Wearing masks in the community probably makes little or no difference to the outcome of influenza-like illness (ILI)/COVID-19 like illness compared to not wearing masks

See Physical interventions to interrupt or reduce the spread of respiratory viruses. From Cochrane Database of Systematic Reviews. Excerpt:

"Abstract

Background: Viral epidemics or pandemics of acute respiratory infections (ARIs) pose a global threat. Examples are influenza (H1N1) caused by the H1N1pdm09 virus in 2009, severe acute respiratory syndrome (SARS) in 2003, and coronavirus disease 2019 (COVID-19) caused by SARS-CoV-2 in 2019. Antiviral drugs and vaccines may be insufficient to prevent their spread. This is an update of a Cochrane Review last published in 2020. We include results from studies from the current COVID-19 pandemic.

Objectives: To assess the effectiveness of physical interventions to interrupt or reduce the spread of acute respiratory viruses.

Search methods: We searched CENTRAL, PubMed, Embase, CINAHL, and two trials registers in October 2022, with backwards and forwards citation analysis on the new studies.

Selection criteria: We included randomised controlled trials (RCTs) and cluster-RCTs investigating physical interventions (screening at entry ports, isolation, quarantine, physical distancing, personal protection, hand hygiene, face masks, glasses, and gargling) to prevent respiratory virus transmission. DATA COLLECTION AND ANALYSIS: We used standard Cochrane methodological procedures.

Main results: We included 11 new RCTs and cluster-RCTs (610,872 participants) in this update, bringing the total number of RCTs to 78. Six of the new trials were conducted during the COVID-19 pandemic; two from Mexico, and one each from Denmark, Bangladesh, England, and Norway. We identified four ongoing studies, of which one is completed, but unreported, evaluating masks concurrent with the COVID-19 pandemic. Many studies were conducted during non-epidemic influenza periods. Several were conducted during the 2009 H1N1 influenza pandemic, and others in epidemic influenza seasons up to 2016. Therefore, many studies were conducted in the context of lower respiratory viral circulation and transmission compared to COVID-19. The included studies were conducted in heterogeneous settings, ranging from suburban schools to hospital wards in high-income countries; crowded inner city settings in low-income countries; and an immigrant neighbourhood in a high-income country. Adherence with interventions was low in many studies. The risk of bias for the RCTs and cluster-RCTs was mostly high or unclear. Medical/surgical masks compared to no masks We included 12 trials (10 cluster-RCTs) comparing medical/surgical masks versus no masks to prevent the spread of viral respiratory illness (two trials with healthcare workers and 10 in the community). Wearing masks in the community probably makes little or no difference to the outcome of influenza-like illness (ILI)/COVID-19 like illness compared to not wearing masks (risk ratio (RR) 0.95, 95% confidence interval (CI) 0.84 to 1.09; 9 trials, 276,917 participants; moderate-certainty evidence. Wearing masks in the community probably makes little or no difference to the outcome of laboratory-confirmed influenza/SARS-CoV-2 compared to not wearing masks (RR 1.01, 95% CI 0.72 to 1.42; 6 trials, 13,919 participants; moderate-certainty evidence). Harms were rarely measured and poorly reported (very low-certainty evidence). N95/P2 respirators compared to medical/surgical masks We pooled trials comparing N95/P2 respirators with medical/surgical masks (four in healthcare settings and one in a household setting). We are very uncertain on the effects of N95/P2 respirators compared with medical/surgical masks on the outcome of clinical respiratory illness (RR 0.70, 95% CI 0.45 to 1.10; 3 trials, 7779 participants; very low-certainty evidence). N95/P2 respirators compared with medical/surgical masks may be effective for ILI (RR 0.82, 95% CI 0.66 to 1.03; 5 trials, 8407 participants; low-certainty evidence). Evidence is limited by imprecision and heterogeneity for these subjective outcomes. The use of a N95/P2 respirators compared to medical/surgical masks probably makes little or no difference for the objective and more precise outcome of laboratory-confirmed influenza infection (RR 1.10, 95% CI 0.90 to 1.34; 5 trials, 8407 participants; moderate-certainty evidence). Restricting pooling to healthcare workers made no difference to the overall findings. Harms were poorly measured and reported, but discomfort wearing medical/surgical masks or N95/P2 respirators was mentioned in several studies (very low-certainty evidence). One previously reported ongoing RCT has now been published and observed that medical/surgical masks were non-inferior to N95 respirators in a large study of 1009 healthcare workers in four countries providing direct care to COVID-19 patients. Hand hygiene compared to control Nineteen trials compared hand hygiene interventions with controls with sufficient data to include in meta-analyses. Settings included schools, childcare centres and homes. Comparing hand hygiene interventions with controls (i.e. no intervention), there was a 14% relative reduction in the number of people with ARIs in the hand hygiene group (RR 0.86, 95% CI 0.81 to 0.90; 9 trials, 52,105 participants; moderate-certainty evidence), suggesting a probable benefit. In absolute terms this benefit would result in a reduction from 380 events per 1000 people to 327 per 1000 people (95% CI 308 to 342). When considering the more strictly defined outcomes of ILI and laboratory-confirmed influenza, the estimates of effect for ILI (RR 0.94, 95% CI 0.81 to 1.09; 11 trials, 34,503 participants; low-certainty evidence), and laboratory-confirmed influenza (RR 0.91, 95% CI 0.63 to 1.30; 8 trials, 8332 participants; low-certainty evidence), suggest the intervention made little or no difference. We pooled 19 trials (71, 210 participants) for the composite outcome of ARI or ILI or influenza, with each study only contributing once and the most comprehensive outcome reported. Pooled data showed that hand hygiene may be beneficial with an 11% relative reduction of respiratory illness (RR 0.89, 95% CI 0.83 to 0.94; low-certainty evidence), but with high heterogeneity. In absolute terms this benefit would result in a reduction from 200 events per 1000 people to 178 per 1000 people (95% CI 166 to 188). Few trials measured and reported harms (very low-certainty evidence). We found no RCTs on gowns and gloves, face shields, or screening at entry ports.

Authors' conclusions: The high risk of bias in the trials, variation in outcome measurement, and relatively low adherence with the interventions during the studies hampers drawing firm conclusions. There were additional RCTs during the pandemic related to physical interventions but a relative paucity given the importance of the question of masking and its relative effectiveness and the concomitant measures of mask adherence which would be highly relevant to the measurement of effectiveness, especially in the elderly and in young children. There is uncertainty about the effects of face masks. The low to moderate certainty of evidence means our confidence in the effect estimate is limited, and that the true effect may be different from the observed estimate of the effect. The pooled results of RCTs did not show a clear reduction in respiratory viral infection with the use of medical/surgical masks. There were no clear differences between the use of medical/surgical masks compared with N95/P2 respirators in healthcare workers when used in routine care to reduce respiratory viral infection. Hand hygiene is likely to modestly reduce the burden of respiratory illness, and although this effect was also present when ILI and laboratory-confirmed influenza were analysed separately, it was not found to be a significant difference for the latter two outcomes. Harms associated with physical interventions were under-investigated. There is a need for large, well-designed RCTs addressing the effectiveness of many of these interventions in multiple settings and populations, as well as the impact of adherence on effectiveness, especially in those most at risk of ARIs."

Subsidized Flood Insurance Makes Storm Damage Worse

It's high time for Congress to end a program that routinely goes into debt providing subsidies to wealthy people living in high-risk areas.

By Joe Lancaster of Reason. 

"Hurricane Idalia made landfall this morning along Florida's Gulf Coast as a Category 3 storm. It's expected to make its way up the East Coast as far north as North Carolina.

While the damage and potential losses will be tragic, it's also worth noting the federal policies that end up exacerbating these hurricanes' damage.

The National Flood Insurance Program (NFIP), managed by the Federal Emergency Management Agency, was created in 1968 to help homeowners in flood-prone areas afford insurance. Federal law requires that mortgaged properties in designated flood hazard areas carry flood insurance, but insurance premiums in oft-flooded areas are significantly more expensive (if they're even offered at all). The NFIP offers federal backing for policies that private insurers would not otherwise touch or that would be too expensive for most people to afford.

Today, the NFIP covers over 5 million policy holders and provides nearly $1.3 trillion in coverage. The program is nominally funded through insurance premiums, and if necessary it can borrow money from the Treasury to be paid back with interest.

But providing insurance to an otherwise uninsurable market comes at a price: A 2011 report by the nonpartisan Government Accountability Office (GAO) found that 22 percent of NFIP's policies were issued at subsidized rates, about 40–45 percent of the cost of an unsubsidized policy. Between 2002 and 2013, the NFIP collected between $11 billion and $17 billion fewer in premiums than the market would have dictated.

As a result of charging premiums below market rate, the NFIP often runs over budget: In 2017, the program owed more than $30.4 billion to the Treasury, the maximum amount it's allowed to borrow. In order to cover payments for damage caused by Hurricanes Harvey, Irma, and Maria that year, Congress canceled $16 billion of the NFIP's debt. (The NFIP has made no further payments since then and currently owes more than $20.5 billion.)

The policies themselves don't make financial sense. NFIP policy holders are not limited in how many claims they can file or how much money they can receive. As a result, more than 150,000 properties nationwide have flooded multiple times and received NFIP reimbursement each time. According to statistics compiled by Pew, these so-called "repetitive loss properties" account for just 1 percent of NFIP policies but 25-30 percent of payouts. By 2009, about 10 percent of repetitive loss policies had received payouts worth more than the properties themselves.

An insurance company's refusal to provide coverage in a high-risk area provides a disincentive to anyone who chooses to live there: When the inevitable happens, you'll be responsible for the damage yourself.

But when the government assumes the risk on an insurer's behalf and makes insurance cheaper than the market would dictate, it creates incentives for people to live in dangerous areas more likely to be battered by extreme weather events.

There is evidence that NFIP's artificially cheaper policies have done exactly that. A 2018 study by Abigail Peralta of Louisiana State University and Jonathan Scott of the University of California, Berkeley, found that after a county joins NFIP, its relative population "increases by 4 to 5 percent" as residents stay in high-risk areas as opposed to moving away.

But for subsidized insurance policies, market forces would be driving people away from living in dangerous areas.

NFIP policies are also more likely to benefit wealthier people with more expensive properties. A 2007 Congressional Budget Office paper found that the median value of an NFIP property was as much as 2.5 times higher than the national average; it also found that 23 percent were not the owner's primary residence. Nearly 80 percent of NFIP policies are located in counties that rank in the top 20 percent of income. And a 2016 study in the Stanford Law Review found that "people who live in wealthier zip codes, receive larger subsidies, both in absolute magnitude and as a percent of their premium."

Two decades ago, John Stossel relayed the story of his beach house in the Hamptons, built on the edge of the water and insured for just a few hundred dollars a year through NFIP. It was fully or partially rebuilt multiple times over the years before finally getting washed away in a storm, with taxpayers footing the bill each time.

As the 2023 hurricane season gets underway, it's high time for Congress to end the NFIP—a program that goes billions of dollars into debt providing subsidies to keep mostly wealthy people living in high-risk areas."

A Flawed Case for Centrally Planned Health Insurance

By David Henderson. 

"In their recent book, We’ve Got You Covered, two health economists make their case for ditching the current system of health insurance in favor of a government-financed, zero-premium insurance for basic coverage. They would allow people to buy supplementary insurance to expand their coverage. The two economists, Stanford’s Liran Einav and MIT’s Amy Finkelstein, are well-known contributors to the literature on health insurance.

With their breezy and humorous writing style, Einav and Finkelstein make what seems at first like a compelling case. They may sway many readers, especially those who don’t know the literature on health economics. But a careful look at their case for ditching our current health insurance and starting over with a centrally planned system uncovers serious omissions and some tensions between their own views. Two omissions are: any mention at all of health savings accounts, and any mention, with a one-sentence exception, of possible reforms of the supply side that would increase supply and reduce the price of health care. One major tension is on their view of the importance of co-payments and deductibles; moreover, they seem to misunderstand the way to measure the impact of co-payments."

Barton Swaim reviews Glory M. Liu's book on Adam Smith

See ‘Adam Smith’s America’ Review: Wealth of a Nation. Excerpts:

"And yet the idea of Adam Smith as a proto-capitalist won’t go away. It is, Glory Liu contends in “Adam Smith’s America,” a false understanding of Smith propounded by figures associated with the University of Chicago Department of Economics, particularly Friedrich Hayek, George Stigler and Milton Friedman. The “complexity and pluralism” of older interpretations of Smith, Ms. Liu writes, have been “overshadowed by the influence of the so-called Chicago School’s distillation of Smith’s ideas into a popular and powerful myth: that rational self-interest is the only valid premise for the analysis of human behavior, and that only the invisible hand of the market, not the heavy hand of government, could guarantee personal and political freedom.”

A “distillation” turned into a “myth”—those are strong words. In the same paragraph Ms. Liu, a lecturer in social studies at Harvard, calls the myth “a deliberate construction.” That sounds close to a fabrication, or lie. But she quickly backs away from that suggestion by saying she is “less interested in providing a definitive account of what Smith originally intended or meant than . . . in elucidating the demands that his readers have brought to his works and how that colored the lessons they have extracted from them.” I am not sure what that means, but I gather from it that Ms. Liu knows she doesn’t have the goods to claim that the Chicago School got any part of Adam Smith wrong.

The book bears the subtitle “How a Scottish Philosopher Became an Icon of American Capitalism,” but you don’t get to the bit where Smith becomes the capitalistic icon until the penultimate chapter. What lies in the middle is basically a history of Adam Smith’s reception in Europe and America. As a work of history the book has its virtues. I had not appreciated how influential “Wealth of Nations” was on the American Founders—Thomas Jefferson read it with care; Alexander Hamilton did likewise but forcefully disagreed with parts of it; John Adams owned two copies, one in French translation. 

But a curious thing happens when Ms. Liu gets to the Chicago School. We learn that a pair of earlier Chicago School economists—Frank Knight and Jacob Viner, who taught and wrote mainly from the 1920s to the ’40s—faulted Smith for failing to grasp the function of prices in a free economy. This would seem to contradict Ms. Liu’s thesis that the Chicago economists falsely turned Adam Smith into a free-market hero: Knight and Viner were pointing out that Smith didn’t grasp an essential reality of markets. Yet somehow, according to Ms. Liu’s analysis, they were wrong to do so. “By framing Smith’s contribution and legacy in the pure, objective language of economics,” she writes, “his Chicago exponents constructed the social-scientific bases of their political outlook which privileged free enterprise over central planning, and market rationality over moral reasoning.”

Forgive me, but Smith, for all his greatness as an economist, was wrong about value and pricing. To say so isn’t to “privilege” free enterprise over central planning but to state what is the case. You get the feeling that no one, according to Ms. Liu, can write accurately about any one thing in Adam Smith’s oeuvre without also, at the same time, considering every other thing he ever wrote and so smothering any potential insight with a thousand qualifications. 

This high-minded disapproval becomes absurd when Ms. Liu gets to Hayek, Stigler and Friedman. These scholars, concerned as they were about the advance of collectivism over much of the globe, emphasized Smith’s perception that the self-interest of merchants tends to promote the interests of society as a whole. Alas, says Ms. Liu, this “often entailed a flattening of Smith’s ideas in ways that smoothed over, or altogether obscured, the complexities, tensions, and other problematic aspects characteristic of earlier readings of Smith.” Thus did the Chicagoans give us “an invented Smithian tradition” bereft of complexities and tensions.

For all the talk of obscuring complexities and inventing traditions, one looks in vain in Ms. Liu’s treatment for any instance of Hayek, Stigler or Friedman misunderstanding or distorting a passage or idea in Smith’s writing. “Though Hayek’s readings of Smith may have been opportunistic,” Ms. Liu writes after quoting a passage from the Austrian economist’s lecture on Smith, “they were not inaccurate.” As for Stigler, the consequence of his work on Smith “was that certain aspects of Smith’s ideas were amplified and glorified, while others deemed irrelevant or unsatisfactory.” Oh, no!

Ms. Liu’s complaint seems to be that Hayek, Stigler and especially Friedman were, for lack of a less pretentious term, intellectuals. Friedman “mastered the art of distilling and repackaging abstract and complex academic theories into more palatable, usable language for a wider audience.” That phrase “mastered the art” sounds vaguely sinister, but this is a description of what intellectuals do. 

We reach the point of comedy when Ms. Liu quotes the socialist agitator Michael Harrington’s criticism of Friedman’s use of the invisible-hand metaphor. “The problem with Friedman’s version of the invisible hand as a right-wing political agenda,” she concludes, “was not that it was a complete misinterpretation of Smith’s text.” (That word “complete” is sly.) “The problem, as Michael Harrington put it, was that it was ‘essentially a mythic, non-historical presentation of an abstract solution taken out of time which does not look to the tremendous evolution of capitalist society.’ ” This is preposterous. If we were to take Harrington’s complaint seriously, we would never again draw on an old book to illuminate a modern problem. 

Free marketeers haven’t won many arguments lately, but they have won the argument over Adam Smith. No number of academic monographs and journal articles will persuade the ordinary reader that he doesn’t understand the defense of free enterprise and free trade in “Wealth of Nations” until he has first made his way through “The Theory of Moral Sentiments.” If Ms. Liu and her likeminded academic peers think I’m wrong about that, they’ll need to master the dark art of intellectual debate."

Shocking Candor on Fuel Standards

Bureaucrats admit that ‘net benefits for passenger cars remain negative.’

By Michael Buschbacher and James Conde. Mr. Buschbacher is a partner at the law firm Boyden Gray PLLC and served in the Justice Department’s Environment Division (2020-21). Mr. Conde is counsel at Boyden Gray PLLC. Excerpts:

"Buried deep on page 56,342 of volume 88 of the Federal Register, the agency makes this concession about its latest proposed rules: “Net benefits for passenger cars remain negative across alternatives.” In plain English, this means that mandating ever-more-stringent fuel economy for passenger cars will harm society.

How much? The department estimates that its plan of increasing passenger-car standards by 2% each year will reduce private welfare by $5.8 billion over the life of the cars. After accounting for alleged social benefits, such as reduced climate-change damages in foreign countries, the standard reduces total public welfare by $5.1 billion."

"the Transportation Department bureaucrats have no real basis for claiming they make better choices than drivers and fleet managers. They literally are making it up."

"the department’s accompanying environmental assessment estimates that in 2060 the proposal would reduce average global temperatures by 0.000%. The modeled effect is so trivial that the bean counters ran out of decimals in their spreadsheets."

Trump Courts a Global Trade War

He promises a new 10% border tax on anything made abroad

WSJ editorial. 

"Donald Trump exaggerates about many things, but on economic policy his record is that he means what he says, for better or worse. His leading message for a second term these days is that Americans should be prepared to pay more for all kinds of goods because he plans to impose a 10% tariff on all foreign goods sold in America.

“To bring tens of thousands more manufacturing jobs back to South Carolina, I will impose a border tariff on all foreign-made goods,” he said recently in Columbia. “So if they want to sell into our country and if they want to take our jobs by doing that, we’re going to have a tax that’s going to be a ‘privilege’ tax.”

Mr. Trump is also pitching a universal reciprocal tariff that would see the U.S. impose tariff rates on foreign goods equivalent to what the exporting country charges on goods from the U.S. He claims to have history on his side, appealing to the 1890 McKinley tariff that imposed some of the highest tariff rates in U.S. history and empowered President Benjamin Harrison to impose tariffs on a reciprocal basis.

This is worth taking literally and seriously because Mr. Trump meant what he said about tariffs when he ran for President in 2016. He imposed taxes on imports ranging from steel and aluminum to solar panels and washing machines, affecting imports worth hundreds of billions of dollars when the border taxes were implemented.

Protectionists pitch tariffs as a tax on other countries, but American consumers pay the price—a total of $80 billion during Mr. Trump’s term, according to a Tax Foundation analysis. This cost the U.S. 166,000 full-time-equivalent jobs, the Tax Foundation says, and the Trump trade tax wiped out roughly 12% of the economic benefit of the 2017 Tax Cuts and Jobs Act.

What about the impact on jobs? Before Covid-19 hit, U.S. employment in manufacturing rose 1.8%, according to the Bureau of Labor Statistics, as the civilian workforce overall grew 2.7%. That’s hardly an unusual jobs increase, and it could as easily be attributed to the corporate tax cut that caused companies to repatriate hundreds of billions of dollars in overseas cash. Deregulation also helped.

An analysis of the steel tariffs estimated an economic price of $900,000 for each job created. Because more U.S. companies buy metal than sell it, another study found increased steel prices cut manufacturing employment by 75,000.

The trade deficit isn’t a useful measure of economic performance, but Mr. Trump claims it is. In his first year in office, the U.S. imported $517 billion more than it exported in goods and services, according to data from the Census Bureau. That increased to $653 billion in 2020, and this relationship holds after adjusting for inflation. President Biden has continued Mr. Trump’s tariff policies, even as the trade deficit hit a record of $951 billion in 2022.

A new universal tariff would be more of the same, and then some. The last U.S. President to entertain a trade idea this radical was Herbert Hoover in 1930 with the Smoot-Hawley Tariff Act. That sweeping border tax triggered global retaliation that shrank world trade and contributed to what became the Great Depression. The Republican Party’s reputation for economic management didn’t recover for 50 years.

Mr. Trump also seems to forget we’re not in the 1980s anymore and Japan and West Germany aren’t the main economic rivals. China is. Trump tariffs aimed at Japan and the European Union have made it harder to rally allies for sensible enforcement when Chinese subsidies, import restrictions or intellectual-property theft bend global trading rules.

The risk for the U.S. economy is that the 2024 ballot won’t have any candidate who understands how trade boosts prosperity, and how trade with allies can make it easier to manage competitors. The Biden Administration has failed to reverse most of the Trump tariffs, and the Inflation Reduction Act came larded with trade-distorting subsidies that are sparking a trade war with the European Union.

President Biden’s abdication on trade includes a refusal to negotiate any new trade deals, even with an ally such as post-Brexit Britain that wants and needs one. His trade rep, Katherine Tai, doesn’t seem to do much except explain why she can’t do much.

***

By the way, Mr. Trump for years has cited the McKinley tariffs but he appears never to have read what happened after those 1890 charges came into effect. Voters rebelled at the higher prices they were forced to pay, and Republicans were wiped out by free-trading Democrats in the 1890 midterm. Democrats under President Grover Cleveland in 1894 partially reversed the tariffs to dig the U.S. out of a recession.

Economic historians now believe those tariffs had little effect on boosting America’s astounding economic growth in that era, which was driven by industries not covered by the tariffs. As for McKinley, who pushed for his tariffs from the House of Representatives, he did become President in 1896—by campaigning in favor of the gold standard, a proxy for a stable value for money, against populist easy-money Democrat William Jennings Bryan.

Free trade isn’t popular in our dirigiste economic era, in part because our political leaders are afraid to defend it. The Trump tariff threat is all too real if he wins in 2024."

How the Student-Loan Payment Pause Hurt Borrowers

Many used the long Trump-Biden moratorium to pile on credit-card, mortgage and other debt

By Allysia Finley. Excerpts:

"According to a June UBS survey, 62% of student-loan borrowers agreed with the spending philosophy of “live for today because tomorrow is so uncertain.”"

"The payment pause, which President Biden prolonged, enabled college grads to spend beyond their means while his promises of loan forgiveness encouraged them to pile on the debt—not only for expensive advanced degrees but also homes, cars and travel. As a result, borrowers are in a worse position financially than before the pandemic."

"two-thirds of borrowers say they don’t know how they will resume making payments once the pause ends next month."

"The Biden administration repeatedly extended the pandemic payment pause before announcing debt forgiveness of $10,000 to $20,000 per borrower last summer. The Supreme Court struck this down, but the administration’s Plan B will cap payments at 5% of discretionary income and forgive remaining balances after 20 years."

"most borrowers will see their payments slashed by more than half, saving them thousands annually. Grads making less than $32,800 won’t have to pay a penny."

"$200 billion that the pandemic pause has cost the government."

"borrowers are now deeper in debt than before the pandemic."

"53% of student-loan borrowers added bank credit card debt during the pandemic, while 36% took on new auto loans and 15% took out new mortgages."

"A typical college grad with a master’s degree from NYU earns $62,745.

UPS

drivers on average will make $170,000 in pay and benefits at the end of their new five-year contract."

"A University of Chicago study found the payment pause had a large “stimulus effect” on the economy as borrowers substituted “increased private debt for paused public debt.”"

"Borrowers with paused payments added an average of $1,800 in other debt during the first 18 months of the reprieve."

"debt relative to income grew more for borrowers whose payments were paused than the broader population."

"Among the top income quartile of borrowers—people making more than $94,425 and couples earning more than $188,850—delinquencies on nonstudent debt now exceed pre-pandemic rates by 25%."

"government promises of loan forgiveness and the extended payment pause encouraged excessive spending and bad financial management."

Maui’s Fires and the Electric Grid

Utilities are spending more on the green energy transition than on resilience

WSJ editorial.

"The deadly fires in Maui last week are still being investigated, and there may have been more than one contributor. But one culprit that seems to be emerging is the tradeoff the local utility had to navigate between power grid safety and the government-mandated green energy transition. 

Video footage points to fallen power lines as a possible cause of the deadly fires. Hawaiian Electric’s bonds and stocks have sold off this week as investors worry that the utility will be liable for fire damage.

If Hawaiian Electric’s lines did ignite the fires, it would echo the problems of

PG&E

, the California utility that filed for Chapter 11 bankruptcy in 2019 after getting sued for tens of billions of dollars for damages from fires caused by its equipment. The 2018 Camp Fire killed 84 people and razed the town of Paradise.

What both utilities have in common is that they prioritized growing renewable power to meet government mandates over hardening their systems and reducing fire risk. In 2015 Hawaii lawmakers required that 100% of the state’s electricity come from renewable sources by 2045. California and some other states followed with similar mandates.

Hawaii’s mandate was an especially tall order since only about 20% of its power in 2015 came from renewables. The islands lack large amounts of empty land to build solar and wind. They also lack natural-gas power that can ramp up quickly to back them up. Most of Hawaii’s power was derived from oil and coal.

To meet the government mandate, Hawaiian Electric embarked on a rapid renewable build-out, which involved heavily subsidizing rooftop solar and batteries and contracting for large-scale renewables at elevated prices. Oil can be an expensive fuel source, but decommissioning fossil-fuel plants prematurely wastes sunk capital.

Every dollar the utility spent on subsidizing solar and connecting renewables to the grid was one less dollar available for strengthening equipment and removing combustible brush. Despite rising fire risk from non-native grass, Hawaiian Electric spent less than $245,000 on wildfire projects on the island of Maui between 2019 and 2022.

Not until last year did the utility seek state approval to raise rates for wildfire-safety improvements, which it still hasn’t received. “Looking back with hindsight, the business opportunities were on the generation side, and the utility was going out for bid with all these big renewable-energy projects,” former Maui County Energy Commissioner Doug McLeod told the Journal.

Hawaiian Electric now generates about 40% of power from renewables and at times produces more solar power than the grid can handle. Grid upgrades required to connect renewables and balance their intermittent flows can divert scarce capital from system improvements needed to withstand physical stress, such as from heavy winds.

A fraying electric grid is a nationwide problem. Consultants at

Marsh McLennan

estimate that more than $700 billion will need to be spent to replace aging transmission lines and maintain grid reliability. Sixty percent of U.S. distribution lines have surpassed their 50-year life expectancy. The average age of large power transformers is 40 years, twice their planned life span.

Grid upgrades to achieve the net-zero promised land will cost another $2.5 trillion by 2050, according to a Princeton University study. Something will invariably give. And as we’ve seen in California and Hawaii, it may be safety."

The flawed premise in Glory M. Liu's book on Adam Smith

See Adam Smith’s America: How a Scottish Philosopher Became an Icon of American Capitalism reviewed by Marcus Shera of George Mason University.

"There is no apparent impartial spectator of Adam Smith’s work, claims Glory Liu in Adam Smith’s America. Adam Smith has been presented as an icon throughout American history by figures on opposite sides of the political spectrum. Thomas Jefferson in 1790 called the Wealth of Nations (WN), the “best book extant” on political economy (p. 21), while Alexander Hamilton “simply cribbed” from WN in his 1791 “Report on Manufacturers” (p. 38 – 9). From the nation’s founding to the present day, Smith is invoked to lend credence to positions on economic policy and the philosophy of a commercial society. Liu hopes to untether Smith from his present reputation as a laissez-faire Chicago economist, by drawing our attention to the many ways Smith has been interpreted and the various figures who have championed him. The book self-consciously does a “reception history.” How were Smith’s writings received throughout American history, and how were his ideas leveraged in the context of particular policy debates? The book does a good job of presenting the varied American views of Smith over two centuries, but by not being clear about which views of Smith reflect the Scot accurately, Liu appears to tacitly suggest that Smith’s original intentions have been manipulated. A claim that present ideological views were “forcefully retrojected” (p. 252) onto a former thinker requires an investigation of how that former thinker ought to be related to today’s intellectual climate.

After a brief biography of Smith, the book proceeds through various periods of U.S. history and the way Smith was received in them. The first chapter, on the reception of Smith during the American Founding, is delightful. Jefferson, Hamilton, Adams, and Madison all admired Smith and it shows in both their writing and statecraft. The common conception that America’s founding was primarily about asserting inalienable Lockean rights overlooks the robust Smithian ideas in the Federalist papers (p. 32), John Adams’ Discourses on Davila (p. 61 – 3), and other important American works. Later characters in Liu’s narrative are more academic. The second and fourth chapters focus on the usage of Adam Smith in nineteenth century American universities, where he came to prominently hold the title as the founder of economics, and how the reputation of Smith clashed with Americans influenced by the German Historical School. The third chapter describes how Smith’s ideas were leveraged in the debate on tariffs surrounding the American Civil war (surprisingly by both pro and anti-tariff camps). The fifth and sixth chapters focus on the Chicago school, Old and New, and hold that the Smith presented by George Stigler and Milton Friedman is not only shallow and inaccurate but deviated from the more nuanced views of their predecessors Frank Knight and Jacob Viner. The book concludes with a chapter on the perspectives on Smith since the 1980s, that hoped for a view of Smith that integrated his moral philosophy, historical political economy, and economics.

When Liu attempts to characterize the Chicago interpretation of Smith, she primarily refers to the writing of George Stigler. Further, she often attributes Stigler’s idea of Smith to Friedman by osmosis. Stigler’s view of Smith was that WN “is a stupendous palace erected upon the granite of self-interest” (1971, Smith’s Travels on the Ship of State, History of Political Economy, 3(2): 265 – 277). That self-interest has clear, and unambiguous content across time and place is a simple assumption for Stigler, leading him to a rather flat view of Smith’s work as a whole. If “self-interest” is taken as a straightforward concept, there’s little room for humans to negotiate and moralize, themes central to Smith’s other major works. Liu is right to point out this weakness in Stigler’s Smith, but the view is not successfully attributed to Friedman other than by association.

Stigler’s Smith is even less properly associated with other Chicago School proteges of the same generation. Notably absent is Ronald Coase, a Nobel Prize-winning Chicago economist who extensively engaged with Smith’s Theory of Moral Sentiments. Coase writes,

It is wrong to believe, as is commonly done, that Adam Smith had as his view of man an abstraction, an ‘economic man,’ rationally pursuing his self-interest in a single-minded way. Smith would not have thought it sensible to treat man as a rational utility-maximiser. He thinks of man as he actually is—dominated, it is true, by self-love but not without some concern for others, able to reason but not necessarily in such a way as to reach the right conclusion, seeing the outcomes of his actions but through a veil of self-delusion. (1976, Adam Smith’s View of Man, Journal of Law and Economics, 19(3): 529 – 546)

Neither is James Buchanan mentioned as another Nobel Prize-winning Chicago-trained economist who often referred to Smith as an influential figure for his own thought. Strangely, the only economist who Liu seems to commend for their reading of Smith is Friedrich Hayek. “Though Hayek’s readings of Smith may have been opportunistic, they were not inaccurate” (p. 223). By not stating too clearly her own view on the proper interpretation of Smith, nor precisely in what way Hayek was opportunistic, Liu is able to make bold statements to the effect that “Hayek, Stigler, and Friedman transformed Smith” (p. 225). Any recasting of Smith’s ideas into a modern setting (a task that modern Smith scholars are eager to do) requires some degree of transformation (or at least transposition). It prompts the question of whether the transformation necessarily changes the essential character of Smith’s thought.

By attributing the Chicago interpretation of Smith to political motivations, Liu buries the lede that the Chicago Smith is a tainted version. Without saying it, she suggests to the reader that if Smith were alive today, he would not necessarily support largely self-regulating markets, or at least that from his writings alone we ought to remain agnostic about what he would say today. Not only is the nature of Smith’s policy claims up for grabs, but the status of economic science as something that can make claims outside of a particular historical context is always in the background of the debate. In the nineteenth century, many of Smith’s critics argued that dogmatic laissez-faire policy conclusions were a result of economics making a false claim to have the status of general science. Part of the book’s subtle argument is that when Smith’s Lectures on Jurisprudence (LJ) surfaced in the 1890s, Smith’s arguments in WN could be interpreted in a historical context that Smith himself recognized. The “Chicago Smith” is then a figure who backtracks on this development by attributing contemporary policy views to him, turning back the clock to before the LJ were discovered.

The interpretive strategy being proposed by Liu is that if there are at least some elements of historical contingency in Smith’s conclusions, we must at the very least remain agnostic about what he would say at any other period. Therefore, the presentation of Smith by Friedman in Free to Choose as a staunch supporter of low taxes, globalization, and deregulation of markets attributes claims to Smith irresponsibly. The premise here is flawed. It is true that Smith did not make an argument in the style of Carl Menger (2020, The Errors of Historicism in German Economics, Econ Journal Watch 17(2): 442 – 507) defending the universal applicability of economic theory. But Smith’s style is much closer to Hume’s method of finding patterns that apply generally across history (1987, That Politics May be Reduced to a Science, in Essays, Moral, Political, and Literary, 14 – 31, Indianapolis: Liberty Fund,). Hume, in order to argue that politics (read political economy) can be a general science, discusses the general effects of political constitutions from Ancient Rome to contemporary Britain, and concludes with some recommendations for the present British constitution based on his investigations. In staking out a claim, Smith gives repeated examples across time and place to back up his point concluding that trade and the institutions which support it have been the cause of wealth since the earliest recorded human history and across the globe. His recommendations for policy are not crippled by the fact that he recognizes historical contingencies and caveats to his fundamentally general claims.

I recommend reading Adam Smith’s America for two reasons. First, to benefit from the thorough scholarship on the history of Smith’s ideas in America. Second, to inoculate yourself against the specter that a non-dogmatic Smith implies a left-wing Smith (or at least a non-right-wing Smith). If it’s true that elements of historical contingency in a theory make reading old texts an exercise in futility, then neither the left nor the right can gain from staking a claim in the founder of political economy. The ability to accurately transpose a thinker from the past is a skill in its own right. In order to judge whether Smith would have supported some given policy today, read Smith himself and argue your conclusions from his still fertile stories of the dynamic loquacious spirit of humanity."

'Painkiller': Netflix Miniseries Tells Shameless Lies About Opioids

By Cameron English of THE AMERICAN COUNCIL ON SCIENCE AND HEALTH. Excerpt:

"Like its loathsome predecessor Dopesick, the Netflix series lays blame for the opioid crisis almost exclusively on Purdue, its sales force of tenacious, attractive young women, and a legion of greedy, gullible doctors who couldn’t resist their feminine charms. Painkiller executive producer Alex Gibney seems to really believe this outlandish story, summarizing the show’s central thesis like this:

“The crisis wasn't something that just happened … It was something that was … manufactured by companies looking to make an egregious profit. I realized that this opioid crisis I've been hearing so much about … was really a crime.”

This is a lie, plain and simple. Writing in the Yale Law and Policy Review in February, epidemiologist and Reason Foundation drug policy analyst Jacob Rich explained why:

“Although OxyContin was introduced in 1996 and Purdue Pharma’s marketing campaign subsequently increased its market share within the industry of pain relievers that contain oxycodone, only 9.0% of all nonmedical opioid users in 2001 reported ever using OxyContin during their lifetime … Overall, it is not clear that nonmedical opioid use has significantly changed since 1990.” [my emphasis]

Equally damning to Painkiller’s premise is the fact that “Today’s nonmedical opioid users are not yesterday’s patients,” as ACSH advisor Dr. Jeff Singer explained in this 2019 review article:

“In a 2007 study of more than 27,000 OxyContin addicts who entered rehab between 2001 and 2004, [researchers] found that 78% said the drug was never prescribed for them for any medical reason, 86% took the pills to get ‘high’ or get a ‘buzz,’ and 78% had a history of prior treatment for a substance abuse disorder.” [my emphasis]

The makers of Painkiller seemed to be aware of this data because they framed it as a flimsy industry talking point worthy of dismissal. In multiple scenes, Purdue’s lawyers and supermodel sales reps claim that the rate of OxyContin abuse is “less than one percent,” based on an infamous 1980 letter published in the New England Journal of Medicine.

Rich noted that the pharmaceutical industry “incautiously” misinterpreted this letter and the “not especially rigorous” study it was based on. But Painkiller’s implication that Big Pharma shills minimized the abuse liability of their potent opioids without evidence is false.

Multiple studies published before and after OxyContin was commercialized showed that patients prescribed oxycodone could use it without developing an addiction. The relatively few who did had histories of drug or alcohol abuse. Here’s one such paper from 1986; here’s a review of 67 studies published in 2008. Additional research published between 2010 and 2018 reached the same conclusion.

So alongside Purdue, let’s add the Cochrane Collaboration, research published in the British Medical Journal, and officials from the National Institute on Drug Abuse and the Office of National Drug Control Policy to the list of sources that have cited the insignificant addiction risk posed by opioids prescribed to patients who need them.

Real people telling a “fictionalized” story

Although many of the show’s characters never actually existed, one of the most disingenuous parts of Painkiller is the beginning of each episode that involves real people who have suffered a terrible loss; the mother or father of an addict who was killed by drug abuse appears on screen and reads the following disclaimer:

“This story is based on real events. However, certain names, characters, instances, events, occasions and dialogue have been fictionalized for dramatic purposes. What hasn’t been fictionalized is [the story of my child who was killed by opioid addiction …]”

Devious. It’s both a superficial defense of Painkiller’s overall accuracy and a shameless excuse for the lies that permeate each episode—including the glaring omissions. Not once did any character in Painkiller mention “fentanyl.” This highly potent opioid and its analogs are widely and illegally available across the US and have been responsible for most overdose deaths for over a decade. By the way, overdose deaths have doubled since 2010, even though opioid prescribing has plummeted over the same period; that tragic fact goes conveniently unmentioned as well.

And at no point did the show probe the myriad causes of drug abuse or the difference between physical dependence and addiction. Maddeningly, the miniseries completely ignored legitimate pain patients who have been left to suffer without treatment thanks to America's inane restrictions on opioid prescribing. Many of these individuals have committed suicide to end their anguish.

Apparently, these are details unworthy of your consideration. All you need to know, dear Painkiller viewer, is that Big Bad Pharma sells pills that turn patients with back injuries and broken bones into junkies—shame on the makers of this prohibitionist agitprop."

Biden’s SAVE versus Current Income‐​Driven Repayment: Grad School Edition

By Neal McCluskey of Cato.

"The Biden’s administration’s plan to greatly reduce student loan repayment, as I showed a couple of weeks ago, will be a boon to people who borrowed for undergraduate education. Under current income‐​driven repayment, a borrower with average undergrad‐​only federal student debt and average new graduate earnings would not only fully repay their debt, they would provide taxpayers a small, $216 profit. Under the administration’s much more generous SAVE proposal, in contrast, the borrower would cost taxpayers $6,362.

Undergraduate debt, however, is not the big number for many borrowers. That is grad school debt, which is not capped by Washington as is undergraduate borrowing. Today, I compare current IDR and SAVE repayment for someone with undergrad and graduate school debt.

With graduate debt, the biggest change from undergrad‐​only is the horizon for forgiveness, which changes from 20 to 25 years. Whatever is left after 25 years of qualifying payments is canceled.

For estimates of current IDR and SAVE, I start with approximate first year earnings for a new graduate degree graduate with average graduate degree debt. Because there are many types of graduate degrees—master’s, doctorate, professional school—I use the average salary for an assistant professor (about $83,000) which happens to most closely coincide with average total student debt ($91,460) of someone with a graduate degree in the federal Digest of Education Statistics. That includes undergrad and grad debt. I use a 3.3 percent earnings increase each year, except in the 6^th, 11^th, and 16^th years, when the borrower receives a 5.3 percent raise. I also increase the federal poverty level for a single person, which determines how much income is walled off from repayment, by 3.3 percent each year. (Basically, 3.3. percent is the inflation rate.)

For current IDR, 10 percent of discretionary income (what remains after removing protected income) must be repaid. Discretionary income is everything above 150 percent of the federal poverty line. For SAVE, the share that must be repaid is weighted between 5 and 10 percent, according to the mix of undergraduate and graduate debt, and discretionary income is everything above 225 percent of the poverty line. Using our original $29,719 in undergraduate debt yields $61,741 in grad debt and a 32–68 undergrad‐​grad mix. That puts the share that must be repaid at 8.4 percent. The borrower consolidated undergrad and grad loans, which weights the interest rates for undergraduate (5.5 percent) and graduate (7.05 percent) loans at the same 32–68 mix, yielding an interest rate of 6.6 percent. Any interest left unpaid would be added to the loan under the current IDR, but not SAVE.

The first figure shows what happens under current IDR. The debt is repaid within 14 years, but unlike for undergraduate‐​only debt, taxpayers lose out in present‐​value terms. While in total the borrower will have repaid $99,676, that is only $81,246 in year one dollars—a $10,214 loss for taxpayers.

The second figure is the life of the loan under SAVE. Under this plan, the loan is paid off in under 18 years and the borrower will have repaid $98,346. In year one dollars, that is only $74,542, a $16,918 loss for taxpayers.

Income‐​driven repayment, even now, helps borrowers and is a burden on taxpayers when graduate debt gets factored in. Moving to SAVE will more than double that taxpayer burden."

Dominic Pino refutes Sohrab Ahmari’s dystopian characterization of the American economy and the state of the American worker

See Our Supposed Dystopia. From Cafe Hayek.

"There are two groups of people who would dispute Ahmari’s dystopian characterization of the American economy. The first are people who study the American economy, and the second are people who work in it.

…..

Ahmari pooh-poohs this pairing in U.S. labor relations, writing of the “downright depraved way it equates the employee’s ‘power’ to quit with the boss’s right to dismiss him.” But according to a July 2022 report from the Pew Research Center, 60 percent of U.S. job-quitters in the previous year saw real wage gains when they found a new job. And the U.S. job market has plenty of turnover, with 2.5 percent of workers changing employers, on average, every single month. Millions of workers regularly use the power to quit as an effective way to raise their compensation.

The U.S. labor market’s greater flexibility compared with more social-democratic European labor markets is a source of national strength. Only petrostates and tax havens have higher average incomes than the U.S., the U.S. takes less of that income from its citizens as taxes, and the U.S. has higher average income growth than Europe. Economist Niklas Engbom found in a January 2022 paper that countries with more fluid labor markets see higher life-cycle wage growth for workers. That’s because a more flexible labor market makes it easier for a worker to find the employer that most highly values his skill set. Since workers know this, they have more incentive to develop valuable skills. That virtuous cycle results in the United States’ having higher life-cycle wage growth than nearly every other country in the OECD, Engbom found.

…..

While Ahmari shakes his fist at the system from his nice house in Florida, most working Americans seem oblivious of the tyranny that he sees in everyday employment. Perhaps it’s false consciousness among the proletariat — or maybe Americans know their economic situations better than Ahmari does."

In a world where we are all beneficiaries of enormous windfall gains that our forebears never had, are we to tear apart the society that created all this, because some people’s windfall gains are greater or less than some other people’s windfall gains?

From Cafe Hayek.

"[from] the final paragraph, on page 424, of the 2016 second edition of Thomas Sowell’s excellent volume Wealth, Poverty and Politics:

Does it not matter if the hungry are fed, if slums are replaced by decent and air-conditioned housing, if infant mortality rates are reduced to less than a tenth of what they were before? Are invidious “gaps” and “disparities” all that matter? In a world where we are all beneficiaries of enormous windfall gains that our forebears never had, are we to tear apart the society that created all this, because some people’s windfall gains are greater or less than some other people’s windfall gains?

DBx: Sowell’s perspective is the adult, correct one, and his questions are apt. But, of course, combining people who can be duped into believing in miracles with other people skilled at doing such duping propels this second group of people into positions of political influence and power.

So very much politicking and political commentary today consists, first, of complaints that the earthly condition of this person and that group is less than heavenly, and, second, of whackadoodle proposals to create for these tormented souls the paradise that they so richly deserve but until now – or since the closing of a lost Golden Age – have been denied to them by devils."

How regulations crush small businesses and the poor

By James Broughel. 

"Today, the Senate Committee on Small Business & Entrepreneurship is holding a field hearing in Iowa on the topic of “One Size Does Not Fit All: Understanding the Importance of Rightsizing Regulations for Small Businesses.” I was honored to submit a written statement for the hearing, outlining a number of important points regarding how federal regulations redistribute wealth regressively and impose a disproportionate burden on small businesses.

Regulations act as a hidden tax that tends to be regressive, meaning the costs fall more heavily on lower income groups and small businesses while benefits tend to be redistributed upwards. Regulations require certain expenditures by businesses regardless of their revenue or output level. Small firms with lower output have a harder time absorbing these fixed compliance costs compared to large corporations with armies of lawyers and accountants at their disposal.

Additionally, costs passed on to consumers and workers through higher prices and lower wages tend to consume a larger share of lower income budgets. Meanwhile, affluent individuals tend to benefit more from regulations, as these people exhibit a higher willingness to pay for outcomes they prefer like safety, carbon reduction, and consumer protections. This dynamic redistributes wealth regressively from poor to rich.

There is also a redistributive effect across time stemming from regulations. Empirical evidence suggests that the total cost burden from federal regulation is enormous, in the trillions of dollars per year according to the best available estimates. This stifles economic growth substantially. One study found regulations have lowered U.S. GDP by 25% compared to what it otherwise would have been in 2012—a $4 trillion loss. Another estimated total regulatory costs at around $1.9 trillion annually.

Costs disproportionately hit small firms, which face around $9,000 in regulatory costs per employee versus just $5,000 for large firms. Overregulation is often a top concern of business leaders in surveys.

Compounding matters, federal agencies rarely conduct distributional analysis of regulatory impacts, despite numerous executive orders requiring they do so. Even when such analysis is done, benefits often receive more attention than costs, leading small businesses to be forgotten. Under the Regulatory Flexibility Act (RFA), agencies must certify regulations do not significantly impact small entities or else conduct further analysis. However, certifications are notoriously unreliable.

Recent Biden administration proposals aim to focus more on distributional analysis, but these are unlikely to yield meaningful improvements without Congressional action given agencies’ poor track record in this area.

The current regulatory regime represents an inverted system of redistribution and injustice. Regulations impose regressive costs on lower income groups to serve the policy preferences of the affluent. The future is plundered through slower growth to indulge present political whims.

Small businesses face the dual harm of shouldering higher costs today even while opportunities diminish for future entrepreneurs. Reforms, such as more stringent distributional analysis of regulatory costs and strengthening the certification process under the Regulatory Flexibility Act, could alleviate some of the disproportionate weight regulations place on those who can least afford it.

To learn more, read my written statement to the committee."

The government doesn't feel your pain

By Scott Sumner. Excerpt:

"Bill Clinton famously told voters:  “I feel your pain.”  Although I now look back on the Clinton years rather fondly, I suspect that even his strongest supporters would not view his soulful empathy as anything more than an act.  The government does not feel your pain.  The FDA does not feel your pain.  Doctors and nurses do not feel your pain.

You feel your pain.

Consider this recent FT story:

But when the procedure began, Czar was still alert and gripped by intense pain. “I remember saying ‘I feel everything’ and nobody believed me.”

The new podcast The Retrievals hears from a dozen women who had the same procedure at the Yale Fertility Center and who all reported extreme pain throughout. At the time they were told by staff they had been given the maximum amount of pain relief, meaning they couldn’t have more. However, it later transpired that a nurse at the clinic had been stealing fentanyl and replacing it with saline solution. It is thought that 200 patients had been denied pain relief during egg retrievals over a period of five months. . . .

I doubt there will be a woman listening who does not recognise elements of this story: of medical professionals underplaying their pain, or rushing them as they explain symptoms, or being made to feel weak, hysterical or unreliable witnesses to their own experience.

Nobody believed them?  All 200 patients?  I’d be really annoyed.

There’s a perception that people have different tolerances for pain.  And yet I’ve never seen a shred of evidence for that claim.  No one can truly know what another person is feeling.  There are lots of things that other people find painful that don’t bother me at all.  But that doesn’t mean I have a high tolerance for pain.  There are other things that bother me more than they bother other people.  We’re all wired differently; we experience the world in different ways.  I have no idea what it feels like to be you.

Here’s Scott Alexander, criticizing the fact that our medical establishment refuses to take reports of pain seriously:

 This paper lists signs of drug-seeking behavior that doctors should watch out for, like:

– Aggressively complaining about a need for a drug
– Requesting to have the dose increased
– Asking for specific drugs by name
– Taking a few extra, unauthorised doses on occasion
– Frequently calling the clinic
– Unwilling to consider other drugs or non-drug treatments
– Frequent unauthorised dose escalations after being told that it is inappropriate
– Consistently disruptive behaviour when arriving at the clinic

You might notice that all of these are things people might do if they actually need the drug. . . .

Greene & Chambers present this as some kind of exotic novel hypothesis, but think about this for a second like a normal human being. You have a kid with a very painful form of cancer. His doctor guesses at what the right dose of painkillers should be. After getting this dose of painkillers, the kid continues to “engage in pain behaviors ie moaning, crying, grimacing, and complaining about various aches and pains”, and begs for a higher dose of painkillers.

I maintain that the normal human thought process is “Since this kid is screaming in pain, looks like I guessed wrong about the right amount of painkillers for him, I should give him more.”

The official medical-system approved thought process, which Greene & Chambers are defending in this paper, is “Since he is displaying signs of drug-seeking behavior, he must be an addict trying to con you into giving him his next fix.”

Here’s the NYT:

How does it feel to suffer from debilitating pain but not be able to get your hands on the medication that could help? In the Opinion video above, we hear from Americans who have had to endure this nightmare.

They are among the countless people with chronic pain who have been the unintended victims of the national crackdown on opioid prescribing. In response to the deadly opioid crisis, the Centers for Disease Control and Prevention issued guidelines intended to limit opioid prescriptions. That advice soon became enshrined in state laws across the country. Suddenly, many pain patients lost the drugs that made their lives bearable. Some sought relief in suicide.

Last year the C.D.C. issued new prescription guidelines intended, in part, to induce a course correction. But facing a confusing mess of federal and state laws, many physicians are still afraid to prescribe opioids to genuine pain sufferers.

Critics of utilitarianism often point to thought experiments:  “What if a certain social goal could only be achieved by torturing thousands of innocent people.”  I guess the idea is to show that the policy in question is obviously abhorrent, even if it were to pass some sort of utilitarian cost-benefit test.

In this case, you cannot even justify these rules by pointing to gains in other areas.  The crackdown on pain relief had a negative effect even if you put zero weight on all of the suffering of people denied pain relief by doctors.  That’s because the crackdown on opioid prescriptions in the early 2010s led to an enormous surge in the use of illegal alternatives such as fentanyl.  The annual death toll from these illegal substitutes is now an order of magnitude higher than a decade ago.

The ideology of paternalism is based on the idea that the government understands your interests better than you do.  There are undoubtedly cases where that assumption is correct.  But on average?  When children suffering from cancer are screaming in pain, are most of them just faking it?  Would you want a government bureaucrat in the DEA to make that decision for you and your child’s doctor?

I don’t agree with the government policy that denies people the right to take certain drugs.  But I understand the logic behind these laws.  I understand why some people would disagree with me.

I don’t agree with the government policy that denies people the right to practice medicine without going through an absurdly long training program, often in areas that have no relationship to their future work.  But I understand the logic behind these laws.  I understand why some people would disagree with me.

I don’t agree with the government policy that denies licensed doctors the right to determine appropriate pain relief.  I do not even understand the logic behind these policies.  I do not understand why anyone would disagree with me."

Competition Increases Concentration

By Brian Albrecht. 

"A market with 1,000 tiny sellers is not some ideal market. Concentration can be extremely beneficial, leading to economies of scale and stiffer competition to win a big share of the market.

Yet the Federal Trade Commission (FTC) and U.S. Justice Department’s (DOJ) draft merger guidelines double down on the idea that concentration is inherently a problem. They add new structural presumptions against concentration, for both horizontal and vertical mergers. Even worse, the agencies won’t recognize any efficiencies “if they will accelerate a trend toward concentration.”

The problem? Concentration is not a good proxy for competition. This post will go through some of the empirical work that generally finds that competition increases concentration. The FTC/DOJ are completely at odds with the economic literature on this point.

What Long-Time Readers Know

Despite what you may have taken away from a misleading Econ 101 class, there is not a simple sliding scale between one seller (high concentration, low competition) and perfect competition (low concentration, high competition).

From a theoretical point of view, even perfect competition does not require infinitely many buyers and sellers. Two sellers can generate perfect competition. That’s what the standard Bertrand model is. Price equals marginal cost. It’s efficient. All the good stuff, with just two sellers.

This is more than just a theoretical matter. In the lab—even in settings with few buyers and sellers and where the experimenters are trying to put the finger on the scale against competitive forces—we see the fruits of competition.

In a disgustingly-under-appreciated experiment, Dan Friedman and Joseph Ostroy even construct the “worst-case” scenario for competition that gave players lots of market power to try to exploit. Still, when people choose their prices and quantities to offer for trade, the market becomes competitive.

So we can have competition without many buyers and sellers. We can also have market power (which signifies a lack of competition) with many buyers and sellers. As Chad Syverson argued in a famous Journal of Economic Perspectives paper on markups that I’ve quoted too many times: “concentration is worse than just a noisy barometer of market power. Instead, we cannot even generally know which way the barometer is oriented.”

What’s the Relationship Empirically?

Ok, you may respond, from pure theory, we do not know the direction of the relationship between competition and concentration. But what do we know empirically? Do some relationships tend to emerge for most markets? Or, in some cases, can we guess which way the relationship goes based on prior evidence?

Yes, we can, but we have to be careful.

Suppose we wanted to explore the relationship between competition and concentration. Generally, in economics, we want to discover a causal relationship: If X changes, then Y changes. Here, we want to ask, if competition increases, what happens to concentration? Or maybe, if concentration increases, what happens to competition?

But what does increasing competition even mean? What would we observe and conclude that competition increased? We can’t measure competition directly. We can measure prices and quantities. Competition is an organizing concept that economists have found useful.

In lots of economics papers, there is a type of Cournot model, where competition simply means the number of sellers or buyers. You start with two sellers, then add another. Surely, another seller satisfies any reasonable definition of more competition. In that world, increases in competition (a new seller falling from the sky) decreases concentration. This is the bad Econ 101 reasoning.

To be clear, I agree that adding more sellers would decrease concentration and increase competition. If we had another company like Apple fall from the sky, the concentration in the market for Apple products would fall, and so would the price of Apple products.

Lots of papers amount to proving that. Or they show the opposite: if the two Apple companies merge, then prices rise. 

But that’s not the kind of causal reasoning we could bring to data. Where did that new seller come from? Another Apple won’t fall from the sky. I’d love for that to happen (or any innovative company), but it’s not happening. It’s not a reasonable change to search for in the data to back out the effect on concentration. In modern empirical work, we can’t simply look at changes in the number of competitors as a measure of competition. The number of sellers is endogenous to the market. Firms may be entering and exiting for a variety of reasons. We cannot regress prices or markups on the number of sellers. Definitely don’t regress concentration on the number of sellers.

Instead, we want to look for an exogenous change that we think captures changes in the competitiveness of a market. A common thing to look for is a reduction in search/trade costs or an increase in how substitutable products are.

The idea is simple. If a consumer’s search costs drop, the goods are more substitutable to that consumer. Think about the difference between flipping between Walmart and Aldi on Instacart, versus going out to the physical stores. From the firms’ perspectives, the consumers’ demand curves in the Instacart example are more elastic, and each firm needs to compete more intensely for each consumer. In equilibrium, markups will fall, and prices will be driven toward marginal cost.

These search costs aren’t competition directly, but in a large class of models, there is a simple mapping from these costs to other measures of competition. Basically, if you have heterogeneous firms selling differentiated products, you get some parameter (search costs or substitutability) that closely matches a measure of competition. I’ve gone through a few of these models before here.

Beyond increasing competition, reducing search costs can increase concentration, since more consumers are able to purchase from the highest-productivity/lowest-cost producers. Compare the concentration measures between a world with a bunch of isolated towns, each with one retailer, and a world where everyone can buy from Amazon. For the nerds around, think of a Melitz model. In those models, lower trade costs increase competition and concentration.

Theory—always start with theory—gives us a reason to believe there is a causal relationship between something like trade costs (as a proxy for competition) and concentration. Moreover, there is reason to expect a positive relationship. More competition causes more concentration.

What do we observe in the data? I’ll once again turn to Chad Syverson:

Many empirical studies in varied settings have found that greater substitutability/competition—resulting from, say, reductions in trade, transport, or search costs—shifts activity away from smaller, higher-cost producers and toward larger, lower-cost producers. As an example, in Syverson (2004a, b), I show that increases in the ease with which consumers can substitute among producers’ spatial differentiation is limited, or products are more physically similar—force out the least efficient producers and increase skewness in the size distribution. In Goldmanis et al. (2010), we demonstrate that search cost reductions reallocate market share toward lower-cost and larger sellers, increasing market concentration even as margins fall. It is not an exaggeration to say that there are scores, perhaps hundreds, of such studies. (links and emphasis added)

The key takeaway from a huge literature in trade and industrial organization (IO) is that you cannot assume trends toward concentration are bad. Empirically, we tend to see more competition increasing concentration. That doesn’t mean it is always the case. A new upstart that is super efficient will initially decrease concentration, before winning over a large portion of the market and increasing concentration. But we should be aware of the trends in the data.

Returning to the merger guidelines (sorry), we cannot directly apply mergers to this literature. A merger is a different causal change than those that are studied in the papers cited. A merger may increase concentration while decreasing competition. That’s not my point.

The argument is simply that some pro-competitive actions increase concentration, and we see that a lot in the data. This is why I think it is unscientific to have a blanket skepticism toward concentration. It would be a shame for the FTC and the DOJ to ignore such a large body of evidence accumulated over the past 20 years."

The Deadly Impact of Government Incompetence (recent Maui fires)

By Dan Mitchell.

"Mostly because politicians focus on the seen rather than the unseen , I’ve unfortunately had several reasons to write about government policies and premature death.

• Government-run health care
• Pandemic lockdowns
• FDA regulation
• Gun control
• Anti-vaping rules
• Bans on organ sales
• Pharma price controls

Today, we’re sadly going to add to this list.

Why? Because the Hawaii government’s short-sighted incompetence contributed to the deadly fire on the island of Maui.

The Wall Street Journal opined about its deadly blunders, most of which were driven by climate alarmism.

…one culprit that seems to be emerging is the tradeoff the local utility had to navigate between power grid safety and the government-mandated green energy transition. …If Hawaiian Electric’s lines did ignite the fires, it would echo the problems of PG&E, the California utility… What both utilities have in common is that they prioritized growing renewable power to meet government mandates over hardening their systems and reducing fire risk. In 2015 Hawaii lawmakers required that 100% of the state’s electricity come from renewable sources by 2045. …Every dollar the utility spent on subsidizing solar and connecting renewables to the grid was one less dollar available for strengthening equipment and removing combustible brush. …Not until last year did the utility seek state approval to raise rates for wildfire-safety improvements, which it still hasn’t received. …Grid upgrades to achieve the net-zero promised land will cost another $2.5 trillion by 2050, according to a Princeton University study. Something will invariably give. And as we’ve seen in California and Hawaii, it may be safety.

Politicians and bureaucrats also failed in other ways, as explained by Connor O’Keeffe in his column for the Mises Institute.

Human choices, land use, and government policies play a big role in how harmful hurricanes, tornadoes, earthquakes, flash floods, and wildfires are to the affected communities. …it’s becoming clear that government failure did much to make this disaster worse—and possibly even started it. While the so-called experts are blaming climate change—and in the process demanding that government grab even more power and authority ostensibly to someday give us better weather—the destructiveness of this fire was the product of an all-powerful and all-incompetent régime. …To review, a power company shielded from competition by the state placed electrical infrastructure among highly flammable state-owned grass fields above the historic city of Lahaina, which the government was twice warned were highly susceptible to fire. And once a fire broke out, a combination of defective water infrastructure, terrible communication by government officials, and only one escape route doomed the people of Lahaina to the worst wildfire experienced in this country in over a hundred years. This was government failure through and through.

In closing, government screwed up.

That being said, I’m not going to pretend to know what share of the blame should be assigned to politicians and bureaucrats.  After all, disasters happen and it may be impossible – or excessively costly – to preemptively deal with all contingencies.

But some humility and repentance by government officials would be a silver lining to this dark cloud. After all, I hope we can all agree that human lives matter more than the alarmism of left-environmentalists."