Alex Tabarrok

More than any other country, Switzerland’s ethos is centered around preparing for civilizational collapse.

All around Switzerland, for example, one can find thousands of water fountains fed by natural springs. Zurich is famous for its 1200 fountains, some of them quite beautiful and ornate, but it’s the multiple small, simple fountains in every Swiss village that really tell the story. Elegant, yes, but if and when central water systems are destroyed these fountains are a decentralized and robust system for providing everyone with drinkable water.

The Swiss political system is also decentralized. If the central government fails, the Swiss might not even notice. The mountains and valleys also mean that Swiss towns and villages are geographically independent yet linked in a spider-web of robust connections.

Despite being at peace since 1815, Switzerland is prepared for war. Swiss males (and perhaps females in the future) are required to serve in the military (those who cannot, pay a special tax) creating a robust reservoir of trained citizens ready to serve in an emergency.

The Swiss have been tunneling the Alps for hundreds of years creating innumerable secret hideaways for people and stores.

As a further example of how ridiculously well prepared the Swiss are for any and all threats, there are things like hidden hydroelectric dams built inside of unmarked mountains so that in the event of mass bombings, they’ll still have electricity from these secret facilities. And, remember, these are the things the Swiss government has let us know about. It is thought that there are probably more fortifications and hidden goodies scattered about the country’s landscape. (ital. added, AT)

In addition, to thousands of military bunkers permeating the Swiss mountains there are several hundred thousand private and public fallout shelters the largest of which can hold some 20,000 people. Some of the largest installations have been decommissioned and even turned into museums but there is little doubt that they could be rapidly re-purposed.. As the Swiss continue to improve their already fantastic railway system it’s standard practice to convert old railway tunnels to security shelters.

Buried deep alongside the hydroelectric dams, shelters and food stores, the Swiss also have libraries ready to reboot civilization:

“In another [underground bunker], detailed instructions on how to build devices for reading all known data storage formats, even older formats like floppy disks, are kept, so that if that knowledge is otherwise lost, future generations can still decode our data storage devices to access the data within correctly. Essentially, the researchers involved in this particular project have attempted to create a “Rosetta Stone” of data formats and are using a ridiculously secure Swiss bunker as the storage point for that knowledge.”

Switzerland is famous for being the place to store wealth in times of crisis and that remains true today with a few twists. The old-rich store their gold in heavily guarded Swiss banks, the nouveau-riche store their bitcoins in Swiss underground bunkers built to withstand cyber- and nuclear attack:

It’s no surprise that Nassim Taleb likes Switzerland because this is a country that has made itself anti-fragile in order to survive the black swans of civilizational collapse.

Hat tip: Maxwell.

Switzerland is a highly diverse society, especially among language groups, and with immigration it is becoming even more diverse. Yet Switzerland is also very peaceful. Why? The answer offered in this paper Good Fences created by geography, I find somewhat depressing. I would focus more on political decentralization as an explanation, that too is a function of geography but unlike geography it can be transplanted. I’m in Switzerland this week:

We consider the conditions of peace and violence among ethnic groups, testing a theory designed to predict the locations of violence and interventions that can promote peace. Characterizing the model’s success in predicting peace requires examples where peace prevails despite diversity. Switzerland is recognized as a country of peace, stability and prosperity. This is surprising because of its linguistic and religious diversity that in other parts of the world lead to conflict and violence. Here we analyze how peaceful stability is maintained. Our analysis shows that peace does not depend on integrated coexistence, but rather on well defined topographical and political boundaries separating groups, allowing for partial autonomy within a single country.

In Switzerland, mountains and lakes are an important part of the boundaries between sharply defined linguistic areas. Political canton and circle (sub-canton) boundaries often separate religious groups. Where such boundaries do not appear to be sufficient, we find that specific aspects of the population distribution guarantee either sufficient separation or sufficient mixing to inhibit intergroup violence according to the quantitative theory of conflict. In exactly one region, a porous mountain range does not adequately separate linguistic groups and that region has experienced significant violent conflict, leading to the recent creation of the canton of Jura. Our analysis supports the hypothesis that violence between groups can be inhibited by physical and political boundaries. A similar analysis of the area of the former Yugoslavia shows that during widespread ethnic violence existing political boundaries did not coincide with the boundaries of distinct groups, but peace prevailed in specific areas where they did coincide. The success of peace in Switzerland may serve as a model to resolve conflict in other ethnically diverse countries and regions of the world.

Adam Smith on Occupational Licensing

by on December 7, 2017 at 11:26 am in Economics, Law | Permalink

Adam Smith warned that “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.” Although Smith’s warning is often quoted, few people know that what Smith was talking about was occupational licensing. At the time Smith wrote, tradesmen such as weavers, hatters, and cutlers (metalworkers) monopolized their industries by limiting entry to students who had served long apprenticeships under a master, and tradesmen also limited the number of students a master could teach. Seven-year apprenticeships had been required in Britain since the 1563 Statute of Artificers. In Smith’s time, however, occupational licensing was beginning to fall apart because the 1563 law had been interpreted to apply only to the trades listed in 1563 and not to the new trades then arising with the Industrial Revolution. The act was finally repealed in 1813, in part because of Smith’s influential attack.

Occupational licensing is also undergoing great changes in the United States today—but in the opposite direction of those in Smith’s time.

That is the introduction to the Undertaker’s License a Cato Research Brief on my paper with Brandon Pizzola on occupational licensing in the funeral services industry.

I Hate Flexible Spending Accounts

by on December 6, 2017 at 7:38 am in Economics | Permalink

I hate “flexible” spending accounts, i.e. those accounts where you put say $1000 in tax-free but you then must submit a bunch of health or education receipts to claim the money–and the “benefits manager” tells you half of the receipts you submitted are no good so you have to trawl through your files to find more–or lose the money. The whole process is demeaning. My hatred of this process, however, pales in comparison to that of Scott Sumner who gives a correct analogy:

Imagine a government that took 10% of each person’s income, and put in in a wooden box. The box was placed at the end of a 10-mile gravel road. Each citizen was given a knife, and told they could crawl on their hands and knees down the road, and then use the knife to cut a hole in the box, and retrieve their money.

Scott’s point is twofold. First, there is a lot of waste in crawling down the road. Second, taken in isolation, it looks like the plan at least offers people an option and so, in isolation, flex accounts and their ilk appear to benefit taxpayers. In the big picture, however, the total amount taken in taxes is somewhat fixed by politics and economics so if we got rid of the spending accounts, taxes would probably fall in other ways that are difficult to predict but nonetheless real.

Some want to crawl down the gravel road, fearing that if they abolish the program the government will not reduce their tax rates, instead the money in the box will be diverted to welfare for the poor, or higher salaries for teachers. I can’t deny that this might occur, but if we don’t even TRY to build a good country, how can we possibly succeed? Isn’t it better to try and fail, rather than not even try?

I agree with Scott. If I am going to be forced to pay taxes I’d like to hand over my cash standing like a man and not be given the option of crawling to recoup some bills the tax collector magnanimously throws on the floor.

In the final video in our Game of Theories mini-class, Tyler puts all the theories together to examine the great recession.

NZ Ministry of Health: People who donate a kidney or part of their liver can now do so knowing they can be fully compensated for lost earnings as a result of their donation surgery.

The Ministry of Health will be implementing compensation for live organ donors from 5 December. People who donate a live organ will be fully recompensed for lost earnings for up to 12 weeks while they recover. This will be paid weekly following the donation surgery. In the past donors received some assistance in the form of a benefit for this.

Former GMU student, Eric Crampton, now Senior Fellow at University of Canterbury had a role in the design.

Hat tip: Frank McCormick.

The NYTimes has an excellent piece on how difficult it is to build new housing in California, even in places where zoning allows such housing on paper. It includes this amazing anecdote:

Then there is Patterson + Sheridan, a national intellectual property law firm that has its headquarters in Houston and recently bought a private jet to ferry its Texas lawyers to Bay Area clients. The jet was cheaper than paying local lawyers, who expect to make enough to offset the Bay Area’s inflated housing costs.

And the gif below:

Read the whole thing.

Gif by Karl Russell | Source: BuildZoom

The Good Wife

by on November 30, 2017 at 11:22 am in History, Medicine | Permalink

Steffanie Strathdee, [is] the associate dean of global health science at the University of California, San Diego. In 2016, she helped revive her husband from a coma with a combination of phage therapy and antibiotics after he’d come back from Egypt with an untreatable bacterial infection, and she’s since become a kind of phage activist, helping others, like the Smiths, coordinate their own phage hunts.

That’s just a sidenote in an article on phages, viruses that kill bacteria. Seems like there’s a movie there.

Phages were long used in the Soviet Union to treat bacterial infections but are only now being studied in the West as bacteria evolve resistance to antibiotics.

Addendum: Dallas Weaver makes excellent points in the comments.

Game of Theories: The Austrians

by on November 29, 2017 at 7:25 am in Uncategorized | Permalink

Here is the fourth video in our Game of Theories mini-class: The Austrians.

Sex Offender Hysteria

by on November 28, 2017 at 2:19 pm in Law | Permalink

Illinois Public Radio has an astounding story on sex offenders who have completed their sentences but are still behind bars because they can’t find a place to live. How hard can it be to find a place to live? Sex offenders in Illinois cannot live close to:

  • Elementary and High Schools
  • Day Care Centers
  • Public Parks
  • Pools
  • Libraries
  • Malls

In addition, they can’t live in a house with a minor. One convicted offender could not return to his mother’s house because his sister was 17 (his conviction did not involve the sister). Sex offenders also cannot live in houses with devices that can access the internet including computers, smartphones and televisions.

Contrary to popular belief, sex offenders have low rates of recidivism relative to many other crimes. It’s almost impossible, however, to argue against a law that is supposed to protect the public from sex offenders. What kind of monster could argue against a law preventing a convicted sex offender from living near a day care center? And who would want a pervert at the mall? Add up every semi-reasonable law, however, and the result is unreasonable and unconscionable. Many people remain in prison for years after their sentences are complete because they cannot find a place to live that satisfies all of the restrictions. Madness.

A remarkable new paper on logical induction by Scott Garrabrant, Tsvi Benson-Tilsen, Andrew Critch, Nate Soares, and Jessica Taylor dramatically extends Ramsey’s Dutch book arguments in support of Bayesian epistemology and in so doing demonstrates deep connections between logical thinking and efficient markets. The research was supported by the Machine Intelligence Research Institute.

We present a computable algorithm that assigns probabilities to every logical statement in a given formal language, and refines those probabilities over time. For instance, if the language is Peano arithmetic, it assigns probabilities to all arithmetical statements, including claims about the twin prime conjecture, the outputs of long-running computations, and its own probabilities. We show that our algorithm, an instance of what we call a logical inductor, satisfies a number of intuitive desiderata, including: (1) it learns to predict patterns
of truth and falsehood in logical statements, often long before having the resources to evaluate the statements, so long as the patterns can be written down in polynomial time; (2) it learns to use appropriate statistical summaries to predict sequences of statements whose truth values appear pseudorandom; and (3) it learns to have accurate beliefs about its own current beliefs, in a manner that avoids the standard paradoxes of self-reference. For example, if a given computer program only ever produces outputs in a certain range, a logical inductor learns this fact in a timely manner; and if late digits in the decimal expansion of π are difficult to predict, then a logical inductor learns to assign ≈ 10% probability to “the nth digit of π is a 7” for large n. Logical inductors also learn to trust their future beliefs more than their current beliefs, and their beliefs are coherent in the limit (whenever φ → ψ, P∞(φ) ≤ P∞(ψ), and so on); and logical inductors strictly dominate the universal semimeasure in the limit.

These properties and many others all follow from a single logical induction criterion, which is motivated by a series of stock trading analogies. Roughly speaking, each logical sentence φ is associated with a stock that is worth $1 per share if φ is true and nothing otherwise, and we interpret the belief-state of a logically uncertain reasoner as a set of market prices, where Pn(φ) = 50% means that on day n, shares of φ may be bought or sold from the reasoner for 50¢. The logical induction criterion says (very roughly) that there should not be any polynomial-time computable trading strategy with finite risk tolerance that earns unbounded profits in that market over time. This criterion bears strong resemblance to the “no Dutch book” criteria that support both expected utility theory (von Neumann and Morgenstern 1944) and Bayesian probability theory (Ramsey 1931; de Finetti 1937).

The authors are quick to acknowledge that their algorithm holds only in the limit which makes it impractical to implement. Nevertheless, the first fully rational beings on the planet will surely be artificial intelligences.

Here’s the third chapter of our mini-series on business cycle theories: The Real Business Cycle.

Once a drug has been approved for some use it may be legally prescribed for any use. New uses for old drugs are discovered quite often so off-label uses can be very different from FDA approved uses. Mitomycin, for example, was approved to treat stomach and pancreatic cancer but is used off-label in laser-eye surgery. Drugs prescribed off-label have not been through FDA-approved efficacy trials for the off-label use. In Assessing the FDA via the Anomaly of Off-Label Drug Prescribing I pointed out that off-label prescribing, therefore, gives us a window onto a world with much less FDA regulation.

Since off-label prescribing is common and in rapidly progressing areas of medicine often the gold-standard, I argued that the behavior of physicians validated off-label prescribing and demonstrated that physicians were willing and able to draw upon non-FDA sources of information to make rational prescribing decisions. Dan Klein and I also showed that physicians are supportive of off-label prescribing saying, for example, that it would be “crazy” to require FDA approval for off-label uses.

The support of physicians for off-label prescribing is telling but not dispositive. Perhaps physicians make hubristic mistakes in prescribing off-label. A new paper by Ladanie et al. (including John Ioannidis) provides important information. The authors search the literature for all the RCTs when an off-label drug was pitted against an on-label drug. They conclude:

Our meta-epidemiological analysis of 25 different treatment indications for off-label drug use
provides no empirical evidence supporting any assumption of generally inferior treatment
effects associated with off-label use. On the contrary, the summary effect estimates across all
indications would even be compatible with more favorable effects, on average, of the off-label
treatment. However, the heterogeneity is substantial and the on-label comparators are not
necessarily the best approved treatment option in all 25 topics. While some off-label
treatments are clearly better, others are clearly not.

The finding is especially impressive because although off-label treatments are sometimes the gold standard they are also often used when standard treatments have failed. Thus, in an RCT, off-label treatments could be worse on average and yet still provide a very useful weapon in the medical armory.

One might argue that if off-label treatments are as good as FDA-approved treatments then the FDA should have higher standards. FDA required clinical trials, however, already cost hundreds of millions of dollars and years of effort, creating drug lag and drug loss. Rather than condemning the FDA, what these results indicate is that the medical system–physicians, hospitals, insurers, scientists–does a good job at evaluating new uses for old drugs. As Dan Klein and I noted in our precis on off-label prescribing:

The off-label experience testifies to the fact that much knowledge
about efficacy and safety is produced outside the FDA regulatory
apparatus. The Pharmacopoeia’s recognition of off-label
indications years ahead of the FDA demonstrates that physicians
and scientists have certified thousands of drug indications quite
independently of the FDA, even when those indications are not
very closely related to the original indications. In addition to the
Pharmacopoeia, there are several other forms of professional certification,
including the American Hospital Formulary Service Drug
Information, HMO formularies, and a wide
array of specialist professional periodicals
and information services. NIH studies,
clinical results and determinations
from other countries, and other professional,
science-based judgments are
examples of nongovernmental, non-mandatory

Hat tip: Michelle Dawson.

Your Next Government

by on November 20, 2017 at 7:23 am in Uncategorized | Permalink

Google is building a small city within Toronto:

Toronto has about 800 acres of waterfront property awaiting redevelopment, a huge and prime stretch of land that amounts to one of the best opportunities in North America to rethink at scale how housing, streets and infrastructure are built. On Tuesday the government and the group overseeing the land announced that they were partnering with an Alphabet subsidiary, Sidewalk Labs, to develop the site.

Not to be outdone, Bill Gates is thinking even bigger, a 25,000 acre site for a new city near Phoenix that might take advantage of Arizona’s forward thinking rules on self-driving cars.

All over the world, we can see the beginnings of a move from nation-states to smaller, more decentralized and agile communities such as common interest developments, special economic zones and proprietary cities. Your Next Govenment is Tom W. Bell’s primer on this coming revolution. If you want to find out the latest on the Honduran Zede or the Polynesian seasteading project, both of which Bell has been involved with, YNG is your first stop. Bell also covers the history of these movements from Henry Ford’s failed Brazilian city, Fordlandia, to the use of special economic zones and foreign trade zones in the United States.

For anyone starting such a community, Bell has up-to-date recommendations on the principles of governance including how to adopt an appropriate legal code.


Writing for the The Oxford Handbook of Classics in Contemporary Political Theory, political philosophers John Thrasher and Gerald Gaus review Buchanan and Tullock’s The Calculus of Consent:

Calculus advances new methods in an attempt to solve an old problem: the problem of
democratic justification. While democracy claims to be the “rule of the people” in any
actual democratic system we actually find the rule of some people over others. More
formally, the winning coalition in any election is able to impose its authority on the losers.
This is true however large the majority happens to be, and however small the minority is,
unless the vote is unanimous; and even then, there may be an excluded minority of those
who did not or could not vote. Yet at the heart of the democratic ideal is the principle that
all are inherently free and equal, with no natural authority to rule over one another. How
odd then to start from freedom and equality and end with majority coalitions imposing
their policies on minorities merely because they have the numbers to do so. Once we see
this oddity we are confronted with the question: how could the authority of democratic
assemblies over free and equal persons be justified? This is the problem of democratic
justification, a problem that animates Calculus.

…A feature of Calculus typically missed is its optimism. Public choice theory is commonly
characterized as anti-democratic, or as undermining faith in the democratic process
(Barry 1989; Christiano 1996, 2004). Rightly understood though, Calculus is an almost
giddy endorsement of democracy (of a specific form) in the face of what looked like dire
prospects for democratic theory.