Pur Autre Vie

I'm not wrong, I'm just an asshole

Tuesday, February 19, 2019

Uber and the Green New Deal

A few thoughts on Uber.

Uber's expenses exceed its revenues by about $1 billion per year. (Here's a recent article laying out the numbers.) The company is able to continue operating thanks to cash from investors. One question is whether those investors are delusional. I think that question turns on whether Uber can attain a position in the market that allows it to charge higher fares without losing too much market share to its competitors. Another possibility is that Uber only needs to survive long enough to deploy its driverless car technology, at which point perhaps its fares will allow it to turn a profit. (Of course this is really just another version of the first possibility—Uber will need some way to charge profitable fares without its competitors taking over the market.)

Whatever eventually happens with Uber, in the meantime it is operating at fares that are presently below the fares that would prevail in a normal market (where I'm defining "normal" to mean a market that is in equilibrium). As many have noted, this amounts to a large transfer of wealth from investors to consumers. However, it also amounts to a sustained attack on existing market participants such as drivers and medallion owners. It's important not to take a reductive view of suicide, but it's hard not to see a link between Uber's behavior and the recent spate of suicides among New York taxi/limo drivers.

On a human level of course this has been devastating. And I think there is a very strong argument that taxi drivers and medallion owners relied on the existing regulatory framework and deserved to see it enforced against violators like Uber (or at least, they deserved for regulators not to tolerate Uber without very good reason, which in my opinion has never been forthcoming).

But it's fair to say that the existing regulatory structure was suboptimal for any number of reasons, and perhaps blowing it up is best for the city in the long run. On this view the economic pain suffered by taxi drivers and medallion owners is perhaps regrettable, but it is largely inevitable, in the same way that tobacco farmers were bound to suffer once the government adopted a (rightly) hostile attitude to the tobacco industry. Of course drivers and medallion owners aren't quite as complicit as people who profit from what amounts to a death industry, but it's certainly true that from a detached viewpoint we often regard economic pain as the cost of progress. In other words, we don't want to intervene directly to protect incumbent providers from competition, although we might prefer a stronger safety net so that individuals aren't driven to desperation.

Now to be clear, I don't count myself in this camp. I think the existing regulatory structure was flawed but basically sound. At any rate, I don't believe that allowing it to collapse under the pressure of massive entry through a regulatory loophole is good policy.

I bring all of this up partly because I think it's interesting in its own right, but also because of an observation Matt Yglesias made on Twitter, to the effect that de-carbonizing the economy will be very disruptive, and an important part of the project would be some kind of support for displaced workers. I think this is right, and it strikes me as the most difficult part of the project. It will be like the New York taxi driver experience, but on a much larger scale, and with severe political consequences for the Democrats if they mismanage it. (And one way to mismanage it would be to water down the program any time it touches anyone sympathetic, which I think is the natural political instinct in cases like this.)

It is a real problem of political economics and it strikes me as a daunting one.

Thursday, February 14, 2019

Amazon and Local Taxes

I don't have strong feelings about Amazon's decision to pull out of its plans to build a large office complex in Long Island City. It probably would have been good for the city, but the city does not really need it and perhaps it will be built somewhere that needs it more. [Edited to add: My cursory review of the Amazon proposal seems to indicate that the city would have been a substantial net winner from a financial perspective, which probably explains why NYCHA tenant leaders supported it. Of course as I observe below, there would have been losers as well as winners, but unless I'm missing something the claims about NYC "saving" $3 billion as a result of the project's cancellation seem to be highly misleading, comparable to the claims about how Britain could "save" hundreds of millions of pounds a week by withdrawing from the EU.]

I would like to make an observation about the politics of location decisions, though. It is easy to get angry about "big corporate giveaways," but they are often rational from the perspective of the community offering them, and getting rid of them would probably require complicated and intrusive laws.

One source of confusion is lack of clarity as to the net and gross benefits being conferred upon the corporation and the community in which it proposes to locate. Imagine a corporation that plans to build a facility that will generate $10,000,000 per years in taxes, while costing the town $1 million in additional government services. Imagine that the corporation is indifferent among three different locations for its facility. One town offers a tax rebate of $5 million per year, another offers $7 million, and the third refuses to offer anything on the grounds that corporate giveaways are bad. The corporation accepts the highest offer and pays a net $3 million in taxes per year, while costing the town $1 million in services. The town comes out ahead by $2 million. Nevertheless the headline may be something like, "Mayor Approves $8 Million Corporate Giveaway" (counting both the tax rebate and the town's expenditure on services), which may draw the ire of voters due to confusion between the gross amount of the rebate and the net amount of taxes paid by the corporation. Still, though, you can't say that the mayor made a bad decision for the city, and you wouldn't advise a civic-minded mayor to turn down such an offer (unless, I suppose, other corporations were making better offers and the city couldn't accommodate all of them).

There are three or four objections that I think you could mount against this sort of rebate. The first is simply that local officials may be bad at calculating the net effect of a business opening a facility in the municipality. If so, in a competitive bidding situation there may be a "winner's curse," where the bidder that makes the biggest upside error in calculating the benefits "wins" the auction and ends up overpaying.

The second (related) objection is that local officials may be corruptible, which exacerbates their tendency to overbid.

The third objection is the most subtle. If you allow corporations to get towns to bid for their presence, then you erode the ability of towns to generate tax revenue from businesses. In other words, you might say that even the most cost-justified tax rebate, with abundant net benefits to the city, is still regrettable because the corporation shouldn't be entitled to any tax concessions at all.

The fourth objection, which I won't address further, is that I've been speaking of the city's interests as if they are unified. In fact different people will be affected differently. If you are a homeowner or you are unemployed, you may benefit a lot from the presence of a new employer (higher house prices, lower unemployment). If you are a renter and you are already employed, the increase in rents may overwhelm any benefit you get from the city's improved finances. Racists may dislike the new employer if it brings in lots of non-white employees, or may support it if its employees are mostly white. Perhaps the city's new voters are younger than the average resident, changing the city's politics for better or worse. On some level I think you have to ignore these effects or you will get bogged down, but you might worry that incumbent politicians (the ones negotiating the tax rebate) are not neutral as between their constituents, systematically helping certain residents and hurting others. (But I mean... on some level this is an ineradicable problem that isn't confined to tax rebates.)

These objections are relatively difficult to address by law. The second is perhaps the easiest in theory. You could pass a law requiring all negotiations to be conducted in a particular way, with public scrutiny and with rigorous bans on any profit by the public servants negotiating on behalf of the city or state. In practice, though, it may be very difficult to detect the payoff made by the corporation, and in general I'm skeptical that U.S. anti-corruption laws are particularly effective.

To address the first objection, you might require all tax rebates to be contingent on the actual state of the world. For instance, if the promise is that the corporation will provide 1,000 jobs, then you would require it to demonstrate that its payroll is at least that large before giving it the rebate. If the corporation ends up under-performing on its promises, then it will face no legal penalty (shit happens, you shouldn't penalize the company for unanticipated shortfalls), but on the other hand it will not get any of the negotiated rebate. (This means of course that the government can't give cash up front, which is probably a prudent limitation to impose in any case.)

The third objection can only really be addressed with a highly intrusive federal law. It is generally difficult to root out "victimless crimes," that is, crimes where both participants have motives to seek each other out (e.g. drug sales). If you ban tax rebates, cities will provide tax credits. If you ban those too, they will provide loan guarantees or project insurance or free services. Or they will simply cut their taxes (are you really going to pass a federal law freezing local taxes in place?).

One fairly radical proposal would be to impose a federal tax on corporations replacing local and state taxes. The revenues would be ceded to the states, counties, and municipalities that would receive them in the status quo ante. You would harmonize tax rates everywhere and refuse to vary them for particular projects. Corporations would then make their location decisions based on other factors, and there would be no "race to the bottom." Corporations would stop being able to internalize their positive externalities, and states and cities would get more tax revenue.

But! "Harmonize" is a bit of a euphemism, since the federal government would now be setting tax policy for every municipality in the U.S. Some cities would find their tax revenue dwindling if the federal government chooses a lower rate than they were previously charging. Other cities would lose their employers as the only basis on which they could compete was low taxes.

And anyway Congress would never do this. But without doing it, I think tax competition is inevitable, and so the best you could do would be to require it to be done in a transparent way, with special ethical rules on the government negotiators.

Wednesday, February 13, 2019

Harris and Trumpy Politics

Everything I wrote about the Liz Warren ancestry controversy can be applied in miniature to the ridiculous controversy about Kamala Harris and what music she listened to while smoking pot in college. I really do mean "in miniature"—it is obviously not remotely as potent an issue, it just has similar attributes.

In short, during an interview Harris said she smoked weed in college and seemed to indicate that while she was smoking weed she listened to Snoop Dogg and Tupac. The problem is that her college years preceded their first albums.

As the Times piece I linked to explains, it's not clear that Harris made the claim being attributed to her. She was asked what kind of music she likes in general, and before she could answer another interviewer interposed another question, specifically asking, "What were you listening to when you was high?" The first interviewer then suggested Snoop, which Harris confirmed, adding Tupac as well. She could easily could have been ignoring the part about being high, or she could have smoked pot later in life while listening to Snoop and Tupac.

But look. No one is going to listen to this defense. I mean it's worth trying, if you want to lay out the facts. But Harris herself is going to look (mildly) ridiculous if she tries to argue the point.

And there's another important feature here, which I forgot to mention in my post about Warren. This is eminently mockable on Twitter, and once people get into the "dunking" and riffing mode, anyone pointing out the precise details of the interview is going to look absurdly uptight.

In fact this thing people do on Twitter, where they feed on each other's jokes and show off their feeble wit, is one of the most annoying things about the site. I can't count the number of times I've seen waves of jokes premised on a tendentious or outright false understanding of the news. And I think the fact that it's all couched in a sort of cynical, ironic, humorous pose makes it much more "persuasive," in a sense, than earnest tweeting.

Anyway the other similarity with Warren is that it's the kind of issue that no rational person would give a shit about (even the existence of this blog post is quasi-ridiculous), but I think it amounts to a kind of threshold issue for some people—is Harris phony? I think it's the kind of thing that can make someone laugh and then distrust Harris forever.

Again I really don't want to make this out to be a big deal. It's not. I just hate this aspect of politics and I hate how well this stuff works for Trump.

Tuesday, February 12, 2019

Getting Angry for No Reason

I refuse to read the whole article, but this piece in the New York Times on capturing carbon dioxide from the air seems dumb as hell. Here's a passage:

The technicians had in front of them 12 large devices, stacked in two rows of six, that resembled oversize front-loading clothes dryers. These were “direct air capture” machines, which soon would begin collecting carbon dioxide from air drawn in through their central ducts. Once trapped, the CO₂ would then be siphoned into large tanks and trucked to a local Coca-Cola bottler, where it would become the fizz in a soft drink.

This is just so dumb. It reminds me of the way people used to describe electric cars as "carbon free" because they don't literally release carbon dioxide into the air. Of course if those electric cars are recharged with electricity from coal power plants, they are hardly "carbon free." People were taking the term far too literally.

Similarly here. If you remove a bunch of carbon dioxide from the atmosphere and then use it to carbonate Coke, guess where that carbon ends up? The question is not whether the technology is capable of literally removing the carbon dioxide from the air, the question is whether that's a more useful (i.e. less carbon-intensive) way to produce carbon dioxide than existing methods.

This is especially dumb because we already produce a lot of carbon dioxide as a byproduct of industrial activity. For instance, fermenting beer creates a lot of carbon dioxide, and a handful of breweries capture it and compress it for use carbonating their beer. This carbon dioxide is "free" in the sense that almost all of the energy used to produce it was going to be used anyway to make the beer, so the incremental environmental cost of capturing the carbon dioxide is simply whatever machinery has to be installed to capture and pressurize the carbon dioxide from the fermentation.

The same is true of all kinds of commercial and industrial activity. Now conceivably the technology profiled in the New York Times article is superior in some way. But if so it's not because it removes carbon from the air (only to put it back into the air when people open their cans of Coke), it's because it does so more efficiently than other methods of producing carbon dioxide for commercial use.

Thursday, February 07, 2019

Fire from the Left

A friend reminds me of an important addendum to my previous post. I think it will matter quite a lot whether the leftists decide that they prefer Trump or the Democratic nominee.

I am exaggerating slightly, but I think it's fair to say that a lot of prominent leftists were ambivalent at best about the 2016 election. Many of them spent the election season vigorously attacking Clinton and making sure that everyone was aware that the Democratic Party in general and Clinton in particular are elitist, game-rigging corporate shills who despise working-class people. Clinton delivered her nomination acceptance speech to loud boos and jeers from Sanders delegates. I think it's hard to overstate how much better off Obama was as a result of a united Democratic Party.

I am not presently arguing for the nomination of a leftist candidate (I'm not sure who that would even be—Sanders, I suppose, though I suspect that a lot of loyalty to him would evaporate the moment he started saying nice things about the Democratic Party). I'm just observing that this fissure has been a real problem in the past, and the Glenn Greenwalds of the world will almost certainly do whatever they can to get Trump reelected. It's a dynamic that will be tricky to navigate.

Trump's Taunts

I was having a conversation with some friends and the subject of Trump's attacks on Elizabeth Warren came up. As it happens I think those attacks tell us a lot about Trump, whose fondness for tagging opponents with unflattering nicknames is a signature move (to the point that people actually mocked him when his nickname for Nancy Pelosi turned out to be... "Nancy").

One of the earliest examples was "low energy" Jeb Bush. In all likelihood Bush was doomed to fail no matter what, but "low energy" seems to have been very effective. I think this was for a few related reasons.

First, it is basically true. Bush's campaign was boring and his manner on the debate stage was bumbling and ineffectual. (Bush fans can argue, rightly I think, that he actually has a good sense of humor and a fair amount of sharpness. The same is apparently true about Gore. In neither case did it matter much.) Bush was also running a campaign straight out of the GOP's "post mortem" on the 2012 election—upbeat, welcoming to immigrants, kumbayah. Trump sensed a much darker mood in the Republican Party's base and found a way to establish a sharp contrast.

Second, "low energy" is vague and impossible to refute. What does it mean? Nothing exactly. It connotes a lot without referring to any specific thing.

Third, relatedly, to confront it directly is to invite more mockery. "Don't call me low energy!" What a low energy response that would have been. A friend asserted, convincingly, that if Bush had walked across the debate stage and punched Trump in the face, he may have salvaged his candidacy (or at least ended Trump's). The likeliest outcome—Trump running away—would have drawn scorn from precisely the right quarters. If Trump didn't run away, Bush actually landed a solid blow (this part is key), and Trump didn't hit back effectively (also key), it would be almost as good. (The move would have drawn condemnation of Bush, but mostly from people irrelevant to the Republican primaries.)

Anything verbal response, though, would simply demean Bush, as Marco "Trump has a small penis" Rubio learned. Trying to shift between dignity and Trump-esque vulgarity is a recipe for disaster.

Fourth, again relatedly, there is a strong psycho-sexual element to the taunt. It's not just that Bush isn't a good public speaker. It's that he's unmanly. (Again, to repeat my second point, this lack of virility is hinted at but not stated outright.) Trump's specialty is serving up provocative sexual and racial innuendo without quite being specific enough for anyone to pin it to him. (He famously said that an Apprentice contestant would "look good on her knees" or something like that... on her knees because she was begging to be allowed back on the show, of course! How dare you suggest any other meaning?)

You see the same dynamic with Trump's "spill the beans" tweet about Heidi Cruz, except that there's no sign of truth in that case.

I want to emphasize that this only works with a particular audience, and it alienates a different (probably larger) audience of reasonable people. But thanks to luck or cunning, the tactic was well-suited to bring a lot of Republican primary voters and less-educated white general-election voters into Trump's camp while alienating a lot of Democratic voters who were never going to vote for him anyway.

Now consider Elizabeth Warren. Trump seems to have gotten the idea of calling her "Pocahantas" in 2014 (note that Trump's style of retweeting is simply to copy-paste the text into his own tweet):
He returned to the term in 2016 (he may have been using it before then, but there's no sign of that on his Twitter account):

This attack has it all—it has an element of truth (more on that in a minute), it's vague, it's almost impossible to refute without losing dignity (as we've seen), and it has a strong element of racial antagonism.

Now the dilemma here is simple. Warren's behavior was problematic from the viewpoints of at least two constituencies (members of Native American tribes and whites who are resentful of affirmative action), both involving strong feelings related to racial identity. In other words, the attack is aimed at a true political vulnerability (unlike, say, "Cryin' Chuck Schumer" or "Sneaky Dianne Feinstein," Trump coinages that don't touch on anything of political significance). So in other words, it was a potent attack even if she maintained a dignified silence about it.

Moreover the attack benefited from strategic ambiguity. Was Trump mocking her for having Native Aemrican blood or for not having it? Was he claiming that she lied about her ancestry or that she used her (genuine) ancestry for illegitimate purposes?

I'll pause here to note that once again different audiences would see these attacks in different ways. Plenty of people were horrified at this attack, either because they assumed the worst (mocking her for having Native American blood) or they thought it was a disgusting tactic in any case. It's a classic example of Trump maximizing his appeal to racially resentful white voters, a tactic that worked brilliantly in 2016 but has unclear prospects for 2020.

In any case, Warren apparently decided to address her response to the most plausible interpretation of Trump's remarks, counting on a sort of "gotcha!" dynamic. And in fact, before Warren's response, if you had forced Trump supporters to write down the substance of Trump's charge and the circumstances that would vindicate Warren, a lot of them would probably have written something like: "She said she had Cherokee blood but she doesn't, and only DNA proof to the contrary would vindicate her."

But, and I can't emphasize this enough, no one was forced to write anything down. Trump and his followers ruthlessly exploited the strategic ambiguity that he had always maintained, with devastating effect. Warren's "gotcha" blow didn't get even close to landing, and she took fire from pretty much everyone and was forced to retreat in humiliating fashion. (As a side note, it's a classic issue where getting into the weeds is both (A) necessary if you want to clear things up and (B) devastating from a political messaging perspective. It's very much like Clinton's emails in this regard. Just an absolute political meat grinder.)

I have no idea how to deal with this on the level of political tactics (e.g. in thinking about our Democratic primary choices). I'm inclined to say that Clinton's emails were a bigger problem because Trump got institutional support from the FBI and the mainstream media that likely wouldn't be forthcoming from anyone this time around (seemingly Warren has made peace with the Cherokee tribe, and the mainstream media hates the nickname). But I don't know! I also don't know how effective it is to think about particular weaknesses of the Democratic hopefuls when surely Trump will latch onto something with the help of his media enablers. (To be clear, though, "Cryin' Chuck Schumer" shows how weak Trump's attacks can be when he doesn't have any obvious angles of attack.)

I'll conclude by observing that Trump has made no real innovations in policy, and it's a massive category error to speak of, say, a "Trumpist" foreign policy except in the the most basic of senses. But he did introduce true tactical innovations to Republican politics, and I believe this was an under-appreciated source of his popularity with Republican voters. They wanted a leader who fights dirty, and they got one. It shouldn't have worked. Voters shouldn't have been vulnerable. But they were, and here we are.