Trump’s immigration success

It’s notorious that bureaucracies are hard to change from the top down.

He’ll sit here, and he’ll say, ‛Do this! Do that!’  *And nothing will
happen.*  Poor Ike—it won’t be a bit like the Army. He’ll find it
very frustrating.  — Harry S Truman

But Donald Trump has pretty much done that. He’s really in practice
cutting back immigration to just those people that the US allows in, and
cutting back which people the US allows in … all without getting
Congress to change the laws.

One of the more amazing bits is the shutting of the asylum pipeline that
people from Central America were using. For a while there, about
100,000 people a month were arriving from Central America and claiming
asylum, and due to the details of US immigration law, were “caught and
released” into the US. That was a significant fraction of the workers
coming into the US labor market. Needless to say, it caused apoplexy in
Trump supporters.

I’ll note here that I don’t know the details of asylum law, but given
the general violence in Central America, I wouldn’t be surprised if all
of these people qualified for asylum. What I would be surprised is if
this is different now than from any of the last 100 years.

But despite what one would think possible, Trump has managed to shut
this pathway off. I’d be interested in reading a clear discussion of
exactly how this was managed.

The rise of Trumpesque politicians

Megan McArdle notes that the rise of Trumpesque politicians in a variety of countries around the world disqualifies a lot of theories about why Trump became President, most of which focus on factors local to the U.S.

In fact, it’s hard to argue that any flavor of American identity politics can explain what has become a global phenomenon: the collapse of the formerly liberal left into two wings, one increasingly socialist, the other increasingly identity-focused; and the displacement of the formerly liberal right by unapologetically nativist, protectionist and populist upstarts.

She proposes that the Internet is the primary cause, both facilitating that populist bete noir, immigration, and the ability of outsider politicians to reach and mobilize the lower-middle-class types who most dislike immigration:

By making it easier to stay in touch with family back home, the Internet and cellphones have dramatically lowered the emotional cost of migration. They’ve also made it easy to disseminate successful strategies for evading border controls or to recruit new migrants, as the recent migrant caravan from Central America reportedly did, on Facebook and WhatsApp.

The Internet also let candidates such as Trump rail against those migrants. He has no trouble finding a platform now, but it’s hard to see how he could have gotten there without social media to turn him into a one-man broadcasting station. One can’t really imagine him writing a serious book such as Barry Goldwater’s “The Conscience of a Conservative”; devoting a substantial portion of his own fortune to a political campaign, a la Ross Perot; or spending patient decades building up a grass-roots organization, as Ronald Reagan did.

And, for that matter, the Internet helps insurgent candidates avoid the official gatekeepers in the the party structure.

Ed Dolan goes into more detail on the lower-middle class that tends to support this sort of candidate, whom he calls “jams”. He notes their primary interests:

Like most people, jams vote more on values than on policies. In public opinion polls, they emphasize four values above all: Family, fairness, hard work, and decency. Equality and freedom are also positives for them, but farther down the list. […] A strong majority of jams think that there is never any excuse for breaking the law and that those who do so deserve punishment rather than sympathy.

Note that traditional leftist thought has prioritized fairness and traditional rightist thought has prioritized freedom, and the jams emphasize neither.

Dolan makes some political predictions for the next few years:

Brexit and Trump voters are not at the very bottom of the economic pyramid, but the angriest are not always the worst off. Jams remember, or imagine remembering, an industrial golden age in which things were better. Theirs, he says, is “the rage of dispossession rather than the rage of unique hardship.”

Politicians are visibly responding to that anger. In their fear of again ending up on the wrong side of populist voters, continues Ganesh, “the politico-media world is going along with a reordering of moral priorities whose principal victims stand to be the quantifiably, unmistakably poor”. The jams’ sheer weight of numbers, when multiplied by the force of their anger, is not something that the poor can equal or that politicians can withstand.

Closer estimates of a Pigovian tax on carbon dioxide emissions

Revised 12/31/2018.

Continuing the previous discussion, I am attempting to make a more accurate assessment of a Pigovian tax on CO2 emission than my previous estimate, which was based on a number pulled from a Wikipedia article. It turns out that “social cost of carbon” is a known term for the externalized cost of CO2 emissions, and can be easily searched for. People have been working on getting good estimates of the number. The most plausible reference I’ve found is Valuing Climate Damages: Updating Estimation of the Social Cost of Carbon Dioxide by the (United States) National Academies (of Sciences, Engineering, and Medicine).[1][2]

That study discusses all of the uncertainties involved in calculating the social cost. It turns out that one of the factors with the most influential uncertainty is the discount rate — the amount we mark down costs that will be incurred in the future. This is really important because the damage from CO2 emitted today continues for many years. If you skip over all the discussion of uncertainties and go directly to the summary on page number 30 (page 49 of the PDF), the cost ranges from $10 to $212 per (metric) ton of CO2. It looks like $100 can be taken as a reasonably conservative figure and $200 as a seriously conservative figure. So let us do our analysis using a carbon tax of $200/ton of CO2.

And here is where I made my mistake in the previous version: 1 ton of CO2 contains 0.27 tons of carbon, so a tax of $200/ton of CO2 is $740/ton of carbon. Since all of the following calculations are done in tons of carbon, the cost numbers are 3.7 times higher than my incorrect version.

From this we can calculate what the carbon tax would be on specific types of energy: A ton of coal produces about 8100 kWh, so the tax on coal-generated electricity would be 9.1 cents/kWh. A gallon of gasoline weighs about 6 pounds, and most of that is carbon, so the tax on it would be $2/gallon. The conventional retail unit of natural gas is the “CCF”, which weighs 0.0026 ton (mostly carbon), so the tax on it would be $1.95/CCF.

Looking at my utility bills reveals some interesting patterns. My electric bill for November is $62.79 for 250 kWh, so it would increase by $22.75, which is a 40% increase. But within that $62.79, only $28.49 is for “supplier charges”, i.e., the rest is to pay for the distribution system that carries the electricity to my house. The price of the electricity itself is 11.4 cents/kWh, and the carbon tax would be an additional 80% on that. That could be significant for industrial users. (Although much of the electricity consumed in New England is hydro power and so would be tax-free.)

My gas bill for November is $52.00 for 29 CCF. The bill converts the 29 CCF into 30 therms, and a therm is effectively 1 CCF of natural gas of standardized composition. So the carbon tax would be $58.5, an additional 112%. But again, the supply cost of my natural gas is only $16, 53.5 cents/therm, so for large-scale consumption, the price increase would be 365%.

So what we see is that a Pigovian tax on CO2 is a substantial incremental cost for home consumption, but a seriously large increase for industrial users.

It’s not immediately clear what fraction of CO2 emissions would be eliminated by a carbon tax of this magnitude. Unexpectedly, that is one of the benefits of the carbon tax approach — it eliminates emissions where the damage caused exceeds the benefits of the emitting activity, and continues emissions where the demage caused is less than the benefits of the emitting activity, and it’s not clear beforehand which activities fall in wich category. But in 2013, the Congressional Budget Office estimated that a carbon tax of a mere $20/ton CO2, increasing 5.6% per year afterword, would lower carbon emissions by about 8 percent. It seems likely that a tax of $200 a ton will cut emissions a lot more than that, though it’s unlikely to reduce it by 80 percent.

How to sell fixing climate change

What I find fascinating about a “Pigovian” carbon tax is that if it is implemented in a “revenue neutral way” (reducing the total take of other taxes as much as the carbon tax raises), it’s a much easier sell than other approaches to mitigating climate change because you can tell the voters how bad it can get — a 30 cent per gallon tax on gasoline and proportionate taxes on other carbon-based energy sources, with the tax rate fixed by the more-or-less computable cost of damage caused by CO2. With most other approaches, the political task is harder, getting permission from the voters for an open-ended authorization to “fix the problem” with no limitations on what might be required.

An array of US federal government agencies recently came out with an assessment of the costs of climate change if we continue with “business as usual”. According to press reports, the rough estimate is the costs rise to 10% of the GDP by the year 2100. Not horrendous, but given that the US GDP is likely to be around $100 trillion per year in 2100, that’s $10 trillion per year, which is in the neighborhood of $30,000 per capita per year.

Less well publicized is what it would cost to avoid climate change, but some friends supplied me with links to a number of studies ([1][2][3]). Those are even rougher, but by 2100, it’s about 5% of the GDP. So the net savings from avoiding climate change is something like $5 trillion per year, which is enough money we really should set about capturing that profit.

So far, none of my readers will be surprised. But it struck me that a particularly effective approach would be to adopt a “Pigovian tax“. Sadly, that’s not a tax in Pigovia, but rather a tax on an activity that compensates for the “externalized” costs of the activity, the harm that is caused to people who aren’t parties to the activity. The cool thing about a Pigovian tax is that if it’s set correctly (to the cost of the harm to others), it causes the Free MarketTM to reduce the amount of the harmful activity to the amount that is “efficient”, that is, optimal when you total up the costs and benefits to all of society.

There are several advantages to this approach: (1) Since it discourages (in this case) emitting CO2 directly by charging money, there is no need for further regulations on CO2-emitting activities, which would inevitably be technically complex and subject to political wrangling. (2) Since it financially rewards any reduction of CO2 emissions, it fully motivates everybody to devise and use new ways of reducing emissions, without having to convince a bureaucracy to require that everybody use it. (3) It properly handles the rare, annoying case when the total benefits of emitting CO2 exceed the total costs, because in that rare situation, the person doing it will still have a net profit after paying the tax.

The crux of a Pigovian tax is to get a close estimate of the externalized costs. In theory, this is a knowable number, but of course it’s harder in practice. Conveniently for me, Wikipedia presents estimates of this “social cost of carbon“, and we can take $100 per ton of carbon emitted (= $27 per ton of CO2 emitted) as a plausible estimate.

From this we can calculate what the carbon tax would be on specific types of energy: A ton of coal produces about 8100 kWh, so the tax on coal-generated electricity would be 1.2 cents/kWh. A gallon of gasoline weighs about 6 pounds, and most of that is carbon, so the tax on it would be 30 cents/gallon. The conventional retail unit of natural gas is the “CCF”, which weighs 0.0026 ton, so the tax on it would be 26 cents/CCF. (My gas bill for October was 30 CCF, so the tax would be an additional $7.80 on a bill of $52.00.)

What I find fascinating about a Pigovian carbon tax is that if it is implemented in a “revenue neutral way” (reducing the total take of other taxes as much as the carbon tax raises), it’s a much easier sell than other approaches to mitigating climate change because you can tell the voters how bad it can get — the price increases listed above. With most other approaches, the political task is harder, getting permission from the voters for an open-ended authorization to “fix the problem” with no limitations on what might be required.

(How much money is involved? The annual consumption of gasoline in the US is 150 billion gallons, on which the carbon tax would be $45 billion. The annual consumption of coal-generated electricity in the US is 2 trillion kWh/year, on which the carbon tax would be $24 billion. The annual consumption of natural gas in the US is 27 trillion CF, on which the carbon tax would be $70 billion. The total of these is $139 billion, which is small enough that it would be easy to make equal reductions to e.g. the Social Security tax.)

A history of race in the United States, and wondering what comes next

Walter Russel Mead writes a history of the entire length (400 years come next July) of race relations in the United States. He focuses on a series of “compromises”, changes in the social/political/economic rules that accommodate changes in the relative power of various factions.

Although I wish he would have gone into detail about the era of imposition of Jim Crow, 1876 to roughly 1910. As far as I can tell, this wasn’t simply a reclaiming of the power of Southern whites but rather a gradual loss of power of Southern blacks, because the process took decades. I suspect the major cause was the huge bulge of immigration of relatively poor whites from Europe, and while the immigrants weren’t treated well in the US, they slotted into the socioeconomic totem pole above blacks.

He considers the current situation the “Compromise of 1977”, which centered on removing “barriers to access” — blacks were now allowed to work for, especially, governments and large, stable businesses. The critical point is that this sort of access can be provided by bureaucratic policies like “affirmative action”, without having to overcome the informal cultural barriers which tend to keep blacks out of employment in many smaller firms.

This ties in to one of Mead’s broader concerns, that the economy is no longer dominated by large, stable firms that offer lifetime employment and a quasi-socialist menu of benefits, his so-called “blue social model”. OTOH, this history is already six years old and we’re now seeing low unemployment that’s likely to last a long time, so the new “social model” is probably emerging now, and that will probably bring about a new “compromise” in the racial situation.

The collapse of Venezuela

I’ve seen little analysis of the disaster in Venezuela. This article is one of the few that tries to sort out the mechanics of the failure. The consensus is that the problems are a populist revolt and what might be called “socialism done in the worst possible way”.

But I wonder if the problem is deeper than that. It’s been noted that Venezuela’s petroleum industry requires a high level of reinvestment of the proceeds to remain productive, and that Chavez robbed those funds to keep the masses happy when the price of oil declined.

What does that reinvestment mean? Most of that money will go to paying the people who labor to maintain the petroleum infrastructure. That is, a lot the money from oil will go to paying the workers in the oil company.

My suspicion is that when Venezuela struck oil, it had to import a lot of specialist workers to exploit the oil, but then a great deal of the export earnings went to paying those workers. This looks good in the national statistics, raising the average income, but if you look at those workers as a separate class, they’re getting most of the money. The class of people who were in Venezuela before may have seen little of the money, and indeed, the net profits from P.d.V.S.A. may have been low except when the price of oil was very high.

The linked article notes that Venezuela had a serious poverty problem before Chavez, and I suspect it had a vicious class divide — the recently immigrated petroleum workers, consuming much of the oil export earnings, and the old-time Venezuelans, who were getting little of the money. Chavez took the money from the carpetbagging oil workers and gave it to the masses. But that wasn’t sustainable.

What to fear from automation

The pundits talk a lot about the threat of automation. But they don’t look at historical examples and so they mis-estimate the consequences.

Farm work

In the late 1800s, inventors started building what we now know as “farm machinery”. Between then and the 1940s, the fraction of people employed on farms plummeted, to the point that less than 2% of the population now does farm work.

The former farm workers didn’t become unemployed, but rather moved to cities to work in offices and factories. The time when workers couldn’t move to the cities — the 1930s — the progress of farm automation stalled: the pay of farm workers decreased to essentially subsistence, but they remained generally employed, and farmers didn’t buy any additional machinery to replace them with.

Factory work

The invention of the modern factory around 1900 was a remarkable change. Not only was a lot of work automated, what remained was radically “de-skilled”. What used to take a number of trained artisans now could be done with a building full of unskilled laborers. In many cases, they didn’t even need to know English.

This may not have been good for the employment of artisans, but it was really good for the employment of unskilled laborers, to the point that the U.S. imported them by the millions.

(Note this is an example where automation improved the job prospects of low-skilled workers.)

Household work

During the first half of the 1900s, household work was automated dramatically. The result was that domestic servants essentially vanished as an employment category, and that a tremendous fraction of the lives of adult women was freed.

The result was not mass idleness of adult women, but a huge movement of them into the job market. This made possible, or was, the modern feminist movement.

The observed pattern is that large-scale automation of an area of work doesn’t cause mass unemployment. Automation will often push down wages in a sector, but if there isn’t alternative employment for those workers, the result will be not unemployment, but that their wages go down to the point that automation isn’t profitable.

On the other hand, automation is always good for the customers, as they get the goods for less. From the point of view of the populace as a whole, it’s like a universal basic income — they can suddenly get additional stuff for no extra money.

Automation isn’t a threat to society, but it is a threat to those whose jobs are being automated.

Partisanship is intense enough that Americans are shifting their identities to match

Researchers are starting to see Americans are remarkably flexible regarding their religion and even their sexuality, and on the whole, Americans shift these supposedly fixed parts of their “identity” to match their politics:

There was more inconsistency among answers to these types of questions than I would have expected. For example, about a quarter of people who identified themselves as born-again Christian in at least one of the three interviews either had not described themselves that way in a previous interview or stopped describing themselves that way in a later interview. Nearly half of respondents who identified themselves as lesbian, gay or bisexual at some point during the three interviews did not identify themselves that way in all three (meaning that some people stopped identifying as LGB, while others started to after not having done so at first).