The Value of De Minimis Imports
Section 321 of the 1930 Tariff Act allows up to $800 in imports per person per day to enter the US duty-free and with minimal customs requirements. Fueled by rising direct-to-consumer trade, these “de minimis” shipments have exploded yet are not recorded in Census trade data. Who benefits from this type of trade, and what are the policy implications? We analyze international shipment data, including de minimisshipments, fromthreeglobalcarriers andUS Customs and Border Protection. Lower-income zip codes are more likely to import de minimis shipments, particularly from China, suggesting that the tariff and administrative fee incidence in direct-to-consumer trade is pro-poor. Theoretically, imposing tariffs above a threshold leads to terms-of-trade gains through bunching, even in a setting with complete pass-through to linear tariffs. Empirically, bunching pins down the demand elasticity for direct shipments. Eliminating §321 would reduce aggregate welfare by $11.8-$14.3 billion and disproportionately hurt lower-income and minority consumers.
That is from a recent paper by Pablo Fajgelbaum and Amit Khandelwal.
Ian Leslie on Olivier Roy and culture
Roy argues that culture in the sense we have understood it is being inexorably eroded. It’s not, as some of his countrymen believe, that one culture is being replaced by another – say, Christianity by Islam. It’s that all culture is being hollowed out by technology, data, globalisation, bureaucracy, and consumerist individualism. Local cultures, in the sense of finely patterned, shared sensibilities, automatically absorbed and deeply felt, are no match for these bulldozing, ‘deculturating’ forces.
We still need shared norms of behaviour in order to function as societies, however. So in place of implicit culture, he says, we have introduced explicit “norms”: rules of behaviour and speech which aren’t felt or intuited but articulated, coded for, and argued over endlessly. Without instinctive standards for behaviour we have to thrash everything out, from the correct use of pronouns to how to behave on public transport or dress for work. “Culture war” implies some kind of profound division between people, but in truth, suggests Roy, our differences are shallow and petty and all the more bad-tempered for it. Scrape away culture and what you’re left with is negotiation. Everything is politics.
Complex, evolved, layered social identities are being replaced by a series of boxes, with freedom consisting of the right to choose your box at any one time (think about the way that sexual identity is coded into an endlessly multiplying series of letters). The oddly shaped flora and fauna of culture have been reduced a series of “tokens” which we buy and display in order to position ourselves versus others. National cuisines, musical genres, styles of dress: these are all just tokens for us to collect and artfully assemble into a personal brand.
Here is the full essay. Here is my earlier post on Roy’s book.
True, false, or uncertain?
Most strategic improvements in sports have been in the direction of increasing variance and living with the (better EV) results:
Baseball: more extra base hits, no more bunting.
Football: more passing game, going for it on 4th.
Golf: driver ball speed increases.
Bball: 3 pointer…
Tennis: bigger serves/groundstrokes.
Snooker: cannoning the pack to extend breaks.
Chess: sub-optimal but niche exploitive lines.
That is from Agustin Lebron. Maybe a lot of the NBA improvements are simply insisting on better defense and fundamentals? And matching player defensive assignments, or five-man rotations, to more closely align with data on historical success?
54 years old….
Look at #4 on this list:
Via Nabeel, source here. And this year India won gold in the men’s and also women’s chess Olympiad, and is favored in December to have Gukesh winning the world championship. By the way, the performance rating of Gukesh at #3 is barely behind Carlsen at #2, at least for this year alone. Those also are (indirectly) accomplishments of Vishy Anand.
Here is my earlier CWT with him.
Sunday assorted links
1. Gukesh 8/9 on Board 1 at the chess Olympiad. I am told Alekhine did 9-0 in 1930, but against much weaker competition.
2. Migrants from developing countries have higher than average incomes.
3. Different features of cognitive achievement and what ages they peak at.
4. David Schmidtz on dining with Nozick (I can endorse his impressions, btw).
Sometimes people are just wrong
The puzzle was that, despite M1 growth in excess of 5 percent during 1970 and 10 percent during the first half of 1971, the engine still continued to sputter. At the June 1971 meeting of the FOMC, the Fed’s chief economist admitted bafflement. “Why is it that the very high recent growth rates of money…fail to produce a satisfactory real performance?” asked Charles Partee.
At the same time, Milton Friedman was writing Arthur Burns and telling him he was “appalled” by the high rates of money growth.
That is from the quite interesting 1998 book Allen J. Matusow, Nixon’s Economy: Booms, Busts, Dollars, and Votes.
I had not known that in 1971, for a while, President Nixon was pushing for a uniform ten percent tax on imports into the United States, and indeed he imposed it temporarily. That was then, this is now…
IP and unrealized capital gains (from my email)
I was thinking about the unrealized cap gains tax after Taylor Swift’s endorsement today and I think I see a new problem distinct from those you and Alex have raised so far. Maybe someone else has pointed this out, but I figured I’d write out the logic and see what you think.
I think there is a big problem of unrealized capital gains in terms of IP.
Much IP is monetized via licenses and royalties that have long term perpetuity like payments that could go up or down based on other market conditions which would directly affect the value of the asset for more than the income growth from the asset.
An example by way of Taylor Swift:
She is expected to make 200M+ off the streaming of her music.
Her music rights would likely be considered an asset. These music rights would likely be valued as a perpetuity or cash flows/ discount rate. Perplexity reported a range of 5-10% as common in the entertainment business meaning Taylor’s current streaming rights are currently worth between 2B and 4B. (200M/.1 and 200M/.05).
If Spotify/Youtube get better at selling ads and increase their reimbursement rate by 10% then Taylor would receive 220M next year and song collection would grow to be worth between 2.2B and 4.4B for an unrealized gain of 200M to 400M.
Taylor would owe 25% tax on this gain or between 50-100M which would be greater than her additional earnings of 20M.
What makes this doubly ironic is, would the federal government force Taylor to sell the rights to her music to pay the cap gains tax?
One thing I forgot to mention is what share of patents in the medical field + copywriters have that sort of payment structure? Where they get a license for a certain future amount of payments. If the stream of payments increases what happens to the unrealized capital gains tax?
There was that baseball player that got paid with that comically large future contract. Is that an asset too?
From Stephen Jonesyoung.
Saturday assorted links
1. Facts about Oregon: “Only 13% of PWUD were aware that all drugs had been decriminalized.”
2. Ghana is back to decent gdp growth (Bloomberg).
3. Honduran Supreme Court moves against ZEDEs.
4. The Antartica ozone hole seems on a path to full recovery?
How has human DNA evolved?
The full title of this paper is “Pervasive findings of directional selection realize the promise of ancient DNA to elucidate human adaptation.” It truly has an all-star cast of authors, including David Reich and Eric S. Lander, and also numerous others at top schools. I did read through this paper, but understood it only in part. In any case, here is the abstract:
We present a method for detecting evidence of natural selection in ancient DNA time-series data that leverages an opportunity not utilized in previous scans: testing for a consistent trend in allele frequency change over time. By applying this to 8433 West Eurasians who lived over the past 14000 years and 6510 contemporary people, we find an order of magnitude more genome-wide significant signals than previous studies: 347 independent loci with >99% probability of selection. Previous work showed that classic hard sweeps driving advantageous mutations to fixation have been rare over the broad span of human evolution, but in the last ten millennia, many hundreds of alleles have been affected by strong directional selection. Discoveries include an increase from ∼0% to ∼20% in 4000 years for the major risk factor for celiac disease at HLA-DQB1; a rise from ∼0% to ∼8% in 6000 years of blood type B; and fluctuating selection at the TYK2 tuberculosis risk allele rising from ∼2% to ∼9% from ∼5500 to ∼3000 years ago before dropping to ∼3%. We identify instances of coordinated selection on alleles affecting the same trait, with the polygenic score today predictive of body fat percentage decreasing by around a standard deviation over ten millennia, consistent with the “Thrifty Gene” hypothesis that a genetic predisposition to store energy during food scarcity became disadvantageous after farming. We also identify selection for combinations of alleles that are today associated with lighter skin color, lower risk for schizophrenia and bipolar disease, slower health decline, and increased measures related to cognitive performance (scores on intelligence tests, household income, and years of schooling). These traits are measured in modern industrialized societies, so what phenotypes were adaptive in the past is unclear. We estimate selection coefficients at 9.9 million variants, enabling study of how Darwinian forces couple to allelic effects and shape the genetic architecture of complex traits.
I can report that nothing in their exposition seemed unreasonable or unsupported to me. But also the paper didn’t much change my worldview? There is the usual Twitter speculation about how this might apply to different groups, but note the data aggregation methods of the paper in fact require that various human groups (Europe only in the dataset) evolved in tandem and in similar ways over time. Without that assumption, the entire piece of work collapses.
Deep Learning for Economists
Deep learning provides powerful methods to impute structured information from large-scale, unstructured text and image datasets. For example, economists might wish to detect the presence of economic activity in satellite images, or to measure the topics or entities mentioned in social media, the congressional record, or firm filings. This review introduces deep neural networks, covering methods such as classifiers, regression models, generative AI, and embedding models. Applications include classification, document digitization, record linkage, and methods for data exploration in massive scale text and image corpora. When suitable methods are used, deep learning models can be cheap to tune and can scale affordably to problems involving millions or billions of data points. The review is accompanied by a regularly updated companion website, EconDL, with user-friendly demo notebooks, software resources, and a knowledge base that provides technical details and additional applications.
By Melissa Dell. And here is my earlier CWT with Melissa Dell.
Facts about Britain
- Between 2004 and 2021, before Russia’s invasion of Ukraine, the industrial price of energy tripled in nominal terms, or doubled relative to consumer prices.
- With almost identical population sizes, the UK has under 30 million homes, while France has around 37 million. 800,000 British families have second homes compared to 3.4 million French families.
- Per capita electricity generation in the UK is just two thirds of what it is in France (4,800 kilowatt-hours per year in Britain versus 7,300 kilowatt-hours per year in France) and barely over a third of what it is in the United States (12,672 kilowatt-hours per year). We are closer to developing countries like Brazil and South Africa in terms of per capita electricity output than we are to Germany, China, Japan, Sweden, or Canada.
- Britain’s last nuclear power plant was built between 1987 and 1995. Its next one, Hinkley Point C, is between four and six times more costly per megawatt of capacity than South Korean nuclear power plants, and four times as expensive as those that South Korea’s KEPCO has agreed to build in Czechia.
- Tram projects in Britain are two and a half times more expensive than French projects on a per mile basis. In the last 25 years, France has built 21 tramways in different cities, including cities with populations of just 150,000, equivalent to Lincoln or Carlisle. The UK has still not managed to build a tramway in Leeds, the largest city in Europe without mass transit, with a population of nearly 800,000.
- At £396 million, each mile of HS2 will cost more than four times more than each mile of the Naples to Bari high speed line. It will be more than eight times more expensive per mile than France’s high speed link between Tours and Bordeaux.
- Britain has not built a new reservoir since 1992. Since then, Britain’s population has grown by 10 million.
- Despite huge and rising demand, Heathrow annual flight numbers have been almost completely flat since 2000. Annual passenger numbers have risen by 10 million because planes have become larger, but this still compares poorly to the 22 million added at Amsterdam’s Schiphol and the 15 million added at Paris’s Charles de Gaulle. The right to take off and land at Heathrow once per week is worth tens of millions of pounds.
- The planning documentation for the Lower Thames Crossing, a proposed tunnel under the Thames connecting Kent and Essex, runs to 360,000 pages, and the application process alone has cost £297 million. That is more than twice as much as it cost in Norway to actually build the longest road tunnel in the world.
That is from the new study of British stagnation by Ben Southwood, Samuel Hughes, and Sam Bowman.
Sweden fact of the day
However, following the start of PhD studies, the use of psychiatric medication among PhD students increases substantially. This upward trend continues throughout the course of PhD studies, with estimates showing a 40 percent increase by the fifth year compared to pre-PhD levels. After the fifth year, which represents the average duration of PhD studies in our sample, we observe a notable decrease in the utilization of psychiatric medication.
Here is the article, via Jesse. Here are some relevant tweets. It doesn’t have to be causal to be interesting!
Friday assorted links
1. A short primer on free market electricity.
2. Joseph Walker podcast with Nassim Taleb.
3. On Sichuan peppers and ma la (NYT).
6. New Zealand government economist job for improving the quality of regulation: Here is the Ministry’s web page for the job. Here is its home page. Here is its first statement of strategic intentions.
7. The truth about Springfield (NYT).
The US Has Low Prices for Most Prescription Drugs
The US has high prices for branded drugs but it has some of the lowest prices for generic drugs in the world and generic drugs are 90% of prescriptions. I’ve been saying this for years but here is the latest study:
U.S. prices for brand-name originator drugs were 422 percent of prices in comparison countries, while U.S. unbranded generics, which we found account for 90 percent of U.S. prescription volume, were on average cheaper at 67 percent of prices in comparison countries, where on average only 41 percent of prescription volume is for unbranded generics. U.S. prices for brand-name drugs remained 308 percent of prices in other countries even after adjustments to account for rebates paid by drug companies to U.S. payers and their pharmacy benefit managers.
Branded drugs are expensive but that is why we have insurance which works reasonably well, albeit far from perfectly. For example, insurance and the low price of generics is one reason that out-of-pocket costs for medical are low in the United States.
If you don’t want to pay high prices for branded drugs just use generics! As I wrote 20 years ago, in what was called a heartless and cruel post:
People talk about the high price of pharmaceuticals as if high prices lasted forever. In fact, within a year of the expiration of a pharmaceutical’s patents, prices will typically fall by more than 50 percent as generic producers enter the market. Patents nominally last for 20 years but the effective patent life is much lower because patents are typically granted years before a product has cleared FDA review. The effective patent life of the average new pharmaceutical in the 1990s averaged just 12 years [new reference for today, 13.5 years, AT]. Competition from competing but non-infringing pharmaceuticals makes the de facto patent life even shorter.
Thus, my response to the seniors and others clamoring for lower pharmaceutical prices is to be more patient. Does this sound harsh? Consider this, the people who are demanding price controls are not simply asking for lower drug prices they are asking for lower prices on the newest drugs. Lower prices for drugs introduced 15 years ago are already here. Remember, those drugs were recently considered the very best modern medicine has to offer, so it’s not like I am expecting those who can’t afford the newer medicines to go back to using leeches.
Price controls or other such plans such as reimportation may bring cheaper pharmaceuticals for a short period but we will then have a much smaller supply of new drugs forever. Only the shortsighted would buy that prescription.
Don’t fail the marshmallow test people!
People get upset when I say just use generics–shouldn’t everyone have access to the very best pharmaceuticals! Yes! But that illustrates another point–these drugs are worth the price!
Hat tip: Steve.
*Ayn Rand: Writing a Gospel of Success*
An excellent book, stressing Rand’s Jewish heritage and its ongoing influence over her work, in spite of her self-professed atheism. The author is Alexandra Popoff, who wrote the wonderful biography of Vassily Grossman as well.
Here is one bit from the preface:
I believe that writers cannot hide themselves in a literary text, even when they later go back to revise it, as Rand had done. She had claimed that being Jewish did not matter to her, but her Jewishness was about the text, crrammed full of ideas, parables, paradoxes, questions, and arguments. Her fictional stories are moral and legal at the same time.
Rand was at one point slated to write the screenplay for a movie about Oppenheimer and the making of the atomic bomb, though the project never realized. Here is an excerpt from the latter part of the book:
In her declining years Rand pursued her passion of stamp collecting. She attended stamp shows and auctions with fellow collectors, one of whom was her surgeon Dr. Cranston Holman. She shopped at Gimbels, her favorite store, played Scrabble with visitors, read Agatha Christie, watched TV cops and robbers, and in her mid-seventies, studied algebra.
The Burns and Heller biographies of Rand are excellent, but this one has plenty of fresh material and insight.