We need to make it harder to buy pills in bottles of 50 or 100 that can be easily dumped out and swallowed. We should not be selling big bottles of Tylenol and other drugs that are typically implicated in overdoses, like prescription painkillers and Valium-type drugs, called benzodiazepines. Pills should be packaged in blister packs of 16 or 25. Anyone who wanted 50 would have to buy numerous blister packages and sit down and push out the pills one by one. Turns out you really, really have to want to commit suicide to push out 50 pills. And most people are not that committed.
My good friend Massimo Young recently moved to Kenya, where he is seeing what happens when you mix a little American ingenuity into a thriving but chaotic developing economy. In what I hope is the first of many blog posts, Massimo reports on just what it takes to succeed in the banking industry in Kenya. (Massimo does not have a financial interest in any of the companies discussed in his post, although he wishes he did!)
M-PESA: The Story of the Most Successful Bank in Kenya By Massimo Young
It’s not easy to do business in Kenya. Business people complain all the time that despite a wealth of opportunities, there are often major roadblocks to accomplishing much on the ground, especially at scale. In fact, Kenya ranks 121st out of 185 countries in the World Bank’s “Ease of Doing Business” survey.
On the other hand, there are some amazing examples in recent years of businesses that have managed to accomplish a lot very quickly. In particular, the wild success of mobile banking in Kenya has changed the way people use money here. Launched just 5 years ago, Kenya’s leading mobile money transfer service, M-PESA, now processes a total of about $5 billion in transactions per year, equivalent to an astounding 15% of the country’s GDP. Before it launched, only 14% of Kenyans participated in the formal banking sector. Today, about half the adult population uses M-PESA.
The environment has taken a back seat to the economy this election season. But timely new research looks at the intersection of politics, economics and the environment: the actual cost of environmental regulations.
The economic costs of environmental regulations have been widely debated since the U.S. began to restrict pollution emissions more than four decades ago. Using detailed production data from nearly 1.2 million plant observations drawn from the 1972-1993 Annual Survey of Manufactures, we estimate the effects of air quality regulations on manufacturing plants’ total factor productivity (TFP) levels. We find that among surviving polluting plants, stricter air quality regulations are associated with a roughly 2.6 percent decline in TFP. The regulations governing ozone have particularly large negative effects on productivity, though effects are also evident among particulates and sulfur dioxide emitters.
As the A.D. at West Virginia, here’s what Luck saw happening at home football games:
“People drinking far too much at pre-game parties and tailgate parties before games. Sneaking alcohol into games. Leaving at halftime or any point during the game to go back out to the tailgate to drink even more and come back into the game. … They would usually drink hard liquor — ‘get their buzz back on’ and come back into the game for the third quarter. And the police again would know exactly at what point in the third quarter these ‘throw-up calls’ would start to come over the radio.”
Math professor R. Andrew Hicks has come up with an amazing new rear-view mirror for the driver’s side of the car that eliminates blind spots. The secret is that standard mirrors are flat, but this one has subtle curves that greatly widens the field of view, but without being distorting. If you look at the photo accompanying the link above, it is amazing how much better the new mirror seems to be.
Alas, you won’t see Hicks’s mirror on many cars any time soon. U.S. regulations require that driver’s side mirrors be flat, and this mirror is not flat. So if you want one, you will have to buy it and install it on the car yourself.
My colleague Glen Weyl and Eric Posner at the University of Chicago Law School, argue in a recent white paper, that new financial products should be subject to regulatory approval analogous to that for new drugs by the Food and Drug Administration. Here is the abstract:
The financial crisis of 2008 was caused in part by speculative investment in sophisticated derivatives. In enacting the Dodd-Frank Act, Congress sought to address the problem of speculative investment, but merely transferred that authority to various agencies, which have not yet found a solution. Most discussions center on enhanced disclosure and the use of exchanges and clearinghouses. However, we argue that disclosure rules do not address the real problem, which is that financial firms invest enormous resources to develop financial products that facilitate gambling and regulatory arbitrage, both of which are socially wasteful activities.
A few years ago, a friend of mine who used to work on Wall Street told me that the only stock anyone needed to own was Goldman Sachs. He was of course half-joking (I sure hope this wasn’t the advice he was giving clients), but his point was clear: whatever price increases were happening out in the world, whatever profits were there for the taking, no matter the market, you could be fairly certain that Goldman was on the scene.
The image of Goldman Sachs as some sort of omnivorous, ever-present beast was perpetuated by Matt Taibbi in his 2010 Rolling Stone article, in which he dubbed the firm “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” And that was just the second sentence.
It would appear that the squid has since had a few of its tentacles lopped off, or at least been shrunken down to size. For only the second time since it went public in 1999, Goldman Sachs has posted a quarterly loss.
Did President Obama get the economics wrong earlier this month when he abandoned stricter air-quality rules, wagering environmentalist loyalty in a bid to avoid job losses from strict new ozone standards? Paul Krugman thinks so, calling the decision to wave off the EPA a “lousy decision all around.” But is Krugman right?
The short-run job-creating move, Krugman contends, would have been for Obama to promulgate the new ozone regulations, which would have forced firms in hundreds of counties across the country to replace and upgrade capital in order to comply with new, stringent pollution abatement requirements. He asserts that because the U.S. economy is in a liquidity trap, wherein conventional monetary policy is insufficient to induce firms to spend, the regulations could have accomplished what the Fed cannot. In such a “world of topsy-turvy,” as Krugman says, the usual rules of economics are thrown out, and even the “Broken Window Fallacy” ceases to hold.
Well then they probably wouldn’t make much money would they? Zing! No but seriously. A new paper by two law professors, Frederick Tung of Boston University and M. Todd Henderson of Chicago, proposes just that. Here’s the abstract (with a link to the full paper):
The authors are essentially proposing giving regulators stakes in the banks they oversee, by tying their bonuses to the changing value of the banks’ securities, theoretically giving them a motive to intervene when things look dicey. If the incentives are well designed, the authors argue, regulators would capture the benefits that accrue from making banks more valuable, and suffer the negative consequences when banks fail.
Jeff Mosenkis, a freelance producer with Freakonomics Radio, holds a Ph.D. in psychology and comparative human development. Government Safety Regulation: Kind Mother or Big Brother? By Jeff Mosenkis
On the same day last week, news stories broke about two different parts of government demonstrating two different ideological approaches to regulating consumer safety. In the first, the FDA came out with rules standardizing the labeling of sunscreen, after 33 years of deliberation.
Presumably, the reasoning behind making sure the claims on sunscreens are clear and uniform across different products (like the standardized nutrition information on food packaging) is to allow consumers to make better decisions for themselves. Let’s call this the Kind Mother approach.We are given information that strongly hints at which is the right choice, but ultimately are still able to decide for ourselves.
At the same time, the Consumer Product Safety Commission (CPSC) has directed its staff to draft regulations governing the safety of table saws. An estimated 40,000 people are injured every year when hands, fingers or other body parts find their way into the path of a table saw blade.
Trademarks are so significant in our economy that many firms and individuals register any mark they think may prove valuable. Which is why the system of private regulation of “skate name” trademarks among derby girls is so interesting.