India Fact of the Day

by on February 8, 2017 at 7:36 am in Economics, Law, Travels | Permalink

In India it is illegal for the police to arrest a woman after dark. The law apparently stems from a case decades ago when a woman was arrested at night and raped by the police. The law doesn’t seem like the second-best way to prevent police rapes let alone the best way. But what should an enlightened court do? Rape is already illegal. The courts create law but the law doesn’t rule. Thus, instead of obliging the police to control themselves the law gives women the grounds to refuse arrest. Imperfect but perhaps easier to monitor.  In India the state is so weak that third and fourth best solutions may be the only ones possible.

A few days ago Conor Sen tweeted:

It’s close right now, but today might be the lowest close for the VIX since February, 2007.

Here is the broader chart.  How can that be?  Not to mention a high Dow.

The consensus view is that the first two weeks for Trump have been an extreme disaster.  But is that true?  Protest has been robust, and so far checks and balances seem to be working.

He issued a bunch of executive orders that mostly cannot be carried through.  He still hasn’t filled most of the second-tier positions of import, and for the State Department he fired/induced to quit a whole bunch of senior figures.  That militates in favor of not much getting done.  Obamacare abolition and tax reform are being postponed until next year it seems, for better or worse.  The Wall is stupid but won’t matter much and may not even happen, given environmental review, Native American rights, and the preferences of Texas Republicans.

Trump also trampled on just about every sacred icon held by those who inhabit my Twitter feed, most of all by having Bannon insult the press by telling them to shut up for a while, and the steady stream of absurdities continues.  Yet the underlying story (NYT) seems to be about six guys in the White House who don’t know how to use the levers and pulleys of the Executive Branch.

Or consider the assessment of E. Richards:

As of now, however, events since January 20 support the conclusion that Donald Trump is not very sincere about actual, rather than verbal chaos and that his administration will mostly defend the world order status quo.

As for beating up on the marmite crowd, is there a better form of training wheels?

People, I do not favor this kind of experiment with governance or with rhetoric.  And the market is by no means always a correct forecast.  But right now it is worried less than many of you are.  I do understand that America is consuming some of its political and reputational capital.  Yet so far the best prediction is that the relatively manageable scenarios are coming to pass.

Addendum: Just think what kind of embedded embarrassment this is for the Democrats.  Whether you agree with Democratic economic policy or not, and whether you agree with the markets or not, the Democrats in effect cannot convince the markets that their presidential rule is better for capital values than is the…scenario of Trump.  The more stupidities you see, and the more you criticize him, the more painful that ouch should become.

Britain has changed since 1998.

Back then, it only took workers about three years to save enough money for a down-payment on a house. Now it takes 20 years, on average, according to the Resolution Foundation, which published a landmark report on income, housing, and inequality in Britain last week.

Here is further information, via the excellent Samir Varma.

A very good sentence

by on February 6, 2017 at 7:59 am in Current Affairs, Law, Travel | Permalink

“Unless the goal is to have an outright travel ban forever, and we should take the president at his word that that’s not the goal, then let’s just have calmer heads prevail and conduct the security analysis that was going to be conducted during these 90 days.”

Here is the WaPo article, citing Leon Fresco, the deputy assistant attorney general for the Office of Immigration Litigation in Obama’s Justice Department.

There is a new paper on this topic, by Gigi Moreno, Emma van Eijndhoven, Jennifer Benner, and Jeffrey Sullivan.  The upshot is to beware price controls:

Price controls for prescription drugs are once again at the forefront of policy discussions in the United States. Much of the focus has been on the potential short-term savings – in terms of lower spending – although evidence suggests price controls can dampen innovation and adversely affect long-term population health. This paper applies the Health Economics Medical Innovation Simulation, a microsimulation of older Americans, to estimate the long-term impacts of government price setting in Medicare Part D, using pricing in the Federal Veterans Health Administration program as a proxy. We find that VA-style pricing policies would save between $0.1 trillion and $0.3 trillion (US$2015) in lifetime drug spending for people born in 1949–2005. However, such savings come with social costs. After accounting for innovation spillovers, we find that price setting in Part D reduces the number of new drug introductions by as much as 25% relative to the status quo. As a result, life expectancy for the cohort born in 1991–1995 is reduced by almost 2 years relative to the status quo. Overall, we find that price controls would reduce lifetime welfare by $5.7 to $13.3 trillion (US$2015) for the US population born in 1949–2005.

I would insist that we do not have good enough models of the innovation process to really understand the price elasticity of supply.  Nonetheless it is surely not zero, and under plausible assumptions the price controls are a bad idea.

We need a new rooftop chant: “Beware analyses that neglect supply elasticities,” to sweet cadences of course.  They should play that on AM radio as well.

For the pointer I thank the still excellent Kevin Lewis.

That is one of the news stories of the end of this week, namely that the Trump administration eliminated a previous Obama administration ruling on this, see Brad Plumer for details.  That sounds horrible, doesn’t it?

I took a look at the cost-benefit study (pointed out on Twitter by Claudia Sahm, or try this link, and please note it was prepared by consultants, not by the government itself).  I spent some time with these hundreds of pages, and they are not always easy to parse (my apologies to the authors for any misunderstandings).  Anyway, I quickly came upon this and related passages (p.45, passim):

In summary, the Final Rule is expected to reduce employment by 124 jobs on average each year due to decreased coal mined while an additional 280 jobs will be created from increased compliance activity on average each year.

Of course those “newly created jobs” are a cost, not a benefit, and should be switched to the other side of the ledger.  That is not what this study did.  And if I understand p.4-31 correctly, this study is using a multiplier of about 2.  This approach is completely wrong, and if it were right Appalachia would love a lot of this coal regulation for its job-creating proclivities, but of course the region doesn’t.

The claimed annual benefit from the changes, from the side of coal demand (not the only effects), is $78 million, fairly small potatoes.  Note the study doesn’t consider what are commonly the most significant costs of regulation, namely distracting the attention of managers and turning companies into legal and regulatory cultures rather than entrepreneurial cultures.  The study does mention uncertainty costs from regulation, although I could not find any quantification of them.

Furthermore, I am not able to scrutinize the introductory section “SUMMARY OF BENEFITS AND COSTS OF THE STREAM PROTECTION RULE” and figure out the final assessment of net benefits for the rule and where that assessment might come from.  I find that worrisome, and paging through the study did not put my mind at ease in this regard.

Now, I know how this works.  Many of you probably are thinking that we need to do whatever is possible to attack or shrink the coal industry, because of climate change.  Maybe so!  Maybe we want to stultify the coal companies, for reason of a greater global benefit.  But a) there is still a role for evaluating individual policy changes by partial equilibrium methods and reporting on those results accurately, and b) “putting down the coal companies,” as you might a budgie, is not what the law says is the proper goal of policy.

Imagine holding an attitude that places the Trump administration as the actual defenders of the rule of law!  Besides, don’t get too worked up (p.174):

Our analysis indicates that there will be no increase in stranded reserves under any of the Alternatives.

There is, however, a very small decline in annual coal production (pp.5-20, 5-21) from the rule that had been chosen.  Water quality is improved in 262 miles of streams (7-26), in case you are wondering, that’s something but hardly a major impact and that almost entirely in underpopulated parts of the country.  All the media coverage I’ve seen implies or openly states a badly exaggerated sense of total water impact, relative to this actual estimate (are you surprised?).  Returning to the study, there is also no region-specific estimate of how large (or small) those water benefits might be, at least not that I could find (again, maybe I missed it, but I did find some language suggesting that no such estimate would be provided).

Chapter seven calculates the benefits of the resulting carbon emissions, but after reading that section my best estimate for those marginal benefits is zero, not the postulated $110 million.  The “social cost of carbon” is actually an average magnitude, and it does not measure benefits from very small changes.  Again, you might think there is an imperative to consider “this policy is conjunction with numerous other anti-coal changes,” but that is not what the law stipulates as I understand it and furthermore it hardly seems that many other anti-coal regulatory changes are on the way.

If it were up to me, I would not have overturned the coal/stream regulations, and my personal inclination is indeed to fight a war on coal.  But if you look at the grounds for evaluation specified by law, and examine the cost-benefit study with even a slightly critical mindset, we don’t know what is the right answer on this individual policy decision.  The study outlines nine different regulatory alternatives and it is not able to conclude which is best, nor is the quantitative thrust of the study aimed toward that end.

Mood affiliation aside, to strike this regulation down, as the Trump administration has done, is in fact not an indefensible action.

On a more practical political level, Trump wishes to send a signal to Appalachian voters that he is looking out for coal and looking out for them.  This is actually a very weak action, and it was chosen because for procedural reasons it was quite easy to do.  The more you complain about it, the stronger it looks, and that’s probably a more important fact than any of the particular details of this study.  Whether you like it or not, the coal debate is not really one that favors the Democrats.

Addendum: Here is the CRS paper, which seems to be derivative of other work, most of all this study.

A new study by the Taub Center for Social Policy Studies in Israel finds a relationship between the longevity of men in Israel and army service, which contributes to Israeli men’s better physical fitness

Main findings:

  • In 2013, the average life expectancy for men in Israel was 81 years, in contrast to the OECD average of 77.7 and a world average of 68.8 years.
  • Considering other variables that influence longevity – including wealth and education levels, the health system and the country’s general demographic profile – the Israeli advantage is large and increasing.
  • An analysis based on a sample of more than 130 countries found that military service added more than three years to male life expectancy.
  • This conclusion is reinforced in data showing the differences in the average life expectancy of men and women in Israel and in the OECD. In the 34 OECD countries, women live an average of 5.5 years longer than men, but in Israel, where military service is shorter and in most cases less physically demanding for women, women’s life expectancy is only 3 years longer.
  • While military service is an important component in public health, it has not yet been discussed in the academic literature on general health factors, nor has it been discussed in Israeli health literature.

Here is further information.  Here is a link to the cited report.  Here is the study itself.

I am very much against the draft outside of extreme military emergencies, but I suspect when the economic history of the American 20th century is written, the end of the draft will play some significant role in explaining the evolution of conditions for the deplorables.

For the pointer to this work I thank Rafi Bryl.

That is a recent paper by Lee Epstein and Eric A. Posner, and here is the abstract:

A statistical analysis of voting by Supreme Court justices from 1937-2014 provides evidence of a “loyalty effect” — justices more frequently vote for the government when the president who appointed them is in office than when subsequent presidents lead the government. This effect exists even when subsequent presidents are of the same party as the justices in question. However, the loyalty effect is much stronger for Democratic justices than for Republican justices. This may be because Republican presidents are more ideologically committed than Democratic justices are, leaving less room for demonstrations of loyalty.

You can read it here.

Let’s recognize Frederick Douglass more and more for his terrific views on immigration:

I submit that this question of Chinese immigration should be settled upon higher principles than those of a cold and selfish expediency.

There are such things in the world as human rights. They rest upon no conventional foundation, but are external, universal, and indestructible. Among these, is the right of locomotion; the right of migration; the right which belongs to no particular race, but belongs alike to all and to all alike. It is the right you assert by staying here, and your fathers asserted by coming here. It is this great right that I assert for the Chinese and Japanese, and for all other varieties of men equally with yourselves, now and forever. I know of no rights of race superior to the rights of humanity, and when there is a supposed conflict between human and national rights, it is safe to go to the side of humanity. I have great respect for the blue eyed and light haired races of America. They are a mighty people. In any struggle for the good things of this world they need have no fear. They have no need to doubt that they will get their full share.

But I reject the arrogant and scornful theory by which they would limit migratory rights, or any other essential human rights to themselves, and which would make them the owners of this great continent to the exclusion of all other races of men.

See also this earlier post by Ilya Somin.

Brad Stone’s The Upstarts

by on January 31, 2017 at 7:22 am in Books, Economics, Law | Permalink

Today in the WSJ I review Brad Stone’s new book about Airbnb and Uber, The Upstarts. Here is one substantive bit:

upstartsInstead of thinking about how to protect the hotel and taxi industries, policy makers should be thinking about how to make it easier for the next Airbnb or Uber to compete. They could require, for instance, that key application program interfaces remain open to competitors, just as some utilities are required to allow alternative energy companies to send electricity through their networks.

Likewise, it’s not obvious that requiring Uber to contract with drivers as employees rather than as independent contractors is a good idea, even for the drivers. Lots of people are willing to drive for Uber, which suggests that Uber is providing drivers with opportunities superior to those that they can find elsewhere. The first rule of the regulator’s oath should be: “Do not destroy mutually profitable exchanges.” Banning the independent-contractor model could also make it harder for cash-strained startups to compete with Uber. Uber might even accept new regulations as a way of raising the costs of its rivals and locking in its monopoly. From upstart to rent-seeker in just seven years—the speed is astounding, but the arc is commonplace.

Read the whole thing.

On this week’s Odd Lots podcast, we speak with Giovanni Mastrobuoni about the relationship between salary and educational attainment in organized crime. He’s the co-author of a paper titled “Returns to Education in Criminal Organizations: Did Going to College Help Michael Corleone?” Based on data sets from the first half of the 20th century, Mastrobuoni and his colleagues were able to show that mafia members who got more education also got paid more in the underworld.

That is from Tracy Alloway and Joe Weisenthal.

Up from Central Square towards Harvard Square is a stretch of Massachusetts Avenue that is mixed residential and commercial, with metered parking. A few weeks ago I needed to stop at the UPS store there and ship a heavy package. There were no free parking spots so I soon found myself cruising up and down along about a 100 meter stretch, waiting for one to open up. The thought occurred to me that if I had had a level 4 or 5 self driving car I could have left it to do that circling, while I dropped into the store.

Such is the root of anti-social behavior.

And more:

(1) People will jump out of their car at a Starbucks to run in and pick up their order knowingly leaving it not in a legal parking spot, perhaps blocking others, but knowing that it will take care of getting out of the way if some other car needs to move or get by. That will be fine in the case there is no such need, but in the case of need it will slow everything down just a little. And perhaps the owner will be able to set the tolerance on how uncomfortable things have to get before the car moves. Expect to see lots of annoyed people. And before long grocery store parking lots, especially in a storm, will just be a sea of cars improperly parked waiting for their owners.

(2) This is one for the two (autonomous) car family. Suppose someone is going to an event in the evening and there is not much parking nearby. And suppose autonomous cars are now always prowling neighborhoods waiting for their owners to summon them, so it takes a while for any particular car to get through the traffic to the pick up location. Then the two car family may resort to a new trick so that they don’t have to wait quite so long as others for their cars to get to the front door pick up at the conclusion of the big social event. They send one of their cars earlier in the day to find the closest parking spot that it can, and it settles in for a long wait. They use their second car to drop them at the event and send it home immediately. When the event is over their first autonomous car is right there waiting for them–the cost to the commons was a parking spot occupied all day by one of their cars.

In sum:

They are seeing the technical possibilities and not seeing the resistance that will come with autonomous agents invading human spaces, be they too rude or overly polite.

That is by Rodney Brooks, the piece has other points of interest, via Tim Harford.

Stanley Pignal, the new Mumbai-based South Asia correspondent for The Economist, tweeted:

Having landed two hours ago, I’m upgrading myself from “India novice” to “India watcher”. Tomorrow “expert”, next week “veteran”

With that in mind as also applying to me, here are some initial thoughts:

People in India drive on the wrong side of the road and I’m not talking about the fact that they drive on the left.

It’s easier to find a good Indian restaurant in Fairfax than in Bandra.

The quality of the intellectual class relative to GDP per capita is the highest of any country I know.

The quality of the intellectual class at the top is as high as Singapore but in Singapore the intellectual class runs the government.

You can take a 1-hour UBER ride for a $5, A taxi is even cheaper. A 10-minute auto-rickshaw drive is 50 cents.

Google FI worked right off the airplane. If you are coming to India for a week or two it’s great. Oddly, however, all of the Indian apps for food delivery, calling the Indian equivalent of UBER or paying with digital cash only accept an Indian telephone number so I am going to have to get a SIM card. Unfortunately, for reasons unknown, getting a Sim card is a bureaucratic hassle although apparently it’s scheduled to get better.

English is fine for getting around. The surprise is the number of Indians who don’t speak English and yet have to operate in a world in which advertising, signage, operating instructions, and so forth are in English.

Netflix works!

Inequality as measured by a standard Gini index is actually lower in India than in the United States. As measured by what you can see, however, inequality is very high. It’s easy to step out of a Louis-Vuitton boutique and over a child sleeping in the street. Doesn’t appear to be causing a revolution, however.

Crime is low. Much lower than in the United States.

Pollution is high, much higher than in the United States, and at levels that do not seem optimal even give low GDP per capita.

In the developed world you go outside for fresh air. In India you go inside for fresh air. (Many homes and businesses have air purifiers with hepa air filters. I bought two.)

PM Modi wants to bring Elon Musk’s hyperloop technology to India. Delhi to Mumbai in an hour. Mumbai to downtown Mumbai in an hour and a half…on a good day. Start simple!

Retail, one of the largest sectors in many economies including India, is very inefficient. You have to go to a dozen small stores in different parts of town to get half of what you need. I was surprised to see a Walmart in Mumbai on Google maps. Great! I took an Uber. It was fake.

Parts of Mumbai are reminiscent of Havana–elegant buildings put up in earlier times including some art-deco buildings, that are now falling apart and even abandoned due to rent control and poor land use policy. At the same time, Mumbai looks like Miami with much new construction interwoven with the older decay. Capitalist shoots pushing out of socialist pavement.

How to prepare for CRISPR

by on January 30, 2017 at 1:07 am in Law, Science, Web/Tech | Permalink

That is an MR reader request, namely:

One issue that it appears we’ll discuss more in the future is genetic experimentation – the sort heralded by CRISPR. How do you suggest we prepare for this technology? What should be reading? Discussing?

Read my book The Age of the Infovore, to better understand the importance of human diversity, and also ponder my earlier post on whether genetic engineering will lead to excess human conformity.  Then investigate what kinds of sperm and eggs are most popular and thus most expensive on the current market; that’s tall, smart people who look a bit like the parents.  That might give us an idea of what kind of genetic engineering people are trying to accomplish.  Then watch or rewatch Star Trek II: The Wrath of Khan.  If you still have spare time, dip into the New Testament again.

Then read about extensive Chinese efforts in this area.  Consider also how slow advances have been in genomics, and how difficult manipulability will be for most issues.  Then study Moore’s Law and Big Data.  Then read about how unlikely regulation will be able to stop advances in this area (the biggest intellectual gap in this set of instructions).  Then read or reread Aldous Huxley and any Greek tragedy centering around the idea of hubris.

Mix together, stir, shake, and sit down and cry.

You may have read that the recent Executive Order also applied to those who hold dual citizenship in any of the specified nations.  I haven’t yet seen it fully explained how pernicious this is.  A lot of countries don’t easily let you renounce their citizenship, they may still claim you, or at the very least they will not issue documentation confirming you are not a dual citizen, no matter what the fact of the matter may be.  Very often there is no “fact of the matter” as to who is a dual citizen.  Say you were born in Iran, and your parents brought you to the United States or Canada at age two.  Let’s say the Trump administration then asks you to prove you are not a dual citizen of Iran.  How are you supposed to do this?  Leave the country and try to get confirmation in Iran itself, noting you might have to prove you have not broken any laws and have paid all back taxes and fees?  Who knows?

How do you like these apples?:

Based on Article 41 of the constitution, Iran does not recognize dual citizenship, and if an individual acquires the citizenship of another country, his or her Iranian nationality will be revoked. This, however, requires certain legal procedures that if not pursued will result in the individual’s foreign citizenship not being officially recognized.

By applying a dual citizenship provision, in effect we are making Iranian law American law.  It is Iran who determines who is banned, not Trump.  You even could imagine a foreign government using this to punish or blackmail people who have scant current connection to their nation.  What should I do if Yemen offers me honorary national citizenship, in return for the service of promoting their cuisine and restaurants in the fine state of Virginia?  Can I turn it down?  Prove I don’t really hold it?  What exactly is to count as such proof?