Results for “corporate tax” 239 found
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.
A new charter city effort, Pronomos Capital, with venture capital
Pronomos Capital, which [Patri] Friedman incorporated in August, is supposed to bankroll the construction of experimental cities on vacant tracts of land in developing countries. Pronomos is set up like a venture fund, making investments in local organizations that do the work of securing government approvals, finding tenants, and hiring retired U.K. judges to enforce the new legal framework, to be based on British common law. The firm says it’s discussing semi-autonomous cities of varying sizes with foreign and local businesspeople in countries where officials have seemed receptive to exempting them from area laws, including Ghana, Honduras, the Marshall Islands, Nigeria, and Panama. A given community could start as small as an industrial park, Friedman says. Most will be aimed at foreign businesses seeking friendlier tax treatment…
The venture firm has raised about $9 million so far (more than half from Thiel), well short of Friedman’s initial goal. He says that’s only enough to cover basic fact-finding expenses for his local partners, and he’ll raise more to buy and develop land once governments approve the plans.
Here is more from Lizette Chapman at Bloomberg, interesting throughout.
Friday assorted links
1. The excellent Ben Westhoff on Joe Rogan.
2. A Canadian pro experiences the world and management system of Russian hockey.
3. The Cato study on wealth inequality. And why did the UK Labour government abandon the wealth tax idea in the 1970s?
4. Kocherlakota argued in Econometrica that optimal wealth taxes should be zero on average.
5. David McCabe at NYT: “The debate can take on a heated and personal tone. At a conference this spring, the soft-spoken legal academic Tim Wu responded to doubts raised by Tyler Cowen, an economist, about whether America has dangerous levels of corporate concentration by saying it was like arguing with someone who believes the earth is flat.”
6. “An inmate claimed his life sentence ended when he died and was revived.”
7. Megan McArdle on the historical importance of the Church.
Friday assorted links
1. Idiosyncratic list of the ten great American novels of recent decades.
2. My podcast with Stephen Hsu.
3. Further results on corporate income tax incidence.
4. Qatar has begun to air-condition the outdoors.
5. An analytical look at the burnout of Carmelo Anthony.
NY State Budget Director on Amazon
The open letter on Amazon from Robert Mujica, New York State’s Budget Director, is on fire. It shines an unflattering light on many people involved in the Amazon decision but its analysis of twitter mobs goes well beyond Amazon.
In my 23 years in the State Capitol, three as Budget Director, Amazon was the single greatest economic development opportunity we have had. Amazon chose New York and Virginia after a year-long national competition with 234 cities and states vying for the 25,000-40,000 jobs. For a sense of scale, the next largest economic development project the state has completed was for approximately 1,000 jobs. People have been asking me for the past week what killed the Amazon deal. There were several factors.
First, some labor unions attempted to exploit Amazon’s New York entry. The RWDSU Union was interested in organizing the Whole Foods grocery store workers, a subsidiary owned by Amazon, and they deployed several ‘community based organizations’ (which RWDSU funds) to oppose the Amazon transaction as negotiation leverage. It backfired.
…Organizing Amazon, or Whole Foods workers, or any company for that matter, is better pursued by allowing them to locate here and then making an effort to unionize the workers, rather than making unionization a bar to entrance. If New York only allows unionized companies to enter, our economy is unsustainable, and if one union becomes the enemy of other unions, the entire union movement – already in decline – is undermined and damaged.
Second, some Queens politicians catered to minor, but vocal local political forces in opposition to the Amazon government incentives as ‘corporate welfare.’ Ironically, much of the visible ‘local’ opposition, which was happy to appear at press conferences and protest at City Council hearings during work hours, were actual organizers paid by one union: RWDSU. (If you are wondering if that is even legal, probably not). Even more ironic is these same elected officials all signed a letter of support for Amazon at the Long Island City location and in support of the application. They were all for it before Twitter convinced them to be against it.
…Furthermore, opposing Amazon was not even good politics, as the politicians have learned since Amazon pulled out. They are like the dog that caught the car. They are now desperately and incredibly trying to explain their actions. They cannot.
…Third, in retrospect, the State and the City could have done more to communicate the facts of the project and more aggressively correct the distortions. We assumed the benefits to be evident: 25,000-40,000 jobs located in a part of Queens that has not seen any significant commercial development in decades and a giant step forward in the tech sector, further diversifying our economy away from Wall Street and Real Estate. The polls showing seventy percent of New Yorkers supported Amazon provided false comfort that the political process would act responsibly and on behalf of all of their constituents, not just the vocal minority. We underestimated the effect of the opposition’s distortions and overestimated the intelligence and integrity of local elected officials.
Incredibly, I have heard city and state elected officials who were opponents of the project claim that Amazon was getting $3 billion in government subsidies that could have been better spent on housing or transportation. This is either a blatant untruth or fundamental ignorance of basic math by a group of elected officials. The city and state ‘gave’ Amazon nothing. Amazon was to build their headquarters with union jobs and pay the city and state $27 billion in revenues. The city, through existing as-of-right tax credits, and the state through Excelsior Tax credits – a program approved by the same legislators railing against it – would provide up to $3 billion in tax relief, IF Amazon created the 25,000-40,000 jobs and thus generated $27 billion in revenue. You don’t need to be the State’s Budget Director to know that a nine to one return on your investment is a winner.
The seventy percent of New Yorkers who supported Amazon and now vent their anger also bear responsibility and must learn that the silent majority should not be silent because they can lose to the vocal minority and self-interested politicians.
…Make no mistake, at the end of the day we lost $27 billion, 25,000-40,000 jobs and a blow to our reputation of being ‘open for business.’ The union that opposed the project gained nothing and cost other union members 11,000 good, high-paying jobs. The local politicians that catered to the hyper-political opposition hurt their own government colleagues and the economic interest of every constituent in their district. The true local residents who actually supported the project and its benefits for their community are badly hurt. Nothing was gained and much was lost. This should never happen again.
Even if you think the end result was fine, as I do, this was a political fiasco for New York. Amazon was wise to exit when they did because the pecking of the chickens would only have intensified as they sunk investments.