Tag Archives: Trump Administration

Big AI Begs Government To Deliver Us From Evil AI

17 Saturday Oct 2026

Posted by in Artificial Intelligence, Regulation

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Please, no. Let’s not get too aggressive about regulating AI development and use.

Sure, certain kinds of AI regulation are worthwhile and probably unavoidable, but those theoretically fall within the bounds of existing law: the framework in which liability issues, property rights, and claims of fraud are settled. Otherwise, there may be a role for industry self-regulation, perhaps within the kind of framework outlined here. Beyond that, broader and more intrusive government regulation and oversight of AI companies would serve to slow or retard development, and thereby hamper progress on addressing safety and security (because ongoing development will help reveal weaknesses). It would also stifle industry competition in the U.S., and cede advantages to adversaries, particularly China.

Promise and Limits

My position on AI regulation flows from optimism about what AI can accomplish as well as recognition of AI’s inherent limits. It is a powerful technology, but it does not “reason”. It is capable of real innovation, but only to the extent that it mechanically and iteratively constructs solutions based on a catalogue of past knowledge. Of course, it does the latter exceptionally well, and its solutions can be quite novel, drawing upon complex links between phenomena across many dimensions, but that is not the same as creative genius.

Those who anthropomorphize AI tend to fall for superstitions about new technology that have plagued humanity for centuries and have, at times, hindered the advancement of human well being. Yet we have prospered from new technologies in spite of this noise.

Begging For Discipline

Unfortunately, recent warnings from some AI executives and developers have been taken to heart across the political spectrum, though not particularly within the Trump Administration. While I have been critical of many of Trump’s policy positions and initiatives, deregulation has been a bright spot (if very uneven), and the promise of a light touch on AI regulation is another plus. Yet Trump has allowed the Pentagon to prohibit defense contracts with Anthropic as a security concern. In addition, the proposed “AI Force” raises questions, especially in light of Defense (War!) Secretary Pete Hegseth’s Anthropic decision. Presumably, the AI Force would be a branch of Homeland Security. AI obviously has significant military and defense applications. But could such an AI Force remain above the regulatory fray even as it designates certain applications or models to be a threat to national security? And could such a designation be contested?

The “doomers” within the AI industry are an obvious irony. They warn that their work might have “existential” consequences but continue that work under what we might call a self-compelled burden of competence. If anyone and everyone is going to do AI, then they too must do it too, if only for the good of humanity. But they insist that joining forces with the federal government to regulate or even pause development will somehow save the day, despite the global nature of the competition.

Perhaps Deeper Motives

To me, their rationale for government regulation seems implausible. The big AI companies are massive enterprises, and whether or not one believes they could “capture” a new regulatory body, they are nonetheless highly interested in shaping the future of any rules and regulation to which they and their competitors would be subject.

Alex Tabarrok insists that regulatory capture is typically confined to mature, regulated industries in his post “What Regulatory Capture Actually Looks Like”. He not only doubts that AI doomers have designs on capturing regulators; he also believes that the doomers expressed fears are completely sincere.

As one of Tabarrok’s commenters suggests, however, the AI executives’ behavior comports with the “bootleggers and baptists” theory of public choice, whereby politicians or influential parties claim the highest motives in serving the public interest and yet stand to reap economic gains from “protective” restrictions. In the case of AI, the executives may well be playing both roles. And they might happily accept both roles even if they believe their own warnings of doom. In fact, any rents the big AI concerns gain as a result of new regulations might be viewed as deserved, or unavoidable in any case.

Another plausible explanation for the pro-regulatory (and pro-pause) position taken by some players, notably Anthropic and OpenAI, is discussed by Francis Turner. It has to do with a desperate need for cash flow. One avenue would involve an effort to:

“… wriggle out of the optimistic compute commitments they have made. … both Open AI and Anthropic have made enormous commitments to purchase compute which has been what has driven the explosive growth in data centers. Unfortunately for Big AI the demand simply doesn’t seem to be there. Or at least the demand to pay the prices Big AI wants to charge.“

Turner also notes that a regulatory push to ban Chinese models would be seen as a competitive boost for these companies. Finally, Turner believes the big AI companies employ individuals with a personal drive to control the evolution and use of AI. That’s not hard to believe! A regulatory regime would offer ample opportunities for industry insiders to step into roles in which they could do just that. Possible motives are ample, whether borne of altruism, power-seeking, or the pursuit of economic gain. We could call this mere rent seeking or political bargaining, rather than regulatory capture, but some sort of capture might well be a goal.

Fears and Risks

Again, cries for regulation are accompanied by a stoking of fears that AI presents existential risks for humanity. One prominent example is closely associated with Noah Smith, though I’m sure he’s not the first to discuss it. That’s the idea that AI will be used to design a deadly supervirus that will wipe out most of the human race. This fear is overblown and unrealistic. A number of extremely deadly pathogens already exist, ebola being the perhaps the most contagious and deadly. Local deployments could surely be used to infect a large number of people, but that would be difficult to pull off and we are capable of containment. It is hardly an existential threat to humanity. As to the creation and spread of deadly new bugs, practical obstacles drastically reduce the likelihood of such an outcome, particularly on an existential scale, as outlined by Claus Wilke in “I’m sorry, you’re not going to die from an AI-engineered supervirus”.

Perhaps the most significant risks presented by AI fall within the realm of cybersecurity. Certain security breaches could conceivably threaten large numbers of people, but they are unlikely to approach existential levels for humanity.

The potential for plain old fraud via AI is real, including the creation and propagation of misinformation at scale. This is probably as much a human or user problem as an AI problem. AI hallucinations are an aspect of it as well, but that’s really an obstacle to adoption, so AI companies are working hard to minimize the problem. Damages under all of these categories should fall within the traditional legal bounds of liability, whether the result of intent or negligence. The latter distinction should carry less weight given that AI decisions are often shrouded within a so-called “black box”. Of course, assigning liability assumes that a responsible party can be identified, but legally defining LLMs as products helps to solve that problem.

Turner also raises the possibility of severe financial damage from an AI agent given authority over large amounts of capital, especially if assigned malicious financial objectives. This category of damage falls within the scope of existing securities laws and regulation.

Finally, some have warned of a risk that humans will suffer “cognitive atrophy” from relying on AI. In fact, it’s said to be a reality even now, and that it will become more severe as humans rely on AI to solve more problems and perform tasks. Will AI cause humans to devolve and face a more brutish existence? While I accept that AI presents a risk of cognitive atrophy, there are also ways in which AI stimulates intellectual curiosity about all manner of things. Much depends on the spirit in which AI is approached. It must be used as a tool and a complement to human intellectual pursuit, not a substitute for it, but that depends in large part on the user. I’m confident that the human spirit of inquiry will remain as strong as ever.

Summary

To sum up my general view regarding the pleadings for regulation of AI, I offer this quote from Per Byland:

“The State’s core function, in both theory and practice, is to give the ruling class a reliable way to extract wealth from society while posing as selfless public servants. It’s an ideal setup for the greedy, self‑absorbed, and unproductive.“

Except in this case we see the ownership and employees within a highly productive sector of the economy ostensibly rooting for the state to make them less productive. Or are they really? If it’s safety they want, then it’s incumbent on them to make their products safe, whatever that might entail, or face legal consequences. Continued development is likely to reveal risks as well as better ways to mitigate those risks.

If it’s economic advantage that Big AI craves, that answer too is in their very hands: they must compete in the AI marketplace to produce capable, reliable, and safe products that buyers value. Adopting a rigid government regulatory solution or a pause in development would likely bring the sacrifice of U.S. competitive advantages in AI and ultimately a centrally-planned and ineffective approach to AI.

As for designs on gaining a political advantage, we can hope that AI doomers will ultimately go the way of all Luddites before them.

A Tax On Imports Takes a Toll on Exports

10 Friday Oct 2025

Posted by in Free Trade, Tariffs

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Tariffs have far-reaching effects that strike some as counter-intuitive, but they are real forces nevertheless. Much like any selective excise tax, tariffs reduce the quantity demanded of the taxed good; buyers (importers) pay more, but sellers of the good (foreign exporters) extract less revenue. Suppose those sellers happen to be the primary buyers of what you produce. Because they have less to spend, you also will earn less revenue.

The Lerner Effect

The imposition of tariffs by the U.S. means that foreigners have fewer dollars to spend on exports from the U.S. (as well as fewer dollars to invest in the U.S. assets like Treasury bonds, stocks, and physical capital). That much is true without any change in the exchange rate. However, lower imports also imply a stronger dollar, further eroding the ability of foreigners to purchase U.S. exports.

The implications of the import tariff for U.S. exports may be even more starkly negative. Scott Sumner discusses an economic principle called Lerner Symmetry: a tax on imports can be the exact equivalent of a tax on exports! That’s because two-directional trade flows rely on two-directional flows of income.

Note that this has nothing to do with foreign retaliation against U.S. trade policy, although that will also hurt U.S. exporters. Nor is it a consequence of the very real cost increase that tariffs impose on U.S. export manufacturers who require foreign inputs. That’s a separate issue. Lerner Symmetry is simply part of the mechanics of trade flows in response to a one-sided tariff shock.

Assumptions For Lerner Symmetry

Scott Sumner enumerated certain conditions that must be in place for full Lerner Symmetry. While they might seem strict, the Lerner effect is nevertheless powerful under relaxed assumptions (though somewhat weaker than full Lerner Symmetry).

As Sumner puts it, while full Lerner Symmetry requires perfect competition, nearly all markets are “workably competitive”. In the longer-run, assumptions of price flexibility and full employment are anything but outlandish. Complete non-retaliation is an unrealistic assumption, given the breadth and scale of the Trump tariffs. Some countries will retaliate, but not all, and it is certainly not in their best interests to do so. The assumption of balanced trade is one and the same as the assumption of no capital flows; a departure from these “two” assumptions weakens the symmetry between tariffs and export taxes because a reduction in capital flows takes up some of the slack from lower revenue earned by foreign producers.

Trump Tariff Impacts

So here we are, after large hikes in tariffs and perhaps more on the way. Or perhaps more exceptions will be carved out for favored supplicants in return for concessions of one kind or another. All that is economically and ethically foul.

But how are imports and exports faring? Here I’ll quote the Yale Budget Lab’s (YBL) September 26th report on tariffs, which includes the chart shown at the top of this post:

“Consumers face an overall average effective tariff rate of 17.9%, the highest since 1934. After consumption shifts, the average tariff rate will be 16.7%, the highest since 1936. …

The post-substitution price increase settles at 1.4%, a $1,900 loss per household.“

The “post-substitution” modifier refers to the fact that price increases caused by tariffs would be somewhat larger but for consumers’ attempts to find lower-priced domestic substitutes. Suppose the PCE deflator ends 2025 with a 2.8% annual increase. The YBL’s price estimate implies that absent the Trump tariffs, the PCE would have increased 1.4%. If that seems small to you (and the tariff effect seems large to you), recall that monetary policy has been and remains moderately restrictive, so we might have expected some tapering in the PCE without tariffs.

We also know that the early effects of the tariffs have been dominated by thinner margins earned by businesses on imported goods. Those firms have been swallowing a large portion of the tariff burden, but they will increasingly attempt to pass the added costs into prices.

But back to the main topic … what about exports? Unfortunately, the data is subject to lags and revisions, so it’s too early to say much. However, we know exports won’t decline as much as imports, given the lack of complete Lerner symmetry. YBL predicts a drop in exports of 14%, but that includes retaliatory effects. In August the WTO predicted only about a 4% decline, which would be about half the decline in imports.

Seeking Compensatory Rents

More telling perhaps, and it may or may not be a better indicator of the Lerner effect, is the clamoring for relief by American farmers who face diminished export opportunities. As Tyler Cowen says, “Lerner Symmetry Bites”. Other industries will feel the pinch, but many are likely preoccupied with the more immediate problem of increases in the direct cost of imported materials and components.

The farm lobby is certainly on its toes. The Trump Administration is now asking U.S. taxpayers to subsidize soybean producers to the tune of $15 billion. Those exporting farmers are undoubtedly victimized by tariffs. But so much for deficit reduction! More from Cowen:

“Using tariff revenue to subsidize the losses of exporters is a textbook illustration of Lerner Symmetry because the export losses flow directly from the tax on imports! The irony is that President Trump parades the subsidies as a victory while in fact they are simply damage control for a policy he created.“

A List of Harms

Tariffs are as distortionary as any other selective excise tax. They restrict choice and penalize domestic consumers and businesses, whose judgement of cost and quality happen to favor goods from abroad. Tariffs create cost and price pressures in some industries that both erode profit margins and reduce real incomes. For consumers, a tariff is a regressive tax, harming the poor disproportionately.

Tariffs also diminish foreign flows of capital to the U.S., slowing the long-term growth of the economy as well as productivity growth and real wages. And the Lerner effect implies that tariffs harm U.S. exporters by reducing the dollars available to foreigners for purchasing goods from the U.S. In these several ways, Americans are made worse off by tariffs.

We now see attempts to cover for the damage done by tariffs by subsidizing the victims. A “tariff dividend” to consumers? Subsidies to exporters harmed by the Lerner effect? In both cases, we would forego the opportunity to pay down the bloated public debt. Thus, the American taxpayer will be penalized as well.

Censorship and Content Moderation in the Public Square

30 Thursday Sep 2021

Posted by in Censorship, Free Speech, Social Media

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I’m probably as fed up with social media as anyone, given the major platforms’ penchant for censoring on the basis of politics, scientific debate, religion, and wokeism (or I should say a lack thereof). I quit Facebook back in January and haven’t regretted it. It’s frustratingly difficult to convince others to give it up, however, and I’ve tried. Ultimately, major user defections would provide the most effective means of restraining the company’s power.

Beyond my wild fantasies of a consumer revolt, I will confess to a visceral desire to see the dominant social media platforms emasculated: broken up, regulated, or even fined for proven complaints of censorial action. That feeling is reinforced by their anti-competitive behavior, which is difficult to curb.

Are There Better Ways?

While my gut says we need drastic action by government, my head tells me … not … so … fast! These are private companies, after all. I’m an adherent of free markets and private property, so I cannot abide government intrusions to force anyone to sponsor my speech using their private facilities. At the same time, however, our free speech rights must be protected in the “public square”, and the social media companies have long claimed that their platforms offer a modern form of the public square. If they can be taken at their word, should there be some remedy available to those denied a voice based upon their point-of-view by such a business? This seems especially pertinent when access to “public accommodations” is so critical to the meaning of non-discrimination under current law (not that I personally believe businesses should be forced to accommodate the specific demands of all comers).

In a lengthy and scholarly treatment of “Treating Social Media Platforms Like Common Carriers”, Eugene Volokh states the following about U.S. Supreme Court case law (pg. 41):

“Under PruneYard and Rumsfeld, private property owners who open up their property to the public (or to some segment of the public, such as military recruiters) may be required by state or federal law to share their real estate with other speakers.”

The Common Carrier Solution

Volokh’s article is very detailed and informative. I highly recommend it to anyone hoping to gain an understanding of the complex legal issues associated with the rights of big tech firms, their users, and other interested parties. His article highlights the long-standing legal principle that so-called “common carriers” in telecommunications cannot discriminate on the basis of speech.

Volokh believes it would be reasonable and constitutional to treat the big social media platforms as common carriers. Then, the platforms would be prohibited from discriminating based on viewpoint, though free to recommend material to their users. He also puts forward a solution that would essentially permit social media firms to continue to receive protection from liability for user posts like that granted under Section 230 of the Communications Decency Act:

“… I think Congress could categorically treat platforms as common carriers, at least as to their hosting function. But Congress could also constitutionally give platforms two options as to any of their functions: (1) Claim common carrier status, which will let them be like phone companies, immune from liability but also required to host all viewpoints, or (2) be distributors like bookstores, free to pick and choose what to host but subject to liability (at least on a notice-and- takedown basis).”

Economist Luigi Zingales emphasizes the formidable network externalities that give the incumbent platforms like Facebook a dominance that is almost unshakable. Zingales essentially agrees with Volokh, but he refers to common carrier status for what he calls the “sharing function” with Section 230-like protections, while the so-called “editing function” can and should be competitive. Zingales calls recommendations of material by a platform part of the editing function which should not be granted protection from liability. In that last sense, his emphasis differs somewhat from Volokh’s. However, both seem to think an change in the law is necessary to allow protections only where they serve the “public interest”, as opposed to protecting the private interests of the platforms.

The most destructive aspect of Section 230 immunity is the so-called “Good Samaritan” clause aimed at various kinds of offensive material (“… obscene, lewd, lascivious, filthy, excessively violent, harassing, or otherwise objectionable, whether or not such material is constitutionally protected.”), which the social media platforms have used as “a license to censor”, as Philip Hamburger puts it. Here, Eugene Volokh and others, including Supreme Court Justice Clarence Thomas, assert that this provision should not receive a broad interpretation in determining immunity for content moderation decisions. In other words, the phrase “otherwise objectionable” in the provision must be interpreted within the context of the statute, which, after all, has to do with communications decency! (Here again, I question whether the government can legitimately authorize censorship in any form.)

Arm of Government?

Viewpoint discrimination and censorship by the platforms is bad enough, but in addition, by all appearances, there is a danger of allowing companies like Facebook to become unofficial speech control ministries in the service of various governments around the world, including the U.S. Here is Vivek Ramaswamy’s astute take on the matter:

“… Facebook likely serves increasingly as the censorship arm of the US government, just as it does for other governments around the world.

In countries like India, Israel, Thailand, and Vietnam, Facebook frequently removes posts at the behest of the government to deter regulatory reprisal. Here at home, we know that Mark Zuckerberg and Sheryl Sandberg regularly correspond with US officials, ranging from e-mail exchanges with Dr. Anthony Fauci on COVID-19 policy to discussing “problematic posts” that “spread disinformation” with the White House.

If Zuckerberg and Sandberg are also directly making decisions about which posts to censor versus permit, that makes it much more likely that they are responsive to the threats and inducements from government officials.”

Even LinkedIn has censored journalists in China who have produced stories the government finds unflattering. Money comes first, I guess! I’m all for the profit motive, but it should never take precedence over fundamental human rights like free speech.

There is no question of a First Amendment violation if Facebook or any other platform is censoring users on behalf of the U.S. government, and Section 230 immunity would be null and void under those circumstances.

Elections … Their Way

On the other hand, we also know that platforms repeatedly censored distribution of the Trump Administration’s viewpoints; like them or not, we’re talking about officials of the executive branch of the U.S. government! This raises the possibility that Section 230 immunity was (or should have been) vitiated by attempts to silence the government. And of course, there is no question that the social media platforms sought to influence the 2020 election via curation of posts, but it is not clear whether that is currently within their rights under Section 230’s Good Samaritan clause. Some would note the danger to fair elections inherent in any platform’s willingness to appease authoritarian governments around the world, or their willingness and ability to influence U.S. elections.

Pledge of Facebook Allegiance

Some of our domestic social media companies have become supra-national entities without a shred of loyalty to the U.S. This article in The Atlantic, of all places, is entitled “The Largest Autocracy on Earth“, and it has a sub-heading that says it all:

“Facebook is acting like a hostile foreign power; it’s time we treated it that way.”

The article reports that Facebook’s Mark Zuckerberg has promoted the mantra “company over country”. That should disabuse you of any notion that he cares one whit about the ideals embodied in the U.S. Constitution. He is a child consumed with dominance, control, and profit for his enterprise, and he might be a megalomaniac to boot. If he wants to host social media relationships in this country, let’s make Facebook a common carrier hosting platform.

EPA Concedes Puddles, Ditches to Owners

30 Thursday Jan 2020

Posted by in Environment, Federalism, Regulation

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Those who like their government served-up intrusive are reacting hysterically to the Environmental Protection Agency’s new Navigable Waters Protection Rule, which forbids the federal government from regulating waters that are not interstate waters or waters that aren’t or cannot be used in any way related to interstate commerce. The federal government will no longer have jurisdiction over normally dry, “ephemeral”  creek beds, private lakes and ponds unconnected to interstate waters, and most ground areas where rainwater pools, such as ditches on private property. This is a very good thing!

The emphasis of the new rule on interstate waters hews more closely to the constitutional limits of federal power than did the rescinded rule that had been imposed by the Obama Administration in 2015, which some called the Waters of the United States (WOTUS) rule (really an interpretation of “navigable waters”, or WOTUS as defined by the 1972 Clean Water Act). Christian Britschgi writes at Reason.com:

“The Obama-era rule was controversial from the get-go, with multiple Red states filing legal challenges claiming it exceeded the federal government’s authority to regulate water pollution. A slew of federal court rulings stayed the implementation of the rule in over half the states.”

Some of the straightforward differences between the new rule and WOTUS were mentioned above, but Anthony K. Francois of the Property and Environment Research Center gets into a bit more detail in his nice summary of these changes in federal authority.

In many cases, state and local governments already have regulatory authority over waters placed off-limits to the EPA. In fact, as Jonathan Adler wrote last summer, some of those state regulations are more stringent than the federal oversight now rescinded. That flies in the face of assertions by activists that states will be patsies in their dealings with property owners (the activists would call them “polluters”). So those who claim that the new rule will cause damage to the environment are really saying they only trust the EPA’s authority in these matters. They are also saying that no private citizen who owns property should be presumed to have rights over the industrial, commercial, or residential use of that property without review by the federal government. Under WOTUS, this represented such a severe abrogation of rights that it interfered with both productive activity and private enjoyment, not to mention the considerable confusion and costly litigation it prompted.

Weighing the costs and benefits of regulatory actions is a difficult undertaking. However, it is far too easy for regulators, with an imbalance of coercive power in their favor, to impose costly standards in locales where there may be little or no net benefit, and where individual property owners have no recourse. Regulators get no reward for protecting individual liberty and property rights, which skews their view of the tradeoff against potential environmental damage. Federal regulatory power is best kept within strict limits. The same goes for state and local regulatory power, but authority at those levels is at least more accountable to local interests on behalf of consumer, business and environmental concerns.

Buttinskies Get Vapours Over Vapes, Rx Pain Killers

29 Tuesday Oct 2019

Posted by in Prohibition

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Every now and then I have to grind my axe against reflexive prohibitionism and the misplaced blame for health issues that runs along with it. This time, my outburst is prompted first by a recent study of opioid deaths, and by developments in the vastly less horrifying vaping scare. Both of these issues are like red meat to the busy-bodies of the world, who just can’t stand to sit by knowing that someone might be doing something into which they might affect an heroic intervention.

Pain Is the Price

Pharmaceutical companies have been settling opioid lawsuits brought against them for failing to provide adequate warnings with opioid painkillers about the potential for addiction, for allegedly distributing quantities in areas with “vulnerable” populations, and for other aggressive marketing tactics. Purdue Pharmaceuticals filed for bankruptcy after agreeing to $12 billion in settlements. Many more cases remain for these companies. Settlements, of course, are not admissions of guilt. Rather, they are the least costly way for these companies to extract themselves from situations in which they have been scapegoated by the grieving families of victims, plaintiffs’ attorneys with instincts for deep pockets, and naive reporting by an uninformed news media.

This week came reports of a new study in Massachusetts that found only a small percentage of opioid deaths in which decedents had been prescribed an opioid. According to the researchers:

“The major proximal contributors to opioid-related overdose deaths in Massachusetts during the study period were illicitly made fentanyl and heroin. … The people who died with a prescription opioid like oxycodone in their toxicology screen often don’t have a prescription for it.”  

And as Jacob Sullum notes at the last link, this is in line with a number of other studies:

“A 2007 study found that 78 percent of OxyContin users seeking addiction treatment reported that they had never been prescribed the drug for any medical reason. Other studies have found that only a small minority of people treated for pain, ranging from something like 1 percent of post-surgical patients to less than 8 percent of chronic pain patients, become addicted to their medication. A 2015 study of opioid-related deaths in North Carolina found 478 fatalities among 2.2 million residents who were prescribed opioids in 2010, an annual rate of 0.022 percent.”

Most people who become addicted to opioids, and most people who OD, begin their use in pursuit of a high. There are issues over which the pharmaceutical industry can be criticized, but it does not deserve much blame for abuse of the medications it produces. Providing pain medications to health care providers for patients with legitimate needs should not be subject to such severe legal risk. This fraught legal environment has a chilling effect on the willingness of manufacturers to meet those needs, not to mention risk-averse physicians. You, too, are likely to suffer severe pain one day, and your plight will be made worse by these effective prohibitionists.

The Vaping Panic

The dangers of vaping are vastly exaggerated, and the tremendous benefits of vaping for those wishing to quit smoking cigarettes have seemingly been forgotten. Vaping products are far less dangerous than cigarettes, but it matters little to prohibitionists at the federal and state levels. This includes the Trump Administration and such Democrats as Rashida Tlaib and Debbie Wasserman-Shultz, who have jumped on the anti-vaping bandwagon with an opportunistic fervor.

Vaping has increased dramatically among teenagers. Flavored or otherwise, it is likely to have substituted for cigarettes among teens to some extent. Many adult vapers seem to like flavored vaping products as well. As others have noted, a ban on flavored vaping products will make little difference: vapers like the nicotine! And like any form of prohibition, vaping bans will lead to more dangerous varieties of product as buyers turn to the black market for vaping supplies, or simply smoke more cigarettes.

A recent proposal in the House Ways and Means Committee to tax e-cigarettes is also terribly misguided. If we’re going to “nudge” anyone, which in this case is to follow the traditional economic prescription to tax things that harm, then surely we ought to consider where the greater harm lies. Cigarettes are already taxed. Introducing a tax on a relatively new alternative constituting a far lesser harm is sure to have undesirable effects on public health.

Summary

It must be cathartic to identify someone or something to blame for tragedies for which the victims themselves are largely at fault. We know too that the enterprise of bringing legal action against corporate scapegoats is financially rewarding. Unfortunately, those scapegoats can have little confidence in the courts’ ability to reach objective decisions, so they feel compelled to settle with plaintiffs at still great expense. It’s a racket that leads to stunted development of new drugs and under-prescription of painkillers. Tort reform, potentially to include caps on damages and financial risks to plaintiffs attorneys, can mitigate these effects, and it is as important now as ever.

Alarmism over vaping creates risks of a different nature. Vaping is not free of risk, but neither is it a massive threat to public health. It is, in fact, a less harmful alternative than cigarette smoking. Authorities should be cautious in their approach to regulating vapes and e-cigarettes, lest they discourage attractive and safer alternatives to smoking.

The CBO’s Obamacare Fantasy Forecast

28 Tuesday Mar 2017

Posted by in Health Care, Obamacare

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The Congressional Budget Office (CBO) is still predicting strong future growth in the number of insured individuals under Obamacare, despite their past, drastic over-predictions for the exchange market and slim chances that the Affordable Care Act’s expansion of Medicaid will be adopted by additional states. Now that Republican leaders have backed away from an unpopular health care plan they’d hoped would pass the House and meet the Senate’s budget reconciliation rules, it will be interesting to see how the CBO’s predictions pan out. The “decremental” forecasts it made for the erstwhile American Health Care Act (AHCA) were based on its current Obamacare “baseline”. A figure cited often by critics of the GOP plan was that 24 million fewer individuals would be insured by 2026 than under the baseline.

It was fascinating to see many supporters of the AHCA accept this “forecast” uncritically. With the AHCA’s failure, however, we’ve been given an opportunity to witness the distortion in what would have been a CBO counterfactual. What a wonderful life! We’re stuck with Obamacare for the time being, but this glimpse into the CBO’s delusions will be one of several silver linings for me.

Again, the projected 24 million loss in the number of insured under the AHCA was based on an actual predicted loss of about 5 – 6 million and the absence of an Obamacare gain of 18 – 19 million. Those figures are from an excellent piece by Avik Roy in Forbes. I drew on that article extensively in my post on the AHCA prior to its demise. Here are some key points I raised then, which I’ve reworded slightly to put more emphasis on the Obamacare forecasts:

  1. The CBO has repeatedly erred by a large margin in its forecasts of Obamacare exchange enrollment, overestimating 2016 enrollment by over 100% as recently as 2014.
  2. The AHCA changes relative to Obamacare were taken from CBO’s 2016 forecast, which is likely to over-predict Obamacare enrollment on the exchanges by at least 7 million, according to Roy.
  3. The CBO also assumes that all states will opt to participate in expanded Medicaid under Obamacare going forward. That is highly unlikely, and Roy estimates its impact on the CBO’s forecast at about 3 million individuals.
  4. The CBO believes that the Obamacare individual mandate has encouraged millions to opt for insurance. Roy says that assumption accounts for as much as 9 million of total enrollment across the individual and employer markets, as well as Medicaid.

Thus, Roy believes the CBO’s estimate of the coverage loss of 24 million individuals under the AHCA was too high by about 19 million!

In truth, Obamacare will be watered down by regulatory and other changes instituted by the Trump Administration, which has said it will not enforce Obamacare’s individual mandate. Coverage under the “new” Obamacare will devolve quickly if the CBO is correct about the impact of the individual mandate.

The CBO’s job is to “score” proposed legislation relative to current law; traditionally, it made no attempt to account for dynamic effects that might arise from the changed incentives under a law. The results show it, and the Obamacare projections are no exception. In the case of Obamacare, however,  the CBO seems to have applied certain incentive effects selectively. The supporters of the AHCA might have helped their case by focusing on the flaws in the CBO’s baseline assumptions. We should keep that in mind in the future with respect to any future health care legislation, not to mention tax reform!