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.

Why don’t they compose music like Bach any more?

by  Tyler Cowen in

Well, they do, or at least they did once.  I am thinking of a recent recording by Nikolaus Matthes, namely Markus Passion, which fills 3 compact discs and sounds remarkably like a Passion from Bach’s time.  It could even be by Bach.  The text is from the time of Bach.  Yet Matthes was born in 1981.

To be clear, it does not rival Bach’s best work, but I have no problems comparing it to a median Bach cantata, which still is pretty good.  It is also better than many of the works by Bach’s contemporaries, including the better-known ones.

And yet no one cares.  Have you heard of this work before?  How many times will you hear of it from now on?

Perhaps you doubt my judgment as to the quality of this work?  Well, you might check out Fanfare, the world’s number one classical music review outlet.  Fanfare gives the work six distinct reviews.

Colin Clarke for instance wrote: “But does it work?  Absolutely.  This is the most remarkable Baroque music of our time — by which I mean this does not feel like the 21st century looking back, instead, it feels as if it were written back in Bach’s time, with the exception of the odd detour forwards.  Most of the time, it could be music written by Bach himself, and I can offer no higher praise to Matthes’s achievement.”

Or from David Cutler: “…Matthes has accomplished something marvelous.  It has more than a hint of Bach, but is it Bach?  The jury must be out on that, but is that not the idea?”

James A. Altena writes: “In sum, both the work itself and this performance are a complete triumph, and do full and worthy honor to Bach.  I cannot think of higher praise than that.”

All the reviewers are very positive, as was a composer friend of mine who listened to the piece.  The home page for the work offers further positive reviews.  And no, I don’t like Prokofiev’s “Classical” Symphony.

You can buy it on German Amazon, and a few other places, streaming links here.

I feel I need to update some of my views on aesthetics, I am just not sure which ones.  And who exactly is Matthes?  Is this another Ossian thing, or rather the inverse?

Emergent Ventures 35th cohort

by  Tyler Cowen in

Luke Strathmann, Brooklyn, to pursue projects related to economics and comedy.

Tanvi Reddy, Austin, neural implants.

Guillaume Blanc, Manchester/Provence, to study fertility and the demographic transition.

Pedro Aldighieri, Northwestern, RiodJ, LLMs and progress in science.

Inayi Folarin Iman, London,  “The Equiano Project, a UK-based charity that promotes freedom of speech and open dialogue on matters of race, identity and culture.”

Ayan Ansari, Greenville, SC, to run a web lab project for his high school.

Henry Bass, 15, Stowe, Vermont, to live in the Bay Area, work on computer projects.

Janna Lu, GMU/Singapore, to visit SF and tech/ai events, with an economics background.

Lyman Stone, Lexington, Kentucky, and Institute for Family Studies, to study and promote ideas of pro-natalism.

Thanosan Prathifkumar, 16, Brampton, Ontario, AI and the monitoring of plants.

Naime Hoxha, Pristina, Kosovo, to find and train young talent in Kosovo.

Kushal Thaman, Stanford, AI studies.

Theo Jaffee, podcasting, San Francisco/Florida.

Joseph Jojoe, Columbia, data labeling tools + AI architectures.

Patricia Hurducas, The Hague/Romania, writing, general career support.

And here are previous cohorts of EV winners, just scroll through.

U.S.A. retail fact of the day

by  Tyler Cowen in

At the remaining publicly listed department stores, credit cards — rather than retail sales — now generate a surprisingly large chunk of profits. Credit income accounted for about 47 per cent and 66 per cent, respectively, of Nordstrom’s and Kohl’s operating income last year, according to Bank of America Global Research. At Macy’s, the figure was about 55 per cent in 2022, said Citigroup.

Here is more from Lex at the FT.