Category: Current Affairs

Bolivia update, uh-oh

by  Tyler Cowen in

With international reserves at about a tenth of their $15 billion peak in 2014, the government of President Luis Arce is safekeeping every dollar bill and gram of gold, depressing activity, sparking fuel shortages and stoking social unrest — all in the name of avoiding a devaluation of an untenable 6.9 boliviano-per-dollar peg…

Arce has been trying to contain the collapse by reversing the damaging decline in hydrocarbon output, granting incentives for foreign oil and gas companies and liberalizing the fuel market last week in an attempt to mitigate gasoline shortages. Even if these measures are on the right track, they are too little, too late: These imbalances have been brewing in Bolivia for years, the result of policy malpractice during the golden era of Evo Morales’s socialist rule between 2006 and 2019, when Arce was his economic czar. A government with a more sensible approach would have tamed spending and invested in making sure the country’s natural gas bonanza kept paying the bills for the next decades (for a detailed chronicle of what went wrong in Bolivia, read my colleagues Peter Millard and Sergio Mendoza here.)

Here is more from Juan Pablo Spinetto at Bloomberg.

How DOGE is really going to work

by  Tyler Cowen in

In the last few days, Vivek has issued a series of tweets showing he understands how the regulatory process works.  That is good, but in turn it means DOGE ambitions end up scaled down.  Now there is a WSJ piece by Vivek and Elon.  Here is what I take to be the critical passage:

DOGE will work with legal experts embedded in government agencies, aided by advanced technology, to apply these rulings to federal regulations enacted by such agencies. DOGE will present this list of regulations to President Trump, who can, by executive action, immediately pause the enforcement of those regulations and initiate the process for review and rescission.

I’m all for this (and more), but take a look at what we are getting here.  Paused enforcement is better than nothing, but the rule doesn’t go away.  In the meantime, private companies probably will continue to act as if the rule may continue, given limited time horizons in politics and indeed for DOGE itself.  The process for “review and rescission” of course is extremely time-consuming and labor-intensive.  Again, bring it on but just do not expect too much from this.  Note further that “right-leaning regulatory troops” are quite thin on the ground, most of all in these agencies.

The column has numerous further points of interest, which perhaps I will take up in the future.  Here is a very good indeed essential piece by Stuart Buck on government efficiency,  Here again is my earlier Bloomberg column on priorities for DOGE.  James Broughel has a sunset suggestion for regulations.

Bike lanes are not about bikes

by  Tyler Cowen in

The city [WDC] has built about 20 miles of bike lanes in the past five years, but despite that, the portion of D.C. residents who bike to work peaked in 2017 and has decreased each year since, falling from 5 percent to 3 percent. So who are these lanes for?

And:

Across town, on South Dakota Avenue NE, the fight is ongoing, and, as The Post’s Rachel Weiner reported, this squabble reveals an essential truth about bike lanes as weapons of civic planning: They are often installed not to satisfy the barely measurable trickle of residents who pedal to work but mainly to make car traffic worse enough that people will be discouraged from driving.

Here is the full piece by Marc Fisher.  A rare sane take on an ultra-mood-affiliated topic.  You may recall my earlier and unfulfilled request for a good cost-benefit analysis on bike lanes for American cities.  Houston fortunately is moving away from this idea, and no “I love the Netherlands” is not an effective counter to the issues at stake here.

New Zealand’s Regulatory Standards Act

by  Tyler Cowen in

From the Antipodes:

“To lift productivity and wages, ACT’s coalition agreement includes a commitment to pass a Regulatory Standards Act.

“The Bill will codify principles of good regulatory practice for existing and future regulations,” says Mr Seymour.

“It seeks to bring the same level of discipline to regulation that the Public Finance Act brings to public spending, with the Ministry for Regulation playing a role akin to that of Treasury.

“Some regulations operate differently in practice than they do in theory. To make regulators accountable to the New Zealanders they regulate, the Bill contains a recourse mechanism, by establishing a Regulatory Standards Board. The Board will assess complaints and challenges to regulations, issuing non-binding recommendations and public reports.

“If we raise the political cost of making bad laws by allowing New Zealanders to hold regulators accountable, the outcome will be better law-making, higher productivity, and higher wages.

I am pleased to, many years ago, have done preperatory work with Bryce Wilkinson on the ideas behind this legislation.  I am told this is likely to pass, here is more on the bill.

The economic powers of the HHS secretary

by  Tyler Cowen in

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

One of the problems with an RFK Jr. ascendancy is that his core views, which run strongly against vaccines and pharmaceuticals, make it unlikely that any of these reimbursement revisions will be done in a rational or scientific way. The best evidence indicates that pharmaceuticals are a relatively cost-effective ways of saving lives, and conversely that many costly surgical procedures are not very effective. One of the main drawbacks of the US health-care system is often described as overtreatment, yet some vaccines and drugs — the Covid vaccines, GLP-1 medications and HIV-AIDS treatments, to name just a few — are yielding very high returns.

The danger is that, with RFK Jr. at HHS, the US would restrain health-care spending in exactly the wrong areas. The human costs of such a mistake are obvious, but from a more narrow fiscal perspective, a sicker America would lead to even more serious budgetary problems.

In any case, for all the recent talk and speculation about DOGE, the HHS secretary could well have more of an impact on the federal budget, for better or worse.

HHS also oversees liability protection for vaccines…

Worth a very serious ponder.

Peter Coy on DOGE

by  Tyler Cowen in

The federal government doesn’t have the people it needs to adequately monitor and vet its enormous streams of payments to defense contractors, hospitals and individuals. For example, administrative expenses account for only half a percent of the budget of the Social Security Administration. Trying to squeeze down that half percent by cutting personnel could lead to misspending of the other 99.5 percent of the budget.

Here is more from the NYT, interesting throughout.  Here is another bit:

To fix such problems, [Brian] Riedl said, “you need G.A.O. and other government experts and others who have done auditing to do most of the legwork.” There is no single easily repeatable fix: “Every program, every program failure and example of mismanagement has its own story.”

You may recall that private health insurance companies have fairly high “overhead,” perhaps a misleading term but nonetheless relevant for these debates.  There are hundreds of billions of “lost” funds at DOD and in Medicare.  Does the plan to improve on that performance involve more staff or less staff?

How to make DOGE work

by  Tyler Cowen in

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

Another priority should be to deregulate medical trials. America is now in a golden age of medical discovery, with mRNA vaccines, anti-malaria vaccines, GLP-1 weight loss drugs and new treatments against cancer all showing great promise. AI may bring about still more advances.

Unfortunately, the US system of clinical trials remains a major obstacle to turning all this science into medicine. There are regulations concerning hospital protocols, the design of the trials, FDA requirements, the procedures of universities and institutional review boards, and the handling of data, among other barriers. America can have better and speedier approval procedures without lowering its standards.

Of all the tasks I’ve outlined, this is by far the most difficult, because it involves changes in so many different kinds of institutions. Yet it has one of the highest possible payoffs, because more treatments might be developed and made available if the clinical trial process weren’t so onerous. Reforming clinical trials should also appeal to older Americans, who are especially likely to vote and who think the most about their medical care. The goal should be an America where most people live to 90.

Many Republicans are very excited about DOGE. But its governance structure is undefined and untested. It does not have a natural home or an enduring constituency. It cannot engage in much favor-trading. Its ability to keep Trump’s attention and loyalty may prove limited. And it’s not clear that deregulation is a priority for many voters.

The more I read about DOGE from Vivek and Musk, the more I feel it needs a greater sense of prioritization.

*Kaput: The End of the German Miracle*

by  Tyler Cowen in

By Wolfgang Münchau, this book is the best and most detailed account of the German economic decline to date.  Excerpt:

In 2018, the federal government promised that Germany would become a world leader in artificial intelligence.

As if they don’t understand that such efforts are more than just a play toy.  The overall lesson I took away from this book (my interpretation, not the author’s) is that if a country does not have enough ambition and seriousness in its businesses and education systems, sooner or later it will not have that in its government either.

Another lesson is that the world, overall, is working less well than you might think.

I am sad to recommend this one.  My primary reservation is that the author does not do enough to diagnose Germany’s obvious cultural malaise as an underlying root cause.

Let’s reform taxation for expats

by  Tyler Cowen in

That is the topic of my latest Bloomberg column.  We should tax on the basis of residency, not citizenship.  Only Eritrea shares with us the practice of doing the latter.  Here is one excerpt:

There is another possible gain, one which may have more appeal to the incoming administration than to economists like me. Trump and his advisers have long worried about the US trade deficit, and there has been talk of taxing foreign direct investment to weaken the dollar and boost US exports. Rather than discourage foreign investment in the US, why not do something more positive — and encourage US investment abroad?

If Americans leave and start new businesses around the world, using previously domestic capital, that too will bring downward pressure on the dollar. Thus could Trumpian ends be achieved by more constructive means. As a bonus, such a plan would not alienate foreign countries, as they tend to view a tax on FDI as a tax on their citizens.

This tax reform also might benefit US exports more directly. Say a US company wants to send an employee abroad to do market research and explore distribution channels for future sales. The US tax system should not turn this into a difficult ordeal.

Encouraging more Americans to work abroad also is a form of foreign aid, as many of them will grow or start businesses, creating jobs and tax revenue for the foreign country. And it is a form of foreign aid that benefits US citizens rather than costing them money. In fact, given the prowess of US business, it may be one of America’s most effective forms of foreign aid.

This one we should just do.

J. Zachary Mazlish on median wages under Biden

by  Tyler Cowen in

An excellent post, one of the best things written this year in economics.  Here is part of the bottom line:

Inflation did make the median voter poorer during Biden’s term.

  1. In no part of the income distribution did wages grow faster while Biden was President than they did 2012-2020.
    1. This is true in the raw data, and even more stark after compositional adjustment.
    2. In particular, the change in median incomes was well below its 2012-20 run-rate.
  2. But, the change in median wages is not what matters; it is the median change in wages that does. And this metric was even weaker under Biden: lower than any period in the last 30 years other than the Great Recession.
  3. People do not feel wages, they feel total income. And median growth in total income — post taxes and transfers — was not just historically low: it collapsed and was deeply negative from 2021 onwards.
    1. Much of this decline is due to timing of pandemic stimulus and even less the “fault of Biden” than other things.

Here is the full post, plenty of detail and distinctions throughout.

Where are incumbents still popular?

by  Tyler Cowen in

From my email, here is your Switzerland fact of the day:

The media is awash with stories about western countries incumbent parties losing elections in the last two years:

The exception no one seems to remember: Switzerland. In the october 2023 election, 3 out of the 4 governing parties increased their vote share. And it wasn’t just parties that are formally in government but effectively act as an opposition: The right wing Swiss People’s Party won. The left wing Social Democrats one. And the moderate Centre party one. The losers: The centre right Liberal Party (in government) and two different green parties (both outside of government).

Possible cause: Low inflation (https://marginalrevolution.com/marginalrevolution/2022/10/the-polity-or-is-it-culture-that-is-swiss.html)?

From Johann C.

Tariff sentences to ponder

by  Tyler Cowen in

In a September 2024 report, UBS, an investment banker, predicted both tech hardware and semiconductors to be among the top four sectors that would be hardest hit by a general tariff. Their analysis is spot on. Many of the hardware components that make AI and digital tech possible rely on imported materials not found or manufactured in the United States. Neither  arsenic nor gallium arsenide, used to manufacture a range of chip components, have  been produced in the United States since 1985. Legally, arsenic derived compounds are a hazardous material, and their manufacture is thus restricted under the Clean Air Act. Cobalt, meanwhile, is produced by only one mine in the U.S. (80 percent of all cobalt is produced in China). While general tariffs carry the well-meaning intent of catalyzing and supporting domestic manufacturing, in many critical instances involving minerals, that isn’t possible, due to existing regulations and limited supply. Many key materials for AI manufacture must be imported, and tariffs on those imports will simply act as a sustained squeeze on the tech sector’s profit margins.

That is from Matthew Mittelsteadt at Mercatus.

Where they are headed

by  Tyler Cowen in

The Australian government has pledged to legislate an age limit of 16 years for social media access, with penalties for online platforms that do not comply.

But the Labor government has not spelled out how it expects Facebook, Instagram, TikTok and others to actually enforce that age limit. Anthony Albanese is facing pressure from the Coalition opposition to rush the bill through parliament in the next three weeks, although a federal trial into age assurance technology has not yet commenced.

Albanese and the communications minister, Michelle Rowland, did not rule out the potential for social media users to have their faces subject to biometric scanning, for online platforms to verify users’ ages using a government database, or for all social media users – regardless of age – being subject to age checks, only saying it would be up to tech companies to set their own processes.

Here is the full story.  Keep in mind this move, if applied consistently, would eliminate anonymous postings.  It also would have to be enforced across a very large number of apps, even for Meta alone.  Should everyone’s biometrics be put into what might be China-hackable form?  And it means the government — not the parents — is deciding the proper level of social media access for children.

Are the major social media critics for this?  Against it?  Or are they not so keen to say, one way or the other?