Category: Law

On a land tax, from the comments

by  Tyler Cowen in

A land tax in its purest form will never survive contact with political reality. To implement it you have to tell people that own their own homes that they are in fact renting them from the government, and at rates which depend on how much other people covet their land. This may be economically incorrect but it is how opposition will play out.

Furthermore, determining land values as distinct from property values in highly built-up areas with strong planning constraints (e.g. the UK) is an exercise in guesswork. You cannot realistically disentangle the value of the land from the actual and likely permissions on that land. The valuation process will be intensely political, prone to corruption, and any modelling easily manipulated by how exemplars are chosen. In the UK at least it would be a bloodbath.

That is from Sonofid.  And from dan1111:

So much hand wringing over NYC and San Francisco, and treating this as the standard “urban” case.

Meanwhile, 90% of US cities feature depressed urban cores with very cheap, under-used land. Maybe figuring out how to make more US cities desirable is the low hanging fruit? And there is plenty of comparative study that can be done, since some cities have been better at rebounding than others.

My Conversation with Glenn Loury

by  Tyler Cowen in

Moving throughout, here is the audio, video, and transcript.  Here is part of the summary:

Economist and public intellectual Glenn Loury joined Tyler to discuss the soundtrack of Glenn’s life, Glenn’s early career in theoretical economics, his favorite Thomas Schelling story, the best place to raise a family in the US, the seeming worsening mental health issues among undergraduates, what he learned about himself while writing his memoir, what his right-wing fans most misunderstand about race, the key difference he has with John McWhorter, his evolving relationship with Christianity, the lasting influence of his late wife, his favorite novels and movies, how well he thinks he will face death, and more.

Here is one excerpt:

COWEN: What’s your favorite Thomas Schelling story?

LOURY: [laughs] This is a story about me as much as it is about Tom Schelling. The year is 1984. I’ve been at Harvard for two years. I’m appointed a professor of economics and of Afro-American studies, and I’m having a crisis of confidence, thinking I’m never going to write another paper worth reading again.

Tom is a friend. He helped to recruit me because he was on the committee that Henry Rosovsky, the famous and powerful dean of the college of the Faculty of Arts and Sciences at Harvard, who hired me — the committee that Rosovsky put together to try to find someone who could fill the position that I was hired into: professor of economics and of Afro-American Studies. They said Afro-American in those years.

Tom was my connection. He’s the guy who called me up when I was sitting at Michigan in Ann Arbor in early ’82, and said, “Do you think you might be interested in a job out here?” He had helped to recruit me.

So, I had this crisis of confidence. “Am I ever going to write another paper? I’m never going to write another paper.” I’m saying this to Tom, and he’s sitting, sober, listening, nodding, and suddenly starts laughing, and he can’t stop, and the laughing becomes uncontrollable. I am completely flummoxed by this. What the hell is he laughing at? What’s so funny? I just told him something I wouldn’t even tell my wife, which is, I was afraid I was a failure, that it was an imposter syndrome situation, that I could never measure up.

Everybody in the faculty meeting at Harvard’s economics department in 1982 was famous. Everybody. I was six years out of graduate school, and I didn’t know if I could fit in. He’s laughing, and I couldn’t get it. After a while, he regains his composure, and he says, “You think you’re the only one? This place is full of neurotics hiding behind their secretaries and their 10-foot oak doors, fearing the dreaded question, ‘What have you done for me lately?’ Why don’t you just put your head down and do your work? Believe me, everything will be okay.” That was Tom Schelling.

COWEN: He was great. I still miss him.

And the final question:

COWEN: Very last question. Do you think you will do a good job facing death?

Interesting and revealing throughout.

This is actually quite a common attitude toward science

by  Tyler Cowen in

On Christmas morning, Scarlett Doumato took a break from playing with her new toys, marched into the kitchen, returned with plastic bags and started collecting evidence — the half-eaten Oreo and a pair of munched-on carrots she’d left for Santa and his reindeer the night before.

Scarlett, a 10-year-old from Cumberland, R.I., could see teeth marks in both. But neither she nor her parents could prove that the person who ate the cookie was Santa or that the reindeer were the ones that chomped on the baby carrots.

Scarlett decided to call for backup.

A few days later, the fourth-grader sent the evidence she’d collected to local police with a letter explaining her investigative methodology and what she was trying to find out: “Dear Cumberland Police department, I took a sample of a cookie and carrots that I left for Santa and the raindeer on christmas eve and was wondering if you could take a sample of DNA and see if Santa is real?”

Here is the full story by Jonathan Edwards, via the excellent Kevin Lewis.

The medical culture that is Britain

by  Tyler Cowen in

Universities have been told they must limit the number of medical school places this year or risk fines, a move attacked as “extraordinary” when the NHS is struggling with staff shortages.

Medical schools have been told to curtail offers to ensure that there is “no risk” of them accepting more would-be doctors than permitted by a government cap, with universities saying they are likely to offer fewer places than normal to sixth-formers this year.

Ministers have been criticised for holding firm to a 7,500 cap on new medical students in England while also acknowledging that a chronic shortage of doctors and nurses is contributing to long delays for NHS treatment.

Robert Halfon, the universities minister, wrote to vice-chancellors last week telling them to limit their offers to sixth-formers, causing frustration among universities, which face fines of £100,000 per student for persistent over-recruitment. Universities say that in the summer, they were forced to reject students for administrative reasons such as submitting vaccine certificates late to stay within permitted numbers.

Here is more from the Times of London (gated).  Perhaps Tyrone approves!

The wisdom of Alex Tabarrok

by  Tyler Cowen in

This will in relative terms help the larger, better established researchers, right?  And how will it handle GDPR, the right to be forgotten, data storage under EU law, and so on?  What is the chance this has all been thought through properly?

The economics of non-competes

by  Tyler Cowen in

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

The value of noncompete clauses is easy to illustrate. Say you run a hedge fund. Many members of your trading team will have partial access to your firm’s trading secrets, and if they leave they can take those secrets with them. In the absence of noncompete agreements, firms would be more likely to “silo” information — becoming less efficient and less able to pay higher wages.

Nondisclosure agreements for workers in such positions are common, but they are difficult to enforce — making noncompete agreements more relevant. How exactly might you find out if some other newly created hedge fund is using your trading algorithms?

Or say you are a sales company with a customer list, or a nonprofit with a donor list. An employee who sees those lists could use that information to start a competing business, or take that information to competitors. It seems reasonable in such cases to restrict the ability of employees to “jump ship.”

If noncompetes are banned outright, to repeat, the effect will be less information-sharing within the company. New workers in particular, who have not demonstrated their long-term loyalty, will have a hard time getting access to information and getting ahead. More senior employees will have the advantage, hardly a formula for boosting economic opportunity.

I call for federalism and piecemeal regulation of the practice, not the all-out federal ban proposed by Lina Khan’s once again overreaching FTC.

Testing Freedom

by  Alex Tabarrok in

In the latest Discourse Magazine I discuss the FDA’s long-standing fear and antipathy toward personalized medical tests and how this violates the 1st Amendment.

In 1972, the FDA confiscated thousands of home pregnancy tests, declaring that they were “drugs” meant to diagnose a “disease” and thus fell under the FDA’s regulatory dominion. The case went to the U.S. District Court for the District of New Jersey, and Judge Vincent P. Biunno ruled that the FDA had overstepped. “Pregnancy,” he said, “is a normal physiological function of all mammals and cannot be considered a disease … a test for pregnancy, then, is not a test for the diagnosis of disease. It is no more than a test for news….” As a result of Judge Biunno’s ruling, home pregnancy tests are easily available today from pharmacies, grocery stores and online shops without a prescription.

These days, debates over home pregnancy tests from the 1970s seem anachronistic and paternalistic. Yet the same paternalistic arguments appear again and again with every new testing technology. In the late 1980s, for example, the FDA simply declared that it would not approve at-home HIV tests, regardless of their safety or efficacy. As with pregnancy tests, the concern was that people could not be trusted with information about their own bodies…the first rapid at-home HIV test was developed and submitted to the FDA in 1987 [but] it took 25 years before the FDA would approve these tests. (Now, you can easily buy such a test on Amazon.)

…The FDA has a vital role in ensuring that tests are clinically accurate—tests should do what they say they do. Tests don’t need to be perfectly accurate to be useful (think of thermometers, personality tests and tire pressure gauges), but if a test advertises that it measures HDL cholesterol, it should do that within the tolerances the firm promises. The FDA has the technical knowledge to ensure that tests work, and that’s a skill that Americans value from the agency.

What Americans don’t want is to be told they can’t handle the truth. Yet when it came to at-home tests such as pregnancy tests, HIV tests and genetic tests, that’s exactly the reasoning the FDA used—and continues to use—to suppress information. The FDA should ensure that tests are safe, but “safety” means physical safety. The FDA may not declare a product unsafe because it might produce dangerous knowledge. Patients have a right to know about their own bodies. Our antibodies, ourselves. The FDA has authority over drugs and devices but not over patients.

Judge Biunno had it right back in 1972 when he said that diagnostic tests produce “news.” Test results, therefore, are a type of speech that fall under the First Amendment right to freedom of speech. The Supreme Court has repeatedly rejected restrictions on freedom of speech based on “a fear that people would make bad decisions if given truthful information”; thus, FDA restrictions on tests based on such fears are unconstitutional. The question of whether consumers will respond “safely” to test results is no more relevant to the FDA’s regulatory authority than the question of whether readers will respond safely to political news published in The New York Times. The FDA does not have the constitutional authority to regulate news.

Why did the gender wage gap stop narrowing?

by  Tyler Cowen in

During the 1980s, the wage gap between white women and white men in the US declined by approximately 1 percentage point per year. In the decades since, the rate of gender wage convergence has stalled to less than one-third of its previous value. An outstanding puzzle in economics is “why did gender wage convergence in the US stall?” Using an event study design that exploits the timing of state and federal family-leave policies, we show that the introduction of the policies can explain 94% of the reduction in the rate of gender wage convergence that is unaccounted for after controlling for changes in observable characteristics of workers. If gender wage convergence had continued at the pre-family leave rate, wage parity between white women and white men would have been achieved as early as 2017.

That is from a new NBER working paper by Peter Q. Blair and Benjamin Posmanick.  Might the gender wage gap be one economics topic where a naive, mood-affiliated view on it best predicts a bunch of other bad views on totally separate topics?

How much did pre-ACA Medicaid expansions matter?

by  Tyler Cowen in

This paper examines the impact of Medicaid expansions to parents and childless adults on adult mortality. Specifically, we evaluate the long-run effects of eight state Medicaid expansions from 1994 through 2005 on all-cause, healthcare-amenable, non-healthcare-amenable, and HIV-related mortality rates using state-level data. We utilize the synthetic control method to estimate effects for each treated state separately and the generalized synthetic control method to estimate average effects across all treated states. Using a 5% significance level, we find no evidence that Medicaid expansions affect any of the outcomes in any of the treated states or all of them combined. Moreover, there is no clear pattern in the signs of the estimated treatment effects. These findings imply that evidence that pre-ACA Medicaid expansions to adults saved lives is not as clear as previously suggested.

That is a new NBER working paper from Charles J. Courtemanche, Jordan W. Jones, Antonios M. Koumpias, and Daniela Zapata.

Here are some relevant pictures.  Now, would you expect subsequent Medicaid expansions to have higher, lower, or the same marginal value?

Do pay transparency laws raise wages?

by  Tyler Cowen in

It seems not:

Labour advocates champion pay-transparency laws on the grounds that they will narrow pay disparities. But research suggests that this is achieved not by boosting the wages of lower-paid workers but by curbing the wages of higher-paid ones. A forthcoming paper by economists at the University of Toronto and Princeton University estimates that Canadian salary-disclosure laws implemented between 1996 and 2016 narrowed the gender pay gap of university professors by 20-30%. But there is also evidence that they lower salaries, on average. Another paper by professors at Chapel Hill, Cornell and Columbia University found that a Danish pay-transparency law adopted in 2006 shrank the gender pay gap by 13%, but only because it curbed the wages of male employees. Studies of Britain’s gender-pay-gap law, which was implemented in 2018, have reached similar conclusions.

Another misconception about pay-transparency laws is that they strengthen the bargaining power of workers. A recent paper by Zoe Cullen of Harvard Business School and Bobby Pakzad-Hurson of Brown University analysed the effects of 13 state laws passed between 2004 and 2016 that were designed to protect the right of workers to ask about the salaries of their co-workers. The authors found that the laws were associated with a 2% drop in wages, an outcome which the authors attribute to reduced bargaining power. “Although the idea of pay transparency is to give workers the ability to renegotiate away pay discrepancies, it actually shifts the bargaining power from the workers to the employer,” says Mr Pakzad-Hurson. “So wages are more equal,” explains Ms Cullen, “but they’re also lower.”

Here is more from The Economist.

How long does a Roman emperor last for?

by  Tyler Cowen in

Of the 69 rulers of the unified Roman Empire, from Augustus (d. 14 CE) to Theodosius (d. 395 CE), 62% suffered violent death. This has been known for a while, if not quantitatively at least qualitatively. What is not known, however, and has never been examined is the time-to-violent-death of Roman emperors. This work adopts the statistical tools of survival data analysis to an unlikely population, Roman emperors, and it examines a particular event in their rule, not unlike the focus of reliability engineering, but instead of their time-to-failure, their time-to-violent-death. We investigate the temporal signature of this seemingly haphazardous stochastic process that is the violent death of a Roman emperor, and we examine whether there is some structure underlying the randomness in this process or not. Nonparametric and parametric results show that: (i) emperors faced a significantly high risk of violent death in the first year of their rule, which is reminiscent of infant mortality in reliability engineering; (ii) their risk of violent death further increased after 12 years, which is reminiscent of wear-out period in reliability engineering; (iii) their failure rate displayed a bathtub-like curve, similar to that of a host of mechanical engineering items and electronic components. Results also showed that the stochastic process underlying the violent deaths of emperors is remarkably well captured by a (mixture) Weibull distribution.

That is from a new paper by Joseph Homer Saleh.  Via Patrick Moloney.  And here are new results on why Roman concrete was so much more durable than the emperors.

Beware the dangers of crypto regulation

by  Tyler Cowen in

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

No matter how strong the temptation, we should not overregulate.

Begin with two central facts. First, there are numerous ways for small and large investors to lose their money, including by investing in risky equities. Regulating crypto won’t end that danger. Second, despite being one of the largest financial frauds in history, FTX has not created systemic financial risk, which should be the main concern of regulators. And market forces already have made the risk from crypto much smaller: At the peak of crypto values in late 2021, crypto assets had a total value of about $2 trillion; as of this writing, that figure is about $845 billion.

And:

Crypto regulation is not easy to do well. If crypto institutions are treated like regular depository institutions, requiring heavy layers of capital and lots of legal staffing, crypto innovation is likely to dwindle. Such innovation has been more the province of eccentric geniuses than of mainstream regulated institutions. It is hard to imagine Satoshi Nakamoto or Vitalik Buterin at Goldman Sachs.

And what exactly should be the goal of crypto regulation? To make stablecoins truly stable in nominal value? Is that even possible? Or to encourage market participants to see those assets as inherently fluctuating in value?

Neither academic research nor market experience offers clear answers. With systemic risk currently low, perhaps it is better to wait and learn more before moving ahead with regulation. And on a purely practical level, very few members of Congress (or their staff members) have a good working knowledge of crypto and all of its current wrinkles and innovations.

There is much more of value at the link.