Category: Law
Rent Control Reduces New Development: Bug or Feature?
The minimum wage will tend to increase unemployment among low-skill workers, often minorities. To many people that’s an argument against the minimum wage. But to progressives at the opening of the 20th century that was an argument for the minimum wage–progressive’s demanded minimum wages to get women and racial minorities out of the work force.
Something similar may be happening with rent control. Rent control reduces new development. Bug or feature? California Republican Tony Strickland argues that reduced development is a feature. New state laws in California prevent cities from restricting development but if rent control was legal cities could be used it to do the same thing just by making it unprofitable to build.
Politico: Strickland said Weinstein’s rent control measure [allowing cities to use rent control] would block “the state’s ability to sue our city” because Huntington Beach could slap steep affordability requirements on new, multi-unit apartment projects that are now exempt from rent control. Such requirements, he argued, could stop development that would “destroy the fabric” of the town’s quaint “Surf City” vibe…. “It gives local governments ironclad protections from the state’s housing policy and therefore overreaching enforcement.”
“On paper, it would be legal to build new homes. But it would be illegal, largely speaking, to make money doing so,” said Louis Mirante…
Hat tip: Ben Krauss at Slow Boring.
Markets in Everything: Fentanyl Precursors
Reuters: To learn how this global industry works, reporters made multiple buys of precursors over the past year. Though a few of the sales proved to be scams, the journalists succeeded in buying 12 chemicals that could be used to make fentanyl, according to independent chemists consulted by Reuters. Most of the goods arrived as seamlessly as any other mail-order package. The team also procured secondary ingredients used to process the essential precursors, as well as basic equipment – giving it everything needed to produce fentanyl.
The core precursors Reuters bought would have yielded enough fentanyl powder to make at least 3 million tablets, with a potential street value of $3 million – a conservative estimate based on prices cited by U.S. law enforcement agencies in published reports over the past six months.
The total cost of the chemicals and equipment Reuters purchased, paid mainly in Bitcoin: $3,607.18.
I don’t doubt that Reuters did what they say they did. I have trouble believing, however, that the implied profit margins are so high. A gram of cocaine costs about $160 on the street and $13 to $70 trafficked into the US and ready to sell. Thus, the street price to production cost is at most 12:1 and perhaps as low as 2.3:1. Note that this profit margin includes the costs of jail etc. I think Reuters overestimates fentanyl street prices by a factor of 2 which would still give a ratio of 415:1 which is way too high. Let’s say fentanyl sells for $1.5 million on the street then to get the ratio to a very generous 20:1 we need costs of $75,000 so my guess is that Reuters has underestimated costs by a significant amount in some manner.
Happy to receive clarification or verification from those with more expertise in the business.
I do accept Reuters point that fentanyl is cheap and easy to produce.
The whole story is excellent.
Overturn Euclid v. Ambler
An excellent post from Maxwell Tabarrok at Maximum Progress:
On 75 percent or more of the residential land in most major American cities it is illegal to build anything other than a detached single-family home. 95.8 percent of total residential land area in California is zoned as single-family-only, which is 30 percent of all land in the state. Restrictive zoning regulations such as these probably lower GDP per capita in the US by 8–36%. That’s potentially tens of thousands of dollars per person.
The legal authority behind all of these zoning rules derives from a 1926 Supreme Court decision in Village of Euclid v. Ambler Realty Co. Ambler realty held 68 acres of land in the town of Euclid, Ohio. The town, wanting to avoid influence, immigration, and industry from nearby Cleveland, passed a restrictive zoning ordinance which prevented Ambler realty from building anything but single family homes on much of their land, though they weren’t attempting to build anything at the time of the case.
Ambler realty and their lawyer (a prominent Georgist!) argued that since this zoning ordinance severely restricted the possible uses for their property and its value, forcing the ordinance upon them without compensation was unconstitutional.
The constitutionality claims in this case are about the 14th and 5th amendment. The 5th amendment to the United States Constitution states, among other things, that “private property [shall not] be taken for public use, without just compensation.” The part of the 14th amendment relevant to this case just applies the 5th to state and local governments.
The local judge in the case, who ruled in favor of Ambler (overturned by the Supreme Court), understood exactly what was going on:
The plain truth is that the true object of the ordinance in question is to place all the property in an undeveloped area of 16 square miles in a strait-jacket. The purpose to be accomplished is really to regulate the mode of living of persons who may hereafter inhabit it. In the last analysis, the result to be accomplished is to classify the population and segregate them according to their income or situation in life … Aside from contributing to these results and furthering such class tendencies, the ordinance has also an esthetic purpose; that is to say, to make this village develop into a city along lines now conceived by the village council to be attractive and beautiful.
Note that overturning Euclid v. Ambler would not make zoning in the interests of health and safety unconstitutional. Indeed, it wouldn’t make any zoning unconstitutional it would just mean that zoning above and beyond that required for health and safety would require compensation to property owners.
Read the whole thing and subscribe to Maximum Progress.
Not Lost In Translation: How Barbarian Books Laid the Foundation for Japan’s Industrial Revoluton
Japan’s growth miracle after World War II is well known but that was Japan’s second miracle. The first was perhaps even more miraculous. At the end of the 19th century, under the Meiji Restoration, Japan transformed itself almost overnight from a peasant economy to an industrial powerhouse.
After centuries of resisting economic and social change, Japan transformed from a relatively poor, predominantly agricultural economy specialized in the exports of unprocessed, primary products to an economy specialized in the export of manufactures in under fifteen years.
In a remarkable new paper, Juhász, Sakabe, and Weinstein show how the key to this transformation was a massive effort to translate and codify technical information in the Japanese language. This state-led initiative made cutting-edge industrial knowledge accessible to Japanese entrepreneurs and workers in a way that was unparalleled among non-Western countries at the time.
Here’s an amazing graph which tells much of the story. In both 1870 and 1910 most of the technical knowledge of the world is in French, English, Italian and German but look at what happens in Japan–basically no technical books in 1870 to on par with English in 1910. Moreover, no other country did this.
Translating a technical document today is much easier than in the past because the words already exist. Translating technical documents in the late 19th century, however, required the creation and standardization of entirely new words.
…the Institute of Barbarian Books (Bansho Torishirabesho)…was tasked with developing English-Japanese dictionaries to facilitate technical translations. This project was the first step in what would become a massive government effort to codify and absorb Western science. Linguists and lexicographers have written extensively on the difficulty of scientific translation, which explains why little codification of knowledge happened in languages other than English and its close cognates: French and German (c.f. Kokawa et al. 1994; Lippert 2001; Clark 2009). The linguistic problem was two-fold. First, no words existed in Japanese for canonical Industrial Revolution products such as the railroad, steam engine, or telegraph, and using phonetic representations of all untranslatable jargon in a technical book resulted in transliteration of the text, not translation. Second, translations needed to be standardized so that all translators would translate a given foreign word into the same Japanese one.
Solving these two problems became one of the Institute’s main objectives.
Here’s a graph showing the creation of new words in Japan by year. You can see the explosion in new words in the late 19th century. Note that this happened well after the Perry Mission. The words didn’t simply evolve, the authors argue new words were created as a form of industrial policy.
By the way, AstralCodexTen points us to an interesting biography of a translator at the time who works on economics books:
[Fukuzawa] makes great progress on a number of translations. Among them is the first Western economics book translated into Japanese. In the course of this work, he encounters difficulties with the concept of “competition.” He decides to coin a new Japanese word, kyoso, derived from the words for “race and fight.” His patron, a Confucian, is unimpressed with this translation. He suggests other renderings. Why not “love of the nation shown in connection with trade”? Or “open generosity from a merchant in times of national stress”? But Fukuzawa insists on kyoso, and now the word is the first result on Google Translate.
There is a lot more in this paper. In particular, showing how the translation of documents lead to productivity growth on an industry by industry basis and a demonstration of the importance of this mechanism for economic growth across the world.
The bottom line for me is this: What caused the industrial revolution is a perennial question–was it coal, freedom, literacy?–but this is the first paper which gives what I think is a truly compelling answer for one particular case. Japan’s rapid industrialization under the Meiji Restoration was driven by its unprecedented effort to translate, codify, and disseminate Western technical knowledge in the Japanese language.
Every Stock is a Vaccine Stock, Revisited
In May 2020, I wrote a post titled Every Stock is a Vaccine Stock highlighting that the stock market reaction to good vaccine news indicated that vaccines were worth trillions and that most of this value was external to the vaccine manufacturers, meaning that the vaccine manufacturers were under-incentivized.
It’s not surprising that when Moderna reports good vaccine results, Moderna does well. It’s more surprising that Boeing and GE not only do well they increase in value far more than Moderna. On May 18, for example, when Moderna announced very preliminary positive results on its vaccine it’s market capitalization rose by $5b. But GE’s market capitalization rose by $6.82 billion and Boeing increased in value by $8.73 billion.
A cure for COVID-19 would be worth trillions to the world but only billions to the creator. The stock market is illustrating the massive externalities created by innovation. Nordhaus estimated that only 2.2% of the value of innovation was captured by innovators. For vaccine manufacturers it’s probably closer to .2%.
Who can internalize the externalities? Moderna clearly can’t because if they could then on May 18 Moderna would have increased in value by $20.52b ($4.97b+$6.82b+$8.73b) and GE and Boeing wouldn’t have gone up at all. Massive externalities.
A clever institutional investor like Blackrock or Vanguard could internalize some of the externalities by encouraging Moderna to work even faster and invest even more, even to the extent of lowering Moderna’s profits. Blackrock would more than make up for the losses on Moderna by bigger gains on other firms in its portfolio. Blackrock does indeed understand the incentives, although its unclear how much beyond jawboning they can actually do, legally.
I’d like to see more innovation in mechanisms to internalize externalities–perhaps in a pandemic vaccine firms should be given stock options on the S&P 500. Until we develop those innovations, however, the government is the best bet at internalizing the externality by paying vaccine manufacturers to increase capacity and move more quickly than their own incentives would dictate. Billions in costs, trillions in benefits.
A new paper by Acharya, Johnson, Sundaresan and Zheng formulizes this intuition. The authors combine a model of preferences in which uncertainty can be priced with an estimate of the stock market reaction to vaccine news and conclude that “ending the pandemic would have been worth from 5% to 15% of total wealth”.
One measure of the ex ante cost of disasters is the welfare gain from shortening their expected duration. We introduce a stochastic clock into a standard disaster model that summarizes information about progress (positive or negative) toward disaster resolution. We show that the stock market response to duration news is essentially a sufficient statistic to identify the welfare gain to interventions that alter the state. Using information on clinical trial progress during 2020, we build contemporaneous forecasts of the time to vaccine deployment, which provide a measure of the anticipated length of the COVID-19 pandemic. The model can thus be calibrated from market reactions to vaccine news, which we estimate. The estimates imply that ending the pandemic would have been worth from 5% to 15% of total wealth as the expected duration varied in this period.
Update on the Supervillains (maybe that’s you)
The law’s price controls will also deter companies from developing new medicines. A study I co-authored estimated that 135 fewer drugs will come to market through 2039 because of the Inflation Reduction Act. Research firm Vital Transformation’s forecast is even bleaker, predicting that the U.S. could lose 139 drugs within the next decade.
Dozens of life-sciences companies have announced cuts to their research and development pipelines because of the 2022 law. These announcements have come in earnings calls and filings with the Securities and Exchange Commission—where deliberate misstatements would expose executives to civil and criminal penalties—so they can’t be chalked up to political posturing.
That is from Tomas Philipson at the WSJ. It is worth noting this kind of academic research has not been effectively rebutted, rather what you usually hear in response is a bunch of snarky comments about Big Pharma and the like.
And to repeat myself yet again: if you are ever tempted to cancel somebody, ask yourself “do I cancel those who favor tougher price controls on pharma? After all, they may be inducing millions of premature deaths.” If you don’t cancel those people — and you shouldn’t — that should broaden your circle of tolerance more generally.
U.S: elevators are much more expensive
Behind the dearth of elevators in the country that birthed the skyscraper are eye-watering costs. A basic four-stop elevator costs about $158,000 in New York City, compared with about $36,000 in Switzerland. A six-stop model will set you back more than three times as much in Pennsylvania as in Belgium. Maintenance, repairs, and inspections all cost more in America too.
The first thing to notice about our elevators is that, like many things in America, they are huge. New elevators outside the U.S. are typically sized to accommodate a person in a large wheelchair plus somebody standing behind them. American elevators have ballooned to about twice that size, driven by a drip-drip-drip of regulations, each motivated by a slightly different concern — first accessibility, then accommodation for ambulance stretchers, then even bigger stretchers.
Deep roots, the persistent legacy of slavery on free labor markets
To engage with the large literature on the economic effects of slavery, we use antebellum census data to test for statistical differences at the 1860 free-slave border. We find evidence of lower population density, less intensive land use, and lower farm values on the slave side. Half of the border region was half underutilized. This does not support the view that abolition was a costly constraint for landowners. Indeed, the lower demand for similar, yet cheaper, land presents a different puzzle: why wouldn’t the yeomen farmers cross the border to fill up empty land in slave states, as was happening in the free states of the Old Northwest? On this point, we find evidence of higher wages on the slave side, indicating an aversion of free labor to working in a slave society. This evidence of systemically lower economic performance in slavery-legal areas suggests that the earlier literature on the profitability of plantations was misplaced, or at least incomplete.
That is from a new NBER working paper by Hoyt Bleakley and Paul Rhode.
How we should update our views on immigration
I am writing this post on a somewhat bumpy plane ride, so I will try doing it without links. Most of the relevant sources you can find through perplexity.Ai, or even on MR itself. Google too.
Overall, I am distressed by the contagion effects when it comes to immigration views. A large number of people are much more anti-immigration than they used to be, in part because yet others are more anti-immigration. All sorts of anecdotes circulate. But let’s look more systematically at what we have learned about immigration in the last ten years or so. Not all of it should count as pro-immigration, but a lot of it should, with one huge caveat.
When it comes to the wage effects of immigration, there is very modest additional evidence in the positive direction. I wouldn’t put much weight on that, but it certainly is not pointing in the other direction.
The United States is showing it can have a higher stock of immigrants and also falling crime rates. I am not suggesting a causal model there, but again that should be more reassuring than not.
There is additional evidence for the positive fiscal benefits of immigrants, including less skilled immigrants. Some of this is from the CBO, some of it I outlined in a Bloomberg column maybe a month or so ago. I don’t view those results as major revisions, but again they are not pointing in the wrong direction.
There is reasonable though not decisive macroeconomic evidence that immigrant labor supply was a significant contributor to America’s strong post-pandemic recovery.
If you are a right-winger who was worried that incoming Latinos would vote Democratic in some huge percentage, you can set your mind at ease on that one. You also can take this as evidence of a particular kind of assimilation.
Fertility rates are falling much more than we had expected, including in the United States. This makes the case for immigration much stronger.
It is increasingly evident that immigrant-rich Florida and Texas are doing just great. The picture is decidedly less positive for many parts of California, but I suppose I see evidence that the white Progressive Left is mainly at fault there, not the immigrants. Still, I do think you can make a reasonable argument that immigrants and the Progressive Left interact in a dysfunctional manner. It is no surprise to me that so many of the leading anti-immigrant voices come from California.
Overall, I am struck by the fact that immigration critics do not send me cost-benefit studies, nor do they seem to commission them. If the case against immigration is so strong, why aren’t these studies created and then sent to me? You could have a good one for a few hundred thousand dollars, right? Instead, in my emails and the like I receive a blizzard of negative emotion, and all sorts of anecdotal claims about how terrible various things are, but never a decent CBA. I take that to be endogenous. I think it is widely accepted that America having taken in the people who are now Italian-Americans would pass a cost-benefit test, even though the Mafia ruled New Jersey and Rhode Island for decades. Somehow people are less keen to apply this same kind of reasoning looking forward, though they are happy to regale you with tales of crimes by current immigrants.
I do see good evidence that trust in American government is falling, but I attribute that mainly to the Martin Gurri effect. I mean look at the current gaslighters in the White House and in the media — they are not primarily immigrants, quite the contrary. Or all the Covid mistakes, were they due to “the immigrants”? I don’t see it.
Now let us look at knowledge updates on the other side of the ledger, namely new knowledge that should make us more skeptical about immigration.
We now see that external hostility to Israel and Taiwan is stronger than we had thought. So the case for a looser immigration policy in Israel is much weaker than it used to be. As for Taiwan, they should be more careful about letting in mainland Chinese. Estonia needs to be more wary about letting in Russians, and indeed they are. And there might be other countries where this kind of logic applies. Do I really know so much about the situation between Burundi and Rwanda? In general, as the level of conflict in the world rises, there will be more of these cases. It is also a major consideration for anywhere near Ukraine. Small countries need to worry about this most of all.
I should note this problem does not seem to apply to North America, though you might require tougher security clearances for some jobs currently held by Chinese migrants.
The second issue, and it is a biggie, is that voters dislike immigration much, much more than they used to. The size of this effect has been surprising, and also the extent of its spread. I am writing this post on Election Day in France, and preliminary results suggest a very real risk that France ends up ungovernable. Immigrants are clearly a major factor in this outcome, even under super-benign views that do not “blame” the immigrants themselves at all.
Versions of this are happening in many countries, not just a few, and often these are countries that previously were fairly well governed.
I think it is better for countries in such positions to be much tougher on immigration, rather than to suffer these kinds of political consequences.
But let’s look honestly at the overall revision to our views. Politics is stupider and less ethical than before, including when it comes immigration (but not only! Fellow citizens also have become more negative about other fellow citizens of differing views, and I view negativism as the root of the problem all around). We need to take that into account, and so all sorts of pro-migration dreams need to be set aside for the time being, at least in many countries. Nonetheless the actual practical consequences of immigration, political backlash excluded, are somewhat more positive than we had thought. For some smaller countries, however, that may not hold, Israel being the easiest example to grasp but not the only. In the longer run, we also would like to prepare for the day when higher levels of immigration might resume, even if that currently seems far off. So we shouldn’t talk down immigration per se. Instead we should try to combat excess negativism in many spheres of life.
Somehow that view is too complicated for people to process, and so instead they instinctively jump on the anti-immigration bandwagon. Too much negativism. But in fact my view is better than theirs, and so they ought to hold it.
Claude read the Chevron pdf
“This is a very significant overturning of Chevron deference, which has been a cornerstone of administrative law for the past 40 years. Some key points about the implications:
- It fundamentally shifts power from executive agencies to courts in interpreting ambiguous statutes. Courts will now have primary authority to interpret statutory ambiguities rather than deferring to reasonable agency interpretations.
- It opens up many existing agency regulations and interpretations to potential new legal challenges. Regulations that were previously upheld under Chevron may now be more vulnerable.
- It will likely make it harder for agencies to issue new regulations or take new regulatory actions, as they will have less latitude in interpreting their statutory authority.
- It may lead to less stability and consistency in regulatory policy, as different courts may reach different interpretations of statutes.
- It could slow down the regulatory process, as more issues may end up being litigated in court rather than deferred to agency expertise.
Some areas that may see significant impacts:
- Environmental regulations (EPA, Dept of Interior, etc.)
- Healthcare regulations (HHS, CMS)
- Financial regulations (SEC, CFPB)
- Labor regulations (DOL, NLRB)
- Immigration policies
- Telecommunications regulations (FCC)
Regulations that rely heavily on agencies filling in statutory gaps or interpreting broad statutory language are most likely to be affected. Major Obama and Biden-era regulations on issues like climate change, healthcare, and financial reform may be particularly vulnerable to new challenges.
However, the majority opinion does state that prior judicial decisions upholding agency actions under Chevron should not necessarily be overturned based on this ruling alone. So there is some effort to limit the disruptive impact, though the dissent expresses skepticism about how effective that will be in practice.
Overall, this represents a major shift in the balance of power between the executive and judicial branches when it comes to administrative law and regulation. The full practical implications will likely take years to play out through new litigation and regulatory processes.”
13.9 percent less democracy?
Estonian edition:
After the Citizenship Act was enacted in 1992, 90% of ethnic-Estonians automatically became citizens while only 8-10% of non-Estonians gained citizenship. This is due to a law that granted citizenship to those who were living in Estonia before 1940, which was the year of Soviet annexation. [3] Because of the law, those that moved or were born in Estonia after 1940 during Soviet times had to apply for citizenship. New numbers show that ‘as of April 2012, 93,774 persons (6.9% of the population) remain stateless, while approximately 95,115 (7% of the population) have chosen Russian citizenship as an alternative to statelessness’. [4] Because many Russian-speakers have not been able to gain citizenship, this combined 13.9% of the population does not have the right to participate in Estonian democracy.
Here is more detail. I believe in 1992, during the first election, about forty percent of the resident, age-relevant population was not eligible to vote. I am not sure what the percentages are right now, but I do know the same basic system continues.
I do not per se object to these policies (fear the Russian bear), while noting I do not have enough information to assess all the trade-offs involved. Nonetheless it is interesting how much attention the Hungarian and Polish democratic “deviations” receive, relative to this one. An EU country in fully good standing around the world, on the basis of ethnicity, denies a significant portion of its longstanding residents the right to vote.
Two further points. First, you have to worry about this issue, as a Russian ethnic, unless your ancestors arrived before 1940. So the worry here is not just about recent arrivals, but it is quite possible that your grandparents were born in Estonia, maybe even great-grandparents. Second, ethnic Russians do have a path to normal Estonian citizenship, but it is difficult, especially the language requirement, which I am told is very tough.
I heard Russian a great deal walking through the streets of Tallinn, and most of all at the ballet. I have seen estimates that one-quarter of the Estonian population is ethnic Russian, and in the major city it is surely more than that.
Garett Jones, telephone!
Testing for Bird Flu is Too Slow
Remember my warnings about the FDAs takeover of 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.
Well the plan marched forward and here we are. Regarding tests for bird flu:
KFFNews: Clinical laboratories have also begun to develop their own tests from scratch. But researchers said they’re moving cautiously because of a recent FDA rule that gives the agency more oversight of lab-developed tests, lengthening the pathway to approval. In an email to KFF Health News, FDA press officer Janell Goodwin said the rule’s enforcement will occur gradually.
However, Susan Van Meter, president of the American Clinical Laboratory Association, a trade group whose members include the nation’s largest commercial diagnostic labs, said companies need more clarity: “It’s slowing things down because it’s adding to the confusion about what is allowable.”
One of the motivations for Operation Warp Speed and my work during the pandemic on things like advance market commitments was that firms wouldn’t invest enough in tests because diseases might fizzle out. The extreme costs of shutting down the economy, however, mean that it’s well worth paying for some tests for diseases that fizzle out if tests are ready when a disease doesn’t fizzle out.
Creating tests for the bird flu is already a risky bet, because demand is uncertain. It’s not clear whether this outbreak in cattle will trigger an epidemic or fizzle out. In addition to issues with the CDC and FDA, clinical laboratories are trying to figure out whether health insurers or the government will pay for bird flu tests.
We need a pandemic trust fund to ramp up advance market commitments when necessary.
On the plus side, I do approve of the new program to pay farmers and farm workers for testing. For example:
Friday’s incentives announcement included a $75 payment to any farm worker who agrees to give blood and nasal swab samples to the CDC.
“Bird flu” has now infected more than 50 types of mammals. To be clear, bird flu may yet fade but every potential pandemic pathogen is a test of readiness and we still are getting a C+ at best.
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.”