Medicare for All Will Cost St $34 trillion Over Its First Ten Years

See How the Urban Institute’s Estimates of ‘Medicare for All’ Costs Stack Up Against Mine by Charles Blahous of Mercatus.

"Last week, a group of scholars from the Urban Institute (UI) released cost estimates for several alternative approaches to health care reform, including an updated estimate of the cost of Medicare for All (M4A) in essentially the form proposed by Democratic presidential candidates Sens. Bernie Sanders (I-VT) and Elizabeth Warren (D-MA). The UI team found that M4A would add $34 trillion to federal spending over its first tenyears. Several people have asked me how the UI team’s estimate compares with my own that M4A would add at least $32.6 trillion to federal budget costs over its first ten years, and most likely substantially more (between $32.6 trillion and $38.8 trillion). To help with comparing the two estimates, I will first offer some general observations and then some specific numbers.

Observation #1: Scholars’ estimates of M4A’s costs are remarkably similar. Although the UI team’s methodologies differ from mine, it is striking how closely ours and other projections match one another, once adjusted for what they are measuring, which years are analyzed, and for certain key assumptions. Policy preferences do not enter into the estimating process, which simply draws upon the best available data to quantify the likely costs of M4A.

Observation #2: The UI team’s methodologies are different from mine, enabling them to analyze a wider range of policies and outcomes. The UI team makes use of a sophisticated health insurance policy simulation model (HIPSM), as well as another model for simulating future individual and household income (DYNASIM). I did not have access to such models. The potential scope of my analysis was therefore limited relative to the UI team’s. For example, because I was working primarily with national aggregates for various categories of health spending, and did not attempt to project how individuals will respond to different options and incentives, I could only estimate the cost of a universal system lacking significant individual choice. I was able to do so for Sen. Sanders’ M4A proposal because it would provide first-dollar coverage of nearly all health expenditures for nearly all Americans. The UI team produced estimates for a wide range of policy proposals in addition to M4A, and many of these estimates required a capacity to project individual participation decisions in addition to other key variables. As we have seen with the Affordable Care Act, it is very difficult for even the most knowledgeable experts to accurately project such outcomes.

Observation #3: My oft-cited figure of $32.6 trillion is a lower-bound estimate, whereas the UI team’s $34 trillion is toward the low end of a range. The $32.6 trillion number often referenced from my study is the number that results from assuming M4A fully delivers all the cost savings that its supporters aspire to achieve. Accordingly, my study makes clear that actual costs would almost certainly be substantially higher than that lower bound. The UI team surrounds its top-line estimate with various sensitivity analyses exploring possible deviations in either direction—both more expensive and less expensive. The UI team’s analyses taken together make clear that their top-line projection is more likely to underestimate costs than to overestimate them, but they also indicate that it’s not the lowest possible estimate.

Observation #4: We now have additional information indicating that actual costs under M4A would likely be substantially higher than under either of our headline estimates. Both my lower-bound estimate as well as the UI team’s estimate assume substantial cost savings from cutting health provider payment rates down to or near Medicare levels. Developments throughout this year further substantiate that M4A is highly unlikely to be implemented with such dramatic payment cuts.

Observation #5: None of the approaches modeled by the UI team would solve both the problems of unsustainable federal health spending and national health cost growth. Experts generally agree that current federal health spending obligations are unaffordable and that national health costs are excessive. Each of the options modeled by the UI team would make at least one of these problems worse, and half of them would actually make both problems worse.

Now let’s try to quantify more specifically how my estimate compares to that of the UI team. The UI team’s analysis is most detailed with respect to year 2020, so my comparisons will focus on that year. As a starting point for comparison, consider that the UI team projects that M4A would add $2.845 trillion in federal costs in 2020.

Adjustment #1: Offsetting tax revenues. If we establish a single-payer system, the federal government will take on more costs, while employers would no longer compensate workers with pre-tax health benefits. To the extent that such worker compensation subsequently takes the form of higher wages, these would be subject to federal taxes. Taking this additional tax revenue into account reduces the UI team’s projected net federal budget effect in 2020 from $2.845 trillion to $2.687 trillion. My estimates accounted for this effect, so UI’s $2.687 trillion figure is the one that more closely mirrors my analysis.

Adjustment #2: Years studied. My study focused on the years 2022-31, the first ten years of full implementation for Sen. Sanders’ 2017 bill at the time I studied it in 2018. Had I assumed the bill was fully effective in 2020, my lower bound estimate for that first year would have been $2.340 trillion.

Adjustments #3-5: Long-term care benefits, administrative costs, and hospital payment rates. The previous Sanders bill I studied did not provide new long-term care benefits whereas the latest Sanders bill, estimated by the UI team, does. My administrative cost assumption was also lower than the one employed by the UI team. The UI team assumed an administrative cost rate of 6 percent for the entire M4A system, whereas I implicitly assumed a lower rate by leaving unchanged the current administrative costs of covering all those now covered by Medicare, Medicaid or other public insurance. The UI team also assumes M4A would pay hospitals at 115 percent of Medicare rates, higher than the Medicare rates assumed in my lower-bound projection. Adjusting my estimates for my best understanding of the UI team’s assumptions would increase my estimate for 2020 from my lower bound of $2.340 trillion to $2.703 trillion—nearly the same as the UI team’s $2.687 trillion.

Adjustment #6: Other technical factors. Not being familiar with the UI team’s models, I cannot know all of the ways in which their assumptions differ from mine. The UI team uses a different data base for national health expenditures than the one I relied upon from the Centers for Medicare and Medicaid Services (CMS). According to the UI team’s paper, reconciling their estimates with CMS data would increase their NHE estimates for both current law and M4A by equal amounts. It’s not fully clear to me whether or how their federal cost estimates would be affected by this adjustment. 

Their sensitivity analysis also indicates that their headline estimate does not assume a state-level Maintenance of Effort requirement, whereas my projections assume one for long-term care. My best guess is that if I employed the UI team’s assumptions for these factors, my estimates (already adjusted for assumptions #2-5) would shift slightly downward, to $2.673 trillion. This once again is extremely close to the UI team’s $2.687 trillion.

There are undoubtedly many other ways in which my assumptions differ from those of the UI team. It appears that any other differences, however, largely cancel one another.

Bottom line: The UI team estimates that M4A’s net pressure on the federal budget in 2020 would be $2.687 trillion. Adjusting my lower-bound estimates for my best understanding of the UI team’s assumptions would bring mine somewhere between $2.673-2.703 trillion.

Ten-year cost estimate: The UI team estimates that new federal costs over ten years (2020-29) would be $32.0 trillion, net of new federal taxes. My lower-bound estimate for 2020-29 would be $29.2 trillion using the best-case assumptions in my paper, whereas if I employed the UI team’s assumptions as described above, it would be somewhere between $31.8 trillion and $32.2 trillion.

The latest analysis from the UI team is another piece of information substantiating what we already know about Medicare for All—that it would add at least $32 trillion to federal budget costs over its first ten years. We are still waiting to hear from M4A’s advocates how they intend to finance this unprecedented increase in federal expenditures, as well as how they would mitigate the economic damage that would result from imposing this amount of additional taxation upon the US economy."

The Unintended Consequences Of Ceasing Nuclear Power Operations In Japan

See Be Cautious with the Precautionary Principle: Evidence from Fukushima Daiichi Nuclear Accident Matthew J. Neidell, Shinsuke Uchida and Marcella Veronesi.

NBER Working Paper No. 26395
Issued in October 2019

 

This paper provides a large scale, empirical evaluation of unintended effects from invoking the precautionary principle after the Fukushima Daiichi nuclear accident. After the accident, all nuclear power stations ceased operation and nuclear power was replaced by fossil fuels, causing an exogenous increase in electricity prices. This increase led to a reduction in energy consumption, which caused an increase in mortality during very cold temperatures. We estimate that the increase in mortality from higher electricity prices outnumbers the mortality from the accident itself, suggesting the decision to cease nuclear production has contributed to more deaths than the accident itself.

Wind Power Sources Remain More Fantasy than Reality

By William F. Shughart II. He is a Senior Fellow at the Independent Institute and Professor in Public Choice at Utah State University.

"At first glance, wind power seems to be the path to a carbon-free energy future. Once harnessed, it’s clean and abundant. Larger turbines have enhanced wind’s power-generating capacity.

But contrary to its supporters, wind energy has grown thanks largely to production tax credits (2.3 cents per kilowatt hour) totaling billions of dollars. However, those credits are being phased out, and without such generous subsidies, wind energy will not make much of a dent in power production or carbon mitigation for at least a decade.

The amount of wind energy has tripled in the past 10 years, growing to 97,223 megawatts in 41 states. Half of that generating capacity is located in five of them: Texas, Iowa, Oklahoma, California and Kansas. Because seasonal wind patterns vary considerably across the country, wind’s contribution to the grid represents just 8 percent of power production nationwide.

Despite all the hoopla over wind energy, the nation’s only offshore wind turbines are located in coastal waters near Rhode Island. The Block Island Wind Farm, which went into operation in late 2016, cost $2 billion, plus $16.7 million to compensate companies that lost access to fishing grounds. Operating and maintenance expenses for wind farms currently add about $48,000 per megawatt generated.

Massachusetts likewise is preparing to obtain power from more than a score of huge wind turbines off its coast, carried to the mainland by underwater cables, with the cost passed through to households and businesses.

According to the Institute for Energy Research, offshore wind energy is “very, very expensive,” costing 2.6 times more than onshore wind power and 3.4 times more than power produced by a natural gas combined-cycle plant. Of course, the cost of wind farms surely will fall as more are built, and perhaps ways will be found to reduce the dangers wind turbines pose to birds, bats, and other wildlife.

In the meantime, if we are serious about reducing energy costs and carbon emissions, we need to be realistic about the limitations of power generated by the wind and other renewables.

A more practical environmental approach is to expand the use of the combined-cycle natural gas plants, which have smaller carbon footprints than coal plants and have reduced such emissions to levels not seen since the early 1990s. The shale revolution has made that possible, greatly strengthening economic incentives to substitute natural gas for coal in power production. Nowadays, data analytics and complex algorithms make it easier to find natural gas and boost the productivity of shale fields.

The surge in America’s natural-gas production also helps to reduce carbon emissions in other countries. Exports of liquefied natural gas (LNG) are projected to double by the end of this year. Asian countries that still rely heavily on coal are the largest purchasers of American LNG, using the clean-burning fuel to improve their air quality.

Shale has been the single biggest addition to the nation’s energy supply in many decades. Renewables at the moment offer more promise than reality. Even with lavish subsidies, wind and solar power together account for slightly more than 10 percent of the nation’s electricity. In contrast, gas provides nearly 35 percent; it is indispensable for generating backup power on days when the wind doesn’t blow, or the sun doesn’t shine.

Because of rising electricity demands and the retirement of coal and nuclear plants, many states are planning for more wind-powered electricity production. Under present regulatory regimes, most of the capital and operating costs of new wind farms will end up being added to consumers’ utility bills. So, too, in some states are “the stranded costs” of mothballed power plants.

Unsubsidized wind energy simply is too expensive to become a major source of electricity in most states. (In 2016, wind represented just seven-tenths of 1 percent of Massachusetts’s power production.) The inability of grid operators to manage the variations in power from wind and solar energy is creating new headaches.

Americans need a reliable supply of affordable electricity. But if too much weight is placed on wind and solar systems and not enough on conventional power plants, the result will be far too little electricity, with potentially grievous economic consequences."

Trump's steel tariffs were supposed to save the industry. They made things worse

By Don Lee, Los Angeles Times.

"When President Trump slapped 25% tariffs on foreign steel in March 2018, panicky U.S. buyers rushed to place new orders ahead of feared supply interruptions, driving prices up sharply.

It was an instant bonanza for domestic steel producers. With much fanfare, some announced ambitious expansion plans. United States Steel Corp. even fired up a pair of long-idled blast furnaces in Granite City, Ill., and Trump seized the occasion to deliver a rousing speech at the plant about the industry’s resurgence.

What a difference a year has made. Benchmark steel prices have fallen well below their level before the tariffs took effect and are now about half their peak in July 2018. The industry has responded with production cutbacks.

And while that Granite City smelter is still operating, Pittsburgh-based United States Steel has begun laying off scores of workers at two other old blast furnaces, near Detroit and in East Chicago, Ind. Several other steelmakers are closing mills, idling employees or cutting back work hours, in Louisiana, Kentucky, West Virginia and Pennsylvania. Overall employment at steel mills is little changed from two years ago.

It’s a potential political problem as well for Trump, who won office in 2016 on a promise to help revive American manufacturing and its blue-collar workers.

The root of the steel problem is a perfect storm that leaders of the American industry, prodded by Trump’s policies, created for themselves, their companies and their employees.

Emboldened by tariffs, the president’s pro-business rhetoric and tax cuts that poured money into corporate coffers, steel companies went on a spending spree that added production capacity to a domestic market that didn’t need it. Historically low interest rates added to the steel industry’s enthusiasm for investing in new and improved plants and equipment.

At the same time, Trump’s penchant for on-again, off-again trade warfare contributed to a general slowdown of the global economy. U.S. manufacturing, which along with the construction sector is the principle consumer of American steel, is currently in recession.

“It’s absolutely shocking that we’re adding capacity,” said Timna Tanners, a steel industry analyst at BofA Merrill Lynch Global Research. Falling demand and higher capacity are a “toxic combination,” she said, adding that the industry faces a painful reckoning — a “steel-maggedon.”

By analysts’ estimates, the more than 50 announced restarts, expansions and new projects — most of which are already underway — will increase domestic steel production capacity by about 20% in the next two to three years.

Trump administration officials and the American Iron and Steel Institute, which represents many domestic steel producers, argue that the tariffs have worked by curbing imports and boosting the share of U.S. production.

It’s true that steel imports have fallen as a share of the total domestic steel market, from about 30% of all U.S. purchases down to 20%. But even if imports fell to zero, there would still be more production capacity in the United States than needed, based on all the new projects underway.

Moreover, when the bulk of new capacity starts up later next year, Tanners said, demand for steel could slow further. Carmakers are increasingly using more aluminum and less steel, and nonresidential construction has already peaked.

That means steel prices could tumble further. Prices have already fallen for the benchmark hot-rolled coil from more than $900 a ton in July last year to about $470 today, said Timothy Triplett, senior editor at Steel Market Update.

“It hasn’t turned out as it might have intended,” he said of the Trump tariffs.

When Trump imposed the metal duties across the globe, he took the action on the grounds that imports threatened American national security, although few agreed with that thinking, even Trump’s own Defense Department. What’s more, the move offended big steel-exporting countries, especially allies including Canada and the European Union, which retaliated with tariffs on U.S. imports.

Trump recently removed the steel tariffs on Canada and Mexico after the two countries agreed to a revised North American Free Trade Agreement, but the damage was done.

Significantly, Trump’s steel tariffs didn’t tackle the fundamental problem: a global glut caused by an overproduction in China, which accounts for half the world’s supply. That’s because even before Trump’s action, China’s share of steel exports to the U.S. was only about 2% as Washington had previously levied many tariffs on China for dumping steel in markets and illegally subsidizing Chinese producers.

Nor did the Trump tariffs address the inefficiencies in the U.S. industry. Instead, the temporary lift merely delayed a shuttering of older, higher-cost integrated mills, which can’t compete with technologically advanced mini-mills and their electric arc furnaces.

AK Steel Corp.’s plant in Ashland, Ky., is a case in point. The Ohio-based company first announced an idling of the facility in October 2015, but it wasn’t until last month that the steelmaker told Kentucky government officials that it would permanently close the Ashland operations by year’s end, eliminating 260 jobs.

An AK spokesperson said the tariffs helped but weren’t enough to save the plant from “global steel overcapacity and unfair trading practices.”

With the fall in steel prices, more inefficient mills could shut down as the industry shifts to mini mills or lower-cost nonunion operations, but that’s not a given either. Labor agreements, long-term purchase contracts and a desire by steel firms to keep old facilities running will push back against restructuring. And companies aren’t likely to walk away from expansions and new plant projects.

“All this together paints a picture of these tariffs hurting the long-term competitiveness of U.S. steel,” said Christine McDaniel, a senior research fellow at George Mason University’s Mercatus Center, who has studied the steel tariffs and their effects. “It’s painful, but we’ve got to let the market work its course.”

Not only did the tariffs backfire, they angered many steel users and smaller players in the industry, who accuse the Trump administration of playing favorites.

As part of the tariff action, the Commerce Department allowed steel buyers to apply for exclusions from the 25% duty if they could show that the type of steel they were importing was not available in sufficient quantity in the U.S. Most requests have been approved, unless an objection was filed by another U.S. steel producer, usually claiming the product can be supplied domestically.

McDaniel found that as of the middle of this year, 59% of all the objections were lodged by just two firms, United States Steel and Nucor Corp. Both were strong proponents of the tariffs and both have ties to Trump administration officials.

Before becoming Trump’s top trade negotiator, Robert Lighthizer represented American steelmakers in private law practice. Nucor helped finance a documentary critical of China made by Peter Navarro, Trump’s trade advisor. And Dan DiMicco, who was part of Trump’s transition team, was once Nucor’s chief executive.

Smaller, rival steel companies complain that the government’s process for deciding on tariff exemptions have cost them many millions of dollars.

NLMK Steel, a steel “re-roller” that employs 1,200 workers at plants in Sharon, Pa., and Gary, Ind., buys slabs from its parent company in Russia and converts them into finished steel coils that are sold to construction and other industries.

Bob Miller, NLMK’s president of U.S. operations, said there is no real domestic market for steel slabs. Mills use slabs they make mostly for their own needs, to make finished coil to sell to end users, meaning that NLMK can’t get enough domestic steel, despite United States Steel and others saying they can supply the market.

Last year, Miller said, NLMK paid $170 million in tariffs for imported slabs — costs that squeezed margins and forced the company to launch rolling layoffs and cut work hours for its employees.
“You saw through policy the government actually picking a winner and a loser,” Miller said. “A year and a half later, the high-cost guys are still the high-cost guys. And to this date you still haven’t addressed the Chinese problem in full.”

Like NLMK, California Steel Industries is a re-roller. The Fontana operation, which employs about 930 workers, buys most of its steel slab from Brazil. Marcelo Botelho Rodrigues, California Steel’s chief executive, said his company filed 266 requests for tariff exclusions on foreign steel. Every one was denied.

The tariffs cost California Steel about $21 million last year. The company expects to post a loss in the fourth quarter. And it has already reduced temps and has a hiring freeze in place.

“It’s not really protecting the U.S. steel industry,” Rodrigues said of the Trump tariffs. “Actually it’s putting a lot of pressure on us.”

Neither Nucor nor United States Steel responded to requests for an interview. North Carolina-based Nucor operates electric arc furnaces and has benefited substantially from the tariffs, announcing more than $2 billion of new investments since the middle of last year. Still, its earnings this year have dropped sharply from last year. United States Steel recently warned of a loss in the latest quarter. And both companies’ stocks are down significantly from early last year.

A spokesperson for Commerce didn’t deny that requests for tariff exclusions that encountered objections were rarely approved. But the spokesperson said the agency “meticulously reviews the request” and that the process is “transparent and fair.”

Section 8 Landlording Shouldn’t Be Mandatory

By Walter Olson of Cato.

"Last year I wrote:

In principle, the federal housing-voucher program known as Section 8 ought to win points as a market-oriented alternative to the old command-and-control approach of planning and constructing public housing projects. While allowing recipients wider choice about where to live, it has also enabled private landlords to decide whether to participate and, if so, what mix of voucher-holding and conventionally paying tenants makes the most sense for a location….
For landlords, participation in the program has long carried with it some significant burdens of inspection, certification, and reporting paperwork. So long as participation was voluntary, these conditions were presumably worth it in exchange for the chance to reach voucher-holders as a class of potential tenants. When accepting Section 8 tenants stops being a voluntary choice, however, the balance is likely to shift. And one of the big policy pushes of the past decade — zealously promoted by the Obama administration — was the local enactment of laws and ordinances prohibiting so-called source-of-income discrimination, which in practice can mean making it a legal offense for a landlord to maintain a policy of declining Section 8 vouchers.

Since then, battles over whether landlord participation in Section 8 should remain voluntary have continued to flare around the country. While progressive litigators have thus far failed to derive an obligation to participate from the “disparate-impact” branch of housing discrimination law, they have persuaded the American Bar Association to endorse laws along these lines. Among the many local battles is a long-running controversy in Baltimore County, Maryland, the subject of this useful opinion piece in yesterday’s Baltimore Sun by local businessman Ben Frederick III.

It is sometimes claimed that to not participate in the program is to "discriminate” against voucher-holders, and suggestions of proxy racial discrimination are often not far behind. But as Frederick notes, landlords (many of whom are minority themselves) object above all to the strings:

There is nothing discriminatory about a person who has invested their life savings in a rental property deciding that they do not want to lose two month’s rent while waiting for a voucher holder to be approved and move in before they begin seeing rent; or from refusing to sign a federally mandated 12-page lease addendum; or from being subject to the whims of government funding for approval for how much rent might be paid; or from being subjected to annual inspections that are unpredictable and inconsistent, where the government will stop paying rent if the rental unit needs repairs, even if tenants abuse and damage the property.

A Johns Hopkins study last year for HUD of low-rent housing markets in Baltimore, Cleveland, and Dallas found that among landlords who chose not to participate in the voucher program, “the primary reasons stated were negative experiences with the program itself, including frustration with the inspection process, general bureaucracy, and disappointment when the PHA [public housing authority] did not take the landlord’s side in conflicts between landlord and tenant.”

Frederick notes that other landlords can and do build a business model around serving Section 8 users. That might involve developing standardized procedures, hiring and training staff with an eye to compliance know-how, and cultivating relationships with government actors. This is all more easily done at scale by adequately capitalized entrants in the rental property market. As it happens, however, the ranks of real-world landlords — perhaps especially in less affluent communities with older housing — include many mom-and-pop landlords short on the skill and inclination needed to pull this off.

Other government voucher programs, Frederick points out, get along with voluntary provider participation. “According to the Kaiser Family Foundation, 72% of physicians accept Medicaid, the government-funded health care program for the poor; 75% of food retailers, including grocery stores, convenience food stores and farmer’s market retailers, accept SNAP, more commonly known as food stamps.” In both cases, shouldering the regulatory burdens gives them access to valuable customer markets. But when they don’t find the burdens worth it, no one compels the doctors and food retailers to participate (at least not yet.)

“As business owners,” Frederick writes, “landlords should be free to make the same choice.” Indeed."

Don Boudreaux on Immigration

See Questions for Immigration Skeptics.

"Because restricting the entry of peaceful immigrants into the U.S. artificially obstructs Americans’ ability to associate with non-Americans – artificially obstructs Americans’ ability to employ and to otherwise deal with non-Americans commercially, to learn from non-Americans, to befriend non-Americans, to marry non-Americans – restricting peaceful immigration reduces the freedom of Americans. Why is this reduced freedom of Americans so seldom mentioned? Isn’t this negative consequence one of significance for those of us who take pride in being citizens of the land of the free?

Speaking of a line from our national anthem, what about immigrants is so frightening to us who boast of living in the home of the brave?

If it’s true, as I’ve often heard proclaimed, that among the most fundamental duties of government is to control the nation’s borders, was the U.S. government deficient in its fundamental duties under all presidential administrations from that of George Washington through that of James Garfield? After all, not until 1882 – with Chester Alan Arthur in office – did the U.S. government begin to restrict immigration, when it infamously prohibited the immigration of Chinese laborers.

If quotas on immigration are an essential tool for protecting us Americans from being terrorized on our own soil, why do we still have no quotas on foreigners who come to America as visitors? Must someone be a resident of the U.S. in order to unleash terror in America?

Immigration skeptics often argue as if the elimination of immigration quotas will result in immigrants streaming in endless hordes into the U.S. from poor countries. But doesn’t the fact that the number of undocumented immigrants in the U.S. fell during the Great Recession – and began again to rise only as the U.S. economy revived – strongly suggest that immigrants are drawn here not simply because the U.S. is a wealthy country but chiefly by the prospect of employment, even if it be employment that’s off the books and hidden from government officials?

Also, if the greater wealth of the U.S. relative to that of other countries were sufficient, absent quotas, to draw excessive numbers of people from poorer places to the U.S., why do most Puerto Ricans not flock to the U.S.? Puerto Rico remains much poorer than places such as Boston, New York, Miami, Dallas, Salt Lake City, and Los Angeles, yet most Puerto Ricans – despite being perfectly free to immigrate to any of the 50 states and the District of Columbia – remain in Puerto Rico.

Indeed, if it were true that people from economically poorer places are invariably drawn to wealthier places, why do not all Kentuckians, Mississippians, and New Mexicans flock to much-richer states such as Connecticut, New Jersey, and Wyoming?"

The Long-Term Effects of California’s 2004 Paid Family Leave Act on Women’s Careers

From Tyler Cowen.

"It is not obviously a winner policy, at least not from the point of view of boosting women’s labor market opportunities.  In fact it seems to harm them:

This paper uses IRS tax data to evaluate the short- and long-term effects of California’s 2004 Paid Family Leave Act (PFLA) on women’s careers. Our research design exploits the increased availability of paid leave for women giving birth in the third quarter of 2004 (just after PFLA was implemented). These mothers were 18 percentage points more likely to use paid leave but otherwise identical to multiple comparison groups in pre-birth demographic, marital, and work characteristics. We find little evidence that PFLA increased women’s employment, wage earnings, or attachment to employers. For new mothers, taking up PFLA reduced employment by 7 percent and lowered annual wages by 8 percent six to ten years after giving birth. Overall, PFLA tended to reduce the number of children born and, by decreasing mothers’ time at work, increase time spent with children.

That is from a new NBER working paper by Martha J. Bailey, Tanya S. Byker, Elena Patel, and Shanthi Ramnath.  And are you wondering why the number of children falls as a response?  Because the mother ends up staying home with them?  Or do mothers invest more in child quality, thereby lower quantity, as in a Becker model?  In any case a good question."

Saez, Mankiw and Summers on the wealth tax

See Larry Summers Does a First-Rate Economic Analysis by David Henderson.

"Bottom line: If you’re someone who wants to see good economics being done or wants your students to see good economics being done, watch the video I discuss below. Larry Summers’s inputs are a microeconomics tour de force. Be aware, though, that Larry has one pretty awful proposal.

Various friends on Facebook and various bloggers have been recommending a panel discussion held at the Peterson Institute for International Economics and featuring Emmanuel Saez of UC Berkeley, Greg Mankiw of Harvard, and Larry Summers of Harvard. The recommendation is well deserved.
The session is titled “Would a ‘Wealth Tax’ Help Combat Inequality? A Debate with Saez, Summers, and Mankiw.” It occurred at an October 17-18 conference.

Normally, I state exact times in such long discussions so that  you can quickly go to those highlights. I’ll do so to some extent here, but I highly recommend that you watch the whole thing. If your time is limited, then watch Larry’s part, which begins at around the 20 minute point and the panel discussion, which begins at around the 50 minute point.

I’ll mention many high points and two criticisms of Larry, not of his analysis, but of his values.
First, although it isn’t absolutely necessary, you’re probably wise to watch Saez’s talk, which goes first and sets the stage. Second, the thing not to miss is Larry Summers’s talk. It’s a relentless application of microeconomics. He lays out how a wealth tax will give incentives to hide wealth or, to the extent it doesn’t, will give wealthy people incentives to donate more to their favorite causes.
Mankiw adds a number of good points but the real show is Summers.

In the panel discussion, Saez makes a weak attempt to back up his claims but Summers just doesn’t let go.

6:25: Saez claims that Amazon’s wealth and Jeff Bezos’s wealth are due to monopoly rents. Really? Amazon cuts prices on virtually everything and delivers incredibly quickly and that’s monopoly? I’ll mention a recent story whose type is not uncommon. I lost my pickleball paddle on Thursday morning and wanted to have a replacement so I could play Saturday morning. So on Thursday at around noon, I went to Amazon’s site. It told me that I had ordered a paddle 2 years ago. I liked it and so I ordered the same one. When I bought it 2 years ago, I paid about $150, including tax. When I bought it this time, I paid about $85 including tax. And it arrived in time for most of my play on Saturday. Those damn monopolists!

7:30: Saez says that it’s hard to measure wealth (true) because we don’t have a wealth tax yet. But even if we had the kind of wealth tax that he, Senator Warren, and Senator Sanders advocates, it would be hard to measure most people’s wealth because over 99 percent of Americans wouldn’t be subject to it. That is, unless he has something else in mind that he’s not telling us.

Now to Larry Summers.

20:45. Larry has been following the Twitter wars between Saez and his critics and finds himself 98.5% convinced that the critics are right. Saez’s data are “substantially inaccurate.” Phil Magness has weighed in on this.

22:00: The arguments about how the wealthy can use money to get a lot of political power don’t make sense in the context of a wealth tax. The reality is that with either the Democratic Party or the Republican Party, a wealthy person can get a lot of clout by spending $4 to $5 million a year. No substantial wealth tax is going to prevent the wealthiest people from spending that amount or even a multiple of that amount.

22:00: When you think about the worst special interest abuses, it’s things like the NRA. Really, Larry? How is the NRA abusive? He doesn’t say. He probably thinks, and probably correctly, that his audience doesn’t like the NRA and, therefore, he doesn’t need to make the case.

22:40: If you had a wealth tax, you would likely increase the clout of the wealthy because a standard way around wealth taxes [DRH note: just look at the estate tax for evidence] is to give away wealth.
24:40: Larry makes a point that his late mentor Martin Feldstein made. The higher Social Security and Medicare benefits are, the less need there is to save. So if you measure wealth the way it’s typically measured–tangible net worth–which excludes the present value of future retirement income streams, the bottom half will look very unwealthy.

25:50: Larry considers 3 activities wealthy people can do. Activity A is continuing to invest it productively. Activity B is consuming it. Activity C is donating it to causes and, thereby, having large political influence. A wealth tax, he notes, is most punitive of Activity A.

At around the 37:30 point, Greg Mankiw starts off strong, giving a comparison of Frank Frugal and Sam Spendthrift. A wealth tax, of course, would cause Frank Frugal, who is doing more for society, to pay higher taxes. I don’t know if Greg knows this, but his discussion is very much in line with early mid-19th century French economist Frederic Bastiat’s discussion in “What is Seen and What is Not Seen” of Mondor and his brother Ariste.

41:45: Greg makes an interesting point about 2 versions of a Universal Basic Income, pointing out that though they look different, they are exactly the same. I was disappointed, though, that he didn’t point out that such a plan would, in one fell swoop, make the federal government much closer in size to the size of Western European governments. See my article for more.

52:38: Larry goes back to one of his themes that I criticized a decade ago–going after wealthy people who illegally hide their wealth. He says that government officials who go after them “are doing the Lord’s wealth.” I’m not a Christian, but if I were, I would never use that term to describe what they’re doing. Relatedly, Larry approvingly quotes Gene Sperling’s claim that wealthy Americans who renounce their U.S. citizenship to avoid U.S. taxes are “economic Benedict Arnolds.” Would he say that about Californians renouncing their California residency to move to Florida and avoid California’s high taxes? And if not, why not?

53:30: Larry says it’s good to penalize people for leaving the United States. I’m glad he didn’t have a say about people leaving Europe in the late 19th and early 20th centuries to avoid conscription, thus leaving their human capital intact.

1:01:40: Catherine Rampell of the Washington Post makes the point that Bastiat refuted in the link above, and Greg does a nice job of refuting it here. Actually, though, I think Bastiat did it better.
1:05:30 to about 1:10:00: Must be seen. Larry makes a point I made in some articles in Red Herring in the late 1990s about how Bill Gates’s wealth did not protect him from the Clinton Administration.
Larry tells Saez he’s looking for a case when reducing a multi-billionaire’s wealth by 20 percent would cause better policy decisions or better decisions in general. Saez can’t give him one.

1:09:24: I missed it the first time around but Greg Mankiw makes the point that if Bill Gates had had 20 percent less wealth, he might have put less into eradicating disease in Africa and that’s what Saez is trying to get rid of.

1:10:10: Saez says “robber barons” means something. Unfortunately, Saez seems ignorant of that issue also.

1:11:20: Heather Boushey in the audience says that she wants wealthy people to have less influence about how their wealth is spent. Larry agrees with her, unfortunately, but points out, as he had earlier, that a wealth tax will give wealthy people an incentive to spend their wealth in ways that she doesn’t want. But before we get to Larry, Greg Mankiw has his finest moment of the session, pointing out that he, Greg, thinks Bill Gates spends his wealth better than Donald Trump would spend it; Greg points out how badly democracy works.

1:17:00: Larry makes a very good point about the practical issues involved that make it hard to tax capital gains annually rather than when realized. His hardware store story is great. He then goes on to point out that an increase in the future path of your income is a capital gain. He does that nicely too.

Overall, Larry was pretty much at his best. At times, he reminded me of David Friedman at his best, although with less of a twinkle in his eye."

Duflo and Banerjee advocate bigger government

By Scott Sumner.

"Nobel Laureates Esther Duflo and Abhijit Banerjee have a new piece in the New York Times.  A reasonable summary of their position might be that they would like American economic policy to more closely resemble the economic policies of the Eurozone.  This would include much higher taxes and also much more generous social welfare programs.  They also claim that higher taxes and higher spending on social welfare programs would not significantly reduce work effort.  They suggest that incentive effects are greatly overrated.

Note that the Eurozone is dramatically poorer than the US, with a per capita GDP of about $40,000 in 2018, vs. $62,600 in the US.  Eurozone workers have lower productivity and they work far fewer hours.  Eurozone incomes are comparable to those earned by residents of Mississippi.

Clearly there is no necessary contradiction here.  Eurozone workers may work far fewer hours for reasons unrelated to “incentives”.  But each time I ask a progressive to tell me why the Eurozone is so much poorer than America, they are completely unable to come up with an explanation that is even remotely plausible.  (Thus “culture” doesn’t explain why the hours worked gap only opened up during my lifetime.)

In contrast, I do have an explanation for the gap.  I believe that incentive effects are greatly underrated and that Eurozone residents have much less incentive to work than Americans."

Bryan Caplan on Barbara Ehrenreich

See Rod Long on the Plight of the Worker.

"In response to my Nickel and Dimed posts, my old friend Roderick Long referred me to his original review of the book.  Highlights of Rod’s review:

Ehrenreich went “undercover” to document the lives of the working poor and the Kafkaesque maze of obstacles they face: the grindingly low wages; the desperate scramble to make ends meet; the perpetual uncertainty; the surreal, pseudo-scientific job application process; the arbitrary and humiliating petty chickenshit tyrannies of employers; the techniques of intimidation and normalisation; the mandatory time-wasting; the indifference to employee health; the unpredictably changing work schedules, making it impossible to hold a second job; etc., etc.
None of this was news to me; I’ve lived the life she describes, and she captures it quite well. But it might well be news to those on the right who heroise the managerial class and imagine that the main causes of poverty are laziness and welfare.
Of course the book has its flaws…
But Ehrenreich’s misguided diagnoses and prescriptions occupy at most a tenth of the book. The bulk of the book is devoted to a description of the problems, and there’s nothing sneerworthy about that. And libertarians will win few supporters so long as they continue to give the impression of regarding the problems Ehrenreich describes as unimportant or non-existent. If you’re desperately ill, and Physician A offers a snake-oil remedy while Physician B merely snaps, “stop whining!” and offers nothing, Physician A will win every time.

Rod’s solutions:

First: eliminate state intervention, which predictably works to benefit the politically-connected, not the poor. As I like to say, libertarianism is the proletarian revolution. Without all the taxes, fees, licenses, and regulations that disproportionately burden the poor, it would be much easier for them to start their own businesses rather than working for others. As for those who do still work for others, in the dynamically expanding economy that a rollback of state violence would bring, employers would have to compete much more vigorously for workers, thus making it much harder for employers to treat workers like crap…
Second: build worker solidarity. On the one hand, this means formal organisation, including unionisation – but I’m not talking about the prevailing model of “business unions,” conspiring to exclude lower-wage workers and jockeying for partnership with the corporate/government elite, but real unions, the old-fashioned kind, committed to the working class and not just union members, and interested in worker autonomy, not government patronage.

I’ve had similar debates with Rod before, but I still can’t resist responding.  Verily, I do “heroise” the managerial class.  And at least in the First World, I do think that irresponsible behavior (partly fueled by the welfare state) is the main cause of severe poverty.  Specifically:

1. Management quality is vital for productivity – and measured management quality really is high in First World countries.  Contrary to stereotypes, poor countries have very little big business. Instead, their economies are dominated by “informality” and self-employment.  So yes, I am most grateful to managers for doing their jobs – especially given all the abuse that intellectuals and activists have heaped upon them.

2. In rich countries, non-work is the main cause of severe poverty.  A small percentage of non-workers are seriously disabled or genuinely can’t find a job.  The overwhelming reason for non-work, though, is behavior that intuitively seems highly irresponsible.  Such as?  Not searching for a job.  Not showing up for work on time – or at all.  Having impulsive sex.  Committing crimes.   Sloth (“laziness”) is one poverty-inducing vice, but don’t forget lust and wrath.

3. There are, of course, many full-time workers who – like Ehrenreich and most of her co-workers – end up moderately poor.  How is this possible?  I endorse the standard economic explanation: low-paid workers are, on average, low-skilled.  Since they aren’t very productive, employers don’t bid much for their services.

4. Why, though, do low-skilled workers endure such unpleasant working conditions?  Again, I endorse the standard economic explanation: making work more pleasant costs money – and low-income workers don’t want to take a pay cut to get more pleasant working conditions.

5. Rod apparently rejects both textbook stories.  Instead, he blames the government for using “taxes, fees, licenses, and regulations” to prevent the poor from “starting their own businesses rather than working for others.”  While I would be happy to see “taxes, fees, licenses, and regulations” go away, I’m afraid there’s little reason to think this would sharply increase the poor’s rates of self-employment or small business ownership.  Why not?  Because  it’s far from clear that regulation on net penalizes small businesses relative to big businesses.  Yes, some regulations impose fixed costs, which discourage small business and self-employment.  However, many regulations specifically exempt small business.  Furthermore, it is much easier for small business to evade regulation.  I wouldn’t be shocked if self-employment and small business became somewhat bigger under laissez-faire, but Rod’s confidence that this effect would be big is wishful thinking.

6. I totally agree with Rod’s view that government hurts the poor by suppressing economic growth.  Because government hurts almost everyone by suppressing economic growth.

7. I’m honestly puzzled by Rod’s desire to see the poor start their own businesses.  Romantic thinking aside, most people lack the competence for self-employment. With or without regulation, it’s incredibly hard.  I get that Rod has seen the ugly side of low-skilled employment first-hand.  But what about the ugly side of low-skilled self-employment?  Instead of bosses mistreating you, you’re mistreated directly by customers.  If you can actually get some customers, which is like pulling teeth.  Imagine how bleak Ehrenreich’s book would have been if, instead of trying to find a bunch of low-skilled jobs, she tried to found a bunch of low-skilled businesses!  Without her savings, she probably would have ended up homeless.

8. I’m even more puzzled by Rod’s desire to “build worker solidarity” and support for unions.  The standard economic story says that unions are labor cartels; they improve wages and working conditions for members at the expense of other workers and the rest of society.  While I’ll defend the legality of unions on libertarian grounds, they’re nothing to celebrate.  The best I can say is that without government help, very few people will belong to unions.  Indeed, even with hefty pro-union regulations on their side, private sector unions have almost disappeared in the U.S.  But isn’t solidarity nice?  Not solidarity with large, unselective groups like “workers” – and not when you build solidarity by scapegoating employers as exploiters and managers as bullies.

9. General observation: If you know a little social science and a lot of libertarianism, Rod Long’s story sounds great.  If you want to sell libertarianism to leftists, his approach is plausibly more persuasive than mine.  Alas, if you take the time to learn more social science, Rod’s story isn’t tenable."

Oxfam claims that the eight richest people on Earth have as much wealth as the bottom half of the world’s population using questionable methodology

See Oxfam Thinks U.S. College Grads Are World's Neediest by Chelsea Follett of Cato.

"Every year, Oxfam releases a report meant to shock the public about the extent of income and wealth inequality. This year’s report claims that the eight richest people on Earth have as much wealth as the bottom half of the world’s population (3.6 out of 7.2 billion people). That’s certainly shocking. It’s also profoundly misleading.

As others have pointed out, Oxfam reached that number with a questionable methodology, which also led them to several other absurd conclusions. According to their own graphs, more poor people live in North America and Europe than China (see the chart below). How can that be, given that traditional poverty measures show the opposite?

Oxfam isn’t using a traditional poverty measure (such as the number of people with a purchasing-power-adjusted income of less than, say, $2 per day). Instead, they focus on something called “net wealth.” This is the sum of an individual’s wealth minus any debts.

Of course, many people in rich countries carry debt due to university loans or a home mortgage, yet also enjoy high incomes and an enviable standard of living.

Here are some illustrations of just how absurd it is to use net wealth as a measure of poverty.

Consider this. Oxfam claims a penniless, starving man in rural Asia or Sub-Saharan Africa is far richer than an American university graduate with student debt but a high-paying office job, a $2,000 laptop and a penchant for drinking $8 designer coffees.

Let that sink in.

(I must credit Cato’s Adam Bates for that example).

Here is another example, courtesy of Johan Norberg. He points out that his daughter, a child with only about twenty dollars in her piggy bank, is richer than 2 billion people by Oxfam’s logic. If that were true, then the solution would surely not be to take away the humble savings of his daughter and redistribute them among those 2 billion souls, but rather to generate more total wealth, “enlarging the pie” so to speak.

That’s the core problem with obsessing over “inequality.” If the goal is to further human wellbeing, then instead of decreasing inequality through redistribution, we should focus on decreasing poverty by creating ever more wealth. Happily, thanks to the wealth-creating power of market exchange, we’re doing just that. The trend lines all show that poverty (by any reasonable measure) is in retreat."

The evidence for wealth inequality leading to democratic capture is extraordinarily thin

By Ryan Bourne of Cato.

"“Billionaires have seized our government,” Senator Elizabeth Warren claimed earlier this year. This idea, that the rise in wealth inequality has led to the capture of politics by super wealthy elites, is fast becoming conventional wisdom on the left of politics and used as justification for wealth taxes.

Paul Krugman has asked, for example, “Can anyone seriously deny that our political system is being warped by the influence of big money, and that the warping is getting worse as the wealth of a few grows ever larger?”

Former lead economist at the World Bank, Branko Milanović, has claimed “In every political system, even a democracy, the rich tend to hold more political power. The danger is that this political power will be used to promote policies that further cement the economic power of the rich. The higher the inequality, the more likely we are to move away from democracy toward plutocracy.”

Warren’s wealth tax architects, economists Emmanuel Saez and Gabriel Zucman, have said that their tax was designed not to raise revenue or improve economic efficiency, but to prevent this ongoing “oligarchic drift that, if left unaddressed, will continue undermining the social compact and risk killing democracy.” 

So which millionaires and billionaires have captured the US’s democracy as wealth inequality has risen? Liberal billionaires, such as George Soros and Tom Steyer, perhaps? Or maybe conservative and libertarian billionaires, such as Sheldon Anderson and Charles Koch? The point I make here is an important one: there is no homogenous political view among the wealthy; just as Martin Gilens found among the income rich “the affluent are no more (or less) likely to be of one mind” than the middle-classes or the poor.

This is unsurprising. Look at Congress itself. Roll Call’s analysis shows that of the ten wealthiest members, five are Republicans and five are Democrats. Analysis below uses the “nominate scores” method to map apparent support for redistribution across those members with positive net worth from roll calls during the 111th–115th congresses. As you can see, there’s no relationship between wealth and support for redistribution overall. Party allegiance is much more important. There is little class-consciousness among the wealthy on the Capitol.

That’s not to say that the very wealthy across America might not, on average, have relatively different views than the rest of us. Evidence here is scarce, but one survey by Benjamin Page, Larry Bartels, and Jason Seawright of 104 wealthy individuals with wealth over $40 million in Chicago did find some differences. 

Wealthy individuals, they found, were (on average) more likely to worry about budget deficits and more likely to want to cut Social Security, healthcare, food stamps, and homeland security spending than the rest of the population. They were less likely to support more redistribution, but overall supported income taxation at current rates and backed a progressive Social Security system. On regulation, they favored intervention in areas where scandals had occurred but considered small businesses to be overregulated. 

Other surveys by Martin Gilens on the top 10 percent by income (a much broader group) have found that “the income rich” had somewhat stronger opposition to taxes and business regulation than the rest of the population, were less protectionist on trade policy; less conservative on religious and moral issues; and more supportive of foreign aid, top income and capital gains tax cuts, gas tax increases, and restraint in Social Security and Medicare spending.

If the wealthy have captured politics, they are doing a pretty good job of hiding it. Yes, we’ve recently seen the Tax Cuts and Jobs Act, and an effective moratorium on new regulation. But we’ve also seen rampant trade protectionism, a President attempting to cut foreign aid, protection of entitlement spending, conservative justices appointed to the Supreme Court, and the President push for much higher homeland security spending. In recent years, there’s been much discussion over pretty imaginative antitrust action against three of the top 10 richest Americans’ companies: Jeff Bezos’ Amazon, Mark Zuckerberg’s Facebook, and Larry Page’s Google. Some “capture of democracy.”

Progressive economists tend to focus, of course, just on top taxes and social spending as a proxy, implicitly arguing that the absence of a bigger welfare state with more taxes on the rich is evidence itself that the wealthy have captured politics already. Surely, simple strength of numbers shows the majority should have voted for more progressive taxes to fund transfers to the rest of us?

But as the chart below shows, across countries there’s no relationship between top wealth shares and social spending. And as top wealth inequality has risen, the welfare state has expanded and not shrank. Indeed, a growing welfare state may be a *cause* of higher private wealth inequality.

It’s easier for progressives to think that the super wealthy are to blame for their policy preferences not being implemented than to contemplate a more uncomfortable explanation: voters generally do not think inequality a major problem, and to the extent they might, they do not support big government policies to solve it. Two percent or less of the public say “the gap between rich and poor” is the “most important issue” facing the country. Estate taxes are widely loathed, despite how few people pay them. Much evidence suggests the public’s conception of fairness differs strongly from the progressive or socialist worldviews.

At a PIIE conference last week, Larry Summers outlined that he thought it extremely unlikely that growing wealth inequality led to a captured democracy. Yes, the rich tend to be more politically involved than the rest of us. But the cost of access to politicians is relatively low. You don’t need to be super wealthy to get on the top donor table. So the key driver of wealth inequality we have seen – rising top wealth – is unlikely to have changed many political outcomes. Vested interests and cronyism are far more important causes, bringing (as they tend to) paths to obtaining money and, more importantly, votes.

In short, the evidence for wealth inequality leading to democratic capture is extraordinarily thin. A 2019 Cato-YouGov poll found that 62 percent of Americans surveyed do not believe that “billionaires are a threat to democracy.” What hard evidence do Warren and others have to suggest they are wrong?"

John Alcorn on the problems caused by the war on drugs

See Prohibitions: Mind Drugs and Policy. John Alcorn is Principal Lecturer in Formal Organizations, Shelby Cullom Davis Endowment, Trinity College, Connecticut. Excerpts:

"Manolis Galenianos and Alessandro Gavazza report find that the War on Drugs has backfired:

“in the past 30 years the United States has markedly increased the enforcement and severity of its drug laws—the so-called ‘war on drugs’—which has resulted in the tripling of arrests for drug-related offenses. Interestingly, during the same period, drugs have become dramatically cheaper and purer. [… .] our analysis suggests that increasing penalties may have contributed to the observed increased purity and affordability of retail drugs in the United States.”"

Carlos Dobkin and Nancy Nicosia find that a targeted ‘surge’ in the War on Drugs, against the market for illicit methamphetamines, had ephemeral results:

“A government effort to reduce the supply of methamphetamine precursors successfully disrupted the methamphetamine market and interrupted a trajectory of increasing usage. The price of methamphetamine tripled and purity declined from 90% to 20%. Simultaneously, amphetamine-related hospital and methamphetamine-related treatment admissions dropped 50% and 35%, respectively. Methamphetamine use among arrestees declined 55%. Although felony methamphetamine arrests fell 50%, there is no evidence of substantial reductions in property or violent crime. The impact was largely temporary. The price returned to its original level within four months; purity, hospital admissions, treatment admissions, and arrests approached pre intervention levels within eighteen months.”

Michael Huemer makes a case that punitive paternalism against consumers of mind drugs and punishment of suppliers of mind drugs are violations of natural rights:

“it is not just that we are punishing people for no good reason. We are punishing people for exercising their natural rights. Individuals have a right to use drugs. [… .] no one should be permitted to drive or operate heavy machinery while under the influence of drugs that impair their ability to do those things; nor should pregnant mothers be permitted to ingest drugs, if it can be proven that those drugs cause substantial risks to their babies [… .] But, in the great majority of cases, drug use does not harm anyone in […] ways that we normally take to merit criminal penalties—and should not be outlawed. [… .] The harm of being unjustly imprisoned is qualitatively comparable (though it usually ends sooner) to the harm of being enslaved. […] scapegoating and stereotyping of drug users and sellers […] is comparable to the racial prejudices of previous generations.”

Some moral philosophers worry that mind drugs and self-medication can become vice. Baruch Spinoza, although hardly a conformist, shares the worry about vice; but argues that prohibitions of vice tend to backfire:

“He who seeks to regulate everything by law is more likely to arouse vices than to reform them. It is best to grant what cannot be abolished, even though it be in itself harmful. How many evils spring from luxury, envy, avarice, drunkenness and the like, yet these are tolerated—vices as they are—because they cannot be prevented by legal enactments.” (Tractatus Theologico-Politicus
Michael Huemer makes a case that punitive paternalism against consumers of mind drugs and punishment of suppliers of mind drugs are violations of natural rights:

“it is not just that we are punishing people for no good reason. We are punishing people for exercising their natural rights. Individuals have a right to use drugs. [… .] no one should be permitted to drive or operate heavy machinery while under the influence of drugs that impair their ability to do those things; nor should pregnant mothers be permitted to ingest drugs, if it can be proven that those drugs cause substantial risks to their babies [… .] But, in the great majority of cases, drug use does not harm anyone in […] ways that we normally take to merit criminal penalties—and should not be outlawed. [… .] The harm of being unjustly imprisoned is qualitatively comparable (though it usually ends sooner) to the harm of being enslaved. […] scapegoating and stereotyping of drug users and sellers […] is comparable to the racial prejudices of previous generations.”"

"Some moral philosophers worry that mind drugs and self-medication can become vice. Baruch Spinoza, although hardly a conformist, shares the worry about vice; but argues that prohibitions of vice tend to backfire:

“He who seeks to regulate everything by law is more likely to arouse vices than to reform them. It is best to grant what cannot be abolished, even though it be in itself harmful. How many evils spring from luxury, envy, avarice, drunkenness and the like, yet these are tolerated—vices as they are—because they cannot be prevented by legal enactments.” (Tractatus Theologico-Politicus [1670] Ch. xx, pp. 338-339)"

"Jessica Flanigan reports that regulations can backfire. For example, prescription can induce imprudent consumption:

“People think that if we didn’t have prescription requirements, people would accidentally overdose all the time. There’s some evidence from the 70’s that middle income countries in Europe that didn’t enforce prescription requirements actually had lower rates of accidental poisoning. People made riskier choices if they thought that their self-medication choices were authorized by a physician.” (p. 8)"

"Moreover, William Evans, Ethan Lieber, and Patrick Power report that the reformulation of OxyContin—a change designed to reduce abuse and illicit diversion—backfired by increasing heroin use:

“We attribute the recent quadrupling of heroin death rates to the August 2010 reformulation of an oft-abused prescription opioid, OxyContin. The new abuse-deterrent formulation led many consumers to substitute to an inexpensive alternative, heroin. Using structural break techniques and variation in substitution risk, we find that opioid consumption stops rising in August 2010, heroin deaths begin climbing the following month, and growth in heroin deaths was greater in areas with greater pre-reformulation access to heroin and opioids. The reformulation did not generate a reduction in combined heroin and opioid mortality: each prevented opioid death was replaced with a heroin death.”"

Gary Becker, Kevin Murphy, and Michael Grossman analyze a different approach to public policy about mind drugs: legalization with taxation, rather than complex regulation. Their model assumes—reasonably, I think—that ‘problem use’ of mind drugs under prohibition involves inelastic demand.  (Heavy users are addicts.)  Legalization with taxation is then superior to prohibition:

“a monetary tax could cause a greater reduction in output and increase in price than optimal enforcement against the same good would if it were illegal, even though some producers may go underground to avoid a monetary tax. When enforcement is costly, excise taxes and quantity restrictions are not equivalent. [… .] This means, in particular, that fighting a war on drugs by legalizing drug use and taxing consumption may be more effective in reducing consumption than continuing to prohibit the legal use of drugs. [… .] When demand is inelastic, quantity reductions through enforcement against illegal producers are very costly and can be disastrous. [… .] Suppliers who avoid detection make huge profits, which provides them with resources to corrupt officials and gives them incentives even to kill law enforcement officers and competitors.” (pp. 38, 40, & 60)"

Cubans are still living under a patriarchy shaped by the revolution

See Cuban Women Await Their #MeToo Moment. By Wendy Guerra in The NY Times. Wendy Guerra is a Cuban poet and novelist. Her most recent book is “El mercenario que coleccionaba obras de arte.” Excerpts:

"To this day, however, most Cuban women are unaware of what their individual rights are, and few know how dangerous it is to become aware of them. In Cuba, various forms of harassment, abuse and violence against women persist, and there are systems in place for punishing those who do not put down their heads and surrender to the reality that men are in control of our daily lives.

Throughout my life, I’ve seen how powerless parents are in matters regarding their own children. Parents have no say over how their children should be raised, whether they will be conscripted or sent away to school in rural areas, and what dangers could befall them being so far from home and such a young age. They have no say over their children’s manners, religious teachings and political ideologies. There are only two choices: Run with the herd or be crushed by it.

As a teenager in the 1980s, I was taught in a “scientific communism” class that family was the heart of society. But from what I could see, that was no longer the case; organizations with mass followings like the Young Communist League had taken its place.

Things do not improve after leaving school. The intrusive way in which some men treat us, no matter who is present, is plain harassment. In Cuba it is considered normal for you to be shouted at, bossed around, touched without permission, because women are seen as subordinates.

When it came time to choose potential successors for a post-Castro Cuba, not one woman was considered. This was by design. In high school, a teacher and former member of the military once told me, “Men are in command because men made the revolution possible.”

The truth is that Cuban women possess great strength and proved their valor on the front lines of the revolution, too.

The guerrilla fighter Celia Sánchez Manduley was one who did. Without her and a small group of female soldiers known as the Marianas, Fidel Castro’s victorious march into Havana in 1959 wouldn’t have been possible. But because Ms. Sánchez is described in her official biographies as “one of Fidel’s closest collaborators,” and not as a revolutionary in her own right, many Cuban girls are unaware of her achievements.

She opposed executions by firing squad and the forced-labor camps where Mr. Castro sent gay men and other so-called counter-revolutionaries. Despite her role in the revolution, Ms. Sánchez was never granted the title of “comandante.” She also was an outspoken woman who, surrounded by a male-dominated military, was not able to carry out her own objectives.

Today, being a woman in Cuba who is unwilling to keep silent is complicated. We are also policed by other women: Family, friends, neighbors and colleagues can all be enlisted to report on, betray and bad-mouth us. This ends up hurting all of us.

While the #MeToo movement has reached countries around the world, Cubans are still living under a patriarchy shaped by the revolution. Cuban men don’t see a problem, and convincing them otherwise is futile, because for generations they’ve been taught that women were liberated 60 years ago during the revolution and that we require nothing more. Doing anything that doesn’t benefit the state makes you suspicious."

"I am not allowed to publish works in my own country that describe Cuba’s stark reality."

"In Cuba, endemic sexism is politically correct."

Sharp Cuts in Immigration Threaten U.S. Economy and Innovation

By Austan Goolsbee. Excerpts:

"Without sustained immigration, economic growth will be notably slower. Moody Analytics analyzed the data and estimated that if annual United States immigration stayed at only 200,000 rather than a more normal one million, gross domestic product would be $1 trillion lower a decade from now.

In addition, lower immigration portends big problems because the basic American retirement system — Social Security and Medicare — relies on workers to pay for retirees, and the entire expansion of the work force over the next 15 years will come from immigration. Lower immigration rates will mean serious funding shortfalls for older Americans.

The final reason the low immigration number is so frightening is not really about population growth at all. It’s that the evidence increasingly says having immigrants here makes workers born in the United States more successful.

That’s partly because immigrants start companies at twice the rate of native Americans. Almost half the companies in the Fortune 500 were started by immigrants or their children, and without them, jobs are likely to be scarcer in the future.

Also, as the American economy becomes more dominated by knowledge work, immigration restrictions are likely to have an increasingly severe impact. In recent research, the New York University economists Petra Moser and Shmuel San examined the economic effects of the national quota system of the 1920s. That was the last time the United States engaged in mass immigration restrictions based on ethnicity.

These laws of the 1920s were designed to block the entry of immigrants from Southern and Eastern Europe and from Asia in order to preserve the ethnic “character” of the United States. With these laws, immigration fell below 300,000 in 1925, from more than 800,000 in 1921, according to the Migration Policy Institute. Quotas remained until the 1960s, and the United States did not return to 1921 immigrant levels until 1989.

Professor Moser and Professor San have found that those quotas seriously curtailed immigration of scientists and inventors of specific ethnicities (Jews from Eastern Europe, for example). The scholars gathered biographical information on 82,000 scientists and inventors in the United States from 1921 to 1956, including details on their areas of specialty, the number of patents they received and their places of birth. They wanted to know how excluding immigrants affected American-born scientists and inventors.

In reality, they found, the quotas didn’t protect domestic scientists and inventors. It hurt them, and it decimated their work. Patents for American scientists who worked in fields with many East European scientists fell almost 60 percent compared with those in other fields. And, over time, fewer American-born people became scientists and inventors at all. The net effect was a substantial reduction in invention in the United States.

The essence of knowledge work is building on others’ ideas, and having fewer creative people from different backgrounds in the United States undermined the entire enterprise.

I asked Professor Moser what she considered the most important lesson from the 1920s immigration experience. “Don’t keep people out based on ethnicity,” she said. “They did it to preserve the ethnic character of the country, but the different perspectives and approaches of immigrants were actually quite important.”"

Make Dishwashers That Clean Again

The Energy Department wants to give consumers an appliance choice

WSJ editorial. Excerpt:

"The dirty little nonsecret for years has been that modern dishwashers don’t clean dishes well. The culprit is federal efficiency standards, which have been tightened to use less energy. Dishwashers that once took an hour from wash to dry now average two hours and 20 minutes, and even then they don’t always do the job. A GE survey of 11,000 dishwasher owners reports that having to wait for hours for dishes to be done is a major consumer annoyance."

"Judging from the more than 2,700 comments already received, a great many Americans are not happy with what’s happened to their dishwashers. “I had no idea that energy regulations were affecting my dishwasher. Now that I know I am absolutely furious” says one. Another writes that “when you have to re wash your dishes because they stink does not save water.” Still another pleads: “For the love of all that is holy, help us make dishwashers work right again.”

Opponents say many of today’s dishwashers include an option for a one-hour cycle. Others cite the impact on the environment if dishwashers are allowed to use more energy and water. Some note that the industry itself opposes the new rule.

But the existing one-hour cycle works only with dishes that are lightly soiled. And for all the worries about environmental impact, there’s no consideration for the double washing that goes on because dishwashers are so lousy. As for industry objections, the Association of Home Appliance Manufacturers argues that dishwasher manufacturers have made significant investments to meet the current standards—and that relaxing these standards would make these stranded investments.

The proposed new rule would not force anyone to change current dishwasher models. If the machines are as good as the industry and environmentalists claim, consumers will stick with them. If not, why not give the American people the chance to buy dishwashers that actually clean dishes? The public comment period on the draft rule remains open until October 16."

Nobel Laureates Aim Too Low on Global Poverty

Immigration and growth would help more than addressing the winners’ ‘manageable questions.’

By David R. Henderson. Excerpts:

"in the case of global poverty, economists actually do have pretty good ideas about how to fight the problem on a macro scale. Namely, immigration and economic growth, which are by far the most reliable ways to improve the quality of life among the world’s poor.

 The relative narrowness of the scope of this year’s winners’ work is owed in part to their method of analysis: randomized controlled trials. Such trials allow economists to reduce the uncertainty of economic analysis by eliminating the possibility of self-selection. Yet they are also usually small in their scope, as the subjects typically must be organized directly by the researchers."

"The research by this year’s Nobel winners says little about how poor nations, and the people within them, can actually become rich, or at least much better off.

Many other economists are asking that question, and coming up with big answers. Michael A. Clemens, an economist at the Center for Global Development, has written that removing or substantially reducing barriers to immigration would create tens of trillions of dollars of additional income for people from poor countries, while also benefiting the rich countries to which they move. How about a Nobel Prize to Mr. Clemens for working on a big question?"

Tax Myths of Warrenomics

Her advisers make three huge errors in denying the rich pay the government more.

By Laurence Kotlikoff. Excerpts:

"The biggest mistake is to focus on gross, not net, taxes. They ignore transfer payments, like Social Security, which are disproportionately paid to the poor. In doing so, they mistake language for economics."

"The flaw in their method is even more obvious when you consider that American tax laws incorporate benefit subsystems, and benefit laws incorporate tax subsystems. The federal personal income tax, for instance, includes the earned-income tax credit, a major transfer program. The Social Security benefit system includes the earnings test, a major tax. If the focus is on gross taxes, should the EITC be excluded and Social Security’s earnings test included? Economics can’t say. What it does say is look past the language and measure net, not gross, taxes.

Messrs. Saez and Zucman’s second mistake is measuring progressivity on a one-year rather than a remaining-lifetime basis. That ignores the fiscal system’s double taxation: Income earned, taxed and saved this year will be subject to future taxation on interest, dividends and capital gains. This omission disproportionately understates taxes for the rich, who save at a higher rate. The current-year focus also understates benefits paid to the poor, since future benefits are a bigger share of their resources.

Their third mistake is failing to adjust for age. The old have paid most of their lifetime taxes, which makes them now look like tax cheats, particularly those who saved out of previously highly taxed labor income. With changing demographics, this problem will deeply confuse tax progressivity comparisons over time."

"I’ll focus on 40-year-olds, but the results are similar for all age groups. Each dollar of pretax remaining lifetime resources of those in the top 1% of the resource distribution is, on average, taxed on net at a 34.5% rate. For those in the top quintile, the average net tax rate is 28.4%. For those in the bottom quintile, every dollar of pre-tax resources is matched by a 46.6% net subsidy. (The tax rises steadily to 4.2% for the second quintile, 12.6% for the third and 18.5% for the fourth.)

Thus, far from being flat, the net tax rate facing middle age Americans rises rapidly with their resources—from negative 46.4% for the bottom 20% to positive 34.5% for the top 1%. The average net rates for the current year only (not including future net taxes) for this cohort understate true progressivity. They range from negative 9.8% for the bottom 20% to positive 38.2% for the top 1%."

"Among 40-year-olds, the richest 1% own 34.1% of their cohort’s net wealth, but account for only 14.5% of its remaining lifetime spending. The poorest 20% own only 0.6% of the cohort’s wealth, but are expected to do 7.3% of its spending."