It might be better to divert drug users to social service programs and intensive case management

See Seattle Has Figured Out How to End the War on Drugs: While other cities are jailing drug users, Seattle has found another way by Nicholas Kristof. Excerpts:

"Seattle’s first crucial step came in 2011 when Satterberg and others started a program called LEAD, short for Law Enforcement Assisted Diversion. The idea is that instead of simply arresting drug users for narcotics or prostitution, police officers watch for those who are nonviolent and want help, and divert them to social service programs and intensive case management."

"Almost immediately, this was a huge success. A 2017 peer-reviewed study found that drug users assigned to LEAD were 58 percent less likely to be rearrested, compared with a control group. Participants were also almost twice as likely to have housing as they had been before entering LEAD, and 46 percent more likely to be employed or getting job training.

LEAD isn’t cheap — it costs about $350 per month per participant to provide case managers. But it is cheaper than jail, courts and costs associated with homelessness."
"While the U.S. doubled down on the criminal justice approach to drugs, Portugal took the opposite avenue, decriminalizing possession of all drugs in 2001. It was a gamble, but it succeeded. As I’ve reported, Portugal’s overdose deaths plunged. The upshot is that drug mortality rates in the United States are now about 50 times higher than in Portugal."

"“Legislative and law enforcement solutions to drug problems in the U.S. have consistently caused more harm than they have solved,” noted Alex Kral, an epidemiologist with RTI International, a think tank. Countless studies have shown, he said, that public health approaches work better."

The Long-Term Benefits of Corporate Tax Cuts Are Undeniable

Every tax cut in recent decades has been denigrated as a trickle-down fraud benefiting the rich at the expense of the rest.

By Gary M. Galles. Gary M. Galles is a professor of economics at Pepperdine University. 

"Every tax cut in recent decades has been denigrated as a trickle-down fraud (whose family tree also includes “voodoo” and even “déjà voodoo” economics) benefiting the rich at the expense of the rest. President Trump’s corporate tax rate cuts were just the most recent illustration. But with next year’s election getting ever closer, such attacks are picking up again.

Are Tax Cuts Fraudulent? 

Those attacks, however, are built on several faulty premises. They rely on a zero-sum view of the world in which gains to some are taken to mean harm to others. They assume corporation owners capture virtually all the benefits of corporate tax cuts. And they rely on highly skewed data to make their case.

The zero-sum view ignores that voluntary market arrangements benefit all participants. Consequently, increasing mutually beneficial trade, as with reduced taxation, benefits both buyers and sellers. In contrast, punishing sellers with higher taxes also induces them to do less with their resources in the service of others.

Lower corporate taxes increase rewards for improving techniques, technology, and increasing capital investments, which increase worker productivity and earnings. They expand rewards for risk-taking and entrepreneurship in service of consumers. They reduce the substantial distortions caused by the tax. And those changes benefit others, such as workers and consumers.

The trickle-down, politics of envy approach also errs in assuming that corporate taxes are borne largely, if not exclusively, by owners of capital. Since higher-income people hold the greater part of current financial assets, this assumption virtually guarantees corporate tax reductions will be derided as just “tax cuts for the rich.”

This assumption is sometimes traced back to “The Incidence of the Corporation Income Tax” by Arnold Harberger in the 1962 Journal of Political Economy, which found essentially all the corporate tax burden was borne by capital owners. That result followed from assuming a closed domestic economy that prevents capital owners from dodging burdens by going elsewhere.

The Reality of Tax Cuts

But Harberger revisited his seminal analysis in 1995 (“The ABCs of Corporation Income Taxation,” in American Council for Capital Formation, Tax Policy and Economic Growth, Washington, D.C., (1995), pp. 51-73) and 2008 (“The Incidence of the Corporation Income Tax Revisited,” National Tax Journal (2008): pp. 303-12), which reversed his conclusions. He considered an open rather than a closed economy, due to capital’s increasing international mobility, given time to adjust. That means owners of capital can better dodge unduly burdensome corporate taxes, but that dodging would result in substantially reducing the productivity-enhancing tools American workers employ, reducing their real incomes.

Consequently, once capital has fully reacted to changed incentives, workers will bear essentially all the burdens. Further, he incorporated the distortions that make the corporate income tax among the most inefficient sources of tax revenue, concluding that workers “must end up bearing more than the full burden of the tax.”

Incorporating consideration of more mobile international capital reverses “tax cuts for the rich” conclusions. But tax cut critics ignore that. Instead, they distort reality further due to a serious but largely ignored measurement issue.

Critics want to divert attention from the positive long-run effects of corporate tax cuts for workers. So they focus on the short run, allowing them to hide such gains from public awareness and still generate misleading “tax cuts for the rich” conclusions.

Short- vs. Long-Term Effects

When an asset’s tax burden is reduced, this causes an immediate increase in its price, capitalizing the expected increased after-tax profits over the foreseeable future. Since most financial resources are owned by those with higher wealth at the time, the gains are measured as huge current gains to “the rich.” But there is no similar measure of the effects on American workers.

Higher after-tax returns lead to greater investment and a larger capital stock incorporating better technology, increasing worker productivity and earnings. But that takes time. So the immediate effects on workers can be small, even when the cumulative effects are very large. And unlike stocks and other financial assets, workers’ higher future earnings do not get capitalized into a current asset price increase. So when people focus on the short run, it triggers a comparison of current gains to “the rich,” which actually capitalize benefits that are anticipated well into the future, against virtually none of the gains for workers because they have not yet occurred, and no market price reveals those future effects now.

In sum, opponents of lower corporate taxes focus on the wrong issue—measured effects on incomes of “the rich” rather than benefits produced for others. They focus on the wrong time period—short-run rather than long-run effects. They rely on wrong premises that are massively misleading for an open economy—that capital owners rather than workers bear the vast majority of corporate tax burdens. And they use biased measures—comparing the capitalized future effects on financial assets with the effects on workers for whom there is no similar capitalization mechanism. That makes it hard to take their conclusions seriously for anything other than reinforcing the answer you want."

New developments in the scientific literature show that tree-planting might be the single best way to reduce the human contribution to carbon dioxide in the atmosphere

By Robert P. Murphy.

"A recent article in The Guardian trumpeted the findings of a new study published in Science that found massive tree planting would be—by far—the cheapest and most effective approach to mitigating climate change. Ironically, the new thinking shows the pitfalls of political approaches to combating so-called “negative externalities.” The good news about tree planting disrupts the familiar narrative about carbon taxes that even professional economists have been feeding the public for years. The whole episode is an example of what Ronald Coase warned about, in his classic 1960 article showing the danger in the traditional approach of using taxes to fix alleged market failures.

Ronald Coase vs. A. C. Pigou on “Externalities”

Coase’s “The Problem of Social Cost” is one of the most frequently cited economics articles of all time, but it can be difficult for a newcomer to absorb its lessons. In this revolutionary piece, Coase challenged the standard approach to externalities that had been developed by economist A. C. Pigou.
According to Pigou, the market economy works fine in allocating resources efficiently under most circumstances. However, when third parties experience benefits or harms because of particular market transactions, the Invisible Hand fails. For example, if a factory dumps waste into a river as a by-product of making TVs, then the factory owner is making “too many” TVs because the owner isn’t taking into account the harm his business is imposing on the people living downstream. The profit-and-loss system presumes that consumers and firms are receiving feedback from the impact of their actions, and so (Pigou argued) a case of pollution leads to inefficiency.

Pigou suggested that in a case like this, the government should impose a tax on the TV factory, corresponding to the harm that additional output causes to the people living downstream. The tax would then lead the owner of the factory to scale back production, to the point at which the “marginal” TV produced would bestow roughly equal benefits and costs to society, taking everything into account. (Without the Pigovian tax, the factory owner would produce additional TV sets for which their marginal cost to society exceeded their marginal benefit, meaning society would be worse off because of these additional units.)

For the purpose of this IER post, I’ll have to be brief, but here is the quick and dirty version of how Ronald Coase came along and completely upended this traditional Pigovian analysis: First, Coase told his readers to stop thinking of these situations in terms of the good guys and bad guys. In my hypothetical TV factory case—which is my example, not Coase’s—we shouldn’t view the factory owner as someone violating the downstream homeowners. Rather, Coase urged his readers to consider, what he called, the “reciprocal nature” of the problem.

Specifically, Coase would say in our example that the real problem is one of scarcity and competing uses for the river water. The factory owner would like to use the river as a place to dump his waste after producing TVs, while the homeowners would like to use the river for their kids to play in or to wash their clothes. The two uses are incompatible, and the issue is: To which party should the use of the river be allocated? Coase warns us that if the government installs a TV tax on the factory, the politicians are simply assuming that the most efficient solution to the conflict is for the factory to scale back TV production.

But we can imagine better outcomes, depending on the specifics. Suppose, for example, that there are only a few households who live downstream from the factory, and are harmed by its waste products. In this situation, rather than the owner greatly scaling back TV production—and depriving consumers around the country of having cheap TVs—maybe the least-cost solution is for the factory owner to buy the properties from the few families and pay them to move somewhere else. Note that we are talking about voluntary exchanges here; the people aren’t being evicted by the sheriff. Rather, just suppose for the sake of argument that for (say) $2 million, the factory owner could buy out the families living downstream, and everybody would be much happier than the outcome that would result under a TV tax.

Now that we’ve worked through this hypothetical example to illustrate the out-of-the-box thinking Coase developed in his 1960 paper, I’ll demonstrate its relevance to the new study about trees and climate change.

Tree Option Might Greatly Reduce the “Social Cost of Carbon”

As The Guardian piece explains, the new study is far more optimistic about the scale of tree planting available on Earth than had been earlier believed. This is why the scientists involved in the study think a massive campaign of planting trees is now the single best approach to mitigating climate change. Here are some key excerpts from The Guardian article:

Planting billions of trees across the world is by far the biggest and cheapest way to tackle the climate crisis, according to scientists, who have made the first calculation of how many more trees could be planted without encroaching on crop land or urban areas.
As trees grow, they absorb and store the carbon dioxide emissions that are driving global heating. New research estimates that a worldwide planting programme could remove two-thirds of all the emissions that have been pumped into the atmosphere by human activities, a figure the scientists describe as “mind-blowing”.
...
“This new quantitative evaluation shows [forest] restoration isn’t just one of our climate change solutions, it is overwhelmingly the top one,” said Prof Tom Crowther at the Swiss university ETH Zurich, who led the research. “What blows my mind is the scale. I thought restoration would be in the top 10, but it is overwhelmingly more powerful than all of the other climate change solutions proposed.”

Citing a figure that planting a new tree costs roughly 30 cents, Prof. Crowther remarked that we could plant the target of 1 trillion trees by spending about $300 billion. Sure, that’s a big number, but its nowhere close to the economic cost of imposing a worldwide carbon tax, the “solution” that many economists have been promoting for years as a no-brainer. (William Nordhaus’ model in its 2007 calibration estimated that even his modest carbon tax would cause several trillion dollars [in today’s dollars] in economic compliance costs, while the more aggressive proposals would cause more than $20 trillion in economic costs.)

This episode is a specific example of the type of problem Ronald Coase warned about. Specifically, the carbon tax logic assumed that the problem was, “People are emitting too much carbon dioxide and we need to coerce them into scaling back.” But what if instead the problem was, “People aren’t planting enough trees, and we need to coax them into planting more”?

To give some quick numbers: By some estimates, a single healthy tree can sequester up to a ton of carbon dioxide by the time it reaches 40 years old, and we also read that a silver maple tree will absorb 400 pounds of carbon dioxide by the time it reaches 25 years old.

So consider a coal-fired power plant that is going to emit a ton of carbon dioxide in order to produce some additional electricity. If the pro-tax economists had gotten their way, there would be a $42 tax levied on the power plant, since the Obama EPA estimated that that was the “social cost of carbon” for the year 2020.

Yet if there is room on Earth for more trees—given the plans of everybody else—that Obama-era estimate greatly overstates the harm of the emission. Rather than imposing $42 in damages as the EPA calculations suggested, the power plant owner could spend a mere $3 to plant 10 trees, meaning that over the next two decades the trees would have absorbed more than the additional emissions, and would in fact continue reducing CO2 in the atmosphere for decades beyond.

As this simple example illustrates, a carbon tax of $42 would have been a gross overkill. It would have led power plants and other firms to scale back their emissions in very costly ways that stifled economic growth, when—apparently—there was a much cheaper solution available. And notice throughout all of this discussion, I am stipulating the basic externality framework for the sake of argument, and am merely showing the problems that Ronald Coase demonstrated with this one-size-fits-all way of thinking.

A Theater Analogy

Consider a movie theater. It’s a problem that people sometimes drop popcorn and other litter on the floor. Now there are two ways the theater could respond: (1) It could install cameras and personnel to monitor the customers and heavily fine anybody caught dropping stuff on the floor. This would be a huge inconvenience and make movie-going far less pleasant. Or (2) the theater could hire personnel to clean up the floor after a show. And notice that even if some combination were used—maybe the theater calls the police on somebody who just runs up and down the aisles dumping soda on the floor—there is no reason that the “fine” imposed on litterers should be used to pay the salary of the employees who pick up popcorn with a broom. Those are two totally different considerations.
When it comes to carbon taxes, the conventional logic has simply assumed that penalizing emissions is the appropriate solution to the ostensible problem of harmful climate change. But maybe that is totally wrong. Perhaps it would make far more sense to pay people to plant trees.

And while it’s true that some carbon tax proposals contain (mild) provisions for reforestation, there is no reason at all for those programs to be linked. In general, taxing carbon is a very inefficient way to raise government revenue. If tree planting is truly superior, then it would make more economic sense to use general tax funds for the subsidies. There is no reason at all to earmark carbon tax revenues for reforestation; this would be as silly as insisting that movie theaters only pay the clean-up employees out of their “litter tax” rather than the general revenues from ticket sales.

Conclusion

New developments in the scientific literature show that tree-planting might be the single best way to reduce the human contribution to carbon dioxide in the atmosphere. The whole episode shows the folly of top-down political solutions to social challenges. Even if we stipulate the standard framework of “market failure,” it does not follow that a carbon tax set to the “social cost of carbon” is the way to restore efficiency. The case for a carbon tax is much weaker than the so-called experts have been assuring us."

The Press Fans Overblown Fears About Diet Soda—Again

By Elizabeth Nolan Brown of Reason.

""I have never seen a thin person drinking Diet Coke," tweeted Donald Trump, himself a frequent consumer of diet soda, back in 2012. Besides being an amusing self-own, Trump's comment helps explain the trouble with most research on diet drinks—including a new study that's been making the media rounds this week. 

"It doesn't matter if it's sugary or diet: New study links all soda to an early death," reported The Washington Post on September 4. It was one of many similar headlines. The implication of all of them was clear: Zero-calorie cola is a big fat lie, and if you don't ditch it now you're staring down a premature grave.

But let's back up. Here's what the paper in JAMA Internal Medicine actually found about drinks containing artificial sweeteners: People who consumed two or more per day were slightly more likely than those who abstained from all soda to die from diseases related to circulatory problems.

(Consuming one or more sugar-sweetened soda per day, meanwhile, was associated with increase risk of dying from liver, appendix, pancreas, and intestinal diseases.) Whether these circulatory problems are directly related to diet soda is unknown—and there are good reasons to suspect they are not.

"Researchers cautioned that elevated soft-drink consumption may be a marker for an overall unhealthy lifestyle," the Post points out. That is, people who consume sodas daily may also be more likely to eat out at restaurants, consume processed snacks, or engage in other dietary habits that up their disease risk.

Alternately, people who don't drink soda at all may be more likely to engage in some behaviors—drinking more water, say, or consuming other nutritious beverages—that accrue them disease-protective benefits.

And while all sorts of people drink diet soda, it tends to be especially popular among people actively trying to lose weight and/or to give up a non-diet soda habit. Which is to say that diet drink consumers could (as that Trump tweet suggests) be heavier to begin with, or could share some other quality (such as previously high consumption of sugary drinks) that sets them up for future health problems.

The scientist behind this study tried to account for some confounding factors, such as smoking and obesity. But accounting for all lifestyle differences is impossible. Here's what the lead researcher, Neil Murphy, told the Post:

We recognize that a possible explanation for the positive associations found for artificially sweetened soft drinks is that participants who were already at greater health risk (those who were overweight or obese; those with prediabetes) may have switched to artificially sweetened soft drinks to manage their calorie and sugar intake.

Even the notoriously pro-nanny-state Center for Science in the Public Interest urged caution about the latest research. "This new European study is somewhat inconsistent with earlier findings," the group's director of nutrition told the Post.

That's true: Several meta-analyses last year found no association between drinking diet soda and weight gain or increased body mass index. Those studies also found no association between aspartame (the most common artificial sweetener) and negative effects on heart-disease risk factors, fat levels, or metabolic issues."

UBI: Some Early Experiments

From Bryan Caplan.

"The Universal Basic Income is only a tangential interest of mine.  Yet when I’ve debated it, I’ve been consistently impressed by how little the eager advocates try to teach me.*  Case in point: I learned more from reading three paragraphs in Kevin Lang’s Poverty and Discrimination than in my typical conversation with a UBI enthusiast:

Because the stakes involved in instituting a negative income tax were so high, policy analysts convinced the federal government to conduct experiments in which some people were randomly assigned to be eligible for the negative income tax while others were randomly assigned to remain subject to traditional welfare. In the experimental group, there was also variation in the generosity of the program. Four experiments were conducted in the United States and a fifth in Canada. The largest of these is known as SIME/DIME (the Seattle Income Maintenance Experiment / Denver Income Maintenance Experiment).
Many policy analysts found the results of the experiments disappointing. Although the labor supply response was modest, it added substantially to the cost of the program. Depending on the generosity of the program evaluated in SIME/DIME, the labor supply response could account for over half of the costs. The least generous program would save $4 billion but would make 95 percent of recipients worse off. A program that would guarantee support at the poverty level and tax-back benefits at a rate of only 50 percent would still make one-fourth of recipients worse off and would exceed the cost of the welfare program then current by $30 billion, an enormous increase.
There were also some “unintended consequences,” the social science equivalent of medical side effects. In particular, the divorce rate rose among recipients randomly assigned to the negative income tax. The combination of the costs of the labor supply effects and the effect on marriage led Senator Daniel Patrick Moynihan, an early supporter of the negative income tax, to withdraw his support.

If I were an enthusiastic UBI advocate, I would know this experimental evidence forwards and backwards.  Almost all of the advocates I’ve encountered, in contrast, have little interest in numbers or past experience.  What excites them is the “One Ring to Rule Them All” logic of the idea: “We get rid of everything else, and replace it with an elegant, gift-wrapped UBI.”  For a policy salesman, this evasive approach makes sense: Slogans sell; numbers and history don’t.  For a policy analyst, however, this evasive approach is negligence itself.  If you scrutinize your policy ideas less cautiously than you read Amazon reviews for your next television, something is very wrong.
*Exception: Ed Dolan"

The Environmental Fiasco of Wind Energy

By John Hinderaker of Power Line. John H. Hinderaker practiced law for 41 years, enjoying a nationwide litigation practice. He retired from the practice of law at the end of 2015, and is now President of Center of the American Experiment, a think tank headquartered in Minnesota. 

"Wind turbines only last for around 20 years, so many of them are now wearing out. That raises serious questions about disposal of defunct wind turbine parts. The turbines’ giant blades are not recyclable, so they must be dumped in landfills. The Sioux Falls Argus Leader reports on one South Dakota landfill that is saying no mas to wind turbine blades:

[T]he Argus Leader reports that more than 100 wind turbine blades measuring 120 ft long have been dumped in a Sioux Falls, South Dakota, landfill, but there’s a problem: the massive blades are taking up too much room, according to local City officials. …

A wind farm near Albert Lea, Minn., brought dozens of their old turbine blades to the Sioux Falls dump this summer.
But City Hall says it won’t take anymore unless owners take more steps to make the massive fiberglass pieces less space consuming.
The wind energy industry isn’t immune to cyclical replacement, with turbine blades needing to be replaced after a decade or two in use. That has wind energy producers looking for places to accept the blades on their turbines that need to be replaced.
For at least one wind-farm in south central Minnesota, it found the Sioux Falls Regional Sanitary Landfill to be a suitable facility to take its aged-out turbine blades.

Why is a Minnesota wind farm trucking its used-up blades to South Dakota for disposal? I don’t know. The reason presumably is either regulatory or economic.

This year, 101 turbine blades have been trucked to the city dump. But with each one spanning 120 feet long, that’s caused officials with the landfill and the Sioux Falls Public Works Department to study the long-term effect that type of refuse could have on the dump.
***
“We can’t take any more unless they process them before bringing them to us,” Cotter said. “We’re using too many resources unloading them, driving over them a couple times and working them into the ground.”

I doubt that many “green” energy advocates have thought seriously about the environmental problems associated with decommissioning wind farms.


If a wind farm includes 100 turbines, that means that 500 million pounds of concrete (which off-gases CO2, by the way) have been poured into what previously was likely farm land. When the turbines are defunct after a mere 20 years, what will be done with hundreds of millions of pounds of concrete? To my knowledge, wind farm developers are not required to have any plan to reclaim the land when the useful life of the turbines has expired–which, in many cases, is right around the corner. My guess is that there is no plan whatsoever to deal with this issue.

Wind energy, like solar energy, is an environmental disaster–just one more reason why it should not be subsidized or mandated by government."

Girls’ comparative advantage in reading can largely explain the gender gap in math-related fields

By Alex Tabarrok.

"In an earlier post, Do Boys Have a Comparative Advantage in Math and Science? I pointed to evidence showing that boys have a comparative advantage in math because they are much worse than girls at reading. (Boys do not have a large absolute advantage in math.) If people specialize in their personal comparative advantage this can easily lead to more boys than girls entering math training even if girls are equally or more talented. As I wrote earlier:

[C]onsider what happens when students are told: Do what you are good at! Loosely speaking the situation will be something like this: females will say I got As in history and English and B’s in Science and Math, therefore, I should follow my strengthens and specialize in drawing on the same skills as history and English. Boys will say I got B’s in Science and Math and C’s in history and English, therefore, I should follow my strengths and do something involving Science and Math.

A new paper in PNAS by Breda and Napp finds more evidence for the comparative advantage hypothesis. Breda and Napp look at intention to study math in ~300,000 students worldwide taking the PISA.

PISA2012 includes questions related to intentions to pursue math-intensive studies and careers. These intentions are measured through a series of five questions that ask students if they are willing (i) to study harder in math versus English/reading courses, (ii) to take additional math versus English/reading courses after school finishes, (iii) to take a math major versus a science major in college, (iv) to take a maximum number of math versus science classes, and (v) to pursue a career that involves math versus science. Our main measure of math intentions is an index constructed from these five questions and available for more than 300,000 students. It captures the desire to do math versus both reading and other sciences.

What they find is that comparative advantage (math ability relative to reading ability) explains math intentions better than actual math or reading ability. Comparative advantage is also a better predictor of math intentions than perceptions of math ability (women do perceive lower math ability relative to true ability than do men but the effect is less important than comparative advantage). In another data set the authors show that math intentions predict math education.

Thus, accumulating evidence shows that over-representation of males in STEM fields is perhaps better framed as under-representation of males in reading fields and the latter is driven by relatively low reading achievement among males.

As the gender gap in reading performance is much larger than that in math performance, policymakers may want to focus primarily on the reduction of the former. Systematic tutoring for low reading achievers, who are predominantly males, would be a way, for example, to improve boys’ performance in reading. A limitation of this approach, however, is that it will lower the gender gap in math-intensive fields mostly by pushing more boys in humanities, hence reducing the share of students choosing math.

The authors don’t put it quite so bluntly but another approach is to stop telling people to do what they are good at and instead tell them to do what pays! STEM fields pay more than the humanities so if people were to follow this advice, more women would enter STEM fields. I believe that education spillovers are largest in the STEM fields so this would also benefit society. It is less clear whether it would benefit the women."