Category: Law
The polity and culture that is Oregon
Oregon voters will likely decide in November whether to establish a historic universal basic income program that would give every state resident roughly $750 annually from increased corporate taxes.
Proponents of the concept say they likely have enough signatures to place it on the ballot this fall, and opponents are taking them seriously…
“It’s looking really good. It’s really exciting,” said Anna Martinez, a Portland hairstylist who helped form the group behind the campaign, Oregon People’s Rebate, in 2020. If approved by voters, the program would go into effect in January 2025.
Most of the Portland business community opposes the proposal. Here is the full story, via Mark W.
Accelerating India’s Development
What will India look like in 2047? Combining projections of economic growth with estimates of the elasticity of outcomes with respect to growth, Karthik Muralidharan in Accelerating India’s Development reports:
Even with a strong GDP per capita growth rate of 6 per cent, projections for 2047 paint a sobering picture if we maintain our current course. While India’s infant mortality is projected to halve from 27 per 1000 births to 13 in 2047, it will still be well above China’s current rate of 8. Child stunting will only decrease from 35.5 to 25 per cent, which is only a 10.5 percentage point or 30 per cent reduction in nearly 25 years. In rural India, 16 per cent of children in Class 5 will still not be able to read at a Class 2 level, and 55 per cent of them will still not be able to do division at the Class 3 level.
Bear in mind that this is assuming an optimistic 6% growth rate in GDP per capita. Even more telling is that if growth increased to 8%, infant mortality would only fall to 10 per 1000 (instead of 13). Growth is great. It’s the single most important factor but it’s not everything. If India can double the elasticity of infant mortality with respect to growth, for example, then at the same 6% growth rate infant mortality would fall to just 6 per 1000 by 2047–that’s millions of lives saved. The big argument of Muralidharan’s Accelerating India’s Development is that India can get more development from the same level of growth by increasing the total factor productivity of the state.
There are many “big think” books on growth–Landes’ Wealth and Poverty of Nations, Acemoglu and Robinson’s The Narrow Corridor, Koyama and Rubin’s How the World Became Rich–but these books are primarily historical and descriptive. The big think books don’t tell you how to develop. Create institutions to strike “a delicate and precarious balance between state and society” isn’t much of a guide to development. Accelerating India’s Development is different.
“Accelerating” opens with two excellent chapters on the political economy of politicians and bureaucrats, outlining the constraints any reforms must navigate. It concludes with two chapters on the future, including ideas like ranked choice voting, representing its aspirations. It’s in-between the constraints and the aspirations, however, that Accelerating India’s Development is unique. I know of no other book that offers such a detailed, analytical, and comprehensive examination and evaluation of a country’s institutions and processes.
Muralidharan’s recommendations are often based on his own twenty years of research, especially in education, health and welfare, and when not based on his own research Muralidharan has read everyone and everything. Yet, he offers not a laundry list but a well-thought out, analytic, set of recommendations that are grounded on political and economic realities.
To give just one example, India’s bureaucracy is far over-paid relative to India’s GDP per capita or wages in the private sector. With wages too high, the bureaucracy is too small–a reflection of the concentrated benefits (wages to government workers), diffuse costs (delivering services to citizens) problem. Lowering wages for government workers is a non-starter but Muralidharan argues persuasively that it is possible to hire new workers from local communities at prevailing wages on renewable contracts. The Integrated Child Development Services (ICDS), for example, is India’s main program for delivering early childhood education. There are 1.35 million anganwadi centers (AWCs) across India and typically a single anganwadi worker is responsible for both nutrition and pre-school education but they spend most of their time on paperwork!
A simple, scalable way to improve early childhood education is to add a second worker to AWCs to focus on preschool education….In a recent study, my co-authors and I found that adding an extra, locally hired, early-childhood care and education facilitators to anganwadis in Tamil Nadu doubled daily preschool instructional time…we found large gains in students’ maths, language and executive function skills. We also found a significant reduction in child stunting and malnutrition…We estimate the social return on this investment was around thirteen times the cost….the ECCE facilitators typically had only a Class 10 or Class 12 qualification and received only one week of training, and were still highly effective.
The example illustrates Muralidharan’s methods. First, the recommendation is based on a large, credible, multi-year study run in India with the cooperation of the government of Tamil Nadu. Second, the study is chosen for the book because it fits Muralidharan’s larger analysis of India’s problems, India has too few government workers which leads to high potential returns, yet the workers are paid too much so these returns are fiscally unachievable. But hiring more workers on the margin, at India’s-prevailing wages, is feasible. India has lots of modestly-educated workers so the program can scale–this is not a study about adding AI-driven computers to Delhi schools under the management of IIT trained educators, a program which would be subject to the heroes aren’t replicable problem. The program is also politically feasible because it leaves rents in place and by hiring lots of workers, even at low wages, it generates its own political support. Finally, note that India’s ICDS is the largest early childhood development program in the world so improving it has the potential to make millions of lives better. Which is why I have called Muralidharan the most important economist in the world.
One of the reasons state capacity in India is so low is premature load bearing. Imagine if the 19th-century U.S. government had attempted to handle everything today’s U.S. government does—this is the situation in India. When State Capacity/Tasks < 1, what should be done? In premature imitation, Rajagopalan and I advocate for reducing Tasks–an idea best represented by Ed Glaeser’s quip that “A country that cannot provide clean water for its citizens should not be in the business of regulating film dialogue.” Accelerating India’s Development focuses on increasing State Capacity but without being anti-market. In fact, Muralidharan proposes making the state more effective by leveraging markets more extensively.
Indian policy should place a very high priority on expanding the supply of high-quality service providers, regardless of whether they are in the public or private sector.
Hence, Muraldiharan wants to build on India’s remarkably vibrant private schools and private health care with ideas like vouchers and independent ratings. Free to choose but free to choose in an information-rich environment. My own inclinations would be to push markets and also infrastructure more–we still need to get to that 6% growth! But I have few quibbles with what is in the book.
Accelerating India’s Development is an exceptionally rich and insightful book. Its comprehensive analysis and innovative recommendations make it an invaluable resource. I will undoubtedly reference it in future discussions and writings. This book is a must-read for anyone interested in understanding and improving life in the world’s largest democracy.
Claude 3 for SCOTUS?
I would vote to confirm:
I decided to do a little more empirical testing of AI’s legal ability. Specifically, I downloaded the briefs in every Supreme Court merits case that has been decided so far this Term, inputted them into Claude 3 Opus (the best version of Claude), and then asked a few follow-up questions. (Although I used Claude for this exercise, one would likely get similar results with GPT-4.)
The results were otherworldly. Claude is fully capable of acting as a Supreme Court Justice right now. When used as a law clerk, Claude is easily as insightful and accurate as human clerks, while towering over humans in efficiency.
Let’s start with the easiest thing I asked Claude to do: adjudicate Supreme Court cases. Claude consistently decides cases correctly. When it gets the case “wrong”—meaning, decides it differently from how the Supreme Court decided it—its disposition is invariably reasonable…
Of the 37 merits cases decided so far this Term,1 Claude decided 27 in the same way the Supreme Court did.2 In the other 10 (such as Campos-Chaves), I frequently was more persuaded by Claude’s analysis than the Supreme Court’s. A few of the cases Claude got “wrong” were not Claude’s fault, such as DeVillier v. Texas, in which the Court issued a narrow remand without deciding the question presented.
Although I’ve heard concerns that AI would be “woke,” Claude is studiously moderate.
Here is much more from Adam Unikovsky. A lot of people are still in denial, or not far enough along to even count as “denying.”
The Pentagon’s Anti-Vax Campaign
During the pandemic it was common for many Americans to discount or even disparage the Chinese vaccines. In fact, the Chinese vaccines such as Coronavac/Sinovac were made quickly and in large quantities and they were effective. The Chinese vaccines saved millions of lives. The vaccine portfolio model that the AHT team produced, as well as common sense, suggested the value of having a diversified portfolio. That’s why we recommended and I advocated for including a deactivated vaccine in the Operation Warp Speed mix or barring that for making an advance deal on vaccine capacity with China. At the time, I assumed that the disparaging of Chinese vaccines was simply an issue of national pride or bravado during a time of fear. But it turns out that in other countries, the Pentagon ran a disinformation campaign against the Chinese vaccines.
Reuters: At the height of the COVID-19 pandemic, the U.S. military launched a secret campaign to counter what it perceived as China’s growing influence in the Philippines, a nation hit especially hard by the deadly virus.
The clandestine operation has not been previously reported. It aimed to sow doubt about the safety and efficacy of vaccines and other life-saving aid that was being supplied by China, a Reuters investigation found. Through phony internet accounts meant to impersonate Filipinos, the military’s propaganda efforts morphed into an anti-vax campaign.
… Tailoring the propaganda campaign to local audiences across Central Asia and the Middle East, the Pentagon used a combination of fake social media accounts on multiple platforms to spread fear of China’s vaccines among Muslims at a time when the virus was killing tens of thousands of people each day. A key part of the strategy: amplify the disputed contention that, because vaccines sometimes contain pork gelatin, China’s shots could be considered forbidden under Islamic law.
…To implement the anti-vax campaign, the Defense Department overrode strong objections from top U.S. diplomats in Southeast Asia at the time, Reuters found. Sources involved in its planning and execution say the Pentagon, which ran the program through the military’s psychological operations center in Tampa, Florida, disregarded the collateral impact that such propaganda may have on innocent Filipinos.
“We weren’t looking at this from a public health perspective,” said a senior military officer involved in the program. “We were looking at how we could drag China through the mud.”
Frankly, this is sickening. The Pentagon’s anti-vax campaign has undermined U.S. credibility on the global stage and eroded trust in American institutions, and it will complicate future public health efforts. US intelligence agencies should be banned from interfering with or using public health as a front.
Moreover, there was a better model. It’s often forgotten but the elimination of smallpox from the planet, one of humanities greatest feats, was a global effort spearheaded by the United States and….the Soviet Union.
…even while engaged in a pitched battle for influence across the globe, the Soviet Union and the United States were able to harness their domestic and geopolitical self-interests and their mutual interest in using science and technology to advance human development and produce a remarkable public health achievement.
We could have taken a similar approach with China during the COVID pandemic.
More generally, we face global challenges, from pandemics to climate change to artificial intelligence. Addressing these challenges will require strategic international cooperation. This isn’t about idealism; it’s about escaping the prisoner’s dilemma. We can’t let small groups with narrow agendas and parochial visions undermine collaborations essential for our interests and security in an interconnected world.
Enhancing FDA Information Sharing for Neglected Tropical Diseases
Many countries look to the US FDA for guidance on approval decisions. In fact the FDA will sometimes receive and evaluate drugs and vaccines whose primary market is in less developed countries. Fexinidazole, for example, is a drug for treating African trypanosomiasis, i.e. sleeping sickness. We don’t get many cases of sleeping sickness in the US but there are many such cases in the Democratic Republic of Congo.
Thus, the US FDA is providing a useful service, both to US pharmaceutical firms and especially to developing countries. That’s great. But Jacob Trefethen of OpenPhil notes that for odd bureaucratic and legal reasons we redact a lot of information that could be useful to the countries that actually will use these treatments. Here, for example, is an excerpt from the approval decision for Fexinidazole:
What’s especially strange here is that as far as Trefethen, or I, can tell, no one wants this! The FDA has no reason to hide this information, the company submitting the proposal surely wants as much information as possible sent to the countries where they will ultimately need to get approval (remember this is successful applications!) and the medical agencies in the developing countries would like to get context to have confidence in the FDA’s decisions. Instead, it seems that these drugs are getting caught in rules intended to protect pharmaceutical firms in other contexts. Thus, Trefethen makes two suggestions:
let’s create a track for products on the Neglected Tropical Disease list, sharing assessments with few or no redactions with the WHO Pre-Qualification (PQ) system, and allow PQ to share those documents further with regulators in partner countries.
Such an approval track already exists in the EU:
[The EU] have an approval track for products that are mostly going to be used elsewhere. If you apply using that track, they loop in regulators from those countries too. They share the documents assessing your clinical data and inspecting your manufacturing site with the WHO prequalification (PQ) team – the team whose stamp of approval speeds things up for many countries with less experienced national regulators. Gavi and the Global Fund need a product to be prequalified in order to buy it through the UN procurement agencies (e.g. UNICEF, for children’s vaccines).
Even without an approval track there are other small changes in priority and emphasis that could improve information sharing. The FDA is not unaware of these information sharing issues, for example, and there are procedures in place for confidentiality agreements with other countries. Trefethen suggests these could be given greater priority.
FDA leadership should set aggressive goals to complete more two-way Confidentiality Commitments with lower- and middle-income country regulators.
Extend the scope of existing commitments, when they’re limited, to allow sharing in more areas – especially related to drug approvals.
Extend 708(c) authority to more country agreements, not just those with European countries, to allow sharing of full documents that include trade secrets.
I’ve long advocated for peer approval, Trefethen gets into the weeds to point to specific ideas to make this a more useful idea, especially for developing countries. See Trefethen for more ideas!
My Conversation with Velina Tchakarova
Here is the audio, video, and transcript. Here is the episode summary:
Founder of the consultancy FACE, Velina is a geopolitical strategist guiding businesses and organizations to anticipate the outcomes of global conflicts, shifting alliances, and bleeding edge technologies on the world stage.
In a globe-trotting conversation, Tyler and Velina start in the Balkans and then head to Russia, China, North Korea, and finally circle back to Putin’s interest in the Baltics. She gives her take on whether the Balkan Wars still matter today, the future of Bulgarian nationalism, what predicts which Eastern European countries will remain closer to Russia, why China will not attack Taiwan, Putin’s next move after Ukraine, where a nuclear weapon is most likely to be used next, how she sources intel, her unique approach to scenario-planning, and more.
Here is one excerpt on a matter of great importance:
COWEN: Maybe we’ll come back to Bulgaria, but let me try some questions about the broader world. Why is it you think China will not attack Taiwan? They claim it as theirs, and arguably, in five to ten years, they’ll be able to neutralize our submarine advantage from the US with underwater drones and surveillance of our submarine presence. At that point, why don’t they just move on Taiwan and try to take it?
TCHAKAROVA: Well, I do understand that there is a lot of analysis coming out right now, especially on behalf of the military experts, not only in the United States but also in other parts of the world, pointing to this realistic scenario that we may see a military attack by China on Taiwan not later than 2027. And why 2027? Because it is being anticipated as the year when China will be able to catch up militarily with the United States.
I do not share this assessment. I just don’t see why China will have to take such a big risk in achieving something that it can achieve in a much smarter and more efficient way. What do I mean by that? I call this approach “death by a thousand cuts.” That would mean that China could spend a little bit longer in a slow but steady political, social, economic, and societal penetration of Taiwan. We could argue it’s the old Soviet playbook. It could be done in a more subtle way, using plausible deniability.
Taiwan is still the most successful democracy in the Indo-Pacific. That means, also, it is vulnerable to this kind of penetration, where you can practically use agents provocateurs on the ground. You can buy up a lot of institutional or individual players. You can start doing all this subversion process in a longer timeframe, but it could bring about bigger success than actually risking military intervention, which is not giving you, I would say, even a 50–50 chance of success.
The terrain of Taiwan, if we compare it with the most sophisticated war that’s going on right now, is much more difficult. You have a very, very limited window to attack. In the case of Taiwan, this window of opportunity is probably limited only to two periods in the whole year, which, of course, is also known by everyone in the region. That particularly means the defense of Taiwan. You have a window of opportunity in April and then in October, so you cannot attack at any time in the year.
It is a sophisticated military attack that cannot be conducted on the whole of the island. Even though China is catching up militarily right now, I think that the mindset of this Chinese leadership — the way the Chinese leadership is actually conducting strategy — does contradict such risky endeavor, again because time is on China’s side. China only needs to really prepare this sum of minor actions in a longer period of time. At least, this is what I would actually do as a strategist, which would promise a much better percentage of success than, like I said, an adventurous military attack.
Now, we may argue that under unanticipated circumstances for the political leadership — think of a situation where the political stability in China is shaken, where the Chinese leader, Xi Jinping, is somehow put into a corner to take a very, let’s say, ad hoc decision on the matter because of certain circles of the hawks, of the military hawks. Of course, we have this possibility as well. It could be a black swan event, something that has happened in China, and this makes him take this decision in order to draw the attention away from internal problems.
Foreign policy adventures are always gathering public support. It’s not 100 percent to be excluded, but in my scenario, I would actually point to, as I explained, this death-by-a-thousand-cuts approach rather than a military attack on Taiwan.
COWEN: Are we now in a world where the laws of war are basically obsolete?
It is worth repeating that issues of foreign policy are very much the most important issues. And here is Velina on Twitter.
Backlash effects are real, for drug policy too
It was less than two years ago that officials in British Columbia, the epicenter of Canada’s drug overdose crisis, unveiled what they called “bold action.”
The experiment, backed by Canada’s police chiefs, was to decriminalize the possession of small amounts of some drugs — including methamphetamine, cocaine, fentanyl and heroin — for personal use. The approach, officials said, would reduce the stigma that can discourage users from seeking treatment and the criminal records that can prevent them from rebuilding their lives.
If the three-year trial produced results, it could be a template for the rest of the country.
But now, with complaints about public drug use rising and a provincial election looming, they’ve abruptly reversed course. The center-left New Democratic Party government, which championed the policy, last month received approval from Ottawa to recriminalize drug possession in most public spaces.
Here is more from Amanda Coletta The Washington Post. We are at margins where many such experiments — because they are not working well enough — are in danger of being reversed.
Do we need antitrust action against “big alcohol”?
The argument here will be familiar to many MR readers, and it now appears in a Bloomberg column of mine. Excerpt:
I say this as a longtime advocate of abstention, so make of it what you will, but: If Southern Glazer’s actions are limiting the supply of alcohol and boosting its price, then so much the better.
There is an overwhelming body of evidence that drinking alcohol leads to more traffic fatalities, reduced productivity and higher rates of violence, not to mention the unquantifiable cost in ruined lives. Legal prohibition of alcohol proved unworkable, but some of the benefits of reduced consumption can be gained by allowing prices to rise and to stay high. One NIH investigation estimated the costs of alcohol use amounted to 2.6% of US GDP.
If a monopoly has some positive social consequences, all the more reason to let it persist. I would also be pleased, for example, by a monopoly in non-medical marijuana.
There are many instances of unlawful monopoly power in market economies, and most of them are best ignored. The FTC, like most parts of the government, does not have unlimited resources.
There are numerous other arguments in the piece.
The Marginal Revolution Theory of Innovation
A FDA panel voted against approving MDMA (ecstasy) for post-traumatic stress disorder. Putting aside the specifics of the case, I was vexed by this statement on innovation from one of the experts voting no:
“I absolutely agree that we need new and better treatments for PTSD,” said Paul Holtzheimer, deputy director for research at the National Center for PTSD, a panelist who voted no on the question of whether the benefits of MDMA-therapy outweighed the risks.
“However, I also note that premature introduction of a treatment can actually stifle development, stifle implementation and lead to premature adoption of treatments that are either not completely known to be safe, not fully effective or not being used at their optimal efficacy,” he added.
A textbook example of making the perfect the enemy of the good. But the problem is even worse. Holtzheimer seems to think that treatments spring from the lab perfectly formed like Athena springing from the brow of Zeus. Indeed, Holtzheimer suggests that treatments should be kept in the lab until they are perfect. News flash: there are no perfect treatments–no drug or device in use today is completely known to be safe, fully effective, and used at its optimal efficacy. Not one. If we follow Holtzheimer’s counsel, we will never approve a new drug.
Innovation is a dynamic process; success rarely comes on the first attempt. The key to innovation is continuous refinement and improvement. A firm with sales gains greater resources to invest in further research and development. Additionally, they benefit from customer feedback, which provides valuable insights for enhancing their products and processes. Learning by doing requires doing. But if imperfect treatments are never approved, scientists often don’t return to the lab to refine and improve them. Instead, the project dies. Thus, when considering innovation today, it’s essential to think about not only the current state of technology but also about the entire trajectory of development. A treatment that’s marginally better today may be much better tomorrow.
Small steps toward a much better world.
Why some additional regulation would help crypto
That is the topic of my latest Bloomberg column, here is one part of the argument, which focuses on the bill that recently passed the House but may stall in the Senate:
As for the policy details: Is this a good bill? Mostly, yes. Without a coherent regulatory framework, the US crypto sector won’t be competitive with those of other nations. That damages the potential for American innovation, encourages some entrepreneurs to take their businesses abroad, and could eventually limit the integration of crypto with mainstream financial infrastructures, which would put the US financial sector at a disadvantage.
The bill has the critical provision of requiring crypto infrastructures to be sufficiently decentralized, at least if that infrastructure is to fall under the jurisdiction of the CFTC rather than the SEC. These decentralized crypto infrastructures, which would include Bitcoin and the Ethereum network, are considered to be “digital commodities,” and are granted greater freedom. Such assets are not like shares of Apple stock, where the buyer expects a very particular kind of corporate responsibility and predictable financial reporting. So the bill stipulates that, for many crypto assets, initial issuance must involve tighter disclosure and regulation, with a role for the SEC. Over time, as the blockchain for that asset became more mature and well-established, regulation would relax.
Any particular proposal for such rules will necessarily involve some ambiguities and be susceptible to being gamed (by companies) or abused (by regulators). What is considered “adequate” decentralization, for example, is ultimately a subjective question. Still, this bill seems like a reasonable place to start for crypto regulation.
The alternative to such regulations of course is complete regulatory discretion, which is currently part of the status quo. And here is Alex’s recent post on crypto regulation.
Money for Blood and Short Term Jobs
The excellent Tim Taylor on a new paper on plasma donation:
John M Dooley and Emily A Gallagher take a different approach in “Blood Money: Selling Plasma to Avoid High-Interest Loans” (Review of Economic Studies, forthcoming, published online May2, 2024; SSRN working paper version here). They are investigating how the opening of a blood plasma center in an area affects the finances of low-income individuals. As background, they write:
“Plasma, a component of blood, is a key ingredient in medications that treat millions of people for immune disorders and other illnesses. At over $26 billion in annual value in 2021, plasma represents the largest market for human materials. The U.S. provides 70% of the global plasma supply, putting blood products consistently in the country’s top ten export categories. The U.S. produces this level of plasma because, unlike most other countries, the U.S. allows pharmaceutical corporations to compensate donors – typically about $50 per donation for new donors, with rates reaching $200 per donation during severe shortages. The U.S. also permits comparatively high donation frequencies: up to twice per week (or 104 times per year)…”
Not too surprisingly, plasma donors tend to be young and poor and they use plasma donation to substitute away from non-bank credit like payday loans.
I am struck by Tim’s thoughts on how this connects with labor markets and regulation:
…I find myself thinking about the financial stresses that many Americans face. Being paid a few hundred dollars for a series of plasma donations isn’t an ideal answer. Neither is taking out a high-interest short-term loan; indeed, taking out a loan at all may be a poor idea if you aren’t expecting to have the income to pay it back. In the modern US economy, hiring someone for even a short-term job involves human resources departments, paperwork, personal identification, bookkeeping, and tax records. These rules have their reasons, but the result is that finding a short-term job that pays for a few days work isn’t simple, even if though most urban areas have a semi-underground network of such jobs.
Roger Miller’s classic 1964 song, “King of the Road,” tells us that “two hours of pushin’ broom/ Buys an eight by twelve four-bit room.” Even after allowing for a certain romancing of the life of a hobo in that song, the notion that a low-income person can walk out the door and find an two-hour job that pays enough to solve immediate cash-flow problems–other than donating plasma–seems nearly impossible in the modern economy.
Monaco on the Marin Headlands
The Dalmation Coast in Croatia, the Amalfi Coast in Italy and Monaco’s coast on the Mediterranean Sea are often found on lists of the most beautiful coastlines in the world. Here are some pictures. Hard not to agree. The fourth picture is of the Marin coastline near San Francisco. It’s also beautiful but is it obviously more beautiful than the other coastlines? Personally, I don’t think so. But one thing is different. Far fewer people are enjoying the Marin coast. Why? Because fewer people live there. Can something be beautiful if there is no one to see it?
There is something to be said for protecting natural wilderness but must we do so on some of the most valuable land in the world?
I agree with Market Urbanism, “Quite simply, we must build Monaco on the Marin Headlands.”
Hat tip to Bryan Caplan who makes the point about beauty in his excellent, Build, Baby, Build.
Croatia
Amalfi
Monaco
Marin:
Blame California?
This paper reexamines the role of social policy in the doubling of divorce rates. We demonstrate that the short-run rise in divorce rates formerly attributed to unilateral divorce solely depends on the state of California. California receives considerable weight in national analyses and adopted several policies simultaneously. When we examine the independent effects of these social policies, we find that legal abortion leads to a clear and immediate rise in divorce rates. However, legal abortion’s impact also hinges on California and may be contaminated by concurrently adopted policies. We then demonstrate that California’s influence extends to the broader unilateral divorce literature. We conclude by describing best practices to confront the challenges of simultaneous policy adoption.
That is from a recent paper by Lauren Hoehn-Velasco, Jacob Penglase, Michael Pesko, and Hasan Shahid. Via tekl.
The Sea Change on Crypto-Regulation
In the last few weeks there has been a sea change in crypto regulation:
1. Bitcoin spot ETFs were approved–reluctantly, after a 3-judge Federal Appeals court ruled unanimously that the SEC had acted arbitrarily and capriciously–but nevertheless opening Bitcoin holdings to institutional investors. Case in point, The State of Wisconsin bought Bitcoin ETFs for its pension fund.
2. In a very unusual move, SAB 121, was overturned by the House and then, even more surprisingly, overturned by the Senate including the votes of many Democrats. < href=”https://www.sec.gov/oca/staff-accounting-bulletin-121″>SAB 121 is an SEC staff accounting bulletin (not law but guidance) that said to banks if you hold crypto for your customers, i.e. a custody service, you must account for it on your balance sheet. This guidance does not apply to custody of any other asset. Essentially, SAB 121 made it prohibitive for banks to offer custody services for crypto because that service would then impact all kinds of risk and asset regulations on the bank. Aside from singling out crypto, the SEC is not a regulator of banks so this seemed like a regulatory overreach.
President Biden said he will veto but that is no longer certain. It wasn’t just crypto lobbying against SAB 121 but traditional banks. The banks point to the approval of Bitcoin ETFs saying, quite logically, why can’t we custody these ETFs the way we do every other ETF? Senate Majority leader Chuck Schumer, D-N.Y., sometimes called Wall Street’s man in Washington, voted in favor of nullifying SAB 121. Schumer can read the room.
3. The House voted to ban the Fed from establishing a Central Bank Digital Currency (CBDC).
4. The House approved a wide-ranging bill to (finally!) establish regulations for digital assets markets. The vote was 279-136 in favor with many Democrats crossing party lines to support it.
5. After saying nothing for months, usually a bad sign, the SEC approved Ethereum spot ETFs. On the surface, this might have seemed logically inevitable given the approval of Bitcoin spot ETFs but many people thought the SEC would do everything it could to find daylight between Bitcoin and ETH. Instead, it tacitly acknowledged that ETH is a commodity and not a security.
Why is this happening? I see three main factors at play. First, crypto is becoming integrated with traditional finance. As the big banks get involved, the politics around crypto are shifting. Second, crypto is becoming normalized. Ironically, the prosecution of Sam Bankman-Fried, Changpeng Zhao and manipulators like Avraham Eisenberg may have convinced some U.S. regulators that crypto doesn’t have to be destroyed, it can be tamed. Nakamoto might not be pleased but realistically this was the only option to move forward. Eventually, everyone wants to pay their mortgage. Third, Trump’s strong endorsement of crypto has alarmed the Biden administration. Most political issues are firmly divided along party lines, but crypto remains an open issue. With millions of crypto owners in the United States, a significant number are highly motivated to vote their wallets. Biden doesn’t want to give the crypto issue to Trump.
None of this means we are entering crypto Nirvana but as far as regulation is concerned a lot has changed in just a matter of weeks.
Full Disclosure: I am an advisor to several firms in the crypto space including MultiversX, Bluechip and 0L.
The Left on FDA Peer Approval
Robert Kuttner discovered an excellent treatment for colds while vacationing in France and is rightly outraged that it’s not available in the United States:
Toward the end of our stay, my wife and I both got bad coughs (happily, not COVID). We went to our wonderful local pharmacist in search of something like Mucinex or Robitussin, which are not great but better than nothing.
“We have something much better,” said he. And he did. It’s called ambroxol. It works on an entirely different chemical principle, to thin sputum, facilitate productive coughing, and also operates as a pain reliever and gentle decongestant with no rebound effect.
We experienced it as a kind of miracle drug for coughs and colds. A box cost eight euros.
Ambroxol is available nearly everywhere in the world as a generic. It has been in wide use since 1979.
But not in the U.S.
…You can’t get ambroxol in the U.S. because of the failure of the Food and Drug Administration to grant reciprocal recognition to generic medications approved by its European counterpart, the European Medicines Agency, when they have long been proven safe and effective. To get FDA approval for the sale of ambroxol in the U.S., a drug company would need to sponsor extensive and costly clinical trials. Since it is a generic, as cheap as aspirin, no drug company would bother.
…I’ve petitioned the FDA, asking them to create a fast-track procedure, whereby generic drugs approved in Europe, and well established as safe and effective, could get reciprocal approval in the U.S.
This would produce approval of ambroxol as over-the-counter medication for coughs and colds without unnecessary new clinical trials. And should ambroxol turn out to have real benefits for Parkinson’s as well, it would already be well established in the U.S. as an inexpensive generic.
Influenced by my work on FDA reciprocity aka peer approval, Ted Cruz introduced a bill, the Result Act to fast-track approval in the United States for drugs and devices already approved in other developed countries. Similarly, AOC has noted that the FDA is far behind the world in approving advanced sunscreens. Perhaps there is an opportunity here for bipartisan support.
Hat tip: the excellent Scott Lincicome.