Category: Current Affairs
Two Updates on the Value of Vaccines
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.
South Dakota is trying to hold on
Map of the TFRs by US state for 2023, based on recently released birth data from January-September 2023. The TFR declined to around 1.62 kids per woman last year, but there are important regional differences. Values range from 1.99 in South Dakota to 1.19 in Washington DC. pic.twitter.com/xXXzKm1kT6
— Birth Gauge (@BirthGauge) January 22, 2024
Bihar is holding on:
Rent Controls
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)
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).”
Will Milei succeed in Argentina?
I give him a 30-40% chance, which is perhaps generous because I am rooting for him. Bryan Caplan, who is more optimistic, offers some analysis and estimates that Milei needs to close a fiscal gap of about five percent of gdp.
I have two major worries. First, if Milei approaches fiscal success, the opposing parties will think long and hard about whether they wish to enable further success. Or will they instead prefer to see the Milei reforms crash and burn for fiscal reasons? I don’t think they know themselves, but the history of politics in Argentina does not give special reason to be super-optimistic here. You don’t have to believe the opposition will deliberately flush their country down the toilet, they just not might be convinced that further fiscal consolidation is needed, even if it is (surely they gotten this wrong a lot in the past).
Second, Argentina has not succeeded in obtaining fiscal stability in the past, not for a long time. I disagree with this passage of Bryan’s:
The monetary and fiscal stabilization is very likely to work. Argentina has faced far worse crises before: The hyperinflations of the 70s to the 90s multiplied prices 100 billion times. That’s like turning a billion dollars into a penny. Yet Argentinians ultimately overcame all these problems and more using the orthodox medicines of monetary restraint and fiscal responsibility. Since even politicians who ideologically opposed these treatments ultimately endured their short-run costs, it is a safe bet that a libertarian economics professor will do the same.
That is a misread of the history. One common tactic, for instance, is to do enough stabilization so that Argentina is “fiscally sound enough” at the peak of a commodity super-cycle. Most recently, that super-cycle has been China buying lots from Argentina (no such positive wave from China will be coming again, not anytime soon at least). When the positive real shocks subside, Argentina goes back into the fiscal hole.
In reality, past reforms never put the country on a sound fiscal footing, even if inflation rates were low for a while.
One scenario for now is that Argentina does enough so that it appears fiscally stable, and the recent discoveries of oil and gas — which will translate into government revenue — kick in to support a temporary status quo. But within ten years the whole thing falls apart again. Even if Milei wants to do more on the fiscal front to get past that point, it is not obvious that either voters or the legislature would support such further moves.
Those are two “pretty likely” scenarios in which Milei fails, and in neither case is it the fault of Milei. As I mentioned above, the chances of success remain below fifty percent.
Miss Information
Miss America, Miss United States and Miss USA are three different people.
David Brooks on bureaucracy
The Massachusetts Institute of Technology now has almost eight times as many nonfaculty employees as faculty employees. In the University of California system, the number of managers and senior professionals swelled by 60 percent between 2004 and 2014. The number of tenure-track faculty members grew by just 8 percent.
The column (NYT) is on the mark throughout, and it goes beyond higher education.
Positive noises about Latin America
Latin America has two-thirds of world lithium reserves and about 40 per cent of its copper. It accounts for 45 per cent of global agrifood trade, according to the EU, and its abundant stock of farmland and water could allow that to grow much further. It is home to the world’s largest surviving rainforest, the Amazon, and its diverse geography includes some of the best locations on the planet to generate solar and wind power.
…It also enjoys some other, less obvious, advantages in today’s troubled world: its states are not at war with each other; it is more democratic than any other developing region; and it is building soft power — latino music, food, art, and films have global audiences. In addition, digital nomads cite Mexico City, Medellín and Buenos Aires as among the world’s best cities for remote working.
Here is more from Michael Stott at the FT. Of course these all remain open questions…
World’s First Dominant Assurance Contract Platform
In September I alerted you to a crowdfunding campaign to produce a dominant assurance contract/refund bonus platform. Many of you stepped up and it’s now and up and running! The platform is called EnsureDone. It’s starting up small, with just a few projects, but already the projects are quite interesting. MakeSunsets, for example, had a campaign to raise $1000 to fund a test of seeding the atmosphere with sulfur to increase reflection. That campaign failed which meant the people who had agreed to contribute earned a refund bonus! The UX could also use some work. Still, it’s nice to see this idea being tested in the wild and I have inside info that another such platform will launch soon.
Back to the Future: Power Dishwashers!
Why do today’s dishwashers typically take more than 2 hours to run through a normal cycle when less than a hour was common in the past? The reason is absurd energy and water “conservation” rules. These rules, imposed on dish and clothes washers, have made these products perform worse than in the past, cleaning less well or much more slowly. One of the best things that the Trump administration did (other than Operation Warp Speed, of course) was creating a product class–superwashers!–that cleaned in under an hour and were not subject to energy and water conservation standards. The Biden administration reversed these rules but the 5th circuit just ruled that the reversal was “arbitrary and capricious.”
The ruling notes
…the record contains historical evidence that dishwasher cycle time has increased from around one hour at the advent of DOE’s conservation program to around two and a half hours in 2020. See CEI Petition, 83 Fed. Reg. at 17773–74. DOE does not appear to contest this data; in fact, DOE in 2020 appeared to agree that the frustratingly slow pace of modern dishwashers caused consumer substitution away from dishwashers and toward handwashing. See 2020 Dishwasher Rule, 85 Fed. Reg. at 68729; see also Record App’x 3 (noting consumers supported efficacious dishwashers by a margin of 2,200 to 16). And nothing wastes water and energy like handwashing: DOE itself estimated in 2011 that handwashing consumes 350% more water and 140% more energy than machine washing. See Record App’x 5 (citing U.S. Dep’t of Energy, Technical Support Document Docket EE-2006-STD-0127: National Impact Analysis 16 (2011), https://perma.cc/849K-NCX8).
…What did DOE say in response? Basically nothing: It acknowledged the concern and moved on. But bare acknowledgment is no substitute for reasoned consideration.
…the Repeal Rule is arbitrary and capricious for two principal reasons. (1) It failed to adequately consider appliance performance, substitution effects, and the ample record evidence that DOE’s conservation standards are causing Americans to use more energy and water rather than less. (2) It rested instead on DOE’s view that the 2020 Rules were legally “invalid”—but even if true, that does not excuse DOE from considering other remedies short of repealing the 2020 Rules in toto.
More generally AnechoicMedia on twitter wrote:
Water usage restrictions on home dishwashers are a complete non-issue from an environmental standpoint and our inability to overthrow this petty regime is why this country sucks. You cannot provide abundance and prosperity while retaining this wartime rationing mindset.
A position with which I wholeheartedly agree.
Kamil Kovar on the German debt brake (from my email)
I was wondering if you would consider writing a post about the German debt brake in light of recent developments? Personally, I am not a huge fan of discussions about fiscal policy (or even worse, austerity…), as I feel they are mostly Rorschach test without much deep thinking. But I did find the recent developments intriguing because they challenge my priors so I am wondering what whether your thinking has changed as well.
My prior was that some form of constitutional debt break is a reasonable mechanism to deal with the pro-debt bias resulting from democratic political process. Of course, some of the recent German experience has challenged that. For example, debt break legislation lead to a lot of “bad” legislating, which was exposed by the court recently. Similarly, the debt break is leading Germany to cut spending and increase taxes relative to what the government would want; given the weakness in German economy this does not seem like optimal fiscal policy (but might be – monetary policy by choice restrictive, and many have called on fiscal to be too). And more broadly, there is a fair argument to be made that it has constrained government investment during last decade, which was an optimal time to do government investment given the negative interest rates.
Part of this I think is a question of imperfect design/implementation. The deficit threshold of -0.35% is higher than I would imagine. Absence of any relationship to current interest rates or effect on future debt levels ala CBO analysis is probably not what finance theory would suggest. And the cyclical adjustment seems suspicious: my understanding is that currently the cyclical adjustment allows for 0.1% of GDP of extra deficit, corresponding to 1% output gap and 1/10 elasticity, see here.[1] But I suspect imperfect design/implementation will always be a feature of these kind of legalistic rules, so should not be waved away.
At the same time, I find lot of the commentary rather subpar. I have in mind for example arguments in this article. While I can see that investment would likely be higher last decade in absence of debt break, saying that debt break results in “Germany that doesn’t invest and massively falls behind in economic terms” is just shocking, as it implies that investment can be only done through higher deficits. Moreover, arguing that debt break has to be abolished so that Germany can invest to deal with geopolitics and green transition is simply ignoring that Germany already found a legally-sound solution to such kind of problems when it constitutionally created its 100 billion euro defense spending fund. Together with the wise use of debt break suspensions during last 4 years this shows that there is sufficient flexibility built into this, despite what the commentators would suggest (“but in practice it’s too inflexible”), as long as there is consensus on such actions. But maybe this points towards the actual problem: maybe in current society building political consensus has become too hard, so that mechanisms which rely too much on such consensus are doomed to create more problems than their benefit. The US debt ceiling comes to mind. Similarly, I think CDU secretly agrees with some of the governments desires, but will not act on them either because it wishes for the government to collapse or is afraid of voters’ reaction.
Very curious what is your thinking and how it has changed.
Kamil
P.S.: Relatedly, I often see left-of-center economists citing IMF research that austerity does not yield decrease in government debts relative to GDP. While I understand the value of such research, I am not sure what are the people suggesting. If austerity cannot lower debt to GDP, what can? I don’t think that most economists would suggest that large scale government investment is going to lower debt to GDP. So it the conclusion that we can never lower debt to GDP?
Kamil expands on these points in a blog post, concluding:
So maybe this is the main critique of the constitutional debt break: In the older world it might have been an good tool, but given the general unravelling of political process around the world, it adds too much of a constraint leading to worse outcomes. It simply is not fit for the current times. It might not be. As for me, I am currently in state of “not sure”.
Okie-dokie…
US Intelligence Shows Flawed China Missiles Led Xi to Purge Army
China missiles filled with water, not fuel: US intelligence
And:
…vast fields of missile silos in western China with lids that don’t function in a way that would allow the missiles to launch effectively
Here is more from Bloomberg.
Predictions for 2024
Bari Weiss interviews myself, Niall Ferguson, John McWhorter, Peter Attia, Nate Silver, and others about the year to come. I am not so pessimistic!
Why Britain’s economy is failing
In the past five years, the number of applications to connect to the electricity grid — many of them for solar energy generation and storage — has increased tenfold, with waits of up to 15 years. The underinvestment is restricting the flow of cheap energy from Scottish wind farms to population centers in England and adding to the delays for those with high power needs, like laboratories and factories. Laws that give local planning authorities considerable power are blamed for Britain’s shortage of housing and blocking the construction of pylons needed to carry electricity from offshore wind farms. Residents’ objections to noisy construction and changes to the landscapes have been a stumbling block.
With “waits of up to 15 years.” And:
One way the British government turned off investors was by changing planning measures in 2015, and tightening them further in 2018, so that a single objection could upend a planning application — effectively banning onshore wind in England. John Fairlie was a consultant in the wind industry at the time.
Mr. Fairlie is currently a managing director at AWGroup, a land development and renewable energy company that recently got an onshore wind turbine up and running in Bedfordshire, in the east of England, that will generate enough electricity to power 2,500 homes. Because of planning restrictions and grid connection delays, the project took seven years to complete.
That is from the excellent Eshe Nelson in the NYT.
Are cities for tourists or residents?
And at what margin?
A new ideological struggle is brewing, yet we have not yet recognized it as such. The question is to what extent cities are for tourists, or for their current residents. Here is a report from Vermont:
A Vermont town known for its autumn foliage has closed its roads to the public for the season, citing an overwhelming amount of influencer tourists.
The select board of Pomfret voted to close Cloudland Road and Barber Hill Road to non-residents from Sept. 23 to Oct. 15. That also blocks access to the popular Sleepy Hollow Farm, a private residence that many tourists try to visit.
New York City has placed severe restrictions on AirBnb, causing hotel room prices to skyrocket. Here is more from Jerusalem Demsas.
Amsterdam has sent out warnings, designed to discourage British tourists from visiting the city for sex, drugs, and drink.
As for the Continent, The Times of London reports:
Beaches, restaurants and estate agents have been attacked by radical anti-tourism groups throughout mainland Spain and the Balearic islands this summer…Flares were let off in restaurants, tourists’ bike tyres were slashed and hooded activists besieged a sightseeing bus.
Venice may be charging day trippers five euros a pop, and I’ve seen calls for raising that price by 5x or more. That is one set of obstacles that probably makes sense, due to congestion and wear and tear on the city itself.
Cruise ships are becoming less popular at many places around the world. How about this from Florida? (NYT):
Activists flooded City Commission meetings, protested on the dock, collected signatures and managed to pass three ballot measures in 2020 imposing stricter controls to protect the marine environment and limit [cruise ship] passengers to 1,500 a day…
Maybe this one is a coincidence, but Japan is hiking the price of its bullet train pass for tourists by seventy percent.
China is schizophrenic on tourism, on one hand easing visa requirements but on the other managing payments in the country isn’t getting easier.
Obviously the right answers here are on a case-by-case basis. But political economy tells us that chosen policies will tend to overemphasize the interests of the voting residents, and underemphasize the interests of the visitors.
Plenty of these anti-tourist stories are making the news, but we’ve yet to see this part of a more systemic pattern. And that pattern is going to intensify, if only because voters are aging, nationalism is ascendant, and protectionist sentiment is on the rise.
I am also pleased to tell you all that the world is full of underexplored spots — try Salta or Kosovo for a start. Or in a major, heavily-touristed city of your choice, just walk ten or fifteen minutes away from the beaten track, if that.
It is snobby and elitist and self-satisfying to speak up against tourism, but in the future we will need a movement to defend the practice.