Tag: Reason

What the Madoff Series Left Out

Mary Pat Campbell

Link: https://reason.com/video/2023/02/21/what-the-madoff-series-left-out/

Excerpt:

And yet, nothing in the series leads the viewer to the conclusion that the SEC needed a bigger budget to catch Madoff. In fact, outsiders were sounding the alarm without access to government funding or regulatory muscle. In 2001, Barron’s journalist Erin Arvedlund reported that many Wall Street investors were suspicious that Madoff was engaged in foul play.

And the SEC received its first complaint that Madoff was running “an unregistered investment company” “offering ‘100%’ safe investments” in 1992. In 1999, a derivatives expert named Harry Markopolos, who worked at a competing firm, started to alert the SEC that Madoff’s investment returns were virtually impossible. In 2005, Markopolos sent the agency an infamous 25-page memo explaining why “The World’s Largest Hedge Fund is a Fraud.” The SEC opened an investigation in 2006, and then closed it the following year because the “uncovered violations” were “remedied” and “those violations were not so serious as to warrant an enforcement action.”

So how is this tale of epic failure on the part of a government agency the fault of deregulation?

Instead of making lazy allusions to the evils of free market capitalism, to better understand the lessons of the Madoff saga, director Joe Berlinger should have consulted the work of the free market economist George Stigler, who won the Nobel Prize in part for his work on “regulatory capture.”

Author(s): ZACH WEISSMUELLER AND DANIELLE THOMPSON

Publication Date: 21 Feb 2023

Publication Site: Reason

Masks Make ‘Little or No Difference’ on COVID-19, Flu Rates: New Study

Mary Pat Campbell

Link: https://reason.com/2023/02/07/masks-covid-dont-work-cochrane-library-review-mandate/

Excerpt:

The wearing of masks to prevent the spread of COVID-19 and other respiratory illnesses had almost no effect at the societal level, according to a rigorous new review of the available research.

“Interestingly, 12 trials in the review, ten in the community and two among healthcare workers, found that wearing masks in the community probably makes little or no difference to influenza-like or COVID-19-like illness transmission,” writes Tom Jefferson, a British epidemiologist and co-author of the Cochrane Library’s new report on masking trials. “Equally, the review found that masks had no effect on laboratory-confirmed influenza or SARS-CoV-2 outcomes. Five other trials showed no difference between one type of mask over another.”

That finding is significant, given how comprehensive Cochrane’s review was. The randomized control trials had hundreds of thousands of participants, and made useful comparisons: people who received masks—and, according to self-reporting, actually wore them—versus people who did not. Other studies that have tried to uncover the efficacy of mask requirements have tended to compare one municipality with another, without taking into account relevant differences between the groups. This was true of an infamous study of masking in Arizona schools conducted at the county level; the findings were cited by the Centers for Disease Control and Prevention (CDC) as reason to keep mask mandates in place.

Author(s): Robby Soave

Publication Date: 7 Feb 2023

Publication Site: Reason

Argentina’s Inflation Crisis

Mary Pat Campbell

Link: https://reason.com/2023/01/29/argentinas-inflation-crisis/

Excerpt:

Argentina is no stranger to economic turmoil, having defaulted on its national debt three times since 2001. Now the country is facing another bout of brutal inflation, with an annual inflation rate of 88 percent reported in October, up from 50 percent in January 2022.

Argentine photographer Irina Werning captured the frustration working Argentines feel in a photo series. “Inflation destroys savings, impedes planning, and discourages investment,” she wrote in her introduction.

In August, when the reported inflation rate hit 78.5 percent, Argentine workers held a mock funeral procession, complete with casket, to mourn the “death of wages.”

Author(s): Mike Riggs

Publication Date: February 2023

Publication Site: Reason

Under Government Pressure, Twitter Suppressed Truthful Speech About COVID-19

Mary Pat Campbell

Link: https://reason.com/2023/01/02/under-government-pressure-twitter-suppressed-truthful-speech-about-covid-19/?utm_medium=email

Excerpt:

Twitter’s ban on “COVID-19 misinformation,” which Elon Musk rescinded after taking over the platform in late October, mirrored the Biden administration’s broad definition of that category in two important respects: It disfavored perspectives that dissented from official advice, and it encompassed not just demonstrably false statements but also speech that was deemed “misleading” even when it was arguably or verifiably true. In a recent Free Press article, science writer David Zweig shows what that meant in practice, citing several striking examples of government-encouraged speech suppression gleaned from the internal communications that Musk has been disclosing to handpicked journalists.

Twitter’s moderation of pandemic-related content was intertwined with government policy from the beginning. Even before Joe Biden was elected president and his administration began publicly and privately demanding that social media companies suppress speech it viewed as a threat to public health, the company’s guidelines deferred to the positions taken by government agencies such as the Centers for Disease Control and Prevention (CDC). And those rules explicitly covered “misleading information” as well as “demonstrably false” statements.

….

That July, Twitter sought to clarify “our rules against potentially misleading information about COVID-19″ (emphasis added). “For a Tweet to qualify as a misleading claim,” the company said, “it must be an assertion of fact (not an opinion), expressed definitively, and intended to influence others’ behavior.” Possible topics included “the origin, nature, and characteristics of the virus”; “preventative measures, treatments/cures, and other precautions”; “the prevalence of viral spread, or the current state of the crisis”; and “official health advisories, restrictions, regulations, and public-service announcements.”

That was a very wide net, potentially encompassing anyone who questioned the CDC’s ever-shifting guidance or criticized government policies, such as lockdowns and mask mandates, aimed at reducing virus transmission. While the intent requirement ostensibly allowed dissent as long as it was not aimed at influencing behavior, that limitation did not mean much in practice, since moderators were apt to infer the requisite intent when they encountered tweets that implicitly or explicitly deviated from the recommendations of “public health authorities and governments.”

….

Another example that Zweig cites: Last August, @KelleyKga, a self-described “public health fact checker,” responded to another Twitter user’s claim that “COVID has been the leading cause of death from disease in children” since December 2021. “What an excellent example of cherry picking!” @KelleyKga wrote. “If you narrow it down to only the specific months you specify, which include the largest Covid wave (seen across the world), AND you ignore all non-disease deaths, AND you ignore cancer, heart disease, SIDS, then COVID is ‘leading.'”

Author(s): Jacob Sullum

Publication Date: 2 Jan 2023

Publication Site: Reason

Inflation Cools to 7.1 Percent, but Still Has a Long Way To Fall

Mary Pat Campbell

Link: https://reason.com/2022/12/13/inflation-cools-to-7-1-percent-but-still-has-a-long-way-to-fall/

Excerpt:

Inflation finally slowed to a near halt in November, possibly signaling a winding down of the prices crisis that has gripped American households this year.

Prices rose just 0.1 percent on average during November, the Department of Labor reported on Tuesday morning. The year-over-year inflation rate fell as well, to 7.1 percent for the 12 months ending in November. That’s the lowest annualized rate since December 2021, and is significantly lower than the 7.8 percent annualized rate reported a month ago.

This also marks the fifth consecutive month in which the annualized inflation rate has held steady or fallen, after peaking in July at an astounding 9.0 percent.

That trend suggests that the Federal Reserve has finally gotten a collar on rising prices. The central bank’s board is expected to hike interest rates for the seventh time this year when it meets on Wednesday. That means it will continue getting more expensive to obtain a mortgage or a car loan, and credit card interest rates will continue to rise—but also that savings accounts and other interest-based investment vehicles are paying larger returns.

Author(s): Eric Boehm

Publication Date: 13 Dec 2022

Publication Site: Reason

As the Monkeypox Spread Recedes, There Are Lessons To Learn

Mary Pat Campbell

Link: https://reason.com/2022/12/01/as-the-monkeypox-spread-recedes-there-are-lessons-to-learn/

Graphic:

Excerpt:

After close to 30,000 infections, 15 reported deaths, and more than one million doses of vaccine, it appears as though the widespread nature of the U.S. monkeypox outbreak may be nearing an end.

The most recent data from the Centers for Disease Control and Prevention (CDC) show a seven-day average of seven new monkeypox cases per day. This is a massive decline from the more than 400 cases per day reported during the height of the outbreak in late July and early August. Though, to be clear, it may be some time before we have no cases of monkeypox in the U.S. at all.

There are several explanations for this success, some more obvious than others. The most obvious: This strain of monkeypox was overwhelmingly spread between men who have sex with other men. While monkeypox is technically not a sexually transmitted infection—it can be spread through physical contact with rashes and sores of an infected person—this particular strain seemed stubbornly resistant to nonsexual spread. Los Angeles County data, for example, shows that only 43 of the 2,388 confirmed cases were in women. So, the number of demographic groups at risk of infection was much lower than the number at risk of catching COVID-19.

Author(s): SCOTT SHACKFORD

Publication Date: 1 Dec 2022

Publication Site: Reason

FTX collapse is a reminder that public pension systems should avoid high-risk investments

Mary Pat Campbell

Link: https://reason.org/commentary/ftx-collapse-is-a-reminder-that-public-pension-systems-should-avoid-high-risk-investments/

Excerpt:

Public pension plans have mostly avoided direct investments into cryptocurrencies, and for good reason. Public pension benefits are constitutionally protected, meaning taxpayers are on the hook for paying for unfunded liabilities. If a highly volatile investment, such as crypto, were to go sour, the public pension fund—thus, taxpayers—would be on the hook to make up for the shortfall and pay for the retirement benefits promised to public workers. Even though there is a potential upside in generating significant returns by investing in cryptocurrency at the right times, the risks and market swings far outweigh the potential benefits for public pension systems. 

But some U.S. public pension systems are already reporting minor financial losses related to FTX, including the Kansas Public Employee Retirement System, according to the Topeka Capital-Journal:

….

Similarly, “The Missouri State Employees’ Retirement System lost roughly $1 million because a private equity firm it invested in was invested in FTX, the embattled cryptocurrency exchange that filed for bankruptcy last week,” the Kansas City Star reported.

….

Overall, the story of FTX is a cautionary tale for all investors. When it comes to public pension systems, which have largely steered clear of making direct investments in crypto, pension funds should resist the growing pressures to seek higher returns and take on risks that could expose taxpayers to major financial losses and more public pension debt.

Author(s): Swaroop Bhagavatula
Quantitative Analyst

Publication Date: 2 Dec 2022

Publication Site: Reason

The ‘Experts’ Were Never Going To Fix Inflation

Mary Pat Campbell

Link: https://reason.com/2022/10/27/the-experts-were-never-going-to-fix-inflation/

Excerpt:

Debate now rages about whether the Federal Reserve should continue to raise interest rates to tame inflation or slow down these hikes and see what happens. This is not the first debate we’ve had recently about inflation and Fed actions. The lesson we should learn, and I fear we won’t, is that government officials and those advising them from inside or outside the government don’t know as much as they claim to about the interventions they design to control the economy.

As a reminder, in 2021, the dominant voices including Fed Chairman Jerome Powell asserted that the emerging inflation would be “transitory” and disappear when pandemic-induced supply constraints dissolve. That was wrong. When this fact became obvious, the messaging shifted: Fed officials could and would fight inflation in a timely manner by raising rates to the exact level needed to avoid recession and higher unemployment. Never mind that the whole point of raising interest rates is precisely to soak money out of the economy by slowing demand, which often causes unemployment to rise.

…..

Over at Discourse magazine, my colleague Thomas Hoenig—a former president of the Fed’s Kansas City branch—explains how Fed officials faced similar pressures during the late 1960s and 1970s. Unfortunately, he writes, “Bowing to congressional and White House pressure, [Fed officials] held interest rates at an artificially low level….What followed was a persistent period of steadily higher inflation, from 4.5% in 1971 to 14% by 1980. Only then did the [Federal Reserve Open Market Committee], under the leadership of Paul Volcker, fully address inflation.”

Often overlooked is Volcker’s accomplishment: the willingness to stay the course despite a painful recession. Indeed, it took about three years from when he pushed interest rates up to about 20 percent in 1979 for the rate of inflation to fall to a manageable level. As such, Hoenig urges the Fed to stay strong today. He writes, “Interest rates must rise; the economy must slow, and unemployment must increase to regain control of inflation and return it to the Fed’s 2% target.” There is a cost in doing this; a soft landing was never in the cards.

Author(s): VERONIQUE DE RUGY

Publication Date: 27 Oct 2022

Publication Site: Reason

Public retirement plan assets should never be utilized for political purposes

Mary Pat Campbell

Link: https://reason.org/commentary/public-retirement-plan-assets-should-never-be-utilized-for-political-purposes/

Excerpt:

State executives and lawmakers from both major political parties have recently threatened to use public retirement plan assets to address political grievances or push political agendas. Issues ranging from guns to oil and climate change to social media are all being suggested as political targets that should dictate investment strategies for public pension funds. When making arguments for their activist agendas, proponents of these various positions rarely mention how investment restrictions or demands will aid in the basic retirement plan objective of supporting public employees in their retirement years.  

To be clear, public retirement plan assets should never be utilized for political purposes.

Trustees of these public pension plans, and others of influence, are under a clear fiduciary obligation to make decisions with the sole purpose of best meeting the pension plans’ objectives for the benefit of that plan’s participants. There is no ambiguity about this: Activist political agendas have no place in public pensions. To be effective in meeting their objectives, public pension systems must be completely apolitical in their decision-making and in their operations. They cannot be beholden to shifting political winds.   

While this idea seems straightforward, the thought of using these massive investment portfolios to leverage certain political agendas is often too enticing for some politicians to pass up. It is incumbent upon governors, other key stakeholders, and legislative representatives in all states to step up and acknowledge that public retirement assets are out-of-bounds for activist maneuvering. This is critical regardless of where these figures fall on the political spectrum. It is equally important for retirement system trustees and leaders, as well as state treasurers, to stand firm as plan fiduciaries and vigorously oppose any attempts to use plan assets in a way that is not solely directed at benefitting the plan’s participants. 

Author(s): Richard Hiller

Publication Date: 10 June 2022

Publication Site: Reason

Guns Aren’t a Public Health Issue

Mary Pat Campbell

Link: https://reason.com/video/2022/09/30/guns-arent-a-public-health-issue/

Graphic:

Excerpt:

The takeaway from the story of Dickey, Rosenberg, and the 1993 gun study at the center of the piece is that the congressman was correct to begin with. The CDC shouldn’t be studying gun violence.

Titled “Gun Ownership as a Risk Factor for Homicide in the Home” and published in The New England Journal of Medicine, the 1993 study looked at 388 people who had been killed in their homes and matched them to 388 neighbors of similar age, sex, and race. One hundred and seventy-four of the victims lived in houses where at least one gun was present versus only 139 of the matched controls.

With scary music and breathless claims, the video tells viewers that if you had a gun in your house, you were 200 percent more likely to be killed with a gun in your home and 400 percent more likely to kill yourself. 

These are both exaggerations and misstatements of the study results. It didn’t address suicide risk at all, nor gun homicides. It found households in which a resident had been murdered at home by any means had a 25 percent greater frequency of having a gun, not 200 percent. But this doesn’t mean owning a gun increases your risk of being killed by 25 percent. 

This is a classic statistical error known as the “base rate fallacy” and is particularly important when studying rare events, like people murdered in their homes. Suppose 10 people are murdered in their homes, and five of those homes had guns. A matched set of 10 people who were not murdered in their homes found only four homes had guns. So there are 25 percent more guns in the homes of murder victims than matched nonmurder victims (Five vs. four).

But what if you put those 20 people in the context of another million, none of whom were murdered in their homes, half of whom had guns in their homes and half of whom didn’t. The rate for gun owners to be murdered at home becomes five out of 500,009, while the rate for non-gun owners becomes five out of 500,011. So now we find that the risk is 0.0004 percent higher.

In other words, being murdered in your home means you have a 25 percent higher chance of having a gun, but having a gun means you have only a 0.0004 percent greater chance of being murdered in your home. Those are not the same thing.

The finding that owning a gun made study subjects less safe was also a conclusion selected from much stronger statistical results that didn’t fit the authors’ political views and, thus, weren’t mentioned in the study. Yes, 25 percent more victims’ homes had guns than control homes, but 38 percent more victims had controlled security access to their property. Why not lobby against gates as a public health matter? Twenty times as many victims had gotten in trouble at work because of drinking, so why worry about guns when drinking at work is two orders of magnitude more dangerous? Renting and living alone were far more dangerous than having a gun. Victims were less likely than controls to own a rifle or a shotgun, so why not a government program to trade in handguns for long guns?

Author(s): JOHN OSTERHOUDT AND AARON BROWN

Publication Date: 30 Sept 2022

Publication Site: Reason

Retirement plans’ impact on recruiting and retention in the public market

Mary Pat Campbell

Link: https://reason.org/commentary/retirement-plans-impact-on-recruiting-and-retention-in-the-public-market/

Excerpt:

A number of conclusions regarding the retirement plan’s impact on recruiting and retention can be drawn from the MissionSquare survey results:  

Recruiting and retention should not be looked at as a singular issue. While public employers have seen steady success in hiring, retention has suffered greatly in recent years in the public market. 

The survey does not make the case that an employer’s retirement plan, whatever the design, has a substantial impact on recruiting or retention at all. In fact, the survey shows employers are more focused on employee morale, development, and engagement to enhance retention, along with salary increases. The survey does not suggest that there is a widespread recruiting issue although some positions, including nurses, engineers, and police officers, are more difficult to hire than others. 

Plan sponsors should avoid treating retirement plan design only as a tool for retaining employees. Rather, they should focus on a retirement plan design that realistically meets the needs of a modern workforce. The retirement plan should focus on providing lifetime income in retirement commensurate with the part of a career that an employee spends with a particular employer. The plan should recognize the realities of mobile modern employees and should not penalize employees that do not spend a full career with one employer. 

The survey illustrates that employers are focused on employee wellness as a means to improve retention. It follows that keeping employees happy should also be the focus of the retirement plan. Retention is best addressed by having a retirement plan that addresses the realities of the workforce today, as noted above.  

Author(s): Richard Hiller

Publication Date: 9 Aug 2022

Publication Site: Reason

The Teacher Retirement System of Texas needs to adjust its investment return assumptions

Mary Pat Campbell

Link: https://reason.org/commentary/the-teacher-retirement-system-of-texas-needs-to-adjust-its-investment-return-assumptions/

Graphic:

Excerpt:

An adjustment of the assumed rate of return down to 7.0% means the plan will recalculate pension debt upwards in 2023, but will also be better positioned to avoid future debt growth over the longer run. The forecast in Figure 2 compares the growth of TRS’ unfunded liabilities under three scenarios: 

  1. Returns meet TRS assumptions;
  2. TRS experiences two major recessions over the next 30 years;
  3. And, TRS makes actuarially determined contributions (also using the two-recession scenario).

With this actuarial modeling of the system, it is clear that statutorily limited contributions will continue to pose funding risks for TRS that will be borne by Texas taxpayers. A proposed 7.0% assumed return will readjust 2023 unfunded liabilities upwards by $6.5 billion, but the plan will suffer fewer investment losses over the next 30 years when the plan inevitably experiences returns that diverge from expectations. TRS’ unfunded liabilities will remain elevated under the rigid statutorily-set contributions. If, however, TRS was to transition to Actuarially Determined Employer Contributions (ADEC) each year, then even by recognizing higher 2023 debt (under a 7.0% assumption) TRS could shave billions off its unfunded liabilities by 2052 ($74.7 billion down from $81.3 billion with current 7.25% assumption).  

Author(s): Anil Niraula, Zachary Christensen

Publication Date: 15 Jun 2022

Publication Site: Reason