Month: January 2021

Sunday assorted links

What I Have Been Reading (Alex)

The Economics of Small Things–An Indian economist in the United States offers a sweet and gentle introduction to economics drawn from his personal and professional life. I enjoyed many of the essays though I have to disagree with one–it makes a difference whether you go to the mangoes or the mangoes come to you as Tyler and I showed!

Wretched Refuse?: The Political Economy of Immigration and Institutions–Kudos to Nowrasteh and Powell for doing the work that critics of immigration have never done–that is, actually test for the effect of immigration on culture and cohesion. I can do no better than quote The Economist, “Wretched Refuse?” is… full of charts and regression analysis. It is also highly original, and takes a chainsaw to the most intellectually respectable case against immigration. No serious economist denies that when people move from poor countries to rich ones, they become more productive and their wages soar. It seems likely, therefore, that more migration would make the world much richer. However, some scholars think that too large an influx from, say, Congo to Canada would make Canada more like Congo—ie, the immigrants would import Congolese habits, and gradually make Canadian institutions more like the corrupt and lawless ones that keep Congo poor. Yet remarkably little effort has been made to test this hypothesis. Messrs Nowrasteh and Powell do so as rigorously as they can.”

The Infinite Machine–I was disappointed in this history of Ethereum. It doesn’t try to explain any of the technical details of Ethereum which is ok but it also doesn’t go into great detail on the personalities, leaving one with a journalistic history of what happened with some short glosses on the people.

The Splendid and the Vile: A Saga of Churchill, Family, and Defiance During the Blitz–As the bombs fall on London, Churchill struggles to increase the production of aircraft, to diplomatically bring the United States into the war, to hold his government together even as British forces are defeated abroad. Meanwhile his teenage daughter falls in love, his son deals with a gambling problem and divorce and his aide looks for a wife. The Splendid and the Vile is a tremendous story of Churchill’s first year in office based on meticulous research and told at a thrilling, breakneck pace. A great read at any time. A poignant and apt read now.

Causal Inference: The Mixtape–an excellent introduction to causal inference. The Mixtape marks the beginning of the DAG era in econometrics.

Why Does Teacher Quality Matter?

From Mike Insler, Alexander F. McQuoid, Ahmed Rahman, and Katherine A. Smith, here is an apparently major result:

This work disentangles aspects of teacher quality that impact student learning and performance. We exploit detailed data from post-secondary education that links students from randomly assigned instructors in introductory-level courses to the students’ performances in follow-on courses for a wide variety of subjects. For a range of first-semester courses, we have both an objective score (based on common exams graded by committee) and a subjective grade provided by the instructor. We find that instructors who help boost the common final exam scores of their students also boost their performance in the follow-on course. Instructors who tend to give out easier subjective grades however dramatically hurt subsequent student performance. Exploring a variety of mechanisms, we suggest that instructors harm students not by “teaching to the test,” but rather by producing misleading signals regarding the difficulty of the subject and the “soft skills” needed for college success. This effect is stronger in non-STEM fields, among female students, and among extroverted students. Faculty that are well-liked by students—and thus likely prized by university administrators—and considered to be easy have particularly pernicious effects on subsequent student performance.

Via the excellent Kevin Lewis.

Perhaps it is the high-skilled rather than low-skilled migrants who induce resentment?

(7) Intergenerational Mobility of Immigrants in the United States over Two Centuries

By Ran Abramitzky, Leah Boustan, Elisa Jacome and Santiago Perez

Using millions of father-son pairs spanning more than 100 years of US history, we find that children of immigrants from nearly every sending country have higher rates of upward mobility than children of the US-born. Immigrants’ advantage is similar historically and today despite dramatic shifts in sending countries and US immigration policy. Immigrants achieve this advantage in part by choosing to settle in locations that offer better prospects for their children. Full-Text Access | Supplementary Materials

That is from the new AER.

Saturday assorted links

The EU Failed the World’s Easiest Cost-Benefit Test

From early on in the crisis I was telling governments, “this is the world’s easiest cost-benefit test” because:

The EU response:

However, the EU approach came with strings. The commission, negotiating for the first time on vital medicines, felt that EU countries would demand value for money, so it dragged out the talks to secure better prices and product liability guarantees. That meant it signed the contracts with AstraZeneca in August, three months after the UK’s contract.

Hat tip: Arthur Baker.

Addendum: On the plus side the EU has authorized the AstraZeneca vaccine. The United States should immediately do the same. Get the Baltimore factory running.

Scott Sumner on Vaccine Nationalism

EconLib: Experts in the UK have looked at the AstraZenaca vaccine and found it to be safe and effective. And yet Americans are still not allowed to use the product. So if paternalism is not the actual motive, why do progressives insist that Americans must not be allowed to buy products not approved by the FDA?  What is the actual motive?

The answer is nationalism. The experts who studied the AstraZenaca vaccine were not American experts, they were British experts. Can this form of prejudice be justified on scientific grounds? Obviously not. There has been no double blind, controlled study of comparative expert skill at evaluating vaccines. We have no way of knowing whether the UK decision is wiser than the FDA decision. Instead, the legal prohibition is being done on nationalistic grounds. We are told to blindly accept the incompetence of British experts, without any proof.  (And even if you believed there was solid evidence that one country’s experts were better than another, it would not explain why each developed countries relies on their own experts.  They can’t all be best!)

These debates always end up being like a game of whack-a-mole. Shoot down one argument and regulation proponents will simply put forth another. Their minds are made up.  You say people shouldn’t be allowed to take a vaccine unless experts find it to be safe and effective? OK, the UK experts did just that. You say that only the opinion of US experts counts because our experts are clearly the best? Really, where is the scientific study that shows that our experts are the best? I thought you said we needed to “trust the scientists”?  Now you are saying we must trust the nationalists?

…what’s wrong with the following three-part system of regulation as a compromise solution:

1. FDA approved drugs can be consumed by anyone in America.

2. Drugs approved by any of the top 20 advanced countries (but not the FDA) can be consumed by anyone willing to sign a consent form indicating that they understand the FDA has not approved this product. I’ll sign for AstraZeneca. (The US government puts together a list of 20 reputable countries.)

3. Drugs approved by none of the top 20 developed economies will still be banned.

This is what regulation would look like if paternalism actually were the motivating factor. But it’s not. It’s Trump-style nationalism that motivates progressives to insist that only FDA approved drugs can be sold in America. They may look down their noses at Trump, but they implicitly share his nationalism.

I agree, of course, and have long supported Pharmaceutical Reciprocity.

Short selling and the price discovery process

We show that stock prices are more accurate when short sellers are more active. First, in a large panel of NYSE-listed stocks, intraday informational efficiency of prices improves with greater shorting flow. Second, at monthly and annual horizons, more shorting flow accelerates the incorporation of public information into prices. Third, greater shorting flow reduces post-earnings-announcement drift for negative earnings surprises. Fourth, short sellers change their trading around extreme return events in a way that aids price discovery and reduces divergence from fundamental values. These results are robust to various econometric specifications, and their magnitude is economically meaningful.

That is from 2013 research by Boehmer and Wu.  Next, beware of any paper doing cross-sectional comparisons across 111 countries, but here is how the resulting correlations go (link):

We find that when short-selling is possible, aggregate stock returns are less volatile and there is greater liquidity. When countries start to permit short-selling, aggregate stock price increases, implying lower a cost of capital. There is no evidence that short-sale restrictions affect either the level of skewness of returns or the probability of a market crash. Collectively, our empirical evidence suggests that allowing short-selling enhances market quality.

While I would not draw very firm conclusions from that, it is not going to help the case against short-selling.  Here is a general literature survey from 2020.  Lots is murky, but again the evidence is not supporting the often rather polemic critics.  A very general point is that short selling is less different from “plain selling” than you might think, all the more so if you consider dynamic portfolio strategies (which can replicate just about any underlying desired net position).

Furthermore, these days there is more choice than ever before.  If the asset you have in mind is somehow too fragile to withstand short-selling pressure, but is valuable nonetheless, staying private never has been easier and with some degree of liquidity to boot.

Cash transfers are better than price controls

Really, and yes there is a trade-off at the relevant margin.  That is the theme of my latest Bloomberg column, here is one excerpt:

Or consider Treasury Secretary Janet Yellen. She supports the proposed hike, as she noted in her confirmation hearing last week, yet in 2014 she endorsed the view that a minimum wage hike would lead to significant job loss. Maybe now she knows better, but if the 2014 Janet Yellen could have been so fooled, then perhaps this debate is not so settled.

Why then push so hard for a policy with such murky outcomes? It would raise the wages of many workers, destroy the jobs of some low-skilled workers, and perhaps lower the hours and thus pay of many other workers.

The burden of the minimum wage is unclear as well. Perhaps it leads to higher retail prices, although many proponents suggest it comes largely out of business profits. This too is unclear, and again raises questions about the wisdom of pushing so hard for such a non-transparent set of reallocations and transfers.

In contrast, consider the plan for cash grants to families with children. Under one proposed plan, these grants would be between $3,000 and $3,600 a year, depending on the age of the child.

The benefits here are obvious and transparent, namely that families are better off when they have more money. Perhaps some families would use that money in self-destructive ways, but this basic view — that more money increases the chance for better outcomes — is not really contested.

And please — most policies are not self-financing!  So you should do more of the better policy, rather than pushing for both.

Friday assorted links

1. The next Michael Lewis book (NYT).

2. Novovax data, including against the South African strain.  And wide confidence intervals.

3. Carolyn Hopkins.

4. Chinese government is collecting Americans’ DNA.

5. John Cochrane on GameStop, etc.

6. And how Robinhood ran out of cash (NYT).  The misinformation in the MR comments section and elsewhere on this is egregious.  Here is yet more common sense, though I don’t quite agree with all the framing.

Conversations With The Browser

Browser Sunday Zoom Conversations are an opportunity for relaxed discussion with special guests.

Browser subscribers and friends are warmly invited to join, listen, and if they wish, intervene with comments and questions. Conversations begin at 1pm ET (which is 10am PT and 6pm GMT) and last for 50 minutes.

Our next Conversation, on Sunday 31st January, promises to be an exceptional event centering on Covid and its consequences.

Alex Tabarrok, Professor of Economics at George Mason University and co-founder of the Marginal Revolution blog, will be talking with Bill Emmott, former editor-in-chief of The Economist and now co-director of the Global Commission On Post-Pandemic Policy.

Alex is a leading voice in America’s national debate about policy responses to Covid. Bill is bringing together experts in diverse fields to look globally at the changes Covid is forcing upon our economies and societies.

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The Invisible Graveyard is Invisible No More

We called it the invisible graveyard, the place they buried people killed by FDA delay. Back then only a few of us–mostly libertarians long practiced in seeing the invisible hand–could see the invisible graveyard. Normal people looked at us oddly and quickly ran away when we frantically pointed to the dead. “There! there! Can’t you see the bodies?” Now, however, the veil has been lifted and even normal people see.

Here is Ezra Klein writing in the NYTimes:

The problem here is the Food and Drug Administration. They have been disastrously slow in approving these tests and have held them to a standard more appropriate to doctor’s offices than home testing. “The F.D.A. needs to catch up to the science,” Mina said, frustration evident in his voice. “They are inadvertently killing people by not following the science.” On my podcast, I asked Vivek Murthy, President Biden’s nominee for surgeon general, whether the F.D.A. had been too cautious. “I do think we’ve been too conservative,” he told me. Murthy went on to argue that there’s a difference between the diagnostic testing doctors do and the surveillance testing the public could do and that the F.D.A. had failed to appreciate the difference. Speeding the F.D.A. on this issue will be an early, and crucial, test for the Biden administration. In this case, Democrats need to deregulate.

Even back in December when I was tweeting from the rooftops things like:

Your daily reminder that 14,696 people have died from COVID in the United States since Pfizer applied for an EUA from the FDA.

people argued that I was exaggerating the simple math of FDA delay. Today, however, the reality of deadly delay is almost conventional wisdom. Here’s Klein again:

The new strains spread quickly. The speed of our countermeasures will decide our fate. What feel like reasonable delays in our normal experience of time — a few weeks here for Congress to debate a bill, a few weeks there for the F.D.A. to hold meetings — could lead to the kind of explosive infections that overwhelm our hospitals and fill our morgues.

Vaccine politics in Europe and America

The contentiousness is much worse in Europe, where zero- and negative-sum thinking is the order of the day.  That is the theme of my latest Bloomberg column, here is one bit:

In most of Europe, it’s hard to see much good news. It’s one thing not to have a vaccine. It’s far worse to turn on television or go on the internet and see people in other countries being vaccinated as their pandemics recede. Most of Europe will not be making significant vaccination progress until April, and even then shortages may remain.

At stake is the very legitimacy of the EU. Most of the vaccination contracts were handled at the EU level, although Germany sidestepped the agreed-upon procedures and cut some deals. If the EU fails at the most significant crisis in a generation, it may not maintain much legitimacy.


When people judge how painful an experience was, they often place a high value on first and last impressions. The last impressions of the U.S. and U.K. will be pretty positive. Most of the U.S. pandemic will be over by July, even under a subpar vaccination schedule. And it may turn out that mRNA vaccines are more protective against the new strains of Covid than any alternatives….

Many European countries may end up with fewer deaths per capita than the U.S. But at the end of the pandemic many Europeans may feel like their leaders failed them, that they suffered lockdowns for many months but received little in return. Right now vaccine politics is all about momentum, and so far only a few countries have it.

Here is a related piece by Bruno M.  And a good piece (slow to start) on what went wrong in the EU.

Why was trading restricted?

Let’s bring in the CEO of Webull, Anthony Denier. And Anthony, your platform also among those that’s restricted trade for the likes of AMC, as well as GameStop. We were talking about Alexandria Ocasio-Cortez now jumping in on the debate, saying that she would be for a hearing in this if it’s necessary. Why restrict the trade, and what led to that action?

ANTHONY DENIER: Well, it wasn’t our choice. Our clearing firm gave us a call and said we’re going to have to stop allowing new opening positions in the three names, AMC, GME, and KOSS. Highly volatile, and what happens is this is not a political decision. And unfortunately, it got political. I think, you know, I think it was once said that don’t let any good crisis go to waste. And that’s clearly what’s happening here.

And we’re seeing politicians jump on the bandwagon so they can get– so they can start trending on Twitter. But in reality, what’s going on is that there is a two-day settlement between if you buy the stock today, those brokerage firms that you bought that stock on have to fund that trade with the clearing central house called DTC for two whole days. And because of the volatility of stocks, DTC has made the cost of the collateral of the two-day holding period extremely expensive.

And we just can’t afford– well, we’re not a clearing firm, but our clearing firm simply cannot afford the cost to settle those trades. We cannot use customer funds to front that cost due to regulation. So the brokerages or the clearing firms have to go into their own pockets to do it. And they simply can’t afford the cost of that trade clearance. That is the reason why these stocks are coming off. It has nothing to do with the decision or some sort of closed room cigar– smoke-filled cigar room of Wall Street firms getting together to the dismay of the retail trader. This has to do with settlement mechanics of the market.


ANTHONY DENIER: …There is no way that a customer would not be able to sell a position they hold. We are simply stopping opening of new positions. Liquidations can happen at any time. This is general market mechanics. We have customer protections in place. We would never stop a customer from being able to get out of a position. But currently, we are stopping customers from getting into a new position. And that has to do with it possibly.

There is more of interest here.  And here is some common sense from the FT — shame on you all for your mood affiliation!