Hollywood evidence on McCarthyism

by  Tyler Cowen in

There is a new NBER working paper on this topic by Hui Ren Tan and Tianyi Wang, here is the abstract:

We study a far-reaching episode of demagoguery in American history. From the late 1940s to 1950s, anti-communist hysteria led by Senator Joseph McCarthy and others gripped the nation. Hundreds of professionals in Hollywood were accused of having ties with the communist. We show that these accusations were not random, targeting those with dissenting views. Actors and screenwriters who were accused suffered a setback in their careers. Beyond the accused, we find that the anti-communist crusade also had a chilling effect on film content, as non-accused filmmakers avoided progressive topics. The decline in progressive films, in turn, made society more conservative.

Here is extensive (positive) commentary by Alice Evans:

    • Dissidents who had organised against the House Un-American Activities Committee (HUAC) were 27 to 32 percentage points more likely to be accused.
    • Celebrities – actors with more experience and Academy Award nominations were more likely to be accused.
    • Actors and writers involved in progressive films were more likely to be accused.

Quicker and easier to read than the paper.  I also would like to see numbers on how many exactly were in fact communists.

Will technology improve animal welfare?

by  Tyler Cowen in

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

There is, however, some better news on the animal welfare front. The cause is on the verge of some major victories — and they have been earned through technology rather than rhetoric.

The first major development is Ozempic and the other weight-loss drugs in the GLP-1 category. By one estimate, 25,000 Americans start taking these weight-loss drugs every week, and 93 million Americans may meet the criteria for using them. The spread of such drugs to many other countries is likely, especially since they seem to produce health gains above and beyond weight loss.

The logic is simple: People lose weight on these drugs because they eat less, and eating less usually means eating less meat. And less meat consumption results in less factory farming.

This should count as a major victory for animal welfare advocates, even though it did not come about through their efforts. No one had to be converted to vegetarianism, and since these drugs offer other benefits, this change in the equilibrium is self-sustaining and likely to grow considerably. Yes, it is only a partial victory, but total victory was unlikely anyway.

And this:

There is yet a third reason for animal welfare advocates to be optimistic. It is more speculative, but now seems less crazy than it used to: Super-powered AI could help us observe and learn animal languages, thus enabling humans to converse with at least some of the smarter (or at least more articulate?) animals. There is already a project at UC-Berkeley to converse with sperm whales by decoding their language and translating it to English, using techniques drawn from large-language models.

If we could talk with animals — and hear their complaints and descriptions of their own suffering — would we be less likely to eat them and treat them badly? How would we respond to the pleas of dolphins to stop using our nets to catch tuna, a process which kills many dolphins?

This is some chance this strategy could backfire; dolphins, for instance, may not be as charming as people think. Nonetheless, it holds at least some chance of a revolution in how we humans think of our relations with the rest of the animal kingdom.

Do you think there are any animals we could talk into vegetarianism, if only for marginal changes?  If not, why be so optimistic that humans will change?  Or maybe underneath it all, you do think that humans are somewhat special?

Government Litigation Risk and the Decline in Low-Income Mortgage Lending

by  Tyler Cowen

Here is a new paper from W. Scott Frame, Kristopher Gerardi, Erik J. Mayer, Billy Y. Xu, and Lawrence Chengzhi Zhao at the Atlanta Fed:

We study the effect of Department of Justice lawsuits in the 2010s against large lenders for alleged fraud in the Federal Housing Administration (FHA) mortgage insurance program. The suits led to more than $5 billion in settlements and caused targeted banks and their peers to precipitously exit the FHA market. Difference-in-differences and triple differences tests exploiting geographic variation in exposure to exiting banks show a 20 percent reduction in FHA lending in heavily exposed areas. This reduction was not associated with improved underwriting standards or lower default rates. Large banks’ FHA exit has significantly reduced low-income households’ overall access to mortgage credit.

Via Moses Sternstein, who also discusses it.

The economics of GLP-1

by  Tyler Cowen in

From Frank Fuhrig:

Lean protein “emerged as the biggest winner” on supermarket shelves among shoppers who have taken popular new weight-loss drugs, according to a report using consumer surveys.

Data analytics firm Grocery Doppio’s “State of Digital Grocery Performance Scorecard: H1 2024” found reduced grocery spending among 97% of consumers who had taken GLP-1 medications — glucagon-like peptide-1 receptor agonists, including semaglutide drugs Ozempic, Rybelsus and Wegovy, prescribed for diabetes or obesity.

Their grocery bills were down by an average of 11%, yet they spent 27% more on lean proteins from lean meat, eggs and seafood. Other gainers were meal replacements (19%), healthy snacks (17%), whole fruits and vegetables (13%) and sports and energy drinks (7%).

Snacks and soda took the brunt of reduced spending by consumers after GLP-1 treatment: snacks and confectionary (-52%), prepared baked goods (-47%), soda/sugary beverages (-28%), alcoholic beverages (-17%) and processed food (-13%).

In an accompanying survey of U.S. grocery executives, 77% said they would respond to the trend among users of the fast-spreading medications by expanding and deepening assortments including more portion-control sizing and packaging. Another 71% said they would increase digital marketing efforts on health and “food as medicine.”

Past diet trends such as low-carb keto plans have also favored lean protein. A Rabobank research report in March examined the dietary benefits of a greater focus on lean protein and suggested that industry could reformulate ultra-processed foods to raise protein and combat obesity.

Despite the rapid adoption of GLP-1 drugs, grocery sales in January to June 2024 hit $458 billion, up 3.8% compared to the first half of last year, the report showed.

Here is the gated link, via J.  I wonder if the behavior of the later adopters will be any different.  There is, after all, an alternative equilibrium where people simply eat a lot more ice cream, knowing they can do so and still lose weight.

Every Stock is a Vaccine Stock, Revisited

by  Alex Tabarrok in

In May 2020, I wrote a post titled Every Stock is a Vaccine Stock highlighting that the stock market reaction to good vaccine news indicated that vaccines were worth trillions and that most of this value was external to the vaccine manufacturers, meaning that the vaccine manufacturers were under-incentivized.

It’s not surprising that when Moderna reports good vaccine results, Moderna does well. It’s more surprising that Boeing and GE not only do well they increase in value far more than Moderna. On May 18, for example, when Moderna announced very preliminary positive results on its vaccine it’s market capitalization rose by $5b. But GE’s market capitalization rose by $6.82 billion and Boeing increased in value by $8.73 billion.

A cure for COVID-19 would be worth trillions to the world but only billions to the creator. The stock market is illustrating the massive externalities created by innovation. Nordhaus estimated that only 2.2% of the value of innovation was captured by innovators. For vaccine manufacturers it’s probably closer to .2%.

Who can internalize the externalities? Moderna clearly can’t because if they could then on May 18 Moderna would have increased in value by $20.52b ($4.97b+$6.82b+$8.73b) and GE and Boeing wouldn’t have gone up at all. Massive externalities.

A clever institutional investor like Blackrock or Vanguard could internalize some of the externalities by encouraging Moderna to work even faster and invest even more, even to the extent of lowering Moderna’s profits. Blackrock would more than make up for the losses on Moderna by bigger gains on other firms in its portfolio. Blackrock does indeed understand the incentives, although its unclear how much beyond jawboning they can actually do, legally.

I’d like to see more innovation in mechanisms to internalize externalities–perhaps in a pandemic vaccine firms should be given stock options on the S&P 500. Until we develop those innovations, however, the government is the best bet at internalizing the externality by paying vaccine manufacturers to increase capacity and move more quickly than their own incentives would dictate. Billions in costs, trillions in benefits.

A new paper by Acharya, Johnson, Sundaresan and Zheng formulizes this intuition. The authors combine a model of preferences in which uncertainty can be priced with an estimate of the stock market reaction to vaccine news and conclude that “ending the pandemic would have been worth from 5% to 15% of total wealth”.

One measure of the ex ante cost of disasters is the welfare gain from shortening their expected duration. We introduce a stochastic clock into a standard disaster model that summarizes information about progress (positive or negative) toward disaster resolution. We show that the stock market response to duration news is essentially a sufficient statistic to identify the welfare gain to interventions that alter the state. Using information on clinical trial progress during 2020, we build contemporaneous forecasts of the time to vaccine deployment, which provide a measure of the anticipated length of the COVID-19 pandemic. The model can thus be calibrated from market reactions to vaccine news, which we estimate. The estimates imply that ending the pandemic would have been worth from 5% to 15% of total wealth as the expected duration varied in this period.

Current state of knowledge on the Trump tax cuts

by  Tyler Cowen in

That is the topic of my latest Bloomberg column.  Here is one summary excerpt:

One result: Total tangible corporate investment went up by about 11%. That has been a welcome shot in the arm for an economy that was by some measures suffering from an investment drought. The strong state of the Biden economy may, in part, be due to the Trump tax cuts.

The second effect of the tax cuts is more dramatic yet. The federal government’s corporate tax revenue fell by about 40%, because of both the lower tax rates and more generous expensing provisions. That decline is from a baseline of corporate tax revenue of 2.9% of GDP in 2017.

What it all means is that US corporations got to keep more of their money, and the US government got less. Suffice to say that there is a wide range of opinions about this trade-off. No study of the tax cut itself can resolve those disagreements. Nonetheless, it is central to any assessment of the policy.

The fiscal position of the government is weaker today than it was in 2017, so opinions on that resource reallocation to the private sector might have changed. On the more positive side, there has been a long-run increase in GDP of 0.9% — a substantial sum in an economy of more than $27 trillion. When it comes to wages, however, the tax cuts have been a disappointment, as labor income rose by less than $1,000 per employee, far less than had been predicted by the bill’s proponents.

Here is the underlying research by Gabriel Chodoros-Reich, Owen M. Zidar, and Eric Zwick.  Note also this:

…the accelerated depreciation provisions generated more investment per dollar of tax revenue than any other incentives in the bill. In contrast, the tax cuts to pass-through firms underperformed.

Trump has been talking about cutting the corporate rate to fifteen percent, a plan which I think not so many economists would support.