Category: Current Affairs
Jimmy’s Jobs of the Future episode
From Jimmy:
Here is the post on LinkedIn and here is the post on X / Twitter. Any engagement / amplification would be much appreciated. Here is the link to the YouTube episode.
I had good fun doing this episode…
Milei update
Argentina President Javier Milei’s economic reform package won a key victory when the Senate approved his omnibus bill Thursday but additional income tax legislation was rejected following debate marred by violent protests that broke out earlier in front of congress.
After weeks of tense negotiations, senators passed Milei’s market-friendly plan that included privatizations and labor law changes when his vice president broke a 36-36 tie. Hours later, the income tax portion of a second bill failed in a vote that went section-by-section through the proposal.
Both the income tax proposal — which Milei’s supporters made changes to late on Wednesday to help smooth passage — and the omnibus economic bill still need to go back to the lower house.
Underscoring some of the political resistance to Milei’s proposals, protesters threw rocks, broken glass and Molotov cocktails Wednesday afternoon at riot police attempting to clear a nearby plaza with a water cannon and tear gas. Protesters also flipped and burned a car.
Despite the income tax setback, the economic changes approved in the first bill would mark Milei’s his biggest legislative achievement, one investors are likely to cheer.
Here is more from Bloomberg. Here are numerous ungated versions of the story.
My Conversation with Velina Tchakarova
Here is the audio, video, and transcript. Here is the episode summary:
Founder of the consultancy FACE, Velina is a geopolitical strategist guiding businesses and organizations to anticipate the outcomes of global conflicts, shifting alliances, and bleeding edge technologies on the world stage.
In a globe-trotting conversation, Tyler and Velina start in the Balkans and then head to Russia, China, North Korea, and finally circle back to Putin’s interest in the Baltics. She gives her take on whether the Balkan Wars still matter today, the future of Bulgarian nationalism, what predicts which Eastern European countries will remain closer to Russia, why China will not attack Taiwan, Putin’s next move after Ukraine, where a nuclear weapon is most likely to be used next, how she sources intel, her unique approach to scenario-planning, and more.
Here is one excerpt on a matter of great importance:
COWEN: Maybe we’ll come back to Bulgaria, but let me try some questions about the broader world. Why is it you think China will not attack Taiwan? They claim it as theirs, and arguably, in five to ten years, they’ll be able to neutralize our submarine advantage from the US with underwater drones and surveillance of our submarine presence. At that point, why don’t they just move on Taiwan and try to take it?
TCHAKAROVA: Well, I do understand that there is a lot of analysis coming out right now, especially on behalf of the military experts, not only in the United States but also in other parts of the world, pointing to this realistic scenario that we may see a military attack by China on Taiwan not later than 2027. And why 2027? Because it is being anticipated as the year when China will be able to catch up militarily with the United States.
I do not share this assessment. I just don’t see why China will have to take such a big risk in achieving something that it can achieve in a much smarter and more efficient way. What do I mean by that? I call this approach “death by a thousand cuts.” That would mean that China could spend a little bit longer in a slow but steady political, social, economic, and societal penetration of Taiwan. We could argue it’s the old Soviet playbook. It could be done in a more subtle way, using plausible deniability.
Taiwan is still the most successful democracy in the Indo-Pacific. That means, also, it is vulnerable to this kind of penetration, where you can practically use agents provocateurs on the ground. You can buy up a lot of institutional or individual players. You can start doing all this subversion process in a longer timeframe, but it could bring about bigger success than actually risking military intervention, which is not giving you, I would say, even a 50–50 chance of success.
The terrain of Taiwan, if we compare it with the most sophisticated war that’s going on right now, is much more difficult. You have a very, very limited window to attack. In the case of Taiwan, this window of opportunity is probably limited only to two periods in the whole year, which, of course, is also known by everyone in the region. That particularly means the defense of Taiwan. You have a window of opportunity in April and then in October, so you cannot attack at any time in the year.
It is a sophisticated military attack that cannot be conducted on the whole of the island. Even though China is catching up militarily right now, I think that the mindset of this Chinese leadership — the way the Chinese leadership is actually conducting strategy — does contradict such risky endeavor, again because time is on China’s side. China only needs to really prepare this sum of minor actions in a longer period of time. At least, this is what I would actually do as a strategist, which would promise a much better percentage of success than, like I said, an adventurous military attack.
Now, we may argue that under unanticipated circumstances for the political leadership — think of a situation where the political stability in China is shaken, where the Chinese leader, Xi Jinping, is somehow put into a corner to take a very, let’s say, ad hoc decision on the matter because of certain circles of the hawks, of the military hawks. Of course, we have this possibility as well. It could be a black swan event, something that has happened in China, and this makes him take this decision in order to draw the attention away from internal problems.
Foreign policy adventures are always gathering public support. It’s not 100 percent to be excluded, but in my scenario, I would actually point to, as I explained, this death-by-a-thousand-cuts approach rather than a military attack on Taiwan.
COWEN: Are we now in a world where the laws of war are basically obsolete?
It is worth repeating that issues of foreign policy are very much the most important issues. And here is Velina on Twitter.
AI and Truth Evasion
A good insight from Eliot Higgins, the head of the intelligence service Bellingcat.
When a lot of people think about AI, they think, “Oh, it’s going to fool people into believing stuff that’s not true.” But what it’s really doing is giving people permission to not believe stuff that is true. Because they can say, “Oh, that’s an AI-generated image. AI can generate anything now: video, audio, the entire war zone re-created.” They will use it as an excuse.
From an extensive interview in Wired.
Addendum: A case in point.
Backlash effects are real, for drug policy too
It was less than two years ago that officials in British Columbia, the epicenter of Canada’s drug overdose crisis, unveiled what they called “bold action.”
The experiment, backed by Canada’s police chiefs, was to decriminalize the possession of small amounts of some drugs — including methamphetamine, cocaine, fentanyl and heroin — for personal use. The approach, officials said, would reduce the stigma that can discourage users from seeking treatment and the criminal records that can prevent them from rebuilding their lives.
If the three-year trial produced results, it could be a template for the rest of the country.
But now, with complaints about public drug use rising and a provincial election looming, they’ve abruptly reversed course. The center-left New Democratic Party government, which championed the policy, last month received approval from Ottawa to recriminalize drug possession in most public spaces.
Here is more from Amanda Coletta The Washington Post. We are at margins where many such experiments — because they are not working well enough — are in danger of being reversed.
What are you people thinking?
Today’s suggested packing lists for seven-week camps can include a light blanket and warm comforter, two sets of sheets, six towels, three pairs of sneakers, 25 pairs of underwear, 25 pairs of socks, sports equipment and toiletries. Then, there are clothes for most every weather scenario, including a raincoat and boots, fleece jacket, more than 20 tops and shorts, and 10 pairs of pajamas—split between lightweight and heavy.
Miscellaneous items include foldable Crazy Creek chairs, a kaboodle to hold hair ties, makeup and nail polish, flashlights, decorative pillows for optimal bunk coziness, family photos to fend off homesickness, games and personalized lockboxes for, say, smuggled-in candy.
“Color War” is its own sartorial challenge. At this epic end-of-summer tournament, campers sport their team’s color and compete in events. But since the kids don’t know what color they’ll be assigned, parents often pack for four possibilities.
For the buying, many families make a “camp appointment” with a personal shopper at Denny’s, a children’s boutique in New York, New Jersey and South Florida. Associates greet them with their camp’s packing list printed out. Spencer Klein, whose family has owned Denny’s since 1978, says the average spend for a new camper appointment is $1,500 to $2,000. (A coveted perk: the store labels everything for free.)
As for those new service sector jobs:
This year, for the first time, Dara Grandis, a Manhattan mom of three, hired professional organizer Meryl Bash to pack for her three children, who head off in late June for seven weeks at camp.
Here is the full WSJ article by Tara Weiss, via the excellent Samir Varma.
RIP, David Boaz
Here is notice from Cato.
Mark Lutter reports on the Bahamas (from my email)
I won’t double indent, this is all Mark:
“The Prime Minister of the Bahamas recently gave a speech on revitalizing Grand Bahama. He called out the current asset owners of Intercontinental Diversified Corporation, a holding company for Freeport, for not re-investing and for selling off various pieces of the asset. He wants a world class partner to develop Grand Bahama. Half his cabinet attended the speech in person. It is the strongest stance a Prime Minister has taken in 50 years with respect to Grand Bahama.
Here is some additional background reading on Grand Bahama and Freeport. The Prime Minister has two years left in his term and has made revitalizing growth on Grand Bahama his political legacy. Some key facts about Freeport
- 70k+ acres of developable land under Grand Bahama Development Company
- Infrastructure to support 250k residents, current population is 50k
- 25 minute flight to Miami
- Existing legal framework for a charter city, though some of the rights of the Grand Bahama Port Authority, the city government, have been eroded over time
I hope you find this interesting enough to blog about and would appreciate a shout out. Happy to answer any additional questions you might have.”
TC again: Here Mark comments on Twitter.
The NIH Doesn’t Fund Small Crappy Trials
A nice catch by Max at Maximum Progress:
[A common critique] is that the NIH funds too many “small crappy trials.” That quote is from a FDA higher up, but the story has been repeated by many others…I downloaded all of the clinical trial data from ClinicalTrials.gov to find out….The median NIH funded trial has 48 participants while the median industry funded trial has 67. The average NIH funded trial has 288 participants while the average industry trial has 335 and the average “Other” funded trial (mostly universities and the associated hospitals) has 923 participants.
By median or by average NIH trials are the smallest out of all the funders. This seems to confirm the “small crappy trials” narrative
…This narrative is reversed, however, when you split up the trials by phase.
Across all trials NIH funded ones are the smallest, but within each phase NIH trials are the largest or second largest. Their overall small enrollment average is just due to the fact that they fund more Phase I trials than Phase III. But NIH Phase I trials have a bigger sample size than industry funded trials on average.
This is an example of Simpson’s Paradox in the wild!
Arguing that the NIH should stop funding unusually small trials is easy but arguing that they should shift from funding the Phase I trials closest to basic research towards later stage trials is less clear.
The NIH’s clinical trial strategy is certainly not perfect and improving it is valuable. But a systematic bias towards “small crappy trials” doesn’t really seem like it’s an important problem facing the NIH.
The Danish Mortgage System Avoids Lock-In
Tyler and I have been promoting the Danish mortgage system for years. Recall that in the Danish system each mortgage is backed by a matching bond. As a consequence, mortgage holders have two ways to pay a mortgage: 1) hold the mortgage and pay the monthly payments or 2) buy the matching bond and, in effect, extinguish the mortgage. The latter option is valuable because when interest rates rise, the price of mortgages fall. As I wrote earlier:
Thus, if a Danish borrower takes out a 500k mortgage at 3% interest and then rates rise to 6%, the value of that mortgage falls to $358k and the borrower could go to the market, buy their own mortgage, deliver it to the bank, and, in this way, extinguish the loan. Since the value of homes also falls as interest rates rise this is also a neat bit of insurance. Remarkable!
James Rodriguez writing at Business Insider points out another advantage of the Danish system, it avoids lock in:
When mortgage rates shoot up, as they did over the past two years, many would-be sellers decide they don’t want to move after all. Sure, a new home could be nice, but trading up would mean parting ways with a cheap mortgage rate. What may have been a welcome change suddenly sounds like a painful, expensive divorce. So they sit tight. A gummed-up housing market is good for nobody: First-time buyers can’t find enough homes for sale, and wannabe sellers remain trapped in places that are either too big or too small. This is called the lock-in effect — and it could linger for decades.
… One estimate (here, AT) suggests the lock-in effect prevented more than 1 million people from selling their homes in the span of just a year and a half, a steep toll considering about 5 million homes exchange hands in a typical year. I used to think of these golden handcuffs as an inevitable side effect of the magical 30-year fixed mortgage. But it doesn’t have to be this way. The answer to our problems may lie thousands of miles away … in Denmark.
…Danish sellers are able to earn a profit when they trade in their low mortgage rates for more-expensive ones, making it easier to move even when rates rise.
Brain drain from Canada
Here is the source. Don’t forget — in the long run the policies you choose shape who is attracted to your country. So be tough, as selection matters above all else. These are not the Canadian losers we are getting.
Bailouts Forever
When interest rates rise, the price of long-term assets falls. Consequently, when the Fed began raising interest rates in 2022, the value of bonds and mortgages dropped, causing significant accounting losses for banks heavily invested in these assets. Silicon Valley Bank went bust, for example, because depositors fled upon realizing it was holding lots of Treasury bonds.
Interest rates remain high and many banks have large unrealized losses on their books. According to the latest FDIC data (see below) unrealized losses currently total $516.5 billion, far exceeding levels seen during the 2008-2009 financial crisis. Price risk is not the same as default risk and if the banks can hold onto their assets until maturity then they will be solvent. The real danger, as with SVB, is if unrealized losses are combined with a deposit run. So far that doesn’t seem to be happening but it’s well within the realm of possibility.
In other news, Hypertext has an issue devoted to Anat Admati and Martin Hellwig’s The Banker’s New Clothes. Admati and Hellwig write:
The 2010 Dodd-Frank Act in the United States promised the end of bank bailouts and “too-big-to-fail” institutions. The European Union’s 2014 legislation for dealing with banks likely to fail was claimed to provide “a framework” to “deal with banks that experience financial difficulties without either using taxpayer money or endangering financial stability.” In November 2014, Mark Carney, at the time the governor of the Bank of England and chair of the Financial Stability Board (FSB), a body of financial regulators from around the world, announced triumphantly that an agreement about new rules for the thirty largest and most complex, “globally systemic” financial institutions would prevent bailouts in the future. Many people in politics and the media believed these claims.
Two From the Tabarrok Brothers
Maxwell Tabarrok offers an excellent review of an important paper.
Taxation and Innovation in the 20th Century is a 2018 paper by Ufuk Akcigit, John Grigsby, Tom Nicholas, and Stefanie Stantcheva that provides some answers. They collect and clean new datasets on patenting, corporate and individual incomes, and state-level tax rates that extend back to the early 20th century. The headline result: taxes are a huge drag on innovation. A one percent increase in the marginal tax rate for 90th percentile income earners decreases the number of patents and inventors by 2%. The corporate tax rate is even more important, with a one percent increase causing 2.8% fewer patents and 2.3% fewer inventors.
Especially useful is Max’s back of the envelope calculation putting this result in the context of other methods to increases innovation.
Read the whole thing.
For something completely different, Connor Tabarrok offers an update on Charlotte the Stingray:
A “miracle pregnancy” picked up by national news brought huge business to a small-town aquarium, but months after the famous stingray was due, there are still no pups. Are we being scammed by a fish?
I particularly liked this line:
Taking all of this into account, my stance is that even if they got it on, it’s unlikely that this shark will have to dish out any child support to Charlotte’s pups.
Read the whole thing.
Are MR readers more interested in tax policy or virgin birth stingrays? We shall see.
Those circularity-inducing service sector jobs
Yes, in Tokyo women pay men in make-up to flatter them. But what does the whole market look like?
Yamada Kurumi, a client, works at a brothel to earn enough money to visit the clubs, which she does about once a week. She had boyfriends in the past but finds hosts more exciting. She is unsure whether to seek an office job after graduating from college or to carry on with sex work, which pays better. “A lot of people start losing touch with friends once they get addicted to host clubs,” says Ms Yamada. “My host is already part of my everyday life…If I get a normal job, I probably won’t be able to see him any more. That scares me.”
Here is more from The Economist.
Deadly Precaution
MSNBC asked me to put together my thoughts on the FDA and sunscreen. I think the piece came out very well. Here are some key grafs:
…In the European Union, sunscreens are regulated as cosmetics, which means greater flexibility in approving active ingredients. In the U.S., sunscreens are regulated as drugs, which means getting new ingredients approved is an expensive and time-consuming process. Because they’re treated as cosmetics, European-made sunscreens can draw on a wider variety of ingredients that protect better and are also less oily, less chalky and last longer. Does the FDA’s lengthier and more demanding approval process mean U.S. sunscreens are safer than their European counterparts? Not at all. In fact, American sunscreens may be less safe.
Sunscreens protect by blocking ultraviolet rays from penetrating the skin. Ultraviolet B (UVB) rays, with their shorter wavelength, primarily affect the outer skin layer and are the main cause of sunburn. In contrast, ultraviolet A (UVA) rays have a longer wavelength, penetrate more deeply into the skin and contribute to wrinkling, aging and the development of melanoma, the deadliest form of skin cancer. In many ways, UVA rays are more dangerous than UVB rays because they are more insidious. UVB rays hit when the sun is bright, and because they burn they come with a natural warning. UVA rays, though, can pass through clouds and cause skin cancer without generating obvious skin damage.
The problem is that American sunscreens work better against UVB rays than against the more dangerous UVA rays. That is, they’re better at preventing sunburn than skin cancer. In fact, many U.S. sunscreens would fail European standards for UVA protection. Precisely because European sunscreens can draw on more ingredients, they can protect better against UVA rays. Thus, instead of being safer, U.S. sunscreens may be riskier.
Most op-eds on the sunscreen issue stop there but I like to put sunscreen delay into a larger context:
Dangerous precaution should be a familiar story. During the Covid pandemic, Europe approved rapid-antigen tests much more quickly than the U.S. did. As a result, the U.S. floundered for months while infected people unknowingly spread disease. By one careful estimate, over 100,000 lives could have been saved had rapid tests been available in the U.S. sooner.
I also discuss cough medicine in the op-ed and, of course, I propose a solution:
If a medical drug or device has been approved by another developed country, a country that the World Health Organization recognizes as a stringent regulatory authority, then it ought to be fast-tracked for approval in the U.S…Americans traveling in Europe do not hesitate to use European sunscreens, rapid tests or cough medicine, because they know the European Medicines Agency is a careful regulator, at least on par with the FDA. But if Americans in Europe don’t hesitate to use European-approved pharmaceuticals, then why are these same pharmaceuticals banned for Americans in America?
Peer approval is working in other regulatory fields. A German driver’s license, for example, is recognized as legitimate — i.e., there’s no need to take another driving test — in most U.S. states and vice versa. And the FDA does recognize some peers. When it comes to food regulation, for example, the FDA recognizes the Canadian Food Inspection Agency as a peer. Peer approval means that food imports from and exports to Canada can be sped through regulatory paperwork, bringing benefits to both Canadians and Americans.
In short, the FDA’s overly cautious approach on sunscreens is a lesson in how precaution can be dangerous. By adopting a peer-approval system, we can prevent deadly delays and provide Americans with better sunscreens, effective rapid tests and superior cold medicines. This approach, supported by both sides of the political aisle, can modernize our regulations and ensure that Americans have timely access to the best health products. It’s time to move forward and turn caution into action for the sake of public health and for less risky time in the sun.