Honduras and its disputes
More importantly, Honduras is not just locked in a dispute with Silicon Valley billionaires, as the authors would lead you to believe. Other claimants against Honduras at the International Center for the Settlement of Investment Disputes (ICSID) include the Paiz family, one of the wealthiest in Guatemala, the U.S. bank JPMorgan Chase, and others from Honduras, Panama, Mexico, Chile, Norway, and the Caymans. More claims were brought by private energy companies after Castro’s 2022 reforms pushed out private investment to expand the state’s role in electricity production. Predictably, there are no signs of progress for Honduras’ crippled energy grid. The state-run National Electric Energy Company loses over $30 million every month, with debts amounting to more than 10 percent of Honduran GDP.
This is to say that Honduras’ current feud with Próspera is part of a pattern of reneging on obligations to investors and expanding state influence, not a one-time rectification of a coup by Silicon Valley billionaires.
Equally absent the article is any mention that the supposedly “center-left” Castro is a self-proclaimed socialist strongly aligned with Venezuela and, in shirking foreign investors and the US, following in its footsteps quite neatly. Castro has indeed gone so far as to remove Honduras from the ICSID over the massive list of outstanding claims against it—a move familiar to Venezuela, which left in 2012. The Honduran government’s rationale—that the ICSID favors corporations instead of states—is the same that Venezuela used. The practical effects of this move are limited, but the symbolic ones are meaningful. Honduras is branding itself as a bad place to do business.
Here is more from Snowden Todd.
France frozen croissant fact of the day
In France, frozen products accounted for 24 per cent of all pastries and other sweet baked goods in 2021. In the UK 21 per cent of pastries were frozen, compared with 13 per cent in Spain and 17 per cent in the US, according to research groups Gira and Global Market Insights.
Industry researchers have predicted that sales of frozen baked goods, including both bread and pastries, would increase by 7 per cent a year from 2021-26. They said the baked goods market overall, comprising both fresh and frozen food, would expand by just 1-2 per cent a year.
Here is more from Barney Jopson at the FT. The producers of the frozen products, as interviewed in the piece, claim their outputs can pass a blind taste test.
Sunday assorted links
1. Mr. Greedy produced 230 descendants in an era of population collapse, RIP. And there are two Shakers left (NYT).
3. Joe Reid once made a point like this, though not in the context of AI: “advanced artificial intelligence makes the return of secret guild society likely, because the only way of preventing models from learning a skill and automating labor will be a meticulous effort to keep know-how undocumented, closely held, and obscure”
4. Casey Handmer on how entrepreneurship changed how he thinks.
Peer Approval to Address Drug Shortages
Reuters: Mark Cuban’s Cost Plus Drug Company said…that it is working with the U.S. Food and Drug Administration to import and distribute penicillin in the country temporarily….Cuban’s Cost Plus will import Lentocilin brand penicillin powder marketed by Portugal-based Laboratórios Atral S.A.
There are two remarkable items in the above passage. First, there is a shortage of penicillin in the United States! Crazy. The second remarkable item is that the FDA has authorized the temporary importation of penicillin from Portugal. In other words, the FDA will accept the EMA’s authorization of penicillin as equivalent to its own, at least for the purposes of alleviating the shortage. That’s good. What is needed, however, is a more permanent form of peer-approval.
I have long advocated for peer approval or reciprocity for any drug or device approved in a peer country but notice that this form of peer approval is only for drugs already approved in the United States. Thus, the approval is really only for labeling and manufacturing, a pretty small ask.
Peer approval for imports would also help to discipline domestic firms who sometimes take advantage of monopoly power to jack up prices. Indeed, you may recall Martin Shkreli and the massive price increases for Daraprim (Pyrimethamine) to $750 a pill when the same pill was available in Europe for $1 or less and in India for 10 cents. Importation would have solved that problem entirely.
Elite Human Capital Is Not Just IQ
Here is a very good response to readers’ questions essay by Richard Hanania, excerpt:
Although EHC [elite human capital] types can make a lot of mistakes, it’s inevitable that they will rule and it’s mostly a good thing that they do. I think a society where most elites could stomach someone like Trump would have so much corruption that it would head towards collapse. This is why conservatives cannot build scientific institutions, and only a very small number of credible journalistic outlets. Right-wingers are discriminated against in academia and the media, but they mostly aren’t in these professions because they select out of them, since they lack intellectual curiosity and a concern for truth. If it doesn’t make them money or flatter their ego in a very simplistic way — in contrast to the more complicated and morally substantive ways in which liberals improve their own self-esteem — conservatives are not interested.
Conservatives complain about liberals “virtue signalling,” but one way to avoid that is to not care about virtue at all. And only by forsaking any ideals higher than “destroy the enemy” can a movement fall in line behind someone like Donald Trump. As already mentioned, I think that markets are counterintuitive to people, and Western civilization has done a good job of giving the entrepreneur his due. That said, EHC is a necessary part of any functioning civilization, and I see my job as helping to make it liberal rather than leftist. A truly conservative EHC class is something close to an oxymoron, since the first things smart people do when they begin to use reason are reject religion in public life and expand their moral circle.
The piece covers other issues as well.
Mental health trajectories in the UK
Yes, there is a human capital crisis of sorts:
We show the incidence of mental ill-health has been rising especially among the young in the years and especially so in Scotland. The incidence of mental ill-health among young men in particular, started rising in 2008 with the onset of the Great Recession and for young women around 2012. The age profile of mental ill-health shifts to the left, over time, such that the peak of depression shifts from mid-life, when people are in their late 40s and early 50s, around the time of the Great Recession, to one’s early to mid-20s in 2023. These trends are much more pronounced if one drops the large number of proxy respondents in the UK Labour Force Surveys, indicating fellow family members understate the poor mental health of respondents, especially if those respondents are young. We report consistent evidence from the Scottish Health Surveys and UK samples from Eurobarometer surveys. Our findings are consistent with those for the United States and suggest that, although smartphone technologies may be closely correlated with a decline in young people’s mental health, increases in mental ill-health in the UK from the late 1990s suggest other factors must also be at play.
That is from a new NBER working paper by David G. Blanchflower, Alex Bryson, and David N.F. Bell. By the way, on the “smart phone causality” issue, here are some recent musings. And a response, and a response to that.
Note that in my rough, first-order human capital hypothesis, the variance is rising. So the top achievers are considerably more impressive, but that also means the number of problematic cases, toward the bottom of the distribution, is rising as well.
Saturday assorted links
*Religious Influences on Economic Thinking*
The subtitle is The Origins of Modern Economics, and the author is Benjamin M. Friedman. Here is the book’s home page, you can order here. I very much look forward to reading this one. Here is my earlier CWT with Ben Friedman.
The Affordable Rent Act
Bloomberg: Moraal is among the growing number of Dutch people struggling to find a rental property after a new law designed to make homes more affordable ended up aggravating a housing shortage. Aiming to protect low-income tenants, the government in July imposed rent controls on thousands of homes, introducing a system of rating properties based on factors such as condition, size and energy efficiency. The Affordable Rent Act introduced rent controls on 300,000 units, moving them out of the unregulated market.
The Affordable Rent Act is like anything named the Democratic People’s Republic, you just know it ain’t so.
Addendum: Yes, the Einstein quote is fake. Today, I am in a mood and don’t care.
From the comments, on moving to the suburbs
Emergent Ventures, 37th cohort
Nicholas Kruus, 17, Highlands Ranch, CO, poverty alleviation, general career support.
Tobi Shevlane, Oxford, AI and prediction of real world events.
John Gross-Whitaker, Stanford, writing and thinking and career development.
Benjamin Manning, MIT, AI as a tool for doing economic research.
Arden Berg, Western Massachusetts, incoming student at the University of Chicago, philosophy and economics.
Sean Cai and associates, Cornell, using AI to improve the information content of musical notation.
Nicholas Decker, George Mason University, economics Ph.D student, to write his Substack and general career development.
Tim Mak, Kyiv, originally McGill, developing a periodical to cover business and defense developments in Ukraine.
Jack Wiseman, London, “A workspace for life sciences, hardware/robotics, and AI research in London for young scientists/technologists.”
Zeaus Koh, 17, Singapore, general career support, bio and AI.
Nathan J. Zhao, Stanford, general career support.
Naila Moloo, 18, Ottawa and Chapel Hill, turning duckweed into bioplastics.
Marina Lin, McLean, VA, high school, biological approaches to hard-NP problems, t cover possible publication costs.
Pablo Cobo Pérez, Córdoba, Spain, 16, programming and AI, to finance a trip to San Francisco.
Jon Hartley, Hoover and Stanford, gather data on how LLMs are used in workplaces.
Sean Keyes, Progress Ireland, to study Irish policy issues, and for travel and fact-finding missions.
Luke Marks, Australia, general career support and AI, to visit the Bay Area.
Janet Guo, MIT and New Zealand, longevity research.
Tejas Chakrapani, 16, Basking Ridge, NJ, general career support for efforts in tech.
Rohit Kulkarni, 17, Chantilly, VA, AI and biology.
Ricardo López Cordero, Mexico City, podcast on Mexican intellectual life.
Ekaterina Leksina, University of Warwick, mathematical biology.
Another zero lower bound prediction bites the dust
Popular New Keynesian macroeconomic models predict that cuts in various types of distortionary taxes are contractionary when monetary policy is constrained at the zero lower bound. We turn to a long span of history in the United Kingdom to test this hypothesis. Using a new long-run dataset of narrative-identified tax changes from 1918to 2020, we show that tax cuts are expansionary in both low interest rate environments and in more normal times. We also do not find evidence of a deflationary spiral in the response of inflation or real rates at the ZLB, suggesting a limited role for intertemporal substitution. We highlight a number of alternative mechanisms that can help rationalize our findings. Our results suggest that tax cuts may still be a useful tool to stimulate economic activity during periods when monetary policy is constrained.
That is from a recent paper by James Cloyne, Nicholas Dimsdale, and Patrick Hürtgen, forthcoming in the JPE.
With Russ Roberts, on Vassily Grossman
Russ tweets:
In about two months I will be discussing Life and Fate by Vasily Grossman with @tylercowen on our respective podcasts. Read along with us if you’d like. 872 pages so start soon. It starts slowly. Just gets better and better.
So what should Russ and I talk about, and here I am asking for Grossman-related queries and content only?
Friday assorted links
1. Why is India so bad at sport? (FT)
2. Review of Olivier Roy on culture.
3. Strong ratings for Reflection 70B, a new open source model.
5. I heard this song on satellite radio yesterday — does anyone still think about these guys?
6. When South Africa banned alcohol sales.
Why Don’t We Have Flying Cars?
In the 1970s the general aviation aircraft industry was selling 15,000 or more aircraft a year but that number fell by a factor of about 10 in the early 1980s. What happened? One factor was a massive increase in tort liability as discussed in my paper with Eric Helland, Product Liability and Moral Hazard: Evidence from General Aviation. Another factor was ever-increasing FAA regulation.
But Max Tabarrok raises an interesting puzzle. It’s not at all obvious that the regulation of personal aircraft has been more strict than that of automobiles. So why the big difference in outcomes? There is, however, one small but potentially very important difference between the regulation of cars and aircraft.
By far the costliest part of the FAA’s regulation is not any particular standard imposed on pilot training, liability, or aircraft safety, but a slight shift in the grammatical tense of all these rules. The Department of Transportation (DOT) sets strict safety requirements for cars, but manufacturers are allowed to release new designs without first getting the DOT to sign off that all the requirements have been satisfied. The law is enforced ex post, and the government will impose recalls and fines when manufacturers fail to follow the law.
The FAA, by contrast, enforces all of its safety rules ex ante. Before aircraft manufacturers can do anything with a design, they have to get the FAA’s signoff, which can take more than a decade. This regulatory approach also makes the FAA far more risk-averse, since any problems with an aircraft after release are blamed on the FAA’s failure to catch them. With ex post enforcement, the companies that failed to follow the law would be blamed, and the FAA rewarded, for enforcing recall.
This subtle difference in the ordering of legal enforcement is the major cause of the stagnation of aircraft design and manufacturing.
In some ways, this is an optimistic message, since it illuminates an attractive political compromise: keep all of the safety standards on airplanes exactly as they are, but enforce these standards like they’re enforced with cars—i.e., through post-market surveillance, recall, and punishment. This small change would reinvigorate the general aviation industry, putting it back on the exponential trend upwards that it lost 50 years ago.
Here is the link.