March 7, 2019

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The recovery has proven resilient due to the willingness of Americans to spend

Special drawing rights should be given to low-income nations to help them fight Covid and climate change

Ports, rail yards and warehouses are straining to meet roaring consumer demand as economy recovers

Market Questions is the FT’s guide to the week ahead

Elvira Nabiullina signals policymakers are likely to stick with tough monetary policy stance

Leading US bond manager says ballooning housing costs could push interest rates higher

Demand for goods might drop after stockpiles are run down as supply chain problems ease

Output expansions mark emergence from historic pandemic-driven downturns

Robinhood’s subdued debut and Scarlett Johansson sues Disney

Companies analysis from our sister publication

Pace of price growth driven up by rising manufacturing costs and materials shortages

It’s hard to top 2020 for drama but there have been some huge issues coming out of nowhere this year

Facebook warns of ‘significant’ slowdown in revenue growth and infrastructure deal advances through Senate

South Korean electronics group cautions Covid resurgence could threaten supply chain

The bloc’s GDP is expected to increase at its fastest rate in two decades, but there are fears governments could cut support too soon

I am used to prosecutors saying something to the effect that, “The law is clear, one must not do X, Y and Z.” After all, one cannot expect people to adhere to laws that are so vague that’s it is not even clear what sort of actions are in violation of the statute.

Here’s how this principle was described by Cornell Law School’s Legal Information Institute:

Void for vagueness Definition

1) In criminal law, a declaration that a law is invalid because it is not sufficiently clear.  Laws are usually found void for vagueness if, after setting some requirement or punishment, the law does not specify what is required or what conduct is punishable.  For more information, see vagueness doctrine.

2) Under vagueness doctrine, a statute is also void for vagueness if a legislature’s delegation of authority to judges and/or administrators is so extensive that it would lead to arbitrary prosecutions.

3) In property law, a declaration that a deed or other instrument purporting to affect property rights is invalid because it lacks a sufficiently clear description of the property.

Thus I was surprised to see the new FTC chair cite the vagueness of antitrust law as a reason that she should have free rein to decide how the law is applied, that is, to engage in what Cornell Law School calls “arbitrary prosecutions”:

Shapiro has been critical of Khan’s approach to antitrust, particularly her view that enforcers focus too heavily on a so-called consumer welfare standard that emphasizes price as the main sign of a lack of competition. . . .

“Antitrust over the last few decades has become dependent on a particular type of economic theory,” Khan said. “The antitrust statutes are quite sparse. They are very general. There’s nothing in there about what econometric analysis to use. There’s been choices about what types of analysis to privilege.”

While the consumer welfare standard is not explicit in the law, it is surely more implicit than any other potential standard.  Khan seems to be saying that since we are not 100% certain that the framers of antitrust law wished to protect consumers from rapacious monopolists, it is perfectly acceptable for her to substitute some other policy goal, which is not written into the law.

And how were the companies that supposedly violated the law in the 2010s to know that Lisa Khan would be appointed FTC chair in 2021?  Should companies obey the law as it existed at the time they made decisions on company policy, or should they look into crystal balls and attempt to obey the law as it will be reinterpreted by unelected future bureaucrats?  And if the law is to change, shouldn’t it be Congress that decides how?

HT:  Tyler Cowen

(5 COMMENTS)

This poll caught my eye:

This shows everything that is wrong with polling.  I wouldn’t even know how to answer the second question, because I don’t see what they are asking.  Required by whom?  Should there be a law requiring that everyone be vaccinated before boarding an airplane?  Of course not.  Should airlines require vaccination?  That’s up to them, but it certainly makes more sense than requiring that people take off their shoes before boarding, or that they wear a seatbelt.

Perhaps I’m unusual, although I know many people that feel the same way.  On the other hand, maybe the “many people I know” are all quite unusual.

For some reason, poll questioners really struggle with the distinction between, “is X a good idea” and “should X be mandated.” I see the two getting mixed up quite frequently.  On the other hand, maybe the public also struggles to distinguish between those two views.  After all, pollsters are people too.

PS.  Should children be required to brush their teeth?  And if so, by whom?  Parents?  Government officials?

(8 COMMENTS)

Earmarking — congressional funding of specific local projects, arranged by individual lawmakers with little scrutiny from their colleagues — is undergoing a reputational rehabilitation. It also appears poised to make a big comeback on Capitol Hill.

Earmarking has long been criticized as wasteful government spending. Revelations that funds have gone to a North Carolina teapot museum, a Florida turtle-crossing tunnel, and research into alcohol’s effects on mice’s motor skills have provided grist for late-night-show hosts and critics of government spending. In 2008, Republican vice-presidential candidate and then–Alaska governor Sarah Palin made political hay by deriding a $220 million earmark for a “Bridge to Nowhere” in her state. The group Citizens Against Government Waste (CAGW) annually releases its Congressional Pig Book summarizing these expenditures for each fiscal year.

As a practical matter, earmarks are a tiny part of federal spending. At their all-time high in 2006, they totaled $29 billion, just 1% of that year’s outlays. More recently, FY 2021’s earmarks were 0.3% of spending. That said, using federal money to finance local projects enables all sorts of political mischief, violates federalism, and undermines the good-government principle of subsidiarity.

About a decade ago, earmarking seemed to have reached a watershed moment. With the “TEA Party” movement in full swing, Congress announced a moratorium on the practice. After hitting an all-time high of 13,997 earmarks in 2005 and the $29 billion in spending in 2006, lawmakers adopted just 152 earmarks over FY 2011–2013, costing a total of $3.3 billion (0.03% of federal spending).

Since then, the practice has had a bit of a revival. The number of projects is still small, but their individual price tags have increased considerably: FY 2021 saw $16.8 billion go to just 285 projects, according to CAGW. The infrastructure bill now nearing passage on Capitol Hill and several other spending bills wending their way through Congress provide opportunities for more such spending.

This comes as some political commentators have been writing wistfully about earmarks, describing them as a way to foster political comity, build congressional alliances, and achieve public goals.

In deference to (if not acceptance of) those claims, here is a (modest?) proposal: If Congress resumes widespread use of earmarks, then the funds should be parceled out equally across lawmakers. That would be equitable and transparent, and what better way to build comity and alliance, and advance public goals, than through fairness and transparency?

Suppose that Congress decides to spend $20 billion on earmarks in a fiscal year. That money could be divided evenly between the two houses of Congress, and then between the individual members of each house. Senators would get $100 million and congressmen about $23 million. The individual lawmakers would then determine which local projects receive the funds, and their choices would be scrutinized by their voters.

For longtime observers of U.S. policy, this idea may sound familiar. Back in 1972, Congress and the Nixon administration instituted the general revenue sharing (GRS) program to transfer some federal tax money to local and (to a lesser extent) state governments. Though the total outlays under the program were relatively small — $83 billion over the program’s 15 years, comprising just 0.2% of federal spending over that time — the program had enough support that it was extended three times before expiring in 1986.

Apparently, one of the reasons the program did end was because federal lawmakers felt they did not get enough credit for it; unlike earmarks, GRS did not associate particular lawmakers with particular projects. (It would be interesting to know if earmark spending decreased during the GRS period, but I couldn’t find data for that time.) This earmark proposal would not fall prey to that problem because individual lawmakers would divvy out the money to the projects.

This proposal would also be more sophisticated than the GRS program. Lawmakers could “bank” some or all of their funds in a given year, instead of having to distribute each year’s money that year. Lawmakers could also join forces to finance projects — say, Rep. A and Sen. B could each contribute $5 million to a project in A’s district in B’s state. And lawmakers could negotiate to borrow and lend funds with each other (presumably at interest). Finally, each lawmaker would be permitted to return the money to taxpayers in his district in the form of tax refunds, thereby addressing the standard question raised about government spending: Would taxpayers prefer the government benefit or the funds used to finance it?

This proposal has at least three virtues over traditional earmarking. First, earmark funds would not be divvied out according to lawmaker seniority and political power, unlike in the “old days” when they were dominated by such pork barrel maestros as the late Sen. Robert C. Byrd (W.Va.) and Rep. Jack Murtha (Pa.). That should help with the comity and alliance-building. Second, the option of handing out tax refunds would incentivize lawmakers to distribute the funds more thoughtfully, increasing the chances that the money really would further public goals. Third, because individual lawmakers decide how their funds are used and would answer to their voters for their decisions, that would partly address subsidiarity concerns.

The one big drawback is that lawmakers could use the money to gain political benefits in an election year — or, put more crudely, to “bribe” voters with government projects and/or tax refunds. But then, is that different from what earmarks do now? Under this proposal, at least the practice would be transparent.

That aside, this (modest?) proposal should deliver — and increase — all the benefits that wistful supporters of earmarking claim the practice provides.

(0 COMMENTS)

Not as much as  you might think.

The Food and Drug Administration claims to follow the science. So why is it attacking ivermectin, a medication it certified in 1996?

Earlier this year the agency put out a special warning that “you should not use ivermectin to treat or prevent COVID-19.” The FDA’s statement included words and phrases such as “serious harm,” “hospitalized,” “dangerous,” “very dangerous,” “seizures,” “coma and even death” and “highly toxic.” Any reader would think the FDA was warning against poison pills. In fact, the drug is FDA-approved as a safe and effective antiparasitic.

Ivermectin was developed and marketed by Merck & Co. while one of us (Mr. Hooper) worked there years ago. William C. Campbell and Satoshi Omura won the 2015 Nobel Prize for Physiology or Medicine for discovering and developing avermectin, which Mr. Campbell and associates modified to create ivermectin.

These are the opening 3 paragraphs of David R. Henderson and Charles L. Hooper, “Why Is the FDA Attacking a Safe, Effective Drug?,” Wall Street Journal, July 28, 2021 (electronic) and July 29 (print.)

I’ll post the whole piece in 30 days. We found out last night, in response to some feedback, that one of the studies we quote was retracted earlier this month due to questionable data. We immediately drafted a letter last night to the Wall Street Journal stating that we retract our cites of that study.

The Wall Street Journal editor was quite responsive, adding this correction at the bottom:

Correction This article has been edited to remove a reference to a study of 200 healthcare workers by Ahmed Elgazzar of Benha University in Egypt. Messrs. Henderson and Hooper relied on a summary of studiespublished in the American Journal of Therapeutics. They learned after publication that this study has been retracted because of charges of data manipulation.

Because we cited multiple evidence, though, we stick by the rest of the piece. Also, our main point, that, contrary to the FDA, ivermectin is incredibly safe, stands.

 

(5 COMMENTS)

Do murderers and criminals deserve a free education? Is there a certain level of morality that is corrupted by providing a free education to criminals? These are some of the questions that are explored in this episode of EconTalk. EconTalk host, Russ Roberts, talks with Max Kenner, founder and executive director of the Bard Prison Initiative, a program that offers college degrees to prisoners, about the program and how it functions.

Kenner discusses the Bard Prison Initiative and the profile of the program as it was depicted in a four-part PBS documentary titled College Behind Bars. Roberts  questions the portrayal of the program in the film, the actual experience of the students, as well as the moral and financial arguments about whether a program like this is ethical and beneficial. Let’s hear your perspective on the education of incarcerated people. Answer our questions in the prompts below, or use them to start a conversation with friends offline.

 

 

1-Roberts mentions his dislike for the phrase ‘liberal arts education.’ Do you agree with his definition of a ‘liberal arts education?’ How do you think his view of a liberal arts education differs from others’ views? How is this relevant to the conversion of incarcerated people getting an education? Do you think this program is reflective of the overall goal of the American prison system? Explain.

 

2- Roberts suggests cynics may view this program as relatively pointless. It is not a program that can help all prisoners in the US, and in reality it has only helped a few hundred people. Do you agree with this point of view or do you agree with Roberts that helping even just one person to ‘transform’ is worth it? How do you feel about the funding of such a program? Should people be upset that criminals are being ‘rewarded’ with a free education, while other people who haven’t committed a crime have to pay for an education? How might your perspective change if the program is privately or publicly funded?

 

3- When further discussing the importance of a liberal arts education, Roberts asks Kenner a very interesting question: “Why should people who got no education, real education, growing up, who made a mistake or were treated horribly by the criminal justice system in the absence of a mistake, why should they study Homer, Shakespeare, and these other things? Why wouldn’t we give them a trade so they can thrive after they leave prison?” How did Kenner respond to these questions? How would you respond to these questions?

 

4- “Man wants liberty to become the person he wants to become.” Roberts mentions this James Buchanan quote in the context of ‘interior freedom.’ What does Kenner mean by ‘interior freedom?’ Why is this concept so important in relation to the education of incarcerated peoples?

 

5- Roberts and Kenner talk about the importance of learning things with other people. Why is this such a profound reason for having a chance of getting a liberal arts education in prison? Roberts mentions an example from the documentary of some inmates memorizing the opening paragraph in Moby Dick. What does Roberts have to say about memorization? Does this reflect some idea of community? How does this relate to the question of whether educating criminals is beneficial?

(0 COMMENTS)

An article by legal scholar Richard Epstein published in the Hoover Institution’s Defining Ideas defends George Mason University professor Todd Zywicki who is challenging his university’s Covid-19 vaccine mandate (“The Uneasy Case for Universal Vaccinations,” July 27, 2021). Epstein presents economic and constitutional arguments against this sort of mandate, at least those imposed by a public institution. Epstein explains the gist of the economic case, based on individual incentives:

A final consideration is that it might be wise not to impose any mandate at all. This view argues that the social case for vaccine mandates is not there. Most individuals will probably get the vaccine because it is in their self-interest to do so. Free riding is not an enticing option, given that it is highly unlikely that everyone else will get the vaccine. At the same time, high-risk individuals have every incentive to make the right choice for themselves, undercutting the need for paternalism. And anyone else who fears exposure will also provide implicit protection to others if they get a vaccine to protect themselves. …

In close cases like this one, there is much to be said for respecting the presumption of liberty.

I defended similar arguments in my Reason Foundation paper “Public Health Models and Related Government Interventions: A Primer” (March 2021). It is highly plausible that individual incentives produce the level of protection that individuals want more efficiently than coercive mandates from governments or public institutions.

The presumption of liberty invoked by Epstein is more a moral or political-legal argument than an economic one. Ultimately, however, any government intervention rests on value judgments, even if the latter must be influenced by the ways the social world works (as analyzed with the tools of economics). In my Reason Foundation paper, I also review the history and ideology of the public health movement. On the presumption of liberty, I write:

Translating these ideas in practical policy proposals starts with a general presumption for individual liberty, which should be corrected by government intervention only in the presence of clear market failures and when government failures are not likely to be worse. Expressed differently, coercion should be minimized. This approach is not as radical as it may look. It is related to the idea of economic freedom that led to the Industrial Revolution and the unprecedented explosion of prosperity that followed. From a moral-philosophical viewpoint, it can be thought as implementing John Stuart Mill’s principle that “over himself, over his own body and mind, the individual is sovereign.”

(21 COMMENTS)

I favor a utilitarian approach to public policy.  One common objection to this criterion is that we cannot measure utility, and hence there is no objective way to use utility maximization as a guide to policy.

I certainly agree that it is impossible to measure utility with any sort of precision, a fact that does somewhat reduce the attractiveness of utility maximization as a policy criterion.  Nonetheless, I believe utilitarianism is the least bad option, for two reasons:

1. Individuals who engage in charitable activities seem to use something close to utility as a guide to their decisions.  Thus it is far more common to see charity that involves redistribution from the rich to the poor than vice versa.

Suppose it was literally true that we had no idea whether the marginal utility of an extra dollar was higher for the poor than for the rich.  Then there would be no basis for the sort of income redistribution that we often see from philanthropists.

One counterargument is that philanthropists rarely engage in simple income redistribution, rather they often devise more paternalistic schemes such as helping the poor have access to more food, clothing, education or health care.  But that’s not really a criticism of utilitarianism; it’s an implied criticism of the view that something like a Universal Basic Income is the best policy from a utilitarian perspective.  Between 1973 and 1981, I was “poor” in an income sense, but I doubt there would have been much value in a billionaire donating money to me.  Alternatively, if a poor person is addicted to drugs or alcohol, it’s not obvious that giving them money will make them better off.

2.  While it’s true that one cannot directly measure utility, it’s also true that one cannot directly measure many of the alternative potential goals of public policy.  Thus suppose your alternative criterion for public policy was simply “protect natural rights”.  We would have the same problem as with utility maximization—it’s difficult to measure natural rights.

Consider gun rights.  If people in some sense have a natural right to bear arms, that then forces us to define exactly which arms they have a right to bear.  Ordinary rifles?  Semi-automatics?  Machine guns?  Artillery?  Truck bombs?  I am sympathetic to Jeremy Bentham’s argument that the concept of “natural rights” is just “nonsense on stilts”.  When I try to think about what sort of legal or constitutional right to bear arms make sense, I’m unable to do so in anything other than utilitarian terms.  Which legal definition of this right works best?  If I did try to come up with a definition of a “natural” right to bear arms, I’d be using the same sort of judgment or intuition that utilitarians get criticized for using in other areas of public policy—trying to base policy on things that cannot be directly measured.

One thing that we can measure (imperfectly) is GDP (or consumption.)  So perhaps we should simply have public policymakers maximize GDP and call it a day.  And indeed for many policy areas–including my own field of monetary policy–maximizing GDP does provide a rough approximation of success.  But in other areas such as environmental policy it does not.

An alternative approach would be to maximize GDP adjusted for externalities.  To some extent we can use market prices to estimate external effects, say by comparing the price of a house next to a noisy airport and an equivalent house somewhere quieter.  But once we start down that road, it’s hard to know where to stop.  How about maximizing GDP adjusted for externalities and inequality?  It might even be possible to measure how fast the marginal utility of an extra dollar declines as income rises.  You could have a billionaire or a wealthy institution go to a low-income country and offer very poor people the choice between a certain $10,000 and a 50-50 shot at $100,000, and other similar wagers. Over time they’d be able to estimate the utility function for income or wealth.  That information might provide data of interest to policymakers designing the optimal tax system.

My point is not that utility can be directly measured; I don’t believe that.  Rather I am arguing that it’s not clear that trying to measure utility is any more difficult than trying to measure any other plausible policy goal.  No one who contributes to charity knows for certain how it will impact the persons they are trying to help, or indeed even their own welfare.  And yet people still give money to charity.  We all make life decisions based on our best guess, and that will inevitably be true of the government as well.

(24 COMMENTS)

Richard Hanania once again cuts through the absurdity of popular thinking about American politics.  Few modern thinkers are as wise and forthright.  Read the whole thing, but here are the highlights.

First, talk of Critical Race Theory “bans” are silly hyperbole.  The debate is about public school curricula, not censorship.

You may think high schoolers should learn such things, or not. But the fact is that if you have government schools, it is government that makes the rules. How could it be otherwise?

Notice that by mandating one thing, you ban another. A classroom that is required to teach gender is fluid and homosexuality should be accepted is banning traditional sexual morality. One that teaches that every major racial census category has its own history decides which groups are singled out for official identities (“Hispanic” and “AAPI,” but not “Jewish” or “Italian”), and denigrates the idea that American history should be taught from a more unified perspective.

The idea that government schools teach some things, but not others, and that a government school curriculum is set by government, has never been controversial. It’s only causing such debate now because instead of Democrats mandating that you teach identity politics and gender fluidity, it’s Republicans wanting to teach their own ideas.

Now maybe you think Critical Race Theory is true. In which case, you should oppose these bans. If you think it’s a false and harmful doctrine, then banning it is pretty much the job of government.

Second, de facto curricula matter far more than de jure curricula:

More important than what CRT bans say is who will be interpreting them. A 2017 survey of school teachers and education bureaucrats showed that they voted for Hillary over Trump, 50% to 29%. That’s actually not as lopsided as I would have guessed, but there’s evidence that Democratic teachers are more committed to politics than Republican teachers, just as liberals care more about politics more generally. In 2020, educators who donated money to a presidential campaign were six times more likely to support Biden than Trump. So while Democrats may have “only” a 21-point lead in voting preferences among educators, when it comes to those who care more about politics, it’s more like an 85%-15% advantage. And teachers are probably conservative compared to the kinds of people who write textbooks, design curriculums, and work in education departments.

With those kinds of numbers, there’s really nothing conservatives can do to make the schools friendlier to their ideas and values. A CRT ban might mean a teacher won’t say “Ok, kids, today we’re going to learn about Critical Race Theory!,” but they’ll still teach variations of the same ideas. Neither Robin DiAngelo nor Ibram X. Kendi, the two thinkers that seem to offend conservatives the most, identifies as a Critical Race Theorist. In fact, the American Federation of Teachers just announced a campaign to bring Kendi’s teachings to every student in the country, and they don’t appear to be deterred by CRT bans. This is their full time job, and they’ll still be at it whenever public attention has moved on from the controversy of the day.

What is to do be done?  Undermine public education, of course.

The implication here is that the only real option for conservatives is to attack public education and encourage a larger migration to private schools and home schooling. A state can ban CRT, but if it does, kids are still being taught by the same people who thought CRT for kindergartners was a good idea in the first place. Instead of passing the right law and relying on liberals to teach things more consistent with conservative values, simply transfer money from those liberals to people who would teach something else.

The percentage of kids attending private schools has actually stayed quite stable for decades at around 8%, while home schooling has jumped from around 1.7% to close to 4% over the last 20 years. If you don’t like what’s being taught in schools, the goal should be to change those numbers.

Aren’t private schools just as left-wing as public schools?  No.

That being said, are private schools really any less liberal than public schools? Maybe not at the most elite level, as Bari Weiss has shown. Yet every indication is that private schools are in general more conservative. According to a 2015 study, “of the 5.8 million students enrolled in private elementary and secondary schools, 36 percent were enrolled in Catholic schools, 13 percent were enrolled in conservative Christian schools, 10 percent were enrolled in affiliated religious schools, 16 percent were enrolled in unaffiliated religious schools, and 24 percent were enrolled in nonsectarian schools.” Combining Catholic and “conservative Christian” schools, this indicates that at least half of private schools teach a sexual morality that would be illegal if promoted by a public educator, at least in California and other blue states.

For me, what’s most impressive about Hanania is the absence of Social Desirability Bias.  He describes the world as it is, and offers advice to improve upon the ugly world in which we find ourselves.

 

(16 COMMENTS)

Those Who’s are at it again. Pursuant to the Supreme Court’s decision in Collins v. Yellen, which ruled that the requirement that the head of the Executive agency the Federal Housing Finance Agency (FHFA) can only be removed by the President for cause represents a violation of separation of powers, the Biden Administration has moved to terminate Director Mark Calabria. FHFA was the agency created by Congress to oversee Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac in the wake of 2008’s crash of the housing market. One of the agency’s first decisions was to place the GSEs into conservatorship, to ensure that they retained the financial assets necessary to continue to serve as the de facto guarantor for the mortgage market.

Calabria, a former Director of Financial Regulation Studies at the Cato Institute, was a Trump appointee who wished to impose financial responsibility on the GSEs in order to minimize the rate of mortgage defaults. This did not sit well with Biden, who wishes for FHFA to play an active role in making housing affordable for those with the lowest incomes. It seems as if we have been here before, at this poisoned nexus between credibly good intentions and discreditably ignoring predictable outcomes. This is shades of 2002 McCulley and Krugman, calling for a housing bubble to artificially bolster an artificially dampened economy.  There are times I believe that those who fail to learn from history are doomed to become policymakers.

There are those, such as Duke’s Manuel Adelino, who point out that subprime mortgages didn’t cause the crash, and they would be correct. The percentage of subprime defaults among the morass of toxic assets wasn’t enough to bring the house of cards a-tumblin’ down. The majority of those defaulting assets were owned by mid-to-higher income buyers, many of whom purchased homes for speculative purposes. This bears acknowledgment, but we simply cannot disregard the subprime market as a proximate cause. Private mortgage securitization was largely the result of the expansion of risky mortgages, as the inherent risk in such instruments came with the promise of higher yields. In this case, securitization also allowed financial institutions to play fast and loose with capital reserve requirements, encouraging profligacy by everyone involved, including the GSEs tasked with acting as a backstop against such behavior via their own, ostensibly safer, mortgage-backed securities.

I can agree with the Constitutional reasons behind the Court’s ruling while being given pause by the reasons behind Mr. Calabria’s firing. Taking the shackles, so to speak, off FHFA will simply allow policy pressures to be exerted upon Fannie Mae and Freddie Mac that result in baggage and bailouts. Prior to the housing bubble, Fannie Mae’s annual losses averaged around 4 basis points. During the crises, those annual losses averaged 52 basis points. That is simply not acceptable for an institution designed to inject stability into the market. The duty of FHFA regulated GSEs should be, as publicly traded institutions, to their shareholders, and not the policy wishes of any given President.

Of course, in a truly free and liberal society, how we handle the least among us says much about our health moving forward. There are any number of ways to encourage the availability of homeownership to those of lowest income without allowing public policy to hijack the market in potentially disastrous fashion:

Encourage states to loosen occupational licensing requirements: The major deterrent to homeownership for the poor is the lack of income needed to properly qualify for non-subprime mortgages. For many workers who don’t possess high-paying skillsets, entrepreneurship is the best path to raising their income level. Occupational licensing laws serve as an unnecessary barrier to entry, creating a ceiling to upward mobility. I am entirely in favor of, say, the barber industry creating their own internal standards and certifications to assess practitioner skill and quality. I don’t see the need for barbers to be licensed. End the Drug War: The job prospects of individuals with prison records is severely limited. This creates poverty that is often intergenerational in scope. Nonviolent drug offenses should simply not be a barrier to upward mobility. This paradigm becomes increasingly harder for policymakers to justify as in increasing number of state legislatures are not only legalizing marijuana but collecting taxes and getting into the dispensary business themselves. Drug prohibition benefits no one except those whose income is derived from creating criminals. It’s time for this paradigm to end. Let the market market: There are any number of nonprofits and private organizations, such as the Neighborhood Assistance Corporation of America (NACA) which exist solely to extend the possibility of homeownership to low-income Americans. These organizations generally also provide financial counseling, credit repair, and other similar services that assist their clients in improving their financial health beyond purchasing a home. Provide tax incentives for rent-to-own programs: I am generally in favor of lowering taxes for any reason, and this would benefit both landlord and renter. Allowing a portion, or even all, of the amount of rent received as part of a rent-to-own contract to be written off would potentially incentivize owners of rental houses to engage in more of such contracts. Additionally, allowing a tax break for improvements made by renters engaged in such a living arrangement would both lower their tax bill and increase the value of the property once they have taken ownership. As an additional caveat to mitigate predatory landlords, if they fail, without cause, to execute the contract allowing the renter to purchase the home, they might be made subject to penalties covering both the tax breaks they received, and the improvements made by the tenant.

Ultimately, the purpose of securitization is to spread and mitigate risk, and if government owned mortgage guarantors are to exist, they must operate solely within the parameters of this purpose. As fairly recent history has demonstrated, when Freddie and Fannie act irresponsibly, it provides a signal to market actors that the government approves of irresponsible securitizations, insurance schemes and risk, and will bail out bad actors. We simply cannot afford to travel this long road backwards.

Tarnell Brown is an Atlanta based economist and public policy analyst.

(12 COMMENTS)

Yes, that’s a sort of oxymoron.  So let me put it this way.  Put more weight on an expert’s opinion than a non-expert’s opinion.  But also uate the soundness of the arguments used by experts; don’t accept them uncritically.

A recent article at Yahoo followed a predictable path, pointing out how a low income Florida county is full of lots of obese people who refuse to get vaccinated.  The reporter has great sympathy for the overworked health care workers in their underfunded medical facilities.  Then the article took a surprising turn:

On Wednesday morning, chief nurse Paige Tolley received a call from the clinic across the street, where Davis works, about rising COVID-19 cases.

“Are y’all seeing multiple daily, too?” Tolley said on the phone. “Keep sending them if y’all need to. We’ll be here.”

Tolley said cases have “really picked up in the past couple weeks,” mostly among unvaccinated people.

“I hate to see the infection rate like it is,” she said.

She and her staff print information on the vaccine from the CDC to give to patients. She encourages them, especially those with health conditions, to get vaccinated “if they think it’s the right thing to do.”

She empathizes with those who refuse. “I’m not going to push anything on anybody,” said Tolley, who hasn’t been vaccinated.

“I don’t know what the virus would do to me, I don’t know how it would affect me, because everybody’s different,” she said. “I also don’t know what the vaccine would do.”

Her coworker, risk control nurse Janna Martin, a mother of three, also hasn’t gotten a COVID-19 vaccine. She’s afraid of unforeseen fertility ramifications. While experts say such claims are unfounded, Martin said her doctor suggested she hold off.  [emphasis added]

And this:

Martina said his wife, a nurse for 14 years, told him the vaccines hadn’t been studied enough. “She hasn’t taken it either.”

Those who say that I should “stay in my lane” and trust people with training in health care (something I lack), would presumably say that I should defer to the expertise of doctors and nurses.  Indeed in the comment section of my two blogs I am frequently chastised for offering opinions on issues outside of my area of expertise.  But while I’m not a medical professional, I don’t find the arguments used by the people quoted in the article to be at all persuasive.

I do believe that expertise is a plus, other things equal.  But you also need to consider whether the expert’s reasoning process sounds persuasive.  We know that even experts (including economists) are prone to making basic cognitive errors.  When doctors were asked a question that required Bayesian reasoning regarding disease probabilities, many of the doctors made an elementary error.

One might argue that ordinary doctors and nurses are not the relevant “experts”, and that we should instead look to the FDA or CDC.  But that approach also has its drawbacks, as government officials may feel pressured to offer not the view that they believe is most likely to be true, rather the view that can be justified based on pre-existing and possibly inappropriate criteria.  Are they engaged in sound cost/benefit analysis? (I.e., for society, not for their own career.)

Tolley said she knows the pros and cons of the vaccines authorized for emergency use by the Food and Drug Administration but considers them “just experimental right now.”

She’s right!  The FDA does consider it “just experimental right now”.

Here’s another case where an economist disagrees with the experts at the FDA:

Personally, I’m included to agree with Dube.  That’s not because I think I know more about vaccines than the people at the FDA, rather it is because the FDA is not offering sound logical reasoning for its policy stance.  I suspect that many of them privately agree with Dube, but don’t feel free to state that opinion publicly.

Recently I heard a public health expert on NPR.  I don’t recall the exact details, but much of the interview consisted of the expert basically saying “Option X is almost certainly best and will likely be approved soon, but for now were are recommending option Y.”  And this was not just on one specific issue; he was making this argument repeatedly in response to several of the interviewer’s questions.

(42 COMMENTS)

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