Inequality VS the Environment

Zachary BartschLeave a comment

What do we know?

We know that density is good for most environmental measures. With greater density comes less water runoff, less carbon emissions, less burned fossil fuel. With density, fewer people own vehicles, implements of yard curation, and we require fewer roofs per person.

What else do we know?

We know that in a static economy, progressive taxation makes after-tax incomes more equal. There are formal models that say the same thing about dynamic economies. Progressive taxation results in more income equality, and regressive taxation results in less. For clarity, income tax progressivity is determined by percent of income paid in taxes. When the rich pay a higher percent tax rate, that’s more progressive.

Are you ready?

Wealthy people tend to have more valuable land. That is, they improve the land and the things built on it. Do you want to tax land progressively? Then what you want is a property tax with a sliding tax rate. This way, you can make those rich people pay their ‘fair share‘. Even without a sliding scale, rich people will pay more dollars for their improved land.

Uh-oh.

Now that we are taxing property on land proportionally, rich people are seeking alternatives. They’re trying to avoid taxes! What do they do? Well, a smaller and cheaper house is a nonstarter. What is all that wealth for, if not to enjoy it partly through one’s home environment? The rich are going to find a place to live where they can be comfortable and where their property taxes are lower. Maybe a place where the land is not so expensive. Hello rural estate!

Do you want a proportional property tax so that rich people pay for the value of their property? Be ready to say hello to suburbanization and sprawl. All those benefits of urbanization mentioned above? Invert all of them to see the results.

Okay…

I see the attraction of taxing immovable property. Taxing a residence is nice for the government because the tax revenues are nice and stable, given the relatively inelastic demand for real property.

If only there were a real property tax scheme that provided stable revenues and encouraged urbanization… Well, the answer is not to try taxing the value of the land without taxing the value of property. What am I? A Georgist?

A Georgist I am not. But, I do have an affinity for lump sum taxes.

If, as a polity, you want urbanization, then impose lump sum taxes per area of land owned. Doesn’t matter if it’s a house. Doesn’t matter if it’s commercial. Doesn’t matter if it’s unimproved farm land. Just sit back and watch the skyline rise, our environmental footprint shrink, and plenty of land being turned into wildlife preserves and parks.

Oh dear.

People have feelings. Consider a beautiful multi story single-family home on an acre. Now consider a mobile home with a large yard and some trees – also on an acre. With a standard, flat proportional property tax, the owner of the big pricey house pays more. With lump sum taxes per square foot of land, they pay the same dollar figure. In other words, the less wealthy person pays a higher proportion of his properties value in taxes. In case you missed it, this beautiful solution to sprawl and environmental degradation comes hand-in-hand with proportional regressivity.

BTW:

I live in Collier County Florida. If all of the land, excluding surface water, in the county was taxed at the same lump sum per square foot, then we would need to pay about $1,600 per acre in order to replace all revenues currently collected from a variety of sources. If we assume that government property is excluded from the tax and we assume that the government owns a very liberal 10% of all property, then it is more like $1,780.

I haven’t even discussed all of the improved economic performance that an already developed counties might enjoy by eliminating the distortionary excise taxes and ad valorem taxes. I don’t know about you, but $1,600 doesn’t sound too bad in exchange for eliminating all the other nickel and dimes that add up to quite a bit.

(Just as I am not a Georgist, I am also not a revolutionary. We need not jump in head-first. We could ease our way into such a system. We’d just add a fixed lump-sum portion to existing property tax bills that increases over time. Property taxes bills would be calculated slope-intercept style with a portion being constant and a portion being dependent of property value.)

Remote Work vs Employer Power: Why I’m Not Sweating Tenure

James Bailey1 Comment

When there’s only one employer in town who hires for jobs like yours, they have labor-market power, and can pay less and have worse working conditions than a competitive firm would. Economists call this “labor market monopsony” but I like the term “employer power”, which is simpler and makes sense when there are a few employers as well as when its literally just one. This keeps down the wages of machinists at the only factory in town, nurses at the only hospital in town, and professors at the only university in town.

Of course, workers in this situation could always move and get a better job elsewhere, and this does put some limits on employer power, but many workers have strong preferences to stay in their home, which means the balance of power is with the employers- or at least, it has been.

The growth of remote work means that workers can get jobs all over the world (or at least all over nearby time zones) without having to leave their town. Which means that monopsony is over, at least for jobs where remote work is possible.

I’m going up for tenure at my college soon, meaning that by next June they will tell me either that I have a job for life or that I’m fired. This “up or out” system naturally causes a lot of anxiety for professors. Partly this is because many professors’ identities are wrapped up in our jobs to an unnecessary and unhealthy extent, and so we take it as a judgement on our worth as human beings. But partly there was always the very practical problem that failing tenure almost certainly meant you would either need to move, accept a substantially worse job, or both.

The thinness of the academic labor market means that unless you live in a major city, its probably the case that no university nearby is hiring tenure-track academics in your subfield this year; and even if you are in a major city, there are probably only 2-3 searches in your field, and they will be so competitive that you almost certainly won’t get the job. To have a real chance at another good academic job, people need to apply nationwide (when I got my first job I sent out 120 applications all over the country to get 1 offer). Getting another job locally generally means taking a job with much worse pay, worse conditions, or both- like high school teacher, adjunct professor, or entry-level business analyst. Those in relatively practical fields like economics were able to get decent jobs outside of academia (PhD economists in private sector and government jobs typically earn better salaries than academics, at the cost of working more hours with less freedom), but such jobs were plentiful only in a few major cities (DC, SF, NYC, Boston), which usually still meant moving. Even in a mid-sized state capital like Providence, I don’t think I’d have an easy time finding something here- or I didn’t think so, until remote work became ubiquitous last year.

Now I won’t be losing any sleep over the possibility of losing my job next year. Partly I think my odds of getting tenure are good, but even a 1% chance of losing my job would have been worrisome in the pre-remote world. Now instead of worrying I just think about the huge range of opportunities in tech, finance, consulting, business, think tanks, and even government. Remote also addresses one big reason I ignored those jobs in the first place and only applied in academia- flexibility. I didn’t want to be stuck in an office 40+ hours/wk; I wanted to be able to pick my kids up from school. Now flexible hours and the ability to be evaluated on output rather than time spent at the office seem to be increasingly common.

To the extent that remote work puts a dent in employer power we would expect to see higher employment, higher wages, and fewer people feeling trapped in their jobs. We’ve seen all of these in 2021- quits in particular are at an all-time high, a good sign that workers don’t feel trapped- though much this could simply be due to the rapid economic recovery. The real test will come when we see how much this is sustained past the initial recovery, and whether it is mainly in remote-able jobs or is a broad improvement.

Would You Pay $3,000 to Not Wear a Mask?

Jeremy Horpedahl6 Comments

How well do masks work at preventing disease transmission? This is a question that many of us have been asking throughout the pandemic. I have been trying to read as much about mask effectiveness as I can (for example, here’s a Tweet of mine from way back in June 2020). I think the bottom line is that, if you want really good RCTs of mask use during the COVID pandemic, there is surprisingly little evidence in any direction. But there are lots of studies, less well done but still OK, suggesting that masks do provide some protection.

I don’t want to wade into all of that research here, because Bryan Caplan has been doing that lately himself. His reading of the literature is that masks aren’t a silver bullet, but he suspects “that masks reduce contagion by 10-15%.” Still he thinks that the costs of masks (inconvenience, discomfort, and dehumanization) are large enough that they don’t pass a cost-benefit test. But this seems like a very strange conclusion given that he suspects masks reduce contagion by 10-15%! So let’s be explicit about the cost-benefit analysis.

[I am assuming that reducing contagion by 10-15% means 10-15% fewer cases and deaths. I see this as a bare minimum, since contagious disease can follow exponential growth trends, so 10-15% less contagion could mean that cases/deaths are reduced by more than 10-15%, but I’m making a simplifying assumption and the hard case.]

Quantifying the costs of the pandemic deaths is tricky, and it’s something that Bryan and I have debated before. Perhaps this is just a rehash of that debate (Bryan is highly skeptical of the VSL estimates), but I think it’s worthwhile to plug in some numbers.

What numbers should we use?

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Scrolling Alone

mdmakowsky1 Comment

Robert Putnam’s Bowling Alone was one of those high brow academic-ish books that, for a few months at least, made the leap to coffee and bedside tables across America, bringing a simple thesis that Americans had dropped out of the traditional social organizations that served, directly and indirectly, as the bedrock of civic life. It was a great read and made a compelling argument.

It was the book that introduced me, then still a grad student, to the concept of social capital to me. It had lots of stylized facts and broad theories, and was seemingly comfortable being at war with itself when the facts didn’t play nice. For a simple run down (and it’s been more than 10 years since I read the book, so take the accuracy here with a grain of salt)

  • Americans bowled more than they used to, but were less frequently members of leagues.
  • Americans didn’t join new associations when they moved to new towns, but they also moved towns less than they used to.
  • We worked a lot more, so there was less social-leisure time to dedicate to local associations.
  • Political and activist groups had sacrificed in-person meetings and local cohesion for greater national scale

You get the idea. Pushing his logic, Americans had become solitary households, islands held together less by social identities than work affiliations. The book, published in 2000, arrived while the internet was still in a pre-social media, pre-smart phone construct, but essentially warned that the growing dearth of social capital would undermine civic engagement and eventually democracy.

It might seem odd, but I think picking up (and picking on) a 20-year old book gives some insight into what we are frequently overlooking today.

  1. Bowling alleys are not filled with loners. They are filled with groups of friends bowling together. What changed wasn’t interest in social activities, it was how we schedule our lives. Work may be both more flexible for many of us, but also less predictable in the hours we work, and with (perhaps) more total hours. Combined with the predominance of two-earner households, its just that much harder for a casual bowler to lock down 2.5 hours every week for a league obligation. Remember, total bowlers increased– they didn’t actually start bowling alone, they just did it on their own schedule.

This a good thing to remember when we’re wringing our hands over the latest thing that the current generation is destroying (television, movies, cereal) or, ahem, abstaining from. What looks like the end of something central to human existence is more often than not just a refitting to new economic incentives and constraints. Humans are clever and we are well-advised not to mistake basic adaptation and re-optimization for massive generational divides.

2. We don’t need to make new friends as much when we move to new towns because we can actually stay friends with people in our old town.

When you moved to a new state, or even a new town in your state, that used to mean going years or decades without seeing or hearing from old acquaintances. That is not the case anymore. Between twitter, instagram, facebook, and zoom, I am in regular contact with people scattered both geographically and temporally (autobiographically?) from my life. Some fall in and out of touch, much the way they would if we lived down the street from each other, but the point is that there isn’t the same pressure to find local social institutions to rebuild a social network from scratch like there use to be.

I’m not sure this a good thing, by the way. I think it has removed important sources of noise and variation in our social networks. I think it was made them far too centered on the groups we formed during schooling, leading to homogeneity within networks and distrust across educational strata. But it doesn’t mean we are alone, but it does mean that shape of our social lives have changed in important ways.

3. Political activism as a source of social identity remains strong. But does it bring community or just conformity?

The clubs or group-identities that dominate our life are relatively unchanged: religion, politics, profession, ethnicity, sports, etc. But the manner in which those social groups cultivate identities has changed. As Putnam noted, politics has become considerably less local, a trend exacerbated by the rise of social media as a tool not just for promoting an identity, but for regulating that identity and assigning status within it.

There is no shortage of people that have noted the rising pressures to conform within groups. This is where I think Putnam’s original thesis has some unexpected bite: I don’t think our social capital has eroded, but it has become a lot less local. It is subject to standards less tailored to your currently lived experience. Further, as any good Orwellian knows, the rewards to successfully identifying in-group traitors and purging them scales with network size. With social media technology exponentially scaling the number of people monitoring us, it has brought with it tremendous pressure to conform. If the nuclear families in the small town 1950s lived in terror of what will the neighbors think, consider the pressure that extremely online millennial professionals are under. One mistake and a lifetime’s social capital can go poof as the hordes move in to shame, excommunicate, and (occupationally) terminate.

If you’re wondering why there seems to be so much in-group signaling on twitter, so much group think and obviously disingenuous mutual affirmation of seemingly ludicrous affronts against common sense and empirical reality, and so much viciousness, just remember what’s at stake. I tend to fall back on a simple model of human utility functions:

Utility = Stuff x Friends

What’s important is that it’s multiplicative, which means loneliness is deadly. In the modern world, our associations are in many ways less robust than previously – one false move and you’re being pushed out on an ice float. Maybe that’s why we should all join a sports league or a religious organization, why we should start volunteering twice a month at the YMCA, join the Rotary Club, help register people to vote. Because its great that you still have your old tribe, but it’s always nice to have a backup plan. A last resort. A set of associations you can keep in a glass box to “Break in Case of Purging”.

Neighbors.

Go urban, young man

Joy Buchanan1 Comment

The U.S. Census Bureau is gradually releasing data gathered in the 2020 decennial. Their release of a map showing which US counties have lost population caused a small Twitter furor.

Visually speaking, it’s a lot of brown. People are leaving rural counties in favor of urban areas with jobs and amenities.

The main facts from Home for a Millennial were: 1) although millennials were slower to buy homes, they are trying to buy them now and bidding up housing prices in desirable metros 2) millennials were more likely to live with parents than previous generations, so that’s part of the answer to where they were prior to the home buying scramble 3) the previously-not-house-buying phenomenon is not associated with chronic unemployment

Buying a home in the desirable areas is going to be expensive, unless there has been a lot of building. Texas, the leader in building, added more than 1.5 million housing units in the last decade. The map above illuminates what “moving to Texas” means. At the county level, some people are leaving Texas. However, the booming cities of Texas are really booming.

Being the largest generation, millennials are going to be a factor in the general move from rural to urban areas. I have about two peer friends who, after graduate school, moved to a rural place. They are garden influencers, using hashtags like #AllTheNature. The novelty of growing their own vegetables has earned them a minor celebrity status among my internet circles. How trad of them. The exception proves the rule. Most millennials don’t want to farm or even dabble in raising goats. If I grew up in farm country, my social media experience would be very different, so I don’t want to conclude too much from my bubble. The Census data confirms it. Many young Americans are gathering into the cities and leaving the rural areas.

I have a (white) Boomer relative who has 4 siblings. He was born in Iowa. I remember him telling me that his large family would drive 2 hours to visit another large family, for fun. He said the only thing to do for entertainment was visit each other’s kids. Those 5 siblings “escaped” cold Iowa in favor of the more desirable metro areas, and they did not go on to have large families of their own.

The move to cities and the shortage of housing therein connects with the delay on forming families (relative to past generations). Expensive housing could be delaying desired children, or millennials who don’t want children could be moving to places that are more fun than the farm.

Aside from rural America losing population, the other big result from the Census was the increase in racial diversity, which is also driven by young people.

The Two or More Races population (also referred to as the Multiracial population) has changed considerably since 2010. The Multiracial population was measured at 9 million people in 2010 and is now 33.8 million people in 2020, a 276% increase.

Has anyone offered a simple narrative that relates the increasing racial diversity with the urban land grab?

The War of Ideas Isn’t Over

Joy Buchanan2 Comments

I have spent some of the last week educating myself about Afghanistan. You might ask where I was back when the US had a strategic advantage. I now regret the time spent at the paint store squinting at 200 different shades of white. Here’s an idea: America gets only 20 paint colors until we achieve our foreign policy objectives. 40? All I know is that we are past the optimal number of shades of white, considering what just happened.

A lot of the “takes” in the past week have been on the subject of blame. Despite the fact that American lives are still at risk in Afghanistan, this has not been a unifying event, like 9/11 was.

Are we picking our battles in such a way that helps vulnerable people? Any energy spent fighting your enemy B is a resource you cannot use to fight enemy C. Incidentally, that is one of the points that President Biden made in his speech on August 16th. There is an opportunity cost to mean tweets.

I reached out to a veteran friend of mine for insight last week. This is part of what he told me:

Biggest mistake is looking at Afghanistan as a single cohesive entity. It isn’t. There is no national identity. The Kyrgyz, Uzbeks, and Kazaks of the north … Karzai was a Pashtun and always ensured the main leadership roles were Pashtun.

He said that there are sub-units of Afghan people opposed to the Taliban who are upset by the advance we all witnessed to Kabul. Divided people lose, and then they don’t have the capacity to help others.

There was a time when the Taliban were few in numbers and hanging on the fringes. One advantage they had is that they went with the “legalize it, tax it” drug policy. Farmers under their jurisdiction can grow opium poppy and pay the Taliban a fee. In the American sphere of influence, we were fighting against the laws of supply and demand. The American public is not the only destination market for illicit opioids, but it’s a big one. It’s pretty self-defeating to ask our security forces to fight against drugs when most Americans can’t be bothered about them.

Consider the movie Little Miss Sunshine, a beloved American comedy. Consider the grandpa. He’s not a perfect man. He has his little vices, like dropping F-bombs in front of his young granddaughter. And, he snorts heroin. It’s easy to imagine what a great rapport he has with his dealer. No one would report his behavior to the police.* The drug habit is not portrayed as a virtuous thing, but overall he’s a sympathetic figure.

There is a lot of muddled thinking in our society when it comes to drugs. The bill comes due.

Humans are very creative. The good news is that we could have more discussions about drugs and experiment with new policies. It’s not inevitable that laws regarding drugs will be the same next year, but there is a lot of inertia that needs to be overcome. A society where celebrities joke openly about doing illegal drugs is not going to also be a society that can effectively “reshape the world in its image”, to quote Tyler.  

Tyler’s point is that this unfavorable outcome was not inevitable. From responses I read, many people offering opinions on Tyler’s article did not read past the headline. Nuance can’t be conveyed in a headline or a tweet. Tweet culture is a handicap right now, at a time when good complete ideas are badly needed. What happened in Afghanistan was complex. A tweet might be long enough to say what you would like to see happen, but it’s not long enough to help anyone.

The same Americans who tweet that they want refugees to live somewhere safe won’t go to a city council meeting and argue in favor of building high-density housing in their neighborhood. The same Americans who have tweeted that they hope the Taliban will build an “inclusive” society…

If you take the view that the failure in Afghanistan was inevitable, then Matt Y ’s explainer is ungated and helpful. There is also a lone voice saying that 20 years of “jail” had value.

If indeed this is a major crisis, then we are showing a lack of awareness when it comes to media. Some Americans alive today might not know about the role of media in fighting Nazis. Here is a fun read about that. In addition to WWII-era Brits, the Taliban are also strategic with media.

Considering that this is partly a war of ideas, I don’t know if taking Kabul so fast will look strategic in hindsight. There is much still to be determined. Had the Taliban consolidated power more incrementally, they would have been able to control the images that got out.

Here’s one image I won’t forget:

On the assumption that 20 times more people saw the image than liked it, this picture has been seen by well over 2 million people. Imagine how those girls’ lives have changed. “they are now with the Marines.” The entire world is breathlessly watching the airlift, and any abuses by the Taliban are headline news.

The media you choose to consume shapes the world around you. Every click is a vote for the kind of world you want. The war of ideas continues.

James Bailey here on information consumption (not on Afghanistan)

*It’s nothing glamorous or entertaining, but this is one approach to opioid use. As more parents lose children to fentanyl overdoses, more civic action is happening which generates publicity. Deaths from opioids increased rapidly after 2010. Little Miss Sunshine came out in 2006, so perhaps if it were made today they wouldn’t have taken such a cavalier approach to heroin.

Have you heard about Human Capital?

Zachary BartschLeave a comment

While writing a paper recently, I was reminded of the importance of economic modelling.

Macroeconomic models are fun to rag on – everybody does it. But all economic models help us to express our understanding of the world clearly and help us to be specific when the temptation to hand-wave is strong. After all, a model is just a fancy way of saying “a system of logic”.

The paper linked above is several revisions in. What you don’t see are the mistakes that my co-author and I made along the way and the vagueness that we had to resolve. An earlier version of the paper simply stated that deaf people were endowed with less human capital than people who could hear. So far so good. But then we said that it was ambiguous who, the deaf or the hearing, would ultimately have more human capital after making additional human capital investments.

But this is not the case!

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Anti-coercive ways to fight Delta

James Bailey2 Comments

Two weeks ago I predicted that Covid cases would continue to spike for at least two weeks due to the Delta variant, but argued against general shutdowns as a way to combat this spike. Two weeks later cases have indeed spiked, and while localities and organizations have been mandating masks and vaccines, we have largely avoided new lockdowns, at least in the US (Australia is reverting to its roots as a prison). In the last post I mostly said what we shouldn’t do to fight Delta, so today I want to show what a better response looks like.

The tendency of authorities to reach first for coercive solutions is a natural product of their incentives, but I’ve been disappointed to see the same tendency among the chattering classes. I think this is due to polarization- people are most interested in debating solutions that are identified with a specific side in politics or the culture war. Masks became blue-coded, so many reds oppose them even though they probably work. Likewise with vaccines, even though they definitely work well and funding them early was the greatest achievement of the Trump presidency. Meanwhile certain medications became red-coded, leading blues to oppose them before the evidence even came in. But many of the best non-coercive and anti-coercive solutions barely get discussed because they have no political valence, or a mixed one.

Fully Approve the Vaccines Already!

The Covid vaccines are still being distributed under an emergency use authorization. This lack of full approval is a source of vaccine hesitancy. More concretely, it also means that pharmaceutical companies aren’t allowed to advertize their vaccines, even though they are much more effective than the typical pharmaceutical you see advertized. The randomized control trials testing the vaccines have been complete for months, we are just waiting on the FDA to do their job.

Authorize Vaccines for Kids

The FDA still bans children under 12 from receiving the vaccine, saying they are waiting for more trial data. Last week, the American Academy of Pedicatrics argued that we have enough data to justify an Emergency Use Authorization for children aged 5-11 given, you know, the emergency. The government is going to make my 5 year old wear a mask to kindergarden won’t allow me (or my physician wife!) to get him a vaccine which would protect him and others much better than a mask.

Ventilation

Opening windows, modifying HVAC systems to bring in more outside air, and using air purifiers is about as effective as requiring masks and is definitely less of an imposition on people. But we don’t talk about it, partly because people took so long to recognize that Covid is spread through the air more than through droplets, and partly because it is less of an imposition on people and so never became a culture-war debate. Ventilation might be too boring to advocate but I think staying alive is very exciting.

Outpatient Treatments that Work

Repurposing existing drugs to fight Covid is a great idea that has not yet lived up to its promise, aside from the widespread use of Dexamethasone for inpatients with severe cases. The core problem is that it takes large randomized controled trials to really prove that a drug works, and these are expensive. Worse, pharmaceutical companies don’t want to pay for these expensive trials once their drug has gone off patent. This means that many promising treatments have been ignored, while a few have been over-promoted on the basis of observational studies and tiny RCTs (and worse, still promoted once large RCTs showed they probably don’t work). But the British government stepped up to fund the large trials that found Dexamethasone effective last year, and private donors have funded mid-size trials that just found Fluvoxamine reduced Covid hospitalization by 31%. This is excellent news because Fluvoxamine is a cheap and relatively safe anti-depressant that people can take at home. There are other promising treatments that have yet get funding for large RCTs; this is exactly the sort of thing that NIH should be throwing money at. While we’re waiting on compentent government, you can ask a doctor about outpatient treatment if you do get Covid.

Overall, many of our best tools for fighting Covid are being ignored despite, or perhaps because of, the fact that they maintain or increase our freedom.

Back to School! But what’s up with college pricing?

Jeremy Horpedahl1 Comment

It’s time to head back to school! Which means it’s time for college students to once again ask the question: How am I going to pay for this?

It’s common knowledge that college is expensive and getting more expensive every year. A Google search for “skyrocketing tuition” produces almost 60,000 results. But whenever a fact is so commonly accepted, it’s worth asking if it’s really true.

Here’s one way to think about: are college tuition and fees increasing faster than the overall rate of inflation? For much of recent history, the answer has been most definitely “yes.” I start the series here in 2006, because there were some methodological changes to the index just before 2006. Cumulatively, college tuition and fees (as measured in the CPI) have increased by 78%, while prices overall have only increased by about 38%.

But for the very recent history, since 2017, the answer is “no.” College tuition and fees have often been increasing at slower rates than overall prices in the CPI, and the difference is especially dramatic in 2021. Since 2017, overall prices have increased by about 12.4%, but college tuition and fees has only increased by 7.8%.

However, even this data overstates how much tuition and fees have gone up for undergraduates in the US!

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