Monday, January 22, 2018

A Modest Proposal for Curbing Bitcoin's Voracious Energy Appetite

Bitcoin mining, as the New York Times’s Nathanial Popper points out, is a voracious consumer of energy, perhaps as much as Denmark. For good reasons, that has environmentalists worried. What is to be done?

First, why is Bitcoin mining so energy-intensive? It’s pretty simple, as Popper explains. Nothing has value unless it is scarce. To keep Bitcoin scarce, you limit the number created. That part is easy—but who gets the new Bitcoins that trickle out of the master spigot at a rate of a dozen or so per hour? The answer is to give them to whoever can demonstrate “proof of work” by solving complex computational problems with ginormous, energy-sucking computers. According Peter Van Valkenburgh of Coin Center, that’s a good thing:
Because of the costs, we know the only people participating are serious, that they are economically invested. That creates the incentives for cooperation.
OK, I get it. But why not find some less environmentally harmful way for people to demonstrate they’re serious? For example, what if we could find something that is scarce and is, at the same time, both an economic input and an economic output? Call it “Factor X.” Using lots of Factor X would show you are serious, but at the same time, it would be a social good—not a social bad like burning energy. Bitcoin would stay scarce, but it would now be a harmless by-product of Factor X.

So, is there such a thing as Factor X? Of course! Labor! Economists tend to take a silly, one-sided view that sees labor as an input only. They talk worshipfully of “productivity,” as if the use of labor were something we should try to minimize. Yet, everyone else knows that labor—in the form of “jobs”— is really an output, something that we should try to maximize. Certainly, all of our recent Presidents seem to have known this:
  • “I think if we continue to create jobs like I’ve done — over 1 million since I’ve been in office, way over 1 million.—Donald Trump
  • “Tonight, after a breakthrough year for America, our economy is growing and creating jobs at the fastest pace since 1999.” Barack Obama
  • “America has added jobs for a record 52 straight months.” George W. Bush
  • “We begin the new century with over 20 million new jobs, the fastest economic growth in more than 30 years.” Bill Clinton
  • “As we have worked together to bring down spending, tax rates and inflation, employment has climbed to record heights; America has created more jobs and better, higher-paying jobs.” Ronald Reagan
Bitcoin analyst Marc Bevand knows this, too. Popper quotes him as saying,
Labeling Bitcoin mining as a “waste” is a failure to look at the big picture. The jobs alone are a direct, measurable and positive impact that Bitcoin has already made on the economy.
Here’s my modest proposal, then. Keep Bitcoin as it is, continue to require miners to perform arduous calculations—but require that the calculations be performed only using an abacus. Keeps Bitcoins scarce. Keeps the environment clean. Creates lots of jobs. A win-win-win solution.

Reposted from NiskanenCenter.org, with a hat-tip to Jonathan Swift.

The Paradox of Property Rights in Paradise


Teton County, Wyoming, is about as close to paradise as you can get. Of its 4,000-odd square miles, Grand Teton and Yellowstone National Parks account for 45 percent, the Bridger-Teton and Caribou-Targhee National Forests for another 45 percent, and the National Elk Refuge for another 1 percent. That leaves 3 percent for private property, the $15 billion assessed value of which averages out to $200,000 an acre.

Teton County Commissioner Mark Newcomb recently sent me a link to a talk he gave on the “epic struggle” of managing that paradise. Zoning and property rights are a key battleground. Recent skirmishes have been fought over such issues as whether sixty-eight homes or only seven should be allowed on twenty-one rural acres, whether six houses authorized on another parcel must be clustered, and whether additions should be permitted on houses located near streams.

It’s hard to know whether the existing 97/3 split strikes the right balance between public and private property, when, as Newcomb points out, no one can put a dollar value on the area’s environmental amenities. The only sure thing is that those amenities account for the high value of the remaining private property. But the question of the overall public/private balance is an issue for Congress, not the county commission.

Instead, the commission’s job is to oversee the existing 3 percent of private property. Newcomb’s talk reflects some doubts over whether current regulations are doing that job well.
First, he raises the issue of administrative fairness:
The system is arbitrary in that it is not rooted in any real analysis, let alone valuation, of the ecosystem services in question. It is arbitrary in that it can result in reasonable development being thwarted because the process is too onerous, or conversely for unreasonable development to be entitled because the cost to challenge it is too high, the pockets of the special interest behind it too deep. It is messy.
Second, he notes that the country’s 80-odd pages of land use regulations are not really about protecting private property rights, in the sense of “entitlements of individuals against the majority.” Rather, they are mainly motivated by the majority’s desire to dictate to individual owners.
I guarantee that these 80 pages of regs governing what you can and can’t do with your property were not requested by the property owners trying to exercise their property rights. They were requested by neighbors, neighbors expressing a diminishment of their rights to natural amenities such as viable and healthy wildlife populations, natural soundscapes, and scenic vistas.
Third, he notes the paradox that the more restrictive regulations become, the more their benefits become concentrated on the few. What would happen, he asks, if someone with deep pockets started buying up most or all of the country’s $15 billion-worth of private land?
Ironically, the more that buyer bought up, the more valuable anything left over becomes…right? Because whatever is left behind is surrounded by that much more space, that much more wildlife, offering that much more opportunity to . . . you guessed it, “Stay Wild.” In other words, everyone wants to live here, especially if no one else lives here.
That, in a nutshell, is the ultimate paradox of property rights in paradise. What’s a poor county commissioner to do?

Reposted from NiskanenCenter.org

Wednesday, January 10, 2018

How the Administration Gets the “Three R’s of Deregulation” Exactly Backwards


In a recent short post for the Harvard Business Review,  I proposed that regulatory reformers should be guided by “Three R’s”:
  • Retain regulations that support the basic rules of a market economy. Those include regulations that protect property rights, ensure that contracts are honored, and protect against common law harms like fraud, negligence, and nuisance.
  • Replace regulations that have legitimate aims but also have harmful unintended consequences.
  • Repeal regulations that are motivated primarily by the manipulation of public policy for private gain (rent seeking).
An article by Lisa Friedman in today’s New York Times illustrates how the Trump administration has gotten the three R’s exactly backwards. It details efforts by coal baron Robert E. Murray, a Trump mega-donor, to overturn a broad array of regulations on the coal industry. Be sure to read the full text of Murray’s wish list, which the EPA and the Department of Energy are systematically implementing.

Rather than retaining regulations that support common law property protections against harmful pollution, Murray wants to repeal them outright. His recommendations do not stop at carbon emissions but also include harmful local pollutants like ozone. To compete the picture, he wants to get rid of mine safety regulations.

Some of the regulations that Murray objects to are open to legitimate criticism. For example, he does not like Obama-era support for clean coal technology, about which many environmentalists also express skepticism. He also does not like subsidies for wind and solar energy. My own recommendation, in line with my second “R,” would be to replace the clean coal requirements and renewable energy subsidies with a simpler, more effective carbon tax.

Finally, rather than seeking repeal regulations that are motivated primarily by rent seeking, Murray indulges in open rent seeking of his own. Can it be viewed as anything other than rent seeking when an energy producer seeks to lower his own operating costs by insisting that downwind property owners absorb his output of noxious wastes without compensation?

Reposted from NiskanenCenter.org

Tuesday, January 9, 2018

Why We Spend So Much on Healthcare and Get So Little for Our Money?



We often hear that we, in United States, spend more on healthcare than other high-income countries, but get less for our money. A report from the Commonweath Fund, “Mirror, Mirror 2017”, is among many pieces of research to reach that conclusion.  Just why is U.S. healthcare spending so high and performance so low? What are the realistic options for reformers? One of the report’s key charts provides an excellent framework for discussing what it calls “flaws and opportunities for better U.S. healthcare.” 


Why is U.S. healthcare spending so high?

To understand why U.S. healthcare spending is so high, we can begin by asking, , “High relative to what?” After all, as one of the wealthiest countries in the world, we spend more than others on a lot of things. The question is whether U.S. healthcare spending is higher than we would expect it to be even when we take our generally high standard of living into account.

Monday, January 8, 2018

The Three R's of Effective Regulatory Reform



With tax cuts now a done deal, Republicans are turning to regulatory reform to give economic growth a further boost. There, they may find more bipartisan support. Past reforms of airlines, rail, and trucking regulation were, after all, set in motion by Democrats. 

Today, there is significant Democratic support for reform of financial regulation, especially as applied to smaller community banks. Overregulated small businesses can be found in every Congressional district, red or blue.
But while regulatory reform could be a big boost if it is done right, indiscriminate deregulation could do more harm than good.

Blanket deregulation won’t help

Many conservatives and libertarians seem to think the only good regulation is a dead regulation. If that were true, it should be possible to quantify regulation and measure the harm it does. However, attempts to do so have not been particularly successful.

Thursday, January 4, 2018

Some in Congress are Still Trying to Open Banking Service to Canabis Businesses

 As California joins the list of states that have legalized recreational marijuana, limited access to banking services continues to be a problem for producers, retailers, and other businesses in this rapidly growing sector. Because marijuana businesses cannot, in most cases, open bank accounts, accept credit cards, or make electronic payments, the sector remains largely cash based, with all the drawbacks that entails. The problem is felt by businesses that deal in medical as well as recreational cannabis.

Charlie Wilson, whose company Green Bits provides management and compliance services to marijuana-related business, puts it this way in a recent post for The Hill:
There is overwhelming evidence that electronic transactions are more secure, faster and more transparent than dealing only in cash. Yet this highly regulated industry is more difficult to monitor precisely because it is all cash. And oversight will only become more difficult with continued rapid growth and as more states legalize cannabis.
Several attempts have been made to remedy the situation. In April, Rep. Ed Perlmutter (D-CO), along with several co-sponsors, introduced the Secure and Fair Enforcement Banking Act (SAFE Banking Act), a reintroduction of legislation that had been introduced but languished in earlier Congresses. There was some hope that provisions of the act would be folded into the recently passed tax bill, but that did not happen. Not to be discouraged, just before Christmas, Rep. Andy Barr (R-KY) introduced a similar bill, the Industrial Hemp Banking Act, as stand-alone legislation.

All of these bills seek to remove federal barriers to provision of banking services. Among other provisions, they would prevent the FDIC from denying deposit insurance to banks that service cannabis-related businesses, prevent federal banking agencies from penalizing banks that conduct such businesses, and make it easier for banks to accept cannabis-related assets as collateral for loans.
Safe banking for marijuana businesses is a bipartisan cause, as the sponsorship of the above-cited bills makes clear. Now what is required is to translate popular support for legalization into Congressional action. As Marijuana Majority points out, “Bad laws change when good people speak up.”

Reposted from Niskanen Center

Sunday, December 10, 2017

Yet Another Sign of a Stronger Labor Market: Increases in Job Leavers and Reentrants


The headline unemployment level remained unchanged at 4.1 percent in November, but a closer look at the underlying data shows signs of increasing strength of the labor market. One such indication is the continued rise in the number of job leavers and reentrants. For slightly different reasons, workers in both categories can be considered voluntarily unemployed, in contrast to job losers, whose unemployment is unambiguously involuntary.

For full details and chart, see my exclusive post on SeekingAlpha.