It is the media, but it’s not their fault

This is the time we bit-stained wretches compete to identify “the cause” of the election debacle.  Hillary was a bad candidate; no, Comey put his thumb on the scale; no, racism/sexism…  Stop it; when your house burns down because you left something on the range frying instead of boiling, and the grease ignited, and your kitchen fire extinguisher was out of date and didn’t work, and the fire department got there late, there are just multiple ’causes’:  if any had been otherwise, the outcome would have been different.

This doesn’t mean nothing mattered; everything did. One of those was completely atrocious coverage in print and video, as well as the ‘off-the-books’ discourse on social media, and that has mattered so much that if we fixed everything else we would still be in terrible trouble.  “The media”, wrapping up facebook, blogs, real newspapers, and tweets, created an uninformed electorate voting in the dark from the heart instead of the head, and from fear and anger instead of hope and reflection. TV news, and print media, uncritically peddled Trump’s nonsense hour after hour as though it were the considerable discourse of a basically serious person;  wallowed in vacuous ‘damn email stuff’ and horserace opining rather than policy; and so on.  These are sound criticisms, but it’s not Wolf Blitzer’s fault or the New York Times‘ that they didn’t do better. All the media are deep in a downward spiral not of their making, and it will get worse before it gets better. There may be incompetent journalists, cynical meretricious tweeters and bloggers, and venal production company execs, but even Edward R. Murrow could not have fixed this. Continue reading “It is the media, but it’s not their fault”

Quote of the Day

This is not the republic of my imagination.

–Charles Dickens, letter to William Macready, from Baltimore (1842)

The Honorable Trade of Shining Shoes

I had my shoes shined just now by a real pro, which made me remember this post from 5 years ago, which I am re-upping.

The amount of time it took me today to find a shoe shine stand in a major airport attests to how changes in men’s fashion over the past 50 years have contracted the size of the market. But I eventually located a master practitioner of the craft and emerged with my footwear emitting the distinctive soft glow of well-attended black leather.

In Mamet’s movie version of Glengarry, Glen Ross, Alec Baldwin’s character degrades the less successful salesmen by saying “You’ll be shining my shoes,” reflecting the ancient idea that what is associated with the feet is disgusting, including of course cleaning the feet of others (the Biblical story of Jesus asking his disciples to follow his example of service and then washing their feet didn’t stimulate a widespread change in attitude).

As I got my own shoes shined, I remembered a story told by former U.N. Ambassador Andrew Young. When he was mayor of Atlanta, he would get his wingtips buffed by an older man who charged $4, making a $5 bill the perfect payment including tip (This apparently is still the business model, I tend to get charged $7 to $8 today, just below the Alexander Hamilton breakpoint). Perhaps feeling a little awkward that he, a very successful post-civil rights movement African-American man, was having his shoes shined regularly by a pre-movement older African-American man, Young made an effort to get to know him and found out to his surprise that the shoe shiner restored so many pairs of shoes a day at $5 a pop that he had been able to afford the rearing of four children, including sending all of them through college.

The conclusion Young drew has stayed with me: “There is no such thing as menial work, only menial pay.”

The end of big trade deals

In their current form, large international trade negotiations are politically illegitimate.

The last global trade deal was the Uruguay round, finally agreed in 1994 after seven years of negotiations. The deal included the setting up of the WTO, a stronger organization than GATT, which it replaced. But no further global trade deal has been agreed. The WTO launched the Doha round  in 2001, but it has fittingly run into the sand.

Trade negotiators are nothing if not obstinate, and tried a new tack. If a global deal is too difficult, why not try regional ones? So TTIP,  the transatlantic deal, and TPP,  the Pacific one, were born. Well, conceived.

Both are moribund. Hollande has declared France’s opposition to TTIP in its current form, which is also under sustained attack in the European Parliament, especially over ISDS.  [Update 30/8: the French trade minister has called for the talks to be suspended. If this is a negotiating tactic, it’s reckless hardball – it would be very hard to walk back.] TPP is opposed by both Clinton and Trump. Obama still officially hopes to get TPP through the Senate in the lame duck session. (See supportive comment from Harold Pollack.) Do you credit this? McConnell has not shifted from his policy of Adullamite obstruction of every Obama proposal. Even if he allowed a vote, would senators really vote against the platforms of their parties, which accurately reflect a hostile public opinion?

This widespread failure of the trade liberalisation agenda is usually put down to a widespread turn in public opinion against free trade, now seen by many on both left and the populist right as a callous neoliberal plot to enrich capitalists at the expense of workers. (It is true that the compensatory support for workers who lost their jobs as a result of past agreements like NAFTA somehow failed to materialise.) Some trade advocates resort to the absurd argument that the failure of TTIP and TPP would put existing trade at risk. But there is very little support for proposals to roll back existing trade agreements, from NAFTA to Uruguay to the European single market. There is something in the trade negotiation process of these new deals that gets voters’ goat.

Let me nail up a thesis to the trade church door. Modern trade negotiations are illegitimate. In their current form they cannot possibly lead to a democratically acceptable result. That is why they are doomed to fail.

The argument has two parts. Continue reading “The end of big trade deals”

Gamblers’ ruin

gamblers_ruin
First I bought some $1.35 Smart popcorn. The package got kindof stuck in the machine.
No problem. I will just buy one of the heavy chocolate bars right above it to jostle it loose. Landed right on top. Neither moved, even when I shook the machine. $2.65.
OK now I am annoyed. I will have to buy a second heavy chocolate bar to jostle both of them loose. Maybe I can keep these in my desk. I’m out of change. Fortunately Aramark takes Visa. Again–Landed right on top. Nothing moved, even when I shook the machine. $3.95.
Dammit. A third heavy chocolate bar seems wasteful. But I paid $3.95 for nothing so far. I swipe the VISA. Again nada–Landed right on top. Nothing moved, even when I shook the machine. $5.25.
Those awful Rice Crispy treats are heavy. This should work. I swipe the VISA. Glances off the pile without dislodging anything I want to eat. $6.60.
Grrr, but the engineering mind kicks in. I need something to land on the pile from a greater height. I try a heavy bag of peanuts from high up. Nope once again. $7.95
Burned by the incremental logic of escalation, I call it a day. Who knew that Smartfood package-bridges were so beautifully constructed?
Now my real dilemma: How do I explain to the wife that the university police just robbed $7.95 from me at gunpoint?

The Prime Minister of Singapore on implications of rejecting TPP

I fear that Congress is headed towards a historic blunder–rejecting the centerpiece of American policy in Asia negotiated over many years by President Obama. Lee Hsien Loong, Prime Minister of Singapore, does an excellent job of describing what is at stake from a diplomatic perspective.

TPP is imperfect. I don’t like some of its provisions pertaining to public health. But rejecting it at this point, with so little apparent thought for the consequences, is an unforced error that calls into question our diplomatic credibility and competence. We once again present ourselves to the world as politically dysfunctional.

Developing new drugs

All over the world, new pharmaceuticals are developed more or less the same way. Governments and foundations spend money on fundamental research on diseases, but once a specific molecule has been identified – and sometimes long before that – the focus shifts to the private sector.

A pharmaceutical company puts its own money first into animal trials, then into human safety studies, then into small-scale efficacy trials, and finally into the big, expensive “Phase III” trials required to obtain approval from FDA or its equivalents elsewhere. About 80-90% of the time, the compound turns out to be a loser.

In the minority of cases in which the drug actually gets approved, the average time-lag between starting work and getting it on the market is most of a decade. Since the pharma business is risky, the cost of capital is high. That’s the justification Big Pharma offers for the price-gouging that patent protection allows: if the payoff isn’t there, the R&D won’t get done.

If you’re going to risk millions of dollars that costs you 10% per year on a longshot, the payoff if it hits needs to be very large. So pharmaceutical companies focus on “blockbuster” drugs: those with potential revenues of more than $1B/yr. That means drugs that (1) have to be taken frequently – ideally, every day for a lifetime – and (2) deal with the diseases of people with good health insurance.

None of this makes anything but a twisted sort of sense. It leads to not enough new drugs and to excessive drug pricing. In particular, it leads to the absurd situation where there’s an obvious social need to develop a drug but no economic mechanism for doing so. Today’s big example is a Zika vaccine, but the same is true of antibiotics and of innovative pain-relief formulations (e.g., pain-appropriate dosages of buprenorphine, opiate-and-antagonist combinations) with less addiction risk.

There are lots of proposals for fixing the whole system: my personal favorite is to at least partially replace patent protection with large cash prizes as the incentive for bringing new drugs through the approval process. (Since the U.S. federal government winds up bearing much of the cost of pharmaceuticals anyway – through Medicare and Medicaid, through VA health, through health coverage for its own military and non-military employees and their dependents, and finally through the tax deduction for employee health benefits – it could write some very big checks and still come out ahead, if the result was marginal-cost pricing for the drugs themselves.)

But in the meantime, there’s something much simpler. If drug development were financed at Treasury rates rather than at the pharmaceutical-company cost of capital, lots of socially important projects that aren’t financially attractive now would become attractive. That could be done by creating a publicly-owned pharma R&D firm to get socially needed drugs through the FDA process and license the resulting patents to generic drug manufacturers, or by lending the money at concessionary rates to current phama outfits to develop drugs serving identified needs and then sell them at controlled prices.

Of course the details matter – the details always matter – but in this case almost any set of details would leave us much better off than we are now.

Footnote

There’s a broader issue here: Right now, the whole world is eager to lend money to the U.S. Treasury, and as a result we can now borrow money for 30-year terms at 2.2% nominal. If our political system can just get out of its fixation on deficits and debt, we ought to be borrowing some of that money and investing it in things with good long-term returns: not just drug development, but R&D more generally (especially, I would say, basic science), infrastructure, and education.

One side effect would be to boost final demand, kicking the economy out of the slow growth that has been so marked since the beginning of the Great Recession.  There’s not much wrong with this country that ten years of tight labor markets couldn’t cure.

Berkeley Athletics update

It’s hard to imagine Berkeley’s public presence degrading below the state our sexual harassment episodes have brought us to, but we have been doing a job on ourselves in intercollegiate athletics as well.  Today’s news has a twofer, a sexual assault accusation with a sports angle. Sigh.

The football and men’s basketball teams’ academic performance has apparently turned around and we are  no longer at the bottom of the NCAA; both teams also did creditably on the field this year. Good.  Unfortunately, we are learning that some really ugly stuff is festering in both programs, never mind that the campus subsidy of this operation is back up to twice the $5m per year a prior chancellor very firmly instructed them to live within.  In football, you may remember the death in practice of Ted Agu in 2014, which resulted from an inhumane, abusive training style practiced by strength and conditioning coach Damon Harrington, aggravated by failure to take care of him when he collapsed, and pervasive, insistent lying in the university’s subsequent engagement with the police and the legal system. Continue reading “Berkeley Athletics update”

How to make more good blue-collar jobs

If you’re looking for a silver lining in the dark cloud of the Trump candidacy, you might notice that it has brought some  attention to the worsening state of white people without a college degree. It’s not that the world is rosy for non-whites without college degrees, of course, but on average they were starting from a lower base; it’s the white part of the working and lower-middle class that seems to be experiencing fairly serious downward social mobility and social dislocation, as demonstrated most dramatically by increasing mortality rates in young adulthood and midlife.

Trump’s success in getting non-college whites riled up about immigration and trade doesn’t answer the question about how much of their plight can actually be traced to those causes, but it has served to remind advocates of the free movement of goods and workers that those policies produce losers as well as winners, and that one function of the political process is to ensure that a rising tide does in fact lift all the boats, rather than lifting the yachts while swamping the dinghies.

Megan McArdle lifts a libertarian voice to join the chorus. And she’s skeptical that income-transfer policies can fix things. (Though in my view we need them just the same.)  What the downwardly-mobile need, McArdle says, is not income per se as much as employment: “good work – by which I mean work that offers opportunity, stability, respect and enough money to raise a family.” And she argues that the answer can’t be turning working-class people into middle-class people by offering higher education to people “who don’t have the ability, preparation or inclination to sit through four years of college,” and that politicians’ other answers to the problem of bringing back good blue-collar jobs are mostly beside the point.

This is way outside my policy wheelhouse,  but from a distance this looks like a problem with a bunch of obvious solutions, though each of them is partial:

Continue reading “How to make more good blue-collar jobs”

Trade, Trump, and downward class warfare

Update

Brad DeLong concurs.

A conversation with my Marron Institute colleague Paul Romer yesterday crystallized an idea I’d been toying with for some time. In a nutshell: opponents of taxing the rich have destroyed, on a practical level, the theoretical basis for believing that free trade benefits everyone.

The Econ-101 case for free trade is straightforward: Trade benefits those who produce exports and those who consume imports (including producers who use imported goods as inputs). It hurts the producers of goods which can be made better or more cheaply abroad. But the gains to the winners exceed the losses suffered by the losers: that is, the winners could make the losers whole and still come out ahead themselves. Therefore, trade passes the Pareto test.

[Yes, this elides a number of issues, including path-dependency in increasing-returns and learning-by-doing markets on the pure-economics side and the salting of actual agreements with provisions that create or protect economic rents on the political-economy side. It also ignores the biggest gainers from trade: workers in low-wage countries, most notably the Chinese factory workers whose parents were barefoot peasants.]

So when the modern Republican Party (R.I.P), in the name of “small government” and opposition to “class warfare,” set its face against policies to redistribute the gains from economic growth, it destroyed the theoretical basis for thinking that a rising tide would lift all the boats, rather than lifting the yachts and swamping the trawlers. Free trade without redistribution (especially the corrupt version of “free trade” with corporate rent-seeking written into it) is basically class warfare waged downwards. Continue reading “Trade, Trump, and downward class warfare”