Europe is paying the price for relying on Russian natural gas

Sep 18 JDN 2459841

For far too long, Europe has relied upon importing cheap natural gas from Russia to supply a large proportion of its energy needs. Now that the war in Ukraine has led to mutual sanctions, they are paying the price—literally, as the price of natural gas has absolutely ballooned. Dutch natural gas futures have soared from about €15 per megawatt-hour in 2020 to over €200 today.

Natural gas prices are rising worldwide, but not nearly as much: Henry Hub natural gas prices (a standard metric for natural gas prices in the US) have risen from under $2 per million BTU in 2020 to nearly $9 today. This substantial divide in prices can only be sustained because transporting natural gas is expensive and requires substantial infrastructure. (1 megawatt-hour is about 3.4 million BTU, and the euro is trading at parity with the dollar (!), so effectively US prices rose from €7 per MWh to €31 per MWh—as opposed to €200.)

As a result, a lot of people in Europe are suddenly finding their utility bills unaffordable. (I’m fortunate that my flat is relatively well-insulated and my income is reasonably high, so I’m not among them; the higher prices will be annoying, but not beyond my means.) What should we do about this?

There are some economists who would say we should do nothing at all: Laissez-faire. Markets are efficient, right? So just let people freeze! Fortunately, Europe is not governed by such people nearly as much as the US is.

But while most economists would agree that we should do something, it’s much harder to get them to agree on exactly what.

Rising prices of natural gas are sort of a good thing, from an environmental perspective; they’ll provide an incentive to reduce carbon emissions. So it’s tempting to say that we should just let the prices rise and then compensate by raising taxes and paying transfers to poor families. But that probably isn’t politically viable; all three parts—letting prices rise, raising taxes, and increasing transfers—are all going to make enemies, and we really must have all three for such a plan to work.

The current approach seems to be based on price controls: Don’t let the prices rise so much. The UK has such a policy in place: Natural gas prices for consumers are capped by regulations. The cap has been increased in response to the crisis (itself an unpopular, but clearly necessary, move), but even so 31 gas companies have already gone under across the UK since the start of 2021. It really seems to be the case that for many gas companies, especially the smaller ones with less economy of scale, it’s simply not possible to continue providing natural gas to homes with input prices so high and output prices capped so low.

Or, we could let prices rise that high for producers, but subsidize consumers so that they don’t feel it; several European countries are already doing this. That at least won’t result in gas companies failing, but it will cost a lot of government funds. Greece in particular is spending over 3% of their GDP on it! (For comparison, the US military budget is about 4% of GDP.) I think this might actually be the best option, though all that spending will mean more government debt or higher taxes.

European governments have also been building up strategic reserves of natural gas, which may help us get through the winter—but it also makes the current price increases even worse.

We could also ration energy use, as we’ve often done during wartime. (Is this wartime? Kind of? Not really? It certainly is starting to feel like Cold War II.) Indeed, the President of the European Commission basically said that this should happen. That, at least, would reap some of the environmental benefits of reduced natural gas consumption. Rationing also feels fair to most people in a way that simply letting market prices rise does not; there is a sense of shared sacrifice. What worries me, however, is that the rations won’t be well-designed enough to account for energy usage that isn’t in a family’s immediate control. If you’re renting a flat that is poorly insulated, you can’t immediately fix that. You can try to pressure the landlord into buying better insulation, but in the meantime you’re the one paying the energy bills—or getting cold when the natural gas ration isn’t enough.

Actually I strongly suspect that most household usage of natural gas is of this kind; people don’t generally heat their homes more than necessary just because gas is cheap. Maybe they can set the thermostat a degree or two lower when gas is expensive, or maybe they use the gas oven less often and the microwave more; but the vast majority of their gas consumption is a function of the climate they live in and the insulation of their home, not their day-to-day choices. So if we’re trying to incentivize more efficient energy usage, that’s a question of long-term investment in construction and retrofitting, not something that sudden price spikes will really help with.

In the long run, what we really need to do is wean ourselves off of natural gas. Currently natural gas provides 33% of energy and nearly 40% of heating in Europe. (US figures are comparable.) Switching to electric heat pumps and powering them with solar and wind power isn’t something we can do overnight—but it is something we surely must do.

I think ultimately what is going to happen is all of the above: Different countries will adopt different policy mixes, all of them will involve difficult compromises, none of them will be particularly well-designed, and we’ll all sort of muddle through as best we can.

The War on Terror has been a total failure.

Sep 11 JDN 2459834

Since today happens to be September 11, I thought I’d spend this week’s post reflecting on the last 21 years (!) of the War on Terror.

At this point, I can safely say that the War on Terror has been a complete, total, utter failure. It has cost over $8 trillion and nearly a million lives, and not only didn’t reduce terrorism, it actually appears to have substantially increased it.

Take a look at this graph from Our World in Data:

Up until the the 1980s, terrorism worldwide was a slow smoldering, killing rarely more than a few hundred people each year. Obviously it’s terrible if you or one of your loved ones happen to be among those few hundred, but in terms of its overall chance of killing you or your children, terrorism used to be less dangerous than kiddie pools.

Then terrorism began to rise, until it was killing several thousand people a year. I was surprised to learn that most of these were not in the Middle East, but in fact spread all over the world, with the highest concentrations actually being in South Asia and Sub-Saharan Africa.

Notably, almost none of these deaths were in First World countries, and as a result most First World governments largely ignored them. Terrorism was something that happened “over there”, to other people.

Then of course came 2001, and 9/11/2001, in which nearly 3,000 Americans were killed in a single day. And suddenly the First World took notice, and decided to respond with overwhelming force.

We have been at war basically ever since. All this war has accomplished… approximately nothing.

The deadliest year of terrorism in the 21st century was not 2001; it was 2014, after the US had invaded both Afghanistan and Iraq, and in fact withdrawn from Iraq (but not yet Afghanistan). This was largely the result of the rise of Daesh (which is what you should call them by the way), which seems to be the most fanatical and violent Islamist terrorist organization the world has seen in decades if not centuries.

Even First World terrorism is no better today than it was in the 1990s—though also no worse. It’s back to a slow smolder, and once again First World societies can feel that terrorism is something that happens to someone else. But terrorism in the Middle East is the worst it has been in decades.

Would Daesh not have appeared if the US had never invaded Afghanistan and Iraq? It’s difficult to say. Maybe their rise was inevitable. Or maybe having a strong, relatively secular government in the region under Saddam Hussein would have prevented them from becoming so powerful. We can at least say this: Since the US withdrew from Afghanistan and the Taliban retook control, the Taliban and Daesh have been fighting each other quite heavily. Presumably that would have been happening all along if the US had not intervened to suppress the Taliban.

Don’t get me wrong: The Taliban were, and are, a terrible regime, and Saddam Hussein was a terrible dictator. But Daesh is clearly worse than either, and sometimes in geopolitics you have to accept the lesser evil.

If we’d actually had a way to take over Afghanistan and Iraq and rebuild them as secular liberal democracies as the US government intended, that would have been a good thing, and might even have been worth all that blood and treasure. But that project utterly failed, and we should have expected it to fail, as never in history has anyone successfully imposed liberal democracy by outside force like that.

When democracy spreads, it usually does so slowly, through the cultural influence of trade and media. Sometimes it springs up in violent revolution—as we hoped it would in the Arab Spring but were sadly disappointed. But there are really no clear examples of a democratic country invading an undemocratic country and rapidly turning it democratic.

British colonialism was spread by the sword (and especially the machine gun), and did sometimes ultimately lead to democratic outcomes, as in the US, Australia, and Canada, and more recently in India, South Africa, and Botswana. But that process was never fast, never smooth, and rarely without bloodshed—and only succeeded when the local population was willing to fight for it. Britain didn’t simply take over countries and convert them to liberal democracies in a generation. No one has ever done that, and trying to was always wishful thinking.

I don’t know, maybe in the very long run, we’ll look back on all this as the first, bloody step toward something better for the Middle East. Maybe the generation of women who got a taste of freedom and education in Afghanistan under US occupation will decide to rise up and refuse to relinquish those rights under the new Taliban. Daesh will surely die sooner or later; fanaticism can rarely sustain organizations in the long term.

But it’s been 20 years now, and things look no better than they did at the start. Maybe it’s time to cut our losses?

Working from home is the new normal—sort of

Aug 28 JDN 2459820

Among people with jobs that can be done remotely, a large majority did in fact switch to doing their jobs remotely: By the end of 2020, over 70% of Americans with jobs that could be done remotely were working from home—and most of them said they didn’t want to go back.

This is actually what a lot of employers expected to happen—just not quite like this. In 2014, a third of employers predicted that the majority of their workforce would be working remotely by 2020; given the timeframe there, it required a major shock to make that happen so fast, and yet a major shock was what we had.

Working from home has carried its own challenges, but overall productivity seems to be higher working remotely (that meeting really could have been an email!). This may actually explain why output per work hour actually rose rapidly in 2020 and fell in 2022.

The COVID pandemic now isn’t so much over as becoming permanent; COVID is now being treated as an endemic infection like influenza that we don’t expect to be able to eradicate in the foreseeable future.

And likewise, remote work seems to be here to stay—sort of.

First of all, we don’t seem to be giving up office work entirely. As of the first quarter 2022, almost as many firms have partially remote work as have fully remote work, and this seems to be trending upward. A lot of firms seem to be transitioning into a “hybrid” model where employees show up to work two or three days a week. This seems to be preferred by large majorities of both workers and firms.

There is a significant downside of this: It means that the hope that remote working might finally ease the upward pressure on housing prices in major cities is largely a false one. If we were transitioning to a fully remote system, then people could live wherever they want (or can afford) and there would be no reason to move to overpriced city centers. But if you have to show up to work even one day a week, that means you need to live close enough to the office to manage that commute.

Likewise, if workers never came to the office, you could sell the office building and convert it into more housing. But if they show up even once in awhile, you need a physical place for them to go. Some firms may shrink their office space (indeed, many have—and unlike this New York Times journalist, I have a really hard time feeling bad for landlords of office buildings); but they aren’t giving it up entirely. It’s possible that firms could start trading off—you get the building on Mondays, we get it on Tuesdays—but so far this seems to be rare, and it does raise a lot of legitimate logistical and security concerns. So our global problem of office buildings that are empty, wasted space most of the time is going to get worse, not better. Manhattan will still empty out every night; it just won’t fill up as much during the day. This is honestly a major drain on our entire civilization—building and maintaining all those structures that are only used at most 1/3 of 5/7 of the time, and soon, less—and we really should stop ignoring it. No wonder our real estate is so expensive, when half of it is only used 20% of the time!

Moreover, not everyone gets to work remotely. Your job must be something that can be done remotely—something that involves dealing with information, not physical objects. That includes a wide and ever-growing range of jobs, from artists and authors to engineers and software developers—but it doesn’t include everyone. It basically means what we call “white-collar” work.

Indeed, it is largely limited to the upper-middle class. The rich never really worked anyway, though sometimes they pretend to, convincing themselves that managing a stock portfolio (that would actually grow faster if they let it sit) constitutes “work”. And the working class? By and large, they didn’t get the chance to work remotely. While 73% of workers with salaries above $200,000 worked remotely in 2020, only 12% of workers with salaries under $25,000 did, and there is a smooth trend where, across the board, the more money you make, the more likely you have been able to work remotely.

This will only intensify the divide between white-collar and blue-collar workers. They already think we don’t do “real work”; now we don’t even go to work. And while blue-collar workers are constantly complaining about contempt from white-collar elites, I think the shoe is really on the other foot. I have met very few white-collar workers who express contempt for blue-collar workers—and I have met very few blue-collar workers who don’t express anger and resentment toward white-collar workers. I keep hearing blue-collar people say that we think that they are worthless and incompetent, when they are literally the only ones ever saying that. I can’t stop saying things that I never said.

The rich and powerful may look down on them, but they look down on everyone. (Maybe they look down on blue-collar workers more? I’m not even sure about that.) I think politicians sometimes express contempt for blue-collar workers, but I don’t think this reflects what most white-collar workers feel.

And the highly-educated may express some vague sense of pity or disappointment in people who didn’t get college degrees, and sometimes even anger (especially when they do things like vote for Donald Trump), but the really vitriolic hatred is clearly in the opposite direction (indeed, I have no better explanation for how otherwise-sane people could vote for Donald Trump). And I certainly wouldn’t say that everyone needs a college degree (though I became tempted to, when so many people without college degrees voted for Donald Trump).

This really isn’t us treating them with contempt: This is them having a really severe inferiority complex. And as information technology (that white-collar work created) gives us—but not them—the privilege of staying home, that is only going to get worse.

It’s not their fault: Our culture of meritocracy puts a little bit of inferiority complex in all of us. It tells us that success and failure are our own doing, and so billionaires deserve to have everything and the poor deserve to have nothing. And blue-collar workers have absolutely internalized these attitudes: Most of them believe that poor people choose to stay on welfare forever rather than get jobs (when welfare has time limits and work requirements, so this is simply not an option—and you would know this from the Wikipedia page on TANF).

I think that what they experience as “contempt by white-collar elites” is really the pain of living in an illusory meritocracy. They were told—and they came to believe—that working hard would bring success, and they have worked very hard, and watched other people be much more successful. They assume that the rich and powerful are white-collar workers, when really they are non-workers; they are people the world was handed to on a silver platter. (What, you think George W. Bush earned his admission to Yale?)

And thus, we can shout until we are blue in the face that plumbers, bricklayers and welders are the backbone of civilization—and they are, and I absolutely mean that; our civilization would, in an almost literal sense, collapse without them—but it won’t make any difference. They’ll still feel the pain of living in a society that gave them very little and tells them that people get what they deserve.

I don’t know what to say to such people, though. When your political attitudes are based on beliefs that are objectively false, that you could know are objectively false if you simply bothered to look them up… what exactly am I supposed to say to you? How can we have a useful political conversation when half the country doesn’t even believe in fact-checking?

Honestly I wish someone had explained to them that even the most ideal meritocratic capitalism wouldn’t reward hard work. Work is a cost, not a benefit, and the whole point of technological advancement is to allow us to accomplish more with less work. The ideal capitalism would reward talent—you would succeed by accomplishing things, regardless of how much effort you put into them. People would be rich mainly because they are brilliant, not because they are hard-working. The closest thing we have to ideal capitalism right now is probably professional sports. And no amount of effort could ever possibly make me into Steph Curry.

If that isn’t the world we want to live in, so be it; let’s do something else. I did nothing to earn either my high IQ or my chronic migraines, so it really does feel unfair that the former increases my income while the latter decreases it. But the labor theory of value has always been wrong; taking more sweat or more hours to do the same thing is worse, not better. The dignity of labor consists in its accomplishment, not its effort. Sisyphus is not happy, because his work is pointless.

Honestly at this point I think our best bet is just to replace all blue-collar work with automation, thus rendering it all moot. And then maybe we can all work remotely, just pushing code patches to the robots that do everything. (And no doubt this will prove my “contempt”: I want to replace you! No, I want to replace the grueling work that you have been forced to do to make a living. I want you—the human being—to be able to do something more fun with your life, even if that’s just watching television and hanging out with friends.)

A guide to surviving the apocalypse

Aug 21 JDN 2459820

Some have characterized the COVID pandemic as an apocalypse, though it clearly isn’t. But a real apocalypse is certainly possible, and its low probability is offset by its extreme importance. The destruction of human civilization would be quite literally the worst thing that ever happened, and if it led to outright human extinction or civilization was never rebuilt, it could prevent a future that would have trillions if not quadrillions of happy, prosperous people.

So let’s talk about things people like you and me could do to survive such a catastrophe, and hopefully work to rebuild civilization. I’ll try to inject a somewhat light-hearted tone into this otherwise extraordinarily dark topic; we’ll see how well it works. What specifically we would want—or be able—to do will depend on the specific scenario that causes the apocalypse, so I’ll address those specifics shortly. But first, let’s talk about general stuff that should be useful in most, if not all, apocalypse scenarios.

It turns out that these general pieces of advice are also pretty good advice for much smaller-scale disasters such as fires, tornados, or earthquakes—all of which are far more likely to occur. Your top priority is to provide for the following basic needs:

1. Water: You will need water to drink. You should have some kind of stockpile of clean water; bottled water is fine but overpriced, and you’d do just as well to bottle tap water (as long as you do it before the crisis occurs and the water system goes down). Better still would be to have water filtration and purification equipment so that you can simply gather whatever water is available and make it drinkable.

2. Food: You will need nutritious, non-perishable food. Canned vegetables and beans are ideal, but you can also get a lot of benefit from dry staples such as crackers. Processed foods and candy are not as nutritious, but they do tend to keep well, so they can do in a pinch. Avoid anything that spoils quickly or requires sophisticated cooking. In the event of a disaster, you will be able to make fire and possibly run a microwave on a solar panel or portable generator—but you can’t rely on the electrical or gas mains to stay operational, and even boiling will require precious water.

3. Shelter: Depending on the disaster, your home may or may not remain standing—and even if it is standing, it may not be fit for habitation. Consider backup options for shelter: Do you have a basement? Do you own any tents? Do you know people you could move in with, if their homes survive and yours doesn’t?

4. Defense: It actually makes sense to own a gun or two in the event of a crisis. (In general it’s actually a big risk, though, so keep that in mind: the person your gun is most likely to kill is you.) Just don’t go overboard and do what we all did in Oregon Trail, stocking plenty of bullets but not enough canned food. Ammo will be hard to replace, though; your best option may actually be a gauss rifle (yes, those are real, and yes, I want one), because all they need for ammo is ferromagnetic metal of the appropriate shape and size. Then, all you need is a solar panel to charge its battery and some machine tools to convert scrap metal into ammo.

5. Community: Humans are highly social creatures, and we survive much better in groups. Get to know your neighbors. Stay in touch with friends and family. Not only will this improve your life in general, it will also give you people to reach out to if you need help during the crisis and the government is indisposed (or toppled). Having a portable radio that runs on batteries, solar power, or hand-crank operation will also be highly valuable for staying in touch with people during a crisis. (Likewise flashlights!)

Now, on to the specific scenarios. I will consider the following potential causes of apocalypse: Alien Invasion, Artificial Intelligence Uprising, Climate Disaster, Conventional War, Gamma-Ray Burst, Meteor Impact, Plague, Nuclear War, and last (and, honestly, least), Zombies.

I will rate each apocalypse by its risk level, based on its probability of occurring within the next 100 years (roughly the time I think it will take us to meaningfully colonize space and thereby change the game):

Very High: 1% or more

High: 0.1% – 1%

Moderate: 0.01% – 0.1%

Low: 0.001% – 0.01%

Very Low: 0.0001% – 0.001%

Tiny: 0.00001% – 0.0001%

Miniscule: 0.00001% or less

I will also rate your relative safety in different possible locations you might find yourself during the crisis:

Very Safe: You will probably survive.

Safe: You will likely survive if you are careful.

Dicey: You may survive, you may not. Hard to say.

Dangerous: You will likely die unless you are very careful.

Very Dangerous: You will probably die.

Hopeless: You will definitely die.

I’ll rate the following locations for each, with some explanation: City, Suburb, Rural Area, Military Base, Underground Bunker, Ship at Sea. Certain patterns will emerge—but some results may surprise you. This may tell you where to go to have the best chance of survival in the event of a disaster (though I admit bunkers are often in short supply).

All right, here goes!

Alien Invasion

Risk: Low

There are probably sapient aliens somewhere in this vast universe, maybe even some with advanced technology. But they are very unlikely to be willing to expend the enormous resources to travel across the stars just to conquer us. Then again, hey, it could happen; maybe they’re imperialists, or they have watched our TV commercials and heard the siren song of oregano.

City: Dangerous

Population centers are likely to be primary targets for their invasion. They probably won’t want to exterminate us outright (why would they?), but they may want to take control of our cities, and are likely to kill a lot of people when they do.

Suburb: Dicey

Outside the city centers will be a bit safer, but hardly truly safe.

Rural Area: Dicey

Where humans are spread out, we’ll present less of a target. Then again, if you own an oregano farm….

Military Base: Very Dangerous

You might think that having all those planes and guns around would help, but these will surely be prime targets in an invasion. Since the aliens are likely to be far more technologically advanced, it’s unlikely our military forces could put up much resistance. Our bases would likely be wiped out almost immediately.

Underground Bunker: Safe

This is a good place to be. Orbital and aerial weapons won’t be very effective against underground targets, and even ground troops would have trouble finding and attacking an isolated bunker. Since they probably won’t want to exterminate us, hiding in your bunker until they establish a New World Order could work out for you.

Ship at Sea: Dicey

As long as it’s a civilian vessel, you should be okay. A naval vessel is just as dangerous as a base, if not more so; they would likely strike our entire fleets from orbit almost instantly. But the aliens are unlikely to have much reason to bother attacking a cruise ship or a yacht. Then again, if they do, you’re toast.

Artificial Intelligence Uprising

Risk: Very High

While it sounds very sci-fi, this is one of the most probable apocalypse scenarios, and we should be working to defend against it. There are dozens of ways that artificial intelligence could get out of control and cause tremendous damage, particularly if the AI got control of combat drones or naval vessels. This could mean a superintelligent AI beyond human comprehension, but it need not; it could in fact be a very stupid AI that was programmed to make profits for Hasbro and decided that melting people into plastic was the best way to do that.

City: Very Dangerous

Cities don’t just have lots of people; they also have lots of machines. If the AI can hack our networks, they may be able to hack into not just phones and laptops, but even cars, homes, and power plants. Depending on the AI’s goals (which are very hard to predict), cities could become disaster zones almost immediately, as thousands of cars shut down and crash and all the power plants get set to overload.

Suburb: Dangerous

Definitely safer than the city, but still, you’ve got plenty of technology around you for the AI to exploit.

Rural Area: Dicey

The further you are from other people and their technology, the safer you’ll be. Having bad wifi out in the boonies may actually save your life. Then again, even tractors have software updates now….

Military Base: Very Dangerous

The military is extremely high-tech and all network-linked. Unless they can successfully secure their systems against the AI very well, very fast, suddenly all the guided missiles and combat drones and sentry guns will be deployed in service of the robot revolution.

Underground Bunker: Safe

As long as your bunker is off the grid, you should be okay. The robots won’t have any weapons we don’t already have, and bunkers are built because they protect pretty well against most weapons.

Ship at Sea: Hopeless

You are surrounded by technology and you have nowhere to run. A military vessel is worse than a civilian ship, but either way, you’re pretty much doomed. The AI is going to take over the radio, the GPS system, maybe even the controls of the ship themselves. It could intentionally overload the engines, or drive you into rocks, or simply shut down everything and leave you to starve at sea. A sailing yacht with a hand-held compass and sextant should be relatively safe, if you manage to get your hands on one of those somehow.

Climate Disaster

Risk: Moderate

Let’s be clear here. Some kind of climate disaster is inevitable; indeed, it’s already in progress. But what I’m talking about is something really severe, something that puts all of human civilization in jeopardy. That, fortunately, is fairly unlikely—and even more so after the big bill that just passed!

City: Dicey

Buildings provide shelter from the elements, and cities will be the first places we defend. Dikes will be built around Manhattan like the ones around Amsterdam. You won’t need to worry about fires, snowstorms, or flooding very much. Still, a really severe crisis could cause all utility systems to break down, meaning you won’t have heating and cooling.

Suburb: Dicey

The suburbs will be about as safe as the cities, maybe a little worse because there isn’t as much shelter if you lose your home to a disaster event.

Rural Area: Dangerous

Remote areas are going to have it the worst. Especially if you’re near a coast that can flood or a forest that can burn, you’re exposed to the elements and there won’t be much infrastructure to protect you. Your best bet is to move in toward the city, where other people will try to help you against the coming storms.

Military Base: Very Safe

Military infrastructure will be prioritized in defense plans, and soldiers are already given lots of survival tools and training. If you can get yourself to a military base and they actually let you in, you really won’t have much to worry about.

Underground Bunker: Very Safe

Underground doesn’t have a lot of weather, it turns out. As long as your bunker is well sealed against flooding, earthquakes are really your only serious concern, and climate change isn’t going to affect those very much.

Ship at Sea: Safe

Increased frequency of hurricanes and other storms will make the sea more dangerous, but as long as you steer clear of storms as they come, you should be okay.

Conventional War

Risk: Moderate

Once again, I should clarify. Obviously there are going to be wars—there are wars going on this very minute. But a truly disastrous war, a World War 3 still fought with conventional weapons, is fairly unlikely. We can’t rule it out, but we don’t have to worry too much—or rather, it’s nukes we should worry about, as I’ll get to in a little bit. It’s unlikely that truly apocalyptic damage could be caused by conventional weapons alone.

City: Dicey

Cities will often be where battles are fought, as they are strategically important. Expect bombing raids and perhaps infantry or tank battalions. Still, it’s actually pretty feasible to survive in a city that is under attack by conventional weapons; while lots of people certainly die, in most wars, most people actually don’t.

Suburb: Safe

Suburbs rarely make interesting military targets, so you’ll mainly have to worry about troops passing through on their way to cities.

Rural Area: Safe

For similar reasons to the suburbs, you should be relatively safe out in the boonies. You may encounter some scattered skirmishes, but you’re unlikely to face sustained attack.

Military Base: Dicey

Whether military bases are safe really depends on whether your side is winning or not. If they are, then you’re probably okay; that’s where all the soldiers and military equipment are, there to defend you. If they aren’t, then you’re in trouble; military bases make nice, juicy targets for attack.

Ship at Sea: Safe

There’s a reason it is big news every time a civilian cruise liner gets sunk in a war (does the Lusitania ring a bell?); it really doesn’t happen that much. Transport ships are at risk of submarine raids, and of course naval vessels will face constant threats; but cruise liners aren’t strategically important, so military forces have very little reason to target them.

Gamma-Ray Burst

Risk: Tiny

While gamma-ray bursts certainly happen all the time, so far they have all been extremely remote from Earth. It is currently estimated that they only happen a few times in any given galaxy every few million years. And each one is concentrated in a narrow beam, so even when they happen they only affect a few nearby stars. This is very good news, because if it happened… well, that’s pretty much it. We’d be doomed.

If a gamma-ray burst happened within a few light-years of us, and happened to be pointed at us, it would scour the Earth, boil the water, burn the atmosphere. Our entire planet would become a dead, molten rock—if, that is, it wasn’t so close that it blew the planet up completely. And the same is going to be true of Mars, Mercury, and every other planet in our solar system.

Underground Bunker: Very Dangerous

Your one meager hope of survival would be to be in an underground bunker at the moment the burst hit. Since most bursts give very little warning, you are unlikely to achieve this unless you, like, live in a bunker—which sounds pretty terrible. Moreover, your bunker needs to be a 100% closed system, and deep underground; the surface will be molten and the air will be burned away. There’s honestly a pretty narrow band of the Earth’s crust that’s deep enough to protect you but not already hot enough to doom you.

Anywhere Else: Hopeless

If you aren’t deep underground at the moment the burst hits us, that’s it; you’re dead. If you are on the side of the Earth facing the burst, you will die mercifully quickly, burned to a crisp instantly. If you are not, your death will be a bit slower, as the raging firestorm that engulfs the Earth, boils the oceans, and burns away the atmosphere will take some time to hit you. But your demise is equally inevitable.

Well, that was cheery. Remember, it’s really unlikely to happen! Moving on!

Meteor Impact

Risk: Tiny

Yes, “it has happened before, and it will happen again; the only question is when.” However, meteors with sufficient size to cause a global catastrophe only seem to hit the Earth about once every couple hundred million years. Moreover, right now the first time in human history where we might actually have a serious chance of detecting and deflecting an oncoming meteor—so even if one were on the way, we’d still have some hope of saving ourselves.

Underground Bunker: Dangerous

A meteor impact would be a lot like a gamma-ray burst, only much less so. (Almost anything is “much less so” than a gamma-ray burst, with the lone exception of a supernova, which is always “much more so”.) It would still boil a lot of ocean and start a massive firestorm, but it wouldn’t boil all the ocean, and the firestorm wouldn’t burn away all the oxygen in the atmosphere. Underground is clearly the safest place to be, preferably on the other side of the planet from the impact.

Anywhere Else: Very Dangerous

If you are above ground, it wouldn’t otherwise matter too much where you are, at least not in any way that’s easy to predict. Further from the impact is obviously better than closer, but the impact could be almost anywhere. After the initial destruction there would be a prolonged impact winter, which could cause famines and wars. Rural areas might be a bit safer than cities, but then again if you are in a remote area, you are less likely to get help if you need it.

Plague

Risk: Low

Obviously, the probability of a pandemic is 100%. You best start believing in pandemics; we’re in one. But pandemics aren’t apocalyptic plagues. To really jeopardize human civilization, there would have to be a superbug that spreads and mutates rapidly, has a high fatality rate, and remains highly resistant to treatment and vaccination. Fortunately, there aren’t a lot of bacteria or viruses like that; the last one we had was the Black Death, and humanity made it through that one. In fact, there is good reason to believe that with modern medical technology, even a pathogen like the Black Death wouldn’t be nearly as bad this time around.

City: Dangerous

Assuming the pathogen spreads from human to human, concentrations of humans are going to be the most dangerous places to be. Staying indoors and following whatever lockdown/mask/safety protocols that authorities recommend will surely help you; but if the plague gets bad enough, infrastructure could start falling apart and even those things will stop working.

Suburb: Safe

In a suburb, you are much more isolated from other people. You can stay in your home and be fairly safe from the plague, as long as you are careful.

Rural Area: Dangerous

The remoteness of a rural area means that you’d think you wouldn’t have to worry as much about human-to-human transmission. But as we’ve learned from COVID, rural areas are full of stubborn right-wing people who refuse to follow government safety protocols. There may not be many people around, but they probably will be taking stupid risks and spreading the disease all over the place. Moreover, if the disease can be carried by animals—as quite a few can—livestock will become an added danger.

Military Base: Safe

If there’s one place in the world where people follow government safety protocols, it’s a military base. Bases will have top-of-the-line equipment, skilled and disciplined personnel, and up-to-the-minute data on the spread of the pathogen.

Underground Bunker: Very Safe

The main thing you need to do is be away from other people for awhile, and a bunker is a great place to do that. As long as your bunker is well-stocked with food and water, you can ride out the plague and come back out once it dies down.

Ship at Sea: Dicey

This is an all-or-nothing proposition. If no one on the ship has the disease, you’re probably safe as long as you remain at sea, because very few pathogens can spread that far through the air. On the other hand, if someone on your ship does carry the disease, you’re basically doomed.

Nuclear War

Risk: Very High

Honestly, this is the one that terrifies me. I have no way of knowing that Vladmir Putin or Xi Jinping won’t wake up one morning any day now and give the order to launch a thousand nuclear missiles. (I honestly wasn’t even sure Trump wouldn’t, so it’s a damn good thing he’s out of office.) They have no reason to, but they’re psychopathic enough that I can’t be sure they won’t.

City: Dangerous

Obviously, most of those missiles are aimed at cities. And if you happen to be in the center of such a city, this is very bad for your health. However, nukes are not the automatic death machines that they are often portrayed to be; sure, right at the blast center you’re vaporized. But Hiroshima and Nagasaki both had lots of survivors, many of whom lived on for years or even decades afterward, even despite the radiation poisoning.

Suburb: Dangerous

Being away from a city center might provide some protection, but then again it might not; it really depends on how the nukes are targeted. It’s actually quite unlikely that Russia or China (or whoever) would deploy large megaton-yield missiles, as they are very expensive; so you could only have a few, making it easier to shoot them all down. The far more likely scenario is lots of kiloton-yield missiles, deployed in what is called a MIRV: multiple independent re-entry vehicle. One missile launches into space, then splits into many missiles, each of which can have a different target. It’s sort of like a cluster bomb, only the “little” clusters are each Hiroshima bombs. Those clusters might actually be spread over metropolitan areas relatively evenly, so being in a suburb might not save you. Or it might. Hard to say.

Rural Area: Dicey

If you are sufficiently remote from cities, the nukes probably won’t be aimed at you. And since most of the danger really happens right when the nuke hits, this is good news for you. You won’t have to worry about the blast or the radiation; your main concerns will be fallout and the resulting collapse of infrastructure. Nuclear winter could also be a risk, but recent studies suggest that’s relatively unlikely even in a full-scale nuclear exchange.

Military Base: Hopeless

The nukes are going to be targeted directly at military bases. Probably multiple nukes per base, in case some get shot down. Basically, if you are on a base at the time the missiles hit, you’re doomed. If you know the missiles are coming, your best bet would be to get as far from that base as you can, into as remote an area as you can. You’ll have a matter of minutes, so good luck.

Underground Bunker: Safe

There’s a reason we built a bunch of underground bunkers during the Cold War; they’re one of the few places you can go to really be safe from a nuclear attack. As long as your bunker is well-stocked and well-shielded, you can hide there and survive not only the initial attack, but the worst of the fallout as well.

Ship at Sea: Safe

Ships are small enough that they probably wouldn’t be targeted by nukes. Maybe if you’re on or near a major naval capital ship, like an aircraft carrier, you’d be in danger; someone might try to nuke that. (Even then, aircraft carriers are tough: Anything short of a direct hit might actually be survivable. In tests, carriers have remained afloat and largely functional even after a 100-kiloton nuclear bomb was detonated a mile away. They’re even radiation-shielded, because they have nuclear reactors.) But a civilian vessel or even a smaller naval vessel is unlikely to be targeted. Just stay miles away from any cities or any other ships, and you should be okay.

Zombies

Risk: Miniscule

Zombies per se—the literal undeadaren’t even real, so that’s just impossible. But something like zombies could maybe happen, in some very remote scenario in which some bizarre mutant strain of rabies or something spreads far and wide and causes people to go crazy and attack other people. Even then, if the infection is really only spread through bites, it’s not clear how it could ever reach a truly apocalyptic level; more likely, it would cause a lot of damage locally and then be rapidly contained, and we’d remember it like Pearl Harbor or 9/11: That terrible, terrible day when 5,000 people became zombies in Portland, and then they all died and it was over. An airborne or mosquito-borne virus would be much more dangerous, but then we’re really talking about a plague, not zombies. The ‘turns people into zombies’ part of the virus would be a lot less important than the ‘spreads through the air and kills you’ part.

Seriously, why is this such a common trope? Why do people think that this could cause an apocalypse?

City: Safe

Yes, safe, dammit. Once you have learned that zombies are on the loose, stay locked in your home, wearing heavy clothing (to block bites; a dog suit is ideal, but a leather jacket or puffy coat would do) with a shotgun (or a gauss rifle, see above) at the ready, and you’ll probably be fine. Yes, this is the area of highest risk, due to the concentration of people who could potentially be infected with the zombie virus. But unless you are stupid—which people in these movies always seem to be—you really aren’t in all that much danger. Zombies can at most be as fast and strong as humans (often, they seem to be less!), so all you need to do is shoot them before they can bite you. And unlike fake movie zombies, anything genuinely possible will go down from any mortal wound, not just a perfect headshot—I assure you, humans, however crazed by infection they might be, can’t run at you if their hearts (or their legs) are gone. It might take a bit more damage to drop them than an ordinary person, if they aren’t slowed down by pain; but it wouldn’t require perfect marksmanship or any kind of special weaponry. Buckshot to the chest will work just fine.

Suburb: Safe

Similar to the city, only more so, because people there are more isolated.

Rural Area: Very Safe

And rural areas are even more isolated still—plus you have more guns than people, so you’ll have more guns than zombies.

Military Base: Very Safe

Even more guns, plus military training and a chain of command! The zombies don’t stand a chance. A military base would be a great place to be, and indeed that’s where the containment would begin, as troops march from the bases to the cities to clear out the zombies. Shaun of the Dead (of all things!) actually got this right: One local area gets pretty bad, but then the Army comes in and takes all the zombies out.

Underground Bunker: Very Safe

A bunker remains safe in the event of zombies, just as it is in most other scenarios.

Ship at Sea: Very Safe

As long as the infection hasn’t spread to the ship you are currently on and the zombies can’t swim, you are at literally zero risk.

Krugman and rockets and feathers

Jul 17 JDN 2459797

Well, this feels like a milestone: Paul Krugman just wrote a column about a topic I’ve published research on. He didn’t actually cite our paper—in fact the literature review he links to is from 2014—but the topic is very much what we were studying: Asymmetric price transmission, ‘rockets and feathers’. He’s even talking about it from the perspective of industrial organization and market power, which is right in line with our results (and a bit different from the mainstream consensus among economic policy pundits).

The phenomenon is a well-documented one: When the price of an input (say, crude oil) rises, the price of outputs made from that input (say, gasoline) rise immediately, and basically one to one, sometimes even more than one to one. But when the price of an input falls, the price of outputs only falls slowly and gradually, taking a long time to converge to the same level as the input prices. Prices go up like a rocket, but down like a feather.

Many different explanations have been proposed to explain this phenomenon, and they aren’t all mutually exclusive. They include various aspects of market structure, substitution of inputs, and use of inventories to smooth the effects of prices.

One that I find particularly unpersuasive is the notion of menu costs: That it requires costly effort to actually change your prices, and this somehow results in the asymmetry. Most gas stations have digital price boards; it requires almost zero effort for them to change prices whenever they want. Moreover, there’s no clear reason this would result in asymmetry between raising and lowering prices. Some models extend the notion of “menu cost” to include expected customer responses, which is a much better explanation; but I think that’s far beyond the original meaning of the concept. If you fear to change your price because of how customers may respond, finding a cheaper way to print price labels won’t do a thing to change that.

But our paper—and Krugman’s article—is about one factor in particular: market power. We don’t see prices behave this way in highly competitive markets. We see it the most in oligopolies: Markets where there are only a small number of sellers, who thus have some control over how they set their prices.

Krugman explains it as follows:

When oil prices shoot up, owners of gas stations feel empowered not just to pass on the cost but also to raise their markups, because consumers can’t easily tell whether they’re being gouged when prices are going up everywhere. And gas stations may hang on to these extra markups for a while even when oil prices fall.

That’s actually a somewhat different mechanism from the one we found in our experiment, which is that asymmetric price transmission can be driven by tacit collusion. Explicit collusion is illegal: You can’t just call up the other gas stations and say, “Let’s all set the price at $5 per gallon.” But you can tacitly collude by responding to how they set their prices, and not trying to undercut them even when you could get a short-run benefit from doing so. It’s actually very similar to an Iterated Prisoner’s Dilemma: Cooperation is better for everyone, but worse for you as an individual; to get everyone to cooperate, it’s vital to severely punish those who don’t.

In our experiment, the participants in our experiment were acting as businesses setting their prices. The customers were fully automated, so there was no opportunity to “fool” them in this way. We also excluded any kind of menu costs or product inventories. But we still saw prices go up like rockets and down like feathers. Moreover, prices were always substantially higher than costs, especially during that phase when they are falling down like feathers.

Our explanation goes something like this: Businesses are trying to use their market power to maintain higher prices and thereby make higher profits, but they have to worry about other businesses undercutting their prices and taking all the business. Moreover, they also have to worry about others thinking that they are trying to undercut prices—they want to be perceived as cooperating, not defecting, in order to preserve the collusion and avoid being punished.

Consider how this affects their decisions when input prices change. If the price of oil goes up, then there’s no reason not to raise the price of gasoline immediately, because that isn’t violating the collusion. If anything, it’s being nice to your fellow colluders; they want prices as high as possible. You’ll want to raise the prices as high and fast as you can get away with, and you know they’ll do the same. But if the price of oil goes down, now gas stations are faced with a dilemma: You could lower prices to get more customers and make more profits, but the other gas stations might consider that a violation of your tacit collusion and could punish you by cutting their prices even more. Your best option is to lower prices very slowly, so that you can take advantage of the change in the input market, but also maintain the collusion with other gas stations. By slowly cutting prices, you can ensure that you are doing it together, and not trying to undercut other businesses.

Krugman’s explanation and ours are not mutually exclusive; in fact I think both are probably happening. They have one important feature in common, which fits the empirical data: Markets with less competition show greater degrees of asymmetric price transmission. The more concentrated the oligopoly, the more we see rockets and feathers.

They also share an important policy implication: Market power can make inflation worse. Contrary to what a lot of economic policy pundits have been saying, it isn’t ridiculous to think that breaking up monopolies or putting pressure on oligopolies to lower their prices could help reduce inflation. It probably won’t be as reliably effective as the Fed’s buying and selling of bonds to adjust interest rates—but we’re also doing that, and the two are not mutually exclusive. Besides, breaking up monopolies is a generally good thing to do anyway.

It’s not that unusual that I find myself agreeing with Krugman. I think what makes this one feel weird is that I have more expertise on the subject than he does.

How to pack the court

Jul 10 JDN 2459790

By now you have no doubt heard the news that Roe v. Wade was overturned. The New York Times has an annotated version of the full opinion.

My own views on abortion are like those of about 2/3 of Americans: More nuanced than can be neatly expressed by ‘pro-choice’ or ‘pro-life’, much more comfortable with first-trimester abortion (which is what 90% of abortions are, by the way) than later, and opposed to overturning Roe v. Wade in its entirety. I also find great appeal in Clinton’s motto on the issue: “safe, legal, and rare”.Several years ago I moderated an online discussion group that reached what we called the Twelve Week Compromise: Abortion would be legal for any reason up to 12 weeks of pregnancy, after which it would only be legal for extenuating circumstances including rape, incest, fetal nonviability, and severe health risk to the mother. This would render the vast majority of abortions legal without simply saying that it should be permitted without question. Roe v. Wade was actually slightly more permissive than this, but it was itself a very sound compromise.

But even if you didn’t like Roe v. Wade, you should be outraged at the manner in which it was overturned. If the Supreme Court can simply change its mind on rights that have been established for nearly 50 years, then none of our rights are safe. And in chilling comments, Clarence Thomas has declared that this is his precise intention: “In future cases, we should reconsider all of this Court’s substantive due process precedents, including Griswold, Lawrence, and Obergefell.” That is to say, Thomas wants to remove our rights to use contraception and have same-sex relationships. (If Lawrence were overturned, sodomy could be criminalized in several states!)

The good news here is that even the other conservative justices seem much less inclined to overturn these other precedents. Kavanaugh’s concurrent opinion explicitly states he has no intention of overturning “Griswold v. Connecticut, 381 U. S. 479 (1965); Eisenstadt v. Baird, 405 U. S. 438 (1972); Loving v. Virginia, 388 U. S. 1 (1967); and Obergefell v. Hodges, 576 U. S. 644 (2015)”. It seems quite notable that Thomas did not mention Loving v. Virginia, seeing as it was made around the same time as Roe v. Wade, based on very similar principles—and it affects him personally. And even if these precedents are unlikely to be overturned immediately, this ruling shows that the security of all of our rights can depend on the particular inclinations of individual justices.

The Supreme Court is honestly a terrible institution. Courts should not be more powerful than legislatures, lifetime appointments reek of monarchism, and the claim of being ‘apolitical’ that was dubious from the start is now obviously ludicrous. But precisely because it is so powerful, reforming it will be extremely difficult.

The first step is to pack the court. The question is no longer whether we should pack the court, but how, and why we didn’t do it sooner.

What does it mean to pack the court? Increase the number of justices, appointing new ones who are better than the current ones. (Since almost any randomly-selected American would be better than Clarence Thomas, Samuel Alito, or Brent Kavanaugh, this wouldn’t be hard.) This is 100% Constitutional, as the Constitution does not in any way restrict the number of justices. It can simply be done by an act of Congress.

But of course we can’t stop there. President Biden could appoint four more justices, and then whoever comes after him could appoint another three, and before we know it the Supreme Court has twenty-seven justices and each new President is expected to add a few more.

No, we need to fix the number of justices so that it can’t be increased any further. Ideally this would be done by Constitutional Amendment, though the odds of getting such a thing passed seem rather slim. But there is in fact a sensible way to add new justices now and then justify not adding any more later, and that is to tie justices to federal circuits.

There are currently 13 US federal circuit courts. If we added 4 more Supreme Court justices, there would be 13 Supreme Court justices. Each could even be assigned to be the nominal head of that federal circuit, and responsible for being the first to read appeals coming from that circuit.

Which justice goes where? Well, what if we let the circuits themselves choose? The selection could be made by a popular vote among the people who live there. Make the federal circuit a federal popular vote. The justice responsible for the federal circuit can also be the Chief Justice.

That would also require a Constitutional Amendment, but it would, at a stroke, fundamentally reform what the Supreme Court is and how its justices are chosen. For now, we could simply add three new justices, making the current number 13. Then they could decide amongst themselves who will get what circuit until we implement the full system to let circuits choose their justices.

I’m well aware that electing judges is problematic—but at this point I don’t think we have a choice. (I would also prefer to re-arrange the circuits: it’s weird that DC gets its own circuit instead of being part of circuit 4, and circuit 9 has way more people than circuit 1.) We can’t simply trust each new President to appoint a new justice whenever one happens to retire or die and then leave that justice in place for decades to come. Not in a world where someone like Donald Trump can be elected President.

A lot of centrist people are uncomfortable with such a move, seeing it as ‘playing dirty’. But it’s not. It’s playing hardball—taking seriously the threat that the current Republican Party poses to the future of American government and society, and taking substantive steps to fight that threat. (After its authoritarian shift that started in the mid 2000s but really took off under Trump, the Republican Party now has more in common with far-right extremist parties like Fidesz in Hungary than with mainstream center-right parties like the Tories.) But there is absolutely nothing un-Constitutional about this plan. It’s doing everything possible within the law.

We should have done this before they started overturning landmark precedents. But it’s not too late to do it before they overturn any more.

Why do poor people dislike inflation?

Jun 5 JDN 2459736

The United States and United Kingdom are both very unaccustomed to inflation. Neither has seen double-digit inflation since the 1980s.

Here’s US inflation since 1990:

And here is the same graph for the UK:

While a return to double-digits remains possible, at this point it likely won’t happen, and if it does, it will occur only briefly.

This is no doubt a major reason why the dollar and the pound are widely used as reserve currencies (especially the dollar), and is likely due to the fact that they are managed by the world’s most competent central banks. Brexit would almost have made sense if the UK had been pressured to join the Euro; but they weren’t, because everyone knew the pound was better managed.

The Euro also doesn’t have much inflation, but if anything they err on the side of too low, mainly because Germany appears to believe that inflation is literally Hitler. In fact, the rise of the Nazis didn’t have much to do with the Weimar hyperinflation. The Great Depression was by far a greater factor—unemployment is much, much worse than inflation. (By the way, it’s weird that you can put that graph back to the 1980s. It, uh, wasn’t the Euro then. Euros didn’t start circulating until 1999. Is that an aggregate of the franc and the deutsche mark and whatever else? The Euro itself has never had double-digit inflation—ever.)

But it’s always a little surreal for me to see how panicked people in the US and UK get when our inflation rises a couple of percentage points. There seems to be an entire subgenre of economics news that basically consists of rich people saying the sky is falling because inflation has risen—or will, or may rise—by two points. (Hey, anybody got any ideas how we can get them to panic like this over rises in sea level or aggregate temperature?)

Compare this to some other countries thathave real inflation: In Brazil, 10% inflation is a pretty typical year. In Argentina, 10% is a really good year—they’re currently pushing 60%. Kenya’s inflation is pretty well under control now, but it went over 30% during the crisis in 2008. Botswana was doing a nice job of bringing down their inflation until the COVID pandemic threw them out of whack, and now they’re hitting double-digits too. And of course there’s always Zimbabwe, which seemed to look at Weimar Germany and think, “We can beat that.” (80,000,000,000% in one month!? Any time you find yourself talking about billion percent, something has gone terribly, terribly wrong.)

Hyperinflation is a real problem—it isn’t what put Hitler into power, but it has led to real crises in Germany, Zimbabwe, and elsewhere. Once you start getting over 100% per year, and especially when it starts rapidly accelerating, that’s a genuine crisis. Moreover, even though they clearly don’t constitute hyperinflation, I can see why people might legitimately worry about price increases of 20% or 30% per year. (Let alone 60% like Argentina is dealing with right now.) But why is going from 2% to 6% any cause for alarm? Yet alarmed we seem to be.

I can even understand why rich people would be upset about inflation (though the magnitudeof their concern does still seem disproportionate). Inflation erodes the value of financial assets, because most bonds, options, etc. are denominated in nominal, not inflation-adjusted terms. (Though there are such things as inflation-indexed bonds.) So high inflation can in fact make rich people slightly less rich.

But why in the world are so many poor people upset about inflation?

Inflation doesn’t just erode the value of financial assets; it also erodes the value of financial debts. And most poor people have more debts than they have assets—indeed, it’s not uncommon for poor people to have substantial debt and no financial assets to speak of (what little wealth they have being non-financial, e.g. a car or a home). Thus, their net wealth position improves as prices rise.

The interest rate response can compensate for this to some extent, but most people’s debts are fixed-rate. Moreover, if it’s the higher interest rates you’re worried about, you should want the Federal Reserve and the Bank of England not to fight inflation too hard, because the way they fight it is chiefly by raising interest rates.

In surveys, almost everyone thinks that inflation is very bad: 92% think that controlling inflation should be a high priority, and 90% think that if inflation gets too high, something very bad will happen. This is greater agreement among Americans than is found for statements like “I like apple pie” or “kittens are nice”, and comparable to “fair elections are important”!

I admit, I question the survey design here: I would answer ‘yes’ to both questions if we’re talking about a theoretical 10,000% hyperinflation, but ‘no’ if we’re talking about a realistic 10% inflation. So I would like to see, but could not find, a survey asking people what level of inflation is sufficient cause for concern. But since most of these people seemed concerned about actual, realistic inflation (85% reported anger at seeing actual, higher prices), it still suggests a lot of strong feelings that even mild inflation is bad.

So it does seem to be the case that a lot of poor and middle-class people really strongly dislike inflation even in the actual, mild levels in which it occurs in the US and UK.

The main fear seems to be that inflation will erode people’s purchasing power—that as the price of gasoline and groceries rise, people won’t be able to eat as well or drive as much. And that, indeed, would be a real loss of utility worth worrying about.

But in fact this makes very little sense: Most forms of income—particularly labor income, which is the only real income for some 80%-90% of the population—actually increases with inflation, more or less one-to-one. Yes, there’s some delay—you won’t get your annual cost-of-living raise immediately, but several months down the road. But this could have at most a small effect on your real consumption.

To see this, suppose that inflation has risen from 2% to 6%. (Really, you need not suppose; it has.) Now consider your cost-of-living raise, which nearly everyone gets. It will presumably rise the same way: So if it was 3% before, it will now be 7%. Now consider how much your purchasing power is affected over the course of the year.

For concreteness, let’s say your initial income was $3,000 per month at the start of the year (a fairly typical amount for a middle-class American, indeed almost exactly the median personal income). Let’s compare the case of no inflation with a 1% raise, 2% inflation with a 3% raise, and 5% inflation with a 6% raise.

If there was no inflation, your real income would remain simply $3,000 per month, until the end of the year when it would become $3,030 per month. That’s the baseline to compare against.

If inflation is 2%, your real income would gradually fall, by about 0.16% per month, before being bumped up 3% at the end of the year. So in January you’d have $3,000, in February $2,995, in March $2,990. Come December, your real income has fallen to $2,941. But then next January it will immediately be bumped up 3% to $3,029, almost the same as it would have been with no inflation at all. The total lost income over the entire year is about $380, or about 1% of your total income.

If inflation instead rises to 6%, your real income will fall by 0.49% per month, reaching a minimum of $2,830 in December before being bumped back up to $3,028 next January. Your total loss for the whole year will be about $1110, or about 3% of your total income.

Indeed, it’s a pretty good heuristic to say that for an inflation rate of x% with annual cost-of-living raises, your loss of real income relative to having no inflation at all is about (x/2)%. (This breaks down for really high levels of inflation, at which point it becomes a wild over-estimate, since even 200% inflation doesn’t make your real income go to zero.)

This isn’t nothing, of course. You’d feel it. Going from 2% to 6% inflation at an income of $3000 per month is like losing $700 over the course of a year, which could be a month of groceries for a family of four. (Not that anyone can really raise a family of four on a single middle-class income these days. When did The Simpsons begin to seem aspirational?)

But this isn’t the whole story. Suppose that this same family of four had a mortgage payment of $1000 per month; that is also decreasing in real value by the same proportion. And let’s assume it’s a fixed-rate mortgage, as most are, so we don’t have to factor in any changes in interest rates.

With no inflation, their mortgage payment remains $1000. It’s 33.3% of their income this year, and it will be 33.0% of their income next year after they get that 1% raise.

With 2% inflation, their mortgage payment will also fall by 0.16% per month; $998 in February, $996 in March, and so on, down to $980 in December. This amounts to an increase in real income of about $130—taking away a third of the loss that was introduced by the inflation.

With 6% inflation, their mortgage payment will also fall by 0.49% per month; $995 in February, $990 in March, and so on, until it’s only $943 in December. This amounts to an increase in real income of over $370—again taking away a third of the loss.

Indeed, it’s no coincidence that it’s one third; the proportion of lost real income you’ll get back by cheaper mortgage payments is precisely the proportion of your income that was spent on mortgage payments at the start—so if, like too many Americans, they are paying more than a third of their income on mortgage, their real loss of income from inflation will be even lower.

And what if they are renting instead? They’re probably on an annual lease, so that payment won’t increase in nominal terms either—and hence will decrease in real terms, in just the same way as a mortgage payment. Likewise car payments, credit card payments, any debt that has a fixed interest rate. If they’re still paying back student loans, their financial situation is almost certainly improved by inflation.

This means that the real loss from an increase of inflation from 2% to 6% is something like 1.5% of total income, or about $500 for a typical American adult. That’s clearly not nearly as bad as a similar increase in unemployment, which would translate one-to-one into lost income on average; moreover, this loss would be concentrated among people who lost their jobs, so it’s actually worse than that once you account for risk aversion. It’s clearly better to lose 1% of your income than to have a 1% chance of losing nearly all your income—and inflation is the former while unemployment is the latter.

Indeed, the only reason you lost purchasing power at all was that your cost-of-living increases didn’t occur often enough. If instead you had a labor contract that instituted cost-of-living raises every month, or even every paycheck, instead of every year, you would get all the benefits of a cheaper mortgage and virtually none of the costs of a weaker paycheck. Convince your employer to make this adjustment, and you will actually benefit from higher inflation.

So if poor and middle-class people are upset about eroding purchasing power, they should be mad at their employers for not implementing more frequent cost-of-living adjustments; the inflation itself really isn’t the problem.

Maybe we should forgive student debt after all.

May 8 JDN 2459708

President Biden has been promising some form of student debt relief since the start of his campaign, though so far all he has actually implemented is a series of no-interest deferments and some improvements to the existing forgiveness programs. (This is still significant—it has definitely helped a lot of people with cashflow during the pandemic.) Actual forgiveness for a large segment of the population remains elusive, and if it does happen, it’s unclear how extensive it will be in either intensity (amount forgiven) or scope (who is eligible).

I personally had been fine with this; while I have a substantial loan balance myself, I also have a PhD in economics, which—theoretically—should at some point entitle me to sufficient income to repay those loans.

Moreover, until recently I had been one of the few left-wing people I know to not be terribly enthusiastic about loan forgiveness. It struck me as a poor use of those government funds, because $1.75 trillion is an awful lot of money, and college graduates are a relatively privileged population. (And yes, it is valid to consider this a question of “spending”, because the US government is the least liquidity-constrained entity on Earth. In lieu of forgiving $1.75 trillion in debt, they could borrow $1.75 trillion in debt and use it to pay for whatever they want, and their ultimate budget balance would be basically the same in each case.)

But I say all this in the past tense because Krugman’s recent column has caused me to reconsider. He gives two strong reasons why debt forgiveness may actually be a good idea.

The first is that Congress is useless. Thanks to gerrymandering and the 40% or so of our population who keeps electing Republicans no matter how crazy they get, it’s all but impossible to pass useful legislation. The pandemic relief programs were the exception that proves the rule: Somehow those managed to get through, even though in any other context it’s clear that Congress would never have approved any kind of (non-military) program that spent that much money or helped that many poor people.

Student loans are the purview of the Department of Education, which is entirely under control of the Executive Branch, and therefore, ultimately, the President of the United States. So Biden could forgive student loans by executive order and there’s very little Congress could do to stop him. Even if that $1.75 trillion could be better spent, if it wasn’t going to be anyway, we may as well use it for this.

The second is that “college graduates” is too broad a category. Usually I’m on guard for this sort of thing, but in this case I faltered, and did not notice the fallacy of composition so many labor economists were making by lumping all college grads into the same economic category. Yes, some of us are doing well, but many are not. Within-group inequality matters.

A key insight here comes from carefully analyzing the college wage premium, which is the median income of college graduates, divided by the median income of high school graduates. This is an estimate of the overall value of a college education. It’s pretty large, as a matter of fact: It amounts to something like a doubling of your income, or about $1 million over one’s whole lifespan.

From about 1980-2000, wage inequality grew about as fast as today, and the college wage premium grew even faster. So it was plausible—if not necessarily correct—to believe that the wage inequality reflected the higher income and higher productivity of college grads. But since 2000, wage inequality has continued to grow, while the college wage premium has been utterly stagnant. Thus, higher inequality can no longer (if it ever could) be explained by the effects of college education.

Now some college graduates are definitely making a lot more money—such as those who went into finance. But it turns out that most are not. As Krugman points out, the 95th percentile of male college grads has seen a 25% increase in real (inflation-adjusted) income in the last 20 years, while the median male college grad has actually seen a slight decrease. (I’m not sure why Krugman restricted to males, so I’m curious how it looks if you include women. But probably not radically different?)

I still don’t think student loan forgiveness would be the best use of that (enormous sum of) money. But if it’s what’s politically feasible, it definitely could help a lot of people. And it would be easy enough to make it more progressive, by phasing out forgiveness for graduates with higher incomes.

And hey, it would certainly help me, so maybe I shouldn’t argue too strongly against it?

Welp, I have COVID.

May 1 JDN 2459701

Tuesday night I had a fever. Wednesday morning, I tested positive.

Given how the pandemic has been going, I suppose it was more or less inevitable that this day would come. From almost the beginning, the refrain was “flatten the curve”, not “wait for a cure”. It was expected that almost all of us would get the virus eventually, and just a question of how long we could draw that out. In my case, apparently two years. For that whole time I had been scrupulous about precautions, but I did not sustain all of them all of the time, and indeed as Scotland loosened restrictions I think I became too complacent.

The good news is that I am young and reasonably healthy (migraines notwithstanding), and I had three doses of the Moderna vaccine. As a result my symptoms are relatively mild; I feel like I have a bad cold or perhaps a mild flu. Aside from the fever, which I’ve been able to keep down with NSAIDs, pretty much all my symptoms are in my sinuses. So far, I haven’t even lost my sense of taste.

It hasn’t even really interfered with my work, because my migraines were already doing a bang-up job of that. (My accent remains consistently “American broadcast standard”, but as you can see, I am gradually picking up some Britishisms, such as “bang-up job” and “sorted” with no “out”, as well as learning to put the “u” in “labour” and “behaviour”. I doubt I’ll ever start saying “aye” and “nae” though.) I am in fact even less productive than I was without COVID, but the marginal difference is relatively small. The main activity it has kept me from doing is moving and unpacking boxes (now that our shipment from California has finally arrived).

So, all things considered, if I was going to get infected with a pandemic and potentially life-threatening virus, it could have been a lot worse.

Centrism is dying in America.

Apr 24 JDN 2459694

Four years ago—back when (shudder) Trump was President—I wrote a post about the true meaning of centrism, the kind of centrism worth defending.

I think it’s worth repeating now: Centrism isn’t saying “both sides are the same” when they aren’t. It’s recognizing that the norms of democracy themselves are worth defending—and more worth defending than almost any specific policy goal.

I wanted to say any specific policy goal, but I do think you can construct extreme counterexamples, like “establish a 100% tax on all income” (causing an immediate, total economic collapse), or “start a war with France” (our staunchest ally for the past 250 years who also has nuclear weapons). But barring anything that extreme, just about any policy is less important than defending democracy itself.

Or at least I think so. It seems that most Americans disagree. On both the left and the right—but especially on the right—a large majority of American voters are still willing to vote for a candidate who flouts basic democratic norms as long as they promise the right policies.

I guess on the right this fact should have been obvious: Trump. But things aren’t much better on the left, and should some actual radical authoritarian communist run for office (as opposed to, you know, literally every left-wing politician who is accused of being a radical authoritarian communist), this suggests that a lot of leftist voters might actually vote for them, which is nearly as terrifying.

My hope today is that I might tip the balance a little bit the other direction, remind people why democracy is worth defending, even at the cost of our preferred healthcare systems and marginal tax rates.

This is, above all, that democracy is self-correcting. If a bad policy gets put in place while democratic norms are still strong, then that policy can be removed and replaced with something better later on. Authoritarianism lacks this self-correction mechanism; get someone terrible in power and they stay in power, doing basically whatever they want, unless they are violently overthrown.

For the right wing, that’s basically it. You need to stop making excuses for authoritarianism. Basically none of your policies are so important that they would justify even moderate violations of democratic norms—much less than Trump already committed, let alone what he might do if re-elected and unleashed. I don’t care how economically efficient lower taxes or privatized healthcare might be (and I know that there are in fact many economists who would agree with you on that, though I don’t), it isn’t worth undermining democracy. And while I do understand why you consider abortion to be such a vital issue, you really need to ask yourself whether banning abortion is worth living under a fascist government, because that’s the direction you’re headed. Let me note that banning abortion doesn’t even seem to reduce it very much, so there’s that. While the claim that abortion bans do nothing is false, even a total overturn of Roe v. Wade would most likely reduce US abortions by about 15%—much less than the 25% decrease between 2008 and 2014, which was also part of a long-term trend of decreasing abortion rates which are now roughly half what they were in 1980. We don’t need to ban abortion in order to reduce it—and indeed many of the things that work are things like free healthcare and easy access to contraception that right-wing governments typically resist. So even if you consider abortion to be a human rights violation, which I know many of you do, is that relatively small reduction in abortion rates worth risking the slide into fascism?

But for the left wing, things are actually a bit more complicated. Some right-wing policies—particularly social policies—are inherently anti-democratic and violations of human rights. I gave abortion the benefit of the doubt above; I can at least see why someone would think it’s a human rights violation (though I do not). Here I’m thinking particularly of immigration policies that lock up children at the border and laws that actively discriminate against LGBT people. I can understand why people would be unwilling to “hold their nose” and vote for someone who wants to enact that kind of policy—though if it’s really the only way to avoid authoritarianism, I think we might still have to do it. Democracy is too high a price to pay; give it up now and there is nothing to stop that new authoritarian leftist government from turning into a terrible nightmare (that may not even remain leftist, by the way!). If we vote in someone who is pro-democratic but otherwise willing to commit these sorts of human rights violations, hopefully we can change things by civic engagement or vote them out of office later on (and over the long run, we do, in fact, have a track record of doing that). But if we vote in someone who will tear apart democracy even when they seem to have the high ground on human rights, then once democracy is undermined, the new authoritarian government can oppress us in all sorts of ways (even ways they specifically promised not to!), and we will have very little recourse.

Above all, even if they promise to give us everything we want, once you put an authoritarian in power, they can do whatever they want. They have no reason to keep their promises (whereas, contrary to popular belief, democratic politicians actually typically do), for we have no recourse if they don’t. Our only option to remove them from power is violent revolution—which usually fails, and even if it succeeds, would have an enormous cost in human lives.

Why is this a minority view? Why don’t more Americans agree with this?

I can think of a few possible reasons.

One is that they may not believe that these violations of democratic norms are really all that severe or worrisome. Overriding a judge with an executive order isn’t such a big deal, is it? Gerrymandering has been going on for decades, why should we worry about it now?

If that is indeed your view, let me remind you that in January 2021, armed insurrectionists stormed the Capitol building. That is not something we can just take lying down. This is a direct attack upon the foundations of democracy, and while it failed (miserably, and to be honest, hilariously), it wasn’t punished nearly severely enough—most of the people involved were not arrested on any charges, and several are now running for office. This lack of punishment means that it could very well happen again, and this time be better organized and more successful.

A second possibility is that people do not know that democracy is being undermined; they are somehow unaware that this is happening. If that’s the case, all I can tell you is that you really need to go to the Associated Press or New York Times website and read some news. You would have to be catastrophically ignorant of our political situation, and you frankly don’t deserve to be voting if that is the case.

But I suspect that for most people, a third reason applies: They see that democracy is being undermined, but they blame the other side. We aren’t the ones doing it—it’s them.

Such a view is tempting, at least from the left side of the aisle. No Democratic Party politician can hold a candle to Trump as far as authoritarianism (or narcissism). But we should still be cognizant of ways that our actions may also undermine democratic norms: Maybe we shouldn’t be considering packing the Supreme Court, unless we can figure out a way to ensure that it will genuinely lead to a more democratic and fair court long into the future. (For the latter sort of reform, suppose each federal district elected its own justice? Or we set up a mandatory retirement cycle such that every President would always appoint at least one justice?)

But for those of you on the right… How can you possibly think this? Where do you get your information from? How can you look at Donald Trump and think, “This man will defend our democracy from those left-wing radicals”? Right now you may be thinking, “oh, look, he suggested the New York Times; see his liberal bias”; that is a newspaper of record in the United States. While their editors are a bit left of center, they are held to the highest standards of factual accuracy. But okay, if you prefer the Wall Street Journal (also a newspaper of record, but whose editors are a bit more right of center), be my guest; their factual claims won’t disagree, because truth is truth. I also suggested the Associated Press, widely regarded worldwide as one of the most credible news sources. (I considered adding Al Jazeera, which has a similar reputation, but figured you wouldn’t go for that.)

If you think that the attack on the Capitol was even remotely acceptable, you must think that their claims of a stolen election were valid, or at least plausible. But every credible major news source, the US Justice Department, and dozens of law courts agree that they were not. Any large election is going to have a few cases of fraud, but there were literally only hundreds of fradulent votes—in an election in which over 150 million votes were cast, Biden won the popular vote by over 7 million votes, and no state was won by less than 10,000 votes. This means that 99.999% of votes were valid, and even if every single fradulent vote had been for Biden and in Georgia (obviously not the case), it wouldn’t have been enough to tip even that state.

I’m not going to say that left-wing politicians never try to undermine democratic norms—there’s certainly plenty of gerrymandering, and I just said, court-packing is at least problematic. Nor would I say that the right wing is always worse about this. But it should be pretty obvious to anyone with access to basic factual information—read: everyone with Internet access—that right now, the problem is much worse on the right. You on the right need to face up to that fact, and start voting out Republicans who refuse to uphold democracy, even if it means you have to wait a bit longer for lower taxes or more (let me remind you, not very effective) abortion bans.

In the long run, I would of course like to see changes in the whole political system, so that we are no longer dominated by two parties and have a wider variety of realistic options. (The best way to do that would of couse be range voting.) But for now, let’s start by ensuring that democracy continues to exist in America.