Russell Roberts's Blog, page 121
July 17, 2022
Some Links
Two recent events have me thinking (as one does) about the unseen and unintended harms of in action, particularly when it comes to government regulation. First, Germany—which is facing a severe electricity shortage because of the Russia conflict—rejected late last week a legislative proposal to maintain several nuclear power plants that were scheduled to be mothballed this year, choosing to burn more coal instead (including some from Russia). Then, this past weekend, the government and economy of Sri Lanka basically collapsed (thousands of protesters even stormed the presidential palace!) because of a wicked combination of crippling debt and major food and fuel shortages.
At first blush, these events don’t really have much in common (other than the Russia-induced global energy crunch), but dig a little deeper and you see that both have at their roots a thing called the “precautionary principle.”
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[T]he precautionary principle is all about a regulatory system’s default setting (banned where there’s merely a “plausible risk”) and the burdens of proof for overcoming that default (allowed only where “conclusive evidence” has been provided). As Mercatus Center’s Adam Thierer put it, “Where there is uncertainty about future risks, the precautionary principle defaults to play-it-safe mode by disallowing trial-and-error progress, or at least making it far more difficult.”
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My preferred approach, by contrast, simply flips the script (as the kids say): The presumption is in favor of action and the state bears a high burden of proof to stop it; thus, private actors can freely act (and innovate) without express government approval unless regulators convincingly demonstrate that the action at issue is very likely harmful to society on net. Regulators’ focus instead should be on risk mitigation, not risk elimination. Any resulting problems from an innovation or action would therefore be addressed after it’s undertaken (and preferably via private means such as insurance and self-regulation). That said, regulators can and should develop narrow (issue-specific) restrictions to address things (e.g., cloning) that present a clear risk of catastrophic, irreversible harm.
Thierer, much to his credit, has played a major role in advocating this kind of “permissionless innovation” standard. (For those interested in more on this issue, I highly recommend his post on some permissionless innovation guidelines and this recent interview on the pandemic and the precautionary principle.) As he shows, abandoning precautionary regulation would not only be likely to lead to better health, safety, environmental, and economic outcomes than the precautionary principle does, but also prevent the types of anti-competitive, Kafkaesque “little tyrannies” that many Americans, like my poor friend here in Raleigh, endure daily.
University of Washington professor Tony Gill asks if wokeness is the new sumptuary regulation. Here’s his conclusion:
A truly free and socially-egalitarian society will reject sumptuary taxes, no matter what form they take. Awake to the woke, and reject how it’s spoke.
On his Facebook page, Phil Magness observes this:
Nikole Hannah Jones has not written a single line for the newspaper where she is employed as a reporter in over two years. She also lacks a terminal degree in any field, has no prior teaching experience in higher ed, and has no scholarly publications. To cap that off, she has been credibly accused of severe acts of journalistic misconduct, including ghost-editing the web copy of her published articles in an effort to game the Pulitzer Prize review process.
Those facts combined render her fundamentally unqualified to hold a faculty position of any type, let alone one that is hired at the full professor level with tenure.
And now she’s outright grifting off of the taxpayers of North Carolina by securing a payout settlement from UNC to withdraw her lawsuit against the university for receiving all of those things and then declining the offer because the university’s board of trustees briefly pushed back against it.
Alberto Mingardi counsels us to “work hard and read [Eric] Hoffer.”
The Wall Street Journal has chosen its new film critic well: Kyle Smith.
Tim Dawson argues that “constant catastrophism is destroying our brains.” A slice:
This beast is a child of the rapacious demands of the modern news cycle and Twitter discourse. Both must be fed — and constantly. When a broadcast journalist is not on camera, they are online: speculating, pontificating, stirring the pot. Politicians and their teams are similarly absorbed: profile-boosting, sledging, tweaking the narrative. Saying things they know to be untrue — but so what? Serious politics requires consideration, wisdom even; manufacturing hysteria is, bluntly, a lot easier. But also a lot more dangerous.
Journalists and politicians might be initiators of this madness, but they are victims of it, too. They, along with the rest of us, sit like spectators in Roman amphitheatres, guzzling booze and baying for blood — caught in a world which encourages anger and catastrophisation to keep the wheels of its consciousness spinning.
Jeffrey Tucker is unimpressed with the new book by the famous covidocrat Deborah Birx. A slice:
It’s very clear that Birx had almost no contact with any serious scientist who disputed the draconian response, not even John Iaonnidis who explained as early as March 17, 2020, that this approach was madness. But she didn’t care: she was convinced that she was in the right, or, at least, was acting on behalf of people and interests who would keep her safe from persecution or prosecution.
For those interested, Chapter 8 provides a weird look into her first real scientific challenge: the seroprevalence study by Jayanta Bhattacharya published April 22, 2020. It demonstrated that the infection fatality rate – because infections and recovery was far more prevalent than Birx and Fauci were saying – was more in line with what one might expect from a severe flu but with a much more focused demographic impact. Bhattacharya’s paper revealed that the pathogen eluded all controls and would likely become endemic as every respiratory virus before. She took one look and concluded that the study had unnamed “fundamental flaws in logic and methodology” and “damaged the cause of public health at this crucial moment in the pandemic.”
And that’s it: that’s Birx grappling with science. Meanwhile, the article was published in the International Journal of Epidemiology and has over 700 citations. She saw all differences of opinion as an opportunity to go on the attack in order to intensify her cherished commitment to the lockdown paradigm.
Quotation of the Day…
… is the opening paragraph, found on page 37, of Book I, Chapter IV of the 1981 Liberty Fund edition of Adam Smith’s monumental 1776 An Inquiry Into the Nature and Causes of the Wealth of Nations:
When the division of labour has been once thoroughly established, it is but a very small part of a man’s wants which the produce of his own labour can supply. He supplies the far greater part of them by exchanging that surplus part of the produce of his own labour, which is over and above his own consumption, for such parts of the produce of other men’s labour as he has occasion for. Every man thus lives by exchanging, or becomes in some measure a merchant, and the society itself grows to be what is properly a commercial society.
DBx: Adam Smith died, at the age of 67, on this date in 1790.
July 16, 2022
About Climate-Change’s Economic Cost
Here’s a letter to WTOP Radio in Washington, DC:
News Director:
During today’s 2:00pm hour, one of your reporters spoke with Marketwatch’s Paul Brandus about Sen. Joe Manchin’s refusal to support all of Pres. Biden’s environmental agenda. Obviously critical of Sen. Manchin’s concern that Mr. Biden’s programs are too costly, Mr. Brandus suggested that the admittedly high cost of the president’s programs are nevertheless lower than are the economic costs of the climate change that would result if the president’s programs aren’t approved.
Color me skeptical. As noted by NYU professor Steven Koonin – former provost and professor of physics at Caltech, who served also as Energy Department Undersecretary for Science in the Obama administration – the U.N. itself finds that climate-change’s likely negative economic impact on world income by the year 2100 will be no more than three percent. Prof. Koonin then put this U.N. forecast into perspective:
An impact of 3 percent in 2100 – some eighty years from now – translates into a decrease in the annual [economic] growth rate by an average of 3 percent divided by 80, or about 0.04 percent per year. The IPCC [Intergovernmental Panel on Climate Change] scenarios assume an average annual growth rate of about 2 percent through 2100; the climate impact would then be a 0.04 percent decrease in that 2 percent growth rate, for a resulting growth rate of 1.96 percent. In other words, the UN report says that the economic impact of human-induced climate change is negligible, at most a bump in the road.*
It seems as though Sen. Manchin and many others in Congress who worry about the high cost of Mr. Biden’s environmental agenda are on solid ground after all.
If your goal is to report on the climate accurately rather than ideologically, I recommend that you assign to all of your reporters the book from which the above quotation is drawn, namely, Prof. Koonin’s 2021 book, Unsettled? What Climate Science Tells Us, What It Doesn’t, and Why It Matters.
Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030
* Steven E. Koonin, Unsettled? What Climate Science Tells Us, What It Doesn’t, and Why It Matters. (Dallas: BenBella Books, Inc., 2021), pages 178-179.
Bonus Quotation of the Day…
… is from pages 72-73 of the 2002 Dover Publications edition of the 1896 English-language translation – The Crowd: A Study of the Popular Mind – of Gustave Le Bon’s 1895 La psychologie des foules:
The leader [of a crowd] has most often started as one of the led. He has himself been hypnotised by the idea, whose apostle he has since become. It has taken possession of him to such a degree that everything outside it vanishes, and that every contrary opinion appears to him an error or superstition. An example is Robespierre, hypnotised by the philosophical ideas of Rousseau, and employing the methods of the Inquisition to propagate them.
DBx: Single-minded obsessions, if not soon arrested, become justifications for the tyrannical pursuit of the object of the obsession. Individuals obsessed with eliminating all further risks of climate change are so obsessed. Also so obsessed are individuals who insist on the overriding necessity of every possible reduction in the risk of encountering the covid virus.
Some Links
Matt Ridley decries the eco-extremism that inflicted so much harm on Sri Lankans. A slice:
At the time, his organic decision was widely praised by environmentalists. Sri Lanka scored 98 out of 100 on the “ESG” – environmental, social and governance – criteria for investment.
Vandana Shiva, a feted environmentalist, said: “This decision will definitely help farmers become more prosperous.” She has been silent recently. Dr Shiva has led relentless criticism of the Green Revolution of the 1960s, which brought fertiliser and new crop varieties to south Asia, banishing famine for the first time in history even as population increased. Her (and others’) claims that traditional, organic farming could feed the world more healthily remain wildly popular among environmentalists. Sri Lanka has tested that proposition and found it wanting.
As the agricultural scientist Prof Channa Prakash of Tuskegee University in Alabama once told me: “Sure, organic agriculture is sustainable: it sustains poverty and malnutrition.” Farming was organic when millions died in famines every decade and the US prairies turned into dustbowls for lack of fertiliser to hold the soil during droughts.
Arnold Kling ponders “the coalition of the sane.” A slice:
Do you want to be more than an Enabler? Demand that the Office of Diversity, Equity, and Inclusion be abolished. Support laws banning “gender-affirming care” for minors and giving parents clear authority to shield their children from those pushing gender transition on them. Insist on the use of standardized tests and rigorous, color-blind grading practices. Fire the teachers and professors who require “activism” from their students. Fire the employees who bring politics into the workplace. Repeal laws that require “diversity” on corporate boards. Insist that pensions and other investments be directed toward profits, not toward “ESG.” Stop encouraging your kids to attend Ivy League colleges.
GMU Econ alum Dominic Pino reports on the continuing shortage of baby formula. A slice:
The United States of America should not be at the mercy of Michigan weather to have a sufficient supply of baby formula. The fact is we’re over-reliant on a small handful of factories because the U.S. baby-formula market has been made unattractive by federal policy.
A Congressional Research Service report from May documents how the U.S. is almost 100 percent reliant on domestic companies to meet demand for baby formula. The U.S. produced an average of 524 million kilograms of infant formula per year between 2012 and 2021 and imported an average of only 3 million kilograms per year, the report says. Domestic production regularly exceeded demand, which seemed to be working well.
But when there are domestic supply problems, there’s nowhere else to go. Tariffs and duties range from 14.9 percent to 25.1 percent depending on the contents, amount, and the country of origin, the report says. More importantly, though, the oligopolistic market structure, dominated by two huge firms that work in concert with state governments through the WIC program, makes the whole market unattractive for foreign manufacturers. The report says, “As such, Congress might consider encouraging mutual recognition agreements on regulatory testing and certification, or other policy instruments to reduce these trade barriers, in addition to potentially lowering tariffs.”
Hear! Hear! for University of Washington professor Stuart Reges.
Bryan Caplan talks about Thomas Szasz.
Juliette Sellgren talks with Jason Fichtner about “why you should save today.”
Eric Boehm reports that “ineffective mask mandates could be returning to L.A. and Seattle.”
Christine Black applauds “the speakeasy churches of 2020.”
“Pandemic related disruptions have caused the largest backslide in childhood vaccinations in 29 years, in what experts say is a ‘red alert’ warning for health.” (DBx: But, as a result, at least these children perhaps have a lesser chance of coming into contact with the covid virus – which outcome, as The Experts have assured us, is a consideration that trumps all others.)
The UK government is trying to block disclosures to the inquiry investigating its handling of the Covid-19 pandemic, according to people with knowledge of the discussions.
The thinking was that by protecting the laptop class with lockdowns, that would protect everyone.
Public health embraced trickle down epidemiology.
Quotation of the Day…
[T]he panic itself was dangerous and leading to the propagation of harmful policies across the states.
DBx: Yes.
And a panicked population is a population that is even more prone to put its confidence in political wizards – wizards who promise, in exchange for unquestioning obedience, protection from vicious monsters. A dynamic of this formula for dystopia is that the panic itself – and its promise of political power to those who most convincingly portray themselves as wizard-saviors – attracts into politics those persons who most itch to play the role of wizard-savior, some of whom actually believe themselves to possess wizard powers.
Most media make matters only worse, for even on their finest days they have a poor nose for detecting the b.s. that streams out of the mouths and press releases of those who compete for positions of public wizardry. In times of panic, itself stirred by the innumerate, increasingly shallow, and click-obsessed media, the media become downright worshipful of those wizards who excel at promising the most simple and direct ‘solutions’ – ‘solutions’ that ignore trade-offs, nuances, the creation of dangerous precedents, and reality itself.
July 15, 2022
Five Negative Consequences of Price Ceilings
This shortage creates the second consequence of a price ceiling – namely, the necessity of some means of rationing the price-ceilinged good. After all, with the price ceiling in place, there’s simply not enough of the good supplied to satisfy demand. What process, what ‘force,’ what mechanism will determine which of these demands get satisfied and which of these demands remain unsatisfied? This determination might be done by random chance or by luck – for example, buyers lucky enough to happen to live closest to the store will find units of the good available for purchase while buyers who live farther away will find the store shelves empty.
Or a more pernicious means of rationing might arise – for example, violence. Those persons who are most willing and able to threaten physical harm to others get the available supplies while more peaceful people do without.
The important point here is that the shortages created by price ceilings necessitate the use of some means of rationing.
The third consequence of a price ceiling is that the amount of the good that buyers will actually be able to acquire will be less than they would acquire were the price ceiling not in place. A price ceiling, in short, reduces the amount of the good that buyers actually get. If the government officials who impose price ceiling intend to help consumers, the resulting reduction in quantities supplied to consumers is wholly inconsistent with that intention.
The fourth consequence of a price ceiling is that it increases the cost that consumers incur to get the good. Even those consumers who are among the fortunate ones actually to acquire some units of the good almost certainly pay for each unit of the good more than they would have paid without a price ceiling in place.
The reason price ceilings raise consumers’ costs of acquiring the good is that price ceilings prohibit only the monetary price of the good from rising. Price ceilings don’t – and cannot – prevent consumers from directly spending non-monetary (“real”) resources in their attempts to acquire the good. When consumers are prevented from competing to acquire the good by offering more money to sellers, consumers compete for the good in other ways, such as rushing to the store or waiting in long lines. Also possible is the offering of tit-for-tat favors. Some of these favors are innocuous, such as a buyer offering to a seller a six pack of beer. Other of these favors are corrupt, such as the town mayor offering to a seller an exclusion from a zoning requirement.
And because price ceilings reduce the quantities of goods supplied to market, the value of each unit of the good that is supplied is higher than is the value of each unit supplied without price ceilings. I remember well the price-ceiling-caused gasoline shortages of the 1970s. In August of 1979, my father learned one Friday that a gasoline station about two miles from our home was to open at noon on Saturday to sell five gallons of gasoline to each motorist on a first-come, first-served basis. My father drove the family car to that station at midnight. He was second in line. He waited in the car until I relieved him at 6:00am. I then waited – in the suffocating New Orleans heat and humidity – the remaining six hours until the station opened at noon. I pumped five gallons of gasoline into the car’s tank, gave the clerk $3.50 (the gasoline was priced at 70 cents per gallon) and then drove home.
You’ll have no trouble believing me when I say that my father and I would have preferred to have paid whatever would have been the market monetary price – the non-ceilinged price – of gasoline than to have paid for this gasoline largely by waiting in line for 12 hours. That low-priced gasoline was inordinately expensive.
Bonus Quotation of the Day…
… is from page 189 of former Caltech physics professor and provost – and former Energy Department undersecretary during the Obama administration – Steven Koonin’s excellent 2021 book, Unsettled? What Climate Science Tells Us, What It Doesn’t, and Why It Matters:
Trust in scientific institutions underpins our ability – and the ability of the media and politicians as well – to trust what is presented to us as The Science. Yet when it comes to climate, those institutions frequently seem more concerned with making the science fit a narrative than with ensuring the narrative fits the science.
DBx: In this book Koonin documents the unsettling – and even to me surprising – extent to which well-credentialed scientists and scientific institutions are either so astonishingly careless with facts and reasoning that they get basic matters backwards, or are so intoxicated by pre-conceived notions that they believe themselves to be justified in telling falsehoods and half-truths.
And there’s every reason to believe that the same pernicious, anti-scientific forces that are at work to misrepresent what the science actually says about the climate and climate policy are at work also to misrepresent what the science actually says about covid and covid policy.
Some Links
Martin Kulldorff and Jay Bhattacharya explain that “Democrats are big fans of Trump’s early covid response.” Two slices:
Drs. Birx, Redfield, and Fauci also turned a blind eye to the enormous collateral damage caused by their policies: missed cancer screenings and treatment, worse cardiovascular disease care, fewer childhood vaccinations, and deteriorating mental health, to name a few examples. Instead of pointing out those failures in the report, the congressional Democrats disparage Dr. Atlas for his concern about them.
In their futile efforts to suppress the disease, these officials’ worst failure was the strategy of school closures. Missing school causes enormous harm to kids, particularly poor and middle-class children. Research predicts they will live shorter, poorer, and less healthy lives as a consequence of the closures. Unfortunately, only a few states, such as Arkansas, Florida, and Wyoming, resisted the Birx-Redfield-Fauci school closures.
In August 2020, along with Prof. Joseph Ladapo then of UCLA and Prof. Cody Meissner of Tufts University, we visited the White House to argue for better protection of older Americans and for opening schools and universities. While we met with the president and the vice president, we were surprised that neither Birx, Redfield, nor Fauci were available to meet with us. From the subcommittee report, we now know that Birx offered “to go out of town or whatever gives the [White House] cover” to avoid meeting with us.
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The verdict is in, and it is now obvious that they failed. With more focus on protecting the old while keeping schools, health care, and small businesses open, Republican Florida and Nebraska and social-democratic Scandinavia have less collateral damage without higher excess mortality.
Birx and Redfield failed to protect older Americans from COVID-19. They failed to protect us all, especially our children, from collateral lockdown damage. They failed to listen and learn from other scientists. In 2020 they misled many Americans, both Republicans and Democrats.
Surprisingly, congressional Democrats are now the ones stepping in to defend these Trump appointees. They should instead embrace independent-minded scientists who favored focused protection instead of lockdowns.
Toby Green, writing at UnHerd, argues that at the root of the turmoil in Sri Lanka are lockdowns.
Also weighing in on Sri Lanka is Tunku Varadarajan. Two slices:
The Green Revolution of Norman Borlaug, the American agronomist who did more to feed the world than any man before or since, set Sri Lanka on the path to agricultural abundance in 1970. It was built around chemical fertilizers and crops bred to be disease-resistant. Fifty-two years later, Sri Lanka has pulled off a revolution that is “antigreen” in the modern sense, toppling its president, Gotabaya Rajapaksa. In an uprising that has its roots in Mr. Rajapaksa’s imperious decision to impose organic farming on the entire country—which led to widespread hunger after the agricultural economy collapsed—Sri Lanka’s people have wrought the first contra-organic national uprising in history.
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Perhaps because of the seven years he spent living in America during the late 1990s and early 2000s, Mr. Rajapaksa was in thrall to green nostrums. He campaigned for president in 2019 on a platform that promised a form of technocratic utopia, including the commitment to turn Sri Lankan agriculture completely organic in a decade. He was particularly attentive to Vandana Shiva, a rabid Indian opponent of modern scientific agriculture. She considers Borlaug the enemy.
Covid hit Sri Lanka particularly hard, wiping out tourism, its economic mainstay. Heedless of this calamity, and of the wider impoverishment caused by lockdowns, Mr. Rajapaksa took a step that poleaxed Sri Lanka. On April 27, 2021—with no warning, and with no attempt to teach farmers how to cope with the change—he announced a ban on all synthetic fertilizers and pesticides. Henceforth, he decreed, Sri Lankan agriculture would be 100% organic. Agronomists and other scientists warned loudly of the catastrophe that would ensue, but they were ignored. This Sri Lankan Nero listened to no one.
Izabella Kaminska understandably worries that the covid lockdowns have normalized lockdowns. A slice:
Many of those who opposed lockdowns for the pandemic, predicted that the policy — if normalised — could one day be taken advantage of by opportunistic political forces to deal with almost any crisis. It was, as Lord Sumption once suggested, a potential pathway to authoritarianism. “If we confer despotic powers on government to deal with perils, which are an ordinary feature of human existence, we will end up doing it most or all of the time,” he wrote in November 2021.
Well, we are now facing just such a crisis. And there is a not insignificant chance that lockdowns might be revived, not just as a knee-jerk reaction to cope with a prevailing health crisis, but also, troublingly, an economic one.
The monkeypox health scare may have failed to get traction, but as Covid cases begin to rise again, the slow beat of pro-lockdown messaging is beginning to circle again in the mainstream media.
For now, the public remains far from receptive. But this could change as soon as energy shortages and supply chain issues begin to bite this winter, which they surely will. The public has already been primed to believe that lockdowns were great for generating energy savings. We saw the evidence of that with our own eyes. Traffic jams disappeared. Oil prices went negative. Air pollution reversed.
In the face of late Soviet-style chaos on the streets, unconstrained inflation, not enough electricity to heat the homes of the vulnerable, the prospect of order emanating from the “temporary” suspension of a market economy might seem appealing.
TANSTAFPFC (There Ain’t No Such Thing As Free Protection From Covid.)
Global tax cartels are as bad as they sound. They are explicitly designed to enable governments that refuse to cut their profligate spending and create friendlier tax environments to get more revenue. They are bad news for tax competition and fiscal sustainability, and they make governments less accountable to taxpayers, businesses and to workers who would like their productivity to be rewarded with higher wages rather than higher tax bills for their employers.
Rob Bradley and Richard Fulmer ask: “Is biomass ‘green’ energy?”
But as I said at the outset, it seems almost ludicrous to discuss the Fed’s inflation target when it misses its target by so much.
There are four major U.S. manufacturers that supply over 90% of the formula. The government has erected almost insurmountable barriers to entry; only one company, ByHeart, has entered the industry in the past 15 years. The government imposes both tariff and nontariff obstacles to discourage foreign competition.
The Agriculture Department purchases half the formula at a discount, (plus manufacturers’ rebates) from the four preferred suppliers. This formula is then distributed at no cost to the millions of qualified moms through the Special Supplemental Nutrition Program for Women, Infants and Children (WIC) program. Studies have shown that U.S. non-WIC distributors have retailed their formula for up to 50% less.
These pricing inefficiencies—paid by non-WIC consumers—are created by government. Were it not for government intervention in the market, in effect creating and subsidizing a monopoly, the shortfall after the shutdown of the Abbott plant would have been covered by its competitors without terrifying moms and subjecting everyone to the politicians’ bloviating.
Quotation of the Day…
… is from page 46 of Deirdre McCloskey’s superb 2022 volume, Beyond Positivism, Behaviorism, and Neoinstitutionalism in Economics (footnote deleted; original emphasis):
I give a good many talks to audiences of well-meaning and well-educated lay people, many of whom have had a course or two in academic economics. I write a good many reviews of books by well-meaning scholars without PhDs in economics, such as Robert Reich and Michael Sandel. I engage in a good many academic disputes with well-meaning scholars with PhDs in economics, such as Thomas Piketty and Marianna Mazzucato. None of these fine people has the slightest understanding of elementary economics.
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