Category: Current Affairs

World’s First Dominant Assurance Contract Platform

by  Alex Tabarrok in

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!

by  Alex Tabarrok in

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)

by  Tyler Cowen in

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”.

Why Britain’s economy is failing

by  Tyler Cowen in

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?

by  Tyler Cowen in

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.

How to make you stupider

by  Tyler Cowen in

The Maine official who moved to disqualify former President Donald Trump from the state’s 2024 Republican primary ballot on Thursday visited the White House this year to meet with President Biden and previously referred to the Electoral College as a “relic of white supremacy.”

Here is the full story.  This is exactly what I am not going to cover in 2024, so right now you get your miniature, one-time dose.  I am not saying this is not important.  I am saying that reading a lot about it, and commenting on it, will make you stupider.  In fact, the non-elastic Parmenides universe is arranged such that anyone who leaves a comment on this post, no matter what that comments says, will lose two IQ points.

Good luck, and see you next year!

Uber and Traffic Fatalities

by  Alex Tabarrok in

Abstract: Previous studies of the effect of ridesharing on traffic fatalities have yielded inconsistent, often contradictory conclusions. In this paper we revisit this question using proprietary data from Uber measuring monthly rideshare activity at the Census tract level. Using these more detailed data, we find a consistent negative effect of ridesharing on traffic fatalities. Impacts concentrate during nights and weekends and are robust across a range of alternative specifications. Overall, our results imply that ridesharing has decreased U.S. traffic fatalities by 5.4% in areas where it operates. Based on conventional estimates of the value of statistical life the annual life-saving benefits are $6.8 billion. Back-of-the-envelope calculations suggest that these benefits are of similar magnitude to producer surplus captured by Uber shareholders or consumer surplus captured by Uber riders.

The authors, Michael Anderson and Lucas Davis, note that alcohol involvement is reported in approximately 30% of fatal crashes, which is an amazingly high number unless you think a lot of people are driving drunk. I am reminded of a clever paper by Levitt and Porter who use the proportion of crashes involving two drunk drivers to estimate that it is not that lots of people are driving drunk but rather that “drivers with alcohol in their blood are seven times more likely to cause a fatal crash” and “legally drunk drivers pose a risk 13 times greater than sober drivers.” Thus, substituting a sober driver for a drunk driver is a very good thing and so it’s plausible to me that Uber significantly reduces traffic fatalities.

Consider this a public service announcement.

Nicholas Kristof on good things in 2023

by  Tyler Cowen in

Just about the worst calamity that can befall a human is to lose a child, and historically, almost half of children worldwide died before they reached the age of 15. That share has declined steadily since the 19th century, and the United Nations Population Division projects that in 2023 a record low was reached in global child mortality, with just 3.6 percent of newborns dying by the age of 5.

That’s the lowest such figure in human history. It still means that about 4.9 million children died this year — but that’s a million fewer than died as recently as 2016…

Or consider extreme poverty. It too has reached a record low, affecting a bit more than 8 percent of humans worldwide, according to United Nations projections.

All these figures are rough, but it seems that about 100,000 people are now emerging from extreme poverty each day — so they are better able to access clean water, to feed and educate their children, to buy medicines.

Here is the full NYT column, and no he doesn’t deny the bad things that are going on, please don’t engage in the usual mood affiliation people…

Happy New Year to come!

Summary trends of 2023

by  Tyler Cowen in

That is the topic of my latest Bloomberg column, here is my biggest worry:

Another takeaway from 2023 is more depressing: Deterrence is less powerful than I thought. Persistence, combined with a belief in one’s cause, is worth more.

The Israeli military is much stronger than Hamas, for example, and is currently proving that on the ground. Yet that did not stop Hamas from proceeding with a violent incursion into Israel. In Ukraine, substantial support from the US and other NATO nations has not stopped Russia from pursuing a war, even with very heavy losses in terms of its military power and international reputation. Russian President Vladimir Putin simply wants Ukraine, and believes some parts of it rightfully belong to Russia.

None of this is good news for the US, which relies on deterrence to support its numerous alliances. It is also bad news for the world at large, because deterrence tends to support peaceful outcomes and the status quo.

Which leads me to another piece of academic research: I am increasingly inclined to reject psychologist Steven Pinker’s view that the world is becoming more peaceful. Unfortunately, the available evidence suggests that international conflict is on the rise again, after a long period of decline. Cyclical theories of world peace and conflict — in particular the idea that peace eventually breeds the conditions for war — are thus due for an upgrade.

You could add the Houthis to that list as well.  I consider AI and governance issues as well.

The Sullivan Signal: Harvard’s Failure to Educate and the Abandonment of Principle

by  Alex Tabarrok in

The current Harvard disaster was clearly signaled by earlier events, most notably the 2019 firing of Dean Ronald Sullivan. Sullivan is a noted criminal defense attorney; he was the director of the Public Defender Service for the District of Columbia and he is the Director of the Criminal Justice Institute at Harvard Law School, he advised President Obama on criminal justice issues, he represented the family of Michael Brown. He and his wife were the first black Faculty Deans in the history of the college.

Controversy erupted, however, when Sullivan joined Harvey Weinstein’s legal defense team. Student protests ensued. The students argued that they couldn’t “feel safe” if a legal representative of a person accused of abusing women was also serving in a role of student support and mentorship. This is, of course, ridiculous. Defending an individual accused of murder does not imply that a criminal defense attorney condones the act of murder.

Harvard should have educated their students. Harvard should have emphasized the crucial role of criminal defense in American law and history. They should have noted that a cornerstone of the rule of law is the presumption of innocence and the right to a fair trial, irrespective of public opinion.

Harvard should have pointed proudly to John Adams, a Harvard alum, who defied popular opinion to defend hated British soldiers charged with murdering Americans at the Boston Massacre. (If you wish to take measure of the quality of our times it’s worth noting that Adams won the case and later became president—roughly equivalent to an attorney for accused al-Qaeda terrorists becoming President today.)

Instead of educating its students, Harvard catered to ignorance, bias and hysteria by removing both Sullivan and his wife from their deanships. Harvard in effect endorsed the idea, as Robby Soave put it, that “serving as legal counsel for a person accused of sexual misconduct is itself a form of sexual misconduct, or at the very least contributes to sexual harassment on campus.” Thus Harvard tarred Sullivan and his wife, undermined the rule of law and elevated the rule of the mob. Claudine Gay, then Dean of the Faculty of Arts and Sciences, contributed to the ignorance, bias and hysteria. (It’s also notable, that Sullivan also criticized Harvard’s handling of the investigation of Roland Fryer as being “deeply flawed and deeply unfair.” This may have been Sullivan’s real sin, as the investigation of Fryer was under Dean Claudine Gay.)

Thus, we see in the Sullivan episode disregard for free speech, unprincipled governance in which different rules are applied to different actors in similar situations, and a bending to the will of the mob, all issues which have repeated themselves under the Gay regime. Sad to say, however, that these flaws were not so much ignored at the time as lauded.

Harvard followed the mob and when the mob turned and the season changed it had left itself no defense.

Addendum: See also Tyler, My thoughts on the Harvard mess.

Claims about Japanese immigration

by  Tyler Cowen in

Japan will become an immigration powerhouse. Before the pandemic, the country was on track to accept about 150,000 new non-Japanese employees per year. This more than doubled to almost 350,000 in the first half of 2023. There are now approximately 3.2 million non-Japanese residents of Japan, up from barely half a million 30 years ago. Visa and permanent-residency requirements continue to ease. Most importantly, the biggest obstacle to employing non-Japanese talent—seniority-based rather than merit-based compensation—is beginning to change. All said, it is now perfectly reasonable to expect that about 10 percent of employees will be non-Japanese by 2030. That’s more than double the current rate of just below four percent.

Here is more by Jesper Koll, the piece is interesting on Japan throughout, mostly about demographics and the Japanese labor market.