Category: Current Affairs

How valuable is social impact investing?

Perhaps it is overrated? That is the theme of my latest Bloomberg column, here is one excerpt:

A second risk is that social impact investing simply redistributes wealth from investments — maybe to less socially conscientious individuals. Imagine a socially conscious investment firm that declines to participate in the initial public offering of a company that pollutes the ocean. That might create downward pressure on the price of the IPO. But there is a problem: The value of the actual investment has not declined, so at a potentially lower IPO price other investors will step in to fill the demand. In fact, those investors may have the chance to buy at a discount and earn a higher return than otherwise.

The net result is that conscientious investors have missed out on a profitable opportunity, while less socially aware investors have earned more. Over time, the less socially aware investors will become richer, and their greater wealth may translate into greater political and economic influence.

That also put less conscientious investors in control of the firm.  And:

It is also difficult to monitor the performance and social efficacy of the funds focused on doing good. In actively managed sustainable equity funds, for example, the most commonly held stocks are estimated to be Microsoft, Alphabet, Visa, Apple and Cisco. I have nothing against those companies, but you have to wonder exactly how much social improvement those investment funds are buying.

So many matters in today’s America are increasingly performative, and so:

It is increasingly difficult for businesses and investment funds to perform their proper work under the glare of perpetual debate and periodic condemnation.

Recommended.

Why are we letting FDA regulations limit our number of coronavirus tests?

Since CDC and FDA haven’t authorized public health or hospital labs to run the [coronavirus] tests, right now #CDC is the only place that can. So, screening has to be rationed. Our ability to detect secondary spread among people not directly tied to China travel is greatly limited.

That is from Scott Gottlieb, former commissioner of the FDA, and also from Scott:

#FDA and #CDC can allow more labs to run the RT-PCR tests starting with public health agencies. Big medical centers can also be authorized to run tests under EUA. For now they’re not permitted to run the tests, even though many labs can do so reliably 9/9 cdc.gov/coronavirus/20

Here is further information about the obstacles facing the rollout of testing.  And read here from a Harvard professor of epidemiology, and here.  Clicking around and reading I have found this a difficult matter to get to the bottom of.  Nonetheless no one disputes that America is not conducting many tests, and is not in a good position to scale up those tests rapidly, and some of those obstacles are regulatory.  Why oh why are we messing around with this one?

For the pointer I thank Ada.

Very good sentences

Nearly all of the biggest challenges in America are, at some level, a housing problem. Rising home costs are a major driver of segregation, inequality, and racial and generational wealth gaps. You can’t talk about education or the shrinking middle class without talking about how much it costs to live near good schools and high-paying jobs. Transportation accounts for about a third of the nation’s carbon dioxide emissions, so there’s no serious plan for climate change that doesn’t begin with a conversation about how to alter the urban landscape so that people can live closer to work.

Those are from Conor Daugherty in the NYT, via the excellent Kevin Lewis.

Rooftops, and warm ones at that

Our best tool is to compare Labour’s 2019 manifesto against the Sanders’ economic platform. Doing so makes clear that Bernie is more radical than Corbyn on economics, both in absolute terms and relative to their countries’ respective politics.

Take the size of government. The Manhattan Institute’s Brian Riedl calculates that Sanders’ promises would add $97.5 trillion to spending over a decade, taking total annual US government spending to around 70% of GDP and more than doubling the size of the federal government. Even if climate investments prove a one-off, spending would settle at a massive 64% of GDP. That’s far higher than Labour’s planned 44% and even France’s current 57% (itself the highest in the OECD).

A look at certain individual spending areas also underlines just how radical the Sanders agenda is. Like Labour, he wants government-funded free public higher education. Unlike Labour, he’d also forgive all existing student debts. On climate change and infrastructure, Labour planned for £400 billion investment over 10 years (about 20% of current annual UK GDP). Sanders wants to invest $16.3 trillion over 15 years (about 75% of current annual US GDP.) On healthcare, both want government spending to expand to cover all medical treatment, prescription charges, long-term care for the elderly, and dentistry. But only Sanders would explicitly ban private health insurance (Labour did consider that proposal but held off in the end).

True, Corbyn and McDonnell favoured nationalising buses, railways, the energy sector, water, and parts of the broadband network. Corbyn even wanted free government-funded broadband for all. But even here the results of Sanders’ pledges would bring similar results. He would set up “publicly owned” and “democratically controlled” broadband networks. And his Green New Deal would bring most public transport under government control and deliver effective public ownership of energy production.

When it comes to financing their promises, Sanders is arguably more radical again. Labour planned to only borrow to invest, raising the deficit by about 2% of GDP per year. But Bernie’s tax plans get nowhere near fully funding his agenda. Absent further broad-based tax rises, Riedl calculates annual borrowing would soar to around 30% of US GDP if his spending plans were implemented…

Combined with national insurance, Labour’s top marginal income tax rate would have been 52%. Sanders’ top federal income tax rate alone would be 52%, bringing a top combined top rate of around 80% once state and payroll taxes are considered. Sanders wants a new wealth tax too, another option Labour shirked. And while Labour wanted to raise the UK’s main corporation tax rate to 26%, Bernie would opt for 35% with a broad base.

That is from Ryan Bourne of Cato, and yes there is more at the link.

I would put it this way: right now we are sampling the offer curve of left-wing intellectuals and activists for “prioritizing climate change” vs. “mood affiliation,” and…let us hope for the best!

Here is Daron Acemoglu on Bernie Sanders.

Tufts University’s Tisch College Launches Center for State Policy Analysis

Tufts University’s Jonathan M. Tisch College of Civic Life today announced the creation of a new, non-partisan Center for State Policy Analysis (cSPA) to ensure that lawmakers and residents in Massachusetts have access to the best information on effective public policy.

cSPA will conduct detailed, independent analyses of current legislative issues and ballot questions in Massachusetts and will widely share this research with the public. The Center aims to partner with experts at Tufts University and beyond to provide real-time analysis that informs legislative debates and helps voters better understand the stakes of ballot initiatives.

Former Boston Globe data-journalist Evan Horowitz will serve as cSPA’s executive director…

Horowitz is also an Emergent Ventures winner, congratulations on the new center!

From Mark Lutter — charter city for Zambia?

I’m pleased to announce the Charter Cities Institute has signed a memorandum of understanding with the Zambian Development Agency. They are planning to propose changes to their special economic zone act to parliament, and we are working with them to improve their proposal and make it adhere closer to charter city best practices, namely, larger size, mixed use developments, deeper reforms, and local autonomy.

The memorandum of understanding is an important step in piloting charter cities. We are proud to partner with the Zambia Development Agency and Nkwashi in bringing charter cities to reality.

Mark, along with Tamara Winter, was part of the first cohort of EV winners.

Penny Goldberg resigns as Chief Economist at the World Bank

When autocratic, oil-rich nations enjoy a windfall from higher crude prices, where does the money go? One place to look is Swiss bank accounts. Sure enough, an increase in oil prices is followed by a spike in deposits held by these countries in financial havens, according to a 2017 paper by Jorgen Juel Andersen of Norwegian Business School, Niels Johannesen of the University of Copenhagen and their co-authors.

When Mr Johannesen presented this result at the World Bank in 2015, the audience included Bob Rijkers, a member of the bank’s research group. The two of them joined forces with Mr Andersen to investigate if something similar happened after another kind of windfall: infusions of aid from foreign donors. Their conclusion was dispiriting. World Bank payouts to 22 aid-dependent countries during 1990-2010 were followed by a jump in their deposits in foreign financial havens. The leaks averaged about 5% of the bank’s aid to these countries.

It seems the World Bank would not publish the paper — the reasons are disputed — and Goldberg resigned her post as chief economist — again the reasons are disputed.  Here is the full story from The Economist.

What is the best model for thinking about this lack of higher ed reporting?

The Education Department opened investigations into Harvard and Yale as part of a continuing review that it says has found U.S. universities failed to report at least $6.5 billion in foreign funding from countries such as China and Saudi Arabia, according to department materials viewed by The Wall Street Journal…

The department described higher-education institutions in the U.S., in a document viewed by the Journal, as “multi-billion dollar, multi-national enterprises using opaque foundations, foreign campuses, and other sophisticated legal structures to generate revenue.”

…Universities are required to disclose to the Education Department all contracts and gifts from a foreign source that, alone or combined, are worth $250,000 or more in a calendar year. Though the statute is decades old, the department only recently began to vigorously enforce it.

Officials accused schools of actively soliciting money from foreign governments, companies and nationals known to be hostile to the U.S. and potentially in search of opportunities to steal research and “spread propaganda benefitting foreign governments,” according to the document.

In addition, while the department said it has found foreign money generally flows to the country’s richest universities, “such money apparently does not reduce or otherwise offset American students’ tuition costs,” the document said.

Here is the full WSJ story.

Transcript of my chat with Thomas Kalil

We have the transcript live on our Day One Project site: https://www.dayoneproject.org/cowen-kalil-transcript

Here was the video version, with some sound imperfections.  And from Schmidt Futures:

…some context on the broader event is here, along with details on our open call for innovation, science, and tech policy ideas to inform the priorities of the next presidential term – your community undoubtedly would have great contributions. We are accepting submissions of these ideas through the Day One Accelerator until March 1.

I am very much looking to my Schmidt Futures event coming up this March.

My Conversation with Tim Harford

Here is the transcript and audio, here is part of the summary:

Tim joined Tyler to discuss the role of popular economics in a politicized world, the puzzling polarization behind Brexit, why good feedback is necessary (and rare), the limits of fact-checking, the “tremendously British” encouragement he received from Prince Charles, playing poker with Steve Levitt, messiness in music, the underrated aspect of formal debate, whether introverts are better at public speaking, the three things he can’t live without, and more.

Here is one bit near the opening:

COWEN: These are all easy questions. Let’s think about public speaking, which you’ve done quite a bit of. On average, do you think extroverts or introverts are better public speakers?

HARFORD: I am an introvert. I’ve never seen any research into this, so it should be something that one could test empirically. But as an introvert, I love public speaking because I like being alone, and you’re never more alone than when you’re on the stage. No one is going to bother you when you’re up there. I find it a great way to interact with people because they don’t talk back.

COWEN: What other non-obvious traits do you think predict being good at public speaking?

HARFORD: Hmmm. You need to be willing to rehearse and also willing to improvise and make stuff up as you go along. And I think it’s hard for somebody to be willing to do both. I think the people who like to rehearse end up rehearsing too much and being too stiff and not being willing to adapt to circumstances, whereas the people who are happy to improvise don’t rehearse enough, and so their comments are ill formed and ill considered. You need that capacity to do both.

And another segment:

HARFORD: …Brian Eno actually asked me a slightly different question, which I found interesting, which was, “If you were transported back in time to the year 700, what piece of technology would you take — or knowledge or whatever — what would you take with you from the present day that would lead people to think that you were useful, but would also not cause you to be burned as a witch?”

COWEN: A hat, perhaps.

HARFORD: A hat?

COWEN: If it’s the British Isles.

HARFORD: Well, a hat is useful. I suggested the Langstroth beehive. The Langstroth beehive was invented in about 1850. It’s an enormously important technology in the domestication of bees. It’s a vast improvement on pre-Langstroth beehives, vast improvement on medieval beehives. Yet, it’s fairly straightforward to make and to explain to people how it works and why it works. I think people would appreciate it, and everybody likes honey, and people have valued bees for a long time. So that would have been my answer.

And:

COWEN: I’ve read all of your books. I’ve read close to all of your columns, maybe all of them in fact, and I’m going to ask you a question I also asked Reid Hoffman. You know the truths of economics, plenty of empirical papers. Why aren’t you weirder? I’ve read things by you that I disagreed with, but I’ve never once read anything by you that I thought was outrageous. Why aren’t you weirder?

The conversation has many fine segments, definitely recommended, Tim was in top form.  I very much enjoyed our “Brexit debate” as well, too long to reproduce here, but I made what I thought was the best case for Brexit possible and Tim responded.

Might the coronavirus bring freer speech to China?

That is the topic of my latest Bloomberg column, here is one excerpt:

Chinese citizens are currently upset and panicked, and their online communication might exceed the ability of the censors to control it. Some censorship is done algorithmically, but much of it is performed by humans, if only because the algorithms are far from perfect and cannot pick up on the rapidly changing allusions and code words people use.

What happens if there are too many subversive messages to censor? The system might break down, and speech might become more free. Reimposing censorship might be difficult, politically and logistically.

There is yet another reason censorship might prove difficult. If you feel desperate and fear for your health, the penalties for speaking out online might not seem so bad by comparison. You might not care so much about that promotion at work or your standing in the party. Moreover, the stress of the situation may lower your inhibitions. And if public criticism becomes more common, it may seem safe to join the growing crowd. The eventual result of all this would be a partial collapse of censorship.

The link also considers the entirely possible scenario that Chinese liberties could instead decrease.

Coronavirus markets in everything

Government officials across Hubei province, the epicenter of the coronavirus outbreak, are desperate to find ways to stop the spread of the infection.

In Hubei’s Fangxian County, officials are trying a different approach — paying sick people.

According to an official Fangxian County notice, anyone who is sick and reports themselves to a hospital can expect to be paid.

Patients who have a fever and turn themselves in will receive 1,000 yuan ($142).

But officials and other interested parties are also being offered cash incentives if they catch anyone with a fever. For each person with a fever who is reported by an official or citizen, there is a reward of 500 yuan ($71).

The notice said that the offer is only valid from today until February 18.

Here is the link (nothing extra there, except a noisy video and you have to scroll down a lot).  Via Neville.

What did Ireland just vote for?

Sinn Féin promises rent freezes and an expansion of public housing. It will tax corporations, particularly multinational companies. It offers a typical, left-of-centre shopping list, financed by borrowing and higher taxes on the rich.

And what about the IRA? In the past days, the connection between the IRA and Sinn Féin in the North has dominated headlines, but most voters in the Republic are weary of the past. One in four are prepared to give Sinn Féin a chance. It would be completely wrong to equate Sinn Féin’s votes with support for the IRA.

Here is more from the FT.  There is close to a three-way tie at the top, but31.8% of 18-24s voted Sinn Féin – more than FF and FG combined in that age group.”  And: “According to the exit poll, Sinn Féin now the most popular party in every age group under 65.”

And that is from Ireland, one of the biggest neoliberal success stories.  Martin Gurri something or other, yes, etc. yup, that’s right, Martin Gurri, etc.

Coronavirus multilateral insurance markets in everything

As financial markets fretted over the spread of a coronavirus outbreak in China this week, one security was in the firing line more directly than any other. Holders of the World Bank’s pandemic bond will lose principal if the disease spreads by a sufficient amount, writes Jasper Cox.

The World Bank’s pandemic bond, issued in 2017, provides funding for the development bank’s Pandemic Emergency Financing Facility (PEF) if an outbreak of one of six viruses meets certain conditions.

Here is the link (gated), here is a more detailed John Dizard FT story:

The event triggers were calculated on a complex formula based on deaths in the country of origin, a smaller number of deaths in neighbouring countries, and a relatively rapid increase in infection and mortality. Interest charges were assumed by rich-country donors including Germany and Japan. The riskier bonds pay 11.5 per cent over Libor, since they required only 250 deaths to reach the trigger. Not bad, considering the “expected loss” for the tranche was only 7.74 per cent. The less risky tranche required 2,500 deaths, so only paid 6.9 per cent over Libor, compared with an expected loss of 3.57 per cent.

Here is a pre-coronavirus discussion of the bonds, mostly with reference to Ebola.