Category: Current Affairs
What should I ask Marc Rowan?
I will be doing a Conversation with him. If you don’t know, here is a snippet from Wikipedia:
Marc Jeffrey Rowan…is an American billionaire private equity investor. He co-founded Apollo Global Management in 1990 with Josh Harris and Leon Black and took over as CEO in 2021.
Marc also has been involved in recent disputes over academia, anti-Semitism, and in particular concerning the University of Pennsylvania. But please note this Conversation was scheduled before all those issues came to the fore, and I do not intend to obsess over them.
So what should I ask Marc?
Sebastian Bensusan on Milei reform impressions (from my email)
This was great:
https://marginalrevolution.com/marginalrevolution/2023/12/argentina-reform-impressions.htmlI think the biggest things that you missed are:
1. He is using the same “emergency measures” (DNUs ~ Executive Orders) that the Kirchner’s used. Many of the things in that DNU are very hard to justify as emergency measures and as such, I consider the method unconstitutional. In other words, he is playing dirty.
2. Many of the things in the bill are not directly relevant to the immediate economic crisis, are not necessarily why he was voted in, and are especially offensive to the side of the country that didn’t vote for him. For example, removing Ley de Tierras is not going to bring foreign investment immediately (nobody wants to invest in Argentina at this time) but it infuriates the losing side further. It is another example of him being ideologically driven. The more of these crusades he fights at the same time, the more likely a strong coalition forms against him.
Argentina Milei reform impressions
I didn’t have much time in Argentina, but I can pass along a few impressions about how Milei is doing, noting I hold these with “weak belief”:
1. He is pretty popular with the general population. He is also popular in B.A. in particular. People are fed up with what they have been experiencing. It is incorrect to think of him as mainly a candidate for the elites.
2. Even if you think he “plays a clown on TV,” he is not a clown. He is a serious thinker who has facility with economic arguments, including at the academic level.
3. If he can lick hyperinflation, but that causes a recession for a year or two, the population will accept that trade-off.
4. Licking hyperinflation will not be so easy. The currency is still declining in value, and Milei has to solve major fiscal problems with 10-15 percent representation in the two-house legislature. For this reason alone, the whole project still could very easily fail, and it would be a long time before libertarian-style ideas would be given another chance in Argentina.
4b. Right now Argentina is auctioning off (FT) $3.6 billion USD worth (but denominated in pesos) in fresh debt. The goal is to clear off central bank debt, and to put fiscal instruments where fiscal instruments ought to be, and sever them from the monetary authority. Right now short-term central bank debt is about 10% of the country’s gdp, a bad place to be. But how well will this new borrowing go? How far can it be extended? The fate of the whole plan may rest on the efficacy of this very particular transition, and if more central government borrowing in Argentina makes you nervous it should. Keep in mind hyperinflation is not just “money printing” (though it is that too), it is after a while an entire interwoven web of corrupt and malfunctioning institutional arrangements. Just how easily and how quickly can those be untangled?
5. Milei’s political enemies are not entirely keen to seize power right now, since they would have to deal with a hyperinflation and possibly a recession. This is operating in his favor.
6. Some of his support is based in a kind of “free lunch” voter desire to simply have more dollars, as some of the populace expects “dollarization” to bring. That is one reason why he won, but it is worrying for his ability to sustain support.
7. What I understand from his deregulatory measures I am very much in support of. But until a broader business confidence is restored, they may not help economic growth much. I don’t think we are going to see a Ludwig Erhard-style economic miracle in Argentina.
8. So far he has yet to make an obvious mistake.
9. Fossil fuel megaprojects (WSJ), such as “Vaca Muerta” may prove Milei’s ace in the hole, if he can hold on long enough.
10. U.S. mainstream media are not doing a good job covering these developments, or even devoting much attention to them.
I will continue to follow this issue.
Why France is underrated
That is the topic of my latest Bloomberg column, here is one bit:
Since the West European economic boom ended in the 1970s, the French civil service has been at best a mixed blessing. French administrators have gotten a lot done, reflecting their impeccable education and internal culture. But they have also helped to make the French economy overly static and too reliant on bureaucracy. A lazier, less activist civil service might have been better.
Fast forward to 2023. War and conflict are now more common on the global scene, a trend that shows no signs of abating. Populist governments are on the rise, and China and Russia are active and restless. None of those problems is easy to solve, and they all require greater involvement from the public sector. Nations with high-quality leadership and civil-service traditions will stand a better chance of navigating the turmoil.
So the bureaucracy that was once a hindrance to France may now turn out to be a comparative advantage. And at a time when governance seems to be deteriorating around the world, Macron continues to have a reputation as a relatively responsible leader.
This year has shown how this advantage plays out. Post-pandemic France has been a bit of a mix, with soaring energy prices, inflation, rising interest rates, continuation of the Ukraine war, labor strikes and protests, and a variety of European migration crises. Yet France avoided a credit downgrade and the French economy continued to create more jobs. Performance has hardly been perfect and the risk of recession remains, but France has done better than might have been expected 18 months ago.
I also consider the relatively successful French start-up scene, including in AI.
Tyler and Alex on Gift Giving
December? It must be time for the holiday favorite that everyone loves, the sweet and wise An Economist’s Christmas!
Effective altruism has taken some hits this year but the core insights remain underrated. We still like the excellent GiveDirectly and also GiveWell’s Top Charity Fund.
Happy holidays everyone!
Milei in action
It only took a day into his term as Argentina’s new president for Javier Milei to get rid of the Ministry of Culture. Milei was inaugurated on 10 December, and the following day, the boisterously libertarian economist and former television commentator fulfilled his campaign promise with typical bravado. Also on the chopping block—or, rather, in the path of his chainsaw, which Milei carried throughout his campaign to symbolise his intent to slash government spending—was the Ministry of Women, Gender and Diversity.
Several other ministries were downsized and recombined into new entities. The Ministry of Social Development, Ministry of Education and Ministry of Labour, Employment and Social Security will be pared down into a newly formed Ministry of Human Capital, headed by the former TV producer Sandra Pettovello. Meanwhile, the Ministries of Public Works, Transportation, Energy, Mining and Communications will merge into a new Ministry of Infrastructure. (It appears that the Ministry of Culture and Ministry of Women, Gender and Diversity will be completely dissolved.)
Here is the full story. Whether or not you favor a Ministry of the Arts in the abstract, I don’t think you should during a fiscal crisis and hyperinflation…
No Child Left Behind: Accelerate Malaria Vaccine Distribution!
My post What is an Emergency? The Case for Rapid Malaria Vaccination, galvanized the great team at 1DaySooner. Here is Zacharia Kafuko writing at Foreign Policy:
Right now, enough material to make 20 million doses of a lifesaving malaria vaccine is sitting on a shelf in India, expected to go unused until mid-2024. Extrapolating from estimates by researchers at Imperial College London, these doses—enough for 5 million children—could save more than 31,000 lives, at a cost of a little more than $3,000 per life. But current plans by the World Health Organization to distribute the vaccine are unclear and have been criticized as lacking urgency.
…Vaccine deployment and licensure is an incredibly complex scientific, legal, and logistical process involving numerous parties across international borders. Roughly speaking, after the WHO recommends vaccines (such as R21), it must also undertake a prequalification process and receive recommendations from its Strategic Advisory Group of Experts before UNICEF is allowed to purchase vaccines. Then Gavi—a public-private global health alliance—can facilitate delivery by national governments, which must propose their anticipated demand to Gavi and make plans to distribute the vaccines.
Prequalification can take as long as 270 days after approval. However, the COVID-19 vaccines were rolled out within weeks of WHO’s approval, using the separate EUL process rather than the more standard prequalification process that R21 is now undergoing.
For COVID-19 vaccines, EUL was available because the pandemic was undeniably an emergency. Given the staggering scale of deaths of children in sub-Saharan Africa every year, shouldn’t we also be treating malaria vaccine deployment as an emergency?
The R21 malaria vaccine does not legally qualify for EUL because malaria already has a preventive and curative toolkit available. My concern is that this normalizes the deaths of hundreds of thousands of children each year in Africa.
We can move more quickly and save more lives, if we have the will.
Earth fact of the day
This week, the International Institute for Strategic Studies in London published the latest edition of its authoritative annual Armed Conflict Survey, and it’s not predicting much peace for the holidays. It paints a grim picture of rising violence in in many regions, of wars chronically resistant to broking of peace. The survey — which addresses regional conflicts rather than the superpower confrontation between China, Russia, the US and its allies — documents 183 conflicts for 2023, the highest number in three decades…
The intensity of conflict has risen year on year, with fatalities increasing by 14% and violent events by 28% in the latest survey. The authors describe a world “dominated by increasingly intractable conflicts and armed violence amid a proliferation of actors, complex and overlapping motives, global influences and accelerating climate change.”
Here is more from Max Hastings at Bloomberg.
What should UAP disclosure policy be?
That is the subject of my latest Bloomberg column. Here is the opener:
There is currently legislation before Congress that, if passed, could be one of the most important laws in US history. The Unidentified Anomalous Phenomena Disclosure Act of 2023, which calls for transparency in matters related to UFOs, is sponsored by Senate Majority Leader Charles Schumer and has considerable bipartisan support, although it may fail due to Republican opposition.
However skeptical you or I might be, there are many allegations from within the federal government that the government is hiding alien crafts and bodies, and that the military is seeking to reverse-engineer alien technologies. There are also more plausible claims that there are flying objects that defy explanation.
And:
…if you think all this talk of aliens is nonsense, isn’t the best response some sunlight to show nothing weird is going on?
That is the strongest argument for the bill: if all the recent UAP chatter reflects neither an alien presence nor threats from hostile foreign powers. In that case, drawing back the curtain would discourage reasonable observers from pursuing the topic further. A modest benefit would result.
What about hostile foreign powers as an explanation for the UAPs?:
In that case, additional transparency could be harmful. The US government conducts a variety of intelligence and military operations, and Congress does not insist that they all be made public. There is no transparency for CIA missions, or for US cyberattacks, or for many other aspects of US foreign policy.
In that scenario the case against the bill is relatively strong. And what about good ol’ alien beings and spacecraft?
In that case, is the best policy really what transparency advocates call “managed disclosure”? They had envisioned a panel of responsible experts managing the flow of information, bit by bit.
One question is whether such knowledge might be better kept secret, or known only to the small number of elites who manage to put all of the pieces together. Whether a broad social panic would result from revealing an alien presence on earth is hard to say — but it is also hard to see the practical upside. The best argument for disclosure is simply that the public has a right to know, and that such a knowledge of the reality of the humankind’s place in the universe is intrinsically valuable.
A second question concerns the inexorable logic of disclosure. Practically speaking, the US has a long tradition of whistleblowers and truth-tellers. If there is actual hard evidence of alien visitation, it is going to leak out, with or without the UAP Disclosure Act of 2023. Just look at the Edward Snowden case, where an American risked imprisonment and exile to reveal secrets that were far less important than what could be at stake here.
If the current legislation does not pass, or if a much weaker version moves forward, some people may take that as their cue to step forward and spill the beans — with direct proof rather than hearsay.
So in that “most interesting” case a transparency bill may not matter for long. That means I am not crushed that the disclosure provisions of the bill have been so watered down. In the case where those provisions really matter, a) it may be better if we don’t know, and b) we will find out sooner or later anyway. Aliens and UAPs aside, the appropriate degree of transparency is one of the most difficult questions in politics.
Argentina projection of the day
Milei’s November election win — on a pledge to rapidly overhaul Argentina’s dysfunctional economy — has triggered a burst of market exuberance. The local Merval stock index is up 28 per cent, while prices for Argentina’s closely watched sovereign bonds maturing in 2030 — some of the most liquid — have risen 22 per cent to 37.2 cents on the dollar.
Here is more from Ciara Nugent of the FT.
Trading on terror
Recent scholarship shows that informed traders increasingly disguise trades in economically linked securities such as exchange-traded funds (ETFs). Linking that work to longstanding literature on financial markets’ reactions to military conflict, we document a significant spike in short selling in the principal Israeli-company ETF days before the October 7 Hamas attack. The short selling that day far exceeded the short selling that occurred during numerous other periods of crisis, including the recession following the financial crisis, the 2014 Israel-Gaza war, and the COVID-19 pandemic. Similarly, we identify increases in short selling before the attack in dozens of Israeli companies traded in Tel Aviv. For one Israeli company alone, 4.43 million new shares sold short over the September 14 to October 5 period yielded profits (or avoided losses) of 3.2 billion NIS on that additional short selling. Although we see no aggregate increase in shorting of Israeli companies on U.S. exchanges, we do identify a sharp and unusual increase, just before the attacks, in trading in risky short-dated options on these companies expiring just after the attacks. We identify similar patterns in the Israeli ETF at times when it was reported that Hamas was planning to execute a similar attack as in October. Our findings suggest that traders informed about the coming attacks profited from these tragic events, and consistent with prior literature we show that trading of this kind occurs in gaps in U.S. and international enforcement of legal prohibitions on informed trading. We contribute to the growing literature on trading related to geopolitical events and offer suggestions for policymakers concerned about profitable trading on the basis of information about coming military conflict.
That is from a new paper by Robert J. Jackson, Jr. and Joshua Mitts. Via the excellent Jordan Schneider.
Debunked?: Possibly the study is quite wrong.
Don’t Let the FDA Regulate Lab Tests!
I have been warning about the FDA’s power grab over lab developed tests. Lab developed tests have never been FDA regulated except briefly during the pandemic emergency when such regulation led to catastrophic consequences. Catastrophic consequences that had been predicted in advanced by Paul Clement and Lawrence Tribe. Despite this, for reasons I do not understand, the FDA plan is marching forward but many other people are starting to warn of dire consequences. Here, for example, is the executive summary from a letter by ARUP Laboratories, a non-profit enterprise of the University of Utah Department of Pathology:
ARUP urges the FDA to withdraw the proposed rule:
- The FDA proposal will reduce, an in many cases eliminate, access to safe and essential testing services, particularly for patients with rare diseases.
- Laboratory-developed tests are not devices as defined by the Medical Device Amendments of 1976, nor are clinical laboratories acting as manufacturers.
- The FDA does not have the statutory authority to regulate laboratory-developed tests.
- The FDA does not have the authority to regulate states, or state-owned entities. This is particularly relevant for the proposed rule regarding academic medical centers.
- The FDA’s regulatory impact analysis is flawed in its design, source information, methods. and conclusions, and it systematically overestimates purported benefits of the proposed rule and dramatically underestimates its cost to society, the healthcare industry, and the ability to provide ongoing essential laboratory services to patients.
- The proposed rule would significantly limit the ability of clinical laboratories to respond quickly to future pandemic, chemical, and/or radiologic public health threats.
- The proposed rule would not be easily implementable, and it would create an insurmountable backlog of submissions that would hinder diagnostic innovation.
- The proposed rule limits the practice of laboratory medicine.
- The FDA has not evaluated less restrictive, easily administered alternatives, such as CLIA reform. This is particularly relevant for common test modifications used in most hospital and academic medical center settings.”
Here is the American Hospital Association:
…we strongly believe that the FDA should not apply its device regulations to hospital and health system LDTs. These tests are not devices; rather, they are diagnostic tools developed and used in the context of patient care. As such, regulating them using the device regulatory framework would have an unquestionably negative impact on patients’ access to essential testing. It would also disrupt medical innovation in a field demonstrating tremendous benefits to patients and providers.
Here is Mass General Brigham, a non-profit hospital system, affiliated with Harvard, and the largest hospital-based research enterprise in the United States:
…we are concerned with the heavy regulatory burden of this proposal. In implementing any regulatory structure, policymakers must consider if the benefits outweigh the costs. Given that FDA predicts 50 percent of tests would require premarket review, and 5 percent will require premarket approval, we have serious concerns that the costs may outweigh the benefits. Given that many LDTs are hospital-based and will never be commercialized, hospitals will have little incentive or ability to develop future LDTs under this proposed rule as they will have little to no opportunity to offset the costs associated with these new regulatory requirements. We are concerned that the regulatory burden could have significant implications on responsible innovation especially for LDTs targeting rare conditions, or public health emergencies.
Two U.S. public lab directors personally reached out to me to ask me amplify the warning. Consider it amplified!
Today is the last day for public comment. Get your comments in!
South Korea projection of the day
…South Korea is distinctive in that it slipped into below-replacement territory in the 1980s but lately has been falling even more — dropping below one child per woman in 2018, to 0.8 after the pandemic, and now, in provisional data for both the second and third quarters of 2023, to just 0.7 births per woman.
It’s worth unpacking what that means. A country that sustained a birthrate at that level would have, for every 200 people in one generation, 70 people in the next one, a depopulation exceeding what the Black Death delivered to Europe in the 14th century. Run the experiment through a second generational turnover, and your original 200-person population falls below 25. Run it again, and you’re nearing the kind of population crash caused by the fictional superflu in Stephen King’s “The Stand.”
That is from Ross Douthat at the NYT. We don’t want that lit-up map of North vs. South Korea to flip now, do we?
My excellent Conversation with John Gray
I had been wanting to do this one for a while, and now it exists. Here is the audio and transcript, here is the episode summary:
Tyler and John sat down to discuss his latest book, including who he thinks will carry on his work, what young people should learn if liberalism is dead, whether modern physics allows for true atheism, what in Eastern Orthodoxy attracts him, the benefits of pessimism, what philanthropic cause he’d invest a billion dollars in, under what circumstances he’d sacrifice his life, what he makes of UFOs, the current renaissance in film and books, whether Monty Python is still funny, how Herman Melville influenced him, who first spotted his talent, his most unusual work habit, what he’ll do next, and more.
Excerpt:
COWEN: Do you think that being pessimistic gives you pleasure? Or what’s the return in it from a purely pragmatic point of view?
GRAY: You are well prepared for events. You don’t expect —
COWEN: It’s a preemption, right? You become addicted to preempting bad news with pessimism.
GRAY: No, no. When something comes along which contradicts my expectations, I’m pleasantly surprised. I get pleasant surprises. Whereas, if you are an adamant optimist, you must be in torment every time you turn the news on because the same old follies, the same old crimes, the same old atrocities, the same old hatreds just repeat themselves over and over again. I’m not surprised by that at all. That’s like the weather. It’s like living in a science fiction environment in which it rains nearly all of the time, but from time to time it stops and there’s beautiful sunlight.
If you think that basically there is beautiful sunlight all the time, but you’re just living in a small patch of it, most of your life will be spent in frustration. If you think the other way around, as I do, your life will be peppered, speckled with moments in which what you expect doesn’t happen, but something better happens.
COWEN: Why can’t one just build things and be resiliently optimistic in a pragmatic, cautionary sense, and take comfort in the fact that you would rather have the problems of the world today than, say, the problems of the world in the year 1000? It’s not absolute optimism where you attach to the mood qua mood, but you simply want to do things and draw a positive energy from that, and it’s self-reinforcing. Why isn’t that a better view than what you’re calling pessimism?
And:
COWEN: Under what circumstances would you be willing to sacrifice your life? Or for what?
GRAY: Not for humanity, that’s for sure.
Recommended, interesting throughout. John is one of the smartest and best read thinkers and writers. He even has an answer ready for why he isn’t short the market. And don’t forget John’s new book — I read all of them — New Leviathans: Thoughts After Liberalism.
Why Housing is Unaffordable: The Elasticity of Supply
We have a great new MRU video on housing and why it’s so expensive in many dynamic cities. The video is a good introduction to the economics and also to the politics of housing supply. A highlight is a wonderful animation illustrating how increasing demand coupled with inelastic supply leads to competitive bidding among buyers, driving up prices. Anyone teaching economics should take a look.
Of course, the video pairs perfectly with our textbook, Modern Principles. Indeed, this is the initial video in a two-part series exploring the elasticity of supply, transforming a traditionally mundane topic into a relevant and fun discussion. Check it out!