Category: Current Affairs

It would be a mistake to split up Facebook

Slate has published an adaptation from my recent book *Big Business: A Love Letter to an American Anti-Hero*, here is one excerpt:

Advocates of splitting up the big tech companies have a utopian vision of what will replace them. Whether you like it or not, we now live in a world where every possible idea (and video) will be put out there in some fashion or another. Don’t confuse your discomfort with reality with your assessment of big tech companies as individual agents. We’re probably better off having major, well-capitalized companies as guardians and gatekeepers of online channels, however imperfect their records, as the relevant alternatives would probably be less able to fend off abuse of their platforms and thus we would all fare worse.

Imagine, for instance, that instead of the current Facebook we had seven smaller companies all performing comparable social networking services, perhaps with some form of interconnectability or data portability. The negative sides of social media, which are indeed real, probably would be worse and harder to control.

It is unlikely that such a setting would result in greater consumer privacy and protection. Instead, we would have more weakly capitalized entities, with less talent on staff and weaker A.I. technologies to take down objectionable material. Probably some of those companies would be more tolerant of irresponsible user behavior as a competitive lure. Fake accounts would proliferate, and social networking sites such as 4chan—often a cesspool of racism and rhetoric that goes beyond the merely offensive—would comprise a larger and more central part of the market.

As for privacy, these smaller Facebook replacements would be more susceptible to hacks, foreign surveillance and infiltration, and external manipulation—the real dangers to our privacy and well-being.

There is much more at the link.

Hong Kong in the broader history of liberty

That is my other Bloomberg column for this week, here is one excerpt:

Still, actual life in Hong Kong seemed to be pretty free, especially compared to the available alternatives, which included the totalitarian state that was Mao’s China. Yet as the British lease on Hong Kong approached expiration, an even deeper problem with a non-democratic Hong Kong became evident: Because there was no legitimate alternative sovereign to protest, the British simply handed the territory over to China. (Compare Hong Kong’s experience to that of Taiwan, which did evolve into a free democratic state and remains independent.) Hong Kong was bartered away like a piece of colonial merchandise. Everyone learned the hard way that democracy really does matter.

Hong Kong still ranks near or at the top of several indices of economic freedom. But that may be a sign these indices have lost touch with the nature of liberty. In Hong Kong, the notion of a credible commitment to the future ceased to have meaning some time ago. Not only is there the specter of Chinese intervention, but there is also a broader understanding that the rules of the game can change at any time, including of course when it comes to extradition procedures. Meanwhile, many Hong Kong residents know their behavior is being monitored and graded, and they know the role of the Chinese government will only grow.

Thus is revealed a deeper lesson still: Freedom is not merely the ability to buy and sell goods at minimum regulation and a low tax rate, variables that are readily picked up by economic freedom indices. Freedom is also about the narratives people live by and the kind of future they imagine for themselves. Both of these are greatly affected by the legitimacy and durability of their political institutions.

The piece also offers a brief discussion of the Bruce Lee movie “Enter the Dragon.”

My trip to Israel

I was very pleased to have been sponsored by the Friedberg Economics Institute, who were wonderful hosts and put together great audiences on my behalf.

Here is my interview with Globes, which they helped to arrange, excerpt:

“We started this trade war with China by shooting in all directions. It would have been much wiser to form our alliances first, and then consider doing something versus China. I believe that the current trade war with China is unavoidable. It would have taken place even without Trump as president. There are too many cases of unfair trading by China, of Chinese companies operating unfairly and even spying, of stealing of US ideas, and preventing US or Western businesses from operating in the country. This dam had to burst sooner or later.

“What is happening now is not good for any country: not for the US, not for China, and also not for Israel, which like many other small countries will be harmed by the trade war. We’re in a situation in which everyone loses.

“The US is pressuring, and will pressure, Israel not to cooperate with China. It has already begun, and it will get worse. You can understand Washington – if you have the Sixth Fleet in Haifa and China controls part of the port, US concern is understandable. On the other hand, China depends on oil from the Middle East. It needs reliable partners in the region in order to ensure its regular supply, and Israel is the only country that meets this criterion. Imagine a future in which China exerts strong pressure on Israel to help it conduct its foreign policy. I think that it will be harder and harder for Israel to cope with Chinese pressure on the one hand and US pressure on the other.”

A variety of other topics are covered at the link.

*Dignity: Seeing Respect in Back Row America*

That is the new book by Chris Arnade, insightful throughout and with excellent photos.  Excerpt:

McDonald’s wasn’t just central to my friends, it was important to everyone in the neighborhood.  It was always packed with families and older couples, especially on weekend mornings.  In the evenings, it was filled with teenagers or young couples going out.

There weren’t really many other options.  McDonald’s was one of the few spaces in Hunts Point open to the public that worked.  While wonderful and well-intentioned nonprofits serve Hunts Point, whenever I asked anyone where they wanted to meet or grab a meal, it was almost always McDonald’s.

Arnade indicts “the elitists,” whereas I would lay heavier blame on alcohol and drug abuse.  Many much poorer people never touch the stuff, and furthermore I would have added a comparison with America’s dark-skinned, not entirely popular Muslim immigrants, the non-drinking ones most of all.  There is indeed something wrong with much of American culture, and we need to think harder about what that might be.  Neither sympathy nor empathy changes that fact, and I am happy to be one of the elitists under indictment.  I would rather write what I think than try to make other people feel better, or to support my favored politics, and perhaps that attempt is doomed in any case?  Is it more or less condescending to hold the poor to high standards?

My Conversation with Russ Roberts

The podcast master himself, here is the audio and transcript, here is the opening summary:

What are the virtues of forgiveness? Are we subject to being manipulated by data? Why do people struggle with prayer? What really motivates us? How has the volunteer army system changed the incentives for war? These are just some of the questions that keep Russ Roberts going as he constantly analyzes the world and revisits his own biases through thirteen years of conversations on EconTalk.

Russ made his way to the Mercatus studio to talk with Tyler about these ideas and more. The pair examines where classical liberalism has gone wrong, if dropping out of college is overrated, and what people are missing from the Bible. Tyler questions Russ on Hayek, behavioral economics, and his favorite EconTalk conversation. Ever the host, Russ also throws in a couple questions to Tyler.

Here is one excerpt:

COWEN: Here’s a reader question. “In which areas are you more pro-regulation than the average American?” They mean government regulation.

ROBERTS: Than the average American?

COWEN: Yes.

ROBERTS: I can’t think of any. Can you help me out there, Tyler?

COWEN: Well, I’m not sure I know all of your views.

ROBERTS: What would you guess? Give me some things to think about there. In general, I think government should be smaller and regulations should be smaller.

COWEN: I’ll give you–

ROBERTS: Let me give you a trick answer. Then I’ll let you feed me some.

COWEN: Sure.

ROBERTS: Many people believe that the financial crisis was caused by deregulation. I think that’s a misreading of the evidence. It’s true that some pieces of the financial sector were deregulated, but government intervention in the financial sector was quite significant in advance of the crisis. In particular, the bailouts that we did of past failed financial institutions, I think, encouraged lenders to be more careless with how they lent their money, mainly to other institutions, not so much to people out in the world like you and me.

Deregulation’s a little bit tricky, so I wanted to get that in. I’m not sure how that pertains to the question. It does, probably, in some way. So give me something I should be more regulatory about.

COWEN: Well, one answer —

ROBERTS: Baseball? Baseball, of course. [laughs]

COWEN: I would say animal welfare — government should have a larger role. But also what counts as a tax-exempt institution, I would prefer our government be stricter.

ROBERTS: Well, I’m with you there. Yeah, okay, kind of.

COWEN: Well, that’s more regulation, okay?

ROBERTS: I guess.

COWEN: Kind of.

ROBERTS: Yeah, kind of. It’s different standards.

COWEN: Higher capital requirements for banks.

ROBERTS: I’m okay with that. Yeah, that’s a good one. I’d prefer a laissez-faire world for banks, more or less. If we can’t credibly promise not to bail out banks — if that’s the case, we live in a world where banks get to keep their profits and put their losses on taxpayers — bad world. A more regulated world would be better than the world we live in; not as good as my ideal world, though. But there’s a case where I would be in favor — like you just said — more capital requirements.

You’re on a roll. See what else you can come up with for me.

COWEN: Spending more money for tax enforcement, especially on the wealthy.

ROBERTS: Not the worst thing in the world.

COWEN: You can spend a dollar and bring in several times that, it seems.

ROBERTS: I don’t think rich people cheat on their taxes. Do you? [laughs]

COWEN: “Cheat” is a tricky word, but I think we could spend more money.

ROBERTS: We could probably collect more effectively.

COWEN: And it would more than pay for itself.

ROBERTS: Yeah. That’s probably true.

COWEN: We’re actually big fans of government regulation today.

ROBERTS: Yeah, we’ve really expanded the tent here. [laughs]

Do read or listen to the whole thing.

Taiwan facts of the day

Taiwan may be small, but the island has emerged as a financial superpower thanks to the thriftiness of local savers and an eye-watering current account surplus of about 15 per cent of gross domestic product. The country now has the second-largest financial system in the world, relative to gross domestic product. And its life insurance industry is the biggest, with assets-to-GDP of 145 per cent, according to JPMorgan.

The local economy is not big enough to accommodate these enormous sums, so Taiwanese financial institutions have funnelled a whopping $1.2tn abroad.

…Taiwanese insurers hold about 4 per cent of the entire US investment-grade corporate bond market, and 14 per cent of longer-term corporate bonds, according to JPMorgan. Insurers’ holdings of US mortgage-backed securities have nearly doubled over the past five years, to $260bn. That makes Taiwan the second-biggest foreign owner of such securities.

Here is the FT piece by Robin Wigglesworth.

No sweet spot for Singapore in US-China tensions

That is the title of the new and remarkable Bilahari Kausikan Op-Ed in The Straits Times.  I will serve up some bits, and please note this is now the world we live in:

Evoking the Long March [by Xi] is intended to prepare the Chinese people for a prolonged struggle with the US. It was, in effect, a tacit admission of the CCP’s mistakes with the consequent need for a retreat, while holding out the promise of ultimate victory…

The Chinese have long memories. Despite our constant denials, they still consider Singapore a “Chinese country” and may feel entitled to our support and will not quickly forget if we are regarded as insufficiently helpful in their time of need.

Some in the Trump administration also seem inclined to view the issue in racial terms. As the only ethnic Chinese-origin majority sovereign state outside greater China, we may be subject to special scrutiny.

What Singaporeans need to understand better is that, under present circumstances, there may be no sweet spot we can occupy that will keep both the Chinese and the Americans simultaneously happy. There is no silver bullet, and it is a fool’s errand to look for one.

Neither can we just lie low and hope for the best. You may not look for trouble but trouble may come looking for you. And trouble is all the more likely to seek you out if either side thinks you are, or can be, intimidated.

We must have the courage to pursue our own national interests. Sometimes our national interests may lead us to tilt one way, sometimes the other. But it must always be our national interest that guides us and nothing else.

Both the Chinese and Americans may not be too happy with us for pursuing our own interests. But Singapore does not exist to give joy to American or Chinese hearts. So long as neither side is so unhappy that it dismisses us as unredeemable, we can live with their unhappiness and manage it…

Our more complex domestic politics is a complication. I see still faint but distinct signs that some section of our population – how large, I do not know – either for transactional economic reasons, or unthinking ethnic sympathies, or sheer chauvinism, is beginning to look at the current US-China tensions through a racial lens.

As US-China competition heats up, this tendency may be accentuated. This is the greatest danger to Singapore in this new phase of US-China competition. It is still at a nascent stage and must be checked, if necessary by the prophylactic exercise of the coercive powers that are the legitimate monopoly of the state, before external and internal forces act and react with each other in a vicious spiral downwards.

If we hold together, we can manage the external complications. If we do not, and the social compact which is the foundation on which modern Singapore was built is strained or broken, these internal stresses may make the external complications unmanageable.

Since this period of US-China tensions will be prolonged, this is not a challenge that lends itself to definitive solutions. Managing it requires continual vigilance and periodic decisive action. It is our own Long March.

Do read the whole thing, as I said above this is now the world we live in.

Cosmopolitanism vs. nationalism

That is the topic of my latest Bloomberg column.  It is hard to excerpt, but here is the closing bit:

The best way for that to happen is to let practical nationalism reign, while at the margin seeking to soften it with moral cosmopolitanism. Both perspectives are valuable, and neither can be allowed to dominate. Each perspective, standing on its own, is intellectually vulnerable, yet the two outlooks together are not quite fully harmonious. It is this dynamic clash, however, that helps to account for the strength of each.

Try explaining all that, and its required background knowledge, in a 280-word tweet. Yet much of the world manages a pretty fruitful balance between moral cosmopolitanism and practical nationalism. There is a wisdom embodied in this lived experience which neither pundits nor philosophers can convey.

A tempered and centrist cosmopolitanism won’t always command the strongest loyalties, nor will practical nationalism always look so pretty. If we can accept that reality, then maybe we can stop throwing stones at each other.

*The New Right: A Journey to the Fringe of American Politics*

That is the new book by Michael Malice, and I have to say it will go down as one of the more important albeit objectionable books of this year.  Imagine an well-informed anthropological treatment of Gamergate, PUA, Ann Coulter, Mike Cernovich, Milo, and all the rest of “that stuff,” both its history and how it fits together.

Just to be clear, this book is not written from the perspective of a journalist trying to make these movements look weird, rather it is written from the perspective of an anarchist trying to make these movements look (relatively) normal.  You might find that approach is not affiliated with the proper mood.  I don’t get the sense that Malice is “one of them,” but his “objectivity” might not be the right kind of objectivity.  I’m not going to try to resolve that meta-issue here, I’ll just say that a “normalizing” treatment of “the New Right” has some descriptive virtues, and you might end up more scared and more concerned than if you read a journalistic expose.  That said, I am not sure the author really grasps the non-niceness of so much of this stuff, or the import of that non-niceness.

Every page of this book is interesting, and so I am going to recommend it.  Here is a Kirkus Review, otherwise MSM doesn’t seem to be touching this one at all.  Here is the Amazon link, 79 reviews and an average of five stars.  The reviews themselves are not entirely reassuring.

I thank an MR reader for the pointer.

Alec Stapp on GDPR

Here is just one segment of an excellent piece:

Compliance costs are astronomical

  • Prior to GDPR going into effect, it was estimated that total GDPR compliance costs for US firms with more than 500 employees “could reach $150 billion.” (Fortune)
  • Another estimate from the same time said 75,000 Data Protection Officers would need to be hired for compliance. (IAPP)
  • As of March 20, 2019, 1,129 US news sites are still unavailable in the EU due to GDPR. (Joseph O’Connor)
  • Microsoft had 1,600 engineers working on compliance. (Microsoft)
  • During a Senate hearing, Keith Enright, Google’s chief privacy officer, estimated that the company spent “hundreds of years of human time” to comply with the new privacy rules. (Quartz)
    • However, French authorities ultimately decided Google’s compliance efforts were insufficient: “France fines Google nearly $57 million for first major violation of new European privacy regime” (The Washington Post)
  • “About 220,000 name tags will be removed in Vienna by the end of [2018], the city’s housing authority said. Officials fear that they could otherwise be fined up to $23 million, or about $1,150 per name.” (The Washington Post)

And another part:

Unseen costs of foregone investment & research

  • Startups: One study estimated that venture capital invested in EU startups fell by as much as 50 percent due to GDPR implementation. (NBER)
  • Mergers and acquisitions: “55% of respondents said they had worked on deals that fell apart because of concerns about a target company’s data protection policies and compliance with GDPR” (WSJ)
  • Scientific research: “[B]iomedical researchers fear that the EU’s new General Data Protection Regulation (GDPR) will make it harder to share information across borders or outside their original research context.” (POLITICO)

Do read the whole thing.

The real losers from the U.S.-China trade war

The countries caught in the middle, as I argue in my latest Bloomberg column.  Excerpt:

n this setting, many Pakistani businesspeople work with both China and the U.S. Now President Donald Trump is essentially telling them to choose sides. Will they do business with Huawei or not? Will they work to open up the Chinese economy or not? And so on.

If you’re Pakistan, on the actual matters under consideration, you will side with China. Pakistan is not going to ban Huawei or push China to open its markets to major U.S. tech companies. China will get its way on those issues, and win some very public victories in the Pakistani public arena. Pakistani leaders and businesspeople who sided with the U.S., or expressed strong American loyalties, will feel burned. Their side just lost a very big debate, centered on a conflict that did Pakistan no good in the first place and was at least in the proximate sense started by Trump.

In other words, the U.S. is making it harder for many foreigners to be on its side, even partially. Over time, it is limiting its own soft power in the countries caught between America and China — and soft power is the one area in which America still has (or is it, already, had?) a big advantage over China.

There is much more at the link, including coverage of Singapore and South Korea.

Venezuelan comovement now includes violent crime too

The feared street gangster El Negrito sleeps with a pistol under his pillow and says he’s lost track of his murder count. But despite his hardened demeanor, he’s quick to gripe about how Venezuela’s failing economy is cutting into his profits.

Firing a gun has become a luxury. Bullets are expensive at $1 each. And with less cash circulating on the street, he says robberies just don’t pay like they used to.

For the 24-year-old, that has all given way to a simple fact: Even for Venezuelan criminals it’s become harder to get by.

“If you empty your clip, you’re shooting off $15,” said El Negrito, who spoke to The Associated Press on the condition he be identified only by his street name and photographed wearing a hoodie and face mask to avoid attracting unwelcomed attention. “You lose your pistol or the police take it and you’re throwing away $800.”

In something of an unexpected silver lining to the country’s all-consuming economic crunch, experts say armed assaults and killings are plummeting in one of the world’s most violent nations. At the Venezuelan Observatory of Violence, a Caracas-based nonprofit group, researchers estimate homicides have plunged up to 20% over the last three years based on tallies from media clippings and sources at local morgues.

Officials of President Nicolás Maduro’s socialist administration have drawn criticism for not releasing robust crime statistics, but the government on Tuesday gave the AP figures showing a 39 percent drop in homicides over the same three-year period, with 10,598 killings in 2018. Officials also report a fall in kidnappings.

The decline has a direct link to the economic tailspin that has helped spark a political battle for control of the once-wealthy oil nation.

Here is more from Scott Smith, via the excellent Kevin Lewis.