Category: Law

When defense is not a public good

Security measures that deter crime may unwittingly displace it to neighboring areas, but evidence of displacement is scarce. We exploit precise information on the timing and locations of all Italian bank robberies and security guard hirings/firings over a decade to estimate deterrence and displacement effects of guards. A guard lowers the likelihood a bank is robbed by 35-40%. Over half of this reduction is displaced to nearby unguarded banks. Theory suggests optimal policy to mitigate this spillover is ambiguous. Our findings indicate restricting guards in sparse, rural markets and requiring guards in dense, urban markets could be socially beneficial.

That is from Vikram Maheshri and Giovanni Mastrobuoni, forthcoming in Review of Economics and Statistics.  Via Peter Deffebach.

From Mark Lutter — charter city for Zambia?

I’m pleased to announce the Charter Cities Institute has signed a memorandum of understanding with the Zambian Development Agency. They are planning to propose changes to their special economic zone act to parliament, and we are working with them to improve their proposal and make it adhere closer to charter city best practices, namely, larger size, mixed use developments, deeper reforms, and local autonomy.

The memorandum of understanding is an important step in piloting charter cities. We are proud to partner with the Zambia Development Agency and Nkwashi in bringing charter cities to reality.

Mark, along with Tamara Winter, was part of the first cohort of EV winners.

Is the world fortunate that the coronavirus hit China first?

Is the world fortunate that the coronavirus hit China first? China’s government has totalitarian impulses but that–for the most part– is working to its favor in combating the virus. What other country in the world could quarantine a city of 11 million people on the basis of (at the time) 17 reported deaths?

CNN: Across China, 15 cities with a combined population of over 57 million people — more than the entire population of South Korea — have been placed under full or partial lockdown.

Wuhan itself has been effectively quarantined, with all routes in and out of the city closed or highly regulated. The government announced it is sending an additional 1,200 health workers — along with 135 People’s Liberation Army medical personnel — to help the city’s stretched hospital staff.

China’s response to the virus has been unprecedented and one cannot help but be a little bit impressed.

I was in India recently and if the coronavirus hits India it could spread very rapidly and millions could die not just in India but around the world. India does not have a strong public health system (it has invested instead in sickness treatment, another example of premature imitation), it also has plenty of other opportunistic diseases and bacteria which would magnify viral sickness and overwhelm the public health system, and India does not have a state strong enough to effectively lock down cities. India’s only big advantage versus China is that it’s relatively free press and communication system could make an outbreak more quickly spotted. China, in contrast, tried to hide the initial outbreak. This does, however, cut both ways. India’s 1994 outbreak of the plague quickly became news, which led to official action, but hundreds of thousands of people quickly left the epicenter in Surat–smart action at the time but deadly if those fleeing are infectious.

We need a Manhattan Project to research, develop and produce new vaccines at a faster pace; the US is best placed to be the world leader in this regard. On other actions, the United States stands somewhere in between China and India. US quarantine action would certainly be slower than in China but it could happen, probably through the military, as we are seeing now.

The US approach of slow but eventually decisive action is probably best but how slow is too slow? Right now most people assume that the coronavirus is a blow to China but if does create a serious pandemic then China may be the first to recover and stabilize.

Hat tip: Lunch discussions with Robin, John and Ajay.

What is the best model for thinking about this lack of higher ed reporting?

The Education Department opened investigations into Harvard and Yale as part of a continuing review that it says has found U.S. universities failed to report at least $6.5 billion in foreign funding from countries such as China and Saudi Arabia, according to department materials viewed by The Wall Street Journal…

The department described higher-education institutions in the U.S., in a document viewed by the Journal, as “multi-billion dollar, multi-national enterprises using opaque foundations, foreign campuses, and other sophisticated legal structures to generate revenue.”

…Universities are required to disclose to the Education Department all contracts and gifts from a foreign source that, alone or combined, are worth $250,000 or more in a calendar year. Though the statute is decades old, the department only recently began to vigorously enforce it.

Officials accused schools of actively soliciting money from foreign governments, companies and nationals known to be hostile to the U.S. and potentially in search of opportunities to steal research and “spread propaganda benefitting foreign governments,” according to the document.

In addition, while the department said it has found foreign money generally flows to the country’s richest universities, “such money apparently does not reduce or otherwise offset American students’ tuition costs,” the document said.

Here is the full WSJ story.

Transcript of my chat with Thomas Kalil

We have the transcript live on our Day One Project site: https://www.dayoneproject.org/cowen-kalil-transcript

Here was the video version, with some sound imperfections.  And from Schmidt Futures:

…some context on the broader event is here, along with details on our open call for innovation, science, and tech policy ideas to inform the priorities of the next presidential term – your community undoubtedly would have great contributions. We are accepting submissions of these ideas through the Day One Accelerator until March 1.

I am very much looking to my Schmidt Futures event coming up this March.

Might the coronavirus bring freer speech to China?

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

Chinese citizens are currently upset and panicked, and their online communication might exceed the ability of the censors to control it. Some censorship is done algorithmically, but much of it is performed by humans, if only because the algorithms are far from perfect and cannot pick up on the rapidly changing allusions and code words people use.

What happens if there are too many subversive messages to censor? The system might break down, and speech might become more free. Reimposing censorship might be difficult, politically and logistically.

There is yet another reason censorship might prove difficult. If you feel desperate and fear for your health, the penalties for speaking out online might not seem so bad by comparison. You might not care so much about that promotion at work or your standing in the party. Moreover, the stress of the situation may lower your inhibitions. And if public criticism becomes more common, it may seem safe to join the growing crowd. The eventual result of all this would be a partial collapse of censorship.

The link also considers the entirely possible scenario that Chinese liberties could instead decrease.

Utah sends employees to Mexico for lower prescription prices

Ann Lovell had never owned a passport before last year. Now, the 62-year-old teacher is a frequent flier, traveling every few months to Tijuana, Mexico, to buy medication for rheumatoid arthritis — with tickets paid for by the state of Utah’s public insurer.

Lovell is one of about 10 state workers participating in a year-old program to lower prescription drug costs by having public employees buy their medication in Mexico at a steep discount compared to U.S. prices. The program appears to be the first of its kind, and is a dramatic example of steps states are taking to alleviate the high cost of prescription drugs.

In one long, exhausting day, Lovell flies from Salt Lake City to San Diego. There, an escort picks her up and takes her across the border to a Tijuana hospital, where she gets a refill on her prescription. After that, she’s shuttled back to the airport and heads home.

Lovell had been paying $450 in co-pays every few months for her medication, though she said it would have increased to some $2,400 if she had not started traveling to Mexico. Without the program, she would not be able to afford the medicine she needs.

Here is the full story, via Jonathan Falk.

What causes car deaths and how to limit them

Perhaps the biggest reason why we don’t see more fatal crashes on freeways is that there are no intersections on them (with a few exceptions). In fact, there are more drivers killed in intersections (20%) than on freeways.

After accounting for freeways (18%) and intersections and junctions (20%), we’re still left with more than 60% of drivers killed in automotive accidents left accounted for.

It turns out that drivers killed on rural roads with 2 lanes (i.e., one lane in each direction divided by a double yellow line) accounts for a staggering 38% of total mortality. This number would actually be higher, except to keep the three categories we have mutually exclusive, we backed out any intersection-related driver deaths on these roads and any killed on 2-lane rural roads that were classified as “freeway.” So, to recap, 3 of out every 4 deaths in a car occur on the freeway, at an intersection/junction, or on a rural road with a single lane in each direction.

And:

In drivers killed on 2-lane rural roads, 50% involved a driver not wearing a seat belt. Close to 40% have alcohol in their system and nearly 90% of these drivers were over the legal limit of 0.08 g/dL. About one-third involved speeding, and 16% did not have a valid driver’s license.

Here is the full piece by Peter Attia, interesting throughout.  Via Anecdotal.

DIY Pancreas?

People suffering from diabetes have turned to sophisticated do-it-yourself technologies. Here’s the abstract to an excellent article on these developments by Crabtree, McLay and Wilmot:

Diabetes technology has been advancing rapidly over recent years. While some of this is driven by medical technology companies, a lot of the driving force for these developments comes from people living with diabetes (#WeAreNotWaiting) who have developed their own ‘do-it-yourself’ artificial pancreas systems (DIY APS) using continuous glucose monitoring, insulin pumps and smartphone technology to run algorithms shared freely with the intent of improving quality of life and glycaemic control. Existing evidence, although observational, seems promising but more robust data are required to establish the safety and outcomes. This is unregulated technology and the off-label use of interstitial glucose monitors and insulin pumps can be disconcerting for people living with diabetes, health care professionals, organisations, and diabetes technology companies alike.

Here we discuss the principles of DIY APS, the outcomes observed so far and the feedback from users, and debate the ethical issues which arise before looking to the future and newer technologies on the horizon.

Hat tip: Dennis Sheehan.

The Zoning Straight-Jacket

In a new paper, Robert Ellickson makes a simple but important point: local land-use zoning freezes land use into place preventing land from moving from low-value to high-value uses even over many decades.

Recall the neighborhood where you spent your childhood. For most Americans, it would have been a neighborhood of detached single-family houses.My thesis in this Article is simple: if you were to visit that same neighborhood decades from now, it would remain virtually unchanged. One reason is economic: structures typically are built to last. But a second reason, and my focus here, is the impact of law. The politics of local zoning, a form of public land use regulation that has become ubiquitous in the United States during the past century, almost invariably works to freeze land uses in a neighborhood of houses.

…The zoning strait-jacket binds a large majority of urban land in the United States. Los Angeles and Chicago, two of the nation’s densest central cities, permit the building of only a detached house on, respectively, 75% and 79% of the areas they zone for residential use. In suburban areas, the percentage typically is far higher. In a companion study of zoning practices of thirty-seven suburbs in Silicon Valley, Greater New Haven, and Greater Austin, I found that, in the aggregate, these municipalities had set aside 91% of their residentially zoned land (71% of their total land area) exclusively for detached houses.

…Absent overly strict regulation, suppliers of goods in a market economy are able to adapt to changes in supply and demand conditions. The freezing of land uses in a broad swath of urban America prevents housing developers from responding to changes in consumer tastes about where and how to live.

I’m in India and they have similar problem, except in India it’s agricultural land that is frozen in place and made difficult to transform to new uses (in the process depriving farmers of the true value of one of their only assets and creating opportunities for regulatory arbitrage that politically-connected special interests exploit by buying at the farm price, obtaining approvals to convert that other cannot obtain and then selling at the much higher post-conversion price.)

Freezing agricultural land in place seems backward because ubanization is clearly India’s future but it’s no less backward than what has happened in the United States. In both cases, an important right in the land bundle was expropriated and collectivized and the market process of creative destruction impeded.

What is the best way to tax food?

We analyze how a sales tax levied on all food products impacts the consumption of healthy food, unhealthy food, and obesity. The sales tax can stimulate the consumption of healthy meals by lowering the time costs of food preparation. Moreover, the sales tax lowers obesity under more general conditions than a tax on unhealthy food (fat tax) and a subsidy on healthy food (thin subsidy). We calibrate the model using recent consumption and time use data from the US. The thin subsidy is counterproductive and increases weight. While both the sales tax and the fat tax mitigate obesity, the former imposes a lower excess burden on consumers.

It seems that if you try to tax fat directly, individuals can readily substitutes into other foodstuffs that are bad for them, or bad for their weight.  If you place a sales tax on food in general, individuals substitute into eating more at home, and there the food is healthier in the first place and furthermore the time-intensiveness of production will limit the number of dishes prepared and thus quantity and in turn obesity.

Here is the article by Zarko Kalamov, via the excellent Kevin Lewis.

Pigouvian in-kind time horn tax in Mumbai

For the Mumbai’s perpetual honkers, who love to blare the horns of their vehicles even when the traffic signal is red, the Mumbai Traffic Police has quietly come up with an unique initiative to discipline them in order to curb the alarming rise in the noise pollution levels in the country’s commercial capital.

From Friday (January 31, 2020), it has installed decibel meters at certain select but heavy traffic signals to deter the habitual honkers through a campaign named ‘The Punishing Signal’.

Joint Police Commissioner (Traffic) Madhukar Pandey said that the decibel monitors are connected to traffic signals around the island city, and when the cacophony exceeds the dangerous 85-decibel mark due to needless honking, the signal timer resets, entailing a double waiting time for all vehicles.

Here is the full story, and for the pointers I thank Sheel Mohnot and CL.  Here is a relevant ad for the policy.  Here is Alex on honking as signaling.

The economist as scapegoat

Russ Roberts defends Milton Friedman (and many others, implicitly), excerpt:

What about spending for public schools? Has that been reduced in this allegedly draconian neoliberal era?

In 1960, per pupil expenditure for elementary and high school students was just under $4000. In 1980, when the neoliberal ideology allegedly began its ascendance, it was a little less than $8000. The latest numbers from 2015–2016 are just under $15,000. All numbers are corrected for inflation (in 2017–2018 dollars). So under this time of alleged cutbacks and resource starvation, per pupil expenditures rose dramatically.

What about transportation infrastructure? Total spending is up in real terms. What about as a percentage of GDP? There has been a decline since 1962 as a percentage of GDP but the numbers are basically flat since 1980…

What about investment in non-defense research and development, and health? Up dramatically since 1980 in real terms.

There is much more at the link, including excellent visuals.

Toward a more general theory of task complexity

That is a theme running throughout my latest Bloomberg column, here are some excerpts:

Why so many of America’s best and brightest college graduates go into management consulting, finance or law school is a perennial question. There are some compelling theories, which I will get to, but first I would like to turn the question around: Why are so many people in top positions, whether in the public or private sector, so old?

I submit that these two trends — and a third, declining productivity growth — are related: Many tasks have become increasingly complex in America, often more complex than people can learn in just a few years. By the time you have experience enough to perform them, you are less interested in taking risks. In your young adventurous years, by contrast, the only jobs you can get are those that don’t reward (or allow) adventure. The result of all this is a less audacious America.

And:

…the smart graduates of America’s top universities will seek relatively thick, liquid job markets, with high upside but also protection on the downside. Management consulting is perfect. If you are intelligent and hard-working, you can signal that quickly, and the entry-level tasks are sufficiently anodyne that few very specific skills are required. These jobs are designed to attract talent, so the consulting companies have an eventual option on promoting the best candidates. The same is true of law and the less quantitative parts of finance.

In the short term, this system seems to work for everyone. If you don’t like those vocations after a few years of trying, you still have elite connections and credentials that you can take somewhere else.

On net, America is selling its talented young people insurance value — but at the expense of long-term innovation. It might be better for the country if more of these individuals started businesses, tried their hand at chemistry or materials science, or worked in obscure corners of manufacturing in the Midwest. Of course, rates of failure or stagnation are higher in those areas, while glamour is often lower. Who wants to work on mastering a complex task for 10 or 15 years, with no real guarantee of commercial success?

And:

The slower rates of growth in scientific progress are part of this picture. Older scientists are more likely to be in charge, but they also make fewer conceptual breakthroughs. Younger scientists are more temperamentally inclined to be revolutionaries, but that is hard when it may take you until your late 20s just to learn the basics of your field. Most areas are too complex for a 23-year-old to make new scientific advances, no matter how brilliant he or she may be.

Tech of course is an exception.  And please do note that de-bureaucratization could do a great deal to lower this task complexity, while other parts of it are inescapable — I didn’t have the space for that point in the column but will return to it and what might be done.  Finally, I thank a number of people who contributed ideas and examples to my argument.

The vaccine makers have solved for the equilibrium

GSK has made a corporate decision that while it wants to help in public health emergencies, it cannot continue to do so in the way it has in the past. Sanofi Pasteur has said its attempt to respond to Zika has served only to mar the company’s reputation. Merck has said while it is committed to getting its Ebola vaccine across the finish line it will not try to develop a vaccine that protects against other strains of Ebola and the related Marburg virus.

Drug makers “have very clearly articulated that … the current way of approaching this — to call them during an emergency and demand that they do this and that they reallocate resources, disrupt their daily operations in order to respond to these events — is completely unsustainable,” said Richard Hatchett, CEO of CEPI, an organization set up after the Ebola crisis to fund early-stage development of vaccines to protect against emerging disease threats.

Hatchett and others who plan for disease emergencies worry that, without the involvement of these types of companies, there will be no emergency response vaccines.

Here is more from Helen Branswell, you can follow her on Twitter here on the evolving coronavirus situation, she is maybe the single best follow on that topic?