A Yardstick for Reform

Posted on July 29, 2019 | Comments Off on A Yardstick for Reform

While recently revisiting my old friend the Export-Import Bank, which is up for reauthorization this September, I was reminded of a quote from Nobel laureate Ronald Coase’s 1975 essay “Economists and Public Policy,” which appears on p. 57 of 1995’s Essays on Economics and Economists:

An economist who, by his efforts, is able to postpone by a week a government program which wastes $100 million a year (which I would call a modest success) has, by his action, earned his salary for the whole of his life.

By this measure, the Ex-Im Bank controversy over the last several years was a success, though there is more work to be done. In 2014 the agency’s authorization lapsed for nearly a year, and after that it was limited to small transactions until May 2019. The total savings run into the tens of billions of dollars.

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Posted in Books, Export-Import Bank, Trade, Uncategorized

This Week in Ridiculous Regulations

Posted on July 29, 2019 | Comments Off on This Week in Ridiculous Regulations

The House has adjourned for its August recess until September 9. The Senate will follow suit after this week; the Republic will soon be safe for over a month. Rulemaking agencies are still on the job, however, and published new regulations ranging from the Army’s real estate handbook to lactic acid tolerance.​

On to the data:

  • Last week, 66 new final regulations were published in the Federal Register, after 53 the previous week.
  • That’s the equivalent of a new regulation every 2 hours and 33 minutes.
  • Federal agencies have issued 1,606 final regulations in 2019. At that pace, there will be 2,789 new final regulations. Last year’s total was 3,367 regulations.
  • Last week, agencies published 367 notices, for a total of 12,367 in 2019. At that pace, there will be 21,471 new notices this year. Last year’s total was 21,656.
  • Last week, 1,450 new pages were added to the Federal Register, after 1,310 pages the previous week.
  • The 2019 Federal Register totals 36,454 pages. It is on pace for 63,289 pages. The 2018 total was 68,082 pages. The all-time record adjusted page count (which subtracts skips, jumps, and blank pages) is 96,994, set in 2016.
  • Rules are called “economically significant” if they have costs of $100 million or more in a given year. Two such rules have been published this year. Six such rules were published in 2018.
  • The running compliance cost tally for 2019’s economically significant regulations currently ranges from $205.1 million to $294.8 million. The 2018 total ranges from $220.1 million to $2.54 billion, depending on discount rates and other assumptions.
  • Agencies have published 39 final rules meeting the broader definition of “significant” so far this year. 2018’s total was 108 significant final rules.
  • So far in 2019, 279 new rules affect small businesses; 14 of them are classified as significant. 2018’s totals were 660 rules affecting small businesses, with 29 of them significant.

Highlights from last week’s new final regulations:

For more data, see “Ten Thousand Commandments” and follow @10KC and @RegoftheDay on Twitter.

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Posted in regulation

Venki Ramakrishnan – Gene Machine: The Race to Decipher the Secrets of the Ribosome

Posted on July 26, 2019 | Comments Off on Venki Ramakrishnan – Gene Machine: The Race to Decipher the Secrets of the Ribosome

Venki Ramakrishnan – Gene Machine: The Race to Decipher the Secrets of the Ribosome

Ramakrishnan won the 2009 chemistry Nobel for figuring out the structure of ribosomes. DNA and RNA contain instructions for protein molecules; ribosomes use that information for actual protein assembly. Ribosomes are an organelle that exists in every cell. There are more than a trillion ribosomes in your body right now; they are not rare. But getting a handle on their structure and how they go about their work was a longstanding mystery. It took Tamakrishnan more than two decades to suss out. Along the way he pioneered the use of x-ray microscopy and crystallography. Some of the science went over my head, but this career autobiography still offers plenty for a layman. As I so often find with these sorts of books, it unintentionally confirms the arguments in the economist Gordon Tullock’s 1966 book The Organization of Inquiry (free PDF), a public choice analysis of professional scientific behavior.

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Posted in Books, Science, Uncategorized

Nasim Nicholas Taleb – Antifragile: Things That Gain from Disorder

Posted on July 25, 2019 | Comments Off on Nasim Nicholas Taleb – Antifragile: Things That Gain from Disorder

Nasim Nicholas Taleb – Antifragile: Things That Gain from Disorder

Taleb, at least in his writing, has an off-putting personality. That is in full effect in Antifragile, moreso than in his other books. There is also plenty of counterintuitiveness-for-its-own-sake that make Taleb popular with people who like TED talks a little too much. But as with Taleb’s other books, there is still some good insights that make worth wading through the pretense and occasional New Age quackery.

As far as the title, something is fragile if stress makes it weaker. It is robust if stress doesn’t affect it. And something is anti-fragile is stress actually strengthens it; think of how muscles respond to weightlifting, or an immune system after learning how to fight a disease. Taleb’s goal is to find ways to make financial markets, technologies, and public policies anti-fragile, and not fragile or merely robust.

One insight is that market volatility can actually make financial markets anti-fragile. Suppose the stock market plummets and reaches a two-year low. This will scare some skittish investors out of the market altogether, leaving only hardier, usually more expert investors left to evaluate investments and drive their prices. In this way, policies designed to prevent market volatility can actually make financial markets more prone to crashes, not less.

There are also some things in Anti-Fragile that can be safely ignored. This includes Taleb’s workout and dietary recommendations, his inconsiderate habit of only scheduling appointments same-day, his fondness for running shoes with articulated toes, or his unsubtle bragging about speaking three languages, having homes in two countries, and being able to read an entire book on London-New York flights, which he is sure to let the reader know he takes regularly. This is a book that offers some food for thought, along with plenty of opportunities to practice eye-rolling.

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Posted in Books, Economics, Uncategorized

Dan Jones – The Wars of the Roses: The Fall of the Plantagenets and the Rise of the Tudors

Posted on July 24, 2019 | Comments Off on Dan Jones – The Wars of the Roses: The Fall of the Plantagenets and the Rise of the Tudors

Dan Jones – The Wars of the Roses: The Fall of the Plantagenets and the Rise of the Tudors

An utterly conventional kings-and-battles account of the period. It’s a good survey of the period, but readers will have to go elsewhere if they want memorable portraits of the personalities involved, what everyday life was like in castle or court, or for the soldiers and their families, what the period’s economy and technology were like, what intellectual or religious life were like, or even the larger historical significance of the York-Lancaster rivalry.

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Posted in Books, History, Uncategorized

Kevin Simler and Robin Hanson – The Elephant in the Brain: Hidden Motives in Everyday Life

Posted on July 23, 2019 | Comments Off on Kevin Simler and Robin Hanson – The Elephant in the Brain: Hidden Motives in Everyday Life

Kevin Simler and Robin Hanson – The Elephant in the Brain: Hidden Motives in Everyday Life

Brutal honesty has been a running theme of Hanson’s career, and he has caused some controversy because of it, though it is nearly always overblown. Simler has a similar approach in his research, and the two make a good pair in this book. Mostly a blend of psychology and economics, Simler and Hanson explore why people lie to themselves as well as to others in justifying their actions in a number of spheres, from work to romance to everyday life.

The drawbacks of this are obvious, from the lies themselves to the bad behaviors they can enable and rationalize. But the benefits are an avoidance of cognitive dissonance and negative views of self and others. Total honesty would decimate nearly everyone’s sense of self-worth, as well as peoples’ ability to trust and interact with others.

In that sense, Hanson and Simler have put together a view of human nature that mixes Hobbe’s nasty and brutish view of human nature with a David Hume- or Adam Smith-style emphasis on humanity’s inherent need for social interaction. As Smith put it, people need both to love and be lovely (by which Smith means worthy of being loved). Reconciling the two is a messy business, but Hanson and Simler do it uncomfortably well, backing their arguments with plenty of empirical research.

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Posted in Books, Economics, Philosophy, Uncategorized

House Passes the Raise the Wage Act

Posted on July 22, 2019 | Comments Off on House Passes the Raise the Wage Act

The Raise the Wage Act, which passed the House on Thursday, would raise the federal minimum wage to $15 by 2025. The bill now moves to the Senate. Over at Inside Sources, I point out some reasons why the tradeoffs would outweigh the benefits:

Workers are paid more than just wages; they often receive non-wage compensation such as employee discounts, free meals or parking, flexible hours, insurance, tuition assistance and more. One way employers can find a way to afford government-mandated higher wages is to cut this non-wage pay. Some workers might see a higher paycheck, but they wouldn’t necessarily be better paid. They would also have less flexibility in how they are paid.

Read the whole thing here. See also this CEI press statement from Trey Kovacs and me. As the Senate mulls the bill, conservatives and progressives should be more mindful of the tradeoffs a minimum wage increase would impose on workers.

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Posted in Economics, Minimum Wage, Publications

This Week in Ridiculous Regulations

Posted on July 22, 2019 | Comments Off on This Week in Ridiculous Regulations

Washington, D.C.’s flash flood was followed up by a heat wave; this week could bring even worse during Congress’ final week in session before the August recess. As the Federal Register surpasses 35,000 pages on the year, rulemaking agencies were still able to publish new regulations ranging from jet routes to worsted wool.

On to the data:

  • Last week, 53 new final regulations were published in the Federal Register, after 49 the previous week.
  • That’s the equivalent of a new regulation every 3 hours and 10 minutes.
  • Federal agencies have issued 1,540 final regulations in 2019. At that pace, there will be 2,770 new final regulations. Last year’s total was 3,367 regulations.
  • Last week, agencies published 421 notices, for a total of 12,000 in 2019. At that pace, there will be 21,583 new notices this year. Last year’s total was 21,656.
  • Last week, 1,310 new pages were added to the Federal Register, after 1,432 pages the previous week.
  • The 2019 Federal Register totals 34,788 pages. It is on pace for 62,569 pages. The 2018 total was 68,082 pages. The all-time record adjusted page count (which subtracts skips, jumps, and blank pages) is 96,994, set in 2016.
  • Rules are called “economically significant” if they have costs of $100 million or more in a given year. Two such rules have been published this year. Six such rules were published in 2018.
  • The running compliance cost tally for 2019’s economically significant regulations currently ranges from $205.1 million to $294.8 million. The 2018 total ranges from $220.1 million to $2.54 billion, depending on discount rates and other assumptions.
  • Agencies have published 38 final rules meeting the broader definition of “significant” so far this year. 2018’s total was 108 significant final rules.
  • So far in 2019, 265 new rules affect small businesses; 14 of them are classified as significant. 2018’s totals were 660 rules affecting small businesses, with 29 of them significant.

Highlights from last week’s new final regulations:

For more data, see “Ten Thousand Commandments” and follow @10KC and @RegoftheDay on Twitter.

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Posted in regulation, Uncategorized

Frank Knight – Risk, Uncertainty, and Profit

Posted on July 19, 2019 | Comments Off on Frank Knight – Risk, Uncertainty, and Profit

Frank Knight – Risk, Uncertainty, and Profit

A 1921 classic in economic theory. Knight emphasizes the inadequacy of the perfect competition model. He also offers frequent psychological insights on human behavior that foreshadow today’s behavioral economics movement, though Knight lacks that movement’s ideological commitment to a top-down approach to public policy. Knight, as a student of emergent order processes, is skeptical of top-down direction as an effective way to nudge human behavior.

The book is most famous for Knight’s insights on economic change and a rejection of Walrasian static equilibrium modeling. A lot of the discussion hinges on Knight’s boutique definitions of the terms “risk” and “uncertainty.”

For Knight, risk is something that can be quantified—I know there is a 50 percent chance of such-and-such happening in the economy, and its general impact on my company, for example. Uncertainty cannot be quantified; it is a true mystery. I have invented a brand new product; will it sell?

A world of pure predictability, in which things sit in a Walrasian equilibrium, sounds comfortable. But it would have no progress or positive change. The whole reason people and companies gamble on risks and uncertainties is because they want profits—all three words in Knight’s title are essential. Standing pat won’t put food on the table. Adapting to change, and creating change, are the ways to succeed in the market.

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Posted in Books, Economics

Inequality in History

Posted on July 18, 2019 | Comments Off on Inequality in History

Catherine the Great, Empress of Russia, had a personal allowance of one thirteenth of national income, per p. 292 of Robert K. Massie’s Catherine the Great: Portrait of a Woman.

By way of context, this would be equivalent to about $2.7 trillion per year in the modern United States. This annual income is more than the combined lifetime fortunes of Silicon Valley’s wealthiest entrepreneurs. While that mathematical ratio isn’t particularly interesting, from an ethical standpoint it is crucial that Catherine did not earn this income by creating value for others. She took it away from them in a zero-sum game.

Today’s entrepreneurs gain wealth by creating value for others in exchange–about 50-fold more than their own earnings, by William Nordhaus’ estimate. Rent-seeking remains a significant problem, but fortunately is less severe than in Catherine the Great’s time.

Today’s economy has much room for improvement, but reformers on all sides would benefit from taking stock of how much things have improved over the last few centuries, and why.

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Posted in Books, History, Inequality, International, Uncategorized