7. Henry on TPP; The first-order trade gains from TPP are not so mysterious nor do they require allegiance to a specific “Ricardian model” as Henry seems to suggest; think of them as akin to removing a price or quantity control in a market. A trillion from that seems like an entirely reasonable estimate, much better than the presumption of sheer agnosticism about that part of the deal. Which means critics still ought to be finding a trillion or more in costs, if they are to sustain their opposition. And here is Stephen Stromberg on TPP: “Critics have shown some remarkable ingenuity getting around Cowen’s essential challenge.”
1. You cannot build and sustain a polity on the idea of redistributing wealth to take advantage of differences in the marginal utility of money across varying wealth classes.
2. The ideas you can sustain a polity around often contradict the notion of socially arbitraging MU differences to try to boost total utility.
3. The MU argument, in isolation, is therefore rarely compelling. Furthermore its “naive” invocation is often a sign of underlying weakness in the policy case someone is trying to make. The proposed policy may simply be too at odds with otherwise useful social values.
4. This is related to why parties from “the traditional Left” so often lose elections, including in a relatively statist Europe.
5. That all said, sometimes we should in fact take advantage of MU differences in marginal increments of wealth and use them to drive policy.
6. Figuring out how to deal with this tension — ignoring MU differences, or pursuing them — is a central task of political philosophy.
7. The selective invocation of the differential MU argument — or the case against it — will make it difficult to improve your arguments over time; arguably it is a sign of intellectual superficiality.
I say downwards:
With bargain gasoline prices putting more money in the pockets of Americans, owners of hybrids and electric vehicles are defecting to sport utility vehicles and other conventional models powered only by gasoline, according to Edmunds.com, an auto research firm.
There are limits, it appears, to how far consumers will go to own a car that became a rolling statement of environmental concern. In 2012, with gas prices soaring, an owner could expect a hybrid to pay back its higher upfront costs in as little as five years. Now, that oft-calculated payback period can extend to 10 years or more.
“We’d all like to save the environment, but maybe not when it costs hundreds of dollars per year,” said Jessica Caldwell, director of industry analysis for Edmunds.com.
It is a bigger shift than I would have thought:
In all, 55 percent of hybrid and electric vehicle owners are defecting to a gasoline-only model at trade-in time — the lowest level of hybrid loyalty since Edmunds.com began tracking such transactions in 2011. More than one in five are switching to a conventional sport utility vehicle, nearly double the rate of three years ago.
That one-and-done syndrome coincides with tumbling sales of electric and hybrid vehicles. Through April, sales of electrified models slid to 2.7 percent of the market, down from 3.4 percent over the same period last year, Edmunds.com said. At the same time, sport utility vehicles grabbed 34.4 percent of sales, up from 31.6 percent.
From Lawrence Ulrich, you can read more here.
1. The “wife bonus”? (Do husbands ever get bonuses, or bonuses withheld? I think so.)
Yesterday I outlined why genetically engineered children are not imminent. The Chinese CRISPR gene editing of embryos experiment was lethal to around 20% of embryos, inserted off-target errors into roughly 10% of embryos (with some debate there), and only produced the desired genetic change in around 5% of embryos, and even then only in a subset of cells in those embryos.
Over time, the technology will become more efficient and the combined error and lethality rates will drop, though likely never to zero.
Human genome editing should be regulated. But it should be regulated primarily to assure safety and informed consent, rather than being banned as it is most developed countries (see figure 3). It’s implausible that human genome editing will lead to a Gattaca scenario, as I’ll show below. And bans only make the societal outcomes worse.
1. Enhancing Human Traits is Hard (And Gattaca is Science Fiction)
The primary fear of human germline engineering, beyond safety, appears to be a Gattaca-like scenario, where the rich are able to enhance the intelligence, looks, and other traits of their children, and the poor aren’t.
But boosting desirable traits such as intelligence and height to any significant degree is implausible, even with a very low error rate.
The largest ever survey of genes associated with IQ found 69 separate genes, which together accounted for less than 8% of the variance in IQ scores, implying that at least hundreds of genes, if not thousands, involved in IQ. (See paper, here.) As Nature reported, even the three genes with the largest individual impact added up to less than two points of IQ:
The three variants the researchers identified were each responsible for an average of 0.3 points on an IQ test. … That means that a person with two copies of each variant would score 1.8 points higher on an intelligence test than a person with none of them.
Height is similarly controlled by hundreds of gene. 697 genes together account for just one fifth of the heritability of adult height. (Paper at Nature Genetics here).
For major personality traits, identified genes account for less than 2% of variation, and it’s likely that hundreds or thousands of genes are involved.
Manipulating IQ, height, or personality is thus likely to involve making a very large number of genetic changes. Even then, genetic changes are likely to produce a moderate rather than overwhelming impact.
Conversely, for those unlucky enough to be conceived with the wrong genes, a single genetic change could prevent Cystic Fibrosis, or dramatically reduce the odds of Alzheimer’s disease, breast cancer or ovarian cancer, or cut the risk of heart disease by 30-40%.
Reducing disease is orders of magnitude easier and safer than augmenting abilities.
2. Parents are risk averse
We already trust parents to make hundreds of impactful decisions on behalf of their children: Schooling, diet and nutrition, neighborhood, screen time, media exposure, and religious upbringing are just a few. Each of these has a larger impact on the average child – positive or negative – than one is likely to see from a realistic gene editing scenario any time in the next few decades.
And in general, parents are risk averse when their children are involved. Using gene editing to reduce the risk of disease is quite different than taking on new risks in an effort to boost a trait like height or IQ. That’s even more true when it takes dozens or hundreds of genetic tweaks to make even a relatively small change in those traits – and when every genetic tweak adds to the risk of an error.
(Parents could go for a more radical approach: Inserting extra copies of human genes, or transgenic variants not found in humans at all. It seems likely that parents will be even more averse to venturing into such uncharted waters with their children.)
If a trait like IQ could be safely increased to a marked degree, that would constitute a benefit to both the child and society. And while it would pose issues for inequality, the best solution might be to try to rectify inequality of access, rather than ban the technique. (Consider that IVF is subsidized in places as different as Singapore and Sweden.) But significant enhancements don’t appear to be likely any time on the horizon.
Razib Khan points out one other thing we trust parents to do, which has a larger impact on the genes of a child than any plausible technology of the next few decades:
“the best bet for having a smart child is picking a spouse with a deviated phenotype. Look for smart people to marry.”
3. Bans make safety and inequality worse
A ban on human germline gene editing would cut off medical applications that could reduce the risk of disease in an effort to control the far less likely and far less impactful enhancement and parental control scenarios.
A ban is also unlikely to be global. Attitudes towards genetic engineering vary substantially by country. In the US, surveys find 4% to 14% of the population supports genetic engineering for enhancement purposes. Only around 40% support its use to prevent disease. Yet, As David Macer pointed out, as early as 1994:
in India and Thailand, more than 50% of the 900+ respondents in each country supported enhancement of physical characters, intelligence, or making people more ethical.
While most of Europe has banned genetic engineering, and the US looks likely to follow suit, it’s likely to go forward in at least some parts of Asia. (That is, indeed, one of the premises of Nexus and its sequels.)
If the US and Europe do ban the technology, while other countries don’t, then genetic engineering will be accessible to a smaller set of people: Those who can afford to travel overseas and pay for it out-of-pocket. Access will become more unequal. And, in all likelihood, genetic engineering in Thailand, India, or China is likely to be less well regulated for safety than it would be in the US or Europe, increasing the risk of mishap.
The fear of genetic engineering is based on unrealistic views of the genome, the technology, and how parents would use it. If we let that fear drive us towards a ban on genetic engineering – rather than legalization and regulation – we’ll reduce safety and create more inequality of access.
I’ll give the penultimate word to Jennifer Doudna, the inventor of the technique (this is taken from a truly interesting set of responses to Nature Biotechnology’s questions, which they posed to a large number of leaders in the field):
Doudna, Carroll, Martin & Botchan: We don’t think an international ban would be effective by itself; it is likely some people would ignore it. Regulation is essential to ensure that dangerous, trivial or cosmetic uses are not pursued.
Legalize and regulate genetic engineering. That’s the way to boost safety and equality, and to guide the science and ethics.
5. Hive Mind: How Your Nation’s IQ Matters So Much More Than Your Own; Garrett Jones’s book will be out this fall!
2. Eel-like robot could explore extraterrestrial oceans; let’s do it. What 1956 thought driverless cars would be like in 1976. Includes a good eight minute video, worth it.
In 2012 economists at the University of Auckland published research establishing clear correlations between family circumstances and incidents of child abuse or neglect. “No one realized we were sitting on such rich data in terms of its predictive power,” says Rhema Vaithianathan, who led the research. “We can find children who are at considerably elevated risk, and we can find them at birth.”
Using data from welfare, education, employment, and housing agencies and the courts, the government identified the most expensive welfare beneficiaries—kids who have at least one close adult relative who’s previously been reported to child safety authorities, been to prison, and spent substantial time on welfare. “There are million-dollar kids in those families,” English says. “By the time they are 10, their likelihood of incarceration is 70 percent. You’ve got to do something about that.”
Moving closer to home:
Jennie Feria, who oversees risk assessment for L.A.’s Department of Children and Family Services, says one idea is to rate families, giving them a number that could be used to identify who’s most at risk in the way lenders rely on credit scores to determine creditworthiness. “The way we may use it, it’s going to be like it’s a FICO score,” Feria says. The information, she says, could be used both to prioritize cases and to figure out who needs extra services. “It’s at the very early stages, because we don’t know how we’re going to use it yet exactly.”
It will be interesting to see how that one develops. The article is by Josh Eidelson.
2. The Growth Economics Blog has written a children’s book, mostly 3rd-7th graders, no knowledge of the Solow model required.
6. Scott Sumner and his wife on China. And is there low-hanging fruit in the fight against inequality? If so, how many people are urging us to grab it?
Yes, it is a good idea to patronize the small restaurants on the outskirts of the hutong, but here is another tip. Go to the very fanciest restaurant possible, in a fancy five-star hotel. Then order the cheapest items on the menu. That likely will involve some vegetables (pumpkin in egg, anyone?), tofu, and fried rice. It will be an amazing meal, quite possibly better, at least to a Western palate, than if you had ordered the most expensive delicacies of that restaurant. Many of these courses will not exceed $10 per shot, which is still about at American prices or even slightly below, and that’s not adjusting for massive differences in quality. If you feel you can afford more than that, fine, but the low budget constraint actually directs your attention to some pretty fine items, and to items which are never truly good in American Chinese restaurants.
I’ve had good street food in Beijing, but in my view it is neither your first nor even your second preferred option.
3. “Austerity evidently killed GDP, but not the labor market. That’s a very interesting hypothesis, but I’m wondering which textbook theory is consistent with it?” That’s the UK, folks.
5. Not a surprise, but a clarification: the U.S. won’t give up what is in effect its IMF veto.
6. Olivier Blanchard is leaving the IMF for the Peterson Institute. And Piketty will be joining LSE, it seems.
7. UberCopter, pretty cheap, considering…
What if, circa 2007, the Fed had figured out what was going on and wanted to take some concentrated steps to save the day? Well, that is the position China is in today, and they are acting fairly decisively:
China is imposing a $160bn municipal bonds for debt swap on banks in an effort to shift some of the financing costs of cash-strapped local governments back to lenders…
Banks are supposed to swap out higher-yielding business loans in return for more municipal bonds, noting that banks owned about 63 percent of the outstanding municipal bonds to begin with. As a form of compensation, the central bank will accept these municipal securities as collateral for some of its special lending facilities. The policy is a mix of jawboning and inducement, in which exact proportions we shall see; there is further coverage here.
You can think of it as “we may expect you banks to share in some of the losses on this paper, but if push comes to shove we’ll just monetize the municipal debt and bail you out too.”
Rating agency Standard & Poor’s late last year estimated that half of all Chinese provinces would merit junk ratings…
These (non-transparent) municipal debts may exceed $3 trillion. And Christopher Balding, in his excellent post on all this, makes a very good point:
Especially with land revenue falling by more than 30% annually when it typically constitutes more than 50% of government revenue, the provinces’ ability to repay is highly suspect.
Some goals of the bailout are to keep the local governments up and running, and also building infrastructure, so that urbanization does not slow down. This is all being done in conjunction with a series of interest rate cuts, and there is likely yet more to come.
Balding adds this as well:
…the banks, after getting cash for the bonds as collateral from the PBOC, are being encouraged to lend out this cash to firms in favored industries. Given the drop in risk weighted capital from holding government as an additional benefit, this means that banks will have significant new capital to lend. The rapid rise in Chinese debt, which has even officially surpassed most developed countries, seems bound to rise even more. I can’t [help but] think that this seems like trying to sober up an alcoholic by buying him a beer.
…Here is hoping that deposit insurance will never be needed.
It will be very interesting to see how this goes, and so far these events remain a dramatically undercovered story. My net takeaway, to date, is that the finances of the provincial governments must be worse than most observers had thought.