Why the Billionaire Space Race is no joke
Also: It’s OK to admit the environmental movement has undermined American economic progress
“It is not easy to see how the more extreme forms of nationalism can long survive when men have seen the Earth in its true perspective as a single small globe against the stars.” - Arthur C. Clarke
In This Issue
The Micro Reads: Nuclear fusion, the post-pandemic economy, AI troubles, and more . . .
The Short Read: Why the Billionaire Space Race is no joke
The Long Read: It’s OK to admit the environmental movement has undermined American economic progress
⚛ “Can Nuclear Fusion Put the Brakes on Climate Change?” - The New Yorker | Longish piece on this exciting energy technology, one that ends with a suitably cautionary note given false starts of the past: “But many, many technological challenges remain before fusion will turn on the lights in your kitchen. Will these fusion devices sustain plasmas for sufficient periods of time? Will they solve their daunting fuel-cycle issues, and manage their exhaust, and will the stresses of the extreme conditions destroy the devices themselves?”
🧮 “Occupational Licensing and Accountant Quality: Evidence from the 150-Hour Rule” John M. Barrios, NBER | Labor market policy can be anti-growth or pro-growth, just as much a R&D spending. From the study:
I examine the effects of occupational licensing on the quality of Certified Public Accountants (CPAs). I exploit the staggered adoption of the 150-hour rule, which increases the educational requirements for a CPA license. The analysis shows that the rule decreases the number of entrants into the profession, reducing both low- and high-quality candidates. Labor market proxies for quality find no difference between 150-hour rule CPAs and the rest. Moreover, rule CPAs exit public accounting at similar rates and have comparable writing quality to their non-rule counterparts. Overall, these findings are consistent with the theoretical argument that increases in licensing requirements restrict the supply of entrants and do little to improve quality in the labor market
🦠 “This Week in the COVID-19 Recovery” - Mark Zandi, Moody’s Analytics | A concise update on how the Delta variant has modestly undermined the bullish economic case for 2021:
The economic fallout from the Delta variant has been meaningful, undermining consumer confidence and causing households to turn more cautious in traveling, going to restaurants and movies, and returning to work. Scrambled global supply chains have become even more jumbled, particularly those coming out of Asia and Australia, where businesses and governments have shut down factories and ports to contain infections. Shortages and higher prices are crimping vehicle production and housing construction. We expect real GDP to increase less than 4% annualized in the just-ended third quarter, mostly due to a smaller inventory drawdown, and no more than 6% this calendar year. A few months ago, before the Delta wave hit, we expected real GDP to advance by close to 7% this year. Employment gains have also moderated, rising by only 250,000 in August, and September also is shaping up to be soft. We expect only 500,000 jobs were created last month. Unemployment insurance claims, which had been steadily falling, have pushed higher in recent weeks. Just prior to Delta, the job market appeared to be kicking into high gear, with employment increasing by almost 1 million jobs in June and July.
🤖 “For Tesla, Facebook and Others, AI’s Flaws Are Getting Harder to Ignore - Bloomberg” | This gloomy piece suggests why now is a bad time to simply assume a New Roaring Twenties and ignore the need for pro-innovation public policy. From the piece: “What do Facebook Inc. co-founder Mark Zuckerberg and Tesla Inc. Chief Executive Elon Musk have in common? Both are grappling with big problems that stem, at least in part, from putting faith in artificial intelligence systems that have underdelivered. . . . There is one lesson to be gleaned from their experiences: AI is not yet ready for prime time. Furthermore, it is hard to know when it will be. Companies should consider focusing on cultivating high-quality data — lots of it — and hiring people to do the work that AI is not ready to do.”
📱 Tweetstorm of the issue:
The Short Read
🚀 Why the Billionaire Space Race is no joke
America’s super-billionaires such Jeff Bezos, Elon Musk, and Mark Zuckerberg shouldn’t be surprised that they’re the subject of frequent attack and mockery. To quote historian Bernard Lewis: “It is not possible to be rich, strong, and successful and be loved by those who are none of these things.” Indeed, it’s the proper job of the media, for instance, to hold such powerful figures and their companies accountable for their actions. No aspiring reporter gets through journalism school without hearing the expression “Comfort the afflicted, afflict the comfortable” presented as a collective mission statement.
But our society is missing something important if we see the “Billionaire Space Race” as merely a contest of uber-egos. Now I don’t expect much analytical insight from Saturday Night Live. And I sure didn’t get it from a sketch last weekend that generated this IO9 headline: “SNL Uses Star Trek and Owen Wilson to Drag Jeff Bezos: Saturday Night Live returned for its 47th season last night and turns out Wilson does a pretty good impression of a dopey weirdo.” (Inthe sketch, Wilson portrays Bezos as the cowboy-hatted captain of a new Star Trek spin-off, Ego Quest. Probably the highlight of a mediocre episode.)
Love or hate Musk and Bezos, what’s really important is that their space efforts are playing a key role in something of civilizational importance. Even stunts such as Bezos inviting William Shatner on a rocket ride or Musk launching a Tesla Roadster into space shouldn’t detract from that reality — not any more than Apollo astronaut Alan Shepherd hitting a couple of golf shots on the Moon during the Apollo 14 mission detracted from the importance of that program.
Moreover, lots of big advances seem at first like trivialities, often for the wealthy. As technology analyst Chris Dixon has explained (referencing the work of the late Clayton Christensen):
Disruptive technologies are dismissed as toys because when they are first launched they “undershoot” user needs. The first telephone could only carry voices a mile or two. The leading telco of the time, Western Union, passed on acquiring the phone because they didn’t see how it could possibly be useful to businesses and railroads — their primary customers. What they failed to anticipate was how rapidly telephone technology and infrastructure would improve (technology adoption is usually non-linear due to so-called complementary network effects). The same was true of how mainframe companies viewed the PC (microcomputer), and how modern telecom companies viewed Skype.
Here’s a prediction given to me by John Roth of Sierra Space in my recent Political Economy podcast: “So I think in 25 years, it is not at all out of the imagination to say that we’re not only going to have multiple space stations in low Earth orbit, probably in different locations in low Earth orbit, you’ll have a moon base. And you’ll be very seriously looking at going to Mars. You won’t be inhabiting Mars yet, but you’ll be looking very seriously at missions to Mars.”
If Roth is correct, the Billionaire Space Race will certainly be seen by then as one small, but important step toward America becoming a true spacefaring nation.
The Long Read
📉 It’s OK to admit the environmental movement has undermined American economic progress
There’s some reason to think that when countries get richer, they start caring more about their natural environment. Indeed, it’s an intuition supported by some economic research. So maybe whatever the superficial catalyst for the emergence of an American environmental movement — the publishing of William Vogt’s Road to Survival in 1948, Cold War radiation fears, Rachel Carson’s Silent Spring — one was probably bound to spring up eventually. At a certain level of affluence, people really start valuing clearing skies and cleaner water. Makes sense.
But our actions always have trade-offs. And the willingness to acknowledge costs as well as benefits marks a key difference between serious policy analysis and provocative policy activism. For instance: The 2013 study “Federal Regulation and Aggregate Economic Growth” by economists John Dawson of Appalachian State University and John Seater, then of North Carolina State University, estimates that regulations since 1949 have reduced real GDP by roughly two percentage points a year. From the paper:
As usual with the compound effect of growth rates, the accumulated effect of a moderate change in the growth rate leads to large effects on the level over time. In particular, our estimates indicate that annual output by 2005 is about 28 percent of what it would have been had regulation remained at its 1949 level. . . . The effect of regulation on TFP is especially noteworthy. Increases in regulation explain much of the productivity slowdown of the 1970s. Regulation's effects differ for output, TFP, capital, and labor, implying that regulation alters the allocation of resources.
Two points here: First TFP stands for “total factor productivity,” a statistical way of capturing technological and business innovation. So this study finds a suppressive effect from regulation on innovation. Second, and this is important, the researchers are not saying society should never impose environmental rules, only “that the cost of regulation is substantial and must be taken seriously in any evaluation of regulation’s net social benefit.”
Now the notion that regulation might hinder innovation-driven productivity growth is hardly a recent one. As I noted in the previous issue of Faster, Please!, a 1981 Congressional Budget Office report identified a flurry of environmental regulation for the 1970s as a possible cause of the infamous productivity growth downshift from the immediate postwar decades: “The 1969-1972 period was one of intense regulatory proliferation in the United States, with new legislation concerning air emissions, discharges into waterways, noise pollution, and occupational safety.”
Regulator impacts are also central to the 2019 paper “Infrastructure Costs” by George Washington University economist Leah Brooks and by Yale law professor Zachary Liscow. Their research finds a “suggestive” connection between a three-fold increase in real spending per mile on interstate highway construction from the 1960s to the 1980s and a spate of federal and state environmental laws that expanded the scope for considering citizen concerns in project design. From that paper:
Perhaps most prominent was the National Environmental Policy Act (NEPA), enacted in 1970, which requires environmental impact reviews for projects with significant federal funding. Other similar legislation includes the National Historic Preservation Act of 1966 that prevents development on national historic sites, the 1973 Endangered Species Act that limits development near protected habitat, and the 1972 Clean Water Act that protects wetlands. In addition to these landmark pieces of legislation, a variety of other federal legislation passed in this era made it more difficult to develop on public lands. By our count, the late 1960s through the mid-1970s saw at least 11 significant federal pieces of legislation that required additional consideration of citizen concerns. In addition, many states also passed their own environmental review statutes. . . . Our findings on costs, while suggestive, are not causal. We also draw no conclusions here as to whether this increased spending increases social welfare.
Is it really so shocking to think a society that suddenly had trouble building roads would also have issues with more exotic construction projects, such as nuclear power plants? Indeed, the data show a clear discontinuity in nuclear reactor construction in the early 1970s as new environmental regulations kicked in. In the 2016 paper “Historical construction costs of global nuclear power reactors,” researchers Jessica R. Lovering, Arthur Yip, and Ted Nordhaus suggest that break is likely attributable to a confluence of regulatory events, perhaps creating uncertainty about the future cost of safety regulations. I would also point to the excellent 2010 book Atomic Awakening from nuclear engineer James Mahaffey, who explains the end of the Atomic Age thusly:
By the 1970’s the United States had made it through the experimental phase of nuclear energy without any show-stopping problems and was trying to do a nation-wide conversion, but environmental and public-safety factions had begun serious campaigns to stop the progress and send the country back to pre-atomic-power levels. Nuclear engineering, under withering attack, was somewhat bewildered by the attention and circled the wagons. . . . Designs of nuclear reactors, plants, auxiliary mechanisms, and associated facilities, such as waste-disposal systems or fuel-handling strategies all became more conservative, with less engineering risk or innovation. . . . The nuclear power expansion was already dead years before the [Three Mile Island] disaster. TMI was merely the “last nail in the coffin.”
And here we are: a moribund nuclear industry (for the moment), a non-existent supersonic airline industry (for the moment), and, of course, no flying cars (for the moment). It seems odd to blame the American technology sector for not innovating and building in atoms rather than bits when we’ve made it so difficult to do the former. Don’t blame Silicon Valley if we can’t build a high-speed train between Los Angeles and Los Vegas.
Of course, for many environmentalists of the 1970s, the anti-growth impact of regulation was a feature, not a bug. They believed that market capitalism not only required an ever-growing economy, but that economic growth was fast-consuming the limited resources of Spaceship Earth and tossing the planet dangerously out of balance. The modern incarnation of that attitude can be found in the Thunbergian de-growth movement.
It’s also true that the 1970s downshift in productivity growth was a global phenomenon. And that fact suggests bad regulation is only part of the story here. There were also more universal macroeconomic headwinds, such as the full exploitation of the “great inventions” of the Second Industrial Revolution. There was also apparently a need for more resources and researchers to find game-changing innovations now that “low-hanging fruit” had been picked.
Also in the case of the United States, I would point to the post-Space Race decline in federal R&D investment. Imagine if Apollo had been followed by New Apollo, focusing on energy research — advanced nuclear fission, fusion, and even space solar. (Geo-thermal, too. It is the “sun beneath our feet,” and Apollo was the sun god, after all.)
Finally, it probably really matters globally if US innovation suffers given our historical role in pushing forward the technology frontier. One could imagine a negative international spillover from a slowdown here.
All that said, I think it’s fair to point to a massive regulatory overcorrection as one plausible culprit for what’s been called the “Great Stagnation” since the 1960s (except for the late 1990s, early 2000s IT boom). While we can debate just how much stagnation is real versus measurement issues, there’s little doubt that 2021 America has failed in many way to achieve the futurist dreams of the Atomic and Spaces Ages. And it’s OK to admit the environmental movement has played a role.
This analysis ignores the benefits of environmental regulation entirely! Air quality improvements avoided lots of deaths and chronic diseases. Water quality improvements and the removal of lead from gasoline did the same. Would our knowledge economy still be as strong if we were still poisoning all our children with lead as much as we were? You highlight some notable examples of environmental movement overreach, and degrowth has always been an unfortunate part of the environmental movement, but it has unquestionably benefited our society and since America is primarily a service economy these days the fact that our brains aren’t full of poison and we have nice parks to relax and think in has to have many broad economic benefits. It would be helpful if you at least engaged with those ideas. Do you think the costs avoided from environmental regulation stuff is completely bunk? It seems clear that many of our chronic diseases are environmental in nature.