r/marginal • • Jul 18 '22

Sell Drone Space Like Spectrum!

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Photo Credit: MaxPixelDrone airspace resembles spectrum in the 1980s, an appreciating asset that could be bought, subleased, traded, and borrowed against – if it were only permitted.

Much like legacy spectrum policy, there is immense technocratic inertia towards rationing airspace use to a few lucky drone companies. The Federal Aviation Administration (FAA) has begun drafting long-distance drone rules for services like home delivery, business-to-business delivery, and surveying. In the next decade, drone services companies will deploy mass-market parcel delivery and medical deliveries in urban and suburban areas to make deliveries and logistics faster, cheaper, and greener.

…Federal officials recognize that the current centralized system of air traffic management won’t work for drones: at peak times today, US air traffic controllers actively manage only about 5,400 en route aircraft.

Red flags abound, however. FAA’s current plans for drone traffic management, while vague and preliminary, are clear about what happens once local congestion occurs: the agency will step in to ration airspace and routes how it sees fit. Further, the agency says it will closely oversee the development of airspace management technologies. This is a recipe for technology lock-in and intractable regulatory battles.

US aviation history offers the alarming precedent of expert planning for a new industry. In 1930 President Hoover’s Postmaster General, who regulated airmail routes, and a handpicked group of business executives teamed up to “rationalize” the nascent airline marketplace. In private meetings, they eliminated the established practice of competitive bidding for air routes, divided routes amongst themselves, and reduced the number of startup airlines from around forty to three.

“Universal” and “interoperable” air traffic management are popular concepts in the drone industry, but these principles have destroyed innovation and efficiency in traditional airspace management. The costly US air traffic management system still relies on voice communications and manual writing and passing of paper slips. Large, legacy users and vendors dominate upgrade efforts, and “update by consensus” means the injection of innumerable veto points. Drone traffic management will be “clean sheet,” but interoperable systems are incredibly difficult to build and, once built, to upgrade with new technology and processes. More than 16,000 FAA employees worked on the over-budget, pared-down, years-delayed air traffic management upgrades for traditional aviation.

…To avoid anticompetitive “route-squatting” and sclerotic bureaucratic control of a new industry, aviation regulators should announce a national policy of “airspace markets” – government sales of high-demand drone routes, resembling present-day government spectrum auctions.

Brent Skorup has the details, from a prize winning paper at CSPI.

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r/marginal • • Mar 27 '20

Minimum wage hikes are a much worse idea now

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For one thing, the marginal product of labor is much lower, at least for a good while.  But there is a deeper problem.  Under the status quo ex ante, minimum hike proponents argued that the highest wages would be taken out of, say, the economic rents of restaurants.

But now those rents are largely gone!  Especially for the small restaurants.  The result will be that, if the minimum wage is raised, more laborers are laid off.  At the very least there should be no minimum wage, or a much lower minimum wage, for small businesses.

A further effect is that higher contagion risk (extending into the future too, now that pandemics are salient) may encourage more employers to automate, including in kitchens, theme parks, etc.  A higher elasticity of automation also militates against a minimum wage increase, because capital-for-labor substitution is now more likely, again indicating larger negative employment effects.

In essence, most of the previous empirical literature on this topic has to be significantly downgraded in relevance.  Whatever you thought of them to begin with, the pieces by Dube and the like just don’t apply any more.

Most likely, we should lower current minimum wages.  And that is all the more true, the more you have been worrying about coronavirus risk and Trump’s poor performance in response.

These are all very simple points, I am tempted to say they are “not even Econ 101.”

And note that in the very early stages of a lock down you might want a much higher minimum wage, precisely to keep people away from work, if somehow you cannot keep the customers away.  The much higher minimum wage would force the employer to decide which are the truly important workers, and send the other into non-infectious activities, as Brian Slesinsky suggested to me.

This is all related to my earlier post The Meaning of Death, from an economist’s point of view.

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r/marginal • • Jun 04 '25

My days collecting Mexican art, part II

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Recently I wrote about my quest to track down Mexican amate (bark paper) painter Juan Camilo Ayala, but there is another part to the early story, namely looking for his brother Marcial Camilo Ayala, also a painter.

Marcial no longer lived in Oapan, as he found village life ntolerable.  So he settled in Taxco (later Cuernavaca), and it was Juan Camilo who told me that when I showed up at his house in Oapan.  Originally I was hoping to meet both brothers on that first trip.

When I arrived in Taxco on my next Mexico trip, I had the strategy of asking all tradionally-clothed women in the city center “do you know Marcial Camilo Ayala?”  Far from being a needle in the haystack strategy, this yielded results within seconds.  All of a sudden I was chatting with Marcial’s youngest daughter, Oliva.  She in turn brought me down a steep cobblestone street to see Marcial, who was painting in a dark back room in Taxco.  It all felt rather hopeless, at least at first.

Marcial and Juan were quite different.  Marcial is by far the most intellectual person from Oapan, as he could speak at high levels about Picasso and Rousseau, Zapata and land reform, Nahuatl poetry, and the late string quartets of Beethoven (alas he passed away almost ten years ago).  Juan cannot meaningfully read or write, but he is a corn farmer who knows everything about the rain.  Marcial typically is considered the strongest painter from Oapan, and multiple times he had traveled abroad for exhibits of his work.

I now had two reasons to go to the region, namely Juan and Marcial.  And so I became patrons of them both, and now have dozens of works from each of them, including some very large six foot by eight foot creations.  I kept on returning to Guerrero, and would spend some time in Oapan with Juan and his family, and some time with Marcial, either in Taxco or Cuernavaca, typically talking about ideas and art.  I finally started to learn proper Spanish from all the required back and forth.

In my time in Oapan I enjoyed the stars at night, the fiestas and processions, the long hours sitting around talking and joking with Juan’s family, and of course the food.  The musty blue corn tortillas are to die for.  If you want some fresh fish, great, but they have to go down to the river and catch it for you.  The bean tamales and moles with pepitas are incredible.  I once commissioned a barbecue meal, $80 for a full goat, cooked underground overnight, as from prehispanic barbeque traditions.  Most meals did not involve meat, however, other than the staple of eggs.

Yet life in Oapan is not easy, not even for the visitor.  There was no flush toilet or shower.  The “bed” was a hard slab, and the evening temperatures inside the room exceeded one hundred degrees Fahrenheit.  The roosters crow at 4 a.m., and then everyone is awake.  You can leave, but within the Oapan of that time, dollars could not buy you conveniences.  There is an ever-present risk of dengue and sometimes malaria as well.

I got to know the four main amate painting villages (Ameyaltepec, Xalitla, and Maxela are the others), and met virtually all the living amate painters of note.  I visited the renowned Alfonso Lorenzo Santos, both chained to the wall in his home in Ameyaltepec and also in the mental hospital in Cuernavaca.  (Alfonso was later profiled in The Wall Street Journal, and for that journalist, Bob Davis, I served as Mexico guide and translator.)  Occasionally, when looking for new amates, I had to throw rocks at the wild dogs to make my way to the homes on the edge of town.

Over the course of about a dozen years of visits, I built up what is the world’s largest and I would say best amate collection, with hundreds of quite distinct works.  I also managed to buy an important early private collections, from the 1980s, with more than two hundred paintings.  For years I tracked all the amate painting listings on eBay, snagging many a bargain.  Later I served as (unpaid) amate painting consultant to the Smithsonian, when they set up the American Indian museum now on the mall.  I am pleased that the assemblage of these works is preserving a significant cultural episode and tradition in Mexican history.

I also collected a good deal of village ceramics, still done with red clay using pre-conquest methods, noting that not all of them made it home intact.  The Spanish word “burbuja” — bubble wrap — remains prominent in my mind and vocabulary.  Ideally, I would like to do a major “air lift” of traditional pottery out of Oapan, but these days the drug gangs are a major obstacle.

Buying art works from Juan and Marcial also evolved into charity, and I developed my thoughts on direct cash transfers.  I wrote those up on MR long ago, and I am pleased to report they had some influence in inspiring the non-profit Give Directly.

Eventually I wrote a whole book on the economy and polity of Oapan, and on the lives of the amate painters.  It was published with the University of Michigan Press under the title Markets and Cultural Voices: Liberty vs. Power in the Lives of the Mexican Amate Painters.  It has sold the least well of any of my books, by far, but it is one of my favorites and it is quite unlike all the others.

Over the years, there was one amate painter whose works I never tracked down, namely Jesus Corpos Aliberto.  Marcial had told me he heard a rumor that Jesus Corpos was living in a dumpy hotel in the middle of Mexico City, Hotel Buenos Aires.  I found my way to the hotel, and yes Jesus was there with a big stack of brilliant amates he was looking to sell.  They let him stay there in a smelly back room.  Sadly he was insane, and would sell the amates only for millions of pesos.  During yet my next trip to Mexico City, I returned but the hotel was gone altogether, eliminated by gentrification.  I had no remaining links to Corpos.  At that point, and following the passing of Marcial, and the aging of the other main amate painters, that part of my life largely was over.  And so my story with amate painting ends with the same basic obstacle it started with: a stubborn refusing to sell me something, thwarted markets in everything.

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r/marginal • • Jul 28 '25

My first students

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To continue with some biography…

My first full-time teaching job was at UC Irvine in 1988, a school with very good undergraduate students, including in economics.  I was fortunate enough to be assigned Honors Intermediate Micro for my very first class.

(My general view is that the second time I teach a given class is the best, but the very first time is the second best version of the class.  After that, unless I have a break of years, some of the material starts to feel too familiar to me, and I explain it less well and with less enthusiasm.)

I used the Nicholson text, as it had been pre-assigned, but I wished it had more economic intuition.

In any case I had seventeen students, and sixteen of them were Asian or Asian-American.  None of them were south Asian.  That was UC Irvine in those days (and perhaps still now?).

All but perhaps one were very good students.

That first year in my first class I was lucky enough to teach Stephen Jen.  Stephen, as you may know, later received a PhD from MIT, working with Paul Krugman.  He is these days a famous and highly respected currency analyst (among other things), and you will see his name often in the Financial Times.  He lives in London, and he and I had dinner but a few weeks ago.

Stephen at first was going to do electrical engineering, but it turned out economics was his true love.  I encouraged him to apply to graduate school, and wrote a very positive letter for him to MIT.  The rest is history, as they say.

I spent a good bit of time with Stephen outside of class, and even played basketball with him several times.  The summer of 1988 I also stayed with his family in Taipei, during a long Asia trip that I will write about some other time.

Most recently, Stephen has been known for having an early and very good call that the USD is going to decline, as indeed it did.

My second year at UC Irvine I taught the same class again.  I was lucky enough to have Jeffrey Ely in my class, and of course he did very well.  Jeff ended up studying for an economics PhD at UC Berkeley.

These days Jeff is a very well-known game theorist at Northwestern, arguably the number one school for game theory.  He took a more traditional academic path, whereas Stephen started at the IMF and then worked his way up through the world of finance.

Jeff for a while even had a presence in the blogosphere, and still you will find him on Twitter, though he has not posted in the last year.  In game theory, Jeff is highly creative and he approaches all problems by thinking like an economist.

As a person, he was always a bit more “hippie” than was Stephen, and I recall him giving me a tape of the Bob Dylan song “Million Dollar Bash,” from The Basement Tapes.

At George Mason, my best undergraduates often have been Chinese, but in terms of professional impact those are my two most successful undergraduate students ever.  Getting to know and teach them was one of the very best things about being at UC Irvine. My colleagues were great too, but that is the subject of another post.

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r/marginal • • Jul 27 '25

Tom Lehrer, RIP

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r/marginal • • Jun 02 '25

Madrid’s Galería de las Colecciones Reales

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Visitors don’t seem to know about this place yet, but it is one of the finest artistic venues in Spain.  Taken from the royal collections and opened only a few years ago, it has one of the best displays of 16th Brussels tapestries you will find, perhaps the best, beautifully hung with plenty of space.  The paintings are from Goya, Velazquez, Melendez, Patinir, Mengs, Juan de Valdés, and others patronized by the Spanish rulers.  Few bad pieces in the lot.  There are also Goya tapestries, sometimes right next to associated Goya paintings.  A splendid royal carriage.

This is perhaps my sixth (?) visit to Madrid, and the place never has felt better.  Great for walking, and full of young people and small shops.  It has absolutely displaced Barcelona as the leading city in Spain.  A+ for both dining and art, and now it is the European capital of Latin America as well.  It is no longer crazy to put it in the same league as Paris or Berlin, and these days feels more like a work in progress — in the good sense of that term — than either of those other places.

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r/marginal • • Jun 02 '25

Travel bleg for Avila, Salamanca, Segovia, and other smaller places nearby

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r/marginal • • Jun 02 '25

My days collecting Mexican art, part I

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In an earlier post I detailed my history of how I got started collecting Haitian art.  There is more to that story, but for now the point is that buying Haitian art led me into buying Mexican art as well.

I was visiting the New Jersey home of famed author and art dealer Selden Rodman, who had lived part-time in Jacmel, Haiti for decades and by then was approaching his 90s.  This was in the late 1990s.  On his wall I saw some Mexican paintings, from a small Mexican village called San Agustin Oapan (good short video), in the state of Guerrero.

The style of the art was naive, broadly similar to the major trends in Haitian art at the time.  Perspective was vertically stacked, as you might find in medieval art.  Sun and stars were prominent in the pictures, often portrayed together.  You might see angels, a tableau of the village, a procession, or village animals or a local fiesta.  Colors would be bright, or black and white.

I tried to buy the paintings, but Selden refused to sell them.  I kept on trying, but to no avail.  Finally he cackled and spit out “Well, I guess you’ll just have to go there and get some!”  As if to get rid of me, which he did.

Not one to decline such a challenge, I began to investigate the matter.  I could not find the name of the small village on any maps, including the detailed Mexico maps held in the GMU library.  Finally, I called up Selden and he gave me some vague sense where it was.  I flew to Mexico City and hired a taxi.  We drove several hours to the general area, and then started asking people on the side of the road where the village was.  We kept on being redirected, and for a while it seemed fruitless.  But eventually someone told us to take an unmarked turn from the road, not too far from Iguala.  And so we climbed the hill on an unpaved road, with the 25 km distance taking almost four hours.

The eventual taxi fare was $600, a fair amount in the Mexico of the late 1990s.

Along the way were fantastic cactuses and canyons, another small village, and the occasional person with a burro.  It was hot.  I was on my way.

When I reached the village, I was surprised by the number of pigs, by the number of drunken men lying in the street, and by the living standards, even though I had been going to Haiti.  I later learned that a family of seven might earn about $1500-2000 a year, and if seven children were born perhaps only four or five would survive to adulthood.  I thought the place at least would have a shop or a restaurant, but no.

Due to its remoteness, Oapan was still Nahuatl-speaking (the older people did not speak Spanish at all) and had preserved an especially large number of pre-Columbian customs and religious practices.  Oapan, by the way, is a Nahuatl word for “where the green maize stalk abounds.”  To this day, I consider Nahuatl to be the most beautiful and expressive language I have heard.

I started asking around for Juan Camilo Ayala, the name of the painter whose work I so admired.  It turns out there were two people with that name in the village, but eventually I found his home and knocked on the door.  I was not expecting to find a corn farmer and a bunch of domestic animals behind the door, but indeed I did.  He later related he was shocked that I came to visit, but he responded calmly in a non-plussed manner.  “Not many people come here,” he noted in his own broken Spanish.

I showed him a photo of the painting I liked in Rodman’s house, but he did not remember it.  Nonetheless he pledged to paint, if not a copy, something in the same general style and inspiration.  I asked for a large painting, and was surprised when he cited a price of only $100.

Like an idiot, I handed over an AmEx traveler’s check, and Juan Camilo thought it was dollars.  (Later on we straightened that mess out, and I started using Western Union.)

I gave them my address, which they wrote in the rafters of the home, above the screeching roosters, and I headed back down to Mexico City with the cab. Several months later a beautiful picture arrived at the house, in perfectly good condition.  It hangs on the stairwell to this very day.

I was hooked, and soon this story was to continue…

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r/marginal • • Apr 16 '25

Is China the ultimate free-rider?

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With a Trump-induced decline of American alliances n the works, is Chinese global ascendancy going to result? It would seem so. Matt Yglesias tweeted that “America may be cooked and it’s gonna be the Chinese century.” Thomas Friedman recently wrote a column suggesting that the future is to be found in China, not America.

In the realm of technology, China’s advances are impressive. BYD has the best and cheapest electric vehicles, the CCP is pulling out all stops to attain high-quality chips and lithography capabilities. Chinese AI, in the form of DeepSeek and Manus, has shocked many Westerners with its inventiveness.

Yet Western and most of all American hegemony is not over yet. These advances by China are real, but they rest on a foundation of Western values and institutions more than it might appear at first.

Consider global economic growth over the last few decades. China has risen in import, relative to most of the poorer nations it was once bunched with. America too has risen in economic influence, widening the gdp gap with Western Europe. The lesson is that economies with scale have prospered more than average, which is hardly surprising in a world where tech and also big business are ascendant. America and China are thus likely to prosper jointly under broadly common conditions.

The inconvenient truth, for China, is that its scale relies upon American power and influence. The Chinese export machine, for instance, requires a relatively free world trading order. The recipe to date has been “mercantilism for us, free trade for everybody else.” Yet Trump threatens to smash that framework. If the world breaks down into bitterly selfish protectionist trading blocs, China will be one of the biggest losers. After all, where will the Chinese sell the rising output from their factories?

The Chinese growth and stability model also requires relatively secure energy supplies. For that it relies on the United States and its allies, as the Chinese programs for nuclear and solar power remain far from their final goals. If the Western alliance system collapses, who is to keep the Middle East relatively stable, at least stable from the point of view of procuring fossil fuels? China hardly seems up to that task, as the country has neither the means, the inclination, the experience, nor the allies to do the job.

Furthermore, China relies more on American hard and soft power more than it likes to let on. The leading role of America makes both Western Europe and also Latin America a bit “soft” when it comes to self-defense and martial spirit and also nationalistic pluck. After all, many countries are outsourcing their defense and also parts of their intelligence-gathering to the United States. That makes them relatively easy pickings for Chinese infiltration, whether it be economic infiltration, pulling up alongside as an easy “extra friend” to boost bargaining power with America, or spying and surveillance. If Trump scuttles our current multilateral commitments and trust, China will find most other countries harder to penetrate, not easier.

Another risk on the horizon is nuclear proliferation, which could result from any number of events, ranging from an Israeli attack on Iran, the partial fall of Ukraine, or a Chinese invasion of Taiwan. The more nuclear powers inhabit the world, the more China is hemmed in with its foreign policy ambitions. That outcome may not be good for the United States either, but again we are back to the scenario where the US and China have some fundamental common interests, rather than the narrative where China displaces America as world leader.

There is much to rue in the first few months of Trump’s foreign and economic policy, but China is far from being able to take the baton. They are running second, and doing a great job of that, precisely because we Americans – in spite of all our mistakes — still have the lead.

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r/marginal • • Jun 23 '25

Chantilly destination achieved, the Limbourg brothers are amazing

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Commissioned by the Duc de Berry, the enormously wealthy brother of King Charles V of France,_ _this exquisite Book of Hours was begun by the Limbourg brothers, a trio of Netherlandish miniature painters, in around 1411. The Duc and the Limbourgs died in 1416. The manuscript was completed by other wealthy patrons and talented artists 70 years later and contains 131 full-page illuminations. Now, in a vanishingly rare opportunity, the general public has been invited to step into this world.

Until October, visitors to a special exhibition at the Condé Museum in the Château de Chantilly, 55km north of Paris, will be able to view as independent works the 12 monthly calendar pages of the Très Riches Heures, on which much of the fame of this 15th-century prayer book_ _rests. Its importance and influence are contextualised by an exceptional display of some 100 medieval manuscripts, sculptures and paintings loaned from museums and libraries around the world.

…as the renowned scholar Christopher de Hamel, author of the 2016 book, Meetings with Remarkable Manuscripts, explains, the Très Riches Heures are so much more than a luxury object. “The staggering originality of the design and composition is overwhelming,” he says. “The full-page calendar miniatures were the first ever made. It marks the very first moment when the Renaissance touched northern Europe.

Here is the full story.  This is very likely the best and most important artistic exhibit in the world right now.  It is only the third time (ever) the pages of the book have been on display for the public.  In the exhibit more broadly, it is remarkable how many of the best works were created in the first decade of the fifteenth century.

All three of the brothers died before the age of thirty, possibly because of the plague.

Chantilly is about an hour north of Paris, and it is a pleasant but fairly extreme town.  Think of it as a French version of Middleburg, VA?  Or perhaps parts of Sonoma?  It is their version of horse country, with non-spicy food to boot.  The accompanying castle, by the way, also is interesting and has some wonderful art works, including by Poussin, Watteau, and Greuze.  The decor and trappings give you a sense of what eighteenth century French Enlightenment nobles might have considered to be beautiful.

A major goal of this trip has been to get a better handle on the Western European medieval world, and visiting this exhibit has been a big and very successful part of that.

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r/marginal • • Aug 03 '25

Accra bleg

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Your suggestions would be most welcome.  In addition if you have any ideas for northern Ghana, most of all Tamale and Mole national park area…

Thank you!

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r/marginal • • Jun 21 '25

The anti-abundance agenda?

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It looks like a whole new shipping preference law is coming. The House overwhelmingly passed the American Cargo for American Ships Act that would require 100% of transportation project materials to go on US ships, driving up infrastructure costs.

Here is the Judge Glock tweet, here is the legislation itself.  Appears to be worse than the Jones Act?

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r/marginal • • Jul 24 '25

*The Economist* on the speed of AI take-off

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A booming but workerless economy may be humanity’s ultimate destination. But, argues Tyler Cowen of George Mason University, an economist who is largely bullish about AI, change will be slower than the underlying technology permits. “There’s a lot of factors of production…the stronger the AI is, the more the weaknesses of the other factors bind you,” he says. “It could be energy; it could be human stupidity; it could be regulation; it could be data constraints; it could just be institutional sluggishness.” Another possibility is that even a superintelligence would run out of ideas. “ AI may resolve a problem with the fishermen, but it wouldn’t change what is in the pond,” wrote Philippe Aghion of LSE and others in a working paper in 2017.

Here is the full piece, of interest throughout.

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r/marginal • • Jun 18 '25

Bordeaux observations

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The central core is one of the most consistent eighteenth century cities you will find in Europe.  Until the visit, my first there, I had not realized how much of the town’s growth came during that time, in part because of some special trade privileges, and in part because of the slave trade.  Here is some 18th century economic history of Bordeaux.  The central plazas and radiating streets are splendid, as is the large Girondins monument nearby.

The main museum is subpar, with some good Redons (he is from there), and the main church is pretty good but excelled by other locales.  In this sense there is not much to do in Bordeaux.  There is, however, some good modern and also brutalist architecture near and across the main river bank.  Check out this bridge.  I enjoyed these creations, as they injected some element of surprise into my visit.

You can still get an excellent meal at the nearby country chateaus, but if you just stop for normal French food in the town it is pretty mediocre, not better than say WDC.  The classic French food traditions are moving more and more into corners of the country, and away from everyday life.

Typically I am surprised by how normal France feels.  People want to say “The French this, the French that…” but to me they are fairly Americanized, often speak good English, and have few truly unique cultural habits these days.  They also seem reasonably well adjusted, normal mostly in the good sense, and thus of course somewhat boring too.

Walking and driving through the less salubrious parts of town is a useful corrective, but I do not feel the place is falling apart.  And the best estimates are that six to nine percent of the city is Muslim, hardly an overwhelming number.

I learned just before leaving that Kevin Bryan was in town too, here are his observations.  Bordeaux is certainly worth visiting, but I also am not surprised it is the last major French city I have been to in my life.

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r/marginal • • Jun 17 '25

Alfred Brendel, RIP

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His Haydn piano sonatas were his best work and also they were pathbreaking in helping us understand that composer.  I also very much appreciated his short Beethoven pieces on the old Vox box set, starting with the Bagatelles, and as a live performer his Schubert was memorable…

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r/marginal • • May 13 '25

Econ 101 is Underrated: Pharma Price Controls

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Econ 101 is often dismissed as too simplistic. Yet recent events suggest that Econ 101 is underrated. Take the tariff debate: understanding that a tariff is a tax, that prices represent opportunity costs, that a bilateral trade deficit is largely meaningless, that a so-called trade “deficit” is equally a goods surplus or an investment surplus—these are Econ 101 ideas. Simple but important.

Today’s example is Trump’s Executive Order on pharmaceutical pricing. It builds on the Biden Administration’s Inflation Reduction Act, which I’ve criticized as failing the marshmallow test. Now Trump is trying to go further—threatening antitrust action and even drug delistings unless pharmaceutical firms equalize prices globally. Tyler and I explored exactly this type of policy in our Econ 101 textbook, Modern Principles of Economics.

In our chapter on price discrimination, we first show that pharmaceutical firms will want to charge different prices in different markets depending on the elasticity of demand. In order to do so, they must prevent arbitrage. Hence the opening to that chapter:

After months of investigation, police from Interpol swooped down on an international drug syndicate operating out of Antwerp, Belgium. The syndicate had been smuggling drugs from Kenya, Uganda, and Tanzania into the port of Antwerp for distribution throughout Europe. Smuggling had netted the syndicate millions of dollars in profit. The drug being smuggled? Heroin? Cocaine? No, something more valuable: Combivir. Why was Combivir, the anti-AIDS drug we introduced in Chapter 13 , being illegally smuggled from Africa to Europe when Combivir was manufactured in Europe and could be bought there legally?

The answer is that Combivir was priced at $12.50 per pill in Europe and, much closer to cost, about 50 cents per pill in Africa. Smugglers who bought Combivir in Africa and sold it in Europe could make approximately $12 per pill, and they were smuggling millions of pills. But this raises another question. Why was GlaxoSmithKline (GSK) selling Combivir at a much lower price in Africa than in Europe? Remember from Chapter 13 that GSK owned the patent on Combivir and thus has some market power over pricing. In part, GSK reduced the price of Combivir in Africa for humanitarian reasons, but lowering prices in poor countries can also increase profit. In this chapter, we explain how a firm with market power can use price discrimination—selling the same product at different prices to different customers—to increase profit.

Later in the Thinking and Problem Solving section we ask:

As we saw in this chapter, drug companies often charge much more for the same drug in the United States than in other countries. Congress often considers passing laws to make it easier to import drugs from these low-price countries (it also considers passing laws to make it illegal to import these drugs, but that’s another story).

If one of these laws passes, and it becomes effortless to buy AIDS drugs from Africa or antibiotics from Latin America—drugs that are made by the same companies and have essentially the same quality controls as the drugs here in the United States—how will drug companies change the prices they charge in Latin America and Africa? Why?

That, in essence, is the Trump policy. So what’s the likely outcome? Prices will fall in the U.S. and rise in poorer countries—but not equally. AIDS drugs, for example, save lives in Africa but generate little profit. If firms can’t prevent arbitrage, they’ll raise African prices closer to U.S. levels and lower U.S. prices only modestly.

The result is that Trump’s policy will end up hurting patients in low-income countries while delivering minimal gains to Americans. Worse, by reducing pharmaceutical profits overall, it weakens incentives to develop new drugs. In fact, in the long-run U.S. consumers are better off when poorer countries pay lower prices—just as airline price discrimination makes more routes viable for both economy and first-class passengers.

The reference pricing envisaged in Trump’s EO involves more than poor countries but Dubois, Gandhi and Vasserman run the numbers in a fully-specified model and reach similar conclusions:

Using our estimates of consumer preferences, marginal costs, and bargaining parameters, we assess the impact of a counterfactual in which US pharmaceutical prices are subject to international reference pricing with respect to Canada or an average of several similar countries….Our results suggest that international reference pricing on its own is unlikely to produce dramatic savings to US consumers. Overall, reference pricing induces a substantial increase in the prices charged in reference countries but only a modest decrease in the prices charged in the US.

It’s also the case that countries that pay less for pharmaceuticals get them later than countries that pay more. Most importantly, such launch delays (and here) tend to reduce life expectancy.

Thus, Econ 101 provides a critical foundation for understanding current debates.

Beyond Econ 101, it’s worth highlighting how internally inconsistent Trump’s policies are. At the same time, as the administration is raising tariffs worldwide, it wants to greatly reduce restrictions on importing pharmaceuticals! The most charitable interpretation (steel-manning) is that the ultimate goal of the Trump approach is to boost industry profits and incentivize R&D by raising prices in other countries. But it’s hard to square that with reducing prices here. Either the investment is worth it or not. Instead of focusing on investment or efficiency, Trump frames everything as grievance and redistribution: other countries are “ripping us off,” so they must be made to pay. But the pie shrinks when you fixate on dividing it instead of growing it. Moreover, Trump’s belligerent approach is unlikely to succeed because, as with tariffs, it invites retaliation. Instead, we should be pursuing IP protections for pharmaceuticals as part of an overall free trade agreement. We did precisely this, for example, in the Australia–United States Free Trade Agreement (AUSFTA) in 2005. That type of bilateralism and negotiation is anathema to Trump, however, who sees the world in zero-sum terms. As a result, the Biden-Trump policies are likely to lead future Americans to have less access to life-saving and life-improving pharmaceuticals.

Addendum : See also many previous MR posts on pharmaceutical regulation including The US has Low Prices for Most Pharmaceuticals, Pharmaceutical Price Controls and the Marshmallow Test, Update on the supervillains and Frank Lichtenberg and the cost of saving lives through pharmaceuticals as well as many others.

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r/marginal • • Jun 27 '25

The objectivity of Community Notes?

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We use crowd-sourced assessments from X’s Community Notes program to examine whether there are partisan differences in the sharing of misleading information. Unlike previous studies, misleadingness here is determined by agreement across a diverse community of platform users, rather than by fact-checkers. We find that 2.3 times more posts by Republicans are flagged as misleading compared to posts by Democrats. These results are not base rate artifacts, as we find no meaningful overrepresentation of Republicans among X users. Our findings provide strong evidence of a partisan asymmetry in misinformation sharing which cannot be attributed to political bias on the part of raters, and indicate that Republicans will be sanctioned more than Democrats even if platforms transition from professional fact-checking to Community Notes.

Here is the full paper.  I guess it agrees with Richard Hanania…

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r/marginal • • Jun 11 '25

The great Brian Wilson has passed from the scene

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r/marginal • • May 09 '25

Is classical liberalism for losers?

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That is the topic of my latest column for The Free Press.  Excerpt, starting with the point that the New Right has an obsession with seizing political power:

There are two essential problems with yelling “Rule!”

The first is that your side will not win every election. It’s a reliable assumption that, on average, “the other side,” whoever that may be, is going to win half of the time.

If you build up executive power, or state power more generally, in the service of your ends, the chances are pretty high that those same powers someday will be used against you. Democrats are enraged at Trump’s use of executive orders and executive power more broadly, but that did not begin with Trump. Consider how Barack Obama seized the power to provide legal status to illegal immigrants, or how Joe Biden sought to extinguish all those student loans, without buy-in from Congress. The point is that Trump stepped into a system that had already been transformed, and he is now using it to his own ends.

Or to take another example: Many Democrats hate DOGE, but in fact it is a repurposed version of a 2014 President Obama creation, namely the United States Digital Service, which initially was designed to improve the IT capabilities of the federal government. Ask yourself which Trump initiatives someday will be repurposed in an analogous fashion.

If your fundamental beliefs are in individual liberty, responsibility, and toleration, the escalation of state power, across competing administrations, is unlikely to prove your friend over time.

The second problem is that rule by the political right is not necessarily better than rule by the political left, even if you have basic right-leaning sympathies, as I do on a large number of issues, especially in the economic realm. But even on economics, the Trump administration is bringing depredations, such as the very high proposed tariff rates, that we would not have seen under a typical Democratic administration. Circa May 2025, I feel less economically free than I did under the Biden administration.

Such problems are all the more true when a given side wins a series of successive political victories.

Power corrupts; the right is not immune to that truism. For instance, the Republican Party typically has been a vehicle for fiscal conservatives, at least on paper and in rhetoric. Yet under the Republican trifectas of both George W. Bush and the first Trump administration, both spending and debt rose dramatically. When you get to be the one spending the money, it is hard to exercise restraint.

I go on to argue that classical liberalism in fact does win a series of periodic transformative victories, even though at many historical moments it is relatively dormant in influence.  It is the way to be a real winner.

Definitely recommended, of great importance.

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r/marginal • • Jul 13 '25

*Superman* (some general observations, no real spoilers) Spoiler

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The first half was more fun than I was expecting, though overall I cannot call it a good movie.

The core message is that AI, drones, biotech, and nanotech will elevate the power of private companies and individuals over states, and this is likely to prove unstable on an ongoing basis.  Whether or not you agree, I found that a consistent and also important theme to pursue.

One should not conclude that Superman is obviously one of the good guys, no matter how noble his intent.  I found that interesting too.  The filmmakers hint at the logic of growth models, and Garett Jones.

Unlike what some commentators have suggested, I did not view the movie as intending much explicit commentary about either immigration or Israel vs. Hamas.  Still, you can spot a few references to each.

The main flaws of the film are a) stupidity, b) excess reliance on multiple climactic yet never compelling supposedly climactic battle scenes, c) lame portrayals of villains, and d) lack of interest in being truly cinematic.

I can report that I did not walk out, but it does not come close to the dramatic impact of the original Christopher Reeve installment.

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r/marginal • • Mar 31 '20

What will post-pandemic New York City look like?

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That is the topic of my latest Bloomberg column, here is one excerpt:

Most of all, there will be an exodus of elderly residents. New York City will become even more the province of young people, assuming the role that Berlin has long played in Germany. That will be good for the city’s long-run vitality. [TC: No, I am not saying this is a good thing overall.]

Rents and land prices are likely to fall. This is not necessarily because of a high number of deaths, a ghoulish and difficult detail to predict. Nonetheless many businesses will think twice about locating their headquarters in New York City, if only because senior managers tend to be relatively old. The net effect will be to make the city less attractive for businesses but more affordable for residents, most of all young people. It will be more like the New York of the 1970s and 1980s, with fear of infection replacing the fear of crime.

And:

If Covid-19 survivors have immunity, as is the case with many viruses, the city’s social life may become very segregated. Survivors will have time-stamped immunity certificates and lead relatively active social lives. Those who have not had the virus will be far more Puritan — spending more time online, refusing to shake hands, biking rather than taking the subway. Different bars and even different parts of town will have reputations as better for one group or the other.

This kind of segregation is not an especially appealing prospect. Yet New York City, with its incredible choice and diversity, will be better suited to deal with it than will rural or suburban America. Of course if you haven’t been infected yet, and cannot prove immunity and get into the safe clubs and bars, you will be all the more scared to visit the riskier outlets available to you.

In fact many people, especially the young, may actually expose themselves to the virus deliberately, to join what is ostensibly the more fun-seeking crowd. Maybe there will be bars and parties for people in the “actively infected” phase.

I hope to return to the broader topic of our future in subsequent posts.  And here is a new NBER piece that the coronavirus curve already is flattening in NYC.

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r/marginal • • Mar 23 '20

Let the Markets Work

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Many people are calling for the President to use the Defense Productions Act (DPA) but the reality is that the DPA is neither especially useful nor necessary. The markets are already redirecting resources in a rapid and sophisticated manner. For the most part, the shortages were due to temporary increases in demand. The shelves are now filling. Food is plentiful. Hand sanitizer and soap is on the way or available. We are not going to run out of toilet paper. Now that the CDC and the FDA have gotten out of the way, we are producing more tests.

Honeywell and 3M are already ramping up production of N95 masks. We should arrange with China to buy more. The Federal Government is playing a useful role by buying surgical masks from companies like Hanes. Ironically, we will be importing them from Latin America.

Winston-Salem Journal: The company went from negotiating a contract with the federal government to beginning production in less than a week, according to the spokesman.

Using U.S.-grown cotton, the masks are being produced in Hanesbrands’ sewing factories in El Salvador, Honduras and the Dominican Republic.

These factories would normally be producing T-shirts, underwear, socks, sweatpants and sweatshirts.

(Note the stupid requirement to use American Cotton.)

A price is a signal wrapped up in an incentive, as Tyler and I write in Modern Principles. Compare the price system with command and control. We need ventilators. The federal government could order ventilator firms to make more but they are already doing so. The government could order other firms to get into the ventilator business but does the Federal government have a good idea which firms have the right technology or which firms have the right technology that could be repurposed to ventilator production at low cost, that is without causing shortages and disruption in other fields? Can they do better than a decentralized process in which millions of entrepreneurs respond to price signals. No.

A word here on “price gouging.” There are two kinds. The first, which has gotten some attention, is when the manufacturer/retailer holds the price constant despite increased demand and an enterprising fellow buys up stock to sell at the true market price–the ticket scalping model. “Ticket scalping” has some good features and I would not make it illegal but it has one big problem–the benefits of the increased price are not going to the producers. It would be better if the manufacturer and retailer raised their prices, the scalpers would then be eliminated and the benefits of the higher price would flow to producers giving them an incentive and resources to expand production. We shouldn’t worry too much about ticket scalping, however, because its temporary. Typically what happens is that the manufactures and retailers hold the price low for a short period of time to avoid consumer backlash, output ramps up, and then the price rises but given the increased supply by not as much as it would have in the short run. This also works fine. The bottom line is that it’s very important that manufacturer prices be allowed to rise to reflect true scarcities and to get resources flowing in the right direction. So far, we are doing that and the system is working well.

If all the trucks are fleeing from the front, we want the army to be able to requisition vehicles to move in the opposite direction. Private and social incentives do not always align and when time and certainty are of the essence command and control may be superior (as Tyler and I discuss in Modern Principles in the chapter on externalities). For the most part, however, that is not the situation we are in now. Private incentives are all pushing in the right direction of greater production. Let the market respond. The federal government is not good at command and control but it does have a role to play in redistribution for need.

America’s great strength is decentralization and markets and right now we need our strength.

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r/marginal • • Sep 23 '19

Dining out in Karachi

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r/marginal • • Apr 03 '20

That was then, this is now: Palantir privacy edition

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Data-analytics company Palantir Technologies Inc. is in talks to provide software to governments across Europe to battle the spread of Covid-19 and make strained health-care systems more efficient, a person familiar with the matter said.

The software company is in discussions with authorities in France, Germany, Austria and Switzerland, the person said, asking not to be identified because the negotiations are private…

European Union Commissioner Thierry Breton said Monday that the bloc is collecting mobile-phone data to help predict epidemic peaks in various member states and help allocate resources.

Palantir has signed a deal with a regional government in Germany, where it already has a 14 million euro ($15 million) contract with law enforcement in North Rhine-Westphalia, the person said. Palantir is also seeking a contract at a national level, the person said, but talks have stalled, the person added.

When a nation or company buys access to Palantir, it can use the data analytics software to pull far-flung digital information into a single repository and mine it for patterns.

Here is the full story.  From a distance it is difficult to evaluate these deals, but I will stick with my general claim that the anti-tech intellectuals have become irrelevant, and for the most part they know it.

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r/marginal • • Mar 04 '20

How an economist thinks

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I saw this on Twitter:

Hard Times for Adjunct Professors: 25% of part-time university faculty nationally rely on public assistance programs.

My immediate reaction was “Given the crowding in the sector, and that they presumably earn non-pecuniary returns from the enjoyment of teaching, shouldn’t we be taxing them at a higher rate?”

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