Nobel Prize winner James Mirrlees found that the top marginal tax rate should be only about 20 percent

See James Mirrlees RIP by David Henderson. Excerpt:

"Mirrlees started with no presumption against high marginal tax rates. Indeed, he has been an adviser to Britain’s Labour Party, which for decades imposed marginal tax rates in excess of 80 percent. But Mirrlees found that the top marginal tax rate should be only about 20 percent; and moreover, it should be about the same 20 percent for everyone. In short, Mirrlees’s work justified what is now known as a “flat tax,” more appropriately called a “flat tax rate.”

Mirrlees wrote, “I must confess that I had expected the rigourous analysis of income taxation in the utilitarian manner to provide arguments for high tax rates. It has not done so.” Indeed.

Mirrlees also proved that the marginal tax rate on the highest-income person should be zero. This is the opposite of the way most noneconomists and most politicians think: marginal tax rates are typically the highest on the highest-income people. Mirrlees’s reasoning is as follows. Imagine that the top tax rate is, say, 40 percent and that the top-earning person makes $500 million in a year before tax. If the government reduced the marginal tax rate to zero for all income over $500 million, it would not lose any revenue because no one was earning more than $500 million. But the individual currently earning $500 million might, because of the increased incentive to earn, decide to work more. He would be better off because he voluntarily chose to do something he did not do before, and the government would be no worse off. The net result is that society, which includes this individual, would be better off."

How Special Interests Hide the True Costs of Tariffs

Our system is designed to make it almost impossible to consider the domestic collateral damage of trade sanctions.

By Veronique de Rugy of Mercatus.

Excerpts:

"However, while it has the data, the Department of Commerce is not required by law to consider the impact on the industries in the cross hairs of a tariff in its recommendation to impose the penalty — even though the impact can be brutal.

For example, for the projected impact of the steel tariffs, numbers produced by the Commerce Department show that they may increase employment in the metals industry by 14,000 jobs. But the report also says that a significantly larger number of jobs will be destroyed, as a result of these tariffs, in industries downstream from metal production.

One of the dozens of such industries is construction, where 16,000 jobs alone are projected to disappear. This explains why over 20,000 heartbreaking requests for exemption from the steel tariffs have already been filed by American firms, all begging their own government to stop hurting them.

Under the current system, if Commerce Secretary Wilbur Ross decides to protect his friends and business interests in the steel industry, he can ignore the damage that his own data show the tariffs will inflict on some of the 6.5 million workers in America’s steel-consuming industries. His sole lawful obligation is to demonstrate that the economic fortunes of the 140,000 steel employees will be promoted by the tariffs. (The same story — available data on negative downstream effects ignored by the administration — applies to the tariffs on Chinese goods.)

Even worse is the legislatively required bias that the United States International Trade Commission must exercise against American consumers of imports when deciding whether or not to impose duties on foreign producers accused of selling their goods for less than they should or selling unduly subsidized products. These trade remedies are called antidumping, and countervailing duties and deciding whether or not to impose them is a core function of the I.T.C. As my colleague Christine McDaniel, a trade economist and former adviser to the I.T.C. chairman, and I exposed in a recent paper published by the Mercatus Center, when I.T.C. commissioners make their determinations in such cases, they’re actually forbidden by statute from considering the impact of these so-called trade remedies on downstream industries — those consumers of goods and services hit by the tariffs.

To understand just how lopsided the process is, look at the tariffs imposed by the Commerce Department in March on Canadian newsprint paper. An American company, North Pacific Paper Company, complained to the Commerce Department that Canadian manufacturers were harming their business by selling newsprint at noncompetitively low prices. The reality is that the general shift to digital platforms is the main cause of declining demand for newsprint. 

That case in now before the I.T.C. (which will render its decision today). Unfortunately, in making their decision about whether to uphold the tariffs to protect the 34 employees of North Pacific Paper, the commissioners are not allowed to consider the damage that this domestic trade remedy would wreak on the 600,000 people employed throughout the American publishing industry. The law forbids it."

New Report Shows US, Not Countries Promoting Climate Change Activism, Reducing Emissions the Most

By Stephen Moore. He is a distinguished visiting fellow for the Project for Economic Growth at The Heritage Foundation.

"Take a wild guess what country is reducing its greenhouse gas emissions the most? Canada? Britain? France? India? Germany? Japan? No, no, no, no, no, and no.

The answer to that question is the United States of America. Wow! How can that be? This must be a misprint. Fake news. America never signed the Kyoto Protocol some two decades ago. We never enacted a carbon tax. We don’t have a cap-and-trade carbon emission program. That environmental villain Donald Trump pulled America out of the Paris climate accord that was signed by almost the entire rest of the civilized world.

Yet the latest world climate report from the BP Statistical Review of World Energy finds that in 2017, America reduced its carbon emissions by 0.5 percent, the most of all major countries. That’s especially impressive given that our economy grew by nearly 3 percent—so we had more growth and less pollution—the best of all worlds.

The major reason for the reduced pollution levels is the shale oil and gas revolution that is transitioning the world to cheap and clean natural gas for electric power generation.

Meanwhile, as our emissions fell, the pollution levels rose internationally and by a larger amount than in previous years. So much for the rest of the world going green.

The world’s largest emitter of carbon dioxide emissions is China. According to the invaluable Institute for Energy Research, “China produces 28 percent of the world’s carbon dioxide emissions. India is the world’s third largest emitter of carbon dioxide and had the second largest increment (93 million metric tons) of carbon dioxide emissions in 2017, more than twice as much an increase as the U.S. reduction.”

For every ton of reduced pollution the United States emits, China and India produce almost 10 more tons. This means it doesn’t really matter how much America reduces its greenhouse gases because China and India cancel out any and all progress we make.

Those who think they are helping save the planet by purchasing an electric car, or putting a solar panel on their roof, or trying to shut down coal production in the United States are barking up the wrong tree. If we want to stop greenhouse gases, there is no way to make progress without China and India on board—which they clearly are not.

This latest data also demonstrates that despite all of the criticism across the globe and in the American media, Trump was completely right to pull the United States out of the flawed Paris accord. That might be one of the most universally violated treaties of all time—which is saying a lot. The chart below shows that nearly every nation that signed on to the Paris accord and has admonished America for not getting in has already broken its promises.

(Chart by The Washington Times)

Not a single EU nation is within 80 percent of its respective target for emission reduction, according to Climate Action Network Europe. In its official EU report, Climate Action Network Europe said, “All EU countries are failing to increase their climate action in line with the Paris Agreement goal.” All but five countries aren’t even at 50 percent of their current targets.

So there you have it. The countries in the Paris climate agreement have broken every promise they’ve made and the nation that hasn’t signed the treaty is doing more than any other nation to reduce global warming. Yet, we are being lectured by the sanctimonious Europeans and Asians for not doing our fair share to save the planet. It’s another case study in how the left cares far more about good intentions than actual results. What matters is that you say that you will wash the dishes, not that you actually do it."

See Weed Killer Hype Lacks Scientific Support by Angela Logomasini of CEI.

"The latest Environmental Working Group (EWG) “study” sounds an alarm regarding the chemical known as glyphosate, which is the active ingredient in the herbicide known as “Roundup.” EWG claims that Cheerios, Quaker Oats and other cereals contain dangerous levels of glyphosate. Sen. Charles Schumer (D-NY) has also jumped into the fray. He issued a press release claiming that the Food and Drug Administration (FDA) is hiding data regarding residues of glyphosate on produce, citing the EWG report as evidence that we need to be concerned. But don’t fall for it; there’s no science to support such ludicrous claims.

Both efforts, perhaps not coincidentally, coincide with the recent court case alleging that the Monsanto-produced chemical contributed to one man’s cancer, and more lawsuits are pending. But as I detailed last week, the science does not support claims that glyphosate is dangerous.

The residue levels of glyphosate or any other pesticide on food are simply too low to present any significant health concerns. The FDA regularly monitors such traces on food and has found that the overwhelming majority of food has no detectible or insignificant levels of pesticides. Even though there’s no real health concern, EWG’s junk science studies capture headlines and needlessly alarm people. I’ve addressed this in the past here, here, and here.

In this latest “study,” EWG claimed that EPA’s standards are not protective enough, so they basically developed their own safety standard. EWG’s standard is 10,000 times lower than the level EPA determined safe, which the Science Editor of Slate, Susan Matthews, points out is ridiculous.

Matthews further puts it in perspective, noting:

Let’s talk about what that means in terms of how much cereal you actually eat. The EWG threshold of 0.01 milligram per day translates to a maximum of 160 parts per billion, given an assumed serving size of 60 grams, which is about 2 cups of cereal or ¾ cup of oatmeal. The parts per billion detected per food sample tested by EWG range from 10 to 1,300. So, yes, some of them cross the EWG threshold. None crosses California’s threshold, and none crosses the EPA threshold. In order to cross California’s very conservative threshold, you’d need to eat 7½ cups of the worst kind of oatmeal a day. In order to cross the EPA threshold, you’d need to eat 100 times that. You or your child would more likely get sick from simply eating hundreds of cups of cereal a day before you’d get sick from glyphosate.

And Schumer’s allegations are equally off base. The FDA reports that its research on glyphosate finds only insignificant traces on food, and there are no significant health concerns. The FDA says it will continue to monitor and issue reports on trace levels of glyphosate found on food. Unfortunately, you can be sure that EWG will continue to hype the issue and mislead people about the risks, even when FDA finds little exposure and no concerns.

We all need to remember that such tiny traces of glyphosate and pesticides found on food are simply too low to raise concerns, while the benefits to farmers and ultimately food production are substantial."

Loss of net neutrality did not cause fire fighters to have their internet connection slowed down

See Throttling Firestorm Overblown by Doug Brake. He is Director, Broadband and Spectrum Policy at Information Technology and Innovation Foundation.

"Verizon finds itself in the hot seat after it apparently slowed data communications of fire fighters in California who exceeded a pre-set threshold on their “unlimited” mobile plan. The incident has little to nothing to do with net neutrality and does not show why we need the old Title II-based rules, but it does provide a useful example of how net neutrality advocates will take advantage of bad optics to push for expansive regulation.

Soon after the issue was reported, Verizon put out a statement explaining that, “[t]his situation has nothing to do with net neutrality or the current proceeding in court.” That is true enough—this type of throttling was explicitly allowed under previous and current net neutrality rules. However, it was through an addendum to a recent court filing seeking to overturn the “Restoring Internet Freedom Order” that these facts came to light. The Santa Clara County fire department explained that, in the middle of fighting the Mendocino Complex Fire, officials discovered its data connection for their support unit had been slowed significantly. The fire department had purchased a government plan similar to normal consumer data plans, where mobile data is technically “unlimited” but speeds are slowed after a certain amount is used. Its connection to net neutrality or why it is inserted into a net neutrality brief isn’t immediately clear.

Even the expansive 2015 "Open Internet Order" made very clear that these sorts of pricing practices were generally above board. Paragraph 122 of the now-obsolete order states that, as long as a carrier slows data traffic because of a choice of a user (such as the data plan purchased) and does not target a specific application or class of applications, throttling is fine. The 2015 order says, “a broadband provider may offer a data plan in which a subscriber receives a set amount of data at one speed tier and any remaining data at a lower tier.” This is of course a common pricing practice. The court filing that described the firefighter throttling incident even admits that “[p]etitioners do not contend that this throttling would have violated the 2015 Order,” but simply argues that it demonstrates operators will put their economic interests first.

This isn’t to say we should be comfortable with a major carrier—even accidentally—throttling a public safety application. This shouldn’t normally happen. But Verizon made clear that this is not normal practice, explaining in its statement that “[t]his was customer support mistake,” and explained that normally they would be willing to lift the throttling under these sorts of circumstances.

But what’s more, there are specific public-safety mobile broadband plans for these sorts of situations. In fact, there is a whole mobile broadband network for public safety: FirstNet. FirstNet is a nation-wide interoperable public safety mobile broadband network. It was given $7 billion and 20 megahertz of spectrum under the Middle Class Tax Relief and Job Creation Act of 2012, and is operated through a public-private partnership with AT&T.

California has opted in to using the FirstNet system, and the Santa Clara Fire Department itself uses FirstNet. According to reporting by the Los Angeles Times, Fire Captain Bill Murphy says they use FirstNet “as a supplement” to Verizon. Why the county would rely primarily on a general-purpose commercial network for coordinating the fight against this historic fire and only subscribe to a dedicated first responder network “as a supplement” is beyond me.

As an aside, the claims of the Santa Clara County counsel—that this incident “has everything to do with net neutrality”—are also ironic considering FirstNet actively prioritizes public safety over other traffic on commercial networks. This shouldn’t be controversial—we want first responder video from an apartment fire, for example, to get through with higher priority than a bunch of spectators trying to stream to Facebook Live or Snapchat. It is in the public interest to have a mobile broadband network for public safety that is the antithesis of “neutral.”

It’s abundantly clear public safety data throttling isn’t a persistent problem requiring additional regulation. Again, according to Verizon’s statements, this was an isolated incident where an automated system worked according to the plan the Santa Clara fire department had purchased. Setting aside the question of why the fire coordination wasn’t simply done over a different plan or a network designed for such use, Verizon apparently has a practice of lifting the rate-limit when public safety is at stake, even for plans that aren’t designed for mission-critical communications.

True, uncovered communications make clear the usual customer support line was not immediately helpful, but a call to the right person at Verizon likely would have fixed the issue. Certainly, a press release with optics this bad would see a quick correction. At the very worst, if this customer support confusion actually expanded into a real problem that consistently implicated public safety, the Federal Trade Commission could step in. There are all sorts of ways the firefighters could have seen this problem fixed, but the old Title II regulations wouldn’t have changed this situation.

Considering this throttling was allowed under the 2015 Title II rules, this scenario very well could have unfolded the exact same way under the old regime if the firefighters had purchased a rate-limited plan. Sure, it's bad optics that Verizon didn’t lift the rate-limiting immediately and sort out the pricing details later. But it was a localized customer-support mistake, and not anything the rules would have prohibited.

But that doesn’t stop net neutrality activists. Take, for example, longtime net neutrality advocate Gigi Sohn, who argues that “Verizon and other broadband providers will put profits over people even when it comes to matters of life and limb,” and claims without the general conduct standard of the old rules and the FCC as a forum to complain to there is nothing to stop ISPs from throttling public safety. Again, the old rules allowed for these types of data plans, even if the fire department should have been on a different one for these purposes and Verizon should have been more responsive in correcting this issue.

Net neutrality discussions have morphed from narrow, reasonable policy debates to pure demagoguery, generalized attacks on ISPs, and over-simplified, click-bait headlines that all feed a false perception that comprehensive regulation is necessary to prevent all sorts of Internet ills, imagined or real, whether they have anything to do with specific net neutrality questions or not. It’s increasingly obvious that activists will leverage the vague, feel-good concept of net neutrality and any bad fact-pattern in a much a broader ideological fight over broadband’s regulatory structure. In other words, use net neutrality as a stalking horse for utility regulation. Of course, throttling of legitimate public safety data traffic should not happen, and we can have a reasoned debate about net neutrality rules, but this incident clearly has nothing to do with Title II or the 2015 net neutrality regulations."

The biggest winners from free trade are in the bottom half of the income distribution

Is Free Trade Bad for American Workers? By John C. Goodman.

"Since the time of Adam Smith, economists have understood that free trade is good for countries as a whole.

Of course, trade creates winners and losers. The most common opinion expressed on TV talk shows and in the current presidential campaign is that the winners are on Wall Street and the losers are ordinary people.

However, the latest research suggests the opposite is true. The biggest winners from free trade are in the bottom half of the income distribution. What’s more, these gains are so large that if real income were measured properly, inequality in the US has been falling not rising – precisely because of increased trade.

The argument for trade is straight forward. Trade is ultimately the trade of goods for goods. In any voluntary exchange, both parties are made better off. Both give up something they value less for something they value more.

But what if other countries sell to us without buying from us? That’s what a trade deficit means. It turns out that trade deficits aren’t bad. If China sells to us and just holds onto the dollars it gets in return, then China is holding paper and we are consuming the real goods they produced. That’s not bad for us.

What is more likely is that China uses the dollars it obtains to buy stocks and bonds and other financial assets back here in the United States. That’s not bad either. It means we get to consume the goods that China sends us and instead of buying goods from us China decides to increase the size of our capital market. Capital is something poor countries lack. Financial capital buys newer and better factories and equipment. It makes workers more productive and allows them to earn higher wages. When China invests in the US, that’s good for American workers, on the average.

Throughout the 19th Century the US ran a trade deficit with Europe, especially Britain. That brought needed capital to our shores, contributed enormously to our economic growth and allowed us to become the richest country in the world.

So much for the economics lesson. What about the human costs of all this?

More trade almost always means more jobs and higher wages in our exporting industries. It tends to mean fewer jobs and lower wages in the industries that compete against the imports. These changes are not small. According to one study, between 2000 and 2007 the U.S. lost 982,000 manufacturing jobs because competition from Chinese imports. However, there is no evidence that trade reduces employment overall.

More trade also means lower prices for the consumers of imported goods. A study by the (union funded) Economic Policy Institute, concludes that 400,000 US jobs were eliminated or displaced between 2001 and 2013, because of Walmart, the nation’s largest retailer and biggest importer.
Even if we accept this estimate, it completely ignores the upside. Millions of American’s are paying less for goods at Walmart than they otherwise would have paid. That means their incomes stretch farther. That means their standard of living is higher.

Thanks to Bernie Sanders and Donald Trump, a lot of attention has been given to the job losses. Almost no attention has been given to the job gains or to the increase in our standard of living.

For example, a study by economists at the University of Chicago discovered that imports are holding down price increases the most for the types of consumer goods lower-income households buy. For example, the prices of non-durable goods purchased by the bottom 10th of the income distribution increased by 0.4 percent per year, while the increase was 11.9 percent for those in the top 10th of the income distribution and 13.4 percent for the richest 5 percent of households.

Another and more recent study by economists at UCLA and Columbia University measured the gains from trade among all countries and concluded that those in the bottom 10th of the income distribution had a 63 percent gain while those in the top 10th had a gain of 28 percent.

There will always be winners and losers from trade. But on the whole, trade appears to make incomes more equal, not less so."

Claim that 99% of Species Are Saved by ESA Not Supported by Data

By Robert Gordon of CEI.

"An urgent fundraising appeal from The Nature Conservancy’s (TNC) “Global Policy Lead[er]” warns of congressional and administration efforts to change—and from the perspective of many—improve implementation of the Endangered Species Act (ESA). As a recent Competitive Enterprise Institute analysis demonstrates, the overall costs of the federal ESA program are easily in the tens and more likely hundreds of billions of dollars, begging the question, are we getting what we pay for? Campaigners for the current law like TNC skip over such information and make nice-sounding claims like: “the Endangered Species Act is one of our nation’s most effective environmental laws. 99% of the species it's protected have been saved from extinction!”

Those who oppose any ESA improvements repeat this claim relentlessly. After nearly a half century it is reasonable to ask if the ESA is effective at recovering species and if the 99% claim-well-founded. Unfortunately, the answer to both is no.

Adding a species to the federal list is just the beginning of the ESA process. If all goes well, the species is supposed to be recovered and then taken off the list (i.e., delisted). Unfortunately, as of the most recent count there are over 1,660 listed domestic endangered or threatened species and only about 80 that have been delisted. Of the 80, about half were officially removed because the data originally used to justify listing was wrong, the “species” turned out to be invalid or because the species is now believed to be extinct. This leaves about 40 delisted species that officially “recovered.” Unfortunately, when these “recovered” species are examined, it is clear that about half were really just more mistakes. For example, a plant called Hoover’s whoolly-star was proclaimed to have recovered. In reality, after this plant was added to the list well over 100,000,000 were discovered. If that is not a mistake, then mistakes don’t exist.

With this lackluster record, those blindly opposed to improving the ESA have been pushing the 99%-saved claim. It may be the best they can do given the number of times a species has really recovered—the ESA’s ultimate goal, which is even rarer than most federally listed species. While the 99% claim sounds good, when examined, it falls apart just like half of the recovered species.
For starters, the claim is built on the assumption that if a species is on the federal list and it is not extinct it is because the ESA “saved’’ the species. This is a bad assumption that assigns causation without supporting data.

By law, the U.S. Fish and Wildlife Service (FWS) reports to Congress every two years on the ESA recovery program and the status of listed species. In numerous consecutive reports, FWS has assigned a “status” to each species, designating each as either “presumed extinct,” “declining,” “stable,” “improving,” or “unknown.” In a recent report FWS added a little-used category of “captivity” for species only held in captivity and differentiated between those “presumed extinct” and those presumed extirpated in the U.S. but extant outside the U.S. Only about 1% of species have been assigned the “extinct” value and hence the 99%-saved claim.

The most recent such data provided by FWS indicated that of 1,141 species covered by the report about 43% were stable or improving while 26% were “declining.” The agency did not actually bother to tally the percent in each category for this report but just presented a big, discouraging blob of data. However, because a value like “declining” in any single report is just a snapshot in time, it does not tell us too much. Has the rate of decline slowed? Is it the same or even worse than when the species was first listed? Has the ESA had any measurable impact at all?

On the basis of snapshot in one year we cannot assume that putting these species on the list has somehow changed things so significantly as to have “saved” them. The same can be said of almost one in four species that are of “unknown” status. The reality is that these species cannot be assumed to have been “saved.”

Analyzing years of this data could perhaps indicate some relationship between how long a species has been on the list and its assigned status. Yet, rather inexplicably, after its fiscal year 2009–2010 report FWS just quit reporting this status data all-together and now reports mostly fluff. Before doing so, however, FWS included this data in one last report, indicating that about 12% of species were “improving.” This assertion is rather hard to believe as in the three preceding reports improving species accounted for a bit more than half of that, 6-8%. In the immediately preceding report—just two years before FWS reported about 160 improving species—only around 90 species were improving. That would be a huge improvement. All of this begs the question: why would an agency cease reporting legally required data—data that was part of a data set stretching back a couple decades—data that, if accurate, effectively showed its most high profile program was saving species? Clearly, if the data were reliable, it wouldn’t.

Another big problem with the 99%-saved claim is that dozens of federally endangered species are, in fact, not really endangered and never were. Like Hoover’s woolly-star, they were misdiagnosed and should never have been on the federal list, yet still languish there. Proclaiming that these species have somehow been “saved” is like a doctor claiming he has cured a patient after discovering his terminal diagnosis was flat wrong.

For example, the regulation listing a plant called the running buffalo clover stated that it was “one the rarest members of North American flora” and that as few as four individual plants within a single population in a single state were all that remained. After listing, many more were discovered—116 populations in 83 counties in seven states. While numbers fluctuate with factors such as weather, just one of these discovered populations has numbered as high as 77,800 plants. The list is replete with similar examples of other misdiagnosed plants, birds, reptiles, insects, arachnids, and snails. A number of species assigned “improving” or “stable” status were, like Hoover’s woolly star, found to be more common, have a wider distribution, or face less serious threats.

Unfortunately, the claim that the ESA has saved 99% of species has nothing to do with science and those making it are either blindly repeating it or, worse, don’t really care.

Given federal and state expenditures and the regulatory burden and economic impact, we deserve better and, at the very least, simple honesty. Clearly, recovering many species may be a real challenge and take a while. It is also clear that many of the species mistakenly added to the list were added long ago. Misleading everyone, however, neither helps nor fixes the ESA’s real shortcomings. With the ESA’s ultimate costs in the tens if not hundreds billions, people should be demanding reform. The good news is, if we recognize these problems, we can likely do a lot better and do it for a lot less."

The Warren Plan and the History of Corporate Chartering

By Walter Olson of Cato.

"Sen. Elizabeth Warren’s proposal for drastic changes to corporate governance, which I wrote about in this space last week, continues to draw thoughtful responses from commentators. Colleague Ryan Bourne notes that one study “found that German firms were 27 percent less valuable to their shareholders” because of the workers-on-boards co-determination laws Warren would have us emulate. Moreover, the value given up was not merely transferred to the firms’ workforces but was in part dissipated through inefficiency. At National Review, Samuel Hammond discusses how co-determination undermines the overall dynamism of a national economy (for example, by discouraging the transfer of capital to risky, high-value new enterprises) and also notes some of the problems with making “stakeholder” value a subject of fiduciary duty for investors. 

Now NYU lawprof and Cato adjunct scholar Richard A. Epstein, a leading libertarian voice on law, tackles the Warren plan in a piece for the Hoover Institution’s Defining Ideas series. Epstein’s piece is worth reading in its entirety for his analysis of (among other topics) the “stakeholder” mystique, the efficiency-friendly role of share buybacks and executive incentive stock, and the constitutional infirmities of the overall Warren scheme (citing the unconstitutional-conditions doctrine), as well as his warning that large-scale capital flight from the U.S. could ensue if investors mistrust the whims of a new federal charter regulator.

In the passage I want to highlight, however, Epstein makes a point often overlooked in other critiques. Writing on the popular and populist Left these days often romanticizes the idea that business charters should be revocable by some central authority for misconduct (“corporate death penalty”), although it is often not spelled out whether the assets of a giant bank or oil or pharmaceutical company hit by scandal should be taken into the public sector by some sort of confiscatory state authority, allowed to revert to shareholders, or perhaps transferred to a successor entity that would maintain the same brands and facilities and headquarters as before (leaving the question of what exactly is being accomplished by charter revocation). Epstein takes the broad historical view:

…Warren wholly misunderstands the historical role and constitutional position of corporate charters. The last thing that any country needs for economic growth is a situation in which government officials decide which firms receive charters subject to what conditions. Does she really think that some public bureaucrat should have the power to refuse to issue Apple a corporate charter unless it puts community members or union members on its board, makes gifts to the Sierra Club, or adopts minimum minority hiring set-asides? And what should be done when thousands of firms balk at these conditions? Can they go to court, or does the federal board run the corporation directly?
Lest anyone forget, the great 19th-century corporate reform was the passage of general incorporation laws that allowed any group of individuals to form a corporation, with its attendant benefit of limited liability, so long as they met certain minimum conditions relating to their capital contributions, their ability to sue and be sued, and their board structures. The new legal regime ushered in sustained economic expansion by knocking out the political favoritism that had previously given some businesses corporate charters that gave them a huge edge over direct competitors denied similar authorization. It would be unsurpassed folly to re-open the doors to these abuses today.

Indeed, a key point about general incorporation laws was that they were egalitarian: you could launch an incorporated venture even if you were obscure, new in town, or out of favor with political influentials. Supporters of plans like Warren’s should be asked whether they really want some combination of political actors – very possibly appointees of Donald Trump or another President like him – to gain power to revoke Google’s or Amazon’s or Facebook’s charter to continue doing business unless the management agrees to cut a deal, perhaps involving private understandings with officialdom, to stave off such a penalty."

New York’s Misdirected War on Ride-Sharing Will Only Hurt Consumers

By Andrea O'Sullivan. Excerpt:

"The claim that these policies will meaningfully reduce congestion is similarly dubious. To vet this contention, we can look to a report commissioned by the mayor’s office in 2016. The study shows that city congestion started to creep up in 2010, before the advent of ride-sharing, and continued to climb until 2015. There is no significant uptick in congestion after ride-sharing became more pronounced in the last decade. Rather, increased pedestrian traffic and tourism—arguably good “problems” to have—are the real culprit.

Will limiting ride-sharing significantly improve the congestion picture? It is doubtful. Instead, policies that improve the affordability and accessibility of substitute transportation options, like public transit, may do more good.

There is another reason that the New York City Council might seek to crack down on ride-sharing companies, and it has little to do with congestion. Money raised through the sale of taxi licenses constitutes a significant bulk of the revenues generated by the city’s Taxi and Limousine Commission each year. Once a hot commodity topping $1 million in value, the market price of a medallion has fallen beneath $200,000 since ride-sharing offered an alternative, and the city has halted plans to offer more medallions in response. So there is an element of self-interest on the part of the city as well.

There are better ways to balance the competing interests in New York City. As Mercatus scholar Veronique de Rugy outlined in her recent policy briefing, public entities can reduce congestion by creating a level playing field of user fees. Indeed, Uber itself has come out in support of road pricing as a solution to congestion.

While the cap on ride-sharing is more likely to punish select companies than reduce traffic, user fees and privatization can leverage market forces to lower congestion without discouraging innovation. This was the approach taken in São Paulo, Brazil. The city initially attempted to clamp down on ride-sharing in a harsh way like New York before they realized that a lighter-touch road use fee would alleviate concerns about congestion and revenue while leaving room for innovation. The results are promising, and New York should consider a similar approach.

Protecting all drivers, ensuring fairness, and reducing congestion are worthy goals. But a cap on innovative services will not achieve them. New Yorkers deserve the best transportation options available; they will only have them with full access to ride-sharing."

There is no national- security case for auto-import tariffs

See Attack of the Killer Audis. WSJ editorial. Excerpts:

"There is no plausible Section 232 case that foreign cars or car parts are a military threat. About $145 million of U.S. defense dollars in 2016—0.02% of spending—went to auto manufacturers and much of this was for civilian purposes.

The United Auto Workers union argues that the U.S. needs to be prepared for a World War II-style mobilization when auto plants “quickly changed from producing civilian cars to Jeeps, tanks and bombers.” But even if the U.S. did have to ramp up defense production, we have far more manufacturing capacity than during World War II, including 14 more auto-assembly plants. Allies could also assist.

As for the “economic welfare” argument, not even American carmakers support Mr. Trump’s tariffs on foreign cars. Detroit’s trucks and vans are already protected by a 25% tariff. And U.S. automakers have largely stopped producing passenger cars for the U.S. market because trucks and SUVs are far more profitable.

GM opposes Mr. Trump’s proposal for a 20% tariff and explained in a public comment to Commerce last week that raising prices to cover the higher cost of imported auto parts would reduce sales. The alternative, GM writes, is to reduce investment, which would result in a smaller workforce and “could delay breakthrough technologies and threaten U.S. leadership in the next generation of automotive technology.” That harm to innovation would be a far greater threat to national security than Audi sedans.

American auto-manufacturing has never been more competitive, and the overwhelming evidence is that the tariffs would hurt the U.S. auto industry and economy. Automotive jobs have increased by about a third since Nafta was ratified and are 100,000 above the peak before the 2008-2009 recession. Much of the job growth is driven by foreign manufacturers and imports. About 40% of the content in Mexican imports was made in the U.S. Cross-border supply chains improve efficiency and create jobs in both countries."

"A big risk is that the President’s tariffs will hurt exports by triggering retaliation."

"a 25% tariff on autos and auto-parts would reduce U.S. production by 1.5% and cost 195,000 job in the industry. If other countries retaliated, 624,000 jobs would be lost."

"Consumers would also have to pay about $5,000 to $6,000 more for a car"

The value of young, immigrant entrepreneurs

See Send Us Your Young, Your Educated: There is an excess supply of potential immigrants. The U.S. should be smart about whom it chooses by Edward P. Lazear. Excerpts:

"immigrants are about 20% more likely than native-born Americans to found new companies."

"an immigrant college graduate is 38% likelier to found a business than an immigrant high-school graduate."

"Immigrant entrepreneurs with only high-school educations report average annual earnings less than half those of entrepreneurs with college educations or more."

"those who arrive when young are likelier to found businesses than those who come as adults. An immigrant who arrives before turning 20 is 34% likelier to start a company than one who arrives after 35."

"The most entrepreneurial immigrants come from Israel, Iran, Syria, Lebanon and Greece. More than 9% of the immigrants from these countries founded an incorporated business, a proportion that is more than three times that of native-born Americans."

"Immigrants from countries that are underrepresented among the U.S. immigrant population have rates of entrepreneurship about 60% higher than those from overrepresented countries."

Breaking Up Big Tech Is Hard to Do

Innovation depends on large companies’ teams and shared technologies

By William Rinehart. He is director of technology and innovation policy at the American Action Forum.

"Here’s the problem: Breaking up tech companies means that the government would have to split up their teams and their underlying technology. It would also require a legal and regulatory system to keep each targeted company separate from the others’ markets. These restrictions would pose challenges for any company. But for highly integrated tech firms, they’d be a death sentence.

Google and Facebook rely on flexible teams that cross the normal divisional boundaries to solve problems. These multipurpose teams drive their firms’ productivity; breaking them apart would risk killing the golden goose. By encouraging coordination among their internal departments, the tech titans have developed complex and constantly shifting organizational webs. This structure would frustrate any Standard Oil-style trustbusting effort because there are so few natural breaks within the companies. Splitting up these firms would require government officials to go cubicle by cubicle—a difficult and draconian move.

Trustbusting would also require breaking up the companies’ technologies. Facebook has developed its own suite of software to address unique problems dealing with vast troves of data: BigPipe to load pages faster, Haystack to store photos efficiently, and Unicorn to search its social data, among others."

"Ev Ehrlich, a former undersecretary of commerce for economic affairs, has proposed breaking up big tech companies by spinning off their ad networks into a new company. But this move would set the industry back two decades.

Tech platforms struggled to raise revenue until they developed large, national advertising networks. “We really couldn’t figure out the business model,” remembers early Google investor Michael Moritz in a 2005 book on the company’s beginnings. Google turned its first profit only after it cultivated a dominant advertising position. Tearing apart its advertising base would destroy its value.

Breaking up these companies would also stymie innovation. The new firms formed from the titans’ components would be barred from straying into each other’s services, but many would likely be unprofitable on their own.

YouTube, for example, is widely believed to be unprofitable, but it is currently supported by Google’s other operations."

"Economics professors from Stanford and MIT have shown that getting productive ideas to the market has become more expensive. So rather than limiting innovation as their critics allege, large tech companies have picked up the slack, using their size and profitability to underwrite projects that might fail on their own."

Was the U.S. Actually ‘Built on Tariffs,’ as Trump Says?

Fact Check by Julia Jacobs of The NY Times. Excerpt:

"Although it is unclear what era in United States history Mr. Trump was referring to, it was most likely the period starting in the late 19th century, from after the Civil War to before World War I, said Douglas A. Irwin, a professor of economics at Dartmouth College.

During this period, the country maintained high taxes on imports that effectively blocked manufactured goods from foreign countries, Professor Irwin said. At the same time, the United States had high levels of economic growth and industrialization.

Some economists have cited a positive association between United States protectionism and economic growth during that era. In this high-tariff period, merchandise imports as a share of the country’s gross national product fell from 7.9 percent in 1869 to 4.2 percent in 1910, the historian Alfred E. Eckes Jr. wrote in his book about United States foreign trade.

The country emerged from this period with a larger share of world exports, wrote Mr. Eckes, who served as chairman of the United States International Trade Commission under President Ronald Reagan.

“In the 19th century,” he added, “Many public and elected officials thought ‘protectionism’ an accolade, not a slur.”

But Professor Irwin argued that correlation does not necessarily mean causation in this case. “It’s utterly simplistic,” he said of the argument. “When you look more deeply into it, it was really other factors driving growth in that period.”

Those alternative explanations include the spread of technology like railroads and the telegraph, as well as a labor force expanding because of an influx of immigrants.

However, at certain points in history, tariffs did provide for a vast majority of government funding.

Before the War of 1812, tariffs generated about 90 percent of the federal government’s revenue, according to congressional records. This could lend some validity to Mr. Trump’s statement that the country was “built” on tariffs.

But that is mostly because the size of the federal government was a fraction of what it would become in later years, Professor Irwin said. At that time in early United States history, the nascent government didn’t need much more than that.

Then, as expenditures ballooned during the Civil War, President Abraham Lincoln imposed excise and income taxes to add revenue. In the decades after the war, tariffs generated less than half of government revenue, according to congressional records."

Elizabeth Warren's Hypocrisy on Financial Regulation: Part 1

By John Berlau of CEI.

"As far as politicians’ transgressions go, I usually don’t get that riled up about hypocrisy. In the course of voting on and debating so many issues, lawmakers are bound to take some stances that are inconsistent with previous positions. Plus, I can respect a genuine change of mind and change of heart even if not explicitly acknowledged.

But the hypocrisy of Sen. Elizabeth Warren (D-MA) in her introduction of the so-called Accountable Capitalism Act—and of progressives who are cheering the legislation on—is so blatant it is almost making my hair stand on end.

I’ll have much more to say on the legislation in the coming days, but let’s start with the first of three ways this monstrosity of a bill contradicts some of the oft-heard talking points of Warren and fellow progressives.

Regulations are needed to “protect” shareholders and investors from being cheated out of their earnings. Instead, apparently, politicians should cheat shareholders and divert a firm’s earnings to favorite “stakeholders.”

Both the headline of Warren’s October 15 op-ed in The Wall Street Journal—entitled “Companies Shouldn’t Be Accountable Only to Shareholders”—and the text of her article make it clear that she thinks shareholders should be much lower on the food chain in business and politics than they are.
“The obsession with maximizing shareholder returns effectively means America’s biggest companies have dedicated themselves to making to making the rich even richer,” she writes. Warren never gives a source for her statistic that “the wealthiest 10% of U.S. households own 84% of American-held shares,” but even if accurate, this figure doesn’t tell the whole story. Just because the top 10% may own 84 % of shares of stocks doesn’t mean that stocks aren’t a substantial portion of the individual assets of the remaining 90 percent. And stocks are also owned by institutional investors, such as pension funds and mutual funds, which serve middle-class and blue collar savers and retirees.
Warren seemed to recognize this widespread ownership of stocks when she was urging the Trump Department of Labor (DOL) not to delay the Obama DOL’s “fiduciary rule,” a massively costly investor “protection” regulation. “Such a delay would endanger billions of dollars in Americans' hard-earned retirement savings,” Warren wrote to Secretary of Labor Alex Acosta.

The rule’s aim was to protect investors from “conflicts of interests” of financial professionals that the Obama DOL claimed could reduce return on investment. “Millions of Americans diligently save for a secure retirement, only to have their hard-earned savings squandered by conflicted advisers to the tune of $17 billion per year,” she asserted.

That $17 billion figure that Warren cited, or even whether alleged conflicts such as broker commissions from funds reduce investor return at all, is heavily disputed. The regulation itself was recently thrown out by the Fifth Circuit Court of Appeals for being “arbitrary and capricious.” But the real irony is that the same politico who championed this paternalistic rule in the name of stopping “conflicts of interests” that hurt investors is in her new bill explicitly introducing conflicts of interest that will reduce shareholder return.

Warren writes in her Wall Street Journal op-ed that the new federal charter in her bill for corporations with more than $1 billion in annual revenue “requires corporate directors to consider the interest of all major corporate stakeholders—not only shareholders—in company decisions.” Warren acknowledges that giving unions, employees and other various “stakeholders” with agendas a voice on par with those who have made the investments to build the company will result in sharply reduced shareholder return.

But she is pleased as punch with this likely outcome, even though her own figure pinpointing shareholder loss from her bill easily tops that of the supposed loss of $17 billion from shareholders’ nest eggs that Warren and other cited to justify the Obama DOL’s fiduciary rule. She writes glowingly of the four decades after World War II, when “shareholders on net contributed more than $250 billion to U.S. companies.”

From now on, when Warren and those supporting this bill champion Sarbanes-Oxley, Dodd-Frank or any policies that shower entrepreneurs with red tape under the guise that these rules help prevent shareholders from getting ripped off, it should be thrown in their faces that they support the ultimate shareholder rip-off: the embezzlement of shareholder money by politically-favored “stakeholders.”

As Competitive Enterprise Institute founder Fred L Smith, Jr., put it so eloquently more than 20 years ago, “To blur this shareholder/stakeholder distinction—to endorse a form of ‘This firm is your firm, This firm is my firm’ collectivism—is to undermine the basis of modern society, to threaten our future by returning to our tribal past.”

Coming soon, I'll examine contradictions #2 and #3 of Warren’s “batty proposal,” as National Review’s Kevin Williamson rightly puts it. Sneak preview for contradiction two: “Federalism is fine for smoking a joint, but not for forming a corporation.”"

Prohibition Is the Obvious Cause of Opioid Crisis as CDC Releases Preliminary Casualty Numbers for 2017

By Jeffrey A. Singer of Cato.

"Earlier this month the Centers for Disease Control and Prevention released preliminary estimates of the opioid overdose rate for 2017. The total overdose rate rose to approximately 72,000, up from a total overdose rate of 63,600 in 2016, an increase of roughly 10 percent. The total overdose rate includes deaths from numerous drugs in addition to opioids, such as cocaine, methamphetamine, and benzodiazepines. The opioid-related overdose rate increased as well, from a little over 42,000 in 2016 to over 49,000 in 2017. This increase occurred despite a 4 percent drop in heroin overdoses and a 2 percent drop in overdoses due to prescription opioids. A 37 percent increase in illicit fentanyl-related overdoses explains the jump in the death rate.

All of this is happening while the prescribing of high-dose opioids continues to decrease dramatically—over 41 percent between 2010 and 2015, with a recent report showing a further decrease of 16 percent during the year 2017.

This is more evidence, if any more was needed, that the opioid overdose problem is the result of non-medical users accessing drugs in the black market that results from drug prohibition. Whether these users’ drug of choice is OxyContin or heroin, the majority have obtained their drugs through the black market, not from a doctor. A 2007 study by Carise, et al in the American Journal of Psychiatry looked at over 27,000 OxyContin addicts entering rehab between the years 2001 and 2004 and found that 78 percent never obtained a prescription from a doctor but got the drugs through a friend, family member, or a dealer. 86 percent said they took the drug to “get high” or get a “buzz.” 78 percent also had a prior history of treatment for substance abuse disorder. And the National Survey on Drug Use and Health has repeatedly found roughly three-quarters of non-medical users get their drugs from dealers, family, or friends as opposed to a doctor.

Media and policymakers can’t disabuse themselves of the false narrative that the opioid problem is the product of doctors hooking their patients on opioids when they treat their pain, despite the large number of studies showing–and the Director of the National Institute on Drug Abuse stating—that opioids used in the medical setting have a very low addiction rate. Therefore, most opioid policy has focused on decreasing the number of pills prescribed. Reducing the number of pills also aims at making less available for “diversion” into the black market. This is making many patients suffer from undertreatment of their pain and causes some, in desperation, to turn to the black market or to suicide.

Since 2010, opioid policy has also promoted the development of abuse-deterrent formulations of opioids—opioids that cannot be crushed and snorted or dissolved and injected. As a just-released Cato Research Brief as well as my Policy Analysis from earlier this year have shown, rendering prescription opioids unsuitable for abuse has only served to make non-medical users migrate over to more dangerous heroin, which is increasingly laced with illicit fentanyl.

This is how things always work with prohibition. Fighting a war on drugs is like playing a game of “Whac-a-mole.” The war is never-ending and the deaths keep mounting.

The so-called “opioid crisis” has morphed into a “fentanyl and heroin crisis.” But it has been an unintended consequence of prohibition from the get go."

If you don’t see much voluntary codetermination, one logical conclusion is that codetermination will decrease output (Tyler Cowen on Warren's corporate proposals)

See If codetermination boosts output, will start-ups use it?

"Think of codetermination as requiring that say 40% of the board seats be given to workers and broad-based worker representatives (not just founders!), as in the new Elizabeth Warren bill.

Sometimes it is claimed that codetermination would limit capital returns, but boost the firm’s investment in labor, and thus possibly boost productivity.  Let’s say a firm with codetermination would produce 10, and the same venture without codetermination would produce only 8.

If you are initiating a start-up, it seems the codetermined firm is more competitive, plus you still could bargain for some share of the extra 2 in output, albeit a smaller share of the initial 8.

A priori, this could work out as either board form proving more profitable for capital.  Still, if you think of most start-ups as being quite desperate to make it at all, I would think the productivity boost would militate in favor of the codetermination form in at least some cases.  After all, your higher productivity means you will be able to capture the market with lower prices, right?

If you don’t see much voluntary codetermination, one logical conclusion is that codetermination will decrease output.  Will anyone tell me by how much?"

Elizabeth Warren Plans To Destroy Capitalism By Pretending To ‘Save’ It

Warren's plan would overrule corporate leaders’ control over their own businesses. This is also known as "socialism."

By Scott Shackford of Reason. Excerpt:

"Warren complains in a Wall Street Journal commentary that shareholders have "extracted" $7 trillion in profits since 1985 that "might otherwise have been reinvested in the workers who helped produce them."

That number may look huge when presented this way, but it breaks down to $233 billion a year when calculated over 30 years. The United States' total Gross Domestic Product for 2016 was more than $18 trillion. (For extra fun homework, imagine taking this to its logical socialist conclusion, and calculate how much money each American would get from that $7 trillion profit figure if it were forcibly redistributed annually over that 30-year period.) Furthermore, Warren's argument assumes that because the money didn't get "reinvested" back into workers—in the form of, say, increased wages—those workers did not benefit from whatever it was that money did instead—like improvements to the machinery or software they use.

It's interesting that progressives (and many nominal conservatives) invoke "economic multipliers" when the government spends our tax dollars on subsidies and grants within the private sector. Entire communities, we are told, benefit when tax dollars are given to just a handful of politically connected firms. That money must acquire some special magic when it passes through a legislator's hands, because private sector profits apparently just get buried in a great big hole.

The truth is that our marketplace looks nothing like it did in 1985, and this is a good thing. Our options and our technologies have expanded dramatically and are increasingly accessible to more and more people. It's telling that none of that seems to be a consideration in Warren's proposal. Here's a reminder about the entire "growing income inequality" nonsense: Our middle class is shrinking because more people are moving up the economic ladder, not down.

Warren explains that she wants to essentially force these companies to use the "benefit corporation" model, which prizes a set of values above just profits. She notes that successful companies like Kickstarter and Patagonia have embraced such a model, and that it's legal in several states.

So, stay with me here: If these types of business models are so successful in the American market, then why wouldn't corporations adopt such a model voluntarily? We shouldn't need a federal bill at all! And what about companies that are reinvesting? Amazon brings in billions in revenue annually, but has operated for most of its lifetime barely making a profit. That it has recently started to increase its profit margin has inspired headlines over how dramatically their profits have increased. But here's what it actually looks like over time, courtesy of ReCode:

Courtesy of ReCode

Amazon made the decision to invest in growth over profits for the long term, and the market has rewarded that decision. Now, it's getting the profits it passed up for years. Amazon is not legally operating under the public benefit corporation business model, but it certainly did operate for most of its lifespan with priorities other than profit. Yet Warren doesn't mention Amazon at all in her commentary. Why aren't they an example of a model corporation?

Warren even complains in her commentary that "companies are setting themselves up to fail" by funneling earnings to shareholders rather than reinvesting them. Assuming this is true, what does this have to do with her? Let them fail. This is why there is a marketplace. Why keep a poorly managed company alive if it's not creating value and drawing customers?

But Warren isn't really concerned about businesses failing. She's worried about the ones that succeed despite operating in ways that she doesn't like. What she really wants to is put the federal government in a position of evaluating and approving how companies grow. She wants to substitute the decisions of people who run businesses with the prejudices and preferences of people who think like she does. And she wants to use the courts to enforce her ideas of how corporations should be managed.

I brought up Amazon for a reason. Even though Amazon heavily reinvests in its own growth over profits it has constantly been getting crap over its low wages. Under Warren's bill, employees could essentially use the government to force Amazon to raise its wages. This would have benefited a certain number of employees, but it also would have done so at the expense of the company's growth. It would be creating fewer jobs. It would be smaller. There are some people who would see this as a good thing, but it could also result in a marketplace where people don't have the broad access to products and supplies that we have today. And that is not even getting into all the technology investments Amazon is responsible for that are making our lives better in any number of ways and will continue to do so in the future.

Warren says she wants American corporations to be looking out for "American interests." They are. They're just not always the same as Warren's political interests. She doesn't grasp the difference.

She has an apparently champion for her bill in Matt Yglesias over at Vox. Yglesias has also noted how frequently zoning regulations and NIMBY types keep much-needed urban housing development at bay. So he realizes when too many people have regulatory veto power over market decisions, stagnation is the outcome, and it ends up hurting any number of people. Why would this be any different?"

The Myth of the Great Wages ‘Decoupling’: There is no disconnect between productivity and worker pay if you use more accurate measures

By Donald Boudreaux and Liya Palagashvili.

"Many pundits, politicians and economists claim that wages have fallen behind productivity gains over the last generation. This “decoupling” explains allegedly stagnant (or in some versions of the story, declining) middle-class incomes and is held out as a crisis of the market economy.

This story, though, is built on an illusion. There is no great decoupling of worker pay from productivity. Nor have workers’ incomes stagnated over the past four decades.

The illusion is the result of two mistakes that are routinely made when pay is compared with productivity. First, the value of fringe benefits—such as health insurance and pension contributions—is often excluded from calculations of worker pay. Because fringe benefits today make up a larger share of the typical employee’s pay than they did 40 years ago (about 19% today compared with 10% back then), excluding them fosters the illusion that the workers’ slice of the (bigger) pie is shrinking.

The second mistake is to use the Consumer Price Index (CPI) to adjust workers’ pay for inflation while using a different measure—for example the GDP deflator, which converts the current prices of all domestically produced final goods and services into constant dollars—to adjust the value of economic output for inflation. But as Harvard’s Martin Feldstein noted in a National Bureau of Economic Research paper in 2008, it is misleading to use different deflators.

Different inflation adjustments give conflicting estimates of just how much the dollar’s purchasing power has fallen. So to accurately compare the real (that is, inflation-adjusted) value of output to the real value of worker pay requires that these values both be calculated using the same price index.

Consider, for instance, that between 1970-2006 the CPI rose at an average annual rate of 4.3%, while the GDP deflator rose only 3.8%. Economists believe that such a difference arises because the CPI is especially prone to overestimate inflation. Therefore, much of the increase in the real purchasing power of workers’ pay is mistakenly labeled by the CPI as mere inflation.

Mr. Feldstein and a number of other careful economists—including Richard Anderson of the St. Louis Federal Reserve Bank and Edward Lazear of the Stanford University Graduate School of Business—have compared worker pay (including the value of fringe benefits) with productivity using a consistent adjustment for inflation. They move in tandem. And in a study last year, João Paulo Pessoa and John Van Reenen of the London School of Economics compared worker compensation and productivity in both the United States and the United Kingdom from 1972-2010. There was no decoupling in either country.

The empirical reality in both countries is consistent with economic reasoning. Firms cannot afford a misalignment of their workers’ pay and productivity increases—the employees will move to other firms eager to hire these now more productive workers. Higher economy-wide productivity, after all, means that workers add more to the bottom lines of employers throughout the economy. To secure the services of these more-productive workers, firms bid up worker pay. This competition for labor services is what links pay to productivity.

Competitive markets also deliver the goods, so to speak, to workers in their role as consumers. Higher productivity means the prices of consumer goods and services decline as output increases. As this happens, workers’ spending power—their real income—is enhanced.

The claim that ordinary Americans are stagnating economically while only “the rich” are gaining is also incorrect. True enough, membership in the middle class seems to be declining—but this is because more American households are moving up.

The Census Bureau in 2012 compiled data on the percentage of U.S. households earning annual incomes, measured in 2009 dollars, in different income categories (for example, annual incomes between $25,000 and $35,000). These data reveal that between 1975 and 2009, the percentage of households in the low- and middle-income categories fell. The only two categories that saw an increase were households earning between $75,000 and $100,000 annually, and households earning more than $100,000 annually. Remarkably, the share of American households earning annual incomes in excess of $100,000 went to 20.1% in 2009 from 8.4% in 1975. Over these same years, households earning annual incomes of $50,000 or less fell to 50.1% from 58.4%.

This household-income trend can’t just be dismissed, as some analysts do, by noting that it was amplified by the greater number of married women in the workforce. The increase in income earned by these women itself reflects greater economic productivity. Women’s increased employment has been facilitated by lower-priced and higher-quality home appliances, prepared meals and other modern conveniences.

Households in the past enjoyed income earned in the market by the husband, with meal preparation, dishwashing and the like performed by the wife. The women who engaged in this household production were not paid a wage in the market, but their work had real economic value to the household (and to the economy). Households today enjoy market incomes earned by both spouses, while the time necessary for household work has been reduced thanks to microwave ovens, automatic dishwashers and other inventions that are themselves reflections of a thriving marketplace.

Middle-class stagnation and the “decoupling” of pay and productivity are illusions. Yes, the U.S. economy is in the doldrums, thanks to a variety of factors, most significantly the effect of growth-deadening government policies like ObamaCare and the Dodd-Frank Act. But by any sensible measure, most Americans are today better paid and more prosperous than in the past."

On the International Agency for Research on Cancer classification of glyphosate as a probable human carcinogen

From European Journal of Cancer Prevention : the Official Journal of the European Cancer Prevention Organisation (ECP) [01 Jan 2018, 27(1):82-87]

By Robert E Tarone. Robert Tarone retired in 2016 after 28 years as Mathematical Statistician at the US National Cancer Institute and 14 years as Biostatistics Director at the International Epidemiology Institute. 

Abstract

The recent classification by International Agency for Research on Cancer (IARC) of the herbicide glyphosate as a probable human carcinogen has generated considerable discussion. The classification is at variance with evaluations of the carcinogenic potential of glyphosate by several national and international regulatory bodies. The basis for the IARC classification is examined under the assumptions that the IARC criteria are reasonable and that the body of scientific studies determined by IARC staff to be relevant to the evaluation of glyphosate by the Monograph Working Group is sufficiently complete. It is shown that the classification of glyphosate as a probable human carcinogen was the result of a flawed and incomplete summary of the experimental evidence evaluated by the Working Group. Rational and effective cancer prevention activities depend on scientifically sound and unbiased assessments of the carcinogenic potential of suspected agents. Implications of the erroneous classification of glyphosate with respect to the IARC Monograph Working Group deliberative process are discussed.

The $289 Million Verdict Against Monsanto Is Scientifically Outrageous

California jurors misled by activist misinformation

By Ronald Bailey of Reason. Excerpt:

"I am truly sorry that DeWayne Johnson is suffering from non-Hodgkin lymphoma (NHL), but years of scientific research has determined that it is exceedingly unlikely, despite the outrageous verdict of a California jury on Friday, that he contracted NHL from using the herbicide glyphosate. Applying the relatively low standard of proof required in California civil courts that a claim is "more likely to be true than not true," the jury awarded Johnson a $289 million judgment including $250 million in punitive damages against Monsanto, the maker of the herbicide.

This is an injustice. So far every regulatory agency that has assessed the safety of glyphosate has concluded that it is unlikely to be a human carcinogen at doses at which people encounter the herbicide. For example, the U.S. Environmental Protection Agency's December, 2017, draft human health risk assessment concluded that "glyphosate is not likely to be carcinogenic to humans." The agency's assessment additionally found "no other meaningful risks to human health when the product is used according to the pesticide label."

Similarly, a 2015 evaluation of the herbicide by the highly precautionary European Food Safety Authority concluded that "glyphosate is unlikely to pose a carcinogenic hazard to humans." Another EFSA review in May covering all crops treated with glyphosate included "a risk assessment which shows that current exposure levels are not expected to pose a risk to human health."

Specifically relevant to non-Hodgkin lymphoma, a long run study of more than 50,000 licensed agricultural pesticide applicators in North Carolina and Iowa published in May reported that "in this large, prospective cohort study, no association was apparent between glyphosate and any solid tumors or lymphoid malignancies overall, including NHL and its subtypes."

So given the reams of solid scientific evidence for the safety of glyphosate, how did the jury get their verdict so wrong? Among other things, the court allowed Environmental Defense Fund activist Christopher Portier to mislead them by permitting him to serve as an expert witness for the plaintiff Johnson.

As I reported earlier, Portier chaired the Advisory Group to Recommend Priorities for the World Health Organization's International Agency for Research on Cancer (IARC) which recommended that the agency evaluate glyphosate. He subsequently served as an invited specialist to the IARC group that evaluated studies related to glyphosate and the risk of cancer. In 2015, the IARC issued, partly as a result of Portier's influence, a scientifically flawed monograph that classified glyphosate as a probable human carcinogen."

Despite Monsanto Trial Verdict, World Still Needs Pesticides

By Lydia Mulvany of Bloomberg.

"It may seem like Judgment Day has come for glyphosate, with a California jury slapping $289 million in damages on Monsanto Co. in a cancer trial, and a federal judge in Brazil halting use of the herbicide over health concerns -- all in the space of a week.

Dramatic headlines are par for the course for Monsanto, a company that activists have targeted for decades and which Germany’s Bayer AG just bought for $66 billion. Bayer shares tumbled Monday on concerns over a protracted legal battle, but Monsanto has weathered these kinds of storms ever since its herbicide and the genetically modified crops it’s used on became such a critical part of modern agriculture.

Bayer Takes the Hit After Monsanto Loses Roundup Cancer Trial

Upon appeal, damages and rulings will likely be overturned or reduced, said Chris Perrella, an analyst at Bloomberg Intelligence.

In the end, glyphosate is the world’s most popular and widely used weedkiller for a reason. It has been good for the environment and good for farmers, and it’ll be needed as the global population expands by billions in the coming decades, Perrella said. The only alternatives to glyphosate are far “nastier” chemicals, or using diesel tractors to till fields, which creates a host of environmental problems, he said.

Soaring Yields

Crop yields have soared in recent years thanks to advances in seed technology, pesticides, herbicides and other inputs. Booming world harvests have helped to keep food inflation relatively tame even as global climate change has brought increased risks from drought, heat and storms. At the same time, there’s been growing consumer distrust of crop chemicals and GMOs, helping to drive a surge in demand for organic food.

While regulators around the world, including the U.S. Environmental Protection Agency, say that glyphosate doesn’t cause cancer, the France-based International Agency for Research on Cancer, a branch of the World Health Organization, labeled the chemical a probable carcinogen in 2015, opening the door to such lawsuits.

The California trial was just the first of more than 2,000 similar cases are pending, according to Jonas Oxgaard, an analyst at Sanford C. Bernstein & Co. Monsanto plans to appeal the jury’s verdict.

Anti-GMO onlookers rejoiced after the verdict. The Organic Consumers Association said it hoped this would be the “first of many defeats” for the “most evil corporation in the world.” Monsanto said in a statement that the case didn’t change the fact that “more than 800 scientific studies and reviews” indicate that glyphosate doesn’t cause cancer.

An Aug. 3 ruling by a federal judge in Brasilia suspended the use of glyphosate as the health ministry evaluates its toxicity. The Brazilian Soy Producers Association has promptly appealed.

“It’s as if the court just randomly said, you can’t use tractors, and we need to study the health effect of tractors,” Oxgaard said of the Brazilian ruling. “Ultimately, GMO haters have been spectacularly unsuccessful -- as much as they hate it and with the passion they hate it, penetration of GMOs keeps increasing every year.”"

Fact-checking Alexandria Ocasio-Cortez’s media blitz

From The Washington Post Fact Checker. Excerpts:

“They [national Democrats] were campaigning most when we had more of an American middle class. This upper-middle class is probably more moderate but that upper-middle class does not exist anymore in America.”
— interview on “Pod Save America,” Aug. 7

Here’s some more sweeping rhetoric. In knocking the current leaders of the Democrats, stuck in “ ’90s politics,” Ocasio-Cortez said the “upper-middle class does not exist anymore.”

But the data show that while the middle class overall may have shrunk a bit, the upper-middle class has actually grown. In a 2016 paperpublished by the Urban Institute, Stephen J. Rose documented that the upper-middle class has grown substantially, from 12.9 percent of the population in 1979 to 29.4 percent in 2014. His analysis showed that there was a massive shift in the center of gravity of the economy, with an increasing share of income going to the upper-middle class and rich.

“In 1979, the middle class controlled a bit more than 46 percent of all incomes, and the upper-middle class and rich controlled 30 percent,” Rose wrote. “In contrast, in 2014 the rich and upper-middle class controlled 63 percent of all incomes (52 percent for the upper-middle class and 11 percent for the rich); the middle class share had shrunk to 26 percent; and the shares of the lower-middle class, poor, and near-poor had declined by half.”

“In a Koch brothers-funded study — if any study’s going to try to be a little bit slanted, it would be one funded by the Koch brothers — it shows that Medicare for all is actually much more, is actually much cheaper than the current system that we pay right now.”
— interview on CNN’s “Cuomo Prime Time,” Aug. 8

We recently gave this sort of claim Three Pinocchios. Some Democrats have seized on a reference in a study released by the Mercatus Center at George Mason University, which receives some funding from the Koch Foundation, that a Medicare-for-all plan advanced by Sen. Bernie Sanders (I-Vt.) would reduce the country’s overall level of health expenditures by $2 trillion from 2022 to 2031. That’s because the Sanders plan would slash payments to providers by 40 percent.

But the study makes clear that this is an unrealistic assumption and in fact the plan would raise government expenditures by $32.6 trillion over 10 years. Without the provider cuts, the additional federal budget cost would be nearly $40 trillion. So, no matter how you slice it, the study does not say it would be “much cheaper” than the current system.

“The reason that the Supreme Court upheld the Affordable Care Act is because they ruled that each of these monthly payments that everyday American make is a tax. And so, while it may not seem like we pay that tax on April 15th, we pay it every single month or we do pay at tax season if we don’t buy, you know, these plans off of the exchange.”
— interview on CNN’s “Cuomo Prime Time,” Aug. 8

This appears to be an example of not understanding policy nuances.

In the 5-4 opinion written by Chief Justice John G. Roberts Jr., the Affordable Care Act was deemed to be an appropriate exercise of the government’s taxing power. But Roberts was not referring to the monthly premium payments, as Ocasio-Cortez claims. Instead, Roberts was referring to the individual mandate to buy insurance — and the requirement to pay an annual penalty when filing a tax return if one did not buy health insurance.

“The Affordable Care Act’s requirement that certain individuals pay a financial penalty for not obtaining health insurance may reasonably be characterized as a tax,” Roberts wrote. “Because the Constitution permits such a tax, it is not our role to forbid it, or to pass upon its wisdom or fairness.”

Ironically, the Obama administration had passed the law insisting the mandate was not a tax."