September 25, 2020 4:18PM

The One Policy Proven to Help the U.S. Semiconductor Industry (and Hamstring China) Is the One Nobody’s Mentioning

A few weeks ago, I noted that Congress had just earmarked billions of taxpayer dollars for American semiconductor manufacturers to counter the alleged (and thus far empty) national security threat posed by heavily‐​subsidized Chinese competitors. The U.S. subsidies, as you can imagine, have been cheered by both conservative fans of industrial policy and the semiconductor industry, which just released a new report on how “government incentives” will (obviously) help (historically healthy and productive) U.S. semiconductor companies somehow “turn the tide” against China. A recent writeup in The Protocol sets out the industry’s response to critics like me:

[Semiconductor Industry Association CEO John] Neuffer sought to address some of the biggest criticisms of the plan. “There’s this concern that it’s a race to the bottom with subsidies,” he said, referring to the idea that China and the U.S. could keep upping subsidies ad infinitum. “Well, that race began 20 years ago, and we’re still standing at the starting line saying ‘Gee, I wonder if we should get into the race.’ ”

Well then. Now, leaving aside the questionable (at best) efficacy of both the current Chinese subsidies and past U.S. government support for our semiconductor industry, as well as the economic and legal (trade law) concerns raised by the “global subsidies race” more broadly, what’s perhaps most striking about the current push by the politicians, the economic nationalists, and the lobbyists to bolster U.S. chipmakers is the absence of any discussion of one actual policy that has been actually proven to supercharge the industry and is being hobbled by the federal government as we speak: high‐​skill immigration. Indeed, a new Georgetown University report underscores the importance of immigration for the semiconductor industry, finding that–

  • Approximately 40 percent of high‐​skilled semiconductor workers in the United States were born abroad. India is the most common place of origin among foreign‐​born workers, followed by China.

high-skill workers by country of origin
  • In 2011, 87 percent of semiconductor patents awarded to top U.S. universities had at least one foreign‐​born inventor. Between 2000 and 2010, the United States enjoyed a net influx of about 100,000 electrical engineering patent holders, while India and China saw large net outflows.

EE Inflow Outflow
  • International students comprise around two‐​thirds of graduate students in electrical engineering and computer science, the top educational fields feeding into the U.S. semiconductor industry among green card applicants. The number of American students enrolled in semiconductor‐ related graduate programs (around 90,000) has not increased since 1990. In that same period, the number of international students nearly tripled from 50,000 to 140,000.

International Students
  • More than 80 percent of international Ph.D. graduates from semiconductor‐​related fields at U.S. universities stay in the country after completing their degrees. Stay rates are highest among Indian and Chinese doctoral recipients.

Stay Rates

Clearly, high‐​skill immigration (both workers and students) has been a boon for the American semiconductor industry — a finding consistent with analyses showing how educated immigrants boost U.S. innovation and productivity more generally. (As well as past work by the SIA.) By contrast, new research reveals that past high‐​skill immigration restrictions push U.S. multinational corporations to move their R&D activities offshore, to increase these activities in other countries (including in China), and thus to diminish the United States’ own innovative capacity. This outcome is particularly relevant for U.S. chipmakers and their current concerns about China: human capital is arguably the Chinese semiconductor industry’s biggest hurdle, and the Georgetown paper finds that “China has so far struggled to attract talent from the United States” and to retain that talent once it’s on the mainland. As such, “[l]arge reductions in the flow of talent between China and the United States would likely be welcomed by Chinese policymakers.” Indeed.

Unfortunately, the Trump administration and its allies are not just ignoring high‐​skill immigration, but actively working to restrict it further — even as COVID-19 hasn’t boosted unemployment in the U.S. tech sector. Given these facts, as well as the alleged threat facing the U.S. semiconductor industry (and by extension national security), you’d think that the ones making such allegations — in Congress, the industry, and the policy community — would at least mention immigration instead of just cheering for subsidies.

Or maybe the China threat just isn’t as big as they claim?

September 25, 2020 4:15PM

America’s Foreign Share Is In The Bottom Third Among Richest Nations

America’s immigrant share of its population stagnated under President Trump for multiple years for the first time since the Great Recession—possibly for the first time during an economic boom since the 1960s. This fact should be assessed against a backdrop in which the United States already had one of the most restrictive migration policies in the world.

New statistics from the United Nations for 2019 confirm that the United States ranks in the bottom third among wealthy countries both in terms of foreign‐​born share of its population and per‐​capita increase in foreign‐​born population. President Trump’s closure of the borders in 2020 has only added restrictions to an already extremely closed system.

Many people call the United States the “most generous country in the world” on immigration, but while it does have the most immigrants in an absolute sense, America is also one of the wealthiest and most populous countries on earth, so a proper comparison would control for wealth and size.

According to the United Nations, 15 percent of the U.S. population was foreign‐​born. Unlike the Census Bureau estimates, the United Nations includes Americans born abroad to American parents who are not “immigrants” in the legal sense since they became U.S. citizens by birth, but for cross‐​country comparisons where citizenship laws vary, it’s necessary to include them.

Of the 217 countries and semi‐​autonomous territories that the United Nations provides population counts for (plus Taiwan), the United States ranks 61st in the world for both foreign‐​born share of its population and its per‐​capita increase in its foreign‐​born population from 2017 to 2019.

As seen in Table 1, among the 57 countries or territories with a per‐​capita GDP over $20,000, the United States ranked 40th—or the 30th percentile—for foreign‐​born share of the population. The average wealthy country had a foreign‐​born population share of 30 percent, double the U.S. share. The United States similarly ranked 39th for per‐​capita increase in its foreign‐​born population from 2017 to 2019. Its population grew 0.27 percent from foreigners compared to an average of 1.8 percent for all wealthy countries.

Other countries maintain foreign‐​born shares far higher than the United States. The United Arab Emirates had the highest foreign‐​born share in the world at 88 percent. Other Gulf states—Kuwait and Qatar—also had most of their populations born abroad. A number of Island nations and city states rank highly on this list, but Australia and Switzerland both had foreign‐​born shares of about 30 percent. Israel, New Zealand, Canada, and Austria had between 20 and 23 percent.

Its worth noting as well, as seen in Figure 1, that the United States is “cheating” even to rank as highly as it does because so many of its immigrants are illegally present in the country. In other words, if the U.S. had enforced its laws as written, it would have an even smaller foreign‐​born population. About a fifth of the U.S. foreign‐​born population was born abroad, according to the Pew Research Center estimate, so taking out those admissions would drop America even further back. Of course, some immigrants live illegally in other countries, but none to the same extent as the United States.

The idea that America is the world’s “most generous” country on immigration is among the world’s most revealing phrases. Yes, it’s misleading even in the sense that it is intended, but more importantly, America doesn’t need to be “generous” to those coming to enjoy the American dream. It just needs to not round them up, not deport them, and not keep them out. That’s not “generosity” or a handout. That’s basic respect for the liberty of other human beings.

As I’ve written before, it is also in the country’s self‐​interest not to prohibit foreigners from living and working in America. Allowing people to freely move and work where they want is not charity. It is an expansion of the free market and allows people to contribute to the economic prosperity of the country and expand the pie for everyone. Unfortunately, our country’s policies—even before Trump—don’t reflect these principles. It’s long past time that they should.

September 25, 2020 4:12PM

Response to Scott Keller on Qualified Immunity and the Common Law

The doctrine of qualified immunity protects public officials from civil liability, even when they break the law, unless a civil rights plaintiff can show that the defendant violated "clearly established law." This rule is nominally an interpretation of our primary federal civil rights statute, Section 1983, but that statute says nothing about any immunity, qualified or otherwise. And the recent scholarship of William Baude, which Justice Thomas himself has relied on in calling for qualified immunity to be reconsidered, argues that the background common law against which this statute was passed did not include anything like the across-the-board defense for all public officials that characterizes qualified immunity today. Rather, the general rule was strict liability for public officials who committed constitutional violations, with "good faith" only relevant to the extent that it was an element of particular torts; there was not, however, a generally applicable good-faith defense for state actors who acted unlawfully.

But a forthcoming article by Scott Keller, partner and appellate practice chair at Baker Botts, challenges this conclusion. His article, titled Qualified and Absolute Immunity at Common Law, focuses on four 19th century tort treatises, as well as various 19th century Supreme Court decisions, and concludes that "19th century common law did recognize a freestanding qualified immunity protecting all government officers’ discretionary duties—like qualified immunity today." He does note, however, the Court's modern immunity doctrines nevertheless depart in several ways from the 19th-century common law, most notably in that "qualified immunity at common law could be overridden by showing an officer's subjective improper purpose, instead of 'clearly established law.'"

This article is an important and ambitious piece of scholarship, and at first glance, it certainly seems to at least complicate the question of whether there were any free-standing immunities around the time that Section 1983 was passed in 1871. For example, he cites Wilkes v. Dinsman, 48 U.S. 89, 129 (1849), which states that "a public officer, invested with certain discretionary powers . . . cannot be made answerable for any injury, when acting within the scope of his authority, and not influenced by malice, corruption, or cruelty." Various 19th century tort treatises seem to express a similar point -- that executive officials, acting in a "quasi-judicial" capacity (what we would today call "discretionary functions") generally cannot be sued unless acting with some improper motive.

An in-depth historical evaluation of Keller's article is beyond my capabilities here, so I'm not going to offer a definite conclusion on how much to take from this. It certainly appears that Keller has mustered a strong case, and I'll admit substantial confusion on how to reconcile some of his evidence with the historical sources discussed in Will Baude's article, which seem to suggest just as persuasively the opposite conclusion.

On a first look, one possible explanation for this apparent contradiction may be the fact that 19th-century constitutional law included far fewer limitations on public officials than exists today. The Bill of Rights, of course, did not even apply against state officials until the Fourteenth Amendment was passed, and it would take until the mid-20th century for the Supreme Court to incorporate most of those rights against the states. Therefore, in this context, saying that executive officers could not be sued unless they acted "with malice" doesn't necessarily imply that they were immune for constitutional violations -- because at least for state actors, there were few federal constitutional limitations on them in the first place.

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September 25, 2020 1:45PM

A Good Bad Idea from TikTok

The interim leader of TikTok, Vanessa Pappas, has just proposed that social media companies agree to warn one another about violent, graphic content on their platforms. Specifically, TikTok proposes a “hashbank for violent and graphic content” with a special concern about suicide videos. The company believes the hashbank and subsequent cross-platform suppression of the objectionable content would “significantly reduce the chances of people encountering it and enduring the emotional harm that viewing such content can bring.”

As it happens I came near some violent and graphic content this morning. A friend sent me a link to a BBC News story about “Cameroon soldiers jailed for killing women and children.” The embedded video, whose label says it “contains disturbing scenes”, apparently depicts the murders of two women and children. The video might be a candidate for TikTok’s proposed hashbank. Using the BBC video to fix ideas, let’s examine the costs and benefits of TikTok’s proposal.

Let’s begin with where TikTok is on solid ground. Some of their users are younger people and thus may be protected from extreme speech in ways that adults should not be. But preventing adults from seeing content they wish to see is paternalistic. But there’s another wrinkle here. Tiktok mentions people “encountering” objectionable content. The dictionary tells us to encounter is “to come upon or experience especially unexpectedly.” If I choose to see risky content, it may be surprising but the risk is part of the choice even if it turns out to be more than I would have wanted to see ex ante. Encountering content seems more like being algorithmically chosen to view content than personally choosing to see it.

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September 24, 2020 5:44PM

A Tale of Two Scourges

Some observers of our policy toward the coronavirus pandemic criticize the tendency to focus on case numbers alone, when hospitalization rates and fatality rates are what really matter. And as we learn more about the COVID virus, mitigation and treatment is improving and fatalities are diminishing.

Similarly, the U.S. Department of Justice’s policy toward the overdose epidemic seems to be focused on arrests and drug interdictions, apparent in a DOJ press release today, itemizing the arrests of drug traffickers and seizures of illegal drugs that have resulted since “Operation SOS” began in July 2018. But it’s the overdose death rate that really matters.

The DOJ claims its operation is bringing down overdose deaths. There’s just one problem: overdoses were already rising in 2019 and early 2020, even before the COVID-19 pandemic hit, and are soaring since the start of the pandemic.

Public health experts and health care practitioners have learned, since the early days of the pandemic, how to mitigate spread with harm reduction measures such as wearing masks and social distancing, and how to better treat the infection. New therapeutics are being developed and, hopefully soon, a vaccine will help us reach “herd” or “community” immunity.

Unfortunately, the same cannot be said for those who prosecute the drug war. Public officials seem reluctant to mitigate the spread of death and disease with proven harm reduction measures like “needle exchange” and “safe injection site” programs, Medication Assisted Treatment, and over‐​the‐​counter distribution of the overdose antidote naloxone. And they seem disinterested in developing the overdose epidemic’s version of a vaccine: ending drug prohibition.

All public health experts agree that, eventually, the world’s population will recover as the coronavirus pandemic gradually disappears. Alas, the same cannot be said about the overdose epidemic.

Look for the DOJ to release another upbeat press release touting arrests and drug seizures next year. And look for overdoses to continue to mount as well.

September 24, 2020 5:41PM

Breonna Taylor Is Another Victim of the War on Drugs

By Jeffrey Miron and Erin Partin

Yesterday Kentucky Attorney General Daniel Cameron announced charges against one of the three officers who killed Breonna Taylor, an emergency medical worker who was shot when police raided her apartment on the suspicion that her ex‐​boyfriend, Jamarcus Glover, had received shipments of drugs at her address. The charges, three counts of wanton endangerment, were not for shooting and killing Ms. Taylor in her own home but for firing three stray rounds through a curtained window. Whether the charges, or lack thereof, are the appropriate legal response lies outside of our particular expertise, but widespread protests in the wake of the announcement show that many people do not feel justice has been served.

The Drug War killed Breonna Taylor. Former Detective Brett Hankinson, Sergeant Jonathan Mattingly, and Detective Myles Cosgrove may have pulled the trigger, but they carried out this raid because of our misguided, ineffective, and racist drug laws. Since President Nixon first declared a “War on Drugs” in 1971, Black Americans have been arrested, jailed, and killed for frequently minor or nonviolent drug offenses. No‐​knock raids, in which police are authorized to enter a property without notifying the residents, have become a favorite tool of law enforcement, with tens of thousands executed each year.

Breonna Taylor was not the first innocent victim of a no‐​knock raid, and unless policymakers act she will not be the last. In March 1994 police in Boston entered the wrong apartment and tackled 75‐​year old Accelyne Williams, who suffered heart failure and died. No officers were charged. In May 2010 7‐​year old Aiyana Stanley Jones was shot and killed by police in Detroit during a botched drug raid as she lay asleep in bed next to her grandmother. Charges against the officer were dropped, and he remained on the force. In May 2011 26‐​year old Iraq war veteran Jose Guerena was shot at 71 times in front of his wife and 4‐​year old daughter. Police claimed he was involved in a drug trafficking ring – allegations that were never substantiated – and no officers were disciplined although his family received a $3.4 million settlement. There are far too many similar stories, not all of which receive the attention or scrutiny they deserve.

The Kentucky AG and others claim that the raid that killed Breonna Taylor was not, in fact, a no‐​knock raid because the police, despite having a no‐​knock warrant, announced themselves. Taylor’s boyfriend disputes this claim and says he thought the intruders were Taylor’s ex‐​boyfriend.

Regardless, the warrant was executed in the early hours of the morning as Ms. Taylor and her boyfriend slept; reacting defensively to heavily armed intruders breaking down doors in the middle of the night is a reasonable response. Using violent shock and awe tactics on people suspected of nonviolent offenses is not.

What many of these violent raids have in common is that they target low‐​level drug offenders. Dozens of raids have ended in injury or death since 2010. The aggressive enforcement of marijuana laws may be as dangerous as the drug itself.

Ending the War on Drugs will not eliminate police misuse of deadly force, but it will limit the ability of law enforcement agencies to use the pretext of “public safety” to commit violence. The Drug War must end; it has already claimed too many victims.

September 24, 2020 11:55AM

Public‐​Private Partnerships and Demand Uncertainty

By Peter Van Doren and David Kemp

This summer, a Washington Post article described the large reduction in toll‐​road revenue caused by the coronavirus pandemic. As of July, less traffic had resulted in more than a $9 billion shortfall. Both public and private operators have lobbied for increased federal and state assistance to offset the reduction in revenue. But properly designed public‐​private partnership (PPP) contracts offer an alternative to manage demand shocks.

While PPPs have been relatively rare in the U.S., over the last three decades there has been €203 billion of PPP investment in Europe and $525 billion in developing countries. In the fall issue of Regulation, Eduardo Engel, Ronald Fischer, and Alexander Galetovic revisit the international experience with PPPs. They argue that although the overall experience with PPPs has been positive, “good governance and careful contract design are necessary to reap the benefits from PPPs.”

A common problem with PPPs is that after contracts are awarded they are routinely renegotiated, often in ways that benefit concessionaires at the expense of taxpayers. These renegotiations arise because of the incentives embedded in the PPP contracts. Traditionally, PPP contracts are fixed term. The concessionaire is guaranteed the toll revenues collected over a pre‐​established time period. If demand is less than anticipated, the concessionaire will receive less revenue. Concessionaires respond by requesting more favorable terms than offered by the original contract.

Engel, Fischer, and Galetovic argue that present‐​value‐​of‐​revenue (PVR) contracts solve the problem of demand uncertainty. As Peter Van Doren and Thomas Firey summarized in a blog several years ago:

In a PVR auction, it is understood that the private company will only operate the road for a time, and then it will be returned to the public. Regulators set a maximum toll level that motorists will be charged to use the road. Private companies then bid on the amount of toll revenue, measured in present value terms, they would want to receive before the road is returned to the public. The lowest PV bid wins. The winner collects revenues and pays for the maintenance of the road until it has earned the revenue that it bid in present value, regardless of whether it takes five years or 50. Thus, the term of the franchise is variable depending on road usage; if usage is less than expected, the lease extends. If usage is greater than expected, the lease is shorter‐​term. The private company won’t “lose,” but it won’t make a windfall either.

By allowing the lease term to fluctuate with changes in demand, PVR contracts eliminate demand risk and reduce the incentive for renegotiations. Chile’s experience with PPPs exemplifies this effect: while almost 60 percent of fixed‐​term PPP contracts in Chile have been renegotiated, only 6 percent of PVR contracts have been.

Infrastructure should be paid for by those who use it. The Chilean experience with PPP projects using PVR contracts should be emulated by the U.S.