Population predicts regulation — but why?

We found that across states, a doubling of population size is associated with a 22 to 33 percent increase in regulation.

The relationship between regulation and population is surprisingly robust- it also holds for Australian states and Canadian provinces, and based on the limited data we have seems to hold across countries too (for instance, the “free market” United States has 10 times as many regulations as Canada- just as it has 10 times the population).

What is less clear is why this relationship is so strong. Mulligan and Shleifer attribute it to a fixed cost of regulating; larger polities can spread this cost over more people, making the average cost of regulating cheaper, so they do it more. We note two other explanations: larger polities might have more externalities worth regulating, or if regulation produces concentrated benefits and dispersed costs, a larger population could make it harder for those harmed by regulation to organize collectively to oppose it.

That blog post is based on work from James Bailey, James Broughel and Patrick McLaughlin, the latter two my Mercatus colleagues, written by James Bailey.

Windows not Windex

Science News: Though no one solution works for all places, public spaces need to focus on proper ventilation, air filtration, germicidal ultraviolet lights and air quality monitoring rather than rigorously disinfecting surfaces, say many scientists who cite evidence that the virus lingers in the air.

“This is what’s really frustrating,” says Jose-Luis Jimenez, an aerosol scientist at the University of Colorado Boulder. “We’ve wasted billions and billions of dollars on disinfecting, which doesn’t serve any purpose whatsoever, yet things like having a $50 filter in every classroom, we haven’t done.”

Similarly, in an excellent piece Derek Thompson writes:

Too many U.S. institutions throughout the pandemic have shown little interest in the act of learning while doing. They etched the conventional wisdoms of March 2020 into stone and clutched their stone-tablet commandments in the face of any evidence that would disprove them. Liberal readers might readily point to Republican governors who rejected masks and indoor restrictions even as their states faced outbreaks. But the criticism also applies to deep-blue areas. Los Angeles, for instance, closed its playgrounds and prohibited friends from going on beach walks, long after researchers knew that the coronavirus didn’t really spread outdoors. In the pandemic and beyond, this might be the fundamental crisis of American institutions: They specialize in the performance of bureaucratic competence rather than the act of actually being competent.

The CDC’s announcement should be curtains for theatrical deep cleanings. But until companies, transit authorities, retailers, and magazines embrace the value of scientific discovery and the joy of learning new things, the show, and the soap, will go on.

Fortunately, there has been some recent learning. The Indian government now advises:

Aerosols could be carried in the air for up to 10 metres and improving the ventilation of indoor spaces would reduce transmission…“Ventilation can decrease the risk of transmission from one infected person to the other. Just as smells can be diluted from the air through opening windows and doors and using exhaust systems, ventilating spaces with improved directional air flow decreases the accumulated viral land in the air, reducing the risk of transmission. Ventilation is a community defense that protects all of us at home or at work,” it stated.

One thing which puzzled me even before the pandemic was the lack of interest in UVC even though there is credible evidence that it reduces hard to kill superbugs.

The large study, published in The Lancet, finds machines that emit the UV light can cut transmission of four major super bugs by a cumulative 30 percent. The finding is specific to patients who stay overnight in a room where someone with a known positive culture or infection of a drug-resistant organism had previously been treated.

“Some of these germs can live in the environment so long that even after a patient with the organism has left the room and it has been cleaned, the next patient in the room could potentially be exposed,” said Dr. Deverick J. Anderson, MD, an infectious disease specialist at Duke and lead investigator of the study. “Infections from one of these bugs are tough to treat and can be truly debilitating for a patient.”

The attentive reader will note that this also implies airborne transmission.

Even the FDA is moderately supportive of UVC:

UVC radiation is a known disinfectant for air, water, and nonporous surfaces. UVC radiation has effectively been used for decades to reduce the spread of bacteria, such as tuberculosis. For this reason, UVC lamps are often called “germicidal” lamps.

UVC radiation has been shown to destroy the outer protein coating of the SARS-Coronavirus, which is a different virus from the current SARS-CoV-2 virus. The destruction ultimately leads to inactivation of the virus. (see Far-UVC light (222 nm) efficiently and safely inactivates airborne human coronavirusesExternal Link Disclaimer). UVC radiation may also be effective in inactivating the SARS-CoV-2 virus, which is the virus that causes the Coronavirus Disease 2019 (COVID-19).

Emergent Ventures winners, 14th cohort

Center for Indonesian Policy Studies, Jakarta, to hire a new director.

Zach Mazlish, recent Brown graduate in philosophy, for travel and career development.

Upsolve.org, headed by Rohan Pavuluri, to support their work on legal reform and deregulation of legal services for the poor.

Madison Breshears, GMU law student, to study the proper regulation of cryptocurrencies.

Quest for Justice, to help Californians better navigate small claims court without a lawyer.

Cameron Wiese, Progress Studies fellow, to create a new World’s Fair.

Jimmy Alfonso Licon, philosopher, visiting position at George Mason University, general career development.

Tony Morley, Progress Studies fellow, from Ngunnawal, Australia, to write the first optimistic children’s book on progress.

Michelle Wang, Sophomore at the University of Toronto, Canada, to study the causes and cures of depression, and general career development, and to help her intern at MIT.

Here are previous cohorts of winners.

Inflation and the Fed

Federal Reserve officials were optimistic about the economy at their April policy meeting as government aid and business reopenings paved the way for a rebound — so much so that and “a number” of them began to tiptoe toward a conversation about dialing back some support for the economy.

Here is more (NYT).  That is yet another sign that our government (treating fiscal and monetary as a consolidated entity) made a mistake in applying too much demand stimulus.  Hardly anyone said this at the time except Summers and Blanchard, and since then few have been willing to come out and admit error.  There is an ex post attempt to redefine the debate by insisting inflation will not spiral out of control.  Quite possibly not, but whatever your view on that question, don’t let it distract you from the actual mistake.  Virtually all macroeconomic commentators in the public sphere were wrong for not realizing and stressing that too much demand stimulus was being applied.  Furthermore, we ended up spending $1 trillion (!) in ways that were pretty far from optimal.

Got that?  People, the rooftops are waiting.

Thursday assorted links

1.”Thomas Bagger, German diplomat and advisor to the federal president, once noted, “The end of history was an American idea, but it was a German reality.”  Link here.

2. For all the mockery, we are almost at Dow 36,000.

3. William Shatner at 90.

4. “Using event study analysis of recent minimum wage increases, we find that these changes do not affect the likelihood of searching, but do lead to large yet very transitory spikes in search effort by individuals already looking for work.”  Link here.

5. All the more reason to call it “The Norwegian Century.”

Deregulate the Market for Land

Martin Wolf in the FT has excellent op-ed on British land use policy:

Here are two facts about land use in England: houses and gardens occupy just 5.9 per cent of available land; and land with permission to develop can be worth 100 times as much as land without it. The notion that there is a shortage of land for additional housing is ludicrous. Moreover, the planning system is much the biggest market distortion in the economy: it is throttling supply, to the benefit of homeowners, who have made huge unearned gains.

…Almost all the debate is cast in Soviet terms: “need”, not demand, and numbers of units, not prices. But market signals are telling us that the public wants more land in residential use, which is vastly more valuable to them than in its main current use, agriculture; 63 per cent of land is currently farmed, while all developed land, plus gardens, plus outdoor recreation, is a mere 15.3 per cent. Moreover, 84 per cent of the UK’s population lives in urban areas, which must generate a still bigger share of gross domestic product. The share of farming in GDP is 0.61 per cent: economically, it is a hobby.

…Opponents will insist that the amenity value of open land is overwhelming. Really?…The idea that we have no land left for houses or that every bit of farmland has imperishable amenity value is absurd.

In the industrial revolution millions of people moved from the countryside to urban areas and cities grew to house them. It wasn’t always pretty but it worked. Especially since the 1970s, however, we have regulated cities so they can’t build up and made it more difficult for land to move from rural to urban uses thereby freezing old systems in place and reducing dynamism. The story varies a little depending on whether we are talking about Portland, San Francisco, Toronto, New York, Mumbai, or London but in broad measures it is remarkably similar around the world.

Addendum: Canada, The Second-Largest Country In The World Is Running Out Of Land illustrates the point.

Do higher minimum wages induce more job search?

In some models job search is just about the posted wage, but I suspect that is the easiest kind of search to do.  In reality, search covers multiple dimensions, for instance wage but also working conditions, such as the comfort of your job post, how much of a jerk the boss is, and so on.

If the minimum wage is hiked, the higher nominal wage will indeed induce more search, because the pecuniary gain from a good match is higher.

That said, a higher minimum wage will to some extent induce employers to lower the non-pecuniary quality of the job.  At the very least, there will be more uncertainty about the non-pecuniary aspects of the job.  Imagine a new job seeker: “I’ve read Gordon Tullock — now I’m wondering if they are going to turn down the air conditioner in the back room where I will be working.”

That uncertainty in fact raises the costs of job search and makes the results of that search less certain.  In this regard, you can think of a higher minimum wage as a tax on job search.

If you think job search is mainly about the posted wage, you won’t be very worried about this affect.  Alternatively, if you think job search is mainly about finding a good match along the non-pecuniary dimensions, you might be very worried about it indeed.  And it will make it harder for minimum wage hikes to boost employment by inducing more labor search.

For this post, I am indebted to a conversation with the excellent Matthew Lilley.

The relationship between religious, civil, and economic freedoms

From Christos Makridis:

This paper studies the relationship between religious liberty and economic freedom. First, three new facts emerge: (a) religious liberty has increased since 1960, but has slipped substantially over the past decade; (b) the countries that experienced the largest declines in religious liberty tend to have greater economic freedom, especially property rights; (c) changes in religious liberty are associated with changes in the allocation of time to religious activities. Second, using a combination of vector autoregressions and dynamic panel methods, improvements in religious liberty tend to precede economic freedom. Finally, increases in religious liberty have a wide array of spillovers that are important determinants of economic freedom and explain the direction of causality. Countries cannot have long-run economic prosperity and freedom without actively allowing for and promoting religious liberty.

Via the excellent Kevin Lewis.

My Conversation with Pierpaolo Barbieri

Here is the audio, visual, and transcript.  Here is part of the summary:

Pierpaolo joined Tyler to discuss why the Mexican banking system only serves 30 percent of Mexicans, which country will be the first to go cashless, the implications of a digital yuan, whether Miami will overtake São Paolo as the tech center of Latin America, how he hopes to make Ualá the Facebook of FinTech, Argentina’s bipolar fiscal policy, his transition from historian to startup founder, the novels of Michel Houellebecq, Nazi economic policy, why you can find amazing and cheap pasta in Argentina, why Jorge Luis Borges might be his favorite philosopher, the advice he’d give to his 18-year-old self, his friendship with Niall Ferguson, the political legacy of the Spanish Civil War, why he stopped sending emails from bed, and more.

Here is just one bit:

COWEN: Why did Argentina’s liberalization attempt under Macri fail?

BARBIERI: That’s a great question. There’s a very big ongoing debate about that. I think that there was a huge divergence between fiscal policy and monetary policy in the first two years of the Macri administration.

The fiscal consolidation was not done fast enough in 2016 and 2017 and then needed to accelerate dramatically after the taper tantrum, if you want to call it, or perceived higher global rates of 2018. So Macri had to run to the IMF and then do a lot of fiscal consolidation — that hadn’t been done in ’16 and ’17 — in’18 and ’19. Ultimately, that’s why he lost the election.

Generally speaking, that’s the short-term electoral answer. There’s a wider answer, which is that I think that many of the deep reforms that Argentina needed lack wide consensus. So I think there’s no question that Argentina needs to modify how the state spends money and its propensity to have larger fiscal deficits that eventually need to be monetized. Then we restart the process.

There’s a great scholar locally, Pablo Gerchunoff, who’s written a very good paper that analyzes Argentine economic history since the 1950s and shows how we move very schizophrenically between two models, one with a high exchange rate, where we all want to export a lot, and then when elections approach, people want a stronger local currency so that we can import a lot and feel richer.

The two models don’t have a wide acceptance on what are the reforms that are needed. I think that, in retrospect, Macri would say that he didn’t seek enough of a wider backing for the kind of reforms that he needed to enact — like Spain did in 1975, if you will, or Chile did after Pinochet — having some basic agreements with the opposition that would outlive a defeat in the elections.

And:

COWEN: The best movie from Argentina — is it Nine QueensNueve reinas?

BARBIERI: It is a strong contender, but I would think El secreto de sus ojos, The Secret in Their Eyes, is my favorite film about Argentina because of what it says about the very difficult period of modernization, and in particular, the horrors of the last military regime that marked us so much that it still defines our politics 50 years since.

Recommended.

Born to be Managers?

The paper’s subtitle is “Genetic Links between Risk-Taking and the Likelihood of Holding Managerial Positions.”  It is hard for me to verify or assess this kind of result, but I pass it along for its interest:

Do genes determine who will become managers? Using the UK Biobank data, we study the phenotypic and genetic correlations between the likelihood of holding managerial positions and physical, cognitive, and mental health traits (n = 297,591). Among all traits we examine, general risk tolerance and risky behaviors (e.g., automobile speeding and the number of sexual partners) have the strongest phenotypic and genetic correlations with holding managerial positions. For example, the genetic correlation between automobile speeding and being managers is 0.39 (P = 3.94E-16). Additionally, the genetic correlations between risk-taking traits and being managers are stronger for females. Genome-wide association study (GWAS) shows holding managerial positions is associated with rs7035099 (ZNF618, 9q32), which has been linked to risk tolerance and adventurousness. Overall, our results suggest individuals with risk-taking-related genes are more likely to become managers. To the best of our knowledge, this paper is the first GWAS of the genetic effects on leadership.

That is from a new paper by Jinjie Lin and Bingxin Zhao.  Via a loyal MR reader.

It feels like we are living in a science fiction novel

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

Now, for the first time in my life, I feel like I am living in a science fiction serial.

The break point was China’s landing of an exploratory vehicle on Mars. It’s not just the mere fact of it, as China was one of the world’s poorest countries until relatively recently. It’s that the vehicle contains a remarkable assemblage of software and artificial intelligence devices, not to mention lasers and ground-penetrating radar.

There is a series of science fiction novels about China in which it colonizes Mars. Published between 1988 and 1999, David Wingrove’s Chung Kuo series is set 200 years in the future. It describes a corrupt and repressive China that rules the world and enforces rigid racial hierarchies.

It is striking to read the review of the book published in the New York Times in 1990. It notes that in the book “the Chinese somehow regained their sense of purpose in the latter half of the 21st century” — which hardly sounds like science fiction, the only question at this point being why it might have taken them so long. The book is judged unrealistic and objectionable because its “vision of a Chinese-dominated future seems arbitrary, ungrounded in historical process.” The Chung Kuo books don’t reflect my predictions either, but it does seem that reality has exceeded the vision of at least one book critic.

I also consider Asimov, Dogecoin, and Stephenson at the link.

The question about secular stagnation that always has bugged me

I have never understood how savings is supposed to remain above investment for extended periods of time.  In a recent Op-Ed, Krugman summed up the secular stagnation view nicely, but you will find similar claims all over:

To maintain full employment, a market economy must persuade businesses to invest all the money households want to save.

If the demand to investment is so low, why don’t the prices of investment goods fall, thereby increasing the marginal return to new investment?  (I do get why the zero lower bound may limit the ability of interest rates to fall).  That would then equilibrate planned savings and planned investment once again and eliminate the savings overhand.  Of course price stickiness may prevent this from happening in the short run, but secular stagnation is a longer run theory.

This point resembles Hayek’s response to Foster and Catchings way back when.  Has it been answered?

News You Can Use

1. Popular wisdom says the second cheapest bottle of wine has the biggest markup because no one wants to look like a cheapskate and buy the cheapest bottle and restaurants take advantage of that tendency to markup the second cheapest bottle relatively more so it’s a poor value. Popular wisdom is wrong according to an analysis of wines at London restaurants. Peak markup is near the middle. Buying by the glass is also ok.

2. How to cook cicadas. An entire cookbook, albeit a short one. No word on what wine pairs well with cicada.

3. The Invisible Graveyard: A Conversation with Economist Alex Tabarrok a good podcast with with physicians in training Mitch and Daniel Belkin. You may also be interested in Metformin and the Biology of Aging with Nir Barzilai.

4. 1729–earn Bitcoin for completing tasks & tutorials. Balaji Srinivasan’s newsletter that pays readers. 1729, a very interesting number and an effort to bootstrap the community and technology to eventually deliver online countries. Here’s a good winning entry, a review of Balaji’s essay Founding vs. Inheriting.