The February cold snap left millions of Texas utility customers without power. I provide a bit of a timeline at the bottom of this post. What happened? Well, first, don’t waste your time arguing with alarmists about whether “climate change” caused the plunge in temperatures. Whether it was climate change (it wasn’t) or anything else, the power shortage had very nuts-and-bolts causes and was avoidable.
Texas has transitioned to producing a significant share of its power with renewables: primarily wind and solar, which is fine across a range of weather conditions, though almost certainly uneconomic in a strict sense. The problem in February was that the state lacks adequate capacity to meet surges under extreme weather conditions. But it wasn’t just that the demand for power surged during the cold snap: renewables were not able to maintain output due to frozen wind turbines and snow-covered solar panels, and even some of the gas- and coal-fired generators had mechanical issues. The reliability problem is typical of many renewables, however, which is why counting on it to provide base loads is extremely risky.
Judith Curry’s web site featured an informative article by a planning engineer this week: “Assigning Blame for the Blackouts in Texas”. The Electric Reliability Council of Texas (ERCOT) is the independent, non-profit operator of the state’s electric grid, with membership that includes utilities, electric cooperatives, other sellers, and consumers. Apparently ERCOT failed to prepare for such an extreme weather event and the power demand it engendered:
“… unlike utilities under traditional models, they don’t ensure that the resources can deliver power under adverse conditions, they don’t require that generators have secured firm fuel supplies, and they don’t make sure the resources will be ready and available to operate.”
ERCOT’s emphasis on renewables was costly, draining resources that otherwise might have been used to provide an adequate level of peak capacity and winterization of existing capacity. Moreover, it was paired with a desire to keep the price of power low. ERCOT has essentially “devalued capacity”:
“Texas has stacked the deck to make wind and solar more competitive than they could be in a system that better recognizes the value of dependable resources which can supply capacity benefits. … capacity value is a real value. Ignoring that, as Texas did, comes with real perils. … In Texas now we are seeing the extreme shortages and market price spikes that can result from devaluing capacity. “
Lest there be any doubt about the reliance on renewables in Texas, the Heartland Institutes’sH. Sterling Burnett notes that ERCOT data:
“… shows that five days before the first snowflake fell, wind and solar provided 58% of the electric power in Texas. But clouds formed, temperatures dropped and winds temporarily stalled, resulting in more than half the wind and solar power going offline in three days never to return during the storm, when the problems got worse and turbines froze and snow and ice covered solar panels.”
Power prices must cover the cost of meeting “normal” energy needs as well as the cost of providing for peak loads. That means investment in contracts that guarantee fuel supplies as well as peak generating units. It also means inter-connectivity to other power grids. Instead, ERCOT sought to subsidize costly renewable power in part by skimping on risk-mitigating assets.
Retail pricing can also help avert crises of this kind. Texas customers on fixed-rate plans had no incentive to conserve as temperatures fell. Consumers can be induced to lower their thermostats with variable-rate plans, and turning it down by even a degree can have a significant impact on usage under extreme conditions. The huge spike in bills for variable-rate customers during the crisis has much to do with the fact that too few customers are on these plans to begin with. Among other things, Lynne Kiesling and Vernon L. Smith discuss the use of digital devices to exchange information on scarcity with customers or their heating systems in real time, allowing quick adjustment to changing incentives. And if a customer demands a fixed-rate plan, the rate must be high enough to pay the customer’s share of the cost of peak capacity.
Price incentives make a big difference, but there are other technological advances that might one day allow renewables to provide more reliable power, as discussed in Tyler Cowen’s post on the “energy optimism” of Austin Vernon”. I find Vernon far too optimistic about the near-term prospects for battery technology. I am also skeptical of wind and solar due to drawbacks like land use and other (often ignored) environmental costs, especially given the advantages of nuclear power to provide “green energy” (if only our governments would catch on). The main thing is that sufficient capacity must be maintained to meet surges in demand under adverse conditions, and economic efficiency dictates that that it is a risk against which ratepayers cannot be shielded.
Note: For context on the chart at the top of this post, temperatures in much of Texas fell on the 9th of February, and then really took a dive on the 14th before recovering on the 19th. Wind generation fell immediately, and solar power diminished a day or two later. Gas and coal helped to offset the early reductions, but it took several days for gas to ramp up. Even then there were shortages. Then, on the 16th, there were problems maintaining gas and coal generation. Gas was still carrying a higher than normal load, but not enough to meet demand.
Anthony Fauci has repeatedly increased his estimate of how much of the population must be vaccinated to achieve what he calls herd immunity, and he did it again in late December. This series of changes, and other mixed messages he’s delivered in the past, reveal Fauci to be a “public servant” who feels no obligation to level with the public. Instead, he crafts messages based on what he believes the public will accept, or on his sense of how the public must be manipulated. For example, by his own admission, his estimates of herd immunity have been sensitive to polling data! He reasoned that if more people reported a willingness to take a vaccine, he’d have flexibility to increase his “public” estimate of the percentage that must be vaccinated for herd immunity. Even worse, Fauci appears to lack a solid understanding of the very concept of herd immunity.
Manipulation
There is so much wrong with his reasoning on this point that it’s hard to know where to start. In the first place, why in the world would anyone think that if more people willingly vaccinate it would imply that even more must vaccinate? And if he felt that way all along it demonstrates an earlier willingness to be dishonest with the public. Of course, there was nothing scientific about it: the series of estimates was purely manipulative. It’s almost painful to consider the sort of public servant who’d engage in such mental machinations.
Immunity Is Multi-Faceted
Second, Fauci seemingly wants to convince us that herd immunity is solely dependent on vaccination. Far from it, and I’m sure he knows that, so perhaps this too was manipulative. Fauci intimates that COVID herd immunity must look something like herd immunity to the measles, which is laughable. Measles is a viral infection primarily in children, among whom there is little if any pre-immunity. The measles vaccine (MMR) is administered to young children along with occasional boosters for some individuals. Believe it or not, Fauci claims that he rationalized a requirement of 85% vaccination for COVID by discounting a 90% requirement for the measles! Really???
In fact, there is substantial acquired pre-immunity to COVID. A meaningful share of the population has long-memory, cross-reactive T-cells from earlier exposure to coronaviruses such as the common cold. Estimates range from 10% to as much as 50%. So if we stick with Fauci’s 85% herd immunity “guesstimate”, 25% pre-immunity implies that vaccinating only 60% of the population would get us to Fauci’s herd immunity goal. (Two qualifications: 1) the vaccines aren’t 100% effective, so it would take more than 60% vaccinated to offset the failure rate; 2) the pre-immune might not be identifiable at low cost, so there might be significant overlap between the pre-immune and those vaccinated.)
Conceptual Confusion
Vaccinations approaching 85% would be an extremely ambitious goal, especially if it is recommended annually or semi-annually. It would be virtually impossible without coercion. While more than 91% of children are vaccinated for measles in the U.S., it is not annual. Thus, measles does not offer an appropriate model for thinking about herd immunity to COVID. Less than half of adults get a flu shot each year, and somewhat more children.
Fauci’s reference to 85% – 90% total immunity is different from the concept of the herd immunity threshold (HIT) in standard epidemiological models. The HIT, often placed in the range of 60% – 70%, is the point at which new infections begin to decline. More infections occur above the HIT but at a diminishing rate. In the end, the total share of individuals who become immune due to exposure, pre-immunity or vaccination will be greater than the HIT. The point is, however, that reaching the HIT is a sufficient condition for cases to taper and an end to a contagion. If we use 65% as the HIT and pre-immunity of 25%, only 40% must be vaccinated to reach the HIT.
Heterogeneity
A recent innovation in epidemiological models is the recognition that there are tremendous differences between individuals in terms of transmissibility, pre-immunity, and other factors that influence the spread of a particular virus, including social and business arrangements. This kind of heterogeneity tends to reduce the effective HIT. We’ve already discussed the effect of pre-immunity. Suppose that certain individuals are much more likely to transmit the virus than others, like so-called super-spreaders. They spur the initial exponential growth of a contagion, but there are only so many of them. Once infected, no one else among the still-susceptible can spread the virus with the same force.
Researchers at the Max Planck Institute (and a number of others) have gauged the effect of introducing heterogeneity to standard epidemiological models. It is dramatic, as the following chart shows. The curves simulate a pandemic under different assumptions about the degree of heterogeneity. The peak of these curves correspond to the HIT under each assumption (R0 refers to the initial reproduction number from infected individuals to others).
Moderate heterogeneity implies a HIT of only 37%. Given pre-immunity of 25%, only an additional 12% of the population would have to be infected or vaccinated to prevent a contagion from gaining a foothold for the initial exponential stage of growth. Fauci’s herd immunity figure obviously fails to consider the effect of heterogeneity.
How Close To the HIT?
We’re not as far from HITs as Fauci might think, and a vaccination goal of 85% is absurd and unnecessary. The seasonal COVID waves we’ve experienced thus far have faded over a period of 10-12 weeks. Estimates of seroprevalence in many localities reached a range of 15% – 25% after those episodes, which probably includes some share of those with pre-immunity. To reach the likely range of a HIT, either some additional pre-immunity must have existed or the degree of heterogeneity must have been large in these populations.
But if that’s true, why did secondary waves occur in the fall? There are a few possibilities. Of course, some areas like the upper Midwest did not experience the springtime wave. But in areas that suffered a recurrance, perhaps the antibodies acquired from infections did not remain active for as long as six months. However, other immune cells have longer memories, and re-infections have been fairly rare. Another possibility is that those having some level of pre-immunity were still able to pass live virus along to new hosts. But this vector of transmission would probably have been quite limited. Pre-immunity almost surely varies from region to region, so some areas were not as firmly above their HITs as others. It’s also possible that infections from super-spreaders were concentrated within subsets of the population even within a given region, in certain neighborhoods or among some, but not all, social or business circles. Therefore, some subsets or “sub-herds” achieved a HIT in the first wave, but it was unnecessary for other groups. In other words, sub-herds spared in the first wave might have suffered a contagion in a subsequent wave. And again, reinfections seem to have been rare. Finally, there is the possibility of a reset in the HIT in the presence of a new, more transmissible variant of the virus, as has become prevalent in the UK, but that was not the case in the fall.
Fragility
Tyler Cowen has mentioned another possible explanation: so-called “fragile” herd immunity. The idea is that any particular HIT is dependent on the structure of social relations. When social distancing is widely practiced, for example, the HIT will be lower. But if, after a contagion recedes, social distancing is relaxed, it’s possible that the HIT will take a higher value at the onset of the next seasonal wave. Perhaps this played a role in the resurgence in infections in the fall, but the HIT can be reduced via voluntary distancing. Eventually, acquired immunity and vaccinations will achieve a HIT under which distancing should be unnecessary, and heterogeneity suggests that shouldn’t be far out of reach.
Conclusion
Anthony Fauci has too often changed his public pronouncements on critical issues related to management of the COVID pandemic. Last February he said cruises were fine for the healthy and that most people should live their lives normally. Oops! Then came his opinion on the limited effectiveness of masks, then a shift to their necessity. His first position on masks has been called a “noble lie” intended to preserve supplies for health care workers. However, Fauci was probably repeating the standing consensus at that point (and still the truth) that masks are of limited value in containing airborne pathogens.
This time, Fauci admitted to changing his estimate of “herd immunity” in response to public opinion, a pathetic approach to matters of public health. What he called herd immunity was really an opinion about adequate levels of vaccination. Furthermore, he neglected to consider other forms of immunity: pre-existing and already acquired. He did not distinguish between total immunity and the herd immunity threshold that should guide any discussion of pandemic management. He also neglected the significant advances in epidemiological modeling that recognize the reality of heterogeneity in reducing the herd immunity threshold. The upshot is that far fewer vaccinations are needed to contain future waves of the pandemic than Fauci suggests.
The other day a friend told me “your data points always seem to miss the people points.” He imagines a failure on my part to appreciate the human cost of the coronavirus. Evidently, he feels that I treat data on cases, hospitalizations, and deaths as mere accounting issues, all while emphasizing the negative aspects of government interventions.
This fellow reads my posts very selectively, hampered in part by his own mood affiliation. Indeed, he seems to lack an appreciation for the nuance and zeitgeist of my body of blogging on the topic… my oeuvre! This despite his past comments on the very things he claims I haven’t mentioned. His responses usually rely on anecdotes relayed to him by nurses or doctors he knows. Anecdotes can be important, of course. But I know nurses and doctors too, and they are not of the same mind as his nurses and doctors. Anecdotes! We’re talking about the determination of optimal policy here, and you know what Dr. Fauci says about relying on anecdotes!
Incremental Costs and Benefits
My friend must first understand that my views are based on an economic argument, one emphasizing the benefits and costs of particular actions, including human costs. COVID is dangerous, but primarily to the elderly, and no approach to managing the virus is free. Here are two rather disparate choices:
Mandated minimization of economic and social interactions throughout society over some time interval in the hope of reducing the spread of the virus;
Laissez faire for the general population while minimizing dangers to high-risk individuals, subject to free choice for mentally competent, high-risk individuals.
To be clear, #2 entails all voluntary actions taken by individuals to mitigate risks. Therefore, #1 implies a set of incremental binding restrictions on behavior beyond those voluntary actions. However, I also include in #1 the behavioral effects of scare mongering by public officials, who regularly issue pronouncements having no empirical basis.
The first option above entails so-called non-pharmaceutical interventions (NPIs) by government. These are the elements of so-called lockdowns, such as quarantines and other restrictions on mobility, business and consumer activity, social activities, health care activities, school closures, and mask mandates. NPIs carry costs that are increasing in the severity of constraints they impose on society.
And before I proceed, remember this: tallying all fatal COVID cases is really irrelevant to the policy exercise. Nothing we do, or could have done, would save all those lives. We should compare what lives can be saved from COVID via lockdowns, if any, with the cost of those lockdowns in terms of human life and human misery, including economic costs.
Economic Losses
NPIs involve a loss of economic output that can never be recovered… it is gone forever, and a loss is likely to continue for some time to come. That sounds so very anodyne, despite the tremendous magnitude of the loss involved. But let’s stay with it for just a second. The loss of U.S. output in 2020 due to COVID has been estimated at $2.5 trillion. As Don Boudreaux and Tyler Cowen have noted, what we normally spend on safety and precautionary measures (willingness-to-pay), together with the probabilities of losses, implies that we value our lives at less than $4 million on average. Let’s say the COVID death toll reaches 300,000 by year-end (that’s incremental in this case— but it might be a bit high). That equates to a total loss of $1.2 trillion in life-value if we ignore distinctions in life-years lost. Now ask this: if our $2.5 trillion output loss could have saved every one of those 300,000 lives, would it have been worth it? Not even close, and the truth is that the sacrifice will not have saved even a small fraction of those lives. I grant, however, that the economic losses are partly attributable to voluntary decisions, but goaded to a great extent by the alarmist commentary of public health officials.
The full depth of losses is far worse than the dollars and cents comparison above might sound. Output losses are always matched by (and, in value, are exactly the same as) income losses. That involves lost jobs, lost hours, failed businesses, and destroyed careers. Ah, now we’re getting a bit more “human”, aren’t we! It’s nothing short of callous to discount these costs. Unfortunately, the burden falls disproportionately on low-income workers. Our elites can mostly stay home and do their jobs remotely, and earn handsome incomes. The working poor spend their time in line at food banks.
Yes, government checks can help those with a loss of income compete with elites for the available supply of goods, but of course that doesn’t replace the lost supply of goods! Government aid of this kind is a palliative measure; it doesn’t offset the real losses during a suspension of economic activity.
Decimated Public Health
The strain of the losses has been massive in the U.S. and nearly everywhere in the world. People are struggling financially, making do with less on the table, depleting their savings, and seeking forbearance on debts. The emotional strains are no less real. Anxiety is rampant, drug overdoses have increased, calls to suicide hotlines have exploded, and the permanence of the economic losses may add to suicide rates for some time to come. Dr. Robert Redfield of the CDC says more teenagers will commit suicide this year than will die from COVID (also see here). There’s also been a terrifying escalation in domestic abuse during the pandemic, including domestic homicide. The despair caused by economic losses is all too real and should be viewed as a multiplier on the total cost of severe NPIs.
More on human costs: a health care disaster has befallen locked-down populations, including avoidance of care on account of panic fomented by so-called public health experts, the media, and government. Some of the consequences are listed here. But to name just a few, we have huge numbers of delayed cancer diagnoses, which sharply decrease survival time; mass avoidance of emergency room visits, including undiagnosed heart attacks and strokes; and unacceptable delays in cardiac treatments. Moreover, lockdowns worldwide have severely damaged efforts to deal with scourges like HIV, tuberculosis, and malaria.
The CDC reports that excess mortality among 25-44 year-olds this year was up more than 26%, and the vast bulk of these were non-COVID deaths. A Lancet study indicates that a measles outbreak is likely in 2021 due to skipped vaccinations caused by lockdowns. The WHO estimates that 130,000,000 people are starving worldwide due to lockdowns. That is roughly the population of the U.S. east coast. Again, the callousness with which people willfully ignore these repercussions is stunning, selfish and inhumane, or just stupid.
Excess Deaths
Can we quantify all this? Yes we can, as a matter of fact. I’ve offered estimates in the past, and I already mentioned that excess deaths, COVID and non-COVID, are reported on the CDC’s web site. The Ethical Skeptic (TES) does a good job of summarizing these statistics, though the last full set of estimates was from October 31. Here is the graphic from the TES Twitter feed:
Note particularly the huge number of excess deaths attributable to SAAAD (Suicide, Addiction Abandonment, Abuse and Despair): over 50,000! The estimate of life-years lost due to non-COVID excess deaths is almost double that of COVID deaths because of the difference in the age distributions of those deaths.
Here are a few supporting charts on selected categories of excess deaths, though they are a week behind the counts from above. The first is all non-COVID, natural-cause excess deaths (the vertical gap between the two lines), followed by excess deaths from Alzheimer’s and dementia, other respiratory diseases, and malignant neoplasms (cancer):
The clearest visual gap in these charts is the excess Alzheimer’s and dementia deaths. Note the increase corresponding to the start of the pandemic, when these patients were suddenly shut off from loved ones and the company of other patients. I also believe some of these deaths were (and are) due to overwhelmed staff at care homes struck by COVID, but even discounting this category of excess deaths leaves us with a huge number of non-COVD deaths that could have been avoided without lockdowns. This represents a human cost over and above those tied to the economic losses discussed earlier.
Degraded Education and Health
Lockdowns have also been destructive to the education of children. The United Nations has estimated that 24 million children may drop out of school permanently as a result of lockdowns and school closures. This a burden that falls disproportionately on impoverished children. This article in the Journal of the American Medical Association Network notes the destructive impact of primary school closures on educational attainment. Its conclusions should make advocates of school closures reconsider their position, but it won’t:
“… missed instruction during 2020 could be associated with an estimated 5.53 million years of life lost. This loss in life expectancy was likely to be greater than would have been observed if leaving primary schools open had led to an expansion of the first wave of the pandemic.“
Lockdown Inefficacy
Lockdowns just don’t work. There was never any scientific evidence that they did. For one thing, they are difficult to enforce and compliance is not a given. Of course, Sweden offers a prime example that draconian lockdowns are unnecessary, and deaths remain low there. This Lancet study, published in July, found no association between lockdowns and country mortality, though early border closures were associated with lower COVID caseloads. A French research paper concludes that public decisions had no impact on COVID mortality across 188 countries, U.S. states, and Chinese states. A paper by a group of Irish physicians and scientists stated the following:
“Lockdown has not previously been employed as a strategy in pandemic management, in fact it was ruled out in 2019 WHO and Irish pandemic guidelines, and as expected, it has proven a poor mitigator of morbidity and mortality.”
One of the chief arguments in favor of lockdowns is the fear that asymptomatic individuals circulating in the community (and there are many) would spread the virus. However, there is no evidence that they do. In part, that’s because the window during which an individual with the virus is infectious is narrow, but tests may detect tiny fragments of the virus over a much longer span of time. And there is even some evidence that lockdown measures may increase the spread of the virus!
Lockdown decisions are invariably arbitrary in their impact as well. The crackdown on gyms is one noteworthy example, but gyms are safe. Restaurants don’t turn up in many contact traces either, and yet restaurants have been repeatedly implicated as danger zones. And think of the many small retailers shut down by government, while giant competitors like Wal-Mart continue to operate with little restriction. This is manifest corporatism!
Then there is the matter of mask mandates. As readers of this blog know, I think masks probably help reduce transmission from droplets issued by a carrier, that is, at close range. However, this recent Danish study in the Annals of Internal Medicine found that cloth masks are ineffective in protecting the wearer. They do not stop aerosols, which seem to be the primary source of transmission. They might reduce viral loads, at least if worn properly and either cleaned often or replaced. Those are big “ifs”.
To the extent that masks offer any protection, I’m happy to wear them within indoor public accommodations, at least for the time being. To the extent that people are “scared”, I’m happy to observe the courtesy of wearing a mask, but not outside in uncrowded conditions. To the extent that masks are required under private “house rules”, of course I comply. Public mask mandates outside of government buildings are over the line, however. The evidence that those mandates work is too tenuous and our liberties are too precious too allow that kind of coercion. And private facilities should be subject to private rules only.
QED
So my poor friend is quite correct that COVID is especially deadly to certain cohorts and challenging for the health care community. But he must come to grips with a few realities:
The virus won’t be defeated with NPIs; they don’t work!
NPIs inflict massive harm to human well-being.
Lockdowns or NPIs are little or no gain, high-pain propositions.
The rejection of NPI’s, or lockdowns, is based on compelling “human” data points. As Don Boudreaux says:
“The lockdowns and other restrictions on economic and social activities are astronomically costly – in a direct economic sense, in an emotional and spiritual sense, and in a ‘what-the-hell-do-these-arbitrary-diktats-portend-for-our-freedom?’ sense.”
This doctor has a message for the those denizens of social media with an honest wish to dispense helpful public health advice:
“Americans have admitted that they will meet for Thanksgiving. Scolding and shaming them for wanting this is unlikely to slow the spread of SARS-CoV-2, though it may earn you likes and retweets. Starting with compassion, and thinking of ways they can meet, but as safely as possible, is the task of real public health. Now is the time to save public health from social media.”
Public schools are closed in favor of virtual classrooms in some areas. Elsewhere, however, schools have physically reopened to the children of willing parents. It should be no surprise that the varying strength of teachers’ unions has a lot to do with these decisions. One cannot claim that the pattern of closures is a response to varying levels of COVID risk, as there is no geographic association between the closures and COVID cases or deaths. The shame of it is that closures compromise learning and also have destructive effects on local labor markets and the ability of parents to earn incomes.
That unions play this role, often decisively, is shown in a new paper entitled “Are School Reopening Decisions Related to Union Influence?“, by Corey DeAngelis and Christos Makridis (HT: Tyler Cowen). The authors examine the fall reopening decisions of 835 school districts and find that “… districts in locations with stronger teachers’ unions are less likely to reopen in person…“. The authors test four different measures of union strength with similar findings. They also rule out potential confounding influences like voting patterns.
Shall we defend the unions for protecting their members from excessive risk? Well, another important finding reported by the authors won’t surprise anyone having the least familiarity with data on C19 risks:
“We also do not find evidence to suggest that measures of COVID-19 risk are correlated with school reopening decisions.”
Few children catch the virus and children are not effective at transmitting C19 to their peers, teachers, and parents. Furthermore, schools closed to in-person learning are not located in areas at elevated risk relative to those remaining open.
The role of teachers’ unions in school reopening decisions is a textbook case of the inadvisability of unionized public employees. Most obviously, it is in their interests to encourage greater funding and taxes. This is but one of many dimensions of the political agendas that teachers’ unions may advance, and to which member dues are put. These are not always representative of members’ views, which is especially problematic in states without right-to-work laws.
The very nature of public service means that the work of public employees (or its absence) has profound external influences on the community at large. The unions are not shy about using this power as leverage in negotiations. Thus, teachers’ unions often act as adversaries not only to taxpayers, but to parents, children, and the business community.
Do public school administrators and elected school board members belong on the list of union adversaries as well? Perhaps: the unions have bullied school districts and have made them less attractive as educational institutions in a cost-benefit sense. In the present case, the unions have successfully lobbied for ongoing payments of income and benefits to their members despite the degraded effectiveness of on-line instruction for many K-12 students. Meanwhile, many parents are learning to exercise choice in the matter by abandoning public schools in favor of private alternatives.
Perhaps life in a prosperous society has sapped our ability and willingness to face risks. This tendency undermines that very prosperity, however. If we ever needed an illustration, the hysteria surrounding COVID-19 surely provides it. Do we really know how to exist in a world with risk anymore? During this episode, the media, public officials, and much of the public have completely lost their bearings with respect to the evaluation of risk, acting as if they are entitled to a zero-risk existence. Of course, COVID-19 is highly transmissible and dangerous for certain segments of the population, but it is rather benign for most people.
Perspective On C19 Risks
Just for starters, the table at the top of this post (admittedly not particularly well organized) shows calculations of odds from the CDC. These odds might well overstate the risks of both C19 and the flu, as they probably don’t account well for the huge number of asymptomatic cases of both viruses.
Another glimpse of reality is offered by a recent Swiss study showing the C19 infection mortality rate (IFR) by age, shown below. You can find a number of other charts on-line that show the same pattern: If you’re less than 50 years old, your risk of death from C19 is quite slim. Even those 50-64 years of age don’t face a substantial mortality risk, though it’s obviously higher for individuals having co-morbidities. These IFRs are lower than all-cause mortality for younger cohorts, but higher for older cohorts.
And here are a few other facts to put the risks of C19 in perspective:
The current pandemic is relatively benign: thus far, the U.S. has suffered a total of about 145,000 deaths, or 440 per million of population;
the Asian Flu of 1957-58 took 116,000, according to the CDC, or 674 per million;
the Spanish Flu of 1917-18 took 675,000 U.S lives, or 6,553 per million.
It should be obvious that these risks, while new and elevated for some, are not of such outrageous magnitude that they can’t be managed without bringing life to a grinding halt. That’s especially true when so-called safety measures entail substantial health risks of their own, as I have emphasized elsewhere (and here).
The Schools
Nothing illustrates our inability to assess risks better than the debate over reopening schools. This article in Wired is well-balanced on the safety issue. It emphasizes that there is little risk to teachers, students, or their families from opening schools if reasonable safety measures are taken.
Children of pre-school and elementary school age do not contract the virus readily, do not transmit the virus readily, and do not readily succumb to its effects. This German study on elementary schools demonstrates the safety of reopening. It is similar to the experience of other EU countries that have reopened schools. This article reinforces that point, but it emphasizes measures to limit any flare-ups that might arise. And while it singles out Israel as an example of poor execution, it fails to offer any evidence on the severity of infections.
Furthermore, we should not overlook the destructive effects of denying in-classroom learning to children. They simply don’t learn as well on-line, especially students who struggle. There are also the devastating social-psychological effects of the isolation experienced by many elementary school children during extended school closures. This is of a piece with the significant risks of lockdowns to well being. Perhaps not well known is that schooling is positively correlated with life expectancy: this study found that a one-year reduction in years of schooling is associated with a reduction in life expectancy of 0.6 years!
It’s true that children older than 10 might pose somewhat greater risks for C19 contagion, but those risks are manageable via hygiene, distancing, and other mitigations including hydroxychloraquine or other prophylaxes against infection for teachers who desire it. Capacity limitations might well require a temporary mix of online and in-school learning, but at least part-time attendance at brick-and-mortar schools should remain the centerpiece.
As Tyler Cowen points out, teenagers are less likely to remain isolated from others during school closures, so their behavior might be more difficult to manage. It’s quite possible they could be more heavily exposed outside of school, hanging out with friends, than in the classroom. This illustrates how our readiness to demure from absolute risk often ignores the pertinent question of relative risk.
Our reaction to C19 amounts to a misapplication of the precautionary principle (PP), which states, quite reasonably, that precautionary measures must be invoked when faced with a risk that is not well understood. Risk must be managed! But what are those precautions and on what basis should benefits we forego via mitigation be balanced against quantifiable risks. That was one theme of my post “Precaution Forbids Your Rewards” several years back. Ralph B. Alexander discusses the PP, noting that the construct is vulnerable to political manipulation. It is, unfortunately, a wonderful devise for opportunistic interest groups and interventionist politicians. See something you don’t like? Identify a risk you can use to frighten the public. Use any anecdotal evidence you can scrape together. Start a movement and put a stop to it!
That really doesn’t help us deal with risk in a productive way. Do we understand that well being generally is enhanced by our willingness to incur and manage risks? As David Zaruk, aka, the Risk Monger, says, “our reliance of the precautionary principle has ruined our ability to manage risk.”:
“Two decades of the precautionary principle as the key policy tool for managing uncertainties has neutered risk management capacities by offering, as the only approach, the systematic removal of any exposure to any hazard. As the risk-averse precautionary mindset cements itself, more and more of us have become passive docilians waiting to be nannied. We no longer trust and are no longer trusted with risk-benefit choices as we are channelled down over-engineered preventative paths. While it is important to reduce exposure to risks, our excessively-protective risk managers have, in their zeal, removed our capacity to manage risks ourselves. Precaution over information, safety over autonomy, dictation over accountability.”
Artificial intelligence (AI) or machine learning (ML) will never make central economic planning a successful reality. Jesús Fernández-Villaverde of the University of Pennsylvania has written a strong disavowal of AI’s promise in central planning, and on the general difficulty of using ML to design social and economic policies. His paper, “Simple Rules for a Complex World with Artificial Intelligence“, was linked last week by Tyler Cowen at Marginal Revolution. Note that the author isn’t saying “digital socialism” won’t be attempted. Judging by the attention it’s getting, and given the widespread acceptance of the scientism of central planning, there is no question that future efforts to collectivize will involve “data science” to one degree or another. But Fernández-Villaverde, who is otherwise an expert and proponent of ML in certain applications, is simply saying it won’t work as a curative for the failings of central economic planning — that the “simple rules” of the market will aways produce superior social outcomes.
The connection between central planning and socialism should be obvious. Central planning implies control over the use of resources, and therefore ownership by a central authority, whether or not certain rents are paid as a buy-off to the erstwhile owners of those resources. By “digital socialism”, Fernández-Villaverde means the use of ML to perform the complex tasks of central planning. The hope among its cheerleaders is that adaptive algorithms can discern the optimal allocation of resources within some “big data” representation of resource availability and demands, and that this is possible on an ongoing, dynamic basis.
Fernández-Villaverde makes the case against this fantasy on three fronts or barriers to the use of AI in policy applications: data requirements; the endogeneity of expectations and behavior; and the knowledge problem.
The Data Problem: ML requires large data sets to do anything. And impossibly large data sets are required for ML to perform the task of planning economic activity, even for a small portion of the economy. Today, those data sets do not exist except in certain lines of business. Can they exist more generally, capturing the details of all economic transactions? Can the data remain current? Only at great expense, and ML must be trained to recognize whether data should be discarded as it becomes stale over time due to shifting demographics, tastes, technologies, and other changes in the social and physical environment.
Policy Change Often Makes the Past Irrelevant: Planning algorithms are subject to the so-called Lucas Critique, a well known principle in macroeconomics named after Nobel Prize winner Robert Lucas. The idea is that policy decisions based on observed behavior will change expectations, prompting responses that differ from the earlier observations under the former policy regime. A classic case involves the historical tradeoff between inflation and unemployment. Can this tradeoff be exploited by policy? That is, can unemployment be reduced by a policy that increases the rate of inflation (by printing money at a faster rate)? In this case, the Lucas Critique is that once agents expect a higher rate of inflation, they are unlikely to confuse higher prices with a more profitable business environment, so higher employment will not be sustained. If ML is used to “plan” certain outcomes desired by some authority, based on past relationships and transactions, the Lucas Critique implies that things are unlikely to go as planned.
The Knowledge Problem: Not only are impossibly large data sets required for economic planning with ML, as noted above. To achieve the success of markets in satisfying unlimited wants given scarce resources, the required information is impossible to collect or even to know. This is what Friedrich Hayek called the “knowledge problem”. Just imagine the difficulty of arranging a data feed on the shifting preferences of many different individuals across a huge number of products, services and they way preference orderings will change across the range of possible prices. The data must have immediacy, not simply a historical record. Add to this the required information on shifting supplies and opportunity costs of resources needed to produce those things. And the detailed technological relationships between production inputs and outputs, including time requirements, and the dynamics of investment in future productive capacity. And don’t forget to consider the variety of risks agents face, their degree of risk aversion, and the ways in which risks can be mitigated or hedged. Many of these things are simply unknowable to a central authority. The information is hopelessly dispersed. The task of collecting even the knowable pieces is massive beyond comprehension.
The market system, however, is able to process all of this information in real time, the knowable and the unknowable, in ways that balance preferences with the true scarcity of resources. No one actor or authority need know it all. It is the invisible hand. Among many other things, it ensures the deployment of ML only where it makes economic sense. Here is Fernández-Villaverde:
“The only reliable method we have found to aggregate those preferences, abilities, and efforts is the market because it aligns, through the price system, incentives with information revelation. The method is not perfect, and the outcomes that come from it are often unsatisfactory. Nevertheless, like democracy, all the other alternatives, including ‘digital socialism,’ are worse.”
Later, he says:
“… markets work when we implement simple rules, such as first possession, voluntary exchange, and pacta sunt servanda. This result is not a surprise. We did not come up with these simple rules thanks to an enlightened legislator (or nowadays, a blue-ribbon committee of academics ‘with a plan’). … The simple rules were the product of an evolutionary process. Roman law, the Common law, and Lex mercatoria were bodies of norms that appeared over centuries thanks to the decisions of thousands and thousands of agents.”
These simple rules represent good private governance. Beyond reputational enforcement, the rules require only trust in the system of property rights and a private or public judicial authority. Successfully replacing private arrangements in favor of a central plan, however intricately calculated via ML, will remain a pipe dream. At best, it would suspend many economic relationships in amber, foregoing the rational adjustments private agents would make as conditions change. And ultimately, the relationships and activities that planning would sanction would be shaped by political whim. It’s a monstrous thing to contemplate — both fruitless and authoritarian.
Note: As I finish this post, Iran has fired missiles at U.S. bases in Iraq, so we know a bit more about their response to the killing of Qassim Soleimani. Tonight’s response by Iran looks to have been impotent. There are risks of other kinds of action, of course. We shall see.
Last week’s killing of Iranian General Qassim Soleimani was not prompted solely by the attack on the U.S. embassy in Iraq by Kataeb Hezbollah, the Iranian-backed militia. Iran, perhaps the largest state-sponsor of terrorism in the world, has been guilty of provocation and aggression in Iraq, Syria, Saudi Arabia and elsewhere under Soleimani’s direction for many years. And he was reviled for his ruthless treatment of protestors within Iran’s borders. In recent weeks there had been a series of rocket attacks on U.S. bases, and there was “chatter” that much more was planned. It’s been noted that the presence of so-many high-level officials in one place at the time of the attack on Soleimani indicated that something big was in the works. This Reuters article gives some insight into Soleimani’s suspicious activities in the weeks prior to his death, of which the U.S. was surely aware. While the attack on the U.S. embassy provided additional pretext (as if it was needed), all of this indicates that Soleimani’s assassination was not an impulsive decision, but deliberated, contrary to assertions by critics of President Trump’s decision to act. It was both retaliatory and preemptive. Soleimani’s travels and whereabouts were well known, and it’s highly likely that a “decapitation” had been planned as a contingency for some time. This report in Politico provides details of the decision making leading up to the strike. The attack was executed brilliantly by all accounts.
The U.S. had retaliated to earlier rocket attacks with strikes against Kataeb Hezbollah positions. That the strike on Soleimani was more than retaliation and an act of self-defense against additional threats is, I believe, the flaw in arguments against the strike like the one Tyler Cowen seemed to make in Bloomerg (though his main point was different). The value of the strike goes far beyond retaliation. This was not intended to be another volley in an ongoing series of “tits-for-tats”.
In addition to Soleimani, several other high-level Iranian military personnel were killed. This undoubtedly disrupted plans that would have threatened U.S. soldiers and assets, yet some describe the strike as an “impulsive” act on Trump’s part, and an “act of war”, as if unprovoked. And as if Iran had not been warring on the U.S. for the past 40 years. What to make of those who take this position? Of course, most are reflexively anti-Trump, refusing to evaluate the decision on it’s own merits. They pretend that Soleimani and the Iranian overseers of the stooge government in Iraq have legitimacy. Anderson Cooper actually compared Soleimani to Charles De Gaulle. It would be more accurate to compare him to the murderous Che Guevara, but then again, many on the Left worship Che’s memory as well! These fools will tell you that Soleimani was “worshipped” in Iran. In fact, there are a great many Iranians who are quietly celebrating his death.
“Some argue that the assassination of Soleimani will increase tensions in the Middle East. This outlook confuses cause and effect: Tensions in the Middle East have intensified over the past decade because of the violent Iranian aggression which Soleimani spearheaded. Aggression which has led to Syria’s destruction and the disintegration of Lebanon and Iraq. Aggression that threatens maritime routes and safe passage in the Arab (Persian) Gulf and the Red Sea, a direct attack on Saudi Arabia’s oil facilities that spiked oil prices and compromised the world’s oil supply. Aggression that has fueled and intensified tensions – including direct military confrontations – between Iran and its proxies and Israel.
General Soleimani and the Al-Quds force led the escalation in the region in the service of the hegemonic vision of the Iranian Mullah regime. Their actions have so far claimed the lives of hundreds of thousands of people, led to the destruction of states, the disintegration of cities, and caused a wave of millions of refugees. Killing Soleimani is not the cause of the escalation – but the result.”
Malamed expected Iran to take retaliatory actions in Iraq, where it already has a strong military presence and good reconnaissance. Missiles have now been fired at U.S. bases from Iran (as of tonight), but with few or no casualties. It remains to be seen how effective a response the Iranians can mount. Any short-term U.S. casualties should probably not be viewed as incremental, given the high likelihood of casualties had Soleimani lived. Perhaps Iran will fire missiles at Israel from western Iraq or Syria, or at Saudi Arabian oil assets, as it did last September. Or it might make a bold military intervention in Iraq to strengthen its control there, which Iran considers crucial to its own security.
“… the economic hardship in Iran — in addition to the challenges the government is facing internally — would not allow Tehran to increase the tension. Iran’s past conduct against Israel strikes on Iranian bases in Syria also shows it will not seek revenge if its national security and interests are in danger. … This all indicates that Iran and its proxies in the region most likely would not seek revenge in the near future and — in regard to Iraq, in particular — would not lead Iraq to fall into a civil war or mass destruction, because it would lose even more in Iraq if it takes such a risk.”
So despite the brash talk, Iran is weak and spread thin across commitments outside its borders, and the regime has real fear of retaliation by its enemies that can only have been reinforced by the strike against Soleimani. Of what other retaliatory actions is Iran capable, assuming the regime can survive in the longer run? And assuming the Mullah regime itself is willing to take existential risks? It has threatened actions against civilians in the West. Can it bring down planes? Can it bomb targets in the U.S.? Can it develop or buy a small nuclear device? It can try any of those things, of course, but with uncertain odds and with risks it might not want to take. Survival is of the utmost importance to the regime, and it is already on shaky ground.
Trump’s critics claim that he authorized the “decapitation” without a plan for its aftermath. Trump has made clear his intent to “punch back twice as hard”, as it were, in response to any additional force from Iran. This is, first and foremost, a game of deterrence. Beyond that, however, and despite talk of “changing the Iranian regime’s behavior”, it appears that the larger plan pursued by Trump is to continue undermining the regime with sanctions and targeted strikes, if necessary. “Maximum pressure”. But there will be no World War III. The markets seem pretty comfortable about that as well, including the oil market.
I do take issue with Trump’s mention of the possibility of striking “cultural sites” in Iran, though he seems to have retracted it. On that point, however, I fully agree with Tyler Cowan (linked above). The only plausible rationale for such a statement is to frighten Iran’s leadership, especially if it has located military and intelligence functions within cultural sites.
Trump still maintains that our ultimate goal should be withdrawal from Iraq. That assumes stabilization in the region and fair elections, which would be well-served by a weaker Iran or a regime change there. As Victor Davis Hanson explains, the Middle East is of declining importance in world energy markets and trade generally. That’s one reason we’re unlikely to ever again send a huge ground force to the region, and it’s a good reason to scale back our presence in the Middle East generally.
It’s a hoot to watch Jordan Peterson‘s videos — he stands before crowds doing … crisply-articulated philosophy, seemingly on the fly. He is an outspoken psychologist at the University of Toronto who covers a lot of intellectual ground with an impactful delivery. One of Peterson’s primary messages is so simple as to seem trite: take control of yourself, because you can and you should for your own sake and those around you! But his treatment is an empowering tonic for both men and women, and many are listening. He has toiled away as a professional psychologist, a professor, an author and a philosopher for many years; his ascent to notoriety has been recent and fairly meteoric. Luminaries like Tyler Cowen and Noah Smith now call Peterson one of the top public intellectuals in the western world.
However, Peterson takes positions that are seemingly hard for the Left to swallow: he believes in the power of individual action; that freedom of expression is the basis of personal and academic freedom; that identity politics is destructive (whether on the Right or the Left); and that white privilege is a lie.
Predictably, the Left has attacked Peterson and attempted to characterize him as a spokesman for the far-right. He meets challenges of this kind with a kind of charged equanimity, exposing falsehoods with quick-footed logic, empirics, and honest reflection. Dan Sanchez has written a nice summary of the attacks on Peterson and shows them to be wholly without foundation. He has critics in both ends of the political spectrum, as Sanchez observes:
“[Far right] critics don’t understand what Peterson is saying, because they are mired in the mindsets of politics and war. The way of politics and war is to confront an enemy horde by amassing your own horde: whether it be on the battlefield, in street demonstrations, or in voting booths. It is to fight tribal barbarism by tending toward the tribal and the barbaric yourself. But the way of the heroic, civilized individual is to lead by example and to lead by appealing to the interests of those whose behavior you want to influence.”
And in Peterson’s own words, quoted by Sanchez, tribal barbarism is the way to social ruin:
“…where we’re making your group identity the most important thing about you. I think that’s reprehensible. I think it’s devastating. I think it’s genocidal in its ultimate expression. I think it will bring down our civilization if we pursue it. We shouldn’t be playing that game.“
On those assertions, Sanchez notes the following:
“… Peterson’s claim that identity politics is ‘genocidal in its ultimate expression’ is no exaggeration. Hitler’s military invasions and death camps were the ultimate expression of the racialist and nationalist identity politics that spiritually drove Nazism. And Stalin’s weaponized famines and ‘gulag archipelago’ were the ultimate expression of the class warfare identity politics that spiritually drove Soviet communism.”
So Peterson clearly condemns groupthink on both the Left and Right. He celebrates the value of people as individuals, and he urges us all to realize our value through individual responsibility and productive effort. Help yourself, help those you love, and help others. That’s a call to real human action, as distinct from the seeking of rents through the political process. Peterson is both a fascinating personality and thinker. His ideas and passion can be a powerful antidote to the complacency that plagues so many today. I hope he continues to gain prominence.
The question of open borders divides libertarians as much as any. The arguments for open borders made by the likes of Bryan Caplan, Alex Tabarrok, Don Boudreaux and Sheldon Richman are in many ways quite appealing. Fewer borders means greater opportunities for gainful trade among individuals. For the U.S., the economic gains from in-migration have been unquestionable. From a pure libertarian perspective, governments should never interfere with the non-violent actions of free individuals, including freedom of movement. These great economists contend, in effect, that there is no real moral distinction between government actions that confine individuals within borders and those that keep people out, though our conciences are less burdened by the latter because the world abroad seems so large.
There is a gnawing contradiction in this viewpoint, however. It relates to the appropriate scope of “ownership”. At the link above, Caplan says:
“The only principled libertarian objection to this is that the citizens of each country are its rightful owners, so they’re entitled to regulate migration as they see fit. … But if you believe this, there is no principled libertarian objection to any act of government. Fortunately, the belief that citizens are countries’ rightful owners is crazy. The social contract is an utter myth. Contracts require unanimous consent, and no country has ever had unanimous consent.“
The Character of a Good
I contest Caplan’s assertion that any one act of government is like all others. Yes, there is always a danger of a majoritarian tyranny in any democracy. But there is also the question of sovereignty, for which borders of some kind are necessary. If policies governing those borders are established legislatively, they should be subject to checks and balances: executive consent as well as judicial review of disputes.
I also contest Caplan’s statement that ownership implies unanimous consent. In fact, there are many forms of property over which decisions do not imply unanimous consent of joint owners. One such form is the subject of what follows, and I believe that form of “ownership” is applicable to one’s citizenship or residency status.
To keep things simple, I’ll frame this discussion only in terms of citizenship. I therefore abstract from issues like green cards, visiting worker programs, and the presence of resident aliens in general. For a nation, the essence of barriers to immigration can be addressed by considering the simpler case of citizens versus non-resident non-citizens. For purposes of this discussion, if you are allowed to arrive on a nation’s shores, you will be a citizen.
If a country’s citizenship can be considered a good worth acquiring, what is its real character? It is privately possessed and not tradable, but not all goods are tradable. An important taxonomy of goods in the public finance literature is based on two dimensions: exclusivity and rivalrousness. The former is the degree to which other parties can be excluded from enjoyment or use of the good or resource.
Most goods have at least some degree of exclusivity: you can be denied admission to a concert, the use of an appliance or furniture, and even parks and port facilities. Pure public goods like national defense and the air we breath are completely non-exclusive, however. Broadcast television is non-exclusive as well, as long as you have the equipment to watch it.
Rivalrousness is the degree to which the use or enjoyment of a good precludes another’s use or enjoyment. My friend can’t eat the steak if I eat the steak. That’s rivalrous. But my friend and I can both enjoy the concert. That’s non-rivalrous. A private good is both exclusionary and rivalrous. A public good is neither.
Citizenship as a Good
Citizenship can be viewed as a bundle of attributes much as any good, but it is an extremely complex bundle: it includes the individual rights enshrined in a nation’s constitution (if any), the personal and economic opportunities available by virtue of access to in-country markets and resources, the culture(s), and any personal risk reduction provided collectively, i.e., a safety net via public support. How, then, would one classify citizenship, or its component attributes, in terms of exclusivity and rivalrousness?
First, the entire citizenship bundle has a high degree of exclusivity. A nation can decide on closed borders, or partially open borders, if it chooses to do so, just as a theme park limits its gate. That is the political decision at hand. The degree of exclusivity of individual components of the bundle matters little if the bundle itself is highly exclusive.
At a high level, citizenship itself is non-rivalrous. My citizenship does not preclude citizenship for anyone else. Therefore, at the level of the bundle, citizenship is exclusive but non-rivalrous, so it has the character of what economists call a “club good“. Citizens are already part of the club; to that extent they are joint “owners”. Like many clubs, decisions about new membership need not be unanimous.
Classification of citizenship attributes as goods is trickier. The exclusivity of citizenship makes the non-rivalrous public goods available to citizens into club goods. Once admitted, for example, you are free to engage in speech, practice a religion of your choice, own a weapon, and receive due process and habeas corpus without interfering with any other citizen’s ability to exercise the same rights. You get national defense and a judicial system. You have equality of opportunity to the extent that your pursuit of economic gain does not interfere directly with anyone else’s opportunities. On the other hand, the freedom of assembly is rivalrous to at least some extent, as we learned last year from events in Charlottesville, VA. In fact, there may be congestion limits to some of the other freedoms mentioned above.
Access to a nation’s markets permits mutually beneficial trade to take place. An individual’s participation usually does not rule out participation by others, so it is essentially non-rivalrous. (In some markets the entry of new sellers may be limited and exclusionary.) Of course, a nation’s resources are scarce; exploiting them for gain or enjoyment necessarily prevents others from using the same resources. From the point of view of existing citizens, these resources are non-exclusive and rivalrous, and are therefore classified as “common resources”, subject to congestion effects, but they are still exclusive to those citizens. The key here is not whether there are gains from trade, but that there is some rivalrousness embedded in this citizenship attribute.
In addition to the basic rights mentioned earlier, the entire legal structure, regulatory apparatus, and the political process are complex attributes of citizenship. These bear on the limits of legal conduct: Can you buy or sell liquor on Sundays? Do businesses require licensure? Is abortion legal? And on and on. In a democracy, the ability to participate in the political process is non-rivalrous: it does not prevent others from participating. However, the range of possible outcomes of the process can also be viewed as an attribute, and these outcomes, as they are promulgated, are certainly rivalrous. If the “other” side gets extra votes, then the power of my vote is diminished. So the limits of legal conduct are exposed to political rivalry. In the case of open borders, a large number of citizens may not favor existing rules, regulations, and the allocation of public spending.
So the attributes of citizenship are mixed in terms of rivalrousness: Some are rivalrous but many are not. The citizenship bundle, at a more detailed level, is therefore a mix of club goods (exclusive but non-rvalrous) and some goods that are rivalrous. This is important, because under the classical description club goods are public goods provided privately; they are therefore under-provided from the perspective of social welfare and the Pareto criterion that a new citizens can be made better off without making any existing citizen worse off. That might not be the case in the presence of congestion effects.
Should a Club Good Be Unrestricted?
Citizenship has value at the margin to both existing citizens, who should be regarded as established club members, and non-citizens. The foregoing establishes that there are some private (exclusive and rivalrous) attributes attached to citizenship. Sometimes this is due to the impact of congestion on the provision of public goods. Patrick McNutt, in his survey of literature on “Public Goods and Club Goods“, summarizes some basic conditions under which public goods are provided by clubs:
“The public good is not a pure public good, but rather there is an element of congestion as individuals consume the good up to its capacity constraint. What arises then is some exclusion mechanism in order to charge consumers a price for the provision and use of the good. Brown and Jackson (1990, p. 80) had commented that the purpose of a club ‘is to exploit economies of scale, to share the costs of providing an indivisible commodity, to satisfy a taste for association with other individuals who have similar preference orderings’. For Buchanan and Ng the main club characteristic is membership or numbers of consumers and it is this variable that has to be optimised.“
Citizenship (or residency) is generally not price rationed, though there are certainly costs to the immigrant. I make no pretense here as to the determination of an optimal membership from a club or larger social perspective. My point is that rationing membership is a rational choice by club members, or citizens in this case.
Okay, I Like My Club
Tribal affiliations, and ultimately nation states, were a natural outgrowth of early competition for resources, especially when identifying threats from outsiders was a constant preoccupation. Territorialism was a byproduct, and with the establishment of agriculture, the peoples of these early societies probably identified strongly with their homelands.
Modern nation-states have evolved from those early patterns, and nations continue to differ in terms of language, culture, and governance. Successful nations are undoubtedly more liberal (in the classical sense) and open to trade and cross-border movement. Maybe one day all nations will be united under the principles of libertarianism… don’t count on it! For now, to one degree or another, a nation’s inhabitants have an interest in minimizing economic and political risks and retaining access to resources within their borders. I don’t believe that desire is irrational or immoral. If the inhabitants of a nation have a moral obligation to share their rights, wealth, and political process with all comers, then they must accept the possibility that their rights will be compromised, and possibly even complete upheaval. They suffer a loss of sovereignty and a loss in the expected value of their citizenship.
There is obviously no limiting principle to the open borders policy, as Tyler Cowen says. Existing citizens would be obligated to accommodate all those who land upon their shores, granting them the full rights and opportunities accorded to all other residents. Perhaps there would be economic gains in the short or long run, as most libertarians would predict. But perhaps there would be some losses along the way. Perhaps there would be political stability after a large influx of new residents, but perhaps not. And ultimately, perhaps changes in the political climate would feed back to the detriment of economic performance. One simply cannot say, a priori, how things would go. There are risks to the existing citizenry, and if they are obliged to accept those risks, those might well include having to feed, clothe and house new residents. There should be no absolute obligation to accept those risks. If the debate is about individual liberty, then surely imposing those risks via open borders would abrogate the rights of existing citizens.
Addendum: A Note on the Goods Taxonomy
Given the two dimensions of goods discussed above, exclusivity and rivalrousness, goods are classified as follows:
Private goods: exclusive and rivalrous;
Public goods: non-exclusive and non-rivalrous;
Club goods: exclusive but non-rivalrous: e.g., a concert;
Common resources: non-exclusive but rivalrous: the air we breath; an aquifer;
Another category is sometimes defined: contestable goods, which have the character of public goods or even club goods when under light use, and are common resources when under heavy use. There is a difference between an empty park and a crowded park; or an empty road and a crowded road.
See ThoughtCo. for a good exposition on the taxonomy.
I’ve long been suspicious of the objectivity of Google search results. If you’re looking for information on a particular issue or candidate for public office, it doesn’t take long to realize that Google searches lean left of center. To some extent, the bias reflects the leftward skew of the news media in general. If you sample material available online from major news organizations on any topic with a political dimension, you’ll get more left than right, and you’ll get very little libertarian. So it’s not just Google. Bing reflects a similar bias. Of course, one learns to craft searches to get the other side of a story, but I use Bing much more than Google, partly because I bridle instinctively at Google’s dominance as a search engine. I’ve also had DuckDuckGo bookmarked for a long time. Lately, my desire to avoid tracking of personal information and searches has made DuckDuckGo more appealing.
Google is not just a large company offering internet services and an operating system: it has the power to control speech and who gets to speak. It is a provider of information services and a collector of information with the power to exert geopolitical influence, and it does. This is brought into sharp relief by Julian Assange in his account of an interview he granted in 2011 to Google’s chairman Eric Schmidt and two of Schmidt’s advisors, and by Assange’s subsequent observations about the global activities of these individuals and Google. Assange gives the strong impression that Google is an arm of the deep state, or perhaps that it engages in a form of unaccountable statecraft, one meant to transcend traditional boundaries of sovereignty. Frankly, I found Assange’s narrative somewhat disturbing.
Monopolization
These concerns are heightened by Google’s market dominance. There is no doubt that Google has the power to control speech, surveil individuals with increasing sophistication, and accumulate troves of personal data. Much the same can be said of Facebook. Certainly users are drawn to the compelling value propositions offered by these firms. The FCC calls them internet “edge providers”, not the traditional meaning of “edge”, as between interconnected internet service providers (ISPs) with different customers. But Google and Facebook are really content providers and, in significant ways, hosting services.
According to Scott Cleland, Google, Facebook, and Amazon collect the bulk of all advertising revenue on the internet. The business is highly concentrated by traditional measures and becoming more concentrated as it grows. In the second quarter of 2017, Google and Facebook controlled 96% of digital advertising growth. They have ownership interests in many of the largest firms that could conceivably offer competition, and they have acquired outright a large number of potential competitors. Cleland asserts that the Department of Justice (DOJ) and the FTC essentially turned a blind eye to the many acquisitions of nascent competitors by these firms.
The competitive environment has also been influenced by other government actions over the past few years. In particular, the FCC’s net neutrality order in 2015 essentially granted subsidies to “edge providers”, preventing broadband ISPs (so-called “common carriers” under the ruling) from charging differential rates for the high volume of traffic they generate. In addition, the agency ruled that ISPs would be subject to additional privacy restrictions:
“Specifically, broadband Internet providers were prohibited from collecting and using information about a consumer’s browsing history, app usage, or geolocation data without permission—all of which edge providers such as Google or Facebook are free to collect under FTC policies.
As Michael Horney noted in an earlier Free State Foundation Perspectives release, these restrictions create barriers for ISPs to compete in digital advertising markets. With access to consumer information, companies can provide more targeted advertising, ads that are more likely to be relevant to the consumer and therefore more valuable to the advertiser. The opt-in requirement means that ISPs will have access to less information about customers than Google, Facebook, and other edge providers that fall under the FTC’s purview—meaning ISPs cannot serve advertisers as effectively as the edge providers with whom they compete.”
Furthermore, there are allegations that Google played a role in convincing Facebook to drop Bing searches on its platform, and that Google in turn quietly deemphasized its social media presence. There is no definitive evidence that Google and Facebook have colluded, but the record is curious.
Regulation and Antitrust
Should firms like Google, Facebook, and other large internet platforms be regulated or subjected to more stringent review of past and proposed acquisitions? These companies already have great influence on the public sector. The regulatory solution is often comfortable for the regulated firm, which submits to complex rules with which compliance is difficult for smaller competitors. Thus, the regulated firm wins a more secure market position and a less risky flow of profit. The firm also gains more public sector influence through its frequent dealings with regulatory authorities.
Ryan Bourne argues that “There Is No Justification for Regulating Online Giants as If They Were Public Utilities“. He notes that these firms are not natural monopolies, despite their market positions and the existence of strong network externalities. It is true that they generally operate in contested markets, despite the dominance of a just few firms. Furthermore, it would be difficult to argue that these companies over-charge for their services in any way suggestive of monopoly behavior. Most of their online services are free or very cheap to users.
But anti-competitive behavior can be subtle. There are numerous ways it can manifest against consumers, developers, advertisers, and even political philosophies and those who espouse them. In fact, the edge providers do manage to extract something of value: data, intelligence and control. As mentioned earlier, their many acquisitions suggest an attempt to snuff out potential competition. More stringent review of proposed combinations and their competitive impact is a course of action that Cleland and others advocate. While I generally support a free market in corporate control, many of Google’s acquisitions were firms enjoying growth rates one could hardly attribute to mismanagement or any failure to maximize value. Those combinations expanded Google’s offerings, certainly, but they also took out potential competition. However, there is no bright line to indicate when combinations of this kind are not in the public interest.
Antitrust action is no stranger to Google: In June, the European Union fined the company $2.7 billion for allegedly steering online shoppers toward its own shopping platform. Google faces continuing scrutiny of its search results by the EU, and the EU has other investigations of anticompetitive behavior underway against both Google and Facebook.
It’s also worth noting that antitrust has significant downsides: it is costly and disruptive, not only for the firms involved, but for their customers and taxpayers. Alan Reynolds has a cautionary take on the prospect of antitrust action against Amazon. Antitrust is a big business in and of itself, offering tremendous rent-seeking benefits to a host of attorneys, economists, accountants and variety of other technical specialists. As Reynolds says:
“Politics aside, the question ‘Is Amazon getting too Big?’ should have nothing to do with antitrust, which is supposedly about preventing monopolies from charging high prices. Surely no sane person would dare accuse Amazon of monopoly or high prices.“
“I have no problem with Twitter or Facebook policing their sites for content they find objectionable, such as pornography or hate speech, even though these are permitted under the First Amendment. A free market in news doesn’t mean that every newspaper must cover every story. A free market in news means free entry. But free entry is exactly what is now at stake. Gab was created, in part, to combat what was seen as Facebook’s bias against conservative news and views. If Gab or services like cannot be accessed via the big platforms that is a significant barrier to entry.
When Facebook and Twitter regulate what can be said on their platforms and Google and Apple regulate who can provide a platform, we have a big problem. It’s as if the NYTimes and the Washington Post were the only major newspapers and the government regulated who could own a printing press.
In a pure libertarian world, I’d be inclined to say that Google and Apple can also police whom they allow on their platforms. But we live in a world in which Google and Apple are bound up with and in some ways beholden to the government. I worry when a lot of news travels through a handful of choke points.“
This point is amplified by Aaron M. Renn in City Journal:
“The mobile-Internet business is built on spectrum licenses granted by the federal government. Given the monopoly power that Apple and Google possess in the mobile sphere as corporate gatekeepers, First Amendment freedoms face serious challenges in the current environment. Perhaps it is time that spectrum licenses to mobile-phone companies be conditioned on their recipients providing freedoms for customers to use the apps of their choice.“
That sort of condition requires ongoing monitoring and enforcement, but the intervention is unlikely to stop there. Once the platforms are treated as common property there will be additional pressure to treat their owners as public stewards, answerable to regulators on a variety of issues in exchange for a de facto grant of monopoly.
Tyler Cowen’s reaction to the issue of private, “voluntary censorship” online is a resounding “meh”. While he makes certain qualifications, he does not believe it’s a significant issue. His perspective is worth considering:
“It remains the case that the most significant voluntary censorship issues occur every day in mainstream non-internet society, including what gets on TV, which books are promoted by major publishers, who can rent out the best physical venues, and what gets taught at Harvard or for that matter in high school.“
Cowen recognizes the potential for censorship to become a serious problem, particularly with respect to so-called “chokepoint” services like Cloudflare:
“They can in essence kick you off the entire internet through a single human decision not to offer the right services. …so far all they have done is kick off one Nazi group. Still, I think we should reexamine the overall architecture of the internet with this kind of censorship power in mind as a potential problem. And note this: the main problem with those choke points probably has more to do with national security and the ease of wrecking social coordination, not censorship. Still, this whole issue should receive much more attention and I certainly would consider serious changes to the status quo.“
There are no easy answers.
Conclusions
The so-called edge providers pose certain threats to individuals, both as internet users and as free citizens: the potential for anti-competitive behavior, eventually manifesting in higher prices and restricted choice; tightening reins on speech and free expression; and compromised privacy. All three have been a reality to one extent or another. As a firm like Google attains the status of an arm of the state, or multiple states, it could provide a mechanism whereby those authorities could manipulate behavior and coerce their citizens, making the internet into a tool of tyranny rather than liberty. “Don’t be evil” is not much of a guarantee.
What can be done? The FCC’s has already voted to reverse its net neutrality order, and that is a big step; dismantling the one-sided rules surrounding the ISPs handling of consumer data would also help, freeing some powerful firms that might be able to compete for “edge” business. I am skeptical that regulation of edge providers is an effective or wise solution, as it would not achieve competitive outcomes and it would rely on the competence and motives of government officials to protect users from the aforementioned threats to their personal sovereignty. Antitrust action may be appropriate when anti-competitive actions can be proven, but it is a rent-seeking enterprise of its own, and it is often a questionable remedy to the ills caused by market concentration. We have a more intractable problem if access cannot be obtained for particular content otherwise protected by the First Amendment. Essentially, Cowen’s suggestion is to rethink the internet, which might be the best advice for now.
Ultimately, active consumer sovereignty is the best solution to the dominance of firms like Google and Facebook. There are other search engines and there are other online communities. Users must take steps to protect their privacy online. If they value their privacy, they should seek out and utilize competitive services that protect it. Finally, perhaps consumers should consider a recalibration of their economic and social practices. They may find surprising benefits from reducing their dependence on internet services, instead availing themselves of the variety of shopping and social experiences that still exist in the physical world around us. That’s the ultimate competition to the content offered by edge providers.
In advanced civilizations the period loosely called Alexandrian is usually associated with flexible morals, perfunctory religion, populist standards and cosmopolitan tastes, feminism, exotic cults, and the rapid turnover of high and low fads---in short, a falling away (which is all that decadence means) from the strictness of traditional rules, embodied in character and inforced from within. -- Jacques Barzun
Note: As I finish this post, Iran has fired missiles at U.S. bases in Iraq, so we know a bit more about their response to the killing of Qassim Soleimani. Tonight’s response by Iran looks to have been impotent. There are risks of other kinds of action, of course. We shall see.
Sacred Cow Chips 