Update on the Sri Lanka Organic Farming Disaster

In Organic Disaster I wrote:

Sri Lanka’s President abruptly banned chemical fertilizers earlier this year in a bid to become 100% organic. The ban has resulted in reduced production and soaring prices that, together with declining tourism and the pandemic, have created an economic crisis.

Here is the latest update:

Sri Lanka has announced compensation for more than a million rice farmers whose crops failed under a botched scheme to establish the world’s first 100-percent organic farming nation.

…The government will pay 40,000 million rupees ($200m) to farmers whose harvests were affected by the chemical fertiliser ban, agriculture minister Mahindananda Aluthgamage said on Tuesday.

“We are providing compensation to rice farmers whose crops were destroyed,” he told reporters. “We will also compensate those whose yields suffered without proper fertiliser.”

The government will spend another $149m on a price subsidy for rice farmers, he added.

About a third of Sri Lanka’s agricultural land was left dormant last year because of the import ban.

A good example of central planning in action.

The Great Wall

APNews: For the thousands of athletes, journalists and others descending on Beijing for the Winter Olympics, China’s strict pandemic measures are creating a surreal and at times anxious experience.

China is isolating everyone coming from abroad from any contact with the general public for the duration of the Games, which open next week. That means being taken from the Beijing airport in special vehicles to a hotel surrounded by temporary barricades that keep participants in and the public out.

“I know the only experience of Beijing I’m going to experience is the Beijing I will see out of my bus window and my hotel window,” said Associated Press photo editor Yirmiyan Arthur, who arrived this week. “I’m not really going to experience China, I’m just going to experience the Olympics within the bubble.”

At the same time China has yet to approve the Pfizer-BioNTech vaccine despite having a Chinese firm, Shanghai Fosun Pharmaceutical, distributing it in Hong Kong, Macau and Taiwan. Sad.

The Adverse Selection of Crypto Regulation

Matt Levine: Facebook Inc. (now Meta Platforms Inc.) announced in 2019 with enormous fanfare that it was going to launch a stablecoin and work closely with all of the relevant regulators blah blah blah, and it went to the Federal Reserve and said “what do we need to do to launch a stablecoin,” and the Fed said “you must bring me the egg of a dragon and the tears of a unicorn,” and now the Facebook stablecoin is shutting down. One of the largest companies in the world devoted millions of dollars to figuring out how to launch a stablecoin and concluded that it was impossible. It is demonstrably not impossible! Tether did it! Tether has a hugely successful stablecoin! Tether does not care at all about working closely with all of the relevant regulators! That’s why!

…“The revolution needs rules,” some crypto guys say, and they get so many rules. “We don’t need to follow any rules,” some other crypto guys say, and they’re also right.

Matt’s point is that the SEC regulates serious, long-term players like Coinbase and Facebook out of business while the shady, fly-by-night operators run around unscathed until they rug pull.

China’s Private Cities

In Rising private city operators in contemporary China, Jiao and Yu report that China’s private cities are growing.

…the last decade has witnessed a large growth in private city operators (PCOs) who plan, finance, build, operate and manage the infrastructure and public amenities of a new city as a whole. Different from previous PPPs, PCOs are a big breakthrough…they manage urban planning, industry development, investment attraction, and public goods and services. In other words, the traditional core functions of municipal governments are contracted out, and consequently, a significant neoliberal urban governance structure has become more prominent in China.

In the new business model, the China Fortune Land Development Co., Ltd. (CFLD) was undoubtedly the earliest and most successful. It manages 125 new cities or towns with a total area of over 4000 km2. Founded in 1998, the enterprise group has grown into a business giant with an annual income of CNY 83.8 billion in 2018. The company’s financial statements demonstrate that the annual return rate of net assets has grown as much as 30% annually from 2011 to 2018, which is the highest among the Chinese Fortune 500 companies.

As Rajagopalan and I argued in Lessons from Gurgaon, India’s Private City the key development has been to scale large enough so that the private operator internalizes the externalities. Quoting Jiao and Yu again:

The key to solving this problem is to internalize positive externality so that costs and benefits mainly affect the parties who choose to incur them. The solution of the new model is to outsource Gu’An New Industry City as a whole to CFLD, which becomes involved in the life cycle including planning, infrastructure and amenity construction, investment attraction, operations and maintenance, and enterprise services. In this way, a city is regarded as a special product or a spatial cluster of public goods and services that can be produced by the coalition of the public and private sectors. The large-scale comprehensive development by a single private developer internalizes the externality of non-exclusive public amenities successfully and achieves a closed-loop return on investment.

As a result private firms are willing to make large investments. In Gu’An, an early CFLD city, for example:

CFLD has invested CNY 35 billion to build infrastructure and public amenities, including 181 roads with a length of 204 km, underground pipelines of 627 km, four thermal power plants, six water supply factories, a wastewater treatment plant, three sewage pumping stations, and 30 heat exchange stations. The 2018 Statistical Yearbook of Langfang City illustrates that the annual fiscal revenue increased to CNY 9 billion, and the fixed asset investment was approximately CNY 20 billion, and Gu’An achieved great success in terms of economic growth and urban development strongly promoted by the collaboration with CFLD.

By the way, The Journal of Special Jurisdictions, is looking for papers on these cities:

Although a relatively recent phenomenon in urban development, Chinese Contract Cities already cover 66,000 square kilometers and house tens of millions of residents. They host a wide range of businesses and have attracted huge amounts of investment. In cooperation, local government entities, private or public firms plan, build and operate Chinese contract cities.  Developers obtain land via contracts with local government or long-term leases with village collectives and enjoy revenues generated from economic activity in the planned and developed community. Residents contract a management firm for housing and other municipal services. In that way, Chinese contract cities offer innovative solutions to urban finance, planning, and management challenges.

The Chinese Contract Cities Conference will offer the world’s first international gathering of experts on this important new phenomenon.

…The proceedings of the Chinese Contract Cities Conference will appear in the Journal of Special Jurisdictions.

See also my previous post on Jialong, China’s Private City.

Your Presidential Picks

Conor Friedersdorf asks:

“You can appoint any American citizen to one term as president,” I wrote earlier this week, “so long as your choice has never run for president before. Who do you appoint to the White House and why?”

and gets some interesting answers including these two:

“Austin makes a case for the public-radio host Kai Ryssdal, highlighting parts of his résumé I’d never known about:

Born in the U.S., but grew up partially overseas. MA in national security studies from Georgetown. [Flew] airplanes off of aircraft carriers in the US Navy. Pentagon staff officer. U.S. Foreign Service. Great communication skills, as heard on his hit radio show Marketplace, where he breaks down economics and markets both foreign and domestic. After he left the Navy he would ride his bike to work at a Borders for $7 an hour. He’s got an unbelievably impressive résumé with real world experience in National Security, International Relations, China Policy, US Military policy, economics, and the markets. Plus he knows what it’s like to work a real job like the rest of us. And he speaks Chinese! That’s huge. I would get behind him any day of the week.

Russell picked one of my favorite public intellectuals:

I’d like to appoint Tyler Cowen as president—besides being an uber-rationalist, we should give him a chance to put his state capacity libertarianism idea into practice. He is also one of the best identifiers of talent possibly on Earth, so we know we would get a dream team administration, likely composed of heterodox thinkers of diverse and opposing views who could shake everyone out of complacency. Finally, he has studiously managed to avoid being labeled as particularly associated with either party, so it’s possible that popular opinion wouldn’t know what to make of it all, giving the Cowen administration a chance to chart some new path, independent of pre-established partisan biases. Magical thinking? Maybe, but no less than we’ve got permeating our politics now.”

Good picks. I’d imagine that Cowen would appoint a pretty good FDA commissioner, or at least try.

Who’s Watching You?

John List has been chief economist for UBER and for Lyft. He’s also run experiments for United, the United Way, and the Chicago schools. In his new book, The Voltage Effect, he talks about a number of these experiments but what really comes through is how much fun he is having.

Several years ago, a company that provided loans to small business owners approached me and my friend and colleague Steven Levitt to help them try to do something intriguing: accurately evaluate the character of people who had applied for loans.

Now, I can imagine a lot of ways of doing this–a traditional approach, for example, would be to look at spending decisions, credit card reports, criminal records, marriage lengths, number of children. One can imagine a lot of potential correlations to be found using big data. That would be pretty clever but here’s what List and Levitt did:

Over the course of several weeks, a research assistant walked by each establishment whose owner had applied for a loan and “accidentally” dropped his wallet on the sidewalk out front. Seconds later, a different member of my research team would pick up the wallet (in which we had placed a slip of with a name and phone number) walk into the establishment, and turn in the wallet to the owner, saying that they had found it outside on the sidewalk and weren’t sure what to do.

Then we waited.

Our first metric coded how long it took for the loan applicant to call to tell us that they had our wallet–that is, if they called at all..[Next] we looked at how much money remained inside: the original $60 (in the form of 3 $20 bills), $40, $20 or no money at all….we were invariably treated to a declaration to the effect of ‘this is how I found it.’ I thanked each person who called; then once we had the data we needed, my team and I generated character/integrity scores for each business owner and sent our reports to the company that had hire us.

Moral of the story: if you ever find a wallet in Chicago, return it. You never know who is watching.

Student Loan Forgiveness is Regressive

Medical school graduates typically owe six-figure student loans but that doesn’t mean they are poorer than high-school graduates who did not go to college. Wealth, properly measured, should include the value of educational investments students borrowed to make. Measured appropriately, student debt is concentrated among high-wealth households and loan forgiveness is regressive whether measured by income, educational attainment, or wealth. Across-the-board forgiveness is therefore a costly and ineffective way to reduce economic gaps by race or socioeconomic status.

…Accounting correctly for both human capital and effect of subsidies in student lending plans, almost a third of all student debt is owed by the wealthiest 20 percent of households and only 8 percent by the bottom 20 percent. Across-the-board student loan forgiveness is regressive measured by income, family affluence, educational attainment—and also wealth.

That’s from those well known right-wing misers at Brookings.

School Closures Were a Catastrophic Error

Jonathan Chait brings the fire:

In the panicked early week of the pandemic, the initial decision to close schools seemed like a sensible precaution. Authorities drew on the closest example at hand, the 1918 Spanish flu, which was contained by closing schools.

But in relatively short order, growing evidence showed that the century-old precedent did not offer much useful guidance. While the Spanish flu was especially deadly for children, COVID-19 is just the opposite. By the tail end of spring 2020, it was becoming reasonably clear both that remote education was failing badly and that schools could be reopened safely.

What happened next was truly disturbing: The left by and large rejected this evidence. Progressives were instead carried along by two predominant impulses. One was a zero-COVID policy that refused to weigh the trade-off of any measure that could even plausibly claim to suppress the pandemic. The other was deference to teachers unions, who were organizing to keep schools closed. Those strands combined into a refusal to acknowledge the scale or importance of losing in-person learning with a moralistic insistence that anybody who disagreed was callous about death or motivated by greed.

…the Democratic Party’s internal debate on school closings was making room at the table for some truly unhinged ideas. The head of the largest state’s most powerful teachers union insisted on the record “there is no such thing as learning loss” and described plans to reopen schools as “a recipe for propagating structural racism.”

Within blue America, transparently irrational ideas like this were able to carry the day for a disturbingly long period of time.

Chait is completely correct, of course. It really was remarkable watching in real time how supporters of public education suddenly started shouting that education didn’t matter and how supporters of structural racism suddenly started arguing that it was the people who wanted to open the schools who were racist despite the obvious deficits that closing the schools was causing.

It was almost as if there was a formation of a mass psychosis.

Read the whole thing.

Dominant Assurance Contracts and Quadratic Funding

Here is my keynote talk for the ACM Advances in Financial Technologies conference. I discuss Two Novel Mechanisms for Funding and Discovering Public Goods, namely dominant assurance contracts (with experimental support here) and the Buterin, Hitzig, Weyl work on quadratic funding.

Lots of other excellent talks on blockchains, AMMs, decentralized finance and so forth are at the link.

Enemy of All Mankind and Indian Chemical Engineering

In 1695 the British pirate Henry Every commanding a stolen ship, one of the fastest in the world, captured the Ganj-i-Sawai an immense treasure ship carrying the granddaughter of the Mughal Emperor, Aurangzeb, from her pilgrimage to Mecca. The looting and mass rapes set off repercussions around the world.

Enemy of All Mankind is Steven Johnson’s page-turning account. I’m not fascinated by pirates per se but Johnson surrounds the narrative arc with expert historical context. Anyone can tell you that cotton was important in trade between India and Europe but you would be hard-pressed to find a more concise account of why than Johnson’s primer. What made Indian cotton unique wasn’t the cotton but Indian chemical engineering.

What made Indian cotton unique was not the threads themselves, but rather their color. Making cotton fiber receptive to vibrant dyes like madder, henna, or turmeric was less a matter of inventing mechanical contraptions as it was dreaming up chemical experiments. The waxy cellulose of the cotton fiber naturally repels vegetable dyes….The process of transforming cotton into a fabric that can by dyed with shades other than indigo is known as “animalizing” the fiber, presumably because so much of it involves excretions from ordinary farm animals. First, dyes would bleach the fiber with sour milk; then they attacked it with a range of protein-heavy substances: goat urine, camel dung, blood. Metallic salts were then combined with the dyes to create a mordant that permeated the core of the fiber.

…The result was a [soft] fabric that could both display brilliant patterns of color and retain that color after multiple washings. No fabric in human history had combined those properties into a single cloth.

Lots of other insights. Every, by the way, was never captured but in 2014 a Yemeni coin that might have come from the Ganj-i-Sawai was found in a Rhode Island orchard.

See also my previous post on Enemy of All Mankind.

What to Watch

Some things I have watched, some good, some not so good.

Cobra Kai on Netflix: A reliable, feel good show, well plotted. It plays like they mapped each season in advance covering all permutations and combinations of friends turning into enemies and enemies turning into friends. Do I really need five seasons of the same thing? No. But I still watch. Popcorn material.

Maid on Netflix: I appreciated the peek into the difficulties of managing the welfare system and pulling oneself up by one’s bootstraps when your family is pulling you down. Margaret Qualley (Andie MacDowell’s daughter who plays her mother on the show) has an odd charisma. It’s been noted that she is an impossibly perfect mother. Less noted is that she is a terrible wife, a poor daughter to her father and a bad girlfriend. Everyone deserves a break is the message we get from this show, except men. Still, it was well done.

The Last Duel is one of Ridley’s best. Superb, subtle acting from Jodie Comer–deserving of Oscar. Slightly too long but there are natural breaking points for at home watching. N.B. given the times it can’t be interpreted ala Rashômon as many people suggest but rather the last word is final which reduces long term interest but I still liked it.

Alex Rider on Amazon: It’s in essence a James Bond origin story. If that sounds like something you would enjoy, you will. I am told the books are also good for YA.

14 Peaks: Nothing is Impossible: A mountain documentary following Nimsdai Purja as he and his team attempt to summit all 14 of the world’s 8,000-meter peaks in seven months. In many ways, the backstory–Purja is a Gurka and British special forces solider–is even more interesting. It does say something that most people don’t know his name.

The Eternals on Disney: Terrible. Didn’t finish it. A diverse cast with no actual diversity. Kumail Nanjiani, Dinesh from Silicon Valley, plays his super hero like Dinesh from Silicon Valley. Karun, the Indian sidekick, is the most authentic person in the whole ensemble. Aside from being boring it’s also dark, not emotionally but visually. It doesn’t matter the scene, battle scenes, outdoor scenes, kitchen table scenes–all so dark they are literally hard to see.

Wheel of Time: It’s hard to believe they spent a reported $10 million per episode on this clunker. The special effects were weak, the editing was bad, the mood-setting and world building were poor. The actors have no chemistry. Why would anyone be interested in Egwene who shows no spunk, intelligence or charisma? For better in this genre is The Witcher on Netflix.

The French Dispatch (theatres and Amazon): I loved it. Maybe the most Wes Anderson of Wes Anderson movies, so be prepared. Every scene has something interesting going on and there’s a new scene every few minutes. A send-up and a love story to the New Yorker. Lea Seydoux is indeed, shall we say, inspiring.

Buy Things Not Experiences!

A nice, well-reasoned piece from Harold Lee pushing back on the idea that we should buy experiences not goods:

While I appreciate the Stoic-style appraisal of what really brings happiness, economically, this analysis seems precisely backward. It amounts to saying that in an age of industrialization and globalism, when material goods are cheaper than ever, we should avoid partaking of this abundance. Instead, we should consume services afflicted by Baumol’s cost disease, taking long vacations and getting expensive haircuts which are just as hard to produce as ever.

Put that way, the focus on minimalism sounds like a new form of conspicuous consumption. Now that even the poor can afford material goods, let’s denigrate goods while highlighting the remaining luxuries that only the affluent can enjoy and show off to their friends.

[The distinction is too tightly drawn]…tools and possessions enable new experiences. A well-appointed kitchen allows you to cook healthy meals for yourself rather than ordering delivery night after night. A toolbox lets you fix things around the house and in the process learn to appreciate how our modern world was made. A spacious living room makes it easy for your friends to come over and catch up on one another’s lives. A hunting rifle can produce not only meat, but also camaraderie and a sense of connection with the natural world of our forefathers. In truth, there is no real boundary between things and experiences. There are experience-like things; like a basement carpentry workshop or a fine collection of loose-leaf tea. And there are thing-like experiences, like an Instagrammable vacation that collects a bunch of likes but soon fades from memory.

Indeed, much of what is wrong with our modern lifestyles is, in a sense, a matter of overconsuming experiences. The sectors of the economy that are becoming more expensive every year – which are preventing people from building durable wealth – include real estate and education, both items that are sold by the promise of irreplaceable “experiences.” Healthcare, too, is a modern experience that is best avoided. As a percent of GDP, these are the growing expenditures that are eating up people’s wallets, not durable goods. If we really want to live a minimalist life, then forget about throwing away boxes of stuff, and focus on downsizing education, real estate, and healthcare.

Hat tip: The Browser.

Photo Credit: MaxPixel.

The Abundance Agenda

Excellent piece by Derek Thompson:

America has too much venting and not enough inventing. We say that we want to save the planet from climate change—but in practice, many Americans are basically dead set against the clean-energy revolution, with even liberal states shutting down zero-carbon nuclear plants and protesting solar-power projects. We say that housing is a human right—but our richest cities have made it excruciatingly difficult to build new houses, infrastructure, or megaprojects. Politicians say that they want better health care—but they tolerate a catastrophically slow-footed FDA‪ that withholds promising tools, and a federal policy that deliberately limits the supply of physicians.

The way I put it in Launching the Innovation Renaissance is that we can be an Innovation Nation or what we are now which is a Welfare-Warfare State.

To give one example, the debate over the Patient Protection and Affordable Care Act was long and vociferous. One of the reasons the debate was vociferous is that the PPACA is part of the vision of the welfare state, a redistributive vision.

How would the innovative state approach the issue of health care? From an innovation perspective two facts about health care are of great importance. First, a huge amount of health care spending is wasted. A strong consensus exists on this point from health care researchers all along the political spectrum. More money will get you a much bigger house, but once you have basic health insurance more money won’t get you much better health care. Should Bill Gates get prostate cancer, his billions will get him a private room and a personal physician, but they won’t do much to extend his lifespan beyond that of a middle-class man with the same disease.

…The second fact is that although spending more on health care now doesn’t get you much, spending more on health care research gets you a lot. It has been estimated, for example, that increases in life expectancy from reductions in mortality due to cardiovascular disease over the 1970-1990 period were worth over $30 trillion–yes, 30 trillion dollars. In other words, the gains from better health over the period 1970-1990 were comparable to all the gains in material wealth over the same period.

Looking at the future, if medical research could reduce cancer mortality by just 10 percent, it would be worth $5 trillion to U.S. citizens (and even more taking into account the rest of the world). The net gain would be especially large if we could reduce cancer mortality with new drugs, which are typically cheap to make once discovered. A reduction in cancer mortality of this size does not seem beyond reach, and the value of such a reduction in mortality far exceeds that of spending more on medical care today. Yet because the innovation vision is not central to our thinking, we overlook potentially huge improvements in human welfare.

The numbers would be higher now due to inflation, population and income growth but you get the idea.