Category: Current Affairs
A small step toward cosmopolitan efficiency and away from nationalism (Mexican law about beach homes)
Morgan Warstler points me to this article:
Mexican congressmen voted on Tuesday to change a law that makes it difficult for foreigners to own beach homes in Mexico.
The law prevents any foreigner from directly owning a home that is located within 50 kilometers of Mexico’s coasts. Foreigners in Mexico are also banned from owning homes that are located within 100 kilometers of the country’s international borders.
Congressmen from Mexico’s house of representatives argued that the law was “outdated,” that it hampers investment in the country, creates unnecessary bureaucracy and no longer matches reality.
They pointed out that thousands of Americans and Canadians already own beach homes in Mexico anyways, and many more are interested in buying.
But currently, foreigners who want to have coastal properties in Mexico need to acquire these assets through Mexican companies or real estate trusts in which a local bank buys a property and then “leases” it to its foreign occupant for an annual fee. A report that was compiled by the Mexican congressmen who support this legal shift said that, between 2000 and 2012, about 49,000 foreigners bought homes in “restricted areas,” by going through these legal loopholes.
But do note:
The Mexican Senate, and the President of Mexico must now vote on this proposal for it to pass. Because this proposal would strike down a law that is part of Mexico’s constitution, it must also be approved by a majority of Mexico’s state legislatures.
Detroit facts for today
…the city’s per capita income, averaged over its 684,799 residents, is just $15,261 per year. (That’s less than half the income of neighboring Livonia.) Auto insurance alone eats up a good $4,000 of that, for residents with a car.
And then comes the litany of municipal woes: Detroit has the highest violent crime rate of any major US city, at five times the national average; there were 344 murders in 2011, of which just 39 were solved. Right now, the average response time, if you put in an emergency call to the Detroit Police Department, is 58 minutes.
Detroit’s infrastructure is crumbling: 40% of its street lights are out of order, and it has 78,000 abandoned and blighted structures, of which 38,000 are considered dangerous buildings. Those buildings account for a large proportion of the 12,000 fires Detroit has every year. At the moment, firefighters are instructed not to use the hydraulic ladders on their firetrucks unless there is an immediate threat to life, because the ladders have not received safety inspections for years. Detroit also has just 36 ambulances, of which generally no more than 14 are in operation at any given time. And in terms of the city’s IT infrastructure — well, you can probably guess; suffice to say that a recent IRS audit characterized the city’s income tax system as “catastrophic”.
As far as Detroit’s balance sheet is concerned, there is $9 billion of debt, excluding pension liabilities, and also excluding healthcare and life insurance obligations which are calculated at roughly $6 billion. Debt service in 2013 is projected at more than $240 million, or about 22% of total revenues. Worryingly, under the section of the proposal headed “Realization of Value of Assets”, one finds the priceless collection owned by the Detroit Institute of Arts…
That is all from Felix Salmon.
Sentences of interest
It’s worth emphasizing that the recent rise in interest rates has been a global phenomenon, not just something seen in the United States.
That is from James Hamilton.
Dani Rodrik has been right all along
For a few years now Dani Rodrik has been tweeting about how second-rate, illegitimate, and undemocratic the current Turkish regime is. He never convinced me, not because I held firmly to some opposing perspective, but simply because I don’t follow Turkish politics closely enough for claims of any kind to have had traction on my views.
It now seems he has been quite clearly correct all along. The Turkish state has behaved very badly in response to recent protests and shown how deeply it is infected by many of the characteristics of autocratic and authoritarian regimes. The treatment of children, doctors, foreign and domestic journalists, the use of chemicals in the water cannon, the indiscriminate use of the riot police, and the generalized paranoid suspicion of the Turkish population — among other factors — all point in this direction. Democracy is about more than just elections.
Here is a short update on recent events. Here is a short piece on the not very impressive response of the Turkish media.
For some coverage of what is going on you can follow @memmetsimsek or Rodrik himself. Michael Clemens has connections to Turkey and he is also a useful source.
If nothing else, it can be forecast that the variance of possible outcomes for Turkey has gone up.
No Patents on Genes
The Supreme Court ruled unanimously yesterday in Association of Molecular Pathology v. Myriad Genetics that a gene, such as BRCA1 or BRCA2, does not qualify for a patent. The fact that Myriad isolated the DNA is not enough to distinguish it from its in situ counterpart as the information it contains is the same. However, cDNA, a version of the gene that has been stripped of non-coding sequences is subject to patent.
With this ruling the price of most of Myriad’s tests will fall as competition enters the market (the BRACAnalysis tests are actually a number of different tests, as I read the technical specifications, only some of these depend on cDNA. The markets appeared to have been initially confused about this.). Even more importantly, the Myriad patents were broad and they prevented researchers from freely studying the BRCA1 and BRCA2 genes, from improving the tests or from developing additional applications. The giants demanded payment (video) from those who would stand on their shoulders. I think the restrictions retarded progress–as have similar restrictions–to an extent that made the patents difficult to justify.
Although I am broadly in agreement with the ruling, it’s also clear that the limited flexibility of patent law–you get a 20-year patent or nothing–and the fact that patent law is not based on patent theory (pdf) greatly hampers the ability to tailor patent law optimally. The ruling, for example, says that a firm can’t patent a gene that it discovers but it can patent the cDNA that it develops. It’s the discovery, however, that’s expensive. The development of cDNA is today a trivial step. Thus, you can patent the trivial step but not the giant leap.
You might think that the law draws a bright line between discoveries which cannot be patented and inventions which can but that’s not correct. Discoveries can be patented and the ruling goes out of its way to push back against the view that they can’t. The ruling correctly notes that a “considerable danger” is that patents on basic ideas and tools would “inhibit future innovation”. Yet the law makes no mention of these considerations and the court provides no guidance on implementation.
Coherent or not, the recent patent cases do indicate that the SC is no longer acceding to the United States Court of Appeals for the Federal Circuit–they are reestablishing control and pushing back in the right direction on the Tabarrok curve.
Breakthrough with Honduran charter cities
Written reports from Central America often require Straussian skills, but at least on the surface it would appear that Honduras will go forward with some version of the free city/charter city idea. A translation passing through Google, Tom Bell, and Lotta Moberg (not holding any one of them responsible for it, but to my eye it appears acceptably close) indicates:
“The Law complements the amendments to Articles 294, 303 and 329 of the Constitution which paved the way for the creation of these special areas. [Those amendments fixed the problems that caused the Honduran S.Ct. to strike down the earlier version of the statute, which aimed to establish REDE.] The ZEDE legislation authorizes the establishment of courts with exclusive jurisdiction, which may adopt legal systems and traditions of other parts of the world, provided that they ensure equal or better protection of constitutional human rights protected under Honduran law.”
The legislation was hardly crammed down the legislature’s throat. As I mentioned, the Honduran S.Ct. struck down an earlier version of the statute. The ZEDE legislation sparked “a fierce debate because several municipalities fear losing their autonomy and tax collection.” (The answer to those objections, in floor debate: You can arrange annexation by the ZEDE, winning the same legal status.)
Interested in moving there? “The ZEDE may establish coexistence agreements with people who wish to live or reside freely within their jurisdiction.”
There is a Honduran Spanish-language link here (it doesn’t work in every browser, but experiment). It starts with this, which seems clear enough:
La ley orgánica especial que regulará las Zonas de Empleo y Desarrollo Económico (ZEDE), la nueva versión de las “ciudades modelos”, fue aprobada ayer por el Congreso Nacional en su último debate, lo que deja las puertas abiertas para que empresarios extranjeros inviertan en regiones específicas con reglas diferentes al resto del país y con autonomía propia.
Developing…
And for the pointer I thank Lotta Moberg.
21-minute video interview with Thomas Schelling
You will find it here, recently recorded. Hat tip goes to Daniel Klein.
Wages in the UK
Total pay in some parts of the UK has shrunk by more than 10% since the start of the downturn in 2007, analysis by a union organisation suggests. The TUC said north-west and south-west England had seen the sharpest cuts – 10.6% and 10.1% respectively. It blamed wages not keeping pace with inflation and changes in employment, such as more part-time working.
The story is here. The pointer is from John van Reenan, who writes further on the topic here (pdf).
Betsey Stevenson is headed to the Council of Economic Advisers
A very good pick of course, and her partner Justin Wolfers will visit again at Brookings, or so I am told on Twitter.
My model for how the Fed thinks about withdrawing QE
Bernanke believes QE works, but having been caught off-guard once before, in 2007-2008, he doesn’t fully trust his own judgment. He fears some risk of bubbles, or excess private disintermediation, in either case resulting from low interest rates. He lets Tarullo and Stein carry related messages to the markets to signal possible fears without having to endorse them.
Let’s say he assigns these risky scenarios a fairly small p = 0.05. Still, another financial collapse would be a disaster, all the more for political economy reasons. Bernanke has spent down his own political capital and these days Republicans are more likely to be obstructionists. Fear of that disaster leads him to withdraw QE sooner than his “most likely to be true” opinion thinks prudent. Economists respond by defending the “most likely to be true” opinion, and by arguing moralistically rather than probabilistically. That doesn’t convince Bernanke, because said economists can only convince him that they are likely right, not that he should obliterate his p = 0.05 fear of being wrong. The current policy course continues, early withdrawal from QE is contemplated, and economists complain all the more. Outside observers find it hard to understand the disconnect.
Here are some related probabilistic considerations from Brad DeLong.
Big Data, Big Government, Big Brother
In addition to monitoring who you call and when, your email, and your internet searches the government also has access to all of your credit card purchases. We usually don’t think about purchases as communication but what people buy says more about most people than does their email. Buying behavior can be used to predict all manner of information about your political views, affiliations, sexual activity, marriage quality and much more.
Where this all is leading
I.B.M.’s Watson, the supercomputing technology that defeated human Jeopardy! champions in 2011, is a prime example of the power of data-intensive artificial intelligence.
Watson-style computing, analysts said, is precisely the technology that would make the ambitious data-collection program of the N.S.A. seem practical. Computers could instantly sift through the mass of Internet communications data, see patterns of suspicious online behavior and thus narrow the hunt for terrorists.
Both the N.S.A. and the Central Intelligence Agency have been testing Watson in the last two years, said a consultant who has advised the government and asked not to be identified because he was not authorized to speak.
There is more here, pointer is from Claudia Sahm.
Should the Detroit Museum sell off some of its art?
Virginia Postrel says yes:
…great artworks shouldn’t be held hostage by a relatively unpopular museum in a declining region. The cause of art would be better served if they were sold to institutions in growing cities where museum attendance is more substantial and the visual arts are more appreciated than they’ve ever been in Detroit. Art lovers should stop equating the public good with the status quo.
On the fiscal front, Detroit has a much stronger claim on its museum’s assets than the typical U.S. city government. During the 1920s, when the local economy was booming and the museum was still building its collection, the DIA relied on annual appropriations from the city not just to fund operations, as many museums do, but also to buy art. That marked “a significant departure from the norm for major American art museums,” observed art historian Jeffrey Abt in his detailed 2001 history “A Museum on the Verge.” City dollars paid for the core of the museum’s collection, including the Van Gogh, Bruegel, Matisse and Bellini.
We easily can imagine that more people would see those artworks if they were located in Los Angeles or other larger and growing cities. Nonetheless I believe such a sale would set off alarm bells for conservatives, related to Arnold Kling’s “civilization vs. barbarism” axis. Detroit would be sending a signal that it will never even try to go back to what it was, much as if a university spent down most of its endowment and relied on borrowing. Still, perhaps that is where we are at with Detroit.
Another issue is that deaccessioning makes all donors feel less confidence in the stewards of their gifts. If I see Detroit selling off its artworks, should a collector donate his Haitian paintings to the Figge Museum, in Davenport, Iowa? What if the farmland bubble bursts? Might they sell those paintings to Miami or maybe western North Dakota? How many donors know that Detroit has this special history of municipally funded art? But again, letting Detroit and the Detroit Museum rot also won’t do much for donor confidence at the national level; it is a precarious institution in any case and perhaps the purchaser will take better care of the pictures and also market them more effectively (otherwise why buy them?).
In any case, I expect previous norms against deaccessioning to weaken with the onset of The Great Reset.
The loss of privacy and the collapse of creative ambiguity
Remember the regime of creative ambiguity when it came to Fed bailouts? You kind of expected one, but weren’t totally sure what might come, and so the banking sector felt safe but not absolutely guaranteed on the side of the creditors. Post-Lehman, those days seem to be over and now the moral hazard problem looms larger.
Perhaps we had a regime of creative ambiguity when it came to privacy and government surveillance. You (or at least I) thought the government was spying on you, but there was some ambiguity as to how much. You could acquiesce to the previous status quo, without fearing it would get worse, because it was not commonly recognized public knowledge that so much spying was going on. Maybe you figured you could tolerate a 0.8 probability of that level of spying because there were checks on it becoming worse, more extensive, more selective, and so on.
But now that previous level of spying is common knowledge (or at least part of it is common knowledge, I suspect there are further revelations to come). At the same time, the IRS, Verizon, and other scandals are common knowledge too, all of a sudden.
The old equilibrium is perhaps no longer stable. People may even be fine with that level of spying, if they think it means fewer successful terror attacks. But if they acquiesce to the previous level of spying too openly, the level of spying on them will get worse. Which they do not want.
On top of all that, the common knowledge of the old spying also may make the old spying less effective in purely practical terms, as potential suspects adjust their behavior. That also may lead a risk-averse government to pursue additional and more intrusive means of spying.
So if the status quo of a few weeks ago is no longer an equilibrium, what happens next?
I predict we will see more spying and more intrusive spying. You should not think that recent events will simply cement a previous status quo in place, rather it moves us down a very particular path and probably makes the entire problem worse. The age of creative ambiguity in surveillance is over and probably not for the better.
Our government will end up thwarting tech innovation and balkanizing the web
…Google Glass + NSA PRISM essentially amounts to a vision in which a foreign country is suddenly going to be flooded with American spy cameras. It seems easy to imagine any number of foreign governments having a problem with that idea. More broadly, Google is already facing a variety of anti-trust issues in Europe where basic economic nationalism is mixing with competition policy concerns. Basically various European mapping and comparison and shopping firms don’t want to be crushed by Google, and European officials are naturally sympathetic to the idea of not letting local firms be crushed by California-based ones. Legitimate concern that US tech companies are essentially a giant periscope for American intelligence agencies seem like they’d be a very powerful new weapon in the hands of European companies that want to persuade EU authorities to shackle American firms. Imagine if it had come out in the 1980s that Japanese intelligence agencies were tracking the location of ever Toyota and Honda vehicle, and then the big response from the Japanese government was to reassure people that Japanese citizens weren’t being spied upon this way. There would have been—legitimately—massive political pressure to get Japanese cars out of foreign markets.
The intelligence community obviously views America’s dominance in the high-tech sector as a strategic asset that should be exploited in its own quest for universal knowledge. But American dominance in the high-tech sector is first and foremost a source of national economic advantage, one that could be undone by excessive security involvement.
That is from Matt Yglesias.