What’s the Point of the Overtime Pay Regulation?

By Ryan Bourne of Cato.

"The Trump administration will reportedly raise the overtime pay salary threshold from $23,660 to $36,000 in the coming weeks. Anyone below the current threshold is eligible to be paid at least one-and-a-half times their regular wage for any hours worked above 40 per week. The proposed change would make approximately 1.3 million extra people eligible for overtime pay.

Economically, such a regulatory change is a great big nothing burger. It will do nothing to affect long-term overall compensation, but will bring mild labor market dysfunction and adjustment costs along the way.

Yes, in the short-run, employers have business practices and contracts with their employees that take time to change. Some workers will therefore benefit from higher total compensation in the immediate aftermath of the rule change, as employers are now legally obliged to pay them extra for overtime. This, no doubt, will be the outcome the Trump team trumpets.

But as time goes by, employers will adjust.

That might come initially through managing their workforce to minimize the likelihood of paying overtime rates - changing shifts patterns, recategorizing workers into exempt categories, outsourcing tasks, or trimming the workforce. Basic economics tells us, though, that what employers ultimately care about are the total costs of employment. In time, the overwhelming response will be employers cutting base pay rates or other perks and benefits (relative to where they would have gone) such that overall employment costs remain unchanged. This is exactly the response that empirical research has found.

So the broadened scope of the rule will do little for workers beyond the short-term. But we’d expect it to modestly reduce the efficiency of the economy in other ways. For example, more employers might decide to spend time tracking their employees’ hours closely, disallow “working from home,” or adjust contracts towards hourly wages that are less appropriate for the nature of their industries."

Rent control doesn’t always lower rents

From Tyler Cowen.

"Using a 1994 law change, we exploit quasi-experimental variation in the assignment of rent control in San Francisco to study its impacts on tenants and landlords. Leveraging new data tracking individuals’ migration, we find rent control limits renters’ mobility by 20 percent and lowers displacement from San Francisco. Landlords treated by rent control reduce rental housing supplies by 15 percent by selling to owner-occupants and redeveloping buildings. Thus, while rent control prevents displacement of incumbent renters in the short run, the lost rental housing supply likely drove up market rents in the long run, ultimately undermining the goals of the law.

That is from a new AER piece by Rebecca Diamond, Tim McQuade and Franklin Qian."

The False Premises of the Ruling Against Johnson & Johnson: Blaming opioid makers for the "opioid crisis" may be emotionally satisfying, but the reality is more complicated

By Jacob Sullum of Reason.

"This week an Oklahoma judge ruled that Johnson & Johnson should pay $572 million to "abate" a "public nuisance" the company created in that state by minimizing the hazards and overselling the benefits of prescription opioids. A few months ago, a North Dakota judge rejected a very similar claim against Purdue Pharma under a nearly identical "public nuisance" statute.

The difference between those two decisions partly reflects the difference between broad and narrow understandings of "public nuisance." But the diametrically opposed rulings also pit a simple narrative of the "opioid crisis" with a clear set of villains against a more complicated story that's closer to the truth.

Ruling against Johnson & Johnson on Monday, Cleveland County District Court Judge Thad Balkman claimed the "current stage of the Opioid Crisis…still primarily involves prescription opioids." According to records collected by the U.S. Centers for Disease Control and Prevention (CDC), however, pain pills were involved in just 30 percent of opioid-related deaths in 2017. Most of those cases also involved other drugs, mainly heroin and illicit fentanyl or fentanyl analogs, which were implicated in three-quarters of opioid-related deaths.

Balkman likewise seems to have accepted at face value Oklahoma's assertion that "opioids are highly addictive." The evidence also contradicts that claim.

In 2015, according to the National Survey on Drug Use and Health, about 2 percent of Americans who took prescription opioids, including nonmedical users, qualified for a diagnosis of "opioid use disorder," a broad category that is not limited to addiction. By comparison, about 9 percent of past-year drinkers had an "alcohol use disorder."

A 2018 BMJ analysis of medical records found evidence of "opioid misuse" in 1 percent of patients who took pain pills after surgery. While studies find that misuse is more common among chronic pain patients, a 2016 New England Journal of Medicine article concluded that "rates of carefully diagnosed addiction" average less than 8 percent.

That study, which was co-authored by Nora Volkow, director of the National Institute on Drug Abuse, noted that "addiction occurs in only a small percentage of persons who are exposed to opioids—even among those with preexisting vulnerabilities." Yet Balkman deemed such statements by Johnson & Johnson "false, misleading, and deceptive."

The judge likewise faulted the company for suggesting that prescription analgesics pose a "low danger" when used for legitimate medical purposes. But according to a 2015 Pain Medicine study, the fatal overdose rate among North Carolina patients who received opioid prescriptions in 2010 was 0.02 percent.

Balkman also thought Johnson & Johnson was wrong to say opioids could be appropriate for treating chronic pain and wrong to suggest that undertreated patients might look like addicts as they desperately sought relief. Yet as South Central Judicial District Judge James Hill pointed out when he dismissed North Dakota's lawsuit against Purdue Pharma in May, the Food and Drug Administration (FDA) has endorsed both of those propositions.

Balkman views the very idea that pain is undertreated as suspect in light of the dramatic increase in opioid prescriptions since the 1990s. But inadequate pain treatment can and does coincide with widespread misuse, and the problem has been aggravated in recent years by ham-handed efforts to reduce prescriptions, as the FDA, the CDC, and the American Medical Association have recognized.

Judge Hill concluded that the link between pharmaceutical companies and opioid abuse asserted by North Dakota "depends on an extremely attenuated, multi-step, and remote causal chain." It ignores the role of regulators who establish rules for opioid use, doctors who exercise independent medical judgment in deciding when and how to prescribe these drugs, and people who choose to take pain pills for nonmedical purposes, the vast majority of whom are not bona fide pain patients.

Hill did not mention the life circumstances that make the psychoactive effects of opioids powerfully appealing to a small percentage of people who try them. Those are the real roots of the "opioid crisis," and they cannot be remedied by litigation."

Why Everything They Say About The Amazon, Including That It's The 'Lungs Of The World,' Is Wrong

Michael Shellenberger.

"The increase in fires burning in Brazil set off a storm of international outrage last week. Celebrities, environmentalists, and political leaders blame Brazilian president, Jair Bolsonaro, for destroying the world’s largest rainforest, the Amazon, which they say is the “lungs of the world.”
 
Singers and actors including Madonna and Jaden Smith shared photos on social media that were seen by tens of millions of people. “The lungs of the Earth are in flames,” said actor Leonardo DiCaprio. “The Amazon Rainforest produces more than 20% of the world’s oxygen,” tweeted soccer star Cristiano Ronaldo. “The Amazon rain forest — the lungs which produce 20% of our planet’s oxygen — is on fire,” tweeted French President Emanuel Macron.

And yet the photos weren’t actually of the fires and many weren’t even of the Amazon. The photo Ronaldo shared was taken in southern Brazil, far from the Amazon, in 2013. The photo that DiCaprio and Macron shared is over 20 years old. The photo Madonna and Smith shared is over 30. Some celebrities shared photos from Montana, India, and Sweden.

To their credit, CNN and New York Times debunked the photos and other misinformation about the fires. “Deforestation is neither new nor limited to one nation,” explained CNN. “These fires were not caused by climate change,” noted The Times. 
 
But both publications repeated the claim that the Amazon is the “lungs” of the world. “The Amazon remains a net source of oxygen today,” said CNN. “The Amazon is often referred to as Earth’s ‘lungs,’ because its vast forests release oxygen and store carbon dioxide, a heat-trapping gas that is a major cause of global warming,” claimed The New York Times.

I was curious to hear what one of the world’s leading Amazon forest experts, Dan Nepstad, had to say about the “lungs” claim.

“It’s bullshit,” he said. “There’s no science behind that. The Amazon produces a lot of oxygen but it uses the same amount of oxygen through respiration so it’s a wash.”

Plants use respiration to convert nutrients from the soil into energy. They use photosynthesis to convert light into chemical energy, which can later be used in respiration.

What about The New York Times claim that “If enough rain forest is lost and can’t be restored, the area will become savanna, which doesn’t store as much carbon, meaning a reduction in the planet’s ‘lung capacity’”?

Also not true, said Nepstad, who was a lead author of the most recent Intergovernmental Panel on Climate Change report. “The Amazon produces a lot of oxygen, but so do soy farms and [cattle] pastures.”

Some people will no doubt wave away the “lungs” myth as nit-picking. The broader point is that there is an increase in fires in Brazil and something should be done about it. 

But the “lungs” myth is just the tip of the iceberg. Consider that CNN ran a long segment with the banner, “Fires Burning at Record Rate in Amazon Forest” while a leading climate reporter claimed, “The current fires are without precedent in the past 20,000 years.” 

While the number of fires in 2019 is indeed 80% higher than in 2018, it’s just 7% higher than the average over the last 10 years ago, Nepstad said.

While the number of fires in 2019 is indeed 80% higher than in 2018, it’s just 7% higher than the average over the last 10 years ago.

One of Brazil’s leading environmental journalists agrees that media coverage of the fires has been misleading. “It was under [Workers Party President] Lula and [Environment Secretary] Marina Silva (2003-2008) that Brazil had the highest incidence of burning,” Leonardo Coutinho told me over email. “But neither Lula nor Marina was accused of putting the Amazon at risk.”

Coutinho’s perspective was shaped by reporting on the ground in the Amazon for Veja, Brazil’s leading news magazine, for nearly a decade. By contrast, many of the correspondents reporting on the fires have been doing so from the cosmopolitan cities of São Paulo and Rio de Janeiro, which are 2,500 miles and four hours by jet plane away.

“What is happening in the Amazon is not exceptional,” said Coutinho. “Take a look at Google web searches search for ‘Amazon’ and ‘Amazon Forest’ over time. Global public opinion was not as interested in the ‘Amazon tragedy’ when the situation was undeniably worse. The present moment does not justify global hysteria.”

And while fires in Brazil have increased, there is no evidence that Amazon forest fires have. 
“What hurts me most is the bare idea of the millions of Notre-Dames, high cathedrals of terrestrial biodiversity, burning to the ground,” a Brazilian journalist wrote in the New York Times.

But the Amazon forest’s high cathedrals aren’t doing that. “I saw the photo Macron and Di Caprio tweeted,” said Nepstad, “but you don’t see forests burning like that in the Amazon.”

Amazon forest fires are hidden by the tree canopy and only increase during drought years. “We don’t know if there are any more forest fires this year than in past years, which tells me there probably isn’t,” Nepstad said. “I’ve been working on studying those fires for 25 years and our [on-the-ground] networks are tracking this.” 

What increased by 7% in 2019 are the fires of dry scrub and trees cut down for cattle ranching as a strategy to gain ownership of land. 

Against the picture painted of an Amazon forest on the verge of disappearing, a full 80% remains standing. Half of the Amazon is protected against deforestation under federal law. 

“Few stories in the first wave of media coverage mentioned the dramatic drop in deforestation in Brazil in the 2000s,” noted former New York Times reporter Andrew Revkin, who wrote a 1990 book, The Burning Season, about the Amazon, and is now Founding Director, Initiative on Communication & Sustainability at The Earth Institute at Columbia University.

Deforestation declined a whopping 70% from 2004 to 2012. It has risen modestly since then but remains at one-quarter its 2004 peak. And just 3% of the Amazon is suitable for soy farming. 

Both Nepstad and Coutinho say the real threat is from accidental forest fires in drought years, which climate change could worsen. “The most serious threat to the Amazon forest is the severe events that make the forests vulnerable to fire. That’s where we can get a downward spiral between fire and drought and more fire.”

Today, 18 - 20% of the Amazon forest remains at risk of being deforested.

“I don’t like the international narrative right now because it’s polarizing and divisive,” said Nepstad. “Bolsonaro has said some ridiculous things and none of them are excusable but there’s also a big consensus against accidental fire and we have to tap into that.” 

“Imagine you are told [under the federal Forest Code] that you can only use half of your land and then being told you can only use 20%,” Nepstad said. “There was a bait and switch and the farmers are really frustrated. These are people who love to hunt and fish and be on land and should be allies but we lost them.”

Nepstad said that the restrictions cost farmers $10 billion in foregone profits and forest restoration. “There was an Amazon Fund set up in 2010 with $1 billion from Norwegian and German governments but none of it ever made its way to the large and medium-sized farmers,” says Nepstad.
Both the international pressure and the government’s over-reaction is increasing resentment among the very people in Brazil environmentalists need to win over in order to save the Amazon: forests and ranchers.

“Macron’s tweet had the same impact on Bolsonaro’s base as Hillary calling Trump’s base deplorable,” said Nepstad. “There’s outrage at Macron in Brazil. The Brazilians want to know why California gets all this sympathy for its forest fires and while Brazil gets all this finger-pointing.”
“I don’t mind the media frenzy as long as it leaves something positive,” said Nepstad, but it has instead forced the Brazilian government to over-react. “Sending in the army is not the way to go because it’s not all illegal actors. People forget that there are legitimate reasons for small farmers to use controlled burns to knock back insects and pests.”

The reaction from foreign media, global celebrities, and NGOs in Brazil stems from a romantic anti-capitalism common among urban elites, say Nepstad and Coutinho. “There’s a lot of hatred of agribusiness,” said Nepstad. “I’ve had colleagues say, ‘Soy beans aren’t food.’ I said, ‘What does your kid eat? Milk, chicken, eggs? That’s all soy protein fed to poultry.’”

Others may have political motives. “Brazilian farmers want to extend [the free trade agreement] EU-Mercosur but Macron is inclined to shut it down because the French farm sector doesn’t want more Brazilian food products coming into the country,” Nepstad explained. 

Despite climate change, deforestation, and widespread and misleading coverage of the situation, Nepstad hasn’t given up hope. The Amazon emergency should lead the conservation community to repair its relationship with farmers and seek more pragmatic solutions, he said.

“Agribusiness is 25% of Brazil’s GDP and it’s what got the country through the recession,” said Nepstad. “When soy farming comes into a landscape, the number of fires goes down. Little towns get money for schools, GDP rises, and inequality declines. This is not a sector to beat up on, it’s one to find common ground with.” 

Nepstad argued that it would be a no-brainer for governments around the world to support Aliança da Terra, a fire detection and prevention network he co-founded which is comprised of 600 volunteers, mostly indigenous people, and farmers.

“For $2 million a year we could control the fires and stop the Amazon die-back,” said Nepstad. “We have 600 people who have received top-notch training by US fire jumpers but now need trucks with the right gear so they can clear fire breaks through the forest and start a backfire to burn up the fuel in the pathway of the fire.”

For such pragmatism to take hold among divergent interests, the news media will need to improve its future coverage of the issue.

“One of the grand challenges facing newsrooms covering complicated emergent, enduring issues like tropical deforestation,” said journalist Revkin, “is finding ways to engage readers without histrionics. The alternative is ever more whiplash journalism — which is the recipe for reader disengagement.”"

More on the phenomenal, ‘eye-popping’ success of Success Academy Charter Schools in NYC

From Mark Perry.

"If you haven’t yet heard about the amazing, appropriately-named Success Academy Charter Schools in New York City, here’s some background:

Founded in 2006, Success Academy Charter Schools is the largest and highest-performing free, public charter school network in New York City. Admission is open to all New York State children, including those with special needs and English language learners. Students are admitted by a random lottery held each April. Success Academy operates 45 schools serving 17,000 students in Manhattan, Brooklyn, Queens and the Bronx. Across the network, 76% of students are from low-income households; 8.5% are current and former English Language Learners, and 15% are current and former special needs students. About 93% of students are children of color.

In the state of New York, there are 2,413 elementary schools and the table above (click to enlarge) shows the top 30 highest performing elementary schools in the state based on New York Elementary School Rankings just released for the 2018-2019 school year and compiled by School Digger. The rankings are based on the Average Standard Score (2019) for each elementary school, and that score is explained here.

What is truly amazing is that of the 30 elementary schools in the entire state of New York (the top 1.24% of schools) with the highest Average Standard Score for the 2018-2019 school year, two-thirds of those top schools (20) are Success Academy Charter Schools. There were four other Success Academy elementary charters that didn’t rank in the top 30, but they weren’t far behind at No. 32 (Success Academy Charter School-Harlem 1) , No. 37 (Success Academy Charter School-Harlem 2), No. 40 (Success Academy Charter School – Springfield Gardens) and No. 45 (Success Academy Charter School-Bronx 3). In other words, 100% of the elementary Success Academy Charter Schools (24 out of 24) ranked in the top 2% of all of the 2,413 elementary schools in New York State (actually the top 1.865%). And when you compare the demographics of the Success Academy Charters Schools above to the other 10 top-ranking schools in the table above, you’ll see that the students attending Success charters: a) are more than two times as likely to qualify for free or discounted lunch, b) nearly four times as likely to be black, and c) 1.4 times as likely to be Hispanic.

Questions: Wouldn’t you think that these Success Academy charter schools would be recognized as academic models for the rest of the city, the state and the entire nation? After all, the students at Success Academy charter schools are performing at the same or even higher level as students in tony, upscale, mostly white and Asian Scarsdale, New York (America’s richest town) whose top-ranked elementary schools is K-5 Edgewood School (ranked No. 31 behind 20 Success Academy charters) and where more than 87% of the students are white or Asian, there are no black students, 0% of the students qualify for free/reduced lunch, the median income is $242,782, and the median home value is $1.34 million! What makes the academic excellence of Success Academy charters even more impressive, especially when compared to schools like Edgewood, is that students at Success Academies are selected at random by lottery in some of the poorest neighborhoods in New York City like in the Bronx where 87% of the students qualify for free or discounted lunches! With those kinds of impressive, eye-popping academic results for some of the city’s most at-risk student populations in Harlem, Queens and the Bronx, shouldn’t that proven record of academic success be replicated in all New York City and New York state public schools?

A: Yes, except for a few major obstacles. The Success Academy charter schools are run by Eva Moskowitz, and her network of charter schools hire only non-union teachers, who are paid well but can be fired for non-performance. So the New York City teacher unions hate Eva Moskowitz despite her jaw-dropping “off-the-charts success” at educating black and Hispanic kids in some of the poorest neighborhoods in the city. Likewise, instead of being thrilled that so many of the city’s low-income, minority students are being educated so successfully, the new New York mayor Bill de Blasio hates charter schools just as much as the entrenched teacher unions (who are a main part of his political base of support) and he has been in a ferocious battle to stop Eva Moskowitz and the spread of charter schools.

As Jason Riley writes in today’s Wall Street Journal: “De Blasio Gives Up on Educating Poor Kids: Rather than expanding schools that help minority students, the mayor wants to shut them down“:

The majority of [public school students in New York] can’t do basic reading or math, according to state standardized test results released last week. And the numbers get even more depressing when broken down by race and ethnicity. Black and Hispanic students make up 67% of the system, while whites and Asians are about 15% and 16%, respectively. Only 28% of black students passed the math exam, versus 33% of Hispanics, 67% of whites and 74% of Asians. On the English exam, the passage rates were 68% for Asians, 67% for whites, 37% for Hispanics and 35% for blacks.

The irony is that the same social-justice advocates who obsess over [racial] inequality also spurn reforms, such as public charter schools, that help close black-white differences in learning (see Venn diagram above). “City charter schools, now teaching roughly 10% of the city’s student population, markedly outperformed traditional public schools again” on the state tests, reported the New York Post. Fifty-seven percent of charter-school test takers passed the state English exam, and 63% passed the math portion. Moreover, the highest scores in the state, for the third year in a row, came from Success Academy, a New York City-based charter-school network, where the passage rates for math and English were an astounding 99% and 90% (out of 7,405 students), respectively. Even more impressive is that these charter students are mostly low-income blacks and Hispanics, not middle-class Asians and whites.

If the primary goal were student achievement, Democratic politicians like New York Mayor Bill de Blasio would allow these successful school models to proliferate. But the mayor is far more interested in placating his political benefactors, the powerful teachers unions, which oppose charter schools because they don’t control them. To the National Education Association, the American Federation of Teachers and their thousands of state and local affiliates, public education is more about jobs than about kids. Reforms that marginalize or circumvent union members are rejected, regardless of whether they benefit students. Mr. de Blasio may identify as a progressive champion of the underprivileged, but that’s lip service. The reality is that he’s blocking the surest path to the middle class for the city’s poor by relegating them to inferior schools.

Bottom Line: In a saner and more sensible world where students and learning are really the No. 1 priority, the educational establishment (including members of the teacher unions and the NYC mayor) would be “falling all over themselves” to study and replicate the proven educational success of Success Academy charter schools like the ones in Harlem, the Bronx, and Queens profiled above.
But in the insane world of New York City where unionized teachers have a stranglehold on public schools, the liberal mayor and liberal teacher unions are waging a war on the city’s successful charter schools like the ones operated by Success Academy Charter Schools. Preservation of the status quo and a continuation of the current failed public school model, and preserving its power, are the primary concerns of the teachers unions and their administrative enablers, which includes Enabler-in-Chief Bill de Blasio.

It’s a perfect opportunity to invoke Perry’s Principle which says that progressives (including teachers unions) really don’t care about or value people (students, parents) as much as they care about and value power over people or just plain straight-up political power. And a slightly modified Perry’s Law also applies here: Competition (and school choice) breeds competence and academic success, while being insulated from competition breeds incompetence and academic failure.

Related: Here’s what the wise Thomas Sowell had to say in 2016 about the Success Academy charters in one of his columns (and featured on CD here), bold added:

We keep hearing that “black lives matter,” but they seem to matter only when that helps politicians to get votes, or when that slogan helps demagogues demonize the police. The other 99% of black lives destroyed by people who are not police do not seem to attract nearly as much attention in the media. What about black success? Does that matter? Apparently not so much.

We have heard a lot about black students failing to meet academic standards. So you might think that it would be front-page news when some whole ghetto schools not only meet, but exceed, the academic standards of schools in more upscale communities. There are in fact whole chains of charter schools where black and Hispanic youngsters score well above the national average on tests. There are the KIPP (Knowledge IS Power Program) schools and the Success Academy schools, for example.

What makes this all the more amazing is that these charter schools are typically located in the same ghettos or barrios where other blacks or Hispanics are failing miserably on the same tests. More than that, successful charter schools are often physically housed in the very same buildings as the unsuccessful public schools. In other words, minority kids from the same neighborhood, going to school in classes across the hall from each other, or on different floors, are scoring far above average and far below average on the same tests.

If black success was considered half as newsworthy as black failures, such facts would be headline news — and people who have the real interests of black and other minority students at heart would be asking, “Wow! How can we get more kids into these charter schools?” But the teachers’ unions are opposed to charter schools — and they give big bucks to politicians, who in turn put obstacles and restrictions on the expansion of charter schools. These include politicians like New York’s “progressive” mayor Bill de Blasio, who poses as a friend of blacks by denigrating the police, standing alongside Al Sharpton."

How FDR’s New Deal Harmed Millions of Poor People

By Jim Powell of Cato.

"Democratic presidential candidates as well as some conservative intellectuals, are suggesting that Franklin Delano Roosevelt’s New Deal is a good model for government policy today.

Mounting evidence, however, makes clear that poor people were principal victims of the New Deal. The evidence has been developed by dozens of economists — including two Nobel Prize winners — at Brown, Columbia, Princeton, Johns Hopkins, the University of California (Berkeley) and University of Chicago, among other universities.

New Deal programs were financed by tripling federal taxes from $1.6 billion in 1933 to $5.3 billion in 1940. Excise taxes, personal income taxes, inheritance taxes, corporate income taxes, holding company taxes and so-called “excess profits” taxes all went up.

The most important source of New Deal revenue were excise taxes levied on alcoholic beverages, cigarettes, matches, candy, chewing gum, margarine, fruit juice, soft drinks, cars, tires (including tires on wheelchairs), telephone calls, movie tickets, playing cards, electricity, radios — these and many other everyday things were subject to New Deal excise taxes, which meant that the New Deal was substantially financed by the middle class and poor people. Yes, to hear FDR’s “Fireside Chats,” one had to pay FDR excise taxes for a radio and electricity! A Treasury Department report acknowledged that excise taxes “often fell disproportionately on the less affluent.”

Until 1937, New Deal revenue from excise taxes exceeded the combined revenue from both personal income taxes and corporate income taxes. It wasn’t until 1942, in the midst of World War II, that income taxes exceeded excise taxes for the first time under FDR. Consumers had less money to spend, and employers had less money for growth and jobs.

New Deal taxes were major job destroyers during the 1930s, prolonging unemployment that averaged 17%. Higher business taxes meant that employers had less money for growth and jobs. Social Security excise taxes on payrolls made it more expensive for employers to hire people, which discouraged hiring.

Other New Deal programs destroyed jobs, too. For example, the National Industrial Recovery Act (1933) cut back production and forced wages above market levels, making it more expensive for employers to hire people - blacks alone were estimated to have lost some 500,000 jobs because of the National Industrial Recovery Act. The Agricultural Adjustment Act (1933) cut back farm production and devastated black tenant farmers who needed work. The National Labor Relations Act (1935) gave unions monopoly bargaining power in workplaces and led to violent strikes and compulsory unionization of mass production industries. Unions secured above-market wages, triggering big layoffs and helping to usher in the depression of 1938.

What about the good supposedly done by New Deal spending programs? These didn’t increase the number of jobs in the economy, because the money spent on New Deal projects came from taxpayers who consequently had less money to spend on food, coats, cars, books and other things that would have stimulated the economy. This is a classic case of the seen versus the unseen — we can see the jobs created by New Deal spending, but we cannot see jobs destroyed by New Deal taxing.

For defenders of the New Deal, perhaps the most embarrassing revelation about New Deal spending programs is they channeled money AWAY from the South, the poorest region in the United States. The largest share of New Deal spending and loan programs went to political “swing” states in the West and East - where incomes were at least 60% higher than in the South. As an incumbent, FDR didn’t see any point giving much money to the South where voters were already overwhelmingly on his side.

Americans needed bargains, but FDR hammered consumers — and millions had little money. His National Industrial Recovery Act forced consumers to pay above-market prices for goods and services, and the Agricultural Adjustment Act forced Americans to pay more for food. Moreover, FDR banned discounting by signing the Anti-Chain Store Act (1936) and the Retail Price Maintenance Act (1937).

Poor people suffered from other high-minded New Deal policies like the Tennessee Valley Authority monopoly. Its dams flooded an estimated 750,000 acres, an area about the size of Rhode Island, and TVA agents dispossessed thousands of people. Poor black sharecroppers, who didn’t own property, got no compensation.

FDR might not have intended to harm millions of poor people, but that’s what happened. We should evaluate government policies according to their actual consequences, not their good intentions."

The government’s own data show no correlation between prescription volume and the non-medical use of opioids or opioid use disorder

See Shaking Down Drug Makers Won’t Stop IV Drug Users by Jeffrey A. Singer of Cato.

"On August 26 Oklahoma State Judge Thad Balkman ruled that Johnson & Johnson must pay $572 million to the state of Oklahoma for contributing to the local opioid addiction crisis. Johnson & Johnson sold two opioids: a fentanyl skin patch with the brand name Duragesic, and Nucynta,a synthetic opioid similar to tramadol but stronger.

Nucynta is not as addictive as most other synthetic and semi-synthetic opioids and has been shown to have low levels of abuse in post-marketing studies. Fentanyl skin patches are very difficult and inconvenient to convert for non-medical use. The Drug Enforcement Administration claims that nearly all the fentanyl seized is so-called “illicit fentanyl,” manufactured mostly in powdered form in clandestine labs in Asia and Mexico, and then smuggled in to the U.S., sometimes via the Postal Service.

Johnson & Johnson was also charged with contributing to the overdose crisis because it owns two subsidiaries that make the active ingredients and narcotic raw materials used by other opioid manufacturers.

Two other opioid manufacturers, Purdue Pharma and Teva Pharmaceuticals, settled with the state, but Johnson & Johnson decided to take the case to trial. Their attorneys say the company plans to appeal the decision.

This is nothing more than a shakedown. As I have written here and here, the government’s own data show no correlation between prescription volume and the non-medical use of opioids or opioid use disorder. In fact, as prescription volume has come down, overdoses have gone up. That’s because as it has become more difficult and expensive to divert prescription pain pills to the underground market for non-medical use, non-medical users have migrated to heroin and fentanyl that the efficient black market is supplying in abundance.

Policymakers and politicians refuse to accept the fact that it is the current policy—drug prohibition—that is the cause of the opioid overdose crisis. Rather than taking a hard look at the dismal failure of America’s longest war, the war on drugs, they just double down on what clearly isn’t working, and seek scapegoats for the death and destruction the war continues to bring.

Oklahoma has extracted some tribute from Purdue Pharma and Teva Pharmaceuticals and, pending appeal, hopes to extract even more from Johnson & Johnson. If enough jurisdictions are successful in getting their piece of the action, we might see drug makers pull out of the pain reliever business altogether. That will not be good for millions of pain sufferers.

While state and municipal coffers may get some quick cash infusions, and some political careers may get a needed boost, this shakedown will not get one IV drug user to pull the needle out of their arm."

Marijuana dispensaries might cut neighborhood crime

Not in my backyard? Not so fast. The effect of marijuana legalization on neighborhood crime. By Jeffrey Brinkman David Mok-Lamme. Published in Regional Science and Urban Economics.

Abstract

This paper studies the effects of marijuana legalization on neighborhood crime and documents the patterns in retail dispensary locations over time using detailed micro-level data from Denver, Colorado. To account for endogenous retail dispensary locations, we use a novel identification strategy that exploits exogenous changes in demand across different locations arising from the increased importance of external markets after the legalization of recreational marijuana sales. The results imply that an additional dispensary in a neighborhood leads to a reduction of 17 crimes per month per 10,000 residents, which corresponds to roughly a 19 percent decline relative to the average crime rate over the sample period. Reductions in crime are highly localized, with no evidence of spillover benefits to adjacent neighborhoods. Analysis of detailed crime categories provides insights into the mechanisms underlying the reductions.

Short Selling Reduces Crashes

By Alex Tabarrok.

"Short sellers are often scapegoated for market crashes but a rational market requires rational buyers and sellers. When the markets are dominated by irrational exuberance only the short sellers are speaking sanity. Short-sellers, therefore, should make prices more informative and reduce the Wile E. Coyote moment when it suddenly dawns on the irrational that gravity exists.
Deng, Gao and Kim test the theory and find it holds up; lifting restrictions on short sales reduces prices crashes.

We examine the relation between short-sale constraints and stock price crash risk. To establish causality, we take advantage of a regulatory change from the Securities and Exchange Commission (SEC)’s Regulation SHO pilot program, which temporarily lifted short-sale constraints for randomly designated stocks. Using Regulation SHO as a natural experiment setting in which to apply a difference-in-differences research design, we find that the lifting of short-sale constraints leads to a significant decrease in stock price crash risk. We further investigate the possible underlying mechanisms through which short-sale constraints affect stock price crash risk. We provide evidence suggesting that lifting of short-sale constraints reduces crash risk by constraining managerial bad news hoarding and improving corporate investment efficiency. The results of our study shed new light on the cause of stock price crash risk as well as the roles that short sellers play in monitoring managerial disclosure strategies and real investment decisions."

Corruption is more damaging for productivity at higher levels of regulation

By Dan Mitchell. 

"When I wrote last month about the Green New Deal, I warned that it was cronyism on steroids.

Simply stated, the proposal gives politicians massive new powers to intervene and this would be a recipe for staggering levels of Solyndra-style corruption.

Well, the World Bank has some new scholarly research that echoes my concerns. Two economists investigated the relationship with the regulatory burden and corruption.

Empirical studies such as Meon and Sekkat (2005) and De Rosa et al. (2010) show that corruption is more damaging for economic performance at higher levels of regulation or lower levels of governance quality. …Building on the above literature, in this paper, we use firm-level survey data on 39,732 firms in 111 countries collected by the World Bank’s Enterprise Surveys between 2009 and 2017 to test the hypothesis that corruption impedes firm productivity more at higher levels of regulation. …estimate the model using sample weighted OLS (Ordinary Least Squares) regression analysis.

And what did they discover?

We find that the negative relationship between corruption and productivity is amplified at high levels of regulation. In fact, at low levels of regulation, the relationship between corruption and productivity is insignificant. …we find that a 1 percent increase in bribes that firms pay to get things done, expressed as the share of annual sales, is significantly associated with about a 0.9 percent decrease in productivity of firms at the 75th percentile value of regulation (high regulation). In contrast, at the 25th percentile value of regulation (low regulation), the corresponding change is very small and statistically insignificant, though it is still negative. …after we control for investment, skills and raw materials, the coefficients of the interaction term between corruption and regulation became much larger… This provides support for the hypothesis that corruption is more damaging for productivity at higher levels of regulation.

Lord Acton famously wrote that “power corrupts, and absolute power corrupts absolutely.”
Based on the results from the World Bank study, we can say “regulation corrupts, and added regulation corrupts additionally.”"

Asking the correct questions about poverty and slavery

From Mark Perry.

"A couple examples below of asking the wrong question.

Wrong Question No. 1: What is the cause, explanation, or origin of poverty?

Reason it’s the wrong question? Because human history is a story of abject poverty that has been the natural state of mankind for many, many thousands of years (see chart above) and therefore no explanation is needed or necessary to understand the historical origins of poverty.

Thomas Hobbes famously described the natural state of mankind in the 17th century as “solitary, poor, nasty, brutish, and short.” More recently, Jonah Goldberg in his 2018 book Suicide of the West wrote that “The natural state of mankind is grinding poverty punctuated by horrific violence terminating with an early death. It was like this for a very, very long time.”

As the natural state of the human condition for millennia, poverty really has no “cause” or “origin” and therefore the question “What causes poverty?” is meaningless and irrelevant.

Correct Question: Not what causes poverty, but what caused the unprecedented and phenomenal “hockey stick” rise in economic growth and human prosperity and flourishing illustrated in the chart above that suddenly started a few hundred years ago, especially in the West?
As Thomas Sowell explains in the video below:

It’s not the origins of poverty that need to be explained. What requires explaining are the things that created and sustained higher standards of living [illustrated in the chart above]. There’s no explanation needed for poverty. The species began in poverty. So what you really need to know is what are the things that enable some countries, and some groups within countries, to become prosperous.”

Wrong Question #2: What’s the reason for slavery and why did it exist in the US and elsewhere?
Reason it’s the wrong question? Because slavery was practiced everywhere for most of human history and is still practiced today. For example, according to that National Geographic article titled “21st Century Slaves“:

There are an estimated 27 million men, women, and children in the world who are enslaved — physically confined or restrained and forced to work, or controlled through violence, or in some way treated as property.

Therefore, there are more slaves today than were seized from Africa in four centuries of the trans-Atlantic slave trade [11 million total, and about 450,000, or about 4% of the total, who were brought to the United States]. The modern commerce in humans rivals illegal drug trafficking in its global reach—and in the destruction of lives.

And as Thomas Sowell wrote:

Of all the tragic facts about the history of slavery, the most astonishing to an American today is that, although slavery was a worldwide institution for thousands of years, nowhere in the world was slavery a controversial issue prior to the 18^th century. People of every race and color were enslaved – and enslaved others. White people were still being bought and sold as slaves in the Ottoman Empire, decades after American blacks were freed.

Therefore to ask the reason for any type of human cruelty including slavery, which have existed for millennia and continues to exist today is to ask the wrong question as Gary Saul Morson points out in his article “How the great truth dawned“:

To ask the reason for cruelty is to ask the wrong question. People sometimes ask the reason for slavery, but since slavery was practiced everywhere for most of human history, the right question is the opposite one: why was slavery eventually abolished in many places? In the Bolshevik context, it is mercy and compassion that require explanation.

So there we have the Correct Question: Why was slavery eventually abolished in so many places including the US following thousands of years of the practice, and what’s the explanation for the rise of mercy and compassion that motivated the end of slavery in the US and elsewhere?
Here’s more from Sowell on the topic of abolishing slavery:

Everyone hated the idea of being a slave but few had any qualms about enslaving others. Slavery was just not an issue, not even among intellectuals, much less among political leaders, until the 18^th century – and then it was an issue only in Western civilization. Among those who turned against slavery in the 18^th century were George Washington, Thomas Jefferson, Patrick Henry and other American leaders. You could research all of the 18^th century Africa or Asia or the Middle East without finding any comparable rejection of slavery there. But who is singled out for scathing criticism today? American leaders of the 18^th century.
Deciding that slavery was wrong was much easier than deciding what to do with millions of people from another continent, of another race, and without any historical preparation for living as free citizens in a society like that of the United States, where they were 20 percent of the population.
It is clear from the private correspondence of Washington, Jefferson, and many others that their moral rejection of slavery was unambiguous, but the practical question of what to do now had them baffled. That would remain so for more than half a century.
In 1862, a ship carrying slaves from Africa to Cuba, in violation of a ban on the international slave trade, was captured on the high seas by the U.S. Navy. The crew was imprisoned and the captain was hanged in the United States – despite the fact that slavery itself was still legal at the time in Africa, Cuba, and in the United States. What does this tell us? That enslaving people was considered an abomination. But what to do with millions of people who were already enslaved was not equally clear.
That question was finally answered by a war in which one life was lost [620,000 Civil War casualties] for every six people freed [3.9 million]. Maybe that was the only answer. But don’t pretend today that it was an easy answer – or that those who grappled with the dilemma in the 18^th century were some special villains when most leaders and most people around the world saw nothing wrong with slavery.

MP: There’s a lot more time spent discussing the two wrong questions above rather than the two correct questions. Focusing on the correct questions would be a lot, lot more productive than wasting time on the wrong questions."

Scientists studying satellite image data from the fires in the Amazon rain forest said that most of the fires are burning on agricultural land where the forest had already been cleared

By K.K. Rebecca Lai, Denise Lu and Blacki Migliozzi of The NY Times. Excerpts:

"Most of the fires were likely set by farmers preparing the land for next year’s planting, a common agricultural practice, said the scientists from the University of Maryland."

"The majority of the agricultural land currently in use in Brazil’s Amazon region was created through years of deforestation. 

“Most of this is land use that have replaced rain forest,” said Matthew Hansen, who is a co-leader of the Global Land Analysis and Discovery laboratory at the University of Maryland. 

“Brazil has turned certain states like Mato Grosso into Iowa,” said Mr. Hanson, referring to the Brazilian state on the southern edge of the Amazon region. “You’ve got rain forest, and then there’s just an ocean of soybean.”"

"The increase in fires every August to October coincides with the season when farmers begin planting soybean and corn."