current events

How we can actually solve the housing shortage

PNRJ current events, inequality, market failure, public policy , , , , , , ,

Sep 16 JDN 2458378

In previous posts I’ve talked about the housing crisis facing most of the world’s major cities. (Even many cities in Africa are now facing a housing crisis!) In this post, I’m going to look at the empirical data to see if we can find a way to solve this crisis.

Most of the answer, it turns out, is really not that complicated: Build more housing.

There is a little bit more to it than that, but only a little bit. The basic problem is simply that there are more households than there are houses to hold them.

One of the biggest hurdles to fixing the housing crisis comes ironically from the left, in resistance to so-called “gentrification”. Local resistance to new construction is one of the greatest obstacles to keeping housing affordable. State and federal regulations are generally quite sensible: No industrial waste near the playgrounds. It’s the local regulations that make new housing so difficult.

I can understand why people fight “gentrification”: They see new housing going in as housing prices increase, and naturally assume that new houses cause higher prices. But it’s really the other way around: High prices cause new construction, which brings prices down. By its nature, new housing is almost always more expensive than existing housing. Building new housing still brings down the overall price of housing, even when the new housing is expensive. Building luxury condos does make existing apartments more affordable—and not building anything most certainly does not.

California’s housing crisis is particularly severe: California has been building less than half the units needed to sustain its current population trend since the crash in 2008. It’s worst of all in the Bay Area, where 500,000 jobs were added since 2009—and only 50,000 homes. California also has a big problem with delays in the permit process: Typically it takes as long as three or four years between approval and actual breaking ground.

We are seeing this in Oakland currently: The government has approved an actually reasonable amount of housing for once (vastly more than what they usually do), and as a result they may have a chance at keeping Oakland affordable even as it grows its population and economy. And yet we still get serious journalists saying utter nonsense like “The building boom and resulting gentrification are squeezing the city’s most vulnerable.” Building booms don’t cause gentrification. Building booms are the best response to gentrification. When you say things like that, you sound to an economist like you’re saying “Pizza is so expensive; we need to stop people from making pizza!”

Homeowners who want to increase their property values may actually be rational—if incredibly selfish and monopolistic—in trying to block new construction. But activists who oppose “gentrification” need to stop shooting themselves in the foot by fighting the very same development that would have made housing cheaper.

The simplest thing we can do is make it easier to build housing. Streamline the permit process, provide subsidies, remove unnecessary regulations. Housing is one of the few markets where I can actually see a lot of unnecessary regulations. We don’t need to require parking; we should provide better public transit instead. And while requiring solar panels (as the whole state is now doing) sounds nice, it makes everything a lot more expensive—and by only requiring it on new housing, you are effectively saying you don’t want any new housing. I love solar panels, but what you should be doing is subsidizing solar panels, not requiring them. Does that cost the state budget more? Yes. Raise taxes on something else (a particularly good idea: electricity consumption) if you have to. But by mandating solar panels without any subsidies to support them, you are effectively putting a tax on new housing—which is exactly what California does not need.

It’s still a good idea to create incentives to build not simply housing, but affordable housing. There are ways to do this as well. Denver did an excellent job in creating an Affordable Housing Fund that they immediately spent in converting vacant apartments into affordable housing units.

There are also good reasons to try to fight foreign ownership of housing (and really, speculative ownership of housing in general). There is a strong correlation between current account deficits and housing appreciation, which makes sense if foreign investors are buying up our housing and making it more expensive. If Trump could actually reduce our trade deficit, that would drive down our current account deficit and quite likely make our housing more affordable. Of course, he has absolutely no idea how to do that.

Victor Duggan has a pretty good plan for lowering housing prices in Ireland which includes a land tax (as I’ve discussed previously) and a tax on foreign ownership of real estate. I disagree with him about the “Help-to-Buy” program, however; I actually think that was a fine idea, since the goal is not simply to keep housing cheap but to get people into houses. That wealth transfer is going to raise prices at the producer side—increasing production—but not at the consumer side—because people get compensated by the tax rebate. The net result should be more housing without more cost for buyers. You could have done the same thing by subsidizing construction, but I actually like the idea of putting the money directly in the pockets of homeowners. The tax incidence shouldn’t be much different in the long run, but it makes for a much more appealing and popular program.

We must stop Kavanaugh now!

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Post 257: Sep 16 JDN 2458378

I realized that this post can’t afford to wait a week. It’s too urgent.

It’s the best news I’ve heard in a long time: Paul Manafort has pled guilty and is cooperating with the investigation. This is a good day for Mueller, a bad day for Trump—and a great day for America.

Manafort himself has been involved in international corruption for decades. It’s a shame that he will now be getting off light on some of his crimes. But prosecutors would only do that if he had information to share with them that was of commensurate value—and I’m willing to bet that means he has information to implicate the Donald himself. Trump is right to be afraid.

Of course, we are still a long way from impeaching Trump, let alone removing him from office, much less actually restoring normalcy and legitimacy to our executive branch. We are still in a long, dark tunnel—but perhaps at last we are beginning to glimpse the light at the other end.

We should let Mueller and the federal prosecutors do their jobs; so far, they’ve done them quite well. In the meantime, instead of speculating about just how deep this rabbit hole of corruption goes (come on, we know Trump is corrupt; the only question is how much and with whom), it would be better to focus our attention on ensuring that Trump cannot leave a lasting legacy of destruction in his wake.

Priority number one is stopping Brett Kavanaugh. Kavanaugh may seem like just another right-wing justice (after Scalia, how much worse can it get, really?), but no, he really is worse than that. He barely even pretends to respect the Constitution or past jurisprudence, and has done an astonishingly poor job of hiding his political agenda or his personal devotion to Trump. The most fundamental flaw of the US Supreme Court is the near-impossibility of removing a justice once appointed; that makes it absolutely vital that we stop his appointment from being confirmed.

It isn’t just Roe v. Wade that will be overturned if he gets on the court (that, at least, I can understand why a substantial proportion of Americans would approve—abortion is a much more complicated issue than either pro-life or pro-choice demagogues would have you believe, as the Stanford Encyclopedia of Philosophy agrees). Kavanaugh looks poised to tear apart a wide variety of protections for civil rights, environmental sustainability, and labor protections. Sadly, our current Republican Party has become so craven, so beholden to party above country and all else, that they will most likely vote to advance, and ultimately, confirm, his nomination. And America, and all the world, will suffer for it, for decades to come.

If this happens, whom should we blame? Well, first of all, Trump and Kavanaugh themselves, of course. Second, the Republicans who confirmed Kavanaugh. Third, everyone who voted for Trump. But fourth? Everyone who didn’t vote for Clinton. Everyone who said, “She’s just as bad”, or “The two parties are the same”, or “He can’t possibly win”, or “We need real change”, and either sat home or voted for a third party—every one of those people has a little bit of blood on their hands. If the US Supreme Court spends the next 30 years tearing away the rights of women, racial minorities, LGBT people, and the working class, it will be at least a little bit their fault. When the asbestos returns to our buildings, the ozone layer resumes its decay, and all the world’s coastlines flood ever higher, they will bear at least some responsibility. All their claimed devotion to a morally purer “true” left wing will mean absolutely nothing—for it was only our “cynical” “corrupt” “neoliberal” pragmatism that even tried to hold the line. It is not enough to deserve to win—you must actually win.

But it’s not too late. Not yet. We can still make our voices heard. If you have any doubt about whether your Senator will vote against Kavanaugh (living in California, I frankly don’t—say what you will about Dianne Feinstein and Kamala Harris, they have made their opposition to Kavanaugh abundantly clear at every opportunity), write or call that Senator and tell them why they must.

The confirmation vote is this Thursday, September 20. Make your voice heard by then, or it may be too late.

We are in a golden age of corporate profits

PNRJ current events, inequality, public policy , , , , , , , , , , , ,

Sep 2 JDN 245836

Take a good look at this graph, from the Federal Reserve Economic Database:

corporate_profits
The red line is corporate profits before tax. It is, unsurprisingly, the largest. The purple line is corporate profits after tax, with the standard adjustments for inventory depletion and capital costs. The green line is revenue from the federal corporate tax. Finally, I added a dashed blue line which multiplies before-tax profits by 30% to compare more directly with tax revenues. All these figures are annual, inflation-adjusted using the GDP deflator. The units are hundreds of billions of 2012 dollars.

The first thing you should notice is that the red and purple lines are near the highest they have ever been. Before-tax profits are over $2 trillion. After-tax profits are over $1.6 trillion.

Yet, corporate tax revenues are not the highest they have ever been. In 2006, they were over $400 billion; yet this year they don’t even reach $300 billion. The obvious reason for this is that we have been cutting corporate taxes. The more important reason is that corporations have gotten very good at avoiding whatever corporate taxes we charge.

On the books, we used to have a corporate tax rate of about 35%, which Trump just cut to 21%. But if you look at my dashed line, you can see that corporations haven’t actually paid more than 30% of their profits in taxes since 1970—and back then, the rate on the books was almost 50%.

Corporations have always avoided taxes. The effective tax rate—tax revenue divided by profits—is always much lower than the rate on the books. In 1951, the statutory tax rate was 50.75%; the effective rate was 47%. In 1970, the statutory rate was 49.2%; the effective rate was 31%. In 1993, the statutory rate was 35%; the effective rate was 26%. On average, corporations paid about 2/3 to 3/4 of what the statutory rate said.

corporate_tax_rate

You can even see how the effective rate trended steadily downward, much faster than the statutory rate. Corporations got better and better at finding and creating loopholes to let them avoid taxes. In 1950, the statutory rate was 38%—and sure enough, the effective rate was… 38%. Under Truman, corporations actually paid what they said they paid. Compare that to 1987, under Reagan, when the statutory rate was 40%—but the effective rate was only 26%.

Yet even with that downward trend, something happened under George W. Bush that widened the gap even further. While the statutory rate remained fixed at 35%, the effective rate plummeted from 26% in 2000 to 16% in 2002. The effective rate never again rose above 19%, and in 2009 it hit a minimum of just over 10%—less than one-third the statutory tax rate. It was trending upward, making it as “high” as 15%, until Trump’s tax cuts hit; in 2017 it was 13%, and it is projected to be even lower this year.

This is why it has always been disingenuous to compare our corporate tax rates with other countries and complain that they are too high. Our effective corporate tax rates have been in line with most other highly-developed countries for a long time now. The idea of “cutting rates and removing loopholes” sounds good in principle—but never actually seems to happen. George W. Bush’s “tax reforms” which were supposed to do this added so many loopholes that the effective tax rate plummeted.

I’m actually fairly ambivalent about corporate taxes in general. Their incidence really isn’t well-understood, though as Krugman has pointed out, so much of corporate profit is now monopoly rent that we can reasonably expect most of the incidence to fall on shareholders. What I’d really like to see happen is a repeal of the corporate tax combined with an increase in capital gains taxes. But we haven’t been increasing capital gains taxes; we’ve just been cutting corporate taxes.

The result has been a golden age for corporate profits. Make higher profits than ever before, and keep almost all of them without paying taxes! Nevermind that the deficit is exploding and our infrastructure is falling apart. America was founded in part on a hatred of taxes, so I guess we’re still carrying on that proud tradition.

Slides from my presentation at Worldcon

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Whether you are a regular reader curious about my Worldcon talk, or a Worldcon visitor interested in seeing the slides, The slides from my presentation, “How do we get to the Federation from here?” can be found here.

I will be presenting at Worldcon this year!

PNRJ current events, futurism, personal, public policy

I interrupt my usual broadcast for this special report. I will be speaking at Worldcon 76 in San Jose this year. My talk, “How do we get to the Federation from here?” is on world government, and will be held in room 212C of the convention center at 5:00 PM on Sunday, August 19. (Here is Worldcon’s complete program guide.

In lieu of my regular blog post next week, I’ll be posting the slides from my talk.

How (not) to destroy an immoral market

PNRJ critique of neoclassical economics, current events, ethics, market failure, public policy , , , , , , , , , , , , ,

Jul 29 JDN 2458329

In this world there are people of primitive cultures, with a population that is slowly declining, trying to survive a constant threat of violence in the aftermath of colonialism. But you already knew that, of course.

What you may not have realized is that some of these people are actively hunted by other people, slaughtered so that their remains can be sold on the black market.

I am referring of course to elephants. Maybe those weren’t the people you first had in mind?

Elephants are not human in the sense of being Homo sapiens; but as far as I am concerned, they are people in a moral sense.

Elephants take as long to mature as humans, and spend most of their childhood learning. They are born with brains only 35% of the size of their adult brains, much as we are born with brains 28% the size of our adult brains. Their encephalization quotients range from about 1.5 to 2.4, comparable to chimpanzees.

Elephants have problem-solving intelligence comparable to chimpanzees, cetaceans, and corvids. Elephants can pass the “mirror test” of self-identification and self-awareness. Individual elephants exhibit clearly distinguishable personalities. They exhibit empathy toward humans and other elephants. They can think creatively and develop new tools.

Elephants distinguish individual humans or elephants by sight or by voice, comfort each other when distressed, and above all mourn their dead. The kind of mourning behaviors elephants exhibit toward the remains of their dead family members have only been observed in humans and chimpanzees.

On a darker note, elephants also seek revenge. In response to losing loved ones to poaching or collisions with trains, elephants have orchestrated organized counter-attacks against human towns. This is not a single animal defending itself, as almost any will do; this is a coordinated act of vengeance after the fact. Once again, we have only observed similar behaviors in humans, great apes, and cetaceans.

Huffington Post backed off and said “just kidding” after asserting that elephants are people—but I won’t. Elephants are people. They do not have an advanced civilization, to be sure. But as far as I am concerned they display all the necessary minimal conditions to be granted the fundamental rights of personhood. Killing an elephant is murder.

And yet, the ivory trade continues to be profitable. Most of this is black-market activity, though it was legal in some places until very recently; China only restored their ivory trade ban this year, and Hong Kong’s ban will not take full effect until 2021. Some places are backsliding: A proposal (currently on hold) by the US Fish and Wildlife Service under the Trump administration would also legalize some limited forms of ivory trade.
With this in mind, I can understand why people would support the practice of ivory-burning, symbolically and publicly destroying ivory by fire so that no one can buy it. Two years ago, Kenya organized a particularly large ivory-burning that set ablaze 105 tons of elephant tusk and 1.35 tons of rhino horn.

But as economist, when I first learned about ivory-burning, it seemed like a really, really bad idea.

Why? Supply and demand. By destroying supply, you have just raised the market price of ivory. You have therefore increased the market incentives for poaching elephants and rhinos.

Yet it turns out I was wrong about this, as were many other economists. I looked at the empirical research, and changed my mind substantially. Ivory-burning is not such a bad idea after all.

Here was my reasoning before: If I want to reduce the incentives to produce something, what do I need to do? Lower the price. How do I do that? I need to increase the supply. Economists have made several proposals for how to do that, and until I looked at the data I would have expected them to work; but they haven’t.

The best way to increase supply is to create synthetic ivory that is cheap and very difficult to tell apart from the real thing. This has been done, but it didn’t work. For some reason, sellers try to hide the expensive real ivory in with the cheap synthetic ivory. I admit I actually have trouble understanding this; if you can’t sell it at full price, why even bother with the illegal real ivory? Maybe their customers have methods of distinguishing the two that the regulators don’t? If so, why aren’t the regulators using those methods? Another concern with increasing the supply of ivory is that it might reduce the stigma of consuming ivory, thereby also increasing the demand.

A similar problem has arisen with so-called “ghost ivory”; for obvious reasons, existing ivory products were excluded from the ban imposed in 1947, lest the government be forced to confiscate millions of billiard balls and thousands of pianos. Yet poachers have learned ways to hide new, illegal ivory and sell it as old, legal ivory.

Another proposal was to organize “sustainable ivory harvesting”, which based on past experience with similar regulations is unlikely to be enforceable. Moreover, this is not like sustainable wood harvesting, where our only concern is environmental. I for one care about the welfare of individual elephants, and I don’t think they would want to be “harvested”, sustainably or otherwise.
There is one way of doing “sustainable harvesting” that might not be so bad for the elephants, which would be to set up a protected colony of elephants, help them to increase their population, and then when elephants die of natural causes, take only the tusks and sell those as ivory, stamped with an official seal as “humanely and sustainably produced”. Even then, elephants are among a handful of species that would be offended by us taking their ancestors’ remains. But if it worked, it could save many elephant lives. The bigger problem is how expensive such a project would be, and how long it would take to show any benefit; elephant lifespans are about half as long as ours, (except in zoos, where their mortality rate is much higher!) so a policy that might conceivably solve a problem in 30 to 40 years doesn’t really sound so great. More detailed theoretical and empirical analysis has made this clear: you just can’t get ivory fast enough to meet existing demand this way.

In any case, China’s ban on all ivory trade had an immediate effect at dropping the price of ivory, which synthetic ivory did not. Before that, strengthened regulations in the US (particularly in New York and California) had been effective at reducing ivory sales. The CITES treaty in 1989 that banned most international ivory trade was followed by an immediate increase in elephant populations.

The most effective response to ivory trade is an absolutely categorical ban with no loopholes. To fight “ghost ivory”, we should remove exceptions for old ivory, offering buybacks for any antiques with a verifiable pedigree and a brief period of no-penalty surrender for anything with no such records. The only legal ivory must be for medical and scientific purposes, and its sourcing records must be absolutely impeccable—just as we do with human remains.

Even synthetic ivory must also be banned, at least if it’s convincing enough that real ivory could be hidden in it. You can make something you call “synthetic ivory” that serves a similar consumer function, but it must be different enough that it can be easily verified at customs inspections.

We must give no quarter to poachers; Kenya was right to impose a life sentence for aggravated poaching. The Tanzanian proposal to “shoot to kill” was too extreme; summary execution is never acceptable. But if indeed someone currently has a weapons pointed at an elephant and refuses to drop it, I consider it justifiable to shoot them, just as I would if that weapon were aimed at a human.

The need for a categorical ban is what makes the current US proposal dangerous. The particular exceptions it carves out are not all that large, but the fact that it carves out exceptions at all makes enforcement much more difficult. To his credit, Trump himself doesn’t seem very keen on the proposal, which may mean that it is dead in the water. I don’t get to say this often, but so far Trump seems to be making the right choice on this one.

Though the economic theory predicted otherwise, the empirical data is actually quite clear: The most effective way to save elephants from poaching is an absolutely categorical ban on ivory.

Ivory-burning is a signal of commitment to such a ban. Any ivory we find being sold, we will burn. Whoever was trying to sell it will lose their entire investment. Find more, and we will burn that too.

Most trade barriers are not tariffs

PNRJ current events, development economics, macroeconomics, market failure , , , , , , ,

Jul 8 JDN 2458309

When we talk about “protectionism” or “trade barriers”, what usually comes to mind is tariffs: taxes imposed on imports or exports. But especially now that international trade organizations have successfully reduced tariffs around the world, most trade barriers are not of this form at all.

Especially in highly-developed countries, but really almost everywhere, the most common trade barriers are what is simply but inelegantly called non-tariff barriers to trade: this includes licenses, quotas, subsidies, bailout guarantees, labeling requirements, and even some environmental regulations.

Non-tariff barriers are much more complicated to deal with, for at least three reasons.

First, with the exception of quotas and subsidies, non-tariff barriers are not easily quantifiable. We can easily put a number on the value of a tariff (though its impact is somewhat subtler than that), but this is not so easy for the effect of a bailout guarantee or a labeling requirement.

Second, non-tariff barriers are often much harder to detect. It’s obvious enough that imposing a tax on imported steel will reduce our imports of steel; but it requires a deeper understanding of the trade system to understand why bailing out domestic banks would distort financial flows, interest rates and exchange rates (even though the impact of this may actually be larger—the effect on global trade of US bank bailouts was between $35 billion and $110 billion).

Third, some trade barriers are either justifiable or simply inevitable. Simply having customs screening at the border is a non-tariff barrier, but it is widely regarded as a justifiable security measure (and I agree, by the way, even though I am generally in favor of much more open borders). Requiring strict labor and environmental standards on the production of products both domestic and imported is highly beneficial, but also imposes a trade barrier. In a broader sense, differences in language and culture could even be regarded as trade barriers (they certainly increase the real cost of trade), but it’s not clear that we could eliminate such things even if we wanted to.

This requires us to look very closely at almost every major government policy, to see how it might be distorting world trade. Some policies won’t meaningfully distort trade at all; these are not trade barriers. Others will distort trade, but are beneficial enough in other ways that they are still worth it; these are justifiable trade barriers. Still others will distort trade so much that they cannot be justified despite their other benefits. Finally, some policies will be put in place more or less explicitly to distort trade, usually in the form of protectionism to prop up domestic industries.

Protectionist policies are of course the first things to get rid of. Honestly, it baffles me that people even want to impose them in the first place. For some reason they think of exports as the benefit and imports as the cost, when it’s really the other way around; when we impose protectionism, we go out of our way to make it harder to get cars and iPhones so that we can stop other countries from taking our green paper. This seems to be tied to the fact that people think of jobs as something desirable, when really it’s wealth that’s desirable, and jobs are just one way of getting wealth—in some sense the most expensive way. Our macroeconomic policy obsesses over inflation, which is almost literally meaningless (as long as it is not too unpredictable, really nothing would change if inflation were raised from 2% to 4% or even 10%) and unemployment, which is at best an imperfect indicator of what we really should care about, namely the welfare of our people. A world of full employment with poverty wages is much worse than a world of high unemployment where a basic income provides for everyone’s needs. It is true that in our current system, unemployment is closely tied to a lot of very bad outcomes—but I maintain that this is largely because unemployment entails losing your income and your healthcare.

Some regulations that appear benign may actually be harmful because of their effects on trade. Yet I should also point out that it’s possible to go too far the other direction, and start tearing down all regulations in the name of reducing trade barriers. We particularly seem to do this in the financial industry, where “deregulation” seems to be on everyone’s lips until it causes a crisis, then we impose some regulations that fix the worst problems, things look good for awhile—and then we go back around and everyone starts talking about “deregulation” again. Meanwhile, the same people who talk about “freedom” as an excuse for removing financial safeguards are the ones who lock up children at the border. I think this is something that needs to be reframed: Which regulations are you removing? Just what, exactly, are you making legal that wasn’t before? Legalizing murder would be “deregulation”.

Trade policy, therefore, is a very delicate balance, between removing distortions and protecting legitimate public interests, between the needs of your own country and the world as a whole. This is why we need this whole apparatus of international trade institutions; it’s not a simple matter.

But I will say this: It would probably help if people educated themselves a bit more about how trade actually works before voting in politicians who promise to “save their jobs” from foreign competition.

Sympathy for the incel

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Post 237: May 6 JDN 2458245

If you’ve been following the news surrounding the recent terrorist attack in Toronto, you may have encountered the word “incel” for the first time via articles in NPR, Vox, USA Today, or other sources linking the attack to the incel community.

If this was indeed your first exposure to the concept of “incel”, I think you are getting a distorted picture of their community, which is actually a surprisingly large Internet subculture. Finding out about incel this way would be like finding out about Islam from 9/11. (Actually, I’m fairly sure a lot of Americans did learn that way, which is awful.) The incel community is remarkably large one—hundreds of thousands of members at least, and quite likely millions.

While a large proportion subscribe to a toxic and misogynistic ideology, a similarly large proportion do not; while the ideology has contributed to terrorism and other violence, the vast majority of members of the community are not violent.

Note that the latter sentence is also entirely true of Islam. So if you are sympathetic toward Muslims and want to protect them from abuse and misunderstanding, I maintain that you should want to do the same for incels, and for basically the same reasons.

I want to make something abundantly clear at the outset:

This attack was terrorism. I am in no way excusing or defending the use of terrorism. Once someone crosses the line and starts attacking random civilians, I don’t care what their grievances were; the best response to their behavior involves snipers on rooftops. I frankly don’t even understand the risks police are willing to take in order to capture these people alive—especially considering how trigger-happy they are when it comes to random Black men. If you start shooting (or bombing, or crashing vehicles into) civilians, the police should shoot you. It’s that simple.

I do not want to evoke sympathy for incel-motivated terrorism. I want to evoke sympathy for the hundreds of thousands of incels who would never support terrorism and are now being publicly demonized.

I also want to make it clear that I am not throwing in my hat with the likes of Robin Hanson (who is also well-known as a behavioral economist, blogger, science fiction fan, Less Wrong devotee, and techno-utopian—so I feel a particular need to clarify my differences with him) when he defends something he calls in purposefully cold language “redistribution of sex” (that one is from right after the attack, but he has done this before, in previous blog posts).

Hanson has drunk Robert Nozick‘s Kool-Aid, and thinks that redistribution of wealth via taxation is morally equivalent to theft or even slavery. He is fond of making comparisons between redistribution of wealth and other forms of “redistribution” that obviously would be tantamount to theft and slavery, and asking “What’s the difference?” when in fact the difference is glaringly obvious to everyone but him. He is also fond of saying that “inequality between households within a nation” is a small portion of inequality, and then wondering aloud why we make such a big deal out of it. The answer here is also quite obvious: First of all, it’s not that small a portion of inequality—it’s a third of global income inequality by most measures, it’s increasing while across-nation inequality is decreasing, and the absolute magnitude of within-nation inequality is staggering: there are households with incomes over one million times that of other households within the same nation. (Where are the people who have had sex one hundred billion times, let alone the ones who had sex forty billion times in one year? Because here’s the man who has one hundred billion dollars and made almost $40 billion in one year.) Second, within-nation inequality is extremely simple to fix by public policy; just change a few numbers in the tax code—in fact, just change them back to what they were in the 1950s. Cross-national inequality is much more complicated (though I believe it can be solved, eventually) and some forms of what he’s calling “inequality” (like “inequality across periods of human history” or “inequality of innate talent”) don’t seem amenable to correction under any conceivable circumstances.

Hanson has lots of just-so stories about the evolutionary psychology of why “we don’t care” about cross-national inequality (gee, I thought maybe devoting my career to it was a pretty good signal otherwise?) or inequality in access to sex (which is thousands of times smaller than income inequality), but no clear policy suggestions for how these other forms of inequality could be in any way addressed. This whole idea of “redistribution of sex”; what does that mean, exactly? Legalized or even subsidized prostitution or sex robots would be one thing; I can see pros and cons there at least. But without clarification, it sounds like he’s endorsing the most extremist misogynist incels who think that women should be rightfully compelled to have sex with sexually frustrated men—which would be quite literally state-sanctioned rape. I think really Hanson isn’t all that interested in incels, and just wants to make fun of silly “socialists” who would dare suppose that maybe Jeff Bezos doesn’t need his 120 billion dollars as badly as some of the starving children in Africa could benefit from them, or that maybe having a tax system similar to Sweden or Denmark (which consistently rate as some of the happiest, most prosperous nations on Earth) sounds like a good idea. He takes things that are obviously much worse than redistributive taxation, and compares them to redistributive taxation to make taxation seem worse than it is.

No, I do not support “redistribution of sex”. I might be able to support legalized prostitution, but I’m concerned about the empirical data suggesting that legalized prostitution correlates with increased human sex trafficking. I think I would also support legalized sex robots, but for reasons that will become clear shortly, I strongly suspect they would do little to solve the problem, even if they weren’t ridiculously expensive. Beyond that, I’ve said enough about Hanson; Lawyers, Guns & Money nicely skewers Hanson’s argument, so I’ll not bother with it any further.
Instead, I want to talk about the average incel, one of hundreds of thousands if not millions of men who feels cast aside by society because he is socially awkward and can’t get laid. I want to talk about him because I used to be very much like him (though I never specifically identified as “incel”), and I want to talk about him because I think that he is genuinely suffering and needs help.

There is a moderate wing of the incel community, just as there is a moderate wing of the Muslim community. The moderate wing of incels is represented by sites like Love-Shy.com that try to reach out to people (mostly, but not exclusively young heterosexual men) who are lonely and sexually frustrated and often suffering from social anxiety or other mood disorders. Though they can be casually sexist (particularly when it comes to stereotypes about differences between men and women), they are not virulently misogynistic and they would never support violence. Moreover, they provide a valuable service in offering social support to men who otherwise feel ostracized by society. I disagree with a lot of things these groups say, but they are providing valuable benefits to their members and aren’t hurting anyone else. Taking out your anger against incel terrorists on Love-Shy.com is like painting graffiti on a mosque in response to 9/11 (which, of course, people did).

To some extent, I can even understand the more misogynistic (but still non-violent) wings of the incel community. I don’t want to defend their misogyny, but I can sort of understand where it might come from.

You see, men in our society (and most societies) are taught from a very young age that their moral worth as human beings is based primarily on one thing in particular: Sexual prowess. If you are having a lot of sex with a lot of women, you are a good and worthy man. If you are not, you are broken and defective. (Donald Trump has clearly internalized this narrative quite thoroughly—as have a shockingly large number of his supporters.)

This narrative is so strong and so universal, in fact, that I wouldn’t be surprised if it has a genetic component. It actually makes sense as a matter of evolutionary psychology than males would evolve to think this way; in an evolutionary sense it’s true that a male’s ultimate worth—that is, fitness, the one thing natural selection cares about—is defined by mating with a maximal number of females. But even if it has a genetic component, there is enough variation in this belief that I am confident that social norms can exaggerate or suppress it. One thing I can’t stand about popular accounts of evolutionary psychology is how they leap from “plausible evolutionary account” to “obviously genetic trait” all the way to “therefore impossible to change or compensate for”. My myopia and astigmatism are absolutely genetic; we can point to some of the specific genes. And yet my glasses compensate for them perfectly, and for a bit more money I could instead get LASIK surgery that would correct them permanently. Never think for a moment that “genetic” implies “immutable”.

Because of this powerful narrative, men who are sexually frustrated get treated like garbage by other men and even women. They feel ostracized and degraded. Often, they even feel worthless. If your worth as a human being is defined by how many women you have sex with, and you aren’t having sex with any, it follows that your worth is zero. No wonder, then, that so many become overcome with despair.
The incel community provides an opportunity to escape that despair. If you are told that you are not defective, but instead there is something wrong with society that keeps you down, you no longer have to feel worthless. It’s not that you don’t deserve to have sex, it’s that you’ve been denied what you deserve. When the only other narrative you’ve been given is that you are broken and worthless, I can see why “society is screwing you over” is an appealing counter-narrative. Indeed, it’s not even that far off from the truth.

The moderate wing of the incel community even offers some constructive solutions: They offer support to help men improve themselves, overcome their own social anxiety, and ultimately build fulfilling sexual relationships.

The extremist wing gets this all wrong: Instead of blaming the narrative that sex equals worth, they blame women—often, all women—for somehow colluding to deny them access to the sex they so justly deserve. They often link themselves to the “pick-up artist” community who try to manipulate women into having sex.

And then in the most extreme cases, they may even decide to turn their anger into violence.

But really I don’t think most of these men actually want sex at all, which is part of why I don’t think sex robots would be particularly effective.

Rather, to clarify: They want sex, as most of us do—but that’s not what they need. A simple lack of sex can be compensated reasonably well by pornography and masturbation. (Let me state this outright: Pornography and masturbation are fundamental human rights. Porn is free speech, and masturbation is part of the fundamental right of bodily autonomy. The fact that increased access to porn reduces incidence of sexual assault is nice, but secondary; porn is freedom.) Obviously it would be more satisfying to have a real sexual relationship, but with such substitutes available, a mere lack of sex does not cause suffering.

The need that these men are feeling is companionship. It is love. It is understanding. These are things that can’t be replaced, even partially, by sex robots or Internet porn.

Why do they conflate the two? Again, because society has taught them to do so. This one is clearly cultural, as it varies quite considerably between nations; it’s not nearly as bad in Southern Europe for example.
In American society (and many, but not all others), men are taught three things: First, expression of any emotion except for possibly anger, and especially expression of affection, is inherently erotic. Second, emotional vulnerability jeopardizes masculinity. Third, erotic expression must be only between men and women in a heterosexual relationship.

In principle, it might be enough to simply drop the third proposition: This is essentially what happens in the LGBT community. Gay men still generally suffer from the suspicion that all emotional expression is erotic, but have long-since abandoned their fears of expressing eroticism with other men. Often they’ve also given up on trying to sustain norms of masculinity as well. So gay men can hug each other and cry in front of each other, for example, without breaking norms within the LGBT community; the sexual subtext is often still there, but it’s considered unproblematic. (Gay men typically aren’t even as concerned about sexual infidelity as straight men; over 40% of gay couples are to some degree polyamorous, compared to 5% of straight couples.) It may also be seen as a loss of masculinity, but this too is considered unproblematic in most cases. There is a notable exception, which is the substantial segment of gay men who pride themselves upon hypermasculinity (generally abbreviated “masc”); and indeed, within that subcommunity you often see a lot of the same toxic masculinity norms that are found in the society as large.

That is also what happened in Classical Greece and Rome, I think: These societies were certainly virulently misogynistic in their own way, but their willingness to accept erotic expression between men opened them to accepting certain kinds of emotional expression between men as well, as long as it was not perceived as a threat to masculinity per se.

But when all three of those norms are in place, men find that the only emotional outlet they are even permitted to have while remaining within socially normative masculinity is a woman who is a romantic partner. Family members are allowed certain minimal types of affection—you can hug your mom, as long as you don’t seem too eager—but there is only one person in the world that you are allowed to express genuine emotional vulnerability toward, and that is your girlfriend. If you don’t have one? Get one. If you can’t get one? Well, sorry, pal, you’re just out of luck. Deal with it, or you’re not a real man.

But really what I’d like to get rid of is the first two propositions: Emotional expression should not be considered inherently sexual. Expressing emotional vulnerability should not be taken as a capitulation of your masculinity—and if I really had my druthers, the whole idea of “masculinity” would disappear or become irrelevant. This is the way that society is actually holding incels down: Not by denying them access to sex—the right to refuse sex is also a fundamental human right—but by denying them access to emotional expression and treating them like garbage because they are unable to have sex.

My sense is that what most incels are really feeling is not a dearth of sexual expression; it’s a dearth of emotional expression. But precisely because social norms have forced them into getting the two from the same place, they have conflated them. Further evidence in favor of this proposition? A substantial proportion of men who hire prostitutes spend a lot of the time they paid for simply talking.

I think what most of these men really need is psychotherapy. I’m not saying that to disparage them; I myself am a regular consumer of psychotherapy, which is one of the most cost-effective medical interventions known to humanity. I feel a need to clarify this because there is so much stigma on mental illness that saying someone is mentally ill and needs therapy can be taken as an insult; but I literally mean that a lot of these men are mentally ill and need therapy. Many of them exhibit significant signs of social anxiety, depression, or bipolar disorder.

Even for those who aren’t outright mentally ill, psychotherapy might be able to help them sort out some of these toxic narratives they’ve been fed by society, get them to think a little more carefully about what it means to be a good man and whether the “man” part is even so important. A good therapist could tease out the fabric of their tangled cognition and point out that when they say they want sex, it really sounds like they want self-worth, and when they say they want a girlfriend it really sounds like they want someone to talk to.

Such a solution won’t work on everyone, and it won’t work overnight on anyone. But the incel community did not emerge from a vacuum; it was catalyzed by a great deal of genuine suffering. Remove some of that suffering, and we might just undermine the most dangerous parts of the incel community and prevent at least some future violence.

No one owes sex to anyone. But maybe we do, as a society, owe these men a little more sympathy?

The extreme efficiency of environmental regulation—and the extreme inefficiency of war

PNRJ current events, ethics, public policy , , , , , , , , , , , , , , ,

Apr 8 JDN 2458217

Insofar as there has been any coherent policy strategy for the Trump administration, it has largely involved three things:

  1. Increase investment in military, incarceration, and immigration enforcement
  2. Redistribute wealth from the poor and middle class to the rich
  3. Remove regulations that affect business, particularly environmental regulations

The human cost of such a policy strategy is difficult to overstate. Literally millions of people will die around the world if such policies continue. This is almost the exact opposite of what our government should be doing.

This is because military is one of the most wasteful and destructive forms of government investment, while environmental regulation is one of the most efficient and beneficial. The magnitude of these differences is staggering.

First of all, it is not clear that the majority of US military spending provides any marginal benefit. It could quite literally be zero. The US spends more on military than the next ten countries combined.

I think it’s quite reasonable to say that the additional defense benefit becomes negligible once you exceed the sum of spending from all plausible enemies. China, Russia, and Saudi Arabia together add up to about $350 billion per year. Current US spending is $610 billion per year. (And this calculation, by the way, requires them all to band together, while simultaneously all our NATO allies completely abandon us.) That means we could probably cut $260 billion per year without losing anything.

What about the remaining $350 billion? I could be extremely generous here, and assume that nuclear weapons, alliances, economic ties, and diplomacy all have absolutely no effect, so that without our military spending we would be invaded and immediately lose, and that if we did lose a war with China or Russia it would be utterly catastrophic and result in the deaths of 10% of the US population. Since in this hypothetical scenario we are only preventing the war by the barest margin, each year of spending only adds 1 year to the lives of the war’s potential victims. That means we are paying some $350 billion per year to add 1 year to the lives of 32 million people. That is a cost of about $11,000 per QALY. If it really is saving us from being invaded, that doesn’t sound all that unreasonable. And indeed, I don’t favor eliminating all military spending.

Of course, the marginal benefit of additional spending is still negligible—and UN peacekeeping is about twice as cost-effective as US military action, even if we had to foot the entire bill ourselves.

Alternatively, I could consider only the actual, documented results of our recent military action, which has resulted in over 280,000 deaths in Iraq and 110,000 in Afghanistan, all for little or no apparent gain. Life expectancy in these countries is about 70 in Iraq and 60 in Afghanistan. Quality of life there is pretty awful, but people are also greatly harmed by war without actually dying in it, so I think a fair conversion factor is about 60 QALY per death. That’s a loss of 23.4 MQALY. The cost of the Iraq War was about $1.1 trillion, while the cost of the Afghanistan War was about a further $1.1 trillion. This means that we paid $94,000 per lost QALY. If this is right, we paid enormous amounts to destroy lives and accomplished nothing at all.

Somewhere in between, we could assume that cutting the military budget greatly would result in the US being harmed in a manner similar to World War 2, which killed about 500,000 Americans. Paying $350 billion per year to gain 500,000 QALY per year is a price of $700,000 per QALY. I think this is about right; we are getting some benefit, but we are spending an enormous amount to get it.

Now let’s compare that to the cost-effectiveness of environmental regulation.

Since 1990, the total cost of implementing the regulations in the Clean Air Act was about $65 billion. That’s over 28 years, so less than $2.5 billion per year. Compare that to the $610 billion per year we spend on the military.

Yet the Clean Air Act saves over 160,000 lives every single year. And these aren’t lives extended one more year as they were in the hypothetical scenario where we are just barely preventing a catastrophic war; most of these people are old, but go on to live another 20 years or more. That means we are gaining 3.2 MQALY for a price of $2.5 billion. This is a price of only $800 per QALY.

From 1970 to 1990, the Clean Air Act cost more to implement: about $520 billion (so, you know, less than one year of military spending). But its estimated benefit was to save over 180,000 lives per year, and its estimated economic benefit was $22 trillion.

Look at those figures again, please. Even under very pessimistic assumptions where we would be on the verge of war if not for our enormous spending, we’re spending at least $11,000 and probably more like $700,000 on the military for each QALY gained. But environmental regulation only costs us about $800 per QALY. That’s a factor of at least 14 and more likely 1000. Environmental regulation is probably about one thousand times as cost-effective as military spending.

And I haven’t even included the fact that there is a direct substitution here: Climate change is predicted to trigger thousands if not millions of deaths due to military conflict. Even if national security were literally the only thing we cared about, it would probably still be more cost-effective to invest in carbon emission reduction rather than building yet another aircraft carrier. And if, like me, you think that a child who dies from asthma is just as important as one who gets bombed by China, then the cost-benefit analysis is absolutely overwhelming; every $60,000 spent on war instead of environmental protection is a statistical murder.

This is not even particularly controversial among economists. There is disagreement about specific environmental regulations, but the general benefits of fighting climate change and keeping air and water clean are universally acknowledged. There is disagreement about exactly how much military spending is necessary, but you’d be hard-pressed to find an economist who doesn’t think we could cut our military substantially with little or no risk to security.

Why is redistribution of wealth so difficult to achieve in the US?

PNRJ current events, inequality, public policy , , , , , , , , , , , , , ,

Jan 28 JDN 2458147

Income and wealth in equality is much higher in the US than in other First World countries. Within the OECD, only Mexico, Turkey, and Chile have higher income inequality than we do. Over 60% of Americans agree that the distribution of wealth in the US is unfair. Furthermore, the majority of Americans support the use of taxes and transfers to directly redistribute wealth from the rich to the poor.

Why, then, is it so hard to actually get any meaningful wealth redistribution in the United States?

Part of it is surely partisan differences: While about 70% of Democrats favor redistributive taxes, about 70% of Republicans oppose them. So one would not expect a move toward redistribution when Republicans control all three branches of government, and indeed we have seen quite the opposite. (Then again, one would also not expect a government shutdown under one-party rule, and yet that is what we have.)

But even most Republicans say they would like to see a much more equal distribution of wealth than the one we actually have. In fact, when I as an inequality economist look at the distribution of wealth people say they want, it looks a little too equal! Even Denmark and Sweden aren’t that egalitarian! I know more or less how to get from here to Denmark; but from here to “Equalden” looks like an awful long way. So if this is really the distribution of wealth people want, we need to be doing a huge amount of wealth redistribution—but we’re hardly doing any at all.

Indeed, we didn’t actually see all that much redistribution of wealth when Democrats more or less controlled all three branches in the period from 2008-2010. We may have seen a little bit shortly thereafter, and tax policy typically does come with a delay of a year or two. But as you can see in this graph, the Great Recession did more to reduce the top 1% income share than any tax policy changes:

US_top_income_share_1pct

The biggest changes made to our tax code under Obama were actually the handling of capital gains; the increase of the top rate on capital gains from 15% to 20%, plus the 3.8% capital surtax from the Affordable Care Act raised the tax bill for the top 0.1% by tens of billions of dollars. Surprisingly, Trump’s tax cuts don’t actually remove these provisions, though they did dramatically cut the corporate tax rate, which will probably have a similar effect on the income distribution.

To be honest, I’m not as disappointed with Trump’s tax cuts as I thought I would be. Some genuinely good ideas (like the reduction of the mortgage interest deduction, tighter restrictions on carried interest, and increase of the personal standard deduction) and some reasonable but debatable ideas (like cuts to the corporate tax rate, switching to a territorial corporate tax system, limits to deductions on corporate debt payments, removal of the deduction of state taxes, and extensions of 529 savings plans to private primary and secondary schools) were mixed in with the absolutely ludicrous and terrible ideas (like eliminating the Obamacare mandate, doubling the estate tax threshold, cutting the alcohol tax, and allowing offshore drilling in Alaska [One of these things is not like the other ones….]). Some of the terrible ideas, like ending the deduction of student loan interest and tuition waivers, were actually removed in the final version of the bill. Of course, you won’t be surprised when I tell you that the overall US tax system became a lot less progressive as a result of this bill. And even if cutting the corporate tax while raising the capital gains tax is probably a good idea (as I and many economists believe), cutting the corporate tax without raising the capital gains tax probably isn’t.

(An aside: For how much they claim to be “tough on crime”, it’s always kind of baffling to see how often Republicans like to cut alcohol taxes and pollution regulations, which are pretty much the only things that have ever been empirically shown to actually reduce crime. There is some evidence that maybe more policing also helps, but if so, it does so in a far less cost-effective way—indeed, the direct cost of alcohol taxes and pollution taxes is negative. Even if they didn’t work at all, they’d still be worth it just because they raise revenue. I begin to suspect that Republicans don’t actually want to reduce crime, because they know they can use the fear of crime to win votes; they simply want to appear tough on crime, and so they press as hard as they can for more policing and incarceration in the country that already has the highest incarceration rate in the world. This may be a more general phenomenon: While Democrats want to actually solve problems, Republicans want to appear to solve problems while actually exacerbating them, thus insuring their own job security. Compare how Bush kept talking about Osama bin laden while invading Iraq, and Obama actually killed Osama bin Laden. Is this too cynical? Can anything be too cynical in the era of Trump? There were 50,000 Russian bots on Twitter trying to tilt our election! Mueller’s FBI investigation is already implicating several of Trump’s top officials! Everything that seemed like paranoia or cynicism just a few years ago is turning out to be entirely true.)

This is what seems to happen: Year after year, we raise some taxes, then we cut some taxes. Then when raise some taxes, then we cut some taxes. The tax system gets a little more progressive for a few years and inequality begins to fall, and then those changes are removed and inequality begins to rise again. Back and forth and round and round we go.

Is there some way to lock in these tax changes for a longer period of time? The only way I can see would be a change in voter behavior: Keep voting in Democrats to all branches of government consistently for 20 years, and then maybe we would see a serious reduction in income and wealth inequality. Or at least stop voting in Republicans; aside from the Democrats, there are some third parties that would also support redistribution, like the Green Party. And yes, it really is about voting behavior: As prevalent as gerrymandering has become, as terrible as the Electoral College is, as widespread as voter suppression has gotten, Trump only won because 63 million Americans voted for him. Even after everything he’s done, Trumps’ approval rating is still about 39%. As long as there are enough people in this country whose partisan loyalty so strongly outweighs any rational assessment of policy, we are going to continue to see such travesties continue.

It would certainly help if our voting system were fairer, so that third parties had a better chance at taking seats. But it’s also difficult to see how that could happen any time soon. For now, the best I can come up with is trying to show people two things:

First, most Americans favor redistribution of wealth. You’re not alone in wanting that. It’s not some fringe opinion.

Second, there is a real difference between Democrats and Republicans on this issue. The canard “The two parties are the same” is the most untrue it has been in at least twenty years.

I would even understand if there are other issues you consider more important than wealth redistribution. Ecological sustainability is the most defensible—you can’t eat GNP—though that would push you even harder toward the left. Among things that might push you right, I can understand being concerned about higher taxes hurting economic growth, and while I think the view that abortion is murder is ludicrous, given that as your belief I can understand why you would want to prioritize fighting abortion. (If I thought we were murdering millions of babies every year, I’d be pretty mad too! Of course, you should be glad, then, that the US abortion rate has been falling. Right? You know about that, right?)

What I don’t get, however, is people who thought that voting for Donald Trump would help working people. I don’t understand how you can see someone who epitomizes everything that is wrong with the billionaire rentier class and think, “Yeah, he seems like he’s definitely a populist. That guy who was born insanely rich and made even more mind-boggling amounts of money by lying and screwing people over is definitely going to look out for folks like me.”

If I understood that, maybe I would know where to go from here. But people’s political beliefs can be astonishingly intransigent to evidence. Politics is the mind-killer.