*Big Business: A Love Letter to an American Anti-Hero*, publication day

I view this work as an antidote to many of the less than stellar arguments circulating today.  It looks like this:

Table of contents

1. A new pro-business manifesto

2. Are businesses more fraudulent than the rest of us?

3. Are CEOs paid too much?

4. Is work fun?

5. How monopolistic is American big business?

6. Are the big tech companies evil?

7. What is Wall Street good for, anyway?

8. Crony capitalism: How much does big business control the American government?

9. If business is so good, why is it disliked?

Here is part of the Amazon description:

An against-the-grain polemic on American capitalism from New York Times bestselling author Tyler Cowen.

We love to hate the 800-pound gorilla. Walmart and Amazon destroy communities and small businesses. Facebook turns us into addicts while putting our personal data at risk. From skeptical politicians like Bernie Sanders who, at a 2016 presidential campaign rally said, “If a bank is too big to fail, it is too big to exist,” to millennials, only 42 percent of whom support capitalism, belief in big business is at an all-time low. But are big companies inherently evil? If business is so bad, why does it remain so integral to the basic functioning of America? Economist and bestselling author Tyler Cowen says our biggest problem is that we don’t love business enough.

In Big Business, Cowen puts forth an impassioned defense of corporations and their essential role in a balanced, productive, and progressive society. He dismantles common misconceptions and untangles conflicting intuitions.

You can pre-order here on Amazon.  Here at Barnes & Noble.  Here at Books a Million.  Here at Itunes.  Here at IndieBound.  From PlayGoogle.  From Kobo.

Here is the publisher’s home page.  Definitely recommended…and if you are a regular MR reader, no more than five to ten percent of this book has already appeared on this blog.

Genes, income, and happiness

Significant differences between genetic correlations indicated that, the genetic variants associated with income are related to better mental health than those linked to educational attainment (another commonly-used marker of SEP). Finally, we were able to predict 2.5% of income differences using genetic data alone in an independent sample. These results are important for understanding the observed socioeconomic inequalities in Great Britain today.

That is from a new paper by W. David Hill, et.al.  And from Abdel Abdellouai’s summary:

Educational attainment shows a larger genetic overlap with subjective wellbeing than IQ does (rgs = .11 & .03, respectively), while income shows a larger genetic overlap with subjective wellbeing than both education or IQ (rg = .32).

All via Richard Harper.

Using Nature to Understand Nurture

An excellent new working paper uses genetic markers for educational attainment to track students through the high school math curriculum to better understand the role of nature, nurture and their interaction in math attainment. The paper begins with an earlier genome wide association study (GWAS) of 1.1 million people that found that a polygenic score could be used to (modestly) predict college completion rates. Panel (a) in the figure at right shows how college completion is five times higher in individuals with an education polygenic score (ed-PGS) in the highest quintile compared to individuals with scores in the lowest quintile; panel b shows that ed-PGS is at least as good as household income at predicting college attainment but not quite as good as knowing the educational level of the parents.

Of the million plus individuals with ed-PGS, some 3,635 came from European-heritage individuals who were entering US high school students in 1994-1995 (the Add Health sample). Harden, Domingue et al. take the ed-PGS of these individuals and match them up with data from their high school curricula and their student transcripts.

What they find is math attainment is a combination of nature and nurture. First, students with higher ed-PGS are more likely to be tracked into advanced math classes beginning in grade 9. (Higher ed-PGS scores are also associated with higher socio-economic status families and schools but these differences persist even after controlling for family and school SES or looking only at variation within schools.) Higher ed-PGS also predicts math persistence in the following years. The following diagram tracks high ed-PGS (blue) with lower ed-PGS (brown) over high school curricula/years and post high-school. Note that by grade 9 there is substantial tracking and some cross-over but mostly (it appears to me) in high-PGS students who fall off-track (note in particular the big drop off of blue students from Pre-Calculus to None in Grade 12).

Nature, however, is modified by nurture. “Students had higher returns to their genetic propensities for educational attainment in higher-status schools.” Higher ed-PGS students in lower SES schools were less likely to be tracked into higher-math classes and lower-SES students were less likely to persist in such classes.

It would be a mistake, however, to conclude that higher-SES schools are uniformly better without understanding the tradoffs. Lower SES schools have fewer high-ability students which makes it difficult to run advanced math classes. Perhaps the lesson here is that bigger schools are better, particularly bigger schools in poorer SES districts. A big school in a low SES district can still afford an advanced math curriculum.

The authors also suggest that more students could take advanced math classes. Even among the top 2% of students as measured by ed-PGS only 31% took Calculus in the high-SES schools and only 24% in the low SES schools.It’s not clear to me, however, that high-PGS necessitates high math achievement. Notice that many high-PGS students take pre-calc in Grade 11 but then no math in Grade 12 but they still go on to college and masters degrees. Lots of highly educated people are not highly-educated in math. Still it wouldn’t be a surprise if there were more math talent in the pool.

There is plenty to criticize in the paper. The measure of SES status by school (average mother’s educational attainment) leaves something to be desired. Moreover, there are indirect genetic effects, which the authors understand and discuss but don’t have the data to test. An indirect genetic effect occurs when a gene shared by parent and child has no direct effect on educational capacity (i.e. it’s not a gene for say neuronal development) but has an indirect “effect” because it is correlated with something that parent’s with that gene do to modify the environment of their children. Nevertheless, genes do have direct effects and this paper forces us to acknowledge that behavioral genetics has implications for policy.

Should every student be genotyped and tracked? On the one hand, that sounds horrible. On the other hand, it would identify more students of high ability, especially from low SES backgrounds. Genetics tells us something about a student’s potential and shouldn’t we try to maximize potential?

For homework, work out the equilibrium for inequality, rewatch the criminally underrated GATTACA and for an even more horrifying picture of the future, pay careful attention to the Mirrlees model of optimal income taxation.

Bryan Caplan *Open Borders* launch day

From Bryan:

Dear friends: Monday, April 8 isn’t just my birthday.  It’s also the official launch date for *Open Borders*!

URL for ordering the book: https://www.amazon.com/gp/product/1250316960/ref=as_li_tl?ie=UTF8&camp=1789&creative=9325&creativeASIN=1250316960&linkCode=as2&tag=bryacaplwebp-20&linkId=1ed2cdfe4a1c0cd2a62e942a39f87b9d

URL for an introductory post on the book: https://www.econlib.org/pre-order-open-borders-the-science-and-ethics-of-immigration/

U.S.A. fact of the day, *Jump-Starting America*

The United States, as of 2014, spends 160 times as much exploring space as it does exploring the oceans.

That is from the new and interesting Jump-Starting America: How Breakthrough Science Can Revive Economic Growth and the American Dream, by Jonathan Gruber and Simon Johnson, two very eminent economists.  And if you are wondering, I believe those numbers are referring to government efforts, not the private sector.  I am myself much more optimistic about the economic prospects for the oceans than for outer space.

Most of all this book is a plea for radically expanded government research and development, and a return to “big science” projects.

Overall, books on this topic tend to be cliche-ridden paperweights, but I found enough substance in this one to keep me interested.  I do, however, have two complaints.  First, the book promotes a “side tune” of a naive regionalism: “here are all the areas that could be brought back by science subsidies.”  Well, maybe, but it isn’t demonstrated that such areas could be brought back in general, as opposed to reshuffling funds and resources, and besides isn’t that a separate book topic anyway?  Second, too often the book accepts the conventional wisdom about too many topics.  Was the decline of science funding really just a matter of will?  Is it not at least possible that federal funding of science fell because the return to science fell?  Curing cancer seems to be really hard.  Furthermore, some of the underlying problems are institutional: how do we undo the bureaucratization of society so that the social returns to science can rise higher again?  Will a big government money-throwing program achieve that end?  Maybe, but the answers on that one are far from obvious.  This is too much a book of levers — money levers at that — rather than a book on complex systems.  I would prefer a real discussion of how today science has somehow become culturally weird, compared say to Mr. Spock and The Professor on Gilligan’s Island.  The grants keep on going to older and older people, and we are throwing more and more inputs at problems to get at best diminishing returns.  Help!

Still, I read the whole thing through with great interest, and it covers some of the very most important topics.

U.S.A. fact of the day

As President Trump threatened to shut down the U.S.-Mexico border in recent days, his Department of Homeland Security nearly doubled the number of temporary guest worker visas available this summer.

The Homeland Security and Labor departments plan to grant an additional 30,000 H-2B visas this summer on top of the 33,000 they had already planned to give out, the agencies confirmed.

The H-2B visa allows foreign workers to come to the United States legally and work for several months at companies such as landscapers, amusement parks or hotels. About 80 percent of these visas went to people from Mexico and Central America last year, government data shows…

With the additional visas, the Trump administration is on track to grant 96,000 H-2B visas this fiscal year, the most since 2007, when George W. Bush was president.

Here is more by Heather Long at WaPo, via Anecdotal.

Why is insulin so expensive?

Why aren’t we seeing more companies making insulin? There are many reasons for this, but patent evergreening is a big one. Patents give a person or organization a monopoly on a particular invention for a specific period of time. In the USA, it is generally 20 years. Humalog, Lantus and other previous generation insulins are now off patent, as are even older animal based insulins. So what’s going on? Pharmaceutical companies take advantage of loopholes in the U.S. patent system to build thickets of patents around their drugs which will make them last much longer (evergreening). This prevents competition and can keep prices high for decades. Our friends at I-MAK recently showed that Sanofi, the maker of Lantus, is no exception. Sanofi has filed 74 patent applications on Lantus alone, that means Sanofi has created the potential for a competition-free monopoly for 37 years.

More here, and yes there are a multiple of reasons, not just that one.  Such as this:

… it is actually legal for one insulin producer to pay another one not to enter the market. A few years ago the company Merck announced plans to sell a biosimilar version of Sanofi’s Lantus. Sanofi sued, and eventually Merck announced that it was no longer pursuing it’s biosimilar, presumably due to payments from Sanofi to stay away.

Here is another relevant source.  And this:

…Sanofi has filed lawsuits against both Merck and Mylan to prevent them from going to market with a generic lantus insulin (the Sanofi blockbuster drug).

Here is Vox coverage.  Furthermore, fewer restrictions on foreign importation could solve much of the problem:

According to the Food and Drug Administration, “in most circumstances, it is illegal for individuals to import drugs into the United States for personal use.”

New bills by Peter Welch, Elijah Cummings, and Bernie Sanders would ease those restraints.  It seems easy enough to address this problem without having systematic government purchases of pharmaceuticals.  Insulin prices have risen as much as threefold over the last ten years, but that doesn’t have to be the case.

Saturday assorted links

How much would a wealth tax raise?

From Larry Summers and Natasha Sarin:

We reasoned as follows: The existing estate tax is a wealth tax levied at the time of death. If 2 percent of wealthy families experience a death and intergenerational transfer (rather than a spousal transfer) each year, then the current 40 percent estate tax should roughly be the equivalent of a wealth tax of 40 percent multiplied by 2 percent — or a 0.8 percent wealth tax — assuming equivalent definitions of wealth and the same threshold for taxation. Since most wealth is held by fairly elderly people, and the mortality rate of 70-year-olds is above 2 percent, we suspect that 2 percent mortality is a conservative estimate. So the actual wealth-tax equivalent of the estate tax is likely greater than 0.8 percent.

The IRS reports that for 2017, the most recent year for which data is available, the estate tax raised around $10 billion from estates over $50 million — and this included tax collected on the first $50 million of estate tax value, so it overestimates the conceptually appropriate figure. Therefore, if this is what the revenue yield would be from a 0.8 percent wealth tax, the implication is that a 2 percent wealth tax would raise a total of $25 billion. That’s around one-eighth of the Saez and Zucman estimate.

There is much more of interest at the link.

The case for regional-based, heartland visas

• U.S. population growth has fallen to 80-year lows. The country now adds approximately 900,000 fewer people each year than it did in the early 2000s.

• The last decade marks the first time in the past century that the United States has experienced low population growth and low prime working age growth on a sustained basis at the same time.

• Uneven population growth is leaving more places behind. 86% of counties now grow more slowly than the nation as a whole, up from 64% in the 1990s.

• In total, 61 million Americans live in counties with stagnant or shrinking populations and 38 million live in the 41% of U.S. counties experiencing rates of demographic decline similar to Japan’s.

• 80% of U.S. counties, home to 149 million Americans, lost prime working age adults from 2007 to 2017, and 65% will again over the next decade.

• By 2037, two-thirds of U.S. counties will contain fewer prime working age adults than they did in 1997, even though the country will add 24.1 million prime working age adults and 98.8 million people in total over that same period.

• Population decline affects communities in every state. Half of U.S. states lost prime working age adults from 2007-2017. 43% of counties in the average state lost population in that same time period, and 76% lost prime working age adults.

• Shrinking places are also aging the most rapidly. By 2027, 26% of the population in the fastest shrinking counties will be 65 and older compared to 20% nationwide.

• Population loss is hitting many places with already weak socioeconomic foundations. The share of the adult population with at least a bachelor’s degree in the bottom decile of population loss is half that in the top decile of population growth. Educational attainment in the fastest shrinking counties is on average equivalent to that of Mexico today or the United States in 1978.

• Population loss itself perpetuates economic decline. Its deleterious effects on housing markets, local government finances, productivity, and dynamism make it harder for communities to bounce back. For example, this analysis found that a 1 percentage point decline in a county’s population growth rate is associated with a 2-3 percentage point decline in its startup rate over the past decade.

That is the opening of a new study by Adam Ozimek of Moody’s Analytics with Kenan Fikri and John Lettieri of Economic Innovation Group.

Friday assorted links

Has the time for income-sharing arrived?

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

To be sure, there are problems with the idea of equitizing human capital. For instance, what if less talented, less hard-working individuals turn out to be the most likely to sign away part of their future income? That creates a problem that economists call “adverse selection.” This is a real issue, but it hasn’t stopped companies from selling equity and startups from selling venture capital shares. As for the students, due diligence and talent measurement may suffice to identify enough good students with bright prospects.

There are also genuine questions about how far this model can be extended. The demand for labor is robust in information technology, but would a similar system work for philosophy professors or prospective musicians? In both cases incomes are undoubtedly lower, motivations non-pecuniary, and the chances for real success more remote. The company Pando Pooling, meanwhile, is trying equitization with minor league baseball players. The importance of raw baseball talent may be so paramount, however, that companies cannot much improve the labor market prospects of their clients.

Note also that we already equitize each other’s labor in many non-explicit, non-corporate ways. If two economists write a paper together, for example, each is tying his or her fate somewhat to the other. And if two people in business decide to share networks or trade favors, each has a stake in the success of the other.

The piece also consider Lambda School in San Francisco as an institution trying to operationalize this practice.