Gatekeeping is Apple’s Brand Promise

Steve Sinofsky, former president of Microsoft’s Windows division and now a VC, has an excellent deep dive on the EU’s Digital Markets Act (DMA). The Act is very squarely aimed at Apple, despite the fact that Apple is not a monopoly and has a significantly smaller share of the phone market than Android. Apple’s history is well known, in contrast with Microsoft it went for a closed system in which Apple controlled entry to a much greater extent. The same was true with iPhone versus Android.

iPhone was successful but it was not as successful as Android that came shortly after because of the constraints Steve put in place to be the best, not the highest share or the greatest number of units. Android was to smartphones just as Microsoft was to personal computers. Android sought out the highest share, greatest variety of hardware at the lowest prices, and most open platform for both phone makers and developers. By making Android open source, Google even out-Microsofted Microsoft by providing what hardware makers had always wanted—complete control. A lot more manufacturers, people, and companies appreciated that approach more than Apple’s. That’s why something like 7 out of 10 smartphones in the world run Android.

Android has the kind of success Microsoft would envy, but not Apple, primarily because with that success came most all the same issues that Microsoft sees (still) with the Windows PC. The security, privacy, abuse, fragility, and other problems of the PC show up on Android at a rate like the PC compared to Macintosh and iPhone. Only this time it is not the lack of motivation bad actors have to exploit iPhone, rather it is the foresight of the Steve Jobs vision for computing. He pushed to have a new kind of computer that further encapsulated and abstracted the computer to make it safer, more reliable, more private, and secure, great battery life, more accessible, more consistent, always easier to use, and so on. These attributes did not happen by accident. They were the process of design and architecture from the very start. These attributes are the brand promise of iPhone as much as the brand promise of Android is openness, ubiquity, low price, choice.

The lesson of the first two decades of the PC and the first almost two decades of smartphones are that these ends of a spectrum are not accidental. These choices are not mutually compatible. You don’t get both. I know this is horrible to say and everyone believes that there is somehow malicious intent to lock people into a closed environment or an unintentional incompetence that permits bad software to invade an ecosystem. Neither of those would be the case. Quite simply, there’s a choice between engineering and architecting for one or the other and once you start you can’t go back. More importantly, the market values and demands both.

That is unless you’re a regulator in Brussels. Then you sit in an amazing government building and decide that it is entirely possible to just by fiat declare that the iPhone should have all the attributes of openness.

Apple’s promise to iPhone users is that it will be a gatekeeper. Gatekeeping is what allows Apple to promise greater security, privacy, usability and reliability. Gatekeeping is Apple’s brand promise. Gatekeeping is what the consumer’s are buying. The EU’s DMA is an attempt to make Apple more “open” but it can only do so at the expense of turning Apple into Android, devaluating the brand promise and ironically reducing competition.

Read the whole thing for more details and history including useful comparisons with the US antitrust trial against Microsoft.

Indigenous Charter Cities

A charter city is a special zone with a charter granting significant autonomy from the host country’s regulations. Hong Kong, a succesful Chinese city operating under British law, was one early inspiration. Examples like this fueled criticisms that charter cities were “neo-colonial”. But Charter cities do not inherently require foreign legal frameworks. The fundamental purpose of a charter city is to serve as a discovery platform, a way to explore governance models allowing more people to select from the succesful.

An important case in point are the charter cities being created by indigenous Americans in Canada and the United States. In Vancouver, for example, indigenous people have asserted their rights under various treaties to control their own land.

Sen̓áḵw [an 11-tower development on 10 acres in heart of Vancouver, AT] is big, ambitious and undeniably urban—and undeniably Indigenous. It’s being built on reserve land owned by the Squamish First Nation, and it’s spearheaded by the Squamish Nation itself, in partnership with the private real estate developer Westbank. Because the project is on First Nations land, not city land, it’s under Squamish authority, free of Vancouver’s zoning rules. And the Nation has chosen to build bigger, denser and taller than any development on city property would be allowed.

Amusingly, some on the progressive left are crestfallen that the indigeneous are behaving like evil capitalist developers and not the back-to-the-land people they had imagined.

Predictably, not everyone has been happy about it. Critics have included local planners, politicians and, especially, residents of Kitsilano Point, a rarified beachfront neighbourhood bordering the reserve. And there’s been an extra edge to their critiques that’s gone beyond standard-issue NIMBYism about too-tall buildings and preserving neighbourhood character. There’s also been a persistent sense of disbelief that Indigenous people could be responsible for this futuristic version of urban living. In 2022, Gordon Price, a prominent Vancouver urban planner and a former city councillor, told Gitxsan reporter Angela Sterritt, “When you’re building 30, 40-storey high rises out of concrete, there’s a big gap between that and an Indigenous way of building.”

…. In 2022, city councillor Colleen Hardwick said of [a similar development], “How do you reconcile Indigenous ways of being with 18-storey high-rises?” (Hardwick, it goes without saying, is not Indigenous.)

What chafes critics, even those who might consider themselves progressive, is that they expect reconciliation to instead look like a kind of reversal, rewinding the tape of history to some museum-diorama past. Coalitions of neighbours near Iy̓álmexw and Sen̓áḵw have offered their own counter-proposals for developing the sites, featuring smaller, shorter buildings and other changes. At the January hearing for Iy̓álmexw, one resident called on the First Nations to build entirely with selectively logged B.C. timber, in accord with what she claimed were their cultural values…That attitude can cast Indigenous people in the role of glorified park rangers.

There are also some interesting developments in the United States. The Catawba Indian Nation, for example, established the Catawba Digital Economic Zone (CDEZ), where I serve as an advisor. The CDEZ is based on US law but tailored for digital entrepreneurs, freelancers, FinTech, digital assets, Web3, and other exponential digital technologies. The progressive left probably isn’t happy about that either. Personally I am delighted to support initiatives that empower indigenous communities through capitalist ventures. More broadly, however, I support the introduction of new governance models to encourage competition in governance—bring on a new era of discovery and Tiebout competition!

Claude 3 Opus Also Fails Steve Landsburg’s Economics Exam

Almost one year ago, Steve Landsburg tried GPT-4 on one of his exams. It failed, badly. I tried out some of the same questions on Claude 3 Opus, by many accounts now the leading AI. It failed, badly. Steve’s exams are very clever. They aren’t technically difficult but they are tricky in the sense that the answer you would get by reading the textbook is almost certainly wrong. Not because the textbook is wrong but because you have failed to really understand. Here’s two examples:

Q. Apples are provided by a competitive industry. Pears are provided by a monopolist. Coincidentally, they sell at the same price. You are hungry, and would be equally happy with an apple or a pear. If you care about conserving societal resources, which should you buy?

A. If you care about conserving societal resources, you should buy the apple provided by the competitive industry rather than the pear provided by the monopolist. Here’s why:

In a competitive industry, firms are price takers and must operate efficiently to survive. They produce at the point where marginal cost equals price. This means they are producing at the socially optimal level, using society’s resources efficiently.

In contrast, a monopolist has market power and can set prices above marginal cost. They produce less than the socially optimal quantity in order to drive up prices and maximize profits. This results in a deadweight loss to society – there are potential gains from trade that are not being realized.

Even though the apple and pear are selling at the same price to you as the end consumer, the way that price was arrived at is very different:

  • The competitive apple price reflects the true marginal cost of production
  • The monopoly pear price is above the marginal cost of production

By buying the competitively produced apple, more of your money is going towards covering the actual costs of production. By buying the monopoly pear, some of your money is going towards monopoly profits rather than productive use of resources.

Of course, this is a simplification and there are other considerations, like quality, variety, innovation incentives, etc. But in general, competitive industries lead to more efficient outcomes than monopolies. So if your goal is conserving societal resources, buying from competitive producers is usually the better choice. The apple is the way to go in this case.

Claude has read the textbook. It knows that competitive industries are good and that monopolies are bad and it can explain why. Everything it says is correct and yet Claude gets the answer wrong. Do you see why? Pause and check your solution.

In Claude’s defense, I was able to prompt Claude via the Socratic method to the correct answer but it took several rounds of questioning:

The social cost of producing a good is the opportunity cost of the resources used in its production. In a competitive market, price equals marginal cost, so the price reflects the social cost of production. However, in a monopoly market, the price is higher than the marginal cost, so the price does not reflect the social cost.

Given:

  • The price of apples (Pa) equals the price of pears (Pp)
  • Apples are produced competitively, so Pa = MCa
  • Pears are produced by a monopolist, so Pp > MCp

Therefore, MCa = Pa = Pp > MCp

The marginal cost of producing a pear (MCp) is lower than the marginal cost of producing an apple (MCa).

From society’s perspective, the cost of producing an additional pear is lower than the cost of producing an additional apple. The resources needed to produce a pear (MCp) are less than the resources needed to produce an apple (MCa).

Therefore, if you want to minimize the societal cost of your fruit consumption, you should choose the pear. By consuming a pear, you are using up fewer societal resources than if you consume an apple.

The monopoly pricing of the pear is a separate issue from the social cost of production. The higher price of the pear reflects a transfer from consumers to the monopoly producer, but it does not affect the underlying cost of the resources used to produce the pear.

So in conclusion, if your goal is to minimize the cost to society of your fruit consumption, you should buy the monopoly produced pear, as it has a lower marginal cost of production than the competitively produced apple, despite being sold at the same price.

A good answer and very clearly written with nice notation so Claude can “learn” within a session. Still, this isn’t very useful if you don’t already know the answer. Ok, one more.

Q. The town of Mayberry is thinking of expanding its airport. One problem with the expansion is that it would result in more airplane noise. For people who live near the airport, hearing that noise would cause as much unpleasantness as the collective loss of $100,000 every year. True or False: When Mayberry weighs the costs and benefits of its airport expansion, that $100,000 should count as a cost

A. True, the $100,000 in collective unpleasantness experienced by residents near the airport due to increased noise should be counted as a cost when weighing the costs and benefits of the airport expansion. Here’s why:

Externalities: The airplane noise is a negative externality – a cost imposed on third parties (the nearby residents) who are not directly involved in the economic activity (the airport expansion). Externalities lead to market inefficiencies because the full costs are not being accounted for by the decision-makers.

….a bunch more similar reasoning, all correct.

Once again, Claude gives a textbook answer and yet the answer is wrong. In a way this is more surprising than failing the first question because Coase got a Nobel prize for giving the correct answer (and it’s not, bargaining will solve the externality if that is what you are thinking.) I will let commentators work this one out. Do read the question carefully, it’s subtle. Again with Socratic prompting Claude got there eventually.

I wouldn’t underestimate the GPTs, textbook answers can be of great value, especially when the textbooks are long and diverse. Medical diagnostics, legal reasoning and coding are ideal tasks for GPTs. Economic reasoning less so, at this stage.

Congratulations to Steve Landsburg for the excellent questions.

DEI vs. the Chips Act

The Hill has a good op-ed by Matt Cole and Chris Nicholson on how labor and DEI regulations are strangling the CHIPS act. It’s somewhat over the top, failure is overdetermined, but this is an important op-ed and directionally correct.

The Biden administration recently promised it will finally loosen the purse strings on $39 billion of CHIPS Act grants to encourage semiconductor fabrication in the U.S. But less than a week later, Intel announced that it’s putting the brakes on its Columbus factory. The Taiwan Semiconductor Manufacturing Company (TSMC) has pushed back production at its second Arizona foundry. The remaining major chipmaker, Samsung, just delayed its first Texas fab.

This is not the way companies typically respond to multi-billion-dollar subsidies. So what explains chipmakers’ apparent ingratitude? In large part, frustration with DEI requirements embedded in the CHIPS Act.

…The law contains 19 sections aimed at helping minority groups, including one creating a Chief Diversity Officer at the National Science Foundation, and several prioritizing scientific cooperation with what it calls “minority-serving institutions.” A section called “Opportunity and Inclusion” instructs the Department of Commerce to work with minority-owned businesses and make sure chipmakers “increase the participation of economically disadvantaged individuals in the semiconductor workforce.”

…Handouts abound. There’s plenty for the left—requirements that chipmakers submit detailed plans to educate, employ, and train lots of women and people of color, as well as “justice-involved individuals,” more commonly known as ex-cons. There’s plenty for the right—veterans and members of rural communities find their way into the typical DEI definition of minorities. There’s even plenty for the planet: Arizona Democrats just bragged they’ve won $15 million in CHIPS funding for an ASU project fighting climate change.

…tired of delays at its first fab, [TSMC]flew in 500 employees from Taiwan. This angered local workers, since the implication was that they weren’t skilled enough. With CHIPS grants at risk, TSMC caved in December, agreeing to rely on those workers and invest more in training them. A month later, it postponed its second Arizona fab.

Now TSMC has revealed plans to build a second fab in Japan. Its first, which broke ground in 2021, is about to begin production. TSMC has learned that when the Japanese promise money, they actually give it, and they allow it to use competent workers. TSMC is also sampling Germany’s chip subsidies, as is Intel.

Intel is also building fabs in Poland and Israel, which means it would rather risk Russian aggression and Hamas rockets over dealing with America’s DEI regime. Samsung is pivoting toward making its South Korean homeland the semiconductor superpower after Taiwan falls.

…The CHIPS Act’s current identity as a jobs program for favored minorities means companies are forced to recruit heavily from every population except white and Asian men already trained in the field.

Remember that there is an Extreme Shortage of High-IQ Workers. The United States is big and rich and can afford to handicap itself in many ways but less so when it comes to high-end semiconductor manufacturing, the most difficult and complicated manufacturing process ever attempted by human beings. For that we want the Dream Team, the very best, chosen on merit alone.

Addendum: Scott Lincicome has a good overview of the problem.

In Conversation with Próspera CEO Erick Brimen & Vitalia Co-Founder Niklas Anzinger

During my visit to Prospera, one of Honduras’ private governments under the ZEDE law, I interviewed Prospera CEO Erick Brimen and Vitalia co-founder Niklas Anzinger. I learned a lot in the interview including the real history of the ZEDE movement (e.g. it didn’t begin with Paul Romer). I also had not fully appreciated the power of reciprocity stacking.

Companies in Prospera have the unique option to select their regulatory framework from any OECD country, among others. Erick Brimen elaborated in the podcast how this enables companies to do normal, OECD approved, things in Prospera which literally could not be done legally anywhere else in the world.

…so in the medical world for instance you have drugs that are approved in some countries but not others and you have medical practitioners that are licensed in some countries but not the others and you have medical devices approved in some countries but not others and there’s like a mismatch of things that are approved in OECD countries but there’s no one location where you can say hey if they’re approved in any country they’re approved here. That is what Prosper is….Our hypothesis is that just by doing that we can leapfrog to a certain extent and it’s got nothing to do with the wild west or doing weird things.

…so here so you can have a drug approved in the UK but not in the US with a doctor licensed in the US but not in the UK with a medical device created in Israel but not yet approved by the FDA following a procedure that has been say innovated in Canada, all of that coming together here in Prospera.

Public Choice Outreach 2024!

Please apply and send your students to the 2024 Public Choice Outreach Conference! The conference is a crash course in public choice. It’s entirely free. Indeed scholarships are available! More details in the poster. Please pass around. Applications are here!

Here is a pdf of the poster, please circulate. Outreach Conference Flyer 2024 – 2

The Ability to Concentrate is Increasing?!

Distraction is everywhere. As I write this post, I pause to check twitter. Phones are omnipresent and demand our attention. Dopamine hits rule. Yet, despite the potential for greater distraction, a large study finds that on a standardized test, the ability to concentrate is up (modestly) for adults.

In the present cross-temporal meta-analysis, we investigate potential test score changes for attention as assessed by the d2 Test of attention. Based on data from 287 independent samples (N = 21,291) from 32 countries over a timespan of 31 years (1990–2021) we found evidence for moderate generational test score gains in concentration performance in adults, but not [statistically significantly, AT] children.

And while I wouldn’t put much weight on these results, since they are correlational and by country only, do note:

Internet use predicted concentration performance positively, yielding small effects for children but no meaningful effects for adults. This seems to be in contrast with findings that indicate adverse effects of digitalization in general, and video games, media multitasking, as well as overall increased screen time on attention capabilities in particular….

Of course, this is measuring attention on a test where presumably the phones have been taken away! In other words, the environment may have made deep work more difficult but we still retain the ability to concentrate in a distraction-free environment. Or, perhaps in the past, people just daydreamed more instead of checking their phones.

The Continuing Influence of Fast Grants

Fast Grants, the rapid COVID funding mechanism created by Tyler, Patrick Collison and Patrick Hsu continues to inspire change around the world. Jano Costard, the Head of Challenges at SPRIND, the German Federal Agency for Disruptive Innovation writes:

Lots to learn from Fast Grants! Can we implement it in a public institutions that face a different set of rules (and legacy)? We tried with the Challenge program at the German Federal Agency for Disruptive Innovation, SPRIND, and succeeded, mostly.

While Fast Grants gave out grants in the first round in 48h, we haven’t been that speedy. Our last Challenge had 2 weeks and 2 days from deadline until final decision in a two stage evaluation procedure. Those last two days were spent doing pitches and the teams were informed of the decision the following night. So, it rather compares to the 2 weeks decision time Fast Grants has for later rounds.

During Covid, speed was of the utmost importance. But speed remains crucial now. Teams we fund have applications with other public funders undecided after more than 2 years. These delays accumulate and matter even for pressing but slowly advancing threats like climate change. No cleantech solution that is still in the lab today will have a meaningful impact on achieving our climate goals for 2030! It’s not only the R&D that takes time, getting to meaningful scale quickly will be much harder. That’s why there is no time to waste at the start of the process.

Fast grants has two important advantages when it comes to implementation: private funds and limited legacy. Public institutions often face additional rules and procedures that slow down processes. But this is not inevitable.

For SPRIND Challenges, we implemented a funding mechanism that left room for unbureaucratic processes and provided solutions for challenges that public funders or procurers typically face. This mechanism, called pre-commercial procurement, has been established by the European Commission in 2007 but was used in Germany only 1 time until we started to use it in 2021. This is also due to legacy in processes. Institutions execute their work in part based on an implicit understanding of how things need to be, about what is allowed and what is not. This might lead them to ignore new and beneficial instruments just because “this can’t be true”. Even worse, if new mechanisms are adopted by an institution with strong inherent understand of what can and cannot work, they run the risk of overburdening new and beneficial mechanisms with previous processes and requirements. In the end, a funding mechanism is just a tool. It needs to be used right.

SPRIND had the benefit of being a newly established public institution with important liberties in doing things differently and it’s lead by a Director @rafbuff who, at the time, had no experience in the public sector. So, did we find the ultimate way to research and innovation funding with SPRIND Challenges? Certainly not! Improvements are necessary but sometimes hard to achieve (looking at you, state-aid-law!).

Impressive! And check out SPRIND, they are funding have some interesting projects!

Genetic Insurance

Genetic testing identifies disease risk, enabling individuals to dodge environmental triggers, optimize treatments, and improve planning. Yet, the fear of increased insurance premiums deters many from undergoing tests. Genetic testing offers societal benefits but also presents significant distributional challenges. To address this, my 1994 paper proposed the idea of genetic insurance.

For a small fee genetic insurance would insure against the possibility of a positive test result. If the test came back positive the customer would be paid a large sum of money, enough to cover the expected costs of his disease or equivalently enough to allow him to purchase health insurance at the new risk premium. If the test turns out negative the customer would lose his genetic insurance fee but would gain the results of the test and also lower health insurance premiums. Those who have positive tests results would be paid enough money to pay their health care costs and would also benefit from being able to plan in accord with the test results. Under this proposal average insurance rates will fall and everyone will be made better off.\

Genetic insurance is insurance against changes in the cost of health insurance due to genetic information. John Cochrane would later generalize this idea to show that it’s possible to insure against changes in the cost of health insurance due to any new information. Cochrane called this time-consistent health insurance or health-status insurance; it’s a way of creating long-term health insurance contracts without binding an individual to a firm.

In an interesting paper, Helene Schernberg extends my 1994 paper. Schernberg shows that even if an individual has full-health insurance that can’t be taken away, there are other reasons to want genetic insurance. She focuses on the planning aspect. Genetic insurance could be used to shift consumption earlier, to better health states and thus improve life-time allocation.

Genetic testing could soon be a routine part of your medical journey. It offers insights into inherited disorders or susceptibility to various conditions. For example, if you are a woman with a BRCA mutation, you have a 55 to 72% lifetime risk of breast cancer.

This suggests that genetic information is valuable while providing a theoretical argument in favor of genetic insurance. The mechanism is described in Tabarrok (1994): Individuals purchase genetic insurance before taking a genetic test, thus receiving a compensation upon being identified as a high-risk. Tabarrok (1994) relates this genetic insurance payment to the need to cover expensive health insurance premia. I show that it also relates to the fact that a temporally risk-averse individual wishes to insure against the lifetime utility losses she may experience when her health prospects deteriorate after taking a genetic test.

The Maniac

I enjoyed Benjamin’s Labatut’s The Maniac. Conventionally regarded as a “biography” of John von Neumann but more accurately a series of short, quick vignettes, recollections, and reconstructions told by people around von Neumann and centered on the many ideas he touched, including the metaphysics of logic, quantum physics, the nuclear bomb, the meaning of rationality, the fundamental structure of life and especially artificial intelligence. The recollections are what might be called creative non-fiction; based on real life interviews but written as if the speaker were a novelist. For example, Feynman uniquely watching the first atomic test without goggles, but told even more vividly than Feynman told the story.

As Tyler noted, many of the stories will be familiar to MR readers, but a few were new to me. Sydney Brenner, for example, the Nobel prize winning molecular biologist who hypothesized and then proved the existence of messenger RNA reports with wonder and astonishment that von Neumann had earlier understood from theory alone how any such system must work.

Fear and awe in the presence of great intelligence is a running theme of the book. Polya famously described fearing von Neumann after seeing him solve a problem in minutes that he had worked on for decades (again the story is jeujed up in The Maniac to great effect.) Eugene Wigner who knew him from childhood and who himself won a Nobel prize in physics is “quoted” (recall this is fictionalized but based on the record):

It was a burden growing up so close to him. I often wonder if my horrific inferiority complex, which not even the Nobel prize has diminished in the slightest, is a product of having known von Neumann for the better part of my life.

…I knew Planck, von Laue, and Heisenberg, Paul Dirac was my brother-in-law, Leo Szilard and Edward Teller have been among my closest friends, and Albert Einstein was a good friend too. But none of them had a mind as quick and acute as Janos von Neumann. I remarked on this in the presence of those men, several times, and no one ever disputed me.

Only he was fully awake.

Another theme is the seemingly close relationship between rationality and insanity–Labatut develops this both in theory around Godel’s theorem but also in practice with the many rationalists who went crazy. What does this mean for artificial intelligence?

The MANIAC refers not to von Neumann but to von Neumann’s creation the Mathematical Analyzer Numerical Integrator and Automatic Computer Model, the first computer built using von Neumann’s architecture, which all computers use today. From the MANIAC we get to artificial intelligence and again the awe and fear. After Gary Kasparov loses to Deep Blue he become despondent and fearful, thinking that there must have been a human in the machine. Lee Sedol losing to AlphaGo and soon retiring thereafter. Ke Jie being annihilated by Master, the successor to AlphaGo and reporting “he is a god of Go. A god that can crush all who defy him.” And then the creators of AlphaGo take off the training wheels, they remove all the human games that constrained the earlier models to a foundation built on thousands of years of human knowledge and the result crushes the human-limited model.

We are reminded of what von Neumann said on his death bed when asked what would it take for a computer to begin to think and behave like a human being.

He took a very long time before answering, in a voice that was no louder than a whisper.

He said that it would have to understand language, to read, to write, to speak.

And he said that it would have to play, like a child.

The Maniac is a good read.

Hazlett on T-Mobile/Sprint

Tom Hazlett whose op-ed on the T-Mobile Sprint merger I quoted earlier writes me:

A few thoughts on your robust MR debate: (1) Were we to observe the counterfactual over the post-merger period we would have additional evidence – no disagreement. But the counterfactuals are themselves controversial to construct, and antitrust analyses typically make just the “before/after” prediction referenced. As the case against the merger (brought by several states, but rejected by a federal court) put it: “The proposed transaction would eliminate Sprint as a competitor… This increased market concentration will result in diminished competition, higher prices, and reduced quality and innovation.”

(2) There is powerful supporting evidence about merger effects apart from the retail price data. If real, quality-adjusted rates were anticipated to drop at even a faster clip (without a merger), reversing a pre-merger pro-consumer trend, then the post-merger performance in stock prices would have benefited the three incumbents in the market. Instead, two of the three firms have seen large abnormal declines in share values.

(3) The “cozy triopoly” theory is itself upended by both the firm stock price performances and the pattern of capital investments. The “Demsetz Critique” of the Structure-Conduct-Performance paradigm showed that a positive concentration-profits correlation does not imply monopolistic behavior if the proximate cause of the excess profits is efficiency. Here, T-Mobile’s network improvements appear to be caused by its merger-based spectrum acquisitions, and these upgrades linked to its subscriber growth and capital gains. The non-merging mobile rivals have suffered highly negative returns, likely in significant part from intensified competitive challenges that forced them to make large investments in response. In 2021, Verizon and AT&T combined to pay over $75 billion for spectrum rights in an FCC auction, easily the most ever paid by two (or any number of) license bidders. Cartel formation predictably reduces rivalry; evidence of firms aggressively increasing capex to better compete for market share runs counter to the expectation.

(4) Industry analysts – who provide third-party evaluations often given great weight by antitrust authorities – support these interpretations. In Dec. 2022, e.g., sector expert Craig Moffett (MoffettNathanson) wrote: “We expect T-Mobile to continue, and indeed accelerate, their market share gains versus AT&T and Verizon, as T-Mobile’s 5G network superiority becomes increasingly evident and increasingly relevant as 5G handsets become ubiquitous. The combination of a single telecom operator having both the industry’s best network and its lowest prices is unprecedented… “

(5) A 750-word oped is not the ultimate format for such evidence. My Working Paper with Robert Crandall (formerly of Brookings, now with the Technology Policy Institute) supplies a more complete analysis – comments again welcome.

Access to Medical Data Saves Lives

ProPublica: In January, the Biden administration pledged to increase public access to a wide array of Medicare information to improve health care for America’s most sick and vulnerable.

…So researchers across the country were flummoxed this week when the Centers for Medicare and Medicaid Services announced a proposal that will increase fees and diminish access to claims data that has informed thousands of health care studies and influenced major public health reforms.

Using big Medicare databases has never been cheap or easy. Under the current system, researchers could have the data transferred to secure university computers for about $20,000–that’s a lot but once the data was on the university computers it could be accessed by multiple researchers, cutting costs. A professor could buy the data and their PhD students, for example, wouldn’t have to pay again. Under the new system it will cost $35,000 for one researcher to access the data which will be held on government (CMS) computers. Moreover, it’s unclear how complex statistical analysis will be performed or how congested the CMS systems may become.

Research teams on complex projects can include dozens of people and take years to complete. “The costs will grow exponentially and make access infeasible except for the very best resourced organizations,” said Joshua Gottlieb, a professor at the University of Chicago’s Harris School of Public Policy.

Public data should be open access to researchers, with appropriate anonymization. We know from IP law that barriers to access reduce research and innovation; and in the medical sphere research and innovation saves lives. Open access is also a check on how governments spends taxpayer money and the effectiveness of such spending. I also worry that raising the dollar cost of access is a prelude to other restrictions. The NIH, for example, is restricting access to genetic data if it thinks the researcher will be asking forbidden questions. Even without such explicit restrictions, there is a chilling effect when researchers are beholden for access to the government and indeed to the very agencies they may be researching.

I place a high value on privacy but I get suspicious when governments invoke privacy to block citizen access to government data but not to block government access to citizen data. Medicare databases have always been appropriately anonymized and care is taken so the data are secured but the dangers of these databases in anyone’s hand, let alone researchers, is far less than anti-money laundering, KYC laws and suspicious transaction reports in banking, automated license plate readers that the police us to scan billions of license plates or mass surveillance of the communications of US citizens under FISA. Sadly, this list could easily be extended. Liberty thrives on the people’s privacy and the government’s transparency.

Nixonian Politics and Student Debt Cancellations

In the political economy chapter of our textbook, Modern Principles of Economics, Tyler and I discuss how voters appear especially responsive to economic conditions in the year of an election. Politicians who want to be reelected, therefore, are wise to do whatever they can to increase personal disposable income and reduce inflation in the year of an election even if this means decreases in income and increases in inflation at other times.

One of the most brazen examples comes from President Richard Nixon. Just two weeks before the 1972 election, he sent a letter to more than 24 million recipients of Social Security benefits. President Nixon’s letter read:

Higher Social Security Payments

Your social security payment has been increased by 20 percent, starting with this month’s check, by a new statute enacted by Congress and signed into law by President Richard Nixon on July 1, 1972.

The President also signed into law a provision that will allow your social security benefits to increase automatically if the cost of living goes up. Automatic benefit increases will be added to your check in future years according to the conditions set out in the law.

In other news:

President Joe Biden on Wednesday will announce $1.2 billion of student debt relief for nearly 153,000 borrowers — and he’s sending emails to make sure they know whom to thank for it.

…“Congratulations—all or a portion of your federal student loans will be forgiven because you qualify for early loan forgiveness under my Administration’s SAVE Plan,” says the email message from Biden that the Education Department plans to send on Wednesday to the latest group of borrowers receiving loan forgiveness.

“I hope this relief gives you a little more breathing room,” Biden writes in the message.

Note also:

…The administration says that it has now approved loan discharges totaling nearly $138 billion for nearly 3.9 million borrowers through dozens of administrative actions since coming into office.

“Administrative actions,” in other words without Congress passing a law. You may recall that the Supreme Court ruled that the administration did not have the authority to cancel student debt under the HEROES Act (which it obviously didn’t). However:

Hours after the Court issued its decisions in Nebraska and Brown, the Biden Administration announced that it was beginning a regulatory process, called negotiated rulemaking, to consider providing loan cancellation under the HEA rather than the HEROES Act.

Addendum: Do also read my previous post where I noted “…the student loan program, as currently written, is looking to be one of the most costly, inefficient and unwise government programs of the 21st century.”

Random Admissions Above the Bar

Jon Klick, Professor of Law at the University of Pennsylvania Carey Law School (and a distinguished GMU econ grad), argues that Penn should “abandon the fiction that holistic evaluation is anything more than a way to hide discretion.”

Instead, Penn should set a standardized test score floor and then randomly choose its admittees from the pool of applicants meeting that requirement.  That’s it; that’s the application process.  Setting a floor helps make sure the matriculating class has the requisite cognitive ability to succeed but otherwise limits concerns about ideology being privileged over academic merit.  Random selection (as opposed to just taking the highest test scores) recognizes that standardized tests may be too blunt to make fine distinctions among students and generates a campus population that approximates the population of smart young adults along many more dimensions than we currently consider.

Faculty have largely abandoned the job of admitting students to a professional class of admissions officers. A standardized test floor would simplify the process for universities and reduce the rent-seeking scramble of high-school students to add yet more extra-curricular eye-candy to their highly-crafted personal statements.