If Elizabeth Warren really wants to unrig the system, she should focus on the Dream Hoarders

Odds are that you have not been following the recent libertarian dust-up over the merits of an Elizabeth Warren presidency. To give a brief recap: The main contenders were Will Wilkinson and Jerry Taylor of the “liberaltarian” Niskanen Center, who have been Warren-friendly to varying degrees; their opponents were colleague Samuel Hammond, along with Tyler Cowen of the more traditionally libertarian Mercatus Center, who touched off the whole debate with a withering critique of Warren’s policies.

A point-by-point exploration of their arguments would exceed the space allotted for this column by several thousand inches. But I think one can sum up the libertarian approach to Warren with a single question: How big a problem do you think billionaires, and the mega-successful corporations they helm, pose to the average American? Actually, come to think of it, I think that’s about how you’d sum up the question of Warren from any angle.

Which is why this debate ultimately matters to a lot more people than just some cranky libertarians: It speaks directly to a whole lot of young people who see that the economy doesn’t work for them the way it did for their parents and grandparents, and therefore conclude that somewhere along the way, the people it is working for — the barons of finance, the giants of Silicon Valley — must have rigged the system in their favor.

To be fair, they’re not entirely wrong. As Adam Smith once wrote, “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.” Bankers and tech executives very much included. So I find myself nodding in agreement with Wilkinson — and, by extension, with the progressive base of the Democratic Party — when he says: “Warren’s general diagnosis of the problem — it’s a rigged system of anticompetitive rent-seeking enabled by insufficiently democratic and representative political institutions — is broadly similar to my own.”

Yet they’re not entirely right, either. Are big corporations, or billionaires, or banks, or tech giants, or health insurers and pharmaceutical firms — to name some of Warren’s favorite targets — really the reason that young people are struggling

  • with enormous student loans? Are they the reason that millennial homeownership lags that of their parents? Are they the
  • reason that recent college graduates are more likely than their elders to be underemployed? Have they
  • driven the cost of health insurance to its current stratospheric levels?

Sure, Warren may be eager to sic her Consumer Financial Protection Bureau on your mortgage lender if you fall afoul of some obscure clause, but that’s not the problem for most Americans. They’re much more likely to struggle with finding affordable housing in prosperous cities. In fairness, Warren does have a plan to ease the zoning regulations that cause the shortage — but for some reason she rarely talks about it on the campaign trail, possibly because it’s constitutionally dubious, but more likely because it would alienate her affluent suburban base.

Similarly, Warren is eager to forgive student loans — a $1.6 trillion transfer to some of the most affluent members of society — but not to attack degree creep, which has walled off most of the best jobs for those who hold a bachelor of arts while enriching a lot of colleges. She targets insurers and drugmakers, but not the hospitals and medical workers who drive most of our health-care costs.

Too many of her proposals are like this; they focus on corporate villains or billionaires while ignoring the much broader class of people that Richard Reeves of the Brookings Institution dubbed the “Dream Hoardersthe well-educated upper-middle-class people who are desperate to pass their privilege onto their kids, and are unhappy about the steadily mounting cost of doing so. They’re Warren’s base.

Unfortunately, the Dream Hoarders — and I include myself in their number — are a much bigger problem for the rest of America than the billionaires whose wealth Warren promises to expropriate. Those billionaires got that way by building companies that disrupted cozy local monopolies, and they fund coding camps for high-school dropouts; Dream Hoarders

  • protect their professional licensing regimes and
  • insist on ever more extensive and expensive educations in the people they hire. Dream Hoarders also
  • pull every lever to keep their own housing prices high — and poorer kids out of their schools — while
  • using their wealth to carefully guide their children over the hurdles they’ve erected.

Which may be why the best predictor of a neighborhood with a low degree of income mobility is not the gap between the top 1 percent and everyone else — the gap that Warren focuses on with all her talk of taxing billionaires — but

If you really want to unrig the system, you need to focus less on a handful of billionaires than on the iron grip that the Dream Hoarders have on America’s most powerful institutions — including, to all appearances, Elizabeth Warren’s campaign.

Trump’s North American Trade Charade

US President Donald Trump’s goals in renegotiating the North American Free Trade Agreement were to reduce the current-account deficit and restore US manufacturing jobs. But the new United States-Mexico-Canada Agreement fails on both counts and will reduce US employment and weaken American producers’ position in international markets.

.. Meanwhile, US tariffs on imported steel and aluminum from Mexico and Canada remain in place.
.. Among other things, the USMCA will limit the number of vehicles that can be imported into the US, which effectively opens the door to managed trade. It is not yet clear how import quotas will be allocated; but almost any quota-allocation system will stifle competition and innovation by favoring incumbents over new market entrants.
.. Trump’s stated goals in renegotiating NAFTA – if “renegotiation” is the right word for when a bully attacks his smaller neighbors until they accede to his demands – were to reduce the bilateral US trade deficits with Canada and Mexico and “bring good jobs back home.” By those criteria, the new agreement is a spectacular failure. As any economist knows, a deficit in goods and services is a macroeconomic phenomenon reflecting a country’s domestic expenditures and savings. For the US to shrink its overall deficit, it must either reduce expenditures or increase savings. Nothing in the USMCA does that.

.. Moreover, the deal will probably destroy more US jobs than it creates. The new rules-of-origin (ROO) benchmark requiring that 75% of an imported vehicle be produced in North America (up from 62.5% under NAFTA) is likely to reduce employment by raising the costs of production.
.. In fact, automakers in Asia and Europe are probably ecstatic at the prospect of increased sales. They have gained an edge over North American producers in third countries, and perhaps even in the US market itself.
.. As for foreign-owned automakers operating in the US, they will almost certainly offshore any facilities that are producing inputs destined for foreign markets. This diversion, combined with the higher price of cars in the US, will further reduce overall US auto production, and thus auto-sector employment.
.. even if US parts producers were to expand production, they would be inclined to automate as much of it as possible, rather than hire more workers.

.. One of NAFTA’s major benefits was that it allowed for integrated supply chains across North America. US automakers gained access to labor-intensive parts at lower cost from Mexico, and Mexican producers gained access to less expensive capital-intensive parts from the US. As a result, the North American auto industry improved its competitive position internationally. The USMCA will not destroy NAFTA’s efficient supply chains, but it will raise their costs, thus undercutting that advantage.

.. in the long run, it will likely

  • reduce US employment,
  • shrink North America’s share of the global auto market, and
  • undermine America’s credibility on international trade issues –

all while failing to reduce the US current-account deficit.

.. other governments will now have to ask themselves why they should negotiate with a country that tears up settled agreements at will.

.. Even if forcing friends and allies to the negotiating table actually benefited US trade, it still would not be worth the loss of US soft power.

 

The New Copycats: How Facebook Squashes Competition From Startups

Mr. Zuckerberg is sensitive to anything that might disrupt Facebook, even the teeniest startup, say current and former executives and employees.

Facebook uses an internal database to track rivals, including young startups performing unusually well, people familiar with the system say. The database stems from Facebook’s 2013 acquisition of a Tel Aviv-based startup, Onavo, which had built an app that secures users’ privacy by routing their traffic through private servers. The app gives Facebook an unusually detailed look at what users collectively do on their phones, these people say.

The tool shaped Facebook’s decision to buy WhatsApp and informed its live-video strategy, they say. Facebook used Onavo to build its early-bird tool that tips it off to promising services and that helped Facebook home in on Houseparty.

.. Mr. Rubin didn’t want to sell but was under pressure from his board to keep Houseparty’s options open, Mr. Elman says. “If a company like Facebook or Snapchat needs your team’s expertise, that might be a better return for shareholders than the risk of going big,” Mr. Elman says he told Mr. Rubin.

.. In December, Facebook began its group-video-chat offensive. Its Messenger app introduced the feature with the ability to see up to six people in a conversation, compared with the eight-person rooms on Houseparty.

In February, Facebook invited Houseparty users between the ages of 13 and 17 to come to its offices in Menlo Park, Calif., to participate in a study and keep a diary for a week afterward that they would share with Facebook, offering as an inducement $275 Amazon gift cards.

.. Last month, it recruited a vice president of engineering, Kinshuk Mishra, who had helped Spotify AB, the music-streaming service, fend off Apple Music. It introduced a new chat feature called “passing notes” to attract more users.

The New Copycats: How Facebook Squashes Startup Competition (wsj.com)

> Facebook uses an internal database to track rivals… The database stems from Facebook’s 2013 acquisition of a Tel Aviv-based startup, Onavo, which had built an app that secures users’ privacy by routing their traffic through private servers. The app gives Facebook an unusually detailed look at what users collectively do on their phones…

WTF is this shady-ass sh*t. Way to “secure users’ privacy,” Facebook.

From the sound of Onavo’s App Store reviews they are using deceptive marketing of the “Your phone is infected, install this now!!” variety. Yet they have a lot of positive but suspiciously brief reviews balancing them out. So Facebook bought a company that MITMs unsuspecting users for profit, using scammer marketing techniques and fake reviews to drive installs, then leverages that to knife babies. “Don’t be too proud,” indeed.

I hope there is cause for Apple to remove this app from the App Store (like deceptive marketing or exploitive practices). Or for a bunch of us good folks to leave negative reviews. These guys depend on informed people avoiding these apps and not leaving reviews.

.. You have to intercept to gather metadata… but semantics aside, they are deceiving users.First there is the marketing scam reported in the app store reviews, people who installed it because some web site told them they have a virus and they need this thing to fix it.

Second, the only mention of their logging practices is buried below the fold in the last line of their description: “Onavo receives and analyzes information about your mobile data and app use.” This is just vague enough to deceive a user that believes it is merely to support their user-facing features, i.e. giving you a report on what you use… not Facebook for spying purposes. Of course, most users never even get that far in the description. They’re installing this to “secure their phone” because of a scary ad they saw.

These guys know exactly what they’re doing. Most of their users, not so much. That’s where we come in. The App Store exists to help protect users from this kind of exploitation and I hope Apple and our community takes action.

.. What struck me from the article was how facebook knew what social networks are competitive threats. They’re tracking what apps you use on your phone.”Facebook uses an internal database to track rivals, including young startups performing unusually well, people familiar with the system say. The database stems from Facebook’s 2013 acquisition of a Tel Aviv-based startup, Onavo, which had built an app that secures users’ privacy by routing their traffic through private servers. The app gives Facebook an unusually detailed look at what users collectively do on their phones, these people say.

The tool shaped Facebook’s decision to buy WhatsApp and informed its live-video strategy, they say. Facebook used Onavo to build its early-bird tool that tips it off to promising services and that helped Facebook home in on Houseparty”

.. Facebook is what Microsoft was in the 1990s. Using its existing market dominance to crush potential competitors by offering their distinctive offerings as mere features of its existing popular products.This did lead to a lot of momentum to the anti-trust proceedings against Microsoft.

I wonder if that encourages Facebook to not do this so obviously in the future? Or maybe it isn’t at all worried about anti-trust for the near term.

I am sure Google, Amazon and Microsoft continue to do doing this as well, but it seems that Facebook is doing this most successfully or at least most prominently with its total destruction of Snap.

 

.. This is just killer:

> In December, Facebook began its group-video-chat offensive. Its Messenger app introduced the feature with the ability to see up to six people in a conversation, compared with the eight-person rooms on Houseparty.

> In February, Facebook invited Houseparty users between the ages of 13 and 17 to come to its offices in Menlo Park, Calif., to participate in a study and keep a diary for a week afterward that they would share with Facebook, offering as an inducement $275 Amazon gift cards.

How the Internet of Things Limits Consumer Choice

Specifically, the DMCA includes an anti-circumvention provision, which prohibits companies from circumventing “technological protection measures” that “effectively control access” to copyrighted works. That means it’s illegal for someone to create a Hue-compatible lightbulb without Philips’ permission, a K-cup-compatible coffee pod without Keurigs’, or an HP-printer compatible cartridge without HP’s.

.. For the Internet of Things to provide any value, what we need is a world that looks like the automotive industry, where you can go to a store and buy replacement parts made by a wide variety of different manufacturers. Instead, the Internet of Things is on track to become a battleground of competing standards, as companies try to build monopolies by locking each other out.