The Hard Work That Must Be Done to Improve Police Accountability

As I observe it currently, the three strategies currently being taken by Progressives to increase police accountability are

  1. Demonizing all police officers, good and bad
  2. Making large cuts to police budgets and/or salaries
  3. Looting Apple stores

I have lamented before that none of these approaches are likely to succeed at reforming police accountability or more broadly at helping black Americans.  Remember that while black Americans disproportionately come in contact with police and the justice system, they also are disproportionately victims of crime.  All the current approaches listed above are unlikely to improve the police and justice system but may make crime worse.

One of the seldom discussed differences between Progressives and libertarians in this country is their skill set for change.  Progressives are very good at creating a "moment" where everyone in the country is forced to look at an issue and potentially agree that change is needed.  Progressives can grab both the streets and the headlines.  But they often suck at the hard work making real change happen in a Democratic system.  They don't seem to have an interest in the drawn out 3-yards-and-a-cloud-of-dust offense needed to make reforms city by city.  Libertarians are just the opposite.  We suck at building mass desire for change -- we write 5000 word think pieces with lots of graphs but you don't see us in the streets.  But we can be good at actually getting change to happen -- I think of ALEC (which is really more Conservative than libertarian, but work with me here) and how it works.  Let's say we decide it would be a good thing to have legal authority and process to build private toll roads.  ALEC goes out there city by city and starts working the local government process.  It finds a location, no matter how small, where it makes progress and gets laws changed.  It then bundles this work into case studies and model legislation and takes it to other communities.

This is exactly the hard ground work that is needed to take the goodwill BLM has built up with the public and convert it to real change.  And, correct me if I am wrong, I have seen exactly zero interest out of anyone in BLM to do this -- it's all street protest and, among the richer folks, high-profile virtue signaling.

Walter Olson had a link on Twitter to an article my Mailee Smith that really gives one an idea how hard the local work is going to be:

Reformers are calling for broad changes. Many of the contemplated reforms—such as making it easier to fire problem officers—are meant both to protect citizens from police brutality and to protect the vast majority of police officers who serve honorably from having their reputations tarnished by the conduct of a few.

These efforts could prove meaningless, though, in states like Illinois that give public-employee union contracts greater power than state law. Buried deep in the Illinois Public Labor Relations Act, which gives collective bargaining power to police unions, is Section 15, entitled “Act Takes Precedence.” Section 15 explicitly provides that when a government-union contract conflicts with any other law or regulation, the contract prevails.

It would be unthinkable, in any other context, to permit an agreement negotiated by unelected third parties to trump state law—but that’s exactly what Section 15 demands. Illinois could enact the best police reforms in the nation, but those reforms won’t matter if they run contrary to a police-union contract.

Good God, this is awful.

Postscript:  There are a couple of added barriers, I think, beyond just skills and interest that keep Progressives from digging down into these issues

  1. Public employees unions have always been a keep political bulwark of the Left, and I think folks on the Left struggle to challenge a public employee union
  2. A cynical interpretation is that hard-core Progressives want to chuck democracy altogether, and thus see no reason to do the hard work of making change happen in a democratic system

Update:  One idea that has been raised by Progressive of late is unbundling the police force, taking social work or civil enforcement tasks from them into other groups.  These seem like approaches worth considering -- I always have wondered why traffic or parking enforcement have to be police functions.  However, this would not have addressed recent high-profile shootings that are driving a lot of the anger

Do Teachers Next

@kevindrum writes this yesterday at his blog:

How long will taxpayers put up with threats to stop doing their job every time police forces are asked to make even the smallest change or sacrifice? It’s childish stuff and before long it’s likely to create a backlash that does the police no good.

Long time readers know at this point I am fed up with everyone in the debate on police.  I have been frustrated for years, long before the advent of BLM, at the structural and cultural barriers to holding police accountable for violence against citizens.  But I am equally frustrated at BLM and the Left for frittering away the moment, focusing on violence and looting Apple stores rather than the hard, city by city work of real reform.

Drum is right that the police and their unions tend to oppose even the smallest reforms.  But I do think he is unfair in that he is leaving out the background that the Left is demonizing their entire profession and threatening to cut budgets and salaries -- a lot of folks would get snippy if the world were suddenly demonizing their profession.

But it is an interesting exercise to take the two sentences I quote from Drum and substitute "teachers", another group of government employees currently refusing to fully do their jobs, for "police".

Postscript:  It is interesting to note in this comparison that no one has suggested that police stay home and get paid because of COVID threats, even though their risk is certainly far greater than that of teachers.  I can't believe it, but after years of being a critic of abuses of police and prosecutorial power, the Left is this close to having me leap to the defense of police.  Incredible.

It Looks Like Trump Is Going to Put My Business in a Vise

Years ago I was arguing with my mother-in-law about Executive power and the Presidency.  She, like many Obama supporters, was arguing that gridlock in Congress over legislation she considered critical was sufficient justification for President Obama to wield new executive powers and go around Congress.  I told her this was a terrible precedent, and asked if she would be just as happy to have President Lindsey Graham wielding such power (this being the prime Republican bogeyman for her, neither of us even imagining Trump).

So now, Obama (and Bush) precedents firm in hand, Trump is reacting to deadlock in Congress over further stimulus by picking up his pen and firing off some executive orders.  I want to discuss one of these, which is to allow at least temporary non-collection of the employee share of social security and Medicare taxes (a bit over 7.6% of wages).

Leave aside as to whether this is really appropriate stimulus for the current economic problems.  A tax break to people who still have jobs might help in certain recession scenarios, but the current situation of having large numbers of people unemployed because their workplaces have been forcibly closed by the action of various governors probably will not be helped a lot if the employed have more money in their pockets -- the problem is that local government officials are not allowing them to spend it. (I will note that no one ever suggests reducing the employer share of these taxes, which might actually increase employment by reducing total employment costs in a way that changing the employee share does not).

The problem I want to discuss is the terrible situation this potentially creates for businesses like mine.  All Trump can do is defer collection of the tax -- he cannot actually set it to zero or forgive it, which must be done by Congress.  This means that if our business does not withhold these taxes from employees, they accrue and build up as a debt still owed to the government by the employee.  Six months from now, when a new administration takes over and ends the deferral, our employees (who are paid twice a month) might get a deduction in their next paycheck not for 7.6% of wages but 91.2% of a paycheck (12 missed paychecks times 7.6%).

But here is why our company is really screwed:  We have 400 employees today, but since we are a summer seasonal business we will have fewer than 100 in January.  If there is a catch-up repayment in January (meaning Congress chooses not to forgive the taxes altogether), most of my employees who would need to repay the tax will be gone.  Do you think the government is just going to say, "oh well, I guess we lost that money"?  Hah!  You don't know how the government works with tax liens.  My guess is that for every employee no longer on the payroll for whom back employment taxes need to be collected, the government is going to say our company is responsible for those payments instead.  We could be out hundreds of thousands of extra dollars.  President Biden will just say, "well I guess you should not have participated in a Trump program."

So this is the vise we are in:  Either we participate in the program, and risk paying a fortune in extra taxes at some future date, or we don't participate, and have every employee screaming at us for deducting payroll taxes when President Trump told them they did not have to pay it anymore.  And what happens if Congress does come along later and forgive the taxes, what kind of jerk am I for not allowing my employees to benefit from the tax break?

Essentially I am forced to guess what legislation might be in the future.  Sort of the opposite of ex post facto law.  Pre facto law?

Update:  LOL, I r stupid, had "vice" instead of "vise"

Unbundling the College Experience

I thought this was a really interesting idea.  The COVID lockdowns and colleges going to remote classes has revealed a pretty strong preference among folks paying for the college experience -- they want the classes (or at least the piece of paper that comes from attending the classes) and they want the social experience.  With classes going online, many college students are deferring college for the year, hoping to get both parts of the package next year.  But what if someone unbundled the experience, providing the group social experience in location A while all their customers were taking classes remotely at colleges B, C, E, etc.

As the coronavirus pandemic continues to temporarily — or perhaps permanently — alter the college experience, two Princeton graduates have come up with a new idea: instead of students taking online courses from their bedrooms and couches, they'll take them from a luxe "bubble" hotel full of other students in the same boat.

It's called The U Experience; come fall, it may be hosting 150 students at hotels in Arkansas and Hawaii — and it's currently accepting applications.

The idea began, according to 24-year-old cofounder Lane Russell, when Harvard said it would shift to remote learning for the fall, but would continue to charge full tuition.

"It really made us think about, 'What is the thing that college is offering, and what are students getting out of it?" Russell said. "And we think that, even if a college is announcing something that indicates that the experience is actually worth $0, a lot of students probably do value it much higher than that."

And in the social and extracurricular void that colleges shifting to remote learning leave behind, "disruption and unbundling is called for," according to 27-year-old cofounder Adam Bragg.  That "unbundling" will take the form of two bubble "campuses": one in Waikiki, Hawaii, and the other in Fayetteville, Arkansas. Both are in hotels that Bragg and Russell said they have bought out.

"Something like this could have never been done before — mainly because the separation of a college experience from colleges was never possible. They held the college experience for ransom, and now that they've shifted to online learning, there is an opportunity to do something like this," Bragg said. He added that, pre-pandemic, a complete buyout "wasn't necessarily an interesting thing for a lot of the hotels, or at least they didn't know they had the interest for this thing. And so on both sides, the levels of coordination are a lot higher than was ever possible before."

Postscript:  yes, I know that with poor execution this becomes the Fyre Festival, but I am always a sucker for unbundling models

Speech Hypocrisy: A Prominent Conservative Sees the Appeal of Cancel Culture

Here is John Hinderaker at Powerline:

In 2017, Professor Knijnenburg wrote that “all Trump supporters, nay, all Republicans, are racist scum.”...

Why should the people of South Carolina fund this bigot? Why should they allow him to teach their children? They should fire him. Yeah, sure, tenure. But tenure should not protect a professor who is guilty of this kind of overt bigotry.

I am racking my brain to figure out how Hinderaker's plea for a public institution to fire a tenured professor is any different from the run-of-the-mill Leftist cancel culture that the Powerline bloggers often lament?  Narrowly defining an Overton window based on one's own beliefs and then demanding that anyone whose speech falls outside that window should be muzzled and denied a living sure sounds like cancel culture to me.   And there is not even a hedge here like, "well it's a private institution so the 1A does not apply" -- this is a public institution.

I have only seen selected bits of Professor Knijnenburg's academic work that have been cherry-picked by critics such as Hinderaker, but I am willing to believe that this professor does not represent the values I would want to see upheld in an institution of higher learning.  But the solution is to ignore Professor Knijnenburg as the trivial scholar he likely is and go after the folks that run these institutions and demand that they justify their standards for putting together the faculty and awarding tenure.  The problem here is not speech, but the absurdly low standards that obtain in much of academia, even at Ivy League Universities.

Well, So Much for Medical Privacy

I got this in my email today from the state of New Mexico:

Dear Employer,

As of Wednesday, August 5, 2020, the New Mexico Environment Department (NMED) filed an emergency rule that requires employers to report positive COVID-19 cases to NMED within four hours of being notified of the case. The employer must notify NMED by email at:

Email: NMENV-OSHA@state.nm.us

This kind of thing actually makes it harder for us to keep our workplace safe.  We depend on our employees completing a daily health self-assessment each day and the only way we could coax a number of them into being honest on this survey was to promise them that a) we would take care of them financially through any quarantine and b) their self-assessment would remain confidential.  But now it can't remain confidential in NM.  This is going to make it much harder for us to get honest information from our employees on potential infection, as they are all worried about  -- as they put it -- getting into some government system.  Arguing that this fear is irrational (and I am not sure it is entirely in a world where mayors are turning off power and water to homes they don't obey them) is beside the point, as it is a fear they have and will prevent an honest discussion with some.

Trump Attempting to Establish the Worst Regulatory Rule Ever

Inspired perhaps by back episodes of the Sopranos or his experience with payoffs required in New York to get any real estate development project going, Donald Trump is attempting to establish a regulatory regime right out of any kleptocracy

President Trump confirmed Monday he is open to a deal in which Microsoft Corp.  or another U.S. company buys the video-sharing app TikTok, but said the government should receive payment for clearing a purchase.

“I did say that ‘If you buy it…a very substantial portion of that price is going to have to come into the Treasury of the United States, because we’re making it possible for this deal to happen.’ Right now, they don’t have any rights unless we give it to them.”

Mr. Trump, a former real-estate developer, compared his demand for a piece of the purchase price to the “key money” a tenant who wants a lease pays a landlord.

“It’s a great asset,” Mr. Trump said of TikTok. “But it’s not a great asset in the United States unless they have the approval of the United States,” he said, reiterating that the Treasury should get “a lot of money.”

Great.  Already there are too many regulatory hurdles to doing about anything, and Trump wants agencies to use regulatory approvals to hold up corporations for payments.   And you can be sure this is a precedent the Democrats will be only too happy to latch onto -- want a pipeline built, where's our vig?  Who wants to be that this is the first Trump decision AOC comes out in support of?  The Republican Party sure has come a long way in my lifetime.

Wait, You Mean That the Economic Damage From COVID Lockdowns DOES Matter?

As I mentioned last week on twitter, I have retreated from that platform for a variety of reasons and will focus again on long-form blogging of the style this site has been pursuing for 16 years.

For the last several months, I have been a lockdown skeptic, at least for the healthy population under 55 or 60 years old.  I will confess my early tendency toward skepticism was driven as much by the behavior of lockdown hawks as any data or knowledge on my part.  Whenever I hear appeals to authority, use of non-transparent computer model results as facts, politicization of scientific positions, and restrictions on dissent in any scientific issue, I immediately get skeptical of the orthodox position.  As I have watched things unfold, I am increasingly convinced that this virus is (like most new viruses in history) going to run its course until large sections of the population have gained immunity.  Lockdowns, while they may have salutary effects in preventing hospitals from being overwhelmed, just seem to be delaying the inevitable -- when we come out of hiding, reservoirs of the disease are still there and infections mount again.  "Flatten the curve" made sense to me, but that seems as far in the past of political rationals as does the Tiger King mania.

But to some extent my opinion on lockdowns does not matter.  The one thing I AM sure of is that, whether lockdowns are effective or not, it is perfectly reasonable to balance the costs of such interventions against their benefits.  But I remember clearly when this commitment to making thoughtful tradeoffs marked one as practically Hitler.  Many of our intelligentsia, particularly on the Left, argued that it was immoral even to consider effects on the economy of COVID interventions.  I always thought this was ironic, because the worst economic effects were sure to hit lower income folks first -- they had jobs you had to, you know, show up for and they had less savings to weather the storm.   Paraphrasing one of my commenters, "Stay at home, work remotely by computer, and keep up with your family on Zoom" has to be one of the most white privilege government orders ever.  But nevertheless there was the Left self-righteously advising exactly this, with pundit after pundit who had portable jobs writing on a computer criticizing any hair dresser who wanted to actually be able to ply their trade as well.

So I was floored when I saw these charts on Kevin Drum's site as part of a criticism of the Republican reluctance to extend rich unemployment benefits:

You know what my reaction to these charts is?  No sh*t, Sherlock.  Many of us warned of EXACTLY this when the lockdowns began.  And folks on the Left treated our warning as not just irrelevant but evil. They would say, "How can you be so callous as to suggest jobs are more important that lives?"

But wait, now the economic impact of the lockdowns IS a problem?  I refuse to defend the Republican morons in Congress or the White House, but I can say that many of them warned of exactly this problem with the lockdowns while the Democrats were full steam ahead on economic shutdown.  I could accept Drum's post as self-criticism of the sort like "Wow, I really underestimated this when I was advocating for lockdowns" but now, he uses this as a platform to blame other people for the problem.

Libertarians have often highlighted how the government tends to create problems by their actions and then gains more power by saying that it needs to fix the problem its own actions created.   I can't imagine we will ever have a better example of this effect -- here is Drum advocating that the government simply must send more money to help people who were willing, even eager, to work but were not allowed to do so by the government.  COVID has been a socialist dream, converting payment for productive work to payment for breathing.

And let's discuss the exact program he is advocating.  He wants an extension of the Federal unemployment supplement of $600 a week which takes most state benefits to $1000 to $1200 a week.    Realize that is $50,000 to $60,000 a year we are paying people to not work (one only qualifies for these benefits if one does not work -- take a job and they are gone).  Look at the former income levels in his chart -- who is going back to work with this kind of government payment?  We are training people that they should be paid this much for not working and encouraging them not to seek actual employment -- this is a terrible message (and one reason a UBI makes far more sense if we are going to transfer this much money).   I think this is contributing somewhat to the position of the teachers' unions.  The public game now is to get paid and not work.

We have 13+% unemployment and our company has to struggle to hire anyone in these conditions.   I posted this on twitter as a comment on a Paul Krugman post, and his followers dutifully lined up to tell me that it was because I did not pay a fair wage.  People are making $25-$30 an hour on unemployment.  I thought $15 was our idea of "fair" -- are we really going to set $30 as our minimum wage?  Will anyone be employed?

Postscript:  I have one other rant related to employment and COVID.   Every blue check mark and Hollywood star bends over backwards on every occasion to thank health care workers during the pandemic.  Good, I agree, health care work is particularly fraught right now.  But you know who else worked through the pandemic?  I will give you a hint:  I bet you never had problems filling your car with gas, that you always had gas and electricity at home, and that (with a few brief exceptions) you always had plenty of food choices.  There are a lot of folks out there who showed a lot of commitment during COVID on whom we rely, and a lot of them are in industries (oil, manufacturing, farming) the elite of the Left tends to look down its nose at as backwards and inferior.

Postscript #2:  I am well aware that Drum has had significant medical issues that make him likely particularly vulnerable to this virus.  I am thrilled that he has a career he can pursue without endangering himself via public contact.  Our family made certain choices we might not have to protect my 85 year old mother in law.  But I am exhausted with people applying their own personal preferences and risk trade-offs to others who may be in very different situations.

George Floyd, A Memo to Conservatives

A good many of my conservative friends are in shock at the reaction to the killing of George Floyd.   "We saw the video.  We agree its awful.  No one we know is defending this."

Yes, that is likely true.  The video was pretty damning.  But you see, these things seldom happen on video.  And when they don't, Conservatives are generally in a "believe all cops" mode that is just as ignorant of due process and nuance as the me-too brigades were with Julie Swetnick's crazy accusations about Judge Kavanaugh.

I understand that a great many police officers are good, even laudable people.  But not all are.  And because there are bad apples, we need careful accountability systems for police particularly because we give them powers and responsibilities that go beyond those of ordinary citizens.

The problem with this accountability is that Conservatives tend to go past respecting and supporting police, to fetishizing them.  I get it -- police are really at the core of beliefs for many Conservatives, whose views turn around the fight between civilization and barbarism.  It's hard not to think of this with barbarism in the streets over the last 24 hours.   No matter how much we respect them and need them to be there, we still also have to impose accountability on them.  You Conservatives frequently stand athwart of this accountability (you Progressives too, but I will get to that in the next post).

George Floyd, A Memo to Progressives

I am not going to lecture serious Progressives on the arson and looting in the streets today -- if you don't understand that stealing iPhones is not an appropriate reaction to police brutality, then the rest of this is going to be lost on you.  But you guys basically represent my side in this thing and frankly you are doing a terrible job.  I will focus on BLM and it could apply equally well to the entire Progressive response.

  1. There is a real problem with police accountability and police violence in this country, one I have been writing about since long before the BLM movement was even created.
  2. The harm of these police accountability issues falls disproportionately, but not solely, on blacks and other minority ethnic groups
  3. For any number of reasons, fixing racism is not the immediate answer.  Most obviously, because racism is super-hard to eradicate and has persisted (though improved, IMO) despite a lot of attention over many decades.   It is hard to point to any time and place in human history when some folks have not been seduced by in-group-out-group thinking.  The other reason is that the primary issue is accountability, not racism.  We give police special powers to use force that the rest of us do not have, but impose less accountability on them for the use of force than the rest of us face.  No matter how good most police officers are, this accountability problem is going to allow bad eggs to repeatedly abuse their power.
  4. There are real, identifiable steps that can actually increase police accountability and transparency and reduce the types of police violence incidents BLM was formed to oppose.  Early on, BLM actually identified a pretty good list.
  5. BLM did a fabulous job of raising awareness and putting these issues near the center of political discussion.
  6. Having done so, BLM now has gone completely off the rails.  It appears to be entirely focused on virtue-signalling and disruption and support of progressive issues completely tangential to its initial focus.  It has no coherent action plan.  Colin Kapernick torpedoed his own football career to bring attention to BLM, but once he did so and had microphones thrust in his face from every direction, neither he nor any of his supporters had anything specific to advocate for, other than outrage and telegraphing their victim status.
  7. Things are even worse today.  A middle and upper class white populace who was sympathetic two days ago may be turning against you.  If you display barbarism in the streets, barbarism that only the police can head off, then you increase sympathy for the police rather than support your narrative of accountability
  8. Progress can be made on these issues, but what it will take is a hard city by city slog to change the rules that govern police discipline and transparency.   As I wrote before, BLM "could learn a lot from Conservative and libertarian groups like ALEC, that focus on creating model legislation and local success stories that can be copied in other places."
  9. Republicans often oppose police accountability steps -- they don't just support the police, they fetishize them.  But the cities that most cry out for new accountability rules -- New York, Chicago, Detroit, Baltimore, St. Louis, Los Angeles -- are have Democratic super-majorities and governments whose officials almost to a one have come out publicly in support of BLM.  So why no progress?  One big barrier is the Democratic Party's unwavering support for public employee unions, and it is police unions that are the biggest barrier to implementing the steps BLM should be demanding.   If you are not diving in and challenging police union contracts on their next renewal, then you aren't doing anything useful on this issue.

Another Climate-COVID Computer Modelling Similarity

In this post, I wrote about parallels between climate and COVID alarm and related issues of computer modelling.  I realized I left out at least one parallel.

In the world of climate, computer model results are often used as the counterfactual case.  Let me give you an example.  The world has warmed over the last 100 years at the same time atmospheric CO2 concentration has increased.  Obviously, to truly judge the effect of CO2 on temperatures, we would like to know what the temperatures would have been over the last 100 years without rising CO2 concentrations.  But we don't have thermometers that read "with" and "without" CO2.

I remember I got caught up in this years ago when I published an analysis that showed that estimates of temperature sensitivity to CO2 concentrations used in projections going forward greatly over-predicted the amount of warming we have seen already.  In other words, there had not been enough warming historically to justify such high sensitivity numbers.  In response, I was told that alarmists considered the base case without CO2 increases to be a cooling world, because that is what some models showed.  Compared to this cooling counterfactual, they argued that the warming from CO2 historically had been much higher.

By the way, this argument always gets to be very circular.  When you really dig into the assumptions of the counter-factual models, they are based on assumptions that temperature sensitivity to CO2 is high.  Thus models predicated on high sensitivity are used to justify the assumption of high sensitivity.

I thought of all this today when I saw this post on COVID models and interventions from Kevin Drum.  I read Drum because, though I don't love his politics, he is more likely than most team-politics writers from either the Coke or Pepsi party to do a reasonable job of data analysis and interpretation.  But I have to fault him for this post, which I think is just terrible.  You can click through to see the chart but here is the text:

At the end of March, the highest estimate for [NY State] hospitalizations was 136,000+. Today the peak is estimated at about 30,000. That’s a difference of 5x. Did the modelers screw up?

Not really. Remember the Imperial College projections for the United States? They estimated about 2 million deaths if nothing was done; 1 million deaths if some countermeasures were taken; and 200,000 deaths if stringent countermeasures were taken. That’s a range of 10x. If you figure that we’ve taken fairly stringent countermeasures but not the maximum possible, then a reduction of 5x is about what you’d expect. Alternatively, if you ignore the Columbia University projection as an outlier, the IHME estimate has only gone down by about 2x. That’s what you’d expect if we took countermeasures that were just a little more stringent than their model assumed.

At the end of March it was still not clear how stringent and how effective the coronavirus countermeasures would be. In the event, it looks like they worked pretty well, cutting cases by at least 2x and possibly more. This is why the model estimates have gone down: because we followed expert advice and locked ourselves down. Just as we hoped.

Treating the early model estimates as if they are accurate representations of the "no intervention" counter-factual is just absurd.   It is particularly absurd in this case as he actually quotes a model -- the early Imperial College model -- that is demonstrably grossly flawed.  He is positing that we are in the Imperial College  middle intervention case, which estimated a million deaths in the US and is likely to be off by more than an order of magnitude.  Given this clear model/estimate miss, why in the world does he treat early Columbia and McKinsey models as accurate representations of the counter-factual?  Isn't it at least as likely that these models were just as flawed as the Imperial College models (and for many of the same reasons)?

The way he uses the IHME model results is also  flawed.  He acts like the reductions in the IHME estimates are due to countermeasures, but IHME has always assumed full counter-measures so it is impossible to use the numbers the way he wants to use them.

Parallels Between COVID-19 Alarm and Global Warming Alarm

So I finally had a day or two of downtime from trying to keep my business afloat (it's weird reading all the internet memes of people at home bored when I have never been busier).  I wondered why I was initially, and remain, skeptical of apocalyptic COVID-19 projections.

I have been skeptical about extreme global warming and climate change forecasts, but those were informed by my knowledge of physics and dynamic systems (e.g. feedback mechanics).  I have been immensely skeptical of Elon Musk, but again that skepticism has been informed by domain knowledge (e.g. engineering in the case of the hyperloop and business strategy in the case of SolarCity and Tesla).  But I have no domain knowledge that is at all relevant to disease transfer and pathology.  So why was I immediately skeptical when, for example, the governor of Texas was told by "experts" that a million persons would die in Texas if a lock-down order was not issued?

I think the reason for my skepticism was pattern recognition -- I saw a lot of elements in COVID-19 modelling and responses that appeared really similar to what I thought were the most questionable aspects of climate science.  For example:

  • We seem to have a sorting process of "experts" that selects for only the most extreme.  We start any such question, such as forecasting disease death rates or global temperature increases, with a wide range of opinion among people with domain knowledge.  When presented with a range of possible outcomes, the media's incentives generally push it to present the most extreme.  So if five folks say 100,000 might die and one person says a million, the media will feature the latter person as their "expert" and tell the public "up to a million expected to die."  After this new "expert" is repetitively featured in the media, that person becomes the go-to expert for politicians, as politicians want to be seen by the public to be using "experts" the public recognizes as "experts."
  • Computer models are converted from tools to project out the implications of a certain set of starting hypotheses and assumptions into "facts" in and of themselves.   They are treated as having a reality, and a certainty, that actually exceeds that of their inputs (a scientific absurdity but a media reality I have observed so many times I gave it the name "data-washing").  Never are the key assumptions that drive the model's behavior ever disclosed along with the model results.  Rather than go on forever on this topic, I will refer you to my earlier article.
  • Defenders of alarmist projections cloak themselves in a mantle of being pro-science.  Their discussions of the topic tend to by science-y without being scientific.  They tend to understand one aspect of the science -- exponential growth in viruses or tipping points in systems dominated by positive feedback.  But they don't really understand it -- for example, what is interesting about exponential growth is not the math of its growth, but what stops the growth from being infinite.  Why doesn't a bacteria culture grow to the mass of the Earth, or nuclear fission continue until all the fuel is used up?  We are going to have a lot of problem with this after COVID-19.  People will want to attribute the end of the exponential growth to lock-downs and distancing, but it's hard to really make this analysis without understanding at what point -- and there is a point -- the virus's growth would have turned down anyway.
  • Alarmists who claim to be anti-science have a tendency to insist on "solutions" that have absolutely no basis in science, or even ones that science has proven to be utterly bankrupt.  Ethanol and wind power likely do little to reduce CO2 emissions and may make them worse, yet we spend billions on them as taxpayers.  And don't get me started on plastic bag and straw bans.   I am willing to cut COVID-19 responses a little more slack because we don't have the time to do elaborate studies.  But just don't tell me lockdown orders are science -- they are guesses as to the correct response.  I live in Phoenix where it was sunny and 80F this weekend.  We are on lockdown in our houses.  I could argue that ordering everyone out into the natural disinfectant of heat and sunlight for 2 hours a day is as effective a response as forcing families into their houses (initial data, though it is sketchy, of limited transfer of the virus in summertime Australia is interesting -- only a small portion of cases are from community transferBy comparison less than a half percent of US cases from travel).
  • In both cases, advocates of the precautionary principle seem to rule the day.  I would argue that in practice, the precautionary principle means that any steps that might conceivably limit something bad should be pursued irregardless of cost.  You see a form of this all over social media, which folks arguing that it is wrong to balance deaths against money, and any life spared is worth the cost.  But this is absurd two at least two reasons
    • First, unemployment and economic recession have real, proven effects on mortality.  Shut down the economy to reduce CO2 or virus spread, and people will die
    • Second, if we really followed this principle for everything we would be back in the stone age.  Take the flu.  15,000-20,000 people will die of the flu every year in the US -- my healthy 25-year-old nephew died of the flu.  Are we going to shut down the economy next year in flu season?  It would reduce flu deaths.  Or take the 37,000 people killed each year in the US in motor vehicle accidents.  With the lockdowns, that figure is certainly reduced right now.  Should we just shut down the economy forever, it sure would reduce car fatalities?
  • And of course there is the political polarization of what should be scientific opinion.  The Nevada and Michigan governors initially banned chloroquine treatment strategies for no good reason other than the fact that Trump publicly highlighted them as promising.

Update:  Prediction from climate applied to COVID-19:  No one will go back and call out widely-used models for failing to accurately model the disease or attempt to learn from their mistakes.  If it is ever mentioned that these models grossly over-estimated deaths, it will be forgiven as being exaggeration in a good cause.  (Somewhat related, Bryan Caplan on Social Desirability Bias)

For the Left, Excess Hospital Beds Were "Too Many Deoderants" ... Until This Month

For years, a significant critique (mostly from the Left) of health care costs has been that over-investment by private hospitals in premium facilities (e.g. ICU beds, MRI scanners, etc) is part of the reason health care costs have been rising so rapidly.  This is why the response to a study like this from several years ago was not "wow, how fortunate the US has so many ICU beds" but instead "wow, this is what is wrong with US healthcare."  This is why per capital healthcare cost is in the next column, implying a link between more beds and higher costs.  And, this is why the "life expectancy at birth" is included in the chart.  The conclusion was supposed to be "see, the US spends all this money on ICU beds and gets nothing for it."  (Obviously this conclusion would be absurdly narrow-minded even before COVID-19, as US life expectancy is lower than that of many other countries due to lifestyle choices and other factors -- a better comparison would be US life expectancy at 65, where US looks much better).

As a result, many states and municipal authorities have Certificate of Need (CON) processes that require hospitals and other health care providers to get government permission before adding certain types of capacity/infrastructure.  Many of these government agencies actually delegate these decisions to a board populated with representatives of the current local incumbent hospitals, meaning one must get permission from one's competitors before adding capacity (permission unlikely to be given).

This sort of regulation has had acute consequences in the age of COVID-19.  John Phelan has an example from Minnesota.

With the extra time, Minnesota will work desperately to expand its ICU capacity. Local stadiums and hotels will be converted to temporary hospitals. “The attempt here is to strike a proper balance of making sure our economy can function; we protect the most vulnerable; [and] we slow the [infection] rate to buy us time and build out our capacity to deal with this,” Gov. Walz said....

Until 1984, Minnesota operated what were called Certificate of Need (CON) laws. These require government permission before a facility can expand, offer a new service, or purchase certain pieces of equipment. While Minnesota has not operated CON laws since 1984, along with two other states—Arizona and Wisconsin—it maintains several approval processes that function like CON laws.

In 1984, Minnesota enacted a hospital construction moratorium. This prohibits the building of new hospitals as well as “any erection, building, alteration, reconstruction, modernization, improvement, extension, lease or other acquisition by or on behalf of a hospital that increases bed capacity of a hospital.” Whenever hospitals or provider groups propose an exception to the moratorium, the Minnesota Legislature requires the Department of Health to conduct a “public interest review.”

Researcher Patrick Moran explains:

In its review, the Department must consider whether the proposed facility would improve timely access to care or provide new specialized services, the financial impact of the proposed exception on existing hospitals, the impact on the ability of existing hospitals to maintain current staffing levels, the degree to which the facility would provide services to low-income patients, as well as the expressed views of all affected parties. [Emphasis added]

Moran continues:

These reviews must be completed within 90 days of the proposed project. However, the public interest review is not binding. The Minnesota Legislature ultimately decides which exceptions are allowed to go forward. Except for the fact that the Legislature makes the final determination about each project, the public interest review process for new hospitals and hospital beds closely resembles CON statutes in other states. [Emphasis added]

Indeed, it is incredible to note that, as with CON laws, the purpose of this system is to make it harder to provide hospital beds in Minnesota. Moran says: “Policymakers hoped that the moratorium would be more effective than CON in reducing the growth of hospital beds.”

They appear to have been successful. In the twenty years from 1984 through 2004, 16 exceptions were granted permitting just 94 additional licensed beds. As the chart below shows, between 1996 and 2016, the number of licensed beds in Minnesota actually fell by 921 while the population increased by 810,000. Exactly how “the Minnesota Department of Health has concluded that the moratorium is largely ineffective in restraining bed capacity”, as Moran says, is something of mystery.

The reason for this sort of thinking has in part been based on misunderstandings on the Left about markets (similar to Bernie Sanders and his too many deoderants statement).  But it is part based on the reality that the US healthcare system is stuck between two different regulatory models.

  • In model 1, which we will call free market, investment by private actors increases supply.  In such a market with a lot of fixed investment, prices are driven down as competitors vie to fill excess capacity.  This is close to the model the US has in veterinary medicine and some non-insurable surgeries like eye correction and plastic surgery, but is far from the model we have in most patient care
  • In model 2, which I will call the public utility model, a small number of private companies operate with heavy regulations of services and prices in exchange for a guaranteed return on assets.  Since the size of the asset base drives profits, private players have the incentive to add lots of assets while regulators look on asset additions skeptically

The US patient healthcare system is stuck between these models, which may be a worse spot than either alone.  Dominance of third party payers or even a single government payer tends to drive the system towards model 2.  But model 2 is notoriously bad at producing innovation, often results in poor capital allocation decisions, and sub-optimizes costs compared to model 1.

Please Honor Social Distancing Rules, Even if You Are Skeptical of the Risk

I write this because I have been publicly skeptical of some of the COVID-19 responses.  But be that as it may, the decision has been made to go all-in on social distancing.  I am fully participating, whatever my personal beliefs are about risk.  Our family is staying isolated and wearing masks and gloves when we need to go into a store -- not because we are scared but because we are participating.  These sorts of things are much easier to do when everyone else is doing them, and more effective as well.

In places like Phoenix that is lightly hit by the virus and in rural areas where my company operates that have been hit not at all (e.g. zero cases in the county), a lot of folks are not playing along.  It would be heartbreaking to crash the economy and double the government debt only to have this thing still drag out because folks couldn't put neighborhood barbecues on hold for a few weeks (yes, I have seen several).

Update from a long-time reader:

The claimed purpose of quarantine is to create a gap in a long line of transmission. While it can be quite effective, the quarantine time does not really start until EVERYONE stops moving around. As long as even a few still move between isolated groups, those groups are not actually isolated at all. This means that failure to self quarantine lengthens the required quarantine period of all who actually comply. I would like this to be over, the sooner the better.

COVID-19 And Some Thoughts on Data Analysis

I am not going to take a position on COVID-19 severity now, if for no other reason as I am not an expert and I think its fine not to clutter the debates about virus responses too much with non-experts (though it is wrong, as discussed below, to censor experts who have heterodox opinions).  I am convinced COVID-19 is "not just the flu" but when I see the governor of Texas being told that there will be a million deaths in Texas alone if there is not a hard quarantine there -- well, I am skeptical.  Like with global warming, the full denier and total alarmist positions are likely both wrong -- with a lot of bad data analysis in the media along the way.  I have decided to focus on the latter.  So here are a few random thoughts:

  • The data we have sucks, and thus any conclusions we are drawing mostly suck too.   The data is worse than just being incomplete or bad -- if it was randomly distributed, we could live with that.  But the lack of test kits and how we have deployed the few we have means that the data is severely biased.  We are only testing people who are strongly symptomatic.  If there is a normal distribution of outcomes from this disease, we are only testing on the right side of the distribution.  We have no idea where the median is or how long the tail is to the left side of asymptomatic outcomes.  The only thing we absolutely know about the disease is its not as deadly as the media is portraying as we are missing hundreds of thousands of cases in the denominator of the mortality rates.  The media has also been terrible about reporting on risk factors of those who died.  When a bunch of people died suddenly in Seattle, one had to read down 5 paragraphs into the story to find that they were all over 70 in an old-age home.  Or when prime-of-life people die, facts such as their being type 1 diabetics -- a known severe risk factor for this virus (and one that makes it different from the flu) are left out.
  • The media is constantly confusing changes in measurement technique and intensity with changes in the underlying progress of the virus itself.  Changes in case numbers have as much to do with testing patterns and availability than they do with the real spread of the disease.
  • While COVID-19 is likely worse than the normal flu, our perceptions of how much worse are strongly affected by observer bias.  Frankly, if every news broadcast every night spent 15 minutes reciting flu deaths each day, we would all be hiding in our homes away from flu.  They present a healthy man in his thirties dying clearly as the tragedy it is, but the spoken or unspoken subtext is, "this is abnormal so this thing is much worse."  But it seems abnormal because we do not report on the very real stories of healthy young people who die of the flu.  My nephew who was 25 years old and totally healthy with no pre-existing conditions died of the flu last month -- and no one featured this tragedy on the national news.
  • The data we are getting sucks worse because the media has decided, as one big group, that for our own good they are going to limit all facts about the virus to only the bad ones.  There is a strong sense -- you see it on Twitter both in Twitter's policies as well as Twitter group attacks -- that saying anything that might in any way reduce one's fear of the disease should be banned for our own good.  One of the more prominent examples was Medium removing an article NOT because it was proven wrong but because it took one side of a very open question and it was obviously decided it was "unsafe" to allow that side to even be aired.

    This strikes me as a terrible precedent and one with a very slippery slope.  We have had to fight this attitude for years in the climate debate, the bad idea that good science is unacceptable if it gets to the wrong answer.
  • The media is never more dangerous than when it understands a little about a scientific topic.  After 40 years of engineering experience with feedback phenomena and exponential effects like positive feedbacks, the media suddenly thinks its the expert now and needs to lecture me that I don't really understand the power of exponential spread.  They are right that exponential disease spread with a highly transmissible virus is dangerous, but their 3rd grade math understanding is so simplistic it makes me scream.  Yes I understand the growth math, but I also understand that the same growth math says that a single bacteria colony in a month of growth should consume the whole Earth and a single chunk of plutonium that fissions indefinitely could destroy the planet.  But neither happens because there are brakes on the doubling process in later iterations.  I don't know in the case of COVID-19 if these brakes are strong or weak, but showing me mindless doubling trees is just insulting.
  • Many of the computer model results I am seeing make no sense to me.  I am exhausted with people talking about computer models as if they are some fact, rather than a really opaque calculation on some researcher's set of non-transparent hypotheses.  The only way I respect a computer model is if someone presents it this way, "If X, Y, and Z are true, and you assume A and B, then this model shows what the result might be, with some large error ranges."  Add to this the fact that most modelers run a range of models based on a range of inputs that yield a range of outputs, and then the media picks the most extreme of all these outcomes and presents it as "the model results of experts" without even showing the range of other outcomes.  Arnold Kling wrote something I nodded my head to about COVID-19 and data modelling:

Once you build a model that is so complex that it can only be solved by a computer, you lose control over the way that errors in the data can propagate through the model. For me, it is important to look at data from a perspective of “How much can I trust this? What could make it misleadingly high? What could make it misleadingly low?” before you incorporate that data into a complex model with a lot of parameters.

  • It will be interesting to see if anyone goes back to the models making the national news today and reconciles them to actual results.  Certainly no one ever does this in the climate debate, so I am not holding my breath.
  • Frankly, I am done with the Precautionary Principle.  This does not mean I am against taking precautions, even strong and expensive precautions, against bad things.  But I am done with the notion that one should ignore the costs of these precautions and not make sensible tradeoffs.  This is even true when trading off the risk to life on one hand with reduction of economic outcomes on the other.  This is in part because reduced economic activity has real effects on human misery and has direct correlations with lifespan and well-being.

Update:  This is exactly the kind of thing I would like to see more of.  Kudos to 538.  When people rattle off ridiculous figures, it causes me to tune out.  I take this seriously.

A Letter to the Harvard President on COVID-19 Response (Wherein Coyote Actually Sortof Makes An Intersectional Argument)

I got this note from the head of alumni affairs (or something like that) at Harvard:

I write to share with you a message President Bacow sent this afternoon to Harvard faculty and staff. He also sent a similar message to students. His message is one he and I would like to extend to all of you.

This is an unprecedented moment for Harvard and for the world. The last week has brought uncertainty, but also great resolve and resiliency. I am heartened by the way members of the broader Harvard community, extended beyond the campus, are coming together to support each other.

I have never been prouder to be a part of the Harvard community.

Attached was a letter (sorry, no online version but this roughly mirrors its content) from the Harvard President about bravely making the decision to send all the students home.  There is a lot of uncertainty in the right response to COVID-19 and so I am generally open to difference of opinion, but the smug tone of making a brave decision in the face of adversity just rubbed me the wrong way.  So I wrote this in response.  Note I am not an expert, just one person's opinion:

FWIW, since you sent this, I will say that I think what Harvard has done is exactly the wrong thing and its actions are a victory of virtue-signaling over rational responses.

In particular, it is clear that the mortality rates for people aged 18-25 from COVID-19 are trivial -- and would be even more trivial except that we don't measure most of the COVID-19 cases in this age group because they are so mild (this from the South Korean experience where they had more measurement and they found many asymptomatic cases in this age range). When in university, these students are gathered together in a pocket of other people in their same age range and also with minimal mortality risk.

By sending these kids home, you have created a massive diaspora of folks from one of the US viral hotspots (Boston) all over the country. Students that would have been living with other low-risk people are now living with parents and grandparents who are very much at risk. Add to this the anecdotal evidence I see on the news and social media of young folks of college age flaunting quarantine and social isolation rules, and I believe that Harvard and other institutions have increased risk rather than decreased it. Also, given that Boston may have the best hospital network in the country, for those of your students who might get sick you have sent them from this location with strong medical services to one which almost certainly has an inferior medical network. Finally, given just how low the risk is to people of this age, it is amazing how panicked people in this age range are today, perhaps because they have a stronger presence on social media where there are panic positive feedback loops. An adult response would have been to tell the kids that they are going to be fine, and that their job was to stay clear of their family members who are far more vulnerable.

A better solution would have been to keep students in school and then to minimize their exposure to the older administration and professor body through online classes. Students if online but still at university could still have access to educational resources and could still hold group discussions that are much harder to do online.

I will add as a final note, because Harvard today seems to be inordinately focused on issues of class and intersectionality: I believe there is an ugly class issue built into the current panic. You can see a class gradient in the panic itself -- AJ's and Whole Foods in San Francisco have empty shelves, whereas everything is normal at the Family Dollar in rural Alabama. What I see are rich people with good amounts of savings and professional jobs at well-capitalized companies where they can work remotely asking that the jobs of low-wage restaurant, factory, and retail workers be sacrificed through quarantine for their incremental safety. I will make my assumptions explicit -- for a variety of reasons from under-counting asymptomatic cases to academic and media incentives that cause skeptical voices to self-censor or be overwhelmed, I believe the US potential mortality from COVID-19 is being grossly overestimated. One might say that it's better to be safe than sorry, but in public policy (I assume they teach this at the Kennedy School) there are always tradeoffs. What, for example, is the human misery and mortality associated with, say, 20% unemployment? I can't remember CNN interviewing many out-of-work restaurant employees about why we should quarantine cities for 2 months. I will bet you that those Harvard professors who are focused on intersectionality will be writing about exactly this a year from now -- and when they do, remember this old white cis European dude told you first.

Warren Meyer
MBA 1989

Bringing Understand Across Party Lines: Guns and Abortion

Theresa Bonopartis writes at the Federalist, "If Abortion Providers Cared About Women, They Wouldn’t Fight Abortion Safety At The Supreme Court."   The article is about what one would expect, an abortion opponent wondering why women who support abortion would oppose reasonable health and safety regulations to protect women from dangerous medical practices while receiving an abortion.

This should be super easy to explain to Conservatives (and vice versa) because there is an exactly parallel question that folks on the Left ask of Conservatives.  My New England liberal mother-in-law often asks "why do gun advocates oppose very reasonable and incremental measures to make gun ownership safer?"

And the reason in both cases is exactly the same:  That strong advocates of certain practices (gun ownership, abortion) are often worried -- and frequently with just cause -- that incremental regulations are not aimed at safety but are meant as ways to constrict the practice on the road to eventual elimination.  They fear these are eliminationist rules in the Trojan horse of "reasonable regulation."   This is why the Left, which generally advocates regulating the hell out of most every service offering, resists abortion regulations that are in some cases less stringent than those put on tanning booths.  And this is why the Right, which is generally happy to deny all civil rights to any criminal and put them in a hole for life, is resistant to background checks for gun ownership.

The funny thing is that as obvious as these parallels are to me, they almost never work with strong partisans.  "That's not the same at all, we are talking about protecting women, not letting wackos carry handguns to shoot up preschools." "That's not the same, we're just trying to protect ourselves while they are killing babies."  But the point is that while the issues are not the same, the reason for skepticism about "reasonable regulations" is exactly the same.

Welcome to August 1929

It is not October of 1929 yet, but we are getting close in the stock market.  A few parallels

  • A 10+ year bull market where many retail participants can't even remember a bear market
  • New low cost brokerage models (in the modern case, zero-commission trading at Robin Hood and emulated by most major brokerages) attracting new inexperienced investors and increasing the trading frequency in retail
  • A government that is completely clueless to its policies that artificially inflate asset prices

We see stocks today that are traded absolutely untethered to their fundamentals as if they were bitcoin rather than ownership interests in productive companies (e.g. Virgin Galactic, Plug power, Apple, Tesla, etc).  Virgin Galactic doesn't even have the prospect of selling its first product and has run up to a $6 billion valuation.  Tesla has an enterprise value close to the largest car company in the world (Volkswagon) despite 1/20 the car sales, no profitability, and stalled revenue growth.  The market in general goes way up on good news and then goes up on bad news.

Be cautious everyone.

Dear Republicans: I Am Sorry, But This is How Precedents Work

In response to Bernie Sanders promising to jam through his programs by executive fiat if necessary in a declared state of emergency, folks of the Right are rushing to distance themselves from helping to create this monster.  From the National Review

Trump’s emergency declaration was contained to a single issue and a single project. Declaring “climate change” — an amorphous threat that’s perpetually a decade away from destroying us all — a national emergency, however, puts virtually all economic activity under the executive branch’s purview. If we’re to believe media reports, there isn’t a single hardship faced by mankind that isn’t in some dubious way connected to the slight rise of the earth’s temperature. Sanders would empower the same bunch of Malthusian hysterics who have been indefatigably wrong about everything for the past 50 years, to run some of the world’s most powerful bureaucracies.

The Sanders agenda terrifies me as well, but let's not pretend that Trump didn't fully establish the precedent for executive action through declaring states of emergency to end-run a Congress.  The fact it was "just that one time" is meaningless -- that's how precedents work (they are a bit like losing one's virginity in that sense).

It's not like this Democratic move wasn't fully predictable at the time of Trump's action.  Even political outsiders like, say, me were able to do it

I can pretty much guarantee you that if Trump uses this emergency declaration dodge (and maybe even if he doesn't now that Republicans have helped to normalize the idea), the next Democratic President is going to use the same dodge.  I can just see President Warren declaring a state of emergency to have the army build windmills or worse.  In fact, if Trump declares a state of emergency on a hot-button Republican issue, Democratics partisans are going to DEMAND that their President do the same, if for no reason other than tribal tit for tat.

The Tesla Stock Price -- WTF?

So as of the morning of 1/17 when I started writing this, the enterprise value of Tesla (market value of its debt and equity) was somewhere around $110 billion.  I can't even pretend to explain how a company that over 10+ years has never made an annual profit and which produced less than 400,000 vehicles as this sort of valuation (Volkswagen, which has about the same equity market value, makes about 11 million vehicles a year).  Tesla has an enterprise value of $300,000 per annual car produced (each of which, on average, lost money for them last year).

I don't have the energy to repeat my concerns on Tesla, but I do want to give a few updates from the last 12 months

  • Tesla is not seeing a lot of organic growth.  I know that seems an odd statement given that deliveries have been up the last few quarters (though even this growth has been pretty modest for a company with such a large valuation growth premium).  In retail there is a useful concept called "same store sales".  Revenue might be growing due to addition of new store locations, but what is happening in the core stores you already have?  In this case, one can say that Tesla's same stores, or more accurately "same product-geography sales" have been disappointing.  They enter new markets with a big splash and a lot of pent up demand -- Model 3 US, then Europe, then UK left hand drive, etc.  But in each case, after 2-3 quarters, lacking some specific one-time boost, deliveries begin falling.  Deliveries fell in the US the last 2 quarters.   Apparently they fell in CA last quarter.   They fell in strong Tesla markets like Norway the last quarter.  They are falling in most of Europe.  Tesla is eeking out small increments of growth each quarter by one time effects -- first the introduction of the model 3 in Europe, then in the 3rd quarter in the UK, then in the 4th quarter with a huge burst of sales in the Netherlands as EV subsidies in that country expired at end of year.  Tesla as a whole has some growth (though still more modest than you might guess from the hype) but look at each constituent market and you see a more disturbing story.
  • The model 3 has cannibalized Tesla's high end, high margin Model S and X products.  In a post last year, I criticized Tesla for under-investing in refreshing the Model S and X, whose designs were getting long in the tooth.  Today, it's becoming increasingly clear that Tesla is on a path to abandoning these products, which have already seen steady sales declines as they are cannibalized by the less expensive model 3.  The problem with this approach is that it is creating a mix shift from higher price/margin to lower price/margin products.  Even as deliveries go up, revenues are not rising nearly as fast and there is downward pressure on gross margins.
  • Given the above two points, I was as surprised as most people that Tesla reported a profit for 3Q2019.  It made almost no sense that they produced more vehicles but with essentially unchanged revenues and had net income go up.  I am still tremendously skeptical about Tesla's financial statements but for what its worth, they seeming to be getting them past the auditors.
  • My guess is that they will show a profit of 4Q2019 but probably still a loss for the year, but if anyone can stretch 2019 into a small positive net income gain, Tesla will find a way.  Maybe a massive sale of emissions credits or some sort of one-time supplier rebate or recognition of self-driving revenues.  No matter what, though, 1Q2020 almost has to be a disaster.  Tesla fans seem to think that China will fill in the hole, but I believe Tesla is exaggerating the ability of its new Shanghai plant to produce in volume, while the Chinese auto market is pretty sick right now anyway.
  • Tesla still does a lot of counter-productive stuff to buff up quarterly numbers.  Just one example, I noticed around Dec. 20 that two Tesla showrooms in Scottsdale had zero display vehicles on the floor.  I was told that this is now a common Tesla practice to sell out all of its display inventory each quarter to show a few extra delivery numbers (with 3 cars each at 200 showrooms this is maybe another 600 deliveries or about 0.5% of quarterly sales).  This strikes me as tremendously short-sited.  They went for weeks in the busy holiday shopping season without any demonstration models in their stores just to increase quarterly deliveries by maybe a fraction of a percent.  Elon Musk and Tesla seem to expend an inordinate amount of energy trying to get short-term boosts in the stock price.  The only other person who spends as much time on twitter pumping stock prices is Donald Trump, who IMO shares a number of personality traits with Musk.
  • The market apparently does not care one bit that the Tesla makes promise after promise that are not only broken, but entirely forgotten.  The Semi, the roadster, battery swap, a million robotaxis by 2020, a thousand solar roofs per week in 2019 -- all these promises and more were introduced to much fanfare and stock pumps and then promptly forgotten by all.  Each new promise that comes out, no matter how unbelievable it smells, is treated by the stock market as an occasion to run the stock up another 20 points.
  • The Tesla acquisition of SolarCity was at least as corrupt as I thought it was at the time it happened.  Recent disclosures in the shareholder suit challenging the SolarCity acquisition as a bailout of the extended Musk family have confirmed that a) SolarCity was on the verge of bankruptcy when Tesla stepped in; b) despite the shaky financials and no other interested parties, Tesla paid a premium for the company with almost no negotiation and c) for at least 2 years afterwards Tesla was essentially shutting down that business, doing fewer installations every quarter and closing sales locations.  Then, in the same week that Musk was deposed in the shareholder suit, Tesla began announcing new solar roof initiatives and making more Musk-like promises of huge future growth.  I am convinced this activity is a sham meant to give Musk the ability to truthfully testify that Tesla is committed to the solar business, and that all this activity will go the way of the Tesla Semi and battery swap once the trial is over.  From recent prototypes it does not appear that Tesla has solved the long-standing installation issues of solar shingles and that at the currently-promised pricing Tesla will lose thousands on every installation.
  • Tesla's biggest mistake IMO is still the lack of a 3rd party, well-capitalized dealer network.  Tesla is the only major auto manufacturer that refuses to participate in JD Power satisfaction and reliability surveys, so we don't have super-good satisfaction data, but the little data we have seems to point to massive reliability and service problems with Tesla cars.  I had thought that 2019 would be the year that such problems would hit the mainstream press, but apparently not.  Part of the reason Tesla is able to hide these problems is the codependent relationship they have with Tesla owners.  Tesla message boards are full of posts that begin "I love my Tesla, but..." and then go on for 3 pages describing product defects and the impossibility of getting service.  From time to time Musk will promise huge new service investments -- particularly just after a blue check mark complains on Twitter -- but all evidence is that they greatly grew their installed based of cars in 2019 with only tiny investments in their service network.
  • I was mostly happy that Vern Unsworth lost his libel suit against Musk for calling him a pedo.  Look, Musk acted like a totally entitled pr*ck in the whole affair, but there are important reasons to keep a very very high bar on libel.  For $TSLAQ fans who are now mad at me for giving even this slight accommodation to Musk, imagine that the US had a much lower bar for libel suits.  Which thin-skinned billionaire CEO of an overvalued automobile manufacturer would likely be first to take advantage of this regime and weaponize the courts against his critics?

Postscript:  I will add a note that people seem unable to separate the company's valuation from how much they like the products.  Certainly Apple has wonderful products AND is a very valuable company.  But this does not have to be the case.  WeWork rents beautiful offices -- heck, it turns out they are giving me $10 of office for every $5 I pay, what's not to love? But it was and still is overvalued as a company because it has no reasonable plan to ever make money.  So saying that Tesla makes great cars or Tesla cars suck are both largely irrelevant statements to my thinking about whether $tsla stock is overvalued.  My personal view is Tesla could have been a nice niche automaker and is probably worth $10-$20 billion -- at which price they might get purchased by another major auto maker.

Postscript #2: I have explicitly left out discussion of Tesla autopilot.  There is no question it has been overpromised and oversold, but I can't quite form an opinion on whether it is safe.  I personally would not trust my own safety to a self-driving technology that did not include LIDAR -- there are just too many ways for a vision-only system to make mistakes.  Tesla AP clearly has made mistakes and hurt and killed people.  Alert drivers make mistakes that hurt and kill people.  I don't know which is more prevalent, though one can be suspicious of Tesla when it does not really make it easy to analyze the data on this and produces clearly flawed analyses.   I certainly don't trust Tesla AP just because of the aura of Elon Musk supposedly being a genius, because I am pretty certain he is not  (things like the hyperloop I DO have a lot of background to understand and its a joke).  As a libertarian I don't want to see the government restricting the hell out of self-driving development and progress with stacks of regulations, and I refuse to call for such regulation just because it would help the value of a Tesla short position.  As should now be clear, I have limited knowledge and mixed feelings on the topic, so I avoided it in the main body of the post.

The US Has the Least Poverty In the World -- Here Is How Metrics Are Crafted to Hide That Fact

A few weeks ago Matt Yglesias published a tweet (since deleted, which I don't totally understand as I thought it was pretty innocuous from a Progressive viewpoint) saying that he wanted to spend more time focusing on "relative child poverty."  What the heck is "relative" child poverty?  I want to spend a bit of time discussing why this is a useless metric, helpful only if one want to try to sell socialism in the US.

Relative child poverty is a metric based on the country's median income -- how many kids live in families with income that is X% of the median.  Here is an example (source):

If you click on the source, the headline presents this as "These rich countries have high levels of child poverty."   The implication is that the US has more child poverty than Latvia or Poland or Cyprus or Korea and only slightly less child poverty than Mexico and Turkey.  But does it really mean this?  No.  This chart is a measure of income equality, NOT the absolute well-being of children.

Many of the countries ahead of the US are there not because their poor are well off, but because their median income is so much lower than ours. In fact, you will notice the lack of African and Asian countries in this. I will bet a lot of money that certain countries in Africa and Asia everyone knows to be dirt poor would beat out the US in this, thus making the bankruptcy of this metric obvious.

Take Denmark in the #1 spot. It looks like 20% more kids in the US live in poverty than in Denmark. But per the OECD, the US has a median income 41% higher than Denmark. So what it really means is the US has 20% more kids living under an income bar that is set 41% higher.  How can this possibly have any meaning whatsoever, except to someone who wants to make the US look bad?

The chart below does the same thing -- it has nothing to do with absolute well-being, but defines poverty as living below some percentage of that country's median income. In this metric, a country where everyone equally made only $1000 or even $10 a year would have 0% poverty!

Within the US, the same game is being played with poverty stats.  Despite decades of government income distribution and poverty programs, the stats appear to show that the US has nearly unchanged poverty rates.   But this is because the census data on which the poverty stats are based EXCLUDE government transfers -- in other words, they exclude the effect of many or most of these poverty programs.  When this and other issues are corrected for, US poverty rates have dropped to all-time historic lows (source)

Here is another study coming to a very similar conclusion.

One thing you never, ever, ever see is comparisons of the poor in the US to poor in other countries on an absolute well-being basis after transfer payments. That is because the bottom 10 or 20 percentile in the US are among the top half of richest people in the world, and in many nations they would be among the top 10%. It is possible to make these comparisons, though. I did so several years ago from a data set I saw Kevin Drum using (ironically to try to make the point the US is worse than Europe, again by using relative poverty numbers).  I am sorry this data is old, but there is a long time-delay in the data source itself and I have not updated the analysis for a couple of years (on my to-do list, though).

Here are the US Bernie-Socialist favorites Denmark and Sweden:

I know progressives would argue that if you take more from the right end and give it to the left end, our poor would be even better off. But we have a control group for this -- Including Sweden and Denmark -- and that is clearly NOT the result one gets.  The problem with this theory is that forcible income redistribution policy and economic growth / prosperity are not independent variables. When you redistribute the pie, you get a smaller pie.

If one wishes to compare poverty across countries, the way to do it should be to compare the disposable incomes after taxes and transfers (adjusted for PPP) of the 10th or 20th income deciles in each country.  This seems obvious to me, after all we use the median (50th decile) income to compare prosperity across nations, so why not the same approach for poverty? But no one ever does it. My guess is the point is to exaggerate poverty in the US and understate it in socialist nations.

Update:  In related news:

Well, in 1820, 94 percent of the world’s population lived in extreme poverty (less than $1.90 per day adjusted for purchasing power). In 1990 this figure was 34.8 percent, and in 2015, just 9.6 percent.

In the last quarter century, more than 1.25 billion people escaped extreme poverty - that equates to over 138,000 people (i.e., 38,000 more than the Parisian crowd that greeted Father Wresinski in 1987) being lifted out of poverty every day. If it takes you five minutes to read this article, another 480 people will have escaped the shackles of extreme of poverty by the time you finish. Progress is awesome. In 1820, only 60 million people didn’t live in extreme poverty. In 2015, 6.6 billion did not.

 

Great Moments in Climate Prediction: 2020 Disaster Predicted in 2004

I am working on a bit of a climate update in a post called something like "Dear Greta, the climate is not about to kill you."  But until then, just so you can calibrate the current hype, here was the hype from 2004.  Specifically, an article in Guardian February 21, 2004:

A secret report, suppressed by US defence chiefs and obtained by The Observer, warns that major European cities will be sunk beneath rising seas as Britain is plunged into a 'Siberian' climate by 2020. Nuclear conflict, mega-droughts, famine and widespread rioting will erupt across the world.

The document predicts that abrupt climate change could bring the planet to the edge of anarchy as countries develop a nuclear threat to defend and secure dwindling food, water and energy supplies. The threat to global stability vastly eclipses that of terrorism, say the few experts privy to its contents.

'Disruption and conflict will be endemic features of life,' concludes the Pentagon analysis. 'Once again, warfare would define human life.'...

Already, according to Randall and Schwartz, the planet is carrying a higher population than it can sustain. By 2020 'catastrophic' shortages of water and energy supply will become increasingly harder to overcome, plunging the planet into war. They warn that 8,200 years ago climatic conditions brought widespread crop failure, famine, disease and mass migration of populations that could soon be repeated.

Randall told The Observer that the potential ramifications of rapid climate change would create global chaos. 'This is depressing stuff,' he said. 'It is a national security threat that is unique because there is no enemy to point your guns at and we have no control over the threat.'

Randall added that it was already possibly too late to prevent a disaster happening. 'We don't know exactly where we are in the process. It could start tomorrow and we would not know for another five years,' he said.

Of course being wrong then does not mean the same folks are wrong now, though it is amazing that being wrong over and over does not seem to dent these folks' credibility one bit in the media.  You would think there might be one journalist who would ask, "you keep predicting climate disaster, and it always remains 10 years away.  What's up with that?"

As always, my advice to you on climate is to be a good consumer of information.  Specifically, when the media claims a trend, look for the trend data.  And if they claim a long-term trend, check to see if the trend data is long-term.  You will be amazed how often the media will claim a trend from a single data point.   I will soon do an update on four of the most hyped climate "trends" -- hurricanes, droughts, crop failures, and sea level rise -- and show that the first three have no trend (or an improving trend) and the fourth, sea level rise, has a trend but that trend has been existent since before 1850, long before most manmade Co2 was put in the air.

A Proposal for Princeton and Other Ivy League Admissions -- Lottery 20% of the Spots

The Varsity Blues admissions scandal along with the lawsuits by Asian Americans against Ivy League schools' admissions processes have brought new scrutiny to private university admissions standards.  I was thinking about a small proposal to respond to this scrutiny that particularly falls on legacy, large donor, and athletic admissions.  I think this proposal would help restore some trust in the process.

I have a lot of problems with my alma mater Princeton and their admissions, so much so that I have dropped out of the recruiting process after participating in it as an interviewer for 20 years.  But one good thing that they and others have done is to apply some of their massive endowment to allowing need-blind admissions, and more recently, to making all financial aid grant-based so that kids can graduate debt-free and do whatever they like with their education, irrespective of how much money it makes.

Here might be a next step:  Draw a line in the admission pool designating kids (by grades and test scores) who we might designate as "Ivy-ready."  Many of these kids will not get admitted, because there are too many of them.  Most won't have the extra-curricular activities  or sports or alumni connections or rich donor parents that differentiate the 1450 SAT that got in and the 1450 SAT that did not.   In current parlance, all of these resume items are likely markers of privilege (including the extra curricular activities, many of which are driven by knowing parents more than real interest).

Proposal:  Save 20% of the spots.  After the other 80% are allocated by the traditional means, throw all the other folks who clear the Ivy-Ready line and throw them in a lottery and lottery the final spots.

Of course, these 20% will have to be freed up from current uses.  Princeton just had a 20%-ish increase in class size by building more residential college capacity, and I wish they had adopted this approach at the time.  I am not sure where it would come from, but my personal starting point would be athletic spots.  I think the Ivies spend way too many resources (including most especially valuable admissions slots) trying to be more competitive at college athletics.  And I say this despite my son having been a student-athlete at Amherst College.  (By the way, tiny Amherst uses so many admissions spots on athletes that pretty much everyone on campus is one.  The kids actually have a term "NARP" -- non-athletic regular person -- for the few unicorns not actually on a varsity team.)

Why Single Payer In the US Will Not Necessarily Lower Costs

A few days ago I wrote a multi-part tweet on the topic of whether single-payer in US health care would necessarily lower costs.  Twitter is a frustrating medium not only because of the short length but also because many critics just read the first tweet in the string (with the summarized hypothesis to be discussed) and comment without reading the rest.  That is probably why I got many comments like "but European single-payers get better pricing" as if I did not spend a number of tweets on exactly this topic.  So I will go back to my old medium of blogging to deal with this complex topic.

As a thought-starter, let's think about another industry where the US government is the single-payer in a complex industry that is a substantial part of GDP:  Defense.  The US government has always been the single payer in the defense industry and I think it isunlikely most of use think the US government gets particularly good pricing in that industry.  I have seen that a number of folks have instinctively rejected this analogy, without giving any specifics about why they do so, but I want to observe here that in fact Defense may have better price dynamics than single payer for pharmaceuticals, as at least in defense there are multiple sellers to play off against each other.  I am not going to insist on this analogy, and will provide another analogy later that I think is perhaps more apt, but I would challenge the reader to name a field where the US government is a single payer -- not a large payer in a larger market but the single only payer -- and gets better pricing than might be had in a free market.

A single-payer system eliminates market pricing and all the enormously valuable information that those prices contain.  In a real market, prices are set based on the knowledge and preferences and expertise of millions of people. In single-payer, you lose access to all that.

For this post I am going to focus mainly on pharmaceutical prices in large part  because, from observing the Twitter comments, that is what most folks seem to think about first as an area for cost reduction under single-payer.  I will return at the end to a discussion of other health care costs under single-payer.   I am also going to entirely avoid discussion of the many supply-side restrictions in the US healthcare system -- from pharmaceutical approval to physician licensing to hospital certificates of need.  I want to look primarily at the supposed beneficial (in some peoples' minds "huge") price reductions that might flow from single payer negotiating leverage.

Before I do that I want to discuss the misuse (IMO) of the term "economies of scale" in this discussion.  In my mind "economies of scale" refers to a real reduction in unit costs from an increasing volume.  In most cases, this is not what we are talking about with single payer.  There is nothing from single payer, to my understanding, that actually reduces the development, production, and distribution costs of pharmaceuticals.  I know folks like to point to the elimination of private insurance companies as a cost saving, but I find that hard to believe.  Most of the functions of the private insurance company would have to remain and profit margins in health insurance are tiny, on the order of low single digit percentages of premiums.  Eliminating these profit margins could theoretically save a few percent on costs, but only if one assumes that the government is just as efficient on claims processing and management.  One might get rid of some marketing costs, but the government has found under PPACA that communication and education costs, essentially not much different from marketing, have been pretty substantial.

The main potential advantage of single payer for pharmaceuticals is not one of economy of scale but of negotiating leverage.   With negotiating leverage, larger buyers can try to extract discounts vs. what other smaller buyers pay.  Certain countries like Canada have certainly been able to do this with pharmaceuticals purchased by their state health care systems.

For all those who want to point this out to me as if I don't know it, I freely stipulate that it is true.  To understand what is going on, let's take a step back.  Pharmaceutical prices will theoretically include three portions:

  1. Variable cost of actually manufacturing and distributing the pharmaceutical.  For many drugs, even expensive ones, this can be relatively low
  2. Fixed cost of developing the pharmaceutical and getting it through testing and approval.  This fixed cost also will contain a share of the costs of failed drug development efforts, just like one producing oil well has to cover the cost of the 10 dry holes drilled before oil was struck.  These fixed costs can be very very high
  3. For drugs still covered by their patents, a profit from having a monopoly position, which we allow to incentivize new drug and medical procedure development

Most US pharmaceutical makers treat the US as the main market for recovering 2 and 3.  They are willing to treat foreign markets and incremental, and price their drugs (either directly or via the licensing fees they charge) closer to marginal cost without full cost recovery.  This is in part because many other countries negotiate, and the US mostly does not -- Medicare has restrictions on pharmaceutical price negotiation and drug companies have limited negotiating leverage.  If you wonder why the latter is so, it is because insurance companies are required by law that they must buy a lot of these pharmaceuticals.  One's negotiating leverage against a single monopoly seller is extremely restricted if one cannot walk away and the seller knows it.

I have for years supported laws allowing drug re-importation from other countries.  I see no reason why US consumers should tolerate essentially subsidizing drug development for the rest of the world.  By the way, if you don't accept my cross-subsidy picture, watch what happens in the rest of the world if the US were to adopt drug re-importation laws.  My guess is that the other countries would ban their export, because they know such policies would serve to reduce the cross subsidy, lowering US prices but raising prices in their countries.

To understand my concerns over cost control in US single payer, let's think about negotiation at Walmart.  It is well known that Walmart uses its huge market size to get large discounts from suppliers.  In part, these discounts could be related to true economies of scale (ie if you are a niche seller and not yet in Walmart, getting into Walmart could drive huge new volumes for your product).  But for companies like Coke, Walmart's main leverage is the threat to walk away, or at least to give less shelf space, to your product.

But forget the leverage and negotiating strategy for a second, how does the negotiation actually go?  As I imagine it, Walmart does some research and finds the lowest price they can find Coke selling to anyone else is X.  They will then turn to Coke and say we want 10% off X.  The key point is that the negotiation begins in reference to an existing market price.   I will bet that's how you negotiate for a car, or for anything else.

But they key question is: "What happens when there is no market price."  I am the last one to say that US health care markets, with all their various inefficiencies and interventions, is anything like a free market, but there is still some sort of market there.  I would argue that if the US goes single payer, that will essentially end the only market for drugs and other health care services in the world.  How do you negotiate if there is no market price to start from?  What does negotiating leverage even mean in that situation (again, consider the Defense example above)?

I suppose for some years negotiation for pharmaceuticals under single payer will be in reference to the old, pre-single-payer price.  But that reference can only be meaningful for so long.  And how does one use negotiating leverage for an entirely new product?

Let's say a new drug comes along that's a better treatment for gout.  There is no market price or price history.  No one has ever bought it or sold it.  What does your negotiating leverage even mean?  There is no market price, so how can you get a discount?  You could say that you want a discount off list, but the inventor could just name the list price arbitrarily high.  You could ask to see their cost accounting but anyone who has ever made the mistake of taking net profit points in a movie can tell you that cost accounting can be gamed endlessly.

This is basically the situation in government defense procurement.  They can theoretically use their negotiating leverage to get a better price for hammers or sidearms, because a market price exists for those set by many other individual buyers. But how does it use its negotiating leverage for a Patriot missile?

And remember, the only way that negotiating leverage has any power is if one is willing to walk away from the table.  At some point, the single payer has to be willing to say, "F it, if that is your best price for Humira, we aren't buying any (and thus no American can have any)."  Does the government really have the ability / cojones to do this and make it stick?  After all, one reason why insurance companies overpay for a lot of medical procedures is that they HAVE to pay for it, by law.  They cannot walk away from the table.  Imagine negotiating for a car if next time the dealer you are buying from knows you have to leave the store that day with a car.  You are not going to get a very good price.

The situation is slightly different in other health care payments, such as to providers.  But this is only true because there are multiple providers and provider groups in a given area.  And here the negotiating leverage is still the same, the threat to walk away.  And in fact we have seen this, with low cost PPACA plans offering very limited networks -- essentially they have walked away from higher cost suppliers.  Note that this really pisses off consumers, and is one of the reasons they say they hate insurance companies, so its not clear if there would be the political will for the government to do the same thing as single payer.  Also note that providers and banding together into larger and larger provider groups -- essentially in this great game of monopsony and negotiation they want to grow to be too large and comprehensive to walk away from.

The likely outcome is to turn pharmaceuticals and other medical suppliers into regulated utilities.  In electricity, the government essentially acts not quite as single payer but in a very parallel role as single price negotiator.  They negotiate the prices to be paid for all consumers in their state or region.  They are negotiating as the single buyer with a company that is a monopoly provider.  This situation faces all the issues we discussed above, basically a negotiation without any market price reference.  So most governments regulating utilities choose an approach where the utility opens its books and sets prices so that the utility gets a minimum return on capital but not any "excess" profits.   In theory, they try to get the lowest price they can that still ensures that private capital will still have an incentive to flow into the company.

There are a number of problems with this approach vis a vis pharmaceuticals and other health care purchases

  • Its not at all clear it achieves a lower price than in a freer market.  Certainly non-regulated cogen companies in California have made a lot of money selling electricity below the regulated rates
  • There is little incentive for innovation.  Regulated utilities make the most money when they do nothing new or risky.  This may be OK in electrical generation, but it is not great for drug development.
  • There is a lot of potential for cronyism.  Even in electrical rates, certain politically favored groups get lower rates subsidized by less influential groups.  Military procurement often leads to bad decisions driven more by lobbying than reason.  In health care, changes in reimbursement rates in Medicare are already subject to immense political gamesmanship -- for example, the famous annual Congressional "doc fix" battles.

Of course the government could just fix prices by law at some low level, or even seize all pharmaceutical patents and offer drugs close to marginal cost (which tends to be low).  This might work great if you are perfectly happy with the medical treatments available today and want nothing new.  But if innovation is a concern of yours at all, this would obviously kill it (not to mention drive a lot of providers out of the business, reducing demand and increasing wait times to those of .. all the other single payer countries).

While the choice not cut off future benefits just to get current stuff cheaper may seem a no brainer to many of you, I would argue that many Progressives, whether from risk aversion or a lack of ability to perceive opportunity costs, might well take this deal.  Its a sort of Directive 10-289 solution and a preference I discussed way back in 2004 (yes, I was blogging at this same site then).

Ironically, though progressives want to posture as being "dynamic", the fact is that capitalism is in fact too dynamic for them.  Industries rise and fall, jobs are won and lost, recessions give way to booms.  Progressives want comfort and certainty.  They want to lock things down the way they are. They want to know that such and such job will be there tomorrow and next decade, and will always pay at least X amount.  That is why, in the end, progressives are all statists, because only a government with totalitarian powers can bring the order and certainty and control of individual decision-making that they crave.

Progressive elements in this country have always tried to freeze commerce, to lock this country's economy down in its then-current patterns.  Progressives in the late 19th century were terrified the American economy was shifting from agriculture to industry.  They wanted to stop this, to cement in place patterns where 80-90% of Americans worked on farms.  I, for one, am glad they failed, since for all of the soft glow we have in this country around our description of the family farmer, farming was and can still be a brutal, dawn to dusk endeavor that never really rewards the work people put into it.

This story of progressives trying to stop history has continued to repeat itself through the generations.  In the seventies and eighties, progressives tried to maintain the traditional dominance of heavy industry like steel and automotive, and to prevent the shift of these industries overseas in favor of more service-oriented industries.  Just like the passing of agriculture to industry a century ago inflamed progressives, so too does the current passing of heavy industry to services.

I understand the large numbers of people are concerned about the potentially bankrupting effects of a major medical condition.  The problem is that people keeps suggesting solutions that don't actually solve the problem, or make things worse.  I have suggested an intervention here that preserves much of the health care market while protecting folks in the case of major medical conditions.

Uber Takes Another Body Blow

Waaaay back in April of 2015, I prophesied that California's efforts to turn Uber drivers into employees would kill Uber, though it would take some years to bleed out.  California has since embodied that court ruling into law (a law which Uber is currently ignoring).  Now, New Jersey is going after Uber:

Two months after Uber decided to ignore new ignore new California legislation requiring companies to reclassify contract workers as employees - a measure which would affect up to one million residents who work as contractors and drastically impact Uber's bottom line - more states are lining up to demand a pound of flesh from the world's formerly most valuable startup (and subsequently one of the year's worst IPOs).

On Thursday, New Jersey picked up where California left off and found that Uber owes the state about $650 million in unemployment and disability insurance taxes because the rideshare company has been misclassifying drivers as independent contractors, the state’s labor department said.

As Bloomberg reports, Uber and its subsidiary Rasier LLC were assessed $523 million in past-due taxes over the last four years, the state Department of Labor and Workforce Development said in a pair of letters to the companies. The rideshare businesses also are on the hook for as much as $119 million in interest and penalties on the unpaid amounts, according to other internal department documents.

The New Jersey labor department has been after Uber for unpaid employment taxes for at least four years, according to the documents, which Bloomberg Law obtained through an open public records request. The legal battle goes back to 2015, when New Jersey first informed Uber that it had obtained a court judgment ordering the company to pay about $54 million in overdue unemployment and temporary disability insurance contributions. It’s not clear whether the company ever paid any of that bill.

The tax issue in my mind is not the biggest problem.  I still think that the worker "protections" states are starting to insist Uber adopt (e.g. minimum wage, shift lengths, shift scheduling, etc) are death for their whole labor model, and in fact will hurt most of their workers by killing what attracted drivers to Uber in the first place.  To summarize that article, there is a huge irony in that for decades labor advocates have been decrying the loss of agency by hourly workers in a capitalist economy.  Uber has given its drivers agency they don't have in almost any other hourly job, and labor advocates are doing all they can to kill it.