Category: Current Affairs

On fentanyl, from the comments

I always find it helpful to recall that the US was the not the first country to be hit by fentanyl. Estonia, for instance, had a massive wave of fentanyl deaths that started before the US, without all the US prescription opioid consumption, and peaked sooner. Currently, their opioid supply has moved beyond fentanyl to derivatives that are even less safe.

It seems to me that the problem was not overprescription per se. Rather, as in Estonia, there seems to be spiral where opioids are seen as acceptable drugs of abuse (entering into the space of marijuana, alcohol, tobacco, and ecstasy), illicit suppliers elect to increase the addictiveness and potency of their drugs, and we end up with much more deadly drugs.

The biggest problem US docs created was removing the social stigma against opioid use and abuse. We created a perception that being addicted to opioids was no big deal, mostly safe, and something that people could do without losing all their social standing.

Does decriminalization work? Nowhere near as well as cultural barriers. Portugal, for instance, has safe injection and all the rest, yet it is experiencing a new wave of heroin use as old addicts return to heroin thanks a weakened economy. And lest we forget the difference in price for legitimate opioids and heroin/fentanyl is not all that high. Legitimate heroin supplies are going to cost at least as much as black market opioids so I suspect we will still have a lot of users who end up on fentanyl derivatives (for which there are no safe prescribing guidelines, nor even data for simple things like LD-50).

As with most major problems, the cause and solution are likely to be social. Historically, these sorts of epidemics die down as people die and the younger users decide to not try the things that killed all their older peers. Quite possibly all our “harm reduction” strategies and treatments will delay this process and leave more people dead; a first pass analysis of mass naloxone treatment suggested that it was associated with difference in difference increase in the opioid death rate due to increased use.

Unfortunately, I see no way out of the current situation that does not risk leaving many, possibly more than current rates, people dying.

That is from a commentator named Sure.

China fact of the day

China is set to add new coal-fired power plants equivalent to the EU’s entire capacity, as the world’s biggest energy consumer ignores global pressure to rein in carbon emissions in its bid to boost a slowing economy.

Across the country, 148GW of coal-fired plants are either being built or are about to begin construction, according to a report from Global Energy Monitor, a non-profit group that monitors coal stations. The current capacity of the entire EU coal fleet is 149GW.

While the rest of the world has been largely reducing coal-powered capacity over the past two years, China is building so much coal power that it more than offsets the decline elsewhere.

Here is more from Leslie Hook at the FT.

My podcast with Shaka Senghor

Here is the audio and transcript, this was one of the “most different” Conversations with Tyler and also one of the most interesting.  Here is part of the summary introduction:

Shaka joined Tyler to discuss his book Writing My Wrongs: Life, Death, and Redemption in an American Prison, what it was like to return to society not knowing the difference between the internet and a Word document, entrepreneurialism and humor in prison, the unexpected challenges formerly incarcerated people face upon release, his ideas for helping Detroit, what he connects with in Eastern philosophy, how he’s celebrating the upcoming anniversary of his tenth year of freedom, and more.

Here is one excerpt:

SENGHOR: Early, when I first went to prison, you can get all types of books. As I got deeper into my prison sentence, they started banning a lot of those books. Malcolm’s book is probably one of the most popular books in prison because it’s, to me, the one book about personal transformation that just permeates that environment. And it doesn’t matter whether you’re black, white, Native American, whatever. It’s something about his redemptive story that just resonates with people who are incarcerated.

Oftentimes, we exchanged books with each other, and we would buy books. I would order books from different outlets that sold books to men and women in prison. The prison library — it varies from prison to prison. Some are better than others.

Back in the day, you used to get books donated by people. They will have estates, and they would just say, “Hey, let’s donate these to the local prison.” But now it’s becoming more and more restrictive in terms of what you can read, specifically around books that reflect black culture, which was really something that was shocking to me.

A lot of those books I read in the early stages of my incarceration are now banned. You can’t get Donald Goines books the way that you used to. Their excuse is that it talks about crime and things like that. But I’m like, “You can’t get that, but you can get Stephen King, which is murder and mayhem.”

COWEN: Can you get Shakespeare? That’s also murder and mayhem.

SENGHOR: Yeah, murder and mayhem. Yeah, you can definitely get all the Shakespearean classics and things like that. This just reflects the contradictions in larger society.

COWEN: I think you were seven years total in solitary, in one period of four years running. Toward the end of that four-year period, did you feel like you were going crazy? Or did you have some greater, stoic sense of calm?

And:

COWEN: The individuals who are incarcerated — what are their senses of humor like? Is it different on the inside or just the same? Are they funnier?

SENGHOR: It is probably one of the most fascinating, quick-witted spaces you can imagine. I did an interview some years back with Trevor Noah, and I remember telling him like, “Prison is hilarious.” And he was like, “No, no, no. That doesn’t seem like quite a good narrative.” [laughs] But what I would always explain to people is that you can’t survive that environment without the ability to laugh at the absurdity of it, the ability to laugh at the craziness of it, the creativity of it.

And you have some brilliant, brilliant comedians in that environment. There’s actually a comedian who’s free now, Ali Siddiq, who’s just an incredible storyteller, and he’s a great comedian. And that talent is abundant in that environment. Guys crack jokes all the time. The officers crack jokes. It’s one of the things that is universal — laughter — and you need that in order to survive hardship.

My favorite part of the dialogue starts with this:

COWEN: It seems to me, from my great distance, that a lot of men in prison have women on the outside who are very strongly attracted to them. How do you think about that? Why do you think there’s a special attraction to men in prison?

His answer was excellent, but too long to reproduce here.

Are central banks manipulating asset prices?

That case still needs to be made, here is Cullen Roche:

1) Are Central Banks “pushing money” on people? 

The whole premise of the first paragraph is that Central Banks have implemented QE and forced money onto people which has resulted in a lot of asset chasing.¹ I’ve never understood this mentality to be honest. When the Fed engages in QE they expand their balance sheet and buy a bond from the private sector. In a low inflation environment bonds become increasingly similar to cash so these sellers of bonds are selling one cash-like instrument for another. As a result, the private sector ends up holding more low interest bearing cash-like instruments and the Fed holds higher interest bearing cash-like instruments. So the whole basis of this theory is that if someone who was already holding a risk averse asset then sells that risk averse asset for something very similar then they will suddenly become less risk averse and run out and drive up stocks? That doesn’t even make sense. If I have a moderate risk tolerance and hold a portfolio of 50% bonds and 50% stocks and I want to sell my bonds because I read a scary article about how bonds are super risky because interest rates are going to rise (more on this later) then I will swap out some part of my 50% bonds for cash or something else that’s relatively low risk (to maintain my moderate risk profile). I don’t swap out my whole bond position for a stock position or a role of the dice at the roulette wheel.

Anyhow, the evidence doesn’t even mesh with this. Global Central Banks have been implementing QE for 10 years now. The average annual return of the Vanguard Total World Index is 8.9% per year over that period. That is 0.02% higher than the average 35 year return. So, if investors are acting crazy today then they’ve been crazy for 35 years. Which might be true. It’s probably true. I actually think investors are usually kind of crazy. But they’re not any crazier today than they were 35 years ago.

Sensible throughout.

*The Decadent Society*

The author is Ross Douthat and the subtitle is How We Became the Victims of Our Own Success.  Excellent book!  It has a real dose of Peter Thiel (and some Tyler Cowen), and most of it comes as fresh material even if you have read all of Ross’s other columns and books.  Imagine the idea of technological stagnation tied together with a conservative Catholic critique of decadence, and in a convincing manner with a dose of pro-natalism tossed in for good measure.  There is commentary on Star Wars, Back to the Future, Jordan Peterson, and much more.

America’s problems are not what you think they are!

Definitely recommended, due out February, and you can pre-order here.

A Coasean solution for New Delhi?

If the late Ronald Coase could be called upon to advise the Delhi government, he would persuade chief minister Arvind Kejriwal to pay farmers in Punjab and Haryana to stop burning crop residue.

In recent times, air quality in Delhi has remained poor throughout the year for various reasons, including the rapid loss of green cover, construction of homes and infrastructure projects, and vehicular as well as industrial pollution. But for a few weeks every November, it gets almost impossible to breathe. The last straw has been the crop residue burning (CRB) by farmers in Punjab and Haryana, which causes a heavy smog to settle over Delhi…

The good news is that these [health] costs—avoidable by Delhi residents if CRB were eliminated—are about 10 times the cost that would be incurred by farmers in adopting substitutes to crop burning. Where policymakers see costs, Coase saw potential for gains from trade.

Here is more from Shruti Rajagopalan.

“OK Boomer”

That is the topic of my latest Bloomberg column, how can I excerpt this one?:

On the negative side, I worry that those who deploy “OK Boomer” are putting themselves down and signaling their own impotence. I am not arguing for “[Expletive Deleted] Boomer,” even though it would have a vitality and rebellious spirit very much reminiscent of the 1960s or 1970s (which of course were quintessential boomer eras). But when I read or hear “OK Boomer,” I start to think there might be something special about baby boomers after all. We boomers may not be different in kind from other generations, but we do seem to inspire rhetorical creativity in our critics.

The closest earlier analog to “OK Boomer” is probably “OK, Chief,” a slightly sardonic response to a bossy or persistent request. So the phrase “OK Boomer” is itself an implicit and indeed somewhat passive admission as to who is really in charge. Members of Gen Z are subtly demonstrating that the clichés about them may have a grain of truth.

As I said I am a baby boomer, born in 1962, and I do a lot of public speaking about such topics as the absence of free lunches in this world. Yet I have never heard anyone say “OK Boomer” back to me. Instead I see the phrase on social media — another sign of the essentially passive nature of the response. (And wearing an “OK Boomer” hoodie or buying other such merchandise doesn’t seem like a major sign of rebellion, either.)

If there is any native medium for the “OK Boomer” meme, in fact, it is short TikTok videos, one of the more evanescent forms of social media. That the site seems plagued by Chinese censorship is just another state of affairs that boomers find more offensive than does Generation Z.

There is also this:

I am greatly pleased that the post-boomer generations are by all appearances less racist and sexist than their predecessors. Still, prejudices are part of human nature. There is always a danger that they will re-emerge, redirected at other targets — defined by their age, their political views, their wealth, the size of their carbon footprint, or some other salient variable. Prejudice doesn’t become acceptable simply because it is not directed at someone’s race, ethnicity or gender.

There is indeed much more at the link.  A better cause for young people would be to fight against the growing age segregation in American society.

Revisiting NSA Spying

In 2013 in light of the Snowden revelations about NSA spying I wrote, Did Obama Spy on Mitt Romney?

Did Obama spy on Mitt Romney? As recently as a few weeks ago if anyone had asked me that question I would have consigned them to a right (or left) wing loony bin. Today, the only loonies are those who think the question unreasonable. Indeed, in one sense the answer is clearly yes. Do I think Obama ordered the NSA to spy on Romney for political gain? No. Some people claim that President Obama didn’t even know about the full extent of NSA spying. Indeed, I imagine that President Obama was almost as surprised as the rest of us when he first discovered that we live in a mass surveillance state in which billions of emails, phone calls, facebook metadata and other data are being collected.

The answer is yes, however, if we mean did the NSA spy on political candidates like Mitt Romney. Did Mitt Romney ever speak with Angela Merkel, whose phone the NSA bugged, or any one of the dozens of her advisers that the NSA was also bugging? Did Romney exchange emails with Mexican President Felipe Calderon? Were any of Romney’s emails, photos, texts or other metadata hoovered up by the NSA’s break-in to the Google and Yahoo communications links? Almost certainly the answer is yes.

As I read the situation, mass government surveillance has now become accepted in America, as in China. This bit remains relevant:

Did the NSA use the information they gathered on Mitt Romney and other political candidates for political purposes? Probably not. Will the next president or the one after that be so virtuous so as to not use this kind of power? I have grave doubts. Men are not angels.

Can we spend another $52 trillion without raising middle class taxes?

The question seems like a joke, right?  Yet because so much of our elite media class wants Elizabeth Warren to win, they are contorting themselves into every possible direction to make this one sound coherent.  It is not a question of whether total nominal expenditures on health care go up or down, but rather of thinking through incidence and opportunity cost and where the real burdens of the plan will fall.  Those are the core themes of my Bloomberg column, here is one excerpt:

Another part of the plan is to pay lower prices — 70% lower — for branded prescription drugs. That is supposed to save about $1.7 trillion, but again focus on which opportunities are lost. Lower drug prices will mean fewer new drugs are developed. There is good evidence that pharmaceuticals are among the most cost-effective ways of saving human lives, so the resulting higher mortality and illness might be especially severe.

And the close:

Warren’s proposals, when all is said and done, are best viewed not as a way of paying for her program but as a series of admissions about just how expensive it would be. Whether or not you call those taxes, they are very real burdens — and many of them will end up falling on the middle class.

By the way, here is a good NYT summary of Warren’s financing plan.  Here is a good Maxim Jacobs tweet:

It’s really hard to pick out which part of her plan is most insane?: – Lowering brand drug pricing by 70%? – CMS paying specialists less money – Taxing unrealized capital gains – Claim hiring more IRS agents will raise $2.3 trillion – “Not one penny in middle-class tax increases”

Here is more from Peter Suderman.

How to think about the Chilean (and other) protests

That is the topic of my latest Bloomberg column, here is one excerpt:

Second, a protest against poor conditions is not the same as a protest against inequality. Many Chilean complaints revolve around the pension system, health care, water rights, public transportation, schools and corruption. Are Chileans upset that their transport options aren’t better? That’s a complaint in absolute terms. Or are they upset that they are riding the subway while many of the wealthy have private cars with drivers? That’s a relative complaint.

The answer will depend on the protester, and in virtually all protests around the world there will be those with both motives. But some North American commentators try to equate these two grudges and subsume them all under the heading of inequality. That just won’t wash.

And don’t forget this:

In the case of Chile, it has the highest real wages in Latin America, income inequality has mostly been falling, and life expectancy is above average for the region. By Latin American standards Chile has a low rate of crime and a high degree of public order. Chile has had open and honest elections, and peaceful transfers of power, since 1990.

So high expectations may be more relevant than either “inequality” or “neo-liberalism” per se, at least for many of the protestors.  There is much more of interest at the link, including some speculations as to why Chile may be different:

Another observation: Income inequality is often more galling when different economic classes encounter each other on a regular basis. So much Chilean economic and social activity is concentrated in Santiago, just as in South Korea it is in Seoul and in Singapore it is in … Singapore. In all three countries, I believe, feelings of inequality and envy are worse for that reason. By contrast, if you are a lower-middle-class person in, say, Mississippi, you may view the mansion and private plane of Bill Gates as if from a different universe.

I’ve also found Chile to have a relatively tough set of social expectations in terms of class, dress and educational background, and a relatively narrow set of expectations for women. These pressures for conformity may contribute to discontent.

Recommended.

How can California be left in the dark?

That is the title of my latest Bloomberg column, the inspiration for which came from an Alex T. tweet.  Here is one passage:

Economists themselves have been of no great help. My Twitter feed includes plenty of the world’s greatest (or at least best-known) economists. They love to debate Elizabeth Warren’s plan for a wealth tax, an idea that probably isn’t going to happen (just ask Mitch McConnell or, for that matter, any moderate Democratic senator). When it comes to designing a better incentive model for California power utilities — a concrete problem for which economics is remarkably well-suited — there has been close to complete silence.

Economists are just reflecting a more general failing in American political debate. The old saying that all politics is local has been turned on its head: All issues are now national in scope and partisan in nature. People are less interested in the day-to-day mechanics of actual governance, including at the state and local level. The comeuppance for those ideological obsessions is now upon us.

I wonder how much worse things will have to get before they become better.

The McConnell-Trump impeachment game

That is the topic of my latest Bloomberg column, here is one key excerpt:

A second factor, however, pushes in the opposite direction. If Trump is viewed as too corrupt, too poisonous or too unreliable by swing voters, some of these senators also run the risk of losing their jobs. These senators therefore wish to rein in Trump, if only for selfish reasons. Trump and his policies are not very popular, as illustrated by numerous polls. And some senators might decide that loyalty to country, and to the future of the world, also argues for constraining Trump.

Reining in Trump does not have to mean forcing the leopard to change its spots, which is probably impossible anyway. But it could mean nudging Trump to be less outrageous: Don’t respond to the Ukraine accusations by encouraging China to investigate Joe Biden’s son, for example. Be more careful in your dealings with Turkey and the Kurds. Refrain from calling Never Trump Republicans “human scum.”

OK, so now to take the next step: How can these senators possibly check Trump? The threat of impeachment is their most potent weapon…

The upshot is that McConnell’s power over the president is growing. These are exactly the kinds of wrist slaps Trump notices.

The question, of course, is how Trump will respond to critical signals from Republican senators. My guess is that he will not play a cooperative “tit for tat” strategy, trading signals in a rational manner to keep senators in line and proceeding toward an orderly resolution of the impeachment judgment from the House. Rather, the signals sent his way might enrage him or raise his stress level to the point where he behaves less rationally than usual. Then the Senate will have to work all the harder to constrain Trump, thereby upping the stakes — and the stress — once again.

We will see.

The economics of California power blackouts

Once again there is a risk of fire so they are turning off the power in many parts of dry and windy northern California, for 2.7 million people.  From The New York Times:

“When you turn the lights out on 3 million people because you have to keep the power lines safe then there’s no reason you should be allowed to continue,” Mr. Court said.

Michael Lewis, PG&E’s senior vice president of electric operations, said the issue was safety.

“We would only take this decision for one reason — to help reduce catastrophic wildfire risk to our customers and communities,” Mr. Lewis said in a statement.

PG&E filed for bankruptcy in January after amassing tens of billions of dollars in liability related to two dozen wildfires in recent years. As speculation grew that its equipment might be the cause of the Kincade Fire, its stock price plummeted about 30 percent on Friday to $5.08, a small fraction of its 52-week high of $49.42.

I would think the market expectation is that if PG&E is allowed to continue, as is likely to be the case, that it slowly will claw its way back to profitability, given that this is a highly regulated sector with barriers to entry.  So the company is afraid of losing its expected remaining profit from further liability, and thus it plays it safe with power, too safe because they don’t suffer so much from the power blackouts.  Sadly, the retail customers do not have many other options.

One solution would be to remove the liability the company faces from the fires, or alternatively you could add a liability option of set of fines from power cuts (call them “breach of contract”).  Both changes would introduce greater symmetry into the liability equation, but of course the former would eliminate the incentives for fire safety and fire reduction and the latter might bankrupt the company or create unenforceable or undefinable legal obligations.  Still, it hardly seems the current arrangement can be first best.

How about raising rates?  And then spending more on capital improvements?  (do read the tweets behind that link):

And in those proceedings, there is an independent division of the CPUC (the ‘Office of Ratepayer Advocates’) that has typically argued against maintenance and safety expenditures, so that rates can be kept low

How about raising rates a lot?  But maybe it is too late for that.

Another option, which I do not feel I have enough information to assess, is to have the state government buy out the power company.  That is not usually a good idea but in this case there is at least a chance it could lead to superior incentives.  The resulting company would then be geared toward pleasing voters, hardly an ideal arrangement but possibly better than the current incentives toward excess safety and massive power cuts with no real chance of consumer backlash.  With government ownership, how would the state internalize the liability risk?  How much would state borrowing rates rise?

Have you seen good proposals for improving the incentives in this rather disastrous matter?

Simple truths about power

These are all people who are connected to the power of government.

Either physically, i.e. economically, or emotionally—power. The dream of sharing power. The gender studies professor not only gets her money eventually from government, but she dreams of being part of a world-transforming enterprise.

Here, I agree with you. There is a dream that unites progressives and bureaucrats and wealthy technologists. And where does that dream come from?

It’s a dream peculiar to this class. Other classes have been united by different dreams.

Is it a substitute for religion?

Yes.

Is that its primary emotional charge?

Well, I don’t know about primary. Look, the primary element is, as we Christians were taught, pride. That is the sin of sins. There is nothing that moves human beings quite so much as the desire to be on top of other human beings.

That is from an interview with Angelo Codevilla.

Who’s a Russian Asset?

Mark Zuckerberg was once again pilloried in Congress. How many companies in the Libra association are headed by LGBTQ people? Isn’t it true that Libra is a project of white men? What are you doing for African Americans whose lives you have ruined? Do you discuss white supremacy at your far right dinner parties? And, of course, overlaying all of this was the idea of Russian interference.

Ironically, one of the goals of the Russians was to enhance US grievances and elevate identity politics. Most notably, some of the most successful Black Lives Matter memes and tweets were created by the Russians. As the NYTimes wrote:

“The most prolific I.R.A. efforts on Facebook and Instagram specifically targeted black American communities and appear to have been focused on developing black audiences and recruiting black Americans as assets,” the report says.…The report says that while “other distinct ethnic and religious groups were the focus of one or two Facebook Pages or Instagram accounts, the black community was targeted extensively with dozens.” In some cases, Facebook ads were targeted at users who had shown interest in particular topics, including black history, the Black Panther Party and Malcolm X. The most popular of the Russian Instagram accounts was @blackstagram, with 303,663 followers.

The Internet Research Agency also created a dozen websites disguised as African-American in origin, with names like blackmattersus.com, blacktivist.info, blacktolive.org and blacksoul.us. On YouTube, the largest share of Russian material covered the Black Lives Matter movement and police brutality, with channels called “Don’t Shoot” and “BlackToLive.”

…Of 81 Facebook pages created by the Internet Research Agency in the Senate’s data, 30 targeted African-American audiences, amassing 1.2 million followers.

The fact that Black Lives Matter was promoted by the Russians doesn’t detract from their legitimate goals. Nevertheless, one can imagine the Russians chortling at how successful their attacks have been. Mark Zuckerberg is one of America’s most successful entrepreneurs, the creator of Facebook, a world-dominant firm, a firm that the Russians and Chinese fear and instead of rejoicing in America’s success, America’s political class are seeking to take Facebook and its CEO down through the petty politics of identity.

Who’s a Russian asset?