Category: Law

Should the Left embrace Robert Moses more?

Here is a fantastic Politico essay by Marc J. Dunkelman, telling the whole story of Penn Station, new and old, and how it came to pass that New York finds it so difficult to construct new infrastructure.  Here is one short excerpt from a much longer story:

Since the mid-1960s—really since the opening of the Verrazzano-Narrows Bridge connecting Brooklyn to Staten Island—no major new piece of public infrastructure has been built within the five boroughs of New York City.

And toward the end:

For anyone convinced that government is an indispensable tool in the progressive mission to improve peoples’ lives, Penn Station is a monument to conservatism. If public officials can’t even clear the way for a serviceable facility at the nation’s busiest transit hub, why give them any more authority?

Recommended.  By the way, Madison Square Garden is now a dump and should be rebuilt from scratch, somewhere else of course.

FDA Dual Track Legislation Advances

S&P Global: Four Republican lawmakers have authored new legislation to permit drugs for critically ill patients to enter the market before completing late-stage trials, saying the bill was necessary because the U.S. Food and Drug Administration’s regulatory process was too slow and burdensome.

The bill would create a time-limited conditional approval pathway in the U.S. similar to a system that has long been used by European regulators.

…The conditional approval would be valid for one year and could be renewed annually for up to five years….Companies would be required to meet certain obligations, like completing clinical investigations to provide full demonstration of safety and effectiveness and other studies.

…Companies could seek full U.S. approval at any time. The FDA would be required to let manufacturers include in their applications the real-world evidence they collected during the conditional approval period.

The lawmakers want the FDA to be able to grant the limited marketing authorization to new drugs that have successfully completed phase 1 and 2 trials, with the idea that companies could generate revenue to help fund their phase 3 studies.

They emphasized their legislation is targeted especially at small biopharmaceutical companies that may struggle to cover the costs of late-stage trials.

Under the dual-track approval system, companies would be able to sell pharmaceuticals earlier but would be required to track outcomes so greater real world information would be developed in the FDA process. The result is a more dynamic approval process better suited to modern medicine. The idea is due to the excellent Bartley J. Madden (note my bias).

Madden and Nobel-prize winner Vernon Smith explained the dual-track idea, noting:

Today’s world of accelerating medical advancements is ushering in an age of personalized medicine in which patients’ unique genetic makeup and biomarkers will increasingly lead to customized therapies in which samples are inherently small. This calls for a fast-learning, adaptable FTCM environment for generating new data. In sharp contrast, the status quo FDA environment provides a yes/no approval decision based on statistical tests for an average patient, i.e., a one-size-fits-all drug approval process.

A similar process has been adopted in Japan for regenerative medicine.

A new charter city effort, Pronomos Capital, with venture capital

Pronomos Capital, which [Patri] Friedman incorporated in August, is supposed to bankroll the construction of experimental cities on vacant tracts of land in developing countries. Pronomos is set up like a venture fund, making investments in local organizations that do the work of securing government approvals, finding tenants, and hiring retired U.K. judges to enforce the new legal framework, to be based on British common law. The firm says it’s discussing semi-autonomous cities of varying sizes with foreign and local businesspeople in countries where officials have seemed receptive to exempting them from area laws, including Ghana, Honduras, the Marshall Islands, Nigeria, and Panama. A given community could start as small as an industrial park, Friedman says. Most will be aimed at foreign businesses seeking friendlier tax treatment…

The venture firm has raised about $9 million so far (more than half from Thiel), well short of Friedman’s initial goal. He says that’s only enough to cover basic fact-finding expenses for his local partners, and he’ll raise more to buy and develop land once governments approve the plans.

Here is more from Lizette Chapman at Bloomberg, interesting throughout.

China trade negotiation fact of the day

Brussels has been striving to secure the deal for six years, as it seeks to prove it has the negotiating muscle to broker meaningful agreements with Beijing that can defend European companies from unfair competition.

The European Commission and the bloc’s foreign policy chief signalled a tougher approach to China in March in a landmark document that branded it a “systemic rival” in some areas — an allegation Beijing denies. Ms Weyand, the chief official working for Phil Hogan, the EU’s trade commissioner, said that “we are moving at a snail’s pace on the investment agreement”.

That is from the FT., and of course that hardly counts as much progress.  Elsewhere you will see Paul Krugman suggesting Trump has lost the trade war, but I don’t think he comes close to even seeing what the trade war with China is about.  No matter what Trump says, the trade war is not about lowering the trade deficit.  It is about (for a start) two major considerations: a) ensuring that national security-motivated partial economic decoupling takes place on terms not so unfriendly to America, and b) giving America levers to make sure China does not make such significant inroads into the world’s tech infrastructure, most notably with 5G but not only.

The stipulation of Chinese purchases of American exports, which probably they will not and cannot meet, is in fact a lever to give the United States enforcement power over the less tangible parts of agreement, which is indeed most of the agreement.  We want China to be in default of the agreement terms, so we may threaten them with tariffs to enforce compliance elsewhere, and so that is a better rather than worse outcome for the United States.

On the trade war, agnosticism is still the correct opinion, at least so far, as we are not even sure we know of the full agreement, or if America and China are visualizing signing literally different versions of the “same” agreement.  And even once (or if) the full text(s) is revealed, we still won’t for some while know how either a) or b) are going, much less relative to the relevant counterfactuals.

In general, I am finding that commentary on the trade war is of relatively dubious value, in part for partisan reasons.  The key here is to set aside your political views, and spend a lot of time talking with national security people.

Not quite the end of the global economic order

Rather it is kludgy free trade we are getting these days, as I argue in my latest Bloomberg column.  Here are a few scattered excerpts:

When it comes to China, the WTO structures were already being jerry-rigged. If anything, you could say that the point of the new trade regime is to make the jerry-rigging more transparent.

In fact, it is hard to see how trade relations with China could be anything but jerry-rigged. The Chinese economy is simply too different, and far more statist, than those of the economically developed Western nations or Japan. And yet China is now the world’s No. 2 economy and largest exporter.

And:

The more important technology becomes to the U.S. and global economies, the more issues such as data storage and access will move to the forefront. Can the Chinese government demand that a technology company hand over user data? On whose servers do the data need to be stored? Can national storage be treated as a prerequisite for market entry? Again, the right answers cannot help but be complicated.

Most generally:

It is well-known in economics that exporting services is much more difficult than exporting resources or manufactured goods. It then follows that trade law for services will be messier and kludgier as well. Trade arrangements for services may feel ugly and excessively bureaucratic, but the underlying reality is that the principles of free trade are being extended, not repudiated.

And:

At a larger scale, what to think of the first phase of the U.S.-China trade agreement? It is still difficult to divine the entire agreement, or how much of it will be announced publicly. The real core of the deal may be an impossible demand on the Chinese to buy many additional billions of dollars of goods from the U.S., with the very impossibility of that demand serving as a cudgel for enforcing Chinese compliance with the less tangible, harder-to-measure aspects of trade relations.

To close:

In short, this new era of international trade certainly looks messier. But maybe that’s because the resources of simplicity have been all but exhausted. Free trade isn’t yet dead. It’s just not quite as free as it used to be.

Recommended.

Boris Johnson sentences to ponder

He has done what no other conservative leader in the West has done: He has co-opted and thereby neutered the far right. The reactionary Brexit Party has all but collapsed since Boris took over. Anti-immigration fervor has calmed. The Tories have also moved back to the economic and social center under Johnson’s leadership. And there is a strategy to this. What Cummings and Johnson believe is that the E.U., far from being an engine for liberal progress, has, through its overreach and hubris, actually become a major cause of the rise of the far right across the Continent. By forcing many very different countries into one increasingly powerful Eurocratic rubric, the E.U. has spawned a nationalist reaction. From Germany and France to Hungary and Poland, the hardest right is gaining. Getting out of the E.U. is, Johnson and Cummings argue, a way to counter and disarm this nationalism and to transform it into a more benign patriotism. Only the Johnson Tories have grasped this, and the Johnson strategy is one every other major democracy should examine.

Here is more by Andrew Sullivan, interesting throughout.

The mattress-stealing, luxury hotel culture that is German

Some hotel guests wake so rested at luxury properties that they purchase the same kind of mattress they slept on. Then there are those patrons who steal them.

At least 48 mattresses have disappeared from guest rooms in the more than 1,100 four- and five-star European hotels surveyed by German review site Wellness Heaven. Guests at five-star hotels were 8% more likely to take mattresses, perhaps because they were more comfy, according to the survey.

That’s far less than the nearly 900 towels or 753 bathrobes that hotels say went missing. Hangers, pens, cutlery, cosmetics and blankets were among the other most commonly lifted items. Personal electronics and small appliances, including tablet computers, hair dryers, coffee makers and TV sets were also reported missing from hotel rooms across the properties.

…He [Keilmann] estimates that roughly $60 million worth of mattresses are lifted from hotels worldwide each year.

Here is the full story, and it seems you can get away with such thefts because the hotels are reluctant to report them and get the police involved.  (By the way, might some of those mattresses be the famous German Schlafsacks?)

For the pointer I thank the excellent Michael Rosenwald.

From the comments — on Paul Volcker

I worked at the Fed in the Volcker years. I am not a fan.

(1) He tightened far too much to get inflation down. A more moderate tightening and a more gradual reduction in inflation — which was the original agreement with the Reagan team — would have been better. The long 1980-82 recession was longer and deeper than it needed to be.

(2) He got the support of Democrats by blaming large deficits for the high interest rates rather than blaming his own excessively tight monetary policy. Of course, high interest rates caused federal interest rates to surge and boost the deficit.

(3) At the NY Fed and then as Chairman, what did he do to rein in reckless bank lending to Latin America? It is not like the banks had nothing to do with the Fed.

(4) Latam debt was floating rate debt. Volcker blew up those countries’ debt service. But the super strong dollar and collapse of commodity prices, connected to tight Fed policy, also damaged Latam.

(5) Volcker had modern leftists attitudes. The Fed has become quite transparent and communicates with the public and Congress. It may amaze younger readers that the Fed would adjourn FOMC meetings with no press statement or public policy announcement. Volcker figured you would find out what the Fed was up to when it did something. The Republican Greenspan and Bernanke started to let the sunshine into the Fed. The paranoid closeted quality of the old Fed generated resentment and conspiracy theories.

(6) Volcker had an authoritarian streak. He suppressed dissent within the Fed system, going after researchers at Fed banks who contradicted Fed dogma. The St. Louis Fed was particularly attacked, but others also.

(7) You might connect the death of Marvin Goodfriend with the death of Paul Volcker. Goodfriend was a critic of Volcker in the Fed. He said Volcker’s tight policy pushed inflation down, but Volcker would not deliver an inflation target. His Fed had no credibility, no one was wiling to believe that the Fed would keep inflation low. One result was a high long bond yield and a steep yield curve. It was fine that Volcker wanted to reduce inflation, but it was the Fed that needed credibility, not its temporary chairman.

(8) I found the recent Volcker Rule worthless. Prop trading played no role in creating the crisis of 2008. The Volcker Rule has simply made markets less liquid. After 2008, as after 1932, the federal government imposes useless regulations just for fun.

That is all from B.B.

USMCA the new NAFTA

The new agreement requires at least 70 percent of an automaker’s steel and aluminum to be bought in North America, which could help boost United States metal production. And 40 to 45 percent of a car’s content must be made by workers earning an average wage of $16 an hour. That $16 floor is an effort to force auto companies to either raise low wages in Mexico or hire more workers in the United States and Canada, an outcome Democrats have long supported.

It also rolls back a special system of arbitration for corporations that the Democratic presidential candidate Elizabeth Warren has criticized as allowing companies to bypass the American legal system and Trump administration officials describe as an incentive for companies to send their factories abroad.

The pact also includes, at least on paper, provisions that aim to do away with sham Mexican labor unions that have done little to help workers by requiring every company in Mexico to seek worker approval of collective bargaining agreements by secret ballot in the next four years.

That is from a week ago, supposedly the actual deal with be somewhat more interventionist and anti-trade than that.  Here is more from Ana Swanson and Emily Cochrane of the NYT.

My debate with Žižek

It was quite something, the proceedings did not disappoint, here is the YouTube:

I can’t fully access video from this airport location, but I believe the actual debate starts at around 1:06.  After the debate proper, a particular highlight is the four video questions that were taped and sent in from humanities academics.

The Holberg people put on a great event.

Why Don’t We Know More About the Subway Cost Disease?

Alon Levy has a good deck based on data he collected covering 205 projects in 40 countries on why subway costs are so expensive in the United States compared to much of the rest of the world.

One of the points he makes is that a significant fraction of cost varies across countries which means “the explanation should be institutional and not geologic or geographic. This is difficult and requires qualitative research, since N is about 40.”

Costs are lower in poorer countries but Levy argues that GDP per capita is not a big factor once differences in type of subways are accounted for, I find that surprising and somewhat difficult to believe.

Levy’s major factor is simply that Americans and New Yorkers in particular don’t know much about how things are done elsewhere. In Europe, when a city builds a subway it can look to ten or twelve examples in three to four nearby countries for best practices. New Yorker’s don’t look anywhere else and say things like “New York has a more built-out commuter rail network than London,” as MTA chair Pat Foye recently claimed. In one way, this is good news because Levy argues that if Americans adopted European practices such as separating design from construction and simplifying station construction they could cut costs significantly.

Levy is to be lauded for his pioneering work on this issue yet isn’t it weird that a Patreon supported blogger has done the best work on comparative construction costs mostly using data from newspapers and trade publications? New York plans to spend billions on railway and subway expansion. If better research could cut construction costs by 1%, it would be worth spending tens of millions on that research. So why doesn’t the MTA embed accountants with every major project in the world and get to the bottom of this cost disease? (See previous point). Perhaps the greatest value of Levy’s work is in drawing attention to the issue so that the public gets mad enough about excess costs to get politicians to put pressure on agencies like the MTA.

My Conversation with Daron Acemoglu

Self-recommending of course, most of all we talked about economic growth and development, and the history of liberty, with a bit on Turkey and Turkish culture (Turkish pizza!) as well.  Here is the audio and transcript.  Here is one excerpt, from the very opening:

COWEN: I have so many questions about economic growth. First, how much of the data on per capita income is explained just simply by one variable: distance from the equator? And how good a theory of the wealth of nations is that?

ACEMOGLU: I think it’s not a particularly good theory. If you look at the map of the world and color different countries according to their income per capita, you’ll see that a lot of low-income-per-capita countries are around the equator, and some of the richest countries are pretty far from the equator, in the temperate areas. So many people have jumped to conclusion that there must be a causal link.

But actually, I think geographic factors are not a great explanatory framework for understanding prosperity and poverty.

COWEN: But why does it have such a high R-squared? By one measure, the most antipodal 21 percent of the population produces 69 percent of the GDP, which is striking, right? Is that just an accident?

ACEMOGLU: Yeah, it’s a bit of an accident. Essentially, if you think of which are the countries around the equator that have such low income per capita, they are all former European colonies that have been colonized in a particular way.

And:

COWEN: If we think about the USSR, which has terrible institutions for more than 70 years, an awful form of communism — it falls; there’s a bit of a collapse. Today, they seem to have a higher per capita income than you would expect a priori, if you, just as an economist, write about communism. Isn’t that mostly just because of what is now Russian, or Soviet, human capital?

ACEMOGLU: That’s an interesting question. I think the Russian story is complicated, and I think part of Russian income per capita today is because of natural resources. It’s always a problem for us to know exactly how natural resources should be handled because you can do a lot of things wrong and still get quite a lot of income per capita via natural resources.

COWEN: But if Russians come here, they almost immediately move into North American per capita income levels as immigrants, right? They’re not bringing any resources. They’re bringing their human capital. If people from Gabon come here, it takes them quite a while to get to the —

ACEMOGLU: No, absolutely, absolutely. There’s no doubt that Russians are bringing more human capital. If you look at the Russian educational system, especially during the Soviet time, there was a lot of emphasis on math and physics and some foundational areas.

And there’s a lot of selection among the Russians who come here…

The Conversation is Acemoglu throughout, you also get to hear me channeling Garett Jones.  Again, here is Daron’s new book The Narrow Corridor: States, Societies, and the Fate of Liberty.

The Optometry Racket

Every year I curse the optometry racket when I run out of contact lenses and have to return to the optometrist to get a “new” prescription. It’s a service that I don’t want and don’t need but am forced to buy by US law which require patients to have a recent doctor’s prescription to buy eyewear. I can stretch out the time by buying months in advance, sometimes I buy when abroad, for a few years I managed to evade the law by buying from Canadian internet sellers but that route has mostly been shut down. Writing in the Atlantic Yascha Mounk notes that around the world no prescription is needed:

In every other country in which I’ve lived—Germany and Britain, France and Italy—it is far easier to buy glasses or contact lenses than it is here. In those countries, as in Peru, you can simply walk into an optician’s store and ask an employee to give you an eye test, likely free of charge. If you already know your strength, you can just tell them what you want. You can also buy contact lenses from the closest drugstore without having to talk to a single soul—no doctor’s prescription necessary.

The excuse for the law is that eye exams can discover other problems. Sure, trade offs are everywhere. Let people make their own decisions. as Mounk concludes:

Like the citizens of virtually every other country around the world, Americans should be allowed to buy any pair of glasses or set of contact lenses at a moment’s notice. While the requirement to get a medical exam from an optometrist who has spent a minimum of seven years in higher education may have good effects in some cases, it also creates unreasonable costs—and unjustifiable suffering….Put Americans in charge of their own vision care, and abolish mandatory eye exams.

The one-child policy and Chinese child trafficking

In the past 40 years, a large number of children have been abandoned by their families or have been abducted in China. We argue that the implementation of the one-child policy has significantly increased both child abandonment and child abduction and that, furthermore, the cultural preference for sons in China has shaped unique gender-based patterns whereby a majority of the children who are abandoned are girls and a majority of the children who are abducted are boys. We provide empirical evidence for the following findings: (1) Stricter one-child policy implementation leads to more child abandonment locally and more child abduction in neighboring regions; (2) A stronger son-preference bias in a given region intensifies both the local effects and spatial spillover effects of the region’s one-child policy on child abandonment and abduction; and (3) With the gradual relaxation of the one-child policy after 2002, both child abandonment and child abduction have dropped significantly. This paper is the first to provide empirical evidence on the unintended consequences of the one-child policy in terms of child trafficking in China.

That is the abstract of a new paper by Xiaojia Bao, Sebastian Galiani, Kai Li, and Cheryl Xiaoning Long.

Medicare for all is not entirely efficient

There is increasing interest in expanding Medicare health insurance coverage in the U.S., but it is not clear whether the current program is the right foundation on which to build. Traditional Medicare covers a uniform set of benefits for all income groups and provides more generous access to providers and new treatments than public programs in other developed countries. We develop an economic framework to assess the efficiency and equity tradeoffs involved with reforming this generous, uniform structure.We argue that three major shifts make a uniform design less efficient today than when Medicare began in 1965. First, rising income inequality makes it more difficult to design a single plan that serves the needs of both higher- and lower-income people. Second, the dramatic expansion of expensive medical technology means that a generous program increasingly crowds out other public programs valued by the poor and middle class. Finally, as medical spending rises, the tax-financing of the system creates mounting economic costs and increasingly untenable policy constraints. These forces motivate reforms that shift towards a more basic public benefit that individuals can “top-up” with private spending.If combined with an increase in other progressive transfers, such a reform could improve efficiency and reduce public spending while benefiting low income populations.

That is from a new NBER working paper by Mark Shepard, Katherine Baicker, and Jonathan S. Skinner.