Category: Law
Does Britain Have High or Low State Capacity?
Tim Harford writing at the FT covers the question “Is it even possible to prepare for a pandemic?” drawing on my paper with Tucker Omberg.
[I]n an unsettling study published late last year, the economists Robert Tucker Omberg and Alex Tabarrok took a more sophisticated look at this question and found that “almost no form of pandemic preparedness helped to ameliorate or shorten the pandemic”. This was true whether one looked at indicators of medical preparedness, or softer cultural factors such as levels of individualism or trust. Some countries responded much more effectively than others, of course — but there was no foretelling which ones would rise to the challenge by looking at indicators published in 2019. One response to this counter-intuitive finding is that the GHS Index doesn’t do a good job of measuring preparedness. Yet it seemed plausible at the time and it still looks reasonable now.
…perhaps we need to take the Omberg/Tabarrok study seriously: maybe conventional preparations really won’t help much. What follows? One conclusion is that we should prepare, but in a different way….Preparing a nimble system of testing and of compensating self-isolating people would not have figured in many 2019 pandemic plans. It will now. Another form of preparation which might yet pay off is sewage monitoring, which can cost-effectively spot the resurgence of old pathogens and the appearance of new ones, and may give enough warning to stop some future pandemics before they start. And, says Tabarrok, “Vaccines, vaccines, vaccines”. The faster our systems for making, testing and producing vaccines, the better our chances; all these things can be prepared.
One thing that did seem to matter, as Tim notes, was state capacity. In other words, it’s not so much being prepared as being prepared to act. And here I have a mild disagreement with Tim. He writes:
In an ill-prepared world, the UK is often thought to have been more ill-prepared than most, perhaps because of the strains caused by austerity and the distractions of the Brexit process.
My view is that the UK got three very important things right. The UK was the first stringent authority to approve a COVID vaccine. The UK switched to first doses first and the UK produced and ran the most important therapeutics trial, the Recovery trial. Each of these decisions and programs saved the lives of tens of thousands of Britons. The Recovery trial may have saved millions of lives worldwide.
I don’t claim that Britain did everything right, or that they did all that they could have done, but these three decisions were important, bold and correct. The coexistence of both high and low state capacity within the same nation can be surprising. The United States, for example, achieved an impressive feat with Operation Warp Speed, yet simultaneously, the Centers for Disease Control and Prevention (CDC) flailed and failed. Likewise, India maintains a commendable space program and an efficient electoral system, even while struggling with tasks that seem comparatively simpler, like issuing driver’s licenses.
Instead of painting countries with a broad brush of ‘high’ or ‘low’ state capacity, we should recognize multi-dimensionality and divergence. How do political will, resources, institutional robustness, culture, and history explain capacity divergence? If we understood the reasons for capacity divergence we might be able to improve state capacity more generally. Or we might better be able to assign tasks to state or market with perhaps very different assignments depending on the country.
High Fructose Corn Syrup and the Sugar Quota
A viral tik-tok video compares the ingredients in American Heinz ketchup with those in Canadian Heinz ketchup. The American version contains high fructose corn syrup (HFCS) while the Canadian one contains sugar. An an economist I can’t tell you whether, “this is why America makes you sick” but I can tell you why the American version doesn’t contain sugar. It’s the sugar quota!
The American sugar quota taxes any imports above a small amount at a very high rate. As a result, the US price of sugar is typically about twice the world price of sugar. The higher price of sugar means that US consumers spend billions more for candy, soda and other products and American sugar farmers increase their sales and profits. But the high price also incentivizes producers of goods that need a sweet kick, including Heinz, to substitute with high fructose corn syrup. Americans are the biggest consumers of HFCS in the world.
The two effects of the higher price–raising the price of domestic sugar and causing substitution towards high fructose corn syrup–illustrate the peculiar political economy of the sugar quota. Most obviously, the sugar quota is supported by domestic sugar producers, including the infamous Fanjul brothers, but it’s also supported and indeed was lobbied for by Archer Daniels Midland the inventors of HFCS! Even though the two sides sit together uneasily, there has apparently been enough profits to go around.
India bots to the rescue
None of women in the Bangalore trial had heard of ChatGPT and some of them had given up on receiving aid after struggling with language barriers, and government officials and middlemen demanding bribes.
The Bangalore trials were led by Saurabh Karn and his team at the nonprofit OpenNyAI. By feeding a collection of millions of parallel sentences spoken in different Indian languages into machine translation software, and adding thousands of hours of dialogue for speech recognition, the bot, named Jugalbandi, offers text-to-speech multi-language translation on the fly. For instance, a rural farmer can pose a question in Haryanvi, the language spoken just outside Delhi, and the tool translates it into English, searches the database for an appropriate answer, and then translates the answer back to Haryanvi and voices it out in a human voice via Meta Platforms Inc.’s WhatsApp to the farmer…
Vijayalakshmi, who goes by a single name as is common in southern India, voiced a question to a bot in her native Kannada language on education scholarships. Moments later, a human-like voice responded to explain the government aid available to her 15-year-old son.
Here is the full story, via the excellent Samir Varma.
The Road to Socialism and Back: An Economic History of Poland, 1939–2019
For four decades during the latter half of the 20th century, Poland and its people were the subjects of a grand socio-economic experiment. Under the watchful eye of its Soviet masters, the Polish United Workers’ Party transformed the mixed economy of this nation of 35 million into a centrally planned, socialist state (albeit one with an irrepressible black market). Then, in the closing decade of the 20th century, under the leadership of Polish minister of finance Leszek Balcerowicz, the nation was transformed back into a mixed economy.
In this book, we document the results of this experiment. We show that there was a wide chasm between the lofty goals of socialist ideology and the realities of socialism as the Polish people experienced them. We also show that while the transition back from a socialist to a mixed economy was not without its own pain, it did unleash the extraordinary productive power of the Polish people, allowing their standard of living to rise at more than twice the rate of growth that prevailed during the socialist era. The experiences of the Poles, like those of so many behind the Iron Curtain, demonstrate the value of economic freedom, the immiserating consequences of its denial, and the often painful process of regaining lost freedoms.
That’s the opening to an excellent new book (pdf) from the Fraser Institute written by Boettke, Zhukov, and Mitchell. More than an economic history of Poland, this book is also a very good introduction to the economics of socialism.
Web 3.0 has a future after all
That is the theme of my latest Bloomberg column, here is one excerpt:
I fully expect the ideas behind Web 3.0 to make a major comeback — as the legal and institutional framework for AI bots. It’s worth thinking through how this might work.
Say you run a charity and want to create and distribute an AI bot that will teach mathematics to underprivileged schoolchildren. That’s great, but the bot will encounter some obstacles. In some jurisdictions, it may need to pay licensing and registration fees. It may need to purchase add-ons for recent innovations in teaching. If it operates abroad, it may wish to upgrade its ability to translate. For a variety of reasons, it might need money.
All those transactions would be easy enough if AIs were allowed to have bank accounts. But that’s unlikely anytime soon. How many banks are ready to handle this? And imagine the public outcry if there were a bank failure and the government had to bail out some bot accounts. So bots are likely to remain “unbanked” — which will push them to use crypto as their core medium of exchange.
Critics often point out that dollars are more efficient than crypto as a form of exchange. But if AI bots can’t use dollars, then they will have to use crypto. Yes, some owners might give bots access to their checking accounts, while others might want to OK every bot expenditure through the dollar-based banking system. But most people, I suspect, would rather let the bots operate on their own, without all those risks and hassles — and again, that brings us back to crypto.
There are well-known arguments for why “agentic” bots are often more efficient than “tool” bots, and they are going to need money that is consistent with a reasonable degree of bot autonomy. Furthermore, possibly for liability reasons (do you want to be indicted in some foreign country because of something your bot said or did?), many of these bots won’t be owned at all. That will be another force pushing the bots to operate in the crypto nexus.
There is much more at the link, including a discussion of NFTs as property rights in this regime. You can expect law, adjudication services, and smart contracts as well, all as substitutes for a “proper” legal system.
Air Pollution Redux
New York City today has the worst air quality in the world, so now seems like a good time for a quick redux on air pollution. Essentially, everything we have learned in the last couple of decades points to the conclusion that air pollution is worse than we thought. Air pollution increases cancer and heart disease and those are just the more obvious effects. We now also now know that it reduces IQ and impedes physical and cognitive performance on a wide variety of tasks. Air pollution is especially bad for infants, who may have life-long impacts as well as the young and the elderly. I’m not especially worried about the wildfires but the orange skies ought to make the costs of pollution more salient. As Tyler noted, one reason air pollution doesn’t get the attention that it deserves is that it’s invisible and the costs are cumulative:
Air pollution causes many deaths. But it is rare to see or read about a person dying directly from air pollution. Lung cancer and cardiac disease are frequently cited as causes of death, even though they may stem from air pollution.
That’s the bad news. The good news, hidden inside the bad news, is that the costs of air pollution on productivity are so high that there are plausible ways of reducing some air pollution and increasing health and wealth, especially in high pollution countries but likely also in the United States with well-targeted policies.
For evidence on the above, you can see some of the posts below. Tyler and I have been posting about air pollution for a long time. Tyler first said air pollution was an underrated problem in 2005 and it was still underrated in 2021!
- Why the New Pollution Literature is Credible
- Air Pollution Reduces IQ, A Lot
- Air Pollution Kills
- David Wallace-Wells with a good overview.
- A good overview of the non-health impacts of pollution.
The price discrimination culture that is Finland
A businessman in Finland has been slapped with a hefty €121,000, or $129,400, fine for speeding in a country where tickets are calculated based on income, a local paper Nya Åland reported.
Anders Wiklöf, the chairman of Wiklöf Holding AB, was driving at 82km/h, or 51mph, when he entered a zone where the speed limit was 50km/h, or 31mph, per Nya Åland.
“I had just started to slow down, but I guess it didn’t happen fast enough,” Wiklöf told Nya Åland. “I really regret the matter.”
In Finland, speeding fines are linked to the offender’s salary and the speed at which they were going when they committed the offense.
Here is the full story. Via Anecdotal.
Evidence from Italy’s ChatGPT Ban
We analyse the effects of the ban of ChatGPT, a generative pre-trained transformer chatbot, on individual productivity. We first compile data on the hourly coding output of over 8,000 professional GitHub users in Italy and other European countries to analyse the impact of the ban on individual productivity. Combining the high-frequency data with the sudden announcement of the ban in a difference-in-differences framework, we find that the output of Italian developers decreased by around 50% in the first two business days after the ban and recovered after that. Applying a synthetic control approach to daily Google search and Tor usage data shows that the ban led to a significant increase in the use of censorship bypassing tools. Our findings show that users swiftly implement strategies to bypass Internet restrictions but this adaptation activity creates short-term disruptions and hampers productivity.
That is from a recent paper by David Kreitmeir and Paul A. Raschky. Via Pradyumna Shyama Prasad.
How D.C. densified
DC’s relative success can be traced to a few decisions made decades ago. In the 1970s, policymakers in Arlington County made a decision to adopt what’s known as ‘transit-oriented development planning’ ahead of the opening of DC’s Metro Orange Line, which runs between Arlington and Prince George County, Maryland (via DC). Arlington policymakers identified that zoning for apartment construction in commercial areas could bring in property taxes and help balance the budget without the level of controversy of changing zoning in existing residential areas. Some nearby jurisdictions followed suit, learning from Arlington’s example, helping the DC region stay more affordable than the country’s other superstar cities.
Here is the full essay by Emily Hamilton of Mercatus, serving up a very good short economic history of Arlington. And this on the District:
The District itself has permitted extensive redevelopment of formerly industrial neighborhoods when they received new Metro stations, including Navy Yard and NoMA. In the years since the 2010 financial crisis, DC has permitted thousands of apartments each year, a high rate compared to peer cities. As in Arlington, they’ve primarily been permitted on land that previously housed industrial or low-value commercial development where there are few or no existing residents to oppose new construction.
Interesting throughout. I am pleased to live in the land of partial YIMBY.
That is all from the new and excellent issue of Works in Progress.
How effective was the IAEA?
Here is the Open AI call for international regulation, most of all along the lines of the International Atomic Energy Agency. I am not in general opposed to this approach, but I think it requires very strong bilateral supplements, from the United States of course. Which in turn requires U.S. supremacy in the area, as was the case with nuclear weapons. From a 564 pp. official work on the topic:
For nearly forty years after its birth in 1957 the IAEA remained essentially irrelevant to the nuclear arms race. (p.22)
There is also this:
However, in the late 1950s and early 1960s it was not the failure of the IAEA’s functions as a ‘pool’ or ‘bank’ or supplier of nuclear material that inflicted the most serious blow on the organization, on its safeguards operation and eventually on Cole himself. For a variety of reasons, the Agency’s chief patron, the USA, chose to arrange nuclear supplies bilaterally rather than through the IAEA. One reason was that the IAEA had been unable to develop an effective safeguards system. Another was that in a bilateral arrangement it was the US Administration, under the watchful eyes of Congress, that chose the bilateral partner rather than leaving the choice to an international organization that would have to respond to the needs of any Member State whatever its political system, persuasion or alliance. But the most serious setback came in 1958 when, for overriding political reasons, the USA chose the bilateral route in accepting the safeguards of EURATOM as equivalent to — in other words as an acceptable substitute for — those of the IAEA.
It is frequently suggested that the IAEA has been partially captured by the nuclear sector itself. I do not consider that bad news, but it is a sobering thought for those expecting too much from this approach. Do note that it took years to set up the agency, and furthermore when North Korea wanted to acquire nuclear weapons the country simply left the agency and broke its earlier agreement. Perhaps the greatest gain from this approach is that the non-crazy nations have a systematic multilateral framework to work within, should they decide to defer to the external, bilateral pressure from the United States?
On the other side, my fear is that the international agreement will lead to excess regulation at the domestic level.
There is also this:
The fact that Iraq’s nuclear weapon programme had been under way for several years, perhaps a decade, without being detected by the IAEA, led to sharp criticism of the Agency and posed the most serious threat to the credibility of its safeguards since they had first been applied some 30 years earlier.
All of these issues could use much more intelligent discussion.
Attack monopoly power with deregulation
One recent study shows just how important regulation is in contributing to monopoly. Since 1970, increased regulation can explain 31% to 37% of the subsequent increase in market power.
Upon reflection, it is obvious that larger firms are better able to deal with regulatory burdens. They have more employees, bigger legal departments and are better suited to deal with governments. Startups are generally leaner and more nimble, but these aren’t necessarily advantages in dealing with Washington or state and local agencies. As regulatory costs rise, the comparative advantage shifts to the larger firms — exacerbating market power problems…
According to researcher Shikhar Singla, regulation costs an average of $9,093 per employee for a typical small firm, compared to $5,246 for a large firm. It is no surprise that, according to the data, smaller firms invest relatively less in more highly regulated areas.
Based on a study of regulatory comments, Singla also found that large firms oppose regulation in general, but push for regulation when such rules and laws damage the interests of smaller firms. Singla also finds that regulatory costs have increased significantly since the late 1990s.
Here is the full Bloomberg column.
Mexico fact of the day
In 2022 almost double the number of Mexicans reported having money extorted than did five years before (see chart). Only a tiny minority report.
From The Economist, here is more:
The big money comes, however, from “taxing” businesses in sectors such as agriculture and mining. Avocados, Mexico’s “green gold”, are a good example. The country provides almost a third of global supply, most of which is grown in the western state of Michoacán. The $3bn-worth of them exported every year to the United States is a huge source of income for the producers and also for gangs. For the past three years Erick Rodríguez, a farmer, has paid an annual “fee” of 10,000 pesos ($560) per hectare to Familia Michoacana, a local criminal group. Mr Rodríguez (not his real name) says the gang comes with data about the size of his farm and tells him to hold back stock to push up prices. Ms Felbab-Brown’s fieldwork in Mexico shows how gangs also force fishermen to sell their catch at a cut price, which they then sell for a profit to restaurants. They also dictate the terms of when and what they can fish.
I suppose the optimistic take is that if this ever can be stopped, Mexican economic growth will be especially high?
Immigration and falling fertility rates
That is the topic of my latest Bloomberg column, here is one excerpt:
Some countries can be expected to keep their relatively restrictionist immigration policies. But in these countries, the population will become smaller and smaller while taxes on the young will get higher and higher, in part to pay for the retirements and health care of the elderly. The high taxes will in turn lower living standards, and that may depress fertility further yet.
A less obvious problem is that once nations enter the lower-population-higher-tax cycle, it may be very difficult for them to attract new migrants. If you were thinking of leaving your country, would you rather go to a wealthy country with higher tax rates, or one with lower tax rates? Especially if the country with higher taxes has a long tradition of not welcoming migrants, and you would be less likely to find any expatriates there? Besides which, due to their aging population, those countries may simply be boring, at least for young people.
The danger is that countries with more restrictionist immigration policies will get locked into low-migration outcomes for the foreseeable future, whether they like it or not.
Recommended.
The FDA Still Doesn’t Trust Women
The FDA has a long history of antipathy towards personal testing. The FDA has opposed personal pregnancy tests, HIV tests, genetic tests, and COVID tests, as I discussed in my article Testing Freedom. Well, the FDA is at it again:
NYTimes: At a hearing Tuesday to consider whether the Food and Drug Administration should authorize the country’s first over-the-counter birth control pill, a panel of independent medical experts advising the agency was left to reckon with two contradictory analyses of the medication called Opill.
During the eight-hour session, the manufacturer of the pill, HRA Pharma, which is owned by Perrigo, and representatives of many medical organizations and reproductive health specialists said that data strongly supported approval. They said that Opill, approved as a prescription drug 50 years ago, was safe, effective and easy for women of all ages to use appropriately — and that over-the-counter availability was sorely needed to lower the country’s high rate of unintended pregnancies.
In contrast, F.D.A. scientists questioned the reliability of company data that was intended to show that consumers would take the pill at roughly the same time every day and comply with directions to abstain from sex or temporarily use other birth control if they missed a dose. The agency seemed especially concerned about whether women with breast cancer or unexplained vaginal bleeding would correctly choose not to take Opill and whether adolescents and people with limited literacy would use it accurately.
Note carefully: The FDA isn’t worried that women won’t take the pill at the same time every day they are worried that women who get the pill without a prescription won’t take it at the same time every day. I guess in the FDA’s view women need some mansplaining to take birth control or at least some doctorplaining.
Dr. Westhoff suggested that for most women, there is no advantage to a doctor prescribing the pills because doctors don’t typically monitor patient adherence and often only see such patients once a year.
Similarly, I suspect that women with breast cancer will be concerned enough about their health to read the warning, Don’t Take This Pill if You Have Breast Cancer. Who knows, women with breast cancer might even ask their cancer physician or Google or their GP(T) about what foods and drugs to take and which to avoid.
If I didn’t know the FDA’s long history of opposing personal testing, I would think this simply bizarre but not trusting people with their own health decisions is practically in the FDA’s DNA.
Private ownership sentences to ponder
Anyone keen to understand how should look at Brookfield Renewable Partners’ recent investment of up to $2 billion in Scout Clean Energy and Standard Solar. B.R.P. is a vehicle of Brookfield Asset Management, a leading global asset management firm, with around $800 billion of assets under management, and it purchased two American developers and owner-operators of wind and solar power-generating facilities. This took place six weeks after President Biden signed the I.R.A. into law.
The I.R.A. will help accelerate the growing private ownership of U.S. infrastructure and, in particular, its concentration among a handful of global asset managers like Brookfield. This is taking the United States into risky territory. The consequences for the public at large, whose well-being depends on the quality and cost of a host of infrastructure-based services, from energy to transportation, are unlikely to be positive.
A common belief about both the I.R.A. and 2021’s Infrastructure Investment and Jobs Act, President Biden’s other key legislation for infrastructure investment, is that they represent a renewal of President Franklin Roosevelt’s New Deal infrastructure programs of the 1930s. This is wrong. The signature feature of the New Deal was public ownership: Even as private firms carried out many of the tens of thousands of construction projects, almost all of the new infrastructure was funded and owned publicly. These were public works. Public ownership of major infrastructure has been an American mainstay ever since…
So it would be truer to say that in political-economic terms, Mr. Biden, far from assuming Roosevelt’s mantle, has actually been dismantling the Rooseveltian legacy. The upshot will be a wholesale transformation of the national landscape of infrastructure ownership and associated service delivery.
That is from Brett Christophers (NYT), who is disapproving. For an alternative view, see this WSJ Op-Ed by Katherine Boyle and David Ulevitch.