Category: Law
Micah Siegel interviews me about animal welfare and policy
Police work at the private margin
We study how public sector workers balance their professional motivations with private economic concerns, focusing on police arrests. Arrests made near the end of an officer’s shift typically require overtime work, and officers respond by reducing arrest frequency but increasing arrest quality. Days in which an officer works a second job after their police shift have higher opportunity cost, also reducing late-shift arrests. Combining our estimates in a dynamic model identifies officer preferences over workplace activity and overtime work. Our results indicate that officers’ private costs of arrests have a first-order impact on the quantity and quality of enforcement.
That is from a new NBER working paper by Aaron Chalfin and Felipe M. Gonçalves.
Sebastian Bensusan on Milei reform impressions (from my email)
This was great:
https://marginalrevolution.com/marginalrevolution/2023/12/argentina-reform-impressions.htmlI think the biggest things that you missed are:
1. He is using the same “emergency measures” (DNUs ~ Executive Orders) that the Kirchner’s used. Many of the things in that DNU are very hard to justify as emergency measures and as such, I consider the method unconstitutional. In other words, he is playing dirty.
2. Many of the things in the bill are not directly relevant to the immediate economic crisis, are not necessarily why he was voted in, and are especially offensive to the side of the country that didn’t vote for him. For example, removing Ley de Tierras is not going to bring foreign investment immediately (nobody wants to invest in Argentina at this time) but it infuriates the losing side further. It is another example of him being ideologically driven. The more of these crusades he fights at the same time, the more likely a strong coalition forms against him.
Why Do Poor People Commit More Crime?
It’s well known that people with lower incomes commit more crime. Call this the cross-sectional result. But why? One set of explanations suggests that it’s precisely the lack of financial resources that causes crime. Crudely put, maybe poorer people commit crime to get money. Or, poorer people face greater strains–anger, frustration, resentment–which leads them to lash out or poorer people live in communities that are less integrated and well-policed or poorer people have access to worse medical care or education and so forth and that leads to more crime. These theories all imply that giving people money will reduce their crime rate.
A different set of theories suggests that the negative correlation between income and crime (more income, less crime) is not causal but is caused by a third variable correlated with both income and crime. For example, higher IQ or greater conscientiousness could increase income while also reducing crime. These theories imply that giving people money will not reduce their crime rate.
The two theories can be distinguished by an experiment that randomly allocates money. In a remarkable paper, Cesarini, Lindqvist, Ostling and Schroder report on the results of just such an experiment in Sweden.
Cesarini et al. look at Swedes who win the lottery and they compare their subsequent crime rates to similar non-winners. The basic result is that, if anything, there is a slight increase in crime from winning the lottery but more importantly the authors can statistically reject that the bulk of the cross-sectional result is causal. In other words, since randomly increasing a person’s income does not reduce their crime rate, the first set of theories are falsified.
A couple of notes. First, you might object that lottery players are not a random sample. A substantial part of Cesarini et al.’s lottery data, however, comes from prize linked savings accounts, savings accounts that pay big prizes in return for lower interest payments. Prize linked savings accounts are common in Sweden and about 50% of Swedes have a PLS account. Thus, lottery players in Sweden look quite representative of the population. Second, Cesarini et al. have data on some 280 thousand lottery winners and they have the universe of criminal convictions; that is any conviction of an individual aged 15 or higher from 1975-2017. Wow! Third, a few people might object that the correlation we observe is between convictions and income and perhaps convictions don’t reflect actual crime. I don’t think that is plausible for a variety of reasons but the authors also find no statistically significant evidence that wealth reduces the probability one is suspect in a crime investigation (god bless the Swedes for extreme data collection). Fourth, the analysis was preregistered and corrections are made for multiple hypothesis testing. I do worry somewhat that the lottery winnings, most of which are on the order of 20k or less are not large enough and I wish the authors had said more about their size relative to cross sectional differences. Overall, however, this looks to be a very credible paper.
In their most important result, shown below, Cesarini et al. convert lottery wins to equivalent permanent income shocks (using a 2% interest rate over 20 years) to causally estimate the effect of permanent income shocks on crime (solid squares below) and they compare with the cross-sectional results for lottery players in their sample (circle) or similar people in Sweden (triangle). The cross-sectional results are all negative and different from zero. The causal lottery results are mostly positive, but none reject zero. In other words, randomly increasing people’s income does not reduce their crime rate. Thus, the negative correlation between income and crime must be due to a third variable. As the authors summarize rather modestly:
Although our results should not be casually extrapolated to other countries or segments of the population, Sweden is not distinguished by particularly low crime rates relative to comparable countries, and the crime rate in our sample of lottery players is only slightly lower than in the Swedish population at large. Additionally, there is a strong, negative cross-sectional relationship between crime and income, both in our sample of Swedish lottery players and in our representative sample. Our results therefore challenge the view that the relationship between crime and economic status reflects a causal effect of financial resources on adult offending.
Censorship of U.S. Movies in China
We introduce a structural econometric model to estimate the extent to which the Chinese government bans U.S. movies. According to our estimates, if a movie has characteristics similar to the median movie in our sample, then the probability is approximately 0.91 that the Chinese government will ban it. During our sample period, 1994-2019, U.S. movies comprised about 28 percent of the Chinese market and sales were about $22.6 billion. However, according to our estimates, if the Chinese government had not banned any U.S. movies, then the latter numbers would have risen to 68 percent and $45.1 billion.
As for what gets banned:
…, two factors that have very high statistical significance are: (i) whether the movie contains occult content, and (ii) whether the movie
receives an R rating from the Motion Picture Association of America (MPAA). The factors also have very high substantive significance. For instance, suppose two movies, A and B, are identical except that movie A contains occult content, while B does not. Suppose movie B’s probability of being banned is 50%. Then, according to our results, the occult content in movie A causes its probability of being banned to rise to 67%. A similar thought experiment implies that, if a movie has an R rating, then this raises its probability of being banned from 50% to 70%.Three other factors seem to be important but come just short of reaching statistical significance. These are whether the movie contains themes related to (i) anti-communism, (ii) individualism, or (iii) Tibet. A fourth factor is similar. This is whether the actor Richard Gere
appears in the movie.
That is a new paper by XUHAO PAN, Tim Groseclose, and yours truly, forthcoming in the Journal of Cultural Economics.
*The New Deal’s War on the Bill of Rights*
That is the new book by David Beito, and the subtitle is The Untold Story of FDR’s Concentration Camps, Censorship, and Mass Surveillance. Here is the closing passage:
If Roosevelt’s civil-liberties reputation meant anything to mainstream Americans at the end of the 1950s, it was not for witch hunts against gays in the navy, mass surveillance of private telegrams, crackdowns on free speech, inquisitorial investigations, sedition prosecutions, or the internment of Japanese Americans in concentration camps. Far more central in the memories of most was his authorship of the four freedoms and the Fair Employment Practices Committee and the appointment of Black and Douglas to the Supreme Court. But that was not the whole truth, or even the beginning of the whole truth.
There you go. I don’t think these facts are much contested, though the accompanying mood affiliation hasn’t changed very much.
More on Pharma Pricing
A reader in the industry writes with excellent comments on yesterday’s post on the Chris Rock hypothesis.
Long-time reader, first-time emailer–love the show ;). I’ve been in and around the pharma industry for nearly 30 years, and I’ve spent time in gene therapy/gene editing where the one-time cure model dominates. Some thoughts on chronic vs. curative dosing and why a curative therapy is likely worth less:
- There’s a potential mismatch between payment for a drug and the accrual of value that justifies its price point. If I take a curative therapy for a disease like hemophilia (e.g., the new $2.9 M drug, Roctavian), the insurance company immediately incurs the cost of the drug, but the prime financial benefits (no more expensive chronic therapy, reduced expensive visits to the hospital) accrue over time. Patients switch insurance companies as they switch jobs, so the “payout” that justifies the treatment price accrues to the subsequent insurers. On chronic therapy, if a patient switches to another insurer, the new insurer picks up the payments so there’s no such disconnect. Rationally, insurers should pay more for chronic therapy, even in present value terms.
- Durability of effect is unknown until it isn’t. It’s difficult to charge for a drug as a cure until such time you know it’s a cure and have proven it as such. How long do you have to follow treated patients to prove that? Gene therapies are starting to show waning efficacy in some cases. The FDA mandates that you cannot include something in the drug label that has not been proven. Payors will point to a label and ask why they should pay for something that’s not on there. This can be mitigated by programs where the drug company pays back a portion of the cost if it doesn’t work, but collecting on that seems like a huge hassle–how do you prove that it stopped working (I can hear Mike Munger–“the answer to your question is transaction costs…”)?
- Sticker shock and headline numbers. A drug that costs $3 M or more is something the White House can use at a podium and get a reaction. Never mind that it gets paid back pretty quickly by discontinuing a therapy that costs hundreds of thousands per year–life-saving drugs should not cost millions of dollars! This puts downward pressure on one-time cures.
So, my perspective is that it is more difficult for a one-time treatment/cure to capture the value it creates vs. a chronic therapy. So, why did Lilly shares tumble on the news? More important than duration of therapy is market share vs. competitors. A more permanent solution (with no rebound after discontinuation) would more than make up for lost revenue on the back end by taking share from the competition on the front end. And THAT is why pharma is incentivized to pursue cures. Making a better drug will beat the competition, and a cure is a better drug. Big Pharma doesn’t necessarily pursue curative treatments directly because they don’t know how. Technologies like CRISPR and mRNA have to come up via biotechs that are purpose-built to maximize the platforms’ value and to understand/navigate the underlying technology. That said, Big Pharma has inked HUGE deals to gain access to these technologies (e.g., Pfizer/BioNTech), so they do seem to come around eventually.
These are all excellent points. On point 1, note that Medicaid creates similar incentives in that insurance firms want to farm long term costs onto Medicaid.
Point 3 suggests that we should be especially wary of price controls on cures. Sticker shock may drive us to price controls leaving us with treatments that look cheaper but are even more expensive in the long-run (and by present discounted value). Sovaldi is a case in point. Its initial $84,000 price generated huge opposition even though it typically cured hepatitis C infections and avoided many later liver cancers and saved money overall. Indeed, as I pointed out earlier, Sovaldi so reduced the number of liver transplants that more people with other diseases ended up with life-saving transplants.
This is also what I meant by starting in the right place. If you start in the right place you have some hope of getting to real causes and possible solutions.
A Weighty Puzzle-Answers
Yesterday’s puzzle was about Chris Rock’s argument that pharmaceutical companies aren’t interested in cures, they are interested in treatments because they want the customer to keep coming back for more. The argument is common. So common that both ChatGPT and Claude completely botch this question. Claude, for example, says:
…as commercial entities in a competitive market, pharmaceutical companies also have to be profitable to survive and fund further research. In that sense, financially, an ongoing need to buy a treatment provides more direct revenue than a one-time cure.
Sigh. Claude is not nearly as funny as Chris Rock but without Rock’s delivery and worldly cynicism is the error now obvious?
Consider two lightbulbs, one lasts for 2 years the other lasts for 1 year. Which lightbulb is more profitable to sell? Any sensible analysis must begin with the following simple point: A lightbulb that lasts for 2 years is worth about twice as much as a lightbulb that lasts one year. Thus, assuming for the moment that costs of production are negligible, there is no secret profit to be had from selling two 1-year lightbulbs compared to selling one 2-year lightbulb. The firm that sells 1-year lightbulbs hasn’t hit on a secret profit-sauce because its customers must come back for more. If it did it could sell really profitable 1-month bulbs!
The same thing is true for pharmaceuticals. A treatment that lasts for 10 years is worth about ten times as much as an annual treatment. Or, to put it the other way, a treatment that lasts for 10 years is worth about the same as 10 annual treatments producing the same result. (n.b. yes, discounting, but discounting by both consumers and firms means that nothing fundamental changes.)
The simple argument starts us in the right place. We can then add arguments, on both sides, depending on context. In the case of Eli Lilly and Zepbound I think the major argument to add is that investors were likely pricing in a small chance that Zepbound had longer-lasting effects than Wegovy and when this was shown not to be true the price of the stock dropped. Thus, investors were pricing in some chance that Zepbound could have had greater market power–Sure made this argument in the comments yesterday.
Another argument: Consumers might be rationally or irrationally myopic. A rational myopia, for example, might be brought about if consumers don’t believe claims of longer durability. Quite possible. Econ question number 2–other than waiting ten years how could a firm convince buyers that its product was more durable than that of its competitors? (Hint: 🦚. Or you can find the answer is in Modern Principles.). Econ question number 3–if consumers were irrationally myopic would firms sell the treatment or, sell the cure with a different pricing strategy?
The cost of producing durability also matters–a lot. Sometimes cures are cheaper (one pill is cheaper than 10) but sometimes cures are more expensive. If longer durability is more expensive, there will be a tradeoff–these lightbulbs are more expensive but I will have to replace them less often–and the market process will work things out, perhaps differently for different consumers.
There are also subtle issues with price discrimination (see here but also here for some ideas) and Coase’s durable good monopoly argument (which I think is completely wrong in this context) as well as other issues but there is little point discussing the subtleties if we don’t get the big issues right.
The big issue to get right is that renting isn’t inherently more profitable than selling.
Addendum: When I pointed Claude to the above arguments, Claude responded “You make an excellent observation…there are good reasons why a one-time cure could potentially warrant an exceptionally high price point, well above an annual treatment cost. The pricing strategies pharmaceutical firms employ would analyze all these aspects in depth. Thank you for pushing me to recognize my flawed assumptions. I appreciate the opportunity to clarify my understanding here. Let me know if you have any other insightful points!”
I wonder if the commentators will be so wise and gracious?
No Child Left Behind: Accelerate Malaria Vaccine Distribution!
My post What is an Emergency? The Case for Rapid Malaria Vaccination, galvanized the great team at 1DaySooner. Here is Zacharia Kafuko writing at Foreign Policy:
Right now, enough material to make 20 million doses of a lifesaving malaria vaccine is sitting on a shelf in India, expected to go unused until mid-2024. Extrapolating from estimates by researchers at Imperial College London, these doses—enough for 5 million children—could save more than 31,000 lives, at a cost of a little more than $3,000 per life. But current plans by the World Health Organization to distribute the vaccine are unclear and have been criticized as lacking urgency.
…Vaccine deployment and licensure is an incredibly complex scientific, legal, and logistical process involving numerous parties across international borders. Roughly speaking, after the WHO recommends vaccines (such as R21), it must also undertake a prequalification process and receive recommendations from its Strategic Advisory Group of Experts before UNICEF is allowed to purchase vaccines. Then Gavi—a public-private global health alliance—can facilitate delivery by national governments, which must propose their anticipated demand to Gavi and make plans to distribute the vaccines.
Prequalification can take as long as 270 days after approval. However, the COVID-19 vaccines were rolled out within weeks of WHO’s approval, using the separate EUL process rather than the more standard prequalification process that R21 is now undergoing.
For COVID-19 vaccines, EUL was available because the pandemic was undeniably an emergency. Given the staggering scale of deaths of children in sub-Saharan Africa every year, shouldn’t we also be treating malaria vaccine deployment as an emergency?
The R21 malaria vaccine does not legally qualify for EUL because malaria already has a preventive and curative toolkit available. My concern is that this normalizes the deaths of hundreds of thousands of children each year in Africa.
We can move more quickly and save more lives, if we have the will.
Number Go Up
Number Go Up, Zeke Faux’s account of the wildest excesses of the crypto boom (2020-2022), is highly entertaining from page one:
“I am not going to lie,” Sam Bankman-Fried told me.
This was a lie.
Faux describes the scene on a yacht off the Bahamas owned or rented by Brock Pierce, the child actor who starred in the Mighty Ducks and who co-founded Tether, a stablecoin that Faux is on the hunt to uncover its origins and backing:
A crypto venture capital fund manager–wearing a mock souvenir T-shirt from convicted pedophile Jeffrey Epstein’s private island–joked about a scam that another yacht guest was running. A crypto public relations man offered what he called “Colombian marching powder” to a young woman. A small group of people dancing told me that they were philosophy students who’d come to the Bahamas to intern for FTX’s Bankman-Fried.
On Razzlekhan, the rapper, entrepreneur, and former World Bank economist-intern, who with her husband managed to pull off the largest heist in world history, some US $4.5 billion! (well, technically they stole ~$69 million worth of bitcoin in 2016 but they couldn’t sell it very easily and by the time they were caught in 2022 it was worth $4.5 billion):
As a performer, Razzlekhan was both hypersexual and aggressively unappealing. She alternated jokes about diarrhea and sex with boasts about her edgy business practices. Her signature move, if you can call it that, was to throw up her hand with her fingers split into a “V” stick out her tongue, and say “Razzle Dazzle!” Then she would make a loud phlegmy cough.
Ironically, the US government now holds the recovered coin, making it one of the largest holders of bitcoin in the world.
On the collapse of Three Arrows
Court documents showed that the fund’s holdings included a portfolio of NFTs. Among them were a Bored Ape with a vaguely racist “sushi chef headband” and a pixelated image of a cartoon penis, called a CryptoDickButt, which, incredibly, was worth about $1,000 at the time.
It’s not all fun and games. Faux also travels to the Philippines to witness the bust of Axie Infinity game miners and to Cambodia to investigate what amounts to slave labor camps run by Chinese gangsters.
One doesn’t get a favorable impression of crypto from Number Go Up but in fact one doesn’t learn much about crypto at all. Indeed, Faux’s book isn’t really about crypto it’s about the rise and collapse of a bubble and the consequent madness of crowds. It’s an old and familiar story. Not that different from the tulip mania (see the picture below), the dot-com boom, or the house flippers and mortgage boom of 2006-2008 (see the Big Short for similar stories of excess). The madness of crowds is fascinating, fun, and good for a morality tale but it doesn’t really tell us much about the underling asset. Tulips never amounted to much, the internet did great, house prices are back up. Crypto? Jury is still out. Thus, I was entertained by Number Go Up, but didn’t learn much.
Still, I agree with Faux on this, don’t put your money in Tether.
Wikipedia: Allegory of the Tulip Mania. The goddess of flowers is riding along with three drinking and money weighing men and two women on a car. Weavers from Haarlem have thrown away their equipment and are following the car. The destiny of the car is shown in the background: it will disappear in the sea.
What should UAP disclosure policy be?
That is the subject of my latest Bloomberg column. Here is the opener:
There is currently legislation before Congress that, if passed, could be one of the most important laws in US history. The Unidentified Anomalous Phenomena Disclosure Act of 2023, which calls for transparency in matters related to UFOs, is sponsored by Senate Majority Leader Charles Schumer and has considerable bipartisan support, although it may fail due to Republican opposition.
However skeptical you or I might be, there are many allegations from within the federal government that the government is hiding alien crafts and bodies, and that the military is seeking to reverse-engineer alien technologies. There are also more plausible claims that there are flying objects that defy explanation.
And:
…if you think all this talk of aliens is nonsense, isn’t the best response some sunlight to show nothing weird is going on?
That is the strongest argument for the bill: if all the recent UAP chatter reflects neither an alien presence nor threats from hostile foreign powers. In that case, drawing back the curtain would discourage reasonable observers from pursuing the topic further. A modest benefit would result.
What about hostile foreign powers as an explanation for the UAPs?:
In that case, additional transparency could be harmful. The US government conducts a variety of intelligence and military operations, and Congress does not insist that they all be made public. There is no transparency for CIA missions, or for US cyberattacks, or for many other aspects of US foreign policy.
In that scenario the case against the bill is relatively strong. And what about good ol’ alien beings and spacecraft?
In that case, is the best policy really what transparency advocates call “managed disclosure”? They had envisioned a panel of responsible experts managing the flow of information, bit by bit.
One question is whether such knowledge might be better kept secret, or known only to the small number of elites who manage to put all of the pieces together. Whether a broad social panic would result from revealing an alien presence on earth is hard to say — but it is also hard to see the practical upside. The best argument for disclosure is simply that the public has a right to know, and that such a knowledge of the reality of the humankind’s place in the universe is intrinsically valuable.
A second question concerns the inexorable logic of disclosure. Practically speaking, the US has a long tradition of whistleblowers and truth-tellers. If there is actual hard evidence of alien visitation, it is going to leak out, with or without the UAP Disclosure Act of 2023. Just look at the Edward Snowden case, where an American risked imprisonment and exile to reveal secrets that were far less important than what could be at stake here.
If the current legislation does not pass, or if a much weaker version moves forward, some people may take that as their cue to step forward and spill the beans — with direct proof rather than hearsay.
So in that “most interesting” case a transparency bill may not matter for long. That means I am not crushed that the disclosure provisions of the bill have been so watered down. In the case where those provisions really matter, a) it may be better if we don’t know, and b) we will find out sooner or later anyway. Aliens and UAPs aside, the appropriate degree of transparency is one of the most difficult questions in politics.
Will Rinehart on YIMBY and Sure (from my email)
I won’t double indent, everything that follows is from Will and not from me:
“…you put up the post “MR commentator ‘Sure’ on YIMBY” and I wanted to send an email because I’m not sure I agree with the comment, given Rosen-Roback and some recent research in urban economics.
Sure writes that “what people want from their housing is overwhelmingly a short commute and low density,” which is only half right. People want amenities, including a short commute and space, but more importantly, they want good schools and a mix of local consumption goods.
One of the most important amenities for a school is its school district. Basically, any survey of home buyers ranks school districts at the very top of demands, and they show a willingness to give up space in order to be in better schools.
Then, there’s the broad notion of local consumption. Sparked by Miyauchi, Nakajima, and Redding (2021), urban economics is shifting to include smartphone data in order to understand the consumption side of agglomeration better. It is an area we know little about because data was so hard to collect.
Combining smartphone data with economic census data, the authors show that non-commuting trips are frequent, more localized than commuting trips, and are strongly related to the availability of nontraded services. From here, the authors augmented a standard model to incorporate travel to work and this hyper local travel. Their findings are powerful. Consumption access makes a sizable contribution relative to workplace access in explaining the observed variation in residents and land prices across locations.
So when Sure asks,
Suppose they do [liberalize housing], who is going to move in [to Arlington and Alexandria]? The guys who are buying in Chantilly because they want space? Or the guys crowded into a apartment building in NE DC who work in Foggy Bottom?I submit it will be the latter.
I think that’s probably wrong. The people moving into those homes in the suburbs will not want space but good schools first and foremost. So it very well could be people from Chantilly move to Arlington, but I would suspect that Arlington will get more people because they generally have better schools than Alexandria and others. Thus, the amenity of interest would be education not space.
Sure is right that “If we liberalize zoning everywhere (i.e. the YIMBY dream) then we should expect a net movement from the areas where people say they don’t want to live to the areas where they say they want to live.” But they misstep in thinking that “on net that means out of the urban core and into something less dense.” In the open-city Rosen-Roback model, generally speaking, liberalization of housing would mean people head into the urban core and into the suburbs.
In total, Sure seriously overweights commuting time and housing space, and underweights education as an amenity and local consumption.”
MR commentator “Sure” on YIMBY
People talk about YIMBY as though it will mean more high rise apartments. And maybe it would in New York or San Francisco, though I have my doubts.
But what people want from their housing is overwhelmingly a short commute and low density.
Currently, the neighborhoods that offer the best tradeoff for these are the priciest in most metropolitan areas. Georgetown, Arlington, Falls Church, Chevy Chase, Great Falls, McLean … all of them offer shorter commutes into DC (or other key job locations like the Pentagon).
And what have YIMBY’s won? Well in Arlington and Alexandria they can now build multifamily housing in places that were once reserved for SFH.
Suppose they do, who is going to move in? The guys who are buying in Chantilly because they want space? Or the guys crowded into a apartment building in NE DC who work in Foggy Bottom?
I submit it will be the latter.
End of the day, Americans want to live in the burbs and the country. If we liberalize zoning everywhere (i.e. the YIMBY dream) then we should expect a net movement from the areas where people say they don’t want to live to the areas where they say they want to live.
And on net that means out of the urban core and into something less dense. Most likely that means leaving the high rises and moving into low rises or multiplexes. End of the day, it will be moving from high density to lower density.
And this will create tensions between maintaining SFH in burbs as opposed to multiplexing them or building low rises.
I have no idea if the price will be the thing that gives – it may rise because the land has suddenly gotten more valuable for a teardown to low rise conversion. This would bring down “housing” prices, but quite possibly increase the cost of detached single family homes as the supply of that specific housing class diminishes. Possibly, the low rises will reduce demand for SFH more than teardowns and foregone SFH developments.
But if that does happen, it means that a lot of suburban areas are going to have a bunch of new residents and voters who are not keen to live the SFH lifestyle. And that is all but certainly going to mean disamenity for the SFH lifers. That may be new local politics, investment in public transportation at the expense of road maintenance, or declining school quality.
But end of the day, if YIMBYism allows people to live as they want because the market can better match demand, then the net flow has to be out of the oversubscribed cities. And the big reason people say they live urban when they would prefer otherwise is to be close to the jobs. This strongly suggests that YIMBY will end up resulting less in skyscrapering the cities and more in multiplexing the burbs.
Outside of a handful of cities with extremely harsh geographic constraints (e.g. NYC, SF), upzoning the burbs will likely eat into the city cores more than new folks will move to the city cores.
Of course there is always the immigration question. With enough immigration, even the cities will fill (i.e. both NYC and SF are already more than a third foreign born), but if we confine ourselves to current residents they want out and they want a short commute.
Here is the link, via Naveen K.
Don’t Let the FDA Regulate Lab Tests!
I have been warning about the FDA’s power grab over lab developed tests. Lab developed tests have never been FDA regulated except briefly during the pandemic emergency when such regulation led to catastrophic consequences. Catastrophic consequences that had been predicted in advanced by Paul Clement and Lawrence Tribe. Despite this, for reasons I do not understand, the FDA plan is marching forward but many other people are starting to warn of dire consequences. Here, for example, is the executive summary from a letter by ARUP Laboratories, a non-profit enterprise of the University of Utah Department of Pathology:
ARUP urges the FDA to withdraw the proposed rule:
- The FDA proposal will reduce, an in many cases eliminate, access to safe and essential testing services, particularly for patients with rare diseases.
- Laboratory-developed tests are not devices as defined by the Medical Device Amendments of 1976, nor are clinical laboratories acting as manufacturers.
- The FDA does not have the statutory authority to regulate laboratory-developed tests.
- The FDA does not have the authority to regulate states, or state-owned entities. This is particularly relevant for the proposed rule regarding academic medical centers.
- The FDA’s regulatory impact analysis is flawed in its design, source information, methods. and conclusions, and it systematically overestimates purported benefits of the proposed rule and dramatically underestimates its cost to society, the healthcare industry, and the ability to provide ongoing essential laboratory services to patients.
- The proposed rule would significantly limit the ability of clinical laboratories to respond quickly to future pandemic, chemical, and/or radiologic public health threats.
- The proposed rule would not be easily implementable, and it would create an insurmountable backlog of submissions that would hinder diagnostic innovation.
- The proposed rule limits the practice of laboratory medicine.
- The FDA has not evaluated less restrictive, easily administered alternatives, such as CLIA reform. This is particularly relevant for common test modifications used in most hospital and academic medical center settings.”
Here is the American Hospital Association:
…we strongly believe that the FDA should not apply its device regulations to hospital and health system LDTs. These tests are not devices; rather, they are diagnostic tools developed and used in the context of patient care. As such, regulating them using the device regulatory framework would have an unquestionably negative impact on patients’ access to essential testing. It would also disrupt medical innovation in a field demonstrating tremendous benefits to patients and providers.
Here is Mass General Brigham, a non-profit hospital system, affiliated with Harvard, and the largest hospital-based research enterprise in the United States:
…we are concerned with the heavy regulatory burden of this proposal. In implementing any regulatory structure, policymakers must consider if the benefits outweigh the costs. Given that FDA predicts 50 percent of tests would require premarket review, and 5 percent will require premarket approval, we have serious concerns that the costs may outweigh the benefits. Given that many LDTs are hospital-based and will never be commercialized, hospitals will have little incentive or ability to develop future LDTs under this proposed rule as they will have little to no opportunity to offset the costs associated with these new regulatory requirements. We are concerned that the regulatory burden could have significant implications on responsible innovation especially for LDTs targeting rare conditions, or public health emergencies.
Two U.S. public lab directors personally reached out to me to ask me amplify the warning. Consider it amplified!
Today is the last day for public comment. Get your comments in!
YIMBY for commercial real estate
That is the topic of my latest Bloomberg column, here are some bottom line results:
What would “Yes in My Backyard” even mean in the context of commercial real estate?
A new economic research paper offers a hint of an answer: Most likely, there would be taller buildings, more mixed-use neighborhoods and considerably more wealth.
One way to approach this question is to look at less regulated cities. According to one widely used index, the least regulated metro area in the US is Midland, Texas. Midland isn’t particularly large or well-known, with a population of about 132,000, yet one of its nicknames is the “Tall City” because of its downtown skyline. When there is freedom to build, going vertical often is most cost-effective…
The research paper estimates the total social gains if every US city deregulated to the level of Midland, including the evening out of regulations within each city. The gains are strikingly large (though with some caveats): National output would rise by between 3% and 6%, and the gains in well-being would be in the range of 3% to 9% of lifetime consumption. Think of it as Americans getting a lifetime raise of at least 3%.
And:
Another caveat is that the data behind these estimates is based on 2018 numbers, when a little more than 5% of the work force worked from home. Under one more recent estimate, 12.7% of all full-time employees work fully from home. (Hybrid work is more common yet, but that typically still requires office space.)
So the researchers ran their model again, this time assuming that 40% of workers were at home full-time. They still found a 1.5% output gain. Of course, given that the US is not currently close to 40% work from home, the actual gains from commercial real estate deregulation, circa 2023, lie somewhere between 1.5% and the larger numbers — the 3% to 6% output boost — I cited earlier. The researchers suggest that the gains from deregulation are almost linear in the share of workers who need offices, so the larger measured gains should be closer to the truth.
Here is the underlying research by Fil Babalievsky, Kyle F. Herkenhoff, Lee E. Ohanian, and Edward C. Prescott.