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Can the School Choice Movement Liberate Childhood?
Richard Hanania has a very good post on the rapidly expanding school choice movement and his hopes for a radical rethinking of education.
The first thing to point out about public education is that it involves an extreme restriction of liberty beyond anything we usually accept. How common is it for government to force you to be in a certain place at a certain time? What I call “time-place” mandates are rare. Sometimes you have to go to the DMV, but even then you spend a short amount of time there, and can generally choose when to go. Sometimes people have to respond to subpoenas or jury duty, but those are uncommon events in most people’s lives. Government says to do your taxes, though you only have a deadline and can fill out the paperwork whenever and under whatever conditions you want.
The only substantial populations of individuals who have their lives structured according to time-place mandates in a free society like ours are prisoners, members of the military, and children. The mandates for children have gotten less strict over the years now that all states allow homeschooling, but opponents of school choice for all practical purposes want to do what they can to shape the incentive structures of parents so that they all use public schools (liberal reformers tend to like vouchers that can be used at charter schools, but not ESAs, which give parents complete control). Of course, children don’t have the freedom of adults, and so others are by default in control of how they spend most of their time. But it’s usually parents, not the government, that we trust in this role. Given the unusual degree to which public education infringes on individual liberty and family autonomy, the burden of proof has to be on those in favor of maintaining such an extreme institution.
…To me, the true promise of the school choice movement isn’t that it might simply save a bit of money or avoid the worst excesses of public education. Rather, it presents an opportunity to rethink childhood…On what basis did we as a society decide that the ideal way to spend a childhood was to attend government institutions 5 days a week, 7 hours a day, 9 months a year, for 12 years? That most of that time should be spent sitting at a desk, with say one hour for lunch and one for recess?
My hope is that states with universal ESAs will see radical experimentation. Maybe some parents would send their kids to a traditional school for six months of the year, and then have them apprenticing or interning in the workforce the rest of the time. Imagine having a few months experience working at a law firm during eighth grade, grabbing coffee for corporate executives in ninth grade, following around a pipe fitter in tenth grade, and helping around a gym in eleventh grade.
I too would like to see radical experimentation in education but I’m struck by how conservative and homogeneous schools are, regardless of their public or private status. Private schools, despite having the autonomy, have not pioneered novel teaching methods. Montessori was innovative but that was a hundred years ago. A few private schools have adopted Direct Instruction, but how many offer lessons in memory palaces, mental arithmetic or increasing creativity?
I am enthusiastic about developments coming out of Elon Musk’s school and Minerva but it’s still remarkable how similar almost all private schools are to almost all public schools. The global adoption of a nearly identical education model is also disturbing, as I harbor significant skepticism that we’ve reached an optimum. I see this as more of an outcome of world-elite consensus, similar to what we saw with COVID policy, with basically only Sweden bucking the trend and coming under intense pressure for doing so.
Online education and AI ought to greatly expand the potential range of experimentation but the demand for experimentation appears to be low.
Hanania has more of interest to say. Read the whole thing.
Competing for residents rather than businesses
Amazon is pulling back from its second headquarters expansion in Crystal City (yes I still call it that), and this will herald a new age of lesser competition for businesses and their main offices:
…the growing difficulty of courting corporations. If Amazon stiffs Northern Virginia, future politicians elsewhere may be less eager to promise tax breaks and infrastructure investments, not to mention spend their reputational capital. Politically speaking, it will be harder for urban and suburban leaders to rise to the top by attracting a new major corporate tenants. “Pro-business” local governments may be less common in the years to come.
Another relevant trend is the work-from-home and hybrid models. Why should a major corporation invest in more office space if a lot of that space will be used only part of the time?
It is worth thinking through how remote and hybrid work will affect regional evolution. There have already been “booms” in some relatively small resort areas, such as parts of Maine, Long Island and West Virginia. But there will be a more general impact as well. To the extent corporations give up on clustering their talent in big office buildings, people will spread out where they live. Not everyone will set down stake in the Hamptons or along the Irish coast. Plenty of people will want to live near family or where they were born, or perhaps a few hours away from the main office as part of a hybrid arrangement.
In this new world, it will be much harder for a well-governed region to rise to the top. Even if its leaders succeed in convincing a company to relocate, for instance, there may be fewer workers who do so. Or perhaps there will be the same number of workers but they will come into the office less frequently and live scattered in many directions, sometimes in other states or metropolitan areas.
There is nothing necessarily wrong with this outcome. But the potential parvenu region just won’t feel that exciting, and the level of activity won’t feed upon itself in terms of attracting more retail and cultural amenities.
And:
Overall, there may be less competition to attract corporations. At the same time, political competition for residents may become more intense, because more people will be able to choose where to live regardless of where they work. This competition could lead to improvements in schools and parks.
Here is the rest of my Bloomberg column.
Modeling persistent storefront vacancies
Have you ever wondered why there are so many empty storefronts in Manhattan, and why they may stay empty for many months or even years? Erica Moszkowski and Daniel Stackman are working on this question:
Why do retail vacancies persist for more than a year in some of the world’s highest-rent retail districts? To explain why retail vacancies last so long (16 months on average), we construct and estimate a dynamic, two-sided model of storefront leasing in New York City. The model incorporates key features of the commercial real estate industry: tenant heterogeneity, long lease lengths, high move-in costs, search frictions, and aggregate uncertainty in downstream retail demand. Consistent with the market norm in New York City, we assume that landlords cannot evict tenants unilaterally before lease expiration. However, tenants can exit leases early at a low cost, and often do: nearly 55% of tenants with ten-year leases exit within five years. We estimate the model parameters using high-frequency data on storefront occupancy covering the near-universe of retail storefronts in Manhattan, combined with micro data on commercial leases. Move-in costs and heterogeneous tenant quality give rise to heterogeneity in match surplus, which generates option value for vacant landlords. Both features are necessary to explain longrun vacancy rates and the length of vacancy spells: in a counterfactual exercise, eliminating either move-in costs or tenant heterogeneity results in vacancy rates of close to zero. We then use the estimated model to quantify the impact of a retail vacancy tax on long-run vacancy rates, average rents, and social welfare. Vacancies would have to generate negative externalities of $29.68 per square foot per quarter (about half of average rents) to justify a 1% vacancy tax on assessed property values.
Erica is on the job market from Harvard, Daniel from NYU. And they have another paper relevant to the same set of questions:
We identify a little-known contracting feature between retail landlord and their bankers that generates vacancies in the downstream market for retail space. Specifically, widespread covenants in commercial mortgage agreements impose rent floors for any new leases landlords may sign with tenants, short-circuiting the price mechanism in times of low demand for retail space.
I am pleased to see people working on the questions that puzzle me.
From Ryan Petersen at Flexport
“I just couldn’t sit around watching this humanitarian crisis in Ukraine without doing anything about it. So Flexport is organizing a massive airlift of relief goods to refugee camps in Eastern Europe starting next week.
You can read more about the full operation below. It’s inspiring stuff.
We’re looking to raise money to pay for more flights—Flexport is covering the first full cargo plane full of relief goods, but we’re asking others to donate including potential corporate sponsors to help us pay for more flights.
Donations are open at Flexport.org/donate and fully tax-deductible through our 501c3 partners.”
Tuesday assorted links
1. More on the new antiviral pills.
2. Neurodiversity gets a corporate champion (FT).
3. Apply to be a Hoover fellow, five year contract (or more). And “We find that weather disasters over the last quarter century had insignificant or small effects on U.S. banks’ performance.” Ahem.
4. Ukraine as crypto capital? (NYT)
5. Why were the Trump tax cuts not more stimulative? Important job market paper by Francesco Furno of NYU.
*The Art Newspaper*
One complaint I have about the current “Woke” debates is that they don’t consider how diverse the intellectual playing field is. You can learn a good deal from studying the interstices of dialogue that don’t fit into the common boxes of either pro-Woke or anti-Woke.
Along the way, I am happy to recommend The Art Newspaper (NB: non-subscribers can click through three articles a month) as an excellent periodical, both the paper and on-line editions. It is considered the “journal of record for the international art world.”
To put it bluntly, the art world is torn. In terms of demographics, the art world should lean fairly hard left, at least in the Anglo countries. It is highly educated, cosmopolitan, wealthy, and “aware” of the world. And many of the individuals operating in the art world do lean fairly strongly to the left. Yet the art world itself is based on principles fairly different from Woke and often directly opposed to Woke.
First and foremost, the art world is based on ownership of property. Most (by no means all) of those properties were created by dead white males, or perhaps by living white males.
Art markets typically are ruled by Power Laws and massive inequality, with most works going to zero value and a small percentage of the creators hitting it big. No one in those worlds really thinks that is going to change, or should change. Indeed, you earn status by showing how discriminating your eye is, which means by dumping on the works that aren’t going anywhere.
Textiles, which are arguably the “most female” genre in terms of their creators, are worth systematically much less in the marketplace. Sometimes people complain about this, but they are not willing to bid up the prices commensurately. (I am pleased to consider myself an exception in this regard — I see and indeed “exploit” massive aesthetic arbitrage opportunities here. The same is true for some kinds of pottery as well. Buying artworks from talented yet undervalued women creators is one of the best ways to be Woke.)
Art works do not come attached with triggers, and many of them reflect “the gaze” of dead white males, or they are soaked with violence, not usually along politically correct lines. Women (and men) are eroticized without apology. And they are eroticized because of the market. “Reactionary” religions are central to many genres.
The subscribers to The Art Newspaper often are art owners, art collectors, and institutional participants in the art world, such as curators and people who work at auction houses. They might fret over the theft of art works from poorer and typically non-white parts of the world, but actual full-scale restitution is not in fact their #1 programmatic goal. Surprise!
So if you read The Art Newspaper, you will step into an elite world quite unlike say the world of the American Ivies. The performative incentives here are entirely different.
In the 1990s, The Art Newspaper hardly ever ran articles with Woke themes. Today it does a lot, yet the actual content and analysis just isn’t that Woke. You can think of it as a respite from the Woke, though it will never criticize the Woke directly. It tries to incorporate Woke rhetoric into an essentially non-Woke and anti-Woke set of customs and incentives and property rights.
If you look at the top five “most read” articles from this last week in early July, you will find at #2:
“Why are the top jobs in Chinese museums going to white men?”
Maybe you’re getting scared now, but the funny thing is the article actually addresses and answers the question. Basically those are the individuals who have essential contacts in the outside art world and knowledge of how that world works. At the end of the piece the article does call for more Chinese leadership talent (as we all would agree), but along the way no one is brow-beaten and there is remarkably little moralizing. Keep in mind The Art Newspaper is being written exactly for these white men, or those who aspire to become them.
One lesson is that when no one is watching, and when actual property is at stake, the contemporary world is still remarkably sensible.
Just how politically correct do you think this article is?
“…new book on 18th-century French art reveals discrete gradations of erotic images.”
Here is the opening passage:
Most who take an interest in 18th-century French art will know of the Goncourt brothers’ description of “the meanderings, the undulations, the pliancies of a woman’s body” in relation to Watteau, or their ecstatic response to Fragonard’s La Chemise enlevée (around 1770) depicting “a woman… on whose mouth hovers a languid smile, [trying], somewhat faintly, to retain the nightgown that has already been ravished from her body…”
I am not sure Andrea Dworkin would approve. Still, the topic is sufficiently obscure that no one is going to get cancelled for “their ecstatic response to Fragonard.”
Every now and then, The Art Newspaper gets downright sad:
The auction house’s £17.2m [Old Masters] offering in London tonight was only 57% sold, overshadowed by the football match
Are they going to stop calling them “Old Masters”? I don’t think so, not even if the term “Master bedroom” goes away.
The most widely read article of the week was “Archaeologists find ruins of vast Medieval Nubian cathedral in Sudan.” Again, no need to get nervous. They used remote sensing techniques to find the ruins. Good article, good photo, homage to its aesthetic virtues, zero moralizing, zero politics. Not a peep about cultural appropriation or CRT.
Lots of articles cover tax law too! You could say they are a kind of supply-sider, albeit without the revenue maximization idea.
And the editor is a woman, Alison Cole. She even wrote a book Italian Renaissance Courts: Art, Pleasure and Power — do you think she can be totally against those things? 22 Amazon ratings, five star average.
If you love the arts, or simply would like to step into a different intellectual world, I am happy to (strongly) recommend The Art Newspaper. It is also full of practitioner-driven economic reasoning, and fairly objective looks at geopolitics, on top of keeping you current about art worlds. The non-Woke lives.
OK, so what about The Woke and Non-Woke in other areas? Classical music? Stand-up comedy anyone? What else?
The Biden Executive Order on promoting competition
Here is the text, I won’t attempt a summary but here are some running comments:
1. The beginning of the piece suggests that concentration is rising in the American economy. But this probably isn’t true. See also these comments by me.
2. Industry concentration has not driven wages down by “as much as 17%” — that’s a porky! OK, they say “advertised wages,” but come on…
3. I am happy to see the document take on occupational licensing.
4. Contra to the recommendation, we should not ban non-compete agreements outright. Many non-compete agreements are perfectly normal institutions designed to protect corporate assets against IP theft, client lists for instance. We should restrict non-compete agreements in some more sophisticated manner, still to be determined.
5. Lower prescription drug prices? Maybe. Do they estimate the elasticity of supply? No. Thus this discussion would fail my Econ 101 class. We do know, however, that prescription drugs are one of the very cheapest ways our health care system saves lives, so this is not obviously a good idea.
6. Right to repair laws? Again, maybe. But show me the trade-off and cite a cost-benefit analysis. If software gives more consumer surplus to consumers (again, a maybe), should we be wanting to tax it with contractual restrictions? Should we be wanting to tax Tesla right now?
7. Portability of bank account information is a good idea.
8. “Empower family farmers…” — do you even need to know what comes next? Aarghh!!!
9. The order “encourages” the DOJ and FTC to take various actions. I won’t blame Biden for this, but we’ve way overstepped what executive orders should be doing, some time ago. The net feeling the honest reader of this section receives is that our antitrust policies toward the large tech companies are not based in much of a notion of rule of law.
10. Should HHS “standardize plan options” in the NHIM to make price shopping easier? Makes me nervous — diverse market offerings can be good.
11. Lots of tired and not typically true claims and insinuations about concentration in airline markets; see my book Big Business or read Gary Leff. And shouldn’t airlines charge for bags? Maybe yes, maybe no, but prices per item are not in general a bad thing.
12. We are warned that farmers and ranchers take in an ever-smaller share of the food dollar spent — thank goodness! And there are a bunch of other selective, scattered observations about food prices (“corn seed prices have gone up as much as 30% annually…”), but nothing close to systematic or showing an actual market failure (corn prices by the way have been plummeting since 2012).
13. Broadband policy should indeed be improved, but this section reads as messy, should do more to emphasize the notion of competition and common carrier platforms, and how about a mention of StarLink?
14. There’s not really any point in marching through a discussion of the “Big Tech” section.
15. Is there a problem with bank concentration in this country? Not where I live. Maybe in some rural areas?
16. YIMBY > NIMBY would do more to limit market power than just about anything else, by the way.
17. Is there even a peep about this country’s biggest and worst-performing monopoly in K-12? Of course not. It is Amazon you have to worry about!
So overall this is not great economics. It is good to see the Biden administration pick up on a few pro-competition issues, but much of the document is not clearly pro-competition either. The reasoning and evidence are pretty much politicized from start to finish.
Charter city finally in Honduras?
Próspera is the first project to gain approval from Honduras to start a privately governed charter city, under a national program started in 2013. It has its own constitution of sorts and a 3,500-page legal code with frameworks for political representation and the resolution of legal disputes, as well as minimum wage (higher than Honduras’s) and income taxes (lower in most cases). After nearly half a decade of development, the settlement will announce next week that it will begin considering applications from potential residents this summer.
The first colonists will be e-residents. Próspera doesn’t yet have housing ready to be occupied. But even after the site is built out, most constituents will never set foot on local soil, says Erick Brimen, its main proprietor. Instead, Brimen expects about two-thirds of Prósperans to sign up for residency in order to incorporate businesses there or take jobs with local employers while living elsewhere…
After years of debate, Próspera will be the first real-world test of a divisive libertarian idea, says Beth Geglia, an anthropologist who studies charter cities. “There was a noticeable lull in the startup city movement in general until the Próspera Zede project got off the ground,” she says. “It’s ground zero.”
There is considerably more at the link, if this continues on track I will gladly visit and report back.
Focus on the supply side
The biggest question in the U.S. right now is how rapidly vaccinations will proceed. Yet only 8.5% of the new appropriations — under the most generous calculations — are directed toward vaccine supply and anti-Covid-19 efforts.
The biggest question for the world is whether the wealthier nations will put up the estimated $25 billion needed to jump-start a global vaccination campaign in a (relatively) timely manner. So far it appears that they will not — again, a supply-side issue. There did not seem to be much interest in putting such an expenditure into the American Rescue Plan, even though the resulting resumption of trade and migration would undoubtedly have benefited the U.S. by far more than $25 billion.
Major stories about supply-side problems receive only fleeting notice in the U.S. media. Poor infrastructure and distribution are making it difficult for the 270 million inhabitants of Indonesia to get vaccinated, yet very few Americans are paying attention. Indonesia is not usually the focus of attention — and people are not sufficiently obsessed with the supply side.
In the corporate world, there was the big announcement that Intel plans to move full speed ahead to produce more high-quality semiconductor chips and to put more chip factories in the U.S. That switch has come after years of disappointing results from Intel. Can it set things straight? Right now there is a chip shortage in automobile manufacturing, and given the potential fragility of Taiwanese chip supply, U.S. national security hangs in the balance…
Supply-side economics got a bad name because it was associated with too many economists who insisted that tax cuts would be self-financing, or who insisted on tax cuts above all other possible supply-side improvements. Yet all economists ought to proudly announce that they are supply-side economists, first and foremost. That is pretty far from the world we live in, especially as social media have made U.S. monetary and fiscal policies a touchstone for the entire world to debate, often in highly emotional terms.
Here is the rest of my Bloomberg column.
What happened to the mandate, the third leg of the stool?
But Congress did ultimately chop off a leg when it repealed the mandate penalties in 2017 — and, despite these predictions, the Affordable Care Act still stands. New federal data and economic research show the law hasn’t collapsed or entered the “death spiral” that economists and health insurers projected.
Many experts now view the individual mandate as a policy that did little to increase health coverage — but did a lot to invite political backlash and legal challenges.
The newest evidence comes from census data released Tuesday, which shows health coverage in the United States held relatively steady in 2019, even though Congress’s repeal of the mandate penalties took effect that year.
“The stool might be a bit rocky, but you can get away with two legs,” said Evan Saltzman, a health economist at Emory University who studies the topic. “It’s like the table at the restaurant that is a little wobbly. You can still sit at it, even if it’s not quite as pleasant.”
That is from Sarah Kliff at the NYT, the whole piece is excellent and full of substance. And:
Mr. Saltzman went on to earn a doctorate in economics after his job at RAND, and focused his research on the mandate. He has found that the mandate isn’t a very effective tool for increasing enrollment. One recent paper of his estimated that eliminating the mandate penalties would reduce marketplace enrollment by 2 percent and increase premiums by 0.7 percent.
“My viewpoint on the mandate has changed,” he said. “Back in 2012, my sense was it was essential. The evidence indicates that the marketplaces are doing about the same as they were before the mandate was set to zero.”
Separately, in The New England Journal of Medicine last year, researchers concluded that “the individual mandate’s exemptions and penalties had little impact on coverage rates.”
To be clear, this surprises me too. Was it Ross Douthat who once said on Twitter that it was the Trump administration and the Republican courts that saved Obamacare? The Krugman line, pushed without qualification for over a decade (and with incessant moralizing), that all of the legs of the stool are necessary, seems…wrong. I would say be careful with this one, as sometimes elasticities don’t kick in for a long time (as maybe with the corporate income tax cuts as well?…let’s be consistent here…). Still, it seems that an update of priors is in order. As you will see in the piece, even Jonathan Gruber thinks so.
And here are useful comments from John Graves.
Should hiring schools coordinate on delaying their interviews?
The AEA emails me this (web version here):
The AEA suggests that employers wait to extend interview invitations until Monday, December 7, 2020 or later.
Rationale: the AEA will deliver signals from job candidates to employers on December 2. We suggest that employers wait and review those signals and incorporate them into their decision-making, before extending interview invitations.
…The AEA suggests that employers conduct initial interviews starting on Wednesday, January 6, 2021, and that all interviews take place virtually; i.e. either by phone or online (e.g. by Zoom). We also ask that all employers indicate on EconTrack when they have extended interview invitations (https://www.aeaweb.org/
econtrack). Rationale: In the past, interviews were conducted at the AEA/ASSA meetings. This promoted thickness of the market, because most candidates and employers were present at the in-person meetings, but had the disadvantage of precluding both job candidates and interviewers from fully participating in AEA/ASSA sessions. Since the 2021 AEA/ASSA meetings (which will take place Jan 3-5, 2021) will be entirely virtual, we suggest that interviews NOT take place during the AEA/ASSA meetings to allow job candidates and interviewers to participate in the conference.
Perhaps not surprisingly, they don’t offer much economic analysis of this recommendation. I have a few remarks, none of which are beyond the analytical acumen of the AEA itself:
1. This proposal could well be a tax on the more conscientious departments, which will abide by the stricture while the more rogue departments jump the gun, giving them a relative advantage in finding job candidates.
2. It is common practice for the very top departments to make phone calls to advisors early, well before Christmas, and in essence tie up their future hires before the rest of the market clears (even if the ink on the contract is not dry until later on). Whatever you might think of this practice, have any of those departments vowed to stop doing this? If not, is the new recommendation simply an exhortation that other departments ought not to copy them, thus giving them exclusive use of this practice? And did the AEA — which essentially is run by people from those top schools — ever complain about this practice?
3. In the more liquid market, as this proposal is designed to create, the better job candidates are likely to end up going to the more highly rated schools. That is the opposite of how the NBA draft works — this year the Minnesota Timberwolves (a very bad team) pick first. So maybe the more liquid market is best for the most highly rated schools — is that obviously a good thing?
4. Many job candidates don’t get any early offers at all, and this is likely to be all the more true with Covid-19 and tight state budgets. Aren’t they better off if the market clears sooner rather than later? Then they can either move on to other jobs searches, take jobs with community colleges, look for postdocs, or whatever. Why postpone those adjustments? Is their welfare being counted in this analysis? Aren’t some of them the very neediest and also most stressed people in the economics job market?
5. Let’s say instead the market is done sequentially, where first you “auction off” the candidates in highest demand, ensuring that say a department rated #17 does not tie up an offer (fruitlessly, at that) to one of the very top candidates. Won’t that #17 school then bid harder for the candidates one tier lower, thus making that part of the market more liquid? I know it doesn’t have to work out that way, but surely that is one plausible scenario?
6. In finance, there are some results that you get less “racing” behavior with batched rather than continuous trading auctions. Again, that doesn’t have to be true, but surely it is no accident that many high-frequency traders oppose the idea of periodic rather than continuous securities auctions? What exactly are the relevant conditions here?
7. Would many economists recommend that say the top tech firms not make any offers before a certain date, so as to keep that labor market “more liquid”? What exactly is the difference here?
8. Might it be possible that a permanent shift to non-coordinated interview dates, and less temporally coordinated Zoom interviews and fly-outs, would permanently lower the status and import of said AEA?
I do not wish to pretend those are the only relevant factors. But here is a simple question: does anyone connected with the AEA have the stones to actually write a cogent economic or game-theoretic analysis of this proposal? Or does the AEA not do economics any more?
How not to fight modern-day slavery
That is the topic of my latest Bloomberg column, here is one excerpt:
The Slave-Free Business Certification Act of 2020, introduced last week by Republican Senator Josh Hawley of Missouri, sounds unobjectionable, maybe even worthy. As the U.S. engages in a worthwhile and necessary reassessment of the role of slavery in its history, the bill would force large companies to investigate and report on forced labor in their supply chains.
In fact, the net effect of the bill — contrary to its stated intent — might be to increase slavery worldwide.
As a general principle, companies should cut off commercial relations with any known sources of slavery. Yet this law calls for mandatory corporate investigation and auditing, backed by CEO certification and with significant penalties for non-compliance. The investigatory process is supposed to include interviews of both workers and management in the supply chain.
Such a get-tough approach has a superficial appeal. Yet placing an investigative burden on companies may not lead to better outcomes.
Consider the hypothetical case of a U.S. retailer buying a shipment of seafood routed through Vietnam. It fears that some of the seafood may have come from Thailand, where there are credible reports of (temporary) slavery in the supply chain. How does it find out if those reports are true? Asking its Vietnamese business partner, who may not even know the truth and might be reluctant to say if it did, is unlikely to resolve matters.
It is unlikely that businesses, even larger and profitable ones, will be in a position to hire teams of investigative journalists for their international inputs. Either they will ignore the law, or they will stop dealing with poorer and less transparent countries. So rather than buying shrimp from Southeast Asia, that retailer might place an order for more salmon from Norway, where it is quite sure there is no slavery going on.
…for every instance of slavery today there are many more opaque supply chains that will be damaged and disrupted if the burden is on large companies to root out labor abuses.
Here are a few points of relevance:
1. The law penalizes opaque supply chains rather than slavery per se. That is unlikely to be an efficient target.
2. Judgments about slavery are put in the hands of businesses rather than the government. Why not just have the U.S. government issue sanctions against slavery-supporting countries when sanctions are appropriate and likely to be effective? What is the extra gain from taxing businesses in this way?
3. There are many forms of coerced and exploited labor, and it is not clear this legislation will target slavery as opposed to simply low wages and poor working conditions as might result from extreme poverty. You also don’t want the law to tax poor working conditions per se, since FDI, or purchasing flows from a supply chain, can help improve those working conditions. You might however wish to target employment instances where, due to the nature of the law, additional financial flows toward the product will never rebound to the benefit of foreign labor. This law (which I have read all of) does not seem to grasp that important distinction.
Did we lockdown some parts of America too early?
No, I am not referring to the preventive measures taken in California, Washington state, and parts of the Tri-state area. Those made good sense to me at the time and in retrospect all the more.
I mean when the whole country started to shut down, including the South, Midwest, and other parts of the West. And yes I know the legal lockdowns were not always the biggest factors, arguably it was when governments started scaring people.
Let’s say you have a simple model of political sustainability where Americans will tolerate [???] months of lockdown — shall we say two? — but not much more. (Maybe three months if we had Merkel as president.) Then, if you scare/lock down in parts of the country where the virus is not yet evident, you create economic misery but not many public health gains. Who after all thinks that Seattle should have been locked down last September? Right?
Many parts of America now hate the lockdown, as they see the economic devastation, are not witnessing overloaded hospital systems, and just don’t quite “get it.” And they are now taking off the lockdown, through both legal and informal means, before it is optimal to do so. One loyal MR reader emailed me this:
The smaller town I am in was never hit hard, and therefore most people are somewhere on the spectrum between COVID is a bad flu and you should wash your hands to pick whatever conspiracy theory (plandemic). People do not believe in the severity of the virus. Not one family we know is social distancing. The ICU never got overrun, the only apocalypse to arrive is an economic one. This is the fundamental point. Most people’s only pain and sadness stems from loss of job, security, future NOT from sickness and death. People here don’t work for big companies or the government.
Oddly, Trump’s big speech when he found “pandemic religion” may have been one of his biggest mistakes. I fully understand that Denmark and Austria did well because they locked down early (and took other measures). There is good evidence that NYC should have locked down earlier yet, but maybe (and I do mean maybe) other parts of the country — most of all rural America — should have locked down later, so they would have their lockdown active “when it really matters.”
In the meantime, we could have restricted or somehow taxed travel out of NYC, which seems to have been a major national spreader.
This is one reason why I am skeptical about models of epidemiology (and economics!) that do not consider political sustainability. I am by no means sure that the claims in this post are correct, but they could be correct. And a model that does not consider political sustainability and time consistency won’t even pick up these factors as concerns. It will simply indicate that a lockdown should happen as quickly as possible. But that was perhaps one of our big mistakes, namely to shut down many of the less dense parts of America before their problems were sufficiently acute, thereby rendering the whole program less sustainable.
And moralizing and blaming our current predicament on “Trump,” or “the yahoos who watch Fox News” is — even if correct — washing one’s hands of the responsibility to incorporate political sustainability into the model.
I fully admit, by the way, that I did not myself appreciate the import of this factor at the time. This is all a sign of how backward our science is in this entire area.
By the way, here is a 55 pp. Powerpoint-like survey of lockdown models. Many references, not much public choice or political economy to be seen.
Stock Buybacks are Fine
Let’s start with what a buyback is, since even many financial journalists do not understand this: A corporation purchases stock from its shareholders. It’s economically indistinguishable from a special dividend, where a corporation pays out money to every shareholder, except it permits shareholders to elect their own tax consequences, unlike a dividend that creates a tax event immediately.
…Proposals to ban buybacks are effectively proposals to demand corporations hold such huge stockpiles of cash, depriving shareholders of investment choices. Such proposals will backfire by slowing down the economic recovery when money that could be invested is instead held in corporate bank accounts, doing nothing.
I agree. Buybacks are just not a big deal.
Rooftops, and warm ones at that
Our best tool is to compare Labour’s 2019 manifesto against the Sanders’ economic platform. Doing so makes clear that Bernie is more radical than Corbyn on economics, both in absolute terms and relative to their countries’ respective politics.
Take the size of government. The Manhattan Institute’s Brian Riedl calculates that Sanders’ promises would add $97.5 trillion to spending over a decade, taking total annual US government spending to around 70% of GDP and more than doubling the size of the federal government. Even if climate investments prove a one-off, spending would settle at a massive 64% of GDP. That’s far higher than Labour’s planned 44% and even France’s current 57% (itself the highest in the OECD).
A look at certain individual spending areas also underlines just how radical the Sanders agenda is. Like Labour, he wants government-funded free public higher education. Unlike Labour, he’d also forgive all existing student debts. On climate change and infrastructure, Labour planned for £400 billion investment over 10 years (about 20% of current annual UK GDP). Sanders wants to invest $16.3 trillion over 15 years (about 75% of current annual US GDP.) On healthcare, both want government spending to expand to cover all medical treatment, prescription charges, long-term care for the elderly, and dentistry. But only Sanders would explicitly ban private health insurance (Labour did consider that proposal but held off in the end).
True, Corbyn and McDonnell favoured nationalising buses, railways, the energy sector, water, and parts of the broadband network. Corbyn even wanted free government-funded broadband for all. But even here the results of Sanders’ pledges would bring similar results. He would set up “publicly owned” and “democratically controlled” broadband networks. And his Green New Deal would bring most public transport under government control and deliver effective public ownership of energy production.
When it comes to financing their promises, Sanders is arguably more radical again. Labour planned to only borrow to invest, raising the deficit by about 2% of GDP per year. But Bernie’s tax plans get nowhere near fully funding his agenda. Absent further broad-based tax rises, Riedl calculates annual borrowing would soar to around 30% of US GDP if his spending plans were implemented…
Combined with national insurance, Labour’s top marginal income tax rate would have been 52%. Sanders’ top federal income tax rate alone would be 52%, bringing a top combined top rate of around 80% once state and payroll taxes are considered. Sanders wants a new wealth tax too, another option Labour shirked. And while Labour wanted to raise the UK’s main corporation tax rate to 26%, Bernie would opt for 35% with a broad base.
That is from Ryan Bourne of Cato, and yes there is more at the link.
I would put it this way: right now we are sampling the offer curve of left-wing intellectuals and activists for “prioritizing climate change” vs. “mood affiliation,” and…let us hope for the best!
Here is Daron Acemoglu on Bernie Sanders.