tag:blogger.com,1999:blog-75395771364862860962024-03-06T04:36:10.760-06:00Supply and Demand (in that order)Casey B. Mulliganhttp://www.blogger.com/profile/03317454408275318282noreply@blogger.comBlogger1211125tag:blogger.com,1999:blog-7539577136486286096.post-35836895851295887412023-12-21T17:24:00.010-06:002023-12-22T06:56:58.754-06:00Supply and Demand Curves with the "Wrong" Slope<p class="p1" style="font-family: "Helvetica Neue"; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size: 13px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify;">"<a href="https://www.nber.org/papers/w29832" target="_blank">Personal Increasing Returns</a>" is a way to describe goods for which consumers can purchase access to a lower price. An important instance is human capital, where consumers reduce the leisure-opportunity cost of consumption by investing in skills. Another is consumer financial management, which <a href="https://www.journals.uchicago.edu/doi/10.1086/317676" target="_blank">Sala-i-Martin and I studied</a> in this <a href="https://www.journals.uchicago.edu/doi/10.1086/317676" target="_blank">JPE paper</a> about purchasing access to cheaper future consumption. The <a href="https://www.nber.org/papers/w26812" target="_blank">demand for illegal drugs</a> can also be understood in this way. </p><p class="p1" style="font-family: "Helvetica Neue"; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size: 13px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify;"><br /></p><p class="p1" style="font-family: "Helvetica Neue"; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size: 13px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify;">It's one model with various variable labels. A marginal cost curve sloping the "wrong" way unifies the applications. My purpose here is to compare and contrast this and other non-trivial instances of wrong-sloping supply and demand curves.</p><p class="p1" style="font-family: "Helvetica Neue"; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size: 13px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify;"><br /></p><p class="p1" style="font-family: "Helvetica Neue"; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size: 13px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify;">The “supply” curves shown in Figures 2 and 5 of "<a href="https://www.nber.org/papers/w29832" target="_blank"><b>Personal Increasing Returns</b></a>" are closely related to what price theory has traditionally described as “forward-falling supply curves.” Examples are Marshall [<a href="https://www.marxists.org/reference/subject/economics/marshall/bk4ch13.htm" target="_blank">Book IV, Chapter XIII</a>] and <a href="https://doi.org/10.2307/2296159" target="_blank">Adams and Wheeler [1952]</a>, although they focus on <b>diminishing marginal cost at the industry level</b> rather than the personal level.<span class="s1" style="text-decoration-line: underline;"><sup><a href="#ref1">[1]</a></sup></span> Either way, sufficiently strong complementarities are required. </p><p class="p1" style="font-family: "Helvetica Neue"; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size: 13px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify;"><br /></p><p class="p1" style="font-family: "Helvetica Neue"; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size: 13px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify;">[click image to see side-by-side]</p><p class="p1" style="font-family: "Helvetica Neue"; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size: 13px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify;"><span class="Apple-converted-space"></span></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEjDgfHd4xPFTnJWmvDf5Aj-ykaoQRn2et7_P_8IeDF9TM8jMOnVUGwoLAlVpXPKaJ97yllDZjXpMGtoDBbC8bi8pvmY7DR7Nvn8BNiosIWScymDbJwmxw6eGxRt2TSwBNej6cSZTPKwbmbGerxTCMhexQSxZx1CCuMC4dpJoYfJFXMamWhJJqbMtva5KuU" style="margin-left: 1em; margin-right: 1em;"><img data-original-height="504" data-original-width="1211" height="266" src="https://blogger.googleusercontent.com/img/a/AVvXsEjDgfHd4xPFTnJWmvDf5Aj-ykaoQRn2et7_P_8IeDF9TM8jMOnVUGwoLAlVpXPKaJ97yllDZjXpMGtoDBbC8bi8pvmY7DR7Nvn8BNiosIWScymDbJwmxw6eGxRt2TSwBNej6cSZTPKwbmbGerxTCMhexQSxZx1CCuMC4dpJoYfJFXMamWhJJqbMtva5KuU=w640-h266" width="640" /></a></div><br /><p></p><p class="p2" style="font-family: "Helvetica Neue"; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size: 13px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; min-height: 15px; text-align: justify;">Although "<a href="https://www.nber.org/papers/w29832" target="_blank">Personal Increasing Returns</a>" assumes constant input prices, including the relative price of human capital <i>h</i>, upward-sloping input supply could introduce upward-sloping elements in Figures 2 and 4. This occurs at quantities where the complementarity between <i>h</i> and <i>q</i> (e.g., human capital and labor supply) is insufficient to offset increasing input prices. Still, such supply curves are known as forward falling as long as they have a declining portion. Each quantity has a unique marginal cost, even if each marginal cost does not correspond to a unique quantity.</p><p class="p2" style="font-family: "Helvetica Neue"; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size: 13px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; min-height: 15px; text-align: justify;"><br /></p><p class="p1" style="font-family: "Helvetica Neue"; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size: 13px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify;">While Marshall’s formulation with firm-level supply that is a function of industry output may produce a forward-falling industry supply curve, the complementarity could be on the demand side instead. Becker [1991] posits that a consumer’s demand curve may be shifted out by market-level demand, particularly in markets for “social activities in which people consumer a product or service together and partly in public.” As a result, the market level demand curve slopes up in the price ranges where the complementarity is sufficiently strong. In that range, an increase <i>dQ</i> in the market quantity shifts the sum of individual demands even more than <i>dQ</i> due to the social interaction, so price must increase to choke off that additional demand (that is, limit the increase in the sum of demands to <i>dQ</i>). Still, each quantity on the market-level curve corresponds to a unique price, even though a single price may not correspond to a unique quantity.</p><p class="p2" style="font-family: "Helvetica Neue"; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size: 13px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; min-height: 15px; text-align: justify;"><br /></p><p class="p1" style="font-family: "Helvetica Neue"; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size: 13px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify;">The <b>snob-good model</b> is the opposite of Becker’s <b>social interactions</b> in that some of the consumers value the good more when others are not consuming it. The resulting demand curve may have a backward <i>S</i> shape, with only the elite consuming at the highest prices. As the price falls enough to induce the general population to consume, enough elites may leave the market to reduce total demand, thereby generating the middle part of the <i>S</i>. Once enough elite are gone from the market, further price reductions increase market demand.<span class="s1" style="text-decoration-line: underline;"><sup><a href="#ref2">[2]</a></sup></span> Unlike Becker’s demand curve, the snob demand model can have multiple market prices corresponding to a single quantity.</p><p class="p2" style="font-family: "Helvetica Neue"; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size: 13px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; min-height: 15px; text-align: justify;"><br /></p><p class="p1" style="font-family: "Helvetica Neue"; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size: 13px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify;">The economics of <b>“backward bending” supply</b> curves and the demand for <b>Giffen goods</b> is entirely different. In those cases, the usual substitution effects on supply or demand are more than offset by income effects. For the backward-bending supply curve, the supplier’s alternative to production is consumption of a normal good; the classic example is the supply of labor. A Giffen good has income and substitution effects in opposite directions because it is an inferior good.</p><p class="p3" style="font-family: "Helvetica Neue"; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size: 13px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; min-height: 15px;"><br /></p><p class="p3" style="font-family: "Helvetica Neue"; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size: 13px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; min-height: 15px;"><br /></p><p class="p4" style="font-family: "Helvetica Neue"; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size: 13px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px;"><span class="s1" style="text-decoration-line: underline;"><sup><span id="ref1">[1]</span></sup></span> Stigler [1949, p. 165] is reluctant to discuss much about forward-falling supply without sufficient demonstration of its importance in practice. Respecting that principle, <span style="text-align: justify;">"</span><a href="https://www.nber.org/papers/w29832" style="text-align: justify;" target="_blank">Personal Increasing Returns</a><span style="text-align: justify;">"</span> points to education decisions, vehicle choice, drugs and alcohol pricing, and other situations where consumer action can significantly affect a price they pay. Boulding [1955] refers to “falling supply price.”</p><p><span class="s1" style="font-family: "Helvetica Neue"; font-size: 13px; text-decoration-line: underline;"><sup><span id="ref2">[2]</span></sup></span><span style="font-family: "Helvetica Neue"; font-size: 13px;"> See also the Veblen [1899] model, algebraic versions of which can be found in <a href="https://doi.org/10.2307/1882692" target="_blank">Leibenstein [1950]</a>.</span> </p><p class="p1" style="font-family: "Helvetica Neue"; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size: 13px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px;"><br /></p><p class="p1" style="font-family: "Helvetica Neue"; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size: 13px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px;">Adams, Robert W. and Wheeler, John T. (1952). "External Economies and the Falling Supply Curve." <i>The Review of Economic Studies</i> 20(1): 24-39.</p><p class="p2" style="font-family: "Helvetica Neue"; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size: 13px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; min-height: 15px;"><br /></p><p class="p1" style="font-family: "Helvetica Neue"; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size: 13px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px;">Becker, Gary S. 1991. "A Note on Restaurant Pricing and Other Examples of Social Influences on Price." <i>Journal of Political Economy</i> 99(5): 1109-16.</p><p class="p2" style="font-family: "Helvetica Neue"; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size: 13px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; min-height: 15px;"><br /></p><p class="p1" style="font-family: "Helvetica Neue"; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size: 13px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px;">Boulding, Kenneth E. 1955. <i>Economic Analysis</i>. New York: Harper & Row.</p><p class="p1" style="font-family: "Helvetica Neue"; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size: 13px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px;"><br /></p><p class="p1" style="font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px;"><span style="font-family: Helvetica Neue;"><span style="font-size: 13px;">Leibenstein, H. 1950. "Bandwagon, Snob, and Veblen Effects in the Theory of Consumers' Demand." <i>The Quarterly Journal of Economics</i> 64(2): 183–207.</span></span></p><p class="p2" style="font-family: "Helvetica Neue"; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size: 13px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; min-height: 15px;"><br /></p><p class="p1" style="font-family: "Helvetica Neue"; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size: 13px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px;">Marshall, Alfred. 1890. <i>Principles of Economics</i>. London: Macmillan</p><p class="p2" style="font-family: "Helvetica Neue"; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size: 13px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; min-height: 15px;"><br /></p><p class="p1" style="font-family: "Helvetica Neue"; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size: 13px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px;">Stigler, George J. 1949. <i>The Theory of Price</i>. Macmillan.</p><p class="p2" style="font-family: "Helvetica Neue"; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size: 13px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; min-height: 15px;"><br /></p><p class="p1" style="font-family: "Helvetica Neue"; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size: 13px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px;">Veblen, Thorstein. 1899. <i>The Theory of the Leisure Class</i>. New York, NY: Macmillan.</p><p><br /></p>Casey B. Mulliganhttp://www.blogger.com/profile/03317454408275318282noreply@blogger.com0tag:blogger.com,1999:blog-7539577136486286096.post-78118899281181247622023-11-24T04:55:00.018-06:002023-11-25T17:54:58.825-06:00Dublin Chaos Last Night: Firsthand Account<p style="text-align: justify;"><span style="-webkit-text-size-adjust: auto; font-family: UICTFontTextStyleBody; font-size: 17px; text-size-adjust: auto;">Between 1 and 2pm local time, young school children were stabbed in Parnell square by a single assailant.</span><span style="-webkit-text-size-adjust: auto; font-family: UICTFontTextStyleBody; font-size: 17px; text-size-adjust: auto;"> </span> <span style="-webkit-text-size-adjust: auto; font-family: UICTFontTextStyleBody; font-size: 17px; text-size-adjust: auto;">We were less than a mile away at John Mulligan's pub at the time; learned about the stabbing on the news during the afternoon.</span></p><p class="p2" style="-webkit-text-size-adjust: auto; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size-adjust: none; font-size: 17px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; min-height: 22px; text-align: justify; text-size-adjust: auto;"><span style="font-family: UICTFontTextStyleBody;">Not yet aware of events, we went by Parnell Square about 90 minutes later.</span><span style="font-family: UICTFontTextStyleBody;"> </span> <span style="font-family: UICTFontTextStyleBody;">A few dozen men aged 20-40 were cursing at the police (gardai).</span><span style="font-family: UICTFontTextStyleBody;"> </span> <span style="font-family: UICTFontTextStyleBody;">Presumably they were locals given that several were yelling in Gaelic.</span><span class="s1" style="font-family: UICTFontTextStyleBody;"></span></p><p class="p2" style="-webkit-text-size-adjust: auto; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size-adjust: none; font-size: 17px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; min-height: 22px; text-align: justify; text-size-adjust: auto;"><span class="s1" style="font-family: UICTFontTextStyleBody;"></span><br /></p><p class="p1" style="-webkit-text-size-adjust: auto; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size-adjust: none; font-size: 17px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify; text-size-adjust: auto;"><span class="s1" style="font-family: UICTFontTextStyleBody;">About 3 blocks south of Parnell Square is the OConnell bridge, the one nearest Trinity College, where at 8pm two buses and a police car were set on fire. <span class="Apple-converted-space"> </span>We were on Fleet Street, which is about 2 blocks west. <span class="Apple-converted-space"> </span>We heard helicopters, which suggested trouble although many tourists and locals were still conducting business as usual. <span class="Apple-converted-space"> </span>As we walked down Fleet Street, in the direction of the bridge, a couple of white teen males pushed passed us wearing black face masks and wearing at least 2 empty backpacks each.</span></p><p class="p2" style="-webkit-text-size-adjust: auto; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size-adjust: none; font-size: 17px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; min-height: 22px; text-align: justify; text-size-adjust: auto;"><span class="s1" style="font-family: UICTFontTextStyleBody;"></span><br /></p><p class="p1" style="-webkit-text-size-adjust: auto; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size-adjust: none; font-size: 17px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify; text-size-adjust: auto;"><span class="s1" style="font-family: UICTFontTextStyleBody;">I thought about telling the teens that face masks are for criminals. <span class="Apple-converted-space"> </span>Undoubtedly they were criminals about to commence looting, which was occurring about that time at about five merchants near the bridge. <span class="Apple-converted-space"> </span>The criminals did not look like poor people and certainly were not emerging from a poor neighborhood.</span></p><p class="p1" style="-webkit-text-size-adjust: auto; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size-adjust: none; font-size: 17px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify; text-size-adjust: auto;"><span class="s1" style="font-family: UICTFontTextStyleBody;"><br /></span></p><p class="p1" style="-webkit-text-size-adjust: auto; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size-adjust: none; font-size: 17px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify; text-size-adjust: auto;"><span class="s1" style="font-family: UICTFontTextStyleBody;">The criminals likely numbered several dozen, which is a small percentage of the number of people present. The bridge is in the heart of the tourist area and near Trinity College (itself a tourist attraction). Of course, there are many pubs, some catering to tourists and others to locals. A fraction of those who had drunk by 8pm were interested spectators.</span></p><p class="p2" style="-webkit-text-size-adjust: auto; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size-adjust: none; font-size: 17px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; min-height: 22px; text-size-adjust: auto;"><span class="s1" style="font-family: UICTFontTextStyleBody;"></span><br /></p><p class="p1" style="-webkit-text-size-adjust: auto; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size-adjust: none; font-size: 17px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify; text-size-adjust: auto;"><span class="s1" style="font-family: UICTFontTextStyleBody;">We saw merchants calmly removing merchandise from their shelves, as if they were instructed to do so or were following a precautionary drill. <span class="Apple-converted-space"> </span>Trinity College was being evacuated, said a Trinity College staffer as we briskly walked past. <span class="Apple-converted-space"> </span>Students were flowing out of the campus. <span class="Apple-converted-space"> </span>I asked a few where they were evacuating to and they said “home, away from here.” <span class="Apple-converted-space"> </span>Several minutes later we would learn that our hotel lobby, about 3/4 mile west, was locked as a precaution.</span></p><p class="p2" style="-webkit-text-size-adjust: auto; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size-adjust: none; font-size: 17px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; min-height: 22px; text-size-adjust: auto;"><span class="s1" style="font-family: UICTFontTextStyleBody;"></span><br /></p><p class="p1" style="-webkit-text-size-adjust: auto; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size-adjust: none; font-size: 17px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify; text-size-adjust: auto;"><span class="s1" style="font-family: UICTFontTextStyleBody;">A block west of Trinity College we saw many police. <span class="Apple-converted-space"> </span>They seemed organized, but quite nervous.</span></p><p class="p2" style="-webkit-text-size-adjust: auto; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size-adjust: none; font-size: 17px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; min-height: 22px; text-align: justify; text-size-adjust: auto;"><span class="s1" style="font-family: UICTFontTextStyleBody;"></span><br /></p><p class="p1" style="-webkit-text-size-adjust: auto; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size-adjust: none; font-size: 17px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify; text-size-adjust: auto;"><span class="s1" style="font-family: UICTFontTextStyleBody;">Note that the fires and looting are unprecedented in recent Dublin history yet the merchants and criminals seem prepared. <span class="Apple-converted-space"> </span>This fact pattern suggests to me that maybe law enforcement had intelligence about organized retail crime and in prior weeks had warned merchants about that capability.</span></p><p class="p2" style="-webkit-text-size-adjust: auto; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size-adjust: none; font-size: 17px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; min-height: 22px; text-align: justify; text-size-adjust: auto;"><span class="s1" style="font-family: UICTFontTextStyleBody;"></span><br /></p><p class="p1" style="-webkit-text-size-adjust: auto; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size-adjust: none; font-size: 17px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify; text-size-adjust: auto;"><span class="s1" style="font-family: UICTFontTextStyleBody;">The chaos has been attributed to “misinformation” (about the <a href="https://www.irishmirror.ie/news/irish-news/suspect-dublin-attack-knife-charge-31524149" target="_blank">knife assailant's nationality</a>) and “right-wing” political sentiments. <span class="Apple-converted-space"> </span>Regardless of any advance warning, this looks like organized crime is a big factor in addition to, or rather than, something political.</span></p><p class="p2" style="-webkit-text-size-adjust: auto; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size-adjust: none; font-size: 17px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; min-height: 22px; text-size-adjust: auto;"><span class="s1" style="font-family: UICTFontTextStyleBody;"></span><br /></p><p class="p1" style="-webkit-text-size-adjust: auto; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size-adjust: none; font-size: 17px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify; text-size-adjust: auto;"><span class="s1" style="font-family: UICTFontTextStyleBody;">We saw a bus burning and smelled smoke throughout the area within a quarter mile of Trinity College. This was a bit confusing to at least one of our kids, who was worried about “bombing,” because we had just returned from Northern Ireland where we learned about sectarian violence that had ended 20 years ago (Dublin is not part of Northern Ireland, which is thriving in terms of tourism, construction, and more).</span></p><p class="p1" style="-webkit-text-size-adjust: auto; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size-adjust: none; font-size: 17px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify; text-size-adjust: auto;"><span class="s1" style="font-family: UICTFontTextStyleBody;"><br /></span></p><p class="p1" style="-webkit-text-size-adjust: auto; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size-adjust: none; font-size: 17px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify; text-size-adjust: auto;"><span class="s1" style="font-family: UICTFontTextStyleBody;">The next morning I heard an elected official say that she was eager for the criminals to serve time in jail — not a response I would expect in Chicago. (Although Chicago as part of USA does provide greater free speech rights—see below). Reportedly the attacker was detained by unarmed civilians (update: one was a food <a href="https://www.irishtimes.com/crime-law/2023/11/24/i-used-my-helmet-as-a-weapon-to-stop-him-brazilian-deliveroo-rider-intervened-in-knife-attack-at-school-on-parnell-square/" target="_blank">delivery man</a> who used his motorcycle helmet as a weapon). Police are typically unarmed, too.</span></p><p class="p1" style="-webkit-text-size-adjust: auto; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size-adjust: none; font-size: 17px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify; text-size-adjust: auto;"><span class="s1" style="font-family: UICTFontTextStyleBody;"><br /></span></p><p class="p1" style="-webkit-text-size-adjust: auto; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size-adjust: none; font-size: 17px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify; text-size-adjust: auto;"><span class="s1" style="font-family: UICTFontTextStyleBody;">PS. In Ireland and Northern Ireland it is <a href="https://www.irishstatutebook.ie/eli/1994/act/2/section/6/enacted/en/html" target="_blank">illegal</a> </span><span style="-webkit-text-size-adjust: auto; font-family: UICTFontTextStyleBody; text-align: left; text-size-adjust: auto;">for “any person in a public place to use or engage in any threatening, abusive or insulting words or behaviour with the intent to provoke a breach of the peace or being reckless as to whether a breach of the peace may be occasioned.” Perhaps that explains why the pro-Palestine protest we saw in Derry was rated G?</span></p><p class="p1" style="-webkit-text-size-adjust: auto; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size-adjust: none; font-size: 17px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify; text-size-adjust: auto;"><span class="s1" style="font-family: UICTFontTextStyleBody;"><br /></span></p><p class="p1" style="-webkit-text-size-adjust: auto; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size-adjust: none; font-size: 17px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify; text-size-adjust: auto;"><span class="s1" style="font-family: UICTFontTextStyleBody;"><br /></span></p><p class="p1" style="-webkit-text-size-adjust: auto; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size-adjust: none; font-size: 17px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify; text-size-adjust: auto;"><span class="s1" style="font-family: UICTFontTextStyleBody;"><br /></span></p><p class="p1" style="-webkit-text-size-adjust: auto; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size-adjust: none; font-size: 17px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify; text-size-adjust: auto;"><span class="s1" style="font-family: UICTFontTextStyleBody;"><br /></span></p>Casey B. Mulliganhttp://www.blogger.com/profile/03317454408275318282noreply@blogger.com0tag:blogger.com,1999:blog-7539577136486286096.post-76793837601846482902023-10-29T15:26:00.011-05:002023-10-30T08:22:55.787-05:00"Justicia Social" Failed Venezuela's Indigenous and Mestizo Populations<p style="text-align: justify;"><span style="font-family: times;">“<i>Capitalism is the road to hell, to the destruction of the world. …it’s the freedom to oppress, to invade, to kill, to annihilate, and to exploit</i>.” <a href="https://climateandcapitalism.com/2013/03/06/hugo-chavez-on-climate-change-and-capitalism/" target="_blank"><span class="s1" style="color: #dca10d;">Hugo Chavez, 2009</span></a>.</span></p><p class="p1" style="font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify;"><span style="font-family: times;">“<i>Help me become President and I’ll help you get the land back</i>.” <a href="https://www.cpim.org/marxist/200602-land-reform-venezuela-2.pdf" target="_blank"><span class="s1" style="color: #dca10d;">Hugo Chavez, 1998</span></a>.</span></p><p class="p1" style="font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify;"><span style="font-family: times;"> </span></p><p class="p2" style="font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; min-height: 15px;"></p><div class="separator" style="clear: both; text-align: justify;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgRithAL5e4n4UeOwAQs8u-XgwyO_xUWismjhrGJjgI5NPJMmWvZ94uHKC3kkfsGSOvu-niCKxZV9abFCSDWYA_xxzB32-zNxVex8cwoAnikgE1hcymiBR48ZnOcCLLcZGfdeQisHPdq8eYA4VLbmThKuhlt4nABZI9XKYofB-76ba1zLEST35m7hpyspQ/s1024/FBgwNbhXIAYXScb.jpeg" style="margin-left: 1em; margin-right: 1em;"><span style="font-family: times;"><img border="0" data-original-height="682" data-original-width="1024" height="266" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgRithAL5e4n4UeOwAQs8u-XgwyO_xUWismjhrGJjgI5NPJMmWvZ94uHKC3kkfsGSOvu-niCKxZV9abFCSDWYA_xxzB32-zNxVex8cwoAnikgE1hcymiBR48ZnOcCLLcZGfdeQisHPdq8eYA4VLbmThKuhlt4nABZI9XKYofB-76ba1zLEST35m7hpyspQ/w400-h266/FBgwNbhXIAYXScb.jpeg" width="400" /></span></a></div><span style="font-family: times;"><div style="text-align: justify;"><br /></div><div style="text-align: justify;">The quotes summarize lessons increasingly being taught in U.S. grade schools, high schools, and colleges. Particularly referenced in “social justice” lessons are <a href="https://archive.nytimes.com/opinionator.blogs.nytimes.com/2015/03/18/noam-chomsky-on-the-roots-of-american-racism/" target="_blank"><span class="s1" style="color: #dca10d;">indigenous peoples</span></a>, whose representatives also <a href="https://www.culturalsurvival.org/news/venezuela-indigenous-peoples-back-chavez" target="_blank"><span class="s1" style="color: #dca10d;">backed Chavez</span></a>. The lessons should be considered with robust reasoning, and compared to data.</div></span><p></p><p class="p1" style="font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify;"><span style="font-family: times;">My purpose here is to consider the case of Venezuela, where Hugo Chavez was President beginning in 1999, as an alternative to “capitalism” for indigenous peoples and their descendants. </span><span style="font-family: times;">At the time of the above quotes, if not now, </span><a href="https://www.britannica.com/place/Venezuela/Immigration-and-ethnic-composition" style="font-family: times;" target="_blank"><span class="s1" style="color: #dca10d;">two-thirds</span></a><span style="font-family: times;"> of the population of Venezuela was mestizo, meaning that each had a mix of indigenous and European ancestry. </span><span style="font-family: times;">A related comparison can be found elsewhere: </span><a href="https://caseymulligan.blogspot.com/2017/03/puerto-rico-cuba-comparison.html" style="font-family: times;" target="_blank"><span class="s1" style="color: #dca10d;">Cuba and Puerto Rico</span></a><span style="font-family: times;"> from 1950 to present.</span></p><p class="p1" style="font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify;"><span style="font-family: times;"><br /></span></p><p class="p1" style="font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify;"><span style="font-family: times;">While many teachers of U.S. students dream about trying something other than capitalism, it became a reality for Venezuelans. Land was redistributed in the name of equity. So were petroleum assets, also as promised.</span></p><p class="p1" style="font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify;"><span style="font-family: times;"> </span></p><p class="p1" style="font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify;"><span style="font-family: times;">Chavez shirts sold well on college campuses. U.S. intellectuals on the left were “<a href="https://www.winnipegfreepress.com/breakingnews/2014/02/06/chomsky-was-wrong-about-chavez" target="_blank"><span class="s1" style="color: #dca10d;">mesmerized</span></a>” by Chavez.</span></p><p class="p1" style="font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify;"><span style="font-family: times;"> </span></p><p class="p1" style="font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify;"><span style="font-family: times;">One direct result of land reform was <a href="https://www.aljazeera.com/opinions/2011/11/13/impunity-for-venezuelas-big-landowners" target="_blank"><span class="s1" style="color: #dca10d;">violence</span></a>. <a href="https://doi.org/10.1016/j.socscimed.2019.02.007" target="_blank">Food became scarce</a>. No longer satisfied with the assets of “rich people,” the government came for the small businesses too. Over <a href="https://apnews.com/article/venezuela-immigration-maduro-ea00ba8d5127bad7474da19ce33ec320" target="_blank"><span class="s1" style="color: #dca10d;">7 million Venezuelans have left</span></a> the country in the past ten years, when the population was about 30 million.</span></p><p class="p1" style="font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify;"><span style="font-family: times;"> </span></p><p class="p1" style="font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify;"><span style="font-family: times;">This alternative to capitalism, steeped in “justicia social,” did not go well for people with indigenous ancestry. My comparison here is not with nirvana, but with the capitalism they had before and the capitalism they will get wherever the migrants end up.</span></p><p class="p1" style="font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify;"><span style="font-family: times;"> </span></p><p class="p1" style="font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify;"><span style="font-family: times;">“Anti-capitalist” and “de-colonial” teachers today rarely mention Venezuela, Cuba, or other real-world alternatives to capitalism. With only a <a href="https://www.google.com/books/edition/Class_Theory_and_History/DMXwGdV29jwC?hl=en" target="_blank">few exceptions</a>, there is no attempt examine the mistakes of the past so that next time can be different. Does the omission reveal laziness, or some interest in repeating such experiences?</span></p><p class="p1" style="font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify;"><span style="font-family: times;"> </span></p><p class="p3" style="color: #dca10d; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify;"><span class="s2" style="color: black;"><span style="font-family: times;">[Image source: <a href="https://twitter.com/venanalysis/status/1447981828254617604"><span class="s3">https://twitter.com/venanalysis/status/1447981828254617604</span></a>]</span></span></p>Casey B. Mulliganhttp://www.blogger.com/profile/03317454408275318282noreply@blogger.com0tag:blogger.com,1999:blog-7539577136486286096.post-7333929919493968622023-10-08T16:15:00.010-05:002023-10-11T09:13:34.155-05:00No More Troubles<p style="text-align: justify;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh5E-44xo7kopFM_lkr5Fbs7p6KJFfUMjym2DIGkX06e1gWpUEaM9U70tMGSrjkL29auWMkN1IGudbxqKzfRYLlxgDaGouplDL-bS3TEikEqvkaFn1BWKxYy7uKVIj-82qCexV7BKJ7Mzl35CpLgIGisaW68LOBzzvrfxBTN9j8OsZ_x_tDD8kCsERVotg/s1024/Dali.jpeg" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1024" data-original-width="1024" height="400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh5E-44xo7kopFM_lkr5Fbs7p6KJFfUMjym2DIGkX06e1gWpUEaM9U70tMGSrjkL29auWMkN1IGudbxqKzfRYLlxgDaGouplDL-bS3TEikEqvkaFn1BWKxYy7uKVIj-82qCexV7BKJ7Mzl35CpLgIGisaW68LOBzzvrfxBTN9j8OsZ_x_tDD8kCsERVotg/w400-h400/Dali.jpeg" width="400" /></a></div><br /> <p></p><p style="text-align: justify;"></p><ul><li><span style="font-family: times; text-align: justify;">The violence seemed like it would never end; bombings, shootings, and kidnappings became so commonplace that they were almost expected, a grim part of the daily news cycle.</span></li><li><span style="font-family: times;">Even simple tasks, like going to the shop or sending the kids to school, were fraught with uncertainty.</span></li><li><span style="font-family: times;">The politicians seemed unable or unwilling to bring about meaningful change, trapped in their own ideologies and the weight of history, if not poorly incentivized.</span></li></ul><p></p><p class="p1" style="font-family: "Times New Roman"; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify;"> </p><p class="p1" style="font-family: "Times New Roman"; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify;">This was Northern Ireland during the three decades of the Troubles, itself preceded by 300 years of conflict between Ireland and Britain. During the Troubles, about 1/500 (cumulative) residents of Northern Ireland were killed by shootings, bombings, civil unrest, and the like.</p><p class="p1" style="font-family: "Times New Roman"; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify;"> </p><p class="p1" style="font-family: "Times New Roman"; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify;">I have been reading Leon Uris’ <i>Ireland: A Terrible Beauty</i> published in 1978. Although Uris is known for his fiction, this is a non-fiction travel book. It has lots of bitterness and anger and would not be easy for a British reader to stomach. It is difficult to understand from today’s perspective.</p><p class="p1" style="font-family: "Times New Roman"; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify;"> </p><p class="p1" style="font-family: "Times New Roman"; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify;">A peace agreement was reached that has lasted 25 years now, even through Brexit. Today “No more troubles” is a slight <a href="https://www.newyorker.com/news/postscript/the-incredible-life-and-tragic-death-of-lyra-mckee" target="_blank">exaggeration</a>, but there has been a reduction of almost two orders of magnitude according to the <a href="https://www.start.umd.edu/gtd" target="_blank"><span class="s1" style="color: #dca10d;">Global Terrorism Database</span></a>.</p><p class="p1" style="font-family: "Times New Roman"; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify;"><br /></p><p class="p1" style="font-family: "Times New Roman"; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjI7FnSKDf_PT1uxRKXz7_Uf27teAYPAqYX6lPApp3_2olOUNfBU70727k43hIzgrCFdX41YLwvN3Ue0Ql81HuITM9V8HvSx6MhxZ5E9NEPk-WNBoLrkrGE_YZ6WsS_AeBXSvORg2guGboGxV0Npoy9IgJHVz8AbXfjfZFH_WdrIrwSNK65mbwR6gVOQTs/s2070/Screen%20Shot%202023-10-11%20at%209.10.51%20AM.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1438" data-original-width="2070" height="278" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjI7FnSKDf_PT1uxRKXz7_Uf27teAYPAqYX6lPApp3_2olOUNfBU70727k43hIzgrCFdX41YLwvN3Ue0Ql81HuITM9V8HvSx6MhxZ5E9NEPk-WNBoLrkrGE_YZ6WsS_AeBXSvORg2guGboGxV0Npoy9IgJHVz8AbXfjfZFH_WdrIrwSNK65mbwR6gVOQTs/w400-h278/Screen%20Shot%202023-10-11%20at%209.10.51%20AM.jpg" width="400" /></a></div><br /><br /><p></p><p class="p1" style="font-family: "Times New Roman"; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify;">Something worked well in Northern Ireland. U.S. President Clinton and U.S. Senator Mitchell get a lot of credit for brokering the 1998 Good Friday agreement. Interestingly, nobody seems to remember exactly which part of Ireland Mitchell’s father was from; perhaps that ambiguity helped the negotiations.</p><p class="p1" style="font-family: "Times New Roman"; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify;"><br /></p><p class="p1" style="font-family: "Times New Roman"; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify;">Note: per GTD coding, Israel (country code 97) does not include the West Bank or Gaza.</p><p class="p1" style="font-family: "Times New Roman"; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify;"><br /></p><p class="p1" style="font-family: "Times New Roman"; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify;">Image Credit: Generated with AI (Bing Image Creator) ∙ October 8, 2023 at 6:48 AM</p><div class="separator" style="clear: both; text-align: center;"></div><br />Casey B. Mulliganhttp://www.blogger.com/profile/03317454408275318282noreply@blogger.com1tag:blogger.com,1999:blog-7539577136486286096.post-87670157744913059232023-10-07T11:26:00.006-05:002023-10-08T22:34:13.690-05:00Private Property: That Spot<p class="p1" style="font-family: "Helvetica Neue"; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size: 13px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify;"><br /></p><p class="p2" style="font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify;"><span style="font-family: times;">Spot is the dog featured in an eponymous short story by Jack London. Spot’s owners desperately want to be rid of the dog. They tried shooting him. There is an attempt to kill Spot with an axe. They tie up Spot and leave town. Spot is set lose on a river ice floe. Spot always finds his way back.</span></p><p class="p2" style="font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify;"><span style="font-family: times;"><br /></span></p><p class="p2" style="font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://assets.americanliterature.com/images/story/that-spot.avif" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="250" data-original-width="480" height="208" src="https://assets.americanliterature.com/images/story/that-spot.avif" width="400" /></a></div><br /><p></p><p class="p2" style="font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify;"><span style="font-family: times;">On several occasions, governments (and others) have tried to eliminate private property. Yet, it finds its way back. After the Russian Revolution, most of the urban </span><a href="https://journals.sagepub.com/share/XJFXVJ2UMRBJI7JPGMFD?target=10.1177/0096144216649951" style="font-family: times;" target="_blank"><span class="s1" style="color: #dca10d;">housing stock was nationalized</span></a><span style="font-family: times;">. The government used its authority over those properties to punish political opponents as well as those who did not perform well in their state-appointed jobs. But, as documented in this </span><a href="https://cir.nii.ac.jp/crid/1130000795182918272" style="font-family: times;" target="_blank"><span class="s1" style="color: #dca10d;">UChicago History dissertation</span></a><span style="font-family: times;">, still tenants traded apartments, improved them, and passed them on to heirs.</span></p><p class="p2" style="font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify;"><span style="font-family: times;"> </span></p><p class="p2" style="font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify;"><span style="font-family: times;">The nationalization of agricultural land has yielded similar results. During China's Great Leap Forward, villagers risked their lives to reallocate communal land into individual plots, a scheme starkly against the official Marxist ideology. This informal system of property rights helped prevent starvation in the villages that adopted it. Kate Xiao Zhou calls it <a href="https://www.google.com/books/edition/How_The_Farmers_Changed_China/5YSGAAAAIAAJ?hl=en" target="_blank"><span class="s1" style="color: #dca10d;"><i>How the Farmers Changed China</i></span></a>.</span></p><p class="p2" style="font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify;"><span style="font-family: times;"> </span></p><p class="p2" style="font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify;"><span style="font-family: times;">Private agricultural plots emerged in the Soviet Union too, even with some government approval. As Nellie Ohr explains in her <a href="https://www.proquest.com/openview/5851809ced1ebdfa666d22ea388fd263/1?pq-origsite=gscholar&cbl=18750&diss=y" target="_blank"><span class="s1" style="color: #dca10d;">Stanford dissertation</span></a> “In 1930 Stalin had declared that [collective farm] members could own a few livestock and use a small private plot of land for personal consumption. However, these rules were often unclear….” Economist <a href="https://heinonline.org/HOL/LandingPage?handle=hein.journals/probscmu26&div=51&id=&page=" target="_blank"><span class="s1" style="color: #dca10d;">Gregory Grossman estimated</span></a> that “the approximately 50 million such tiny ‘farms,’ whose area represent only about 3 percent of the national total of cultivated land, have a gross output which is more than one fourth the gross output of Soviet agriculture.” [Paul Samuelson was infamously surprised that private agriculture in the USSR, cultivated by uneducated peasants without the benefit of scale economies, would be more productive than government farms.] See also <a href="https://archive.org/details/privatesectorins0000wdek" target="_blank"><span class="s1" style="color: #dca10d;"><i>The Private Sector in Soviet Agriculture</i></span></a>.</span></p><p class="p2" style="font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify;"><span style="font-family: times;"> </span></p><p class="p2" style="font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify;"><span style="font-family: times;">I recently visited some friends working at a major consulting firm in London. Of course, the firm is a capitalist enterprise, but regarding its office space the management decided that the workspaces would be a common resource for all employees. The management now has its own Spot moments, as employees use the same workspaces day after day, informally treating them as their own.</span></p><p class="p2" style="font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify;"><span style="font-family: times;"><br /></span></p><p class="p2" style="font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: normal; margin: 0px; text-align: justify;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://euromaidanpress.com/wp-content/uploads/2021/02/1432-1536x1098-1-1024x732.jpg" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="572" data-original-width="800" height="286" src="https://euromaidanpress.com/wp-content/uploads/2021/02/1432-1536x1098-1-1024x732.jpg" width="400" /></a></div><br /><span style="font-family: times;"><br /></span><p></p>Casey B. Mulliganhttp://www.blogger.com/profile/03317454408275318282noreply@blogger.com0tag:blogger.com,1999:blog-7539577136486286096.post-59629362747332804992023-10-01T20:45:00.016-05:002023-11-10T18:12:00.821-06:00Economics Lessons from the Kibbutzim
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<w:LsdException Locked="false" Priority="39" SemiHidden="true"
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<w:LsdException Locked="false" Priority="48" Name="Grid Table 3"/>
<w:LsdException Locked="false" Priority="49" Name="Grid Table 4"/>
<w:LsdException Locked="false" Priority="50" Name="Grid Table 5 Dark"/>
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<w:LsdException Locked="false" Priority="46"
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<w:LsdException Locked="false" Priority="49" Name="Grid Table 4 Accent 1"/>
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<w:LsdException Locked="false" Priority="52"
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<w:LsdException Locked="false" Priority="46"
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<w:LsdException Locked="false" Priority="51"
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<w:LsdException Locked="false" Priority="52"
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<p class="MsoNormal" style="text-align: justify;">In March 2023, I visited <span class="SpellE">Ma'agan</span> Michael Kibbutz and had a meeting with a former
Israeli government official charged with managing the government bailout of about
200 kibbutzim.<span style="mso-spacerun: yes;"> </span>Both offered empirical
lessons about the challenges of communal living.</p>
<p class="MsoNormal" style="text-align: justify;"><o:p> </o:p></p>
<p class="MsoNormal" style="text-align: justify;"><b>Background and Description<o:p></o:p></b></p>
<p class="MsoNormal" style="text-align: justify;"><span class="SpellE">Ma'agan</span>
Michael was one of the few kibbutzim not bailed out.<span style="mso-spacerun: yes;"> </span>It is one of the wealthier and more populous
kibbutzim, with approximately 2000 residents. (Kibbutzim is the plural of kibbutz, which is described in more detail below but might be briefly described as a voluntary socialist community in Israel.) </p>
<p class="MsoNormal" style="text-align: justify;"><o:p> </o:p></p>
<p class="MsoNormal" style="text-align: justify;">In an earlier era, this kibbutz
and the others followed a more egalitarian model.<span style="mso-spacerun: yes;"> </span>For example, children were once raised
communally in dormitories and would visit their biological parents for only
three hours each day.<span style="mso-spacerun: yes;"> </span>This alone was a
big sacrifice for families for the sake of ideology, not to mention <a href="https://doi.org/10.1016/j.childyouth.2023.106918">harmful actions</a>
that adults might occasionally take against children knowing that their parents
were not around.</p>
<p class="MsoNormal" style="text-align: justify;"><o:p> </o:p></p>
<p class="MsoNormal" style="text-align: justify;">Now nuclear families live together
in their own residence.<span style="mso-spacerun: yes;"> </span>Every family
receives an income that varies only according to the age and structure of their
family.<span style="mso-spacerun: yes;"> </span>As of 2023, that was about $3,500
per month.<span style="mso-spacerun: yes;"> </span>Dining and laundry are in common. Rent, healthcare, formal education, and those two services are "free" -- not taken out of the $3,500.<span style="mso-spacerun: yes;">
</span>A family can purchase and own household appliances for their residence.<span style="mso-spacerun: yes;"> </span>Some get a washer and dryer because the
community laundry takes too long.</p>
<p class="MsoNormal" style="text-align: justify;"><o:p> </o:p></p>
<p class="MsoNormal" style="text-align: justify;">Part of the kibbutz is something
like a car rental agency.<span style="mso-spacerun: yes;"> </span>They have a
fleet of cars.<span style="mso-spacerun: yes;"> </span>A central office holds the
keys.<span style="mso-spacerun: yes;"> </span>A member could pick up a car key
and use a car for the day.<span style="mso-spacerun: yes;"> </span>I believe
that this was charged against their $3,500. Much of the accounting is done on computer with a fab system.</p>
<p class="MsoNormal" style="text-align: justify;"><o:p> </o:p></p>
<p class="MsoNormal" style="text-align: justify;">Some of the members are employed
outside the kibbutz, but nonetheless must surrender <span class="GramE">all of</span>
their earnings to the community.<span style="mso-spacerun: yes;"> </span>A
partial exception would be earnings during periods of sabbatical.<span style="mso-spacerun: yes;"> </span>One three-year sabbatical is permitted per
lifetime.</p>
<p class="MsoNormal" style="text-align: justify;"><o:p> </o:p></p>
<p class="MsoNormal" style="text-align: justify;">Forty-five hours per week of work
is required from all adults, with some categorical exceptions.<span style="mso-spacerun: yes;"> </span>Mothers are required only 37.5 hours per
week.<span style="mso-spacerun: yes;"> </span>Retirees do not work at all; their
Israeli-government pensions go to the community.</p>
<p class="MsoNormal" style="text-align: justify;"><o:p> </o:p></p>
<p class="MsoNormal" style="text-align: justify;">More than 90 percent of the land
in Israel is government land, including the land allocated to <span class="SpellE">Ma'agan</span> Michael since at least the 1940s.<span style="mso-spacerun: yes;"> </span>It is a prime seaside property, as you can
see in this photo. <span style="mso-spacerun: yes;"> </span>They once fished in
the Mediterranean but now operate a couple of different kinds of fish farms on
their property.<span style="mso-spacerun: yes;"> </span>They also have a couple
of factories for manufacturing.<span style="mso-spacerun: yes;"> </span>The plastics
factory they founded in 1963 has annual sales approaching $100 million, which
helped them avoid the financial crises experienced by most other kibbutzim.<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<div class="separator" style="clear: both;"><a href="https://israelsgoodname.files.wordpress.com/2020/01/welcome-to-paradise-maagan-michael.jpg" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" width="400" data-original-height="536" data-original-width="800" src="https://israelsgoodname.files.wordpress.com/2020/01/welcome-to-paradise-maagan-michael.jpg"/></a></div>
<p class="MsoNormal"><o:p> </o:p></p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgr-iRl15SDazXyaTnNKpfg3cay7SYDal1h8sSd6X5sT3c0DG2QplaUr9WyFsQtarVd25GmBytcKqCHzwuarIMrxLmrAIVYPWaEGoUkzL41tJZcIGauoE19ymFH_r3MMlQrPGbwUt3KUkO_MJvI2RrKvv_n1fzUWKZl9GpXWAsNKxKVOuNRdZcg6NzQaEo/s2362/fishfarm.jpg" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" width="400" data-original-height="1412" data-original-width="2362" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgr-iRl15SDazXyaTnNKpfg3cay7SYDal1h8sSd6X5sT3c0DG2QplaUr9WyFsQtarVd25GmBytcKqCHzwuarIMrxLmrAIVYPWaEGoUkzL41tJZcIGauoE19ymFH_r3MMlQrPGbwUt3KUkO_MJvI2RrKvv_n1fzUWKZl9GpXWAsNKxKVOuNRdZcg6NzQaEo/s320/fishfarm.jpg"/></a></div>
<p class="MsoNormal" style="text-align: justify;">The common areas of the kibbutz can be compared to a college.<span style="mso-spacerun: yes;"> </span>The dining room resembles the college
cafeterias from my own college days, which are not as upscale as modern college
dining facilities.<span style="mso-spacerun: yes;"> </span>The grounds are less
neatly kept than college campuses are (the beach photo is not typical in
that regard).</p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal" style="text-align: justify;"><b>Problems with communal living, even on a small scale<o:p></o:p></b></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal" style="text-align: justify;">As Ran <span class="SpellE">Abramitzky</span> discusses in his
book <i>The Mystery of the Kibbutz</i>, and labor economists have observed with
employment <span class="SpellE">contracts, </span>work effort can be a problem
when pay is not tied to performance.<span style="mso-spacerun: yes;"> </span>The
kibbutz, where members have often known each other since birth, tries to police
this by watching each other.<span style="mso-spacerun: yes;"> </span>They can expel
a member from the kibbutz for poor performance, which is a serious punishment.</p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal" style="text-align: justify;">The kibbutz also looks hard at the work ethic of persons
applying for membership.<span style="mso-spacerun: yes;"> </span>However,
membership in the kibbutz is voluntary, and individuals cannot be compelled to
stay.<span style="mso-spacerun: yes;"> </span>The most productive members have a
significant financial incentive to leave.</p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal" style="text-align: justify;">Perhaps a more serious problem is occupational choice and
human capital accumulation.<span style="mso-spacerun: yes;"> </span>With uniform
pay, members have little financial incentive to excel in their jobs,
particularly in roles they find unfulfilling.<span style="mso-spacerun: yes;">
</span>While the kibbutz covers the cost of formal education, much of human
capital development in conventional labor markets occurs after formal schooling
is completed.</p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal" style="text-align: justify;">Too much is democratized on the
kibbutzim.<span style="mso-spacerun: yes;"> </span>First, there is the challenge
of reaching agreement, leading to significant and frustrating indecision. <span style="mso-spacerun: yes;"> </span>Second, incentives are lacking to acquire and
utilize information relevant to collective decision-making.<span style="mso-spacerun: yes;"> </span>An individual could work hard to determine
the right answer, but his vote hardly counts (the <a href="https://link.springer.com/content/pdf/10.1007/978-3-319-47828-9_1.pdf" target="_blank">paradox of voting</a>).</p>
<p class="MsoNormal" style="text-align: justify;"><o:p> </o:p></p>
<p class="MsoNormal" style="text-align: justify;">Financial decisions are a prime
example.<span style="mso-spacerun: yes;"> </span>Few kibbutz members have an incentive
to learn about, say, present values.<span style="mso-spacerun: yes;"> </span>About
fifty years ago, numerous <span class="GramE">kibbutzim initiated</span> projects
that seemed viable if the time value of money were ignored, but were big losers
from an NPV perspective.<span style="mso-spacerun: yes;"> </span>The abundance of
failures among those projects was a major reason that kibbutzim would later be bailed
out.</p>
<p class="MsoNormal" style="text-align: justify;"><o:p> </o:p></p>
<p class="MsoNormal" style="text-align: justify;">Equality, including gender
equality, was an important ideal of the early kibbutzim and, to a large extent,
still today.<span style="mso-spacerun: yes;"> </span>Nevertheless, despite the
ideology, gender segregation by occupation seems just as strong as it is off
kibbutz.<span style="mso-spacerun: yes;"> </span>All but one of the laundry
employees I saw were female.<span style="mso-spacerun: yes;"> </span><span class="GramE">All of</span> the tractors and heavy machinery were operated by men.</p>
</div>
</body>Casey B. Mulliganhttp://www.blogger.com/profile/03317454408275318282noreply@blogger.com0tag:blogger.com,1999:blog-7539577136486286096.post-59622914675756073412023-03-03T21:41:00.031-06:002023-03-04T09:19:27.538-06:00ChatGPT: Marshall, Hicks, or Cliff Clavin?<p><span style="font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; text-align: justify; vertical-align: baseline; white-space: pre-wrap;">Marshall discusses his Laws of Derived Demand in his </span><span style="font-family: "Times New Roman"; font-size: 12pt; font-style: italic; font-variant-east-asian: normal; font-variant-numeric: normal; text-align: justify; vertical-align: baseline; white-space: pre-wrap;">Principles of Economics</span><span style="font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; text-align: justify; vertical-align: baseline; white-space: pre-wrap;">. Specifically, in </span><a href="https://www.econlib.org/library/Marshall/marP.html?chapter_num=34#book-reader" style="text-align: justify; text-decoration-line: none;"><span style="color: blue; font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; text-decoration-line: underline; text-decoration-skip-ink: none; vertical-align: baseline; white-space: pre-wrap;">Chapter VI of Book V</span></a><span style="font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; text-align: justify; vertical-align: baseline; white-space: pre-wrap;">.</span></p><span id="docs-internal-guid-d743b8d4-7fff-68f8-aa4e-0bd285c33281"><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">Marshall listed four “conditions” that result in wage-inelastic derived demand for the corresponding factor of production:</span></p><br /><ol style="margin-bottom: 0px; margin-top: 0px; padding-inline-start: 48px;"><li aria-level="1" dir="ltr" style="font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: decimal; vertical-align: baseline; white-space: pre;"><p dir="ltr" role="presentation" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">“no good substitute being available at moderate price”</span></p></li><li aria-level="1" dir="ltr" style="font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: decimal; vertical-align: baseline; white-space: pre;"><p dir="ltr" role="presentation" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">“stiff and inelastic” final demand</span></p></li><li aria-level="1" dir="ltr" style="font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: decimal; vertical-align: baseline; white-space: pre;"><p dir="ltr" role="presentation" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">“small part of the expenses of production” (i.e., small factor-cost share)</span></p></li><li aria-level="1" dir="ltr" style="font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: decimal; vertical-align: baseline; white-space: pre;"><p dir="ltr" role="presentation" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">Inelastic supply of other factors</span></p></li></ol><br /><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">Putting aside the fourth law, we can discuss the first three in the context of the Allen-Hicks formula for the own-price elasticity of derived demand, </span><span style="font-family: "Times New Roman"; font-size: 12pt; font-style: italic; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">β</span><span style="font-family: "Times New Roman"; font-size: 12pt; font-style: italic; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"><span style="font-size: 0.6em; vertical-align: sub;">ii</span></span><span style="font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">, in the two-factor case (see also </span><a href="https://youtu.be/RDmV5IHCiUk" style="text-decoration-line: none;"><span style="color: blue; font-family: "Times New Roman"; font-size: 12pt; font-style: italic; font-variant-east-asian: normal; font-variant-numeric: normal; text-decoration-line: underline; text-decoration-skip-ink: none; vertical-align: baseline; white-space: pre-wrap;">Chicago Price Theory</span><span style="color: blue; font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; text-decoration-line: underline; text-decoration-skip-ink: none; vertical-align: baseline; white-space: pre-wrap;"> Chapter 11</span></a><span style="font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">).</span></p><br /><div align="left" dir="ltr" style="margin-left: 0pt;"><table style="border-collapse: collapse; border: none;"><colgroup><col width="601"></col><col width="48"></col></colgroup><tbody><tr style="height: 0pt;"><td style="overflow-wrap: break-word; overflow: hidden; padding: 0pt 5.4pt; vertical-align: top;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjeoLxnXbAJLoQBNOl5LaIFWncKf5CvSexTL8OtrRKDw5xStwjm-JA_AVuyZ7eDMf8yveK7x4wSi0yFGkNgu5ik5TRANri-MxQKAxSRQ7-FRP8BQnnAieYIL30V_SytecjnyrHjp8Bg4WB-BACeSfoz6E4qRzvnK1rQvKtcWt97q6OenNpWPRaYty_T/s424/Screen%20Shot%202023-03-03%20at%209.47.11%20PM.jpg" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="78" data-original-width="424" height="59" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjeoLxnXbAJLoQBNOl5LaIFWncKf5CvSexTL8OtrRKDw5xStwjm-JA_AVuyZ7eDMf8yveK7x4wSi0yFGkNgu5ik5TRANri-MxQKAxSRQ7-FRP8BQnnAieYIL30V_SytecjnyrHjp8Bg4WB-BACeSfoz6E4qRzvnK1rQvKtcWt97q6OenNpWPRaYty_T/s320/Screen%20Shot%202023-03-03%20at%209.47.11%20PM.jpg" width="320" /></a></div><br /><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt; text-align: center;"><br /></p></td><td style="overflow-wrap: break-word; overflow: hidden; padding: 0pt 5.4pt; vertical-align: middle;"><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p></td></tr></tbody></table></div><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">where </span><span style="font-family: "Times New Roman"; font-size: 12pt; font-style: italic; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">s</span><span style="font-family: "Times New Roman"; font-size: 12pt; font-style: italic; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"><span style="font-size: 0.6em; vertical-align: sub;">i</span></span><span style="font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> is good </span><span style="font-family: "Times New Roman"; font-size: 12pt; font-style: italic; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">i</span><span style="font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">’s share in factor cost, </span><span style="font-family: "Times New Roman"; font-size: 12pt; font-style: italic; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">ε</span><span style="font-family: "Times New Roman"; font-size: 12pt; font-style: italic; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"><span style="font-size: 0.6em; vertical-align: sub;">D</span></span><span style="font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> < 0 is the price-elasticity of demand for the final product, and </span><span style="font-family: "Times New Roman"; font-size: 12pt; font-style: italic; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">σ</span><span style="font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> > 0 is the elasticity of factor substitution. None of these parameters are necessarily constants; they may vary according to the factor allocation. Marshall’s first law can be understood as a comparative static with respect to </span><span style="font-family: "Times New Roman"; font-size: 12pt; font-style: italic; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">σ</span><span style="font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> in the direction of zero, holding constant </span><span style="font-family: "Times New Roman"; font-size: 12pt; font-style: italic; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">s</span><span style="font-family: "Times New Roman"; font-size: 12pt; font-style: italic; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"><span style="font-size: 0.6em; vertical-align: sub;">i</span></span><span style="font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> and </span><span style="font-family: "Times New Roman"; font-size: 12pt; font-style: italic; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">ε</span><span style="font-family: "Times New Roman"; font-size: 12pt; font-style: italic; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"><span style="font-size: 0.6em; vertical-align: sub;">D</span></span><span style="font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">. The second law can be understood as a comparative static with respect to </span><span style="font-family: "Times New Roman"; font-size: 12pt; font-style: italic; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">ε</span><span style="font-family: "Times New Roman"; font-size: 12pt; font-style: italic; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"><span style="font-size: 0.6em; vertical-align: sub;">D</span></span><span style="font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> holding constant </span><span style="font-family: "Times New Roman"; font-size: 12pt; font-style: italic; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">s</span><span style="font-family: "Times New Roman"; font-size: 12pt; font-style: italic; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"><span style="font-size: 0.6em; vertical-align: sub;">i</span></span><span style="font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> and </span><span style="font-family: "Times New Roman"; font-size: 12pt; font-style: italic; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">σ</span><span style="font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">. The debated third law is a comparative static with respect to the share parameter, with Hicks at least holding constant </span><span style="font-family: "Times New Roman"; font-size: 12pt; font-style: italic; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">ε</span><span style="font-family: "Times New Roman"; font-size: 12pt; font-style: italic; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"><span style="font-size: 0.6em; vertical-align: sub;">D</span></span><span style="font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> and </span><span style="font-family: "Times New Roman"; font-size: 12pt; font-style: italic; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">σ</span><span style="font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">.</span></p><br /><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">ChatGPT confidently asserts that there are three Marshall’s Laws. Three is a fair count if we exclude the law that Hicks disputed. However, by that count, ChapGPT gets them 5/6 incorrect. Instead, it lists the definition of derived demand, followed by a statement about long versus short run. The third in its list is perhaps a combination of the disputed third law and the first law.</span></p><br /><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Mulligan</span><span style="font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">: </span><span style="font-family: "Times New Roman"; font-size: 12pt; font-style: italic; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">What are Marshall's Laws of Derived Demand?</span></p><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="font-family: "Times New Roman"; font-size: 12pt; font-style: italic; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"><br /></span></p><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">ChatGPT</span><span style="font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">: </span><span style="font-family: "Times New Roman"; font-size: 12pt; font-style: italic; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">Marshall's Laws of Derived Demand are a set of principles that describe the relationship between the demand for a particular factor of production (such as labor) and the demand for the goods and services that factor helps produce. These laws were developed by economist Alfred Marshall in the late 19th century and are still widely studied and referenced today.</span></p><br /><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="font-family: "Times New Roman"; font-size: 12pt; font-style: italic; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">The three laws of derived demand are as follows:</span></p><br /><ol style="margin-bottom: 0px; margin-top: 0px; padding-inline-start: 48px;"><li aria-level="1" dir="ltr" style="font-family: "Times New Roman"; font-size: 12pt; font-style: italic; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: decimal; vertical-align: baseline; white-space: pre;"><p dir="ltr" role="presentation" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">The demand for a factor of production is derived from the demand for the product that the factor helps produce.</span></p></li><li aria-level="1" dir="ltr" style="font-family: "Times New Roman"; font-size: 12pt; font-style: italic; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: decimal; vertical-align: baseline; white-space: pre;"><p dir="ltr" role="presentation" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">The demand for a factor of production is more elastic in the long run than in the short run.</span></p></li><li aria-level="1" dir="ltr" style="font-family: "Times New Roman"; font-size: 12pt; font-style: italic; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: decimal; vertical-align: baseline; white-space: pre;"><p dir="ltr" role="presentation" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">The elasticity of demand for a factor of production depends on its importance in the production process and the availability of substitutes.</span></p></li></ol><br /><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="font-family: "Times New Roman"; font-size: 12pt; font-style: italic; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">Taken together, these laws suggest that the demand for labor, for example, is ultimately determined by the demand for the goods and services that labor helps produce. In the short run, the demand for labor may be relatively inelastic because it can be difficult for firms to quickly adjust their production processes to changes in demand. However, in the long run, firms may be able to find substitutes for labor or change their production methods, making the demand for labor more elastic. The importance of labor in the production process also affects its elasticity of demand: if there are few substitutes for a particular type of labor, its demand may be relatively inelastic</span><span style="font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">.</span></p><br /><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">ChatGPT also confidently discusses the Hicks challenge but refers to a “law” that was not even one of the four.</span></p><br /><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Mulligan</span><span style="font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">: </span><span style="font-family: "Times New Roman"; font-size: 12pt; font-style: italic; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">Didn't Hicks show that Marshall was wrong about one of the laws?</span></p><br /><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">ChatGPT</span><span style="font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">: </span><span style="font-family: "Times New Roman"; font-size: 12pt; font-style: italic; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">Yes, economist John Hicks challenged one of Marshall's laws of derived demand, specifically the second law, which states that the demand for a factor of production is more elastic in the long run than in the short run. Hicks argued that this law was not always true and that the elasticity of demand for a factor of production could depend on the specific circumstances.</span></p><br /><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="font-family: "Times New Roman"; font-size: 12pt; font-style: italic; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">Hicks pointed out that in some cases, the demand for a factor of production could be more elastic in the short run than in the long run. For example, if a firm has already made significant investments in a particular technology or capital equipment, it may be difficult for the firm to switch to a different production method or substitute other factors of production. In such cases, the demand for the factor of production may be relatively inelastic in the long run, while being more elastic in the short run as firms can adjust their inputs more easily.</span></p><br /><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="font-family: "Times New Roman"; font-size: 12pt; font-style: italic; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">Hicks’ critique of Marshall's second law suggests that the relationship between the demand for a factor of production and the goods and services it helps produce is complex and can vary depending on the specific circumstances of the market. Nonetheless, Marshall's laws of derived demand remain an important contribution to economic theory and continue to be studied and debated by economists today</span><span style="font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">.</span></p><br /><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">Next, I asked for sources. It got the books correct, which is pretty good for ChatGPT (famous for <a href="https://news.ycombinator.com/item?id=33841672" target="_blank">fabricating books and articles</a>) but wrong chapters. It should be Marshall Book V, Chapter VI. Hicks’ second edition only has 11 chapters, although perhaps Chapter 12 can be understood as the material that follows Chapter 11 in which case “Chapter 12” is the correct part of the book.</span></p><br /><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Mulligan</span><span style="font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">: </span><span style="font-family: "Times New Roman"; font-size: 12pt; font-style: italic; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">Where did Marshall state the laws? Where did Hicks challenge one of the laws?</span></p><br /><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">ChatGPT</span><span style="font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">: </span><span style="font-family: "Times New Roman"; font-size: 12pt; font-style: italic; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">Alfred Marshall first introduced his laws of derived demand in his seminal work "Principles of Economics," first published in 1890. Marshall's laws are discussed in Book V, Chapter III, where he discusses the theory of distribution and the demand for factors of production.</span></p><br /><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="font-family: "Times New Roman"; font-size: 12pt; font-style: italic; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">John Hicks challenged Marshall's second law in his 1932 book "The Theory of Wages." In the book, Hicks argues that the elasticity of demand for factors of production can depend on the specific production technology and market conditions. Hicks specifically critiques Marshall's assumption that the demand for a factor of production is always more elastic in the long run than in the short run. Hicks' critique is discussed in Chapter 12 of his book</span><span style="font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">.</span></p><br /><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">I disputed the citation of Chapter III, so it apologized [not shown here] and cited Chapter VI of Book IV, which purportedly discusses “Distribution of Produce” (the actual title is “Industrial Training”). More disputes produced more rounds of apology and fake references. It tended back to Book V, Chapter III (a famous chapter) but with a different fake chapter title at each iteration.</span></p><br /><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">Cliff Clavin was the famous tavern know-it-all in </span><span style="font-family: "Times New Roman"; font-size: 12pt; font-style: italic; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"><a href="https://www.imdb.com/title/tt0083399/" target="_blank">Cheers</a></span><span style="font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">. Perhaps Cliff is back, this time behind the curtain of AI spouting lots of jargon in grammatically correct but ignorant sentences. Is Norm somewhere back there too?</span></p><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><img alt="John Ratzenberger, 'Cheers' Mailman Cliff Clavin, Delivers a Special Message about the United States Postal Service - mxdwn Television" height="279" src="https://lh5.googleusercontent.com/kWjR2yxOZQr-RgxPqJ91yltvZMfltvzHRAJhVrx1kR7QGI3DjZ1onw11mpIbR0YDPa-ZveNRqk5iFxXYszF6BHur-KYJo-GC438bE6GUCucN5BF9hDWXf7_cdS91-VtLtFQ_UjO0VV-VZH4L5rMkkQ=w400-h279" style="font-family: "Times New Roman"; font-size: 12pt; margin-left: 0px; margin-top: 0px; white-space: pre-wrap;" width="400" /></p><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">[image credit: </span><a href="https://television-b26f.kxcdn.com/wp-content/uploads/2020/08/Cheers-Cliff-Calvin-Screenshot-770x470.png" style="text-decoration-line: none;"><span style="color: blue; font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; text-decoration-line: underline; text-decoration-skip-ink: none; vertical-align: baseline; white-space: pre-wrap;">https://television-b26f.kxcdn.com/wp-content/uploads/2020/08/Cheers-Cliff-Calvin-Screenshot-770x470.png</span></a><span style="font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">]</span></p><br /><div style="text-align: justify;"><span style="font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">Meanwhile, for more than a decade Artificial Intelligence has </span><a href="http://help.economicreasoning.com/" style="text-decoration-line: none;"><span style="color: blue; font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; text-decoration-line: underline; text-decoration-skip-ink: none; vertical-align: baseline; white-space: pre-wrap;">offered tools</span></a><span style="font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> that are never self-contradictory and power a good exposition of </span><a href="http://models.economicreasoning.com/pdfdownloads.html" style="text-decoration-line: none;"><span style="color: blue; font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; text-decoration-line: underline; text-decoration-skip-ink: none; vertical-align: baseline; white-space: pre-wrap;">Marshall’s Laws and much more</span></a><span style="font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> in economics and statistics.</span></div><div style="text-align: justify;"><span style="font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"><br /></span></div><div style="text-align: justify;"><span style="font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">[Yes, ChatGPT can do the same for coding too: fabricated function options, fake references, etc.]</span></div><div style="text-align: justify;"><span style="font-family: "Times New Roman"; font-size: 12pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"><br /></span></div><div style="text-align: justify;"><span style="text-align: left; white-space: pre-wrap;"><span style="font-family: Times New Roman;"><a href="http://www.perplexity.ai">www.perplexity.ai</a></span></span><span style="font-family: Times New Roman;"><span style="white-space: pre-wrap;"> correctly recited Marshall's four laws, including links to some microeconomics lecture notes. It correctly reported the sources of Marshall's law, and acknowledged that it could not report which chapter. It was incorrect as to which law Hicks challenged.</span></span></div></span>Casey B. Mulliganhttp://www.blogger.com/profile/03317454408275318282noreply@blogger.com0tag:blogger.com,1999:blog-7539577136486286096.post-89930245667825774012022-12-27T17:52:00.003-06:002022-12-27T17:54:45.393-06:00Lightning Strikes Coale Twice?<div style="text-align: justify;"><a href="https://news.bloomberglaw.com/business-and-practice/from-big-tobacco-to-trump-coale-fights-for-free-speech-period" target="_blank">Mr. John P. Coale was</a> one of the plaintiffs’ lawyers that initiated the first tobacco settlement agreements, which included a historic and ingenious scheme for individual states to levy the economic equivalent of national (sic) excise taxes. The scheme has been a topic in my excise-tax lectures for as long as I have been teaching them. Let’s not forget that Mr. Coale entered the fray when tobacco companies were thought to be invincible in the litigation arena.</div><div class="separator" style="clear: both; text-align: center;"><a href="https://a57.foxnews.com/static.foxnews.com/foxnews.com/content/uploads/2021/08/720/405/ohn-Coale-.jpg?ve=1&tl=1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="405" data-original-width="720" height="225" src="https://a57.foxnews.com/static.foxnews.com/foxnews.com/content/uploads/2021/08/720/405/ohn-Coale-.jpg?ve=1&tl=1" width="400" /></a></div><br /><div style="text-align: justify;"><br /></div><div style="text-align: justify;">I met Mr. Coale in Atlanta this year (2022), at an awkward meeting of Republicans – awkward because he is a trial lawyer, which is an occupation that perennially gets its regulatory favors from Democrats (President Trump’s deregulation team took pride in cutting out those favors, e.g., Fair Pay and Safe Workplaces EO, CFPB Arbitration rule, the Fiduciary rule, the Borrower defense rule, the NLRB "Murphy Oil" Rule, and NLRB workplace grievances).</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Mr. Coale was and is suing big tech on behalf of Donald Trump, accusing them of violating the 1st Amendment of the U.S. Constitution as “state actors.” He cited (as I remember) the 1989 Supreme Court case <a href="https://supreme.justia.com/cases/federal/us/489/602/" target="_blank">Skinner v Railway Labor Executives’ Association</a>, finding that “Although the Fourth Amendment does not apply to a search or seizure, even an arbitrary one, effected by a private party on his own initiative, the Amendment protects against such intrusions if the private party acted as an instrument or agent of the Government.” This conclusion is even more compelling for the first amendment, Coale says.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">I wondered, with much skepticism, whether his big tech case might be anywhere near as spectacular as the big tobacco ones. Now it appears that big tech was even more integrated with the federal government than Mr. Coale initially accused. And <a href="https://twitter.com/RandPaul/status/1605908816582873088" target="_blank">Elon Musk did the discovery</a> for him.
</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><br /></div>Casey B. Mulliganhttp://www.blogger.com/profile/03317454408275318282noreply@blogger.com0tag:blogger.com,1999:blog-7539577136486286096.post-18934768645830259282022-11-06T16:01:00.008-06:002022-11-07T18:13:05.694-06:00The Incidence of Intellectual Diversity<p style="text-align: justify;">We now have lots of measures of diversity in the academy, by which I mean heterogeneity in race, gender, geography, political attitudes, etc. At this weekend's <a href="https://cli.stanford.edu/events/conference-symposium/academic-freedom-conference" target="_blank">Stanford Conference on Academic Freedom</a>, much discussion focused on the chasm between the political composition of the academy and the general population. A debate ensued as to whether/how this is related to academic freedom and whether/how public policy should advance affirmative action for "deplorables" (we deplorables use that term affectionately).</p><p style="text-align: justify;">Such regulation is likely dangerous and imprudent, in part because the incidence of such diversity is poorly understood. Small, and not necessarily frequent, voluntary actions can make a big difference.</p><p style="text-align: justify;">I first noticed this as a college student circa 1990 when political correctness was surging. Moreover, the large majority of my college classmates were quite unserious about academics, putting more time and effort into various extracurriculars and activism (South Africa was one of the big topics). But adapting to the latter was pretty easy. I fulfilled distribution requirements by taking courses like physics and computer science with the respective majors rather than the general ed versions that were watered down by popular demand. I took many economics courses in the graduate schools and over at MIT.</p><p style="text-align: justify;">While extremely serious about their studies, the graduate students were politically correct too. More salient to me was a fair bit of group think around both policy and technical issues. It seemed to me that they too uncritically accepted the Keynesian visions of much of the faculty. Dynamic programming was nonexistent until Benabou (MIT) and Leahy (Harvard) came to town during my senior year, and still was quite a niche topic. With some effort I found <a href="https://www.hup.harvard.edu/catalog.php?isbn=9780674750968" target="_blank">Stokey-Lucas-Prescott</a> at Harvard Press, but I searched what seemed like every bookstore in the greater Boston area for Sargent's <a href="https://www.hup.harvard.edu/catalog.php?isbn=9780674218772" target="_blank">Dynamic Macro Theory</a> (also a Harvard Press book) until finally acquiring a copy during a Christmas-break-blizzard trip to the <a href="https://chicagoreader.com/blogs/one-last-look-at-the-old-seminary-co-op-bookstore/" target="_blank">Seminary Coop in Chicago</a>. </p><p style="text-align: justify;">During a typical day on campus I would attend class, say, asking Professor Larry Summers something like "the trade deficit is a real variable -- why should nominal variables like currencies be our primary explanation of why they change over time?" [He and Feldstein were teaching that the U.S. trade deficit had to decline, which required a significant depreciation of the US $ especially vs the yen]. Summers especially would often provide a mocking answer, typically provoking a hearty laugh among my classmates.</p><p style="text-align: justify;">Here Robert Barro made a big difference without necessarily much effort [he invested in us students in many other ways too, but that is another topic]. The small number of students (of various ages) with interests closer to mine ended up working with Barro, and that's how we students met each other. Barro had an extra desk on the second floor of NBER that I shared with Xavier Sala-i-Martin, Randy Kroszner, and (at various times) Michael Kremer, Serge Marquie, Jaume Ventura, and Holger Wolf. After classes I would go to the NBER and recount my classroom exchanges with Xavier, Randy, etc. With them as a friendly sounding board, I suffered no harm from Summers' nonanswers [see also the sequel in <a href="https://www.wsj.com/articles/a-turnabout-on-corporate-taxes-1508883600" target="_blank">WSJ</a> and <a href="https://www.washingtonpost.com/news/wonk/wp/2017/10/17/lawrence-summers-trumps-top-economists-tax-analysis-isnt-just-wrong-its-dishonest/" target="_blank">WaPo</a>]. Quite the opposite. Their support helped me learn to stand on my own, and helped me find the few dynamic programmers in town (Barro would take several of us to Hoover one summer where I also met Sargent, McGratten, Judd, and others with overlapping interests). I was learning that even the "smartest" people at the best universities had vulnerabilities in their arguments, which were betrayed by a refusal to engage.</p><p style="text-align: justify;">The lesson here is that faculty can help a lot just by helping students find each other, especially on intellectual dimensions like those mentioned above. As long as the intellectual minority is not so small as one, they can get a better education than the majority do. Sheer numbers automatically exposed me to the group think, while just a few minority friends can be enough to facilitate engaging alternatives. The raw distribution on campus need not be anywhere near the population distribution for at least the minority to benefit from intellectual diversity.</p><p style="text-align: justify;">Several of the participants at this weekend's conference reported similar experiences. Being alone is tough, but a few sympathetic colleagues go a long way. Indeed, having the conference helped with that too. The sorting aspect reminds me of Milton Friedman's description of the <a href="https://archive.org/details/twoluckypeopleme00frie" target="_blank">formation of the Mont Pelerin Society</a> in 1947, which seemed quaint and anachronistic in 1998 but suddenly now needed as much as ever.</p><p style="text-align: justify;">To be clear, my classmates did not gang up on me for being skeptical of the prevailing views. Politically incorrect views did occasionally spawn <a href="https://www.thecrimson.com/article/1991/6/6/the-faculty-feuds-over-the-politics/" target="_blank">cancellation campaigns</a>, although not as frequently as today. Certainly numbers play a role in mob rule, although even today the mob itself is already a minority, albeit outspoken.</p><p style="text-align: justify;"><br /></p>Casey B. Mulliganhttp://www.blogger.com/profile/03317454408275318282noreply@blogger.com1tag:blogger.com,1999:blog-7539577136486286096.post-30540649305101553992022-07-28T10:18:00.013-05:002022-07-31T08:03:27.673-05:00Contents of the "Inflation Reduction Act"<p>Please let me know how this so-called "<a href="https://www.democrats.senate.gov/imo/media/doc/inflation_reduction_act_of_2022.pdf" target="_blank">Inflation Reduction Act</a>" reduces inflation. Here's what's actually in it:</p><p><b>Major items</b></p><p></p><ul style="text-align: left;"><li>Alternative minimum tax for corporations <i>Sec 10101</i></li><ul><li>This raises the level of business taxation, which reduces real wages.</li><ul><li>IF it reduced the dispersion of business taxation, that would be a force toward increasing real wages to help offset the level effect. BUT see below on the dozens of IRA provisions that increase the dispersion of business taxation.</li></ul><li>Gives the Treasury Secretary the authority to determine an individual corporation's tax liability! <i>Sec 10101 (a)(2)(C), (a)(13)</i></li><ul><li>[I changed my mind: I want to be Treasury Secretary!]</li></ul></ul><li>Close the "carried interest loophole" <i>Sec 10201</i></li><li>$80B for IRS <i>Sec 10301</i></li><i><br /></i><li>3 types of drug price controls</li><ul><li>Prices set by HHS for selected Medicare drugs <i>Sec 1191</i> [I think the Senate typist meant Sec 11091]</li><li>Inflation rate cap for Part B drugs (obtained at hospitals and clinics rather than pharmacies) <i>Sec 11101</i></li><li>Inflation rate cap for Part D drugs (obtained at pharmacies) <i>Sec 11102</i></li></ul><li>Medicare Part D (i.e., drug plans for seniors) insurance-benefit floors and reduced subsidy rates <i>Secs 11201-11202, 11401</i></li><ul><li>Both benefit floors and subsidy-rate cuts will increase Medicare Part D premiums. The net result could be more subsidy $ and more drug-plan expenses for most seniors.</li><li>One insurance-benefit floor (<i>Sec 11201</i>) requires that enrollees have 100% of their pharmacy bill covered after they have spent $2k for the year. Another (<i>Sec 11202</i>) does the same on a monthly basis (roughly $150 per month).</li><li>A third insurance-benefit floor is for vaccines <i>Sec 11401</i></li><li>Zero is a dangerous number for a price!</li><li>The 80% Medicare subsidy associated with these transactions is cut sharply. This by itself would reduce distortions in the program.</li><li>Remember that Part D premiums are already about 75% subsidized. At that rate (which will increase -- see below), the government expense for Part D could well increase. </li></ul><li>Increases in subsidies for Medicare Part D premiums <i>Sec 11404</i></li><ul><li>Specifically, expanding eligibility for "low-income" premium subsidies</li></ul><li>Budget gimmick courtesy of Alex Azar: repeal rebate rule <i>Sec 11301</i></li><ul><li>This rule would have prevented drug manufacturers from competing for Medicare Part D business by offering rebates, thereby sharply increasing Medicare Part D premiums and the government's Part D expenses.</li><li>On paper, repealing this rule would reduce the federal deficit. However, many expect that the rule would be struck down in court (regardless of whether the IRA repeals it), especially now that agencies have less latitude in reinterpreting statutes. Hence this savings is a budget gimmick.</li><li>I explain in <a href="http://yourehiredtrump.com" target="_blank">Chapter 10 of yourehiredtrump.com</a> how HHS Secretary Azar concocted this rule. We warned him and Trump that Democrats would, via a budget gimmick like this, use the rule to "fund" their big-government programs.</li></ul><li>Extend the "temporary" Obamacare expansions that were put in place during the pandemic <i>Sec 12001</i></li><br /><li>Clean energy tax credits <i>Secs 13101-13802</i></li><ul><li>291 pages of the <span style="color: #38761d;">Green Dream</span>!</li><li>Interestingly, Sec 13105 increases credit for nuclear power plants, but just those already built. Intended to slow down nuke-plant closures?</li><li>Otherwise "clean" refers to the various technologies that are in vogue, including bio fuels and battery manufacturing</li><li>Get a tax credit for purchasing a <u>used</u> Electric Vehicle <i>Sec 13402</i></li><ul><li>$4K or %30 of sale price</li><li>But only for households with AGI less than $150K and EVs selling for less than $25K</li><li>Must go through a car dealer</li><li>Limit of one credit per vehicle lifetime</li><li>Limit of one credit per taxpayer per 3 years</li></ul><li>As a result, the federal government will be granted EV credits when:</li><ul><li>EVs are produced,</li><li>EVs are sold new, and</li><li>EVs are sold used</li></ul></ul><li>$20B for agricultural conservation programs <i>Secs 21001 and 21002</i></li><li>Appropriations for clean energy programs ($80-85B total)</li><ul><li>Another 100+ pages of the <span style="color: #38761d;">Green Dream</span>, not to be confused with clean energy tax credits (291pp).</li><li>$2B subsidies for "Electric loans for renewable energy" <i>Sec 22001</i></li><li>Biofuel subsidies <i>Sec 22003</i></li><li>$10B for rural electric cooperatives <i>Secs 22004 and 22005</i></li><li>$15B for Greenhouse Gas Reduction Fund <i>Sec 60103</i></li><li><i><div style="font-style: normal;">$1B for HUD clean energy projects <i>Sec 30002</i></div></i></li><li><div style="font-style: normal;">$3B for NOAA climate resilience projects <i>Secs 40001-40007</i></div></li><li><div style="font-style: normal;">$10B to subsidize switching from natural gas appliances to electric <i>Secs 50111-50123</i></div></li><li><div style="font-style: normal;">$1B to subsidize zero building energy code adoption <i>Sec 50131</i></div></li><li><div style="font-style: normal;">$14B for DOE loans and grants <i>Secs 50141-50145</i></div></li><li><div style="font-style: normal;">$3B for electricity transmission subsidies <i>Secs 50151-50153</i></div></li><li><div style="font-style: normal;">$6B for the Office of Clean Energy Demonstrations <i>Sec 50161</i></div></li><li><div style="font-style: normal;">$2B various other DOE <i>Secs 50171-50173</i></div></li><li><i><div style="font-style: normal;">$1B for clean heavy-duty vehicles <i>Sec 60101</i></div></i></li><li><div style="font-style: normal;">$3B for clean energy programs for ports <i>Sec 60102</i></div></li><li><div style="font-style: normal;"><i><span style="font-style: normal;">$6B for various pollution-reduction programs </span><i>Secs 60113-60116</i></i></div></li><li><i><div style="font-style: normal;">$3B for Environmental and Climate Justice Grants <i>Sec 60201</i></div></i></li><li><div style="font-style: normal;">$5.5B for various other clean energy/environment Secs <i>60502-60506</i></div></li><li><div style="font-style: normal;">$3B for USPS clean fleet <i>Sec 70002</i></div></li></ul><li><b>Taxing fossil fuels</b></li><ul><li>Increase royalty rate on offshore oil and gas by about 4 percentage points <i>Sec 50261</i></li><li>Increase royalty rate on onshore oil and gas by about 4 percentage points <i>Sec 50262</i></li><ul><li>Both royalty rates are expanded to flared gas <i>Sec 50263</i></li></ul><li>Methane Emissions Charge <i>Sec 60113</i></li><li>Permanent extension of tax on coal <i>Sec 13901</i></li><ul><li>Roughly $1 per ton. For context, coal prices were sometimes below $50/ton before the pandemic</li></ul></ul></ul><div><i><br /></i></div><div><b>Smaller items</b></div><div><br /></div><div><ul style="text-align: left;"><li>Eliminating cost sharing for vaccines in Medicaid and CHIP <i>Sec 11405</i></li><li>Changes to Medicare payments for biosimilars (<i>Secs 11402 and 11403</i>)</li><li>Reinstate superfund <i>Sec 13601</i></li><li>Research credit for small businesses <i>Sec 13902</i></li><li>$5B for forestry subsidies <i>Secs 23001-23005</i></li><li>$0.5B to further carry out the 1950 Defense Production Act <i>Sec 30001</i></li><li>$1B for National Park Service and Bureau of Land Management <i>Secs 50221-50223</i></li><li>$0.6B various water <i>Secs 50231-50241</i></li><li>Regulation of offshore wind leasing <i>Sec 50251</i></li><li>Some kind of extension of offshore leasing program <i>Sec 50264</i></li><li>Limit encroachment of offshore windmills onto areas under lease for offshore drilling <i>Sec 50265</i></li><li>Various other DOE and DOI <i>Secs 50271-50303</i></li><li>Various other EPA programs (less than $1B) <i>Secs 60104-60112</i></li><li>Small amounts for Council on Environmental Quality <i>Secs 60401-60402</i></li><li>$4B for Endangered species programs <i>Secs 60301-60302</i></li><li>$2B for Neighborhood Access and Equity Grant Program <i>Sec 60501</i></li><li>Various other <i>Sec 70001, 70003-80004</i></li></ul></div><p></p><div><br /></div><br /><br /><p></p>Casey B. Mulliganhttp://www.blogger.com/profile/03317454408275318282noreply@blogger.com1tag:blogger.com,1999:blog-7539577136486286096.post-90713906930823934412022-06-28T14:14:00.007-05:002022-06-28T15:44:52.076-05:00How Incumbents Capture Price Controls: Example from the U.S. Senate<p style="text-align: justify;">U.S. <a href="https://www.shaheen.senate.gov/news/press/new-diabetes-caucus-co-chairs-shaheen-and-collins-release-bipartisan-legislation-to-lower-insulin-costs_" target="_blank">Senators are proposing</a> to put both retail and business-to-business price controls on insulin. The (intended?) result will that be that consumers will pay more, diabetes complications will get worse, and incumbent manufacturers will make more money.</p><p style="text-align: justify;">Drugs generally follow a life cycle. Unique new drugs often command a high price that soon falls sharply as the incumbent faces competition from <a href="https://www.journals.uchicago.edu/doi/full/10.1086/374703" target="_blank">alternative therapies</a> and/or generics. Insulin has the same kind of life cycle. Two biosimilars (essentially a generic version of a biologic, which is a more complicated type of drug) were quickly approved under one of the new approval pathways created by the Trump Administration that helped <a href="https://www.marketwatch.com/story/prescription-drug-prices-arent-rising-theyre-falling-for-the-first-time-in-47-years-2019-03-12" target="_blank">bring prices down</a> (explained further in my <a href="https://www.nber.org/papers/w29574" target="_blank">forthcoming <i>Journal of Law and Economics</i></a> paper). <a href="https://www.amerisourcebergen.com/-/media/assets/amerisourcebergen/biosimilars-page/sgs-biosimilars-usmarketlandscape-030722.pdf" target="_blank">Seven more biosimilars</a> are in the approval pipeline and will soon be competing with the incumbents.</p><p style="text-align: justify;">The incumbents would like to freeze time before those competitors arrive, and Senators Shaheen and Collins are obliging. While they advertise freezing the retail price at $35 plus inflation, they will also impose price controls on the business-to-business transactions that new entrants use to break into the market (read more about them in Chapter 10 of <a href="http://yourehiredtrump.com">http://yourehiredtrump.com</a>, or in Chapter 13 of <a href="http://chicagopricetheory.com" target="_blank">my favorite textbook</a>, or in the analysis by <a href="https://www.federalregister.gov/documents/2019/02/06/2019-01026/fraud-and-abuse-removal-of-safe-harbor-protection-for-rebates-involving-prescription-pharmaceuticals" target="_blank">OACT</a> and <a href="https://www.cbo.gov/system/files/2019-05/55151-SupplementalMaterial.pdf" target="_blank">CBO</a>). By hindering the entry and diffusion of the new biosimilars, the price of insulin will not fall as it would have, and usually does over the drug life cycle.</p><p style="text-align: justify;">Suppressing competition is exactly what I'd expect Big PhRMA to order up on the Congressional menu (again, see Chapter 10 of <a href="http://yourehiredtrump.com">http://yourehiredtrump.com</a>). I am less surprised than anyone to again see PhRMA deploy Karl Marx's rhetorical device (he always decried the "middlemen" of capitalism), "<a href="https://www.washingtonpost.com/politics/2022/06/22/senators-unroll-bipartisan-plan-curb-insulin-prices/" target="_blank">This legislation rightly recognizes the role of insurers and middlemen</a>" as they see a PhRMA-protection bill come together.</p><p style="text-align: justify;">Consumers will have less choice and pay more as a result of this bill. Adherence to diabetes treatments will be worse than it would have been if this bill were not getting in the way of competition. Low adherence is not just a health problem, but a financial problem too as private and public health plans are saddled with additional hospitalization expenses for treating diabetes complications.</p>Casey B. Mulliganhttp://www.blogger.com/profile/03317454408275318282noreply@blogger.com0tag:blogger.com,1999:blog-7539577136486286096.post-68162506064696992962022-06-27T10:29:00.006-05:002022-06-27T11:24:09.300-05:00The Hidden Increase in Capital Taxation<p style="text-align: justify;">The taxation of business income is now increasing significantly, without any action from Congress. The increase can be understood as two forces acting through one simple formula.</p><p style="text-align: justify;">For tax purposes, depreciation is a statutory time path of deductions from a business' taxable income for each dollar invested in a real asset. The path is called "depreciation" because the <i>undiscounted</i> present value of that time path is equal to one. That is, 100 percent of every dollar invested will someday be available as a deduction.</p><p style="text-align: justify;"><b>One simple formula representing two shocks: <i>D</i>/(<i>D</i>+<i>R</i>)</b></p><p style="text-align: justify;">An important reason that business-income taxation distorts investment is that business owners evaluate time paths at a discount rate <i>R</i> > 0. Therefore, in present value, only a fraction (<i>z</i>, in the usual notation) of investment is deductible from taxable income.</p><p style="text-align: justify;">With constant depreciation (<i>D</i>) and discount (<i>R</i>) rates, <i>z</i> = <i>D</i>/(<i>D</i>+<i>R</i>) <= 1. This simple formula captures two things going on right now in the U.S.: the <b>sunsetting</b> of TCJA's bonus depreciation and <b>inflation</b>. (The former is specific to the U.S. but the latter is relevant for those nations that also tax business income while allowing depreciation deductions).</p><p style="text-align: justify;">TCJA allowed the expensing of some investment, which makes <i>z</i> = 1 (think of expensing either as <i>R</i> = 0 or infinite <i>D</i>). Expiration of expensing pushes <i>z</i> below one.</p><p style="text-align: justify;">The depreciation schedule is a nominal time path; depreciation allowances are not indexed for inflation. Therefore the appropriate discount rate <i>R</i> is a nominal interest rate. Clearly nominal interest rates have increased over the past year and a half (inflation!), which reduces <i>z</i> in all but the expensing case. Indeed we can ignore the expensing case if we take the sunsetting first and then add in inflation.</p><p style="text-align: justify;"><b>Quantitative results</b></p><p style="text-align: justify;">In order to translate reductions in <i>z</i> into increases in the effective real price of investment, I use a special case of the Hall-Jorgenson formula, where the pre-tax real price is inflated by the tax factor (1-<i>tz</i>)/(1-<i>t</i>) <= 1, were <i>t</i> is the statutory rate of taxation of business income (<a href="https://www.nber.org/system/files/chapters/c7774/c7774.pdf" target="_blank">Cohen, Hassett, and Hubbard</a> consider the more realistic, but also more complicated, cases). The equality holds only when <i>z</i> = 1 (i.e., expensing).</p><p style="text-align: justify;">The chart below shows the relation between the nominal interest rate <i>R</i> and the tax factor. We start close to the origin with low inflation and bonus depreciation. Sunsetting by itself moves off the origin to (pre-inflation) <i>R</i> of, say, 2-3%/yr. That is about a 7 percent increase in the real price of investment.</p><div class="separator" style="clear: both; text-align: justify;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEglOvKMhtlii9939oqkphYIwFjZXt_Aspz1OXgtvmvkEuMILYJqF6gmsMyhOzEEhD9VJUIOr-DLAJyR9GhvcrZ8D0tZb0FZLB0aJyzgTjf9HEPTXuyRSVE7HMEAQ8hY3Y_w1cFYZpIpjrqNSO17KhY1zvsKVKWAQE5Tmw9Pcj7_nt6-4PR5zwnkIi3w" style="margin-left: 1em; margin-right: 1em;"><img data-original-height="478" data-original-width="881" height="217" src="https://blogger.googleusercontent.com/img/a/AVvXsEglOvKMhtlii9939oqkphYIwFjZXt_Aspz1OXgtvmvkEuMILYJqF6gmsMyhOzEEhD9VJUIOr-DLAJyR9GhvcrZ8D0tZb0FZLB0aJyzgTjf9HEPTXuyRSVE7HMEAQ8hY3Y_w1cFYZpIpjrqNSO17KhY1zvsKVKWAQE5Tmw9Pcj7_nt6-4PR5zwnkIi3w=w400-h217" width="400" /></a></div><br /><br /></div><p></p><p style="text-align: justify;">Next inflation increases <i>R</i>. So far annualized <i>R</i> appears to have increased about 2 percentage points although there are concerns that it could increase more (presumably it would increase close to 1-for-1 with inflation if inflation were expected to be permanent). That increases the real price of investment another 4 percent or so.</p><p></p><p style="text-align: justify;">Inflation further increases the real price of investment due to personal income taxation, especially to the extent that personal income is taxed at higher personal rates than business income is. On the other hand, the sunsetting of expensing is not relevant for structures because they did not get bonus depreciation. So perhaps all three effects combined increase the price of investment 15 percent, with about half specific to TCJA.</p><p style="text-align: justify;"><b>Oil and gas</b></p><p style="text-align: justify;">Oil and gas extraction is particularly capital intensive. Using a capital share of 71 percent, that suggests an 11 percent shift (upward) in the marginal cost for that industry, with about half due to TCJA subset and therefore not shared by foreign producers of oil and gas.</p><p style="text-align: justify;">Comparing the period of the Biden presidency (Feb 2021 - Feb 2022, which is latest available) to 2018-19, inflation-adjusted world oil prices have increased 20-25 percent while US O&G industry marginal cost has shifted up 11 percent. That by itself would blunt much of the supply response. Then add:</p><p style="text-align: justify;"></p><ul><li>new threats of federal energy and banking regulation,</li><li>threats to increase the statutory rate on business income, and</li><li>the effects of ESG investing that increasingly stigmatizes investment in fossil fuels,</li></ul><div style="text-align: justify;">and it should be no surprise that U.S. supply hardly responded in 2021 to high oil prices while suppliers in Canada, Russia, China, Norway, and even OPEC did.</div><p></p>Casey B. Mulliganhttp://www.blogger.com/profile/03317454408275318282noreply@blogger.com1tag:blogger.com,1999:blog-7539577136486286096.post-65561760897598416232022-06-16T11:58:00.005-05:002022-06-18T09:09:26.504-05:00Recession Time? Don’t Act Surprised<p class="MsoNormal" style="text-align: justify;">Treasury Secretary Yellen <a href="https://twitter.com/caseybmulligan/status/1535239204371935233?s=20&t=RntcnBSEzcLHkSdF_O6FNQ" target="_blank">does not see any indicator</a> of an imminent recession.<span style="mso-spacerun: yes;">
</span>She isn’t looking. The normal economic tailwinds have calmed and, as predicted, Biden's economic policies are a significant headwind.</p>
<p class="MsoNormal" style="text-align: justify;">A recession is sometimes defined
as a reduction in the number employed nationally for a couple of months.<span style="mso-spacerun: yes;"> </span>Other times it is defined as a reduction in real
GDP for two quarters or more.</p>
<p class="MsoNormal" style="text-align: justify;">When it comes to predicting
events like this, my recursive approach is to first understand where the
general trends are heading.<span style="mso-spacerun: yes;"> </span>In technical
terms, is the economy’s “steady state” above or below where we are now, and how
much?<span style="mso-spacerun: yes;"> </span>If the trends are strong up, small
perturbations around that trend will not make a recession.<span style="mso-spacerun: yes;"> </span>If the trends are flat, then even a small negative
shock will create a recession by one or more of the definitions.<span style="mso-spacerun: yes;"> </span>Which definition will be triggered can be
assessed by contrasting employment trends with productivity <span class="GramE">trends.</span></p>
<p class="MsoNormal" style="text-align: justify;">Four important trends are worth
considering: organic productivity growth, organic population growth, recovery
from the pandemic recession, and new public policies affecting <span class="GramE">productivity, <span style="mso-spacerun: yes;"> </span>population</span>,
or employment.</p>
<p class="MsoNormal" style="text-align: justify;"><b>Organic trends</b></p>
<p class="MsoNormal" style="text-align: justify;">Given that recessions are defined
in absolute rather than per capita terms, population growth is normally an
economic tailwind.<span style="mso-spacerun: yes;"> </span>However, annual adult
population has fallen from a bit above one percent 1980-2018 to about 0.4
percent.<span style="mso-spacerun: yes;"> </span>Illegal immigration is a wild
card here because we do not know how many are immigrating, what fraction are adults,
and whether and how those adults will be economically engaged.<span style="mso-spacerun: yes;"> </span>With that caveat, we now are in a situation
where even a small negative shock that would not have caused a recession in the
one-percent population growth era will now.</p>
<p class="MsoNormal" style="text-align: justify;">Recovery from the pandemic was
also a tailwind.<span style="mso-spacerun: yes;"> </span>It someday will
continue to lift employment, but <span class="GramE">at the moment</span> it
looks like employment has recovered as much as it can <span class="SpellE">given</span>
the serious health problems encountered during the pandemic, including but not
limited to self-destructive substance abuse habits that are not complementary
with productive employment.<span style="mso-spacerun: yes;"> </span>Some of
these people will show up on payrolls but how reliably they show up for work is
another question.<span style="mso-spacerun: yes;"> </span>Diabetes, liver
disease and heart disease have <a href="https://www.nber.org/papers/w30104" target="_blank">gotten out of control since 2020</a>.</p>
<p class="MsoNormal" style="text-align: justify;">Workers lost skills and capital
laid idle during the pandemic.<span style="mso-spacerun: yes;"> </span>These are
recovering, although their recovery will not be fully recognized in the growth
data.<span style="mso-spacerun: yes;"> </span>GDP and productivity levels were
exaggerated during the pandemic as many goods were unavailable or low quality
in ways not captured by the national accountants.<span style="mso-spacerun: yes;"> </span>For example, public school teachers stayed
home from <span class="GramE">school</span> but the national accountants assumed
that they were as productive as ever merely because they continued to get
paid.<span style="mso-spacerun: yes;"> </span>As they get back to traditional
teaching, this will not be officially recognized as economic progress for the
same reason the pandemic regress was never acknowledged.<span style="mso-spacerun: yes;"> </span></p>
<p class="MsoNormal" style="text-align: justify;">Crime has gotten bad, especially
in big cities where productivity is normally the highest.<span style="mso-spacerun: yes;"> </span>Consumers and businesses are avoiding big cities,
which is a cost (“excess burden”) beyond the crime statistics because the whole
point of the avoidance behaviors is to keep from being one of those statistics.</p>
<p class="MsoNormal" style="text-align: justify;">Fitzgerald, <span class="SpellE">Hassett</span>,
and I <a href="https://www.hoover.org/research/analysis-vice-president-bidens-economic-agenda-long-run-impacts">predicted
in 2020</a> that Biden’s economic agenda would reduce the levels of full-time
equivalent employment per capita by 3.1 percent and real <span class="SpellE">gdp</span>
per capita by 8.5 percent.<span style="mso-spacerun: yes;"> </span>If that level
effect were spread over five years, that would be 0.6 percent per year and 1.7
percent per year, respectively, as shown in the Table as an addendum panel.<span style="mso-spacerun: yes;"> </span>That by itself makes a recession likely in
one of those five years.</p>
<p class="MsoNormal" style="text-align: justify;"><b>Regulatory Policy</b></p>
<p class="MsoNormal" style="text-align: justify;">Our analysis of Biden’s agenda distinguished
regulation from capital taxation from labor taxation. <span style="mso-spacerun: yes;"> </span>His regulatory agenda seems to be going ahead
as we expected.<span style="mso-spacerun: yes;"> </span>The good news is that Biden’s
nomination of David Weil to the Department of Labor was <a href="https://news.bloomberglaw.com/daily-labor-report/senate-turns-back-david-weil-as-labors-top-wage-hour-enforcer">rejected
by the Senate</a> and Biden was slow to fully mismanage the National Labor
Relations Board.<span style="mso-spacerun: yes;"> </span>But we did not anticipate
that Biden’s DOL would disrupt labor markets as much as it did with its mask
mandates.<span style="mso-spacerun: yes;"> </span><span class="GramE">Sticking
with our original estimate, it</span> looks that Biden’s regulatory agenda is
reducing employment by 0.2 percent per year (of five years) and real GDP by 0.7
percent per year below the organic trends.<span style="mso-spacerun: yes;">
</span>See the Table’s top panel.</p><p class="MsoNormal" style="text-align: justify;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEg4PDKXcwJx-Zx_eRYfQHue6Ck58qNNVbqiOsscvZAGQ3GBk8IUJu3-xHrs3IoVJi-s0PUqu0xOzBPQUV92lBf-JEB-JVLjKjMXBxEC3MLW7Z6jX_d1LEpHxw5grnq5tMAsvJ1yJm6pk6AkJWV0xE1pnzz8b7iq43RapFkL8NQf-RsC1uY_bdZc11VV" style="margin-left: 1em; margin-right: 1em;"><img data-original-height="325" data-original-width="725" height="179" src="https://blogger.googleusercontent.com/img/a/AVvXsEg4PDKXcwJx-Zx_eRYfQHue6Ck58qNNVbqiOsscvZAGQ3GBk8IUJu3-xHrs3IoVJi-s0PUqu0xOzBPQUV92lBf-JEB-JVLjKjMXBxEC3MLW7Z6jX_d1LEpHxw5grnq5tMAsvJ1yJm6pk6AkJWV0xE1pnzz8b7iq43RapFkL8NQf-RsC1uY_bdZc11VV=w400-h179" width="400" /></a></div><br /><br /><p></p>
<p class="MsoNormal" style="text-align: justify;">Of particular concern over the
next few months is the reliability of <a href="https://www.eenews.net/articles/grid-monitor-warns-of-u-s-blackouts-in-sobering-report/">the
electric grid</a> and <a href="https://www.washingtonpost.com/transportation/2022/05/07/airlines-summer-travel-reliability/">air
travel</a>.<span style="mso-spacerun: yes;"> </span>Snafus of this type are
already built into our regulatory analysis but these examples put more texture
on the economic reasoning that links the marginal regulations with poor
economic performance.</p>
<p class="MsoNormal" style="text-align: justify;"><b>Capital Taxation: Inflation Sneaks
In</b></p>
<p class="MsoNormal" style="text-align: justify;">Biden’s Build Back Better bill
would implement much of the capital taxation we envisioned in 2020.<span style="mso-spacerun: yes;"> </span>The good news is that the bill has not yet
passed, and passage of its capital tax elements are not imminent in some other
form.<span style="mso-spacerun: yes;"> </span>The bad news is that inflation is
taxing businesses without any Congressional action (recall <a href="https://press.uchicago.edu/ucp/books/book/chicago/I/bo5976645.html">Feldstein</a>
and <a href="https://www.nber.org/books-and-chapters/costs-and-benefits-price-stability/inflation-and-user-cost-capital-does-inflation-still-matter">more
recently <span class="SpellE">Hassett</span></a> on the effect of inflation on
the cost of capital), while it appears that Biden will let temporary provisions
in the 2017 TCJA expire.<span style="mso-spacerun: yes;"> </span>With capital
taxation during the Biden administration increasing about half of what we
expected, it would reduce real GDP by about 0.4 percent per year over five
years.</p>
<p class="MsoNormal" style="text-align: justify;">Speaking of inflation, higher Fed Funds rates are already showing up in mortgage rates.<span style="mso-spacerun: yes;"> </span>In effect, the Federal Reserve is introducing a tax (or cutting a subsidy) on structures investment, which is likely to send at least that sector into a recession.<span style="mso-spacerun: yes;"> </span>Socially responsible (a.k.a., woke) investing is also skewing the allocation of capital.</p><p class="MsoNormal" style="text-align: justify;">Combining capital taxation and
regulation, the headwinds in the Biden economy are 0.25 percent per year for
employment and 1.1 percent per year for real GDP.</p>
<p class="MsoNormal" style="text-align: justify;"><b>Labor Taxation: Direction
Unclear</b></p>
<p class="MsoNormal" style="text-align: justify;">Labor taxation is an interesting
wild card here.<span style="mso-spacerun: yes;"> </span>Marginal tax rates on
work were cut sharply when the $300 weekly unemployment bonus expired last
summer.<span style="mso-spacerun: yes;"> </span>That effect has played out
already.<span style="mso-spacerun: yes;"> </span>But I expect that Congressional
Democrats, and even some Republicans, will expand unemployment benefits if
anything resembling a recession were occurring.<span style="mso-spacerun: yes;">
</span>That could easily and quickly reduce employment by one percent, if not
more.<span style="mso-spacerun: yes;"> </span>On the other hand, various federal
health insurance subsidies are about to expire.<span style="mso-spacerun: yes;">
</span>If they do (without resurrection), that will encourage work.</p>
<p class="MsoNormal" style="text-align: justify;"><b>Bottom Line</b></p><p class="MsoNormal" style="text-align: justify;">Overall, a recession is highly likely
with so many headwinds and so few tailwinds.<span style="mso-spacerun: yes;">
</span>A recession is more likely by the GDP definition than the employment
definition.<span style="mso-spacerun: yes;"> </span>The depth of the recession depends
on how much Congress destabilizes things by further adding to the already large
federal portfolio of programs for the unemployed and poor and further adding to
tax burdens.</p><p class="MsoNormal" style="text-align: justify;"><o:p></o:p></p>
<p class="MsoNormal" style="text-align: justify;"><br /></p>
Casey B. Mulliganhttp://www.blogger.com/profile/03317454408275318282noreply@blogger.com1tag:blogger.com,1999:blog-7539577136486286096.post-56181273065982345482022-04-08T07:22:00.035-05:002022-04-25T13:55:43.264-05:00Is the Missing ERP Revealing Bad News about Biden's Health?<p style="text-align: justify;"><a href="https://www.law.cornell.edu/uscode/text/15/1022" target="_blank">15 USC 1022(a)</a> requires</p><blockquote><p style="text-align: justify;">"The President shall annually transmit to the Congress not later than 10 days after the submission of the budget ... an economic report (hereinafter in this chapter referred to as the “Economic Report”) together with the annual report of the Council of Economic Advisers...."</p></blockquote><p style="text-align: justify;">Because the budget was submitted March 28, 2022, yesterday was the due date for submitting the <i>2022 Economic Report of the President</i>. No report has been released in 2022 and neither the White House nor news media have said anything about this year's report.</p><p style="text-align: justify;">CEA, like many other government agencies, is funded with public money. It should perform its duties as directed by the public through the statutes duly enacted by its representatives in Congress.</p><p style="text-align: justify;">Moreover, CEA is unique from most of the rest of the Executive Office of the President in that it is explicitly created and directed by federal statutes. As it should, this unique statutory basis has elevated CEA's influence within the White House. But if CEA does not comply with the law, what stops the rest of the bureaucracy from treating CEA as just one of many White House Offices and Councils whose entire existence could be erased at the whim of the President or senior staff?</p><p style="text-align: justify;">Why the lack of compliance with 15 USC 1022(a)? Here are my guesses, beginning with those I assess to be most likely.</p><p style="text-align: justify;"></p><ul style="text-align: left;"><li style="text-align: justify;">Biden, who must at least meet with CEA and sign the report, is too feeble to perform all of the duties required of him by law and politics. Senior staff have made the tough decision as to which laws will not be followed in order to reserve Biden's energy for other duties.</li><ul><li style="text-align: justify;">I am not the only one to notice that it has been a month since Biden had anything on his public schedule <a href="https://www.nia.nih.gov/health/tips-coping-sundowning" target="_blank">later than mid-afternoon</a>.</li><li style="text-align: justify;">This theory predicts that no EOP employees get fired.<p></p></li></ul><li style="text-align: justify;">Biden's senior staff views statutes as mere suggestions, and therefore even a minor logistical challenge would be enough to ignore 15 USC 1022(a).</li><ul><li style="text-align: justify;">This is consistent with the fact that the FY 2023 budget (an OMB product) missed the statutory deadline too, which has occurred before when a President was <a href="https://crsreports.congress.gov/product/pdf/RS/RS20752" target="_blank">just coming into office</a> or when the deadline occurred during a government shutdown but (I think) is otherwise unprecedented.</li><li style="text-align: justify;">Expected punishment is low, under the theory that a Democratic Congress would not hold a Democratic administration accountable.</li><li style="text-align: justify;">This possibility is the worst for (among other things) the CEA as an institution because then CEA itself becomes a mere suggestion.<p></p></li></ul>
<li style="text-align: justify;">The draft ERP, which likely began in early 2021, contains something that in hindsight is terribly embarrassing to the Biden administration. It either needs to be rewritten or released on a day when other news distracts all of the attention. This is bit unlikely, because the embarrassment would have to be something that the ERP covers that the (much longer) President's Budget does not. On the other hand, this explanation is complementary with the Biden-debilitation story because likely the President would be needed to adjudicate a serious dispute among senior staff. [More generally it would be interesting to know how disputes are resolved when POTUS is debilitated. Does VPOTUS help?]<p></p></li>
<li style="text-align: justify;">The current CEA is unaware of 15 USC 1022(a) and what actions are required to comply with it. I doubt this because the CEA chair, Cecilia Rouse, was a CEA member who had helped prepare two prior ERPs (2010 and 2011).<p></p></li>
<li style="text-align: justify;">The current CEA is aware of 15 USC 1022(a) and the actions are required to comply with it, but proved incapable of doing its part. I doubt this even more because that puts the President in jeopardy and an army of former CEA staff could have been called to help on a volunteer basis. More time could have been obtained by going downstairs and asking OMB to delay its budget release, which itself was already past the statutory deadline.<p></p></li><li style="text-align: justify;">Progressives in the administration have objected to even the mildest citation of unintended consequences and the law of demand (mild enough that even Jared Bernstein insists that they be mentioned). Such objections could likely exist, but very unlikely stop the lawful ERP transmittal because</li><ul><li style="text-align: justify;">The CEA chair had much time to engage in earnest debate with the rest of the administration (as CEA 45 often did, sometimes for more than a year). In the end she could assert her statutory authority to issue the ERP as she and POTUS see fit.</li><li style="text-align: justify;">Possibly the CEA chair would be willing to fudge the economics for the progressive cause, and therefore the dispute would not be reason to miss the statutory deadline.</li></ul></ul><div style="text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiRuak-MtssB8e5FCaZNyRssckd_-lLTGuODLeP1iGDfOJts8AymXV7FmEVXZZcVxr_11RkCmS1Ud6VCixhm-peGtg4FXT0Kui66I2lb4WVwqRnAXribdMUFmARG8E9_IGypoklc1yllXYMqgr44TUacZ84ojYWUs6qNtskdXfZ3qdbq6iYXXULFWvr/s3000/P20190318SC-0016.jpg" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="2000" data-original-width="3000" height="266" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiRuak-MtssB8e5FCaZNyRssckd_-lLTGuODLeP1iGDfOJts8AymXV7FmEVXZZcVxr_11RkCmS1Ud6VCixhm-peGtg4FXT0Kui66I2lb4WVwqRnAXribdMUFmARG8E9_IGypoklc1yllXYMqgr44TUacZ84ojYWUs6qNtskdXfZ3qdbq6iYXXULFWvr/w400-h266/P20190318SC-0016.jpg" width="400" /></a></div><br /><div style="text-align: justify;">Even if the 2022 ERP is transmitted to Congress next week, it will be more than 100 days into the calendar year, as compared to the <a href="http://caseymulligan.blogspot.com/2022/03/the-most-tardy-erp-in-history.html" target="_blank">previous "record"</a> (lawfully) set in 2019 on the 78th day of the year. 96 percent of all previous ERPs (75 in total) had been transmitted by February 23, which is the 54th day of every year.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><u>Update</u>: <a href="https://www.whitehouse.gov/wp-content/uploads/2022/04/ERP_2022_.pdf" target="_blank">ERP 2022</a> was electronically transmitted April 14, 2022, which was the 104th day of the year and 17 days after the budget submission.</div><div style="text-align: justify;"><ul><li>The Joint Economic Committee is the statutory Congressional receiver of the annual ERP. The hard copies, which is usually provided to JEC on the official "day of transmittal," was not delivered until April 25, 2022. This observation adds support to the Biden-disability theory because POTUS at least signs the hard copies.</li><li>On the other hand, the excellent CEA45 production editor, Al Imhoff, also served in that role for ERP 2022 (see p. 345). The fact that a second production editor was hired (Kellam worked on Obama-era ERPs) suggests that CEA46 was so late writing its chapters that there was no time for Imhoff to serially process them as he did for CEA45. This hypothesis is also consistent with the fact that many more of CEA45's chapters were <a href="https://trumpwhitehouse.archives.gov/cea/research/" target="_blank">released as stand-alone public reports</a> throughout the year (Imhoff was copy editing many of those too), some of which could be entered into ERP production 4-5 months ahead of the statutory deadline.</li></ul></div><p></p>Casey B. Mulliganhttp://www.blogger.com/profile/03317454408275318282noreply@blogger.com1tag:blogger.com,1999:blog-7539577136486286096.post-7309972760179445022022-04-05T20:16:00.014-05:002022-04-06T10:32:04.051-05:00New Emissions Regulations are Coercive Paternalism, not Environmental Science, or even Benevolent Paternalism<p style="text-align: justify;">Trump's <a href="https://www.govinfo.gov/content/pkg/ERP-2021/pdf/ERP-2021-chapter6.pdf" target="_blank">CEA showed</a>, based on credit transactions among manufacturers,
that vehicle standards to abate a ton of CO2 cost about $163 on the
margin, while even Obama said the abatement was worth only $50. i.e., tightening emissions regulations fails a cost-benefit test by a wide margin.</p>
<p style="text-align: justify;">Now Biden claims that new stricter standards pass a cost benefit test.
Although this will be cast as an environmental issue, the new conclusion is driven by assumptions unrelated to environmental economics or climate science:</p>
<p style="text-align: justify;">(1) <i>Consumer fuel savings get (mostly) double counted because "behavioral economics."</i> Specifically, </p><p style="text-align: justify;"></p><blockquote style="text-align: justify;">"The agency’s analysis assumes that potential car and
light truck buyers value only the savings in fuel costs from purchasing a
higher-MPG model they expect to realize over the first 30 months they
own it. Depending on the discount rate buyers are assumed to apply, this
amounts to 25-30 percent of the expected savings in fuel costs over its
entire lifetime." (p. 420 of <a href="https://www.nhtsa.gov/sites/nhtsa.gov/files/2022-04/Final-TSD_CAFE-MY-2024-2026.pdf" target="_blank">DOT's final rule</a>)</blockquote><p style="text-align: justify;">This double counting (100 - 27.5% = 72.5% of $98 billion in fuel savings) is more than quadruple the purported $16 billion net benefit shown in Table VI-11 of the final rule.</p><p style="text-align: justify;">[I call it double counting because, by the principle of revealed prevalence, fuel savings is already built into the price and sales of fuel-efficient vehicles; many consumers do not purchase such vehicles because of the relative price and characteristics of competing vehicles. Alternatively, you could say that DOT ignores benefit of low-MPG vehicles, but the revealed-preference result is the same. </p><p style="text-align: justify;">Following an Economics 301 homework solution from October 2019, in December 2020 Trump's CEA provided a vector proof -- that the market price for GHG credits (i) reflects fuel savings as consumers perceive them and (ii) fully quantifies the industry-level real GDP effects of changing GHG standards, without any additional term for fuel savings -- on the White House website. See the appendix of <a href="https://trumpwhitehouse.archives.gov/wp-content/uploads/2020/12/CEA_SAFE_Report.pdf" target="_blank">this document</a>.]</p><p style="text-align: justify;">By comparison, the gross climate benefit is purportedly $27.5 billion. i.e., they would have to more than double their already inflated "social cost of carbon" to push their thumb on the scale as vigorously as they did with "behavioral economics." See below for more on paternalism.</p><p></p>
<p style="text-align: justify;">(2) <i>Biden says that some tightening comes for free because 5
manufacturers had already signed a pledge with California EPA to so
tighten</i></p>
<p>
</p>
<p style="text-align: justify;">But this ignores that California rules, when followed by just a subset of manufacturers, do not reduce the supply of federal credits, whereas changes in federal rules do even if the federal rules are not as strict as California's. The equilibrium credit price is built into the prices paid by purchasers of new cars.</p><p style="text-align: justify;">(3) When the above are enough to tilt the scale, all costs and benefits are discounted 3%/yr. When an extra push is needed, <i>Biden discounts environmental benefits at 2.5% per year while everything else is
discounted 3%/yr.</i></p>
<p style="text-align: justify;"></p><blockquote style="text-align: justify;">"the use of the social rate of return on capital ... inappropriately underestimates the impacts of climate change for the purposes of estimating the SC-GHG. ... the consumption rate of interest is the theoretically appropriate discount rate in an intergenerational context." (p. 547 of the <a href="https://www.nhtsa.gov/sites/nhtsa.gov/files/2022-04/Final-TSD_CAFE-MY-2024-2026.pdf" target="_blank">Technical Support Document</a>. See also p. 573 of the final rule.)</blockquote><p><br /></p><p><u>More on coercive paternalism</u></p><p style="text-align: justify;">Trump's DOT and EPA spoke forcefully against paternalism as a justification for fuel standards. If people lack knowledge, give them the knowledge rather than imposing a decision on them. Here is how they said it</p><p style="text-align: justify;"></p><blockquote>"the idea that regulating fuel economy and CO2 emissions can mitigate
the consequences of inadequate access to information by placing
decisions that depend on access to complete information in the hands of
regulators rather than buyers has superficial appeal. Yet commenters do
not establish that such a drastic step is necessary to overcome any
inadequacy of information, or that requiring manufacturers to supply
higher fuel economy will be more effective than <i>less intrusive approaches such as expanding the range of information</i> available to buyers." (<a href="https://www.govinfo.gov/content/pkg/FR-2020-11-05/pdf/2020-24608.pdf" target="_blank">85 FR 24608</a>, italics added) </blockquote><p>In contrast, Biden's DOT and EPA say nothing like this, but instead extol the purported virtues of "behavioral economics." They do not mention less intrusive approaches, let alone show why they would have fewer net benefits.</p><p></p><p></p>Casey B. Mulliganhttp://www.blogger.com/profile/03317454408275318282noreply@blogger.com0tag:blogger.com,1999:blog-7539577136486286096.post-21543863055561033362022-04-02T08:06:00.006-05:002022-04-02T10:57:24.938-05:00White House Economic Analysis of Ukraine<p style="text-align: justify;">The <i>2019 Economic Report of the President</i> includes the most extensive economic analysis of Ukraine of any President going back at least to Truman. It discussed:</p><p></p><ul style="text-align: left;"><li style="text-align: justify;">Historical harms -- including murder -- imposed on Ukraine by Moscow (<a href="https://www.govinfo.gov/content/pkg/ERP-2019/pdf/ERP-2019-chapter8.pdf">Chapter 8</a>),</li><li style="text-align: justify;">The extensive costs of the collective ownership imposed on Ukrainian agriculture, asking why would collective ownership of healthcare work out any better if the economic incentives were the same (<a href="https://www.govinfo.gov/content/pkg/ERP-2019/pdf/ERP-2019-chapter8.pdf">Chapter 8</a>),</li><li style="text-align: justify;">How the <a href="https://www.nytco.com/company/prizes-awards/new-york-times-statement-about-1932-pulitzer-prize-awarded-to-walter-duranty/" target="_blank"><i>New York Times</i> covered up and lied about</a> events in Ukraine because the events were incongruent with the leftist fantasies of many of its readers (<a href="https://www.govinfo.gov/content/pkg/ERP-2019/pdf/ERP-2019-chapter8.pdf">Chapter 8</a>). Pulitzer Prizes were awarded for those lies!</li><li style="text-align: justify;">Ukrainian energy trade (<a href="https://www.govinfo.gov/content/pkg/ERP-2019/pdf/ERP-2019-chapter5.pdf" target="_blank">Chapter 5</a>).</li></ul><div style="text-align: justify;">Below is one of the charts from the 2019 ERP.</div><div style="text-align: justify;"><br /></div><div><div class="separator" style="clear: both; text-align: justify;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEi6Wd7XWdHDbMZ31vTTTT-5TkXfeQcuxjl57jN_hO2GPTCklUgpuvNRHLqcOkLxVro9NlSbF9aDHiFyd_TKyj7ihxO2twoyWhYTh5kEyMxte9jQqO-4n9dIX00TIxbEtxdltND7Oh2YTrZuURKmfkIX5-FeMaVuLsqcLv7Zchu_vGcxdNBi-o5ZuA3g" style="margin-left: 1em; margin-right: 1em;"><img data-original-height="515" data-original-width="629" height="328" src="https://blogger.googleusercontent.com/img/a/AVvXsEi6Wd7XWdHDbMZ31vTTTT-5TkXfeQcuxjl57jN_hO2GPTCklUgpuvNRHLqcOkLxVro9NlSbF9aDHiFyd_TKyj7ihxO2twoyWhYTh5kEyMxte9jQqO-4n9dIX00TIxbEtxdltND7Oh2YTrZuURKmfkIX5-FeMaVuLsqcLv7Zchu_vGcxdNBi-o5ZuA3g=w400-h328" width="400" /></a></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><br /></div></div><div style="text-align: justify;">Ukraine was never even mentioned in an ERP between 1947 and 1992. Nor were any related keywords (see below).</div><div><ul style="text-align: left;"><li style="text-align: justify;">The 1993 ERP noted that Ukraine was among former Soviet republics issuing its own currency in 1992 (pp. 304-5).</li><li style="text-align: justify;">The 1994 ERP noted that "[CEA member] Stiglitz traveled to Russia and Ukraine and established an official relationship with the Russian Government's Working Center for Economic Reform." (p. 256)</li><li style="text-align: justify;">The 1995 ERP noted that the U.S. engaged in several bilateral investment treaties, including "treaties with the former Soviet republics of Georgia, Ukraine, and Belarus." (p. 249).</li><li style="text-align: justify;">The 1997 ERP cited Ukraine in a list of many countries allocated "U.S. non-military bilateral aid" and that in the case of Russia and Ukraine, this aid was for "public health programs" (pp. 264-5). It also cited the "explosion at Chernobyl" as part of a paragraph about "how developing countries treat their environment." [I wish the 2019 ERP had included a section on <a href="https://www.cambridge.org/core/books/abs/cambridge-history-of-communism/communism-and-environment/C3F52CF2227C1E8516E8BF7F1A820F4C" target="_blank">environmental stewardship by socialist countries</a>, but the idea did not occur to me until much later. The environmental rhetoric was much the same as modern-day socialists'].</li><li style="text-align: justify;">On page 167 of the 1998 ERP, it was noted that Ukraine was one among several countries assigned "less stringent" emissions limits by the Kyoto protocol. On page 259, a large list of countries receiving U.S. aid was listed, including Ukraine.</li><li style="text-align: justify;">On page 290 of the 1999 ERP, it was noted that currency boards have been recommended for countries such as "Indonesia, Russia, and Ukraine."</li><li style="text-align: justify;">Page 260 of the 2001 ERP reports that CEA "initiated a new dialogue with economic officials in Ukraine."</li><li style="text-align: justify;">Page 131 of the 2005 ERP includes a box about "The Benefits of Land Titles." Several countries are mentioned in the box, with Ukraine as one of those where "entrepreneurs believe their property rights are secure [and therefore] reinvest ... back in their business."</li><li style="text-align: justify;">In a paragraph about the "disadvantages to nuclear power," p. 172 of the 2008 ERP cites the "Chernobyl nuclear power plant in Ukraine."</li><li style="text-align: justify;">The 2010 ERP notes the rapid deprecation of "the currencies of Hungary, Poland, and Ukraine" (p. 86).</li><li style="text-align: justify;">A footnote on p. 130 of the 2012 ERP explains which countries are included in its emerging markets index. Ukraine is one of 21.</li><li style="text-align: justify;">Figure 1-4 of the 2014 ERP has international comparisons of quarterly real GDP time series. Ukraine is one of the countries included. A similar chart is repeated on page 117.</li></ul><div style="text-align: justify;">This post was based on text searches for "Ukraine", "Ukrainian," "Holodomor," "Kyiv," "Kiev," or "Chernobyl" in the 1947-2021 ERPs.</div></div><p></p>Casey B. Mulliganhttp://www.blogger.com/profile/03317454408275318282noreply@blogger.com0tag:blogger.com,1999:blog-7539577136486286096.post-88642537724978055672022-03-30T10:23:00.008-05:002022-04-02T07:10:01.292-05:00The Most Tardy ERP in History<p style="text-align: justify;">The White House Council of Economic Advisers' Annual Report, a.k.a., <i>Economic Report of the President</i>, has not yet been transmitted to Congress as of today, the 89th day of 2022.</p><p style="text-align: justify;">This is the latest ERP transmittal ever, with the previous record being 2019, which was transmitted on the 78th day (signed on the 77th -- see photo below) following a prolonged federal government shutdown. </p><p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEgQui9fgnNAG7AG10PHy0b5oZOixHCSB8QbD_4108NP2hegvp5sZzpO-cEL-ahqHxfcIHA8kNDqLgRngkSH9iRb0kWdYYjva7dOm2KkHOB2EX1hv4UXubIOeRfzMtAhPvQHzY2Za0LdIMgFmxDf4ma5cUtvvof6ALLKbH5NdKxcDhyNdbvRdG8omvBo" style="margin-left: 1em; margin-right: 1em;"><img data-original-height="641" data-original-width="909" height="283" src="https://blogger.googleusercontent.com/img/a/AVvXsEgQui9fgnNAG7AG10PHy0b5oZOixHCSB8QbD_4108NP2hegvp5sZzpO-cEL-ahqHxfcIHA8kNDqLgRngkSH9iRb0kWdYYjva7dOm2KkHOB2EX1hv4UXubIOeRfzMtAhPvQHzY2Za0LdIMgFmxDf4ma5cUtvvof6ALLKbH5NdKxcDhyNdbvRdG8omvBo=w400-h283" width="400" /></a></div><br /><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEhdFgqS0sBSNCWCVEOzpT2PUBQqYFDw7amswOcr2C0LW0-8Z3xaEPyWMFB3nTaJrtJqe8_fkzsCZjEME-cWltToR7MdZ3G1c_ieBVQgJMMQZb_4UDJ9qc8XJ7zMOlePgvuPhfXyiuFdO3d_jXWemtQjbUp-a1KNqnmAVgFDJUGLh6MzWNsaFwr8Xcye" style="margin-left: 1em; margin-right: 1em;"><img data-original-height="2000" data-original-width="3000" height="266" src="https://blogger.googleusercontent.com/img/a/AVvXsEhdFgqS0sBSNCWCVEOzpT2PUBQqYFDw7amswOcr2C0LW0-8Z3xaEPyWMFB3nTaJrtJqe8_fkzsCZjEME-cWltToR7MdZ3G1c_ieBVQgJMMQZb_4UDJ9qc8XJ7zMOlePgvuPhfXyiuFdO3d_jXWemtQjbUp-a1KNqnmAVgFDJUGLh6MzWNsaFwr8Xcye=w400-h266" width="400" /></a></div><br /><div style="text-align: justify;">By law, the ERP must be transmitted to Congress annually. Initially, the deadline was within 60 days of when Congress began its regular session, which is typically January 3. In 1978, that deadline was shortened to 20 (?) days. <a href="https://www.govinfo.gov/content/pkg/STATUTE-104/pdf/STATUTE-104-Pg1388.pdf#page=1" target="_blank">In 1990</a>, and <a href="https://www.law.cornell.edu/uscode/text/15/1022" target="_blank">still today</a>, a 10-day deadline is triggered by the President's Budget submission rather than the Congressional session. That submission occurred on March 28, putting the 2022 ERP deadline at Thursday April 7, 2022.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Unless the law is to be broken by a wide margin, the 2022 ERP will be the first ever issued in April. It will be only the 4th of 76 to be transmitted after February 23.</div><div style="text-align: justify;"><br /></div><p></p>Casey B. Mulliganhttp://www.blogger.com/profile/03317454408275318282noreply@blogger.com0tag:blogger.com,1999:blog-7539577136486286096.post-2603746682213427422021-11-13T22:13:00.009-06:002021-11-25T15:09:19.440-06:00Social Justice Thrives in Cook County during Tradeoff Holiday<div style="text-align: justify;">During this terrible pandemic, a silver lining has been that many inconvenient tradeoffs no longer apply. A <a href="https://tobin.yale.edu/sites/default/files/files/C-19%20Articles/CARES-UI_identification_vF(1).pdf" target="_blank">Yale study</a> showed that paying people not to work does not, for the time being, prevent anyone from working. Perhaps also emptying the prisons can enhance public safety. We can have <a href="https://www.filesforprogress.org/memos/new-generation-of-prosecutors-reimagine-public-safety.pdf" target="_blank">social justice and safety at the same time</a>.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Figure 1 below shows points-in-time <a href="https://www2.illinois.gov/idoc/reportsandstatistics/Pages/PopulationDataSets.aspx" target="_blank">numbers of people in Illinois prisons</a> who were convicted in Cook County and admitted to prison within the past half year. The stock of new convicts had been between 3000 and 4000, until the pandemic when it dropped to 1000. Figure 2 limits the sample to convicted murderers. They had been entering Illinois prisons at a rate of about 130 per year (65 per half year), until the first half of 2020 when the rate dropped to about 40 per year (20 per half year).</div><div style="text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEimimdGv7CqwUGEQKR-XQXsC9XmsqmPTC_-qjJn5NHCO6pG0_Ww6RV5BDGA-_IyMWU5hbrm7yBc0GmPrfOc01yzAHt4M3cc0McS6w4ZxahyBX1alVpVh8vB-FVE-6AXRpHWT2gfKAA0G38/s1033/Screen+Shot+2021-11-13+at+9.25.28+PM.jpg" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="724" data-original-width="1033" height="280" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEimimdGv7CqwUGEQKR-XQXsC9XmsqmPTC_-qjJn5NHCO6pG0_Ww6RV5BDGA-_IyMWU5hbrm7yBc0GmPrfOc01yzAHt4M3cc0McS6w4ZxahyBX1alVpVh8vB-FVE-6AXRpHWT2gfKAA0G38/w400-h280/Screen+Shot+2021-11-13+at+9.25.28+PM.jpg" width="400" /></a></div><br /><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhEu_AAtHWqIy36_gsYtHQmyq5TZPGx6yQ-OzLDoqyR7zbayhxkmZmlTglhZlCR1OYJxPEEGEA6WaMPHsCbkF2bC1JwvSohE8qzgei8vIeNrdAaQXdo6hEK9WNcucpAbEo2YVJf1S8gBdA/s1033/Screen+Shot+2021-11-13+at+9.26.29+PM.jpg" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="717" data-original-width="1033" height="278" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhEu_AAtHWqIy36_gsYtHQmyq5TZPGx6yQ-OzLDoqyR7zbayhxkmZmlTglhZlCR1OYJxPEEGEA6WaMPHsCbkF2bC1JwvSohE8qzgei8vIeNrdAaQXdo6hEK9WNcucpAbEo2YVJf1S8gBdA/w400-h278/Screen+Shot+2021-11-13+at+9.26.29+PM.jpg" width="400" /></a></div><br /><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">I hope that Chicago-area activists can work to help maintain this progress. Perhaps they could even lend some expertise to the rest of Illinois (not shown in the charts above), which has missed a social-justice opportunity by continuing to admit convicted murderers to prison at pre-pandemic rates.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Formerly experts thought that <a href="https://www.vox.com/2016/1/14/17991672/crime-drop-murder-mass-incarceration-prison" target="_blank">incarceration enhanced public safety</a>. But that was based on old data, examined by researchers lacking sufficient social-justice training. Especially during a pandemic, there is no reason to worry about adverse consequences until somebody has conducted a new study using state-of-the-art empirical methods.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">A troublesome skeptic might insist on metrics to indicate when the tradeoff-holiday has ended, when the path to safety might again involve more incarceration rather than less. Could it be dangerous to barrel forward on the social-justice highway, when at any moment we could find ourselves in high-speed reverse?</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Such a reactionary critic forgets that social justice is crowd sourced. The overwhelming odds are that one of us will notice the situational shift and promptly alert the polity. In the worst-case scenario, remember: if we want to make an omelette, we must be prepared to <a href="https://www.google.com/books/edition/Lenin/UNkev4PJX5AC?hl=en&gbpv=1&dq=make+an+omelette+break+some+eggs+lenin&pg=PA247&printsec=frontcover" target="_blank">break a few eggs</a>.
</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">[<b>Update</b>: Cook County Prosecutor Kim Foxx is often credited with reducing incarceration. This week the American Constitution Society and the Black Law Students Association of UChicago Law School <a href="https://www.law.uchicago.edu/events/bail-reform-states-attorney-kim-foxx" target="_blank">hosted her</a>. Did you encourage her to keep making the omelette?!]</div><div style="text-align: justify;"><br /></div>Casey B. Mulliganhttp://www.blogger.com/profile/03317454408275318282noreply@blogger.com0tag:blogger.com,1999:blog-7539577136486286096.post-39230614100749321252021-11-04T11:48:00.013-05:002021-11-04T13:30:14.783-05:003rd release of Build Back Better: 7 million less employment<p style="text-align: justify;">Last night a third release of BBB was <a href="https://rules.house.gov/sites/democrats.rules.house.gov/files/BILLS-117HR5376RH-RCP117-18.pdf" target="_blank">shown to the public</a>. Both in pages and overall economics, it is in between the 1st and 2nd editions.</p><p style="text-align: justify;">First-release items resurrected yesterday</p><p></p><ul style="text-align: left;"><li style="text-align: justify;">Repeal of Trump's <a href="https://www.nationalreview.com/2020/11/pharmas-rebate-rule-inside-job-or-political-genius/" target="_blank">terrible rebate rule</a> (Section 139301). It is likely illegal so repealing it does nothing but CBO probably will credit Dems with cutting about spending by about $200B with this provision.</li><li style="text-align: justify;">Drug "Price Negotiation Program" (Section 139001).</li><li style="text-align: justify;">Rx "Drug Inflation Rebates" (Section 139101).</li><li style="text-align: justify;">Favors to labor unions such as allowing union dues to be tax deductible (Section 138514) and giving the National Labor Relations Board <a href="https://www.littler.com/publication-press/publication/us-house-poised-add-civil-penalties-national-labor-relations-act" target="_blank">new authority to levy hefty penalties</a> on employers (Section 21006, which was also in previous releases). </li><li style="text-align: justify;">E-cigarette and tobacco taxes (Section 138520).</li><li style="text-align: justify;">Federal family leave (Section 130001).</li></ul><div style="text-align: justify;">Important items maintained from the 2nd release</div><ul style="text-align: left;"><li style="text-align: justify;">Affordable housing (still $150B across various sections such as 40001ff).</li><li style="text-align: justify;">Expanded ACA premium tax credits (Sections 137301ff).</li><li style="text-align: justify;">New federal childcare (Section 23001) and preK programs (Section 23002), including massive <a href="https://www.wsj.com/articles/spending-build-back-better-marriage-single-mother-unemployment-welfare-childcare-11635706221" target="_blank">hidden taxes on marriage</a>.</li><li style="text-align: justify;">Child Tax Credit expansion (Section 137101ff).</li><li style="text-align: justify;">Partial launch of the Green New Deal (various sections such as 136001ff).</li><li style="text-align: justify;">Medicaid expansions (various sections).</li><li style="text-align: justify;">Privacy regulation (Section 31501).</li></ul><div style="text-align: justify;"><u>New item</u>: Increase annual cap for deduction of State and Local Taxes (SALT) from $10K to $72.5K (Section 137601). About <a href="https://twitter.com/GS_Watson/status/1455975747500351491?s=20" target="_blank">8 percent of filers</a> are affected by this. I guess that about 6 percent of filers are workers who would go from a binding cap to a nonbinding cap. For such people, IF the federal and SALT rates remain constant, the overall marginal tax rate on labor income falls. This is my assumption for the table below, but I note that lifting the SALT cap encourages states to increase SALT rates (for everyone, not just the 8 percent) and discourages states from cutting rates. Moreover, the additional SALT revenues from those rate changes may well be spent on programs that pay people not to work.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">This table shows 14 BBB provisions with significant hidden effects on incentives to work. (My <a href="http://caseymulligan.blogspot.com/2021/10/build-back-betters-hefty-penalties-on.html" target="_blank">earlier post</a> provides more detail on those incentives). The final column of the table shows an estimated impact of these hidden incentives on FTE employment, allocated among the 14 provisions. This does not include any employment effects of funding BBB with income taxes on households (Sections 138201ff) and businesses (Sections 138101ff).</div><div style="text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgbjaSCgk25JHk_ATpcWT48zEv-6jnhBHoTSxRuos8MnI3HnbaYEJ-2Uld635BKAgK4BYWSiEbLU5OHWOtPq0ZfQ5B01y8VIE6BqHYE9CwjKyTRU_32fp9omx2W1Psbe7zjc8T5eMcWdMo/s599/Screen+Shot+2021-11-04+at+10.13.52+AM.jpg" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="599" data-original-width="593" height="412" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgbjaSCgk25JHk_ATpcWT48zEv-6jnhBHoTSxRuos8MnI3HnbaYEJ-2Uld635BKAgK4BYWSiEbLU5OHWOtPq0ZfQ5B01y8VIE6BqHYE9CwjKyTRU_32fp9omx2W1Psbe7zjc8T5eMcWdMo/w408-h412/Screen+Shot+2021-11-04+at+10.13.52+AM.jpg" width="408" /></a></div><div><br /></div><br /><div style="text-align: justify;"><br /></div><p></p>Casey B. Mulliganhttp://www.blogger.com/profile/03317454408275318282noreply@blogger.com1tag:blogger.com,1999:blog-7539577136486286096.post-39424743471055292872021-10-28T18:19:00.009-05:002021-11-05T09:56:49.665-05:00Revised Build Back Better: Cliffnotes<p><b>Hidden Work Disincentives</b></p><p style="text-align: justify;">I had been tracking 13 types. Three disappeared from <a href="https://rules.house.gov/sites/democrats.rules.house.gov/files/BILLS-117HR5376RH-RCP117-17.pdf" target="_blank">today's revised bill</a>. The Medicaid expansions appear to be less. Affordable housing was cut in half (still at $150B). Dems once aspired to allow union dues to be tax deductible but that was cut. Many other pro-union provisions remain.</p><p style="text-align: justify;">The new childcare program has now replaced an income phaseout above 250% median income with a cliff. This change from last month's bill to lastest draft has little effect on the average marginal tax rate because the same funds are being phased out over a narrower range. I.e., a few people see very large additions to their marginal tax rate while others disincentivized with a phaseout now see no addition.</p><p style="text-align: justify;">The "green energy" provisions have a lot of producer-protectionist elements in them, which add to the labor wedge much like excise taxes do. However, the green energy provisions were scaled back in today's revision.</p><p style="text-align: justify;">The Obamacare expansion (pp. 1458ff) is a bit more aggressive than last month's BBB bill. The revision stops indexing -- ie health insurance gets more expensive over time and it is 100% taxpayer problem rather than plan members'.</p><p style="text-align: justify;">My summary of marginal-tax-rate and employment effects are shown in the table below. More derivations are available <a href="https://committeetounleashprosperity.com/wp-content/uploads/2021/10/CTUP_BuildBackBetterPenalties.pdf" target="_blank">in my report</a> although that report refers to last-month version.</p><div class="separator" style="clear: both; text-align: justify;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhOxUo7o5y6ELVbC_pi3Cc_EXt5noEG6rtJflBT83Ax_0HBCjfazwj80HPjZzHy6HPCEPvNXmoxtHA9-_FuEOT6C_zxBXqZFFKGE5F8y6AfIv8c-CD19KBAnAuGCJpjohKVf0SZuB2QPuY/s594/Screen+Shot+2021-10-28+at+3.24.39+PM.jpg" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="576" data-original-width="594" height="388" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhOxUo7o5y6ELVbC_pi3Cc_EXt5noEG6rtJflBT83Ax_0HBCjfazwj80HPjZzHy6HPCEPvNXmoxtHA9-_FuEOT6C_zxBXqZFFKGE5F8y6AfIv8c-CD19KBAnAuGCJpjohKVf0SZuB2QPuY/w400-h388/Screen+Shot+2021-10-28+at+3.24.39+PM.jpg" width="400" /></a></div><div style="text-align: justify;"><br /></div><p style="text-align: justify;"><b>Hidden Marriage Disincentives</b></p><p style="text-align: justify;">Replacing the childcare phaseout with a cliff increases the (already remarkably large) marriage disincentive because even a father with moderate earnings will, if he joins the family, push them beyond the range of eligibility. I.e., the family with married parents will likely be paying full price. The various, and extreme, provisions to inflate the full price of childcare remain in the revised bill.</p><p style="text-align: justify;"><b>Pharma scores two wins</b></p><p style="text-align: justify;">The news came out early that this bill would not have prescription-drug price controls. But it also allows <a href="https://www.nationalreview.com/2020/11/pharmas-rebate-rule-inside-job-or-political-genius/" target="_blank">Trump's terrible rebate rule</a> to continue. Even <a href="https://web.archive.org/web/20211028163629/https://www.whitehouse.gov/briefing-room/statements-releases/2021/10/28/president-biden-announces-the-build-back-better-framework/" target="_blank">Biden was expecting</a> the revised bill to contain a repeal, with much savings in corporate welfare that could be put toward "transforming America." Should I start calling it "Biden's terrible rebate rule"?</p><p style="text-align: justify;"><b>Employers are still the enemy</b></p><p style="text-align: justify;">The revision maintains the directive for OSHA to increase employer fines by at least 10X (Section 21004). Among other things, a private-sector employer with an unvaccinated employee on the payroll will be punishable by a fine of up to $1,365,320 PLUS up to $136,532 per day that employment continues (yes, $51 million per employee per year; note that the statute dictates specific amounts and that the amounts be annually indexed). This far exceeds the social cost, if any, of employing such a person.</p><p style="text-align: justify;">However, revised bill does not mandate employers to provide retirement accounts. I am expecting this onerous mandate to show up in the new retirement bills introduced this week in House and Senate, but for now this element of freedom remains in employer-employee relations.</p>Casey B. Mulliganhttp://www.blogger.com/profile/03317454408275318282noreply@blogger.com0tag:blogger.com,1999:blog-7539577136486286096.post-31755555695863270962021-10-14T19:33:00.035-05:002021-11-18T11:30:46.177-06:00Childcare in "Build Back Better"<div style="text-align: justify;">Because childcare is said to be a highlight of the “<a href="https://docs.house.gov/meetings/BU/BU00/20210925/114090/BILLS-117pih-BuildBackBetterAct.pdf" target="_blank">Build Back Better</a>” bill, I read through the bill and made notes here as to childcare provisions and some of their economic incentives, aside from the obvious that new spending must someday be financed with taxes. You will be surprised at the disparity between what the bill incentivizes and what we're told it will do.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">[For provisions less related to childcare, see <a href="https://caseymulligan.blogspot.com/2021/10/build-back-betters-hefty-penalties-on.html" target="_blank">my earlier summary</a>.]</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Section 23001 of the "Build Back Better" bill would use the Obamacare mold to create a federal childcare program.</div><div><ul style="text-align: left;"><li>Low-cost (a.k.a., "low quality") childcare would be prohibited unless the provider were to forgo all federal dollars, which would involve something like having zero children from a family at or below $200K annual income.</li><ul><li>Childcare workers would have to be paid as much as elementary-school teachers.</li><li>According to the <a href="https://www.bls.gov/oes/2019/may/oes_nat.htm" target="_blank">Bureau of Labor Statistics</a>, elementary school teachers earned an average of $63,930 annually in 2019.</li><li>The same BLS data show childcare workers earning an average of $25,510. I.e., under BBB childcare would have to pay them 151% more.</li><li>A 151% increase is similar to the <a href="https://trumpwhitehouse.archives.gov/wp-content/uploads/2019/02/Deregulating-Health-Insurance-Markets-FINAL.pdf" target="_blank">increase in individual health insurance premiums</a> that occurred when Obamacare came into effect.</li><li>See also Section 132002f (which appears to be eliminated in the Nov 3 revision). Complying with all of these statutes, certifications, and the implementing final rules will add administrative costs to childcare. E.g., just as physicians today complain about paperwork taking away from their real job, so will childcare providers under BBB.</li><li>Much of the extant supply of childcare is provided at a church or other faith-based location, but federal funds for expanding supply cannot be used there (this prohibition is about 80% of the way through the long Section 23001). The result will be creating supply at locations that could not otherwise pass the market test because they are too costly or offer insufficient quality (by parents' assessment). </li><li>When quality regulation was tried in Quebec, the results were opposite of advertized intentions:</li><ul><li><a href="https://www.aeaweb.org/articles?id=10.1257/pol.20170603" target="_blank">there were</a> “increases in early childhood anxiety and aggression”</li><li>“there was a large, significant, negative shock to the preschool, noncognitive development and health of children exposed to the new program, with little measured impact on cognitive skills.”</li><li>“worse health, lower life satisfaction, and higher crime rates later in life.”</li><li><a href="https://www.cato.org/blog/universal-childcare-could-have-terrible-social-consequences" target="_blank">HT Ryan Bourne</a></li></ul></ul><li>Families would pay on a sliding scale. i.e., earning more means paying more for the same childcare.</li><ul><li>Above 150% median family income ($102K annually), the implicit marginal tax rate would be 7% until the benefit is exhausted.</li><ul><li>For a family with two children, they would face the 7 percent rate until income was beyond $400K</li></ul><li>Between 75% and 150% median, the implicit marginal tax rate is about 14 percent.</li><li>The sliding scale is based on HOUSEHOLD income: <i>the implicit marriage tax could easily be $20K per year that a couple has children under age 5</i>. [this is not the only marriage tax in BBB]</li><ul><li>The unintended (?) consequences do not stop there. Adding to the pool of "deadbeat dads" further discourages work because of the "<a href="https://en.wikipedia.org/wiki/Debt_overhang" target="_blank">overhang</a>" (an economics term) of mounting child support debt. As <a href="https://www.fatherhood.gov/sites/default/files/resource_files/e000001697.pdf" target="_blank">a UWisconsin study</a> put it, "greater debt has a substantial negative effect on both fathers’ formal employment and child support payments." See also <a href="https://doi.org/10.1002/pam.20092" target="_blank">this article</a>. </li><li>For most families, the childcare costs of having additional children 0-4 would be zero. This will affect the number and spacing of births , and by this channel could reduce employment of mothers. Also incentives to keep cousins in the household.</li></ul></ul><li>Although there are loopholes, child eligibility requires a parent to be employed (part-time is OK), self-employed, engaged in job search, job training, school, or on medical leave. It’s OK if a second parent does no work (but see the marriage tax above).</li></ul><div style="text-align: justify;">Section 23002 creates a universal public pre-school program</div><div><ul style="text-align: left;"><li style="text-align: justify;">no tuition charged to parents</li><li style="text-align: justify;">applies to exactly two cohorts of children (age 3 and age 4).</li></ul><div style="text-align: justify;">Section 132001: Federal funding for childcare information services (i.e., finding childcare). Less than 1/1000th of the funds spent in Sections 23001 and 23002.</div></div></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Sections 137102f: Expanded Child Tax Credit (CTC). See <a href="https://bfi.uchicago.edu/working-paper/2021-115/" target="_blank">here for a detailed analysis</a> of how the expansions discourage work, especially among single mothers.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Section 137201: Expanded Child and Dependent Care Tax Credit (CDCTC, not to be confused with the CTC). This credit is tied to employment. On the other hand, it is phaseout with income. Therefore its net effect on national employment (not counting the tax increases that will eventually be needed to pay for it) will be less than the effects cited above. Section 137202 is a similar provision administered on the employer side, but is not phased out with income and therefore expanding it is more likely to encourage work. However, this provision is apparently rarely used by employers: see <a href="https://www.cbo.gov/publication/57056" target="_blank">CBO's revenue score from the American Rescue Plan</a>, which had the same provision except on a temporary basis.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Section 137301: a per-employee business credit of up to $5,000 annually is available for operators of childcare facilities (I don't think a household employing a nanny would count). This might, to a small degree, offset the higher wages that such facilities would be required to pay (recall the 151% increase cited above). [This was eliminated from later drafts]</div>Casey B. Mulliganhttp://www.blogger.com/profile/03317454408275318282noreply@blogger.com1tag:blogger.com,1999:blog-7539577136486286096.post-31451314540172733932021-10-06T06:35:00.018-05:002021-12-15T18:58:41.192-06:00Build Back Better's Hidden but Hefty Penalties on Work<p class="MsoNormal" style="text-align: justify;">Largely by stepping toward an
economy in which workers bear the burden of distributing healthcare and housing
with little regard to ability or willingness to pay, the <a href="https://docs.house.gov/meetings/BU/BU00/20210925/114090/BILLS-117pih-BuildBackBetterAct.pdf" target="_blank">Build Back Better bill (BBB)</a> would implement
the single largest permanent increase in work disincentives since the income
tax came into its own <a href="https://www.journals.uchicago.edu/doi/abs/10.1086/250039" target="_blank">during World War II</a>.</p>
<p class="MsoNormal" style="text-align: justify;">The bill would also reduce work
by limiting competition in the labor market, imposing employer mandates, and
increasing consumer prices for telecommunications, energy, and other
products.<span style="mso-spacerun: yes;"> </span><span class="GramE">All of</span>
these disincentives go on top of those already in the baseline due to a continuing
portfolio of federal, state, and local tax, spending, and regulatory policies.</p>
<p class="MsoNormal" style="text-align: justify;">The implicit employment and
income taxes in BBB would increase marginal tax rates on work by about 7
percentage points.<span style="mso-spacerun: yes;"> </span>I expect that such a
change in the disincentive would reduce full-time equivalent employment by
about 4.5%, or about 7 million jobs. </p>
<p class="MsoNormal" style="text-align: justify;"><b>Penalizing Work and Hiring<o:p></o:p></b></p>
<p class="MsoNormal" style="text-align: justify;">The disincentives are delivered through
two fundamental economic mechanisms.<span style="mso-spacerun: yes;">
</span>First and foremost is the creation and expansion of employment-tested
benefits.<span style="mso-spacerun: yes;"> </span>Full-time employment is a
major barrier to participating in the programs, even <a href="https://www.journals.uchicago.edu/doi/10.1086/683365">if that employment
does not produce much income</a>.<span style="mso-spacerun: yes;">
</span>Especially, BBB allows even America’s highest-income households to participate
in subsidized “Obamacare” insurance plans as long as they are not engaged in
any job that offers health insurance.<span style="mso-spacerun: yes;">
</span>For most full-time workers, their employment status by itself excludes
them and their family from the <a href="https://galen.org/assets/Expanded-ACA-Subsidies-Exacerbating-Health-Inflation-and-Income-Inequality.pdf">additional
Obamacare subsidies</a> delivered through BBB, especially its sections 137501
and 137502.</p>
<p class="MsoNormal" style="text-align: justify;">[Some employers will respond to
BBB by dropping their coverage, but from an employment-incentive perspective
this only changes the form of the full-time employment tax to the Affordable
Care Act’s (ACA’s) employer penalty for not offering coverage.<span style="mso-spacerun: yes;"> </span>The salary equivalent of that penalty is
almost $4,000 per full-time employee per year].</p>
<p class="MsoNormal" style="text-align: justify;">Family medical leave is another benefit
tied to not working.<span style="mso-spacerun: yes;"> </span>Section 130001 is
quite explicit that eligibility requires a caregiving activity “in lieu of
work, other than for monetary compensation.” <span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span>Family
medical leave is a cash benefit paid in proportion to the number of hours of
such caregiving.<span style="mso-spacerun: yes;"> </span>[Presumably the
beneficiary could not both engage in a normal work schedule and claim such
caregiving activities, but the details would be the subject of future
executive-branch rulemaking.<span style="mso-spacerun: yes;"> </span>If double-dipping were rampant, this would raise expenditure on the program
thereby requiring additional taxation that would itself discourage work.]</p>
<p class="MsoNormal" style="text-align: justify;">BBB also creates and expands
employer mandates, with compliance enforced with penalties that are
proportional to employment, regardless of how rich or poor the employees may
be.<span style="mso-spacerun: yes;"> </span>An example of a proportional
employer-penalty scheme is BBB’s new requirement to administer IRA deductions
from employee paychecks, with all employees enrolled by default.<span style="mso-spacerun: yes;"> </span>The penalty for non-compliance is $10 per
employee per day (Section 131101), which is similar in magnitude to the ACA’s penalty
for failing to provide health insurance.</p>
<p class="MsoNormal" style="text-align: justify;">Section 21004 increases penalties
on employers for failure to comply with federal occupational safety, health,
and labor-standards requirements.<span style="mso-spacerun: yes;"> </span>The
increases are tenfold or more.<span style="mso-spacerun: yes;"> </span>For
example, the penalty for a large (100+) employer to employ an unvaccinated
person is between $50,000 and $700,000 per violation and an additional $70,000
per day, all rescaled for the inflation adjustment prescribed in the statute.<span style="mso-spacerun: yes;"> </span>This could amount to $51 million (sic) for every year that each unvaccinated person remains on the
payroll.</p>
<p class="MsoNormal" style="text-align: justify;">These and other parts of BBB further
reduce employment by suppressing competition in the labor market.<span style="mso-spacerun: yes;"> </span>Such provisions seek to prevent non-union
workplaces, which are almost 95 percent of all private employment, from
distinguishing themselves from unionized workplaces.<span style="mso-spacerun: yes;"> </span>Others put nonunion workplaces at an outright
disadvantage.<span style="mso-spacerun: yes;"> </span>[The labor union movement,
of course, is an attempt to restrict or monopolize the supply of labor in order
to extract higher employee compensation.]<span style="mso-spacerun: yes;">
</span>Section 138514 would allow union dues to be deductible from federal income
tax, putting <a href="https://www.ntu.org/foundation/detail/house-dem-bill-would-add-42-billion-tax-break-for-union-dues">about
$400 million</a> per year on the union side of the economic scale.<span style="mso-spacerun: yes;"> </span>Other sections, such as 132002, target
“infrastructure grants” to “labor unions and other employers … that pay the
prevailing wage.”<span style="mso-spacerun: yes;"> </span>Section 136401 creates
a credit for the purchase of an electric vehicle that “satisfies the domestic
assembly qualifications” (that is, unionized).</p>
<p class="MsoNormal" style="text-align: justify;"> </p>
<p class="MsoNormal" style="text-align: justify;"><b>Penalizing income<o:p></o:p></b></p>
<p class="MsoNormal" style="text-align: justify;">The second mechanism is
income-tested benefits, which discourage the earning of income by withholding
benefits as a household’s income rises.<span style="mso-spacerun: yes;">
</span>For example, Section 136407 creates a tax credit for 15 percent of the
price of the purchase of an electric bicycle, but the credit is reduced $0.20
per additional dollar earned by the household.<span style="mso-spacerun: yes;">
</span>More important, from an aggregate perspective, are the various additions
to major income-tested programs such as Medicaid, “affordable housing” and the
Child Tax Credit.<span style="mso-spacerun: yes;"> </span>By my count, the
various new affordable housing subsidies in BBB exceed $220 billion over ten
years [two days after I wrote this, <a href="https://www.cbo.gov/system/files/2021-10/HCFS_Recon.pdf" target="_blank">CBO estimated $312 billion</a>].</p>
<p class="MsoNormal" style="text-align: justify;">Other provisions are, legally or
economically, new excise taxes.<span style="mso-spacerun: yes;"> </span>These
discourage work by reducing real wages, especially to the extent these policies
raise consumer prices by protecting incumbent producers.<span style="mso-spacerun: yes;"> </span>A major example is section 31501, which
directs the FTC to further enforce “privacy” rules that are effectively
prohibitions on lower cost internet plans.<span style="mso-spacerun: yes;">
</span>When President Trump and the 115th Congress repealed such
prohibitions, the cost of internet service dropped so sharply and immediately
that the consumer savings drew the <a href="https://www.federalreserve.gov/mediacenter/files/fomcpresconf20170614.pdf">attention
of then Federal Reserve Chair Janet Yellen</a> due to its visible effect on the
overall Consumer Price Index.<span style="mso-spacerun: yes;"> </span>This shows
why we can expect higher prices for internet plans under BBB.</p>
<p class="MsoNormal" style="text-align: justify;">A plethora of “green policies”
have a similar effect on prices of transportation and energy, such as taxes on methane emissions (Section 30114), subsidies to rural utilities (Section 12007), and green electricity programs (Sections 30411, 136101). Undoubtably the BBB will be sold as a windfall for the poor, but all of the bill's explicit and implicit excise taxes are <a href="https://www.city-journal.org/costs-of-revival-of-regulatory-state" target="_blank">particularly regressive</a>.</p>
<p class="MsoNormal" style="text-align: justify;"> </p>
<p class="MsoNormal" style="text-align: justify;"><b>Projected Employment Effects<o:p></o:p></b></p>
<p class="MsoNormal" style="text-align: justify;">The magnitude of BBB’s
disincentives for work and hiring varies across households and firms.<span style="mso-spacerun: yes;"> </span>They also vary by margin of response, such as
adjusting work schedules, the duration of employment, or the duration of
nonemployment.<span style="mso-spacerun: yes;"> </span>Properly measured
disincentives also <a href="https://ntanet.org/NTJ/71/1/ntj-v71n01p75-120.html">reflect
the reality</a> that benefit <span class="SpellE">takeup</span> is typically well
below one hundred percent.<span style="mso-spacerun: yes;"> </span>I estimate
that, on average, BBB implicit employment and income taxes would add almost
seven percentage points to the marginal tax rate on labor income.<span style="mso-spacerun: yes;"> </span>At least another two percentage points would
someday be required to finance its projected $220 billion contribution to the
annual federal budget deficit.</p>
<p class="MsoNormal" style="text-align: justify;">These disincentives are on top of
the many other taxes on income, payroll, and sales; other implicit and explicit
employment taxes; and longstanding income-tested benefits.<span style="mso-spacerun: yes;"> </span>Even ignoring the additional financing, the
disincentives would reduce the share of marginal product kept by the average
worker from about 0.52 to 0.45, which is a reduction of about 13 percent.<span style="mso-spacerun: yes;"> </span>I expect that such a change in the
disincentive would reduce full-time equivalent employment by about 4.5%, or
about 7 million jobs.<span style="mso-spacerun: yes;"> </span>Perhaps employment
would prove to be more sensitive to incentives, as it did during the 1990s
welfare reform (see also the update below), or less sensitive, but 7 million is a good point estimate.</p>
<p class="MsoNormal" style="text-align: justify;">I estimated the 7 percentage
points by aggregating the disincentives in the various sections of BBB.<span style="mso-spacerun: yes;"> </span>The largest is the expansion of subsidies for
Obamacare exchange plans.<span style="mso-spacerun: yes;"> </span>Using the same
methods as <a href="http://acasideeffects.com/">Mulligan (2015)</a>, I estimate
that these subsidies by themselves add almost three percentage points.</p>
<p class="MsoNormal" style="text-align: justify;">For the employer IRA mandate, I
estimate 0.5 percentage points, which is the average result from two
methods.<span style="mso-spacerun: yes;"> </span>One method is from Council of
Economic Advisers (<a href="https://trumpwhitehouse.archives.gov/wp-content/uploads/2019/06/The-Economic-Effects-of-Federal-Deregulation-Interim-Report.pdf">2019</a>)
analysis of the removal of an IRA mandate.<span style="mso-spacerun: yes;">
</span>The second method is, based on the <span class="SpellE">Harberger</span>
triangle method, to take half of the penalty and apply it to the <a href="https://www.bls.gov/opub/ted/2021/67-percent-of-private-industry-workers-had-access-to-retirement-plans-in-2020.htm">33
percent of workers</a> who do not currently have pension coverage through an
employer.</p>
<p class="MsoNormal" style="text-align: justify;">Although the BBB’s expanded Child
Tax Credit (CTC) has received much attention, I do not find that it adds much
to the marginal tax rate on labor income.<span style="mso-spacerun: yes;">
</span>The CTC expansion removes a negative tax on labor income, but that
applies only below the poverty line and is offset to some degree by expansions
in the Earned Income Tax Credit.<span style="mso-spacerun: yes;"> </span>The CTC
creates a new five percent phaseout range, but my estimates from the Current
Population Survey suggest that less than five percent of nonelderly persons
aged 21-64 are in a household that with 2019 incomes that would be in that
range.<span style="mso-spacerun: yes;"> </span>I therefore estimate the expanded
CTC’s contribution to the marginal tax rate increase to be only 0.24 percentage
points.</p>
<p class="MsoNormal" style="text-align: justify;">For several other provisions,
such as the Medicaid expansion in states that opted out of the original ACA
expansion, the new Medicaid home and community-based programs, and affordable
housing, I assume that each dollar budgeted in BBB translates into the same
contribution to disincentives as each dollar expected to be spent on the
expanded subsidies for exchange plans.</p>
<p class="MsoNormal" style="text-align: justify;">I assume that the effects on
restraining competition in labor markets are the same as Council of Economic Advisers
(<a href="https://trumpwhitehouse.archives.gov/wp-content/uploads/2019/06/The-Economic-Effects-of-Federal-Deregulation-Interim-Report.pdf">2019</a>)
found for four Obama-era regulations intended to bolster unions (the Fiduciary
rule, the Persuader rule, and two joint-employer rules).<span style="mso-spacerun: yes;"> </span>I assume that the Green Energy components of
BBB contribute one-fifth to the labor wedge of what <a href="https://www.hoover.org/research/analysis-vice-president-bidens-economic-agenda-long-run-impacts" target="_blank">Fitzgerald, <span class="SpellE">Hassett</span>, <span class="SpellE">Kallen</span> and Mulligan</a>
estimated for Biden’s campaign promises regarding renewable energy.</p>
<p class="MsoNormal" style="text-align: justify;">Many of the details of the BBB programs will remain unknown
until it becomes law and executive agencies issue their rules for administering
them.<span style="mso-spacerun: yes;"> </span>Although I assume that benefit <span class="SpellE">takeup</span> is well under 100 percent, I may still have
overestimated it in which case BBB would be more of an adverse productivity
shock and less of a work disincentive.</p>
<p class="MsoNormal" style="text-align: justify;">[Adverse productivity shocks tend to have comparatively
small employment effects and large adverse effects on wages, capital
investment, and living standards.<span style="mso-spacerun: yes;"> </span>As
such, they have a lot in common with BBB’s prescriptions for higher marginal tax
rates on <a href="https://www.hoover.org/sites/default/files/research/docs/president_bidens_economic_agenda_hassett.pdf">corporate
and noncorporate businesses</a>, which are not analyzed here.<span style="mso-spacerun: yes;"> </span>I have also not yet quantified the
disincentive effects of various unemployment-benefit sweeteners in BBB, such as
the Section 137507 that makes exchange plans essentially free during any calendar
year in which a person has unemployment compensation.]</p><p class="MsoNormal" style="text-align: justify;">[Update: Many economists studying the EITC and CTC give a lot of attention to the option of having zero earnings during a full calendar year. It is a fact that BBB gives almost every parent a significant bonus for choosing that option. I find this option to <a href="https://economix.blogs.nytimes.com/2013/02/06/earned-income-ironies/" target="_blank">be hardly relevant</a> for a large majority of adults, but another approach would be to conclude from welfare reform and EITC changes that low-skill single mothers will be very responsive to the BBB's new subsidies for zero work. If so, perhaps I underestimate the national employment effect by a million or so. Thanks to Kevin Corinth, Bruce Meyer, Matthew Stadnicki, and Derek Wu]</p><p class="MsoNormal" style="text-align: justify;">[2nd update: BBB reduces <a href="https://caseymulligan.blogspot.com/2021/10/childcare-in-build-back-better.html" target="_blank">childcare costs</a> for some families and increases it for others. Most important for these purposes, the bill's new childcare subsidies introduce a new set of income phaseouts much like Obamacare did in 2014. Including the various childcare/credit programs, I now project BBB's employment impact to be -9 million.]</p><p class="MsoNormal" style="text-align: justify;">As a younger <a href="https://www.youtube.com/watch?v=UabzJm8HNNU&t=640s" target="_blank">Barack Obama put it</a> (watch for about 80 seconds), "<span style="text-align: left;">I am absolutely convinced ... we have to have work as the
centerpiece of any social policy."</span>]</p>
Casey B. Mulliganhttp://www.blogger.com/profile/03317454408275318282noreply@blogger.com2tag:blogger.com,1999:blog-7539577136486286096.post-67335348654481905852021-07-30T13:14:00.005-05:002021-07-30T14:18:45.036-05:00Michael T. Maloney: A Few Memories<div style="text-align: justify;">Michael T. Maloney passed away this week. We both loved applied price theory and golfed to the exact same handicap.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">We both liked sailing too and together sailed around Long Island in less than 24 hours. He frequently asked why we had to spend so much time scouring the ocean for our competition. To this day I don’t know how to answer this question coming from a first-class IO economist, but perhaps he did not want to imitate Ahab too much.</div><div style="text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi6yT3MT25pHvPX5JX9xZmeQ2bb9HpJd3CRloAa17_tcXyrEo-QxSoInyc-ssclgU22m63E29w_fkW1TWcZiCL4EymjU7qXFUMGMD33i13jmnxtaCbhSOEXduy0qAWZuBexMu6ukMZYjCo/s334/IMG_0486b.jpg" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="242" data-original-width="334" height="290" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi6yT3MT25pHvPX5JX9xZmeQ2bb9HpJd3CRloAa17_tcXyrEo-QxSoInyc-ssclgU22m63E29w_fkW1TWcZiCL4EymjU7qXFUMGMD33i13jmnxtaCbhSOEXduy0qAWZuBexMu6ukMZYjCo/w400-h290/IMG_0486b.jpg" width="400" /></a></div><br /><div style="text-align: justify;"><br /></div><div style="text-align: justify;">I wish to find better pictures (<a href="https://www.facebook.com/12708426/posts/10106737865904638/" target="_blank">Skip has several on facebook</a>) but here we are crossing the starting line first in 2011. Below we are about half way down the island on the ocean side.</div><div style="text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhZxaHSTmWMULWxAIzQN1gZoYhRy07_NWFaNgqgHFWjrAtQXX1Ka2TnlGMKsyBVpP5wqVMA97Y9f1C4ZCBwYypGMmbgNUoVACJs5qgBPNngP2u9JzntTpoTTZS_0Npo6i_rvXofbi7n38I/s654/Screen+Shot+2021-07-30+at+2.00.42+PM.jpg" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="654" data-original-width="452" height="640" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhZxaHSTmWMULWxAIzQN1gZoYhRy07_NWFaNgqgHFWjrAtQXX1Ka2TnlGMKsyBVpP5wqVMA97Y9f1C4ZCBwYypGMmbgNUoVACJs5qgBPNngP2u9JzntTpoTTZS_0Npo6i_rvXofbi7n38I/w442-h640/Screen+Shot+2021-07-30+at+2.00.42+PM.jpg" width="442" /></a></div><br /><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Our 2011 corrected finish time was the best in that year’s fleet (and many other years’ fleets). We (Mike and me and 2 others) especially liked beating the two U.S. Navy college teams, which had crews of a dozen each, larger boats, and of course government money.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">We almost lost Mike a few years ago when he parked in front of his house, went inside, and minutes later saw his Suburban completely crushed by the falling of a large tree.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">An indicator of both how he viewed economics as a unified field and how much he enlivened his department is the number of colleagues who published articles with him despite coming from different subfields. Bobby (McCormick), Skip (Sauer), Bob (Tollison), Bruce (Yandle), Bentley (Coffey) and Matt (Lindsay), to name a few. Also many <a href="https://www.facebook.com/12708426/posts/10106737865904638/" target="_blank">Clemson students</a>.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Mike was particularly saddened when Matt Lindsay passed away in 2015. I hope they are together again.
</div><div style="text-align: justify;"><br /></div>Casey B. Mulliganhttp://www.blogger.com/profile/03317454408275318282noreply@blogger.com2tag:blogger.com,1999:blog-7539577136486286096.post-47224958811022711532021-03-27T09:32:00.000-05:002021-03-27T09:32:17.696-05:00Misleading Baltimore Stats for Celebrating Lax on Crime<p>In 2020, the City of Baltimore stopped prosecuting "minor charges" such as drug crimes. The headlines are that 2020 crime "<a href="https://www.bostonglobe.com/2021/03/26/nation/after-crime-plummeted-2020-baltimore-will-stop-drug-prostitution-prosecutions/" target="_blank">went down a lot</a>" from 2019. Homicides <a href="https://homicides.news.baltimoresun.com/" target="_blank">fell by 13</a>.</p><p>Not mentioned is that, over a similar time frame (2020 Q1-Q3 vs 2019 Q1-Q3), "<a href=" https://health.maryland.gov/vsa/Documents/Overdose/Quarterly%20Drug_Alcohol_Intoxication_Report_2020_Q3.pdf" target="_blank">Opioid Intoxication Deaths</a>" increased by 48 persons (at an annual rate). That is an increase of 36 percent, compared to 21 percent for the rest of the state of Maryland or 3 percent for Baltimore 2018-2019. </p><p>Of course a <a href="https://www.npr.org/2021/01/26/960492035/deaths-of-despair-how-the-pandemic-may-be-fueling-lethal-drug-overdoses" target="_blank">lot of unusual things happened during the pandemic</a>, which was also experienced by the rest of Maryland and the world. But is there any reason to be confident that lax enforcement of drug laws would not increase activity associated with fatally dangerous drugs?</p>Casey B. Mulliganhttp://www.blogger.com/profile/03317454408275318282noreply@blogger.com0tag:blogger.com,1999:blog-7539577136486286096.post-2504133464359781902021-03-02T10:44:00.006-06:002021-03-02T10:48:07.608-06:00How Chicago Economics is Helping End a Pandemic: Interview with Murphy, Philipson, Topel<p class="MsoNormal" style="line-height: 200%; margin-bottom: 0.25in; text-align: justify; text-indent: 0.5in;"><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";">Covid-19 has disrupted much of human
life, but Operation Warp Speed has drastically mitigated the costs of the
virus. The $10 billion federal program launched in April 2020 encouraged and
accelerated the development and mass manufacturing of COVID-19 vaccines,
streamlined Federal approval for vaccines and their manufacture, and provided
Federal funds for private vaccine research and advance-purchase orders.<span style="mso-spacerun: yes;"> </span>COVID-19 vaccines are currently being
administered to the general public at least six months earlier than expected.<span style="mso-spacerun: yes;"> </span>Vaccinating the population against COVID-19
six months earlier </span><a href="https://www.newsweek.com/operation-warp-speed-what-deal-opinion-1520816"><span color="windowtext" style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman"; text-decoration: none; text-underline: none;">was worth about</span><span style="background: white; border: 1pt none windowtext; color: black; mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-border-alt: none windowtext 0in; mso-color-alt: windowtext; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman"; padding: 0in; text-decoration: none; text-underline: none;"> $1.8 trillion</span></a><span style="background: white; color: black; mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-color-alt: windowtext; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";"> to the U.S. alone</span><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";">
in terms of lives saved and accelerating the return to normal schooling, work,
socializing, etc<span style="background: white; color: black; mso-color-alt: windowtext;">.</span> (Mulligan and Philipson 2020).<span class="MsoFootnoteReference"><span style="background: white;"><o:p></o:p></span></span></span></p>
<p class="MsoNormal" style="line-height: 200%; margin-bottom: 0.25in; text-align: justify; text-indent: 0.5in;"><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";">Operation Warp Speed is a historic
milestone for economic research on medical innovation that occurred over
decades on the University of Chicago campus.<span style="mso-spacerun: yes;">
</span>Chicago’s research results, traditions, and emphasis were brought to the
federal government in 2017 by several of its faculty and alumni.<span style="mso-spacerun: yes;"> </span>In the three years before COVID-19 came to
the United States, that economic team showed the President of the United States
how federal policy reforms were delivering real value to consumers by
encouraging innovation in healthcare industries.<span style="mso-spacerun: yes;"> </span><span class="GramE">Also</span> before the
pandemic, the team prepared and published a blueprint for vaccine innovation
during a pandemic that would become the intellectual foundation for Operation
Warp Speed.<span style="mso-spacerun: yes;"> </span>This document tells the
story of the program’s University of Chicago origins.<span style="mso-spacerun: yes;"> </span>The document traces the economics of the
program back to underlying <span class="SpellE">UChicago</span> economic
principles on regulation generally and health economics specifically, following
the contents of a </span><a href="https://youtu.be/GY7YKb4LDCg"><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";">recent
video conversation</span></a><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";"> I had with University of Chicago
colleagues Kevin M. Murphy, Tomas J. Philipson, and Robert H. <span class="SpellE">Topel</span>.</span></p><p class="MsoNormal" style="line-height: 200%; margin-bottom: 0.25in; text-align: justify; text-indent: 0.5in;"><span style="text-indent: 0.5in;"></span></p><div class="separator" style="clear: both; text-align: center;"><iframe allowfullscreen="" class="BLOG_video_class" height="330" src="https://www.youtube.com/embed/GY7YKb4LDCg" width="551" youtube-src-id="GY7YKb4LDCg"></iframe></div><br /> <p></p>
<p class="MsoNormal" style="line-height: 200%; margin-bottom: 0.25in; text-align: justify;"><span class="SpellE"><b><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";">UChicago</span></b></span><b><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";">
on Regulatory Barriers in Healthcare<o:p></o:p></span></b></p>
<p class="MsoNormal" style="line-height: 200%; margin-bottom: 0.25in; text-align: justify; text-indent: 0.5in;"><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";">Operation Warp Speed, especially its
economic elements, emerges from a large body of <span class="SpellE">UChicago</span>
research centered around the unintended consequences of health regulation. Many
economic frameworks developed in the Chicago price theory tradition allow for
both quantitative work and application across various industries. An early
piece by Milton Friedman and George J. Stigler, <i style="mso-bidi-font-style: normal;">Roofs or Ceilings?</i> found that housing regulation exacerbated
housing problems rather than making them better (Friedman and Stigler 1946).<span style="mso-spacerun: yes;"> </span>Stigler would dedicate much of his career to
developing the economics of regulation, including the famous “regulatory
capture theory.”<span style="mso-spacerun: yes;"> </span>As Stigler put it in
his 1971 paper, “as a rule, regulation is acquired by the industry and is
designed and operated primarily for its benefit … regulatory policy will often
be so fashioned as to retard the rate of growth of new firms” (Stigler 1971).<span class="MsoFootnoteReference"><o:p></o:p></span></span></p>
<p class="MsoNormal" style="line-height: 200%; margin-bottom: 0.25in; text-align: justify; text-indent: 0.5in;"><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";">A famous 1973 paper by Chicago’s Sam <span class="SpellE">Peltzman</span> applied the entry-barrier theory specifically to
the regulation of drugs, vaccines, and medical devices.<span style="mso-spacerun: yes;"> </span>He observed that the U.S. Food and Drug Administration’s
(FDA) approval procedures amounted to industry entry barriers, concluding that “consumer
losses from purchases of ineffective drugs or hastily-marketed unsafe drugs
appear to have been trivial compared to their gains from innovation” (<span class="SpellE">Peltzman</span> 1973).<span style="mso-spacerun: yes;"> </span><span class="SpellE">Peltzman’s</span> approach was appreciated throughout the
profession,<a href="#_ftn1" name="_ftnref1" style="mso-footnote-id: ftn1;" title=""><span class="MsoFootnoteReference"><span style="mso-special-character: footnote;"><span class="MsoFootnoteReference"><span style="font-family: "Times New Roman",serif; font-size: 11pt; line-height: 107%; mso-ansi-language: EN-US; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;">[1]</span></span></span></span></a> including a book from M.I.T. Professor Peter Temin also concluding that FDA
delays were too long (Temin 1980).<span style="mso-spacerun: yes;"> </span>More
recently, Tomas Philipson and Chicago alumnus Eric Sun concluded that FDA pre-market
regulation and post-market tort liability acted as a double tax on product
development (Philipson and Sun 2008).<span style="mso-spacerun: yes;">
</span>With Eric Sun and other coauthors, Philipson conducted cost-benefit
analyses of the tradeoff between speed and safety, concluding in 2008 that FDA
was putting too much weight on safety.<span style="mso-spacerun: yes;">
</span>This work influenced FDA deregulation efforts during the Bush Administration,
although that administration continued to be frustrated by the fact that FDA
“steadily disregarded many of the [] provisions” of laws intended to get FDA to
move faster (Gottlieb 2010).<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: 200%; margin-bottom: 0.25in; text-align: justify;"><b style="mso-bidi-font-weight: normal;"><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";">Regulate or
Deregulate?<o:p></o:p></span></b></p>
<p class="MsoNormal" style="line-height: 200%; margin-bottom: 0.25in; text-align: justify; text-indent: 0.5in;"><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";">Philipson joined the Trump Administration
in 2017 and Mulligan in 2018, both in its White House Council of Economic
Advisers (of which Philipson would ultimately become Acting Chair).<span style="mso-spacerun: yes;"> </span>These issues arose immediately in connection
with President Trump’s campaign promise to lower prescription drug prices.<span style="mso-spacerun: yes;"> </span>He appointed FDA Commissioner Scott Gottlieb,
who had been </span><a href="https://www.wsj.com/articles/SB10001424052970204831304576597200095602270"><span color="windowtext" style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman"; text-decoration: none; text-underline: none;">critical of FDA
delays</span></a><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";">.<span style="mso-spacerun: yes;">
</span>Trump’s economic team, which included Chicago economists Anna Wong, Don <span class="SpellE">Kenkel</span>, Eric Sun, Kevin Corinth, Paula Worthington, Rich <span class="SpellE">Burkhauser</span> and Troy Durie, predicted that deregulation
would reduce drug prices because reduced FDA barriers would result in more new
drugs and </span><a href="https://www.whitehouse.gov/briefings-statements/cea-report-administrations-fda-reforms-reduced-biopharmaceutical-drug-prices/"><span color="windowtext" style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman"; text-decoration: none; text-underline: none;">more manufacturers
of existing drugs to compete for consumer dollars</span></a><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";">.<span style="mso-spacerun: yes;"> </span>On the other side was Health and Human Services
(HHS) Secretary Alex M. Azar II, who proposed a “</span><a href="https://www.pwc.com/us/en/industries/health-industries/library/latest-thinking-on-drug-pricing.html"><span color="windowtext" style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman"; text-decoration: none; text-underline: none;">drug pricing
blueprint</span></a><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";">” that would add regulations on
everything from television advertisements to </span><a href="https://www.nationalreview.com/2020/11/pharmas-rebate-rule-inside-job-or-political-genius/"><span color="windowtext" style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman"; text-decoration: none; text-underline: none;">business-to-business
price controls</span></a><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";">.<span style="mso-spacerun: yes;">
</span>Although deregulation was a pervasive theme in his administration, the
President was no ideologue but rather just looking for results.<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: 200%; text-align: justify; text-indent: 0.5in;"><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";">In
a 2018 report that was little noticed at the time (Council of Economic Advisers
2018), CEA laid out and updated <span class="SpellE">Peltzman’s</span> case that
FDA regulations are entry barriers that reduce entry and raise prices.<span style="background: white; color: black; mso-color-alt: windowtext;"> </span>It showed
that Gottlieb’s deregulation was in fact increasing entry of generic drugs and
predicted that lower prices would follow.<span style="mso-spacerun: yes;">
</span>The CEA received their first sense of progress on January 10, 2019, with
the confidential advance release of the Consumer Price Index (CPI) report for
December 2018.<span style="mso-spacerun: yes;"> </span>It showed that 2018 was
the first calendar year since 1972 that retail prescription drug prices
actually fell even though consumer prices generally were increasing.<span style="mso-spacerun: yes;"> </span>The CEA composed a message to be posted on
the President’s Twitter account the next day.<span style="mso-spacerun: yes;">
</span>But this message had to be approved by HHS, which was <span class="GramE">loathe</span>
to release something so contrary to its perceived “need for regulatory action”
in the face of purported “prices of existing drugs [that] have been rising in
the United States much more rapidly than warranted by inflation or costs” (United
States, Department of Health and Human Services).<span style="mso-spacerun: yes;"> </span>Mulligan convinced the President’s
communication team that the CPI is reliable and is telling us something
important. <span style="mso-spacerun: yes;"> </span>The President would brag
about the result in everything from </span><a href="https://www.youtube.com/embed/04AF8VMf2Co?start=596&end=645"><span color="windowtext" style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman"; text-decoration: none; text-underline: none;">impromptu press
briefings</span></a><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";"> to his </span><a href="https://www.youtube.com/watch?v=BYU5VE2c6Ps"><span color="windowtext" style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman"; text-decoration: none; text-underline: none;">State of the Union address</span></a><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";">.<span style="mso-spacerun: yes;"> </span>Although none of us knew what 2020 would
bring, the President was also getting valuable experience at, and witnessing
results from, removing barriers to medical innovation, especially at the FDA.<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: 200%; text-align: justify; text-indent: 0.5in;"><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";"><o:p> </o:p></span></p>
<p class="MsoNormal" style="line-height: 200%; margin-bottom: 0.25in; text-align: justify;"><b style="mso-bidi-font-weight: normal;"><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";">The Value of Medical
Innovation during a Pandemic<o:p></o:p></span></b></p>
<p class="MsoNormal" style="line-height: 200%; text-align: justify; text-indent: 0.5in;"><span class="SpellE"><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";">UChicago’s</span></span><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";"> Tomas J. Philipson
and Richard A. Posner founded the field of economic epidemiology, which
emphasized that the costs of a contagious disease are not limited to the health
losses of those who contract the disease because many others upend their lives
in order to stay healthy (Posner and Philipson 1993).<span style="mso-spacerun: yes;"> </span>In 2006, Kevin M. Murphy and Robert <span class="SpellE">Topel’s</span> “Value of Health and Longevity” assessed the
valuation of improvements in health expenditures and their policy implications
(Murphy and <span class="SpellE">Topel</span> 2006).<span style="mso-spacerun: yes;"> </span>This study calculated the value of
innovations that occurred in the past, the potential value that can occur in
the future from reducing the incidence, and the mortality of various
diseases.<span style="mso-spacerun: yes;"> </span>They even looked at the value
of innovation to reduce mortality from contagious respiratory diseases, of
which COVID-19 proved to be an example.<span style="mso-spacerun: yes;"> </span>Gary
Becker, Tomas Philipson, and Rodrigo Soares estimated the health component of
economic growth associated with the value of health improvements (Becker,
Philipson and Soares 2015).<span style="mso-spacerun: yes;"> </span>Part of
Becker’s <span class="SpellE">UChicago</span> course on human capital looked at
the value of preventing a worldwide pandemic (Jaffe, Minton, Mulligan and
Murphy 2019).<span class="MsoFootnoteReference"><span style="color: black; mso-themecolor: text1;"><o:p></o:p></span></span></span></p>
<p style="line-height: 200%; margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 0in; margin: 0in 0in 12pt; text-align: justify; text-indent: 0.5in;"><span style="font-size: 11pt; line-height: 200%; mso-fareast-font-family: "Times New Roman";">Chicago’s
emphasis on medical innovation profoundly influenced the White House economic
team.<span style="mso-spacerun: yes;"> </span>Judging from the 74 Economic
Reports of the President (ERPs) published since the Truman Administration, no
economic team gave so much attention to medical innovation.<span style="mso-spacerun: yes;"> </span>The 2018 ERP had a full chapter about the
health sector, half of which was about "Improving People’s Health through
More Access to Medical Innovations" and "Encouraging <span class="GramE">Innovation, and</span> Making It Affordable." The 2019
ERP (p. 18) cites FDA deregulation as one of the highlights of the year and
devotes twelve pages to how FDA reforms increased competition and reduced
prescription drug prices. The same report also looks at the possible
negative innovation effects of a proposed Federal ban on for-profit
healthcare. <o:p></o:p></span></p>
<p style="line-height: 200%; margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 0in; margin: 0in 0in 12pt; text-align: justify; text-indent: 0.5in;"><span style="font-size: 11pt; line-height: 200%; mso-fareast-font-family: "Times New Roman";">The
2020 ERP updated the status of the FDA reforms in its chapter about
deregulation, its chapter about healthcare, and its chapter about competition
policy. It also cited the new Right to Try law and relaxed regulatory
barriers to treating chronic kidney disease (Council of Economic Advisers
2020).<span style="mso-spacerun: yes;"> </span><o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: 200%; text-align: justify; text-indent: 0.5in;"><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";">In
order to continue to add to the formidable intellectual capital stock of
Chicago economics, Tomas J. Philipson and Casey B. Mulligan have developed a
new initiative supporting economic research on healthcare markets and medical
innovation. The initiative takes the unique approach of addressing issues
specific to health care through a broader economic lens, applying insights from
industrial organization, macroeconomics, finance, labor economics, and other
fields. Some of the key focus areas investigated so far are FDA hedges,
financial health engineering to support medical research, the effects of
reference pricing on market entry, and innovation incentives and disincentives
in NIH funding. In April of 2020, Mulligan published a report on the excess
burden of COVID-19 and the value of medical innovation that assesses the total
cost of COVID-19 in the U.S. (Mulligan 2020). Later, Mulligan and Philipson estimated
that Project WARP Speed was worth $1.8 trillion due to getting COVID-19
vaccines at least six months before anybody expected. The initiative is
currently planning a conference in the Spring of 2021 around the many issues of
technological change in healthcare, including the measurements and determinants
of these innovations.<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: 200%; margin-bottom: 0.25in; text-align: justify; text-indent: 0.5in;"><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";">Although COVID-19 would not arrive in
the U.S. for two more years, Trump’s CEA was also being asked by the National
Security Council’s biodefense team to look at the economics of vaccine
innovation during pandemics.<span style="mso-spacerun: yes;"> </span>This was an
opportune time to bring the Chicago tradition on regulation together with its
results on epidemiology and the value of medical innovation.<span style="mso-spacerun: yes;"> </span>In a report published in September 2019, CEA
concluded that “…improving the speed of vaccine production is more important
for decreasing the number of infections than improving vaccine efficacy” and
emphasized the need for large-scale manufacturing and the possible advantages
of public-private partnerships” (Council of Economic Advisers 2019).<span style="mso-spacerun: yes;"> </span><o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: 200%; text-align: justify; text-indent: 0.5in;"><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";"><o:p> </o:p></span></p>
<p class="MsoNormal" style="line-height: 200%; text-align: justify;"><b style="mso-bidi-font-weight: normal;"><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";">Presidential Human Capital<o:p></o:p></span></b></p>
<p class="MsoNormal" style="line-height: 200%; text-align: justify; text-indent: 0.5in;"><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";">The
CEA vaccine report prompted a President’s Executive Order, also before the
current pandemic, noting that “viruses emerge from animals … that can spread
efficiently and have sustained transmission among humans.”<span style="mso-spacerun: yes;"> </span>President Trump concluded that “vaccination
is the most effective defense….”<span style="mso-spacerun: yes;"> </span>As two
of Trump’s former senior staff members put it “when COVID-19 emerged, the White
House was ready and expeditiously applied the report's deregulatory and fiscal
lessons to streamline FDA approval for vaccines and their parallel
manufacturing on a large scale” (Grogan and Philipson 2020).<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: 200%; text-align: justify; text-indent: 0.5in;"><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";">Mulligan
and Philipson were in the Oval Office with the President and his economic team
in February 2020 (when COVID-19 cases just were beginning to spread in the U.S.,
and before Operation Warp Speed).<span style="mso-spacerun: yes;"> </span>His
staff continued to worry that the FDA would not be interested in removing any
more approval barriers.<span style="mso-spacerun: yes;"> </span>But the
President was confident, telling them that “I’ve done it before and will do it
again … bring the FDA management in here.”<span style="mso-spacerun: yes;">
</span>He and his administration not only knew why approval barriers needed to
be removed but knew from prior experience how to do it.<span style="mso-spacerun: yes;"> </span>By the end of that calendar year, two vaccines
were approved, produced, and beginning to be delivered to the American
population.</span><b style="mso-bidi-font-weight: normal;"><span style="font-size: 14pt; line-height: 200%; mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";"><br clear="all" style="break-before: page; mso-special-character: line-break; page-break-before: always;" />
</span></b><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";"><o:p></o:p></span></p>
<p class="MsoNormal" style="text-align: justify;"><b style="mso-bidi-font-weight: normal;"><span style="font-size: 14pt; line-height: 107%; mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";">Bibliography<o:p></o:p></span></b></p>
<p class="MsoNormal" style="text-align: justify;"><b><span style="font-size: 14pt; line-height: 107%; mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";"><o:p> </o:p></span></b></p>
<p class="MsoNormal" style="text-align: justify;"><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";">Becker, Gary, S.,
Tomas J. Philipson, and Rodrigo R. Soares. "The Quantity and Quality of
Life and the </span><span style="mso-tab-count: 1;"> </span><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";">Evolution
of World Inequality." <i>American Economic Review</i>, 95 (1): 277-291,
2005.<o:p></o:p></span></p>
<p class="MsoNormal" style="text-align: justify;"><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";"><br /></span></p><p class="MsoNormal" style="text-align: justify;"><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";">Council of Economic
Advisers. <i>The Administration’s FDA Reforms and Reduced Biopharmaceutical </i></span><span style="mso-tab-count: 1;"> </span><i><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";">Drug Prices</span></i><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";">.
Executive Office of the President, October 2018.<o:p></o:p></span></p>
<p class="MsoNormal" style="text-align: justify;"><i><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";"><br /></span></i></p><p class="MsoNormal" style="text-align: justify;"><i><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";">---. Economic Report
of the President</span></i><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";">. Executive Office of the President, February
2018.</span></p>
<p class="MsoNormal" style="text-align: justify;"><i><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";"><br /></span></i></p><p class="MsoNormal" style="text-align: justify;"><i><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";">---. Economic Report
of the President</span></i><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";">. Executive Office of the President, March
2019.</span></p>
<p class="MsoNormal" style="text-align: justify;"><i><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";"><br /></span></i></p><p class="MsoNormal" style="text-align: justify;"><i><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";">---. Economic Report
of the President</span></i><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";">. Executive Office of the President, February
2020.</span></p>
<p class="MsoNormal" style="text-align: justify;"><i><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";"><br /></span></i></p><p class="MsoNormal" style="text-align: justify;"><i><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";">---. Mitigating the
Impact of Pandemic Influenza through Vaccine Innovation</span></i><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";">.
Executive Office of the </span><span style="mso-tab-count: 1;"> </span><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";">President,
September 2019.</span></p>
<p class="MsoNormal" style="text-align: justify;"><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";"><br /></span></p><p class="MsoNormal" style="text-align: justify;"><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";">Department of Health
and Human Services. “Fraud and Abuse; Removal of Safe Harbor Protection for </span><span style="mso-tab-count: 1;"> </span><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";">Rebates Involving Prescription
Pharmaceuticals </span><span style="mso-tab-count: 1;"> </span><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";">and
Creation of New Safe Harbor Protection for </span><span style="mso-tab-count: 1;"> </span><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";">Certain Point-of-Sale Reductions in
Price on Prescription Pharmaceuticals and Certain Pharmacy </span><span style="mso-tab-count: 1;"> </span><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";">Benefit Manager Service Fees.” <i>Federal
Register</i> 84, no. 25 (February 6, 2019):</span> 2340.<span class="MsoHyperlink"><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";"><o:p></o:p></span></span></p>
<p class="MsoNormal" style="text-align: justify;"><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";"><br /></span></p><p class="MsoNormal" style="text-align: justify;"><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";">Friedman, Milton, and
George J. Stigler. <i>Roofs or Ceilings? The Current Housing Problem.</i>
Irvington-on-</span><span style="mso-tab-count: 1;"> </span><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";">the-Hudson,
New York: Foundation for Economic Education, 1946.<o:p></o:p></span></p>
<p class="MsoNormal" style="text-align: justify;"><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";"><br /></span></p><p class="MsoNormal" style="text-align: justify;"><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";">Gottlieb, Scott.
"The FDA Is Evading the Law." <i>Wall Street Journal</i>. December
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<p class="MsoNormal" style="text-align: justify;"><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";"><br /></span></p><p class="MsoNormal" style="text-align: justify;"><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";">Grogan, Joseph, and
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<p class="MsoNormal" style="text-align: justify;"><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";"><br /></span></p><p class="MsoNormal" style="text-align: justify;"><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";">Mulligan, Casey B.
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" <i>supply and demand (in </i></span><span style="mso-tab-count: 1;"> </span><i><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";">that
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</i></span><span style="mso-tab-count: 1;"> </span><i><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";">Register</span></i><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";">
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<p class="MsoNormal" style="text-align: justify;"><span style="mso-ascii-font-family: "Times New Roman"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: "Times New Roman";"><o:p> </o:p></span></p>
<p class="MsoNormal" style="text-align: justify;"><span face=""Arial",sans-serif" style="color: #333333; font-size: 9pt; line-height: 107%; mso-fareast-font-family: Arial;"><o:p> </o:p></span></p>
<div style="mso-element: footnote-list;">Footnotes<br clear="all" />
<hr align="left" size="1" width="33%" /><br /><div id="ftn1" style="mso-element: footnote;">
<p class="MsoFootnoteText"><a href="#_ftnref1" name="_ftn1" style="mso-footnote-id: ftn1;" title=""><span class="MsoFootnoteReference"><span style="mso-special-character: footnote;"><span class="MsoFootnoteReference"><span style="font-family: "Times New Roman",serif; font-size: 10pt; line-height: 107%; mso-ansi-language: EN-US; mso-ascii-theme-font: minor-latin; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">[1]</span></span></span></span></a> See the 2001 survey by
Klein and Tabarrok.</p>
</div>
</div>Casey B. Mulliganhttp://www.blogger.com/profile/03317454408275318282noreply@blogger.com0