Category: Current Affairs

England is underrated, a continuing series

The UK has said it will refrain from regulating the British artificial intelligence sector, even as the EU, US and China push forward with new measures.  The UK’s first minister for AI and intellectual property, Viscount Jonathan Camrose, said at a Financial Times conference on Thursday that there would be no UK law on AI “in the short term” because the government was concerned that heavy-handed regulation could curb industry growth.

Here is more from the FT.  And also from the FT: “UK approves Crispr gene editing therapy in global first.

Pharmaceutical Price Controls and the Marshmallow Test

The pharmaceutical market is in turmoil. On the one hand we have what looks like a golden age of medicine with millions of lives saved by COVID vaccines, a leap in mRNA technology, excellent new obesity and blood sugar drugs, breakthroughs in cancer treatments and more. On the other hand, the Inflation Reduction Act includes the most extensive price controls on pharmaceuticals we have ever seen in the United States.

In Washington-speak the “Inflation Reduction Act” requires HHS to “negotiate” drug prices for Medicare Part D and Part B to establish a maximum “fair” price. In reality there is no negotiation–firms who refuse to negotiate are hit with huge taxes. The “negotiation,” if you want to call it that, is “your money or your life” and fairness has little to do with it. The IRA also requires very costly inflation rebates, i.e. a price control/tax. In essence, the IRA is a taking; for drugs with a large Medicare market it is similar to abrogating patents to 9 years for small molecule drugs and 13 years for biologics. For the included drugs there will be a significant reduction in revenues. Moreover, we don’t yet know whether the plan will be extended to more and more drugs. There is significant uncertainty affecting the entire market. What will be situation in 10 years? Will the US be like Europe?

Our government is failing the marshmallow test, big time.

Reduced revenues mean less R&D. The value of extending life is very high and so in my view medical R&D is underprovided. Thus, price controls are taking us in the wrong direction.

The positive effects of price controls are immediate and easy to see: Prices are reduced.

The negative effects of price controls take time and are harder to see. Namely:

  • Fewer drugs for Medicare market.
  • Less research on post-approval indications and confirmatory trials.
  • Reduced incentive for generics to enter quickly.
  • Most importantly: Less R&D spending leading to fewer new drugs, a reduced pharmaceutical armory, lower life expectancy and higher morbidity. By one calculation, ~135 fewer new drugs through to 2039 (see also here and here and here and here).
  • Fewer new drugs means more spending on physicians and hospitals so in the long run price controls may not even save money! (Most prescriptions are for generics. Drugs fall greatly in price when they go generic but physicians and hospitals never go generic!)

Price controls are a classic example of political myopia. Price controls, like rent controls and deficit financing, have modest benefits now and big future costs and thus they are supported by politicians who want to be elected now. Unfortunately, current citizens don’t forecast the future well and future citizens don’t have a vote so it’s easy to create big future costs without engaging an opposition.

The emergence of groundbreaking pharmaceuticals and the increasing implementation of price controls are probably related trends. Everyone wants the great new pharmaceuticals without paying for them. We need to think more long-term–we have much more to gain from a continuing flow of new pharmaceuticals than from lower prices on the last generation. Don’t forget that children who fail the marshmallow test do less well later in life. Well, our government is failing the marshmallow test, big time.

Pharmaceutical price controls driven by myopia and the failure to delay gratification are greatly harming future patients.

Should I keep an eye on Spain? (from my email)

Keep an eye on Spain. What is happening politically is very serious and the tension is increasing.

Fernando Savater: Spain is formally a democracy, sure, but it is ceasing at a forced march from being a rule of law state.

https://theobjective.com/elsubjetivo/opinion/2023-11-05/resignados-sumisos-luchar-sanchez/

Felix de Azúa: The reactionary left will face the coup right with a predictable result: economic ruin and institutional chaos.

https://theobjective.com/elsubjetivo/opinion/2023-11-11/irse-preparando-sanchez/

…Felipe González is very worried, as well.

https://www.youtube.com/watch?v=g5fAXnrMHuI

That is all from Mario Abbagliati.

The Latin American option

Estimates for the number of Palestinians, Syrians, and Lebanese in Brazil range from 10 to 12 million, with a reasonable degree of uncertainty.  Most of them came over before those were distinct countries, for one thing.  Other Latin American countries also have migrants from that region, Panama in particular, and as you may know Bukele of El Salvador is of Palestinian origin.

I don’t know of any formal statistics, but by repute those individuals have done quite well in Latin America.  And it is hard to argue they have increased rates of violence or political disorder.

I would gladly see Brazil and other Latin polities open their immigration to current Palestinians in the Middle East.

The major Latin economies have very low fertility rates, about 1.55 for Brazil.  They will need more people, and more young people, in any case.  Now seems like a good time to act.

The U.S. should care about Europe too

That is the message of my latest Bloomberg column, yes Europe is falling behind but we should worry rather than gloat.  Here is one excerpt:

A deeper truth is that Europe still has unparalleled cultural and political capital, often along dimensions that the US cannot match. Europe was the center of the world for a long time, even if it no longer is, and has a detailed and emotionally vivid understanding of how distinct traditions and histories can coexist. Of course they often don’t, and that too is part of Europe’s lesson for the world.

On a more practical level, the US and other nations need a Europe that can defuse its populist right pressures, handle external migration from the Middle East and Africa, and provide a partial defense against Russian expansion in Ukraine and other parts of far eastern Europe. A Europe that is declining in relative economic importance is unlikely to be able to perform those roles well.

All of which is to say, a Europe striving to regain its place atop the global economy is a welcome development not just for Europeans but for small-d democrats everywhere. If only it would go about the task with a greater sense of urgency.

Empfehlenswert.

China estimate of the day

According to a report by the All-China Federation of Industry and Commerce, more than 80% of China’s 1 billion private enterprises are family-owned, with about 29% of these businesses in traditional manufacturing. From 2017 to 2022, around three-quarters of China’s family businesses are in the midst of a leadership transition, marking the largest succession wave in Chinese history.

Here is the full story, via Rich Dewey.

Autonomous Vehicles Lower Insurance Costs

The insurance giant Swiss RE did a study comparing human drivers with Waymo autonomous vehicles in the same zip-codes and found that autonomous vehicles generated significantly fewer insurance claims.

This study compares the safety of autonomous- and human drivers. It finds that the Waymo One autonomous service is significantly safer towards other road users than human drivers are, as measured via collision causation. The result is determined by comparing Waymo’s third party liability insurance claims data with mileage- and zip-code-calibrated Swiss Re (human driver) private passenger vehicle baselines. A liability claim is a request for compensation when someone is responsible for damage to property or injury to another person, typically following a collision. Liability claims reporting and their development is designed using insurance industry best practices to assess crash causation contribution and predict future crash contributions. In over 3.8 million miles driven without a human being behind the steering wheel in rider-only (RO) mode, the Waymo Driver incurred zero bodily injury claims in comparison with the human driver baseline of 1.11 claims per million miles (cpmm). The Waymo Driver also significantly reduced property damage claims to 0.78 cpmm in comparison with the human driver baseline of 3.26 cpmm. Similarly, in a more statistically robust dataset of over 35 million miles during autonomous testing operations (TO), the Waymo Driver, together with a human autonomous specialist behind the steering wheel monitoring the automation, also significantly reduced both bodily injury and property damage cpmm compared to the human driver baselines.

The Waymo vehicles are in San Francisco and Phoenix so this doesn’t mean that autonomous vehicles are better everywhere. Also, when we say autonomous vehicles we really mean the entire Waymo system including backup. In addition, there are some differences that are hard to account for such as human drivers use more freeways even in the same zip codes. Nevertheless, it is clear that autonomous vehicles are happening. I predict that some of my grandchildren will never learn to drive and their kids won’t be allowed to drive.

What the Kia-Hyundai Crime Wave Tells Us About the Long-Term Decline in Crime

Motor vehicle thefts (per capita) are about one third the level they were in the early 1990s, a drop which is consistent with the Great Crime Decline, the large fall in many crimes since the early 1990s. A lot of ink has been spent trying to explain the great crime decline–abortion legalization, lead abatement, increased imprisonment, more policing–these are just some of the leading theories.

In recent years, however, there has been a notable increased in motor vehicle theft–not back to earlier peaks–but a substantial increase. Theft hasn’t increased uniformly across the board, however. Thefts of Kias and Hyundais have seen massive increases–in some places thefts of these cars have increased by a factor of five or ten in just a few years. The reason is simple–most cars today have electronic immobilizers which mean that without the key present these cars can’t easily be hotwired. Some enterprising thieves, however, discovered that Kia and Hyundai neglected to install these devices and they spread the word through Tik-Tok videos about a method to quickly and efficiently jack these cars.

I propose that the micro can shed light on the macro. Consider the four theories for the great crime decline that I mentioned earlier–abortion legalization, lead abatement, increased imprisonment and more policing. The first two, abortion legalization and lead abatement, are theories about why there are fewer criminals–these theories say that people improved and that is why crime declined. But better people shouldn’t steal any car models, including Kias and Hyundais! Moreover, people haven’t suddenly become worse. Thus, offender-based theories cannot explain the sharp rise in motor vehicle thefts. There have been some changes in punishment, imprisonment and policing, in recent years but these have been slow moving and fairly small and in addition they also don’t explain the rise in Kia and Hyundia thefts in particular.

Obviously, what explains the rise in thefts of Kias and Hyundias in particular is the discovery that these vehicles were unguarded, unprotected and unsecured. Notice that being unguarded, unprotected and unsecured swamped any effect coming from abortion legalization, lead abatement, increased imprisonment or more policing.

The failure of the big four to explain the rise in Kia and Hyundai thefts isn’t proof that these theories are wrong. But lets ask the inverse question, can the rise in Kia and Hyundai thefts suggest an explanation for the great crime decline? In other words, can we explain the great crime decline by an increase in security. Begin with the most direct case, motor vehicle theft. Car immobilizes and other security devices began to be installed in the 1990s so the timing fits. Moreover, the timing fits multiple countries. One of the weaknesses of theories of the great crime decline such as increased imprisonment and policing is that these theories work for the United States but the crime decline occurred in many industrialized countries at about the same time. Canadian crime rates, for example, fall in near lockstep with US rates but with very different prison and policing strategies. Immobilizer technology, however, happened at similar times in similar places and where we saw delays or early adoption we also see delayed or early falls in motor vehicle theft. In addition, motor theft declined first for newer cars (secured) rather than for older cars despite the fact that the newer cars are the more desirable for thieves–again this fits the security hypothesis better than an offender or punishment hypothesis.

The security hypothesis fits motor vehicle theft but the connection is less clear with respect to other crimes. Home security devices have increased and become higher quality over time but the change was less rapid and less precisely timed to the early 1990s. The rise of credit cards and decline of cash could have reduced muggings, although again the timing doesn’t appear to be precise. Violent crime would seem even less likely to be security related–although cameras and lights surely matter–but keep in mind that a lot of violent crime is a side-effect of property crime. Vehicle thefts, muggings and drug deals turn into homicides, for example. In addition, there are “life of crime” or “career” effects. If you make motor vehicle theft and burglary less profitable that makes a life of crime less profitable which can reduce crime in general even without specific deterrence.

Overall, the security hypothesis carries some weight, especially in explaining multiple countries. I don’t fully discount any of the major theories, however. Multiple causation is important.

The main less I draw is this: The increase in Kia and Hyundai thefts suggests that the crime wave declined not because the ocean became more gentle but because we built more secure sea walls. The big waves are still out there in the vast ocean and if we lower the walls we shouldn’t be surprised if another big crime wave comes rolling in.

Good Developments in Africa

The Guardian: Visas to visit Kenya are to be scrapped for other African nationals from next year as part of a movement towards opening up trade and travel within the continent.

“By the end of this year, no African will be required to have a visa to come to Kenya,” Kenya’s president, William Ruto, said at a climate change conference in Congo-Brazzaville.

Costly and time-consuming visa requirements, as well as high air fares, have long created barriers to inter-African travel for African passport holders; 32 out of 54 African countries still require the nationals of half or more countries on the continent to obtain a visa.

Good. Kenya should also scrap visas for US and European citizens!

This is part of Africa’s move to free trade with the The African Continental Free Trade Area (AfCFTA), the largest free trade area in the world measured by the number of countries participating. Eventually AfCTA will cover 1.3 billion people across 55 countries.

Visas can have very high costs in reducing travel and trade. Africa is moving in the right direction. The US and Europe in contrast are adding visa requirements and the wait times to get a US visa are an absurd embarrassment.

My Conversation with Githae Gitinji

This is a special bonus episode of CWT, Githae is a 58-year-old village elder who mediates disputes and lives in Tatu City, Kenya, near Nairobi.  Here is the audio, video, and transcript.  Here is the episode summary:

In his conversation with Tyler, Githae discusses his work as a businessman in the transport industry and what he looks for when hiring drivers, the reasons he moved from his rural hometown to the city and his perspectives on urban vs rural living, Kikuyu cultural practices, his role as a community elder resolving disputes through both discussion and social pressure, the challenges Kenya faces, his call for more foreign investment to create local jobs, how generational attitudes differ, the role of religion and Githae’s Catholic faith, perspectives on Chinese involvement in Kenya and openness to foreigners, thoughts on the devolution of power to Kenyan counties, his favorite wildlife, why he’s optimistic about Kenya’s future despite current difficulties, and more.

Excerpt:

COWEN: What do you do that the court system does not do? Because you’re not police, but still you do something useful.

GITHINJI: What we normally do, we as a group, we listen to one another very much. When one person reaches that stage of being told that you are a man now, you normally have to respect your elder. Those people do respect me. When I call you, when I tell you “Come and we’ll talk it out,” with my group, you cannot say you cannot come, because if you do, we normally discipline somebody. Not by beating, we just remove you from our group. When we isolate you from our group, you’ll feel that is not fair for you. You come back and say — and apologize. We take you back into the group.

COWEN: If you’re isolated, you can’t be friends with those people anymore.

GITHINJI: When we isolate you, we mean you are not allowed to interact in any way.

COWEN: Any way.

GITHINJI: Any business, anything with the other community [members]. If it is so, definitely, you have to be a loser, because you might be needing one of those people to help you in business or something of the sort. When you are isolated, this man tells you, “No. Go and cleanse yourself first with that group.”

If you find his Kikiyu accent difficult, just read the transcript instead.  This episode is best consumed in a pair with my concurrently recorded episode with Harriet Karimi Muriithi, a 22-year-old Kenyan waitress — the contrasts in perspective across a mere generation are remarkable.

Why aren’t the American hostages receiving more attention?

Yesterday Senator Marsha Blackburn tweeted: “The White House admitted Hamas is holding nearly 500 Americans hostage in Gaza.”  To be clear, those are Americans not allowed to leave Gaza (NYT), they are not being held in a compound.  As for hostages in the narrower sense of that term, there seem to be about ten.  Neither are instances of liberty, nor are they safe positions to be in.  Personally, I would consider both groups to be hostages.

No matter which definition of hostage you prefer, I don’t see so many major MSM articles about these hostages.  I remember the much earlier Iranian hostage crisis, when many Americans even knew the identities and life stories of individual hostages.  It was a front page item almost every day.  As I am composing this post (the day before), I don’t see it on the NYT front page at all.  Same with WaPo, though they do have “Biden hosts Trick or Treaters at the White House.”  If you consider this New Yorker story, well yes it covers the American hostages somewhat, but it is nothing close to what I might have expected.  They are not even the article lead.  So why so little coverage?  I have a few candidate hypotheses, which may or may not be true:

1. The MSM wants Biden’s reelection, and they don’t want him ending up painted as “another Jimmy Carter” who cannot rescue the hostages.

2. The young Woke staffers at MSM don’t want to make Hamas look too bad, or to make the Israeli retaliation look too good.

3. These hostages are themselves not “The Current Thing,” even though the war itself seems to be The Current Thing.  Has “The Current Thing” become so narrowly circumscribed?

4. For some national security reasons, MSM has been told by our government that too much hostage coverage would endanger their possible release or rescue.

5. The Biden administration is pressuring MSM not to cover the hostages too much, out of fear that the domestic pressures for America to intervene will become too strong.

6. It simply hasn’t happened yet, due to noise in the system.

What else?  I am not saying any of those are true, and some of them are more conspiratorial than the kinds of explanation I usually find persuasive.  So why don’t the American hostages receive more attention?

Denmark takes forceful measures to integrate immigrants

After they fled Iran decades ago, Nasrin Bahrampour and her husband settled in a bright public housing apartment overlooking the university city of Aarhus, Denmark. They filled it with potted plants, family photographs and Persian carpets, and raised two children there.

Now they are being forced to leave their home under a government program that effectively mandates integration in certain low-income neighborhoods where many “non-Western” immigrants live.

In practice, that means thousands of apartments will be demolished, sold to private investors or replaced with new housing catering to wealthier (and often nonimmigrant) residents, to increase the social mix.

The Danish news media has called the program “the biggest social experiment of this century.” Critics say it is “social policy with a bulldozer.”

The government says the plan is meant to dismantle “parallel societies” — which officials describe as segregated enclaves where immigrants do not participate in the wider society or learn Danish, even as they benefit from the country’s generous welfare system.

Here is more from the NYT, and do note that Singapore has its own version of this policy.  I would make a few observations:

1. Putting aside the normative, analyzing the effects of such policies will be increasingly important.  Economists are not especially well-suited to do this, nor is anyone else.  I am well aware of the Chetty “Moving to Opportunity” results.  That is good work, but a) it probably doesn’t apply to coercive Danish resettlements, and b) cultural context is likely important for the results.  At least for the countries that migrants wish to move to, most will have their own versions of this dilemma.

2. “Open Borders” as a sustainable political equilibrium is looking much weaker than it did a month ago.  The key question in immigration policy is not “how many migrants should we take in?” (a lot, I would say), but rather “how can we make continuing immigration a politically sustainable proposition?”  Many immigration advocates are in a fog about their inability to offer better answers to that question.

3. Will this Danish action, once the entire political economy is worked through, increase or decrease the allowed number of migrants to the country?  Looking at the demand side to migrate, will this policy end up attracting a higher or lower quality of migrants to Denmark?  Is Denmark even attractive enough as a destination to get away with this?  Or will it send a better signal to would-be migrants and thus raise quality?

I would not be too confident about my answers to those questions, nor should you be so confident.