Abundance by Ezra Klein, Derek Thompson Extract

Read an extract from Abundance by Ezra Klein, Derek Thompson.

Beyond Scarcity

You open your eyes at dawn and turn in the cool bedsheets. A few feet above your head, affixed to the top of the roof, a layer of solar panels blinks in the morning sun. Their power mixes with electricity pulled from several clean energy sources—towering wind turbines to the east, small nuclear power plants to the north, deep geothermal wells to the south. Forty years ago, your parents cooled their bedrooms with joules dredged out of coal mines and oil pits. They mined rocks and burned them, coating their lungs in the byproducts. They encased their world—your world—in a chemical heat trap. Today, that seems barbaric. You live in a cocoon of energy so clean it barely leaves a carbon trace and so cheap you can scarcely find it on your monthly bill.

The year is 2050.

You walk to the kitchen to turn on the sink. Water from the ocean pours out of the faucet. It’s fresh and clear, piped from a desalination plant. These facilities use microbial membranes to squeeze out the ocean salt. Today, they provide more than half of the country’s fresh used water. Previously overtaxed rivers, such as the Colorado, have surged back now that we don’t rely on them to irrigate our farms and fill our coffee mugs. In Phoenix and Las Vegas, previously parched cities are erupting in green foliage.

You open the refrigerator. In the fruit and vegetable drawer are apples, tomatoes, and an eggplant, shipped from the nearest farm, mere miles away. These crops don’t grow horizontally, across fields. They grow vertically on tiered shelves inside a tall greenhouse. Banks of LED lights deliver the photons the plants need in precisely timed increments. These skyscraper farms spare countless acres for forests and parks. As for the chicken and beef, much of it comes from cellular meat facilities, which grow animal cells to make chicken breasts and rib eye steaks—no live animals needed, which means no confinement and slaughter. Once prohibitively expensive, cultivated meat scaled with the help of plentiful electricity. When your parents were young, nearly 25 percent of all global land was used to raise livestock for human consumption. That is unimaginable now. Much of that land has rewilded.

Out the window and across the street, an autonomous drone is dropping off the latest shipment of star pills. Several years ago, daily medications that reduced overeating, cured addiction, and slowed cellular aging were considered miracle drugs for the rich, especially

when we discovered that key molecules were best synthesized in the zero-gravity conditions of space. But these days, automated factories thrum in low orbit. Cheap rocketry conveys the medicine down to earth, where it’s saved millions of lives and billions of healthy years.

Outside, the air is clean and humming with the purr of electric machines all around you. Electric cars and trucks glide down the road, quiet as a light breeze and mostly self-driving. Children and adult commuters follow on electric bikes and scooters, some personally owned and some belonging to subscription networks run by the city. Another last-mile delivery drone descends from canopy level, pauses over a neighbor’s yard like a hummingbird, and drops off a package. These e-bots now deliver a sizable chunk of online orders, reducing the drudgery of much human delivery work.

Your micro-earpiece pings: a voice text from a friend and his family, on their way to the airport for another weekend vacation. Across the economy, the combination of artificial intelligence, labor rights, and economic reforms have reduced poverty and shortened the workweek. Thanks to higher productivity from AI, most people can complete what used to be a full week of work in a few days, which has expanded the number of holidays, long weekends, and vacations. Less work has not meant less pay. AI is built on the collective knowledge of humanity, and so its profits are shared. Your friends are flying from New York to London. The trip will take them just over two hours. Modern jetliners now routinely reach Mach 2—twice the speed of sound—using a mix of traditional and green synthetic fuels that release far less carbon into the air.

The world has changed. Not just the virtual world, that dance of pixels on our screens. The physical world, too: its houses, its energy, its infrastructure, its medicines, its hard tech. How different this era is from the opening decades of the twenty-first century, which unspooled

a string of braided crises. A housing crisis. A financial crisis. A pandemic. A climate crisis. Political crises. For years, we accepted homelessness and poverty and untreated disease and declining life expectancy. For years, we knew what we needed to build to alleviate the scarcities so many faced and create the opportunities so many wanted, and we simply didn’t build it. For years, we failed to invent and implement technology that would make the world cleaner, healthier, and richer. For years, we constrained our ability to solve the most important problems.

Why?

Scarcity Is a Choice

This book is dedicated to a simple idea: to have the future we want, we need to build and invent more of what we need. That’s it. That’s the thesis.

It reads, even to us, as too simple. And yet, the story of America in the twenty-first century is the story of chosen scarcities. Recognizing that these scarcities are chosen—that we could choose otherwise—is thrilling. Confronting the reasons we choose otherwise is maddening.

We say that we want to save the planet from climate change. But in practice, many Americans are dead set against the clean energy revolution, with even liberal states shutting down zero-carbon nuclear plants and protesting solar power projects. We say that housing is a human right. But our richest cities have made it excruciatingly difficult to build new homes. We say we want better health care, better medicine, and more cures for terrible diseases. But we tolerate a system of research, funding, and regulation that pulls scientists away from their most promising work, denying millions of people the discoveries that might extend or improve their lives.

Sometimes these blockages reflect differences of beliefs or interests. A thousand square acres of solar panels can be a godsend to the city they power and a blight to the community they abut. A seven-story affordable apartment building in San Francisco means homes for those who would otherwise live hours from their work even as it blocks views and clogs parking for those who lived there before.

Other times, our crises reflect the overhang of the past into the present. One generation’s solutions can become the next generation’s problems. After World War II, an explosion of housing and infrastructure enriched the country. But without regulations for clean air and water, the era’s builders despoiled the environment. In response, the US passed a slew of environmental regulations. But these well-meaning laws to protect nature in the twentieth century now block the clean energy projects needed in the twenty-first. Laws meant to ensure that government considers the consequences of its actions have made it too difficult for government to act consequentially. Institutional renewal is a labor that every generation faces anew.

But some of this reflects a kind of ideological conspiracy at the heart of our politics. We are attached to a story of American decline that is centered around ideological disagreement. That makes it easy to miss pathologies rooted in ideological collusion. Over the course of the twentieth century, America developed a right that fought the government and a left that hobbled it. Debates over the size of government obscured the diminishing capacity of government. An abundance of consumer goods distracted us from a scarcity of homes and energy and infrastructure and scientific breakthroughs. A counterforce is emerging, but it is young yet.

The Supply-Side Mistake

At the heart of economics is supply and demand. Supply is how much there is of something. Demand is how much of that thing people want. Economies balance when supply and demand meet and derange when they part. Too much demand chasing too little supply causes shortages, price increases, and rationing. Too much supply pooling around too little demand brings gluts, layoffs, and depressions. Supply and demand are linked. At least, they are in the real world. In our politics, they have been cleaved. Democrats and Republicans divvied them up.

The words “supply side” are coded as right-wing. They summon memories of the curve that the conservative economist Arthur Laffer jotted on a napkin in the 1970s, showing that when taxes are too high, economies slow and revenues, paradoxically, fall. This led, in part, to decades of Republican promises that cutting taxes on the rich would encourage the nation’s dispirited John Galts to work smarter and harder, leading economies to boom and revenues to rise.

Tax cuts are a useful tool, and it is true that high taxes can discourage work. But the idea that tax cuts routinely lead to higher revenues is, as George H. W. Bush said, “voodoo economics.” It has been tried. It has failed. It has been tried again. It has failed again. These failures, and the Republican Party’s dogged refusal to stop trying the same thing and expecting a different result, made it vaguely disreputable to worry about the supply side of the economy. It’s as if the nonsense of phrenology made it sordid for doctors to treat disorders of the brain.

But the conservative agenda did something else, too: it cast production as a function of unfettered markets. Supply-side economics was about getting the government out of the private sector’s way. Cutting taxes so people would work more. Cutting regulations so companies would produce more. But what of the places where society needed a supply of something that the market could not, or would not, provide on its own?

This is where you might have expected Democrats to step in. But Democrats, cowed by the Reagan revolution and frightened of being seen as socialists, largely confined themselves to working on the demand side of the ledger. When Americans in 1978 heard that “government cannot solve our problems, it can’t set our goals, it cannot define our vision,” the words didn’t come from Ronald Reagan. They came from President Jimmy Carter, a Democrat, in his State of the Union address. This was a preview of things to come. In 1996, the next Democratic president, Bill Clinton, announced that “the era of big government is over.” The notion that the US government cannot solve America’s problems was not unilaterally produced by Reagan and the GOP. It was coproduced by both parties and reinforced by their leaders.

Progressivism’s promises and policies, for decades, were built around giving people money, or money-like vouchers, to go out and buy something that the market was producing but that the poor could not afford. The Affordable Care Act subsidizes insurance that people can use to pay for health care. Food stamps give people money for food. Housing vouchers give them money for rent. Pell Grants give them money for college. Tax credits for child care give people money to buy child care. Social Security gives them money for retirement. The minimum wage and the earned-income tax credit give them more money for anything they want.

These are important policies, and we support them. But while Democrats focused on giving consumers money to buy what they needed, they paid less attention to the supply of the goods and services they wanted everyone to have. Countless taxpayer dollars were spent on health insurance, housing vouchers, and infrastructure without an equally energetic focus—sometimes without any focus at all—on what all that money was actually buying and building.

This reflected a faith in the market that was, in its way, no less touching than that offered by Republicans. It assumed that so long as enough money was dangled in front of it, the private sector could and would achieve social goals. It revealed a disinterest in the workings of government. Regulations were assumed to be wise. Policies were assumed to be effective. Cries that government was stifling production or innovation typically fell on deaf ears. A blind spot emerged. Political movements consider solutions where they know to look for problems. Democrats learned to look for opportunities to subsidize. They gave little thought to the difficulties of production.

The problem is that if you subsidize demand for something that is scarce, you’ll raise prices or force rationing. Too much money chasing too few homes means windfall profits for homeowners and an affordability crisis for buyers. Too much money chasing too few doctors means long wait times or pricey appointments. This leads to the standard Republican riposte: Just don’t subsidize demand. Keep the government out of it. Let the market work its magic. That’s fine for goods where access is not a matter of justice. If virtual-reality headsets are expensive, well, so be it. It is not a public policy problem if most households cannot afford a VR headset. But that cannot be said for housing and education and medicine. Society cares about access to these goods and services, as well it should. Democrats and Republicans passed policies into law that, collectively, spend trillions of dollars helping people afford them. But giving people a subsidy for a good whose supply is choked is like building a ladder to try to reach an elevator that is racing ever upward.

The results of that mistake are everywhere. In 1950, the median home price was 2.2 times the average annual income; by 2020, it was 6 times the average annual income. Between 1999 and 2023, the average premium for employer-based family health insurance rose from $5,791 to $23,968—an increase of more than 300 percent—and the worker contribution to that premium more than quadrupled.6 In 1970, the average annual cost of tuition and fees was $394 at public colleges and $1,706 at private colleges. In 2023, it was $11,310 at public colleges for in-state students and $41,740 at private colleges.7 Child care for an infant and a four-year-old costs, on average, $36,008 in Massachusetts, $28,420 in California, and $28,338 in Minnesota.

An uncanny economy has emerged in which a secure, middle-class lifestyle receded for many, but the material trappings of middle-class success became affordable to most. In the 1960s, it was possible to attend a four-year college debt-free but impossible to purchase a flat-screen television. By the 2020s, the reality was close to the reverse.

We papered over the affordability crisis with low prices for consumer goods, soaring asset values that kept richer Americans happy, and mountains of debt: housing debt and student-loan debt and medical debt that kept the working class semi-afloat. This makes some sense of the last few decades of our economic debates: a crisis of housing debt, a huge new program to subsidize health insurance costs, debates about making college free and forgiving student loans, endless rounds of tax cuts, proposal after proposal for the government to pay for child care and preschool, a bubble in crypto that attracted so many investors in part because it seemed like a rocket ship into wealth that anyone could ride.

But then came inflation. For years, the central problem in the American economy was demand. We both reported on the financial crisis, and every conversation with Obama administration economists was about how to persuade employers to hire and consumers to spend. The 2009 stimulus was too small, and while we avoided a second Great Depression, we sank into an achingly slow recovery. Democrats carried those lessons into the COVID pandemic. They met the crisis with overwhelming fiscal force, joining with the Trump administration to pass the $2.2 trillion CARES Act and then adding the $1.9 trillion American Rescue Plan Act and the trillion-dollar infrastructure bill on top. Democrats made clear that they preferred the risks of a hot economy, like inflation, to the threat of mass joblessness.

They succeeded. But solving the crisis of the pandemic economy created a new crisis for the post-pandemic economy: too much demand. Supply chains that had been battered by the pandemic and Russia’s invasion of Ukraine began to break. Inflation returned with a vengeance. The conversations we had with the Biden administration’s economists were different from the conversations with the Obama administration’s economists, even when they were the same people. They needed companies to make more goods and make them faster. They needed more chips so there could be more cars and computers. They needed ports to clear more shipments and Pfizer to make more antiviral pills and shipping companies to hire more truckers and schools to upgrade their ventilation systems. They needed more supply and, if they could not get that, less demand.

“If car prices are too high right now, there are two solutions,” Biden said. “You increase the supply of cars by making more of them, or you reduce demand for cars by making Americans poorer. That’s the choice.”

By 2024, the surge in prices had slowed. Inflation, as economists measure it, had eased. But the broader affordability crisis that predated the bout of inflation persisted. The fear that we did not or would not have enough of what we needed settled heavily on politics. Policymakers began to rethink globalization, warning that we could not depend on critical exports from China if conflict or crisis came between our nations. Governors and mayors focused their attention on housing supply as homeless encampments spread across their streets. The Inflation Reduction Act began the work of building the green infrastructure necessary to migrate our economy to clean energy. The CHIPS and Science Act dangled tens of billions of dollars to restart semiconductor manufacturing in America. Whether these policies will work remains to be seen. That these policies represent a break with recent decades of American politics is undeniable.

Politics is not just about the problems we have. It’s about the problems we see. The supply problem has lurked for years, but it has not been the core of our politics. That is changing. A new theory of supply is emerging—and with it, a new way of thinking about politics,

economics, and growth.

Extracted from Abundance by Ezra Klein and Derek Thompson. Published by Profile Books.

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Abundance

by Ezra Klein and Derek Thompson

It's time to rethink liberal answers to society's biggest challenges - we must abandon fearmongering and embrace visionary action.

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