Category: Current Affairs
My Conversation with Samantha Power
Samantha Power has a new and excellent book out, The Education of an Idealist: A Memoir, which I very much enjoyed. And so a Conversation with Tyler was in order, here is the audio and transcript, here is one bit:
COWEN: For a final closing segment, I just have some super simple questions about foreign policy again. Over the course of the last summer, Iran apparently seized two British tankers. There’ve been other incidents in the Strait of Hormuz in some way connected with Iran. From a game-theoretic point of view, why would they do this? Why does this make sense?
POWER: Well, the one thing that they would know that would give them some point of leverage is the extreme war fatigue within the United States, and really within the Western world. So, by upping the stakes, arguably — I mean, who knows why the hell they’re doing what they’re doing?
But by upping the stakes, they arguably could be sending a signal like, “You want to get in this game? It’s not as if we’re an island and you can just break the deal, penalize us gratuitously, penalize the people who are still trying to maintain the terms of the deal, and that there won’t be collateral consequences outside the nuclear space.”
Because the nuclear consequences, as they begin to enrich and violate the terms of the deal — having legitimately argued that we had violated the terms of the deal — the effects of those are not day-to-day effects in the news world. It’s a bit abstract for the public and even for policymakers. It’s an incremental abrogation.
But acts like this show that they have leverage, that they are active militarily in parts of the world where we have a vested interest in maintaining freedom of navigation. So I think they’re showing that they can hit in domains outside the nuclear domain. I think that is probably what they’re doing.
Here is another segment:
COWEN: In which ways do you feel your thought is in some manner still Irish in orientation in a way that would distinguish you from, say, American-born individuals?
POWER: It’s hard to know because I can’t run the counterfactual, so I don’t know what’s just because my mother is a physician and very empathetic toward her patients, and do I learn from that? Or am I moved by having come from a small country, at that time a poor country, that was sending —
COWEN: With a history of oppression, right?
POWER: With a history of oppression, with a history of the dignity of its people being trampled. Is that why I care so much about individual dignity? Again, I can’t run the history a different way.
And finally:
COWEN: Very simple — are baseball games too long? Why not make it 7 innings?
POWER: Why not make it 12?
COWEN: It’s boring, right?
POWER: For you and, as it turns out, for others.
COWEN: For me. So many games are over 3 hours. Shouldn’t the game be 2 hours, 17 minutes?
We also cover her first impressions of America, being a wartime correspondent, China and Iraq, Star Wars vs. Star Trek, van Morrison vs. Bob Dylan, robot empires vs. robot umpires, her favorite novel, how personal one should get in a memoir and why, and German defense spending, among other topics.
Definitely recommended.
(Expensive) markets in everything
Department store Neiman Marcus is helping people with their indecisiveness by selling asymmetrical jeans.
The $462 high-waisted jeans feature one skinny leg and one wide leg.
They can be bought in a medium blue color, ranging from sizes x-small to large.
Rebuilding the British right?
For most of the postwar era, the Conservative Party prided itself on its ability to tell an economic story. Tories traditionally explained their right to govern in terms of an overarching economic vision for the country, a vision which was instantiated in policy and which often set the political agenda.
From Macmillan to Thatcher to Cameron, they presented themselves as the party of national prosperity, and of hard-nosed economic realities, and many people voted for them on this basis. But this no longer seems to be the case.
The last few years have witnessed what elsewhere we called the Strange Death of Tory Economic Thinking. In the years following the EU Referendum, Conservatives in Britain largely dropped the economy from the heart of their political story. This is not just a criticism of Mayism, with its Home Office view of the world; many who professed to be market liberals seemed to do so performatively, without serious consideration of what they wanted to deregulate or how.
The recent change of Prime Minister provides an opportunity to put this right. We hope that the new government will turn away from the trajectory of the last three years, and start taking economics seriously again. If it chooses not to, we would urge others on the centre-right to take up the challenge.
This paper is an attempt to sketch out some principles for a centre-right economic outlook, and some specific policies to focus on.
We begin by presenting a few important stylised facts about the contemporary British economy that should frame an economic narrative; we then set out some political principles for how to turn these into economic policy.
Based on these, we set out a set of policies in four areas where we think progress can be made: tax, housing, infrastructure and devolution, and innovation and technology.
Finally, we conclude with some long-term actions that need to be taken to begin rebuilding an economic narrative for the Right.
This website was written by Sam Bowman and Stian Westlake. If you would like to discuss it, they can be contacted via Twitter (@s8mb and @stianwestlake respectively). If you would like a PDF of the whole website, you can find one here.
Here is the link.
Emergent Ventures winners, fifth cohort
16-year-old programmer from Northern England, grant for career development and his interest in income-sharing agreements. Here is James on Twitter.
Incoming Harvard Ph.D student in economics, for work on “What happens to the ability of firms to write contracts when courts are dysfunctional? [in India]” and related ideas. Twitter here.
17-year-old from Chennai, Twitter here.
San Francisco, to support his project to reexamine and fundamentally improve the book as a method for learning and absorbing ideas, Twitter here. Here is his essay on why books do not work.
Nicholas Donahue and Austin Kahn
Has a start-up, open source VR headset focused towards makers and web developers, based on the notion that the web is the proper platform for VR.
Clementine Jacoby and Recidiviz
To start a non-profit to collect and spread data on recidivism and penal reform for state-level policy, Fast Company article on Recidiviz here.
GMU, Schar School, “How can we explain a specific AI outcome? What if the law mandates it?”, with an eye toward an eventual start-up.
Washington, D.C., for career development and to explore the marketing of neoliberal ideas through social media.
Shruti Rajagopalan, for Indian political economy and improving Indian economic policy, in residence at Mercatus. Twitter here.
20-year-old infovore, career development grant, Twitter here.
A non-profit working with survivors of sexual abuse in the Catholic Church, article here about their work.
If you have received an award lately, but are not listed, don’t worry — you’ll be in the sixth cohort. Here are the earlier cohorts of winners.
East Germany fact of the day
Evidence of a widening gulf has become too copious to ignore. Last month, for example, a poll by the Allensbach Institute asked eastern Germans whether they saw democracy as practised in Germany as the best form of government. Only 31 per cent agreed. Two years ago, the figure was 53 per cent.
In western Germany, meanwhile, 72 per cent described democracy as the best form of government, broadly unchanged from two decades ago.
The same divergence shows up when Germans in both parts of the country are asked about their identity: 47 per cent of eastern Germans say they identify above all as eastern Germans, compared with only 44 per cent who feel simply German. This, too, is a sharp reversal from only a few years ago.
Also striking is the sheer persistence of specifically eastern German views and stereotypes: even 30 years after the fall of the wall (and with an east German chancellor, Angela Merkel, holding office since 2005), more than a third of eastern Germans describe themselves as “second-class citizens”.
That is from Tobias Buck in the FT.
America’s depressing new culture war
What do we learn from reading through a list of top Patreon winners? That is the topic of my latest Bloomberg column, here is one excerpt:
Feel free to peruse the list yourself. My own browsing and clicking led me to a new conclusion: America’s culture war is not just left-wing vs. right-wing, or privileged vs. unfortunate, or even Trump vs. his critics. It is between those who believe in aspiring to something greater and those who do not.
You will note that your main criticisms already are covered in my text.
How deregulatory is the Trump administration?
Here is an email from a loyal, anonymous MR reader:
Critics of the administration’s much-ballyhooed deregulatory efforts argue that there’s not really that much there; they contend the White House and agencies have been tinkering around the margins (and helping out special interest groups), but not really addressing regulation’s economic cost. They argue there’s been virtually nothing done to address the bloated corpus of 100 years of accumulated federal regulation, and there’s been no legislative action to change regulatory processes.
The administration’s defenders and their fiercest critics alike argue that Trump has taken a machete to the regulatory state. But aside from naming a few rule changes here or there, they don’t offer much concrete support for their claim.
What’s the steel man case that Trump has broken the back of the administrative state? Some hypothes
1. They haven’t made things worse. After eight years of an administration that was seen (fairly or not) as hostile to business, just taking the boot off the throat of entrepreneurs is a major step forward. Small-business optimism is at pre-crisis levels. The last two years have seen the fewest economically significant final rules promulgated since 1990. Beyond formal rules, the administration has ended the abuse of “dear colleague” letters, guidance documents, and sue-and-settle.
2. Related to #1, there’s been no new legislation along the lines of Sarbanes-Oxley or Dodd-Frank that will take as long as a decade to get regulations worked out. That takes a lot of the uncertainty out of the system.
3. Enforcement has been curtailed. The administrative state is a threat because its enforcement is so capricious and subject to questionable extralegal adjudication. The Trump administration has responded by simply not enforcing many regulations. EPA inspections are down by half; CFPB is asleep at the switch. Enforcement heads are basically emulating Ron Swanson, for the better.
4. The 14 uses of the Congressional Review Act in early 2017 should in fact count as highly deregulatory; it was of course more than had ever been done with this tool in the past. Okay, so the regs in question weren’t yet final or hadn’t been in effect for very long. That’s just playing a baselines game; the bottom line is tens of billions of dollars of costs were cut over what would have been.
5. The record-breaking number of appellate judges appointed by the president and confirmed by the Senate will shift the judiciary to be more skeptical of regulators’ self-aggrandized power. Justice Gorsuch is champing at the bit to eliminate Auer and Chevron deference; overruling these precedents would be game-changing.
6. There’s been more taking place than you think. No, there hasn’t been a huge shakeup of federal departments, but those kinds of things are mostly for show anyway; federal power remains more or less constant, responsibilities just get shifted around. Benefit-cost analyses and regulatory impact analyses done by most agencies are sloppy at best and mostly just a Soviet-style effort to justify what’s already been decided, so they don’t capture the magnitude of what’s happening.
What has happened? The president has appointed people who take regulatory analysis seriously and understand opportunity cost. Some of the deregulation has been in areas most sensitive to the costs of regulation, like labor and energy. ACA individual mandate? Gone. HUD is taking steps to push housing deregulation at the local level; this has gotten almost no attention.
7. There’s more that would have been done but for the “deep state.” It’s a matter of public choice economics, not AM radio conspiracies, that regulators may not be enthusiastic about deregulating. For instance, Trump’s much-trumpeted two-out-one-in executive order for federal regulations was largely kneecapped by OMB so that over 90% of new regulations are deemed exempt from the order. Given inherent resistance to change (again, for perfectly understandable reasons, this is not a conspiracy), it’s amazing that anything has been done at all!
Has monetary policy lost its power?
No, says my latest Bloomberg column. Here is one of the opening bits:
The most striking fact about the current situation is that not one of the world’s major central banks has announced that it would like to see a higher rate of price inflation. Have you heard support for a 3% inflation rate lately from the heads of the European Central Bank, the Bank of Japan or the U.S. Federal Reserve? It is therefore no surprise that central banks don’t seem to matter much.
In essence, central banks would like to make marginal contributions to stimulating the economy, without incurring the political wrath from a higher rate of price increase. The powers they have lost are political, not economic.
On these and related questions, I am grateful to the writings of Scott Sumner over the years. And in sum:
In fact, when it comes to macroeconomics, the current malaise is not just political but also cultural: It is a paralysis of the spirit to achieve and excel. Conventional economic theory has not been proved wrong, at least not yet. There is just a fading willingness to apply it.
Boris Johnson’s suspension of Parliament
The betting markets have stayed in the 48-55 range for Brexit by year’s end, even after the suspension announcement. That to me does not sound like “hard Brexit hell or high water.”
I would sooner think that Boris Johnson wishes to see through a relabeled version of the Teresa May deal, perhaps with an extra concession from the EU tacked on. His dramatic precommitment raises the costs to the Tories of not supporting such a deal, and it also may induce slight additional EU concessions. The narrower time window forces the recalcitrants who would not sign the May deal to get their act together and fall into line, more or less now.
Uncertainty is high, but the smart money says the Parliamentary suspension is more of a stage play, and a move toward an actual deal, than a leap to authoritarian government.
That said, I still do not like either Brexit or the suspension.
Another day in the news
Dudley
Russian co-signed loans?
Suspension of British Parliament?
Planned Iranian drone attack on Israel?
What will it be tomorrow?
Shruti Rajagopalan update
Next week Dr. Shruti Rajagopalan (also an Emergent Ventures winner) will be joining Mercatus as a senior research fellow, focused on Indian political economy, property rights, and economic development.
Shruti earned her PhD from George Mason in 2013 and most recently she is an associate professor of economics at Purchase College, SUNY. She is also a fellow of the Classical Liberal Institute at NYU, and will be teaching at the newly-formed Indian School of Public Policy in New Delhi.
Welcome Shruti!
You can follow Shruti on Twitter here.
Is the trade war with China a carbon tax?
I know that in my Twitter feed I am told a “carbon tax is GOOD” and the “Trumpian trade war with China is BAD.” But isn’t Trump’s trade war, at least indirectly, a tax on carbon emissions?
Most Chinese exports are manufactured goods, and they are produced in a fairly carbon-intensive manner. Furthermore, it doesn’t seem that Vietnam is able to pick up the slack, so it is not just a case of substituting from one dirty carbon emitter to another. It seems the trade war is genuinely restricting trade, and over time it will restrict the consumption and production of carbon-intensive goods. China is by far the exporter with the most to lose.
Of course the targeting of these new taxes is far from ideal from an environmental point of view, nor are they contingent on emissions in the proper manner (still, China is hardly on the verge of being able to switch into clean manufacturing, and in that sense contingent may not matter so much). And it is hardly the case that Trump has “green motives.”
Still, put aside all the imperfections — don’t we finally have a carbon tax — and a framework for improving it — that so many commentators have been wanting all along? Won’t this give Elizabeth Warren the chance to really fine-tune the apparatus?
On these points I am indebted to some remarks from Ray Lopez. And here is my earlier 2016 post “Tyrone on why Democrats should vote for Donald Trump.“
Addicted to Fines
Governing: Like many other rural jurisdictions, towns in south Georgia have suffered decades of a slow economic decline that’s left them without much of a tax base. But they see a large amount of through-traffic from semi-trucks and Florida-bound tourists. And they’ve grown reliant on ticketing them to meet their expenses. “Georgia is a classic example of a place where you have these inextricable ties between the police, the town and the court,” says Lisa Foster, co-director of the Fines and Fees Justice Center. “Any city that’s short on revenue is going to be tempted to use the judicial system.”
… in hundreds of jurisdictions throughout the country, fines are used to fund a significant portion of the budget…In some extreme cases, local budgets are funded almost exclusively by fines. Georgetown, La., a village of fewer than 500 residents, was the most reliant on fines of all reviewed nationally. Its 2018 financial statement reported nearly $500,000 in fines, accounting for 92 percent of general revenues. Not far behind is Fenton, La., which reported more than $1.2 million in fines, or 91 percent of 2017 general fund revenues.
In To Serve and Collect (forthcoming Journal of Legal Studies) Makowsky, Stratmann and myself find that the allure of fine and forfeiture revenue can distort policing by shifting arrests towards crimes and misdemeanors with greater potential for revenue rather than greater social harm.
There is, however, some good news. The U.S. Supreme Court ruled that the Constitution’s ban on excessive fines applies to states and localities and that is putting pressure of them to reform. My co-author Mike Makowsky has a good suggestion:
The way governments allocate fine revenue also matters. The majority deposit it into their general fund, but many in Oklahoma, for example, route the money to separate police or public safety funds. That’s a mistake, says Michael Makowsky, an economics professor at Clemson University in South Carolina. “You want to separate officer incentives from the revenues they generate,” he says. One solution he proposes is to route fines and fees to state governments. States would then redistribute all the funds back as block grants based on population or other metrics, effectively removing incentives to issue tickets.
The Governing report is good and links to more data.
Treasury rates and global PMI
Would a payroll tax cut help avoid a recession?
Right now, probably not. Here is an excerpt from my latest Bloomberg column:
The inclination in American politics is to cut the payroll tax on the worker side, not the employer side. That is the opposite of what should be done.
In a recession, the usual problem is that too many people are seeking too few jobs. The reluctance lies on the side of the employer, not the worker. So cutting the taxes paid by the worker won’t help much. In contrast, cutting the taxes paid by the employer might at least boost the demand for workers and thus stimulate employment.
In the long run, according to economic theory, it does not matter whether you cut payroll taxes for workers or employers; eventually wages will adjust so that the true, tax-adjusted set of wage offers ends up the same. But for the purposes of fighting a near-term recession, it matters very much whose taxes are cut.
Do read the whole thing. Do note, however, that I am not currently expecting a recession, I just don’t see enough pointers in that direction, and furthermore most of the time recessions do not happen.