Potpourri

Siwan Anderson delivered the Innis Lecture at the Canadian Economics Association last summer on "Unbundling Female Autonomy" (Canadian Journal of Economics, November 2022, 1671–701, https://onlinelibrary.wiley.com/doi/10.1111/caje.12628). Anderson writes (citations omitted):

"Female empowerment is a multi-faceted concept that targets: improved female decision-making power in the household, reduction of violence against women, increased market and political opportunities, equal legal rights and dismantling gender-biased customs and norms. . . . Perhaps the classic argument in this area is that empowered women invest more in children. . . . In particular women want to, ceteris paribus, allocate relatively more of household resources to children's education and health than will men. Because both of these are crucial determinants of human capital formation and human capital formation is at least a proximate cause of economic development, development will be enhanced by factors that improve female autonomy (or a woman’s outside option) relative to their husbands through the channel of increasing their control over the allocation of household resources. . . . One may conjecture that short-term policy interventions would be unlikely to significantly shift strongly embedded societal norms, given that many have persisted for centuries. However, emerging evidence suggests the contrary. For example, reserving seats for female politicians in rural areas of India has helped curtail negative stereotypes about women as local leaders. Television programs have been able to alter fertility preferences in multiple settings. Bursztyn et al. were able to adjust pre-determined individual Saudi male beliefs regarding the appropriateness of their wives' labour supply decisions by providing information on actual average male beliefs in their local geographical area. Regular secondary school class discussions, held amongst both boys and girls in India, were able to reshape some female negative attitudes and behaviours. . . . There is no reason, then, to expect that cultural changes in the currently developing world will mimic the paths followed in the West. . . . First, the timing of structural changes is different. Developing countries today experienced expansion of education and growth of the service sector at much lower levels of GDP per capita than when they took off in the West. Their legal contexts are also markedly different. Today's developing countries typically inherited the formal legal structures of their former colonists, which tend to be more progressive and favourable to women than the corresponding legal structures that prevailed at comparable levels of development in the West. At the same time, these formal legal structures often coexist in today's developing countries alongside extremely male-biased forms of customary law. Finally, there does not seem to be a massive shock to married women's labour supply, comparable to that occasioned by World War II, that could serve as a jolt to gender norms."

Jan Eeckhout reviews the evidence on "Dominant firms in the digital age" (UBS Center Public Paper #12, November 2022, https://www.ubscenter.uzh.ch/en/publications/public_papers/dominant-firms-in-the-digital-age.html).

"The rise of dominant firms that we have seen during the advent of the digital age is built on cost-reducing and efficiency-enhancing innovations that create increasing returns to scale. This implies a winner-takes-all market with a dominant firm achieving a long-lasting monopoly position. And while monopoly is often associated with higher prices, most of these firms achieve this position by doing the opposite, that is lowering prices. They can do this because their innovations and investments lead to an even larger reduction in costs. And that is why the digital technology is so attractive for customers: technological innovation is the hero. But because costs decline more than prices due to scale economies, technological change is also the villain."

Brian R. Cheffins  discusses "Getting Antitrust and History in Tune" (Accounting, Economics, and Law: A Convivium, published online March, 2, 2022, https://www.degruyter.com/document/doi/10.1515/ael-2021-0084/html). From the abstract:

"Antitrust is high on the reform agenda at present, associated with calls to 'break up big tech.' Proponents of reform have invoked history with regularity in making their case. They say reform is essential to reverse the baleful influence of the Chicago School of antitrust, which, in their telling, disastrously and abruptly ended in the 1980s a 'golden' era of beneficially lively antitrust enforcement. In fact, antitrust enforcement was, at best, uneven, from the early 20th century through to the end of the 1970s. As for the antitrust 'counter-revolution' of the late 20th century, this was fostered as much by fears of foreign competition and skepticism of government regulation as Chicago School theorizing. The pattern helped to ensure that the counter-revolution was largely sustained through the opening decades of the 21st century. This article, in addition to getting antitrust and history in tune by drawing attention to the foregoing points, provides insights regarding antitrust's future direction."

Gita Gopinath delivered the 2022 Martin S. Feldstein Lecture at the National Bureau of Economic Research on "Managing a Turn in the Global Financial Cycle" (NBER Reporter, October 2022, https://www.nber.org/reporter/2022number3/managing-turn-global-financial-cycle).

"A key policy question therefore is how emerging and developing economies should respond to this tightening cycle that is driven to an important degree by rising US monetary policy rates. The textbook answer would be to let the exchange rate be the shock absorber. An increase in foreign interest rates lowers domestic consumption. By letting the exchange rate depreciate, and therefore raising the relative price of imports to domestic goods, a country can shift consumption toward domestic goods, raise exports in some cases, and help preserve employment. However, many emerging and developing economies find this solution of relying exclusively on exchange rate flexibility unsatisfying. This is because rising foreign interest rates come along with other troubles. They can trigger so-called 'taper tantrums' and sudden stops in capital flows to their economies. In addition, the expansionary effects of exchange rate depreciations on exports in the short run are modest, consistent with their exports being invoiced in relatively stable dollar prices. . . . Consequently, several emerging and developing economies have in practice used a combination of conventional and unconventional policy instruments to deal with turns in the global financial cycle. Unlike the textbook prescription, they not only adjust monetary policy rates but also rely on foreign exchange intervention (FXI) to limit exchange rate fluctuations, capital controls to regulate cross-border capital flows, and domestic macroprudential policies to regulate domestic financial flows. . . . Accordingly, to enhance IMF advice, David Lipton, the former first deputy managing director of the fund, championed the need to develop an Integrated Policy Framework that jointly examines the optimal use of conventional and unconventional instruments."

Every three years, the Bank of International Settlements conducts a survey of global over-the-counter foreign exchange markets. The BIS Quarterly Review includes five articles discussing results from the latest survey. For example, here’s the abstract from “The global foreign exchange market in a volatile time,” by Mathias Drehmann and Vladyslav Sushko (December 2022, https://www.bis.org/publ/qtrpdf/r_qt2212f.htm).

"Turnover in global foreign exchange (FX) averaged more than $7.5 trillion per day in April 2022 amid a volatile market environment. Compared with the previous BIS Triennial survey in 2019, trading volumes were higher because of greater activity in short-maturity FX derivatives and more inter-dealer trading. By contrast, trading with customers stagnated, mirroring a slowdown in international investment in 2022. A greater share of trading was executed via various bilateral methods, rather than via multilateral platforms that make prices available to all participants, implying that the transparency of the FX market may have decreased further."

The Congressional Budget Office publishes regular reports on inequality in the US economy: most recently, The Distribution of Household Income, 2019 (November 2022, https://www.cbo.gov/publication/58781) and US Household Wealth: 1989–2019 (September 2022, https://www.cbo.gov/publication/57598). From the income distribution report:

"CBO's analysis compares Gini coefficients based on four different income measures: market income, income before transfers and taxes, income after transfers but before taxes, and income after transfers and taxes. . . . Between 1979 and 2019, income inequality as measured by the Gini coefficient for all four income measures rose. Increases in market income at the top of the distribution drove much of the rise in income inequality over that time. Of the four measures of income presented here, income inequality as measured by market income is the highest. Social insurance benefits, particularly Social Security and Medicare benefits, reduced income inequality relative to market income inequality. (Those benefits are included in income before transfers and taxes.) The progressive structures of means-tested transfers and federal taxes also reduced income inequality, but by smaller amounts than social insurance benefits did."

From the wealth distribution report:

"The total real wealth (that is, wealth adjusted to remove the effects of inflation) held by families in the United States tripled from 1989 to 2019—from $38 trillion in 2019 dollars (roughly four times the nation’s gross domestic product, or GDP) to $115 trillion (about five times GDP). . . . The growth of real wealth over the past three decades was not uniform: Family wealth increased more in the top half of the distribution than in the bottom half. Families in the top 10 percent and in the top 1 percent of the distribution, in particular, saw their share of total wealth rise over the period. In 2019, families in the top 10 percent of the distribution held 72 percent of total wealth, and families in the top 1 percent of the distribution held more than one-third; families in the bottom half of the distribution held only 2 percent of total wealth."

Regulatory Economics

Robert S. Adler served as a Commissioner at the Consumer Product Safety Commission from 2009 to 2021, including as acting chair the last two years. He offers "Reflections of an Unapologetic Safety Regulator" (Regulatory Review, October 17, 2022, https://www.theregreview.org/2022/10/17/adler-reflections-of-an-unapologetic-safety-regulator/). He discusses what he calls the Great Safety Paradox:

"Paradoxically, the more successful regulators are in protecting the public, the less anyone notices. This paradox occurs because well-crafted safety rules do not raise prices or interfere with products' utility. In such cases, no one notices the improvement in safety. Most parents do not realize that the cribs they place their infants in no longer permit them to slip between the slats and strangle. Nor do they understand how much safer and less lead-laden their children’s toys are. Similarly, most consumers will never recognize that their children no longer face being crushed by a garage door that unexpectedly closes on them or that infants do not suffocate in refrigerators because the doors can now be easily opened from within. Numerous government safety rules operate in a similar fashion, with life-saving benefits but little public recognition. . . . When health and safety agencies write a safety rule, they do so to eliminate or reduce deaths and injuries that consumers suffer in product-related accidents. The CPSC estimates that roughly 31,000 people die and 34 million people suffer product-related injuries every year. These deaths and injuries impose significant costs on the economy—roughly one trillion dollars annually. They do so first as medical costs and lost wages, then as higher premiums for health insurance—or higher taxes to pay for the uninsured. Moreover, product-related tragedies almost always result in a loss of economic productivity of the victims, not to mention the pain and suffering they experience. Accordingly, the argument that regulations necessarily impose new costs on society is not persuasive. The costs in the form of deaths and injuries are already there, and often they impose as much of a drag on the economy as any safety rule. . . . As former CPSC Commissioner R. David Pittle once said, 'it is far easier to redesign products than it is to redesign consumers.'"

Public Choice has published a six-paper symposium, plus an introduction, on "George Stigler's theory of economic regulation" (October 2022, https://link.springer.com/journal/11127/volumes-and-issues/193-1). Sam Peltzman contributed “Stigler’s Theory of Economic Regulation After Fifty Years” (https://link.springer.com/article/10.1007/s11127-022-00996-0; ungated working paper version at https://chicagounbound.uchicago.edu/cgi/viewcontent.cgi?article=2625&context=law_and_economics).

"[T]he Captured Regulator of 1971 is overstated but highly provocative. But without the provocation would we be here commemorating a fiftieth anniversary? . . . The capture theory does seem to fit some prominent cases, such as Stigler's motivating examples of truck regulation and occupational licensure. . . . We also have 20/20 hindsight of the proliferation of 'social regulation' that was underway when Stigler (1971) appeared. Environmental regulation is perhaps the most prominent example. Others include worker safety, the security of their pensions and consumer product safety. By some measures this regulatory expansion was, and remains, historically unprecedented. Typically social regulation cut across many industries. And it was invariably resisted by those industries. On the other side, deregulation of industries like transportation and securities brokerage surfaced in the late 1970s amidst significant industry resistance. Then more recently we get ‘reverse capture,’ where the industry is created by the regulator—as in renewable energy, biofuels and the like. None of these developments seem contemplated by the capture theory. . . . The distinction I want to pursue is between the creation . . . and the output (design and operation) of regulatory bodies. Even casual history suggests that these often respond to different political forces and interest groups. In particular, the industry often—perhaps mainly—resists the establishment of regulation. The affected industries resisted the consumer reforms of the Progressive Era, the labor reforms of the New Deal and the social regulation of the 1970s. But, once confronted with the reality of the regulation, the industry interest usually plays a prominent role in what these agencies do."

The Harvard Journal of Law & Public Policy has collected five papers for "A Symposium on Regulatory Budgeting" (Summer 2022 online-only Per Curiam issue, https://www.harvard-jlpp.com/a-symposium-on-regulatory-budgeting/). For example, Andrea Renda discusses the "Regulatory Budgeting: Inhibiting or Promoting Better Policies?" She writes:

"Over the past two decades, several governments have introduced tools to incentivize regulators to become more aware of the costs they impose on businesses and citizens when they propose new rules. . . . [G]overnments of various political orientations have introduced forms of regulatory budgeting, which require administrations to identify, every time they introduce new regulation entailing significant regulatory costs, provisions to be repealed or revised, so that the net impact on overall regulatory costs is (at least) offset. These rules are generically referred to as 'One-In-X-Out' (OIXO). . . . In their most common form of 'One-In-One-Out' (OIOO), these rules amount to a commitment not to increase the estimated level of burdens over the chosen timeframe. The OECD refers to these commitments as 'regulatory offsetting.' . . . There are at least twenty countries in the world that have adopted an OIXO rule. These include ten EU member states (Austria, Finland, France, Germany, Hungary, Italy, Latvia, Lithuania, Spain and Sweden) as well as Canada, Mexico and Korea. In the past, three countries have had a similar rule in place (Denmark, the UK, and the United States), but later decided to gradually phase it out . . . . Four other countries were reportedly introducing similar regulatory budgeting systems in 2020: Poland, Romania, Slovakia, Slovenia. . . . If carefully designed, regulatory budgeting rules are not incompatible with an ambitious policy agenda. In Germany, for example, the OIOO rule was adopted in a context in which by ambitious programs such as Energiewende are in place, and a systematic scrutiny of the impact of new legislation on sustainable development is carried out. In France, the government uses the OI2O rule but at the same time adopts ambitious proposals in terms of social and environmental benefits. In short, there is no incompatibility per se between the adoption of a cost reduction or regulatory budgeting system and an ambitious regulatory and policy agenda in the social and environmental domain."

The US Environmental Protection Agency has published its estimate of a social cost of $190 per metric ton of carbon emissions ("Report on the Social Cost of Greenhouse Gases: Estimates Incorporating Recent Scientific Advances," September 2022, https://www.epa.gov/system/files/documents/2022-11/epa_scghg_report_draft_0.pdf). Kevin Rennert and Brian C. Prest offer a blessedly readable overview in "The US Environmental Protection Agency Introduces a New Social Cost of Carbon for Public Comment" (Resources for the Future, November 15, 2022, https://www.resources.org/common-resources/the-us-environmental-protection-agency-introduces-a-new-social-cost-of-carbon-for-public-comment/).

"In its sensitivity analysis, EPA updates each of the four major steps of SCC [social cost of carbon] estimation: socioeconomic projections, climate modeling, translation to economic damages, and economic discounting. In doing so, the agency draws heavily on peer-reviewed and published work from the SCC Initiative, a multi-institution collaborative effort led by RFF and the University of California, Berkeley. This work includes the RFF-Berkeley Greenhouse Gas Impact Value Estimator (GIVE) model, which was recently published in the journal Nature." To give an idea of the sensitivities here: The central EPA estimate for the social cost of carbon—$190 per metric ton—uses a 26 percent discount rate. But the estimate would be $120/ton with all the same underlying estimates and a discount rate of 2.5 percent, and $340/ton with all the same estimates and a discount rate of 1.5%. Rennert and Prest also write: "In a major step forward for transparency, the computer code used for the sensitivity has been built using the open-source Mimi software platform (another output of the SCC Initiative), making the code free and easily accessible to download, replicate, and evaluate."

Discussion Starters

The environmental organization Greenpeace challenges the practicality and benefits of plastics recycling in "Circular Claims Fall Flat Again" (October 24, 2022, https://www.greenpeace.org/usa/reports/circular-claims-fall-flat-again/).

"Mechanical and chemical recycling of plastic waste has largely failed and will always fail because plastic waste is: (1) extremely difficult to collect, (2) virtually impossible to sort for recycling, (3) environmentally harmful to reprocess, (4) often made of and contaminated by toxic materials, and (5) not economical to recycle. Paper, cardboard, metal, and glass do not have these problems, which is why they are recycled at much higher rates. Due to toxicity risks, post-consumer recycled plastic from household waste is not being produced at commercial scale for food-grade uses globally or in the U.S., and likely never will be."

Jennifer Randles discusses "Fixing a Leaky U.S. Social Safety Net: Diapers, Policy, and Low-Income Families" (RSF: The Russell Sage Foundation Journal of the Social Sciences, August 2022, 8:5, 166-183, https://www.rsfjournal.org/content/8/5/166).

"Diaper need—lacking enough diapers to keep an infant dry, comfortable, and healthy—affects one in three mothers in the United States, where almost half of infants and toddlers live in low-income families. Diaper need . . . exacerbates food insecurity, can cause parents to miss work or school, and is predictive of maternal depression and anxiety. When associated with infrequent diaper changes, it can lead to diaper dermatitis (rash) and urinary tract and skin infections. Infants in the United States will typically use more than six thousand diapers, costing at least $1,500, before they are toilet trained. Cloth diapers are not a viable alternative for most low-income parents given high start-up and cleaning costs and childcare requirements for disposables. Many low-income parents must therefore devise coping strategies, such as asking family or friends for diapers or diaper money; leaving children in used diapers for longer; and diapering children in clothes and towels. Low-income parents also turn to diaper banks, which collect donations and purchase bulk inventory for distribution to those in need and usually provide a supplemental supply of twenty to fifty diapers per child per month. In 2016, the nation's more than three hundred diaper banks distributed fifty-two million diapers to more than 277,000 children, meeting only 4 percent of the estimated need. Many of those who seek diaper assistance live in households with employed adults who have missed work because of diaper need."

Kathleen Fear, Carly Hochreiter, and Michael J. Hasselberg suggest "Busting Three Myths About the Impact of Telemedicine Parity" (NEJM Catalyst, October 2022, 3:10, https://catalyst.nejm.org/doi/full/10.1056/CAT.22.0086).

"Three beliefs—that telemedicine will reduce access for the most vulnerable patients; that reimbursement parity will encourage overuse of telemedicine; and that telemedicine is an ineffective way to care for patients — have for years formed the backbone of opposition to the widespread adoption of telemedicine. However, during the Covid-19 pandemic, institutions quickly pivoted to telemedicine at scale. Given this rapid move, the University of Rochester Medical Center (URMC) had a natural opportunity to test the assumptions that have shaped prior discussions. Using data collected from this large academic medical center, UR Health Lab explored whether vulnerable patients were less likely to access care via telemedicine than other patients; whether providers increased virtual visit volumes at the expense of in-person visits; and whether the care provided via telemedicine was lower quality or had unintended negative costs or consequences for patients. The analysis showed that there is no support for these three common notions about telemedicine. At URMC, the most vulnerable patients had the highest uptake of telemedicine; not only did they complete a disproportionate share of telemedicine visits, but they also did so with lower no-show and cancellation rates. . . . Importantly, this access does not come at the expense of effectiveness. . . . As the pandemic continues to slow down, payers may start to resist long-term telemedicine coverage based on previous assumptions. However, the experience at URMC shows that telemedicine is a critical tool for closing care gaps for the most vulnerable patient populations without lowering the quality of care delivered or increasing short-term or long-term costs."