The California tax burden is driving people out
That is the topic of my latest Bloomberg column, here is one bit:
California’s highest income tax rate is 13.3%. That is in addition to a top federal tax rate of 37%. California also has a state sales tax rate of 7.25%, and many localities impose a smaller sales tax. So if a wealthy person earns and spends labor income in the state of California, the tax rate at the margin could approach 60%. Then there is the corporate state income tax rate of 8.84%, some of which is passed along to consumers through higher prices. That increases the tax burden further yet.
And this:
Researchers Joshua Rauh and Ryan Shyu, currently and formerly at Stanford business school, have studied the behavioral response to Proposition 30, which boosted California’s marginal tax rates by up to 3% for high earners for seven years, from 2012 to 2018. They found that in 2013, an additional 0.8% of the top bracket of the residential tax base left the state. That is several times higher than the tax responses usually seen in the data.
These high-earning California residents seem to have reached a tipping point: Maybe many of them could afford the extra tax burden, but at some point they got fed up, read the signals and decided the broader system wasn’t working in their interest.
Overall, Proposition 30 increased total tax revenue for California — but not nearly as much as intended. Due to departures, the state lost more than 45% of its windfall tax revenues from the policy change, and within two years the state lost more than 60% of those same revenues.
Be long energy infrastructure, find the truly scarce input there
Governments around the world are intensifying scrutiny on the building of data centres over fears that their huge energy usage is putting excessive pressure on national climate targets and electricity grids.
Ireland, Germany, Singapore and China as well as a US county and Amsterdam in the Netherlands have introduced restrictions on new data centres in recent years to comply with more stringent environmental requirements.
The threat to new projects is highest in Ireland, a hotspot for server farms built by cloud computing companies such as Google and Microsoft, because of its low tax rate and easy access to high-capacity subsea cables through which global internet traffic is run.
A decision by the country’s energy and water regulator in 2021 to limit new data connections to the electricity grid is now having a “material impact at the ground level”, said Hiral Patel, head of sustainable and thematic research at Barclays and lead author of a report on data centres.
Data centre operators Vantage, EdgeConneX and Equinix had permits for new projects in Dublin rejected by local authorities last year. Ireland’s data centres are set to account for 32 per cent of national electricity demand in 2026, the International Energy Agency forecast last month.
The environmental impact of data centres — huge facilities that hold the servers that create the online storage for the data of millions — has become a growing issue around the world.
Loudoun County in the US state of Virginia, and Germany have recently introduced curbs that include limiting permits for data centres in residential areas, or requiring them to contribute renewable energy to the grid and reuse waste heat.
Here is more from Kenza Bryan at the FT.
Monday assorted links
1. Speculative speculations on how consciousness emerges.
2. The new, forthcoming Neal Stephenson.
3. What Michael Nielsen suggests I ask him.
4. Cousins are disappearing. I have (had?) four of them?
5. “People in the meeting later told others in frustration that his winding process and irritability were making it more difficult to reach decisions about the border.” Brutal throughout.
6. Argentina’s political gender gap is widest among young people.
7. Four different Super Bowl ads incorporated UFO themes. As I once heard from a member of the U.S. military: “Ten years from now, everyone will believe in either demons or aliens.”
Nash’s Contributions to Mathematics
Nash won the Nobel prize in Economics for his 2-page proof of Nash equilibrium, among the slightest of his achievements. Nash’s truly staggering contributions were in his embedding theorems, according to Gromov “one of the main achievements of mathematics of the twentieth century”. In this excellent talk, Cédric Villani gives an accessible guide to these theorems for mere mortals. Villani is a Fields medal winner, a French politician, and a character, all of which adds to the talk.
What I’ve been listening to
Why I don’t like Fischer Random 960
As you may know, a major tournament is going on right now, based on a variant of Fischer Random rules, sometimes misleadingly called “Freestyle.” Subject to some constraints, the pieces are placed into the starting position randomly, so in Fischer Random chess opening preparation is useless. You have to start thinking from move one. This is a big advantage in a game where often the entire contest is absorbed into 20-30 moves of advance opening preparation, with little or no real sporting element appearing over the board.
Yet I don’t like Fischer Random, for a few hard to fix reasons:
1. Most of the time, at least prior to the endgame, I don’t understand what is going on. Even with computer assistance. I could put in five to ten minutes to study the position, and get a sense of the constraints, but as a spectator I don’t want to do that. As a relatively high opportunity cost person, I am not going to do that.
1b. Classical chess sometimes generates positions where one does not really understand what is going on. Then it is thrilling, precisely because it is occasional. A perpetual “fog of war,” as we receive in Fischer Random, just isn’t that thrilling. In the opening, for instance, I don’t even know if one player is attempting “a risky strategy.” I am not sure the player knows either. And I don’t feel that watching more Fischer Random would change that, as there are hundreds of different possible opening positions, mostly with different properties.
2. The younger players have a notable advantage, because they are better at calculating concrete variations and rely less on intuition. (We already see this in the current results.) Experience is simply worth much less in this very novel format. For any one tournament, that is an interesting intrigue. But over time it is a bore, as if only rookies and sophomores could win NBA titles. In fact what spectators enjoy watching is Steph Curry going up against Lebron James, or the analogs in chess. We want to see Magnus meet Fabiano again, not watch two eighteen-year-olds slug it out. Sorry, Pragga! You’ll have your day in the sun.
3. Fischer Random cuts off chess from the rest of its history. That is otherwise a big advantage of chess over many other games and contests. I like seeing that a player’s move is connected to say an idea from Tal in the early 1960s, or whatever. I like “Oh, the Giuoco Piano is making a comeback at top levels,” or “today’s players are more willing to sacrifice the exchange than in the 1970s,” and so on.
4. I get frustrated seeing all those Kings sitting on F1, not able to castle in the traditional sense. There are rules for castling in Fischer Random, but it feels more like pressing the “hyperspace” button in the old Space Invaders video game than anything else. Who wants to see a Knight on C1 for twenty-five moves? Not I.
5. I agree that current opening prep is insanely out of control. I am fine with the remedy of 25-minutes per player Rapid games, or anything in that range, with increment of course. Those contests are consistently exciting and they are not forced draws (you can play something weird against the Petroff, or to begin with) nor are they dominated by prep.
6. If you don’t want to watch Rapid, I would rather randomize the first few opening moves than the placement of the pieces. If you don’t control the first three (seven? ten?) first moves, once again opening prep becomes much tougher. So what if some games start with 1. b4 b6? The resulting position is still playable for both sides and furthermore it still makes intuitive sense to chess spectators. Of course the computers would restrict this randomization to sequences that still are playable for both sides. The very exact nature of current chess opening prep in fact implies you need only a very small change in the rules to disrupt it, not the kind of huge change represented by Fischer Random.
That all said, I am all for experimentation, it’s just that some of them should be strangled in the crib.
Sunday assorted links and stuff
1. Lookism in sentencing decisions.
2. An autonomous vehicle was set on fire by a crowd in San Francisco. In some alternate universe, a small drone would emerge from the burning vehicle and strike them all down.
3. Have you noticed that Michelle Obama was, less than 24 hours ago, up to #3 in the betting markets for likelihood of being the next U.S. President? She was at about 7%. Now it is Gavin Newsom who is #3 at about ten percent. At the same time, the NYT Editorial page, other MSM sources, and Hillary Clinton all seem to be turning on Biden, on the issue of age of course. I would not place too much emphasis on that seven percent number, or that ten percent number, as I suspect there is private information at work here — either private information that Biden is toast, or private information that he isn’t toast. The problem is I don’t know which. Still, this is a live issue.
It is also a good test of public intellectuals. Obviously, the issue is not just about Biden’s current competency (which I cannot judge — articulateness is overrated!), but also a) how the public perceives him, b) how his staff and other countries perceive him, and c) how matters will be four to five years from now, when he is still President, if he is still President. (Start by reading Shakespeare on political leadership.) If you’re defending Biden, for reasons related to your expected value calculations, I hope at least you are being honest with yourself about your Straussianism here. But please do add to your calculations the notion that the American public is pretty fed up with this kind of response from our mainstream political institutions.
One possible lesson here is that our political establishment really cannot coordinate on making needed changes. The other possible lesson is that they can. I am prepared for Bayesian updates, as my status quo assessments by necessity will be disturbed.
4. Susie Essman is a comic genius (NYT).
5. A three-minute clip on how various top chess players walk into a tournament entrance. Can you guess who shows up last?
What should I ask Michael Nielsen?
I will be doing a Conversation with him. No description of Michael quite does him justice, but here is Wikipedia:
Michael Aaron Nielsen (born January 4, 1974) is a quantum physicist, science writer, and computer programming researcher living in San Francisco.
In 1998, Nielsen received his PhD in physics from the University of New Mexico. In 2004, he was recognized as Australia’s “youngest academic” and was awarded a Federation Fellowship at the University of Queensland. During this fellowship, he worked at the Los Alamos National Laboratory, Caltech, and at the Perimeter Institute for Theoretical Physics.
Alongside Isaac Chuang, Nielsen co-authored a popular textbook on quantum computing, which has been cited more than 52,000 times as of July 2023.
In 2007, Nielsen shifted his focus from quantum information and computation to “the development of new tools for scientific collaboration and publication”, including the Polymath project with Timothy Gowers, which aims to facilitate “massively collaborative mathematics.” Besides writing books and essays, he has also given talks about open science. He was a member of the Working Group on Open Data in Science at the Open Knowledge Foundation.
Nielsen is a strong advocate for open science and has written extensively on the subject, including in his book Reinventing Discovery, which was favorably reviewed in Nature and named one of the Financial Times’ best books of 2011.
In 2015 Nielsen published the online textbook Neural Networks and Deep Learning, and joined the Recurse Center as a Research Fellow. He has also been a Research Fellow at Y Combinator Research since 2017.
In 2019, Nielsen collaborated with Andy Matuschak to develop Quantum Computing for the Very Curious, a series of interactive essays explaining quantum computing and quantum mechanics. With Patrick Collison, he researched whether scientific progress is slowing down.
Here is Michael’s Notebook, well worth a browse and also a deeper read. Here is Michael on Twitter. So what should I ask him? (I’m going to ask him about Olaf Stapledon in any case, so no need to mention that.)
Sticky norms
Shanhong Luo, a professor at Fayetteville State University, studies the factors behind attraction between romantic partners, including the norms that govern relationships. In a paper published in 2023 in Psychological Reports, a peer-reviewed journal, Dr. Luo and a team of researchers surveyed 552 heterosexual college students in Wilmington, N.C., and asked them whether they expected men or women to pay for dates — and whether they, as a man or a woman, typically paid more.
The researchers found that young men paid for all or most of the dates around 90 percent of the time, while women paid only about 2 percent (they split around 8 percent of the time). On subsequent dates, splitting the check was more common, though men still paid a majority of the time while women rarely did. Nearly 80 percent of men expected that they would pay on the first date, while just over half of women (55 percent) expected men to pay.
Surprisingly, views on gender norms didn’t make much of a difference: On average, both men and women in the sample expected the man to pay, whether they had more traditional views of gender roles or more progressive ones.
Here is more from the NYT.
How much of our boom has been an immigration boom?
Matt Yglesias directed me to a new CBO report, which confirms that immigration explains the recent GDP boom:
In our projections, the deficit is also smaller than it was last year because economic output is greater, partly as a result of more people working. The labor force in 2033 is larger by 5.2 million people, mostly because of higher net immigration. As a result of those changes in the labor force, we estimate that, from 2023 to 2034, GDP will be greater by about $7 trillion and revenues will be greater by about $1 trillion than they would have been otherwise. We are continuing to assess the implications of immigration for revenues and spending.
Correlations between spouses
Correlations between spouses
Extraversion: r= .005
Neuroticism: .082
Height: .227
Weight: .154
Education: .5
Political party: .6"Mates tend to be positively but weakly concordant on personality and physical traits, but concordance of political attitudes is extremely high" pic.twitter.com/BmdpySfakh
— Rob Henderson (@robkhenderson) February 10, 2024
Saturday assorted links
1. Liverpool man who inherited £100,000 lets 12 strangers give the money away.
2. Jonathan Eaton, RIP. And more on his work in trade economics.
3. ACX grants from Astral Codex. And new African School of Economics coming in Zanzibar.
4. The Monk and the Gun is a fun Bhutanese movie about the foundations of democracy (and markets).
5. Using AI to campaign and deliver your victory speech, while in jail.
6. Another 2014 post on Putin: “Putin is signaling to the Russian economy that it needs to get used to some fairly serious conditions of siege, and food is of course the most important of all commodities. Why initiate such a move now if you are expecting decades of peace and harmony?”
7. John Bruton, RIP (NYT, he negotiated peace with Northern Ireland and also set the corporate income tax rate low in Ireland and designed the referendum that overturned the country’s ban on divorce).
What should I ask Coleman Hughes?
I will be doing a Conversation with him, based in part around his new book The End of Race Politics: Arguments for a Colorblind America. On Coleman more generally, here is Wikipedia:
Coleman Cruz Hughes (born February 25, 1996) is an American writer and podcast host. He was a fellow at the Manhattan Institute for Policy Research and a fellow and contributing editor at their City Journal, and he is the host of the podcast Conversations with Coleman.
Also from Wikipedia:
Hughes began studying violin at age three. He is a hobbyist rapper—in 2021 and 2022, he released several rap singles on YouTube and Spotify, using the moniker COLDXMAN, including a music video for a track titled “Blasphemy”, which appeared in January 2022. Hughes also plays jazz trombone with a Charles Mingus tribute band that plays regularly at the Jazz Standard in New York City.
I saw Coleman perform quite recently, and I can vouch for his musical excellence, including as a singer. So what should I ask Coleman?
Is El Salvador special?
But Bukele copycats and those who believe his model can be replicated far and wide overlook a key point: The conditions that allowed him to wipe out El Salvador’s gangs are unlikely to jointly appear elsewhere in Latin America.
El Salvador’s gangs were unique, and far from the most formidable criminal organizations in the entire region. For decades, a handful of gangs fought one another for control of territory and became socially and politically powerful. But, unlike cartels in Mexico, Colombia and Brazil, El Salvador’s gangs weren’t big players in the global drug trade and focused more on extortion. Compared to these other groups, they were poorly financed and not as heavily armed.
Mr. Bukele started to deactivate the gangs by negotiating with their leaders, according to Salvadoran investigative journalists and a criminal investigation led by a former attorney general. (The government denies this.) When Mr. Bukele then arrested their foot soldiers in large sweeps that landed many innocent people in prison, the gangs collapsed.
It would not be such a simple story elsewhere in Latin America, where criminal organizations are wealthier, more internationally connected and much better armed than El Salvador’s gangs once were. When other governments in the region have tried to take down gang and cartel leaders, these groups haven’t simply crumbled. They have fought back, or new criminal groups have quickly filled the void, drawn by the drug trade’s huge profits. Pablo Escobar’s war on the state in 1980s-90s Colombia, the backlash by cartels to Mexican law enforcement activity since the mid-2000s, and the violent response to Ecuador’s government’s recent moves against gangs are just a few examples.
El Salvador also had more formidable and professional security forces, committed to crushing the gangs when Mr. Bukele called on them, than some of its neighbors. Take Honduras, where gang-sponsored corruption among security forces apparently runs deep. That helped doom Ms. Castro’s attempts to emulate Mr. Bukele from the start. In other countries, like Mexico, criminal groups have also reportedly managed to co-opt high-ranking members of the military and police. In Venezuela, it has been reported that military officials have run their own drug trafficking operation. Even if presidents send soldiers and police to do Bukele-style mass roundups, security forces may not be prepared, or may have incentives to undermine the task at hand.
Here is more from Will Freeman and (NYT), interesting throughout.
How much does status competition lower Korean fertility?
Using a quantitative heterogeneous-agent model calibrated to Korea, we find that fertility would be 28% higher in the absence of the status externality and that childlessness in the poorest quintile would fall from five to less than one percent. We then explore the effects of various government policies. A pro-natal transfer or an education tax can increase fertility and reduce education spending, with heterogeneous effects across the income distribution. The policy mix that maximizes the current generation’s welfare consists of an education tax of 22% and moderate pro-natal transfers. This would raise average fertility by about 11% and decrease education spending by 39%.
Here is the full paper by Seongeun Kim, Michèle Tertilt, and Minchul Yum. Here is the version forthcoming in the AER.