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Jeffrey A. Singer

Colorado and Washington were the first states to legalize recreational marijuana in 2012. The states began allowing retailers to sell marijuana to adults in 2014. Currently, 24 states and the District of Columbia have followed their lead.

In early 2023, the Youth Risk Behavior Survey (YRBS) published by the Centers for Disease Control and Prevention noted the percentage of high-schoolers reporting marijuana use over the past 30 days fell from 23 percent in 2011 to 16 percent in 2021. The updated survey, released yesterday, found that the number increased to 17 percent in 2023, though the report characterized the difference as “no change.” Compare that to 2013, when the survey reported that 23 percent of teens used marijuana in the past month.

According to a different survey, the latest National Survey on Drug Use and Health (NSDUH), teen marijuana use has dropped considerably over the past decade, a time during which several states have legalized recreational marijuana. The survey found the percentage of persons aged 13 to 17 stating they have ever used marijuana fell 18 percent between 2014 and 2023. The number of teens using marijuana in the past year fell 15 percent during that period, and the percentage of teens currently using marijuana fell 19 percent but dropped only slightly between 2022 and 2023.

In 2019, researchers reported in JAMA Pediatrics:

Consistent with the results of previous researchers, there was no evidence that the legalization of medical marijuana encourages marijuana use among youth. Moreover, the estimates reported in the Table showed that marijuana use among youth may actually decline after legalization for recreational purposes.

Perhaps because the researchers were economists who understood the unintended consequences of prohibition, they postulated a reason for the decline after legalization: “It is more difficult for teenagers to obtain marijuana as drug dealers are replaced by licensed dispensaries that require proof of age.”

This is consistent with findings in the 2023 YRBS that noted teen marijuana use trending upward between 2009 and 2013, with the trend generally reversing during the years since retail marijuana sales first became legal in 2014. Legal retailers of adult-only substances tend to enforce age restrictions on minors diligently. Black market drug dealers ignore them.

While critics of marijuana legalization point to research suggesting marijuana use may harm the developing (especially adolescent) brain, the evidence continues to mount that the best way for policymakers to reduce adolescent and teen marijuana use is to legalize it for adults.

Emily Ekins

A newly released national survey from the Cato Institute of 2,000 Americans conducted by YouGov finds that two-thirds (66%) of Americans say global trade is good for the US economy, and 58% say it has helped raise their standard of living. This may help explain why 63% of the public favors the United States increasing trade with other nations.

Three-fourths (75%) are concerned about tariffs raising the prices of products they buy at the store. Indeed, two-thirds (66%) of Americans would oppose paying even $10 more for a pair of blue jeans due to tariffs, even if they are intended to help US blue jean manufacturing.

Americans Perceive Costs and Benefits to Trade

Americans believe global trade has increased material abundance in their personal lives by increasing the variety of products they can buy at the store (64%) as well as boosting technological innovation (44%).

While Americans believe global trade has helped the country and themselves personally, many perceive problems too. Pluralities worry trade agreements will cut American wages (39%) and jobs (39%), and reduce the quality of jobs available (37%).

Voters worry particularly about trade’s impact on American manufacturing. Nearly 8 in 10 worry global trade has harmed some American manufacturing industries. But while 80% believe the country would be better off if more Americans worked in factories, only 25% would themselves like to work in a factory. Many also believe other countries are taking advantage of Americans — for instance, 59% think that China practices mostly unfair trade with the U.S.

Likely for these reasons, Americans are sympathetic to imposing tariffs on some imports. For instance, 62% would favor adding a tariff to imported blue jeans to boost production and employment in the domestic blue jean industry. However, when faced with the possibility that such a tariff makes a pair of blue jeans $10 more expensive, a strong majority (66%) of Americans oppose adding such a tariff. And even more would oppose blue jean tariffs if they caused the price of jeans to increase $25 per pair of jeans (81% oppose) or $50 more per pair (87% opposed.) 

Americans Worry about Lobbying

Americans worry about lobbying’s impact on trade. Three-fourths (75%) are concerned that special interest groups are lobbying the government to put tariffs or other restrictions on trade. Indeed nearly half (48%) of Americans would become more opposed to a new tariff if a business or lobbying group pushed for it.

Most Americans Think Trade Deals Have Been Fair

Most Americans (53%) don’t believe the US has been taken advantage of by long-term trading partners. Nonetheless, nearly half (47%) believe Americans have been cheated. And few believe that China has been playing fairly.

Republicans are most likely to believe the US is being taken advantage of (66%) compared to only a third (32%) of Democrats and about half (48%) of independents. The South (51%) and Midwest (50%) are more likely than the West (42%) and Northeast (43%) to feel cheated.

Some trading partners are perceived more positively than others. For instance, a majority (66%) think Canada has traded fairly with the US, including 72% of Democrats and 66% of Republicans. Fewer think Japan has traded fairly, with only about half (49%) agreeing, including 55% of Democrats and 50% of Republicans. Even fewer (43%) think Mexico trades fairly with the US. However, there is a more significant partisan gap: While a slim majority (53%) of Democrats think Mexico has traded fairly, 38% of Republicans agree. Perceptions of fair trade plummet when China enters the equation. Only 15% of Americans think China trades fairly with the United States, including 20% of Democrats and 13% of Republicans.

Tit for Tat Trade Strategy

Americans are reluctant to unilaterally reduce trade barriers. In other words, Americans only want to reduce tariffs and other trade restrictions if the countries we trade with also reduce their restrictions. Nearly two-thirds (62%) of the public agree the government should reduce tariffs and other restrictions on products made in other countries “only if those other countries lower their trade restrictions on US products.” Less than a quarter (23%) believe that the US should reduce tariffs and trade restrictions “even if those other countries don’t lower their trade restrictions on US products.”

Parents Want Access to European-Made and ‑Regulated Baby Formula in the United States

In the aftermath of the national baby formula shortage, more than two-thirds (67%) of the public say that Americans should be allowed to buy baby formula manufactured in Europe and regulated by European government agencies. Currently, only formulas that the US FDA approves can be purchased in the US

Many Americans would also like to reduce barriers to purchasing European baby formula. A plurality (46%) favors removing tariffs on imported baby formula, 21% oppose and 34% don’t have an opinion. Some groups are even more supportive of removing tariffs on European baby formula, including Democrats (54%), parents of children under 18 (51%), and those with postgraduate degrees (54%).

Americans Want to Buy American

If all else were equal, a majority (75%) of Americans prefer to buy American-made products. Part of the reason is that most (55%) trust American-made products more than foreign-made products. However, if they were confident the quality would be the same, a slim majority of Americans (51%) would rather buy a less expensive product made abroad. Thus, a large share of Americans abandon their preferences for domestically produced goods as soon as a better price becomes available. For instance, 7 out of 10 Americans would not pay even $10 more for an American-made frying pan. Further, although the public says they prefer American-made products, 76% did not purposefully buy an American-made product in the past week.

A majority (58%) of Americans say they’d rather have businesses in the US “manufacture and make everything that we need within this country.” Less than half recognize or prioritize the gains from specialization and trade: 42% say that businesses in the US should “focus on what they make best and buy from companies in other countries what they make best.” Yet Americans are wary about paying more for the products if made domestically. For instance, 27% wouldn’t pay anything more to get an American-made frying pan if a cheaper import was available. Three-fourths (75%) would not be willing to pay more than $10 for an American-made frying pan if a less expensive import was available.

Most Americans do not consider economic concepts of “comparative advantage” or “gains from trade” when thinking about American trade policy. However, attaining more education may change minds and turn people against autarky. For instance, while 64% of Americans with high school diplomas wanted to manufacture everything we need in this country, in contrast, 55% of post-graduates think US companies should focus on what they make best and buy from companies in other countries what they make best.

Perceptions of the Trade Deficit Improve After Learning It’s Reinvested in the US

Most Americans (62%) have a negative perception of the US’s $1 trillion trade deficit, saying it’s a “bad thing.” A quarter (25%) don’t think it matters much either way, and 13% think it’s a good thing. However, if respondents learned that the money from the trade deficit was reinvested into the US economy, then concern drops to 24% who think the trade deficit is a problem. Instead, 76% would not be concerned about the trade deficit because they thought it either was a good thing (46%) or didn’t matter (30%). Notably, opinions about the trade deficit don’t vary much with educational attainment.

Americans Put America First

Americans understandably want trade policy to primarily benefit Americans. However, there is disagreement about how to achieve this.

A majority of Americans (56%) would support putting tariffs on goods made in other countries and imported into the US if those countries put restrictions on American-made products. However, support for these retaliatory tariffs drops significantly if it increases prices of goods at the store (34% support), decreases innovation and growth of American businesses (27%), encourages businesses to lobby for subsidies or tariffs (38%), or decreases jobs at other American companies that rely on the tariffed imports (22%).

Ultimately a solid majority (61%) of Americans believe US businesses need to “learn how to become strong and compete globally without any government handouts or taxpayer subsidies” while 39% think American businesses need taxpayer subsidies “to help them compete with other countries’ businesses that don’t play fair.”

Partisanship Colors Attitudes on Tariffs

Partisanship deeply colors how Americans think about trade policy, especially tariffs. In a hypothetical, 61% of both Democrats and Republicans supported adding tariffs to TVs imported into the United States to “boost production of the American TV industry.” However, in an experiment in which half of the survey respondents were told that Donald Trump imposed these tariffs, 65% of Democrats said they would oppose the tariffs, while 70% of those who identified as Republicans said they would support them. On the other hand, if told that Joe Biden imposed these tariffs, then 57 percent of Democrats would support the tariffs—a 22-point swing relative to the scenario where Trump imposed them. Meanwhile, Republican support declined by 19 points (51%) relative to the scenario where Trump imposed the tariffs.

Americans Benefit from Globalization at the Grocery Store

A majority of Americans regularly benefit from trade globalization at the grocery store. Six in 10 (61%) say they bought fresh fruits and vegetables at the store every week or once a month in fall and winter months that were grown in other countries.

However, most don’t connect their ability to buy out-of-season fresh fruit with globalization.

Only a third (33%) thought globalization had “a lot” to do with it. A little less than half (45%) thought globalization had “some” to do with it, 18% thought it did not have much, and 4% thought it had nothing to do with it.

Americans Wildly Overestimate Imports from China

The survey asked Americans about what percent of all goods imported into the United States they believe come from China. The answer? About 15–16%. Yet, 81% of Americans overestimated the share of imports the US receives from China: 31% said 25 percent of imports, 28% said 50 percent of imports, 18% said 75 percent of imports, and 4% said 95% of imports came from China. Only 5% of Americans underestimated with 5% saying less than 5 percent was imported from China. Only 13% of Americans selected roughly the correct answer.

Voters are Concerned about Global Poverty

Three-fourths (75%) of Americans are concerned about global poverty, including 29% who are very concerned. Even more Americans (83%) believe that reducing global poverty would improve global stability and make the world and our country safer.

Most Americans (74%) also say “one of the best things the US government can do for the world’s poorest people is to let Americans freely trade with them.” This received bipartisan support with 77% of Democrats and 73% of Republicans agreeing.

Americans are split, however, on whether global capitalism and trade (50%) or more government investment and aid (50%) does the better job of lifting people out of poverty.

Trade is Not a Top Election Issue

Trade issues are unlikely to be a top priority for voters this year. Only 1% of surveyed Americans said that globalization and international trade was a top-three issue for them, the lowest for any issue asked about on the survey. Instead, far more cared about inflation (40%), health care (30%), jobs and the economy (28%), immigration (27%) and climate change (21%). This pattern holds for registered voters as well, with only 1% who identified trade as a top-three issue.

Voters certainly care about the impact US trade policies have on the prices of products they buy at the store, job availability, and the strength of American business. Nonetheless, trade issues specifically are not likely to guide their vote choice for president.

Full survey toplines found here.

Full survey crosstabs found here

Methodology

The Cato Institute 2024 Globalization and Trade Survey was designed and conducted by the Cato Institute in collaboration with YouGov. YouGov collected responses online February 22–29 2024 from a national sample of 2,000 Americans 18 years of age and older. The margin of error for the survey is +/- 2.54 percentage points at the 95% level of confidence. Questions about the trade deficit were collected in a separate survey April 24–30, 2024. The margin of error for this survey was +/-2.33 percentage points. Restrictions were put in place to ensure that only the people selected and contacted by YouGov are allowed to participate.

Jennifer Huddleston

In July 2024, millions of individuals and businesses found their lives disrupted by a global IT outage caused by a faulty update to software issued by cybersecurity company CrowdStrike. The faulty update caused a calamity impacting everything from Starbucks and McDonald’s to the London Stock Exchange to airlines.

At least part of the blame for CrowdStrike’s catastrophic impact belongs to European regulations that require Microsoft to structure certain features for compliance purposes, opening up potential security liabilities.

While the CrowdStrike incident may be the most timely and significant example, it is just one of the many ways European regulation is increasingly impacting American consumers and providing them with less innovative and less secure products.

Why is that? Let’s start with the CrowdStrike situation. A 2009 agreement with European regulators required that Microsoft give other security services the same level of access to its Windows system that it has itself. The result is that when a flaw in a security system—like CrowdStrike’s faulty update—occurs, it can have far more devastating effects on the entire operating system and therefore a broader global impact.

The European Commission has pushed back on the claims that such an agreement has forced Microsoft into this position, stating that “Microsoft is free to decide on its business model.” However, European regulations are removing American tech companies’ ability to control their own business models.

The Digital Markets Act (DMA), an EU regulation beginning in 2022, designates five American companies among its “gatekeepers” and places significant restrictions on the types of services these companies can offer, how they present their products, and, in some cases, requires additional access through interoperability obligations. As AEI’s Shane Tews points out, under the DMA, Apple, which was unaffected by the CrowdStrike issues due to its closed ecosystem, could be required to create the same kind of security vulnerabilities by giving additional access to third-party vendors.

The DMA has already caused companies to remove several services and features from the European market—services and features that Americans can still use—due to its compliance requirements. These range from losing the “Ask to buy” parental control feature in the Apple App Store to significant interface changes to services like Google Maps. Not only do such changes hurt European consumers by limiting their access to products, but these regulations impose hardships on the small businesses that they claim to protect by either eliminating their visibility on search engines or taking away features that may help build consumer trust.

But as the issue with CrowdStrike shows, the impact of European regulation is no longer isolated to just Europe. As with many regulatory compliance requirements, it may not be technologically or economically feasible to simply offer a different product in Europe. As a result, we often see a “Brussels Effect,” where EU policy becomes the global standard for technology policy. The average consumer might not realize this in their day-to-day life, but they have been experiencing it for years in both large and small ways.

In Europe, the frustrating cookie pop-ups are one example of an inconvenience necessitated by data privacy regulation compliance requirements, as is the absence of certain services or information avenues like the Los Angeles Times. Other examples include the recent changes to Apple products charging cords with the iPhone 15, brought about not by improvements in technology but by a need to comply with EU regulation.

What features around the world and what vulnerabilities must consumers put up with to appease bureaucrats in Brussels? Thousands of disrupted vacations and business losses from CrowdStrike are likely to be just one example of how regulation gave us worse technology and consumer experiences, not better.

Notably, European regulation is its main contribution to global tech policy. As Ben Thompson puts it in his popular blog Stratechery, “[T]he problem with leading the world in regulation: you can only regulate what is built, and the E.U. doesn’t build anything pertinent to technology.”

Concerningly, some American regulators like the Federal Trade Commission are actively working with EU bureaucrats to regulate US companies through such policies rather than recognizing that this approach hampers American innovation, the economy, and consumers. There are a growing number of examples—including the CrowdStrike outage—that show this approach will lead to significant tradeoffs for consumers around the world that can’t be ignored.

Eric Gomez and Benjamin Giltner

July 2024 was a quiet month for the backlog of US weapons that have been sold but not delivered to Taiwan. There were no new arms sales notified to Congress and no news of any weapons deliveries to Taiwan. The Taiwan arms sale backlog stands at $20.5 billion.

Figures 1 and 2 show the backlog by dollar value of weapons categories (asymmetric, traditional, and munitions), with Table 1 providing a detailed breakdown of the weapons platforms in the backlog.

While there were no new arms sales for July, there were two developments in Taiwan arms sales worth mentioning.

On July 17, China announced its suspension of arms control and nuclear proliferation talks with the United States due to recent US arms sales to Taiwan. These negotiations began after the November 2023 Biden-Xi summit in San Francisco, though China was reportedly not responsive to US efforts to have subsequent rounds of discussions after an initial round in late 2023.

The breakdown of US-China nuclear talks is a disappointing development, though given the current state of the relationship not much is lost from their cancellation. To halt US arms sales, Beijing typically sanctions US defense companies, despite these companies being legally prohibited from doing business with China. Linking nuclear talks with arms sales, especially over a sale of short-range loitering munitions that pose no threat to the Chinese mainland, is unlikely to change US behavior.

The second piece of news from July pertains to an August 2023 sale of Infrared Search and Track (IRST) systems that will equip Taiwan’s F‑16 fighter aircraft. IRST pods search for infrared emissions, such as heat from engine exhaust, allowing them to detect targets with a small radar signature. A stealth aircraft may appear very small on radar but is easier to detect using IRST systems. Our dataset codes the IRST pod as a traditional capability because it is a sub-component of another traditional capability: crewed fighter aircraft.

According to a Taiwanese government e‑procurement notice from July 12, 2024, the IRST pods are now under contract. The notice gives a date range of June 2024 to December 2030 for the contract, but it does not specify how many IRST systems are being procured. Nor does the notice indicate when delivery is expected to be completed. There is also no Department of Defense notice for an IRST contract award as of August 5, 2024, meaning we are currently unable to cross-reference the Taiwan procurement notice against a US defense contract announcement.

Moreover, the final delivery date for the IRST pods is unknown. The period mentioned in the procurement notice may include support for IRST pods after they are delivered and installed on Taiwan’s fighter aircraft. Our dataset would remove the IRST systems from the backlog after delivery, and not cover post-delivery support. In the meantime, we will keep the IRST systems in the backlog and will continue to monitor its progress.

Taiwan Arms Backlog Dataset, July 2024

Colleen Hroncich

With a new school year approaching, it’s time to reset the Cato Private Schooling Status Tracker and see what happened over the last year.

The tracker runs from August 1 through July 31 each year and tracks openings and permanent closures announced during that timeframe. The 2023–24 tracker was similar to the previous year with 46 openings and 58 closures, resulting in a net loss of 12 schools. The 2022–23 tracker listed 47 openings and 54 closures for a net loss of seven schools. Looking back to 2020–21, there were 59 closures after the initial spike of more than 100 closures in the immediate aftermath of COVID-19. This year-to-year similarity in closures seems to indicate things have stabilized when it comes to the health of the private school sector.

These stats raise the question: who cares? Why do we track and report what’s happening among private schools? Since states started to mandate funding and attendance at public schools in the mid-1800s, private schools have faced the tremendous challenge of competing with a tuition-free alternative. In recent decades—and especially since the pandemic—people have increasingly realized one size does not fit all kids when it comes to education. This has led to an increase in school choice programs that allow state education funds to follow kids to a variety of learning options.

However, the spread of educational freedom through school choice programs won’t be helpful if there are no private options available. In a healthy marketplace, underperforming options will close and new providers will open. This mechanism is disrupted in the current system because funding goes to public schools without any link to how well they perform. And private options that serve students well may not be sustainable because their main competition is tuition-free. Programs like education savings accounts (ESAs), tax credit scholarships, and vouchers help provide a more level playing field.

In addition to fairer funding mechanisms, some states are taking steps to ensure new educational options don’t have to jump through unnecessary hoops to open. For example, this year Florida—a long-time school choice leader—passed a law that makes it easier to open new schools. As of July 1, 2024, private schools can be opened in facilities owned or leased by churches, libraries, community service organizations, museums, theaters, and more without needing special use permits or re-zoning. According to Ryan Delk, founder and CEO of the microschool network Primer and one of the advocates for the new law, around 50,000 locations are now eligible to operate schools.

The new tracking year could prove to be interesting with many new and expanded school choice programs being more fully enacted in the last year or two. For example, Iowa and Arkansas have new ESAs, Florida made its ESA universal, North Carolina’s voucher is now universal, and Oklahoma has a new universal refundable tax credit for education. We’ll be keeping an eye out to see how the private school sector fares in the midst of all of these changes.

Jeffrey A. Singer

A qualitative study published August 2 in the Journal of the American Medical Association reported that “semaglutide products are actively being sold without prescription by illegal online pharmacies, with vendors shipping unregistered and falsified products.” Some of these products were knockoffs of brands such as Ozempic and Wegovy and contained impurities, some of which were toxic.

In other cases, vendors never delivered products that people purchased online. The researchers reported receiving only three of the six products they bought. They found six online vendors are classified as “rogue” or “not recommended” by LegitScript, a private organization that monitors and certifies online vendors, or by the National Association of Boards of Pharmacies.

The researchers found that about 42 percent of online vendors were operating without a valid license or selling these drugs without a prescription.

As I wrote last month, GLP‑1 agonists were developed to treat diabetes by increasing insulin and sugar levels in the bloodstream. However, clinical researchers continue to find the drug can have several other benefits. Many of these potential benefits derive from their effects on the brain, which reduce appetite and cravings and induce satiety. They are already being used as effective weight loss drugs—the primary reason consumers are purchasing them online—but might potentially help people to reduce or quit consuming tobacco, alcohol, opioids, cannabis, and other substances.

In May, Charles Silver, Michael F. Cannon, and I co-wrote an article calling for the Food and Drug Administration to reclassify GLP-1s as over-the-counter (OTC) drugs and encourage pharmaceutical manufacturers to market their products with labels detailing to consumers how to properly and safely use them.

Experience shows that their prices drop when prescription drugs become available OTC. Part of the reason is insurance tends to pay for prescription drugs, whereas consumers pay directly for over-the-counter medications. Direct-paying consumers are more price-sensitive and induce manufacturers to compete on price.

If the FDA lets consumers legally buy GLP-1s OTC, it will reduce the risks consumers assume when purchasing fake or adulterated knockoffs in the grey market.

Federal policymakers might be concerned that adults may harm themselves if they inappropriately use GLP-1s they purchase over the counter. Yet they allow minors to buy lethal doses of acetaminophen (Tylenol), diphenhydramine (Benadryl), and ibuprofen (Advil) over the counter. Still, if policymakers are uncomfortable about making GLP-1s OTC, they can establish a “behind-the-counter” category for GLP-1s and other drugs as a halfway measure. This would add the step of forcing consumers to speak to a pharmacist—a licensed gatekeeper—before they can buy a drug. That would still make it easier for consumers to access GLP-1s without the added expense of a visit to the doctor’s office for a prescription. It would also allow competition among manufacturers to bring down the price of these drugs.

People are already purchasing GLP-1s without a prescription, effectively making them OTC drugs. By officially classifying them as OTC, the FDA could deal a blow to the grey market and improve the safety, price, and accessibility of these versatile medications.

Jeffrey Miron

In many high-paying occupations, the proportion of racial and ethnic minorities is below their percentage in the population (see, for example, these data on physicians, lawyers, and architects). 

One possible reason is ongoing discrimination against these groups, or the impact of lower income, which might itself reflect prior discrimination.

Cato Research Brief no. 393, however, suggests that government licensing contributes to these racial disparities: 

Our research investigates the 150-hour rule for certified public accountant (CPA) licensure, which requires the equivalent of a fifth year of higher education. Our results suggest that the rule reduced overall entry into the CPA profession, but it caused minority entry to fall 13 percent more than nonminority entry and did not improve the quality of CPAs. 

Yet again, licensing fails to generate its alleged benefits while creating significant adverse consequences.

Lemoni Matsumoto, an undergraduate at the University of Chicago, contributed to this article.

Jack Solowey and Jennifer J. Schulp

Paul Krugman deserves a lot of credit. He provides a living example of why people should not be given unchecked power to make decisions for others.

In case you haven’t heard, Krugman thinks crypto is dumb—“nothing but ‘technobabble and libertarian derp.’” That’s fine. We’re all entitled to our opinions.

Krugman also thought the Internet was overrated, writing in 1998 that “by 2005 or so, it will become clear that the Internet’s impact on the economy has been no greater than the fax machine’s.”

Krugman, though, even gets credit in connection with this woefully incorrect prediction because he subsequently did something noble—he admitted his error: “I was clearly trying to be provocative, and got it wrong, which happens to all of us sometimes.” Of course, it does, and kudos to anyone willing to acknowledge his mistakes.

But what if Krugman’s wrong about crypto? Because, again to his credit, this is a possibility he’s recognized: “…I’m a crypto skeptic. Could I be wrong? Of course.”

If the US took a pro-innovation and light-tough regulatory approach to crypto—as it did for the Internet—skeptics’ opinions of crypto, right or wrong, wouldn’t matter so much, because the technology would be free to rise or fall on its own merits.

Unfortunately, the U.S. has taken an overtly hostile approach to crypto that’s more prohibitionist than regulatory. Frankly, it seems consistent with another Krugman line that “killing the crypto industry would be a public service.” (Imagine if this crew had been in charge of Internet policy in the 1990s.)

Krugman appears to understand neither how crypto “regulation” actually works in the US at present, nor what reforms are in the offing. He fears, for instance, that the outcome of the next election may “stop regulators from treating crypto assets and institutions the same way they treat stocks and banks.” There are many problems with this sentence. For one, not all crypto assets are properly considered “stocks,” and not all crypto “institutions” are properly considered banks. To say they are doesn’t even capture the maximalist position of even the most heavy-handed regulators.

But even if one charitably assumes that what Krugman meant is that crypto should be regulated in a comparable way to comparable financial instruments, that still does not describe the status quo. The problem with the current state of crypto regulation, for example, is not so much that an agency like the Securities and Exchange Commission is trying to regulate crypto but that it is refusing to do so by failing to provide clear rules for how token issuers and exchanges register even when the agency asserts they’re under its jurisdiction.

In addition to the poor grasp of regulatory dynamics, there are reasons to think Krugman’s crypto skepticism is off the mark. Core to his argument is the assertion that crypto serves “no useful purpose.” Yet he goes on to provide something of an elegant description of a core crypto function: “What Bitcoin and its emulators try to do is sidestep the need for a legal framework with a technological fix that doesn’t depend on banks’ centralized record-keeping.” That’s well said.

Following that acknowledgment, Krugman, perhaps tellingly, subtly changes his argument that crypto serves “no useful purpose” to the argument that its useful purpose is better served by alternatives: “But what problem does it solve that can’t be handled more easily and cheaply in other ways?” That nuanced shift matters a great deal. Because following Krugman’s logic, crypto is useful if it proves easier and cheaper to use.

There are such cases. Bank payment services may be cheaper and easier if you have a bank account. But they also may not be. As our colleague Nick Anthony documents, for instance, there are plenty of times when Bitcoin transaction fees are lower than bank transfer fees and plenty of times when they’re not. It depends on when you transfer the bitcoin (during high or low demand hours) and what your needs are for the bank transfer: is it cross-border and how fast do you need it to settle?

Moreover, there’s much work being done to make crypto transactions even cheaper. For instance, “Layer 2” blockchains—which record transactions on separate ledgers to increase scalability before bundling and recording them on main chains like Ethereum—can dramatically reduce fees. Krugman’s argument doesn’t grapple with these developments. It doesn’t even seem aware that key blockchains no longer rely on energy-intensive proof-of-work mining but have transitioned to more energy-efficient alternatives.

In addition, Krugman assumes one has a bank account. Many around the world don’t, and crypto is useful to them. Vietnam frequently is at or near the top of the charts for crypto adoption, likely due to its historically high rate of unbanked citizenry, among other factors. Crypto is also useful for sending money where the traditional bank system is teetering, as in a warzone.

Globally, the value of purchases via stablecoins (cryptocurrencies pegged 1:1 to another asset, like a fiat currency) has risen significantly recently, including in advanced economies. But the focus of Krugman’s crypto skepticism is a bit more provincial, pointing to “digital payment systems that skip the hocus-pocus, like Venmo and Apple Pay” as superior alternatives.

While Venmo and Apple Pay are great options for many (one of us has essentially testified to Congress to that effect), they don’t solve every problem for every person. Venmo doesn’t work internationally, and Apple Pay requires an Apple device and payment card from a participating provider. Neither of these are criticisms, they’re just recognitions that all products and services, including other competing digital payment apps and crypto tools, have different benefits and limitations. A diversified payments ecosystem, of which crypto can be one component, ensures that different needs can be met at different times.

In addition, applying Krugman’s implicit argument retrospectively reveals its flaws. Why Venmo and Apple Pay, haven’t you heard of credit cards? Why credit cards, haven’t you heard of Charga-Plate? And yes, why the Internet, haven’t you heard of fax machines?

Ultimately, we too recognize that our interpretations may be wrong. That’s precisely why we don’t want to impose them on everyone else through interventions that narrow Americans’ options. Krugman, by contrast, seems concerned that American voters may care about something he dislikes and want to hold onto something he would like to see disappear. So how about a compromise: let people who want to use crypto use it, and let Krugman sit this one out.

Colleen Hroncich

In December 2021, the Friday Feature highlighted KaiPod Learning, an innovative organization that was providing in-person learning communities for children who homeschooled or attended cyber schools. KaiPod centers are staffed with a learning coach who can support students with their chosen courseloads. And they incorporate a lot of flexibility with daily offerings and prices pro-rated depending on use.

The success of KaiPod led founder Amar Kumar to branch out and create KaiPod Catalyst in 2023. “We were inspired by two factors: the number of educators looking for alternative career paths and the number of families looking for alternative education options,” he explains. “We knew that we’d never be able to open enough KaiPod Learning locations to satisfy that demand, so we needed to find a different way. Thus, Catalyst was born. We took everything we learned in building the largest owned network of microschools in the country and created a launch playbook for anyone to benefit from.”

KaiPod Catalyst is a program that helps people create, run, and grow microschools. It includes support for marketing and outreach, community engagement, finance and fundraising, finding a location, hiring, operations, and more. The initial phase of the program to get a microschool off the ground is free. After launch, KaiPod supports the new microschool for three years in exchange for a per-student fee. The KaiPod website also includes a variety of free resources to help potential microschool founders focus their vision and learn about finances.

Several microschools that have been previous Friday Features have participated in KaiPod Catalyst. Alexandra Batista, founder of Steps Learning Center in Florida, raved about the program. “In my lowest moments, when I’m about to lose my mind, I say, ‘What do I do?’ And there is not one situation that I’ve brought up and they haven’t found a solution for me,” she told me. “It’s having a backup at all times because what I’m doing is risky. When I started, I did it all with Google searches. Asking Google, ‘What is the process for a permit?’ and ‘What permit do I need for this?’ That’s how I did it. And just having somebody to tell me, ‘This is the blueprint of how you do everything’—it was mind-blowing. And it made my job so much easier.”

While the Catalyst program goes beyond Amar’s initial vision, he points out, “The KaiPod of today is true to the same principles in my original business plan: the value of small groups, intense personalization for students powered by technology, and new career paths for teachers. But, in other ways, we’ve learned and adapted as the market has evolved. Coming out of the pandemic, the diversity of learning options has really multiplied and we’re so excited to be able to accelerate this transformation even further.”

Amar acknowledges that the huge variety of educational models has been a huge surprise. “We have really come to appreciate the wide diversity of this movement and the importance of microschools created by people from the community for the community,” he says. “Microschooling’s strength is its diversity, and no amount of top-down control would achieve what we’ve been able to achieve in just 18 months.”

More than 100 founders have already participated in KaiPod Catalyst, and a new cohort is about to begin—the deadline to apply is August 31, 2024. “I encourage people to think of three educators in their life…how are they doing? Are they happy in their career? Do they deserve more? If so, I’d encourage you to send them a link to our site, so they can learn more,” Amar says. “Starting a school isn’t right for everyone, but we hope that everyone will at least take a small step to learn more about the innovation happening in American education.”

Nicholas Anthony

Will the rise of a central bank digital currency (CBDC) mark the end of cash? For years, people have been concerned about how the use of cash has declined. But the rise of CBDCs has brought this concern back to the forefront because many people see the introduction of CBDCs as an attempt to replace cash.

Is that really the case? Well, different people will give you different answers.

“It’s Not a Replacement”

In some jurisdictions, concerns about the potential cashless society that a CBDC could lead to have become so prominent that central bankers have made dismissing cash concerns a key part of their messaging. For example, the Federal Reserve has said it “is considering a CBDC as a means to expand safe payment options [like cash], not to reduce or replace them.” The European Central Bank has said, “A digital euro would complement cash, not replace it.” And the Bank of England has said a CBDC “would not replace cash.”

In short, these officials have tried to make the point that a CBDC would only be an option to exist alongside cash.

However, it should be noted that these same central banks have often pointed to the decline of cash as a reason to create a CBDC. For example, after citing the decline in cash use, both the Federal Reserve and the European Central Bank have argued that a CBDC is needed to “preserve ready public access to safe central bank money” and to preserve “a public means of payment.”

So while officials may say CBDCs are not meant to replace cash, it’s difficult to square how that can be the case when the decline of cash is cited as a reason to introduce a CBDC. Perhaps the line being drawn is that they won’t forcibly take away cash, like when the US government prohibited citizens from holding gold, but that is a fine line, to say the least.

Not Everyone Got the Memo

With that said, it seems not every central bank got the memo on the call for pro-cash messaging. Officials in Australia, the Bahamas, the Eastern Caribbean Currency Union, Lebanon, Nigeria, Peru, Rwanda, and the Solomon Islands have all openly said their goal is to go cashless and that CBDCs are a way to get there. Even the International Monetary Fund has recommended CBDCs as a replacement for cash. And proponents of CBDCs have often noted that cash needs to be removed for a CBDC to be used as a tool for monetary policy.

For some of these jurisdictions, the issue boils down to costs. The Rwandan central bank specifically recommended introducing a CBDC to “achiev[e] a cashless economy” because it cost the nation over $30 million to print and process cash between 2018 and 2022. Luke Forau, governor of the Central Bank of Solomon Islands, echoed this concern, saying he introduced a CBDC because “we want to reduce the use of physical cash as it is very expensive to print the notes and coins.” Likewise, the Central Reserve Bank of Peru said a “CBDC can increase social welfare by reducing the costs and risks of using cash.” Finally, International Monetary Fund managing director Kristalina Georgieva said, “CBDCs can replace cash which is costly to distribute in island economies.”

Others, however, have been less clear about their reasoning.

The Eastern Caribbean Central Bank wrote in its 2019 annual report that it launched a CBDC to reduce the use of cash by 50 percent by 2025, but it didn’t explain why that was a goal in the first place. Around the same time, the Central Bank of the Bahamas wrote that “reducing the ill effects of cash usage” was an objective of the Bahamian CBDC and that it expected the launch would lead to a “concurrent reduction in cash transactions.” Riad Salameh, former governor of the Lebanese central bank, said he wanted to launch a CBDC to take the country cashless. Finally, after launching a CBDC, Central Bank of Nigeria governor Godwin Emefiele said, “The destination, as far as I am concerned, is to achieve a 100% cashless economy in Nigeria.”

For a third group, going cashless is required to apply CBDC policies. As James Mackintosh of the Wall Street Journal put it, “The main monetary power of the digital dollar comes from the abolition of bank notes.” What does Mackintosh mean by this? Policies like negative interest rates depend on the absence of cash.

Cornell professor and former International Monetary Fund chief Eswar Prasad noted this dependence when he wrote that a CBDC would be a “useful policy tool” because “[if] cash were replaced with a digital dollar [then] the Fed could impose a negative interest rate by gradually shrinking the electronic balances in everyone’s digital currency accounts, creating an incentive for consumers to spend and for companies to invest.”

In other words, a negative interest rate policy would be akin to fining people for not spending “enough” money. Prasad notes that cash must be replaced for this policy to work because cash would otherwise act as an escape hatch. In fact, as I have explained at length in my book, it’s not just cash that would need to be banned for these CBDC policies to work. Cash, foreign currency, cryptocurrency, and even some commodities could all serve as escape hatches for citizens. Therefore, for their plan to work, the government would need to eliminate all these alternative payment methods to cut off any escape hatch from their “better” monetary policy.

The End of Cash?

So, is the introduction of CBDCs an attempt to replace cash? Well, it depends on whom you ask, but the answers don’t seem all that different in the end. For some central banks, the answer is that a CBDC won’t replace cash but also that we need one because cash is disappearing. For other central banks, the answer is that a CBDC should absolutely replace cash, but their stated reasons for doing so can vary. And for others, the benefits that CBDCs are supposed to deliver explicitly depend on the absence of cash.

No matter how you break it down, if the future of money involves CBDCs, then the future of cash does not look bright.

Are you interested in learning more about central bank digital currency? My new book, Digital Currency or Digital Control? Decoding CBDC and the Future of Money, is out now.