The last new landfill in Iowa, near Davenport, was built thirty years ago.

Nearly one-third of Iowa’s thirty-seven active landfills have less than 30 years’ capacity left under their current permits, according to a 2025 survey. In Middle Tennessee, five of the region’s seven permitted landfills could reach capacity within ten years, against a state waste stream of about 13 million tons a year.

Neither state is short of land. Iowa’s sites are hemmed in by the towns that grew up around them, by abandoned coal workings underneath them, and by neighbouring municipalities whose consent an expansion requires. Landfill capacity is not just a question of land. It’s a question of (permitted) air space, within hauling distance of your municipality, and located within political boundaries that will put up with it.

THE CASE THAT NONE OF THIS IS NECESSARY

An analysis of waste management options, “Just Bury Your Trash” by Alex Chalmers of the Cosmos Institute and Rob Wiblin of the 80,000 Hours Podcast, argues that recycling has been oversold, that properly-designed, modern, lined landfills are much better than their reputation, and that most of what is currently being diverted into recycling should be buried, though exceptions should be made for items like metals that can be profitably recycled.

Their case rests primarily on

• a) the often-unclear life-cycle arithmetic around recycling

• b) contamination issues around recycling streams

• c) the expense of salvaging certain items (especially plastics)

• d) the fact that landfills take up less than 0.01 percent of land in the U.S.

Chalmers and Wiblin acknowledge that burning can be environmentally friendly because controlled incineration reduces waste volume, produces far less methane than landfills, and can be made environmentally responsible, but reject it on cost grounds.

Chalmers and Wiblin’s essay is aimed at redirecting environmentalist energies away from individual-level recycling and towards what happens to our trash today. However, I think they underestimate the extent of regional price variability, and thus the importance of incineration as an alternative. I assume throughout that the cost of burial itself will not change much, an assumption I return to below.

Currently, the U.S. buries about four-fifths of the trash it doesn’t recycle or compost. This makes sense because burial is currently much cheaper than incineration, as on average, burial is 20 to 30 percent cheaper. But an examination of actual prices suggests that there is very wide variability in prices, and that incineration may well make sense in cities with little room to expand, especially when haulage costs are considered.

As of 2024, the average ‘gate fees’, which are the cost to bring garbage to a landfill, range from around $45 per ton in the South Central U.S. to $80.67 in the Northeast. By state, prices range from about $35/ton in Kansas to $124.25/ton in Alaska. These figures don’t include transportation costs, which can substantially raise prices.

For cities with ready access to reasonably priced dumps, burial is the clear choice, though not necessarily a permanent one; as Shenzhen is now discovering, airspace filled cheaply today can become an excavation bill decades later. The set of such cities is also shrinking for reasons that have little to do with environmental politics: Iowa and Tennessee are Republican-run and land-rich, and neither can site what it needs. But for others, the math runs the other way, and it is not close.

SCARCE GOOD IS PERMITTED CAPACITY NEAR A CITY

But new landfill space requires land and technical investments, transportation, political permission, and overcoming NIMBYism. And when landfills close, the land doesn’t then become available. Fresh Kills is supposed to become a park, eventually, and will be 2,200 acres, almost three times the size of Central Park. That will take decades and considerable money.

“Cheap and close” has a date on it

These arguments assume that short-term landfilling conditions hold true over time horizons of several decades. But these conditions change over time. The amount of airspace will be used up. The list of substances of interest will increase.

PFAS get through landfill liners and make their way into the leachate. There’s no standard for PFAS in landfill leachate at this point, but that doesn’t mean compliance isn’t expensive, just that no one knows how expensive compliance will be.

In 2024, EPA designated PFOA and PFOS as hazardous substances under CERCLA (upheld by the D.C. Circuit in August 2026). Landfills face strict, retroactive CERCLA liability, and there are no exceptions for landfills that are merely receiving someone else’s waste.

Urban growth is encroaching into formerly peripheral areas closer to the center of town. This means that the opportunity cost of using land for landfills is increasing.

Shenzhen’s Yulong landfill, where China’s largest-scale landfill excavation began in 2024, demonstrates how landfills are an implicit liability. Yulong was Shenzhen’s first municipal landfill, originally opened in 1983 on the periphery of the city. The landfill accepted waste until 1997 and was capped in 2005 and is now surrounded by high-rises. Now, however, it is being excavated, with waste sorted into different material streams, the combustible fraction being taken to nearby waste-to-energy plants, and contaminated soil being excavated for treatment. The landfill did not have an impermeable liner at its base. The project involves the removal of 2.55 million cubic metres of waste and is scheduled for completion by the end of September 2026, freeing up approximately 30 hectares of land to be developed as an industrial cluster.

When presented with shrinking landfill volumes, cities have four options: ship, expand, treat, or minimize. Shipping and expanding are popular options at the moment, but these too are finite strategies that don’t change the amount of garbage we produce and have to stick into the ground.

In Iowa’s Boone County, officials are taking steps to stretch the life of its landfill. Starting in July of 2027, it will stop accepting garbage from Ames. That should add an estimated two decades of capacity.

Nearby in Linn County, there’s no comparable land to accommodate a new landfill. Officials say they’ll likely turn the landfill into a transfer station and pay to have the garbage taken elsewhere, a move they expect could double tipping fees.

Already, the landfill near Marion has absorbed debris from a 2008 flood, a 2020 derecho and a hailstorm that damaged more than 80,000 roofs across eastern Iowa. Officials expect the landfill will fill eight years earlier than anticipated, in 2036. As Boon’s administrator puts it, “we are running out of room, and it’s not just the Boone County Landfill.”

All of which leads us back to the Tennessee legislature, and solutions. The Waste-to-Jobs bill, for instance, would require brands to pay to fund statewide collection of aluminium, glass, and plastic. Its sponsor believes “it’s not going to happen with incremental steps.” That’s all very nice, but the plants needed to divert are not yet built, markets to buy diverted items are assumed, not necessarily assured, and $171 million a year in valuable material is a lot of maybe. Passing diversion bills is cheap; delivering diversion isn’t.

Seoul could not replace its landfill, so it changed the law instead

Nanjido Landfill started operating in 1978 and was planned to be used for five to six years. Today, it is remembered as a mountain that reached a height of 98 meters. Similarly, the Sudokwon Landfill in Incheon, which has been receiving garbage from Seoul and Gyeonggi Province since 1992, is now approaching its own last day.

The Environment Ministry said it was unable to find a site to replace Sudokwon. The ministry conducted two rounds of public recruitment in 2021 and promised various incentives. Still, no one applied. In particular, the mayor of Incheon has been opposing the landfill’s receipt of garbage from other regions. According to various opinion polls, over 80% of Incheon residents said they are against accepting garbage from other regions.

As of January 2026, garbage from Seoul, Incheon and Gyeonggi that has not been treated is not allowed to be buried at the landfill. Only non-combustibles and incineration ash may be buried. On the second day of the ban, the amount of garbage entering the landfill was 66 tons. The amount of garbage brought in was about 3% of last year’s daily average of 2,045 tons.

The ban has been applied as planned, but the alternative measures are inadequate. In particular, the gap in garbage incineration is emerging as a problem. Seoul produces about 3,000 tons of garbage every day, but only about two-thirds is being incinerated at the city’s Mapo, Nowon, Yangcheon and Gangnam incineration plants. The total capacity of the four facilities is 2,200 to 2,300 tons a day. Recently, as garbage management has become stricter at each plant, the share being treated rather than buried is known to have risen to about 83%. Still, it is not enough to deal with garbage on its own. Since March, the government has allowed up to 163,000 tonnes a year to be buried untreated as an exception while public incinerators are under maintenance.

That is why Seoul’s district governments have been contracting private incinerators outside Seoul. For example, Gangdong District uses private incinerators in Cheonan City of Chungnam and Sejong City, while Gangnam District uses the incinerator in Cheongju City of Chungbuk. Geumcheon District uses those in Gongju City and Seosan City of Chungnam as well as Hwaseong City of Gyeonggi Province, while some of Seoul’s trash goes as far as Gangwon Province.

Seoul Metropolitan Government plans to build an incineration facility in Mapo Ward, but the plan has yet to make progress. It is planning to build an incinerator that utilizes the underground with a park built on the surface, but is encountering opposition from Mapo Ward, and courts have twice annulled the site decision.

The use of incinerators outside the region costs about $33 per short ton more than disposal at Sudokwon Landfill. Disposing of garbage at Sudokwon costs about 116,800 won, or $73 per short ton, but garbage transported to private incinerators costs 170,000 won, or about $106 a short ton. The reason garbage had to be transported to private incinerators is that public incinerators were not built before the ban took effect. Not building them first is what made the ban expensive.

Landfills are cheaper than incinerators and resource recycling. But short term cost-effectiveness is beside the point. Especially, when no one will host a landfill at any price, incentives included. Seoul’s predicament is what happens when a city leaves its disposal plans until the deadline.

WHAT TREATMENT DOES TO THE QUANTITY

“Treatment” refers to several different configurations. Composting and anaerobic digestion target organic material and avoid creating methane. Mechanical sorting would allow for the removal of recyclables, but has no provision for organics. The production of RDF could be sold to cement kilns or other nearby boilers; Ames has used RDF since 1975, and German and Dutch cement kilns operate on greater than 60 percent alternative fuels. However, this would require a receptive, proximate boiler/kiln owner, and is less intensive in terms of implementation than a mass-burn plant and an option for communities without a heat sink. Mass-burn would provide energy recovery, but also conserve the most landfill space. Therefore, the best waste assessment would include a plan for a mixture of waste treatment options.

Volume. Contrary to popular belief, incinerating municipal solid waste (MSW) does NOT save 90% in disposal capacity. That figure comes from comparing loose waste volume to compacted ash volume, instead of a more honest airspace to airspace comparison. Consider an annual waste stream of 1/2 million short tons (= 454,000 tonnes):

• If all of it goes to a modern landfill, including compaction and cover material, it has a placed density of 0.75 tonnes/m3, so it uses 605,000 m3 of airspace per year.

• If all of it is combusted, the resulting ash is around 20-25% by weight of incoming waste, and the air pollution control residues are another 3-5%, after deducting recovered metals. That’s about 99,000 tonnes per year. Ashes pack out at a placed density of about 1.6 tonnes/m3, so the ash uses about 62,000 m3 of airspace per year, or about 80,000 m3 once you add the waste that has to be exported when the incinerator is unexpectedly shut down.

So the actual volume reduction is about 87%. Over a 30-year period, that’s a difference of about 63 ha of new landfill at a cell depth of 25 metres. The real-world figures will vary depending on waste characteristics, ash/APC residue fractions, credits for ash used in construction applications, and compaction in the landfill.

Incineration does have an independent volume reduction benefit, which is very important where land is limited. But incineration doesn’t obviate the need for disposal. Singapore has no land to spare for landfills, incinerates virtually all waste that will burn at four plants, and it’s on track to fill its landfill by ~2035 (hence the goal in its Zero Waste Masterplan to cut the amount of waste going to the Semakau Landfill by 30% by 2030). Japan directly incinerates about 75% of its MSW at about a thousand plants, and has been building new land in the sea with its ash for decades, but its capacity for engineered landfill at Tokyo Bay will run out in roughly 50 years, on a 2017 estimate, and localities continue to struggle to find disposal sites.

WHICH RISKS A CITY CAN ACTUALLY MANAGE

While neither option is safe, each poses very different risks; the key strategic question is figuring out which ones the city government will be best positioned to bear.

Export agreements are generally five-to-twenty year contracts to address a thirty-year problem, with escalation rates that reflect market conditions and may be compounded. However, these agreements may not adequately price-in certain critical risks.

Rail rates, fuel costs, truck driver availability, landfill consolidation, landfill life, landfill closings, the ability of other states’ legislatures to prohibit importing trash are just a few of the critical risks associated with exports that are beyond the control of a city, especially when exporting several hundred miles away. Most of these risks are controlled by others, in other states or other jurisdictions.

However, the biggest risk is construction cost/schedule risk. However, this is a one-time risk prior to operations and is relatively straight-forward to mitigate with the right turnkey lump-sum contracts with liquidated damages for schedule delays.

Once in operation, O&M cost/performance risk can be mitigated with appropriate performance guarantees. Availability guarantees cap O&M risk. Fee payments will not change if throughput is higher/lower than predicted.

Therefore, volume risk, which is really a type of local policy risk, is more interesting. Total tonnages are a function of waste diversion goals and recycling mandates. For example, the Osaka Bay Phoenix scheme overcomes this risk by pooling waste from numerous Kinki region municipalities, diversifying the risk of erroneous forecasts by individual municipalities.

Volume risk could be reduced contractually as well. Thirty-year waste volume guarantees are difficult for local governments to agree to, but projects could be structured to give operators merchant tails. Shorter contracts reduce the duration of volume risk. It is true that risk accepted by the lender will be compensated for in capex rather than donated, but that price belongs in the capital line.

The most difficult risk to mitigate, it turns out, is jurisdictional risk, although this doesn’t show up on the balance sheet as an asset or a liability. A big metro area can easily buy twenty years of landfilling, or it can buy remote landfilling as needed, but it can’t buy thirty years of political acceptance in a community that happens to be located in another state, and three states removed at that. Such acceptance broke down in Korea.

Overcapacity can take two different forms. One is physical. When waste volumes fall, furnaces that processed waste efficiently at one time are then processing it inefficiently. The other form of overcapacity is financial. This is the result of building too many furnaces relative to waste volumes.

But overbuilding can occur because planners are unsure whether waste volumes are likely to be high or low. In that sense, overbuilding is a bet against waste minimization efforts succeeding. Overcapacity is bad news when it is the result of falling waste volumes or overbuilding or both.

But it’s not necessarily better to avoid the challenge of managing surplus treatment capacity by filling landfills. Denmark provides an instructive example. In 2020, Danish lawmakers agreed to close seven waste incinerators. As part of the agreement, incineration capacity will be reduced by 30 percent by 2030. Denmark has been burning about a million tonnes of imported waste each year to keep its furnaces fed. Denmark built for worst-case scenarios that did not materialize and has now agreed to downsize.

There are financial penalties associated with Denmark’s excess furnaces; capital was committed in anticipation of wastes that aren’t coming, and loans remain outstanding for plants that won’t be used. But at least Denmark’s excess furnaces can be taken out of service, and it is doing just that, albeit reluctantly and over time. It cannot do anything analogous with landfill airspace, which, unlike treatment capacity that wears out but can in principle be rebuilt on its own footprint, is gone once used. In principle is carrying weight there, as Seoul’s twice-annulled Mapo replacement shows. Once lost, landfill space can be recovered only through excavation. Seoul can’t get its airspace back at any price.

Having sufficient treatment capacity is no guarantee that a city is managing its wastes wisely---it could be collecting them sloppily, accepting high emissions from treatment, or neglecting waste prevention strategies---but retiring surplus incinerators is not inconsistent with a preference for treating wastes rather than depositing them into the ground, treated or otherwise.

Overbuilding incinerators can be bad news financially, but the bill for having built too much incineration capacity isn’t reason to conclude that it would have been better to fill landfills (think penny wise, pound foolish). For cities without space to fill, the key policy decision is whether to pay a premium to build treatment capacity.

Relatedly, the costs of getting out of remote landfilling can be very different from the costs of getting out of surplus capacity. When landfill sites are filled, someone has to pay to dig them up, sort them, burn them, and fix the sites, as is happening now in Shenzhen. When plants are unnecessary, someone has to write off stranded capital, as is happening now in Denmark. This is not to say that cities are better off owning plants, but the risks are not symmetrical and the costs of failure are very different in the two cases.

Finally, locking in capex doesn’t lock in the price of waste management. A large share of gross annual plant expenditures will be on operations, reagents, ash disposal, and waste export during outages, all of which are highly dependent on input prices outside the city’s control. On the other hand, some expenditures will be offset by power and scrap revenues, which will be exposed to volatile commodity prices. Thus, building a waste-to-energy (WTE) plant will fix some, but by no means all, of a city’s waste expenditures to a quantity.

WHAT COMES OUT OF THE STACK

Clean incineration is no abstraction. Tokyo has twenty-one incinerators serving its twenty-three wards, several of them in neighborhoods. Copenhagen has an incinerator within the city, complete with a ski slope on the roof. Both operate under different but similarly stringent regulations that demonstrate incinerators can be built and operated in communities, and do so cleanly.

In Japan’s case, its success has been nothing short of stunning. In 1997, a survey examined approximately 1,150 municipal waste incinerators and found 72 with dioxin emissions over 80 nanograms of toxic equivalent (ng I-TEQ) per cubic meter. The resulting Law Concerning Special Measures against Dioxins, which was promulgated in July of 1999 and went into effect in January 2000, set a limit on dioxin emissions from large new incinerators of 0.1 ng I-TEQ/m3, as well as higher limits on smaller units, and regulations on emissions from ash as well as flue gas. The U.S. limit for new MSW incinerators is still written as a total mass figure rather than in toxic equivalents. By 2004, Japan’s total national dioxin emissions had fallen by about 95%, from an estimated 7,680 grams of toxic equivalent in 1997 to 341 g TEQ, and have continued to fall since (98% decrease as of 2010). To be sure, Japan’s dioxin problem was worse than ours, but that hardly excuses our own timidity on waste incinerators; Japan has shown it is possible to go from 80 ng/m3 emissions to 0.1 with comprehensive legislation in approximately five years.

The Best Available Techniques conclusions on Waste Incineration in the European Union were released in December of 2019 and were required of more than 500 facilities by the end of 2023. BATs set emission limits on dioxins, dioxin-like polychlorinated biphenyls (dl-PCBs), mercury, other metals, acid gases including HCl, HF, and SO2, ammonia (NH3), nitrogen oxides, volatile organic compounds, particulate matter, and carbon monoxide. They also call for continuous monitoring of mercury and long-term monitoring of dioxins/furans, which is stronger than the current U.S. MACT requirements of stack tests once per year, tests which the industry knows about ahead of time, and therefore can game.

In short, Japan’s dioxin-specific standards, as well as the more comprehensive EU regulations, show that modern incinerators can be built and operated in communities. It is a challenge for the U.S. to catch up to those countries’ regulations, and therefore incinerators that meet them, but it’s a challenge we’re reluctant to take on.

The American record is what weaker limits and weaker enforcement produce. The EPA’s 1995 emission standardsresulted in more than a 99 percent reduction in dioxin and furan emissions by December of 2000 (compared to a 1990 baseline) and more than a 93 percent reduction in cadmium, lead, and mercury emissions.

However, in 2011, the New York State Department of Environmental Conservation found that the state’s ten MSW incinerators emitted fourteen times as much mercury per unit of energy as its eight coal-fired power plants, and more lead and cadmium as well. It also makes sense to build these where they can sell the heat. Conversion efficiencies in the low twenties sound bad in terms of energy in/out, but at least provide an excuse for where to build them.

Communities near WTE plants have long shouldered disproportionate negative effects of these plants. The Tishman Environment and Design Center found in 2019 that 58 of the 73 incinerators in the country, which make up about 80% of them, are in communities where at least 25 percent of residents are low-income, people of colour, or both; a total of about 4.4 million people live within three miles of an incinerator. Ten of the twelve incinerators that emit the most lead are located in low-income and/or communities of colour. Some cities have been able to close their plants, which is definitely a win. In 2019, Detroit’s WTE plant operator shut the plant down after a threatened Clean Air Act lawsuit citing more than six hundred violations of federal emission limits.

In January of 2024, the EPA proposed a standard of 110 parts per million of NOx for existing plants, but new plants will have a limit of 50 ppm. The final rule, signed in March 2026, kept 50 ppm for new plants but is weaker than the proposal and doesn’t tighten NOx limits for mass-burn waterwall units, the most common design. Selective catalytic reduction (SCR) technology is also only required for new plants. Meanwhile, incinerators in Rahway, Essex County, and Camden, NJ have been violating emission limits repeatedly for pollutants like carbon monoxide, sulphur dioxide, and particulate matter, and are escaping with small fines. Clearly, lax regulations have not incentivized companies to uphold emission limits, and the fines have not been strict enough of a deterrent.

While these are legitimate reasons to be against WTE, I don’t think that we should give up on them altogether. If held to stricter emission standards, they have the potential to be less harmful to the environment than landfills.

What are some ways to improve WTE plant emissions?

• Constructing new plants should be allowed if they meet the Best Available Techniques standards from Europe and the dioxin emission limit from Japan, rather than the Maximum Achievable Control Technology standards in the US. The standards for legacy plants in 2026 are less stringent than what is already achieved in other countries: standards achieved in 2000 in Japan and 2023 in Denmark.

• Mercury should be continuously monitored. Dioxin monitoring should be continuous, as per the 2019 BAT conclusions. Data should be made public as soon as possible, not quarterly.

• Plants should be required to have SCR with a contractual obligation.

• Penalties for exceeding emission limits should be immediate and automatic, not reliant on community members to sue.

• APC residues should be sent to a lined monofill with a leachate collection system. Bottom ash should be leach tested before reuse in construction; those which do not pass should only be used in bound and sub-base applications.

• Siting criteria should take into account cumulative impacts.

WHY COPENHAGEN AND NOT CLEVELAND

Partly because mass-burn’s electrical efficiency is terrible. With efficiency at only the low-to-mid twenties, most of its energy content is released as warm air. But a plant can make money by selling heat, capturing much more of the waste’s calorific content. More than 60 percent of Danish households receive district heating; almost a quarter comes from burning trash. If it had a heat load, an American plant would be much cheaper. But only a few American cities have district heat; it’s not just a plant, but the pipes and pumps and customers to go with it.

It’s expensive to dispose of trash in Denmark because Denmark made it expensive to dispose of trash in Denmark. Denmark implemented a waste tax in 1987 and banned the landfilling of combustible waste in 1997. In Ohio, in addition to the gate fee, there’s a state disposal fee of $4.75/ton. Americans assume these prices to be a fact of nature, revealed through the invisible hand; for other countries, they’re an act of congress.

In the 1970s, Tokyo solved the NIMBY issue by making each ward responsible for its own waste; with a few exceptions, each of its 23 has a plant (21 total), some of them smack-dab in residential areas. Seoul’s four plants, in its 25 districts, were products of lengthy negotiations for compensation and agreements for joint-use; its fifth, and replacement for the Mapo plant, has been unable to find a home. If a country can build WTE plants, it’s because it worked to be able to build WTE plants; it’s an ability that atrophies through disuse and must be consciously reconstituted.

Ames, Iowa has been running the American counterexample since 1975. Its resource recovery plant shreds municipal trash, pulls out metal with magnets and burns the rest as fuel in the city’s power plant; in 2025 it handled nearly half the city’s waste stream. Ames is retiring it next year all the same, citing new regulations, rising operating costs and worn-out equipment, and will truck its trash to Carroll County instead.

Staff also mentioned a problem of composition drift, a cost escalator unique to waste plants. Initially, the feedstock is mostly paper, but over time there’s more and more plastic. When you burn plastic, it releases hydrochloric acid, which can eat through the tubes in a boiler, requiring downtime to fix them.

Second lesson from Ames is that there are certain economies of scale in operation. After looking at its numbers, Ames determined it was cheaper to truck to another county. If we had numbers for operating a couple of plants in succession, maybe an American city could follow Bornholm’s lead. But we don’t have those costs.

The island of Bornholm, Denmark, recently made headlines when it announced a plan to close its waste-to-energy plant in 2032 and “eliminate landfill and incineration as waste management options.” The island’s existing plant was coming to the end of its useful life, and, owing to unfavorable economies of scale, it opted not to replace it. At that point, the island of forty thousand already recycles thirty-nine percent of its household waste; the plan is to ship the rest off-island to be burned.

Finally, if you build one plant once every couple decades, you’re going to keep paying the price for first-of-a-kindness. Each project will be custom-tailored and involve expensive and drawn-out permitting, expensive lawsuits, a steep learning curve for contractors, new-fangled financial structures. In China, where there are 1,129, the economics are different; but that’s also due to other factors: cheap labor and land, different environmental regulations. Repetition and standardization drive down costs; China’s been building trash incinerators its whole life.

WHAT WOULD FOLLOW

It is not useful to compare current nationwide average tipping fees and transportation costs with the current nationwide average cost of MSW disposal at WTE plants. Cities should instead develop a 30 year waste disposal cost model for their situation and ask: At what escalation rate and delivered disposal cost does it make sense to build a WTE plant?

Although each city’s calculations are different, as long as delivered costs are likely to be greater than about $105/short ton, it’s worth doing the math. At costs over $135/short ton, a plant is justified in most circumstances. At less than $75/short ton, a plant is unlikely to be justified. Calculations hinge on escalation rate, site-specific construction costs, access to useful heat sinks, and terms of capital financing. But, generally, the answer will be surprising. It is common knowledge that cheaper, available MSW landfilling is less costly. But consider:

• WTE plants fix the capital charge, which is the largest single line and the one that escalates worst elsewhere. Landfilling at someone else’s facility means escalating rental payments. Transportation costs are more unpredictable. Closure is outside your control. Shenzhen’s original MSW landfill opened in 1983. After 40 years of explosive growth around the site, the city has begun to feel the pain of the dump’s existence.

• MSW landfilling burns through a non-renewable resource, consuming 600,000 of your precious, irreplaceable cubic meters each year.

• On a 30-year basis with city-financed construction costs, a plant is cheaper at any plausible escalation rate. About 63 hectares of landfill capacity will be saved, whatever discount rate is used. Only when all three worst-case assumptions hold true: a premium for plant construction, privately-financed construction, and no escalation in landfilling costs, does a WTE plant look more costly.

As the data-centre boom rolls on, some of them are starting to receive orders for the components needed in servers. Many of them had been losing share to Chinese and Taiwanese competitors. Now they have an opportunity to strengthen their capabilities with help from profitable orders for advanced products as well as government subsidies for some electronic components. How well they use this chance will shape Japan’s prospects of developing new strengths in electronic components, which have been a source of the country’s productivity since its postwar reconstruction.

Japan’s electronic-component makers vary widely in their financial conditions. For instance, Murata, which makes multilayer ceramic capacitors (MLCC), has an operating margin of 19.6% for April–June 2026 and has plenty of resources for investment. By contrast, Nippon Chemi-Con, which makes aluminium electrolytic capacitors, posted an operating margin of 4.4% for April–June 2026 and must revive its competitiveness with limited resources.

Profitable data-centre-related orders will help companies invest in technology. Ordinary orders will be necessary to maintain their production scale and customer relationships. Investments prompted by demand from servers can contribute to improving other products that share production techniques, materials, manufacturing processes and human resources. Against this backdrop, how much of these efforts can companies fund themselves? And in areas deemed strategically important, how much support from policymakers is needed to enhance Japan’s strengths? Murata’s MLCC manufacturing process and Nippon Chemi-Con’s technology for manufacturing electrode foil used to produce capacitors will be useful references for consideration.

Everyone wants the ordinary orders

For both, however, winning more orders, especially of general-purpose products, is critical. At market-leading Murata, management has lowered its minimum operating-margin target for the year ending March 2028 to 18% from the previous 20% as it tries to take on competitors by increasing its market share of multilayer ceramic capacitors (MLCCs), the most common passive components used in electronic equipment. Chemi-Con, meanwhile, wants to increase its operating margin to at least 8% in FY2028 from below that level as it looks to recapture general-purpose business.

In the quarter ended June, Murata’s higher utilisation rate boosted operating profit by about ¥48bn, far more than the ¥17bn help from a weak yen. Overall, operating profit rose ¥36.8bn from a year earlier. Chemi-Con also benefited from volume and currency, by about ¥1.5bn and ¥1.1bn respectively. Higher material, energy, selling and fixed manufacturing costs took back about ¥1.6bn, but operating profit still rose to ¥1.67bn from ¥0.15bn a year earlier.

The two firms’ different situations shine a spotlight on the broader challenge for Japan’s component makers: How to compete against rivals in China, some of which have been producing general-purpose products for consumer electronics at rock-bottom prices? Murata has ample resources: for the year ending March 2027 it plans ¥255bn of capex and ¥174bn of R&D spending, and it has a ¥150bn share buyback in the works. Chemi-Con, by contrast, has little room to expand when it is making only a thin operating profit.

Greater China accounted for about half of Murata's revenue for the fiscal year ended March 2026 and 44% of Chemi-Con's revenue in the quarter ended June this year.

Shipment value by JEITA members posted a second straight year at a record in FY2025 on strong server demand for AI-related applications. Shipments rose 4%. However, Japan’s share of the world’s electronic components has been falling since the mid-2000s, going from around 43% in 2006 to 32% in 2025.

Component makers in China have been getting strong government support in recent years. Viiyong, for instance, posted revenue of RMB1.041bn in 2023, jumping to RMB1.845bn in 2025. The company has a RMB3bn capex plan to lift its annual production capacity to more than 900bn units. Revenue from automotive applications jumped from just RMB14.7m in 2023 to RMB195.3m in 2025 as it won IATF16949 quality-systems certification and AEC-Q200 qualification for automotive MLCCs. The company has begun shipping MLCCs with high capacitance to major server makers, too.

Fenghua is focusing its MLCC investments on products for automotive and industrial-control applications as well as high-capacitance MLCCs after trimming planned investment to about RMB5.27bn from about RMB7.5bn, slashing capacity for smaller capacitors used in consumer products. Fenghua's project reached usable condition by the end of 2025, and its board approved closing it out in April this year. Both companies disclosed subsidies and tax breaks from the government, with Viiyong booking RMB41.5m in 2023, RMB50.7m in 2024 and RMB32.4m in 2025, while Fenghua has been getting support from local governments in the form of assets, income, and favourable tax treatment as a high-tech company.

Some rivals, such as Sanhuan, announced in 2023 they had begun mass-production of advanced MLCCs with dielectric thickness as thin as 1 micrometre and more than 1,000 layers. However, the company did not offer details on mass-production yield or automotive qualifications for reliability.

For now, it appears that Japanese component makers must win orders of general-use MLCCs in order to defend and expand their technological edge in high-end products. But they are not safe from Chinese competition in the upmarket either, as Viiyong is an example that has made technological advances.

Chemi-Con draws the line at foil

MLCCs depend on a range of specialised materials, and METI's policy for advanced electronic components notes that materials and production equipment strongly affect component quality, with much of the key technology lying in the materials. For example, Sakai Chemical develops barium titanate (ceramic material) with appropriate particle characteristics at its R&D centre in Onahama to meet requirements from MLCC manufacturers, while producing them for MLCC production lines at its own Iwaki plant. Similarly, Shoei Chemical develops and manufactures fine nickel powders and pastes as MLCC electrode materials at its R&D bases in Ome and Tosu using its own and its partners’ technologies, including those acquired through collaboration in Canada, then mass-produces them. Noritake is also conducting joint evaluation with MLCC makers of thermal conditions in manufacturing processes and transport conditions between processes at its Komaki plant.

Japan has already introduced subsidies for MLCCs and other components with a view to maintaining production processes and technologies. However, I would like to touch on a point that may have been insufficiently examined in deciding which products to subsidize.

Japan designated ¥21.2bn in the FY2023 supplementary budget to support production of cutting-edge electronic components. Eligible items include multilayer ceramic capacitors (MLCCs), film capacitors, certain types of filters, magnetic sensors, as well as some related manufacturing equipment and materials. Murata, with its subsidiary Kanazawa Murata, and Toray, among others, have been approved for subsidy projects, with maximum grants of about ¥5.4bn and ¥3bn respectively.

Chemi-Con has been focusing on improving yields to restore competitiveness, enhancing productivity, and shifting some products’ final assembly operations overseas. However, the company keeps foil production inside Japan. It transfers the finished product (foil) to its overseas production bases for capacitor production, but manufactures foil in Japan using its own technology. Chemi-Con is concerned that the production process (using chemical substance(s) in a bath and an electric waveform to expand the surface area of the foil, that is, its etching technology) may leak to competitors if it manufactures them overseas. The company is also concerned that it would become difficult to acquire/upgrade machinery incorporating its know-how for optimizing foil production.

However, aluminium electrolytic capacitors, the final products incorporating electrode foils, are not eligible for the current government support. Chemi-Con may find it difficult to apply for support, even if it wants to seek assistance from the government to maintain its advanced technology for foil manufacturing.

Since March 2024, METI has required companies applying for this support to protect core technologies by limiting who can access them. They must treat the engineers and other staff who have access appropriately, including on pay, and sign confidentiality agreements with suppliers that hold the technology. They must also consult METI in advance before, for example, transferring the technology, doing related R&D abroad or raising an overseas plant's capacity by more than 10%. That applies if there is a risk of forced transfer or leakage, or if METI asks. METI may consider it important for Japan to maintain production technologies for components where foreign companies are catching up. For example, Japan’s share of bulk acoustic wave (BAW) filters, eligible for the subsidy, is reported to have fallen below 10%.

While it is important to ensure continued production of such electronic components, the question is whether it is sufficient to identify products to support. Some components, even if widely available, may be difficult to replace in terms of manufacturing technologies. It seems to me important to introduce subsidies for manufacturing technologies/processes that are (1) required to maintain competitiveness in products, (2) difficult to replace, and (3) unlikely to be implemented/maintained without subsidies.

Hiroshima kept developing. At a price.

Micron may be foreign-controlled. But it operates the country’s only DRAM factory. That’s a point of strategic importance to Japan, given Elpida’s failure as Japan’s national champion. That failed memory maker received ¥30bn of preferred shares from the Development Bank of Japan in 2009 only to go bankrupt three years later as prices collapsed.

Micron bought Elpida, including its Hiroshima plant, in 2013. A decade later it made its first announcement of a Japanese investment in cutting-edge EUV lithography to make more sophisticated memory. The plant has been key to Micron’s latest generation of chips. It was the first to make 1-beta DRAM, and has been critical in ramping production of 1-gamma chips using EUV. Micron’s chief executive said the first wafer to make high-bandwidth memory started production at Hiroshima. In July 2026 it began work on another new cleanroom. Kota Nosaka, representative director of Micron Memory Japan, said around 80% of the chip materials the plant needs now come from Japan.

Japan Display: what’s to learn from JDI’s struggles?

By July 2026 Japan had earmarked about ¥775bn for Micron, including for research. It has a commitment from Micron to produce chips in the approved factories for at least ten years. Its 2025 business plan refers to training for adults. And the terms of the grants require reporting on progress, and clawbacks if projects fall through.

The question is whether it got good value for its investment. But it’s hard to assess a return on investment in industrial policy. Some will argue the point was to have Japan-owned memory chips; others say Japan-made chips were the aim; others argue Japan has to get a return on its investments. All are valid, but they’re not always in harmony.

In the case of Japan’s mobile-display maker, Japan Display (JDI), the domestic ownership criterion was met. But when Japanese investment vehicle INCJ invested ¥200bn for 70% of JDI, the display maker struggled. It stopped producing panels in Hakusan and scaled back mobile displays in 2019. By the time INCJ left JDI in 2025, total loans and investments were ¥462bn, of which it recovered about two-thirds. Its investment resulted in a ¥154.7bn loss.

What next for Japanese support of chips?

Beijing scrapped ownership requirements for assembling new-energy vehicles in 2018, allowing Tesla to own its plant. But the deal with Shanghai included a reduction in the rate of corporate taxes from the normal 25% to 15% between 2019 and 2023, and a requirement to invest RMB14.08bn by the end of 2023 and pay RMB2.23bn in taxes from 2023, conditions it met. And the share of parts made locally has risen from around 30% at the start of 2020 to 95% by December 2025. Meanwhile, more than 60 of the Shanghai plant's 400-plus tier-1 suppliers now also serve Tesla's global production network, according to a China Daily report on the Shanghai government's website.

Japan does not have the clout of China, whose huge market allows it to dictate terms to foreign companies. But future grants could include conditions on processes invented in Japan, how Japanese suppliers can win approval to supply chips to other customers, the number of workers who undertake paid training, publishing progress towards goals, and clawbacks if goals are missed.

Who gets trained to run the new lines?

Chemi-Con's subsidiary Chemi-Con Nagaoka had seven dual-arm collaborative robots and 11 other industrial robots working alongside its 87 employees in 2022. This reflects wider demand for automation against the backdrop of a shrinking working-age population in Japan and ageing in China. It also points to opportunities for Japan-based makers of robots and other technologies and integrators of automated processes using robots, inspection technologies, tooling, controls, etc.

However, automation creates shortages of other types of skills. Companies will not necessarily be able to recruit enough people with skills to keep automated systems running, fix errors, and optimise them. Investment in modernising the production process is constrained by a shortage of talent to maintain and improve that process.

One option is training. Training is inadequate, especially among non-regular workers. According to the labour ministry’s FY2024 survey, the share of employees who have received off-the-job training was 44.6% for regular workers, but only 18.4% for non-regular workers.

Companies that receive subsidies to introduce automation should be made to offer paid training opportunities for “non-regular” workers in the labor market who can potentially take on more technical roles. Companies should be expected to provide career paths for such workers to regular, technical positions. This is a tall order. But given the importance of upskilling technical workers in Japan, I think it can be justified, especially in cases where government support is provided.

Companies should be asked to disclose the number of workers who complete such programmes, the number subsequently hired as regular employees, their retention rate, and wage increases. Modernising the manufacturing sector and improving working conditions both hinge on expanding the pool of workers with technical skills.

What I’ll watch next

Murata has more than enough capacity to make these investments. Chemi-Con likely doesn’t. But thin margins aren’t in and of themselves an argument for support.

This is the opportunity. This is what support should be predicated on. This is what I would look for in any applications for support from component makers during the current buildout:

• At Murata: materials, process, and yield investments to improve MLCC quality; investments to make Murata’s MLCCs more competitive for general-purpose applications.

• At Chemi-Con: next-gen foil at Takahagi; better automation at Nagaoka; a cadre of technicians who know how to keep the foil-making equipment running.

• More generally, a credible answer to questions: How much of this investment stays in Japan? How much of this investment wouldn’t have happened without government support? And can you point to clear, measurable investments in productivity and process gains, and paid-for worker training?

Because the ultimate goal shouldn’t just be making sure Chemi-Con and Murata capture as much value from data centre demand as possible. It’s using investments during this period of strong demand to broaden their abilities to make other kinds of components. The question is whether Japanese producers and suppliers will be competitive when data centre demand cools.

It’s hard to tell whether the great burrito debate of 2026 is a symptom of or a cause of high prices. On 5 August 2026, Andrew Kolvet, a Turning Point USA spokesman, posted a picture of a student’s complaint that a burrito shouldn’t cost $20. The post has been viewed more than three million times. Conservative commentators, including Ben Shapiro, Marc Thiessen, and even JD Vance, are weighing in on whether the student is being fair.

But the median price of a burrito in a restaurant, according to Toast, an American restaurant analytics company, is $13.67, as of July 2026, which is up 2.2 percent on the previous year. Chipotle, the burrito chain, claims the average chicken burrito costs less than $10, although the median is only a statistical abstraction; every time you order a burrito, you get a different price. That said, you can get a frozen burrito at HEB in Texas for as low as 58 cents a pop. Let alone going to a smaller restaurant (who frankly deserves more business than Chipotle).

The food component of the consumer price index (CPI) is up about 34 percent since the beginning of 2020. But some items have become more expensive than others. However, burritos don’t seem to be one of them. Yet, there is smoke in the air, so where is the fire? What cause these debates in the first place?

The fire seems to be (at best) an ill-advised attempt at improving the efficiency of Chipotle’s business. Keeping the real prices the same, while increasing the variation (often in the direction of worsening customer experience and reducing the quality and quantity of burrito stuff).

How Did McDonald’s End Up Building Chipotle?

It started with the world’s most ill-advised options trade, made by Bill Ackman (before he decided to be a full time influencer on Twitter, attacking Zohran Mamdani). In 2005, Ackman was pressing the world's largest hamburger chain to spin off 65 percent of its 8,000 company-operated restaurants and borrow $14.7 billion against its real estate, a restructuring he claimed could lift the share price by half. Most of Pershing Square's 4.9 percent position was held in options rather than stock, which gave him a clock to work against.

It was not clear that McDonald’s was doing well. The company had made some poor acquisitions in the late 1990s. It bought Boston Market, a chain of restaurants that served roast beef and roast chicken. It bought a pizza chain. The most interesting one was a burrito chain called Chipotle: an initial minority stake of roughly $50m in February 1998, growing to about $360m over the next seven years. McDonald’s saw Chipotle as a counter to Taco Bell after falling behind in China, where it had been losing out to Yum Brands, the parent of KFC and Taco Bell.

McDonald’s was hands-off with Chipotle, which was still run by its founder and chef, Steve Ells. Under Ells’s management, the company flourished. In 2006 it became a separate business with its own stock; McDonald's aggregate gross proceeds from the IPO, a follow-on offering and the October exchange offer came to about $1.1bn. Ackman's position paid off handsomely, and he was out of McDonald's by 2007. Chipotle, meanwhile, went public at $22 a share and doubled on its first day of trading, and by August 2015 had reached an all-time high of $757.77.

Ells would have been delighted at the outcome. But he and Ackman were not on the same wavelength. Ackman wanted Chipotle to invest in its business as aggressively as it could to increase shareholder returns. Ells’s management team was more concerned about product quality and consistency. Ackman, who had founded an activist hedge fund called Pershing Square, was concerned about efficiency and reducing variance.

What Made Chipotle Different?

The reason is less interesting, but also less immediately apparent, for what it tells us about capitalism. Chipotle became Chipotle precisely because McDonald’s was hands off, and the same thing happened with other fast food chains. Chipotle, like other fast food chains, started as a competitor that attempted to copy McDonald’s, and was acquired by McDonald’s when it became an up-and-comer. McDonald’s invested hundreds of millions in real estate for Chipotle, and allowed the founder, a chef named Steve Ells, to turn down making french fries or building a family room or installing a drive-through or making the food cheaper with inferior meats. Then, when it became clear that the investment would never be recouped, McDonald’s got rid of it. The sale of Chipotle, and the ensuing public fight between the parent company and the founder, was conducted without even thinking about the workforce or the food. The other chains that followed Chipotle had less luck.

Qdoba copied Chipotle's recipe for success, including the open kitchen and assembly line, plus its own addition of queso and nachos, and was bought by Jack in the Box for $45 million in 2003, when it had 85 locations and $65 million in system sales. But when Chipotle started to expand beyond Denver, Jack in the Box treated Qdoba as a franchise, and installed it in second-tier strip malls. Consistency suffered, and Qdoba was sold to Apollo Global Management for about $305 million in 2018.

Baja Fresh went the other way. Founded in 1990, it was larger than Chipotle with stronger unit volumes when Wendy's bought it for $275 million in 2002. Wendy's did spend on it (a menu overhaul, remodels, and a fourth-quarter 2004 goodwill write-down of $175m to $195m) but never on the brand. In 2006 it sold the chain for about $31 million, a loss of nearly 90 percent.

Chipotle was different from all of these companies, though, and the reason has to do with a concept in cybernetics that has a surprisingly funny name: Ashby’s law of requisite variety, which is the principle that in order to reduce variability in a system, its regulator needs to have as many potential responses as there are states that the system might have to ensure that they never make it to the customer. (For example, Chipotle’s assembly line reduced variety by dividing the restaurant workers into people that pressed tortillas, assembled burritos, bagged them, and took money, and also hiring someone to just cook the food, to make sure the assembly people would never be slowed down waiting for it.) You could think of Chipotle as a company that took on the variety of restaurant operations so that its customers wouldn’t have to, with slack in the system.

Managers were the key, and Chipotle hired the best ones, paying them six figure salaries at a time when few other restaurant chains were doing that, and then evaluated them not just on profitability, but also on how well they could retain their employees and keep morale high and the employees working well together. In addition to its assembly line, the company hired people to cut the cilantro by hand, and to help make sure the food cooked quickly and the assembly line wouldn’t slow down. The managers were allowed to hire heavy, too, which let them control variety and quality themselves. This is also the W. Edwards Deming principle that the optimal performance of a component is not necessarily the best thing for the system as a whole, meaning the component should be allowed to lose money so that the system makes more.

In addition to all this, the counter gave Chipotle a feedback loop, which Stafford Beer called the algedonic channel, that let the managers watch the people that were getting the food, and immediately fix anything that was wrong, from the food itself to the cleanliness of the space. Chipotle grew deliberately, expanding only into markets it could staff with managers it trusted, and set sales records through the great recession. But it was never small: over 500 restaurants by the time McDonald's fully divested in 2006, and 1,572 in the United States by the end of 2013.

It was this management style that allowed the stores to be generous with portions, and made the consistency of generous portions a strength. It’s important because, in a system of speed service, you can’t allow the customers to negotiate, since one customer haggling would slow down the next person in line at lunch. Ells was able to ignore regular price increases (raising the price only when the quality of the ingredients rose) because of the efficiencies he was able to get from his workforce, and he refused to install self-serve kiosks and went out of his way to emphasize the human element. He was willing to take carnitas off the menu at about a third of restaurants in January 2015, after a routine audit found a pork supplier out of compliance with Chipotle's animal-welfare standards, rather than fill the gap with conventionally raised pork. All this added up to an efficiency and consistency that was the stuff of legend, and when McDonald’s sold off its equity stake, the new investor activists had to be careful that they didn’t break what was working. The result was that Chipotle’s stores outperformed not just fast food, but also steakhouses on margin, with higher revenues than the traditional chains and profit margins that exceeded the steakhouses, along with almost no marketing spend. In the decade before 2015, when its stock multiple was higher than anything in McDonald’s history, Chipotle had 9 percent annual same-store sales growth.

What Went Wrong in 2015?

In 2015, Chipotle had a series of food safety incidents. Over the course of a little more than six months, five people fell ill with E. coli O157:H7 in Seattle in July, at least 234 with norovirus in Simi Valley in August, 64 with Salmonella Newport from tomatoes in Minnesota in August and September, 52 with E. coli O26 across nine states from mid-October, and at least 136 with norovirus in Boston in December. In total, more than 500 people across a dozen states were sickened by four different pathogens. The Boston outbreak was later attributed to an apprentice manager told to keep working after vomiting in the restaurant, who two days later helped pack a catering order for the Boston College basketball team.

Chipotle finished 2015 down 30 percent from its August high. By July 2016 it was at $431, down 43 percent from the peak. It did not bottom until August 2017, at $295.11.

Ells’s response was to spend a few million dollars on free burritos, and to overstaff restaurants (which is not a bad idea except that it increases labor cost, which was the result: Chipotle’s operating margin went away in a heap). He was committed to the idea that Chipotle restaurants should continue to do everything by hand, from the prep work on, and to buy produce from local and small farms (which would make it harder to track down a food safety culprit).

His co-chief-executive, Monty Moran (a Chipotle original and Ells's childhood friend), had taken home $28.1 million in 2014 against Ells's $28.9 million; both packages were roughly halved the following year, to $13.6 million and $13.8 million. The eye-watering numbers came the year before the crisis; the year the crisis hit, the company's market value fell by more than $10 billion.

Ells’s chief marketing officer was arrested for drug possession and conspiracy after police wiretaps recorded him discussing arrangements for a monthly cocaine supply. Ells brought him back three months later.

Meanwhile the CDC and the FDA investigations were closed without identifying a specific food item in either of the E. coli outbreaks.

In April 2020 Chipotle agreed to pay a record $25 million fine as part of a three-year deferred prosecution agreement with the DOJ related to food safety outbreaks that affected more than 1,100 people from 2015 to 2018. It found that Chipotle allowed sick workers to come to work and stored food at unsafe temperatures.

Ells’s system had been designed in a way that obscured its own causes. Deming wrote about this. Chipotle sourced its produce from a network of small farms, but didn’t enforce tracking. It did everything by hand and in restaurants. Nobody knew where or when batches had been delivered. Chipotle’s chief of outbreak response said that the tracking system wasn’t granular enough to handle an emergency.

Ells gave a televised apology, and started making some changes to Chipotle’s processes after the fact. His system had failed, but he didn’t know why because he’d designed it to be so loose, and because he didn’t have to worry about cost. His idea of success was based on building loyalty.

Why Was Chipotle So Easy to Take?

In 2016 Chipotle was mired in a series of food-poisoning and safety scandals. Ackman had the perfect excuse to step in. On 6 September 2016, Ackman disclosed that Pershing Square had bought a 9.9 percent stake, worth about $1.2bn, in Chipotle. The 13D covered 2,882,463 shares and made Pershing the second-largest holder. A criminal investigation had already been opened.

Chipotle’s board, for its part, had been chided by shareholders for lack of oversight. Before Ackman made his move, CtW Investment Group (a shareholder activist group that works with union pension funds) and Amalgamated Bank said the nine-person board was insular , long-tenured, and not independent enough to provide oversight.

Chipotle’s management hired bankers and lawyers to defend itself against Pershing Square, and Ells spurned it. But that was easier in theory than in practice. Pershing Square’s power came from its ability to influence the index funds that already owned Chipotle, and they were already unhappy because of the food poisoning fiasco. Before the crisis (and for the first time in Chipotle’s history), the opportunity had arisen for a successful activist takeover. Until 2014, Chipotle stock’s performance was more than 3,000 percent.

On 8 December 2016, Chipotle ended its co-chief-executive arrangement. Moran resigned. Ells remained CEO.

On 16 December 2016, Chipotle named four new directors effective 14 December 2016, bringing the board to twelve. Pershing Square’s partners Ali Namvar and advisory board member Matthew Paull (the former McDonald’s CFO) both got seats, as did two independents (Paul Cappuccio and Robin Hickenlooper). Now Pershing Square had two seats on a twelve-person board. Moran was gone three months after the 13D, under pressure from Ackman, and Ackman helped bring Brian Niccol aboard as chief executive in March 2018.

These events led directly to $100 million in cost cuts and an earnings-per-share target of $10 (which, it should be noted, required that Chipotle give up some of the messaging that it had employed before about the future of food and culture), and the hiring of a new chief executive in Brian Niccol, from Taco Bell. Niccol was the right person for this job. He had a track record of getting companies to meet their cost goals and of implementing a customer-facing strategy based on engineered scarcity (limited-time offers) and mobile ordering. He’d built loyalty in a way that Ells hadn’t.

By mid-2017, Chipotle was singing a different song. There had been no contamination incidents in about nineteen months. Sales were growing. Then in July more than 135 people were sickened by norovirus at the restaurant in Sterling, Virginia, again traced to an ill food handler, and the stock fell to a four-year low.

Was It an Accident, or Was It the System?

The Board used the Boston outbreak to claim that meaningful change had occurred when in fact nothing had changed at all. The entire special-cause variation that Ells’s system overlooked was that one ill worker stayed on the job when she should not have, a zero tolerance policy violation. This one violation was enough to give Ackman the opening he needed.

The opportunity for Pershing Square to extract value would not have arisen without Ells’s missteps. The governance failures (Moran’s salary relative to tech industry C-suiters, the board insularity that led to Amalgamated Bank and CtW Investment Group acting on behalf of union pension funds as institutional investors) all were Ells’s own doing and spoke to a character weakness that he showed when he let loyalty to a friend override his sense of duty as CEO and fiduciary to shareholders.

And his commitment to the small farms and the hand-prepped produce was not a failure of quality control; on that, Ells had the advantage that he cared. He just needed a little help from W. Edwards Deming: that quality comes not through inspection, or even adjustment, but improving the design of the process.

But Pershing Square was bleeding. Assets under management fell from $20.2 billion in mid-2015 to $8.2 billion by March 2018, with investors requesting roughly two-thirds of the cash that could be withdrawn, and the firm cutting headcount and lowering its management fees. Ackman needed a visible win, fast. Chipotle would deliver, in spades, because the CEO and his board had already declared norovirus in Virginia an accident when it was actually a special-cause variation in their system. The board was looking for a leader who could improve its image, but they didn’t know how to fix their system, so their new hire was an extractor, which is what he was best at. The norovirus outbreak was an accident because the board didn’t see it as an expression of an underlying failure in the design of Chipotle’s processes and practices.

What Did Niccol Change?

Niccol was hired from Taco Bell where his superpower was in creating demand through engineered scarcity: he would sell a limited-run item and use the wait list, the social media buzz, and the mobile app to create a feeling of must-have-it-now.

At Chipotle, his first major initiative was to grow Chipotle’s app, which rewarded loyalty through a membership program. The rewards program meant that the app could push targeted promotions to a base that now stands at more than 21 million active members. Niccol built a secondary assembly line directly behind the counter, for people who ordered through the app. Those app orders would amount to about 35 percent of total sales, and would double throughput with no increase in the store’s footprint or staffing. And because the customer wasn’t watching, the company eliminated the feedback loop, that conversation between the customer and the crew. Now, rather than each meal being an opportunity for a tiny amount of customer service, or for the customer to exert influence over the outcome, the only feedback was from reconciling inventories at the end of the night.

The rewards program meant that the app could push targeted promotions to a customer base that grew to about forty million.

Over the next few years, Ackman and management at Chipotle implemented a series of measures to tighten control. In the name of consistency, employees were told to use robots to portion the meat. You think that would reduce variance, especially as robots are used to ensure consistent quality in other restaurants, but it seems the bad tail got fatter than the good one at some locations!

You see, managers had to walk around every night with a list of supplies to make sure everything was there, and if there were shortages, they had to report it. Managers and cooks would be told about outliers. A manager who had a lot of high or low outliers might be retrained.

The new system of controls and accountability eliminated all slack in the system. The deliberate overstaffing was gone, and all buffers that absorbed variation were considered waste that could be recovered. Variation in outcomes became more pronounced (the scatter plot shows it). In order to maintain “consistent portion sizes,” Chipotle began retraining the worst ten percent, the same fallacy committed in the funnel experiment: assuming common-cause variation was the result of special-cause variation.

At the corporate level, the headquarters moved from Denver to Orange County, the employees who’d been there since the nineties drifted away. A fifteen-year lease had just been signed in Denver, the menu prices went up fifteen percent (and began to go up every six months) and the experiments were wound down, (though most of that predated him): ShopHouse's fifteen locations closed in March 2017 and Tasty Made's single Ohio restaurant in February 2018, days before Niccol started, with Pizzeria Locale surviving until 2023. Expansion goals were raised from 6,000 to 7,000 locations, on the strength of small-town units, with the market definition broadened to towns of 40,000 people as the drive-throughs were introduced.

Food, beverage and packaging costs fell to 29.5 percent of revenue in 2023 while restaurant-level operating margin rose to 26.2 percent, from 23.9 percent the year before. By 2024 food costs had ticked back up to 29.8 percent. Through 2024, under Niccol, Chipotle has averaged high single digits growth each quarter (Comparable sales rose 8.0 percent in 2022 and 7.4 percent in 2024). The same figure that Ells achieved during the decade before 2015, but in a different way. First by attracting more customers; now, by getting more money out of those that remain.

Did the Portions Actually Shrink?

In June 2024 a Wells Fargo team led by Zachary Fadem ordered and weighed 75 like-for-like burrito bowls across eight New York City locations, half digital and half in store. At the median the two channels came out nearly identical. But the heaviest in-store bowl weighed 47 percent more than the lightest, and for digital orders the gap was 87 percent (between a 26.8-ounce bowl and a 13.8-ounce one). Fadem wrote that consistency varied widely, with some locations serving bowls about a third heavier than others, and that order consistency remained an opportunity for the company. And the majority of the ten lightest bowls came from one store, ordered digitally.

Yet, Food, beverage and packaging costs, however, increased to 30.6% in the third quarter, compared with 29.7% a year earlier. Niccol attributed the higher costs in part to portions.

Analysts have called results “highly variable” and said they “warrant further analysis and monitoring,” with Wells Fargo has noted dispersion in portion size has nearly doubled. That dispersion was attributable to consistency within Chipotle’s chain, not just within a particular restaurant, setting Chipotle apart from other fast-food chains like McDonald’s.

Niccol also mentioned in July that at least 10 percent of Chipotle’s 3,500 locations were underperforming in terms of servings, that these outlier locations were identified and receiving coaching and that it is more expensive to be consistently generous with portions. A month later, Niccol left the company and took a job at Starbucks, if you call being the CEO a job.

In November, a disappointed shareholder sued Chipotle and its leadership, alleging that the company downplayed evidence that customers were unhappy with uneven serving sizes. In December 2025, Judge Sherilyn Peace Garnett tossed the case, saying the plaintiff failed to sufficiently allege the executives’ denials were false. In particular, the shareholder couldn’t show that portions were systematically shrunken as opposed to varying by location. Though the shareholder can retry their claims, Garnett’s ruling usefully outlines the difference between the two possibilities.

What Was Ackman Harvesting?

When all that is said and done, though, Pershing Square made a 16 percent return on its Chipotle investment from entry to exit. The S&P 500, by comparison, returned 15 percent. The activist effort involved two CEOs, a hundred million dollars in spending cuts (well, more than that but poetic flair after all), and took nine years. And it outperformed an index by one point.

The details of how it all happened are a case study in brand destruction through short-term margin extraction. When Chipotle hired a new permanent chief executive in November 2024, Scott Boatwright, he declared value pricing a nonissue. More than 60 percent of customers earned more than $100,000 a year, he said, apparently oblivious that they can be extremely sensitive to price and quality changes. In 2025, same-store sales fell 1.7 percent, the first annual decline since 2016. In Q4, comparable sales were down 2.5 percent and transactions were down 3.2 percent. Management is guiding for flat sales in 2026.

During the same quarter, operating margins fell to 14.1 percent and food costs rose to 30.2 percent. The stock was down 50 percent for the year in 2025.

In the end, a brand and customer loyalty built up over decades was converted into modest margin increases over a few quarters. Ackman reduced the fund’s position to about 5 percent by February 2020 and then further pared the position in early 2024. In the fourth quarter, it sold off the final 21.5 million shares and moved that capital into Meta. On the early 85 percent of the position, Pershing Square made a $2.4 billion profit and an IRR that fell just short of 22 percent. Institutional Investor counted the transaction in its tally of activist exits under “facing losses.”

It’s worth considering that the value of the goodwill and trust of Chipotle customers, assets that take decades to build and have little currency in a balance sheet or annual report, was harvested by an activist investor to generate a one percentage point outperformance over an index fund and accidentally cause a ton of discourse about burrito prices.

Why Was There No One at the Helm?

The market’s response was almost predictable because, at this point, it was not Ells’s company. By 2016, 95 percent of Chipotle’s stock was held by institutional investors. Some were dedicated activists, but Vanguard, BlackRock and Fidelity combined owned about thirty percent and did not directly influence the company’s management. In "The Agency Costs of Agency Capitalism," the legal scholars Ronald Gilson and Jeffrey Gordon describe index investors as "rationally reticent": they hold the votes but are reluctant to spend the resources to use them. Reticence is not incapacity. John Coates has shown that the big three exercise a majority of voting power across US public companies, largely through proxy advisors like ISS. Pershing Square didn’t need all of Chipotle. Just a room full of votes, most delegated to firms building scaled models, that can never understand generosity and is more than willing to outsource to a “respectable” player. All PS needed was to be the only one in the room with a point of view.

In 1982 Deming described how managers, faced with this type of organization, would seek to extract value rather than build it. If shareholders’ equity is invisible in the balance sheet, it is invisible to the business model, and thus easy to take. Chipotle was a textbook case. Generosity was measured by customers and employees, but not booked. When it began to dwindle, the financial statements reported waste that could be transformed into a margin. And, once goodwill was depleted, customer traffic began to decline, an effect that lags behind and so is difficult to diagnose.

Niccol and the new chief executive were doing what the market expected and rewarded.

It wasn’t just that, it was also what was in their power at the time. There was something simple and visible they could do to improve Chipotle’s margins at any restaurant immediately: cut portions. Profit margins can be created right away, and can be explained to market analysts. The better feeling from eating at the store is much harder to measure: it is created by sixty thousand hourly employees over many years. It comes from the intangible accumulation of what I was told of as the feeling of generosity. Niccol told Fortune in May 2024 that the portions had not gotten smaller, and said much the same on the July earnings call. The language about heavier ingredient usage came later, in the third-quarter release, by which point he had already left for Starbucks. After, the Wells Fargo team of analysts led by Zachary Fadem visited New York City branches to measure portions. Customers and employees knew better. When you are punished for generosity, it’s clear where the variation will go. I saw how much better the food had tasted before those changes.

How Do You Not See That Coming?

The new chief executive has told investors that he doesn’t think Chipotle should be a value chain, and wants to serve people with higher incomes. It is still too soon to tell if that plan can succeed, though sales continued to decline in 2026.

But there is something eerie and compelling about watching the financial unwind of Chipotle’s brand equity and accumulated corporate goodwill. Pershing Square was making a profit from that goodwill. I was told that the original business was founded in 1993, and then the goodwill of that founding built over the next eleven years allowed the company to charge a higher price without coupons or discounts, to retain and develop managers, and to give customers a feeling of value that didn’t require a financial incentive to come back. There was no accounting entry for that generosity, only a feeling in the store, and so it looked like waste to cut. For Niccol, it may not have even seemed like extracting value: the generosity was never booked so converting it into store margins was a way to save the company. That strategy looked smart, or at least correct, until same store sales started falling around 2025 and it seemed clear the goodwill was gone.

The question is, how do you not see that coming? If Ells was not looking at the risk of his accumulated goodwill being extracted at Chipotle, who was? It seems that Ells spent eight years getting out from under a parent company and by the time of the 2006 flotation was not focused on the need to keep the company independent from activist investors. In that year he did not create a dual class structure or keep a special voting block for himself, as Mark Zuckerberg did at Facebook, or a staggered board that makes it harder for an activist to influence the board, as John Coates has argued. Vanguard, BlackRock and Fidelity all own big stakes in Chipotle, but they are all index funds and cannot intervene. He kept his marketing chief, apparently did not build a system to trace the ingredients in his food, had a board of friends, and called his bankers and lawyers to defend the company only after Pershing Square bought its stake.

Tom Perriello, a Yale educated former diplomat is humming in agreement when a potential constituent recites conspiratorial lies that she has been told about transmission line "radiation messing up the crops and livestock". People all over Twitter are posting pictures of power lines and transmission lines being ugly. Yet, when people go over to Japan, power lines and transmission lines are considered part of Japan’s aesthetics of mundane luxury and is constantly used in media, especially anime and manga. Why is that? How can we make the aesthetics argument? That seems a bit boring and a step back. So, what if we shouldn’t and learn to appreciate aesthetics on our own terms?

This isn’t a Japan-only thing, as you can easily find a ton of photography and art about power lines all over social media if you care to take a look. is the one who takes the pictures you see above, for example.

Kobayashi Kiyochika printed a view of Mt. Fuji in 1880, from within the Hakone mountains. Off to the left, drawn just as carefully as the mountain itself, is a telegraph pole.

In 1880, the telegraph pole was the newest feature in the Japanese landscape, and printmakers played a central role in creating the hype. Already the medium had taken up the railway, the gaslight, the brick streets. Dozens of kaika-e, enlightenment prints, the woodblock images that sold the modern city back to its own residents, placed the telegraph pole front and centre, upright, the wires disappearing neatly off the page.

A boast

In 2021, the Nerima Art Museum in Tokyo pulled together about 130 of them from the 1850s to the present day, under the banner Densen Kaiga, or roughly, ‘Electric Wire Paintings’. Yosuke Kato was the curator. The exhibition made it clear that the wire had never once disappeared from Japanese picture-making, and that its function within those pictures continued to change.

The earliest example pre-dated the poles themselves. In 1854, Perry gave a demonstration of a telegraph set at Yokohama, and a Matsushiro-domain retainer named Osuke Hibata, stationed there as a guard and good with a brush, sketched the apparatus and its wire. The sheet is held by the Postal Museum. It’s the first wire anyone in Japan ever bothered to draw.

Japan wasn’t the only place to represent the wire as a promise. In December 1920, the GOELRO commission presented its electrification plans to the Eighth Congress of Soviets, and Lenin stood before a map of the country speckled with lightbulbs, one for each generating station not yet built. The pylon and bare bulb were staples of Soviet posters for the next 70 years.

M. Pisarevsky. We will finish the seven-year plan of USSR’s electrification ahead of time. USSR, 1959

From the beginning, the pole had an element of the mundane about it, and, by the time the electric power pole reached Japanese painting, about 20 years after the telegraph pole, any elation had been drained from it. Yet they persist in the frame.

They appear on works by Ryusei Kishida, as the lines’ shadows posed against the red soil of new land-clearings, so that both read as Tokyo expanding westward.

Kawase Hasui and Shinsui Ito fold them into the background of their meisho-e, famous views. Yoshio Fujimaki weaves them through his 1934 handscroll of the Sumida’s two banks. Hiroshi Yoshida, working the same period, leaves them out of his images of Tokyo altogether, telling us all we need to know about the kind of Tokyo he wanted.

In 1935, Kinosuke Ebihara painted a mass of sparrows sitting on a line, and the show’s catalogue remarks that this is an anomaly. For all the wires in Japanese art, there are very few birds perched on them.

There were some, though. Kan’emon Asai, for instance. He was an oil painter who, from around 1950, worked assiduously and exhaustively on a series titled Densen Fukei, ‘Wire Scenery’. In these paintings, the wires aren’t behind anything; they cover the entire foreground and he produced so many that he was dubbed Mr Wire Scenery.

(The Nerima show dedicated an entire gallery to the ceramic gaishi insulators that keep the line from touching the pole, on the basis that they’re good-looking things. The first Japanese ones were made in Arita in 1870.)

Back to the US, paintings reached wires by a different route. Charles Burchfield created a small watercolour titled Telegraph Music in 1917, but returned to it between 1948 and 1952, making dozens of studies as he tried to expand it into something bigger. His goal was sound. He drew audio-cryptograms, stylised marks representing specific noises, such that a plucked wire produces ripples of sound that travel outward and downward through the wooden poles, accompanied by crow caws and wind-whipped clouds, while a bluebird is silent on a fence post.

Burchfield retained the title for the 1949 version. The original 1917 painting was placed at the centre of Song of the Telegraph, completed in 1952. In 1963, he wrote that few sounds were ‘as wild and elemental as the “music” of the telegraph wires’.

Which is a neat way to describe an anime series called Serial Experiments Lain, 46 years ahead of time.

Photography came a bit later. The issue with photography, after all, is that the wire enters unbidden. Lee Friedlander made a career of holding his ground. From the 1960s onwards, he permitted telephone poles, traffic signs, shop window reflections and such to enter his images. The dominant reading of his pictures, the version the Museum of Modern Art put forward in its survey of his work, was that he turned ordinary photographic blemishes into enigma: ‘a pole often gets in the way.’ Joel Coen chose 70 Friedlander photos for a monograph in 2022; he writes of these photos as ‘bisected and carved by stop signs and utility poles’.

By 1975, this was the subject of an entire exhibition. New Topographics: Photographs of a Man-Altered Landscape gathered Robert Adams, Lewis Baltz, Stephen Shore, Joe Deal, Frank Gohlke, Henry Wessel and the Bechers in a single gallery. (The title came from the show’s curator, William Jenkins.) Adams’ book The New West, showing suburban developments in middle grey tones near Colorado Springs and Denver, with their attendant utility poles, had come out the year before.

With anime, it’s a matter of someone choosing to include the wire for whatever reason as part of the scenery (and maybe the narrative). The obvious reference point is Neon Genesis Evangelion (1995-96), whose art director was Hiroshi Kato, who would fulfill the same role in the Rebuild films. The wires are a basic component of Evangelion’s visual grammar, such that, when the studio Khara wanted a poster to advertise its final film, it offered a blue sky, some clouds, and just poles and lines. Media scholar Shin’ichi Kinuwa shows how effective this visual shorthand is in other settings, too, using wooden poles to signify a specific time period, poles casting long shadows over a setting sun to evoke a specific kind of sadness, and streets criss-crossed by lines to convey tension.

There’s also Serial Experiments Lain (1998), the flip side of the coin: audio. Made by Triangle Staff and directed by Ryutaro Nakamura, with the script written by Chiaki J Konaka, the sound of wires humming under a sky full of empty poles grows louder and louder until the audio becomes as important as the visuals. You can find compilations of those sequences online. Someone uploaded just 12 hours of audio, and it has around 1.7 million views.

Makoto Shinkai uses the same ingredients to build his landscapes, but for the sake of depth and perspective. His 5 Centimeters per Second (2007), painted by Shinkai along with Takumi Tanji and Akiko Majima, has wires that carry the picture’s composition. They lead our eyes out of frame, divide the sky into random segments and juxtapose a railroad crossing, a schoolhouse rooftop, and the sky.

The live-action movie had already figured this out, though. In Yasujiro Ozu’s Late Spring (1949), Chishu Ryu and Setsuko Hara sit in a train car. A window shows them just the top of each telephone pole and wire as the train passes. Many of these choices were driven by what would be possible to film. But what results seems like emotion.

And now the tables have turned. According to Kinuwa, Japanese Suits, produced by Fuji TV, barely features the wires at all because the American producers were pushing for a more glamorous, stylized look. Wires, on the other hand, make it instantly clear you’re in Japan, a country far from luxury and glamour (I know, I know, I also question the producers’ line of thinking). When directors want to show money, new love, and the possibilities of modernity, they actively avoid poles. Wires are an option that can be discarded, and they are often treated as such, a victory of sorts.

Renge Ishiyama was born in 1992, and the first line on her business card says she loves electric wires. She’d vaguely liked wires since the third grade. What clarified her interest, she said, was getting ahold of reference material from anime, Neon Genesis Evangelion and the Ghost in the Shell movies and series, which steered her toward old buildings, ruins, factories, and back alleys. In high school, she joined the photography club, and her camera began wandering to wires without prompting. She made a doujinshi about them for Comiket in the winter of 2017, and in December 2022, Heibonsha released her book of essays, Densen no Koibito, Electric Wire Lover. By then, she’d taken more than 15,000 photos of wires. Here is how the book opens:

I am the lover of electric wires. I hadn’t yet noticed it when I already liked them.

In June 2022, the Japanese Electric Wire and Cable Makers’ Association appointed her its official wire ambassador. And she isn’t the only one. The Nerima show featured six other living artists creating similar work: Chizuru Masumura, whose photos of utility poles are shot in extreme closeup; Hideki Yamaguchi, who makes drawings of the Keio Line in intricate ink; and Akira Yamaguchi, who arranges utility poles like cut flowers, a joke he calls chukado, and who also exhibited a pole-themed comic in his booth at the festival for the first time.

There has been talk in Japan, for a few years now, of what the streets will look like after all the wires go underground. The pictures exist in this weird limbo. Nobody wanted the wires. Kiyochika was trying to depict progress, Friedlander was trying to solve a compositional challenge, Anno was trying to evoke an atmosphere.

What do you think of a place that has never really existed anywhere except as a background? Even the studios aren’t sure. No one is. The affection for the wires is real! Nobody drew them because they were pretty, they drew them because they were present, and they were found to be pretty, even to the point of romance, in the process.

There is a NIMBY bill in the legislature right now (SB 1090) attempting to strip LA County fire survivors of their ability to use SB 9 to build a duplex or do a lot split.

A lot of these people were underinsured or had no insurance at all. The last major thing they own is the piece of land that used to hold their home. Duplexes and lot splits are the last remaining tools for these people to finance their reconstruction.

Write a letter of opposition here: https://actionnetwork.org/letters/stop-sb-1090-from-preventing-rebuilding-in-fire-zones

NIMBYs are perfectly willing to strip these people of tens of thousands of dollars all over again, or prevent them from rebuilding and coming back at all, regardless of what justification they offer.

Kendall White, a Wall Street Journal reporter, spent last month inside New York DSA. She went to Coffee with Comrades, a Socialism 101 seminar, a new-member social, a book club, and a hootenanny. She noted the Mao paperback on the shelf and the Soviet-star fur hat beside it, the expensive riesling, the crowd of young white transplants, the choir singing the Internationale. She filed a piece arguing that the appeal is social rather than ideological, and that the vacuum it fills is one the Democratic Party dug for itself during the pandemic. And it’s clearly not just “social” reasons that keep young people from trusting the likes of Andrew Cuomo.

The piece’s interest stops at the social, which lets it explain away years of institutional failure and declining economic prospects among the young. It’s still useful, because it reminds people what local and state political groups used to do, and what NY DSA has mastered.

Here is the moment. On her way out of the new-member social, the reporter passed a state assembly candidate she had spoken with briefly an hour earlier. He said goodbye to her by name. She wasn’t wearing a name tag.

Her piece offers this as evidence of charm, and yes, it’s charming, the kind of charm you can train into people (not that my saying “charming” this much is, well, charming). The skill shows up in organizing curricula going back to the Industrial Areas Foundation, and the fact that a hostile journalist walked out feeling personally recognized by a stranger is the most charming thing in the article. She went looking for Marxists. She had a good time and came back with something so much more, but didn’t recognize it.

I want to make a case to people who will find DSA and groups like Progressive Victory uncomfortable. Others (, recently) would rather fight factional battles, or discredit these groups because the membership isn’t whatever they define as the “working class”, or dismiss them in the name of “broad appeal” and “popularism” for the over-45 vote. Some used DSA’s rising popularity to justify maliciously punching down at the downwardly mobile. That isn’t interesting or even useful to me.

So, if you work on industrial policy, free speech/privacy, YIMBYism, pronatalism/family policy, unconventional environmentalism, greater security, full employment, and any and all heterodoxy, and if your politics require training people and systems to operate better and deliver higher quality, even a little, then groups like the NY DSA described in that article may have solved a problem you haven’t. That’s a showcase of competence above and beyond what a lot of more established groups with greater resources have. We need to learn from them, recruit from them, or work with the parts of them where we agree. It beats punditing around or fighting more useless factional wars.

Case in point, and by now close to common sense in YIMBY circles: Zohran Mamdani is delivering better results than the more moderate Daniel Lurie.

In short, not because NY DSA or PV politics are yours. Because their operations are probably better than yours (and definitely mine). The neat part about operations is that you can learn from others. I’m certainly taking notes.

A what trip?

In 2017, NYC-DSA lost its first council race; in 2018 it elected a state senator; by 2025 it had put a mayor in Gracie Mansion behind roughly a hundred thousand volunteers; and in an eight-day span this June, DSA-backed challengers ousted the sitting chair of the Congressional Hispanic Caucus, took an open Brooklyn seat by twenty points, and in Denver ended a House incumbency dating to 1997, all against $9.6 million in hostile super PAC spending that largely failed.

A Discord group called Progressive Victory did 290,000 voter contacts in a Georgia runoff, then swing-state canvass houses, then nightly phone banks behind a winning Seattle mayoral campaign. What’s more impressive is that NYC-DSA and Progressive Victory are volunteer groups that don’t have anything like the resources of the people behind Andrew Cuomo or Adriano Espaillat.

So how did they build that volunteer base? Posting online is one thing. Getting those posters to make voter contacts or show up in person is another. Well, we have a skeptical outsider who spent four weeks watching how it’s done.

A standing weekly calendar with a low barrier to entry: coffee, a book club, board game nights, a running club. A softball league. A soccer league. World Cup watch parties. Birding trips. A no-audition choir. A structured education track for newcomers, taught by trained facilitators, with a clear curriculum. A new-member social held in a private apartment where existing members were briefed to be welcoming. Elected officials attending as members rather than as speakers. A group chat, an invitation to the next meeting, and phone numbers exchanged, all obtained by a first-time attendee who came in hostile.

Now, near the end of her piece, the reporter describes trying to find the equivalent on the moderate side. She filled out an interest form for the state’s Young Democrats. Two weeks later, no reply. She checked their website. No events listed.

This is a delightful contrast we can all certainly learn from!

Before There Was Phones

The associational base of American politics (where large member-driven groups are active in politics) collapsed across two generations. Robert Putnam’s original 1995 analysis found membership in the General Federation of Women’s Clubs down 59% since 1964 and the League of Women Voters down 42% since 1969; Bowling Alone generalized the pattern across civic groups, unions, lodges, and leagues. Theda Skocpol’s Diminished Democracy tries to explain what replaced them. From the 1960s onward, mass-membership federations gave way to professionally managed advocacy groups, organizations that, as one review of her evidence puts it, speak for members without involving them, in a civil society now dominated by largely memberless associations.

Schlozman and Rosenfeld’s The Hollow Parties documents both parties ceding mobilization, fundraising, and agenda-setting to a consultant-and-nonprofit “party blob,” leaving hard partisan shells with no civic interior. In short, what was populist and member-driven was systemically hollowed out, and the resources now flow to consultants and nonprofits. You can guess how that plays out.

Individual political energy did not decline. People are still interested in politics, after all! Eitan Hersh’s survey research, summarized in Boston Review, found a third of Americans reporting two or more hours a day on politics, and four in five of those spending not one minute on actual political work. You can see the problem (or opportunity). Enormous political attention with almost nowhere institutional to live.

Organized capacity did not completely drain out of American politics. In fact, it’s clearly more concentrated now. The American Political Economy school describes a system whose fragmentation and veto points reward two capacities above all: long time horizons, and the ability to operate across many venues at once. JS Tan’s essay on the data-center boom is a perfect demonstration of this. The same country that cannot permit apartments or fast trains has erected million-square-foot server farms at historic speed, because hyperscalers hold both capacities and can arbitrage jurisdictions against one another for subsidies and permits. has a neat little way of boiling it down: the country has “lost the capacity to build for the public.”

Case One: NYC-DSA

NYC-DSA has been active since the 1980s, but was only considered an electoral force after the 2016 Sanders campaign. It prototyped its field model on Khader El-Yateem’s 2017 council race (where a paid canvass manager named Zohran Mamdani first worked with future mayoral field director Tascha Van Auken), then built on that through Julia Salazar’s 2018 win and legislative slates in 2020 and 2022. Then national DSA nearly broke. From a 2021 peak of roughly 95,000 constitutional members, national DSA fell to about 78,000, with members in good standing dropping to nearly 58,000, a contraction of a third, amid a 7.3% single-month membership drop coinciding with the Bowman expulsion fight and a convention-mandated budget roughly $2 million in deficit, projections of running out of money within months, and the national director’s resignation. Through all of it, the organization publicly claimed 70,000+ members while roughly 54,000 were actually paying dues. Keep that gap in mind for every number below, including the flattering ones.

Whether the crash was caused by the Bowman affair or was just the secular deflation of the Trump-era surge is disputed inside the organization. The timing evidence supports a shock-plus-slope reading. That said, the pendulum is swinging back, with more than 95,000 national members by November 2025, over 100,000 today, and NYC-DSA at 14,000+, up from 8,800 at the June 2025 primary.

New York’s divergence is the operational detail most people seem to overlook in favor of the “young people supporting socialists” thing. An analysis using national membership records shows NYC-DSA held steady while the national organization shrank, then accounted for over 30% of all national growth in 2024. The chapter’s own coordinators attribute that to a few basic things they work to get right. Things like a customized join page pushing monthly renewing dues over one-time payments, recurring re-engagement emails to lapsed members, a winter member drive, and a finding that socials and spectacle-style events were consistently the top weekly list-builders. Basic, consistent mechanisms, by the chapter’s own account.

For the mayoral primary, The Nation’s reconstruction counts ~50,000 volunteers, of whom ~30,000 knocked 1.6 million doors and made 2.3 million calls under 400+ volunteer field leads; by the general, the campaign counted about 100,000 volunteers and 3 million doors. It’s four-rung ladder (canvasser to field lead to coordinator to director) that promoted nearly 500 field leads in months, most not yet DSA members is also interesting just for the fact of converting so many volunteers into leads in such a short time. Between elections, the chapter runs dozens of monthly social events: softball, a socialist soccer league, a no-audition choir, game nights, a caregivers’ group, plus a paid night-school Academy taught by academics and a national training catalogue that codifies everything down to child-minding logistics and a two-session course on talking to non-socialists, homework conversations included. A Socialists in Office committee meets weekly with the chapter’s electeds. Mamdani still calls the chapter his “political home”.

In an eight-day span this June, DSA-backed insurgents ousted Rep. Adriano Espaillat, won Nydia Velázquez’s open seat by twenty points, and toppled fifteen-term Rep. Diana DeGette in Denver, putting DSA on track to go from two to at least five members of Congress. In Albany, they added at least six state-legislative pickups against $9.6 million in super PAC primary spending, of which the $2.9 million aimed at socialists largely failed. Chapter co-chair Gustavo Gordillo’s explanation: “The incumbents just were not able to keep up.”

Case Two: Progressive Victory

Progressive Victory was founded in July 2022 by Sam Drzymala with the streamer Vaush. The idea is to get fans of progressive creators to “touch grass,” which here means converting streaming audiences into field volunteers through a Discord community. It’s one of the rare real-life applications of what researchers describe as Discord’s third-place-like design to electoral labor. The organization reports 15,000+ members with about 1,400 paying $5 monthly dues, 290,000 voter contacts in the 2022 Georgia runoff, seven swing-state canvass houses in 2024 producing roughly 10,000 doors per house per month at a claimed ~$1 per door, and 1.6 million total voter contacts in the 2024 cycle.

Progressive Victory, like NY-DSA, also has a pretty full calendar, but with a Discord twist. We’re talking about mixing nightly phone banks (for Mamdani, Katie Wilson’s winning Seattle race, and Aftyn Behn’s Tennessee special) with stuff like A/V meetings, karaoke nights, and other “touch grass” events.

It also helps that PV takes advantage of the discourse. Its “Choose Your Fighter” rally put Hasan Piker beside Rep. Ro Khanna amid a party-wide fight over Piker. There’s something to be said for “all publicity is good publicity” after all.

What the field evidence shows, and doesn’t

So both NY-DSA and Progressive Victory are great at gathering volunteer energy and aiming it at elections. The next question is whether that energy moves votes.

We know face-to-face contact reliably raises turnout. The Gerber-Green New Haven experiment moved contacted voters from roughly 44% to 53%, Yale’s synthesis of hundreds of GOTV trials confirms personal contact as the most consistent method, and relational contact runs stronger still: an 8-point lift in the 2018 Outvote experiment and 13.2 points in a 2020 Green-led study, later repeated by a conservative shop.

That’s turnout, which is good and essential for winning elections. What about persuasion? Kalla and Broockman’s forty-nine-experiment review puts the average persuasive effect of general-election contact at zero, with exceptions only for unusual candidates, heavy targeting, and early contact. National DSA’s own internal research, drawn from membership records across the whole organization, complicates the favorable side from within: growth is driven by outside events, no chapter tactic reliably recruits members who stay, and surge cohorts retain worse than the base they join. Just a reminder that this is at the national level, and that NY-DSA is considered the exception, since it has held its support base and grown its list through more and bigger social events.

Read carefully, none of this establishes a portable campaign playbook, and the marquee case cuts against one. Mamdani was an unusual candidate in the media capital during the most-covered municipal race in decades, with contact beginning the previous December. Those are precisely the conditions Kalla and Broockman carve out as the exception, which makes the win suggestive and unrepeatable in the same breath.

Hegel’s pendulum will keep swinging. So what we really need to think about between the swings is whether we can catch and hold people at scale. The chapter gathered tens of thousands of volunteers, ran them up a four-rung ladder, and promoted hundreds of field leads in months, most of them not yet members.

A permaculture, not an agricultural, model

Most organizing talk is agricultural. You fertilize, you plant, you tend, you harvest what you planted. Weather, famine, economics, and chaos can change the size of the harvest, but there’s some linearity between what you reap and the work you put in.

That’s not a useful way to think about organizing. What comes closer is something called permaculture. Permaculture is the art of catching water, of building the swales and terraces that keep it from running off the moment it falls. It has no linearity to speak of, but the mid- to long-term results can be impressive, like rivers being restored.

Here, our rainfall is political surges. A Sanders campaign, a Trump election, an assassination, a data center proposed in the next county. The standing calendar, the softball league, the no-audition choir, and the book club are the earthworks. Retention through the dry years between surges is the water table: raised slowly, or at least not falling as fast.

Some customer service basics

Underneath the field mechanics sits something public administration understood before campaign science measured it. Lipsky established that a citizen never meets the state, only its agent. Companies like Costco and Chick-fil-A are more than aware of this, hence the friendly staff and better working conditions.

What people think of government usually comes from their experiences with the teacher, the postal worker, the clerk, the caseworker, whatever agent they actually deal with. Fenno’s paradox is the same fact in electoral form: a public that disapproves of Congress while approving of its own member. Why? The member usually votes with the rest of Congress anyway. It comes down to constituent services (a member’s staff helping resolve issues like applying for grants or expediting passports) and earmarks (provisions in federal spending bills that let members of Congress direct money to visible local or state projects).

The canvasser is the movement’s postman. No voter meets “NY-DSA” or “Progressive Victory.” She meets one volunteer on her stoop, or is a member’s “oomfie” online. That encounter is the whole organization as far as her personal experience is concerned.

Why I’m interested in this?

We talked about how the associational base collapsed and took with it the civic pipeline that once turned ordinary people into the labor a polity runs on. That collapse is visible today such as the bottom of the ballot, where a lot of local and state level governing occurs in real life. 70% of all elections from 2018 through 2025 drew no more candidates than seats, a study of school-board races found 53% uncontested with four-fifths of South Dakota’s districts canceling for want of candidates, and the 2024 voting survey recorded over 772,000 poll-worker slots with recruitment difficult in nearly half of jurisdictions. Such as waste don’t you think, and where there is waste there is opportunity.

Even setting aside the sheer volume of content and ground game that groups like NY-DSA and Progressive Victory bring, there’s a plainer reason to learn from them. The idea, or to me the prize, is a base: slowly training up a portion of these people, or at minimum learning enough from them to build your own, beats starting from nothing or resuming the factional wars. That holds even if you’re more conservative than they are. Then again, a lot of pundits love punching down on the downwardly mobile, especially millennials and younger.

That is not a new trick. It is a very old one we forgot.

In 1942 the Bureau of the Budget had the same set of problems everyone has: too much work, not enough people, procedures nobody had read in years. It did not freeze hiring, talent was scarce in wartime, and it did not redraw the org chart. It taught a handful of managers to find the wasted motion in their own offices and cut it out. Workshops, manuals, and a run of good propaganda posters. While that program and others like it were running, public trust in government sat near 80 percent. We are not claiming the one produced the other. We are claiming they kept company.

A few writers besides us, at State Capacitance and at Energy Crystals, have written about the uncomfortable version of this history. Government workers back then were not more talented or harder-working. They were managed better. Reforms shipped as pilots before they scaled. Then the corporate management fashions of the 1960s and 70s came in and undid it. Kevin put it best: “Politicians had better dashboards in the era of punch cards than we have in the era of AI.”

So why not bring it back?

Work Simplification App

The method, in a nutshell

Each tool asks a few blunt questions.

The Process Chart asks what the steps really are. You walk a procedure end to end and tag every step: operation, move, inspection, delay, storage. Laid out in order, the waste shows itself. The four approvals that should be one. The form keyed in twice. The wait nobody owns. This is what Ichiro ran against Peak Shredder, and his line is the one the whole thing is built on: “Operational staff don’t need dictums. We need tools.”

The Work Distribution Chart asks who does what, and for how long. People across the top, work down the side, hours in the cells. It does not flatter anyone. It is how you catch the director still reviewing rebates by hand while the strategy goes unwritten. Ichiro thinks this is a great way to sniff out “ex-analyst syndrome,” the affliction of managers who didn’t give up their old job when they got promoted.

The Work Count asks whether the volume justifies the machinery. It is the numbers under the process, and they are usually smaller than the apparatus built to handle them.

Behind the three is the Functional File, the one place the forms, scripts, and templates actually live. The Bureau got so good at this that private businesses asked the federal government to teach them the same approach.

Nobody trains the people who run things

Activist movements train organizers and judges. MBAs lean on organizational strategy, which is more glamorous but not relevant to improving domain-specific processes. And many managers were pressed into service without even a seminar. Nobody trains the official who has to make the city run: the one who geotags every bus stop so the next storm does not kill anyone, or who counts the six thousand small-business rules that piled up while no one was looking. The craft is teachable, and almost no one teaches it. You cannot have an imagination for what a system feels like from inside it if you have never been inside one.

Luckily (for you, not us), Kevin, Ichiro, and I have done our time inside the machine. So we built something to put the craft back in reach, and to get people into the same room to learn it in person.

What we built

Work Simplification is a free, installable web app. It is the 1945 toolkit on your computer, nothing more.

A Process Chart with the operation, move, inspect, delay, and store symbols, severity stamps, bottleneck flags, and a Before/After view, so the cut you are proposing sits next to what it replaces. A Work Distribution Chart mapping people against steps, with friction marked. A Work Count for the derived numbers, and a Functional File for the paperwork a process runs on. A Field Manual that explains each move in plain English, and a Team view for the people doing the work.

It opens on a pack chooser. Pick a world to start in, or take an empty desk. One of the worlds is recreation of the utility energy services desk F. Ichiro Gifford cut his teeth in, so you can take the tools apart on a real process before you point them at your own.

Two choices were deliberate. It looks like a 1945 government pamphlet, stencil type and rubber-stamp verdicts included, a reminder that this is recovered craft and not a “productivity app” wearing a hat. And it is offline by construction. Install it once and it runs in its own window. No network, no account, no telemetry, your data in your own browser. If you are charting a touchy internal process with an IT department that thinks Gmail is security risk, that is the only honest setting.

What’s next

We put it on Product Hunt next week. The response decides the direction, and we have a real fork in front of us. It could grow into a fuller SaaS with teams and AI built in. It could go the other way, a native standalone app (talking about native Swift and C# here, not another Javascript wrapper) closer to something like Office, or perhaps a template in Notion or Obsidian. We would rather watch how people actually use the first version than guess now. One thing is fixed either way: the in-person training, courses and events, run the way the Bureau ran them.

A tool, not a dictum

Many government offices manage services that are 1) too complex for a single human to comprehend and 2) impossible for normal people to opt out of: monetary policy, electric service, public health. In these contexts, normal people should be able to trust the People in Charge to handle things off-screen. But when inflation spikes, or the power goes out, or the world locks down, normal people are forced to contend with leviathans they cannot predict, much less protect their loved ones from.

People don’t want advice on bear-market investing, or time-of-use electric rates, or mRNA vaccine safety. They want to hear:

Hi, you’re talking to a Person in Charge. I know what you’re going through, and I take it seriously. I cannot promise everything, but I know what I’m doing, and I’m on your side.

The problem is that many government offices cannot make that promise—some are corrupt, many do the wrong thing by design, and the majority are shot through with incompetence and complacency about that incompetence. The public is right to distrust government, but they don’t have alternatives. The only alternative to bad bureaucracy is better bureaucracy.

But you do not fix a bureaucracy by yelling at it or starving it. You fix it from the inside, one charted process at a time, with someone who has been inside holding the pen.

So open it, chart something small, and cut a step.

Work Simplification App

Urbanism and YIMBYism outside big cities do not mean towers. What it does mean is neighborhoods dense enough to walk and oftentimes with enough destinations close enough together that a golf cart covers the rest for day-to-day, and better yet, pleasant enough that if you need a car, it could be a japanese style kei car or truck.

Golf carts? Well, being able to travel around town is so nice. So nice that we have places like Peachtree City, Georgia, and The Villages in Florida becoming popular because they are golf cart-friendly. In Peachtree, roughly eleven thousand registered golf carts carry its residents along more than a hundred miles of paths to the school and the store. The Villages is a 55+ master-planned community (with a big old waitlist) that is purpose-built for carts, featuring over 100 miles of dedicated multi-modal paths, tunnels, and bridges that connect homes to town squares, shopping, and medical centers.

These particular towns aren’t exactly what YIMBYs are selling but a (very) rough version of the thing. They are low-density and master-planned sprawl (one of them age-restricted). The golf cart is a fun way to get around, and they have enough foresight to plan for them. That said, it is still incredibly difficult and costly to plan around “golf carts,” let alone walkability with zoning and minimums on the books. Not to mention, the ride to the store still runs ten or fifteen minutes. The destinations still sit far apart, and the cart was added to cover the gap. We also have new developments like the Culdesac that’s based on walkability, not golf carts, with the biggest limit being how states and cities limit and restrict any sort of development.

The appetite is fifty years deep and almost entirely unmet. The product that meets it is the same legal freedom built at real density inside a city that already exists, where the destinations sit close together and the ten minute ride becomes three. Done right, the cart stops being a substitute for the car and becomes a small daily delight on top of a neighborhood you could also just walk.

One legal permission separates that product from getting built, and the movement is fighting for it in the wrong places. The fight runs from San Francisco and even to supposedly “technocratic” places like Berlin, where prices broke long before the movement existed. The places where the supply problem is now most fixable are the small and mid-size cities where demand is arriving, where land is cheap, and where the political opposition is real but not yet entrenched. The movement is not there. The demand already is.

Limited Frames

The U.S. housing crisis is routinely framed as a supply failure in the places where prices are already highest. That framing is not wrong on its own terms. The biggest issue it is very limited and based on where a lot of YIMBYs and urbanists live in.

I would argue that the secondary problem after NIMBYism is geographic demand concentration. Gyourko’s Superstar Cities identified the dynamic. A handful of metros combine inelastic land supply with a rising national share of high-income households, producing a bidding-up of land prices that sorts lower-income households out. Ganong and Shoag’s Why Has Regional Income Convergence in the U.S. Declined? supplied the consequence. From 1880 to 1980, U.S. state incomes converged at 1.8% per year. After 1980, the convergence collapsed. The mechanism is housing cost. Tightening land-use regulation in the highest-wage metros raised housing costs to the point where, after housing, the returns to migration for low-skilled workers turned negative.

Some YIMBYs’ response is to build more where the rich already are. Yes, I have written articles where I celebrate removing zoning restrictions in rich enclaves with utter glee. I do very much believe in getting rid of zoning, and even mid- and small-sized cities can benefit from this. I don’t share the idea that the concentration is fixed and focusing on economic of scales is the way to go. People love brands and having choices at the end of the day. A “monopoly” of a few superstar cities has shown that it is dangerous, especially if governance in said superstars is less than ideal. My home city of Houston is more affordable than most, isn’t because of Houston’s mayors. In fact, Houston mayors have historically tried to make housing more expensive via trying to implement zoning, which is defeated by local groups.

So, the alternative is to treat the concentration as a variable and change it by strengthening other small to mid-size brands/cities and promoting YIMBYism and urbanism.

The right to build is itself a product to sell, not an ideology

Conventional housing-policy frame treats zoning as a constraint on construction. Build new units and supply rises, thus so prices fall. The frame is correct but again a very incomplete and limited way of thinking. Legal entitlement to build is itself an asset whose value capitalizes into land prices the moment the entitlement changes, regardless of whether anyone builds anything.

Capozza and Helsley laid out the theory in two foundational papers. “The Fundamentals of Land Prices and Urban Growth” in the 1989 Journal of Urban Economics showed that in rapidly growing cities, the value of expected future rent increases (the growth premium,) can account for half of total land price. “The Stochastic City” added the option-value insight. Uncertainty about future rents imparts an option value to undeveloped land independent of any planned development. Glaeser and Gyourko’s “Zoning’s Steep Price” inverted this framing.

Gap between house prices and marginal construction costs is the zoning tax. It is the implicit price of the right to build that the regulatory system has confiscated. The zoning tax exceeded 50% of housing costs in San Francisco by the early 2000s, and Gyourko and Krimmel’s follow-up shows it is now moderate-to-high in nearly every American central city for which data exist.

This isn’t just a California thing. Greenaway-McGrevy and Phillips’s evaluation of Auckland’s 2016 Unitary Plan in Regional Science and Urban Economics in 2024 found land-price gradients shifting in upzoned versus non-upzoned areas consistent with a 23.7% increase in equilibrium floorspace, capitalized into land prices the moment the plan was announced. Cheung’s Urban Studies paper reconfirms this. Parcels where land dominated total value gained after upzoning, while parcels where the existing structure dominated lost relative price, because the new entitlement made redevelopment more likely.

We see this with California’s accessory dwelling unit reforms. Beginning with AB 2299 and SB 1069 in 2016, California systematically stripped local barriers to ADU construction on single-family parcels. The FHFA’s tracking of Enterprise-backed appraisals shows the share of California appraisals with an ADU rose from 1.8% in 2016 to 3.0% in 2023. Industry appraisal data shows ADU-equipped properties trading at 25-50% premiums to comparable non-ADU homes, with Los Angeles markets reaching 58%. UCLA’s Lewis Center has an ongoing parcel-level analysis explicitly designed to “isolate the impacts of ADU legalization (i.e., the option value created for existing parcels) on land values.” Every single-family lot in California gained the right to host a second dwelling unit and that right capitalized into land values before most owners exercised it.

São Paulo is another example. The city’s Certificates of Additional Construction Potential (CEPACs) are tradeable bonds granting the holder the right to build above the baseline floor-area ratio in designated zones. Between 2004 and 2009, São Paulo raised approximately $812 million by auctioning CEPACs. It’s not a policy I would prefer, but push comes to shove, development rights became a financial instrument with a quoted market price if we have to.

“Zoning reform produces new housing” is true and slow. “Zoning reform unlocks value already in your land but legally suppressed” is also true and fast. Value is a very subjective thing. It could show up in the comparable sales the week the plan is gazetted. It could show up in the fact that building an ADU will let the homeowner bring in their aging parents or just to rent out. That is a proposition you sell to a landowner, and there are many others. The affordability case turns on what happens next.

Yes, building more lowers prices

The NIMBY counter-argument arrives in two reliable examples.

The first is the denial of supply on prices aka supply skepticism. It is the claim that building more housing just attracts more demand, so prices won’t fall. Most YIMBYs are familiar with this.

The second example, called spillover skepticism, isn’t talked about as much. It is the claim that building in Buffalo cannot help San Francisco even if reform works locally.

Both objections are wrong. We many papers like the 2024 Furman Center Supply Skepticism Revisited synthesis gathered both theory and the evidence time and time again.

Locally, new construction lowers prices in the immediate neighborhood. Kate Pennington’s San Francisco analysis finds rents fall 2% for parcels within 100 meters of new construction, decaying to zero within 1.5 kilometers. Xiaodi Li’s New York study finds that for every 10% local stock increase, rents decrease 1% and sale prices decline within 500 feet. The “luxury housing causes gentrification” claim is the inverse of what the data show.

Within a metropolitan area, new construction creates moving chains that benefit lower-income households. Evan Mast’s JUE moving-chains paper found that 100 new market-rate apartments in 12 major American metros produced 45 to 70 openings in below-median-income neighborhoods within five years, with 19 to 39 of those openings reaching the bottom income quintile. Bratu, Harjunen, and Saarimaa’s Helsinki replication and Mense’s 2025 JPE Macro paper confirm the mechanism. Most demand redistribution happens within metropolitan footprints, which means the suburb is doing more supply work than the rival metro.

Across metros, the substitution channel operates at the national scale. Mondragon and Wieland’s Housing Demand and Remote Work estimates that an additional percentage point of remote work causes a 0.92% increase in local house prices after controlling for migration spillovers. The Bush Institute and SMU Build Homes, Expand Opportunity report runs the counterfactual. If all 250 largest U.S. metros had adopted Sunbelt-Mountain housing policies, 5.6 million more homes would have been built between 2010 and 2023, average home prices would be $115,000 lower, and rents would be $450 lower.

Let’s Talk About Houston

Houston is the only major American city without conventional use-based zoning. Three citywide referenda failed, but that hasn’t stopped the city from enforcing deed restrictions and minimum lot sizes. Still, despite the best efforts there is no zoning map. Both local groups and developers pushing, in 1998, Houston cut the minimum lot size within the I-610 Loop from 5,000 square feet to 1,400 square feet. They also removed the open-space and setback requirements that had made small-lot construction infeasible, and extended the reform citywide in 2013. Mercatus Center analyses document nearly 80,000 small-lot houses built since 1998. Not to mention more dense SFH areas with 34,000 detached townhomes added between 2007 and 2020 on lots that would have been illegal in any other major American city.

Just to give you idea on how much a superstar Houston is, in 2024, Houston issued 65,747 residential building permits. That’s the second-most of any U.S. metro. Texas as a whole issued 225,756 permits, more than any other state. The Bay Area, by contrast, issued 9,100 permits across all nine counties. Houston permitted more than seven times what the Bay Area permitted, on a population base roughly twice the size. Manhattan Institute analysis puts the Houston metropolitan median house-price-to-income ratio at 4.7.

It is worth noting that Houston does have its problems. It does have rising rents and a serious affordable-housing shortage at the lowest income tiers. Other cities have it worse. The reason I made the point is Houston’s model is not “housing is cheap.” It is “housing is buildable, so the price spiral does not run away.” The within-metro filtering mechanism documented by Rosenthal, Mast, Bratu et al., and Mense supplies the distributional payoff. The chain runs because the chain has units to consume.

Houston also shows what kind of reform wins. The conventional planning instinct is to find the optimal middle, a little zoning and a little density, both held back. Houston went the other way and deregulated use almost entirely, abolishing the rule dictating what you can put on a lot. The cities that tried to find a defensible middle produced the most disappointing outcomes. The optimal middle does not exist in housing policy.

A caveat about transferability deserves naming. Houston’s no-zoning baseline is path-dependent on three failed referenda, Texas property-rights doctrine, weak local government, and the absence of a state income tax. None of that package transfers cleanly to Ohio or Michigan or upstate New York. What transfers is the moves, meaning the lot-size cut, the by-right approval for small-lot construction, and the removal of open-space and setback rules. Texas proves the point inside its own borders, because the 2025 reform package kept zoning but reformed it in the same operational direction.

Texas Triangle and the Sunbelt

We all know about Houston. Why are we talking about Houston? It is the largest city in the Texas Triangle. DFW issued 47,045 single-family permits in 2024, Austin issued 16,521, and San Antonio issued 10,916. You are starting to see the structural difference between Texas and California. California has two superstar metros that absorb most of the in-migration and price most of the population out. Texas runs four mid-market metros, not to mention the many smaller markets inside and surrounding the Triangle. None of the Texas Triangle cities are really “dominant”. So, that lets prices set where wage-earning households can still buy.

What happens if that balance breaks? Well, we see the Texas system starts to revert to the superstar dynamic. Austin’s 2020-2022 absorption is the best-documented example. Home prices rose nearly 60% in 24 months, and smaller Texas cities including College Station absorbed demand shocks of 34% to 57%. By 2026, Austin has flipped to outmigration. Home prices are retreating from the former superstar, and inventory is recovering faster than any major U.S. metro. The demand reversal was not Austin’s doing. Higher interest rates and energy shocks are usual suspects. It didn’t help that the destruction of the hiring rates for white-collar professionals also helped cool every hot market in the country. Where supply is inelastic, a demand reversal shows up as frozen sales and prices that refuse to move. Where the building infrastructure already exists, it shows up as falling prices and recovering inventory.

In 2025, the Texas Legislature passed a bipartisan housing reform package explicitly modeled on the Houston template. SB 15 preempts minimum lot sizes in large cities, SB 840 authorizes multifamily by right on commercially-zoned land, HB 24 limits NIMBY protest power, and SB 2477 fast-tracks office-to-housing conversions. The coalition spanned business associations, free-market groups, faith-based organizations, racial and ethnic minority groups, and progressive housing advocates.

What’s in it for Cleveland and Atlanta

The empirical case for supply is settled. The political case is not, and it fails for a specific reason. The usual YIMBY argument does not explain why a Cleveland homeowner would vote for zoning reform when their property values are stagnant and their tax base is hollowing out. The option-value-of-buildability framework answers exactly that, and it is most powerful where it has been least applied.

The demand is already arriving. Zillow’s 2024 hottest-markets list put Buffalo first, with Cincinnati, Columbus, Indianapolis, and Providence rounding out the top five. Realtor.com’s 2026 forecast had Hartford, Rochester, Worcester, Toledo, and Providence as the top five “refuge markets” for buyers fleeing high-cost metros. The Philadelphia Fed’s great-reshuffle paper documents the welfare accounting. Originating cities saw housing-cost relief, and receiving markets absorbed the income shock. Hartford, Providence, and Chicago remain 55-76% below pre-pandemic inventory levels. As Austin showed, the supply infrastructure has to be in place before the demand arrives, not after.

Homeowners can be allies or adversaries. Either case, homeowners can still be customers. A homeowner in Cleveland watching their property value stagnate has the opposite economic interest from a San Francisco homeowner with seven-figure equity. Capozza-Helsley showed that the growth premium can account for half of urban land price, scaling with expected future rent growth. Buffalo, Cincinnati, Columbus, Indianapolis, and the recovering Connecticut and Rhode Island metros have demand fundamentals that produce larger option-value gains than Detroit, Toledo proper, or Cleveland city center, where the premium is thinner. The sign is positive in every case, and only the magnitude varies. Apply the mechanism to a Cleveland parcel assessed at $80,000 in a tract zoned exclusively for single-family use. The right to build a duplex, a triplex, or an ADU raises its value the day the entitlement is granted, and the homeowner who voted YES becomes wealthier. Even if the homeowner voted NO, that homeowner is still a customer. Often times, as we see with the ADU reform in California, NIMBY homeowners can and will build their own ADUs and other housing if it benefits them.

The obvious objection is that this cuts against affordability. If the right to build raises land prices, hasn’t housing just gotten more expensive? The resolution is in who gets what, and when. The option capitalizes into the owner’s land the day it is granted, but it pays out in cash only when someone exercises it, and exercised across thousands of parcels it produces the units that run the filtering chains. The owner is paid for the option. The renter is paid in the housing the option eventually builds. The two conflict only when the entitlement is scarce. Spot-upzoning one block while everything around it stays frozen lets capitalization run ahead of construction, because the lucky parcel becomes rare and worth hoarding. Broad, by-right upzoning does the opposite. It spreads the option value thin enough that holding out for the rezoning lottery stops making sense, and it maximizes the parcels that actually build. “Build everywhere” is not only fairer than “build on the rezoned block.” It is the configuration under which the land-price effect resolves into housing instead of into windfall. The renter in Cleveland is the person the chain is for.

The fiscal multiplier is largest for cities currently trapped. The National League of Cities’ fiscal conditions datashows cities with growing populations maintain a per capita ending balance of $566, against $438 in cities with declining populations. The mechanism is visible in Carmel, Indiana, whose mixed-use district generates land assessment values 20 times greater per acre than comparable single-use development, per Redevelopment Director Henry Mestetsky’s presentation to City Council. Carmel’s property tax rate is fifth-lowest in Indiana at $2.0354 per $100 of assessed valuation, and yet its high tax bills, a median $3,804 on a median home value of $455,500, reflect the assessed values the bundle produced rather than the rates. The commercial base expanded so far that low rates still funded the residential side. A city at the bottom of the assessment curve, which is to say Cleveland, gets there by allowing the parcel to be something other than a single-family home.

Atlanta is the in-between case. A high-growth Sunbelt metro with emerging affordability pressure, BeltLine-driven appreciation, and the beginning of zoning-reform discussion under “ATL Zoning 2.0,” but no Houston template installed. The political question is whether it adopts the Texas package now, while the coalition for affordability still exists, or waits until it has become San Francisco. Charlotte, Raleigh, Provo, and Greenville are running the Houston playbook. Atlanta has not yet.

There is a system-level case too. Braess’s paradox shows that adding capacity to a network and routing everyone through it can degrade performance for all users. The Hsieh-Moretti prescription of routing every worker to the highest-productivity metros is the housing-policy version of the same error, and the distributed answer scores higher on resilience and on the welfare of the median household.

The Rust Belt YIMBY argument is structurally simpler than the coastal version. Your property value rises, your tax base widens, and the affordability problem solves itself before the city becomes Austin in 2021. None of that is available in San Francisco. All of it is available in Cleveland, Buffalo, Toledo, Pittsburgh, Cincinnati, and Detroit.

Implementation bugs galore!

My position is maximalist one, get rid of zoning. That doesn’t mean I am not aware of the side effects it could cause. Thankfully, issues with implementation of zoning reform are documented, and each has a known patch.

Displacement. High-income remote workers arrive in secondary markets and bid up existing single-family inventory, pricing out incumbents before reform-enabled supply can respond. The patch is closing the window between “old restrictions removed” and “new supply online” through pre-approved building typologies and by-right approval. Minneapolis 2040 produced 16-34% lower home prices and 17-34% lower rents (Gu and Munro 2025) without a construction boom, through the demand-side effect of a credible reform announcement. But an announcement is a promise the supply has to keep. Minneapolis got the announcement right and the follow-through wrong, which is why it shows up twice in this playbook.

Backlash. Auburn, Maine’s Mayor Jason Levesque earned the title “YIMBYest City in America” and then lost reelection 62% to 38% in November 2023 to a deputy police chief who organized the opposition. Levesque’s own self-diagnosis names the failure mode in one line. He had “campaigned for the people who want to live in Auburn, not for the people who live in Auburn.” The patch is a designed consent structure that delivers the upside to the incumbent at the parcel level. Israel’s TAMA 38 program is the applied case. More than 100,000 apartments were reinforced between 2005 and 2024 because each building voted on its own reconstruction and the owners received the upside directly, an elevator, a balcony, a seismic retrofit, and 20-40% property-value uplift. It made the incumbent the primary beneficiary by construction, not by the hope that option value would capitalize after the fact.

Partial-implementation. Minneapolis 2040 eliminated single-family-only zoning in 2019, and the reform was widely framed as solving the binding constraint. It did not. The City Council explicitly directed staff to keep height, setback, and lot-coverage regulations closely matching existing single-family requirements. The Minneapolis Fed’s tracker shows only 46 new two-to-four-unit buildings permitted from 2020 to 2022 citywide, with just 20 in formerly single-family zones. Justin Fox’s analysis puts the end of single-family zoning at roughly 1% of new units permitted since January 2020. Eliminating the use category was the easier political move, and the built-form rules were the binding constraint left in place. The fix is to change the binding constraint, not the label. The Texas 2025 package is the operational template, with minimum lot sizes (SB 15), commercial-zone multifamily by right (SB 840), protest limits (HB 24), and conversion fast-tracking (SB 2477) shipped at once.

State preemption is still limited. Oregon’s HB 2001 in 2019 was the first statewide elimination of single-family-only zoning in towns above 10,000, and by the end of 2022 all 56 affected jurisdictions had complied, because the state coalition had been built across multiple prior legislative sessions. When West Linn and other suburban councils searched for workarounds. The coalition had the capacity to defend the law in each one. Auckland did not have that. The mandate arrived from above with no local advocacy infrastructure to defend it. Hence, the mandate had no constituency to hold it and keep the local town to account.

My point being?

Urbanism and YIMBYism are fundamentally products to be sold to towns and cities like SAP selling ERPs to enterprise. Different firms will use SAP’s systems in different ways. Same with cities and towns. Most likely way they are going to use YIMBYism and Urbanism is that golf cart community I described.

Then Textbook (a collection of local and state capacity from school systems) died. Quietly, the way most beautiful and doomed ideas do. No funeral, no eulogy, just a slow exhale. And rather than weep into my velvet shirt, I did the unthinkable!

I learned something. I took those lessons, pressed them like dead flowers between the pages of my own ambition, and have spent my idle hours building something. Something neat. Something that might even work, God help us all.

Here is a sneak peak! I hope you will enjoy the news when it comes out! The only thing I can guarantee is how gorgeous it looks.

Tencent’s then-president Liu Chiping told markets the company would “emphasize optimization” of costs (like personnel) in 2022. Chinese tech firms put hundreds of thousands of formal-sector white-collar workers out of work over the following three years. The Labour Contract Law was in force throughout (even with its grounds requirement and an active arbitration system). None of it stopped Tencent from performing layoffs.

“Socialist” California’s big tech firms cut entry-level hiring by more than 50% from 2019 to 2025 and ran successive layoff waves under a “notionally” opposite regime. California has at-will employment with no statutory severance and no just-cause standard. Google and Meta paid roughly 4 to 6 months of pay plus stock acceleration for the initial waves. Later waves of layoffs were not as generous to those unlucky souls.

You want to ask “Where were employers not firing anyone?” In Japan, the 2025 active job-openings-to-applicants ratio was 1.22 overall and 1.50 in manufacturing with unemployment held at 2.5% (some people don’t like that for some reason). Firms that wanted to reduce headcount did not invoke the four-requirement test for redundancy dismissal. They ran kibō-taishoku programmes (voluntary retirement at premium prices with 12 to 36 months of base pay on top of statutory retirement).

Tokyo Shoko Research found listed companies announced programmes covering 19,009 employees in 2024 (tripled from 2023).

What matters is whether local demand exceeds supply. When it does, employers cannot easily fire because they cannot easily replace (and the threat of layoffs loses its edge if people can find another job). When demand collapses you see that statutory protection becomes more like statutory guidelines (and, like all guidelines, employers find ways around it or just ignore them).

Hold up a moment? Earlier I imply that it is harder to fire someone in China than in California? Yes, with a heaping helping of caveats! Chinese employers face the Labour Contract Law‘s grounds requirement. This isn’t paper-only law the government quietly declines to enforce. The SPC’s August 2025 interpretation closed a common evasion route, and recent court rulings have invalidated performance-improvement-plan dismissals. That said, Chinese employers work around the formal regime through “optimisation” and pay N+1 as part of their “release”. SMEs in China often try to ignore the law and risk lawsuits.

You see incidents like the Jiangsu Suchun Liquor reorganization (SPC Guiding Case No. 164). A Chinese court, citing the local Party committee’s need to preserve jobs and prevent “mass incidents,” let an outside investor restart a bankrupt distillery’s production before formally taking it over. Essentially using bankruptcy law to keep workers employed.

Over the Pacific pond, Californian employers don’t really have any such requirements. Larger firms might pay out severance to reduce the likelihood of a wrongful-termination litigation. As a job market gets worse, severance packages often drop despite the threat of litigation.

You can guess whether the bottom half of each labour market has any formal protections. Despite the legal risks, a lot of Chinese SMEs ignore the Labour Contract Law, and 200 to 240 million flexible workers sit outside it entirely. Japanese non-regular workers (36.2% of the workforce) face yatoi-dome (the non-renewal of fixed-term contracts) as a normal exit mechanism. California employers fire at will and pay nothing in most cases.

You can guess what happens to young workers. China and California are both in genuine new-graduate hiring crises driven by different mechanisms. Japan’s labour market is tight. The protection that matters most for a 22-year-old graduate in 2026 is not Article 39 of the LCL or Tameny v. Atlantic Richfield. It is whether anyone is hiring.

Labour demand is the bedrock of protection

NBS reported a 16-24 urban unemployment rate (excluding students) of 18.9% in August 2025. It’s the highest since the methodology was revised in December 2023. Per China’s Ministry of Education data reported by The Economic Observer, the 2025 graduating class numbered 12.22 million and four consecutive cohorts have exceeded 10 million. A Zhilian Zhaopin survey put the 2024 graduate employment rate at 55.5% (down from 57.6% the year before). Zhang Dandan at Peking University (in a July 2023 Caixin article since removed from the original site) decomposed the cohort to argue the upper-bound rate could be as high as 46.5% if “lying flat” and “full-time children” populations are included.

California’s situation is hidden by the headline numbers. The state’s overall 5.5% unemployment rate (December 2025, per EDD) does not reflect the new-graduate cohort, which faces a different market. The Federal Reserve Bank of New York’s recent-graduate dashboard shows unemployment for ages 22 to 27 at 5.3% in Q2 2025, 5.7% in Q1 2026, which isn’t too bad. Then you see underemployment at 41.5%. For ages 20 to 24 with a bachelor’s or higher, BLS data put unemployment at 9.5% in September 2025. Recent graduates now run higher unemployment than the general workforce, reversing a thirty-year pattern. Oxford Economics attributes 85% of the rise in US unemployment since mid-2023 to new labour-market entrants. Handshake job postings for new grads fell 15 to 16% year-over-year and applications per posting rose 26 to 30%. Cengage Group found only 30% of 2025 graduates secured full-time jobs in their field.

Back to Japan, new graduates face the opposite condition. Recruit Career Future Research Institute’s Class of 2026 process survey found 39.3% of the cohort already held at least one informal offer by February 2025 (thirteen months before graduation). By December 1, 2025, the figure was 94.8%. JILPT’s official report put the Class of 2025 naitei rate at 92.6% (the highest since records began in 1999).

A new graduate in Japan is more than ten times as likely to have a job offer at graduation as a Chinese counterpart and substantially more likely than a Californian. Demographics, sectoral composition, and AI exposure explain almost all of it.

Dismissal regimes converge in practice

China’s Labour Contract Law permits unilateral termination only on “justified” grounds (Articles 39, 40, 41). Lawful no-fault terminations require N months of severance (one month per year of service). Unlawful termination requires 2x N (2N). Workers must be converted into open-ended contracts after ten years or two consecutive fixed-term renewals.

Japan’s Labour Contract Act Article 16 voids any dismissal “lacking objectively reasonable grounds and not socially acceptable.” Japan’s seiri-kaiko yon-yōken (four requirements) makes forced layoffs nearly unwinnable in court. The doctrine is set out in the Nihon no Jinjibu legal encyclopedia.

California (famously antibusiness) is fully at-will. The Labour Code §2922 reads, “An employment, having no specified term, may be terminated at the will of either party on notice to the other.” California’s only real exceptions are anti-discrimination protections.

How employers actually dismiss

China’s standard for white-collar dismissal is youhua (优化, “optimisation”). It’s a neat little euphemism for converting an unlawful termination into a mutually agreed departure under Article 36. The playbook (corroborated by Gank Interview’s January 2026 walkthrough) runs as follows. The employer issues a performance improvement plan with targets the employee is expected to fail. Once the employee fails, the company uses documented failure as Article 40(2) “inability to perform.” Most employees accept N+1 rather than pursue 2N through arbitration.

How can Japan get rid of headcount when the executives feel like it? Well, they have their own system, called kibō-taishoku (voluntary retirement). It’s still a lot more consensual than the Chinese and California examples. By mid-November 2025, Tokyo Shoko Research recorded 41 companies covering 11,045 employees. The Nikkei‘s analysiscalled it “the highest level since just after the Lehman Shock in 2009.” The more worrying trend is that the participants are not failing companies. The Nikkei now uses the term kuroji risutora (黒字リストラ, “profitable-company restructuring”).

When workers refuse the package, what happens? Employers use oidashi-beya (追い出し部屋, “chasing-out rooms”). The practice exists “to circumvent regulations preventing easy dismissal of permanent employees or to avoid paying enhanced retirement pay.”

California’s at-will baseline is heavily modified in the other direction. Per VentureBeat’s tracker and CNBC’s compilation, Google and Meta both paid 16 weeks base plus 2 weeks per year of service in the 2022 to 2025 layoff wave. A five-year mid-level engineer gets roughly 24 to 26 weeks. Employers pay any sort of severance is reducing chance of wrongful-termination litigation. Offering severance for a release is cheaper than a lawsuit. Especially, if the layoffs come at a suspicious time. As time goes on, Big Tech has been offering less and less severance per round.

Why the courts will not let employers exit the formal regime

It looks like these laws are nothing more than paper (with the exception of Japan of course). That’s not the whole truth. Japan is an aggressive case when it comes to enforcement but some cases are in the defense of the SMEs. On the other hand, Chinese and even Californian courts have started pushing back on the evasion mechanisms too.

China SPC’s Judicial Interpretation II (August 2025, effective September 1) directly attacks the standard playbook. Per the Jingtian Gongcheng law firm’s clause-by-clause analysis, “voluntary” social-insurance waivers are void and over-broad non-compete clauses on ordinary positions are void. The practice of “mixed employment” through affiliated companies triggers consolidated treatment of years of service. The Shanghai High People’s Court has invalidated PIP-driven dismissals where the employer skipped the required targeted training and transfer attempt. The SPC 32nd Batch Guiding Cases hold that termination grounds are locked in at the time of notice.

The Toyo Sanso case (Tokyo High Court, 1979) in Japan established the four-requirement framework still applied today. The Nihon Shokuen Seizō Supreme Court decision (1975) established the abuse-of-rights doctrine, codified verbatim into Article 16 of the Labour Contract Act in 2007. Voluntary retirement at premium prices exists because forced redundancy almost never survives judicial review.

California’s Supreme Court has slowly built four exception structures over four decades against at-will employment. Tameny v. Atlantic Richfield (1980) created a tort claim for wrongful discharge in violation of public policy. Foley v. Interactive Data (1988) recognized implied-in-fact contracts from handbook language and longevity. Guz v. Bechtel (2000) consolidated this framework. Green v. Ralee (1998) expanded public-policy sources to administrative regulations. At-will is still the law of the land in California. It’s just that the case law for litigation (that will undermine at-will) just keeps building.

The bottom half is easy to fire in all three places

What happens if you don’t have the time or the resources to get legal protections in China or Japan? Let alone take advantage of case law in California? The formal regime is simply inapplicable or unenforced, and dismissal is effectively at-will.

China, 200 to 240 million workers outside the Labour Contract Law

Per the State Council’s December 2025 report to the NPC Standing Committee, flexibly employed workers (think food delivery and rideshare apps) exceed 200 million. Caixin and Jinan University’s IESR put the figure at 240 million as of end-2024. As Qiushi puts it, “Some platform companies, in order to reduce labor costs, use franchise, agency, or contracting arrangements to lengthen the employment chain, or have workers register as individual industrial and commercial households, blurring the labor relationship.” Only 70.57 million flexible workers were enrolled in basic urban-employee pension insurance (roughly 30% coverage). These workers can be “fired” by app deactivation.

Small-firm Chinese employers routinely ignore the Labour Contract Law and take the risk. Migrant workers without proper contracts (which is more likely the case than not) are paid in cash and dismissed verbally with no recourse.

21 million non-regular Japanese workers face yatoi-dome

Per Q4 2025 labour force data, 21.26 million of 58.66 million employed workers are non-regular (36.2%). The share rose from 31.4% in 2004 to 37.1% in 2023 per MHLW data. Yatoi-dome (雇止め) is the term for non-renewal of fixed-term contracts. It is functionally a dismissal but is not legally treated as one. The Cabinet Office’s OECD EPL analysis shows Japan’s regular/non-regular protection gap is the 6th-largest in the OECD and has widened since the 1990s.

Japanese SMEs face an additional informal mechanism. Per the Nihon no Jinjibu encyclopedia, SMEs “face practical difficulty satisfying the four redundancy requirements” because they lack reassignment options and temporary-layoff capacity. Courts respond with “totality of circumstances” review which makes informal pressure more workable for SMEs.

California, at-will with no litigation tail at small firms

California’s at-will baseline is the default for almost everyone outside large firms. The wrongful-termination doctrines requires protected-class or protected-activity violation or an employer with enough assets that a contingency-fee plaintiff’s lawyer will take the case. Neither condition is typically met at small or even mid size employers.

More insecure forms of work like delivery apps are more explicitly carved out. California’s Proposition 22 classifies app-based drivers as independent contractors. They can be deactivated without cause and without recourse. Same as in China.

China’s welfare expansion as a response to the demand problem

Net it out. If you have the resources, you get more protection in China than California on dismissal (and only barely, when PIPs are in play). That said, China’s growing pro-employee case law isn’t a leftward turn. It’s a developmentalist state responding to several pressures at once. Demographic collapse. Weak household demand. A fiscal squeeze on the local governments that built the development model in the first place.

The demographic shock

Population fell for a third consecutive year in 2024. The NBS reported a year-end population of 1.408 billion, a decline of 1.39 million, with 9.54 million births against 10.93 million deaths. James Liang, in an essay on Sina Finance, notes the underlying decline accelerated. Dragon years average 6.4% more births than rabbit years, and 2024 only delivered 5.8%. A widely cited demographic report on Gelonghui puts China’s TFR around 1.02 in 2023. Per the China Association of Social Security, the 20 to 29 female cohort shrank by roughly 4.4 million per year between 2017 and 2022.

The State Council Development Research Center’s She Yu states the official framing. “The excessive cost of child-rearing has become the principal factor suppressing fertility intentions.” Ageing compounds it. The 2025 China Pension Finance White Paper reports 65+ at 15.6% of the population in 2024. CASS pension scholar Zheng Bingwen, at the 2025 Boao Forum, projects super-aged status (≥20% over 65) by 2032. Pension fund cash-deficit and reserve-exhaustion dates have been pushed from 2028/2035 to 2036/2044. Delay, not solution.

The childcare subsidy

Per the Implementation Plan jointly issued by the General Offices of the CCP and the State Council on July 28, 2025, every child born on or after January 1, 2025 receives 3,600 yuan per year until age three. The State Council Information Office press conference of July 30, 2025 confirmed Ministry of Finance budget of roughly 90 billion yuan for 2025. What’s unusual is the central government bearing about 90% of the cost rather than forcing provincial and local governments to pay for it. The Economic Daily called this “the first large-scale, universalized, direct cash benefit to the population since the founding of the PRC.”

China’s welfare state has historically operated through employers and hukou-linked entitlements. Almost never through a more universalist cash transfer. 3,600 yuan amounts to roughly 300 yuan per month.

Hukou liberalisation is a long trajectory, fiscally bottlenecked

A Peking University NSD working paper by Zhang Jipeng and Chen Zhu reconstructs the slow history of hukou liberalization. Small cities fully opened in 2014. Type-II large cities (1 to 3 million urban population) had restrictions abolished in 2019. The State Council’s July 2024 Five-Year Action Plan formalised removal of settlement restrictions in all cities below 3 million, substantial liberalisation for 3 to 5 million, and points-based settlement for the five megacities. A December 2025 State Council report to the NPC Standing Committee records that from 2019 to 2024 the resident-population urbanisation rate rose from 62.7% to 67.0%, and the urban-rural income ratio fell from 2.64 to 2.34. The State Council’s March 2025 acknowledgment put central incentive transfers for migrant-citizen public-service provision at 40 billion yuan in 2024 and 42 billion yuan in 2025.

40 billion yuan is a rounding error against what local governments have lost. Per the Sina Finance “China Land Finance Report 2024”, land-transfer revenue fell from a 2021 peak of 8.5 trillion yuan to 5.8 trillion in 2023, a 31.7% decline, and continued falling to roughly 4.87 trillion in 2024 per a Zhihu fiscal analysis. Land revenue averaged 34% of local government revenue from 2012 through 2023, peaking at 43.2% in 2020. Local dependence on central transfer payments rose from 28.6% of local revenue in 2021 to 36% by 2023, and Heilongjiang and Tibet receive over 80% of their fiscal spending from central transfers. Local governments lost roughly 3 trillion yuan in annual land revenue between 2021 and 2024. The 40-billion-yuan migrant-citizen fund is just over 1% of that loss. Beijing is filling a crater with a teaspoon.

This is why hukou reform is gradual. The cities most able to absorb migrants are precisely the cities that lost the most land revenue and now lack local fiscal capacity to expand public schools, public housing, and public health services.

Twenty-seven gas turbines run day and night without an air permit. 2 miles away are about six public schools, including an elementary school. They are trucked in to power xAI’s Colossus 2 data centre across the state line in Mississippi. The nearby Boxtown neighbourhood already breathes a cancer risk roughly four times the national average, and the turbines could emit more than 1,700 tons of nitrogen oxides a year.

Likely the largest industrial NOx source in a metro area already failing national smog standards. Mississippi regulators have nonetheless permitted an even larger facility at the same site. The turbines run because the regional grid takes five to seven years to deliver new interconnections, and AI capital-expenditure schedules do not.

A steady, high-load-factor customer spreads the grid’s fixed costs across a broader base. In theory, it should lower rates for the households around it.

It is also, in the United States in 2026, mostly just theory. Wholesale prices near significant data-centre activity have risen as much as 267% over five years, and household prices rose 7.4% in the year ending February 2026. PJM’s capacity-market clearing prices have hit their FERC-approved cap for three auctions running. Pew estimates that data-centre capacity costs alone are adding $18/month to residential bills in western Maryland and $16/month in Ohio, before transmission and distribution buildout. The industry isn’t doing what it says it could.

Ninety years earlier, in the same country, a federal agency that had not existed six years before was stringing electric lines to Tennessee farms whose owners had never owned a refrigerator. The Tennessee Valley Authority, chartered in 1933, employed more than nine thousand workers within a year, building dams and electrifying a region whose per-capita income was half the national average. The Rural Electrification Administration, founded in 1935, brought power to most American farms within fifteen years.

What could data centres do?

Data centre actors accounted for roughly half of U.S. corporate clean-energy procurement in 2024, and the IEA’s Energy and AI report documents them as the largest single class of corporate clean-power buyers in the world. You need demand for energy if you want to build out more energy infrastructure, especially clean energy infrastructure.

Electricity systems carry large fixed costs and recovered across whatever load shows up to pay them. A new subdivision adds load that peaks at dinner and disappears overnight. A data centre runs 24/7 at 90%-plus capacity factor. The data centre is the better customer on cost recovery alone.

What hyperscalers want is a lot of cheap power on timelines that match their capex schedules. They do not care if it’s clean energy or fossil fuels. They want compute, and they want it cheap. The cheapest compute in 2026 is powered by solar plus storage plus, where available, nuclear. You think that a rational hyperscaler in a working electricity system would invest in clean generation and sign contracts that anchor utility investment. It would absorb cost overruns so its neighbours’ bills did not move. Some of them do.

You also think that ones who have a bit of political influence would encourage the government to make the investments for them, in a way that doesn’t draw ire from the public.

So why don’t they all?

What do hyperscalers do instead?

The hyperscaler arriving in a new region can spend years on interconnection negotiations and absorb cost overruns so its neighbours’ bills do not move. Or the hyperscaler can route around the institution entirely. It can build behind-the-meter gas turbines, sited where permitting frictions are lowest, and run them while the permits are pending or without seeking them at all. xAI in Boxtown is the irresponsible example of this. It sits there not because the architecture forced it to, but because its principals do not believe the surrounding energy environment is their problem. The political economy so far signalled that they are right.

This isn’t just the xAI turbines in Boxtown. We have the 4.5 GW Crusoe gas expansion in Abilene, the 400 MW Williams “Socrates” facility serving Meta in Ohio, and Microsoft’s $7 billion Chevron-built gas plant in the Permian Basin.

Cleanview tracks 56 GW of behind-the-meter capacity across 46 sites and now projects 30% of new data-centre capacity will be served on-site. Almost all are up from effectively zero a year ago. It’s become enough of a problem that a bloc of Senate Democrats opened a formal investigation in March 2026 into twelve such projects.

It isn’t just all fossil fuel expansions. Microsoft signed a $10.5 GW renewables procurement with Brookfield in 2024, the largest corporate clean-power deal on record. Google has signed PPAs anchoring new utility-scale solar buildouts and a Kairos Power agreement for advanced reactors structured as a long-horizon clean-anchor contract rather than a turbine workaround. Emissions aren’t going to be much of a problem with solar panels and wind turbines.

It is a small set of operators who have decided that absorbing the procurement risk is cheaper, than the regulatory blowback the shortcut will eventually produce.

The queue is what makes the shortcut attractive. By the end of 2025, over 2,060 GW of generation and storage were seeking grid connection across the U.S., according to Lawrence Berkeley National Laboratory, more than twice the country’s existing fleet. The median wait from request to commercial operation has doubled, from under two years for 2000–2007 projects to over four years for 2018–2024 projects.

CenterPoint Energy in Texas reported a 700% jump in large-load requests in a single year. Other Texan utilities like ComEd and PPL (along with Oncor) now report more gigawatts of data-centre applications than their entire historical peak demand.

Lack of hardware makes it really hard to clear out the queue. By Wood Mackenzie’s Q2 2025 survey, lead times for standard power transformers have reached 128 weeks and 144 for generator step-up transformers. Roughly 80% of large U.S. power transformers are imported. Cleveland-Cliffs is the only domestic American producer of the grain-oriented electrical steel transformers require.

There are nearly $2 billion in announced manufacturing expansions. Which will not come online until 2028 or later. You need the grain-oriented-steel workforce and the high-voltage line crews. Along with substation engineers who connect new generation. We can’t scale up because the apprenticeship pipelines for these trades have been thinning for two decades while nobody was paying attention.

What do utilities want?

The other part of the problem is who the hyperscalers need to work with. American investor-owned utilities operate under a regulatory contract essentially unchanged since the early twentieth century. The state grants the utility a regional monopoly and an obligation to serve every customer in it.

In exchange, a commission sets rates that recover the utility’s operating costs plus a regulated return on its rate base (the depreciated capital sunk into plant and lines). This was a sensible design for extending wires to new neighbourhoods at predictable cost. It is also a disastrous design for coordinating a multi-trillion-dollar buildout against a state competitor that does have the capacity to do so.

This rewards rate-base growth above almost everything else. The Averch-Johnson effect (named after the 1962 paper that formalised it) is the standard result on this kind of regulation. A utility whose authorised return exceeds its cost of capital has a structural incentive to “over-invest”.

The American Economic Liberties Project’s January 2025 paper by former Sempra chief economist Mark Ellis estimated that authorised returns on equity exceed the actual cost of capital by enough to cost American utility customers roughly $50 billion a year, about $300 per household. The stock market capitalises that stream of excess returns at about $1 trillion. For 2024, the average authorised return on equity for U.S. regulated utilities was 9.7%, against a broad-market forecast of 6.7%. Over three decades, Ellis finds, IOU capital investment per kilowatt-hour delivered grew about 3.8% per year faster than demand. The legal threshold articulated by Justice Brandeis in 1923 and adopted by the Supreme Court in 1944 holds that returns above the cost of capital are “unjust and unreasonable“. Nobody enforces it, because nobody’s job description is to.

You can do this experiment yourself (well, almost). Two California utilities (San Diego Gas & Electric and the Sacramento Municipal Utility District) serving major metro areas under the same state energy policy. Same wildfire risk and demand growth. One answers to Sempra’s shareholders, the other to a board elected by the City of Sacramento. Between 2020 and 2023, SDG&E’s residential rate rose 65% and now exceeds 45¢/kWh. SMUD’s rose less than inflation and stayed near 17¢/kWh. The gap is more than two and a half times.

Financing explains some of it. Public utilities raise capital through municipal bonds at 4 to 5% interest and are exempt from corporate income tax. IOUs raise capital at nearly double the cost. But these account for perhaps a third of the gap. The rest is the management philosophy that follows from ownership. SMUD’s managers are not maximising earnings per share and its investors are not expecting double-digit returns. SDG&E’s are. Sempra’s CEO took home roughly $14 million in total compensation in 2023, while SMUD’s general manager made under $700,000. Sempra’s stock price tracks SDG&E’s rate base because that, by regulatory design, is the source of its profit. A larger rate base produces higher earnings, and the resulting share price feeds executive pay. Everyone in the chain responds rationally to the incentive structure. Nobody is behaving badly. The chain is the problem.

The pattern is industry-wide. The American Economic Liberties Project found that between 2020 and 2023, IOU residential rates rose 49% more than inflation while publicly-owned utilities’ rates rose 44% less. Investor-owned utilities used 2025 earnings calls to disclose $1.4 trillion in planned capital investment through 2030, a 21% upward revision in a single year, the rate base growing in real time with the profit stream attached.

The mechanisms range from outright bribery to rate-case manoeuvring. The defining recent case is FirstEnergy and Ohio’s House Bill 6, in which from 2017 to 2020 the company paid roughly $60 million through a dark-money nonprofit controlled by Larry Householder, then Ohio’s House Speaker, now a federal inmate. The payments bought $1 billion in subsidies for FirstEnergy’s struggling nuclear and coal plants. The company also paid $4.3 million to the man who would go on to chair the state utility commission.

The newest mechanism is secret data-centre contracting. You might think utilities at least file these things publicly. You can guess that they don’t.

A March 2025 Harvard Electricity Law Initiative paper, Extracting Profits from the Public by Eliza Martin and Ari Peskoe, reviewed nearly fifty regulatory proceedings and found a pattern. Utilities negotiate special contracts with hyperscale customers and file them with state PUCs under confidential treatment.

The infrastructure costs are then spread to all ratepayers through ordinary rate cases. Federal antitrust litigation against Duke Energy established that the company sought to shift the costs of a $325 million data-centre discount onto its other ratepayers. Similar patterns appear at AEP and Dominion, and at Entergy in the South. The rate structures that once spread the cost of reliable power across everyone are now forcing the public to pay for infrastructure built to supply a handful of wealthy corporations.

Utilities looking at a hyperscale interconnection is not looking at a problem. It is looking at the largest rate-base-growth opportunity in half a century. So, they will offer favourable terms and spread the infrastructure costs across its broader ratepayer base, filing the whole thing under confidential treatment. The hyperscaler, faced with grid lead times that cannot wait and just don’t care. Of course they take the deal.

Why doesn’t either side fix itself?

The deregulatory account is that American electricity got expensive because regulators got in the way. That Texas is the proof case (the most market-based major grid in the country) with the lowest industrial rates in the lower 48. Get government and the legacy utilities out of the way, the argument goes, and supply responds. The second Trump administration’s Executive Order 14154 and the “Speed to Power” agenda are its policy expression.

The progressive account runs the other way. American electricity got expensive because corporate concentration captured the public interest. IOUs extract excessive returns through regulatory capture. In this case, it is the hyperscalers externalise their power costs onto residential ratepayers. The alignment between Big Tech and the Trump administration is the visible quid pro quo. The ideal remedy is some sort of enforcement. It’s also a popular idea as Abigail Spanberger won Virginia by 14 points in November 2025 campaigning on this account. No to mention, 78% of Americans told Consumer Reports they are worried data centres will raise their bills.

Each account have a degree of truth. Permitting and interconnection lead times are just absurd. IOUs do extract roughly $50 billion a year through a comprehensively gamed system. But both share a deeper failure as they assume the architecture of American electricity governance is adequate. The operational (not political) problem is which actors operate within it.

ERCOT runs the most market-based major grid in the country. In twelve months it requested a federal emergency order during Winter Storm Fern. The legislature afterwards passed Senate Bill 6 to mandate large-load interconnection rules. The state also leaned on the Texas Energy Fund (a $9 billion voter-approved programme) to fund dispatchable generation. That is an energy and industrial policy in everything but name. Texas (reluctantly and in pieces) is reverting to state coordination because the market alone cannot do the planning.

Even the Texas Public Policy Foundation (ever hostile to coordinated state action) documents that the state’s winter capacity gap is now larger than during Winter Storm Uri in 2021. ERCOT added 31 GW of solar and 15 GW of batteries but only 3.1 GW of new natural gas between 2021 and 2026. While peak winter demand grew roughly 20%.

PJM (the largest grid operator in the country and serving 67 million people) hit its FERC-approved capacity price cap for the third auction in a row in December 2025. Still 6,625 MW short of its reserve-margin target. Absent the temporary cap negotiated with Pennsylvania Governor Josh Shapiro, PJM estimates the price would have cleared roughly 60% higher. It’s own market monitor attributed about $6.5 billion of the $16.4 billion auction cost to data-centre load.

The progressive account isn’t any better. If it was simply that Big Tech and IOUs extract from ratepayers. The cure would be to discipline them and nothing else. But hyperscalers choose gas turbines because no institution exists to deliver the alternative. State regulators are patching, late and unevenly. The Virginia State Corporation Commission approved a new GS-5 rate class in November 2025 shifting more buildout cost onto large data-centre customers. A the same time approving a $16/month residential rate increase.

Who got what they paid for?

So why do utilities and hyperscalers, whose deeper interests actually diverge, end up coordinating against the public anyway? American political economy is fragmented across layers of government and empowers local self-rule. Which privileges actors with long time horizons and the ability to operate across many venues at once. As JS Tan has argued, hyperscalers have both. It turns out, so do investor-owned utility holding companies. Almost nobody else does.

In practice this means venue arbitrage. A hyperscaler shopping a $5 billion project can play states and counties against one another, and play their regulators. A utility shopping a rate case can find a friendly PUC or legislature and play it against federal pressure. Neither needs the other’s enthusiastic cooperation. The short term incentives just happen to align.

Hyperscalers’ deeper interest is in cheap power, which is the same for you and. Given a working developmental institution, that interest would dominate. In the system we have now, it loses to something more proximate. Utility wants rate-base growth while the hyperscaler wants compute on capex timelines grid interconnection cannot meet.

You can see where this is going as the deeper interest is slow, but there is a shortcut. Most of the industry are going to take the shortcut.

They are coordinate with the utilities, sometimes through secret contracts. Other times through siting decisions that route load toward whatever utility offers the least scrutiny, not because their interests align but because nothing better is on offer.

The political surface is loud enough to mistake for the cause. Five major hyperscalers each gave $1 million to the Trump inauguration fund. Marc Andreessen and Ben Horowitz pledged $50 million to an AI super PAC.

Trump’s Executive Order 14148 fast-tracks any data centre over 100 MW, covering gas turbines and coal equipment while pointedly excluding wind and solar. I am not the “Big Tech bought the election” type. I am also not going to pretend the contributions and the EO are unrelated.

The temptation is to read this as straightforward corruption (I am not ruling it out). Hyperscalers bought the deregulation they wanted. I think that reading is too simple. Hyperscalers really did want was to scale. What they bought (and what the administration delivered) was permission to bypass the regulatory institutions that were not delivering it. The utilities were happy to receive their share.

The permission is not durable, and the political surface is already shifting. The backlash is not confined to the affluent-liberal-NIMBY caricature big tech finds convenient. As has put it, “Data centers are one of the only physical manifestations of ‘big tech’ encroachment on ppl’s lives and broad swaths of the public are very angry and resentful of these companies and the power they have,” adding that “AI cos have done a terrible job explaining why they need these data centers.” Some industry observers see the reckoning coming: predicts that “The next Dem admin will look to ban data center scale deployment of diesel gen sets.” puts the strategic failure more sharply: “If you want to maximize the rate of progress over the long run you need to take probable political opposition into account and take steps to mitigate it by making sure it won’t derail you.” The bypass strategy works only until it doesn’t.

There are good proposals out there to build as much energy (clean btw) to bring down prices to penny a kilowatt/hour. It’s just as said, the country has not lost the capacity to build. It has lost the capacity to build for the public.

When Zohran Mamdani won the Democratic primary for mayor of New York in July 2025, not everyone took the news well. The New York Post ran a piece headlined “Zohran Mamdani’s feeding off Gen Z’s misplaced doomerism.” Its argument leaned on Jean Twenge, who has spent fifteen years making the case that each new generation arrives carrying some fresh psychological pathology, rather than, say, responding to a decade that ran from the Great Recession through the COVID years, or anything else with real weight to it. Gen Z, she explained, votes “the bastards out” because depression makes the world look permanently grim.

Twenge is not wrong that perception drives behaviour. Indeed it does, and we would not argue otherwise. Where she goes wrong, in our view, is the perception itself, and the question of whether it tracks anything real. Young New Yorkers, and older ones, were looking at concrete, material things. The Second Avenue Subway cost $2.5 billion a mile, eight to twelve times what comparable lines cost in Paris or Madrid, by the count of NYU’s Transit Costs Project. A cap on food-vendor permits, in place since 1979, had sat untouched for forty-six years. On the black market a single permit now sublet for $15,000 a year, as one investigation found. Six thousand small-business rules had piled up over the decades, and we suspect nobody was keeping count.

Telling a voter that she is depressed, and that the cure is your candidate (one with a certain kind of “distinguished” history), is a way of not discussing the subway, or the economy that makes a plate of halal run over $10.

What about New York?

We are picking on Mamdani and New York for a straightforward reason. The city is thick with history and case studies, and not the dusty kind. Recent history that conservatives to progressives can learn from.

Two years before Mamdani won, New York drove out the one transit official in living memory, nicknamed Train Daddy, who had actually been fixing the system.

Andy Byford took over the New York City subway in January 2018, with on-time performance at 58.1%. He had come up from station foreman in 1989, through the London Underground and the Toronto Transit Commission. A self-described subway nerd, he spent his first weeks walking the platforms.

One of his first orders was for three vacuum cars to clean the track beds. Litter on a track bed delays no train. On any cost-benefit model a consultant would run, the vacuum cars are waste: money spent on something that moves no measurable number. Byford bought them anyway, and said why. “My customers shouldn’t have to look at that.”

That is not an especially technocratic line from Train Daddy. He had practical and safety arguments available to him, and used none of them. Instead he made plain that he was buying a subway that looked cared-for, on the theory that a rider who sees filth correctly concludes that nobody is in charge. Two equally competent engineers could walk the same platform, see the same track bed, and disagree about whether the vacuum cars are worth the money. Looking at the thing directly is necessary. It is not the whole of the skill. The other half is an imagination for what the thing feels like to the person using it.

Byford worked the trains in two ways. Contrary to the popular memory of him, much of it was incremental. A SPEED Unit audited the faulty signals that had been quietly slowing trains for years and raised limits where the engineering allowed. Not to mention, the Save Safe Seconds campaign shaved seconds off millions of daily trips. Eighteen months in, weekday on-time performance hit 81.5%, the highest since 2013.

His second way, and what gets remembered is the big structural projects. Fast Forward, a $40 billion plan to re-signal most of the system on a timeline 75% faster than the baseline. (A note before planning anything that bold, Byford had done the work for three decades across four agencies.) He knew how the procurement and the labour realities actually worked, not from a briefing but from doing them.

The point worth holding onto is that the vacuum cars belong to neither category. Clean track beds and re-signalled track are different kinds of project, and a manager who thinks only in measurable outputs will fund the second and cut the first. Byford funded both, because both mattered to how the system was experienced.

In January 2020 he resigned. Andrew Cuomo, Twenge’s beloved governor, had spent a year freezing him out: briefing Byford’s subordinates while Byford sat in his own office, and overruling his engineering judgement. He brought in AlixPartners to “transform” the MTA by trimming Byford’s authority down to “the day-to-day running of service.” Cuomo’s stated objection to Fast Forward was that it was too slow. A politician with no transit background was informing a four-continent professional that his timeline lacked ambition. Byford went on to run Transport for London, and now leads high-speed rail at Amtrak.

Mamdani

Mamdani took office five years later. Before anyone reads what follows as cheerleading for a left-wing mayor, hold on for a moment. A Republican and an ex-Democrat independent are coming a few sections down, and they are also models of competency.

On January 25, 2026, three and a half weeks into his mayoralty, Zohran Mamdani got his first snowstorm. Winter Storm Fern dropped about a foot of snow on the city, and the streets were ploughed fast.

It was not smooth. Ploughs shoved snow into bus stops, the nearest open space, and nobody was tracking which stops had been cleared. Then sub-freezing cold turned the banks to ice. Riders posted photos of three-foot walls of frozen snow where their stops used to be, and crosswalks vanished. At least 20 people died of cold exposure in the weeks that followed. Some inside their own apartments. City Council Speaker Julie Menin said the deaths “were not inevitable.”

Four weeks later, the city’s first blizzard since 2016 buried all five boroughs under nearly two feet of snow. It was a worse storm by every measure. Mamdani’s response was markedly better. Between storms, the administration had geotagged every unsheltered bus stop and crosswalk so DSNY could track each location and the time it was last cleared. Emergency shovelers went from 550 to 1,300, their pay from $19 to $30 an hour. Warming centres more than doubled. An overnight travel ban kept private cars off the roads. By Monday morning, 2,200 bus stops were clear and no one had died on the streets. You do not often watch a mayor learn that fast from his own mistakes, or learn from them at all.

His administration brought the first enforcement action against a delivery app under New York’s food-delivery laws, an $875,000 settlement with HungryPanda and restitution to 380 immigrant-owned restaurants it had overcharged. The point is not the settlement figure. It is that the legal authority had been sitting there unused for years. Enforcing a junk-fee law against a well-capitalised tech platform was nobody’s idea of “what works”. It had no champion among the pundits who use and abuse that phrase. The Mamdani administration checked whether the law was being followed, found that it was not, and enforced it.

On the more “centre” or “moderate” side of things, Mamdani’s Executive Order 11 directed seven agencies to inventory the 6,000 rules and fees facing small businesses. The order set fixed deadlines and was built with the city’s chambers of commerce. The street-vendor reform is another example. The 1979 permit cap had created a black market charging $15,000 a year for a sublet, while vendors caught working without one faced criminal charges. The administration moved to lift the cap and decriminalise unlicensed vending. The aim was a more legitimate channel towards the 17,000 permits the city is legally required to issue and simply never got round to. When a cap is producing a black market, lift it. Then build the lawful channel, so that the legal path is also the easy one.

None of this is especially ideological, regardless of what the discourse on Twitter has decided. Which raises a fair question. Why did Eric Adams, the supposedly more “respectable” and “centrist” mayor, do none of it? The honest answer is that the credentialled-centrist style does not reward this work. It rewards what presents well to the foundations and the ratings agencies, and an unenforced junk-fee law presents as nothing at all. We are only months into Mamdani’s term, and anyone who tells you how it ends in three years is selling something.

Carmel and Detroit

So how do Mamdani and Byford actually connect? Two more cases, both rather more centrist, bring it round.

Jim Brainard became mayor of Carmel, Indiana in 1995 with no real public-office experience. Early on, a friend pointed at a pile of pipes by the road and asked him what they were. Brainard did not know, so he wrote to urban-planning departments around the country and asked for their syllabi. Twenty-eight years later Carmel had 152 roundabouts and a reputation as “the internet’s favorite small city,” on the strength of an urbanism that is genuinely walkable by American suburban standards.

Carmel’s traffic-fatality rate runs at roughly a fifth of the national one, and a downtown rebuilt from a sidewalk-less suburb now holds more than 150 corporate headquarters. A Republican, Brainard governed against half his coalition’s instincts, not out of heterodoxy, though in effect he was heterodox, but because he wanted Carmel to be a better product for its citizens and customers.

Mike Duggan inherited bankrupt Detroit in 2014. He had already run three Detroit-area institutions and knew them from the inside. As county prosecutor he had once reached back to a law-school class on common-law nuisance and used it to force absentee owners to fix or forfeit houses, an effort that saved an estimated 15,000 to 20,000 of them. As mayor he built a Department of Neighborhoods and watched Detroit post its first population growth since 1957. He has since left the Democratic Party to run for governor as an independent. On results alone, he would make a good governor for Michigan.

The method

Start with Circuit City, because it is the cleanest case of the failure this whole essay is about. By the technocratic playbook the company did everything right. Watching its costs, it fired 3,400 of its highest-paid store associates in March 2007, about 9% of the workforce, and replaced them with cheaper hires to bring down selling and administrative expense. On the spreadsheet the move was sound, sensible reallocation of capital.

But the spreadsheet was not being empirical. It was being empirical about the handful of things it had decided to count, and the most important fact about Circuit City was not among them: those associates were the company’s actual offer. The reason a shopper chose Circuit City over Walmart or Amazon is the same reason a confused customer walked out with the right television rather than empty-handed. Analysts warned at the time that knowledgeable service was one of the few things the chain had that Walmart did not. The layoffs were not an empirical decision. They were a prior commitment about what a retailer is, dressed in the costume of cost discipline. Knowledgeable service is simply a very hard thing to put on an asset sheet for the respectable types, and what cannot be put on the sheet does not exist.

That holiday, same-store sales fell almost 12%. Circuit City liquidated all 567 remaining stores less than two years after the firing.

What ties Circuit City to the mayors and to Byford? I argue it is two things called customer experience and process improvement. You treat the city as a system with users in it. You ask where the friction sits, and what the system feels like to the person inside it.

What we mean is fixing the process rather than blaming the people inside it. It is an old, unglamorous discipline, and for all its results nobody much embraces it. What respectable technocrat would rather stand near the factory floor and the quality audit than at the strategy offsite?

It is also not the credentialled-centrist mayoralty or some sort of McKinsey-trained reformer. It certainly not anything similar to Rahm Emanuel.

You would ask how a rider feels about track-bed litter, or a station that smells of urine. They ask how a vendor paying $15,000 for a permit the city is meant to issue free could possibly improve anything for the citizen buying lunch. It does not! It only makes the food cost more and restrict people from opening up shop.

It’s also important to not that incrementalism and big reform are not an either/or. The skill is knowing which the situation calls for. When the architecture is sound but clogged, you take a page from “Yes, Prime Minster” and salami-slice. That is hundreds of small cuts, each one beneath notice, and they add up further than you would think. When the architecture is broken, you sometimes have to rebuild.

And there is something for which neither the pundit’s grammar nor the consultant’s has a word. It is as some marketers would put it, changing how a thing is experienced without changing the thing itself. Often it is no more than spending the money to keep something clean more often. You would be shocked how frequently this is the cheapest real improvement available, and the quickest way to lift the very perceptions Twenge worries about. It is also, somehow, the first thing a manager cuts when he funds only what he can count.

Byford’s “my customers shouldn’t have to look at that” is the whole of it. The customer is the rider and the shop owner, not the donor and not the out-of-town activist. And the gap is not only one of interest. The donor and the activist have never stood on the platform at rush hour, and have never met the gig worker the junk fee was skimming. You cannot have an imagination for what a system feels like from inside it if you have never been inside it. A pundit will defend incrementalism as realism, and not just any incrementalism but the slow do nothing kind that ruins the broader reputation of incrementalism itself! The reply to that is constraint was never ambition. It was always capability, with a dab of will.

The pipeline

Why is it so rare? The generous answer is that the incentive structure rewards organised claimants. (On that note, many aren’t even the city’s customers and citizens, like commuters from New Jersey into New York.)

That answer isn’t the whole truth, but it isn’t wrong either. The activist machines are not the villains here, and, like it or not, they do real work. Someone has to gather the volunteers and carry a point of view. Their failing, left or right, is duller than villainy. It does not occur to most people to ask whether the thing actually runs, and they tend to assume, implicitly, that the civil service will do as it is told, which opens a whole other can of worms.

The gap they leave has been filled, for forty years, by a technocratic class. A class that most people, until recently, would have called Cuomo a part of, in spite of Cuomo’s contempt for Byford as “just a division head.”

Now consider what the class built. There is the $2.5-billion-a-mile subway, and the consulting capture of state functions alongside it. It did not merely neglect the unenforced fee cap and the uninventoried rules.

The commentary has the same blind spot. It will praise a mayor for lifting the city’s mood faster than it will praise him for auditing its signals. Morale is real, and worth having. But it is what riders feel when a system works. You cannot reach for it directly, no matter what some pundits will say.

So the question is not how to beat the activist machines. It is how to work with them, on the policy goals they and the city actually share, to cut the friction, and how to build a training pipeline for the operational craft.

We have multiple mayors and civil servants who express a high level of competence in improving cities, with many of them being amateurs on the mayor side. We know this isn’t a one-off. What’s also interesting is that it isn’t limited to partisanship. There is a case to be made for reproducibility, and the activists machines have the networks to actually spread any reproducible training or set of policies and procedures that reduce friction for goals.

Pundits, who have the audience to make that case, would rather produce more punditry.

On a clear September morning in 2024, in Baldwin Village, South Los Angeles, Mayor Karen Bass stood on a five-acre lot at the corner of Coliseum Street and La Brea Avenue and turned a ceremonial shovel. Behind her, renderings showed a six-storey building with 800 flats stacked above a Costco warehouse. A local resident, Karen Johnson, told NBC she was excited because “we only have a Ralphs right here.” Governor Newsom sent a statement. Councilmember Heather Hutt sent another. Of the 800 flats, 184 would be reserved for households at 30, 50, and 80% of area median income, with the lowest band renting at $1,040 a month. The project was privately financed. No Low-Income Housing Tax Credits. Just a wholesale club agreeing to be the load-bearing tenant.

A year later, Marina residents gathered in the parking lot of an iconic mid-century Safeway at the foot of the Golden Gate Bridge. The store is known to locals as the “Singles Safeway” for its Monday-night dating scene, has been there since 1959, and is a neighbourhood institution. A developer called Align Real Estate had proposed replacing it with a 25-storey, 790-unit residential tower designed by Arquitectonica, with the Safeway returning at 57% larger on the ground floor. Eighty-six of the flats would be deed-restricted to very-low-income households. The protest signs went up. Marina Community Association’s Erin Roach delivered the line: “We’re not anti-housing, we’re anti this development.” The mayor of San Francisco, Daniel Lurie, agreed with her. So did his ally on the Board of Supervisors, Stephen Sherrill, who had quietly removed the parcel from the citywide upzoning plan a month earlier. Both denounced the developer for “gaming the system.”

(On that note: Daniel Lurie is opposing this housing project in his city while polling his weakest on housing, with 78% of San Franciscans saying cost of living has gotten worse.)

Two projects. Roughly 800 flats apiece. Both anchored by a major retailer. Both rely on the same state law: California’s AB 2011, the Affordable Housing and High Road Jobs Act. One mayor turned the shovel herself. The other promised to fight.

Why does this matter?

The dominant story about American housing politics in 2026 is that the YIMBYs won. State legislatures have passed pre-emption laws. Pro-housing reformers have been elected in major cities. The zoning code is, slowly, being rewritten. We have been here before. We had Tesco’s Spenhill in London in the 2000s. We have had Hong Kong’s Housing Authority since the 1960s. We have had Gavin Newsom’s “3.5 million homes by 2025” pledge. The relevant question is not whether the rhetoric has shifted, but whether the rhetorical shift will translate into actual buildings.

This matters because the answer determines whether the United States can build out of its housing crisis or merely talk out of it. If state pre-emption laws hold, then several million flats become possible across underused commercial sites in expensive coastal metros within a decade. If the laws are quietly hollowed out by mayors who run as reformers (especially centrist reformers) and then govern as obstructionists, then the rhetoric was the policy and there is nothing else coming. Misdiagnosing why the Marina Safeway will or will not get built is the difference between betting on the law and betting on the politicians. Bet on the law and the politicians become weather. Bet on the politicians and the law becomes window-dressing. The Marina Safeway is one test of which bet is right. The Coliseum Costco is the other.

What’s wrong with the conventional story?

The conventional account of the Coliseum project, repeated by Mayor Bass and most of the friendly coverage, runs as follows: a pragmatic Democratic mayor of a large American city has used a clever new state law to deliver hundreds of units of affordable housing on a previously underused parking lot, in partnership with a beloved retailer and a private developer, all without federal subsidies. This is what good housing politics looks like. It is replicable. It is the future.

The strongest version of this story is genuinely compelling. AB 2011 is a remarkable piece of legislation. The Coliseum project is going up. Bass did champion it publicly. The 184 affordable units are at rents that working-class South Los Angeles families can afford.

It is the inference about the mayor that fails.

Karen Bass has, on closer inspection, a striking pattern of behaviour on housing that is hard to reconcile with the “pragmatic reformer” narrative. She stood up an ambitious permit-streamlining programme called ED1 and then rolled it back once development applications started flowing in. She opposed SB 79, the state bill allowing more apartments near transit stops, on the grounds that it deprived the city of granular control. She opposed allowing Palisades fire victims to build duplexes on their own lots, explaining to a podcast host that “the people in the Palisades didn’t want that…if you impose it on a neighbourhood, then you will have hardcore NIMBYs.” People has taken to calling her Mayor NIMBY (which is, on reflection, slightly unfair to the NIMBYs, who tend to be more honest about what they want). Daniel Lurie in San Francisco might follow the same pattern (in miniature so far), with the addition that his hostility to specific projects is more openly stated. Both happen at once: the headline embrace of one prestige project, and the quiet obstruction of the broader regime that would produce many more.

The pattern is not ideological inconsistency. It is loss aversion as urban policy. The anger of one miffed homeowner is felt by a mayor about twice as heavily as the gratitude of one new tenant. The new tenant doesn’t yet live in your district. Kahneman and Tversky’s old finding (losses register about twice as heavily as gains of equal size) predicts the entire mayoral career arc. The political incentive runs against new construction even when the policy preference runs for it. Which is exactly why the law has to do the work the mayor will not.

The story is not that good mayors deliver housing. The story is that even mostly-good mayors will obstruct housing whenever it is politically convenient, and the only thing even enables the production of buildings is the law and the political economy. Bass turned the shovel at the Coliseum because the project had already cleared AB 2011 review and at the time, the YIMBY coalition was strong enough to prevent Gavin Newsom from siding with her on this issue like he did with the duplexes. Had AB 2011 not existed, or had Bass possessed any local lever to slow the project down, I would not be writing this paragraph. The relevant agent is the statute, not the politician.

Why would anyone want to live above a Safeway?

Marina Safeway, as the San Francisco Standard put it in February 2026, “the NIMBYs’ last stand”: the mayor opposes it, the local supervisor opposes it, the neighbourhood opposes it, and the law still requires it to be approved. The Planning Department issued a notice of conditional AB 2011 eligibility on 24 March 2026. Under the statute, the city has 180 days from a complete application to issue a final decision. The deadline is 1 August 2026.

Yes, you get that and you are going to ask “So, what?”.

I have said almost nothing about why anyone would actually want to live above a Safeway. The politics is impossible to understand without the product, which is what the urbanism literature has done the least to defend.

The central observation of behavioural economics: human beings are far more affected by friction than by price. If you make something ten seconds harder and people stop doing it. Make it ten seconds easier and they start. Reshaping of daily life over the last twenty years has been about removing small frictions like faster free delivery or smartphones. The grocery-anchored mid-rise applies the same idea to the activity humans spend more time on than any except sleep: keeping themselves fed.

Consider what it is to forget the onions in America. Forgetting the onions is a delightful little sidequest. You might even ask yourself whether the dinner can survive without them. You consider takeout. You give up and get in the car. You might drive 1.6 or 5.6 miles to the nearest grocery store. Then you have to find the onions, most likely queue at self-checkout rather than a person. Finally, you drive home, and arrive forty-three minutes later with a slightly mutinous spouse.

In a grocery-anchored mid-rise, you take the lift down, walk past the rotisserie chickens, pick up the onions, take the lift back up. The whole excursion takes four minutes or maybe it’s ten minutes tops.

Industry analysis finds that ground-floor premium grocery stores increase the rent achievable above them by up to 5.8%, and that number is low. It reflects only what landlords currently know how to capture. Renters would pay considerably more if the typology were less unusual.

Rory Sutherland has a line that applies here. Modern luxury is not really about size or expense. It is about not having to schlep. The richest people in San Francisco don’t have larger refrigerators than the merely well-off. They have private chefs, which is a way of paying $300,000 a year to make the schlep someone else’s problem (a luxury good the IRS has not, to its credit, yet found a way to define as taxable compensation). You could say that the grocery-anchored mid-rise democratises a slice of that luxury. The lift in a Marina Safeway tower is, functionally, a private chef. Most likely a worse one, considering the state of cooking among my peers and Gen Z, admittedly. But available to everyone in the building, at no marginal cost beyond the rent.

Aesthetic objections is the part of this debate is something I find least persuasive. Marina’s opposition rests on the assumption that a one-storey supermarket plus a surface car park on prime waterfront land within sight of the Golden Gate Bridge is somehow attractive. It is not. It is a deeply ugly piece of mid-twentieth-century commercial sprawl that San Franciscans have learned to mistake for “neighbourhood character” because they have lived with it for so long. The cities the Marina’s defenders love when they go on holiday (you can guess) are entirely composed of flats above shops. Edinburgh’s New Town is a grocery-anchored mid-rise from 1770 with a Sainsbury’s at the bottom; you have nothing to teach the Edinburgh planning department (besides the fact that said planning department may also be NIMBYs ignoring history) about preserving neighbourhood character.

Grocery anchor is often the only genuinely good thing on the block. The Marina Safeway is iconic because Marina residents go there repeatedly, with affection. The proposal, recall, is to expand the Safeway by 57% while putting flats above it. It is puzzling that this counts as a controversy until you remember Sam Moss’s observation that wealthy neighbourhoods learned long ago to define their preferences as principles, and Veblen’s older observation that those principles tend to exclude the most people.

The most important fact about these buildings: almost everyone who has lived in one would do it again. The Wegmans-anchored apartments in Washington DC have waiting lists. The Whole Foods-anchored buildings in Los Angeles fill up the day they open. The Hong Kong Wah Fu Estate, opened in 1968, retains higher resident satisfaction scores than most British council estates of equivalent age. In Tokyo, the integrated Ito-Yokado towers are prestigious. The product works. The market knows. The mayor of San Francisco may not yet.

Why is this harder to stop than it looks?

The product love above is not separate from the politics. It is the politics. Three forces make grocery-anchored housing harder to kill than ordinary apartment development. Most opposing politicians haven’t noticed.

The typology is global and mature. Apartments stacked on a concrete or steel podium over a supermarket are the default mode of dense urban housing in much of the world. In Hong Kong, the Housing Authority has been building exactly this kind of building since the 1980s; about 2.13 million people, roughly 30% of the territory’s population, lived in Public Rental Housing in early 2025, most of it in podium-anchored estates. The ten-year supply target for 2025/26 to 2034/35 is 308,000 public units. In Singapore, 77.2% of the resident population lives in HDB flats, roughly 90% of large-format HDB shophouses are anchored by NTUC FairPrice, and the HDB built 21,000 such flats in its first three years of operation. In London, Tesco’s Spenhill subsidiary built more than 4,000 flats under Mayor Livingstone’s residential-led London Plan, until Tesco’s 2015 retrenchment killed the pipeline, of which more later. The American examples (Beckert’s Park on Capitol Hill, The Exchange in Wheaton, the various Whole Foods-anchored projects in DC and LA) are catch-up, not innovations.

The grocery anchor brings a constituency that ordinary apartment developments lack. A developer fighting NIMBYs alone is on hostile rhetorical terrain. The actual political economy is more complicated, but at community-meeting altitude “developer” is shorthand for “rich greedy person,” and that’s the altitude these fights are conducted at. A developer fighting NIMBYs with Costco or Safeway as co-sponsor is in an entirely different argument. Costco is consistently rated one of the most-trusted retailers in America. Its CEO Ron Vachris has described the Coliseum project as a way “to enter markets where traditional big-box development would be nearly impossible,” and the Coliseum alone is expected to create 400 permanent retail jobs plus thousands of construction jobs. The Marina Safeway has the kind of intergenerational neighbourhood loyalty no developer can manufacture by himself; opposing 800 flats above it is one thing, but opposing the expansion of the Singles Safeway (57% bigger, with a wider deli counter and more checkouts) is much stranger to argue at a community meeting.

This is the part that should be on every protest sign and conspicuously isn’t. The Marina opposition is asking that its favourite neighbourhood Safeway not be allowed to get bigger and better. The thing the protesters say they love (the daily-life utility of the store, the Monday-night singles tradition, the iconic mid-century building) would, under the proposal, get a substantial upgrade. The thing they say they want to preserve, the surface car park, would be the only thing lost. Try writing that on a placard.

Tesco in 2000s Britain mobilised the same dynamic: it was easier to argue with planners about flats than to argue with everyone who shopped at the Tesco. The grocery anchor is a constituency, with employees, customer loyalty, brand favourability, and UFCW representation behind it. When NIMBYs fight Costco or Safeway directly, they are fighting an organisation with more political capital than they have. They are, in many cases, fighting their own friends.

The desirability of the building disarms the standard objection. The standard NIMBY argument runs: a tall building here would destroy the neighbourhood character. The argument assumes the building is undesirable. When the building turns out to be exactly the kind of place people want to live, with a grocery store downstairs they already like, the argument collapses on its own. The Marina Safeway opposition is struggling to articulate a coherent harm. The Tenants Union explicitly declined to oppose the project on the grounds that “there’s nobody being harmed by that, except the shoppers who will temporarily have their Safeway closed.” When even the tenants’ lobby refuses to oppose your tower, you are no longer fighting NIMBYism. You are fighting nostalgia, and nostalgia is not a permitting category.

It can’t just be the policy?

You might say, “Hold up! We seen laws passed for other things, and only ADUs really get built at scale! How does groceries make a difference?”

Laws enable development, but it doesn’t actually build units. Consider what a developer has to assemble to finance affordable housing without an anchor tenant. The standard American capital stack runs to five separate sources: Low-Income Housing Tax Credits, allocated by state agencies on a competitive lottery with two-year wait times; state and local subsidies, each with its own application process; deferred developer fees, which don’t pay out until the building stabilises how many years later; CDFI loans, cheaper than commercial debt but slower to underwrite; and tax-exempt bond financing where available.

A typical “affordable” project takes three to seven years of predevelopment work before a shovel hits the ground, and roughly ~10% of total project cost is spent on assembling the financing itself.

Grocery-anchored typology shortcuts the entire stack. A Costco or Safeway lease underwrites the “affordable” component privately. The math works because grocery retail is one of the few credit-worthy commercial uses with stable long-term cash flows that can be securitised against the residential portion’s construction loan. Predevelopment shrinks from years to months. The Coliseum’s capital stack closed without a single LIHTC application, which the developer has described as a model for replication.

So NIMBYs are feeling with these projects are wider and better-financed than the neighbourhood-association opposition. Even where mayors object, the laws operate independently of them. The British experience is the cautionary case. In 2007, under Mayor Livingstone’s residential-led London Plan, Tesco set up its Spenhill subsidiary to develop housing above its own stores. By 2014, Spenhill had built more than 4,000 flats across a series of London sites and was the largest single grocery-anchored housing programme in Europe. Then, in 2015, under new CEO Dave Lewis, Tesco retrenched. The Spenhill sites were sold off, the development arm was wound up, and the pipeline died with it. The flats already built remain (residents seem perfectly happy with them, fifteen years on). The flats that would have followed never came. When the political economy rests on a single retailer’s strategic appetite, the policy lasts as long as the appetite does. AB 2011 is built differently: the supermarket is one supporting leg, the law is another, and the labour coalition is a third. Knock one out and the others hold. Tesco died, and the buildings stopped. AB 2011 cannot die without an act of the California legislature, which neither the building trades nor the grocers will permit.

In 2008, British media was talking about overpopulation and how the UK was at the start of a baby boom, especially during a time of low immigration and emigration.

Now? Boris Johnson opens his latest Daily Mail column with bells tolling in Tuscany for far more funerals than weddings, kindergarten playgrounds eerily deserted in Tokyo, and bus routes cancelled across Europe as elderly passengers take “their last subsidised freedom pass to the sky.” He’s clearly proud of the fact that his party, post the Great Recession, had smothered UK’s nascent baby boom in the crib. Can’t have those pesky brats having their own brats after all.

Johnson is still among the most effective political journalists writing in English, and this column is him at the top of his form. The prose is fluid. The imagery lands. The dark humour earns its place. He’s making a contestable claim feel obvious through pure rhythm, and the reader is enrolled before they notice there is one.

His argument is that the falling birth rate isn’t a crisis but a blessing. The planet will thank us. The doom-mongers should butt out. The state should let people decide. On a first reading, it’s persuasive.

Now picture two households Johnson’s prose doesn’t visit.

A couple in their early seventies, in a paid-off four-bedroom house in Surrey. They bought it in 1987. The mortgage cleared a decade ago. The house is worth, today, somewhere north of £900,000. Their state pension arrived this morning, indexed by the triple lock, up another 4.1 per cent on last year. They aren’t rich. They’re comfortable. Their lives are working.

Their grandson is twenty-eight, with a 2:1 from a redbrick and six years of post-graduation work history without a permanent contract in any of them. He works through an app; warehouse shifts in Park Royal, courier runs, occasional fortnights of nothing. Last month he made £1,420. The month before, £820. He shares a flat in Walthamstow (still hopes to find a proper gig one day) and pays £760 in rent. He hasn’t been on a third date in eighteen months; no personal flat to bring someone back to, no schedule to plan around, no future he can compress into a sentence on an app. He’s the same age his grandfather was when he had his second child. He doesn’t think he’s falling behind. He thinks the country has moved past the point at which what he’s doing counts as starting a life.

Both households are doing exactly what people in their situation do. One is going well. One is failing. They’re connected. Johnson’s bells toll in Tuscany. They also toll, more quietly, over every son, grandson, and great grandson who never quite started.

Britain isn’t the first country to have this argument with itself

How we explain why the grandson hasn’t started determines what we do next. If he’s freely chosen not to want what his grandfather wanted, the policy response is to do nothing. Accept the transition. Plan for a smaller, older Britain. Adjust at the margins.

If he wanted to launch and couldn’t, the response is the opposite. We have to ask which costs were imposed, by whom, and to whose benefit: whether the policies that made his grandfather’s house worth £900,000 are the same policies that hollowed out the floor under his entry-level career.

The two diagnoses produce opposite governments. The first sees a generation living differently. The second sees a generation taxed by an arrangement that was never put to a vote. Pension solvency, productivity, housing reform, the welfare state, and most concretely whether the grandson ever crosses into the life that surveys say he still wants: none of these stakes are abstract.

The cultural story, and why it doesn’t hold

The dominant explanation for falling Western birth rates is cultural. Women have entered higher education and the workforce in numbers their grandmothers couldn’t match. Marriage has been delayed or abandoned. Religious observance has weakened. Johnson gives this story its sunniest reading: the human population, he writes, is “organically self-regulating, seeking a better balance with Nature.”

Trouble is that the cultural-shift theory cannot absorb one specific, well-documented finding: desired fertility, what people say they want when surveyed, has barely fallen. Across the OECD, the modal answer to “how many children would you like to have?” remains two or three, almost identical to 1970. Achieved fertility has fallen sharply. The gap between what people want and what they get is the largest ever measured.

If people had simply changed their minds about children, the survey numbers would have fallen with the birth numbers. They haven’t.

Cultural change is also very suspect. British women were having multi-decade record breaking numbers of kids during the late 00s, with Gen X having more kids than their Boomer counterparts. The ‘00s was also a time of ever increasing education and women in the workforce. So, it clearly isn’t caused by women having degrees and careers.

What changed about the price?

France and Britain, side by side

France and Britain are, by every variable the cultural theory tracks, the same kind of country. Rich Western European democracies. Comparable women’s labour-force participation. Comparable secular trends. The same global currents. By the theory, they should be on the same demographic trajectory.

For two decades they weren’t. France’s TFR held above 1.8 from the early 2000s through the mid-2010s, among the highest in Europe. Britain’s drifted down toward 1.4. A large gap, and on the cultural theory inexplicable.

From the early twentieth century, consolidated in the post-war settlement under the Conseil National de la Résistance, France ran a deliberate structural pronatal regime. It wasn’t cash bonuses or Mussolini-style rhetoric. It was a coherent system. Two components carried most of the load. The first was universal heavily-subsidised crèche provision from infancy. The second was the quotient familial, a tax code that divided households by number of children, so a French family with three children paid significantly less income tax than the same family with one. Universal allocations familiales paid every family regardless of income. The French state treated family formation as infrastructure. Lyman Stone, the leading conservative demographer of pronatal policy effectiveness, titles his analysis plainly: Does Pronatal Policy Work? It Did in France.

The regime is currently being dismantled, and the dismantling has a name: Emmanuel Macron. The cuts began under François Hollande, where Macron served first as deputy chief of staff (2012–2014) and then as Minister of Economy (2014–2016). The quotient familial cap was lowered twice, from €2,336 to €1,500. The universality of allocations familiales, established in 1946, was broken in 2015 by income-based modulation. The Cour des comptes quantified the cumulative impact at €3.3 billion. As President from 2017, Macron extended these cuts. In 2024, despite proclaiming a réarmement démographique, he reduced congé parental from three years to three months. APLs were cut in 2017, frozen in 2018. The 2018 loi ELAN began the privatisation of HLM stock, gutting the SRU social-housing quota. The 2017 Ordonnances Macron expanded fixed-term contracts, capped prud’hommes wrongful-dismissal awards, and introduced the CDI de chantier, a project-based “permanent” contract paying no prime de précarité.

France’s TFR has fallen from 2.0 in 2014 to 1.62 in 2024, a 20 per cent collapse in a decade. 663,000 children were born in France in 2024, the lowest figure since the Second World War, and for the first time since 1945 France recorded more deaths than births in the year to May 2025. INED’s Generations and Gender survey shows ideal family size dropped from 2.5 children in 2005 to 1.9 in 2024. The regime worked while intact; France’s collapse is what the structural thesis predicts when you take it apart.

Britain ran the inversion for longer, and from earlier. Childcare costs rose from roughly 40 per cent of the total cost of raising a child in 2012 to around 60 per cent today, among the highest net rates in the OECD. The planning regime restricted housing supply while existing-home prices rose by an average of £100,000 per home in the seven years before 2008, and continued rising afterward. Real wages stagnated from 2007 onward. The under-thirty-five cohort, which owned 3.2 per cent of the country’s housing stock in 2008, hasn’t recovered share since. A young British family pays for the same inputs a young French family pays for, gets less help, earns roughly the same.

A country’s fertility mechanism operates at two stages. The first is the launch (whether a young couple ever has a first child), and the strongest individual-level predictor here is employment stability, with stronger effects for men than for women. Alderotti, Vignoli, Baccini and Matysiak’s Demography meta-analysis (2021) finds men’s unemployment the single most fertility-suppressive labour-market condition, with the effect intensifying since the Great Recession and biting hardest where welfare protection is weakest. German workers on fixed-term contracts have a twenty-percentage-point lower probability of childbearing than those on permanent contracts, and the gap persists more than a decade after labour-market entry. The McDonald’s shift, the zero-hours job, the CDI de chantier: these don’t just pay less. They suppress launch.

The second stage is parity progression (whether a couple has a second, third, or fourth child), and here the conventional wisdom is wrong. Doepke, Hannusch, Kindermann and Tertilt’s The Economics of Fertility: A New Era (CEPR summary) documents that the long-standing negative correlation between income and fertility has flattened or reversed across the rich world. Where structural conditions allow, higher income now predicts more children, not fewer. The facilitating conditions (supportive family policy, cooperative fathers, favourable norms, labour markets that don’t punish parenthood) are precisely the levers France pulled until 2014, and Britain hasn’t pulled this century. Cap benefits at the second child, freeze working-age welfare, leave childcare uncovered, end the universality of allocations familiales, and you suppress parity progression.

Now Hungary, the case Johnson names directly. He calls it a failure. The data don’t. Hungary’s TFR rose from 1.25 in 2010 to 1.59 in 2021 (when the COVID Crisis was in full swing and before Europe’s mini oil shock). Critics correctly note period TFR is noisy and can reflect timing rather than completed family size. Stone responds with tempo-and-parity-adjusted fertility (the gold-standard measure that strips out timing effects) and finds Hungary one of only two countries (Slovakia is the other) with documented increases in completed cohort fertility since 2014. His difference-in-differences analysis of seventeen countries’ pronatal interventions from 2000 to 2025 finds an average effect of 0.09 to 0.18 additional births per woman, persisting more than a decade. Mongolia, where pronatal incentives were expanded and later eroded with fertility moving correspondingly each time, is the cleanest natural experiment in the literature.

Cash baby-bonuses work; it’s more of a question if the support for said policy is sustained, structural family-policy regimes producing durable fertility differences over time. France-before-Macron is the long-run version. Hungary is the targeted-intervention version. France-after-Macron and Britain are these regimes running in reverse, producing the convergent outcome we now see.

The cultural theory can’t explain any of these gaps. The structural theory can. It’s also the one almost no one in the relevant coalitions is willing to act on.

Generational Asymmetry

The grandson in Section 1 isn’t a hypothetical, and he isn’t the dramatic case. He’s an example of a post-2008 young British man without an elite-credential pathway. The literature has spent thirty years explaining why his case is asymmetric: the man’s economic position is the load-bearing variable in whether a couple ever crosses into family formation.

Alderotti meta-analysis tucks this in carefully: men’s unemployment is the single most fertility-suppressive labour-market condition, with effects measurably stronger than women’s. The mechanism has a long pedigree, going back to William Julius Wilson’s When Work Disappears (1996), which argued that disappearing male wage jobs were the load-bearing cause of family disintegration in inner-city Chicago. Becker’s specialization model gives a complementary economic account.

Autor, Dorn and Hanson identified this cleanly. In When Work Disappears: Manufacturing Decline and the Falling Marriage-Market Value of Young Men (2019) (yes yes, I know it using the same name as WJW’s When Work Disappears), they exploited the gender-specific composition of the China trade shock. Regions hit by male-intensive industry shocks saw marriage fall, fertility fall, and the share of unwed mothers and below-poverty single-parent households rise. Regions hit by female-intensive shocks saw the opposite. Same external shock, opposite domestic effects, depending on which side of the household economy got hit. The asymmetry isn’t a curiosity. It’s the mechanism. Where you gut the male wage floor, the family doesn’t form. The same paper documents a differential rise in male premature mortality from drugs and alcohol in the affected regions: Case and Deaton’s deaths-of-despair trajectory, traced to the same labour-market shock that suppressed launch.

What did Britain do, post-2008, to the male wage floor?

Real average weekly earnings didn’t return to their April 2008 level until 2024, sixteen years of stagnation unprecedented in modern peacetime. Young men under thirty-five bore disproportionately more of this than other groups, because the contraction landed on the rungs they were trying to climb. Zero-hours contracts, by 2024 the main job for over a million UK workers, are concentrated among the young and overrepresented in male-dominated low-skill sectors. The Resolution Foundation reports job mobility (the engine of early-career wage growth) is lower than in the 1980s. Apprenticeship completions in male-coded trades fell across the 2010s as further-education funding for non-academic pathways was gutted under austerity. A redbrick degree, once a near-guarantee of a salaried entry-level rung, no longer reliably opens the door. Graduate vacancies in 2025 fell to their lowest level since 2018.

By February 2026, 957,000 young people in the UK were not in employment, education, or training, up by a quarter of a million in three years, with the increase concentrated among young men. Economic inactivity due to ill-health among working-age men under thirty-five has roughly doubled since 2019. Some is pandemic tail; most is structural: a generation taught to expect the labour market has no place for them.

This is darker than the wage data alone. Drug-poisoning deaths in England and Wales rose 81.5 per cent between 2012 and 2022, with men accounting for the overwhelming majority. The 2024 male suicide rate is the highest since 1999, and suicide remains the leading cause of death for British men under fifty. Scotland, hit hardest by deindustrialisation, now has the highest drug-death rate in Europe, with the excess concentrated in deprived male cohorts under forty-five. The pattern Case and Deaton documented in West Virginia is the pattern Wilson documented in 1980s Chicago is the pattern now visible in Blackpool, Glasgow, and the post-industrial North-East. Different accents, same shock.

The grandson is, statistically, on a less stable contract than female graduates of his cohort, and earns less in real terms than his grandfather did at the same age. He is more likely to be NEET than a female peer, and much more likely to die by suicide, drugs, or alcohol before forty than any recent cohort of British men. He is also the variable on which any future decision to have a child most heavily depends. Women want stable partners at the end of the day!

This is why he hasn’t been on a third date in eighteen months, and why telling him to relax (telling him the falling birth rate is “organically self-regulating”) is so glib. The architecture suppressed family formation by dismantling the floor under the people whose economic stability is the strongest individual-level predictor of whether a family ever begins. The grandson’s empty schedule is its signature.

A pronatalist column that doesn’t see this isn’t seeing the problem. Johnson reads the grandson’s stalled life as preference. It is, more often, the absence of a launch, and the launch was sabotaged at the male economic position. No British minister announced that the goal was to immiserate young working-class men. The two-child cap, the fixed-term contract regime, the housing shortage, the wage stagnation, the gutting of further-education funding for non-academic trades: each was defended on its own terms. Their joint product is a cohort of young men ground down at the point in life they would, in any previous British generation, have been earning enough to become someone’s husband. Macron’s France ran the same play in another tongue. The Ordonnances Macron read almost as if designed to suppress male launch directly: project-based contracts paying no precariousness premium, weakened wrongful-dismissal protection, hitting precisely the male-dominated trades.

There’s one more thing the structural literature won’t quite say. Taxing the inputs to family formation produces fewer families. It also produces a generation of men who don’t see what’s happening to them as a structural condition. They see it as personal failure. They shouldn’t blame themselves; the architecture is doing the work. But the architecture is invisible by design, and the failure is concrete. A number of them go looking for somebody to blame. The post-2010 turn in young male political behaviour across the rich democracies (toward Trump, AfD, Le Pen, Reform) reads at one level as a generation of men who can feel a floor missing under their feet and have been offered no honest account of who removed it. The far right tells them a story. It’s a wrong story, and the centre-left coalitions that nominally oppose it haven’t told them a better one. Johnson and his contemporaries are complicit in the demographic outcome, and in the political one downstream of it.

That’s the darker current under the falling birth rate. Underneath the demographic numbers, a generation of men is being processed by a policy regime that benefits older asset-holders into a condition the polite analyses don’t quite want to name. Demographers call it suppressed launch. Sociologists call it deaths of despair. The men themselves say the country has moved on without them. They are right.

Patterns repeat across the rich world

The France-Britain comparison doesn’t stand alone. It sits inside a pattern documented across the rich democracies.

The intergenerational wealth gap isn’t a British peculiarity. The Institute for Fiscal Studies and the Resolution Foundation arrive independently at the same finding: household wealth roughly doubled between the 1990s and 2020s, with gains going overwhelmingly to older asset-holding cohorts. UK 25-to-34-year-olds would need to become five and a half times wealthier over the next thirty years to match the wealth of the typical baby boomer at the same age. Those born in the 1980s are on track for lower rates of homeownership than any UK cohort since the 1930s.

The same shape appears across the United States, Australia, Canada, and the Netherlands. Wherever housing functions as the primary retirement asset and post-2008 QE was layered onto an asset-skewed economy while pensioner benefits were ringfenced, the redistribution followed. The British settlement is the most aggressive version. France is now the same regime in French.

Every country running this version reports the same thing about its young people: delayed family formation, widening gaps between desired and actual fertility, falling birth rates the cultural narrative cannot account for. There’s nothing anomalous about the British case. It’s what every other rich democracy is now becoming, in different accents.

Austerity architecture, admitted

George Osborne, who as Chancellor presided over the British post-2008 settlement, was once asked about the distributional effects of QE. His answer was unusually candid: “[QE’s] purpose is that people who already have something like a house or a pension or some shares will see the value of those things go up. That’s what the policy is designed to do and it feels unfair because the people who don’t have those things aren’t getting the benefits of the policy.”

That’s the architect explaining what he built. Were the admission about almost anything else, it would have made front pages; because it was about quantitative easing, the line lived briefly in the financial pages and disappeared. The policy was intended to inflate the asset base of those who already held one. We owe him the courtesy of believing him.

QE alone doesn’t produce the regime; QE was paired with austerity, and we should be more precise about what that austerity was. The cuts of the 2010s weren’t uniform. Pensioner benefits were ringfenced and indexed upward by the triple lock. Working-age welfare, social housebuilding, childcare subsidies, housing benefit, further-education funding, local-authority youth services: those were defunded. The LSE Centre for the Analysis of Social Exclusion showed services directed at young people absorbed the largest share of cuts while transfers to retired households were largely protected. The European Youth Forum’s Generation Austerity report documented the same pattern across Europe. What was sold as fiscal discipline was, in distributional fact, Youth Austerity: a contraction whose burden was selected by age. Greece, Spain, Italy ran their own variants under EU rules. The US ran a softer version through the housing crash and state-level cuts. France ran its own, slowly under Hollande and aggressively under Macron. Everywhere the same shape: asset support upward, contraction across the working-age life-course.

Why does this austerity architecture persist? Because the actors operating it respond to incentives. Older voters turn out at high rates, are more numerous in most rich democracies through at least 2040, hold assets whose value is sensitive to policy, and are the median voter on most distributional questions. They vote their interest. A homeowner who paid off her mortgage in 1995 has nothing to gain from cheaper housing in 2026 and a great deal to lose. This isn’t villainy on her part. It’s how coalitions work. Meloni’s pronatalist rhetoric is loud, her policy quiet, because the policy that would help would cost her own coalition. Johnson’s “let people decide” is the same trick in English.

Johnson’s record while in office is the most damaging thing about his article. On employment stability, the lever academic research identifies as the strongest predictor of whether a couple ever has a first child, his government oversaw a record expansion of zero-hours contracts: over a million UK workers were on them as their main job by 2024, the highest level on record, disproportionately concentrated among the young. On family benefits, the lever for parity progression, his government retained Osborne’s two-child benefit cap, the most explicitly anti-pronatal piece of legislation in modern British history. On housing supply, his 2020 Planning for the Future white paper, which would have introduced zonal planning to break the local-veto regime, was abandoned in 2021 under backbench pressure following the Chesham and Amersham by-election. The 300,000 homes annual target was scrapped under his successor for the same coalitional reason. The man writing in 2026 to tell young people to relax about birth rates is the man who held the levers academic research identifies as causal, and chose, at the political moment of decision, not to pull them.

Macron is the same story in another language. The pronatalist rhetoric is loud: réarmement démographique, the emphatic concern for la natalité française. The policy runs the other way: a quotient familial cap lowered twice while Macron was Hollande’s deputy chief of staff, the universality of allocations familiales broken under his watch as Minister of Economy, APLs slashed and frozen, the Ordonnances Macron expanding fixed-term and project-based contracts, congé parental cut from three years to three months. The French TFR responded by collapsing on the schedule the structural literature would predict.

The verdict

The British and French birth rates are now falling at the same rate, with at least four distinguishable causes. The deepest is structural: aging democracies, once their median voter passes a certain age, function as coalitions of asset-holders and produce policy that protects assets at the expense of the inputs to family formation. Below that, post-2008 monetary and fiscal policy converted the structural advantage into outcome: QE inflated the assets the older cohort owned, Youth Austerity cut the investment the younger cohort needed, and the cut fell asymmetrically on young men. Below that sit specific national choices: the triple lock, the two-child cap, the broken universality of allocations familiales, the Ordonnances Macron. Each could have been made differently. Hungary made some of them differently and got a different birth rate. The most contingent layer is rhetorical: Johnson’s column, Macron’s réarmement démographiquespeeches, a senior member of the winning cohort telling the losing cohort that everything is fine.

Fix only the rhetoric and you change nothing. Fix the structure and you fix the rest.

This is, finally, a piece about young people, so let me close by speaking to them directly.

What’s being denied to your generation is the oldest material precondition for romance: a flat with a second bedroom, a contract that lasts past Christmas, a future you can compress into a sentence for someone you might want to spend it with. The desire is real. Surveys across the rich democracies keep returning the same answer: young people still want partnership, still want children, still want roughly what their grandparents had. What’s denied is the material floor on which any of that gets built. The grandfather had his second child at twenty-eight because the labour market handed him the platform. The grandson on a zero-hours contract doesn’t get the platform, and so doesn’t get the second date.

You may be a conservative young man who reads Johnson and finds parts of his diagnosis on welfare correct. You may be a centrist young woman who voted Macron in 2017 because he seemed like the adult in the room. You may be a young progressive who turned out for Sánchez or Starmer or Harris because the alternatives looked openly cruel. The political differences between you are real. The material situation underneath them is identical, and the older members of each of your coalitions know it.

The conservative young man’s preferred mix won’t solve his housing problem if his coalition’s older voters don’t want lower house prices. Johnson has held the levers and didn’t pull them. Trump won 54 per cent of young American men in 2024 on the promise of letting them launch; eighteen months in, his approval among Gen Z sits in the mid-twenties, with job market, cost of living and healthcare cited as the breaks.

The centrist young woman’s preferred mix won’t fix her childcare problem if Macron is the centrist who lowered the quotient familial cap, broke universal allocations familiales, slashed APLs, and cut congé parental from three years to three months.

The young progressive’s preferred mix is, as it happens, what the structural literature actually endorses; the centre-left incumbents aren’t delivering it. Sánchez’s PSOE-Sumar government has presided over a “booming economy with falling unemployment” alongside an affordable-housing crisis that has gutted young Spaniards’ life prospects, and the young Spanish vote has fragmented across the radical left, Vox, and abstention. Germany’s SPD watched young men under twenty-four make AfD their preferred party in 2024. Starmer’s government is bleeding the under-thirty vote.

If you’re under thirty-five, you’ve watched your peers cycle through these vehicles. They voted left in 2017, centrist in 2019, hard right in 2024, and many have already turned on the right by 2026. The pattern isn’t stupidity. It’s a generation looking for the political vehicle whose elders will let them have what their grandparents had: a job, a flat, a partner, a child, a future they can put into a sentence. They keep moving, and the movement keeps being read as cultural noise. It isn’t noise. It’s the only signal a generation that has been told to relax has left to send.

The older members of every camp share something their disagreements obscure: they view your generation as economically expendable. The Tory pensioner, the PSOE pensioner, the SPD pensioner, the homeowner among American Democrats: different in their politics, identical in their economic incidence. They will tolerate your loss before their own. They are not lying when they tell you the falling birth rate is a blessing, that you should relax. They are telling you the truth. Why bother after all? Nothing the youth can do to stop them.

You are not in a coalition with the pensioners who out-vote you. The young Vox voter in Andalusia, the young Reform voter in Hartlepool, the young Mélenchon voter in Marseille, the young Trump voter who has already turned away from him: their differences are political and worth arguing about. Their material situation is the same. So is the future their elders are quietly content to let them lose.

There is a lamp lit above the firehouse on Main Street, USA, and it has been lit since 1955.

Walt Disney lived in the apartment above the firehouse during construction. The lamp signaled, by company convention, that he was in residence. He died in 1966. The lamp stayed on. It is still on.

I’m a bit too obsessed with this little detail. I mean, about fifty-six thousand people walk past it on a typical day. Past pastel storefronts, a horse-drawn omnibus, the smell of vanilla pumped through the doors of the Confectionery, gas lamps that came from Baltimore and were bought by the pound. Past the most successful piece of pre-war American small-town urbanism in continuous operation in the country. Tens of millions of Americans pay every year to walk through it.

It almost did not get built, because the project was irrational and a bit whimsical.

When Walt pitched Disneyland to his brother Roy and the board of Walt Disney Productions in 1952, the board said no. The company was already overextended on three other risky bets: high-budget live-action films, nature documentaries, and television. Estimated cost of the park, ten to twenty million dollars. Company net profit the prior year, $720,000. Banks told Walt the outdoor amusement business was “a cultural anachronism that had already declined into senility.” That was the actual phrase. Cultural anachronism. Declined into senility.

Walt did it anyway, in a way that today would be career-ending. He took a $60,000 loan against his life insurance through Commerce Bank in Kansas City, pledging the financial safety net of his wife and children as collateral. He sold his Palm Springs vacation home. He set up a personal corporation called WED Enterprises (his initials) outside the studio’s risk-management process so the board couldn’t kill the project. And he gave ABC television an equity stake in the park in exchange for the network distributing Disney programming and putting up roughly seventeen million dollars in construction money.

The park opened on July 17, 1955. By the end of its first year it had attracted 1.2 million visitors and was profitable. Disney bought ABC out five years later. The bankers were wrong about cultural anachronism.

Sixteen years later, Walt and Roy would build a place forty-six times the size. To pencil it, they had to convince the Florida state legislature to invent a county.

What does it take to build something big in America?

Most of what I write about is the small stuff: ADUs, infill, and sometimes reviving the downtowns of small cities and towns. The political economy supports that work right now, and what gets built matters. But it isn’t everything I want. I want more Main Streets across America, at a greater scale than I usually talk about. I want a country that still knows how to plan and build at Disney-World scale, places imagined (and even ridiculed for the absurdity of them) before they get reduced to spreadsheets. The political economy for that kind of ambition doesn’t exist in 2026, and I know it.

So. Government-engineered financing vehicles are how more ambitious urbanism actually gets built in this country. Private capital, by itself, cannot do it, and never has. Disneyland required Walt to mortgage his family’s safety net. Disney World required the Florida legislature to invent a special-purpose taxing district with bond-issuing authority. The 1968-73 apartment boom required a federal stack of Section 236 interest subsidies, FHA 221(d)(4) construction insurance, and Ginnie Mae securitization. The 1981-86 apartment boom required ERTA’s accelerated depreciation. Every time. The pattern is structural.

At the same time, YIMBY victories like California’s ADU laws (which are responsible for nearly a quarter of all new units in the state), Oregon’s HB 2001, Montana’s middle-housing reforms, and Massachusetts’s Section 3A are real wins. Without them, this country would be building less housing than we do now. To deny their impact is wrong, and the people doing the denying are doing more damage to American housing politics than they realize.

What if we had a better political economy? What if we could build on top of those victories? What are the next steps?

I’d like to start with Paul Williams’ recent report for the Center for Public Enterprise. American multifamily starts have been stuck at roughly 350,000 units a year for forty years, through every conceivable interest-rate regime, zoning regime, and political cycle. The two moments when production exceeded 500,000 sustained were the HUD boom of 1968-73 and the ERTA boom of 1981-86. Both came directly out of federal credit and tax infrastructure. When the machinery was on, supply boomed; when it was off, supply collapsed. The flat line is a policy artifact, not a market verdict.

So the next step is to turn the federal credit apparatus back on. Five levers. Most cost little (for the deficit hawks reading). All build on infrastructure that already exists. They would, plausibly, raise multifamily production to 500,000-700,000 units annually for the decade we need to work through the shortage.

Is zoning reform enough?

The YIMBY/urbanist argument, which I share, runs something like this. Zoning prevents apartments from being built in the metros where they’re most needed. Single-family-only districts, parking minimums, height limits, FAR restrictions, discretionary review, and weaponized environmental procedures collectively make it illegal or financially infeasible to build the housing demand exists for. Williams uses a container metaphor for this: your zoning, permitting, and planning regime is the size of the container you hold out to collect rainwater. An unpermissive regime is a tablespoon. The right reforms are an upgrade to a gallon jug.

But the metaphor itself half-admits the problem. The container does not summon the rain.

YIMBYism, urbanism, Strong Towns, whatever you want to call it: the working coalition has always been more than willing to talk about what zoning reform can and can’t do. ADU and infill reforms often outperform other zoning reforms because homeowners or small businesses who want to redevelop will do so for personal or local reasons, without reference to the broader market. It’s only the more market-optimistic “abundance” framing that argues you only need to reform the regulatory regime and the supply will come.

Look at Austin. Through the 2010s, Austin liberalized its zoning more aggressively than most peer metros. The pandemic added a one-time domestic-migration shock and zero-percent interest rates. Multifamily starts in Austin surged. National multifamily permits broke 500,000 in 2021-2022, the highest since the 1980s, and a large share of that bump came from Sun Belt metros where zoning had been preemptively cleared. Then the Federal Reserve raised rates from zero to over 5% in eighteen months. Construction loan rates followed them up. The bump unwound as interest rates increased and the tech industry that powered Austin’s growth shed workers. Permits are now down roughly 25% from peak.

But notice what YIMBYism and its organizers actually accomplished. They upgraded Austin to a gallon jug. The jug worked exactly as advertised: when the financing rain fell, the jug filled, and rents fell. They are still falling, and they need to fall further to get Austin’s rent burden back to pre-COVID levels. Without the organizers, the council members, and the years of work behind them, Austin would have fewer units and be more expensive today than it is. The constraint that arrived in 2024 was not the size of the jug. It was the rain.

The lesson here is not “zoning reform doesn’t work.” Zoning reform absolutely works, and it is a prerequisite for everything else. The lesson is that zoning reform alone gets cyclically captured by the financing environment. When finance is loose, supply surges. When finance is tight, supply collapses. Net production over a decade ends up barely distinguishable from a non-reformed regime, and the YIMBY-coalition victories of the 2020s end up looking, in 2035, like Austin in 2024.

The flat line is older than YIMBY. It tracks the disappearance of federal credit and tax infrastructure that historically made apartment construction financially attractive at scale. Forty years, one number, untouched by anything that happened at the local level.

To see why federal financing infrastructure is the structural answer, look at how Disney World actually got built.

How did the Disneys actually pull it off?

1955: how did Walt finance Disneyland?

Disneyland’s financing, at $17 million, was modest by today’s standards. A present-day developer would consider $17 million a routine project. And yet, in 1955, $17 million was approximately twenty-five times the parent company’s annual net profit. The board wouldn’t fund it. Walt had to invent his own vehicle.

The vehicle was personal. WED Enterprises, set up outside the studio. A life insurance loan from Commerce Bank in Kansas City, backed by his family’s safety net. The Palm Springs sale. A line of bank credit through Bank of America, where Walt had banked since the 1930s. And the ABC equity deal, which converted television rights into construction money.

By the time the park opened, Walt had pledged his personal financial existence against the project. The board’s caution had not been wrong, exactly. The project was a bet that could have ended Walt’s career and his family’s wealth. It paid off because Disneyland turned out to be a perpetual cash machine, and the cash machine became the funding source for the next attempt.

But notice what this means. The most beloved piece of small-scale American urbanism the country has produced in the postwar period was financed by a single individual borrowing against his own life. The capital markets said no.

1971: why did Walt need a county?

A decade later, Walt’s ambitions outgrew the personal capital stack. He wanted 27,000 acres in central Florida, forty-six times Disneyland’s footprint, including Magic Kingdom, hotels, transportation infrastructure, and the planned EPCOT city he wouldn’t live to see. The estimated cost was $400 million. In 2026 dollars, roughly $3 billion.

The Disneyland playbook would not scale. You cannot finance a $400 million project through life insurance loans. The bond markets would not lend on a swamp. Orange and Osceola Counties had no power, water, or sewer infrastructure within ten to fifteen miles of the site. And the governance infrastructure for a 27,000-acre, multi-municipality, master-planned development simply did not exist in 1965.

Walt’s solution, executed with Florida’s governor Haydon Burns and finalized after Walt’s death by Roy, was Reedy Creek. On May 12, 1967, Florida Governor Claude Kirk signed Chapter 67-764, creating the Reedy Creek Improvement District: a special-purpose taxing district with the same authority and responsibility as a county government. The district could levy property taxes. It could provide municipal services. Most importantly, it could issue tax-exempt municipal bonds.

The Florida legislature included an unusual pledge in the enabling act. The state pledged to bondholders that it would “not in any way impair the rights or remedies of the holders ... until all such bonds, together with interest thereon, and all costs and expenses ... are fully met and discharged.” This pledge was the financial keystone of the project. It made Reedy Creek’s bonds state-backed in all but name, salable at low interest rates to risk-averse institutional investors. By the time DeSantis tried to dissolve the district in 2022, Reedy Creek carried roughly $1 billion in outstanding bond debt, serviced annually by approximately $58 million in district taxes paid by Disney itself.

The state was challenged in court on whether a special-purpose district mostly serving a private corporation was a valid public purpose. The Florida Supreme Court upheld the district in 1968, on the explicit reasoning that “tourism, recreation and the conservation of natural resources” were valid public purposes.

Combined with retained operating cash flow from Disneyland and conventional corporate financing, Roy completed Disney World on time and on budget for $400 million without taking on additional corporate debt. Magic Kingdom opened October 1, 1971. By every measure (visitor count, longevity, cultural durability) it’s the most successful piece of master-planned American urbanism ever built.

The thing that gets me about Reedy Creek is what was actually required. The most ambitious piece of urbanism in modern American history needed a custom-built state-chartered taxing district with bond-issuing authority and an explicit state pledge to bondholders. Without Reedy Creek, the project does not pencil. Even with Walt and Roy. Even with Disneyland’s cash flow. Even with Florida cooperating.

1984: did building Disney World almost kill the company?

Disney World didn’t insulate the Walt Disney Company from the consequences of building it.

By the early 1980s, Disney was capitalized for content and theme-park operations but thinly defended on equity. In March 1984, the financier Saul Steinberg purchased 6.3% of Disney’s stock and triggered a takeover scare. By June, Steinberg controlled 12.2% and offered to acquire 49% for $1.3 billion. At the time, that was more than the company’s available cash, which was under $10 million.

To fend Steinberg off, Disney paid $297.5 million in greenmail plus $28 million in expenses, took on $850 million in new debt, and acquired the real-estate firm Arvida and the greeting-card maker Gibson Greetings as defensive bulk. The company that built Reedy Creek almost became a forced-sale target precisely because building Reedy Creek had left it financially exposed.

Think about what this means for the argument. Even Walt and Roy Disney’s playbook (decades of operating cash flow, a state-engineered financing vehicle, the most successful master-planned urbanism in American history) left the parent company close enough to the edge that a single hostile financier with $11 million in initial capital could nearly take it down a decade later. The state vehicle was necessary. It was also not quite sufficient. The parent corporation absorbed risk that no rational private capital structure would have absorbed unaided.

If the country’s most resourceful urbanist, with the State of Florida actively in his corner and a perpetual cash machine in California funding him, still ended up exposed to a hostile takeover in 1984, the proposition that present-day urbanism can be financed by private capital alone isn’t merely wrong. It’s senile.

2026: could anyone build Disney World today?

What would it take to build Disney World today?

I keep trying to imagine the capital stack and I cannot construct it. The Reedy Creek mechanism was partially dismantled in 2022, and its successor, the Central Florida Tourism Oversight District, is governor-controlled. No state legislature is currently in the business of inventing custom special-purpose districts for ambitious urbanism. The federal credit apparatus that produced the HUD boom of 1968-73 was dismantled after Nixon’s 1973 moratorium. The tax apparatus that produced the ERTA boom was dismantled by the 1986 Tax Reform Act. Construction lending from regional banks has collapsed since 2023, with the post-SVB regulatory environment and the $1.8 trillion CRE maturity wall hitting simultaneously. Conventional construction credit is nearly impossible to price under current input-cost inflation and tariff regimes.

A 2026 Walt Disney could not finance Disney World. No state would invent Reedy Creek for him (even Texas with its MUD system); the political environment for doing so has been actively poisoned by the 2022 fight. Conventional banks won’t lend at terms that make the project pencil. And without a federal pledge equivalent to Florida’s 1967 pledge to Reedy Creek bondholders, he could not securitize his way through the bond markets either.

Has the federal government ever done this for apartments?

The HUD boom of 1968-73 was the federal version of what Florida did for Disney one year earlier. The Housing and Urban Development Act of 1968 set a goal of 26 million new housing units over ten years. To hit that target, HUD deployed three integrated tools that, taken together, were essentially Reedy Creek for apartments. Section 236 interest-rate subsidies that reduced effective mortgage rates on qualifying rental projects to as low as 1%. FHA 221(d)(4) construction insurance, which provided non-recourse, fixed-rate financing covering up to 90% of project cost. And Ginnie Mae securitization, issued in 1970 for the first time in American history, which connected FHA multifamily lending to global capital markets and removed lender capacity as a binding constraint on production.

Multifamily starts surged from 400,000 in 1968 to an annualized 1,000,000 units in March 1973. Three million apartment units in four years. Then, in 1973, the Nixon administration imposed a moratorium on new commitments. Section 236 wound down. The boom ended.

The ERTA boom of 1981-86 was the tax-code version of the same idea. The Economic Recovery Tax Act of 1981 created accelerated cost recovery for real estate (15-year depreciation with front-loaded methods) that made apartment investment a tax shelter capable of generating paper losses sufficient to offset other income. Multifamily starts climbed from under 300,000 in 1981 to over 500,000 by 1985 and stayed there for five years. Then, in 1986, the Tax Reform Act extended depreciation to 27.5 years, switched to straight-line methods, and added passive loss limitations. The tax economics of rental housing development collapsed almost overnight. Multifamily starts fell to 140,000 by 1991 and have never sustainably exceeded 500,000 since.

Every time American urbanism or housing produces at scale, a custom financing vehicle is created to make it possible. Disneyland in 1955 ran on WED Enterprises, an ABC equity deal, and a personal life insurance loan. Disney World in 1971 ran on Reedy Creek and the state bondholder pledge. The HUD boom ran on Section 236, 221(d)(4), and Ginnie Mae together. The ERTA boom ran on accelerated cost recovery and passive loss treatment.

Every time we dismantle the vehicle, production falls back to a baseline that is a policy artifact rather than a market equilibrium. The 350,000-unit flat line for multifamily starts (forty years long, through every conceivable macroeconomic environment) is what happens after we turn the machinery off.

The pattern matters more than usual right now because the credit cycle is at exactly the wrong point. Multifamily loan maturities surge from $104 billion in 2025 to roughly $162 billion in 2026. Builder bankruptcies are accelerating. Construction lenders have widened spreads or pulled out of the market entirely. We are sitting in the sharpest construction-credit collapse since 2008, with the federal apparatus off, and a $1.8 trillion CRE maturity wall arriving on top of it.

What would turning the machine back on look like?

Five levers. What follows is the technical version.

The federal credit apparatus that produced the 1968-73 boom is, in modified form, still sitting on the federal balance sheet. It has just been allowed to atrophy. Reactivating it does not require inventing new agencies. It requires turning existing infrastructure back on.

Lever 1: why does an FHA loan take a year to close?

On paper, FHA’s 221(d)(4) is unbeatable as a construction financing product. Fixed-rate, non-recourse, up to 90% loan-to-cost, 40-year terms. It’s the lineal descendant of the program that financed the 1968-73 HUD boom. Today it finances roughly 10,000-15,000 units a year, about 4% of multifamily production, a rounding error against the three to four million unit shortage.

Why? Process friction. Loans routinely take 270-360 days to close, against 60-90 days for conventional construction financing. HUD launched a “single underwriter” reform in 2014 that was never fully implemented. A 2024 OIG auditfound HUD still tracking applications across five regional centers on manual spreadsheets.

Williams’ fix: codify single-underwriter in the MAP Guide, fund the IT modernization HUD has been promising for a decade, expand categorical exclusions for infill, and resource the program like the production platform it could be. Cost: negligible. FHA mortgage insurance is statutorily actuarially sound; the investment is in HUD’s operational capacity. Scale: 50,000-75,000 units a year in normal markets, with upside toward 100,000+ in crunches. For context, in 2010, during the GFC’s private-credit retreat, FHA across all programs financed more than 150,000 rental units.

Underrated, because it skips Congress and appropriations entirely. All it needs is an HUD secretary who cares about execution.

Lever 2: what are the states already doing?

While the federal apparatus has atrophied, state housing finance agencies have been quietly building the next generation of construction finance infrastructure. MassHousing’s BILD program pairs preferred equity with Freddie Mac permanent debt at debt-like returns, targeting 25-35% of total project equity. New York’s Housing Acceleration Fundprovides subordinate construction loans through CDFIs and banks at 3% interest-only. Michigan’s Housing Accelerator Fund is structured similarly.

These programs collectively represent about half a billion dollars in capital and have worked at small scale. MassHousing’s BILD has a pipeline of 33 projects representing 7,000+ units against an initial $50 million fund.

The match: a $2 billion one-time federal contribution capitalizing similar programs in 25-30 states, structured to revolve so the funds recycle into new projects after permanent conversion. Cost: $2 billion one-time, ongoing zero. Scale: roughly 30,000 additional units a year. The mechanism crowds in private capital, leverages existing state HFA expertise, and produces mixed-income housing rather than just deeply-subsidized affordable units. It also creates durable production infrastructure that can operate counter-cyclically, which is what we need given the post-2023 bank pullbacks.

Lever 3: why aren’t Fannie and Freddie in this market?

Fannie Mae and Freddie Mac dominate multifamily permanent lending, together roughly 41% of total origination volume in 2024, but are essentially absent from construction financing. This is a historical artifact, not an inherent limitation. The GSEs’ charters emphasize permanent mortgages because that’s where their underwriting expertise developed. Construction has always been left to banks and insurers.

The fix has three parts. Forward commitments on permanent financing, structured like MassHousing’s FORGE Loan, which uses a 36-month rate lock to let developers secure permanent financing terms before breaking ground. Mezzanine and preferred equity products that fill the gap between senior construction debt and developer equity, currently served at high prices by CDFIs and impact investors. And a secondary market for construction-to-perm loans, enabling true scale through MBS structures.

Cost: essentially zero from a federal-budget perspective. GSE products are priced to be self-funding. The policy lever is regulatory (FHFA scorecards, possibly a charter clarification from Congress), not fiscal. Scale: 50,000-100,000 units a year depending on portfolio share. This is the lever that does the most to address the post-2023 regional bank pullback, because it puts patient capital into the gap that private credit has vacated.

Lever 4: could the tax code do for housing what it did for solar?

The 1981 ERTA boom was driven by 15-year accelerated depreciation. The 1986 Tax Reform Act extended that to 27.5 years straight-line, and production collapsed within five years.

The proposal is to restore some version of accelerated treatment. Three options, ordered by aggressiveness: shorten the straight-line schedule from 27.5 years to 15-18 years; partially expense the first $100,000 per unit; or fuller expensing under tighter passive-loss rules. Today’s 37% top marginal rate is well below the 50% rate that prevailed during ERTA, which materially reduces both the per-dollar value to claimants and the revenue loss to Treasury. We can get much of the production effect without recreating the worst tax-shelter abuses that drove the 1986 backlash.

The closest analog is the IRA’s clean-energy production-tax-credit and investment-tax-credit structure. We just demonstrated, on the energy side, that this approach can mobilize hundreds of billions of private capital toward an industrial-policy goal in a few years. The mechanism translates to multifamily.

Cost: real but bounded. Shortening the depreciation window costs less than partial expensing, which costs less than full expensing, with corresponding production effects. Estimates range from a few billion annually for shorter straight-line to tens of billions for full expensing. Scale: 50,000-100,000+ units a year. This is the most fiscally substantive lever in the package and also the one with the cleanest recent precedent.

Lever 5: what is the FHLB system even for?

The Federal Home Loan Bank system is a $1.3 trillion government-sponsored enterprise that, per the CBO’s 2024 analysis, receives roughly $6.9 billion a year in implicit federal subsidy through the spread between FHLB consolidated obligations and Treasuries. Almost none of this flows into housing production. The 11 regional FHLBs primarily make collateralized advances to member institutions, totaling $737 billion in 2024. Affordable Housing Program contributions in 2024 were about $751 million, roughly 12% of net income.

In 2023, Silicon Valley Bank, Signature Bank, and First Republic Bank held tens of billions in FHLB advances days before failing, using the system as a lender-of-next-to-last-resort rather than a housing-finance institution. The FHLBs were repaid in full because their statutory super-lien gives them priority over the FDIC.

The fix: amend the FHLB Act to authorize construction-to-permanent multifamily lending, either directly or through member institutions. FHFA would set risk-based capital requirements and a 10% portfolio target for housing construction and permanent financing. The bipartisan CURB Act shows there is appetite for FHLB reform across the aisle.

Cost: zero federal-budget impact. The FHLBs are self-funding. Scale: 50,000+ additional units a year at a 10% portfolio share, supporting roughly $70 billion in housing investment. This creates permanent counter-cyclical infrastructure that lends into downturns when private capital retreats.

Why isn’t the technical case winning?

You can make a strong technical case for building lots of housing. The political case isn’t. “Build more apartments” has been the YIMBY ask for over a decade and has produced state-level wins, but at the federal level, where the credit apparatus actually lives, the slogan has been weak. There is no political coalition for “more apartments” that competes effectively with organized homeowner interests and the institutional capital that profits from the current product mix.

This is, at its root, a problem of register. At the national level, the case for housing supply has been argued in the language of supply, and the language of supply is technocratic, demographic, and a little bit boring. The arguments are correct. They have not produced federal credit reform. They have not produced a coalition broad enough to break the forty-year flat line.

The rest of the country isn’t listening because the rest of the country doesn’t read white papers. The rest of the country reads memory. Memory of how a place felt, of what your grandparents could afford, of the courtyard you played in when you were nine. The rest of the country has feelings about a 1925 courtyard in Pasadena, or about the lamp above the firehouse on Main Street USA, or about the 2BR their grandparents raised three kids in and that no developer in their current city would dream of building. Those feelings are politically active, and at the moment they’re being routed almost exclusively through reactionary politics, because reactionary politics has been more willing to speak the register of memory than YIMBYism has.

This is, plainly, a self-inflicted wound, but the wound belongs to the national policy conversation, not to the organizers who have actually been winning. Talk to anyone who knocked doors for California’s ADU bills, or who packed a city council hearing in Montana, and you’ll find people who already know how to speak the register of memory and loss and aspiration. The organizing has always been emotional. The white papers came after.

And I want to be specific about a particular dynamic, because it has gone uncalled-out for too long. There is a class of national-level housing commentator, usually writing for some big publication like the NYT or something small like a substack, occasionally from a think tank, rarely from a city where they’ve ever had to flip a council vote, who has spent any sort of time arguing that state and local YIMBY wins haven’t actually moved the needle. That California’s ADUs aren’t real urbanism. That Montana’s middle-housing reforms are theater. That Oregon’s HB 2001 didn’t change anything. That the whole movement needs to reset, get serious, get federal, get something. The argument has the causation exactly backwards. Those wins were the largest legalization expansions in fifty years of American housing policy. They were also the only consistent housing-policy victories of the last decade, full stop. They were earned by people who packed council hearings, knocked doors, got primaried, sat through six-hour zoning debates, and absorbed personal abuse from neighbors who showed up to call them slumlords for wanting to allow a duplex. The framing that “not enough is being built” is technically true and rhetorically poisonous, because it concedes the only working model American housing politics currently has to whoever shows up next claiming a better one. If you want more housing built, the organizers who have actually been winning are not the problem. They are the proof of concept. Defend their work like your political project depends on it, because it does.

And here is the thing the national discourse rarely says out loud. Local and state YIMBY organizing is, by every standard of rational self-interest, delightfully irrational. The expected personal benefit of any given organizer’s hours at a council hearing is somewhere south of zero. Show up, get yelled at, lose a Saturday, possibly lose a neighbor, possibly lose a friend, possibly get primaried, in exchange for what? A marginal bump in the probability that a duplex gets allowed three blocks from your house, in a city you might leave in five years anyway? Mancur Olson wrote a whole book about why this kind of organizing isn’t supposed to happen. The logic of collective action says every rational actor should free-ride.

And yet here they are, year after year, going to the hearings, knocking the doors, doing the thing the rational ledger says they shouldn’t (among other things), and producing the wins, despite the NIMBYs’ biggest support base is often the upper crust, in addition to the upper middle class Boomers. The largest developers consistently shown to be fair weather friends at best, and often opposed to the YIMBYesy candidates (Tom Steyer for example) .

The rational version of the movement, by contrast, is the national abundance commentariat: white papers, Substack posts, conference panels, no Saturdays lost. It has produced excellent analysis. It has not produced housing. The same was true of Walt Disney mortgaging his life insurance to build a park the bankers called a cultural anachronism. Big things get built by people willing to do what the rational ledger says they shouldn’t. So do small things.

The gap is at the national level, where the housing supply argument gets laundered into technocratic language before it reaches the people who might fund it or legislate it. Cost burdens, vacancy rates, permits per capita, whatever. None of that is how anyone ever got a state legislature to invent a county. The frames below are suggestions, not instructions. Organizers don’t need instructions from anyone. The frames are sketches, three of many possible ways to carry what organizers know into rooms where the conversation has lost its nerve. Treat them as starting points, not a definitive list.

What the frames share is the willingness to be moved. That posture is sometimes called nostalgia, sometimes whimsy, sometimes romance. I’m going to use whimsy and romance because they’re the most accurate. Whimsy is advocating for things because they’re charming. Romance is advocating for things because we used to have them and we miss them. Both are politically powerful in ways the supply argument has not been.

Frame 1: why can’t your daughter afford a 2BR?

You know a 28-year-old like this. She’s your sister, your daughter, your friend’s kid, the person at the next desk. She has a partner. They’ve been together for four years. They want to get married, they want to have kids, and they want to do it in the city where they actually live, which is the city where their jobs are. They make decent money. Combined, more than her parents made when they bought their first house. They cannot find a 2BR they can afford. They’ve been looking for two years. The 1BRs they can afford have a den that her partner uses as an office, which means the kid would be in their bedroom, which means they aren’t going to have the kid yet, which means they aren’t going to get married yet, which means the whole thing keeps getting pushed back, six months at a time, for what is starting to feel like the rest of their twenties.

Multiply her by twenty million. Under-35 household formation has cratered. The median first-time homebuyer is in their late 30s. Marriage and first-birth ages are at all-time highs. The classic American life script (meet someone, partner up, household, kid, equity, roots) is being delayed. Young people still want it. They cannot afford the shelter it requires.

Couillard’s 2025 paper finds that half the U.S. fertility decline since the 2000s is attributable to housing costs, with subsidies for 3+BR construction generating 2.3x more births per dollar than equivalent 1BR subsidies. The mechanism is not subtle. Families form in apartments with rooms for children. The apartments without rooms for children are what the current capital structure builds, because they pencil. The levers above can be tuned toward family product at near-zero administrative cost: a fast-track FHA processing tier for projects above some 2+BR threshold, GSE pricing tilts for above-baseline family-unit shares, depreciation schedules that favor larger units. Every lever, retuned slightly, builds the apartments where the 28-year-old can finally start her life.

The coalition this frame assembles is the broadest of the three. Young-adult voters who can’t launch. Their parents, who watch them not launch. Family-policy moderates on both sides of the aisle. Pronatalist conservatives who want the birth rate to go up. Affordability progressives who want renters to not be crushed. The frame is romantic about a particular thing, which is the American life script: the script that says you should be able to meet someone and marry them and have kids with them and put down roots in the city where your work is, and that the country owes its young people the conditions under which that script remains possible. The script is contested in the discourse. It is not contested in the actual preferences of under-35 Americans. They want it. They are being denied it. These levers are how we give it back to them.

Frame 2: do you remember when America built things?

Walt Disney was 51 years old, in declining health, with a board that opposed him and bankers who told him his project was a cultural anachronism. He built Disneyland anyway. Five years later he was already planning Disney World, forty-six times the size, and personally lobbying the Florida state legislature to invent a county to make the bond math work. Roy finished it on time and on budget for $400 million.

Walt is the patron saint of building big in America. Not “build a corporation.” Not “extract returns.” Not “exit at stabilization.” Build the place itself, at the scale the vision actually requires. And he wasn’t alone. The country we built before 1986 was a country full of Walts. We built the Interstate Highway System and the post-war suburbs. We built the master-planned new towns of the 1960s and 1970s, places like Reston and Columbia and Irvine and the Woodlands, designed from scratch and now home to hundreds of thousands of people. We built the HUD-boom apartment stock that put a roof over three million families in four years. The TVA dams. The L.A. aqueduct. The Brooklyn Bridge had been built two generations earlier, and yet here we still were, building. We built at scales that present-day America looks at and assumes must have been done by a different species.

We weren’t a different species. We were the same country, with the same union contracts, the same bureaucratic dysfunction, and the same political rancor. What we had that we no longer have is the machinery. Federal credit infrastructure. Tax policy that pointed at production. State legislatures willing to invent counties when counties needed inventing. The HUD secretary in 1968 had tools the HUD secretary in 2026 does not. The result is that Walt’s playbook, the playbook of all the postwar urbanists, doesn’t run anymore.

This is the romance of a lost capacity. It runs on the felt sense, which I think a lot of Americans have, that we used to be a country that could do things, and we’ve forgotten how. The forgetting is correctable. The correction is a tune-up of dormant infrastructure that previously produced, and could again produce, the construction curve that built modern America.

The coalition this frame assembles is the strangest and possibly the largest. Abundance liberals. Nostalgic conservatives. Infrastructure-state Democrats. The post-liberal right. The technocratic center. The people who read Marc Andreessen and the people who read Ezra Klein and the people who read both. Strong Towns sympathizers. Anyone who has stood in a piece of postwar civic infrastructure (a Carnegie library, a TVA dam, even a Robert Moses parkway, the lobby of a 1930s post office) and felt something that wasn’t there in the strip mall they drove past on the way over. The coalition is genuinely cross-partisan because the romance of national building capacity predates current partisan alignments. It belongs to FDR and Eisenhower and LBJ and the Reagan of accelerated depreciation. It belongs to the country before 1986.

Frame 3: why can’t we build bungalow courts anymore?

covers courtyard apartments better than I will over at Courtyard Urbanist, so I’m going to come at this from the precursor.

You know the form when you see it. A cluster of small one- and two-bedroom homes arranged around a shared landscaped courtyard. Four to ten units. Two or three stories. Wood windows, built-in cabinetry, decorative tile. Front porches that face the courtyard rather than the street, so when you come home you walk through a garden to your front door and your neighbor is on her porch and her kid is playing on the path between the units and the bougainvillea is doing what bougainvillea does in October light. The form is called the bungalow court. It was pioneered in Pasadena and Hollywood in the 1910s, spread across the Los Angeles basin in the 1920s, and was killed in the 1930s and 1940sby zoning ordinances, parking minimums, and the FHA underwriting standards that pushed American multifamily toward the double-loaded-corridor apartment block we have been building, more or less unchanged, ever since.

The bungalow courts that survived are beloved a century after they were built. They are nationally registered historic districts. They are the things people fly to Pasadena to walk through. They are also, as a building type, the most obvious example of missing middle housing: the form factor that everyone who has stood in one understands as what good American urbanism looks like, and that nobody has been able to build at scale for ninety years.

It isn’t because we forgot how. The form is well documented. Architects know how to draw it. Contractors know how to build it. Cities are starting to allow it again. The problem is that nobody can finance it. The Terner Center’s 2024 analysis finds that under current financing terms, missing-middle projects are not financially feasible in most California markets. The only category that pencils is for-sale duplexes in the East Bay and Sacramento. Harvard GSD’s researchconfirms the structural problem: the current financial system is designed primarily to support either single-family homes or large multifamily developments, leaving missing-middle projects at a disadvantage. The small-balance construction loan that finances a six-to-twelve-unit courtyard building is the loan regional banks have stopped making, that GSEs have never made, and that private credit cannot price profitably.

Enterprise Community Partners’ analysis is explicit about what’s needed: low-interest, low-cost small-balance loans that cover a larger share of construction cost (80% or higher), plus loan guarantees and pre-development support. This is exactly what the state HFA accelerator funds and streamlined FHA 221(d)(4) deliver.

So the frame, in plain terms. We used to build a kind of building that everyone who has ever stood in one loves. The zoning fight to allow it again is half-won; the financing fight to make it pencil hasn’t started. Pull the levers above and the bungalow court can pencil again.

The coalition this frame assembles is the most aesthetically self-aware. New Urbanists. Missing-middle advocates. Strong Towns sympathizers. Landscape architects. Anyone who has ever stood in a 1925 courtyard at 4pm in October and felt the light come down through the bougainvillea and wondered why we stopped building this. The pitch is concrete and small and specific in a way the other frames are not: these levers will let us build bungalow courts again.That’s a promise that can be drawn. It can be photographed. It is not a demographic abstraction. It’s a place you can stand in.

So what?

Government-engineered financing vehicles are how ambitious American urbanism actually gets built. WED Enterprises was Walt’s. Reedy Creek was Walt and Roy’s. The Section 236 stack was the country’s, for the 1968-73 boom. Accelerated depreciation was the country’s, for the 1981-86 boom. The pattern is structural. The flat line is the cost of pretending otherwise.

Williams is right that the apparatus exists, the levers are mostly low-fiscal-cost, and the production response would come fast because the entitled-but-unbuilt pipeline is already roughly 750,000 units deep. The infrastructure that produced the 1968-73 boom is sitting there. Turn it back on.

The technical case is settled. The political case isn’t. The agenda needs framing that builds coalitions broader than “more apartments” has historically built. I’ve offered three as starting points, not a definitive list: let young Americans start their lives, build big like Walt did, and finance the bungalow courts. Better frames almost certainly exist. The work is to find them.

And the coalition starts with crediting the people who have actually been doing the work. The state organizers. The local YIMBYs. The council members who took the votes that cost them friends. The tenants’ rights folks and the missing-middle architects and the Strong Towns chapters and the Pasadena preservationists who keep the bungalow courts standing. They built every inch of political ground the federal credit agenda could plausibly stand on. Anyone who shows up to the federal conversation and treats them as a problem to be routed around is not a serious participant in that conversation.

The bankers told Walt Disney that outdoor amusement was a cultural anachronism that had already declined into senility. They were wrong. The equivalent dismissal of multifamily today, that the market can produce what we need without federal credit infrastructure, is wrong the same way.

The lamp above the firehouse is still lit. The flat line is the choice we keep making, and the choice is reversible, if we want it to be.

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.