Category: Law

Three myths about federal regulation

By Patrick A. McLaughlin and Casey Mulligan, Patrick of course being from GMU/Mercatus:

Despite evidence to the contrary, three common myths persist about federal regulations. The first myth is that many regulations concern the environment, but in fact only a small minority of regulations are environmental. The second myth is that most regulations contain quantitative estimates of costs or benefits. However, these quantitative estimates appear rarely in published rules, contradicting the impression given by executive orders and Office of Management and Budget guidance, which require cost-benefit analysis (CBA) and clearly articulate sound economic principles for conducting CBA. Environmental rules have relatively higher-quality CBAs, at least by the low standards of other federal rules. The third myth, which is particularly relevant to the historic regulations promulgated during the COVID-19 pandemic, is the misperception that regulatory costs are primarily clerical, rather than opportunity or resource costs. If technocrats have triumphed in the regulatory arena, their victory has not been earned by the merits of their analysis.

Here is the link to the NBER working paper.

Rewatching *Dirty Harry* (no real spoilers)

Released in 1971, as usual with San Francisco movies one can see the reach of NIMBY — the city doesn’t look much larger or busier today.  The subtext of the film is that law and order is collapsing, yet San Francisco was far cleaner back then and street harassment never is presented as a risk.  Even the red light district of 1971 seemed better kept than many of the nicer parts circa 2020.

You can see how much the debate has shifted from “how the police treat the guilty” to “how the police treat the innocent.”

It is startling to see actual San Francisco children in the movie — they did not seem to be hired extras.

Yana was shocked that Clint Eastwood did not direct the movie, I was amazed when he started directing.

Overall it held up remarkably well I thought.  Virtually every scene is good, and its ability to offend both sides (and indeed other sides too) remains evident.

The Japan model

So what is the Japan model? First, it is a cluster-based approach, derived from a hypothesis obtained from an epidemiological study based on Chinese data and conducted on the Diamond Princess cruise ship that entered the port of Yokohama on February 3, 2020. This hypothesis accounts for the many passengers who were not infected with the coronavirus despite having had close contact with infected persons. It posits that the explosive increase in infected persons is a result of the high transmissibility of certain infected individuals, which forms a cluster. Infected individuals with even higher transmissibility appear from these clusters to form more clusters and infect many others. Based on this hypothesis, under the cluster-based approach, each cluster is tracked to the original infection source and persons with high transmissibility are isolated to prevent the spread of infection. For this reason, pinpoint testing is carried out and broad testing of the population is not required, in contrast to the approaches taken in other counties.

This cluster-based approach is conditioned on an environment in which there are only a few infected persons and clusters are detectable at an early stage. In February 2020, when the spread of infection was observed in Hokkaido, a cluster-based approach was adopted. As a result, Hokkaido was successfully able to contain its outbreak.

For the cluster-based approach to be effective, protective measures at airports and ports are important. Hokkaido has the advantage of being an island, making it comparatively easy to control the inflow of infected people. Behavioral changes are also required. On February 28, 2020, acting without legal basis, Hokkaido Governor Naomichi Suzuki declared a state of emergency and called on residents to refrain from going outside. Residents took the call seriously, and are responsible for the success of the cluster-based approach. Following its success in Hokkaido, the cluster-based approach was adopted nationally. On February 25, 2020, a Cluster Response Team was established in the Ministry of Health, Labour and Welfare.

Here is more from Kazuto Suzuki, with other points of note.

The economics of Covid-19 liability

The more you are interested in test, track, and trace, the more you should favor at least partial liability waivers for business, at least that is how I see it.  Here is an excerpt from a new paper by Daniel Jacob Hemel and Daniel B. Rodriguez:

Ex ante (before an exposure), the specter of liability generates incentives for businesses to take precautions that reduce the risk of virus transmission. Ex post (after an exposure), fear of liability may deter businesses from proactively informing customers and workers that they have been exposed to the virus through the business’s operations. The desire on the part of businesses to spare themselves from litigation may interfere with comprehensive contact-tracing efforts. To minimize the potentially perverse ex-post consequences of liability without sacrificing significant ex-ante benefits, the article proposes a limited safe harbor from liability for businesses that promptly contact customers and workers after learning about a possible exposure.

Again, here is my short liability study with Trace Mitchell of Mercatus.

My (second) Conversation with Paul Romer

Interesting throughout, here is the audio and transcript.  Here is the summary:

Paul Romer makes his second appearance to discuss the failings of economics, how his mass testing plan for COVID-19 would work, what aspect of epidemiology concern him, how the FDA is slowing a better response, his ideas for reopening schools and Major League Baseball, where he agrees with Weyl’s test plan, why charter cities need a new name, what went wrong with Honduras, the development trajectory for sub-Saharan Africa, how he’d reform the World Bank, the underrated benefits of a culture of science, his heartening takeaway about human nature from his experience at Burning Man, and more.

I liked the parts about charter cities and the World Bank the best, here is one excerpt:

COWEN: How optimistic are you more generally about the developmental trajectory for sub-Saharan Africa?

ROMER: There’s a saying I picked up from Gordon Brown, that in establishing the rule of law, the first five centuries are always the hardest. I think some parts of this development process are just very slow. If you look around the world, all the efforts since World War II that’s gone into trying to build strong, effective states, to establish the rule of law in a functioning state, I think the external investments in building states have yielded very little.

So we need to think about ways to transfer the functioning of existing states rather than just build them from scratch in existing places. That’s a lot of the impetus behind this charter cities idea. It’s both — you select people coming in who have a particular set of norms that then become the dominant norms in this new place, but you also protect those norms by certain kinds of administrative structures, state functions that reinforce them.

And this:

COWEN: If you could reform the World Bank, what would you do?

ROMER: Oh, that’s an interesting question. I think the Bank is trying to serve two missions, and it can’t do both. One is a diplomatic function, which I think is very important. The World Bank is a place where somebody who represents the government of China and somebody who represents the government of the United States sit in a conference room and argue, “Should we do A or B?” Not just argue, but discuss, negotiate. On a regular basis, they make decisions.

And it isn’t just China and the US. It’s a bunch of countries. I think it’s very good for personal relationships, for the careers of people who will go on to have other positions in these governments, to have that kind of experience of, basically, diplomatic negotiation over a bunch of relatively small items because it’s a confidence-building measure that makes it possible for countries to make bigger diplomatic decisions when they have to.

That, I think, is the value of the World Bank right now. The problem is that that diplomatic function is inconsistent with the function of being a provider of scientific insight. The scientific endeavor has to be committed to truth, no matter whose feathers get ruffled. There’s certain convenient fictions that are required for diplomacy to work. You start accepting convenient fictions in science, and science is just dead.

So the Bank’s got to decide: is it engaged in diplomacy or science? I think the diplomacy is its unique comparative advantage. Therefore, I think it’s got to get out of the scientific business. It should just outsource its research. It shouldn’t try and be a research organization, and it should just be transparent about what it can be good at and is good at.

And toward the end:

COWEN: Last question thread, what did you learn at Burning Man?

ROMER: Sometimes physical presence is necessary to appreciate something like scale. The scale of everything at Burning Man was just totally unexpected, a total surprise for me, even having looked at all of these pictures and so forth. That was one.

Another thing that really stood out, which is not exactly a surprise, but maybe it was the surprise in that group — if you ask, what do people do if you put them in a setting where there’s supposed to be no compensation, no quid pro quo, and you just give them a chance to be there for a week. What do they do?

They work.

For purposes of contrast, here is my first Conversation with Paul Romer.

Early distancing can be very potent

Finally a rainfall paper that perhaps you can believe in!?:

We test whether earlier social distancing affects the progression of a local COVID-19 out-break. We exploit county-level rainfall on the last weekend before statewide lockdown. After controlling for state fixed-effects, temperature, and historical rainfall, current rainfall is a plausibly exogenous instrument for social distancing. Early distancing causes a reduction in cases and deaths that persists for weeks. The effect is driven by a reduction in the chance of a very large outbreak. The result suggests early distancing may have sizable returns, and that random events early in an outbreak can have persistent effects on its course.

Here is more from Rolly Kapoor, et.al.  Here is a relevant Twitter thread, via Gaurav Sood.

A charter city finally in Honduras? (from Mark Lutter)

Prospera, Honduras just launched on the island of Roatan. It is a ZEDE (Zona de Empleo y Desarollo Economico), the legacy of Paul Romer’s time in Honduras promoting charter cities. It has substantial autonomy, different taxes, different courts, different labor law, and more. It is one of the most innovative jurisdictions in the world.

First, a bit of history. The ZEDE legislation was passed in 2013. It allows for the creation of a special jurisdiction with an almost unprecedented amount of autonomy. The only recent comparison is the Dubai International Financial Center, which, as the name suggests, focuses exclusively on finance. The ZEDE legislation allows for different labor law, environmental law, business registration, dispute resolution, and more. It is more analogous to Hong Kong, or at least the Hong Kong ideal, of one country, two systems.

In 2013 and 2014 rumors swirled about ZEDE projects, including a port in the Gulf of Fonseca, but nothing materialized. I even moved to Honduras in 2014, at the time the murder capital of the world, to be closer to the action. As late as 2017, the Honduran government was saying projects were about to begin.

The ZEDE legislation is the successor to the RED (Regiones Especiales de Desarrollo) legislation, which Romer helped introduce to build charter cities. Romer had a falling out with the Honduran government in 2012. Shortly after his departure, the RED legislation was declared unconstitutional. The ZEDE legislation was passed to address the constitutional shortcomings of the RED legislation, though it also benefitted from seeing the Supreme Court judges who ruled against the RED legislation fired. To be fair, the government claims they were fired for a ruling on a police brutality case, which I am wont to believe. If there was sufficient government support behind ZEDEs to fire Supreme Court justices, it would not have taken seven years for the first ZEDE to be launched.

I worked with much of the Prospera team under the previous incarnation, NeWAY Capital (I’m not sure of the formal relationship between the two). I left around the time they pivoted to Honduras, 2.5 years ago. I was skeptical, as Honduras was the place projects went to die. Years had gone by without projects gaining meaningful traction and I expected them to run out of funding before launching. I’m happy to have been proven wrong.

Congratulations to Erick Brimen and the team. It is a lot of work to create a new jurisdiction, especially one as innovative as Prospera. The Charter Cities Institute has two team members spending approximately two thirds of their time on developing a “Governance Handbook,” a guide to the governance of a new jurisdiction. It will likely take about 9 months to complete, and that is just for the handbook, not implementation…

Residency costs $1300 annually, unless you’re Honduran, in which case it costs $260. Becoming a resident also requires signing an “Agreement of Coexistence,” a legally binding contract between Prospera and the resident. Prospera, therefore, cannot change the terms without exposing itself to legal liability. Most governments have sovereign immunity, this goes a step beyond removing that, with a contract that clearly defines the rights and obligations on both sides.

After signing the Agreement of Coexistence, all residents are required to buy general liability insurance which will ensure themselves against both civil and criminal liability. General liability insurance, as well as criminal liability insurance, has been proposed by economist Robin Hanson, among others.

That is from an email by Mark Lutter, Founder and Executive Director of the Charter Cities Institute. I thank Massimo for drawing my attention to this.

The economy that is New Brunswick (that’s Canada, not New Jersey)

Middle and high school students to process lobster after temporary foreign worker ban

With lobster processing set to begin Sunday, desperate New Brunswick seafood plants are turning to high school and even middle school students to fill the gap left by temporary foreign workers.

The decision by the Higgs government to block foreign workers amid the coronavirus pandemic has left processors in the province saying they have only about half the workforce they need, while counterparts in Nova Scotia and Prince Edward Island are ready to go “full tilt.”

“[The province] pulled the rug from under our feet,” said Russel Jacob, owner of Westmorland Fisheries in Cap Pele…

Middle school students must have permission from their parents and will make about $13 an hour.

High school students will be paid about $15 an hour.

Jacob expects they will not perform nearly as well as the experienced foreign workers.

Here is the full story, via Eric Hendry.

My initial point of course was one about the value of immigrants.  But might it also be said that a significant chunk of the rising unemployment in New Brunswick is voluntary?  Admittedly not everyone is sufficiently able-bodied to perform the work, but if junior high school students can do it…that means that many of the unemployed adults are simply unwilling to take these jobs?  Is one allowed to say that these days?  It doesn’t have to mean the government should do nothing about the broader economic crisis.

Why the FDA is banning the Gates-connected testing kits

Now we know:

An F.D.A. spokesperson said home collection kits raised additional concerns about safety and accuracy that required the agency’s review. The issue in the Seattle case appears to be that the test results are being used not only by researchers for surveillance of the virus in the community but that the results are also being returned to patients to inform them.

The two kinds of testing — surveillance and diagnostic — fall under different F.D.A. standards. In a pure surveillance study, the researchers may keep the results just for themselves. But coronavirus testing has largely revolved around getting results returned to doctors who can share the results with patients.

Here is the full NYT story, via Paul Novosad.  Just stunning.  Here is Alex’s earlier post on the episode.

The F.D.A. halts a virus testing program backed by Bill Gates

An innovative coronavirus testing program in the Seattle area — promoted by billionaire Bill Gates and local public health officials as a way of conducting wider surveillance on the invisible spread of the virus — has been ordered by the federal government to stop its work pending additional reviews.

Researchers and public health authorities already had tested thousands of samples, finding dozens of previously undetected cases in a program based on home test kits sent out to both healthy and sick people in the hope of conducting the kind of widespread monitoring that could help communities safely reopen from lockdowns.

But the research groups and the public health department of Seattle and King County, which had been operating under authorization from the state, was notified this week that it now needs approval directly from the federal government. Officials with the U.S. Food and Drug Administration directed the partnership to cease its testing and reporting until the agency grants further approval.

Here is the NYT link, ahem.

Small steps toward a much better world

After mounting criticism and thousands of deaths in New York nursing homes—including several individual facilities that have lost more than 50 residents—the state on Sunday reversed the mandate, which said nursing homes couldn’t refuse to accept patients from hospitals who had been diagnosed with Covid-19. New York now says hospitals can send patients to nursing homes only if they have tested negative for the virus.

Here is the WSJ article, via John F.

The general lesson still has yet to sink in

Apple Store’s Temperature Checks May Violate EU Privacy Rules, Says German Data Protection Office

Of course they do.  And yes, I know that is a small thing, and furthermore temperature checks may not even be effective.

The general point is this: you cannot over the longer run have a society based on such inflexible rules of adjustment.  For decades it may seem possible, due to underlying stasis, but eventually the truth will be revealed.  No single anecdote will be so convincing, and it will take a long time for the failures to pile up.  And in the meantime this will breed disrespect for the more valuable laws.

Why aren’t we talking about forcible quarantine more?

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

There has been surprisingly little debate in America about one strategy often cited as crucial for preventing and controlling the spread of Covid-19: coercive isolation and quarantine, even for mild cases. China, Singapore and South Korea separate people from their families if they test positive, typically sending them to dorms, makeshift hospitals or hotels. Vietnam and Hong Kong have gone further, sometimes isolating the close contacts of patients.

I am here to tell you that those practices are wrong, at least for the U.S. They are a form of detainment without due process, contrary to the spirit of the Constitution and, more important, to American notions of individual rights. Yes, those who test positive should have greater options for self-isolation than they currently do. But if a family wishes to stick together and care for each other, it is not the province of the government to tell them otherwise.

What I observe is people citing those other countries as successes, wishing to “score points,” but without either affirming or denying their willingness to engage in coercive quarantine.  Here is another bit:

Furthermore, all tests have false positives, not just medically but administratively (who else has experienced the government making mistakes on your tax returns?). Fortunately, current Covid-19 tests do not have a high rate of false positives. But even a 1% net false positive rate would mean — in a world where all Americans get tested — that more than 1 million innocent, non-sick Americans are forcibly detained and exposed to further Covid-19 risk.

And this:

Coercive containment was tried during one recent pandemic — in Castro’s Cuba, from 1986 to 1994, for those with HIV-AIDS. It is not generally a policy that is endorsed in polite society, and not because everyone is such an expert in Cuban public health data and epidemiological calculations. People oppose the policy because it was morally wrong.

And what about uncertainty? Is it really a safe bet that America’s quarantine policy would be executed successfully and save many lives? What if scientists are on the verge of discovering a cure or treatment that will lower the Covid-19 death rate significantly? Individual rights also protect society from the possibly disastrous consequences of its own ignorance.

Here are a few points that did not fit into the column:

1. I am not opposed to all small number, limited duration quarantine procedures, such as say holding Typhoid Mary out of socializing.  This same point also means that a society that starts coercive quarantine very early might be able to stamp out the virus by coercing relatively small numbers of people.  (It is not yet clear that the supposed successes have achieved this, by the way.)  That is very different from the “mass dragnet” to be directed against American society under current proposals.

2. I am familiar with the broad outlines of American quarantine law and past practice.  I don’t see that history as necessarily authorizing how a current proposal would have to operate, and on such a scale.  In any case, I am saying that such coercive quarantines would be wrong, not that they would be illegal.  I believe it is a genuinely open question how current courts would rule on these matters.

3. From my perch from a distance, it seems to me that Human Challenge Trials for vaccines are more controversial than is mass forced quarantine.  I could be wrong, and I would gladly pursue any leads on the current debate you might have for me.  Who are the philosophers or biomedical ethicists or legal scholars who have spoken out against such policies?

“Our regulatory state is failing us”

A number of commentators suggest that the real problem is President Trump, rich people overly concerned with tax cuts, a Republican Party with a deregulatory ideology, and so on.

Instead I have been repeating insistently that “our regulatory state is failing us.”  The FDA and CDC, for instance, have through their regulations made it harder for testing and also widespread mask supply to get off the ground.

I don’t see how you can blame (supposed) deregulatory fervor for the presence of too many regulations, as we have been observing in these instances.

I do think you can blame President Trump, along multiple dimensions, for a poor response to the pandemic, see my grades here.  (If there were a separate risk communication grade, Trump would get an F minus for that.)  Nonetheless a regulatory state cannot be said to work well if it requires such extraordinary attention from a sitting president.

It can be the case that both Trump and the permanent bureaucracy are at fault.  If something takes a long time to get done for reasons relating to preexisting rules, regulations, and laws, usually the current president is not directly at fault for that particular problem.  Was it only Trump’s fault, for instance, that the permits to build a mask factory can take months to acquire?  Or that the HHS did not respond to inquiries about gearing up mask production in Texas?  Or that a law had to be changed to allow industrial companies to sell quality masks to hospitals?  Or that so many a-legal or extra-legal activities (e.g., rich people arranging deliveries by plane, etc.) had to occur to sneak masks into this country?  That the trade barriers on masks persisted for so long? (And yes likely the Trump administration is at fault for de facto toughening restrictions on masks from China.)

It is fine to say “the buck stops here,” and to criticize Trump for not having erected processes to be more aware of these problems and to dissolve them more quickly.  I would agree with some of those criticisms, while noting the Trump administration also has tried to ease many of the regulations hampering adjustment.

This is more something on the horizon, but how do these apples make you feel?  Comforted?  The fault of plutocratic Republicans most of all?

And in both cases, vials and stoppers, a vaccine manufacturer cannot just switch to a slightly different product or another brand. They typically have to run manufacturing changes by FDA first, which could make quick supplier changes to curb shortages a difficult prospect.

The FDA can decide how flexible it will be about this type of change, says Sklamberg. The agency said in a December 2017 draft guidance that companies could note some changes in their annual reports rather than waiting for approval, but it has not finalized the policy.

The ability to switch products could be crucial as the entire world readies for a possible vaccine and vies to secure their supplies.

If you wish, consider a simple question.  When the CDC pooh-poohed masks early on, or botched their testing kit thereby delaying U.S. testing by weeks or maybe months, did the permanent staff of the CDC rise up and rebel and leak howling protests to the media, realizing that thousands of lives were at stake?  That is surely what would happen if say the current FDA announced it was going to approve thalidomide.

Those are still cases of our regulatory state failing us.

Human Challenge Trials

What if we develop a vaccine for COVID-19 but can’t find enough patients to run a randomized clinical trial? It sounds absurd, but this problem has happened in the past. Ebola was identified in 1976, and candidate vaccines were proven safe and effective in mice and primates in 2004 and 2005, respectively. But no human vaccine was produced [at that time] because it was extremely difficult, bordering on impossible, to trial an Ebola vaccine. The problem? Ebola is so deadly that people take precautionary measures long before a vaccine can be tested.

A few pieces have been written about human challenge trials, clinical trials in which healthy people are infected with a disease in order to see if a treatment or vaccine works, but most of them focus on the ethical issues. I don’t think there are serious ethical issues so writing at The National Interest I focus on why challenge trials are useful statistically and why they may even be necessary.

Even health care workers, however, have a low enough infection rate that you either need many months to determine if there is a significant effect, or you need large populations. In Italy, about 6,000 doctors were infected over two months, out of a population of about 241,000 Italian doctors. This is a monthly infection rate of 1.2 percent. If the vaccine is 50 percent effective, then to detect this within a month, you need a sample size of 7,776 people equally divided between a vaccinated group and a non-vaccinated group. You could run the test in a smaller sample of 1,322 but then the trial would take six months. A more effective vaccine would make detecting an effect easier, but flu vaccines work at 40 to 60 percent effectiveness, so an assumption of 50 percent is not unreasonable.

But will Italian doctors still be getting infected at a rate of 1.2 percent per month when a vaccine becomes available for trial in six months or a year? We hope not. The hope is that social distancing and the use of personal protective equipment will have greatly lowered the infection rate. A low infection rate is great, unless you want to properly test a vaccine.

…The virtue of a challenge trial is that the results would be available very quickly, within a few weeks, and using only a small population. If the vaccine is 50 percent effective, for example, then we would need around 100 volunteers or perhaps even fewer depending on how many people exposed to the virus in laboratory conditions contract the disease.

By advancing a vaccine by many months, a challenge trial could save many thousands of lives and spare the world the huge economic costs of the lockdowns and social distancing that we will be using to combat the virus.

Challenge trials, however, don’t solve all problems. In particular, to limit the risk we would want to restrict the patients in a challenge trial to be young and healthy. But that raises a problem of external validity. We also want the vaccine to be safe and effective in less healthy and elderly people which requires secondary challenge trials or field testing in that population. Nevertheless, as Athey, Kremer, Synder and myself argue in our NYTimes op-ed, the high risk of vaccine failure means that we would like 15-20 vaccine candidates and challenge trials could help us whittle this number down to the best two to three substantially speeding up the vaccine discovery process.

One more point is worth bearing in mind.

[A]n ordinary vaccine trial is not without risk—a vaccine could backfire and make the disease worse—so exposing fifty or so volunteers to the virus in a challenge trial must be balanced against exposing thousands to a potentially dangerous vaccine in an ordinary clinical trial.

Thus, the total risk may be lower with a combination of challenge trials and longer, larger field trials.

Challenge trials have a long history in medicine and their statistical advantages make them powerful and even necessary. As The Guardian notes:

Scientists, however, increasingly agree that such trials should be considered, and the WHO is the latest body to indicate conditional support for the idea.

“There’s this emerging consensus among everyone who has thought about this seriously,” said Prof Nir Eyal, the director of Rutgers University’s Center for Population-Level Bioethics in the US.