the dominance of private academies, the delivery infrastructure that decouples food access from proximity) limit direct generalizability. But the structural dynamics (threshold effects in walkable accessibility, the tension between transit proximity and housing affordability, disamenity effects of large-scale institutions) are likely to operate in any high-density city where young families face time poverty and financial constraint. The specific numbers will differ. The logic should travel.

Getting the questions right

South Korea (or most countries) cannot close the Strait of Hormuz. It cannot control oil prices or global inflation. What it can control is whether the physical environment makes parenthood logistically survivable for households on the fence.

Every threshold in this study is a policy lever. Every one is currently left to the market, which prices young families out of the neighborhoods where the thresholds are met and traps them in neighborhoods where they aren’t. The evidence from Seoul tells us where to start. The evidence from 1973, 2008, 2022, and now 2026 tells us we are running out of time.

The median home in San Francisco costs $1.3 million. In Miami, prices have roughly doubled in a decade, going from 150,000 in 2016 to over 600,000. Across scores of American cities, a household earning the median income cannot afford to buy the median home, and in many cases cannot comfortably rent one either. The political class continues to treat this as a problem the right election result could solve. Elect more Democrats, and cities will build the affordable housing their residents need. Elect more Republicans, and deregulation will unleash the market.

It sounds good, you know, but it just doesn’t smell right.

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A study by Fernando Ferreira and Joseph Gyourko, published in the Journal of Urban Economics in 2026, asks whether the party affiliation of a city’s mayor affects how much housing gets built. Drawing on four decades of mayoral elections matched with Census Bureau building permit data, the answer seems to be a hard no. Not a small effect that fails to reach significance. Not an effect that shows up in some subsamples. Again, a null, full stop.

The real levers of housing policy lie elsewhere: in the incentives, social networks, zoning regimes, and democratic failures that constrain supply regardless of which party holds the mayor’s office. Drawing on the paper’s empirical results and on case studies from Houston to Carmel, Indiana to show why.

Identifying a Causal Effect

Republican-led cities do issue more housing permits than Democrat-led ones in raw averages, about 17 percent more. But Republican mayors tend to govern in Sun Belt cities with flat topography and abundant land. The raw correlation tells us almost nothing about causation.

Ferreira and Gyourko exploit a regression discontinuity design built on close elections. In a race where a Democrat wins by a single percentage point, the city is virtually identical to one where a Democrat loses by a single point. By comparing housing permits across this threshold, the authors isolate something close to a pure partisan treatment effect.

2,094 Democrat-versus-Republican elections from 1980 through 2017, matched to the Census Bureau’s Building Permits Survey covering roughly 20,000 permit-issuing places. Manipulation tests show no evidence that either party disproportionately wins close races; covariate balance confirms that cities on either side of the threshold look similar on population, housing stock, and voter turnout.

No Effect, No Matter How You Look

Across every bandwidth, kernel function, and way of measuring permits, electing a Democrat rather than a Republican has no meaningful effect on housing supply.

In the main specification, electing a Democrat is associated with a 0.016 percentage point increase in total permits per housing unit, against a sample mean of 0.97 percent. That is less than 2 percent of the mean, with a standard error nearly five times the point estimate. The null holds for single-family and multifamily permits separately, for permits measured at the end of a term versus averaged across it, and for differences against the prior term.

The most telling test involves incumbency. A Democrat mayor who barely wins a first election is more than 20 percentage points more likely to win reelection. If partisan preferences about housing exist but are initially constrained, they should emerge in second terms, when incumbents have consolidated power. They don’t. Permits during the term following reelection show no discontinuity.

Ferreira and Gyourko also test whether partisanship matters more in particular settings: big cities, fast-growing metros, areas with little jurisdictional competition. Drawing on Tiebout’s model, they find modest evidence that Democratic mayors in less competitive metro areas permit slightly more housing, but it doesn’t survive alternative specifications. There is no evidence that partisanship matters more in larger jurisdictions, faster-growing ones, or more recent decades. That last point is notable given documented increases in partisan intensity nationwide.

The one published study reaching a different conclusion, by De Benedictis-Kessner, Jones, and Warshaw (2025), finds a modest increase in multifamily permits under Democrats. But the result is fragile: it disappears on Ferreira and Gyourko’s larger dataset, under alternative specifications, and when the sample is varied by city size or time period.

Real Life Case Studies

This section draws on external sources, not the Ferreira and Gyourko paper.

If party labels drove housing supply, we would expect a clear pattern: red cities building freely, blue cities strangling supply, or vice versa. Actual cities defy that at every turn.

Houston and its neighbors. Houston is the only major American city without conventional zoning, a distinction maintained since voters rejected zoning in referenda in 1948, 1962, and 1993. Its regulatory flexibility has kept median home prices below the national median despite explosive growth. Between 1999 and 2016, over 25,000 homes were built on lots smaller than 5,000 square feet, enabled by a 1998 reform reducing minimum lot sizes to 1,400 square feet.

But Houston’s permissiveness is not a product of Republican governance or even its Democratic mayors. The city has had Democratic mayors for most of recent history, including during the lot-size and parking reforms. Lower-income and moderate-income Houstonians voted overwhelmingly against zoning in 1993, against both parties’ wishes.

The contrast sharpens when you look next door. Pasadena, Texas, a conservative, blue-collar refinery city that is officially “non-zoned” like Houston, has weaponized the regulatory tools it does have. The Institute for Justice and Strong Towns documented the city requiring a sole-proprietor mechanic named Azael Sepulveda to build 28 parking spaces before opening his shop in a building that had been an auto repair business for 30 years. The cost, $40,000, was nearly half what he paid for the property. He averaged two to three cars a day. Pasadena actually increased its parking minimums in 2022, nearly doubling the requirement for auto shops to a standard exceeding every major Texas city. Meanwhile, an hour south on 288 is Lake Jackson. The hometown of libertarian congressman Ron Paul (and myself), a full zoning ordinance has governed land use since the city’s founding as a Dow Chemical company town.

A Democrat-led city with genuine permissiveness. A conservative suburb that is nominally unzoned but aggressively restrictive. A libertarian icon’s hometown with comprehensive zoning. The variable that explains the differences is not ideology but path dependence and institutional incentives.

Austin. A liberal city in a conservative state, Austin was the NIMBY capital of Texas, until the election of progressives YIMBYs. Existing homeowners wielded a century-old state law allowing just 20 percent of neighboring landowners to trigger a supermajority requirement for zoning changes, repeatedly killing comprehensive reform. The NIMBY coalition included conservative homeowners and progressive anti-gentrification activists in roughly equal measure. The resulting 135,000-unit deficit was the product of institutional rules, not partisan preferences.

The breakthrough came from the Republican-controlled state legislature. HB 24, passed in 2025 with bipartisan support, raised the protest threshold from 20 to 60 percent and reduced the council override to a simple majority. Even Lt. Gov. Dan Patrick made affordability a top priority. The tool Austin’s NIMBYs had wielded most effectively was a Jim Crow-era law with no connection to contemporary partisanship.

New York City. The 2025 mayoral race demolishes the left-right frame entirely. Andrew Cuomo, the centrist former governor, assembled a coalition of NIMBY homeowners, large developers, and building trades. His housing plan proposed 500,000 units but implicitly promised to protect low-density outer-borough neighborhoods. Bloomberg, whose mayoralty produced tower clusters in hotspots and downzoning everywhere else, contributed $8.3 million to an allied Super PAC.

Zohran Mamdani, a 34-year-old democratic socialist, ran and won as an unabashed YIMBY: citywide upzoning, expanded public housing, rent freeze on stabilized apartments. He won. The Republican, Curtis Sliwa, made opposition to the “City of Yes” upzoning reforms a central plank. The centrist was the NIMBY candidate. The socialist was the builder. The Republican was the most anti-housing of the three.

Voters also passed charter amendments shifting zoning powers from council members, who had exercised de facto vetoes over development in their districts, to the mayor. The “no” voters were concentrated in neighborhoods that had supported both Cuomo and Trump: an outer-borough homeowner coalition hostile to density regardless of partisan affiliation. The alignment tracked renters versus homeowners, not left versus right.

Carmel, Indiana. Carmel, a suburb north of Indianapolis with a median household income of $130,322 and historically deep-red politics, underwent an urbanist transformation under James Brainard, a Republican mayor from 1996 to 2024. He built 155 roundabouts, a walkable city center with 362 residential units and a 1,600-seat concert hall, and pushed townhome development along a rail-to-trail conversion. Banks initially refused to finance the townhomes; they now sell for two to five times initial projections. The city quadrupled from 25,000 to over 100,000.

Brainard used public-private partnerships and tax increment financing. He borrowed ideas from European cities and sat on Obama’s climate task force. A conservative suburb embracing density and mixed-use development does not emerge from any partisan playbook.

Pattern keeps on coming. Montana’s 2023 pro-housing reforms passed under a Republican governor. A Republican judge held for Minneapolis 2040 for years. Connecticut’s Democratic governor vetoed an ambitious housing bill. Illinois Democratic governor is pushing for state wide zoning reform.

So What is the Problem, if not Partisanship?

If partisanship is not the bottleneck, what is? New construction imposes localized costs on existing residents (congestion, noise, school crowding, changes to neighborhood character) while its benefits accrue largely to nonresidents who might want to move in but have no political voice.

Gyourko and McCulloch (2024) analyze over 263,000 home sales across 217 municipal borders, they find that homes cost roughly $40,000 more in areas with stricter density limits, that 65 percent of homeowners would experience welfare losses from increased density, and that the median homeowner would require $5,164 in compensation to accept modest density increases nearby. In affluent, low-density neighborhoods, the figure rises to $29,655. For rental housing, it reaches $263,192. Opposition to apartments is five to six times stronger than opposition to owner-occupied density, which helps explain why multifamily construction faces ferocious resistance even in cities that nominally support “affordable housing.”

This opposition is concentrated among the residents with the most political influence and the strongest institutional tools to prevent change. A 2025 Clever Offers survey found that 61 percent of boomer homeowners never plan to sell, 88 percent do not care if remaining prevents younger buyers from entering the market, and 59 percent would support a candidate who prioritizes home values even if it makes housing less affordable for others. When the median voter in a local election is a long-tenured homeowner sitting on six figures of untaxed appreciation, the incentives point toward restriction regardless of party.

Reform, Not Electoral Strategy

Duranton and Puga (2023) argue that the transfers needed to compensate existing residents are far smaller than the economic distortions created by housing shortfalls. But the mechanism design is harder than it looks. , executive director of YIMBY Law, has made a persuasive case for how to get it right. She points out that the most prominent federal housing proposals, from the Center for American Progress, the Institute for Progress, and the Searchlight Institute, all recognize the issue as an incentive problem but target the wrong actors and reward the wrong things. Some plans pay renters who lack political power to change land-use decisions. Others reward cities for adopting pro-housing policies that are easy to game: Minneapolis’s missing-middle upzoning legalized duplexes that could be no larger than the houses they replaced; California cities imposed six-figure hookup fees on the ADUs the state told them to allow; Canada’s Housing Accelerator Fund paid billions for policy changes already underway that failed to prevent permit declines when rates rose.

Trauss’s alternative: pay cities directly through unrestricted general fund grants for every permit issued above an expected trend line. Don’t evaluate policies. Put money in the budget of the institution that controls permitting and tie it to the outcome you want. Research finds that when housing is fiscally beneficial, some elected officials are more likely to permit it. The approach also has bipartisan appeal, since general fund grants don’t look like welfare expansion and eligibility can include fast-growing Sun Belt and Midwest cities alongside coastal ones.

My Point?

Ferreira and Gyourko’s work demolishes the narrative that the right election on party alone could bring housing prices back to earth. Across four decades, the party of the mayor does not affect how much housing gets built.

I have used the word “institutions” as shorthand for what constrains housing supply: zoning codes, protest petition laws, parking minimums, discretionary permitting. That language is useful but it’s also very limiting. Formal rules don’t enforce themselves. Behind every zoning restriction is a persistent social network of people: the homeowners who show up to every planning meeting, the neighborhood association presidents who have each other’s phone numbers, the longtime residents who know which council staffer to call. These networks are partisan, but they predate the current alignment of the parties and will outlast it. They organized against apartments in liberal San Francisco and conservative Pasadena using different vocabularies (”anti-displacement” in one, “neighborhood character” in the other) but with identical effect. Austin’s NIMBY coalition held together across left and right for decades. New York’s outer-borough homeowner alliance spanned Cuomo Democrats and Trump Republicans without apparent tension. The partisan frame fails not because it oversimplifies ideology, but because it misidentifies the unit of analysis entirely. The relevant actors are not parties but durable, place-based networks of property owners whose interests in restricting supply are material, immediate, and largely indifferent to national political brands.

The task is not just to rewrite rules but to shift the underlying political economy so that the networks aligned against building are met by equally persistent networks aligned in favor of it. The YIMBY movement, at its best, is an attempt to build exactly that counter-network.

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Sunday morning, gasoline wholesalers started calling their customers to announce 25-cent-per-gallon price increases, effective immediately. “Clearly, there’s a whiff of panic there,” said Tom Kloza, an oil analyst and adviser to Gulf Oil. GasBuddy’s Patrick De Haan estimated that some stations would raise prices by as much as 85 cents per gallon by week’s end. The national average hit $3.00 for the first time since December. By Monday, European diesel futures had jumped 23 percent to a two-year high. Jet fuel, gasoline, naphtha, and high-sulfur fuel oil followed. European natural gas futures surged more than 50 percent, the sharpest single-day move since 2022, the kind of move that comes from physical supply disappearing, not traders repricing risk.

On Saturday, February 28, the war between the United States, Israel, and Iran began. By Sunday, the Strait of Hormuz, through which roughly 20 percent of the world’s seaborne oil transits daily, had effectively shut down, not because Iran imposed a formal blockade but because the insurance market made transit impossible.

Lloyd’s List tracked just 23 vessel transits through the Strait on March 1, compared to a January daily average of 10.3 million deadweight tons. Traffic was down 81 percent week-over-week. Just one crude oil tanker transited the Strait that day. Zero LNG carriers. At least four vessels had been struck in and around the waterway, including the Palau-flagged tanker Skylight, hit by a missile and set ablaze within Omani territorial waters. One crew member was killed on the Marshall Islands-flagged crude tanker MKD Vyom. At least 150 crude and LNG tankers dropped anchor in open Gulf waters, clustered off the UAE, Saudi Arabia, and Qatar.

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Then the insurers pulled out. Seven of the twelve member clubs of the International Group of P&I Clubs, which provides marine liability coverage for approximately 90 percent of the world’s ocean-going fleet, issued cancellation notices for war risk coverage in the Persian Gulf. Steamship Mutual’s cancellation took effect 72 hours after midnight GMT on March 1. Maersk suspended all Hormuz transits. MSC instructed every vessel in or bound for the Gulf to proceed to designated shelter areas and suspended all worldwide cargo bookings to the Middle East. Hapag-Lloyd and CMA CGM halted transits and imposed emergency surcharges ranging from $2,000 per twenty-foot container to $4,000 for refrigerated units. Japanese lines NYK, Mitsui O.S.K., and Kawasaki Kisen halted all Hormuz operations. Services that could not transit Hormuz began rerouting around the Cape of Good Hope, adding weeks to delivery times.

Without war risk coverage, neither tankers nor LNG carriers can operate, regardless of whether the waterway is technically open. As Lloyd’s List put it, the Strait has been closed not by Iran but by shipping itself. “I don’t think Iran can shut down the Strait of Hormuz, but insurance companies and vessel operators can,” Kloza said. Even if the shooting stopped tomorrow, the insurance markets would take weeks or months to reopen.

The downstream effects compounded within hours. QatarEnergy halted LNG production at Ras Laffan, the world’s largest export facility, after Iranian drones struck the complex, and declared force majeure. Ras Laffan covers roughly a fifth of global LNG supply. Saudi Aramco shut units at Ras Tanura, the kingdom’s largest domestic refinery, after a drone strike. The loss of 4.3 million barrels per day of refined product exports from the Persian Gulf lifted refinery margins everywhere else on the planet. Diesel faces the most acute near-term physical pressure, according to Kpler, because it is the primary fuel for military logistics, regionally concentrated in supply, and the hardest petroleum product to replace quickly. Europe gets 45 percent of its jet fuel from the Middle East.

Brent crude surged as much as 13 percent intraday to above $82 a barrel, its highest level since January 2025. Barclays warned that Brent could reach $100 as the security situation spirals. JPMorgan said a prolonged disruption could push prices to $120. Deutsche Bank modeled a full Strait closure at $200. As recently as mid-February, Brent had traded in the low-to-mid $60s. Goldman Sachs had projected Q4 2026 Brent at $60; the EIA’s February forecast expected a $58 annual average. A Reuters poll had $63.85, with a geopolitical risk premium of $4 to $10 already priced in. None of these forecasts priced in a Hormuz closure, and by Saturday all of them were obsolete.

For American consumers, the arithmetic is already moving. A $10-per-barrel increase in crude translates to about 25 cents per gallon at the pump. Diesel price increases will bleed through to trucking surcharges, rail freight, and farm input costs just as spring planting begins. Seventy percent of consumers say gas prices affect their feelings about the economy, and energy costs feed into virtually every other price, from groceries to airfare to heating.

In every prior crisis when oil reached these prices, Houston responded. The 2008 spike produced 728,000 mining and logging jobs nationally (the BLS category that includes oil extraction) and 457,500 new positions in the Houston metro alone. High prices meant pain at the pump, but they also meant a compensating boom in the communities that produced the oil.

That industry no longer exists. The independents, the chaotic, debt-fueled ecosystem that converted price signals into production and employment, have been replaced by Wall Street’s capital allocators. The wildcatter era was volatile, environmentally damaging, and financially reckless in its debt-fueled form. Norway solved the governance problem with a sovereign wealth fund. Texas built a boom-bust cycle instead. But the underlying capacity to convert high prices into production and employment was sound. What replaced it is financially optimized and structurally unresponsive, an industry that no longer converts price signals into jobs regardless of what any president asks.

What follows starts with what $100 oil used to buy in Houston, and what it buys now, then documents the capital discipline regime that ensures the industry will not respond. It follows the price shock into the policy toolkit, where new Federal Reserve research shows the transmission from oil to interest rates has tripled in speed since 2021. Then it tracks the consequence almost nobody is discussing: oil shocks suppress fertility, the mechanism is now empirically documented at every link from barrel price to first birth, and the gendered structure of the employment shock means young men are hit hardest. It closes with what policymakers are getting wrong.

What did $100 oil used to mean?

Between 2010 and 2014, Houston added 457,500 jobs, with energy as the city’s primary economic engine. Direct oil and gas employment peaked at roughly 350,000 across the metro. But the real mechanism was the independents. In Corpus Christi, a land man could count 10 to 20 independent operators competing for acreage, each bringing in local doctors and lawyers as investors on well deals. The business model was straightforward: borrow to drill, prove reserves, ride the production upward or flip the asset to a larger player.

When prices were high, the model printed jobs and spread the money far beyond the wellhead. Roughnecks in Midland sent remittances to families in Houston’s eastern suburbs. Service company owners in Katy hired welders, dispatchers, equipment operators. For every direct upstream job, nearly three indirect and induced positions were supported across the Texas economy. A drilling boom meant overtime for pipe fitters, which meant down payments on houses, which meant work for roofers and electricians, which meant spending at grocery stores and car dealerships. Local banks lent against proven reserves. Landowners received royalty checks. School districts in the Permian funded new buildings with severance tax revenue. The cycle was volatile and occasionally ruinous in the busts, but during a price spike it converted global commodity prices into local wages, local consumption, and local tax revenue at scale.

Young men without college degrees could earn $80,000 to $120,000 a year on a rig crew. That income supported marriages, mortgages, and children in communities across West Texas, the Gulf Coast, and the Intermountain West. The boom towns had high birth rates not because of cultural attitudes but because stable income, affordable housing relative to wages, and confidence that the work would last a few years all arrived at the same time. When oil was high, Houston boomed, and the boom was labor-intensive enough to create the household conditions under which families form.

What does $100 oil mean now?

Energy and mining now accounts for 9.4 percent of Houston’s metropolitan employment, down from the city’s largest sector to its fifth-largest. Total upstream energy employment has fallen from approximately 350,000 at the 2014 peak to 290,000 by 2024. The Greater Houston Partnership projects that oil and gas extraction will lose positions in 2026, energy-adjacent manufacturing will lose positions, and administrative support will shrink. These were the baseline forecasts before the Strait of Hormuz closed.

Median household earnings in the metro area are $77,182. The energy cluster still pays $141,667 on average, but fewer workers can access that premium each year. South of the city, petrochemical plants in Texas City, Baytown, and Freeport use crude oil and natural gas as feedstock, not merely fuel, so rising crude prices hit them as direct input costs.

Thirty-year fixed mortgage rates remain between 6 and 7 percent, double the 2021 lows of roughly 3 percent. Monthly mortgage payments consume approximately 35 percent of median household income, a level that housing economists generally consider the threshold of unaffordability. The National Association of Realtors had predicted a housing recovery in 2026, driven by anticipated rate declines. An oil-driven inflation re-acceleration makes those rate cuts less likely.

In this industry’s new configuration, $100 oil is a cost with no compensating boom. The price increase flows through to every household. The employment surge that historically offset the pain is not coming.

Won’t the industry just drill more?

How Wall Street replaced the wildcatters

In 2008, when Brent peaked at $133 per barrel, the American energy sector’s response was immediate. Hundreds of independent E&P firms competed for acreage, services, and talent. When prices rose, production followed within months. The model was also debt-fueled and financially unsustainable, with many independents generating negative free cash flow for years.

The price crash of 2014–2015 triggered a wave of bankruptcies. The pandemic collapse of 2020, when West Texas Intermediate briefly traded at negative $37 per barrel, finished what the first crash started. Capital discipline became the industry’s permanent organizing principle, enforced by compensation structures, board mandates, and an investor base that would punish any reversion to the growth-at-all-costs model.

The result is visible in a single comparison (source: IEA/VisualCapitalist):

The pattern has only deepened. Between 2022 and the first half of 2025, nearly 45 percent of U.S. oil and gas companies’ cash flows went to dividends and share buybacks, according to Deloitte. Wood Mackenzie reported in late February 2026 that the 30 largest oil and gas companies now return 30 to 50 percent of operating cash flow to shareholders, cutting reinvestment rates to half of mid-2010s levels. The money no longer cycles through Houston’s economy. It flows to institutional shareholders and pension funds, most of whom are not in Houston and none of whom hire welders in Katy.

The first real test came in 2022. With crude above $100 for much of the year, the five largest publicly traded oil companies earned a combined approximately $199 billion. The global oil and gas industry earned nearly $4 trillion, more than double its recent annual average, according to IEA Executive Director Fatih Birol. The industry generated more cash than at any point in its history and used it not to drill but to buy back its own stock and raise dividends.

By early 2026, European majors including Shell, BP, TotalEnergies, and Equinor were cutting share buybacks as Brent lingered in the $60s, while U.S. supermajors ExxonMobil and Chevron reiterated their buyback pace. The industry’s response to lower prices was to return less cash and drill less. Its response to higher prices will be to return more cash and drill the same.

“Whether it’s $150 oil, $200 oil, or $100 oil, we’re not going to change our growth plans,” said Scott Sheffield, then CEO of Pioneer Natural Resources, now part of ExxonMobil following a $60 billion acquisition. EOG Resources’ Q4 2025 earnings call, held the day before the Iran strikes, committed to returning 90 to 100 percent of annual free cash flow to shareholders in 2026 and keeping oil production flat. Chevron recorded $12.1 billion in share buybacks during 2025, a record, and reiterated the pace through 2026. On Monday, ExxonMobil and Chevron shares surged more than 6 percent in pre-market trading. Investors were not pricing in a production surge. They were pricing in higher margins on the same barrels.

The machines that replaced the roughnecks

The rig count tells the story in one number. U.S. rigs declined from 750 in December 2022 to 550 for the week ending February 27, 2026, a 27 percent drop. Oil-directed rigs stood at 407, down 79 from a year earlier. In any prior era, a decline of that magnitude would have produced a corresponding drop in production. Instead, weekly crude output averaged 13.7 million barrels per day as of mid-February, just under the all-time high. In the Permian Basin, operators hold 239 rigs, down 65 from a year ago, yet production has barely budged, driven by extended-lateral drilling that now reaches 15,000 feet or more per well, up from 5,000 a decade ago.

The industry achieved extraordinary per-rig productivity, and in doing so, systematically eliminated the infrastructure for rapid scaling. The surplus rigs, the idle service crews, the speculative wildcatters who responded to price signals within months have all been deliberately dismantled.

The total upstream workforce is approximately 1 million full-time equivalents today, down from the 1.26 million peak. The industry shed 252,000 core jobs while producing substantially more energy. The labor required per barrel has been cut by more than half. Petroleum engineering graduates at U.S. universities collapsed from a peak of 2,615 in 2017 to roughly 623 bachelor’s degrees annually, a 76 percent decline. Some programs were nearly wiped out: Louisiana State down 89 percent, University of Oklahoma down 90 percent, Colorado School of Mines down 88 percent from their peaks. The mass layoffs of 2014 and 2020 damaged the industry’s reputation among young professionals so severely that high oil prices no longer pull students back. Even if companies reversed their financial strategy tomorrow, the workforce for a 2014-style surge does not exist.

The competitive ecosystem Houston lost

has done a great job of describing paradise lost of Houston’s (well Texas as it’s Midland does the drilling. Houston writes the checks) O&G ecosystem. Since late 2023, the sector has absorbed nearly $200 billion in mergers: ExxonMobil acquiring Pioneer for $60 billion, Chevron acquiring Hess for $53 billion, and Diamondback merging with Endeavor for roughly $26 billion, among others. Half of the Midland sub-basin, the most productive tight-oil formation on Earth, is now controlled by two companies. Exxon cut approximately 2,000 jobs globally following the Pioneer acquisition. Chevron cut approximately 600 from Hess Tower in Houston. In prior oil shocks, hundreds of firms making independent decisions collectively produced a rapid supply response. Two firms do not behave that way.

The EIA’s January 2026 forecast projected U.S. crude output holding near the 2025 record of 13.6 million barrels per day in 2026, then declining 2 percent to 13.3 million in 2027, what would be the first annual drop since 2021. Dallas Fed Energy Survey respondents reported breakeven prices of $61 to $62 per barrel in the Permian, barely above the EIA’s pre-crisis price forecasts. Wood Mackenzie’s analysis, published two days before the strikes, warned that production from current commercial projects across the 30 largest companies will fall nearly 40 percent between 2025 and 2040, a gap equivalent to adding two Permian Basins. The industry was already in decline before the Strait of Hormuz closed, and nothing about the current crisis changes the incentive structure.

Can’t the government do something?

If Houston’s oil industry is structurally configured not to respond, the question becomes what governments can do instead. Every major tool in the kit was designed for an industry that no longer exists.

Strategic Petroleum Reserve

The Strategic Petroleum Reserve holds roughly 415 million barrels as of late February 2026, about 57 percent of capacity. The Biden administration released 180 million barrels in 2022, the largest emergency drawdown in U.S. history, drawing the reserve to a 40-year low of 347 million by July 2023. Treasury estimated this lowered retail pump prices by 17 to 42 cents per gallon. The administration partially refilled it, purchasing or retaining roughly 200 million barrels at an average of $74.75. But DOE must still sell 99.6 million barrels by 2031 under existing congressional mandates, and Trump’s pledge to fill the reserve completely would cost an estimated $20 billion. At current levels with a maximum drawdown rate of 4.4 million barrels per day, the reserve covers roughly 94 days of net imports. A release can shave cents off the gallon for weeks. It cannot substitute for ongoing production if the Hormuz disruption persists for months.

The SPR could have been more than an emergency dump valve. Employ America, the research group that designed much of the framework the Biden administration adopted, proposed using fixed-price forward contracts and put optionsto create a soft price floor for domestic producers, offering insurance against the crashes of 2014, 2016, and 2020 that had conditioned capital discipline in the first place. DOE finalized a rule in October 2022 allowing fixed-price forward purchases, but execution lagged, and Employ America publicly warned that DOE appeared “spooked” by weak initial bids. Used strategically, the SPR could function as a market-stabilization mechanism that addresses one of the root causes of capital discipline. The administration that came closest ran out of time. The current administration has shown no interest.

OPEC+ agreed on March 1 to raise output by 206,000 barrels per day from April, exceeding analyst expectations of 137,000 but still less than 0.2 percent of global demand. The group holds roughly 3.5 million barrels per day of spare capacity, nearly all concentrated in Saudi Arabia and the UAE, the same countries now absorbing Iranian missile strikes. As Rystad’s Jorge Leon noted, if oil cannot move through Hormuz, production targets matter less than logistics and transit risk. The net supply loss, accounting for pipeline bypass capacity, is still 8 to 10 million barrels per day.

Interest rates

Raising interest rates does not put oil in the Strait of Hormuz. Yet the central bank response was immediate. Markets increased bets that the Fed would remain on hold at its March meeting and potentially through the summer. Monday’s ISM manufacturing data showed more than 70 percent of managers reporting higher prices in February, an 11.5 percentage point jump from the prior month, and that was before the oil spike hit. The Globe and Mail’s assessment was blunt: it is increasingly questionable whether the Fed will cut rates at all this year, and it may end up raising them. Ten-year Treasury yields posted their largest single-day advance since October.

The speed of this transmission has itself changed. A December 2025 SF Fed Economic Letter found that two-year Treasury yields now respond more than three times as strongly to oil supply news as they did in the pre-2021 period. The heightened sensitivity dates to the Fed’s 2022 liftoff and reflects markets pricing in a more aggressive central bank response to oil-driven inflation. For households, this means the pass-through from barrel to mortgage rate is faster and steeper than in any prior oil shock.

The pattern replicated globally. In Europe, Reuters reported that the disruption would cloud the outlook for both the ECB and Bank of England, potentially forcing postponement of further rate cuts. Deutsche Bank’s base case before the strikes was already for the ECB to hold through 2026, with the next move a hike in mid-2027. The timing is brutal: the eurozone had just hit its 2 percent inflation target in December for the first time in three years. Germany’s €500 billion fiscal expansion was supposed to provide a tailwind. An energy shock from the Gulf threatens to undo that progress in weeks. In Asia, OCBC economists warned that “monetary policy easing bias will be put to the test” across the region, with net energy importers facing simultaneous inflation, currency depreciation, and deteriorating trade balances. In Africa, nine countries including Nigeria, Kenya, and Egypt had cut rates just last month; Bloomberg reported Monday that the oil shock now threatens to derail that entire easing cycle.

The modeling underscores the scale. Capital Economics calculates that oil sustained at $100 a barrel would add 0.6 to 0.7 percentage points to global inflation. Oxford Economics models a more severe scenario: a Hormuz closure lifting Brent to $130 could push U.S. inflation to 4.5 percent and eurozone inflation close to 4 percent, derailing expectations of monetary easing entirely.

The question is whether tightening in response to a supply shock is the right prescription. Bernanke and Blanchard found that energy price shocks accounted for nearly all of inflation’s rise in late 2021 and early 2022, and nearly all of its decline in the second half of 2022. Tight labor markets contributed negatively to inflation in 2020 and early 2021.The wage-price spiral never materialized. Real wages fell. If central banks hold or cut into an oil-driven inflation spike, they risk unanchoring inflation expectations. If they raise rates, they apply what Bernanke’s own research showed was the wrong tool for the problem. As one macroeconomic analyst noted, the near-term implications are hawkish regardless. But the industry transformation described in Section III makes the dilemma worse on either path. In the old system, high prices triggered a production surge that moderated prices within months, keeping tightening cycles short and shallow. That self-correction no longer happens. Central banks tighten, prices do not moderate through new supply, and the costs, higher mortgage rates, slower hiring, weaker currencies in import-dependent economies, compound on households with no offsetting energy boom to cushion the blow.

Fiscal buffers

The fiscal buffers that governments used to cushion the last oil shock have been substantially depleted. Global public debt reached $102 trillion by 2024. Following the post-COVID expansions, 143 countries implemented fiscal consolidation measures affecting an estimated 85 percent of the global population: 91 governments capped public-sector wages, 80 cut energy and food subsidies, 86 raised consumption taxes, and over 120 restricted social safety net eligibility.

Renewable energy

If energy price shocks drive inflation, expanding energy supply is the direct response. Every gigawatt of renewable capacity installed is a gigawatt of demand permanently removed from the fossil fuel market. Between January and May 2025, China alone added 198 gigawatts of solar and 46 gigawatts of wind. Total installed Chinese solar capacity now exceeds 1,000 gigawatts, roughly half the world’s total.

Current U.S. policy moves in the opposite direction. The administration’s legislative agenda, the One Big Beautiful Bill, would phase out wind and solar production tax credits by 2027 and introduce new excise taxes on renewable energy projects using Chinese-manufactured inputs, reducing renewable energy capacity additions substantially over the next decade. Independent analyses project this could increase average household energy costs by approximately $400 per year within a decade from ending renewable credits alone.

A major oil supply disruption happening at the same time as legislation that reduces alternative energy supply capacity increases household exposure to exactly the kind of price volatility now unfolding. The administration authorized the military action that created the supply shock. It is pursuing legislation that reduces the capacity to build the alternative supply that would buffer against it.

What does an oil shock do to birth rates?

The metric that hides the problem

The Total Fertility Rate, the number every government tracks and every headline cites, loses critical information by collapsing two independent measures into one. A 2025 study in Scientific Reports (a Nature portfolio journal) by Stephen J. Shaw, analyzing data from 314 million mothers across 33 higher-income economies and 1,470 country-years, demonstrates the problem.

The decomposition is straightforward:

TFR = TMR × CPM

The Total Maternal Rate (TMR) measures the proportion of women who become mothers. Children per Mother (CPM) measures the average family size among those who do. TFR is the product.

These two components are statistically independent. Shaw confirmed this through breakpoint co-occurrence testing, wavelet coherence analysis, and Mutual Information testing. When TFR declines, policymakers cannot tell whether fewer women are entering motherhood or whether mothers are having smaller families. The policy implications are different in kind, not just degree. The 2024 UN World Fertility Report mentions childlessness twice across 62 pages.

What oil shocks do to motherhood rates

Japan provides the clearest case. When the Oil Shock struck on October 19, 1973, the TMR fell sharply across all 47 prefectures simultaneously. Shaw subjected this to a binomial test: the probability of all 47 showing declines between 1974 and 1975 by chance is less than one in ten thousand. Monthly birth data pinpoints the onset to October–November 1974, consistent with an approximately 12-month conception-to-birth lag from the shock. CPM barely moved. The pattern replicated across Italy and the United Kingdom in 1974: near-identical TMR collapses, no corresponding shift in family size among mothers.

The oil crisis suppressed entry into motherhood rather than reducing family size among women who were already mothers.

The United States offers the more recent case. TFR in 2016 was identical to TFR in 1980: 1.82. But TMR had fallen from 76.1 percent to 69.4 percent, nearly 7 percentage points, masked by a simultaneous rise in CPM. Mothers were having slightly larger families, offsetting the growing number of women who never became mothers. Anyone relying on TFR alone would have missed it. The structural break coincided with the 2008 financial crisis.

Oil prices climbed toward $147 per barrel by July 2008, and gasoline hit $4 per gallon early that year, well before the Lehman collapse. The housing bubble burst partly because households already strained by energy costs began defaulting on mortgages. Fertility rates that had been rising across advanced economies reversed sharply. In the United States, TFR fell from 2.12 in 2007 to 1.8 by 2016. In Greece and Spain, which suffered a double-dip recession, TFR dropped from 1.5 to about 1.3. Across the five largest developed economies, 350,000 fewer babies were born in 2012 than in 2008.

But TFR again obscures what actually happened. The sustained decline was driven more by falling first births than by higher-order births, consistent with rising childlessness. Kearney and Levine (2022) found that the Great Recession contributed to the initial decline, but that women born after the mid-1980s continued having fewer first births at every age, even as the economy recovered. Comolli and Bernardi (2015) showed the mechanism: the downturn increased childlessness by lowering first-birth rates among women in their late thirties, women for whom delay meant, biologically, permanent childlessness. Demographers at the Carsey School noted the same pattern in the Great Depression, which produced the highest level of childlessness ever recorded in U.S. history. The economic shock was temporary. The TMR decline was not.

In Europe, the strongest fertility declines tracked the worst labor market deterioration: Southern Europe, Ireland, and parts of Central and Eastern Europe. The academic literature is consistent: childless young adults are most affected by economic downturns, and the longer a recession delays first births, the more likely those delays become permanent.

France illustrates the pattern in contemporary form. Between 2013 and 2023, CPM remained virtually stable at 2.3 to 2.4 children per mother. TMR dropped from 85.0 percent to 72.8 percent, over 12 percentage points in a single decade.

Has this already happened?

Before the 2022 energy crisis, something surprising had been happening across much of the developed world: fertility was recovering. The IMF documented that fertility rates had been rising across advanced economies in the decade before 2008. Even then, it is not all doom and gloom. France’s TFR held above 1.8 through 2017 (without immigrants factored in). Bulk of the Nordic countries maintained rates near or above 1.7 for most of the decade. The Czech Republic climbed steadily from 1.28 in 2003 to 1.83 by 2021. The United States saw a mini-baby boom during COVID, which ended in 2023, around the time of rate hikes and oil prices biting. The “Discourse” (or the more serious parts of it) debated whether the recovery was real or fragile. The 2022 energy shock answered that.

Russia’s invasion of Ukraine sent energy prices across Europe to levels not seen in a generation. Natural gas prices on the Dutch TTF benchmark rose more than tenfold from 2021 lows. Consumer price inflation in Central Europe, where dependence on Russian gas was heaviest, hit double digits and stayed there. The countries that had been recovering fastest proved the most vulnerable.

Hungary had been the poster child for pronatalist policy. A decade of aggressive interventions, including zero-interest loans, tax exemptions for mothers, debt forgiveness, and housing grants, had lifted the country’s TFR from 1.23 in 2011 to 1.59 by 2021, from worst in the EU to ninth best. Then the energy crisis hit. Hungary’s inflation surged above 25 percent in early 2023, driven heavily by energy and food costs. TFR fell from 1.59 in 2021 to 1.56 in 2022 to 1.51 in 2023, then collapsed to 1.39 in 2024, Hungary’s lowest rate in more than a decade, erasing most of the gains from a decade of policy effort. Marriages fell from 72,000 in 2021 to 50,200 in 2023 to 46,550 in 2024, with the sharpest declines among young people in their mid-to-late twenties. The Hungarian Conservative acknowledged that “the COVID-19 pandemic, the war in Ukraine, the energy crisis and economic difficulties on a global scale have also shaken families’ sense of security.” The most expensive pronatalist program in Europe could not withstand two years of energy-driven inflation.

Going back to the Czech Republic. Czecha’s collapse was even more dramatic. As recently as 2021, Czechia had one of the highest fertility rates in Europe at 1.83, higher than France. Then consumer prices surged past 15 percent inflation, and real wages fell in every quarter of 2022 and 2023. TFR dropped 10.4 percent in a single year, from 1.83 to 1.64, the largest single-year decline recorded among EU member states. It kept falling, to 1.53 in 2023 and then 1.37 in 2024, the lowest since records began in 1806, with only 84,000 births. The head of demography at Charles University warned that current-year fertility could reach 1.25. The OSW Centre for Eastern Studies linked the decline directly to falling living standards and collapsing security perceptions: the share of Czechs expressing concern about the threat of war rose from 11 percent in 2021 to 43 percent by 2023. Czech demographer Eva Waldaufová found that 89 percent of survey respondents cited a lack of affordable housing and 88 percent cited financial uncertainty as reasons for having fewer children than desired.The majority still wanted two children but were not reaching that number.

Shaw’s framework predicts the TMR component absorbed the blow disproportionately. The marriage collapses in Hungary and the first-birth delays in Czechia point in the same direction: it is entry into parenthood, not family size among parents, that the energy shock disrupted.

Who is going to be hit hardest in 2026?

Young men are going to be hit harder than any other demographic group. Young men are the population whose economic status most directly determines whether first births happen.

Start with the labor market channel. Elder and Payne (2024), writing in Energy Economics, found that oil price uncertainty shocks produce asymmetric effects on U.S. unemployment by gender, with men disproportionately affected. The industries most exposed to oil-driven cost shocks (construction, manufacturing, transportation, logistics) are the same industries that disproportionately employ young men without college degrees. When diesel prices rise 23 percent in a day, as they did on Monday, the trucking companies, freight operators, and construction firms that absorb those costs respond by freezing hiring or cutting hours.

The connection between male employment and first births is not speculative. A 2025 study by Han and Uchikoshi, published in the Chinese Sociological Review, found that the entire Korea-Japan fertility divergence is concentrated in women aged 25 to 29, and that approximately a third of Korea’s decline in this age group traces to a near-tripling of male economic inactivity. Among Korean men aged 25 to 29, the share neither working nor seeking work rose from roughly 10 percent in the mid-1990s to 30 percent by the early 2020s. In Japan it barely moved. Male inactivity suppresses first births specifically: men who are not in the labor force do not marry, and in both countries, marriage remains effectively a prerequisite for childbearing.

The 2026 oil shock arrives into this dynamic through three reinforcing channels. Diesel surcharges and rising input prices will slow hiring in male-dominated blue-collar sectors during what should be the spring ramp-up in construction and agriculture. The SF Fed’s finding that Treasury yields now respond three times more strongly to oil supply news means mortgage rates will rise faster than in any prior shock, pushing homeownership further from reach for young couples. And seventy percent of consumers already say gas prices shape their perception of the economy, so the psychological effect of watching pump prices climb daily compounds the material cost. For women in their mid-to-late thirties already at the edge of the biological window, any postponement of a partner’s proposal or a couple’s timeline risks becoming permanent childlessness.

Each successive shock operates on a lower baseline, which means the same-sized disruption does more damage. A 5-percentage-point TMR decline from 90 percent leaves 85 percent entering motherhood. The same decline from 60 percent leaves 55 percent entering motherhood and 45 percent remaining childless. The same absolute shock produces qualitatively different outcomes depending on where it lands.

The following table presents TMR data from Shaw’s study (please note, I will update these to DataWrapper when I have some spare time)

A TMR of 47.9 percent means that more than half of South Korean women are projected to remain childless.

We can calculate the TMR required to achieve replacement-level fertility (TFR ≈ 2.1) given each country’s current CPM:

For South Korea, replacement TMR would need to exceed 100 percent, meaning replacement fertility is mathematically impossible through motherhood rates alone, regardless of policy. The Han and Uchikoshi data explain why: male economic inactivity has suppressed marriage rates so severely that no achievable increase in family size can compensate.

What are policymakers getting wrong?

Houston’s wildcatter industry converted $100 oil into jobs, wages, and community investment. Houston’s current industry converts the same price into share buybacks and dividends that leave the community. The households experiencing the price shock are the same. What differs is whether any of that money circulates back.

Brent has surged nearly 28 percent year-to-date and analysts are warning of $100 or higher if the Hormuz disruption persists. The starting conditions are worse on every dimension: higher rates, depleted fiscal buffers, weaker labor markets, and a demographic baseline with less margin than any previous shock hit.

Three assumptions underpin the current policy response, and none of them hold. Energy policy assumes the industry responds to prices, but consolidation and capital discipline ensures it will not. Standard monetary policy assumes supply-side self-correction will shorten tightening cycles, but higher interest rates aren’t going to move oil out of a war zone. Demographic policy targets family size among mothers when the evidence shows the binding constraint is the rate of entry into motherhood itself, ie young people’s very ability to get some economic stability in their lives. Each assumption was calibrated to conditions that no longer exist.

To the right: the American oil and gas industry are not coming to save you. The CEOs have said so publicly, on earnings calls, to shareholders, in plain English. $100 oil, $150 oil, $200 oil, and the production plan does not change without external pressure. The rigs are not coming back without a fight. Wall Street is hellbent on making sure roughnecks are not coming back. The wildcatters who would have responded to this price signal were bought out by ExxonMobil and Chevron, and those companies will return the windfall to shareholders, not to the Permian. “Drill, baby, drill” is a slogan for an industry that no longer exists. If you want energy prices down, you need every tool on the table, including the ones you have spent the last decade trying to kill.

To the left: you are fully aware that this war does not mean the economic damage manages itself. The Strait is closed. Prices are rising now. Every week without emergency action on refinery coordination and non-US diplomatic efforts to reopen shipping lanes is a week the damage compounds into the lives of the young workers, renters, and so many innocents. The window to prevent the downstream damage is closing fast.

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