I wanted to remark on the White House’s plan to “build black wealth and narrow the racial wealth gap”. The plan consists of two facets

• Address racial discrimination in the housing market
• Increase federal contracting with “small disadvantaged businesses” to the tune of about and additional $20 billion per year

I agree that the former continues to be an issue. The most recent study of which I’m aware found that black couples and white couples, on paper identical other their race, fared differently with lenders. I’m skeptical that the latter will do much. The track record of city racial set-asides has been quite mixed and in general has largely been a subsidy to people who didn’t actually need a subsidy.

The devil, of course, is in the details. Is “inequity” in home valuations a form of discrimination or is it just the working of the market?

And there’s also the caveat that there’s no telling what the final legislation will look like once it has been passed through the Congressional meatgrinder.

Finally, unmentioned in the White House’s “fact sheet” is another fact. At every income level American blacks consume a higher proportion of their income than corresponding whites, saving and investing less. There is a behavioral component in wealth that should not be ignored.

I am generally disinterested in the state politics of states other than my own. Howeer, I would like to ask a question about Texas’s pending election reform bill which has been much in the news lately. Who is correct? Is it President Biden who calls the bill an “assault on democracy” or is it the editors of the Wall Street Journal who say it’s imperfect but reasonable adjustment to a post-pandemic country?

I don’t have an opinion other than to suspect it’s a case of politics as usual with both sides exaggerating the bill’s flaws or benefits mutatis mutandis for political purposes.

After more than decade and a half of Memorial Day posts I don’t have a lot more to say about the occasion other than the best way to commemorate our honored dead is by not adding to their number. I have little problem with those who believe in a responsibility to protect or spreading democracy at the point of a gun taking up arms to pursue their goal but let’s reserve our military for actually defending the country.

For want of a nail the shoe was lost.
For want of a shoe the horse was lost.
For want of a horse the rider was lost.
For want of a rider the message was lost.
For want of a message the battle was lost.
For want of a battle the kingdom was lost.
And all for the want of a horseshoe nail.

Jeffrey Tucker’s post at RealClearMarkets begins with the state of the rental car business:

In Bozeman, Montana, a rental car will zap you $350 a day plus gas, or $650 for something fancier than a compact. In Manchester, New Hampshire, $250 a day plus gas. In Dallas, Texas, and Denver, Colorado, it’s better at $80 but the wait times are very long. Many people find themselves without and instead take Uber. In Salt Lake City, Utah, and Savannah, Georgia, you will throw down $150 per day plus.

The only real deals out there – by which I mean not $14 per day like it was six months ago but $70 – require that you grant the agency choice over what car they give you: the answer is whatever they happen to have on the floor. Also watch for a change in terms of service. Some companies have dropped “unlimited mileage:: a woman in Denver found herself with a $28,000 bill from driving 200 miles.

and concludes with a lament about the lockdowns:

This is a tremendous illustration of the interconnected and delicate systems that make up the market economy. When it is allowed to work, it is reliable, plentiful, efficient, responsive, and wealth creating. It’s so much part of our lives that we take it for granted. The digital economy has made trade, exchange, and production easier than ever before even as the reason it works so well is less understood than ever – and ever more under attack.

When you break it by force – I’m still astounded that this actually happened – you create conditions for disaster both immediately and down the line. We are finding out now just how bad this can get.

You may or may not be aware of it but most rental car establishment are franchise operations. Franchise businesses are different from other retailers—more parties participate in the business model. There’s the franchisor, e.g. McDonalds, the franchisee, e.g. the individual or company who has a relationship with McDonalds to operate a restaurant with the McDonalds name and menu, and the customers. In addition to a substantial fee at the outset, franchisors charge the franchisees ongoing royalty fees. I haven’t been able to locate records of any franchisor suspending royalty payments during the lockdowns. Although there are force majeur clauses (“it was out of my control!”) in their franchising contracts, I don’t believe those clauses will be enough.

It will be years before the dust has settled from the COVID-19 pandemic but I suspect that once it has we will find that

• the relief put into place by federal and state governments did more to help franchisors than franchisees
• the relief put into place by federal and state governments did more to help those in the top 20% of income earners than of those in the bottom 20%
• that thousands of franchises from car rental to clothing stores to hot dog joints will end up closing permanently and they won’t come back for the foreseeable future
• that all of those businesses closing down will have run-on effects that are hard to predict including effects on banks, malls, and state and local governments

Can anyone give me a credible explanation for why the Federal Trade Commission moved to block the reconsolidation of Illumnina and Grail? This article by Joe Lonsdale at STAT provides a little background:

Illumina’s acquisition of Grail would be a vertical merger. Rather than removing a direct competitor, as in a horizontal merger — think GM buying Ford — a vertical merger brings together two firms at different stages in the same supply chain, allowing for greater financial and operational efficiency.

Illumina has an effective monopoly on genomic sequencing, a critical input for the liquid biopsy products offered by Grail and its competitors. The FTC argues that if this vertical merger is approved, Illumina could underprice Grail’s products, giving the company an unfair advantage over its competitors.

That argument is wrong. First, low prices are a healthy form of competition that would make Grail’s liquid biopsies cheaper for consumers. Second, decades of economic analysis have shown that most vertical mergers increase competition, especially in fields that rely heavily on R&D.

Vertical mergers such as Illumina’s acquisition of Grail accelerate the pace at which innovations reach the marketplace. The reason is simple: Startups need to focus on one big problem at a time. Research startups like Grail take on tremendous risk as they develop new biotechnologies. Most fail, and even fewer would succeed if they also had to bear the risk of bringing their innovations to market.

A “diverse array of American innovators” has put together a petition (PDF) protesting the FTC’s action:

We fear the FTC’s new challenge will not only slow the deployment of GRAIL’s screening tools, but also have repercussions undermining innovation broadly. Mergers and acquisitions are vital for innovation, providing many start-ups with investment needed to scale, market, or even fully develop their product—which, in turn, attracts investment in future products and companies. In the United States, mergers and acquisitions are a $1.6 trillion market, and if the FTC takes an overzealous approach to antitrust enforcement, it will have a chilling effect on the deployment of new technologies across the economy.

The FTC should drop its challenge to the Illumina-GRAIL merger and take a targeted approach to antitrust enforcement, intervening only where there is clear evidence a deal will harm consumers. If the FTC pursues that prudent course, it can help unleash innovations key to meeting the great challenges of our time.

I find it puzzling. Over the last decade or so the FTC has allowed quite a few much more threatening acquisitions than this. They’re giving me the impression that the only form of innovation the Biden Administration is interested in is government innovation.

I think that Andrew Latham is whistling past a graveyard in his piece at 1945 proposing what I think is a futile plan to reinvigorate the liberal “rules-based order”:

But while the original project foundered on the shoals of Soviet-American rivalry, a rump liberal order did emerge after the second world war in the form of a set of norms, rules, and institutions that created a space within which the world’s democracies could flourish. It was far from perfect – and it certainly had its dark side – but it was worth preserving. And it remains worth preserving today.

Now, however, even that vestigial liberal order is under threat – as are the democratic nations at its core. Around the world, democracies are falling prey to illiberalism and populism while a powerful and newly assertive China, assisted by a declining but truculent Russia, seeks to challenge the legitimacy of the existing order and the liberal-democratic ideas and institutions that give form, substance and meaning to it.

The question then becomes: assuming that this world order – and the democratic space at its core – is worth preserving, what sort of institutional steering mechanism or watchdog will be required to both manage and uphold it?

IMO the rules-based order he laments was moribund almost as quickly as it was instituted. To have a credible rules-based order you’ve got to be willing to operate under the rules and we manifestly are not. We’ve been violating the rules we instituted following World War II quite regularly over the period of the last 70 years. You can point to exigent circumstances or that the president has the authority to do this or that under the Constitution but the fact reamins we haven’t been operating by the rules.

Even then a sort of “rump” rules-based system could be maintained as long as we were by far the most power economic and military power on the planet but we’ve been merrily undermining that over the period of the last 30 years. Now the rules-based liberal order is a Humpty-Dumpty neither we nor a consortium of democracies can put together again.

This weekend Chicago has blown through the number of homicides year-to-date perpetrated by this time in 2016 and, as I have previously documented, that year saw the highest number of homicides per 100,000 population in Chicago’s history. Chicago’s mayor has proposed a police reform plan which, if anything, will exacerbate the problem. People who live in the neighborhoods most affected by the violence have been protesting in front of the mayor’s home. I

When I was downtown yesterday evening I saw an enormous police presence which I presume was in response to the “large crowds of rowdy young people” who have been gathering, fighting, and moving through the Loop, Grant Park, and Millennium Park. We were indoors long before dark and were fortunate to be able to park in a secure location.

Here’s an excerpt from Andrew Sullivan’s latest criticism of Critical Race Theory:

The 1619 Project is a case in point. It doesn’t just expose some of the hideous past we’d rather forget. It insists that “white supremacy” is the definition of the United States, that its true founding was therefore 1619, that its core principle from the get-go was not freedom but slavery, that slavery is the true basis for American wealth, that the police today are the inheritors of slave patrols, that only black Americans fought to end slavery, and so on. It insists that the Declaration of Independence was “false”, not merely imperfectly implemented, and designed to obscure the real project of racist oppression. And its goal is the dismantling of liberal epistemology, procedures, ideas and arguments in order to revolutionize what cannot by definition be reformed.

This is what makes CRT different. When it began, critical theory was one school of thought among many. But the logic of it — it denies the core liberal premises of all the other schools and renders them all forms of oppression — means that it cannot long tolerate those other schools. It must always attack them.

Critical theory is therefore always the cuckoo in the academic nest. Over time, it throws out its competitors — and not in open free debate. It does so by ending that debate, by insisting that the liberal “reasonable person” standard of debate is, in fact, rigged in favor of the oppressors, that speech is a form of harm, even violent harm, rather than a way to seek the truth. It insists that what matters is the identity of the participants in a debate, not the arguments themselves. If a cis white woman were to make an argument, a Latino trans man can dismiss it for no other reason than that a white cis woman is making it. Thus, identity trumps reason. Thus liberal society dies a little every time that dismissal sticks.

Every time a liberal institution hires or fires someone because of their group identity rather than their individual abilities, it is embracing a principle designed to undermine the liberal part of the institution. Every university that denies a place to someone because of their race is violating fundamental principles of liberal learning. Every newspaper and magazine that fires someone for their sincerely-held views, or because their identity alone means those views are unacceptable, is undermining the principles of liberal discourse. Every time someone prefers to trust someone’s subjective “lived experience” over facts, empiricism and an attempt at objectivity, liberal society dies a little.

And every student who emerges from college who believes that what matters is whether you are on “the right side of history” rather than whether your ideas can be tested by the ruthless light of open debate is a student who does not have the ability to function as a citizen in a liberal society. The ability to respect and live peaceably alongside people with whom you vehemently disagree is a far harder skill than cheering on one of your own. And yet liberal institutions are openly demonstrating that it is precisely this kind of difficult toleration they will not tolerate.

I’m sorry but this matters. It’s not the only thing that matters right now, I know. But if we remove the corner-stone of liberal democracy — the concept of a free, interchangeable citizen using reason to deliberate the common good with her fellow citizens, regardless of any identity — then it is only a matter of time before it falls.

Read the whole thing. I don’t think he’s being unduly alarmist. An entire cohort of young people is being maleducated without, as he puts it, “the ability to function as a citizen in a liberal society”. It is already an issue and it is not limited to a handful of young people at a handful of schools. It’s everywhere including in our streets.

You might find this op-ed by Angus King and Mike Gallegher at the Wall Street Journal on the actions being taken by Congress to deal with cybersecurity interesting. That should be a free link—not paywalled. I won’t bother synopsizing it.

I think that Congress should be using a “carrots and sticks” approach to cybersecurity, e.g. incentives for cooperation and penalties for security failures, but I’m skeptical about the federal government’s ability to do much about cybersecurity. IMO it’s a form of asymmetrical warfare and the organization and predispositions of the federal government are pretty much the opposite of what’s needed. The digital equivalent of “special forces” is needed and IMO that can more easily be provided by the private sector than by government.