More on Repealing the Laws of Economics

Oaktree's Howard Marks contends that when governments attempt to repeal the laws of economics through price controls and trade barriers, they consistently produce unintended harm despite good intentions. He traces this pattern across three domains: rent control, fire insurance regulation, and tariffs. In California's fire insurance crisis, regulators prohibited insurers from using forward-looking catastrophe models and blocked premium increases to reflect rising reinsurance costs. The result: major carriers including State Farm, Allstate, and Chubb withdrew or stopped writing new policies. By the time of the 2025 wildfires, fewer than a quarter of affected properties in Pacific Palisades and Altadena were insured. Marks notes that "you can limit the price insurers can charge for coverage, but you can't make them provide coverage at that price." Thousands of homeowners lost both homes and financial protection. On tariffs, Marks acknowledges legitimate uses—national security, iconic industries, countering unfair trade practices—but warns that broad tariff regimes protect domestic producers at consumer expense and risk inferior goods and higher prices. He cites economist Niall Ferguson's observation that all industrialized economies transition from manufacturing to service sectors around $40,000 per capita GDP; the U.S. manufacturing decline reflects prosperity, not unfair trade. Marks also flags two structural fiscal crises: trillion-dollar annual deficits despite economic growth, and Social Security Trust Fund insolvency projected for 2035, neither of which elected officials are addressing meaningfully.