Should you vote today? Only if you want to.

Today is election day in the United States and everywhere I turn I see “get out the vote” ads. Even on Facebook my feed is filled with people urging others to vote. I am fine with these nudges insofar that they are just that – nudges.

I am concerned when I see claims that voting is one’s duty. I am especially concerned when I see claims that, if you don’t vote, you are allowing the evil [socialists/white men/etc] to govern. These claims concern me because they respectively promote worship of the state and tribalism.

There is more to life than being a politico. If Americans at large sacrificed their other activities in order to become fully informed voter-activists, we would be a boring lot. If you enjoy politics, go vote, but you needn’t feel superior over someone who thinks their time would be better spent playing music or grabbing a beer with friends after work. Life is short and should be spent doing what one enjoys.

Likewise, it is perfectly okay to have an opinion on how government should be run. I, and I imagine most NoL readers, have strong policy preferences. It is however beyond arrogance to believe that an educated person can only believe X and only a mustached villain would believe Y. To be clear, I am not saying that truth is relative.

NIMBYist policies lead to housing shortages, that is a fact. I am in favor of revising zoning regulations and ending parking subsidies to mitigate the problem. I don’t think that the family that owns a detached unit in Santa Monica and opposes denser development is evil though. I understand their hesitance to see their neighborhood changed.

If you wish to vote today, please do so but please don’t act like a snob towards those who do not. Express your policy preferences, but leave your holier than thou attitude at home.

Tldr; play nice.

Legal Immigration Into the United States: The H-1B Visas Confusion and Controversy (Part 2 of 6)

This is the right place for a painful digression. It’s painful because it’s about a program related to immigration that is both confusing and calculated, as if by design, to become controversial. Yet, as I argue below, toward the end of this essay, it’s a program with promise.

Many middle-class foreigners with college degrees are in the US on temporary working visas. By numbers, the main category of working visas is the H-1B visa. (This is confusing, but there is currently no such thing as an H-1A visa.) Holders of the H-1B visa must meet specific educational qualifications. They are sponsored by American employers – but also by employers who look much like labor contractors based abroad. They may stay in the US for a period of three years, renewable for an additional three years. That’s except if they work for a university or for a research institute, in which case their visa is pretty much eternal. Although the number of visas allotted each year is capped, by accumulation, the program involves significant numbers of people, about 350,000 in 2016. Some or most H-1B visas are allocated by lottery on an annual basis. (It’s completely separate from the diversity lottery described above [in Part 1], as I said.)

The rationale behind the H-1B visa is to supply workers in specialties that industrial and other organizations cannot find domestically. The program is controversial for two reasons. Continue reading

China-Myanmar Economic Corridor and the limits of ‘Cheque Book Diplomacy’

On September 9, 2018 Myanmar and China signed a memorandum of understanding (MoU) for establishing the China-Myanmar Economic Corridor (CMEC), as part of China’s ambitious Belt and Road Initiative (BRI). The corridor will traverse a distance of approximately 1700 kilometres and seeks to connect Kunming (in China’s Yunnan Province) with Myanmar’s key economic points – Mandalay, Yangon, and Kyauphkyu.

According to the MOU, both sides have agreed to collaborate in a number of areas. Some of the important areas identified for collaboration by both countries are: infrastructure, construction, manufacturing, agriculture, transport, finance, human resources development, telecommunications, and research and technology.

Chinese Foreign Minister Wang Yi had first announced the proposal to build CMEC during his meeting with Myanmar’s State Counselor Aung San Suu Kyi in November 2017. The MOU had been finalized in February 2018.

The CMEC is an ambitious project from which Myanmar could benefit immensely. Yet, there have been apprehensions with regard to the economic feasibility of the project, and Myanmar does not want to meet the fate of other countries which have fallen into what has been dubbed as a ‘Debt Trap’.

Opposition to Kyauphkyu

There has been skepticism with regard to the BRI project in general, and China’s involvement in the SEZ and Sea Port to be set up in Kyauphkyu (a coastal town in the Rakhine Province) in particular. Large sections of the population have been questioning the economic rationale of the project – and the benefits for Myanmar. CITIC (China’s biggest financial conglomerate) was awarded both projects, but it had to reduce its stake from 85 percent to 70 percent in the Sea Port after vehement opposition from the local population. Locals found the 85-15 arrangement unreasonable. Fearing a debt trap, the NLD government in Myanmar has also reduced the initial value of the Sea Port project – a whopping $7.3 billion USD to $1.3 billion. There has been opposition to the SEZ as well (mainly on environmental grounds), and while the initial Chinese take in the SEZ (originally valued at $2.7 billion) was 51 percent, it is likely to be revised.

U Kan Zaw, a Minister in the erstwhile Than Sein government (and Chairman of the Kyauphkyu SEZ tender committee), confessed that Myanmar was not very keen for Chinese investment (it had sought investments from the UK and Europe), but it was not left with any other option once other countries declined to invest.

China beginning to acknowledge shortcomings of BRI projects

Of late Beijing has expressed a willingness to re-examine some aspects of BRI-related projects (including CMEC and the China Pakistan Economic Corridor – CPEC). On the face of it, at least Beijing seems open to addressing the worries of countries which are part of the BRI.

Chinese media itself is trying to send a message that Beijing is responsive to concerns of countries which are part of the BRI initiative. A recent example is an article in CGTN on CMEC, which acknowledged not just the drawbacks of the project, but also the fact that the response to CMEC has been tepid so far in Myanmar. Said the article:

CMEC is temporarily suffering from a cold reception, we believe that it is an excellent endeavor.

The authors of the article also makes a significant point: that Chinese businessmen are not familiar with Myanmar. While the article could be referring to the lack of familiarity with Myanmar’s policies, many host countries have been critical not just of the ‘one sided’ nature of Chinese economic investments, but their unwillingness to understand local cultures, and the fact that they remain aloof from the local population.

On a number of occasions, Chinese businessmen have even misbehaved with locals. In Pakistan, on two occasions, Chinese businessmen have beaten up policeman, and this did not go down well with the local population.

While alluding to the failure of big ticket infrastructure projects, the article also refers to the need for Chinese investments in ‘light industry’ as opposed to ‘heavy industry’ (in a reference to infrastructural mega projects, such as those which were scrapped by Malaysian Prime Minister Mahathir Mohammad).

One of the interesting aspects of CMEC is that Myanmar was keen to have third party investments, and not restrict itself only to Chinese investments. Investments will come from countries in South East Asia and East Asia — Thailand, South Korea, and Japan. While China’s economic presence in Myanmar is staggering, this has not gone unchallenged and of late countries like South Korea are also increasing their presence in Myanmar. The authors of the CGTN article also try to pitch for Chinese cooperation with other countries, arguing that joint investments will mean not only lesser economic and political burden for China, but that they could also reduce hostilities between Western and Chinese companies.

Finally, the article speaks about the need for greater cooperation between Myanmar and China in the sphere of agriculture (especially aquaculture), and that this cooperation should be economically beneficial for the local population.

Conclusion

It remains to be seen whether China will actually acknowledge the genuine concerns of countries participating in the BRI, and whether or not it will actually take some tangible steps to address the apprehensions. As stated earlier, Beijing seems slightly more flexible in its negotiations, but whether this is a short term trend (which many would argue is a consequence of Malaysian PM Mahathir Mohammad’s straight talking with China) or not remains to be seen.

China may be further compelled to change its approach towards overseas economic investments after the recent electoral rout of Abdulla Yameen (outgoing Maldivian President), considered to be pro-China. One trend which is clearly emerging, as was evident from the electoral verdict of Maldives, was that leaders (many of whom position themselves as strongmen) blindly following Chinese diktats for short term economic goals does not go down well with ordinary citizens, and China may need to address its perception problem by looking beyond Cheque book Diplomacy.

Rule of Law: the case of open texture of language and complexity

This article by Matt McManus (@MattPolProff) recently published at Quillette made me remember H.L.A. Hart’s theory of law and the problems derived from the open texture of language, a concept borrowed by him from Friedrich Waismann, an Austrian Mathematician and philosopher of the Vienna Circle. Many authors would rather distinguish “open texture” from vagueness: being the latter a proper linguistic matter, the former is related to the dynamic of the experience. As Kyle Wallace summarized the problem: “certain expressions are open textured simply because there is always the possibility that in some new experience we may be uncertain whether or not the new expression is applicable.”

However, Brian Bix, in his “H.L.A. Hart and the ‘open texture’ of language,” argues that, despite the concept of “open texture” being a loan from Waismann’s philosophy, the use gave to the term by Hart is not derogatory at all. With respect to Hart’s point of view, the “open texture” of the law is rather an advantage, since it endows the judges with a discretionary power to adjust the text of the law to the changing experience.

Concerning individual liberty, the laudatory qualification of the open texture of the law made by Hart and Bix might be shared by the jurists of the Common Law tradition, but it hardly would be accepted by anyone from the Civil Law System. According to the former, every discretionary power enabled to the judges helps to prevent the political power from menacing individual liberties, while, following the latter, the written word of the law, passed by a legislative assembly according to constitutional proceedings, is the main guarantee of individual rights.

But the subject of the open texture of the language of the law acquires a new dimension when it is related to the coordination problem derived from the limits to knowledge in society. As it was distinguished by F. A. Hayek in the last chapter of Sensory Order, we could talk about two types of limits to knowledge: the relative and the absolute. The relative limit to knowledge depends upon the sharpness of our instruments used to gather information, whereas the absolute limit to knowledge is sealed by the increasing degrees of abstraction that constitute every classification system. Since every new experience demands the rearrangement of the current system of classification we use to order our perception of reality, the description of this feedback process requires a supplementary system of classification of a higher level of complexity. The progress of the subject of knowledge into higher levels of abstraction reaches an unconquerable limit when he is tasked with the full study of himself.

Thus, we could ascertain that the judiciary function would be enough to fulfill the problems that could arise from the open texture of law, since the judge pronounces the content of the law not in general terms, but in concrete definitions in order to solve a case. In this labour, the judge not only applies the positive law, but he might “discover” abstract principles that become relevant in order to the given new experiences that begot the controversy over the content of the law he is due to solve. This function of “immanent critique” of the positive law by the judiciary system is well discussed by F. A. Hayek in the fifth chapter of his Law, Legislation and Liberty. Since the judiciary function solves in every concrete case the coordination problem derived from the fragmentation of knowledge in society, the open texture of the law does not make it opaque to the citizens.

That notwithstanding, the open texture of the law remains as a systemic limit to the legislative assemblies to define the whole content of the law. Thus, since the whole content of the law can only be achieved in a given concrete case by a judge solving a particular controversy, every central planner would have to accomplish his model of society not through decisions based on principles, but on expediency. Central planning and rule of law will be always set to collide. In this sense, the concept of open texture of the law might work as a powerful argument for the impossibility of every central planning to be performed, sooner or later, under the rule of law.

Nightcap

  1. The science war Peter Boettke, Coordination Problem
  2. On wider access to culture Chris Dillow, Stumbling & Mumbling
  3. Spaceship Earth explores Culture Space Robin Hanson, Overcoming Bias
  4. The liberal dream is freedom plus groceries (and that’s okay) Brad DeLong, Grasping Reality

A Millennial’s New Perspective on Home Ownership

The last few years I’ve loudly protested that home ownership is overrated; it’s a bad investment plus lots of responsibility. And yet, this summer my fiance and I bought a 100 year old house on the south shore of Long Island.

Yes, I have lost my mind.

I basically stand by my earlier position, but with greater nuance. Owning a home is a complicated undertaking. But it’s given me a greater appreciation for the nuance involved in managing real estate.

Home ownership is a great big Gordian knot of inter-dependencies. It’s massive set of knowledge problems wrapped in externality problems.There’s a massive role for local knowledge which means policy makers’ attention should be less focused on things like home ownership rates, and more on guiding the right people into the right places to take advantage of that local knowledge.

With local knowledge comes local politics. I don’t know anything about local politics, but expect more posts about what’s going on in my town hall over the next few decades.

So what have I learned in this first month of home ownership?

  • There’s something to be said about pride in ownership

It’s still a real trip to turn on my lights in my kitchen so I can do my laundry in my laundry machines. I didn’t think I’d enjoy it this much. The endowment effect is real. One effect has been to increase my interest in contributing to local public goods via civic engagement and other routes.

I haven’t been to a town hall meeting yet, but I plan on going to one tomorrow. I suspect it will be awful. But I’m walking distance, so I’ll be a little bit drunk.

  • The real estate market has some serious frictions

This might be obvious, but it’s interesting. There are artificial and natural obstacles to the efficient use of real estate. Transaction costs are significant and property rights issues are hairy.

Buying a house is a complicated transaction and going through the process has really made clear to me how difficult it is to commodify land. Each piece of land has a unique location and history. Information asymmetries are substantial. The neighborhood you’re buying into is utterly out of your control. Put simply: Amazon won’t be selling real estate any time soon.

Part of the reason I’m happy with buying a house is that our rent had been increasing about $100/month/year. Land lords absolutely take advantage of real estate frictions to charge as much as they can. The alternative (which I chose) is to lock-in to a specific property.

  • The required knowledge to operate a home is significant and difficult to evaluate.

It takes a lot of knowledge to manage a house. If I were to take a wild guess (at this non-quantifiable variable), I’d say that between 5% and 50% of a homeowner’s brain is necessary to operate a house. Even if you bring in experts to do everything, evaluating those experts is a lot of work.

There are repairs and upgrades to make, and my formal education prepared me for exactly none of those projects. On the other hand, I’ve got the Internet. Without YouTube and Reddit I’d be a half dozen unlucky mistakes away from homelessness.

On the other other hand, I’ve learned a ton of stuff I’ve got no use for. Like how to grow asparagus (which it turns out it isn’t worth doing except out of boredom).

You can’t evaluate knowledge until it’s too late. And there’s more to learn than you ever will, so you have to make mistakes. It’s true of home ownership and it’s true of life more generally.

  • Gardening is a real trip.

In History of Economic Thought professor Gonzalez shared a story about two economists meeting in Switzerland during WWII. On showing his vegetable garden to the visiting economist, the visitor said “that’s not a very efficient way to grow food,” to which the gardener said, “yes, but it’s a very efficient way to grow utility.”

I’ve wanted to garden for some time, but the market for gardens is thin. So now I’m starting with almost no useful experience. My public stance has been that lawns are boring and dumb. But figuring out how to manage a little ecosystem ain’t easy. I now get why someone would just put in a lawn and be done with it.

At my old apartment complex the entire ecosystem was made of: humans, trees, lawns, cockroaches. I suspect the cockroaches did so well because all their competition was poisoned away. As an emergent order guy, I’m not really into that. But I get it now. In the same way the king wants everyone living in neat little taxable rows my life would be easier if I could just slash and burn all the complexity out of my yard.

Tl;dr: My biggest surprise as a new home owner is just how big a cognitive load owning a house is. You hear homeowners talk about how much work it can be, but I think it’s rare to hear someone talk about how much know-how is required.

Given the capacity to generate externalities, I’m a bit surprised that there isn’t more public policy devoted to issues of home ownership* (beyond subsidizing finance and increasing barriers to entry). I supposed I’ll learn a lot more about these issues as I learn about local politics.

*That isn’t to say I think it’s a good idea to get the government involved in trying to tell people how to go about the business of daily life. I think homeowners are (basically) doing fine left to their own devices.

Nightcap

  1. Artificial Intelligence: How the Enlightenment ends Henry Kissinger, the Atlantic
  2. What if we have already been ruled by an Intelligent Machine – and we are better off being so? Federico Sosa Valle, NOL
  3. We are in a very, very grave period for the world Henry Kissinger (interview), Financial Times
  4. What should universities do? Rick Weber, NOL