Bitcoin After 10 Years

The end of this month (31 October 2018) will mark the 10th anniversary of the online posting of the now-famous white paper by “Satoshi Nakamoto” outlining the concept of “Bitcoin: A Peer-to-Peer Electronic Cash System.” This is an opportune occasion to compare what Bitcoin has achieved with what Satoshi wanted to achieve. While Bitcoin’s rise to a market valuation of over $100 billion is certainly a remarkable accomplishment of one sort, the founder had other aims.

Three problems with the status quo

In announcing the new project in February 2009 Satoshi emphasized three institutional problems with the status quo payment system that Bitcoin would address. First, inflation from central banks that issue fiat money:

The root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust.

Second, a lack of privacy and security from commercial banks:

We have to trust them with our privacy, trust them not to let identity thieves drain our accounts.

Third, the high cost of bank-mediated payments:

Their massive overhead costs make micropayments impossible.

How well has Bitcoin addressed these three problems?

More From Ed Calabrese on Environmental Regulation

University of Massachusetts toxicologist (and Cato adjunct scholar) Edward J. Calabrese has arrived.  On October 3, he testified to the Senate Subcommittee on Superfund, Waste Management, and Regulatory Oversight, a part of the larger Committee on Environment and Public Works, chaired by John Barrasso (R-WY).

Calabrese was asked for his expert opinion on a draft EPA proposal to consider alternative regulatory models, including ditching the “Linear-No Threshold” (LNT) model that it employs, as does almost every other regulatory agency on earth.  You can read about EPA’s proposal here.

The LNT model assumes that the first photon of ionizing radiation (or the first molecule of a carcinogen) is capable of inducing a genetic mutation (i.e. altered DNA) that can be then transmitted to future generations.

Many years ago, Calabrese went looking for the scientific basis for the LNT, for it ran counter to what he was finding in his toxicological research—that low doses of some toxins or ionizing radiation may actually confer benefits. That, of course, is also the basis for much of modern chemical pharmacology.

Try as he could, and he tried for years, he could not locate the seminal science that gave rise to the LNT.  But he did find its progenitor, Hermann Muller, who claimed to have induced heritable point mutations with X-rays in the fruit-fly Drosophila. But where was the data and the peer-reviewed study?  Muller did author a brief article in Science on July 22, 1927, but, as Calabrese notes in his brand new paper, “He made this gene mutation claim/interpretation in an article that discussed his findings, but failed to include any data.”  The Science article said the data would be in a subsequent publication.

In fact, the data underlying what may have been the most important claim in the history of regulatory science, were never published in a peer-reviewed journal. 

Nonetheless amidst public concern about atomic radiation, the National Academy of Sciences formed the Biological Effects of Atomic Radiation (BEAR-1) panel, which reported its findings in Science in 1956.  Muller was obviously highly influential, and the Science report clearly established the LNT:

Any radiation dose, however small, can induce some mutations. There is no minimum amount of radiation dose, that is, which must be exceeded before any harmful mutations occur.

Calabrese documents that Muller’s good friend and another Drosophila geneticist, Edgar Altenberg, confidentially challenged Muller’s interpretation that he was inducing point mutations.  Rather, the very large doses of x-rays that Muller subjected the fruit flies to was simply knocking out wholesale portions of the chromosomes. 

But Altenburg never went public with his criticism.  Perhaps, Calabrese speculates, it was because of personal loyalty and a deep relationship.  When Muller attempted suicide in 1932, rather than addressing his family, his final note was to Altenburg. Muller and Altenburg ultimately lived until 1967, dying within months of each other.

Muller’s Science publication allowed him to claim research primacy, which landed him both prestige and the eventual 1946 Nobel Prize in Physiology or Medicine.

That prize validated Muller’s hypothesis and ultimately enshrined the LNT model as gospel, and it spread beyond ionizing radiation to other carcinogens and mutagens, as well as to many toxic chemicals in which, literally, the dose makes the poison. In Calabrese’s words,

…it has been Muller’s incorrect gene mutation interpretation and its legacy that created the LNT dose response model, leading to its recommendation by the US National Academy of Sciences in 1956…and then subsequently adopted by all regulatory programs throughout the world.

As a result of his recent testimony and publication, Calabrese may be changing the regulatory world. 

Unlinked References:

Biological Effects of Atomic Radiation Panel, 1956. Genetic effects of atomic radiation.  Science 123, 1157-64.

Muller H. J, 1927.  Artificial transmutation of the gene. Science 66, 84–87

 

Higher-paid Immigrants Forced to Wait Longer Due to Per-country Limits

In America’s strange legal immigration system, every country receives the exact same quota for green cards—7 percent of the number issued—regardless of how populous it is. When immigrants—mainly Indians, Chinese, Filipinos, and Mexicans—hit these “per-country limits,” nationals of other countries may pass them in line. This creates massive wait times for some immigrants, while cutting the waits for everyone else.

In 2018, for example, employer-sponsored immigrants with bachelor’s or master’s degrees waited more than three years for a green card if they were born in China, and about a decade if they were born in India, while those from other countries waited less than a year. Going forward, the Indian wait will stretch on for decades. The system is unfair, and for that reason alone, Congress should end it.

But the per-country limits are also economically senseless. They prioritize the right birthplace over the right skills. In the employer-sponsored categories, businesses could decide to pay Indian or Chinese applicants much more than other immigrants, yet Indian or Chinese employees would still suffer the same pointless discrimination. Discriminating based on nationality, rather than skills, undercuts the productivity of the United States and lowers the average wage of new immigrants to the United States.

To see if this was happening, I reviewed the data on approved labor certifications submitted by employers in the EB2 and EB3 employer-sponsored immigrant classifications to the Department of Labor (DOL). These labor certification applications contain the wage offered to the immigrant as well as their birthplace. Employers with approved labor certifications may petition for a green card on behalf of their workers, but the worker may only apply for a green card once a visa number is available under the quota. The Department of Labor validates the information provided on the labor certification in order to deal with concerns that immigrants are taking jobs from U.S. workers.

I used the latest DOL wage data from fiscal year 2018 to produce the estimates in Figure 1. To produce the weighted average wage with the country cap, I weighted the wages for each nationality by the number of their nationals admitted under the country caps in the EB2 and EB3 employer-sponsored categories. The average wage without the country cap is the average of the approved labor certification wages in 2018.[*] The weighted average wage with the per-country limits was $95,534, while the wage without it would be $107,126. The per-country limits depress the average wage for new employer-sponsored immigrants by $11,592.

Figure 1: Average Wages of EB2-EB3 Immigrants

“Eet eez, how you say — zee dumb law.”

Reuters reports (“French lawmaker proposes bill to outlaw mockery of accents”) that lawmaker Laetitia Avia of Emmanuel Macron’s ruling party intends to introduce a bill adding discrimination based on accent or pronunciation (“glottophobia”) to the list of banned discrimination categories. This came after an exchange between leftist party leader Jean-Luc Mélenchon and journalist Véronique Gaurel, born in Toulouse, in which he appeared to make fun of Gaurel’s southwestern accent and then called for the next question to be in “comprehensible French.”

I thought of researching whether France has enacted other vaguely framed laws aimed at soothing the sensibilities of the Toulouse region. But since there is no way to search for vague laws as a category in themselves, I soon realized that might set me off on — if you will excuse the expression — a Too-Loose-Law Trek.

Government Should Compensate Property Owners for Flood Damage It Facilitated

The Fifth Amendment’s Takings Clause provides that the government may not take private property without giving just compensation to property owners. It was woven into the thread of our founding document to ensure that the government will always be held accountable for its actions—or omissions—which result in landowners losing their property. Today, however, the government constantly attempts to circumvent its duty to compensate landowners, and too often courts let lend it a helping hand.

In the 1950s, the U.S. Army Corps of Engineers began constructing the Mississippi River Gulf Outlet (MRGO) navigational canal in Louisiana, turning a 650-foot channel into a half-mile wide waterway. To construct the canal, the Corps destroyed wetlands that were protecting the St. Bernard Polder, an expansive stretch of low-lying land, from hurricane flooding and resulting property damage. The Corps then failed to armor the banks of the canal from erosion or take any action to guard against the known risk of catastrophic damage to St. Bernard Parish (“parish” is the Louisiana name for a county).

When Hurricane Katrina struck Louisiana in 2005, a 25-foot storm surge went directly up the MRGO, destroying the levees and devastating St. Bernard Parish. Parish residents suffered unimaginable property loss, as their homes were utterly decimated by the storm. When the people of St. Bernard tried to hold the federal government responsible for its inaction, the U.S. Court of Appeals for the Federal Circuit denied their claim.

Still, the Supreme Court has established that if the government floods private property, it is a taking for which the Fifth Amendment requires just compensation. Cases such as Arkansas Game & Fish Commission v. United States (2012) consistently stand for this important principle. Numerous state courts agree on this issue and hold that when government inaction causes flooding and property loss, it constitutes a compensable taking.

The Federal Circuit, on the other hand, has tried to create a distinction between government action and inaction. The court’s opinion in this case is an attempt to rewrite takings jurisprudence, providing the government with a convenient escape route by which it can avoid the constitutional responsibility to compensate landowners for taking their property by not taking reasonable steps to prevent damage.

This loophole cannot be allowed to fester, so St. Bernard Parish has asked the Supreme Court to settle this issue definitively. Cato and ensemble cast of organizations and professors have filed an amicus brief supporting that petition. We argue that when the government, whether through action or inaction, takes private property, it has a distinct, well-established responsibility to compensate landowners.

Let’s Face It: US Policy in the Middle East Has Failed

The ongoing controversy surrounding the murder of a dissident Saudi journalist and Saudi Arabia’s brutal bombing campaign of a largely defenseless neighboring Yemen, which has come with an enormous human toll, have elicited increased scrutiny over the U.S.-Saudi alliance. The White House remains supportive of Riyadh, both diplomatically and with continued military aid. Republicans have offered mildly critical words for the Saudi regime, while an increasing number of Democrats are calling for a fundamental reassessment of the U.S.-Saudi relationship.

Such a reassessment is long overdue. Washington’s partnership with Riyadh has often been treated as sacrosanct, at least here in the nation’s capital. It should have been clear long ago that the Saudis are not good allies. In fact, they often act in ways that undermine U.S. interests. Backing one of the world’s most appallingly tyrannical regimes to the hilt has actually not been a net positive for U.S. national security or for stability in the region.

With any luck, the unfolding drama over the U.S.-Saudi partnership will extend beyond merely this troubled bilateral relationship to U.S. policy in the Middle East as a whole. The United States is deeply entangled in this region, with roughly 50,000 boots on the ground, dozens of permanent military bases and deployed assets, and a staggering sum of taxpayer dollars, essentially wasted. We are engaged in active combat operations in at least five countries across the Middle East and North Africa, bogged down in endless counter-insurgency campaigns, grisly counter-terrorism operations, and inglorious proxy wars. Washington also tasks Central Command with the responsibility of supporting, training, arming, and stabilizing various corrupt dictatorships, while we also try to put the squeeze on Iran.

A well-timed paper  by Chatham House’s Micah Zenko clarifies the failure of U.S. regional objectives, despite the gargantuan resources devoted to them. Zenko lists four primary objectives: (1) enhancing regional security and reducing political instability within Middle East governments; (2) preventing the emergence of terrorist safe havens; (3) ensuring the free flow of energy resources; and (4) enabling allies to build enough military capacity to defend themselves.

We have failed at each of these. Indeed, far from serving a stabilizing role, U.S. policy has rather plainly destabilized the region. The Iraq War upended the Middle East, empowered Iran, and fueled a new generation of jihadist terrorists. Washington bungled a series of changes in the Egyptian regime and helped (along with other external actors) fuel Syria’s civil war. The Obama administration’s Libya war created anarchy and new refugee flows. And our longstanding support for Saudi Arabia as a balance to Iran has not only failed to roll back Iran’s regional activity, but it has also emboldened Riyadh to act aggressively and pick fights with several of its neighbors.

Second, the effort to prevent terrorist safe havens is based on a false premise that territorial safe havens matter much at all. But even accepting the flawed premise, U.S. policies have multiplied the number of “ungoverned spaces” as incubators for terrorist groups. As Zenko points out, “troops maintained in foreign countries to prevent terrorism actually increase the probability that those troops’ home countries and global interests will experience terrorism.”

Third, there is good reason to believe that U.S. efforts to ensure the free flow of oil actually address a problem that largely solves itself. Each state has a strong interest in maintaining the flow of oil through the Persian Gulf, and Saudi Arabia is not the juggernaut it once was. Global energy markets have evolved over the last 40 years and are much more resilient and able to overcome supply shocks than in the past. At best, patrolling the Persian Gulf waterway deters a scenario - an attempt by Iran or some other party to close to Strait of Hormuz - that is already an extremely low probability event.

Fourth, the United States has certainly provided numerous authoritarian regimes in the Middle East with the military capability and know-how to protect themselves, but whether that has redounded as a benefit to U.S. interests and regional stability is another question entirely. Much of what we provided to Iraq ended up in the hands of ISIS. American made weapons have been used to ruthlessly suppress peaceful protesters, from Egypt to Bahrain. And U.S. military support for Saudi Arabia is currently enabling unspeakable war crimes in Yemen, in a conflict that has actually bolstered the position of Al-Qaeda in the Arabian Peninsula (AQAP).

Washington is terrible at self-evaluation. Our record in the Middle East is one of abject failure. Strangely, even when we have presidents that agree with that assessment to one degree or another, policy doesn’t change. President Obama wanted to shift U.S. focus and resources away from the Middle East to East Asia. It didn’t happen. Trump, in April 2018, said, “We’ve spent $7 trillion in the Middle East and we’ve got nothing for it. Nothing, less than nothing, as far as I’m concerned.” And yet his administration has increased overall troop levels in the region, doubled down on backing traditional allies, and revived an anti-Iran posture that harkens back to the Bush era neocons.

A real reevaluation of U.S. policy toward this region is imperative. After decades of trying, Washington has failed in its primary objectives. A new and enlightened policy framework should appreciate the dearth of serious threats to core U.S. security emanating from the region and should emphasize diplomacy as a way to manage relations with regional actors, rather than the military-centric approach that has failed so miserably.

Markets Can Calm Opioid Epidemic If Government Gets out of the Way

Yesterday, WBUR in Boston reported on a simple technology that could reduce the number of opioid deaths: fentanyl test strips. The strips can be used by drug users to test for the presence of fentanyl in drugs they buy on the street. A Brown University study found that,

Sixty-two percent of young adult drug users who participated in the study in Rhode Island dipped the thin, pliable strips into the cooker where they heated the powder, or into their urine sometime after injecting. Half reported a positive result — a single dark pink line emerging on the strip — signaling fentanyl.

Most changed their routine as a result in at least one of these ways: 45 percent said they used a smaller amount of the drug; 42 percent slowed down their use; 39 percent used with someone else who could help if they ODed; and 36 percent did a test amount before injecting the full syringe.

While these routine changes aren’t as effective at preventing overdose as not taking the drugs at all, they do reduce the risk of a fentanyl overdose. So why aren’t more of these potentially lifesaving strips in the hands of those who could use them? As WBUR recounts,

But few drug users have access to fentanyl test strips. They are not FDA-approved, so are not for sale in drugstores or other outlets in the U.S. A handful of harm reduction groups fund distribution through private contributions. Other groups say they’d like to order the strips from the Canadian manufacturer but can’t afford the cost: about $1 per strip.

As federal and state officials are scrambling to come up with policy responses to the opioid epidemic it seems they are ignoring one easy measure: get out of the way and let the market provide low-cost harm reduction tools to those who can benefit from them.

Written with research assistance from David Kemp.

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