Creating a Market Without a Market

At the very end of this article at MIT Technology Review, discussing an idea of which I’m extremely skeptical—a market-based approach to drug approval, are these sentences:

Could a free-market approach lead to lower costs? Baker is skeptical. “Drug companies charge what they can get away with,” he says. “Making it easier to get a drug through the FDA won’t change that one iota.”

Two points. The first is that Dr. Baker’s remarks reflect a genuinely shocking lack of a meeting of minds on what markets are all about but the other brings up a very interesting point. Why do all discussions of markets never include, well, creating markets? How can you have a free market in anything with government-erected barriers to entry?

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Summarizing in One Sentence

This article at the Weekly Standard, ostensibly on U. S. debt and Chinese investment, can be summed up in one sentence. The United States is running a very large trade deficit with China.

We might rejoice over our good fortune but for one fact. Since in effect the Chinese are exporting goods and importing employment, we are not all equal beneficiaries of China’s benevolence. If you can figure out a way to help the guy who’s lost his job making tires in Akron and has no real prospects of getting another equivalent job without China ending its one-way autarky, I’m dying to hear it.

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Some People Will Always Want Slaves

Writing at the Huffington Post, Norm Matloff points out the obvious, that tech companies want foreign workers to keep domestic wages low:

To see how this works, note that most Silicon Valley firms sponsor their H-1B workers, who hold a temporary visa, for U.S. permanent residency (green card) under the employment-based program in immigration law. EB sponsorship renders the workers de facto indentured servants; though they have the right to move to another employer, they do not dare do so, as it would mean starting the lengthy green card process all over again.

This immobility is of huge value to many employers, as it means that a foreign worker can’t leave them in the lurch in the midst of an urgent project. In a 2012 meeting between Google and several researchers, including myself, the firm explained the advantage of hiring foreign workers: the company can’t prevent the departure of Americans, but the foreign workers are stuck. David Swaim, an immigration lawyer who designed Texas Instruments’ immigration policy and is now in private practice, overtly urges employers to hire foreign students instead of Americans.

This stranglehold on foreign workers enables firms to pay low wages. Academics with industry funding claim otherwise, but one can see how it makes basic economic sense: If a worker is not a free agent in the labor market, she cannot swing the best salary deal. And while the industry’s clout gives it bipartisan congressional support concerning H-1B and green card policy, Congress’s own commissioned report found that H-1B workers “received lower wages, less senior job titles, smaller signing bonuses and smaller pay and compensation increases than would be typical for the work they actually did.”

The actual evidence that there’s a shortage of labor in IT is meager. If there were a shortage, you’d expect wages in IT to rise faster than the rate of inflation. They aren’t.

But, hey, have a heart! Without chaffering the wages of workers down, how do you expect Bill Gates to get his next trillion?

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Status Report on Solar Power

At Ars Technica there’s an interesting status report on residential solar power in the United States. Things are, apparently, proceeding very well:

As is probably abundantly clear to those who have read this far, the story of residential solar power is complex and constantly changing, due to the rapid pace of research and the ever-shifting regulatory landscape. But technology and economics have evolved to the point where we can say, confidently, that rooftop solar power now makes good sense if you own a home in a sunny part of the country… that is, unless local politics erect too many obstacles.

For those in less hospitable climes, the purely rational case is harder to make. But you still may be swayed, nevertheless, by the prospects of gaining a measure of independence from your local power utility and by joining the vanguard of citizens striving to take some responsibility for their personal contributions to our planet’s looming climate problem.

It would be interesting to see what the economies of the various forms of power generation would be in the absence of massive subsidies. It’s not just us. The Chinese, for example, have been investing heavily solar power manufacturing, obviously with the intention of becoming the primary source for them. That has had the effect of driving the price down sharply. Will that continue? Who knows?

My guess is that in the absence of subsidies we’d find that one size did not, indeed, fit all. In some places solar power makes great sense. In others wind power would be a better choice. There are undoubtedly places and uses where natural gas or nuclear or even coal are the best economic choices.

If only there were some form of political organization capable of handling different conditions and requirements in different places!

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Division of Labor

Japan began investing heavily in robots in automobile manufacturing long before the United States did. More than 20 years ago they came to the realization that there were many jobs in which robots just didn’t make sense. Not only have robots not replaced humans in auto manufacturing in Japan:

5.5 million people, or 8.7 percent of Japan’s workforce are employed in automotive manufacturing and related industries. Within Japan, there are currently 78 factories in 22 prefectures that build cars.

Auto parts manufacturing accounts for over 600,000 jobs in the sector, and another 390,000 jobs are allocated to the production of raw materials and basic equipment used in automotive manufacturing.

How can that be? Simple, says this article at Forbes:

At the root of the discrepancy is an appreciation of which jobs robots do more efficiently and which require a human touch. Leading car companies have almost completely automated their paint and body shops. These are jobs that require constant repetition and consistent quality and often present safety and ergonomic challenges. Although lead-based paints aren’t used anymore, working in these areas still could expose workers to a bevy of unhealthy chemicals, making these the quintessential kinds of jobs robots have been designed to handle.

On the other hand, assembly lines — which must deal with the multitude of options on new models from side airbags to built-in vacuum cleaners — continue to heavily rely on a human workforce. To handle today’s highly customized vehicles, with as many as 55,000 parts for the variety of electronics and other bells and whistles offered on autos, requires the flexibility of human workers who can adjust to changing needs and innovations without extensive reprogramming.

and that will remain true for the foreseeable future.

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What You Can’t Do and What You Shouldn’t Do

This measure, reported by the Washington Examiner, strikes me as being likely to be an unconstitutional invasion of privacy:

President Trump and his Justice Department are being urged to go slow on appealing a court’s rejection of their travel ban and follow Germany’s example and put GPS ankle bracelets on visitors from the seven targeted nations until a final decision is made.

A prominent legal expert said that the administration should wait to appeal until Supreme Court nominee Neil Gorsuch gets to the court, giving Trump a 5-4 majority and in the meantime put the tracking devices on any refugee or visitor.

not to mention obnoxious and objectionable. Germany and the U. S. are not the same and we don’t have the same problems. What is legal in Germany may not be legal in the U. S. and vice versa.

Also, the president has substantially less leeway on what may be required of people inside the U. S. than he does with people seeking to come to the U. S.

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Kudos to Gaga

I want to commend Stefani Germanotta (Lady Gaga) on how she conducted herself during the Super Bowl halftime show last night. She made her views about President Trump and his policies clear while conducting herself and performing her act in a highly professional manner.

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What About Afghanistan?

Since Donald Trump took office as president very little has been said about Afghanistan. During the campaign he appeared to discount it, placing more emphasis on Pakistan. The Voice of America speculates on what President Trump will do with respect to Afghanistan:

Some scholars suggest the Trump administration may shift its focus towards Pakistan. During the election campaign candidate Trump said the situation in Pakistan, not Afghanistan, is the region’s main security problem.

“We know that Trump hasn’t said a lot about Afghanistan during the campaign or after the election but what he said about the region makes it sound like he is primarily interested in the strategic problems related to Pakistan,” said Rebecca Zimmerman, a policy researcher at Rand Corporation.

But Thomas H. Johnson, director of the Naval Postgraduate School’s Program for Cultural and Conflict studies warns against that.

“His initial conversation with Pakistan’s Prime Minister Nawaz Sharif was very strange and his eventual policies towards Pakistan will have a significant impact on his Afghan policies,” Johnson said.

Johnson added that given his statements concerning NATO, Germany and other traditional American security instruments and allies, the past polices may mean little to the new U.S. president.

Prominent Pakistani journalist and author Ahmed Rashid says, “What you have now is a much more complicated regional situation with the Taliban also getting backing from Iran. They are in talks with Russia. They have been in talks with China. You have many more regional players involved.”

Anthony Cordesman, national security analyst at the Center for Strategic and International Studies also believes Pakistan is not the only country the United States should be concerned about when it comes to dealing with Afghanistan.

He says the situation in Afghanistan is deteriorating, “I think we are looking at a year which is going to be another year of very serious fighting. There is very little immediate prospect that you are going to have the kind of negotiations that would actually have a major impact or a predictable impact.”

Over the course of the last 16 years the U. S. has suffered roughly 3,500 casualties in Afghanistan, most of them in the last eight years. There is a direct correlation between operational tempo and casualties. In 2008 Barack Obama ran on winning the war in Afghanistan. We presently have about 8,000 troops in Afghanistan.

What will President Trump do with respect to Afghanistan? What should he do?

It seems to me that there are four possible courses of action there:

  1. Increase forces again and try to win the war in Afghanistan.
  2. Maintain present force levels with the missions of force protection, counter-insurgency, and training the Afghan military. That was essentially President Obama’s policy at the end of his term of office.
  3. Maintain present force levels with the missions of force protection and counter-terrorism.
  4. Remove all of our troops from Afghanistan.

I believe that #1 and #2 are futile. If we adopt #4 we should be prepared to make punitive raids if Al Qaeda or DAESH attempts to set up bases in Afghanistan. It may also have geopolitical implications.

What should we do? What will President Trump do?

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Remittances

Remittances, payments sent to other countries by immigrants here in the United States, amount to roughly $150 billion annually and account for roughly 20% of the total income of immigrants. Here’s my question.

Should remittances be included in the total cost of immigrants to the United States? If not, why not? They provide little value to the U. S. economy. Basically, they’re just removing money from it. To date I’ve never seen any accounting of the cost of immigration that takes remittances into account.

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The Best Football Movies

I don’t have much interest in sports but it being Super Bowl Sunday and all I thought I’d participate by listing what I thought were the best football movies. Here’s my list:

The Freshman* (1925)
Horse Feathers** (1932)
The Gladiator (1938)
Knute Rockne, All American (1940)
Trouble Along the Way (1953)
Paper Lion (1968)
Brian’s Song (1971)
The Longest Yard (1974)
North Dallas Forty (1979)
Rudy (1993)
Any Given Sunday (1999)
Remember the Titans (2000)
Friday Night Lights (2004)
The Blind Side (2009)

There are some others, like Necessary Roughness or The Replacements that I’d put in the category of light entertainment.

What do you think are the best football movies?

* I realize that The Freshman is a college movie, not really a football movie, but football does play an important role in it.

** Same with Horse Feathers.

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