Alexei Navalny’s Death Is a Timely Reminder of How Much Russia Sucks By Eric Boehm, Reason, February 16, 2024 Excerpt: If there is the thinnest bit of a silver lining to be found in the untimely demise of Alexei Navalny, the Russian opposition leader who reportedly died this week in prison, perhaps it is this: It is a well-timed reminder of how much Russia sucks. Most Americans probably don’t need the reminder. After all, Russia has been an authoritarian state for as long as any American alive today can remember, and Russian President Vladimir Putin’s record of murdering political opponents, imprisoning critics, and silencing dissent is well established. Also, there’s that foolish, destructive war in Ukraine. This week, however, the internet has been treated to the absurd spectacle of former Fox News pundit Tucker Carlson’s bizarre propaganda tour of Moscow (on the heels of his more defensible decision to interview Putin). Via videos posted to X, formerly Twitter, Carlson raved about the beauty of the Moscow subway system and was wowed by the stunning technology of…shopping carts? Through it all, Carlson has repeatedly suggested that maybe Russia isn’t such bad a place, as if a lack of subway graffiti were the most important metric for measuring the quality of a country. My comment: It’s too bad that Tucker didn’t seem to have seen any Dollar stores in Moscow. Surely then, he would have seen through his own hype. 1968 Robert F. Kennedy Campaign Ad Ignorant U.S. Senator Scares the Bejesus out of Young Children   Los Angeles’ one weird trick to build affordable housing at no public cost by Ben Christopher, Cal Matters, February 7, 2024. (HT2 co-blogger Scott Sumner) Excerpt: Another key detail: Unlike most recent statewide laws aimed at speeding up the approval of new housing, the Los Angeles law doesn’t require developers to pay construction workers heightened “prevailing wages” — roughly equal to what unionized construction workers earn on a public infrastructure projects. Muhammad Alameldin, a researcher at UC Berkeley’s Terner Center for Housing Innovation, said that makes Executive Directive 1 a kind of alternate reality for housing policy in California. Then comes the next step. Most so-called “ED1 projects” also make use of a hodgepodge of statewide “density bonus” laws that allow developers of 100% affordable housing projects to pack far more units and floors onto a given lot than would otherwise be allowed under local zoning rules. These laws also let affordable developers pick and choose from a wide range of goodies and freebies that cut costs further and allow for yet denser development. That means no parking spots, limited open space, smaller rooms and fewer trees. All those added units mean developers can set the rents lower and still pay themselves back for the cost of construction and then some. Comment: By “No Public Cost” in the title, the author means not “no cost to the public,” but “no cost to taxpayers.” The people who buy them will still pay a pretty penny, but it’s worth it to them. Biden administration to reportedly relax EV rule on tailpipe emissions Reuters, February 18, 2024 Excerpt: U.S. President Joe Biden’s administration intends to relax limits on tailpipe emissions that are designed to get Americans to move from gas-powered cars to electric vehicles, the New York Times reported, citing people familiar with the plan. The administration would give car manufacturers more time instead of requiring them to rapidly ramp up sales of electric vehicles over the next few years, the report said, adding that the new rule could be published by early spring. The shift would mean that EV sales would not need to rise sharply until after 2030. Reuters previously reported that the White House could enact proposed Environmental Protection Agency regulations as soon as March that would mandate dramatic reductions in tailpipe emissions. The administration proposal would require boosting U.S. EV market share to 67% by 2032 from less than 8% in 2023. I predict that the mandate for EV sales will NOT rise sharply before 2035.   Me vs Huemer by David Friedman, David Friedman’s Substack, February 13, 2024 Excerpt: One problem with Huemer’s argument is that the expertise of the expert rarely covers enough of the issue to derive a conclusion on the basis of his own knowledge. A climatologist knows more about climate than I do so the expert consensus on what is going to happen to global temperature, assuming I can figure out what it is, is a better guess than I can produce for myself. But the climatologist has no expertise in economics, which is one of the things needed to work out the consequences of that change — and I do. He probably has little expertise in statistics; I am better off figuring out for myself, with the assistance of information from statisticians,  whether to believe Michael Mann’s hockey stick diagram. His expertise in climatology tells him nothing about the effect of CO2 concentration on crop yields, a question it may not have occurred to him to think about. His conclusions about the consequences of climate change depend on quite a lot of things he is not an expert in. Once I have accepted his prediction of future climate I have no reason to give special weight to his conclusions about its effect on human welfare or the cost of reducing CO2 production, both of which the policy conclusions that people argue about depend on, so there is little reason to prefer his conclusions to mine. That is one example that I happened to have looked at in considerable detail. The same would be true of gun control, where one of the main controversies (over concealed carry) was set off by an article by two economists offering evidence for an economic point I had made, years before, in my Price Theory. For the abortion controversy the issues are religious and moral questions on which, as best I can tell, there are no experts, at best people whose writing helps the reader think through the issue for himself.   (1 COMMENTS)

“Let’s be honest. Hillary Clinton is going to be the next president of the United States.” I uttered those fateful words on election day 2016 and then proceeded to lose a few hundred dollars at Predictit.org, where I had bet on a Clinton victory. The experience made me appreciate Yogi Berra’s maxim that “it’s hard to make predictions, especially about the future” even more. That experience combined with what I’ve read about experts’ lousy records making concrete predictions was chastening, to say the least, and now my default answer to, “What do you think is going to happen?” and, “What should we do about [whatever]?” is, “I don’t know.” It’s a good lesson to remember as we mark the second anniversary of Russia invading Ukraine. I’d say allow more immigration, but that’s a good idea regardless. Reading Richard Hanania’s Public Choice Theory and the Illusion of Grand Strategy: How Generals, Weapons Manufacturers, and Foreign Governments Shape American Foreign Policy, convinced me sanctions will be ineffective if not counterproductive. They stand a very good chance of being worse than doing nothing, and the paradigmatic case for successful sanctions–the end of Apartheid in South Africa–was not due to sanctions but due to other causes. Was the Russian invasion bad? Yes. Is Vladimir Putin a bad guy? Yes. Do those two facts alone mean we can make things better? No. The world is filled with problems we do not know how to solve, and it’s unwise to try to keep up with all of them and foolish to try to solve all of them. I basically stopped keeping up with current events after reading Rolf Dobelli’s essay “Avoid News: Towards a Healthy News Diet.” Dobelli argues that news is to the mind as candy is to the body, and he explains that news takes our faulty ways of thinking about risks and makes them worse. As he puts it, for example, “Terrorism is overrated. Chronic stress is underrated.” Most of what you see on the evening news or read on your favorite news website is irrelevant to your daily affairs, and many of the confident pronouncements people are making about this or that will be wrong or correct only fortuitously. Checking the news is like going to the pantry for a bag of chips. It’s OK to do every so often, but just as chronic snacking on junk food ruins our bodies, chronic snacking on junk information ruins our minds. I’m also inspired by Michael Huemer’s article “In Praise of Passivity” and Chris Freiman’s argument for why it is OK to ignore politics. I don’t think we’re at the stage in our knowledge of the social and moral sciences where we can confidently predict the actual, long-run consequences of many actions and interventions. We can make predictions based on models, which can be informative, but there’s enough randomness in the system that, once again, even the best forecasters aren’t very good at it. For someone who doesn’t specialize in a particular area, a citizen’s or observer’s Hippocratic Oath: first and foremost, don’t make things worse. As Hanania argues, many American military adventures abroad wind up with ad hoc justifications based on jingoism and short-run political expediency. Huemer is right: it’s OK to stand by and watch. Huemerian passivity, of course, isn’t the same as apathy. We should care about what happens in the world, but not to the point of distraction or neglect of our other duties. In any event, politics is hard and the world is an unimaginably complex place. To the objection that it is not OK to ignore politics and that we have a duty to be informed citizens, Freiman responds by pointing out the overwhelming intellectual burden one needs to bear in order to really understand things and account for the consequences of different policies and proposals. It is hard enough for me to keep up with the scholarly literature in my very narrow field of specialization within economics, and even then, there is a lot I don’t know and end up missing. Christopher Freiman thinks it’s OK to ignore political debates even about very sensitive issues because of the sheer complexity of what is involved and because it’s by no means certain that we will make things better overall. I tend to agree. So what are we to do? I am learning to pray with Reinhold Niebuhr for the courage to change the things I can, the serenity to accept the things I can’t, and the wisdom to know the difference. What’s happening in Ukraine right now is getting a lot of attention, but it’s almost certainly something I can’t change.   Art Carden is Professor of Economics & Medical Properties Trust Fellow at Samford University, and he is by his own admission as Koched up as they come: he has an award named for Charles G. Koch in his office, he does a lot of work for and is affiliated with an array of Koch-related organizations, and he has applied for and received money from the Charles Koch Foundation to host on-campus events. (0 COMMENTS)

Despite recent attempts to reduce barriers to building in California, the housing sector remains hamstrung by excessive regulation.  Ben Christopher writing at Cal Matters says there’s one bright spot in this otherwise dreary picture: But unlike the vast majority of affordable developments that have been proposed in California in recent memory, no taxpayer dollars are allotted to build the thing. Especially in the state’s expensive coastal cities, the term “unsubsidized 100% affordable project” is an oxymoron, but Los Angeles is now approving them by the hundreds. That’s thanks to an executive order Los Angeles Mayor Karen Bass, signed in December 2022, shortly after being sworn into office. In the year and change since, the city’s planning department has received plans for more than 16,150 affordable units, according to filings gathered by the real estate data company, ATC Research, and analyzed by CalMatters. That’s more than the total number of approved affordable units in Los Angeles in 2020, 2021 and 2022 combined. This sort of outcome was completely unexpected: “I don’t think anybody saw this coming,” said Scott Epstein, policy director at Abundant Housing LA and one of the authors of that analysis. “When it comes to 100% privately invested projects…I don’t think we’ve ever seen anything close to the magnitude that that has been unleashed.” The key to success was reducing the regulatory burdens faced by developers of affordable housing units: The order sets a shot-clock of 60 days for the city’s planning department to approve or reject a submitted project. As long as that project meets a basic set of criteria, it must be approved. That means no city council hearings, no neighborhood outreach meetings and no environmental impact studies required. . . . Another key detail: Unlike most recent statewide laws aimed at speeding up the approval of new housing, the Los Angeles law doesn’t require developers to pay construction workers heightened “prevailing wages” — roughly equal to what unionized construction workers earn on a public infrastructure projects. In the past those barriers were so burdensome that affordable housing could not be built in LA without large public subsidies.  But the recent change unleashed a wave of new projects that are 100% privately funded. Read the whole thing. (0 COMMENTS)

In my previous post, I wrote about one of the two most important prices in the Argentine (or any) economy- exchange rates. That brings us to the other of the two most essential prices in the economy, the one that is THE most important price, the time price of money, the interest rate. Interest rates are no less distorted in Argentina nowadays than the price of the local currency compared to other currencies.  Consider the short-term liabilities of the Argentinean central bank that Mr. Caputo, the Argentine finance minister, is concerned he will be forced to monetize if exchange markets are liberalized. Do you know the nominal rate they are paying per year? An APR of 100%, or about 9% per month. In nominal terms, that seems a lot; however, when inflation is running at 25% per month, the interest rate in real terms is negative to the tune of two digits per month!  No wonder people flee those deposits the first opportunity they have… Talking about the return to the gold standard after WWI, Mr. Jacques Rueff argued that no country needs gold to resume redemption; they must be willing to pay the interest rate necessary to keep depositors invested in the countries’ currency. That century-old lesson is as valid for Argentina today as it was then. The demand for pesos is low, because any cash balance you hold in that currency is losing purchasing power at 15% a month- even if you have an interest-bearing investment! In any modern economy, there are many distortions in the price of money; Argentina is an outlier in terms of the extent of the distortions but not their existence. It is not easy to allow financial markets to reveal the actual price of capital in the middle of so many interventions, but that is not an excuse not to liberalize markets and allow them to reveal the natural scarcity of savings in the Argentine economy. The fiscal needs of the state are indeed forcing the administration to continue to crowd out private investments to carry most of the existing savings to the funding of the public deficit, if not by paying higher interest rates, by creating other regulatory costs that make the more than 15% monthly loss the least bad of the investment alternatives peso holders have. Again, to bring the interest rate to something closer to market reality, to the time preference of Argentinean society, would imply positive interest rates, that is for sure… With that, Mr. Caputo is wasting the good will with which the new administration was received in its early days thanks to the significant majority of the votes it received in the recent elections and risking the success of the Milei’s administration.   Leonidas Zelmanovitz, a Senior Fellow with the Liberty Fund, holds a law degree from the Universidade Federal do Rio Grande do Sul in Brazil and an economics doctorate from the Universidad Rey Juan Carlos in Spain. (0 COMMENTS)

This is a link to a talk I gave last month in Carmel, California. The talk is titled “Economic Inequality: Popular Misconceptions and Important Facts.” The hosts were the owners of a house that used to be owned by actress Joan Fontaine. The sponsor was the California Arts & Sciences Institute. My talk begins at the 1:30 point and goes to the 40:44 point. Then there’s pretty lively 30-minute Q& A. One very interesting part of Q&A was our discussion of Social Security.   (0 COMMENTS)

Here’s a question for you – should libertarians reject moral degeneracy?  (For now, let’s just table the object-level discussion about what specifically constitutes degeneracy, and focus on the meta-level discussion instead. Bob may think homosexuality constitutes moral degeneracy and should be rejected, but alcohol use is fine, while Bill may think alcohol use is morally degenerate and should be rejected, but homosexuality is fine. For the purposes of this discussion, Bill and Bob agree on the meta-level question that moral degeneracy should be rejected, even though they disagree at the object level about what behaviors are morally degenerate.) I ask this because out there on the wild world of Twitter, a fellow libertarian Tweeted out the following: “Libertarians shouldn’t accept degeneracy!” If you truly believe this you don’t know what libertarianism is. Libertarianism is a philosophy regarding the political/legal order, nothing more. Moral degeneracy is not an issue of the political/legal order, unless you believe that the state exists to make us moral. And if you believe that, you are categorically NOT a libertarian. Certainly there are some thinkers out there who believe there is a role for the state to make us moral, and I share this person’s distrust for that idea. But I still don’t think his Tweet quite works, for a few reasons.  Let’s accept that libertarianism has nothing to say beyond the political/legal order, and thus it offers no prescriptions about how what people ought to believe or how they ought to act beyond that specific realm. Even so, it doesn’t follow from this that there is nothing else libertarians ought to believe, accept, or reject. For example, I would say that “libertarians shouldn’t accept Holocaust denial.” Note that in making this statement, I am not calling for government-imposed censorship to silence people who deny the Holocaust. To say, “you shouldn’t accept X” is not the logical equivalent of “X should be banned by the state.” Also, remember not to equivocate between accepting something, and merely tolerating it – while I do believe libertarians should tolerate Holocaust denial on free speech grounds, you can disapprove of something while still tolerating it.  Holocaust denial is not strictly speaking an issue of the political/legal order, but libertarians should still reject it, because it’s not true. That is, the reasons that exist to reject Holocaust denial still obtain independently of libertarian political philosophy. Everyone should reject Holocaust denial for those reasons – including libertarians. Libertarians should also reject the geocentric model of the solar system. Geocentrism doesn’t run afoul of libertarian arguments regarding the political/legal order, but nonetheless libertarians shouldn’t accept it – because there are sound arguments against it.  Similarly, I know Christian libertarians who believe the state should have no role in mandating or compelling religion. Yet, they also believe that libertarians (and everyone else) should accept Christianity – because they believe Christianity is, in fact, true. And while I disagree with them at the object-level, I agree with them at the meta-level – if Christianity is true, then libertarians should accept it, as should non-libertarians. To say “libertarians shouldn’t accept Christianity because libertarianism is simply about the political order, nothing more” seems, well, obviously wrong. And for the same reason, if there are sound arguments that moral degeneracy is a real phenomenon, and is bad, and ought not be accepted, then it seems almost trivially true that libertarians should reject moral degeneracy. One can believe this without believing the state is therefore mandated to make us moral. So, the Tweet above contains a few confusions, as I see it. It seemingly conflates whether or not one ought to accept or reject certain beliefs or modes of behavior as implying that the state should mandate or forbid those beliefs or modes of behavior. It also seems to imply that the sole reason libertarians have for accepting or rejecting anything must come from libertarian arguments about the political order – and if libertarian arguments about the political order don’t touch on moral degeneracy, then libertarians have no reason to reject moral degeneracy. But who says the arguments of libertarian political philosophy are the sole basis on which we ought to evaluate ideas, or decide what we should accept or reject?  I prefer the more holistic approach reflected by Adam Smith, particularly in his The Theory of Moral Sentiments. Smith does say that a person who simply keeps his hands to himself has done pretty much all that he can justly be compelled to do – “We may often fulfil all the rules of justice by sitting still and doing nothing.” (That is, simply refraining from violating the negative rights of others.) But Smith’s vision was broader than this. He still believed there were ways we ought to behave, and behaviors we ought to reject, over and above the merest requirements of what can be justly forced. Fulfilling all the rules of justice was a necessary condition for a civilization to grow and thrive and flourish – but by no means was it the sole and sufficient condition. Smith spoke extensively about the desire not just to be praised but to be praiseworthy, and the desire to avoid not just being blamed but to be blameworthy. This entails that there are modes of behavior that in fact deserve to be praised, and other modes of behavior deserving of blame, and that we ought to engage in the former and avoid the latter. How is this meant to work if we speak as though the sole criteria for what we ought to accept or reject is simply what is established by the political order?  There is a danger of sliding from “even though we should reject X there shouldn’t be a law against it” to thinking “since there shouldn’t be a law against X, we shouldn’t reject it.” Theodore Dalrymple worried about this in his book In Praise of Prejudice: The Necessity of Preconceived Ideas, where he argued the latter view, in practice, “ends up increasing the  power of government over individuals” by “destroying all moral authority that intervenes between individual human will and governmental power. Everything that is not forbidden by law is, ipso facto, permissible. What is legally permissible is morally permissible…This, of course, makes the law, and therefore those who make the law, the moral arbiters of society. It is they who, by definition, decide what is permissible and what is not.”  I worry that the above Tweeter, and many other libertarians, sometimes fall into this mode of thinking. In the Tweet that inspired this post, it was suggested that there were apparently only two options – either you think the state must be mandated to become the moral arbiter of society, or you must accept moral degeneracy. This is accepted with delight by many social conservatives before throwing down the reverse-card – while the libertarian above suggests that since the state shouldn’t be a moral arbiter libertarians shouldn’t reject moral degeneracy, some conservatives argue that since we shouldn’t accept moral degeneracy, we need to make the state a moral arbiter.  I reject both side of that coin. In my view, we don’t want the state to be a moral arbiter and this makes it all the more important that we recognize there are behaviors we ought to accept and reject independently of what the political order requires. Edmund Burke was right when he said, “Society cannot exist, unless a controlling power upon will and appetite be placed somewhere; and the less of it there is within, the more there must be without.” And if libertarians are keen to ensure as little control as possible comes from without, it’s all the more important to cultivate it from within.  Or at least that’s how it seems to me. If you disagree (or even if you agree, I suppose), do by all means say so in the comments! I’d love to hear your thoughts, dear readers!    (0 COMMENTS)

“I am ready to serve,” said Kamala Harris. Shouldn’t we be surprised to hear politicians begging to serve? There are places for that. One can get a job at McDonald’s. If one is more of an altruist, one can serve as a nurse or in a private charity. (See “Kamala Harris Says She Is Ready to Serve as Biden Faces Age Scrutiny,” Wall Street Journal, February 12, 2024.) If Ms. Harris were to serve at McDonald’s, she would soon discover a big difference. There, nobody is obliged to pay for or eat what he has not personally ordered. What is served must be what each one wants. A student of human affairs may suspect that this is precisely what Ms. Harris wants in “serving” politically: to force half the population to eat what she serves. In other words, as she later prudishly admits, what she wants is not to serve, but “to lead”: Everyone who sees her on the job, Ms. Harris said, “walks away fully aware of my capacity to lead.” Am I overdoing my point? The standard economic objection is that, in a free society, the state and its agents serve in the sense that they produce “public goods,” including public services, that everybody wants but cannot be produced on the market. In that sense, politicians do “serve” in the big McDonald’s of political society. They produce services such as the enforcement of contracts and the rule of law, public security, and territorial defense, instead of Big Macs. But this is not the humble role that politicians long for in a democratic regime with totalitarian pretensions. Moreover, public choice analysis has demonstrated the explanatory power of the hypothesis that politicians (and bureaucrats) are motivated by the same self-interestedness as ordinary people. The problem is that instead of serving other people while pursuing their own interest like a McDonald’s employee does, politicians actively work against the interests of those who are not essential to their election. This is clear in a majoritarian democracy. We may admit that the rulers of Anthony de Jasay’s “capitalist state,” whose only function would be to make sure that the state is not taken over by people intent at “governing” (that is, of favoring some at the cost of harming others), would be worthy of some special esteem. More generally, politicians who would try to maintain a free society with equal liberty for all might properly deserve the gratitude of everybody who benefits from such a regime—which must be virtually everybody, at least in the long run. But this is obviously not the sort of humble servants we have. (0 COMMENTS)

As war in Gaza rages on, in this episode, EconTalk host Russ Roberts welcomes Israeli journalist Haviv Rettig Gur for an historical look at antisemitism, the Holocaust, and “the long twentieth century.” Gur offers a deep dive into anti-Semitism, particularly in the European context, before turning to the present day conflict. Gur’s account starts in 1880 with the assassination of Russia’s Czar Alexander and the rise of industrialization. He emphasizes the bottom-up nature of the “mass popular pogroms” in the Southern Russian Empire related to the expanding railway network. While the Jews, says Gur, tended to see such incidents as evidence of regime-based action, historians now agree that this was a mistake. Rather, “The people around them, around whom they had lived, really wanted them gone and really wanted them tortured and dehumanized until they understood the point.” As Jews left the Imperial lands by the millions, many fled westward toward the Austro-Hungarian and German empires, who in turn blamed the Russian regime dumping their “Jewish problem” on them. Thus was anti-Semitism in the early 20tgh century both a bottom-up and a top-down phenomenon. Gur argues this fundamentally reshaped the Jewish world both mentally and geographically. “And that is the beginning of 60 years of the steady, not just emptying out of Europe of its Jews, but the conscious, willful, purposeful, systematic making of Europe uninhabitable to Jews. ” This historical background Gur says can help us to better understand the Arab-Israeli conflict today. We’d like to hear how your understanding was affected by this episode, and we hope you’ll consider sharing your thoughts with us today.     1- Roberts and Gur discuss the massive wave of immigration to US 1880-1920. How does the experience of Jewish immigrants differ from that of other, particularly European, immigrants of the time? How might this help us understand the position of Israel today?   2- Roberts and Gur have a long discussion of the Holocaust, from which I learned a great deal. Perhaps what most struck me, however, was Roberts’ assertion that, “all authoritarians need help to oppress.” What does he mean by this, and who are among those he and Gur suggest “helped” the Nazis carry out their plan? Are there any among these that surprised you? Why? How did the existent of such “helpers” lead to the rise of modern Zionism?   3- How does Gur compare “the Jewish experience” to the Western moral discussion of the Holocaust? What was the “new kind of Jew” that emerged after World War II, and how does Gur characterize their post-war “liberation?” How did the experience of World War II change the nature of Zionism?   4- How does Gur characterize the problem of Palestine, particularly with respect to Britain? How does the anti-colonialist mindset of the Palestinians compare to that of Israelis; how are the are the two groups engaged in a zero-sum game? How is Hamas using Algeria as a model, according to Gur, and why does he suggest that such a strategy will not work against Israel?   (0 COMMENTS)

No city epitomizes the strengths and weaknesses of the US economy more than San Francisco.  The strengths are obvious; it’s a leader in the most important industry of the 21st century—artificial intelligence.  But the weaknesses are just as obvious.  Here’s Reason magazine: In October 2022, San Francisco raised eyebrows when the city budgeted $1.7 million for a single-stall public restroom in the city’s Noe Valley neighborhood. The high price tag, according to city officials, was due to the steep price of construction in San Francisco, as well as remaining supply chain issues. But the state stepped in shortly after, scrapping the planned bathroom after outrage spread over its high cost to taxpayers. Fifteen months later, the public plaza where the restroom was originally planned still doesn’t have a place to pee—and it doesn’t look like it will get one any time soon. I read this article while on vacation in Tanzania, which has good quality toilets in its public parks.  Why is a country with a per capita GDP of $1327 ($3595 PPP) better at building toilets than a city with a $144,600 per capita GDP?  According to Reason, San Francisco cannot afford them. Obviously, I’m not using “afford” literally, the city could certainly afford to build these toilets.  Rather I am using “afford” in the conventional everyday sense of the term, as when I say I cannot afford to stay in a certain luxury hotel.  Given the high cost, it doesn’t make sense.  Even so, why does San Francisco face a situation where the price is so high that it’s not worth doing, when they have more than 100 times more resources than Tanzania? I suspect that that answer is that Tanzania’s toilet building productivity is far more than 100 times higher than that of San Francisco.  I suspect that Tanzania could build a perfectly fine single stall toilet for less than $17,000.  But why is that?  Isn’t it easier to build toilets than large language models? Reason magazine suggests that the problem is a set of regulations, such as rules requiring approval from busybody design experts and radical environmentalists, and mandating the use of union labor: San Francisco has the most expensive construction costs in the world—and it’s hardly surprising. In order to build a public bathroom in Noe Valley, at a location that already had the necessary plumbing to add a restroom, builders would have to pass a dizzying number of regulatory stops. These include seeking approval from the Arts Commission’s Civic Design Review committee, passing review under the California Environmental Quality Act, and getting the go-ahead from the city’s Rec and Park Commission and San Francisco’s Board of Supervisors. If that isn’t enough, the project would also be subject to a period of “community feedback.” Even after gaining approval, the city wouldn’t be free to simply find the cheapest acceptable bathroom—likely a pre-fabricated option—and connect it to city plumbing. According to a 2022 San Francisco Chronicle article, pre-fabricated bathrooms violate the city’s Public Labor Agreement. Adding to costs, the city would also be required to use union labor to construct the bathroom. In contrast, the construction of LLMs is largely free of city regulation. The toilet example may seem rather trivial, but it is indicative of a much larger problem.  The same sort of regulations apply to housing—America’s most important industry, which is just another way of saying the industry that has the greatest effect on living standards. This is America in a microcosm.  When free of intrusive regulation, we are the most productive society in human history.  But in heavily regulated sectors we are often unable to rise to the level of third world countries like Tanzania.  It would be nice to have a place to pee while we await the arrival of our future AI overlords. (0 COMMENTS)

Yesterday, I gave talks to two classes at the Naval Postgraduate School. Both are classes taught by my good friend Ryan Sullivan. The talks were both titled “How Economists Helped End the Draft.” This has become an annual event in his class and one I look forward to. As I always do, I drew an upward-sloping curve to show how, when the government institutes a draft and pays less, it causes people who have supply prices that are below the wage that would have been paid in a volunteer military, but above the wage paid in a military with a draft, not to volunteer. (I pointed out that when I looked at every one of the many bills proposed by someone in Congress in 1980 or 1981–I’ve forgotten which–I found that each of them reduced first-term pay, sometimes drastically.) This means that some of these people will be replaced by people with even higher supply prices, people who would not have volunteered even for a volunteer military. I gave dramatic examples of people who likely had very high supply prices during the draft era, Exhibit A being Elvis Presley. Then I gave less-dramatic examples: someone who knew at age 18 that he wanted to be a doctor, someone who wanted to start a business or get a job, etc. In Q&A, one student asked if keeping the volunteer military means that there is more income inequality than otherwise. I said no and that the opposite was the truth. I was thinking of all the relatively low-paid people who would still volunteer but would get regular military compensation (which includes room and board) that was 20% to 50% lower than they would have got if they had been in a volunteer military. Afterwards, the student came up to explain his point. He was thinking about the Elvis Presleys of the world and of the less dramatic examples of people who had high supply prices because they had high opportunity costs. Their pay would be cut. I was thinking of the 70% of first termers (my guess) who would volunteer at the draft-era wage but would have earned more under an an all-volunteer wage. I hadn’t thought of his point and readily admitted it: it means, combined with my point, that the effects on income inequality are ambiguous. But there’s a reason I didn’t think of his point. I keep thinking that many good-willed people who worry about income inequality are really worried about relatively low-income people. This example reminds me that many people who worry about income inequality really are focusing on income inequality and don’t care whether certain steps taken to reduce it hurt both high-income and low-income people. I’m not saying that this student is in that category. He may not have thought of my point. This is yet another example of the perversity of focusing on reducing income inequality. (0 COMMENTS)