Thursday, June 30, 2016
If we are headed to a mid-20th century solar minimum, or a Grand Solar Minimum for the next two centuries, this will offset greenhouse warming to some extent-the sign of the solar offset is becoming increasingly clear: towards cooling
From Judith Curry.
"We can conclude that the evidence provided is sufficient to justify a complete updating and reviewing of present climate models to better consider these detected natural recurrences and lags in solar processes. – Jorge Sánchez-Sesma
In pondering how the climate of the 21st century will play out, solar variability has generally been dismissed as an important factor by the proponents of AGW. However, I think that it is important that scenarios of future solar variability and their potential impacts on climate should by considered in scenarios of future climate change.
I have been cursorily following the literature on this topic. I have recently been in communication with Jorge Sanchez-Sesma. He has new paper that was just accepted for publication in Earth System Dynamics, an interactive open-access journal published by the EGU. I am featuring this paper in a post since it provides important new analysis and insights on this topic, and also provides a useful assessment of the literature and current state of knowledge on this topic.
The significance of this paper is reflected in the EGU metrics link that indicates that this paper has been downloaded 1531 times so far (before it has been formally published).
Evidence of cosmic recurrent and lagged millennia-scale patterns and consequent forecasts: multi-scale responses of solar activity to planetary gravitational forcing [link]
Abstract. Solar activity (SA) oscillations over the past millennia are analyzed and extrapolated based on reconstructed solar-related records. Here, simple recurrent models of SA signal are applied and tested. The consequent results strongly suggest the following: (a) the existence of multi-millennial (9500-year) scale solar patterns linked with planetary gravitational forcing (PGF), and (b) their persistence, over at least the last glacial– interglacial cycle, but possibly since the Miocene (10.5 Ma). This empirical modeling of solar recurrent patterns has also provided a consequent multi-millennial-scale experimental forecast, suggesting a solar decreasing trend toward Grand (Super) Minimum conditions for the upcoming period, AD2050–2250 (AD 3750–4450). Taking into account the importance of these estimated SA scenarios, a comparison is made with other SA forecasts. In Appendixes A and B, we provide further verification, testing and analysis of solar recurrent patterns since geological eras, and their potential gravitational forcing.
The Introduction provides some background information on this topic:
Solar activity (SA) has non-linear characteristics that influence multiple scales in solar processes. For instance, millennia-scale solar oscillations have been recently detected, like those of about 6000 and 2400 years, with important and interesting influences in the near, past and future climate. These millennial scale patterns of reconstructed SA variability could justify epochs of low activity, such as the Maunder Minimum, as well as epochs of enhanced activity, such as the current Modern Maximum, and the Medieval Maximum in the 12th century.
Although the reason for these SA oscillations is unclear, it has been proposed that they are due to chaotic behavior of non-linear dynamo equations, or stochastic instabilities forcing the solar dynamo, leading to on-off intermittency, or planetary gravitational forcing with recurrent multi-decadal, multi-centennial and longer patterns. It should be noted that all proponents of planetary forcing have forecasted a solar Grand Minimum for the upcoming decades, but one of them has also forecasted a Super Minimum for the next centuries. In addition, during recent decades, statistical forecasts (with physically based spectral information of reconstructed records) of solar magnetic activity predict a clear decrease in SA, reaching a minimum around AD2100.
These different cosmogenic radionuclide-based reconstructions of SA present variations for the past millennia, and large uncertainties appear in reconstructions of the solar modulation of galactic cosmic rays from different proxies, 10 Be and 14 C, and of changes in the geomagnetic shielding influence. However, these reconstructed records provide, especially when considered all together, the most objective information as elements for detecting and eventually modeling and extrapolating multi-millennial-scale solar oscillations, trends and absolute levels.
The Discussion summarizes the findings and puts them into context:
Our analysis establishes the following:
Our experimental multi-millennial-scale analogue forecast of TSI, supported mainly by recurrent oscillations over the last glacial–interglacial cycle, shows a lowering trend toward a minimum for the coming decades. Our forecast also confirms previous efforts by several authors who have forecasted a solar Grand Minimum for the upcoming decades. Although the complete physical basis of this recurrent process is missing, there are several examples of physical and theoretical evidence that also support our findings.
- Solar System dynamics generate lateral forces with multi-millennial scale (~9500 years) oscillations similar to those shown by solar activity.
- There is a suggested lagged response of around 67 centuries,of solar activity to the gravitational forcing (lateral force). The maximum forces F precede the maximum solar activity TSI, meaning that increases (decreases) of force F produce lagged increases (decreases) of TSI.
- Taking into account that the Sun’s rotation axis is tilted by about 7.25_from the axis of the Earth’s orbit, the PGF are able to generate meridional forces and consequently meridional circulations in the Sun.
- The lagged response appears to increase with forcing periods with a non-linear logarithmic function that implies temporal-scale influences and possible connections with meridional circulations in different deep layers of the Sun;
- The similarity of the ~9500-year TSI with the average SSN 10.5-year cycle, with scales differing at almost 3 orders of magnitude, suggests a self-similar process with a mechanism possibly linked to recurrent PGF in different scales.
In this work, we have forecasted a continuation of the solar decline for the next decades, which is supported through precursory signals during recent decades:
Also, in this work, we have forecasted a Grand solar minimum, with sustained low solar activity for the next 2 centuries, which has been supported through a number of recent studies and their findings:
- A steady and systematic decline in solar polar magnetic fields, starting from around 1995, which is well correlated with changes in meridional-flow speeds..
- A decline in solar wind micro-turbulence levels. Based on extensive interplanetary scintillation (IPS) observations at 327 MHz, obtained between 1983 and 2009, a steady and significant drop in the turbulence levels in the entire inner heliosphere, starting from1995, was detected.
- A significant reduced ionospheric cut-off frequency to radio waves, normally about 30 MHz, to well below 10MHz.
From the Conclusions:
- The continuation of this decline in solar activity is estimated to continue until at least 2020, and there is a good possibility of the onset of a Grand solar minimum from solar-cycle 26 onwards (2031).
- Based on the S04 SA record, it has been shown that gradual (abrupt) changes in solar surface meridional flow velocity lead to a gradual (abrupt) onset of grand minima, and that one or two solar cycles before the onset of grand minima, the cycle period tends to become longer. It is noteworthy that surface meridional flows over Cycle 23 have shown gradual variations, and Cycle 24 started 1.3 years later than expected.
The tested existence of the ~9.5 kyr period recurrent pattern suggests that SA is characterized by solar dynamics with long-term patterns. Considering that it has been suggested that the modulating oscillations of SA, around 84, 178 and 2400 years, are possibly related to the Sun’s rotation rate and impulses of the torque in the Sun’s irregular motion, our results also suggest that similar mechanisms on the solar dynamo must be proposed for solar oscillations of around 9.5 kyrs.
With all of these recurrent and persistent phenomena, we have presented, tested and verified an experimental multi-millennial forecast technique for SA. We have provided elements and recent supporting studies on precursor signals of an entering into a Grand minimum SA mode. The extreme duration of the last solar minimum is important evidence of longer cycles, similar to those presented before the start of the Maunder and Spörer minima.
We can conclude that the evidence provided is sufficient to justify a complete updating and reviewing of present climate models to better consider these detected natural recurrences and lags in solar processes.
Excerpts from Reviewer #2
One of the reviewers [link] made some good comments about the general significance of the paper:
It addresses an ongoing discussion in the scientific community regarding the current declining solar activity and whether solar activity will die down in the near future to the level and duration, to justify it as being called a “Grand-Minimum.” This paper on the other hand takes and entirely different line of thought in that it looks for long term signatures in solar activity, and identifies, based on empirical modelling of solar activity, a 9500 year solar activity cycle which suggests “Grand Minima” like conditions for the period 2050-2250.
In conclusion, I agree entirely with the author that looking for short term signatures or time scales of practical consequences i.e. in years is in essence “missing the forest for the trees”. One needs to look at long term signatures and this study by the authors has yielded the first multi-millennial scale solar activity oscillation which is modulated, as the author suggests, by solar dynamics, essentially the solar dynamo and helio-seismology, with long term patterns. This is a significant step forward in gaining an overall perspective of the sun climate system and I hope the solar community can now take this forward.
This is a remarkable paper in many ways. This paper has a single author — Jorge Sanchez-Sesma, who is a climatologist (not a solar physicist). I have been in contact with Jorge and will be posting an interview with him in several weeks. He has a remarkable story to tell.
This paper indicates that the case is increasingly compelling for millennial-scale variations in solar activity. The arguments for a forthcoming Grand Solar Minimum are also increasingly compelling.
To what extent a Grand Solar Minimum will influence the Earth’s climate remains uncertain. As discussed on a previous blog post IPCC: solar variations don’t matter, the IPCC AR5 Ch 8 stated:
Nevertheless, even if there is such decrease in the solar activity, there is a high confidence that the TSI RF variations will be much smaller in magnitude than the projected increased forcing due to GHG.
The previous post also describes different perspectives on this from Svensmark and a 2013 NRC report (see also Effects of solar variability on climate; 21st century solar cooling.)
Solar indirect effects on climate remain at the knowledge frontier, and are associated with substantial uncertainty and ignorance. This uncertainty and ignorance is not a rationale for ignoring solar effects on the 21st century climate (and 22nd, 23rd centuries). And anyways, is the solar uncertainty (we understand the sign) really so much more greater than that associated with the effects of clouds on climate (see my recent post The cloud climate conundrum), where even the sign of the feedback is uncertain and the magnitude of cloud forcing swamps greenhouse gas radiative forcings.
But we are starting to see some ideas emerge as to how these solar effects and processes could be included in climate models. Independently of climate models, the statistical forecast technique used by Sanchez-Sesma provides the basis for creating alternative scenarios of the 21st century climate. I find his arguments about lags to be particularly important as we sort out the solar-climate effects.
Tackling the variability of solar activity and solar indirect effects seems more tractable than the cloud-climate problem and untangling the myriad of scales of ocean oscillations, so I would hope to see much more emphasis put on unraveling the solar-climate connections.
The policy significance of this issue is clear: if we are headed to a mid-20th century solar minimum, or a Grand Solar Minimum for the next two centuries, this will offset greenhouse warming to some extent. The extent of the offset depends on whether climate sensitivity to CO2 is on the larger or smaller end of the range of estimates, and the magnitude of the solar impact. But the sign of the solar offset is becoming increasingly clear: towards cooling."
100 Nobel Laureates Demand that Greenpeace Stops Killing Poor Children The scientists denounce Greenpeace's opposition to modern crop biotechnology as a "crime against humanity"
By Ronald Bailey, a science correspondent at Reason magazine and author of The End of Doom (July 2015).
"An open letter today signed by 100 Nobel Prize Laureates calls upon the anti-technology activist group "Greenpeace to cease and desist in its campaign against Golden Rice specifically, and crops and foods improved through biotechnology in general." The laureates point out that "scientific and regulatory agencies around the world have repeatedly and consistently found crops and foods improved through biotechnology to be as safe as, if not safer than those derived from any other method of production. There has never been a single confirmed case of a negative health outcome for humans or animals from their consumption. Their environmental impacts have been shown repeatedly to be less damaging to the environment, and a boon to global biodiversity."
The laureates specifically demand that Greenpeace stop its attacks on Golden Rice which has been genetically enhanced to produce a vitamin A precursor as a way to prevent millions of deaths and cases of blindness annually in poor countries where the grain is the chief food staple. Vitamin A deficiency causes blindness in between 250,000 and 500,000 children each year, half of whom die within 12 months, according to the World Health Organization. A study by German researchers in 2014 estimated that activist opposition to the deployment of Golden Rice has resulted in the loss of 1.4 million life-years in just India alone.
Among the signatories are David Baltimore, Paul Berg, Elizabeth Blackburn, Steven Chu, Daniel Kahneman, and Harold Varmus.
The laureates' letter states:WE CALL UPON GREENPEACE to cease and desist in its campaign against Golden Rice specifically, and crops and foods improved through biotechnology in general;
WE CALL UPON GOVERNMENTS OF THE WORLD to reject Greenpeace's campaign against Golden Rice specifically, and crops and foods improved through biotechnology in general; and to do everything in their power to oppose Greenpeace's actions and accelerate the access of farmers to all the tools of modern biology, especially seeds improved through biotechnology. Opposition based on emotion and dogma contradicted by data must be stopped.How many poor people in the world must die before we consider this a "crime against humanity"?Actually, Greenpeace and other anti-biotech activists such as Naomi Klein and Vandana Shiva have long surpassed that threshold."
Wednesday, June 29, 2016
By Donald J. Boudreaux, writing for Mercatus.
"One of history's most profound discoveries is that complex, beautiful and immensely useful arrangements often emerge without anyone designing them.Charles Darwin, of course, famously explained how complex life forms emerge over many generations through trial and error. Each of these life forms is well suited to survive in its environment. Yet no one designed these life forms.Indeed, the complexity of the natural world is so impressive that many people of faith resist Darwin's theory. They find it difficult to believe that the amazing and magnificent order of the natural world could be the result of anything but the conscious design of a creator.I don't wish to debate theology or biology. Instead, I want to discuss another complex, beautiful and immensely useful arrangement: the modern economy.No one designed, or could possibly have designed, this economy. It's true that governments enforce many of the rules that put boundaries on economic activities. But the complexity, size and flexibility of the global market are too vast for it to have been designed by any human mind or any congress of human minds.Pick up an ordinary pencil. What you hold is the result of the ideas and efforts of literally hundreds of millions of people. The seemingly simple pencil in your hand exists only because some people know how to explore for iron ore while other people know how to transform that ore into steel. Still other people know how to mold that steel into blades for chain saws — chain saws whose motors are built by different people. And then other people use those chain saws to fell trees.Another few people pilot the boats and drive the trucks to transport the logs to the lumber factory. The sheets of lumber are then somehow made into pencil shafts. Each of these pencil shafts encases a cylinder of “lead” (a mixture of graphite and clay) that enables pencils to do their jobs. Yet producing the “lead” itself demands the efforts of countless other workers — as does the pencil's eraser, as does the aluminum ferrule that keeps the eraser attached to the pencil.The pencil you hold is the result of the knowledge and efforts of literally hundreds of millions of people, nearly all of whom are strangers to you. Even more remarkable is the fact that only a tiny fraction of the people whose efforts were necessary to put that pencil into your hand had any idea that their efforts would help to produce pencils.No one designed the economic processes that result in pencils. No one could possibly do so. Yet these processes obviously exist. They exist because they emerged, unplanned, over the years from economic competition guided by market prices.Long before Darwin explained how order emerges unplanned in the natural world, Adam Smith — a Scottish moral philosopher whose work gave birth to the science of economics — explained how individuals in a society with private property but without any guidance from government act in ways that unintentionally create an economy that is stupendously productive."
From Keith Hennessey, a Lecturer at Stanford University's Graduate School of Business.
"In Pennsylvania today Donald Trump said, “When subsidized foreign steel is dumped into our markets, threatening our factories, the politicians do nothing.”
This is false. President Bush imposed tariffs on imported steel in 2002. A month ago the Obama Administration imposed duties on Chinese steel of more than 200 percent and up to 92 percent on steel imported from South Korea, Italy, India, and Taiwan.
Steel is an intermediate good. When you raise protectionist barriers against imported steel as Mr. Trump threatens, you temporarily help U.S. steelworkers. You also raise input prices for American firms that use steel to build bridges and buildings and make cars, and trucks, trains and train tracks, appliances, ships, farm equipment, drilling rigs and power plants, and tools and packaging. Higher input costs hurt American workers in those factories and on those construction sites.
Mr. Trump should ask the workers who make dishwashers at Whirlpool’s plant in Findlay, Ohio whether they’re in favor of more expensive steel. Or he can ask the John Deere workers who use steel at their factories in Iowa, Kansas, Louisiana, North Carolina, North Dakota, Tennessee, and Wisconsin. Or the auto workers at almost any U.S. car and truck assembly line. Raising prices for imported steel hurts all of these American workers.
Yes, the Chinese are selling steel in the U.S. at a low price, called “dumping.” Yes, this hurts the owners and employees of U.S. steel manufacturers. It also helps many other American workers and even more American consumers. And the Obama Administration is using the tools in current law to respond to the Chinese actions.
Trump: “A Trump Administration will also ensure that that we start using American steel for American infrastructure. … We are going to put American-produced steel back into the backbone of our country. This alone will create massive numbers of jobs.”
No, it won’t, and the downside is it would cost taxpayers more. Put another way, any given amount of tax dollars will build less infrastructure. We’ll repair fewer bridges but, by golly, the fixed ones will have ‘MERICAN steel. I’d rather get the best value for every tax dollar we spend on infrastructure, thus ensuring we fix as many bridges as possible.
Mr. Trump’s lines may sound good in steel country, but his policies would harm other American workers, drivers, and taxpayers. On the whole Donald Trump’s steel policy would be bad for America."
By Virginia Postrel, a Bloomberg View columnist. Excerpts:
"Sold to the public in 2008 as a visionary plan to whisk riders along at 220 miles an hour, making the trip from San Francisco to Los Angeles in a little over two and a half hours, the project promised to attract most of the necessary billions from private investors, to operate without ongoing subsidies and to charge fares low enough to make it competitive with cheap flights. With those assurances, 53.7 percent of voters said yes to a $9.95 billion bond referendum to get the project started. But the assurances were at best wishful thinking, at worst an elaborate con.
The total construction cost estimate has now more than doubled to $68 billion from the original $33 billion, despite trims in the routes planned. The first, easiest-to-build, segment of the system -- the “train to nowhere” through a relatively empty stretch of the Central Valley -- is running at least four years behind schedule and still hasn’t acquired all the needed land. Predicted ticket prices to travel from LA to the Bay have shot from $50 to more than $80. State funding is running short. Last month’s cap-and-trade auction for greenhouse gases, expected to provide $150 million for the train, yielded a mere $2.5 million. And no investors are lining up to fill the $43 billion construction-budget gap.
Now, courtesy of Los Angeles Times reporter Ralph Vartabedian, comes yet another damning revelation: When the Spanish construction company Ferrovial submitted its winning bid for a 22-mile segment, the proposal included a clear and inconvenient warning: “More than likely, the California high speed rail will require large government subsidies for years to come.” Ferrovial reviewed 111 similar systems around the world and found only three that cover their operating costs.
This research should surprise no one who pays attention. Even advocates acknowledge that almost all high-speed rail systems need ongoing subsidies."
"The high-speed rail project is a classic example of how concentrated benefits and diffused costs shape public policy, even when the general public has a direct say. Back in 2008, the bond referendum faced no organized opposition. Voters might have preferred that the money go to schools, parks, roads, social services or even local trains, but those alternatives weren’t on the ballot. It was an up-down vote on whether to let a tiny bit of tax money per person go to fund a really cool train -- and all the companies that would work on building it. Voters looked at the streamlined concept images and thought, Wouldn’t that be great? Whoosh!
But a closer look even back then would have made it clear that, barring a miracle, the rail project wouldn’t keep its promises. To do so, it would have to be the fastest, most popular bullet train in the world, with many more riders per mile and a much greater percentage of seats occupied than the French and Japanese systems -- a highly unlikely prospect. Yet only the most determined wonk would have discovered these comparisons.
Some of those who knew better still succumbed to the glamour of the idea. “There's something undeniably alluring about a bullet train -- the technology is so powerful, the speed so breathtaking, it makes quotidian trips seem exotic,” opined the Times's editorial board in October 2008. Admitting that “it seems close to a lead-pipe cinch that the California High-Speed Rail Authority will ask for many billions more in the coming decades, and the Legislature will have to scrape up many millions of dollars in operating subsidies,” it nonetheless concluded that “we still think voters should give in to the measure's gleaming promise.” Give in they did.
Eight years later, the legislature is getting antsy. Last month, the state assembly unanimously passed a bill requiring that the authority provide clearer statements of route changes and projected expenses, including borrowing costs. The state senate will hold a hearing on the bill Tuesday."
Tuesday, June 28, 2016
This was my response to an article by columnist Catherine Rampell. It was printed in the San Antonio Express-News. Click here to read it. Or read it below.
Catherine Rampell says the assessment of our economy having the worst recovery after a deep recession since World War II is highly misleading ("Economic recovery better than you think," June 14). But her column itself may also be misleading.
She does acknowledge the slow growth rates in real GDP since the recession ended. Obama may be the first president not to have at least one year with a real GDP increase of at least 3%.
But in one sense, even though the GDP has grown (however slowly), the economy has not recovered. Right now, only 77.8% of 25-54 year olds have a job, still below the 79.7% in December of 2007, when the recession started.
If we give Rampell the benefit of the doubt, and agree that there has been some recovery, we can focus on why she says it has been so slow. It is because the recession was caused by a financial crisis and such recessions usually result in recoveries with less growth than other recessions.
She gets that from a paper by two respected economists, Carmen M. Reinhart and Kenneth S. Rogoff. They "examined the aftermath of 100 financial crises spanning the past century-and-a-half."
But other economists have looked at this issue and are at least somewhat skeptical that recoveries after financially caused recessions are different from others. Christina and David Romer wrote a paper on this in 2015.
They said, of financially caused recessions, "we find that output declines following financial crises in modern advanced countries are highly variable, on average only moderate, and often temporary."
Christina Romer was Obama’s first chief economic advisor and is now back teaching at the University of California (Berkeley). She is also an acknowledged expert on the Great Depression. David, her husband, is a recognized expert on economic growth.
Ms. Rampell has probably heard of them yet she failed to mention their research on this subject. And the Romers are not the only skeptics of this thesis.
Michael Bordo (of Rutgers University) and Joseph Haubrich (of the Federal Reserve) wrote a paper last year on the topic and concluded that "recessions associated with financial crises are generally followed by rapid recoveries." Again, this is not mentioned by Rampell.
If it was not the financial crisis, then what might make our current recovery so weak? It could be a result of economic historian Robert Higgs' concept of "regime uncertainty," the idea that with so many new regulations being enacted, businesses may be afraid to invest, not knowing what initiatives they will be allowed to continue with in the future or what their profit rate might be.
Back in 2011, Scott Baker and Nicholas Bloom at Stanford University and Steven Davis at the University of Chicago analyzed "regime uncertainty" and found it to be a valid thesis. They created an index to quantify uncertainty and concluded "When businesses are uncertain about taxes, health-care costs and regulatory initiatives, they adopt a cautious stance."
If business becomes cautious, that means less investment spending. Which, in turn, can reduce the growth of GDP.
None of this conclusively proves that Rampell is wrong. Showing cause and effect in economics is difficult since there are so many uncontrolled variables and each recession can have its own peculiarities.
But I think that Rampell was wrong to base her opinion only on the research of two economists (Reinhart & Rogoff), even though they are well respected. We need to be open to other valid causes of the slow recovery.
Monday, June 27, 2016
See Rector, Poverty, and Immigration by Bryan Caplan of EconLog.
"Robert Rector has done excellent and courageous work on American poverty. His chief observations:
1. The vast majority of America's "poor" are rich by world and historic standards. 82% of poor American adults say they were never hungry during the last year because they couldn't afford food; 96% of poor American parents say their children never went hungry because they couldn't afford food. Half of poor Americans live in a single-family home, and 41% own their own home. Poor Americans have 60% more living space than the average European. 82% of poor Americans have air conditioning. 64% have cable or satellite t.v. 40% own a dishwasher. 34% have a t.v. that would have made billionaires drool in 1990. Materially speaking, poor Americans are doing just fine.
2. Most poor American adults could have avoided their situation with prudent behavior - especially by delaying childbearing until they marry. 71% of poor families with children are headed by single parents. About 80% of all long-term poverty occurs in single-parent homes. Married high school dropouts have lower poverty rates than single parents with one or two years of college. Most unmarried fathers earn enough to keep their kids out of poverty:
[O]ver 60 percent of fathers who have children outside of marriage earned enough at the time of their child's birth to support their potential family with an income above the poverty level even if the mother did not work at all. If the unmarried father and mother married and the mother worked part-time, the typical family would have an income above 150 percent of poverty, or roughly $35,000 per year.If you combine Rector's evidence with common-sense moral beliefs about the deserving poor, it's hard to avoid the conclusion that few "poor" Americans qualify. The moral admonition to "help the deserving poor" asks us come to the aid of people who are (a) genuinely destitute, even though (b) they took reasonable measures to avoid destitution. Rector shows that few Americans qualify on either count. Most "poor" Americans enjoy a long list of luxuries - and most would be even richer if they (or their parents) chose to delay childbearing until after marriage using cheap, effective contraception."
Farm subsidies can have unintended effects, small farmers get little benefit and subsidies actually harm some farmers and consumers
See The Evolving Role of the USDA in the Food and Agricultural Economy by Jayson L. Lusk, a professor of Agricultural Economics at Oklahoma State University. This was written for Mercatus.
"Since its inception more than a century and a half ago, the US Department of Agriculture (USDA) has experienced enormous growth in both size and complexity—as has the industry it seeks to serve. Today the USDA is among the largest federal employers and its 2014 budget exceeded $160 billion. Its spectrum of activities span from the protection of rural farm interests to urban food assistance.Consequently, the department is the target of a wide range of interest groups besides farmers, including food assistance advocates and advocacy groups interested in issues such as obesity, animal welfare, food safety, the environment, and more. The disparate agendas of these groups make it difficult for Congress to assemble a unified policy package each time USDA’s programs are due for reauthorization. The latest reauthorization, the Agricultural Act of 2014, was signed into law two years late in February 2015.In a new study for the Mercatus Center at George Mason University, economist Jayson L. Lusk documents the changes in American agriculture since the USDA’s inception and the expansion of the department’s mission. Much of the USDA’s regulation is outdated, wasteful, and conflicting.CHANGING INDUSTRY, CHANGING DEPARTMENTAmerican Farming Has Changed Drastically since 1862
- In 1900, 40 percent of Americans worked on farms. Today, a mere 1 percent do.
- Despite massive growth in output, agriculture accounts for less than 1 percent of US GDP today.
- Whereas farm households previously earned less than the average US household, today they earn over $20,000 more than the average household and have nearly triple the average household’s net worth.
- Farm households today are more financially diversified than in the past and depend on agriculture for less than a quarter of their income.The USDA’s Responsibilities Have Also Changed Drastically since 1862
- When the USDA was established in 1862, its stated mission was to collect foreign seeds and distribute them to farmers.
- In 1906, Congress passed laws requiring the inspection of meat, poultry, and eggs, and the USDA was tasked with enforcing food safety.
- During the Great Depression, the USDA mandated price floors and bought surplus crops. This unintentionally encouraged overproduction, lowering food prices, and the USDA quickly exhausted its $500 million budget.
- As part of the New Deal, farmers were given subsidies for not planting crops.
- Under Lyndon B. Johnson’s administration, the USDA began to oversee food stamp and commodity distribution programs, and a large increase in spending ensued.The USDA’s Outdated Farm Policies Continue to Affect ProductionIn the United States fewer, larger farms now produce more with less labor than in the past, and farmers are in better financial standing relative to other workers, but USDA farm policy continues to subsidize farmers—often via programs tied to Depression-era polices. For example, it was only in 2015 that the Supreme Court struck down an order from the 1940s regarding raisin marketing, which Justice Elena Kagan described as “the world’s most outdated law.”THE USDA TODAYMuch of current USDA spending goes toward farm subsidies and food assistance programs such as the Supplemental Nutrition Assistance Program (SNAP).Farm subsidies can have unintended effects:
- Offering an agricultural subsidy creates an incentive to produce more. In the case of farming, much of the benefit from subsidies is captured by landowners or holders of seed patents rather than by small farmers. The overall result is an inefficient use of resources.
- Research suggests that subsidies actually harm some farmers and consumers. By encouraging the production of commodity crops, subsidies reduce fruit and vegetable production, leading to higher prices for consumers.Early food assistance programs were designed to alleviate farm surpluses, but there is little evidence that child nutrition, school lunch, or food stamp programs actually increase farm prices:
- It is estimated that for every dollar spent on SNAP, farmers benefit by less than one cent.
- However, research suggests that SNAP spending does reduce food insecurity.ECONOMIC CONSIDERATIONSMuch of the USDA’s activity is justified by the claim that it corrects market failures and ensures that markets remain competitive and do not create unnecessary costs. In fact, most USDA activities have little to do with addressing “unfair” competition. In cases where unfair competition does exist, there are already a variety of federal laws under which victims can sue for redress.
- USDA farm policies sometimes reduce competition in the market. A number of USDA actions, such as marketing orders (regulations), actually seek to promote market power and reduce competition. Some marketing orders allow commodity organizations (essentially trade associations) to control supply, which raises prices and harms consumers. Also, agricultural cooperatives are exempt from antitrust law, even though they coordinate business activities in a way that can reduce competition.
- As public choice theory predicts, farm policy is influenced by political interests. The costs of agricultural subsidies are diffused and go unnoticed by taxpayers, but the payouts are concentrated on a smaller, better-organized group of farmers who can lobby for redistributive policies. Research has found that legislators who receive donations from pro-farm groups tend to vote in favor of such redistributive policies.CONCLUSIONThe size, budget, and responsibilities of the USDA have grown tremendously since its inception. The department today takes on an array of varied and often conflicting tasks. Research suggests that much of the agricultural regulatory apparatus has become outdated as the industry has evolved radically over time. This situation presents opportunities to reform the USDA in order to meet today’s challenges."
Sunday, June 26, 2016
By James Pethokoukis of AEI.
"One reason, some free-marketeers have argued, that Britain needed to vote to leave the EU was to escape big government Brussels. If Brexit, then no longer would Britain be “a serf-nation under the European yoke, [it] gains control of its economy and sweeps away the burdens of regulation and tax.”
But then I bounced over to the Index of Economic Freedom to see what it had to say about the UK. Not only did it rank #10, just ahead of the US, but also there’s this glowing report:
Economic freedom has been on an upward path in the United Kingdom over the past five years. … Disciplined fiscal adjustments have helped to restore economic dynamism, steadily reducing the budget deficit. The corporate tax has been cut from 28 percent to 20 percent. … With an effectively institutionalized legal system that enforces the rule of law and guarantees security of contracts, the U.K. is able to benefit fully from open-market policies and a relatively efficient regulatory environment. The labor market is well developed and vibrant. …I see. So, not Hong Kong on the Thames, but also not so bad. The Leave campaign also promised — perhaps now revoked — to spent the money now sent to Brussels on the National Health Service. Hmm."
Since 2010, the U.K. has experienced the strongest growth in the G20 thanks to the performance of its three main economic sectors: services, manufacturing, and construction. Unemployment is at a six-year low, and retail sales are robust. … Corruption is not a major problem, although a few high-profile scandals have damaged political reputations in both major parties. The 2011 Bribery Act is considered one of the world’s most sweeping anti-bribery laws. The rule of law is well established within an independent legal framework. Private property rights and contracts are very secure, and the court system is efficient. Protection of intellectual property rights is effective. … The efficient and transparent regulatory framework encourages entrepreneurship. With no minimum capital required, it takes less than a week to establish a business. The labor market is relatively flexible. … EU members have a 1 percent average tariff rate. Trade agreements are currently being negotiated with countries that include the United States and Japan. The United Kingdom generally treats foreign and domestic investors equally under the law. The overall stability of the financial system has been restored. The banking sector is highly competitive and offers a wide range of financial services.
See On the Alesina Hypothesis by Greg Mankiw. He responded to something Krugman said about an article that Mankiw wrote in the NY Times last Sunday. First an excerpt from that article. Then the more recent post from Mankiw.
"When Barack Obama took office in 2009, the economy was in the midst of the Great Recession. President Obama’s advisers relied on standard Keynesian theory when they proposed a large increase in government spending to energize the economy. The stimulus package was the administration’s first economic policy initiative. As the economy recovered, the administration supported tax increases to shrink the budget deficit.
But even at the time, there were reasons to doubt this approach. A 2002 study of United States fiscal policy by the economists Olivier Blanchard and Roberto Perotti found that “both increases in taxes and increases in government spending have a strong negative effect on private investment spending.” They noted that this finding is “difficult to reconcile with Keynesian theory.”
Consistent with this, a more recent study of international data by the economists Alberto Alesina and Silvia Ardagna found that “fiscal stimuli based on tax cuts are more likely to increase growth than those based on spending increases.”"Now the newer post:
"In my recent NY Times article, I explored several hypotheses to explain slow growth. One was based on work by Alberto Alesina and Silvia Ardagna suggesting that the standard Keynesian view of tax and spending multipliers is inconsistent with the international evidence.
Paul Krugman says the Alesina-Ardagna work has been "refuted." Nothing could be further from the truth. See this recent paper by Alesina, Favero, and Giovazzi on fiscal consolidations, which reports evidence consistent with the earlier work and is forthcoming in the peer-reviewed Journal of International Economics. (By the way, this work is also consistent with the Romers' finding of large tax multipliers, much larger than the literature finds for spending multipliers.)
To be sure, these issues continue to be debated. Remember: My piece was presenting hypotheses about what has been happening in the economy, not taking a stand about which one is right. From my perspective, the Alesina work suggests a still plausible hypothesis."
From Mark Perry.
"There has been a lot of media and pundit commentary about Brexit, here’s a roundup of some comments that I think are especially interesting and illuminating:
1. John Bolton writing in the Boston Globe, “Brexit Victory Is a True Populist Revolt” (emphasis mine):
During 43 years of British EU membership, UK citizens came increasingly to believe they were losing control over those governing them. Decisions were made in an utterly opaque EU bureaucracy, with British interests routinely overwhelmed by those of other EU members, especially Germany. Nonpartisan analyses concluded that approximately 60 percent of all legislation enacted by Britain’s Parliament was dictated, in whole or in part, by decisions already breached by Brussels bureaucrats or EU diplomats.2. Megan McArdle writing in Bloomberg “‘Citizens of the World’? Nice Thought, But …“:
The outcome was a true populist revolt. Only a few members of the elite supported Brexit, but the middle class was overwhelmingly in favor. The dispositive margin of victory, however, came not from the ranks of “the nation of shopkeepers,” but from blue collar, trade union members.
Immediately, the United States should do everything we can, politically and economically, to come to the side of our strongest ally in the world. Contrary to President Obama’s threat during his recent visit to London, Washington should put a bilateral US-UK free trade agreement at the very front of our diplomatic agenda. But most of all, we should welcome Britain’s departure from the EU. Happy Independence Day!
The inability of those elites to grapple with the rich world’s populist moment was in full display on social media last night. Journalists and academics seemed to feel that they had not made it sufficiently clear that people who oppose open borders are a bunch of racist rubes who couldn’t count to 20 with their shoes on, and hence will believe any daft thing they’re told.3. Matt Ridley writing in the Wall Street Journal, “The Business Case for Brexit“:
Or perhaps they were just unable to grasp that nationalism and place still matter, and that elites forget this at their peril. A lot people do not view their country the way some elites do: as though the nation were something like a rental apartment — a nice place to live, but if there are problems, or you just fancy a change, you’ll happily swap it for a new one.
In many ways, members of the global professional class have started to identify more with each other than they have with the fellow residents of their own countries. Witness the emotional meltdown many American journalists have been having over Brexit. Well, here’s one journalist who is not having a meltdown.
The EU is also against free trade. It says it isn’t, but its actions speak louder. The EU has an external tariff that deters African farmers from exporting their produce to us, helping to perpetuate poverty there, while raising prices in Europe. The EU confiscated Britain’s right to sign trade agreements—though we were the nation that pioneered the idea of unilateral free trade in the 1840s. All the trade agreements that the EU has signed are smaller, as measured by the trading partners’ GDP, than the agreements made by Chile, Singapore or Switzerland. Those the EU has signed usually exclude services, Britain’s strongest sector, and are more about regulations to suit big companies than the dismantling of barriers.4. Brian Wesbury writing for First Trust Portfolios “Brexit is Freedom“:
Even worse than in Westminster or Washington, the corridors of Brussels are crawling with lobbyists for big companies, big banks and big environmental pressure groups seeking rules that work as barriers to entry for smaller firms and newer ideas.
5. Tim Carney, writing in the Washington Examiner, “In the U.K.’s Tribal Battle, the Cosmopolitan Elite Tribe Just Lost“:The bottom line is that investors should ignore scare stories about what would happen if Brexit wins. Great Britain runs consistent trade deficits with the rest of Europe.Regardless of what foreign leaders say before the vote, if the British vote to leave, the rest of the EU is going to chase them to the ends of the earth. No way will they allow one of their biggest export markets to become more distant. They will beg the UK to sign a free trade deal. In addition, and this is actually great economic news, it would free the US and UK to sign a free trade deal that the EU is now holding up. Any market volatility would be short – lived and any swing to the downside would be a buying opportunity. Brexit is not a reason to sell. In fact, freedom is a good thing.
The EU moved political power further away from home. More power, more concentrated, benefited the tribes of cosmopolitan elites — whose tribal bonds were Twitter, Facebook, journalism and education.6. Michael Goodwin writing in the New York Post, “Britain’s Vote for Freedom Proves Power is with the People“:
The EU took power from the tribes that were more based on place and language and history. These latter tribes had been largely deprived of their ability to shape the world around them. The elite tribes, on the other hand, had actually seen their political capacities multiplied.
Now the elites of the continent have lost some power to change the UK, and the elites of the UK have lost some power to shape the continent. Meanwhile, the populace, by bringing power closer to home, has regained some of the power it naturally ought to have.
The world is coming full circle because now it’s the Brits who are free. It took them a while, but they finally had their own Tea Party and their own revolution. I salute them for their courage. And I raise a glass to freedom.
This is Western democracy in all its grandeur. It refreshes itself not with the blood of innocents, but with the peaceful passion of ordinary people.
That’s the beauty of Brexit, and of grand old England. The people spoke, they were heard, and the wheel of history is turning. Let’s get on with it. Raise another glass to freedom."
Saturday, June 25, 2016
By Chris Baecker at FEE. He manages fixed assets for Pioneer Energy Services and is an adjunct lecturer of economics at Northwest Vista College in San Antonio. Excerpts:
"Why threaten the American consumer with price hikes? Why not, for example, allow domestic steel-input consumers to benefit from rock-bottom prices that result from Chinese overproduction? How does it make sense to protect the American steel industry with a tariff of more than 500% if employment in, and value produced by, those input consumers is greater?
The answer also happens to explain why we’re lagging behind the rest of the world in the sugar trade: concentrated benefits (domestic industry) vs. dispersed costs (artificially inflated prices for consumers). Such beneficiaries typically have more clout with policymakers than consumers do. It’s this kind of rent-seeking that prevents us from being able to take advantage of the shortcomings of a centrally-planned (though certainly less so than a couple generations ago) economy like China’s, or the fact that some countries just flat out produce something more efficiently than we do.
Ironically enough, if Mr. Trump is so concerned with illegal immigration from our south, perhaps he should first take a look at the agricultural and dairy subsidies Uncle Sam doles out that put Mexican farmers out of business and drive them north to get a piece of our artificially- inflated industry."
"after the war, the world moved toward freer trade. In that time, our real exports of goods and services rose steadily, accelerating in the mid-1980s, belying the claim that “we don’t make” stuff.
As Harvard professor and former Chairman of the President’s Council of Economic Advisers Greg Mankiw recently pointed out in The New York Times, manufacturing is currently at an all-time high. The problem, as it were, is that we’re doing it with less manpower."
That very transformation is currently underway in the energy industry. Even after the price of oil started tanking, and rigs were idled, and jobs were being eliminated, production still increased. We became more efficient. It won’t take the same quantity of capital and labor to respond to $50 oil the next time it rises to that level. The displaced resources can be redeployed to other areas of the economy.
There are undoubtedly industry shakeups in freer markets. Labor, capital, and entrepreneurs are reshuffled. But our society encourages innovation by safeguarding intellectual and property rights. That allows us to find new and better ways of doing things."
Nevertheless, more trade liberalization is afoot. My industry has a new market: the rest of the world, thanks to the repeal of the oil export ban last December. That’ll surely alleviate something else nearly all our leaders are prone to complain about: our trade deficit.
It’s a curious thing that you rarely hear that it’s actually only half of an equation, but it is.
The balance of payments (BoP) is basically an accounting of our international transactions. The current account (trade) is the one we always hear about when it’s in deficit. Interestingly enough, it tends to trend back toward break-even only when we’re heading toward recession. It makes sense that imports rise in good times. “We’re Americans,” I tell my students, “we like to buy stuff. We like to buy stuff so much, we rent storage facilities in which to put all our extra stuff!” Regardless, there’s nothing inherently wrong with a trade deficit.
The counterbalance is the capital account. We have a big example of that in our backyard: the Toyota plant in south San Antonio. This is foreign direct investment. That plant is in the heart of truck country. It gives Toyota direct access to that market here. And, they employ highly-skilled Texans. That seems like a win-win, a sign of strength perhaps, when a foreign company wants to locate operations here.
You actually contribute to the capital account when you crack open a Bud Light after feeding Purina to Scooby, who was hungry because you forgot to feed him while you were eating a Smithfield ham steak (that had been stored in a GE freezer) for dinner before going to see “X-Men: Apocalypse” at the AMC Rivercenter 11. All those companies are foreign-owned. The profit portion of the prices paid for those goods is exported to another country. Foreign entities saw value in the brand recognition of items Americans know and love. And they were able to buy those companies in part because they do more of something that we don’t: save.
When the consumer expenditure portion of the Gross Domestic Product [GDP] started climbing in the 1980s from 60% to almost 70% today, it was arguably fueled by the concurrent proliferation of the all-purpose credit card. Perhaps it goes without saying, but when you’re spending, you’re not saving. And when you’re borrowing, you are dissaving. Much of the consumer savings derived from more efficient global production of goods could go to more savings. Instead, it seems to go toward buying more stuff.
When you think about it though, our incentive to save has slid right alongside available interest rates.
A couple years after they were pushed way up to break the inflation of the 1970s, interest rates have been on a steady march downward: ~7-8% in 1980s, ~5% in the 1990s, half that in the 2000s, and now near 0%. Monetary policy that could be enticing us to invest in learning new skills, opening a new business, guarding against unforeseen events, etc., instead has nudged us toward $1,000,000,000,000 in both credit card and automobile debt this year. What was the current trade deficit again?
If bringing down the trade deficit is the goal, increasing domestic savings and investment is preferable to erecting trade barriers. And if curbing interest-bearing consumer indebtedness happens as well, all the better."
By Kate Hardiman, writing for The College Fix. She is a student at University of Notre Dame.
"At least one professor in America does not feel the Bern.
University of Massachusetts Dartmouth Professor Jack Stauder says his political and ideological conversion away from socialism and Marxism occurred when he actually witnessed these systems in action.
After traveling to more than 110 countries to pursue various forms of research, notably cultural anthropology, Stauder described his conversion from Marxism as a process of disillusionment.
“I gradually became disenchanted with Marxism by visiting many of the countries that had tried to shape their societies to conform to its doctrines. I was disillusioned by the realities I saw in … socialist countries – the USSR, Eastern Europe, China, Cuba, etc,” Stauder told The College Fix via email.
“I came to recognize that socialism doesn’t work, and that its ‘revolutionary’ imposition inevitably leads to cruelty, injustice and the loss of freedom,” the professor continued.
“I could see the same pattern in the many failed left-wing revolutions of Latin America and elsewhere. By combining actual travel with the historical study of socialism and revolution, I succeeded in disabusing myself of the utopian notions that fatally attract people to leftist ideas.”
Re-embracing his Western farming and ranching homes of Colorado and New Mexico also helped solidify Stauder’s rejection of leftist ideals, he said.
“Returning to my roots also helped my transition away from the leftist ideology that exists in the intellectual atmosphere of university life,” Stauder noted. “By spending my summers in the Southwest in the company of rural working people, farmers and ranchers, I developed perspectives on the real world very different from those that prevail in the academic world.”
Academic institutions are breeding grounds for leftist ideals, according to Stauder, as “academics in general are intellectuals, and hence susceptible to ideologies.”
“People seem to feel the need to believe in something, and when intellectuals abandon traditional religion, as most have done, they tend to seek substitutes,” he said.
Political campus movements against the Vietnam war in the 1960s and 1970s inspired Stauder’s initial interest in leftist political ideals. For many years, he identified as a Marxist and a radical.
These protests were common and influential on the campuses where he studied and worked, notably that of Harvard College. There, Stauder began his undergraduate career studying American history and literature and eventually switched to cultural anthropology after working with a Maya community in Chiapas, Mexico. This experience inspired him to pursue a Ph.D. in anthropology at Cambridge University in England.
Stauder’s most recent research bridges anthropology and ecology and he recently published The Blue and the Green: A Cultural Ecological History of an Arizona Ranching Community.
When asked about the current bias in academia, Stauder pointed to the overwhelming amount of research confirming a leftist bias.
“Academia has developed its own culture, a subset of the wider elite culture of the ‘new upper class’ (see Charles Murray, Coming Apart). As in all cultures, pressures exist to conform one’s thoughts and actions, and those who do not conform tend to be marginalized or suppressed,” Stauder said.
Though it may be challenging, Stauder encourages professors simply to “be individuals. Seek the truth, and stand by it.”"
Friday, June 24, 2016
Election Uncertainty Takes Toll on Business: About one-third of small firms’ owners report negative impact, according to survey
By Ruth Simon of the WSJ. Excerpts:
"the uncertainty that many small-business owners say is weighing on their operations.
Roughly one-third of 715 small-business owners surveyed in June by The Wall Street Journal and Vistage Worldwide Inc. said that uncertainty related to the November presidential election is having a negative impact on their business. Firms have reported delaying hiring, putting off investments or reducing new equipment orders."
"Overall business investment has already slowed. Nonresidential fixed investment has fallen for the last two consecutive quarters, according to the Commerce Department, the first back-to-back quarterly drops since 2009.
Companies typically pull back on capital investment and hiring ahead of an election, while consumers scale back purchases of durable goods and higher-priced items, said Brandon Julio, an assistant professor of finance at the University of Oregon Lundquist College of Business. Small businesses are more likely to be skittish because they face a higher cost of capital than larger firms and often have more trouble recovering from mistakes, he said."
"Overall, small-business confidence in June fell to its lowest level since November 2012, reversing all of the gains of the previous three months, according to the WSJ-Vistage Survey."
"Some big companies are also pointing to political uncertainty as a drag on business. High-end retailers Neiman Marcus Group Inc. and Tiffany & Co. have in recent months cited the presidential election as weighing on their shoppers."
See Brexit’s Real Impact Would Be Gradual and Global: If Britain leaves the EU it will set back the economic benefits from decadeslong push for global integration by Gregg Ip of the WSJ. Excerpts:
"the economic rationale for integration. It increases the size of the market, exposes local firms to more competition and accelerates the dissemination of new ideas via foreign investment and immigration. In 2004, academic economists Scott Bradford and Robert Lawrence estimated the world would be 7% poorer if it reverted to the trade rules of the 1930s.
The British economy was declining relative to France’s and Germany’s until it joined the EU in 1973. Margaret Thatcher became prime minister in 1979 and began loosening the state’s grip on the economy. Since then, Britain’s per capita income has grown as fast, or faster, than France’s and Germany’s."
"Critics say global integration enriches elites at the expense of the average worker. This, too, is off base. More skilled workers have gained disproportionately, but every worker is also a consumer and thus benefits when international competition makes products better and cheaper. Doug Irwin, a trade historian at Dartmouth College, says if two million American workers lose $15,000 in annual income forever—an extreme estimate of the impact of trade with China—while 320 million American consumers gain just $100 from trade, the benefits to all of society still exceed the costs.
Even immigration is, on balance, probably a plus. The Center for Economic Performance at the London School of Economics finds that EU immigrants to Britain are better educated and more likely to work than UK-born nationals, and to pay more in taxes than they collect in benefits."
"Spreading production among more plants may protect a company from protectionist impulses, but it also reduces productivity and raises costs for its customers. Multiplied across many countries and companies, the effects add up. Gary Hufbauer, an economist at the Peterson Institute for International Economics, thinks the slowdown in global trade growth since 2010, which he blames in part on protectionism, has left world GDP 2.7% smaller than otherwise."
Thursday, June 23, 2016
"Is your doctor willing to sell you out for the price of a sandwich? That’s the implication a lot of people seem to have taken from a new study published by JAMA Internal Medicine. It looked at the prescribing behavior of physicians for whom pharmaceutical reps bought meals, and found that those who got even a meal worth less than $20 -- think Olive Garden or Potbelly, not Le Bernardin -- were significantly more likely to prescribe brand-name medications that had a cheaper alternative.
I’m a little less sure what to make of the study. For one thing, its design doesn’t really control for reverse causation -- the possibility that pharma reps were buying sandwiches for the folks who already prescribed their drugs more, because those folks were more interested in attending industry-sponsored events on that drug. We should also question the assumptions that the doctors who weren’t bought sandwiches are prescribing the “right” amount of these drugs, and that any deviation from this prescribing behavior represents an unjustified bias.
Let’s lay out an alternative story: The prescription drugs are superior to the older or cheaper alternatives in some significant way -- perhaps they’re more effective in certain subgroups of patients, perhaps they have a better dosing schedule, perhaps their side effects are more easily tolerated, or they have fewer nasty potential interactions with other drugs the doctors might be prescribing. Doctors, however, are busy. And like all of us, they can get stuck in a rut, tending to prescribe the same old things they’ve always written for various conditions. If a pharma rep could sit down with these doctors and inform them about the benefits of their newer brand-name drug, these physicians would write a lot more prescriptions for it.
But as we just noted, doctors are busy, so you’re unlikely to get 30 minutes of their time -- unless you buy them lunch. Or as the study itself says: “If events where industry-sponsored meals are provided affect prescribing by informing physicians about new evidence and clinical guidelines, then the receipt of sponsored meals may benefit patient care. If physicians, however, choose to attend industry events where information is provided about drugs they already prefer, then meals may have no affect on prescribing patterns. If, alternatively, meals change physicians’ prescribing practices as a result of promotional influence, either by encouraging future use or rewarding an ongoing preference for the promoted drug, this would be cause for concern.”
In other words, while the study does seem to suggest that buying a doctor a meal correlates with that doctor writing more prescriptions of your fancy drug (a result consistent with other studies), it doesn’t tell us what the mechanism of action is. “Doctors who are bought sandwiches by pharma reps then prescribe their drugs” sounds nefarious; “doctors who attend presentations on drugs are more likely to prescribe them” somewhat less so. While the easy, intuitive response is that they’re bribing doctors to write for their drugs, the frequent wrongness of easy, intuitive responses is exactly why we have a whole elaborate social science system, building theories through series of studies, rather than just checking our gut every time we want an answer to some question.
And indeed, a straight bribe actually seems the least likely explanation for this behavior. Doctors' incomes have been under a lot of pressure in recent years. But they are not under so much pressure that these folks are in desperate need of someone to buy them an inexpensive sandwich a couple of times a month. (The average cost of a meal in the study was $12-18 -- a respectable weekday lunch, no doubt, but one that most physicians can afford to pay for themselves without much trouble.) It seems implausible that a lot of cardiologists (average income almost $400,000) were thinking to themselves: “Sure, this brand-name prescription is probably completely unnecessary, but if I stop prescribing it, who will buy my next ham on rye?”
So there's the most innocuous theory: that doctors who receive meals are also receiving information that helps them do their jobs. There's the most cynical theory: bribery. Somewhere in between is the possibility that gifts create the drive for reciprocity.
By giving physicians something -- anything -- pharmaceutical sales reps trigger a deep human instinct for reciprocating. This impulse is what small-group economies run on; instead of the measured exchange of trade, foragers embed themselves in open-ended networks of favor trading. I do something for you now, and later, you do something for me (the "what" and "when" to be determined). Though this stuff is often derided as corruption or old boys’ networks when it happens in modern economies, some amount of it is essential to keep any human group running -- and it is often what restrains the more cutthroat temptations of the marketplace.
Interestingly, the "gift" that triggers this impulse doesn’t even have to be something you particularly want. In one study, for example, gifts to a charity went up substantially when the solicitation letters included a gift of postcards and envelopes, even though, judging from my own household’s behavior, I’d guess that few of these gifts were actually used. On the other hand, it does seem that the open-ended nature of the gift is important. Another study found that nonprofits' thank-you gifts to donors actually made subsequent donations go down, perhaps because it made the relationship feel like a quid pro quo. People like doing things for others. They don’t like paying $250 for a charity-themed mug.
In some sense, then, physicians might be acting out of a laudable instinct -- responding to generosity with generosity of their own. But the action itself is not socially desirable, because few of us want our medical treatment to be the currency in someone else’s favor-trading network.
The question is how you figure out whether this is what’s going on -- and then, perhaps, what to do about it. As the postcard example suggests, the gifts can be of entirely negligible value or even use, and they still trigger this deep human instinct. That’s exactly what this study seems to show: A past crackdown on expensive gifts to physicians still left us with a sizeable problem. If doctors had been primarily motivated by expensive meals as bribes, then the switch to $15 sandwiches should have driven the effectiveness of this technique to near zero. Instead they remained effective.
Physicians' ethical guidelines could outright forbid contact with pharmaceutical or medical-device representatives, but that would create more problems than it solved. Who wants to deprive physicians of information from folks who know a lot about the product? Or perhaps we could forbid them to accept gifts of even negligible value, not so much as a pen or a sandwich eaten on the lap while watching a presentation … while accepting the risk that doctors who buy their own sandwiches and Bics will also stop making the time to learn about new drugs."
See ‘We Were Just Standing There When, Boom!, These Savings from Afar Fell and Crushed Us!’
"Here’s a letter to Jared Bernstein:
Mr. Bernstein:In your blog post today, “Do economists understand economies?,” you state that “The assumption that more international trade is always a plus has led too many economists to miss problems in global macro. Most importantly, some of our trading partners suppressed their consumption, boosted their savings, and exported those savings to us such that their trade surpluses become our trade deficits. The need to offset that macro drag, in tandem with large inflows of cheap capital, led to destabilizing bubbles that were missed by most economists.”I disagree.First, no economist assumes that “more international trade is always a plus.” Instead, economists who support free trade argue that individuals and firms should be allowed to buy from, and to sell to, whomever they please without regard to political borders. More international trade is a plus only insofar as it results from people’s voluntary choices. Any amount of international trade beyond that which people voluntarily perform, with only their own money, is a minus and not a plus.Second, you write as if foreigners force their savings onto us Americans, while we then – refusing to restrict imports – watch helplessly as asset prices in the U.S. bubble as a result. There is much that is mistaken here, not least of which is the fact that there’s no credible evidence that asset bubbles in the U.S. are caused by artificially boosted foreign savings flowing onto our shores. Certainly, no inflow into the U.S. of ‘excess’ foreign savings explains the housing bubble that preceded the Great Recession. As my colleague Johanna Mollerstrom and her co-author David Laibson show in a 2010 paper, the rate of global savings during the time when U.S. housing prices were bubbling did not increase enough to cause this bubbling.* Hence, the unusually high U.S. current-account deficit of ten years ago was not caused by any glut of foreign savings being forced onto Americans.Sincerely,Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercator Center
George Mason University
Fairfax, VA 22030* David Laibson and Johanna Mollerstrom, “Capital Flows, Consumption Booms and Asset Bubbles: A Behavioral Alternative to the Savings Glut Hypothesis,” Economic Journal, Vol. 120, May 2010, pp. 354-374."
"Are you a corporate employee who wishes that your income were tied more closely to your employer’s profits?
I have good news for you: There’s an easy way to make that happen. Take 10% (or 5% or 20%) of your wages, and use them to buy corporate stock.
Are you a corporate employee who *doesn’t* wish that your income were tied more closely to your employer’s profits?
I have good news for you, too. You don’t have to buy additional stock if you don’t want to.
Hilary Clinton, however, wants to change all that. She wants to force you into a profit sharing arrangement that is, for all practical purposes, equivalent to forcibly converting part of your salary into corporate stock. If you were planning to do that anyway, this will make no difference to you. If you weren’t planning to do it anyway — if, for example, you preferred to diversify your risks by investing your wages in some other industry — then, of course, this will make you worse off.
(I trust that none of my regular readers is silly enough to respond that Clinton’s plan is much better than buying stock, because you get the profit-sharing in addition to your existing salary. But for the benefit of the occasional drive-by reader, this is not possible. Market pressures insure that your total compensation is equal to the value of what you produce for the company, and if one facet of that compensation goes up, then another must go down.)
I have the impression that Clinton supporters like to tout her credentials as a true policy wonk. But the first rule of wonkism is that before you start dictating changes in voluntary chosen arrangements, you’ve got to identify a market failure that you’re trying to alleviate. In this case, what is that market failure? As far as I’ve been able to determine, Clinton has not even attempted to address that question. This is not policy analysis; it is a declaration or contempt even for the possibility of a thoughtful analysis. Don’t we already have enough of that on the other side."
Wednesday, June 22, 2016
See Soda Tax Won't Fix Waste and Corruption in Philly by Michelle Minton of CEI.
"In a study published this week by the Competitive Enterprise Institute, we found that real world “sin taxes,” aimed at curbing consumption of sugary foods and drinks largely failed to meaningfully alter consumer behavior. Most notably, the peso per liter (or 10 percent) tax enacted in Mexico in 2014 at first seemed to reduce soda sales, but a recent survey of 8,000 households found no effect on weight. Most surprisingly, researchers found that lower income families and homes with an obese head of household were least likely to reduce consumption of soda in response to the tax. And Mexico is not unique; numerous other studies find that soda taxes, even as high as 40%, were associated with only the smallest change in weight after a year. People who switched from soda to another beverage usually substituted it with equally high-calorie products."