Afternoon roundup

A closing of some of the browser tabs:

• Eli Dourado on NEPA - America's equivalent to the RMA. Superb seeming primer on how it all works, though I would not be one to notice any holes in it. 
• Road-building is going to get harder, thanks to a court interpretation around water consenting. Minor bits of drainage are going to hit large hurdles. 
• Chris Snowdon in conversation with Marewa Glover on New Zealand's tobacco and vaping regime. 
• Possibly the best approach for "glue ourselves to things" protestors: leave them there.
• Lindsay Mitchell picks up another aspect of the Perry child poverty report: substantial differences across regions in foodbank uptake, sorted by material deprivation. 
• "Rather than address the workforce crisis it inherited, Labour instead resorted to restructuring the health system to put it under greater central government control and make it more vertical. This was a fatal error." 
• NPR's Darian Woods and Wailin Wong on America's blocking Chinese access to higher-tech chips.
• Government may be preferring government-built housing in easing RM constraints. That, as a pattern, will make it harder to get necessary RM reform - if govt can exempt itself from the worst effects of bad RM rules...
• Older piece now, but I want to be able to find it again. Cato's critique of the US Jones Act, which prohibits foreign shippers from transporting goods between US ports. NZ shippers often want this kind of rule here too. It's been doing particular harm in Puerto Rico lately. 
• Sex work legalisation in NZ included measured aimed at protecting temporary migrants from exploitation; those rules may be doing more harm than good.
• Youth justice facilities overwhelmed by numbers.
• Emergency rooms overwhelmed by numbers and want of staff.
• Mental health system overwhelmed by numbers and want of staff.
• One reason the new Rings of Power series may not be as faithful to The Silmarillion's account as it could be: copyright. 
• Wellington: for, by, and of connected insiders. 
• MBIE is running a review of space policy. Wish there were a one-click submission option "Just leave it alone and don't break things." There are just so many submission processes on...
• Yet another area in which NZ could do well by simply recognising standards in use in other places. This time, car safety. 
• It looks like the prescription guidelines for medicines for ADHD have been designed around avoiding Ritalin flowing out into other uses rather than helping patients. And the one doctor who prescribed in accordance to patient needs rather than guidelines is in trouble for it. 

The coming disintermediation

The great Eli Dourado shows the way:

What’s even more exciting is the next generation of disintermediating technologies. Bitcoin could displace some financial institutions—to varying degrees, banks, the Federal Reserve, Western Union, and credit card companies.Mesh networks could solve the last-mile problem of Internet service delivery, which tends to be monopolized or at least concentrated. 3D printers could disintermediate supply chains. 3D chemical printers could disintermediate drug companies and the FDA.

Delivery drones like Amazon Prime Air‘s arguably disrupt package delivery services, though not entirely because FedEx and UPS will still run drone-utilizing distribution networks. More importantly, delivery drones disintermediate the real estate market for small businesses. It will no longer be important, if you run a local business, to have a storefront in a prime location. Your customers can order online and items can be delivered to them in half an hour straight from the factory or artisanal workshop. It could be the Etsyfication of the economy.

If information, electricity, money, and production all get disintermediated, what is left? If these trends continue, the future will be one in which human interaction is unmediated, and to a surprising degree, unregulable. It will be difficult to stop a willing buyer and seller from transacting. Information about the proposed transaction might not be censorable. Payment via Bitcoin or other cryptocurrencies can’t be stopped. Production and delivery of the item may be difficult or impossible to detect and intercept.

Intermediaries are often used by governments as points of control. As we shed intermediaries, it may become possible to live one’s entire life without any particular authority even knowing that one exists. I doubt that we’ll ever get that far in the process, because using non-abusive intermediaries often makes economic sense. But for the next few decades, at least, I expect the trend to continue and the world to get a lot more interesting.

I've wondered when we'd start getting chemical printers; I love that they're in progress.

The various commenters at SciBlogs who reckoned it entirely right and good that the FDA stomp all over 23andMe may have collective apoplexy over the pharmaceutical implications of chemical printers. They're right that 23andMe didn't pay obeisances to the FDA; I don't think they ever should have had to. But it's irrelevant where people will be able to route around the regulatory blockages. Something like 23andMe will start running out of Singapore or China if the US kills it. If chemical printers are banned in the ban-things regimes, they'll get developed elsewhere. And they'll either be printed here or people will sneak them in.

And then, oh and then.

Whether or not you think ChemPrinters are a great thing (I think they're a great thing), if you think they're likely to emerge, here are a few implications:

• Drug patents won't much work anymore. Sure, Pharma will try for DRM restrictions on chemical printers to ban their production of patented chemicals, but it will be no more effective than DRM restrictions on other media in the longer term. 
• If you try to force things back through the regulated channels by having doctors report on patients who are given prescriptions that never get filled, you risk hastening the disintermediation of medicine. What do I mean? Online self-diagnosis via improved versions of Doctor Google. 
• If you want that new pharmacological compounds be developed, you need to move to a prize system rather than patents. Set a prize for "compound that effectively (as defined) treats X (as defined) with no more than Y costs in side effects (as defined)", pay the developer directly on proof of effectiveness. This is probably worth doing anyway as it would at least help some new antibiotics and new vaccines to get developed.
• Update, thanks to Ryan: Note that in this world, we will need new antibiotics faster than in the current world. And things are looking very bad indeed on that front in the current world. Where chemical printers are ubiquitous and easy, there will be plenty of clowns who decide to jump straight to the compounds that kill the resistant bugs. And then we'll get quicker resistance development. I don't see any easy way to prevent such uses. While I think it's great that people will be able to route around those who make it hard to get E, the same tech will also make it easy to get around the gatekeepers who help to prevent antibiotic resistance.
• If you want compounds to have gone through at least some safety checks, you need to cut down the costs of going through any approval process. Otherwise, people will just start printing whatever compounds they think might help. That whole deal where dying people have to fight to be allowed to try experimental drugs before they're approved? Well, they'll print their way around that nonsense whether you like it or not.
• Hey, Peter Dunne. Guess what. I'm gonna print me some pseudoephedrine. I don't want methamphetamine. I want cold medicine that works. First we get the ChemPrinters. Then we get the inks. Then we get the cold relief....

There's still better than even odds that the ban-things countries will be able to make it very hard to have your own ChemPrinter. If they can ban pseudoephedrine because it's a potential precursor to meth, they can ban ChemPrinter ink cartridges. And think of the DHS's reaction when somebody puts up a recipe for printing plastic explosives. 

But I'm hopeful. At worst, we get ink cartridges that can be filled at home, more complicated ChemPrinters, and users buying elements of the periodic table. One chance in four within the next two decades? Even odds within the next three?

Bad management

Managers are strong complements to workers; with bad managers, everyone's productivity goes down the toilet.

Eli Dourado reckons the cost of managerial complements makes a case for zero marginal product workers: the worker might be producing more value than he's taking home in pay, but not enough to cover the cost of the manager that lets the worker produce positive-value products. Read the whole excellent post.

And we can see this when the managerial complement goes awry. Case in point: Mexico. 

Mexico City’s Buena Vista Walmart is the first super-market I’ve ever seen paralised by a trolley-jam. It is not more busy than any other large city supermarket, and not understaffed. No: the reason it takes ten minutes to walk from one side of the store to the other every single night is because they have no baskets—only large trolleys. To my sample of Mexican Walmarts, this is unique; most Mexican Walmarts have trolleys and baskets. And so the error must have been made by the managers of that particular outlet. Of course, this is only a small example of inept management in Mexico, but it’s sadly representative—labour productivity in Mexico is about a third of that in the US. If Mexico were as well managed as the US, it would be as rich.

This all raises a few questions: why are managers in Mexico (and the developing world in general) so terrible? why are those in the US so good? and how much of the difference is able to be affected by policy?

James Savage chalks it up to Mexico's caste system, nepotism / seniorism, and an awful school system. If your first worry is about hiring somebody who won't steal from you, you'll weight connections over competence. But again, read the whole post and despair at the morass of interlocked problems that reinforce each other and make solutions difficult. Foreign firms coming in and bringing with them stronger demand for competence has to be part of the solution, but the Walmart example suggests it might take a while.

Air Canada provides a different problem. Here's Josh Gans, lamenting just how awful Air Canada is compared to what he's been used to in Australia. Where Virgin in Oz had in-flight face painting for the kids at the back of the plane - effectively in-flight child entertainment far away from the parents - Air Canada seemed determined to make sure his family of 5 were separated throughout the plane. Josh very nicely explains the obvious points about just how terrible it is for all fliers that Air Canada made it impossible for him to sit beside his kids; it would be surprising if Air Canada's gains in forcing families to book through the Air Canada system outweighed the losses they get from ruining everybody else's flight.

The less sinister explanation is that Air Canada have a very poorly executed booking and flight reservation system. Someone, somewhere forgot about families and deep in the code there is no way for Air Canada to sort out the mess. My bias is on incompetent planning rather than evil attempts at price discrimination in these matters.

This is observationally equivalent to my hypothesis, formed about a decade ago and now potentially out of date: a too-large proportion of Air Canada staff actively hate the passengers.

I don't think Josh's explanation is sufficient; Air Canada could always choose to release third-party booked seat allocations more than 24 hours ahead of flights. And my "they hate the passengers" explanation is not only more plausible than that it's profit maximizing to impose potentially massive costs on full-fare paying flyers to keep price-sensitive families from using aggregators, it's also parsimonious, explaining much of the overall Air Canada experience.

Again, like James's Mexico problem, we've got a set of interlocking issues: this time around union rules, seniority, effective domestic monopolies, and government bailout backstops making for soft budget constraints. But this one seems easier to unravel. Canada could unilaterally allow cabotage on its routes instead of waiting for a bilateral agreement with the States. Let Virgin America run intra-Canada flights, drive Air Canada into bankruptcy, sell off the planes to new entrants, and start over with new management that doesn't hate passengers.

I'll continue to be very happy with Air New Zealand (regardless of changes to its AirPoints upgrades system), and even more happy with Emirates on the Trans-Tasman.

Observing externalities

The existence of an externality isn't sufficient basis for declaring market failure; indeed, optimal Coasean internalization pretty often will involve what looks, to the outside observer, like one party imposing harms on another - the implicit side-payment is harder to see.

This isn't new news, or at least it shouldn't be, but Eli Dourado presents the logic pretty nicely in a Mercatus working paper. I'm likely to pick this one up for the week on externality in my Economics and Current Policy Issues class; the first section gives a lucid and tractable exposition of the basic theory I try to get through to students in lecture. We're both fans of Buchanan and Stubblebine's approach. Here's Eli:

Once again, when externalities are internalized in a complex fashion through firms and other transaction-cost-reducing arrangements, the visible external harm or benefit will often persist. We still observe external benefits from lighthouses and, at least in jurisdictions that still allow smoking in bars, we still observe nuisance externalities generated by smokers. But these are not market failures; these are problems that the market has solved despite the high transaction costs that plague the primary actors.

Market failure results from gains from trade that fail to obtain due to some impediment; alert entrepreneurs view such impediments as profit opportunities for those who are able to innovate around the blockage.

And Eli's extension to cybersecurity makes points that get missed by cybersecurity experts.

Crypto-optimism

Eli Dourado's excellent discussion of technologies of control and technologies of evasion reminds me of the anarcho-optimism of Cryptonomicon. Eli builds a business cycle story:

Here’s my model. First we need to differentiate between two kinds of innovation and think about their effects. The first kind of innovation is geared toward brute maximization of production. It is typically centralized and makes use of economies of scale. Examples might include an assembly line factory or a big, coal-fired power plant. Because these innovations tend to be centralized, they introduce points of control. The capital is typically fixed and therefore easy to tax and regulate. It’s well known in the development literature that it’s really hard for governments to control rural peasants who live off the grid. Once they move to the cities and plug into centralized services, it is easier to require them to send their children to school, for instance. Because these innovations introduce points of control, I will call them technologies of control.

On the other hand, not all innovations are about brute maximization of production. Some are about producing things that we already know how to produce in ways that have ancillary benefits. An important ancillary benefit is evading control. Examples of these innovations include 3D printers and solar power. The evasion of control that is possible with 3D printers is the subject of Cory Doctorow’s short story Printcrime. And portable solar power cells can make people harder to control by supplying electricity without the need to register an address, have a bank account, stay put, and so on. These are obvious examples, but control can be evaded through more subtle innovations as well. I will call innovations that circumvent points of control that can be used by governments or monopolies to exploit, tax, or regulate technologies of resistance.

Now, postulate some background rate of innovation. How many resources will be devoted to technologies of control and how many to technologies or resistance? The answer is that it depends on how invasive the state (or other monopolies) are. When the state is invasive, at the margin the incentive is to find ways to circumvent the points of control; a greater proportion of resources will go into technologies of resistance. When the state is non-invasive, at the margin the incentive is a purer maximization of production; a greater proportion of resources will go into technologies of control, which results higher growth.

Add in time-to-build or other frictions in shifting capital from technologies of control to technologies of resistance, and we get cycles.

I love the story, but I'm not sure how well parts of it match the stylized time path. Here's Eli:

So far, I’ve been pretty general about technologies of resistance, but I want to tie it back into McJolfsson’s story about rapid skill-biased technical change. The key point is that labor is extremely regulated; firms that use labor are subject to intense government control. In part this is because policies that give labor a “bigger piece of the pie” are popular with voters, and in part it is because labor can complain and enforce its rights in a way that machines cannot. If you own a business and you are subject to intense government control, you are going to invest resources in circumventing the points of control. In our economy, that means getting rid of lots of labor as cheaply as possible, which means skill-biased technical change. As Arnold Kling has said, “if a job can be defined, it can be automated or outsourced.” But it’s because there is so much control exercised in the labor market that the incentive to automate and outsource is so high.

Agreed. But surely American labour market regulation has been in decline since the late 1970s. I have a hard time seeing a big labour regulation shock anywhere in the 2000s that would have precipitated a dumping of labour. I suppose the shock has to come from technology reducing the costs of substitution more quickly than labour market deregulation reducing the need for such substitution. Do read Eli's full argument, which brings together Brynjolfsson's techno-optimist story with Cowen's Great Stagnation.

I'm a long term optimist on technologies of evasion. Eventually, something like BitCoin will be successful. Meanwhile, Patri is sparking more real-world hacks around control. The latest one: floating platforms 12 miles off San Francisco where foreign tech entrepreneurs could route around idiotic American immigration laws.

This immigration issue deeply affected the Blueseed team, of which two are immigrants (from Serbia and Romania), and the other is the son of Cuban immigrants. Rather than accepting the current reality, Dan tells us, "If U.S. policy hasn’t kept pace with the changing economic realities of the era, someone needs to find a solution that will help entrepreneurs come to Silicon Valley if they so desire. And that someone might as well be us. In other words, it’s time to stop complaining and start solving the problem."

On their website they state they plan to start accommodation prices off at around $1500 a month, and transportation will be provided to the mainland by a daily ferry. Internet connectivity will be provided via a point-to-point 40Gbps laser link with satellite link backup. They are also looking at additional backup solutions using submarine cable and potentially a series of WiMAX relay buoys. A visa is not required to earn a paycheck on Blueseed, and most residents will be able to travel back and forth to the mainland with a business/pleasure B1 Visa.

I worry that it will be really easy for the government to change a line of regulatory code to make it tough for Blueseed residents to commute back and forth; but, I'm also not sure that they'll face big pressure to do so and regulatory inertia would then work in Blueseed's favour. Until some California Congressman reckons the extra votes he gets from making a stink about platform-dwellers stealing jobs swamps the costs he'd impose on the tech industry.

Contractarian non-voting

Does agreeing to play the game make you complicit in the game's outcome?

I'd argued a contractarian case for conscientious non-voting.

I've a reasonable contractarian foundation. If I agree to a process, then I'm bound to accept the outcome of that process. And voting outside of a context where baseline rights are protected against majoritarianism means I give assent to the process that strips others of their rights, even if I voted against that outcome. It's not Sophie's choice, but it's not a good one.

I often hear arguments of the form "Well, if you don't vote, you can't complain." A contractarian of my stripe would reverse things: if you agreed to the rules of a poker game, you can't whine afterwards that you lost your shirt. If you don't like the game, you shouldn't play it at all: abstention is not unreasonable.

Eli Dourado tries to give me a way out. He agrees with conscientious non-voting, but thinks the contractarian turn unnecessary and, worse, wrong. Here's the first part of his argument, with which I agree entirely:

What Brennan misses (at least in the essay; I have not read the book) is that the cause of all these harms is not just that voters make bad choices. That is a narrow perspective. It is that so many domains are subject to collective choice in the first place. The correct response to the question, “Shall we pass a law that destroys the lives of people who use drugs, especially if they are black?” is not merely “No,” but “Take your democracy and shove it.” Merely responding “No” is collectively harmful, because it fails to challenge the implicit proposition that the domain is rightly subject to collective choice.

When you vote in an election on an issue (or for candidates who can decide an issue) that should not be subject to collective choice in the first place, your vote makes no instrumental difference. It is therefore costless not to participate. By the Clean Hands Principle, you should not vote in such an election.

The libertarian's vote does at least as much to legitimate democratic jurisdiction over personal private choice as it does to move the outcome of that choice. I went a bit farther than that, arguing that voting signifies assent; Eli disagrees:

Does my vote, my “getting my hands dirty,” constitute consent in contractarian terms?

I think it clearly does not. The simplest example is one in which dissenters misunderstand how improbable decisive voting is. Suppose that the question I cited earlier, “Shall we pass a law that destroys the lives of people who use drugs, especially if they are black?” is in fact at issue in an election. A minority of 30% oppose this measure, and half of these correctly believe drug use should not even be subject to collective choice. Nevertheless, the 15% of people who oppose collective choice for drug use incorrectly believe that there is a significant chance that their vote will be decisive. Since the vote is happening no matter what, they show up at the polls to try to avert disaster. Does their voting on the question on the basis of mistaken beliefs about their probability of success constitute consent? I believe it does not.

Another example is the case of the Hail Mary pass; it involves no mistaken beliefs. Suppose you arrive at home to discover that some gunmen have broken into your house and are about to execute your daughter. The gunmen offer you a proposition. They happen to have 100 dice with them; if you roll 100 1s, they will spare your daughter’s life. Now, you know very well that the odds of rolling 100 1s with 100 d6 is 1 in 6^100, a very large number, but you say a Hail Mary and roll them anyway. Are you therefore consenting to your daughter’s execution, or at least to the proposition that rolling dice is a legitimate way of deciding whether your daughter should be executed? Again, I think not.

Like most people, I believe that consent can be a source of obligation, including political obligation. But only real consent counts; if your disgust at political discourse and need for self-expression overcomes your desire to keep your Hands Clean, then yes, your hands are dirty, but no, you haven’t consented. Consent has to be intended. The fact that contractarianism in practice relies so heavily on unintended forms of (fake) consent means that we don’t really have to take it seriously as a source of political obligation.

I agree with Eli that the threshold for consent in contractarianism is pretty low. If we can imagine that individuals sufficiently insulated from their interests by the constitutional veil could have unanimously consented to a set of constitutional rules, then the constitutional move solves democracy's infinite regress problem. Everybody knows that that consent is fake, but it's a useful thought experiment. But if imaginary consent by hypothetical people behind the veil lends moral weight to a constitution,* how can the real voting act not convey some kind of consent?

I'll agree with Eli that nobody would take the Hail Mary example as constituting consent. It's a contract signed under duress. Neither the signer, nor anybody around, nor the gunmen (unless he's utterly insane) would view there as having been consent. The contract wouldn't stand up in court either. Nobody takes coerced consent as real. Even if we imagine a case where a crazed gunman forces somebody to sign a contract that he was already about to sign, we'd still require some second affirmation after the gunman had been locked away that the consent was real. It isn't just what's true in the signer's heart that matters, it's how the community of observers understands the act.

Imagine an alternative case where I undertake something that any reasonable person would understand as constituting consent, but that I hadn't consented in my heart. Then, my only out is if I can demonstrate that it was unreasonable to have expected that I understood the act as signifying consent. So when Firefly's Captain Mal unwittingly wed a local lass by participating in a local ceremony (hit the 2:50 mark), the consequence of which he did not understand, he was eventually able to extricate himself - partially because the local lass wasn't quite what she'd seemed either. But everyone around understood the act as constituting assent, even if he was unaware.

Turn things around a bit. If Mal knew that everybody understood his acceptance of Saffron's gifts as acceptance of marriage, and he still accepted the gifts, he would either be consenting to marriage or engaging in fraud in hopes of a fun wedding night to be followed by an "I didn't know!" annulment. But not having consented in the deepest cockles of your heart isn't a defence to breach of contract.

Alas, I didn't write philosophy as an undergraduate. I'm sure there's a philosophical literature on what's sufficient for consent, and it probably isn't "voluntarily doing something, knowing that most people take the act as constituting consent". But that's my working hackish definition.

In Eli's argument, the voting act can do harm "because it fails to challenge the implicit proposition that the domain is rightly subject to collective choice." If we're in the world in which a libertarian's voting can do harm on this kind of basis, we're also in the world in which people take voting as signifying some agreement with the implicit proposition; I'm not sure how this "failure to challenge" can do harm unless the act of voting goes a bit farther and gives at least some support to the collective choice mechanism. Would we see so much handwringing about the health of democracy when turnout rates dip if the voting act didn't provide at least some kind of support for the system?

Eli gives some nice cases in which someone may vote while not assenting to the domain of collective choice. But pointing out these kinds of cases isn't enough to show that voting doesn't normally demonstrate agreement; lying to the murderous horde at the door that's seeking somebody hiding in your basement doesn't make you a liar, but lying for fun when there's no great reason for doing it just might. Voting when you reject the system is a bit fraudulent, but sometimes there are worse harms to be avoided.

My confidence in the propositions here advanced is pretty weak - philosophy just isn't my absolute or comparative advantage. And note the caveat in my first post: the case here advanced only applies to the anarcho-curious (Dourado @Normative's nice term) and strong minarchists who view most actions of government as illegitimate. Brennan's case is far more general and applies to all would-be voters: if you vote, it is wrong to vote badly.

* Yes, the weight is weak because the assent is hypothetical. But it can rule out at least some potential constitutions - ones that leave an individual worse off than he would be in the state of nature.