Food ‘self-sufficiency’—recipe for disaster

By Pierre Desrochers and Joanna Szurmak of The Fraser Institute. 

"Several politicians, including most recently the leader of the Conservative Party of Canada, have pledged support for the creation of a Quebec research centre on so-called food self-sufficiency. While there are aspects of the local food movement worthy of support, self-sufficiency is not one of them. But in the name of food security (with an eye on the protectionist farmer union vote), many politicians say the government should ban cheaper imports and promote local supply. However, this would force consumers to spend more on staples while relying on a limited regional basket. What could possibly go wrong? According to history, a lot.

This year marks the 175th anniversary of the abolition of the United Kingdom’s “Corn Laws,” which were designed to maintain artificially high food prices to support British and colonial producers (“Corn” was a generic name for grains). At a time when most of the British public spent about half its income on food, many policymakers (who were also elite landowners) argued that higher food prices and reduced choice were the price of food security.

Unfortunately, bad weather in the 1840s ruined harvests in the U.K., and then the potato blight showed up in Europe with especially disastrous consequences in Ireland where reliance on this crop among poor people was greater than elsewhere. Protectionist practises proved so disastrous that, facing public outrage, British Prime Minister Robert Peel ended agricultural protectionism in 1846. The short-term consequences for Canadian grain farmers were harsh, but their situation soon improved in the prosperous years that followed.

Fortuitously, the middle of the 19th-century also saw the development of modern transportation infrastructure of coal-powered steamships and railroads. For the first time in human history, it was possible to move large quantities of food anywhere—and at a low price. Instead of having to grow a wide range of crops and raise different kinds of livestock to feed their households, many farmers were able to specialize in, and export, what they did best and rely on others for their remaining needs. The result was a more abundant and diverse food supply at lower prices for everyone.

Most important, coal-powered transportation put an end to widespread hunger and misery in advanced economies. Not surprisingly, the key to reliable food supplies turned out to be the ability to quickly move the surplus from regions with good harvests to those that experienced droughts, floods, disease and other calamities. A more globalized food supply chain allowed Europe to get through devastating cattle plagues in the mid-1860s and another potato blight in 1879. We rarely hear about these disasters because, while they did cause hardship, they did not result in massive loss of human life.

Many people who lived through these times were very grateful for the globalization of the food supply chain. Writing in 1856, British historian George Dodd observed that in the “days of limited intercourse, scarcity of crops was terrible in its results; the people had nothing to fall back upon; they were dependent upon growers living within a short distance; and if those growers had little to sell, the alternative of starvation became painfully vivid.” In 1862, economist and agricultural writer T. E. Cliffe Leslie reminded his readers about the “unmistakable warnings… in the last few years, that we cannot afford to be dependent for the staples of our food and industry on any single place or production.”

Today, perhaps the only real problem created by the unparalleled abundance, affordability, reliability and security of our globalized food supply chain is complacency. Most people in advanced economies have no idea that the romantic ideal of regional self-sufficiency remains a real threat to food security. Politicians of all stripes have sadly succumbed to an ideological canard that will cost us dearly.

The best way to improve the security of our food supply is to press forward with more specialized production in the world’s most suitable locations, backed up with more scientific research and greater reliance on stable long-distance trade. Those arguing for so-called food self-sufficiency would be wise to heed the hard lessons of the past."

We Need to Build Our Way Out of This Mess

By Eli Dourado. Mr. Dourado is an economist and a senior research fellow at the Center for Growth and Opportunity at Utah State University. This was from the New York Times.

"Many of our country’s problems are reducible, in one way or another, to the fact that we have lost the imperative to transform the physical world. While the soft technology of the internet has marched forward, development of real stuff — of steel and concrete — has slowed, hampered by laws that privilege the status quo.

Many Americans experience the fallout from our failure to build in the housing market. Housing costs are at an all-time high, and over the past half-century, the median rent has outpaced the median household income. In our coastal hubs, our most productive cities, the numbers are even more dire. The typical home value in San Francisco, for instance, is $1.48 million, 12 times the city’s median annual household income of around $120,000.

Housing costs exacerbate economic hardship and inequality. Because the poor spend a greater share of their income on housing, high costs hit them the hardest. State homelessness rates track housing prices. The economist Matthew Rognlie showed in 2015 that capital’s rising share of income, an indicator of growing inequality, was caused entirely by increases in housing prices. Housing costs also perpetuate educational inequality; they are 2.4 times as high near high-scoring public schools as near low-scoring public schools. Children whose families are priced out of the best school zones forgo hundreds of thousands of dollars of lifetime income as a result.

Although housing is for many of us a proximate manifestation of the failure to build, it is not the only one. America’s airports lag those in Asia in Europe, and high-speed rail is practically nonexistent. We have more electric power outages than residents of any other rich country. Our infrastructure inadequacies slow our response to climate change and lower living standards.

The solution to high housing costs could not be simpler: Build more homes. To address housing affordability, many progressives have advocated subsidized affordable housing programs. These programs may not be adequate to generate sustained cost reductions, and they aren’t necessary. What will work with certainty are the laws of supply and demand. If we increase the supply of housing enough, prices will fall. Any solution to our infrastructure problems will likewise boil down to the need to build infrastructure.

But to build housing and infrastructure, we must sweep aside the regulatory obstacles that stand in the way.

In housing, zoning and related rules are the culprits behind the restricted supply of new homes. Zoning, in theory, is supposed to separate incompatible uses of land — for example, keeping polluting factories separate from housing. In practice, it has an ugly history of promoting racial segregation. In 1910, Baltimore adopted the country’s first explicitly racial zoning law, barring Black residents from moving into predominantly white neighborhoods and, cynically, vice versa. The Baltimore law was copied in cities all over the South until the Supreme Court held that a version in Louisville, Ky., was unconstitutional in 1917. Even after this ruling, explicitly racial zoning codes in some cities tested its limits.

While we would not tolerate open segregationist justifications for zoning today, laws that ban multifamily construction in certain neighborhoods — along with parking minimums and restrictions on lot coverage, setbacks and building heights — continue to perpetuate segregation by income and race. These rules reduce the supply of housing, increasing its cost. Recent research estimates the value of the “zoning tax,” the amount by which zoning rules are artificially raising the cost of land. In our coastal hubs — San Francisco, Los Angeles, Seattle and New York — the zoning tax per quarter-acre of land exceeds twice the city’s median income. In San Francisco, it’s four times the median income.

In infrastructure, too, the proximate obstacle to building more is legal. Under the National Environmental Policy Act, passed in 1969, federal agencies must produce a detailed statement of environmental impacts for any action — including granting a permit — that significantly affects the human environment. In contrast with the ugly motivations driving zoning, NEPA came into existence riding a wave of environmental consciousness. It was motivated by two well-meaning but mistaken beliefs: that material progress was the enemy of environmental quality and that environmental justice could be served through greater citizen input.

The act slowed progress in infrastructure. Per-mile spending on the Interstate System of highways tripled between the 1960s and the 1980s, with the inflection point coming in the early 1970s, when NEPA took effect. And in practice, the citizen input function of NEPA has been used not to enact environmental justice but to let wealthy communities oppose projects — including transportation and public works projects — that inconvenience them. To protect against community opposition, environmental impact statements under NEPA have ballooned over the years and now take an average of four and a half years to complete. One that was finalized in 2019 took almost 16 years.

Actions that affect the environment deserve scrutiny, but the biggest cost of NEPA is with respect to federal actions that have no impact. When permit approvals do not significantly affect the human environment, agencies and project sponsors have to prove that through another report. These environmental assessments, of which over 10,000 are produced per year, likewise add years to the process.

And until an environmental assessment or environmental impact statement is finalized, no work on the project in question can begin. Even after finalization, a lawsuit filed by virtually anyone can challenge the adequacy of these documents and bring the project to a halt.

The delay and risk in government decision making affect both government-led initiatives and private sector projects, which depend on speedy returns for financing. One reason venture capitalists have invested so much in software companies and relatively little in transformative physical-world technology is that the returns in software come faster and face less regulatory risk.

Environmental review has far-reaching economic and social consequences. It slowed the 2009 economic recovery, as infrastructure projects specified in the American Recovery and Reinvestment Act were subject to at least 192,705 NEPA reviews. Projects funded through this year’s infrastructure bill will undoubtedly face similar delays. Even immigration policy is not immune to NEPA lawsuits. Arizona is challenging President Biden’s order to halt construction on the border wall on NEPA grounds.

To become a nation that builds, we must tear down the regulatory obstacles. In housing, ordinances that prohibit multifamily housing need to go. Other policies that limit density, like parking minimums and height restrictions, must be liberalized.

If we want to build infrastructure as well as housing, we need to address environmental review as well as zoning. We must protect the environment, but we need not do it indirectly with laws that operate only through paperwork and court cases. We should do it directly — with stricter air and water standards, smarter conservation policies and a carbon tax. A direct approach would enable speedy government decisions and get shovels in the ground. A pro-building, pro-environment deal, eliminating environmental review in favor of these direct protections, could improve the environment through stricter substantive standards and through a stimulative effect on new, clean infrastructure.

How did the most dynamic country on the planet become so sclerotic? We did it to ourselves. We enacted laws that privilege the status quo at the expense of change and progress. We liberally passed out veto rights to anyone with the money and wherewithal to hire a lawyer. If we want to reverse the damage and create a more prosperous future, we must make it easy to build."

Unintended Consequences: GDPR Edition

By James Pethokoukis of AEI.

"The purpose of the EU’s General Data Protection Regulation—which went into effect in May 2018—is to protect personal online data in a unified way across the region. It sharply limits what companies can do with user data without explicit consent and lets people request their online data. You’ve surely seen the permission screens or “consent interfaces” as you’ve clicked from site to site.

But that’s not all the GDPR does. Of course not. It’s a sweeping privacy rule that covers a huge and diverse economic sector. There are inevitably going to be unintended consequences. And we continue to find more and more of them, which should be a caution flag for American policymakers eager to replicate GDPR-like internet regulation here in the US.

In the new NBER working paper “GDPR and the Lost Generation of Innovative Apps” (Rebecca Janßen, Reinhold Kesler, Michael E. Kummer, and Joel Waldfogel), researchers find the following after analyzing data on some 4 million apps at the Google Play Store from 2016 to 2019:

We document that GDPR induced the exit of about a third of available apps; and in the quarters following implementation, entry of new apps fell by half. We estimate a structural model of demand and entry in the app market. Comparing long-run equilibria with and without GDPR, we find that GDPR reduces consumer surplus and aggregate app usage by about a third. Whatever the privacy benefits of GDPR, they come at substantial costs in foregone innovation.

Specifically: About a third of existing apps exited the market in the year after GDPR’s implementation, while the rate of app entry fell by nearly half. The results also sync with other research finding that the “implementation of GDPR had an immediate, pronounced, and negative effect on investment.”

Of course, as the researchers add, none of this necessarily means GDPR was a mistake: “A full evaluation of GDPR requires a tallying of the potential beneficial effects on privacy, along with its various unintended consequences such as increases in market concentration, undermining revenue models for content production, and – here – reducing beneficial innovation.” Yet one wonders: If EU lawmakers had been aware of such consequences before GDPR was adopted, would their next steps have been different? One might like to think so."

Retail Pharmacy Paranoia Is Understandable–But Patients Are The Real Victims

By Jeffrey A. Singer of Cato.

"There is already ample evidence that the war on opioid prescribing has intimidated many pharmacies and pharmacists into refusing to dispense legally‐​prescribed opioids. This is tragic for patients, but an understandable result of incredulous lawsuits brought by state attorneys general against pharmacy retailers CVS, Walgreens, and others for allegedly contributing to the opioid overdose crisis by filling opioid prescriptions—even as overdose deaths continue to mount while opioid prescribing continues to drop precipitously. (87 percent of those overdose deaths involve illicit fentanyl, more than a quarter involve cocaine, and more than a quarter involve meth.)

A recent study by Oregon State University College of Pharmacy found 1 in 5 pharmacies refuse to fill prescriptions for buprenorphine, the Schedule 3 drug used for medication assisted treatment for addiction to opioids. The Drug Enforcement Administration classifies Schedule 3 drugs as “drugs with a moderate to low potential for physical and psychological dependence.”

It now appears that pharmacy chain paranoia has extended to prescribing psychostimulants. The Wall Street Journal reports today that CVS will no longer fill prescriptions for Adderall and other psychostimulants used to treat ADHD that are prescribed by clinicians working for the telehealth providers Cerebral, Inc. and Done Health. These two telehealth firms have been treating patients with ADHD with these drugs, classified by the DEA as Schedule 2: “a high potential for abuse which may lead to severe psychological or physical dependence.”

Prior to March 2020, DEA regulations required an in‐​person evaluation before clinicians could prescribe any Schedule 2 drug. That rule was relaxed in response to the COVID pandemic and the public health emergency. Providers are now permitted to prescribe such drugs after a telehealth appointment.

Cerebral and Done Health attracted many patients through social media ads during the darkest days of the pandemic. Some have criticized their telehealth providers for prescribing the psychostimulants after a 30‐​minute video appointment. But Cerebral claims its clinicians can require an unlimited number of appointments for evaluation and follow‐​up. Done Health claims its software helps its clinicians complete their initial evaluations in 30 minutes. Clinical psychologists will tell you it is not necessary to evaluate a patient for ADHD in person—a detailed history and interview is usually all that is needed, and that can be done with telehealth technology. Some but not all practitioners supplement their interviews with cognitive tests.

The pharmacy chains’ paranoia over filling prescriptions for controlled substances—and their increasing reluctance to do so—is understandable considering that policymakers and prosecutors blame them for somehow causing an overdose crisis that is really the direct result of drug prohibition. The pharmacies have a lot to lose when the government comes down on them. Alas, the biggest losers in all of this are the patients."

President Costanza Takes On Inflation

Biden lays out his plan on prices, but he’d do better if he did the opposite

WSJ editorial.

"President Biden on Tuesday tried to get ahead of Wednesday’s April inflation report with a speech rehashing his well-worn proposals to reduce prices: Boost subsidies, raise taxes, and increase regulation. He should take Jerry Seinfeld’s advice to George Costanza and do the opposite of his every policy instinct.

The President again called on Congress to pass his Build Back Better, er, sorry, “Building a Better America” plan including more subsidies for green energy, electric cars, child care, housing and more. He also doubled down on his proposed billionaire’s tax—i.e., unconstitutional wealth tax—and Medicare drug price controls.

***

Mr. Biden again blamed inflation on the pandemic and Vladimir Putin, omitting that Democrats poured kerosene on the accelerating economic recovery last March with their $1.9 trillion spending bill. Inflation was already at 7.9% when Mr. Putin invaded Ukraine (see the nearby chart). At the same time, their policies are hampering the supply side of the economy in myriad and interconnecting ways.

Consider energy and food. The Administration’s war on oil and gas created enormous regulatory uncertainty that is stanching investment in new production despite high energy prices. Producers can’t find workers. Many left the industry when prices nose-dived early in the pandemic and are reluctant to return because Democrats have promised to put drillers out of business.  

Then there’s the left’s blockade on pipelines, which is limiting natural gas production in the Northeast’s rich shale deposits. Progressives blame rising gas prices on natural gas exports, but the larger culprit is increasing demand in the U.S. Hefty subsidies for wind and solar forced coal and nuclear plants to close down, but renewable power needs to be backed up by more gas.

Mr. Biden says more green energy will reduce electricity prices. But then why have power prices increased by 11.1% in the last year? More green energy will make the grid less reliable and increase demand for gas along with diesel-powered emergency generators, as it has in California and Texas. 

Speaking of which, diesel prices have increased by $2.40 a gallon in the last year, a buck more than gasoline prices, amid increased demand from freight and reduced refining capacity. Higher diesel prices filter through to food prices as ships, trains, trucks, tractors and other farm equipment rely on the fuel.

Biofuel mandates and subsidies have spurred refineries to shut down or shift to producing smaller amounts of “renewable” diesel from cooking oils. This is also a large reason soybean oil prices have more than doubled from pre-pandemic levels and why the American Bakers Association has urged the Administration to ease renewable fuel mandates.

Poultry producers say the ethanol mandate is driving up the cost of their feedstock. At the same time, surging corn and soy prices are discouraging farmers from planting wheat to compensate for lost exports from Ukraine. Yet the Administration wants to increase renewable fuel mandates and subsidies.

What the country needs is more investment to boost the supply side of the economy, which will increase worker productivity, real wages and living standards. Mr. Biden’s plan to hammer businesses and investors with increased taxes and regulation will do the opposite.

In his speech he again lobbied for Medicare to negotiate drug prices—i.e., price caps—but this will create more pharmaceutical market distortions and suppress investment in innovation. By the way, prescription drug prices have risen a mere 2.2% in the last year. Thank competition for that, not government.

***

As White House aides whispered to friendly media on Monday, Mr. Biden’s Tuesday speech was really less about inflation and more about setting up the fall campaign against Republicans. He claimed the GOP has no plan for inflation, as if Democrats don’t run Congress and the White House. He linked all Republicans to Florida Sen. Rick Scott’s unspecific proposal that all Americans should pay some federal income tax and all Congressional legislation should sunset after five years.

“The congressional Republican agenda,” Mr. Biden warned, would “put Social Security, Medicare, and Medicaid on the chopping block every five years.” Who believes this? Mr. Scott’s plan hasn’t been endorsed by the rest of his party.

Mr. Biden said Republicans want to “depress” American wages, but real disposable personal income increased $4,205 (in 2012 dollars) from January 2017 to December 2020 yet has since declined by $374, almost all on his watch. Inflation is causing real wages to decline despite rising nominal wages.

Americans have learned the hard way over the last two years that no amount of federal transfer payments can make up for the decline in real wages caused by inflation. President Costanza still hasn’t."

What Caused the Baby Formula Shortage?

Tariffs, government labeling rules and state welfare monopolies all play major roles.

WSJ editorial.

"By now you’ve heard that some 40% of the nation’s baby formula is out of stock, causing new mothers to hunt from store to store to feed their infants. This should never happen in America. How did it? Here’s the government part of the story you won’t hear from the political class.

Abbott Laboratories in February recalled several brands and shut down a plant in Michigan after complaints that four infants fell severely ill with a dangerous bacteria after ingesting its powdered formula. The Food and Drug Administration launched an investigation and onsite inspection, noting earlier findings that had detected the bacteria at the plant.

It’s not clear when the FDA was made aware of the problems at the plant and why it didn’t take action sooner. Abbott said this week that “after a thorough review of all available data, there is no evidence to link our formulas to these infant illnesses.” The FDA said Friday the Centers for Disease Control and Prevention closed its investigation after finding no more cases of infant illness.

Some conservatives blame the FDA for causing a scare, but the agency had no choice but to investigate the complaints and warn consumers. The real culprit is government policies that have limited formula options.

Last year Abbott accounted for 42% of the U.S. formula market, about 95% of which is produced domestically. There are only four major manufacturers of formula in the U.S. today: Mead Johnson, Abbott, Nestle, and Perrigo. One reason the market is so concentrated is tariffs up to 17.5% on imports, which protect domestic producers from foreign competition. Non-trade barriers such as FDA labeling and ingredient requirements also limit imports even during shortages.

Canada’s strong dairy industry has attracted investment in formula production. But the Trump Administration sought to protect domestic producers by imposing quotas and tariffs on Canadian imports in the USMCA trade deal. The FDA can inspect foreign plants so the U.S. import restrictions aren’t essential for product safety. They merely raise prices for consumers and limit choice.

Further limiting competition is the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) for low-income mothers. By the Department of Agriculture’s estimate, WIC accounted for between 57% and 68% of all infant formula sold in the U.S. Under the welfare program, each state awards an exclusive formula contract to a manufacturer.

Companies compete for the contracts by offering states huge rebates on the formula women can buy. The rebates equal about 85% of the wholesale cost, according to a 2011 USDA study. Women can only use WIC vouchers to purchase formula from the winning manufacturer. These rebates reduce state spending, but there’s no such thing as free baby formula.

Why would manufacturers give states an enormous discount? Because the contracts effectively give them a state monopoly. Stores give WIC brands more shelf space. Physicians may also be more likely to recommend WIC brands. After 30 states switched their WIC contracts between 2005 and 2008, the new provider’s market share increased on average by 84 percentage points.

***

America’s baby-formula shortage illustrates how bigger government can make big business bigger, thereby limiting competition and choice. This is especially worth noting as Democrats push to expand entitlements and government control over the private economy with Medicare for All, free child care, universal pre-K and more.

It also illustrates that global trade has its uses, and there are costs to the faddish drive to produce everything in America. Members of both parties in Congress want to subsidize domestic production, but this can create its own supply-chain vulnerabilities. Globalization nowadays may be a dirty word, but having diverse suppliers is an economic strength."

Black deaths at the hands of police are statistically rare, and those involving unarmed suspects are rarer still

Was a Judicial Nominee Prejudiced in Her ‘Role as an Advocate’? Nusrat Choudhury claimed police kill unarmed black men in America ‘every day.’ That’s nowhere near true. by Jason L. Riley. Excerpts:

"There is no evidence that police officers kill unarmed black men daily. Black deaths at the hands of police are statistically rare, and those involving unarmed suspects are rarer still. Arrests in the U.S. number more than 10 million in a typical year. According to a database maintained by the Washington Post, police shot 1,054 people in 2021, including 234 whites and 139 blacks. Thirty-three of those shooting victims were unarmed, including eight whites and six blacks.

Meanwhile, black homicides not involving police numbered more than 7,700 in 2019 and more than 9,900 in 2020 and are expected to surpass 10,000 when the 2021 figures are released. These civilian shooting deaths are the real scourge of low-income black communities, but highlighting them doesn’t advance the left’s political agenda. So such activists as Ms. Choudhury choose to keep the focus on law enforcement, even if it means distorting the truth and smearing police.

To make matters worse, mainstream media outlets go out of their way to spread the ignorance that these activists spew. Last week the New York Times ran a story about the rise in shootings in New York City and the impact on children, 40 of whom have been shot this year. Nowhere in the story are we told that the shooters and shooting victims in these tragedies are almost always black or Hispanic. Aside from a reference near the end to a candlelight vigil attended by “mostly young Black children between 12 and 14 years old,” race isn’t mentioned."

Banning Menthol Cigarettes Will Do Nothing to Promote Racial Justice

By Michelle Minton of CEI. Excerpt:

"By some estimates, up to 85 percent of black smokers choose menthols—compared to just 30 percent of white smokers—so the push to prohibit their sale on racial justice grounds might have some merit, were there credible evidence that menthol cigarettes caused greater harm than non-menthols. But there isn’t. Decades of research fail to substantiate claims that menthol cigarettes are more attractive, easier to smoke, more addictive, harder to quit, or more toxic to health than non-mentholated cigarettes. Furthermore, though tobacco companies almost certainly have targeted the marketing of menthols at black consumers—which might be one reason menthols are more popular with black smokers—it doesn’t appear to have caused higher smoking or smoking-related health disparities. 

For one thing, the proportion of black adults who smoke is roughly the same as the proportion of white adults who smoke, although black smokers tend to initiate their smoking at a later age and smoke fewer cigarettes throughout the day compared to white smokers. Black youth aren’t more likely to smoke than other youth, with the prevalence of cigarette smoking among black students substantially lower than those in all other ethnic groups. And menthols don’t appear especially appealing to the 1.5 percent youth who do smoke, with 60 percent of high schoolers and 65 percent of middle schoolers who smoke reportedly choosing non-mentholated cigarettes.

Another claim often made is that menthol cigarettes are more addictive or harder to quit. Though some studies found lower quit rates among menthol smokers, differences in cessation vanish when researchers account for other factors that influence the likelihood that smokers will attempt and succeed in quitting, like income and education.

There is also no evidence that menthol cigarettes are more toxic or harmful to health, something even the Centers for Disease Control and Prevention and Prevention—until very recently—admitted on its website, noting that menthols “are just as dangerous as non-menthol cigarettes” (though this language was removed soon after FDA’s announced menthol ban). In fact, some studies have found menthol smokers are less likely than non-menthol smokers to develop certain smoking-related diseases, like lung cancer, though this is likely due to the lower number of cigarettes menthol smokers tend to consume. What all of the evidence suggests is that menthol cigarettes, have little, if anything, to do with ongoing racial health disparities.

More likely, such disparities stem from broader forms of social, economic, and political inequalities. For example, people who report higher levels of stress, feelings of being stigmatized, and instances of racial discrimination are more likely to smoke and less likely to quit. Smokers who are economically disadvantaged are also less likely to have the resources necessary to find, utilize, and afford adequate care, reducing their chances of successfully treating smoking-related illnesses.

Furthermore, minority groups (racial or otherwise) also have less political power, which means their needs receive less attention. That might explain why the debate over e-cigarettes, has fixated on the small and mainly hypothetical risks such products might pose to “the youth” instead of the very real and life-saving benefits that lower-risk substitutes for smoking would almost certainly have for the millions of adults—primarily in marginalized groups—who still smoke. Outlawing the sale of menthol cigarettes won’t solve any of those lingering systemic forms of bias. In all likelihood, it will many of them worse. 

A key argument made by menthol ban supporters is that a ban will benefit black people most because they will be more motivated to quit smoking when they can no longer legally obtain their cigarette of choice. They are so convinced of this that they refuse to discuss the possible downsides of criminalizing yet another substance associated with people of color. Instead, they brush off fears that the ban will lead to the sorts of discriminatory policing caused by every other drug prohibition as nothing more than Big Tobacco rhetoric aimed at protecting its profits. But, it isn’t just Big Tobacco raising these concerns. 

Civil rights groups, like the ACLU, criminal justice and drug policy reformers, families of victims of police brutality, law enforcement groups, and harm reduction advocates have come out against the menthol ban. While they certainly don’t disagree that smoking is dangerous, they argue that outlawing menthol cigarettes will do more harm than good. Instead of promoting smoking cessation, they fear the ban will increase illicit cigarette sales, lead to more over-policing in minority communities, and set the stage for more violent interactions between people of color and law enforcement.

Even anti-tobacco groups, like the Campaign for Tobacco-Free Kids, once shared these fears and opposed a menthol ban because they knew it would increase illicit tobacco sales. And, given our country’s history of discriminatory enforcement of both drug and tobacco laws, such fears seem justified. At the very least, they deserve serious public discussion. But, that isn’t happening.

Even in the unlikely event that the ban prompted the large decreases in smoking that proponents predict, it still wouldn’t obviate the need to consider its potential downsides. But anti-tobacco advocates have no interest in genuinely considering the negative impact a menthol ban could have on the very people, communities, and causes they claim to care about.

For example, they repeatedly respond to questions about the ban’s criminal justice implications by claiming that the FDA won’t take enforcement action on individual consumers, only the businesses involved in illegally producing, transporting, or selling menthol cigarettes. But such arguments don’t address how other federal agencies, state authorities, and local police might choose to enforce this ban or how they might respond to the spike in illicit tobacco sales the ban will almost certainly cause. 

Currently, menthol cigarettes make up over a third of legalcigarette sales in the U.S. It is highly unlikely that outlawing their legal sale will make that demand disappear. Instead, menthol smokers who don’t want to quit smoking entirely and don’t want to switch to equally harmful non-menthol cigarettes will seek out non-legal sources for menthol cigarettes. With the illicit tobacco trade already rampant throughout the country, that won’t be much of a challenge.

Bootlegged cigarettes are big business in America, particularly in high-tax states like New York (where over 60 percent of cigarettes sold are illicit) and even more so in low-income neighborhoods, like Harlem and the South Bronx (where over 80 percent of cigarettes consumed come from illicit sources). Eliminating legal sales of menthol cigarettes will only drive more consumers into these underground markets, marking them larger, more accessible for both adults and minors (since street dealers typically don’t verify their customers’ age), and make the problem more visible. When that happens, it will likely be the same groups currently promoting a menthol ban on racial justice grounds who will begin pressuring authorities to crack down on violators."

Study: Free Pre-K Doesn’t Give Education Benefits

By Annie Holmquist of Intellectual Takeout.

"The U.S. has been toying with the idea of universal pre-K for a number of years, believing that such a policy will close learning gaps and boost educational achievement. By contrast, the U.K. has plowed ahead with the idea, implementing what is known as the National Childcare Strategy.

But a new study suggests that Britain’s head start in the area of government-funded early education hasn’t been as beneficial as some would like to believe. The Daily Mail explains:

“Children who were given free nursery school places at the age of three gained no educational benefit, a major study said yesterday.

It found that by the age of seven there were no differences in school achievement between pupils who had previously taken up the free places and those who hadn’t.

…

Dr Jo Blanden, one of the research team from Essex and Surrey universities which prepared the report, said: ‘On the face of it, our results cast doubt over the value for money of universal early education.’

She added: ‘More than 70 per cent of the children taking up free places would probably have gone to nursery anyway, and children’s test scores do not seem to be any higher in the longer term as a result of the policy.”

The findings seem rather reminiscent of those discovered by the Peabody Research Institute at Vanderbilt University last year. Studying Tennessee’s state-funded Voluntary Prekindergarten program, the researchers found that there were no academic differences between preschool and non-preschool attendees. In fact, non-preschool students were found to perform better academically and behaviorally by the time they reached 3rd grade.

Given the results of first the Tennessee study and now the U.K. study, might it be wise to gather more evidence on the benefits – or lack thereof – before we plow ahead with the mindset that universal pre-K will alleviate our educational woes?"

Debunking the Economic Fallacies in Hugh Jackman and Robert Reich’s Simpsons Episode

By Patrick Carroll of FEE.

"In Sunday’s season finale of the Simpsons, former Secretary of Labor Robert Reich teamed up with Hugh Jackman to do a musical act about economics. The act focused on inequality and the demise of the middle class, and argued that “greedy rich men” are responsible for declining wages and lower standards of living.

A few days before, Reich tweeted out a preview of the act.

While many may find themselves agreeing with Reich, the truth of the matter is that this clip is full of economic fallacies. Let’s break them down one at a time.

Fallacy 1: High Profits Are the Result of Greed

The clip starts off with this line from Reich.

“The decline of unions, rampant corporate greed, Wall Street malfeasance, and the rise of short-sighted politics all contributed to increased economic inequality, widespread real unemployment, wage stagnation, and a lower standard of living for millions of Americans.”

When Reich says “rampant corporate greed,” a graph is shown depicting rising corporate profits. The implication seems to be that excessive greed is what causes high profits.

The reasoning typically goes as follows: greedy employers pay their employees less and charge their customers more in order to increase their margins. The problem with this reasoning is that it assumes managers have far more power to set wages and prices than they actually have.

The reality is, business owners are subject to the discipline of the market. If they try to pay their employees less than the going rate for their labor, the employees will simply go work for someone else. If they try to charge their customers more than the going rate for the product, their customers will buy from someone else.

So, a business owner may want to rip off their workers and customers as a means of increasing their margins, but the reality is that they can’t, at least not for long.

So if entrepreneurs can’t get ahead by being extra greedy, what sets apart the successful ones from the unsuccessful ones? In reality, it’s a combination of luck, good foresight of market conditions, good management skills, and, quite frankly, the extent to which you can convince the government to rig the market in your favor (this happens way more than most people realize).

Fallacy 2: Americans Are Experiencing Wage Stagnation and a Lower Standard of Living

In the second part of his opening line, Reich claims that there is “wage stagnation, and a lower standard of living for millions of Americans.” This is misleading at best. If we’re talking about nominal wages (the number on the paycheck), those have clearly gone up. But even looking at real wages (what your wages can buy), it’s hard to say those have stagnated. As Marian L. Tupy explains for Human Progress, even though average hourly earnings haven’t changed much when adjusted for inflation, that number ignores other important factors such as non-wage benefits (which have increased significantly) and improvements in the quality of goods.

The claim that standards of living are going down is also problematic. Consider a typical American household in the 1970s compared to today. Think about the change in access to appliances, phones, computers, TVs, cameras, and such. Intuition makes clear—and the data bear this out—that standards of living are indeed increasing across the board.

If you’re still not convinced, just ask yourself, would you rather live in the 1970s—a time before the internet, smartphones, and streaming services—or today?

Fallacy 3: The Economy Is a Fixed Pie

The musical act continues with the following line. “They chopped salaries to raise stock prices, cut up the pie and kept all the slices.”

The second part of that line is a reference to the idea that there’s only so much wealth to go around, and workers only get a small portion of that wealth, while most of it goes to the rich and powerful. The problem here is that Reich is assuming wealth is a fixed pie, which means the rich get richer by “keeping slices” for themselves instead of distributing them to others.

In reality, the pie is not fixed. It can get bigger. Under a fixed pie model, the only way to become better off is at the expense of someone else. One person has to lose in order for someone else to gain. But in the real economy, most of what happens is win-win transactions. When a business trades a product with a consumer, they are both better off. The pie has increased in size. No one is “keeping slices” from anyone else. Sure, some people might be more productive and end up with more money, but in a free market you make money by benefiting others, not by taking from them.

Fallacy 4: Trickle-down Economics Has Been Debunked

The next line of the act goes as follows. “Tax breaks went to CEOs, never trickling down to average Joes.”

This is a clear dig at “trickle-down economics,” which is essentially the idea that when the rich become even more rich, their extra money will “trickle-down” to the lower class, making the poor better off as well.

The left loves to use this term in debates. The moment anyone suggests cutting corporate taxes or taking it easy on the rich, they immediately get a grin on their face and say, “actually, trickle-down economics has been debunked.”

The problem with this line is quite simple: trickle-down economics isn’t even a thing. No serious economist claims that the money from the rich would somehow spill over to the lower classes if only they had more.

Briefly, the actual reason economists favor taking it easy on the rich is because, unlike the government, rich people tend to invest in businesses that grow the economy, leading to more abundance and higher standards of living for everyone. But that’s not trickle-down economics. That’s just economics. And you’ve got your work cut out for you if you want to debunk that.

What They Forgot to Mention

While the fallacies presented in the Simpsons clip are egregious enough, what really makes this clip inaccurate is what they didn’t say. They completely left out the harmful impact of government regulations on the economy. There was no mention of trade barriers, cronyism, or any of the other things the government does that make life hard for the poor.

Despite our rising standards of living, there are still real problems in the economy. But we won’t be able to solve them until we dispense with economic fallacies and take the time to learn what’s actually causing them."

The Myth of Market Concentration

By Douglas Holtz-Eakin.

"A central plank of administration policy, congressional legislative efforts, and the progressive view of the universe is that a recent history of increasing market concentration has left American consumers helpless. As the president put it in his executive order on competition: “A fair, open, and competitive marketplace has long been a cornerstone of the American economy, while excessive market concentration threatens basic economic liberties, democratic accountability, and the welfare of workers, farmers, small businesses, startups, and consumers.” He added: “Yet over the last several decades, as industries have consolidated, competition has weakened in too many markets, denying Americans the benefits of an open economy and widening racial, income, and wealth inequality.”

Increasing concentration in U.S. industries is such a crucial element of the current policy dialogue that it makes sense to check on the facts in this area. In his first publication for AAF, Fred Ashton does exactly that: examine the data for evidence of increasing concentration. Specifically, he uses newly released Census data (collected from 2002 to 2017) to calculate the fraction of sales accounted for by the top four firms in each industry. (Note: four is not a magic number. One can use many other integers and get the same basic result.)

These results are shown below (which is Figure 1 in Ashton’s paper). In the lingo of this research area, CR4 is the said fraction of sales by the top four firms; NAICS (North American Industry Classification System) identifies industries, with more digits (six versus four, for example) being a finer classification, and the cutoff; and the cutoffs for medium and high concentration set at 40 percent and 70 percent, respectively.

As an example, in 2002, 9 percent of 6-digit industries were highly concentrated, while in 2017, the fraction was 8 percent.

Take a moment to examine the figure (waiting, waiting, waiting … ).

The basic result is that all of the bars are essentially the same length in 2002, 2007, 2012, and 2017. Put another way, concentration in the U.S. economy HAS. NOT. CHANGED. ONE. BIT.

There are lots and lots of robustness checks – different industry breakdowns, using more or fewer firms in the concentration ratio, and so forth. These don’t alter the basic picture. It is important to add, however, that this does not rule out any competition problem whatsoever. For a given concentration, there might be conduct problems now that were not present previously. Or, the real market power might be in a particular area of geography that gets masked by the aggregate analysis.

Those caveats notwithstanding, its strikes Eakinomics that those who invoke rising concentration as the rationale to assault successful companies, torch existing antitrust standards, and ramp up federal micromanaging of the economy are doing the public a real disservice. First get the facts right, please."

Horrible FDA Regulation of Infant Formula

By David Henderson.

"I thought I had known the major government contributors to the baby formula crisis. But the following 3 paragraphs tell some things that are new to me:

Regulation is a major reason only four large formula producers control most of the U.S. market. First, parents receiving WIC assistance are allowed to choose only certain brands. Second, consumers must pay a 17.5 percent tariff on any imported formula, which prices countless brands out of the U.S. market. It’s a nice arrangement for the companies — and for their lobbyists — but it raises prices for families and makes it difficult to boost supplies during shortages.

When new formulas enter the market, regulations forbid sellers from letting anyone know about them for 90 days, even as manufacturers may advertise existing formulas all they like. Those first months on the shelf are make-or-break for many new products, which is why existing producers like this otherwise pointless regulation. At times like this, parents might appreciate hearing about new options.

One of those options is toddler formula, which in many cases meets the Food and Drug Administration’s nutritional requirements for infant formula. However, FDA regulations prohibit many manufacturers from recommending this option.

This is from Ryan Young, “Cronyism Makes the Baby Formula Shortage Worse,” AIER, May 24, 2022.

The 90-day restriction is outrageous.

Read the whole thing."

Why Forced Addiction Treatment Fails

By Maia Szalavitz of The NY Times. Excerpts:

"But voluntary rehab has a better track record and is less likely to harm the people it is intended to help. Criminalization and coercion have helped create a patchwork of addiction programs that is harsh, low quality, underfunded, understaffed and too often fraudulent. Since legally mandated care is often the only way to get immediate and free treatment, a damaging cycle continues. 

To do better, the United States needs more evidence-based treatment. And since the data shows that the best treatment is compassionate and inviting, coercion should be the last resort, not the first."

"A 2016 research review shows why. Of the nine studies included, five found no significant reductions in drug use or crime among people who underwent required treatment, and two studies found that mandated therapy made those measures worse. Only two studies found a small benefit in short-term recovery. This is in contrast with the strong literature on voluntary medication use for opioid addiction, which shows that it can reduce mortality by 50 percent or more.

Massachusetts has one of the most frequently used civil commitment systems for addiction, and the results are grim. Much of the treatment takes place in prisons, and lawsuits and reporting has described filthy conditions and lack of access to addiction medications proven to save lives. The state’s statistics show that people who have been committed are twice as likely to die of opioid-related overdose as those who seek help voluntarily. A meta-analysis looking at studies in the United States and around the world of involuntary treatment and H.I.V. and overdose-related risk found similar results."

"Legal coercion undermines many aspects of effective addiction therapy. It can be difficult to trust providers whose job involves reporting on you to a court. Since relapse is common and often leads to legal consequences, this can discourage disclosure. Coercion can also smother the internal desire to change, which is known to be critical for long-term success."

"One of the most successful addiction treatments, motivational enhancement therapy, focuses on helping people build relationship and career goals. Proponents of this approach say it allows people to see for themselves that their drug use is an obstacle, creating desire to change.

Another therapy, called Community Reinforcement and Family Therapy (CRAFT), teaches families to lovingly motivate people with addiction and is more effective than other treatments. A third highly effective approach, known as contingency management, uses rewards like free movie tickets instead of punishment. But these therapies are, unsurprisingly, rarely available in mandated treatment."

"Research finds that 86 percent of people with long histories of frequent emergency room visits and arrests who have diagnoses of substance use and severe mental illness will accept and persist in housing with supportive care. This includes being guided by advocates through the bureaucracy and welcomed without the rigid rules requiring perfect abstinence that are typical in rehabs and housing programs."

"spending more on reducing barriers to care and housing, and improving the quality of treatment so that people with addiction actually want to participate will be far more effective than adding yet more money for courts and cops."

"reducing compulsory treatment will improve the quality. Currently, more than a quarter of people in rehab are legally mandated."

"But if fewer people were forced to simply accept what’s offered, programs would have to become friendlier. It’s basic capitalism: Customer service is better when businesses compete than when consumers have no choice."

The Rich Are Not Who We Think They Are

By Seth Stephens-Davidowitz. He is the author of “Don’t Trust Your Gut: Using Data to Get What You Really Want in Life.” Excerpts:

"We now know who is rich in America. And it’s not who you might have guessed.

A groundbreaking 2019 study by four economists, “Capitalists in the Twenty-First Century,” analyzed de-identified data of the complete universe of American taxpayers to determine who dominated the top 0.1 percent of earners.

The study didn’t tell us about the small number of well-known tech and shopping billionaires but instead about the more than 140,000 Americans who earn more than $1.58 million per year. The researchers found that the typical rich American is, in their words, the owner of a “regional business,” such as an “auto dealer” or a “beverage distributor.”"

"What are the lessons from the data on rich earners?

First, rich people own. Among members of the top 0.1 percent, the researchers found, about three times as many make the majority of their income from owning a business as from being paid a wage. Salaries don’t make people rich nearly as often as equity does.

Second, rich people tend to own unsexy businesses. A different study, by the statisticians Tian Luo and Philip B. Stark, examined which businesses were most likely to fold fastest. The kind most likely to go out of business most quickly is a record store. The average record store lasts just 2.5 years. (For comparison, the average dentist’s office lasts more than 19.5 years.) Other businesses that fold quickly include toy stores (3.25 years), clothing stores (3.75 years) and cosmetics stores (4.0 years).

There are, however, plenty of unsexy businesses from which a few people are getting rich. These include auto repair shops, gas stations and business equipment contractors.

The third important factor in gaining wealth is some way to avoid ruthless price competition, to build a local monopoly. The prevalence of owners of auto dealerships among the top 0.1 percent gives a clue to what it takes to get rich."

"more than 20 percent of auto dealerships in America have an owner making more than $1.58 million per year.

Auto dealerships have legal protections; state franchising laws often give auto dealers exclusive rights to sell cars in a territory. Same for many beverage distributors, which act as middlemen between alcohol companies and stores and supermarkets. Beverage distributors have long been protected by a system set up after prohibition that prevents beverage companies from distributing their products themselves."

So it looks like government controls make or keep some people rich.

Elizabeth Warren Introduces Price-Gouging Bill That Fails To Define What Qualifies as Price Gouging

The bill would penalize companies for price gouging during times of war, public health emergencies, or natural disasters—which would have encompassed all of the last two years.

By Liz Wolfe of Reason.

"The prices Americans are paying for groceries and other essentials are at all-time highs. One of the reasons?" asked Sen. Elizabeth Warren (D–Mass.) on Wednesday via Twitter. "Giant corporations are price gouging & reaping record profits. We need to put a stop to corporate gouging that drives up prices for families."

It couldn't be that runaway inflation—which has reached astonishing 40-year highs in recent weeks—is, according to Federal Reserve of San Francisco economists, partly attributable to President Joe Biden's mid-pandemic economic stimulus plans, which pumped money into the bank accounts of Americans with seemingly little thought given to what could result. In Warren's view of the world, it's corporate, not government, malfeasance that's leading to pocketbook pain for everyday Americans.

Warren holds that such problems must be solved by the federal government in the form of a new bill that would limit the prices companies can charge consumers during times of "exceptional market shock." That includes times of war, public health emergency, or natural disaster—which would have encompassed all of the last two years, barring firms from raising their prices to adapt to difficult and fast-changing economic circumstances.

Warren's bill, introduced with Sen. Tammy Baldwin (D–Wis.) and Rep. Jan Schakowsky (D–Ill.), would empower the Federal Trade Commission (FTC) to investigate and penalize companies with "unconscionably excessive price increases," which is disturbingly defined nowhere in the legislation.

Companies will be "presumed to be in violation" if they use "the effects or circumstances related to the exceptional market shock as a pretext to increase prices." In other words, companies responding to inflation or supply chain woes caused by the pandemic could be presumed in violation and fined by the FTC, unless such price increases were due to costs outside the firm's control. Companies would also be required to disclose information about their pricing strategies in regulatory filings.

The bill is unlikely to garner broad support and become law. So-called price gouging is a pet issue of Warren's, one shared by the likes of the White House, which has claimed, amid the ongoing nationwide baby formula shortage, that it will crack down on price gouging as supplies dwindle.

Prices contain useful information about how hotly demanded a product is. Consider what would happen if firms never charged higher prices for goods or services in high demand: They would run out of the good or no longer be able to offer the service at all, denying consumers the ability to get the good or service they need. Uber's surge pricing is inconvenient when you need to get somewhere, but it also conveys useful information about the scarcity of available drivers, allowing some would-be customers to shift to an alternative, better coordinating the remaining supply so drivers are provided to those who are either least price-sensitive or most in need, conveyed by their willingness to pay.

Moreover, it's not clear that Warren's bill is narrowly tailored to target "price gouging" as people classically understand it. It looks more like the federal government wading into the sticky territory of setting price controls over the long term, given how broadly the text defines "exceptional market shock." It is important, during prolonged periods of war or pandemic, for companies to be able to adjust their pricing strategies to respond to, say, higher prices and decreased supply of wheat, when one-quarter of the world's supply is cut off due to Russia's war in Ukraine and will remain cut off for an unknown length of time. (Ditto for pork, crabs, and a gazillion other products that have been affected by COVID-related supply chain disruptions over the last two years.) Empowering the FTC to hassle these companies for engaging in the exceedingly normal practice of altering their prices to respond to changing supply and demand is ludicrous, and yet another step on the road toward Venezuela.

Though Warren's bill is unlikely to pass, this pet issue won't be shelved anytime soon."

Inflation, Market Power, and Price Controls

From University of Chicago survey of economists.

Question A:

A significant factor behind today’s higher US inflation is dominant corporations in uncompetitive markets taking advantage of their market power to raise prices in order to increase their profit margins.

Question B:

Antitrust interventions could successfully reduce US inflation over the next 12 months.

Question C:

Price controls as deployed in the 1970s could successfully reduce US inflation over the next 12 months.