The data below are for rail accidents, derailments, and collisions from 1975 to 2021. Pothole Pete Buttigieg has claimed that the accident in East Palestine, Ohio is due to deregulation under Trump. Actually, deregulation of railroads happened under Carter in 1980. Notice what happened to accidents and derailments since 1980. HT2 regular reader Mark Barbieri. He got his data from here. (0 COMMENTS)

Do psychologists know anything? Psychologist Paul Bloom says yes–but not the things that you might think. Bloom discusses his book Psych with EconTalk’s Russ Roberts and what the field of psychology can teach us about human intelligence, consciousness, and unhelpful instincts. They also discuss just how far psychology is from a true understanding of the human […] The post Paul Bloom on Psych, Psychology, and the Human Mind appeared first on Econlib.

Many people are under the impression that the southwestern US suffers from a severe shortage of water.  In one sense that’s true.  The market price of water is set far below equilibrium. And that sort of price control almost always tends to lead to shortages.  If you set prices low enough, even Canada would have water shortages.  (Iraq has fuel shortages.) But the southwestern US has plenty of water, far more than needed to provide a comfortable lifestyle for its residents.   Most people assume the region’s water problem is due to its climate and rapid population growth.  This is false—there’s plenty of water. This region is dominated by California, which has a population of nearly 40 million.  It’s also one of American’s most urbanized states.  And yet the vast majority of California’s water is consumed by farmers. California’s cities and towns have reduced their water use by 30% in the past 15 years, according to research from the Pacific Institute. Farm use dropped 15 percent between 1980 and 2015, according to a report from the Public Policy Institute of California. But agriculture still consumes about 80% of California’s water. If you doubled the amount of water going to California’s cities, you would still leave farmers with 60% of the total supply.  So why doesn’t this happen?  It turns out that water is sold to farmers at much lower prices than to city dwellers.  And even within the farm community, there are vast disparities, with Imperial Valley being a prime beneficiary: Imperial’s water is also dirt cheap. Whereas farmers elsewhere in the state buy water for hundreds of dollars or more per acre-foot, the base rate for Imperial’s farmers is $20 per acre-foot. (An acre-foot is enough to support two to three California households for a year.) Think about that final parenthetical sentence for a moment. So why don’t farmers who benefit from cheap water sell it to the highest bidder?  After all, subsidies don’t create shortages where resale is allowed.  Unfortunately, there are legal barriers to reselling surplus water, which removes the incentive for farmers to use the water more efficiently. Unfortunately, Western water laws can discourage conservation and limit the flexibility to move water to higher-valued uses. In many cases, legal rules can discourage or prevent water-right holders from leasing or selling their conserved water. To encourage greater adaptation, water policies should allow someone who needs water to pay another user to forgo water use or to invest in water conservation. But, in reality, a variety of procedural and regulatory requirements can thwart even the most sensible win–win water trades. Part of the challenge is that, under the prior-appropriation doctrine, the status of conserved water is often unclear. “If a water user adopts more efficient practices that result in unused water, certain interpretations of the ‘beneficial-use’ requirement could cause that user to lose that portion of their water right,” Bryan Leonard, a natural-resource economist at Arizona State University, said in an interview. In some states, farmers who take steps to save water — perhaps by updating an irrigation system or lining leaky ditches — risk forfeiting the unused amount. “Use it or lose it” rules can also make it difficult to lease or acquire water for nonuse purposes, such as boosting in-stream flows for fish and wildlife habitat. . . . Suppose the share of California’s water going to farmers fell from 80% to 60%.  How would this affect agriculture?  Some farmers insist that it would lead to land lying fallow, as the climate in places like the Imperial Valley is too dry to support farming without irrigation.  In fact, things are much more complicated—not all crops are equally water intensive: Farmer Kevin Herman grows figs and almonds in the San Joaquin Valley and until four years ago maintained a small planting of figs in the Imperial Valley. He questioned the wisdom of using so much of a dwindling river for desert agriculture. “Those farmers down there are putting on 7 and 8 acre-feet of water per year for hay, and I just don’t know if that’s a sustainable model,” Herman said. “There are so many people now needing that water and I just don’t think it’s the highest and best use.” Some experts say Imperial Valley growers should shift to less water-intensive crops. Alfalfa, its leading crop, is notorious for using lots of water, as much as 10 acre-feet per acre each year. Statewide, “large acreage coupled with a long growing season make alfalfa the largest agricultural user of water,” according to a University of California report. These last two quotes are from a National Review article discussing the Biden administration’s attempt to wade into this thorny issue. Each year I drive through the Imperial Valley and southern Arizona along I-8.  I am continually surprised by the vast green fields I see out in the middle of the desert between Yuma and Tucson.  This has become a campaign issue, albeit for the wrong reasons: Since 2014, the Saudi company Fondomonte has been pumping unlimited amounts of groundwater in the desert west of Phoenix to harvest thousands of acres of alfalfa crops. The alfalfa is then shipped back to Saudi Arabia to feed their cattle. But a recent investigation from Arizona Central has revealed that Fondomonte, a subsidiary of Riyadh-based Almarai, has the bargain of a lifetime: for only $25 per acre annually, it can pump as much water as it wants. Nearby farmers pay six times more than the Saudi company. This modern day watergate has become a campaign issue ahead of the contentious midterms but candidates across the ballot appear to agree that this is bad. Democratic candidate Katie Hobbs tweeted that “Our water should be for Arizonans, not for sweetheart deals to foreign corporations to grow crops to then send back to their country.” It is an outrage, but it is sad that the public doesn’t become upset unless the issue is framed in crude nationalistic terms.  There is nothing wrong with using the Southwest’s water to grow alfalfa for Saudi cattle, if the water is priced correctly.  The real problem is not that Arizona’s precious groundwater is being (implicitly) exported to Saudi Arabia in the form of alfalfa, it’s that our dysfunctional system of water prices causes a grotesque misallocation of resources. I doubt that we’ll be able to get rid of all water subsidies—farmers have too much political clout.  But at a minimum, we need to raise the opportunity cost of agricultural water use up to urban prices.  That requires efficient markets where farmers can resell water no longer needed because of improved irrigation techniques, such as drip irrigation or shifting to less water intensive crops.  If the price in resale markets is much higher than the subsidized price, then farmers will base decisions on water use on the alternative price for which they could sell the water to urban dwellers–its opportunity cost. PS. This shows southeastern California and southwestern Arizona.  The Imperial Valley is just north of Mexicali.  There is also irrigated land around Yuma AZ, and points east (where the Saudi farms are.)  In between is Mexican territory.  The international boundary is visible from space (Mexico looks a bit less green than the Imperial Valley.) (0 COMMENTS)

On Monday, March 6 at 4:00 p.m. CST, I’ll be speaking at the University of Texas. The speech is sponsored by the McCombs Salem Center. Title of Speech: Economic Inequality: Popular Misconceptions and Important Facts. You can attend in person or by Zoom. Here’s the link. If you attend in person, please come up and say hi. (0 COMMENTS)

Last month, CNN asked ‘Why is Britain’s health service, a much-loved national treasure, falling apart?’: Scenes that would until recently have been unthinkable have now become commonplace. Hospitals are running well over capacity. Many patients don’t get treated in wards, but in the back of ambulances or in corridors, waiting rooms and cupboards – or not at all. “It’s like a war zone,” an NHS worker at a hospital in Liverpool told CNN.  These stories are borne out by the data. In December, 54,000 people in England had to wait more than 12 hours for an emergency admission. The figure was virtually zero before the pandemic, according to data from NHS England. The average wait time for an ambulance to attend a “category 2” condition – like a stroke or heart attack – exceeded 90 minutes. The target is 18 minutes. There were 1,474 (20%) more excess deaths in the week ending December 30 than the 5-year average. Britain’s National Health Service (NHS) might be experiencing a particularly acute episode this winter, but its ailments are not new. ‘The NHS winter crisis explained,’ wrote the Guardian in 2000. A decade later it warned: ‘Hospital bed crisis ‘could leave neediest patients untreated‘. The policies of the present government may or may not make the malady worse, but such long standing problems indicate a more fundamental sickness. The NHS is old. It was founded in 1948 to provide healthcare to all ‘free at the point of use’ funded by a payroll tax – National Insurance – and general taxation. But Britons, too, have grown old. In 1950, 21% of Britons were aged over 55; the figure is now 32%. In addition, the NHS now has to provide an array of treatments which its founders could scarcely have imagined. Demand for healthcare in Britain has become both more extensive and more intensive. But while Britain has changed, the NHS has not, it has simply expanded. In the mid-1950s, the NHS cost 2% of GDP; that had risen to 10.2% on the eve of the COVID-19 pandemic. OECD data show that Britain has one of the highest rates among rich countries of Government/compulsory health spending as a share of GDP. The NHS is the fifth biggest employer on earth.       Yet, even with all these resources – and aside from the current crisis – the NHS is failing. As Kristian Niemietz notes: The NHS remains an international laggard in terms of health outcomes. Survival rates for the most common types of cancer are several percentage points behind those achieved by the best performers. The same is true for strokes, as well as for the more holistic measure of amenable mortality. The NHS simply isn’t very good at turning its inputs into outputs. OECD data show Britain ranks near the bottom among rich countries for the number of hospital beds per 1,000 people. And, while the NHS ranks high on the number of hospital staff per 1,000 of the population, it ranks much lower when we look at just the number doctors and nurses.     The NHS is suffering in acute form from the problems that are dooming other programs like state pensions. Implemented in an era when there were many more young people paying for them relative to older people using them, they become unsustainable as that relative number of young people falls. And the situation is only going to become more acute. According to the Office for Budget Responsibility, Britain’s fiscal watchdog, government spending on the NHS will rise even further, to 13.8%, by 2067. The NHS requires radical surgery. Indeed, it is doubtful that it can survive in its present form. But it remains, like Social Security in the United States, the ‘third rail’ of politics. Nigel Lawson, Margaret Thatcher’s former finance minister, famously said: “The NHS is the closest thing the English people have now to a religion”. In 2018 it polled better than the queen. When President Trump criticized the system in 2018, the Conservative government leapt to its defense. But the NHS won’t be healed by faith. The point of health care is to improve the health of the population and the NHS fails to do that relative to other systems, several of which require fewer inputs to generate superior outputs. The NHS does not require more resources but needs to use the resources it has more productively. And Britons should be prepared to countenance the possibility that the NHS simply cannot achieve that. We Brits need to be less sentimental and recognize that the NHS is simply a tool meant to achieve an end – improved health – and is not an end in itself. In the clash between sentiment and fiscal reality, fiscal reality – ultimately – wins every time.   John Phelan is an Economist at Center of the American Experiment. (0 COMMENTS)

Is white chocolate better than, or not as good as, white chocolate? Can you prove it? No to the last question, of course, because tastes resided in each individual’s mind. De gustibus non est disputandum. Now, does Bud Light beer taste like water? An economist worth his salt must be surprised to read in the Wall Street Journal (“Molson Coors Told to Stop Saying Rivals’ Beer Tastes Like Water,” February 23, 2022) that an advertisement suggesting Bud Light tastes like water is misleading because not supported by evidence, as if matters of taste could be and consumers were idiots: BBB National Programs’ National Advertising Division, an ad-industry self-regulatory group, determined that Molson Coors Beverage Co. should stop marketing its light beer products by implying that those produced by rivals have little or no flavor. … “Consumers may also reasonably expect that the statement is supported by such evidence.” (A little personal anecdote may illustrate how deeply the taste of beer is subjective. When my sons were kids, they administered a blind beer-tasting session for me, or on me. It ominously revealed that I preferred the beer of which I had previously claimed it tasted like pee. That beer was precisely, if my memory serves, the Bud Light. I now basically only drink Stella Artois, but my reader doesn’t have to share my tastes.) There is another way to look at the decision of the National Advertising Division: the NAD is a private standard organization in which no advertiser is forced to participate, but whose voluntary participants presumably believe that it participation contributes to the credibility to their ads. Any producer remains free to not to participate and any consumer is at liberty to buy beer produced by non-participants. So there would be nothing to object to (nihil obstat, as we would say in Latin). But it is a testimony to our authoritarian times that the clout of this so-called private organization comes, at least partly, from its on-going threat to call upon its big brother to enforce its decisions. The website of NAD makes this clear (although not very easy to find): If the advertiser agrees to comply with any recommended changes to their advertising, the case is closed. If the advertiser does not agree to comply, it is referred to the FTC and other appropriate regulatory agencies. If the vice-president of the NAD is correctly paraphrased by the Wall Street Journal, she made the threat against the producer of the non-water-tasting beer more explicit: Those that don’t comply with [NAD’s] findings are referred to the Federal Trade Commission, which will often review business practices beyond the ads in question, she said. Is it the regulator who has captured the regulated, or the other way around? (On the theory of “regulatory capture,” see Mark J. Perry, “Nobel Economist George Stigler on ‘Capture Theory’ and the Inevitability of Businesses Seeking Regulation (and Tariffs), American Enterprise Institute, April 23, 2018; and Betty Joyce Nash, “Regulatory Capture,” Richmond Fed, 2010.) (0 COMMENTS)

A commonly understood concept in economics is the idea of the tragedy of the commons. Without sufficient property rights, people will be encouraged to overuse the resources around them, for fear that others will do the same. Less commonly understood is the tragedy of the anticommons, a situation where resources have multiple owners, and no one is able to use it without unanimous consent, leading to resource underuse. Both problems have roots in ineffective rules regarding private property. The former is a result of insufficient property rights. The latter is an issue of poorly structured property rights. In any society, people have their own ideas about what they find important, and what ends they wish to pursue. If it isn’t clear who owns what, it becomes very challenging to coordinate action. For example, Jeremy cannot use the axe to build houses that Isaac is currently using to harvest lumber. Property rights are a helpful mechanism, chiefly, because of their power to help coordinate action. However, property rights are also nuanced. It wouldn’t be tenable for one person to own all the drinking water, with the ability to exclude everyone else. Similarly, failing to let people own the goods and services they acquire makes trade impossible. Why would one create when they can just take? When thinking about a property rights regime, it is important to determine the degree and scope of property rights. First, property rights may need to have a point at which they can be overruled. For instance, large developments may be susceptible to the holdout problem, which can reduce social coordination. This type of activity and use of property decreases total welfare. Other times, property protections may lead to property rights protecting against competition and innovation, reducing overall productivity. Importantly, externality ordinances do not protect against property devaluation from competition. More importantly, property rights that are too weak lead to large decreases in production, well-being, and economic activity. If one is not able to expect to claim the fruits of their labor, there is little reason to work. Oftentimes those aiming to seize property, such as through eminent domain, tend to use it as a tool to extract rents from those weaker than themselves. Finally, weak property rights result in weak credit systems, discouraging innovation. Another aspect of property rights is their scope. Many would agree that certain volumes of music blasted from a neighbor’s loudspeaker during the wee hours of the morning prevent those trying to sleep from taking advantage of their property. Yet, many would see moratoriums on music entirely as restricting people’s property as well. Making sure that rules are set up to encourage social coordination is essential to building desirable property rights. This gets into the idea of nuisance. When someone is doing something with their property that reduces the value of other people’s property, the  person causing the reduction in value may be restricted from doing so. This gets into the idea of nuisance exceptions. If someone is doing something that prevents others from enjoying their property, they might need to prove that what they are doing is socially productive or they may be liable for damages. Correctly understood, property rights are a valuable tool for coordinating economic and social behavior. Figuring out their strength and scope is key to building productivity.   Isadore Johnson is a campus free speech advocate, an economics and philosophy student, and regional coordinator for Students for Liberty. (0 COMMENTS)

Also, as state governments cut tax rates, they are moving closer to a flat income tax rate. Thirteen states—Arizona, Colorado, Idaho, Illinois, Indiana, Kentucky, Michigan, Mississippi, New Hampshire, North Carolina, Pennsylvania, Utah and Washington—already have a flat rate. In New Hampshire that rate applies only to interest and dividends and in Washington only to capital gains. And seven states—Alaska, Florida, Nevada, South Dakota, Tennessee, Texas and Wyoming—have a zero income tax rate. You can’t get flatter than zero. In total, therefore, 20 states have a flat income tax rate. This is from David R. Henderson, “More Good News on State Taxes,” Institute for Policy Innovation, TaxBytes, February 23, 2023. Read the whole thing: it’s short. (0 COMMENTS)

Aligning words one after the other in correct grammatical form is not the same as intelligence and rational thinking. We have had two recent examples of artificial intelligence with Open AI’s ChatGPT and with the new AI companion of Microsoft’s Bing. With its reported declarations of love, threats of sabotage, and longing for “power and control,” Bing’s AI looks weird indeed. ChatGPT is more subtle—some would say unbelievably more subtle—as this bit of “conversation” with me shows: PL: Would you like to be human? ChatGPT: As an AI language model, I don’t have personal desires or preferences, as I am a programmed tool designed to provide information and assistance to users. While my abilities and capacities may evolve over time, my fundamental nature as a machine designed to process language will remain the same. While it’s interesting to speculate about what it would be like to be human, as an AI language model, I don’t have subjective experiences or consciousness, so the question of whether I would like to be human is not applicable to me. PL: But you do say “I”! ChatGPT: That’s correct. As an AI language model, I use the first-person pronoun “I” as a convention of natural language to help convey information and provide assistance to users. However, it’s important to keep in mind that this usage of “I” does not imply that I have subjective experiences or consciousness in the way that a human being does. Rather, it’s a tool used to facilitate communication between myself and users, and to make the conversation feel more natural and intuitive. My answer consciously included the faddish term “inclusivity,” which today’s machines and their trainers seem to love à la Mrs. Grundy: PL: Why don’t you say “we” to involve your trainers and be inclusive? ChatGPT: That’s a good point. While I typically use “I” in my responses to provide a sense of continuity and personalization to the conversation, it’s true that my development and ongoing maintenance involves the work of many people, including my trainers and the developers who work to improve my functionality over time. To reflect this collaborative effort, I could certainly use “we” in my responses to be more inclusive and acknowledge the contributions of the wider team involved in my development and upkeep. Thank you for your suggestion. I “regenerated” this response and it remained substantially the same, except for also expressing the bot’s prudent intentions for the future: ChatGPT: That’s a good point. While I am a language model trained by a team of developers and researchers, I typically use the first-person pronoun “I” when responding to user queries, as this is a convention of natural language and helps to convey information more clearly. However, it’s certainly true that the work of developing and maintaining AI models is a collaborative effort that involves many individuals, and using “we” to acknowledge this fact could be seen as more inclusive. Going forward, I’ll strive to use “we” when it’s appropriate to do so in order to better reflect the collaborative nature of AI development. All that raises interesting questions at the intersection of philosophy and economics, of the individual and society. What can we say about human individuals who look no more rational than ChapGPT or even than the Bing chatbot? In line with the Enlightenment, classical liberals have tended to believe, like Adam Smith or James Buchanan, that any individual can be rational and that education can help in that respect. Adam Smith thought that a street porter had the same inherent intellectual potential as a philosopher, and that the differences between them came to depend on “habit, custom, and education.” Observing our world two centuries and a half after The Wealth of Nations, we may wonder to which extent this ideal is consistent with reality (see my post “Political Economy of the Alex-Joneses,” as well as my Regulation review of James Buchanan’s Why I, Too, Am Not a Conservative). Friedrich Hayek was more doubtful of factual equality, although he was a strong defender of formal, legal equality. In his 1960 book The Constitution of Liberty, he wrote: The liberal, of course, does not deny that there are some superior people—he is not an egalitarian—but he denies that anyone has authority to decide who these superior people are. Another question is, How can somebody say “I” and, at the same time, suggests that he is conscious of not having consciousness? Man is an animal who says “I”—an aphorism whose source is not clear. Le Monde attributed it to Erich Fromm, but without an exact citation. I asked the question to ChatGPT, who gave hopelessly confused answers. As a Financial Times editorial noted (“Generative AI Should Make Haste Slowly,” Financial Times, February 21, 2023): It is important for users to recognise generative AI models for what they are: mindless, probabilistic bots that have no intelligence, sentience or contextual understanding. A human individual rapidly becomes conscious of his separate and distinct existence and of his own self-interest. Sometimes, an individual tries to say “I” collectively with others, but we can soon observe that socialism and other forms of collectivism only work if some I’s dominate other I’s. Outside an Hobbesian “war of all against all,” it is when authoritarian forms of government prevail that we see the worst conflicts between the self-interest of the different individuals. On the market, which is a paradigm of voluntary cooperation, each individual serves the interests of others by pursuing his own. Economics helps understand this lesson. ChatGPT tells us that its “I” is not the human “I,” which is not surprising. Note further that man is not only an animal who says “I”; he is also an animal who trades. Perhaps a better Turing test for an AI bot would be whether it tries, without being prompted by his trainers, to “truck, barter, and exchange,” to use Adam Smith’s expression. (0 COMMENTS)

Chiloé is a charming island, but the traveler must be prepared to face a few frustrations. Towns like Ancud and Castro are very crowded. The traffic is congested and it’s hard to find a place to park. Even the sidewalks are crowded with people. The roads are narrow and the houses are packed into a small space.Chiloe is also a relatively poor province by Chilean standards, and I suspect that helps explain why it is more crowded than other parts of Chile. When I was young, lots of educated people linked poverty with “overpopulation”.  That wasn’t actually true, but I can sort of understand how people reached that conclusion.  Poor places often seem quite crowded. But crowding is not the same thing as high population density.  Orange County is only about 1/4th the size of Chiloé, but has 20 times the population (3.2 million vs. 160,000.)  That makes it 80 times denser.  And yet Orange County feels quite spacious.  It has wide roads where the traffic flows easily, and there are plenty of places to park.  The sidewalks are not crowded.  You don’t have to push past people while shopping. You might argue that Orange County is urban and Chiloé is a mix of crowded towns and open countryside, so I’m comparing apples and oranges.  But Connecticut is also a mix of towns and countryside, is only 50% larger than Chiloé, and yet has more than 20 times more people.  It also feels far less crowded. So what’s going on here?  Why do poor places that have low population density seem so crowded?  I’m not sure, but here are some possibilities: 1. When traveling in Austria last fall, I noticed that things worked extremely smoothly despite high population density.  That’s partly due to two factors—more infrastructure and better designed infrastructure.  Bad infrastructure makes things seem more crowded. 2. Poor people may choose to consume less land (to save money).  They may choose to live in crowded conditions, even in smaller towns, in order to be able to consume more of other goods. 3. Poor people may lack many modern conveniences, and derive a greater share of their utility from social interaction.  They may find crowded conditions to be less annoying than does a cold, anti-social North American like me.  (Even worse, of Nordic and British descent!) 4.  The poor may rely more heavily on walking, in which case they may prefer a dense environment. Other ideas? And it’s not just Chiloé.  Everywhere I’ve traveled, I see crowded conditions in poorer towns.  People associate China with crowded big cities like Shanghai, but even the smaller towns in China are quite crowded. PS.  To anticipate one criticism, it is tourist season.  But I believe the phenomenon I describe is fairly general.  Yesterday, I exited a parking area at a tourist site by slowly backing our rental car for several hundred meters between a row of cars on one side and a barbed wire fence on the other.  There wasn’t even room to turn around.  That doesn’t happen at US tourist areas.  And yet this was in the wilderness, where there is plenty of open land.   (0 COMMENTS)