Month: January 2024

Why hasn’t the opioid epidemic converged to manageable levels?

by  Tyler Cowen in

There is a new NBER working paper on this very good question by David M. Cutler and J. Travis Donahoe:

Opioid overdose death rates in the United States have risen continuously for over three decades, increasing 2,142 percent in total from 1990 to 2020. This is surprising. One might expect drug epidemics to be self-limiting, as policy and individual behavior reacts to observed deaths. We study why opioid deaths have risen so greatly and for so long. We consider three reasons for a prolonged epidemic: exogenous and continuing changes in demand or supply, and spillovers in demand for opioids across users, which we term “thick market externalities.” We show there is no evidence of sufficiently large exogenous changes in the demand or supply of opioids that could explain such a prolonged increase in death rates. We test for spillovers using county-level data on opioid deaths from 1991–2018 and opioid shipments from 2006–2009, combined with data on friendships and distance between counties. Estimating a model with addiction and spatial spillovers, we find large spillovers in opioid use and deaths across areas. A shock that increases opioid death rates by 1 in an index county causes 0.38 to 0.76 more deaths in other counties because of spillovers. Because opioids are addictive, this leads to even more deaths and spillovers in future years. In some specifications, these effects are large enough to generate a continuously increasing epidemic without any ongoing changes in demand or supply. We estimate spillovers explain 84 to 92 percent of opioid deaths from 1990 to 2018 and are the main reason deaths have increased for so long.

Is there any way to make the spillovers in demand less strong?

How and why do legal codes differ across red and blue states?

by  Tyler Cowen in

Polarization in the traditional sense is not very important:

…this study examined the criminal codes of the six largest deep red states and the six largest deep blue states – states in which a single political party has held the governorship and control of both legislative bodies for at least the past three elections. It then identified 93 legal issues on which there appeared to be meaningful difference among the 12 states’ criminal law rules. An analysis of the patterns of agreement and disagreement among the 12 states was striking. Of the many thousands of issues that must be settled in drafting a criminal code, only a handful – that sliver of criminal law issues that became matters of public political debate, such as those noted above – show a clear red-blue pattern of difference.

If not red-blue, then, what does explain the patterns of disagreement among the 12 states on the 93 criminal law issue? What factors have greater influence on the formulation of criminal law rules than the red-blue divide?

The Article examines a range of possible influences, giving specific examples that illustrate the operation of each: state characteristics, such as population; state criminal justice characteristics, such as crime rates; model codes, such as the ALI’s Model Penal Code; national headline events, such as the attempted assassination of President Reagan; local headline cases that over time grow into national movements, such as Tracy Thurman and domestic violence; local headline cases that produced only a local state effect; the effect of legislation passed by a neighboring state; and legislation as a response to judicial interpretation or invalidation.

In other words, not only is the red-blue divide of little effect for the vast bulk of criminal law, but the factors that do have effect are numerous and varied.

That is from a new paper by Paul H. Robinson, Hugh Rennie, and Clever Earth.  Via the excellent Kevin Lewis.

The Contractual Origins of High-Rent Urban Blight

by  Tyler Cowen in

Have you ever wondered why empty storefronts in major cities stay empty for so long?  There is a new and still in the works paper by Daniel Stackman and Erica Moszkowski, and it provides valuable information about one piece of the puzzle.  Here is the abstract:

We document the rise of storefront vacancies in prime retail locations, a phenomenon we refer to as high-rent blight, in America’s largest and most expensive urban retail market: Manhattan. We identify a little-known contracting feature between retail landlord and their bankers that generates vacancies in the downstream market for retail space. Specifically, widespread covenants in commercial mortgage agreements impose rent floors for any new leases landlords may sign with tenants, short-circuiting the price mechanism in times of low demand for retail space. Quasi-experimental estimates suggest that binding rent floors imposed by mortgage covenants substantially reduce the probability of occupancy, and we show in counterfactual exercises that covenants may have increased vacancy rates by as much as 14% over the 2016 to 2020 period.

There are some earlier MR posts on this question, though I am not sure of the appropriate key words to find them…

Two Updates on the Value of Vaccines

by  Alex Tabarrok in

1) From the recent annual meeting of the American Society of Tropical Medicine & Hygiene (abstract 6949) we learn that the R21/Matrix-M malaria vaccine maintained it’s efficacy over 4 seasons.

…Importantly, maintained high efficacy over four malaria seasons with only four doses is demonstrated, with no concerns to date of rebound in those who have not received repeated booster doses of the malaria vaccine. These data show that the R21/MM vaccine could significantly reducing malaria cases and deaths in children living in malaria endemic areas by inducing well maintained protective immunity.

This is excellent news and further supports my call for rapid, emergency distribution of malaria vaccines.

2) Glennerster, Kelly, McMahon, and Snyder estimate the value of a universal coronavirus vaccine. The COVID vaccines have been very valuable (see our Science paper) but each new variant of concern causes a spike in death rates. As new variants emerge, we modify the vaccines but that takes time and happens only after the death rate spikes. In addition, no one is thrilled with boosters. A universal coronavirus vaccine, and there are dozens in the works, could preclude the need to adjust vaccines on the fly and avoid or greatly ameliorate the death spikes. Based on reduced US mortality alone, Glennerster et al. estimate that a universal vaccine would be very valuable–so much so that an Advance Market Commitment on the order of $6-$10 billion would easily pass a cost-benefit test even if it had just say a 40% chance of accelerating a universal vaccine.

As I said repeatedly during COVID, billions<<Trillions.

Matt Yglesias on the media

by  Tyler Cowen in

A point I tried to make on our Politix episode with Will Stancil is that progressive-minded people — and particularly progressive-minded media figures — have a certain ideological investment in the promotion of bad vibes.

Younger left-wing people are notably more depressed than politically conservative ones, which may be partially selection effect, but I think is driven by the fact that so much progressive messaging about the world is marked by negativity and doomerism. I read a cool story last week out of the Bay Area about how BART brought engineering work for new rolling stock in-house, which wound up delivering the trains under budget and ahead of schedule. That’s an upbeat, positive news story that’s also straightforwardly left-wing in its implications. But that’s not the kind of narrative that gets traction in progressive media spaces, which are dominated by pronouncements about how we live in a late capitalist dystopian hellscape.

…it’s considered both un-progressive and un-journalistic to talk about good things rather than to expose problems.

Conservatives find it annoying that American journalists are so left-wing. But in practice, this generates a much more complicated partisan landscape than you might think. The conservative audience is alienated by the values of mainstream journalism and spends a lot of time consuming propaganda news that is optimized for partisan purposes. The progressive audience finds mainstream journalism congenial enough that it’s hard to compete with, and yet, mainstream journalism produces a steady stream of negativity and ultra-specific focus on the idiosyncratic problems of young urban professionals.

That is all from Matt’s (paid) Substack, worth subscribing to.

Tuesday assorted links

by  Tyler Cowen

1. Arnold Kling on Hotelling and Julian Simon.

2. “President Vladimir Putin derided those “jumping around without pants,” at a party, while some guests have tried to make amends through donations and adopting a cat.” (NYT)

3. Oklahoma skyscraper gets redesign to become USA’s new tallest building.

4. “Critically, 3% reported that Replika [a chatbot] halted their suicidal ideation.”

5. Do shareholders actually want profit maximization?

South Dakota is trying to hold on

by  Tyler Cowen in

Bihar is holding on:

image.png

When will the world have its first trillionaire?

by  Tyler Cowen in

Not anytime soon, as I argue in my Bloomberg column, here is one of the arguments:

The desire to diversify is another limiting force. Once you have a considerable sum of money, it makes sense to spread your assets widely. Gates, for example, sold a good deal of Microsoft stock early on, presumably with diversification as a motive. At the time it seemed like an obviously good idea. Yet today Gates would be much richer if he had held onto his Microsoft shares. By one estimate he would in fact be a trillionaire, but even that hypothetical required a very dramatic recent run-up in Microsoft shares.

No one gets to be a billionaire by fully diversifying, anyway. Rather, billionaires pour their hearts and souls into a small number of very particular enterprises, which then (might) earn very high rates of return. But throughout the course of one’s life, it doesn’t make sense to keep on holding so much risk. It is better to cash in and enjoy some safety, in turn limiting your chance to become a trillionaire.

As I do note in the piece, it is the Federal Reserve that will get us there eventually.

Rent Controls

by  Alex Tabarrok in

Ryan Bourne has a good rundown on rent controls in Argentina. In 2020 Argentina introduced a relatively mild form of rent control; rent increases during tenancy were capped at a weighted average of inflation and wage growth, tenancy was a minimum of 3 years and it became very difficult to end a tenancy. In ordinary times, this might have had only mild negative effects but in a high inflation rate scenario everything was accelerated (and the controls got worse over time, most notably in 2023 rent increases were capped at the minimum of inflation and wage growth).

….The results of all this were predictable. Around the policy’s introduction, it’s estimated that 45% of landlords stopped renting to instead sell their properties, not least because most home sales were made in dollars [it was illegal to rent in dollars, AT]. A lot of landlords shifted to short-term rentals on AirBnB too. In 2019, Buenos Aires had 10,000 properties listed on AirBnB; now it’s over 29,500. There have thus been no end of stories about a rental housing crisis, with tenants unable to find rental accommodation, despite the Financial Times reporting late last year that energy use implies ‘one in seven homes’ in Buenos Aires, the capital, laid empty.

This supply crunch led to soaring rents. Bloomberg reported that rents jumped sharply after tenancy rent controls were announced, as landlords opted out of the market or front-loaded rent increases to protect against inflation. Having been falling in real terms through 2018 and 2019, and tracking inflation for most of the previous decade, rents in Buenos Aires grew at 1.7 times the pace of inflation in 2020, broadly tracked inflation in 2021 and 2022, and then accelerated much faster than inflation again in 2023 as the rate which rents could be increased within tenancies was tightened further to the lower of wage growth or inflation.

As a result, the average rent for a two bedroom apartment in Buenos Aires has surged from 18,000 pesos per month at the end of 2019 to 334,000 pesos today, far above the 210,000 pesos if prices had merely tracked broader inflation, as used to happen. This relative price hike obviously hurts the poor most, because they cannot easily afford deposits to buy homes, or more expensive shorter-term dollar rentals.

Controls on rents within tenancies also soured landlord-tenant relations, incentivising landlords to forgo expensive maintenance (thus allowing the value of the property to fall towards its regulated price or to encourage tenants to leave). Misallocation of properties was rife. Reports in Buenos Aires described friends having to share apartments further out of the city centre, meaning cramped conditions and longer commutes. Under such controls, people enjoying sub-market rents are incentivized to stay in properties ill-suited for them, while others must leave properties they can afford prematurely when rents adjust sharply before their wages rise.

Milei’s Decree 70/2023, translated as ‘Foundations for the Reconstruction of the Argentine Economy,’ eliminated rent controls, including allowing contracting in dollars. Even though it has been only a matter of months, early signs are very positive:

Already the reduced risks to landlords is leading a rebound in the rental supply. Broker Soledad Balayan has shown a 50% rise in notices for traditional rentals since the decree. A host of other sources, including the Argentine Real Estate Chamber, have confirmed large supply jumps. Perhaps unsurprisingly, reports show new rental prices falling, by between 20 and 30% so far.

Quick tour of Argentina’s fiscal deficit (from my email, anonymous author)

by  Tyler Cowen in

I won’t double indent, but this is not by me, though I agree with it:

“I agree with your read re Argentina’s history of fiscal stability. From this paper (unclear if the data is accurate), here is Argentina’s deficit from 1960 to 2016 or so:

[See Figure 3 here]

Notice 2003-2009 is the only time with a noticeable superavit (exports > imports, taxes > spending), which coincides with Kirchner. It happily coincided with booming soy prices and it was immediately followed by more public spending. Remember soy exports have their own special tax rate (retenciones + FX tax, ~double other exports). Here are soy prices (source):

[See Figure here]

Here is Carlos Pagni in 2009 covering the law that let the state spend as much as it pleased once again. This was only a few years after 2004, when the IMF had forced Argentina to pass Ley 25.917 constraining government spending and debt under GDP.

Also notice that the deficit continued after the hyperinflation of 1989-1990! Between the privatizations, Plan Bonex, and reduced social spending, Menem reduced inflation (and caused a recession for which he is resented to this day). Then Cavallo comes in with convertibilidad. This gets world bankers excited and the dollars start flowing back into Argentina but the fiscal deficit immediately resumes. That same Menem ran an ad campaign in 1999 partially based on infrastructure investments after his decade of deficit.

In other words, the Peronistas simply do not believe that too much spending leads to a crisis. They will always spend if allowed to. Argentina still lacks the institutions to prevent this.

Looking at the recent history of fiscal deficit, Milei can make two contributions:

Short-term: Cut spending before things explode. The Peronistas would’ve continued to print + spend, deepening the problems. Milei is already succeeding at this and will likely succeed while he remains in power. For example, he has cut some of the funding to the provinces, which will be forced to cut their spending. Some of them are already considering printing their own currency (paper bonds like the LECOP or Patacones from 2001). 

Long-term: Prevent future spending. This is what the Libertarians promise: remove the people that spend us to the ground for good. We should measure “historical success” by this measure. This is why dollarization is attractive: it prevents the state from printing money to fund its deficit. 

I have my hopes up but I don’t understand Argentinian institutions or history well enough to know if he can make progress on this. As a comparison, the Bank of England was founded in 1694 and became formally independent a few centuries later in 1997 (including an IMF intervention into fiscal spending as recent as 1976).”

Monday assorted links

by  Tyler Cowen

1. Noah Smith on the California Forever Project.

2. Corporations defending DEI.

3. More on ice deposits on Mars? (speculative)

4. Larry speaks the truth about Harvard.

5. “A rich literature explores gender differences between men and women, but an increasing share of the population identifies their gender in some other way. Analyzing data on roughly 10,000 students and 1,500 adults, we find that such gender minorities are less confident and provide less favorable self-evaluations than equally performing men on a math and science test.”  Link here.

6. These two cicada broods will emerge at the same time (NYT).

7. “Dana-Farber Cancer Institute is reviewing more than 50 papers, including work of the hospital’s CEO.” (WSJ)  That is at Harvard.