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Trade Fact of the Week: U.S. has lost 35,000 exporting businesses since the mid-2010s

Posted on by Alyssa Brown

FACT:

U.S. has lost 35,000 exporting businesses since the mid-2010s.

 

THE NUMBERS: 

U.S. export share of GDP:

2021:        10.8%
2020:       10.2%
2019:        11.8%
2018:        12.3%
2014:        13.5%

 

WHAT THEY MEAN:

Three Census Bureau reports provoke some thoughts on the U.S.’ export economy, workers and pay, growth with and without inflation, and the next three years of policy:

(1)  The “FT-900,” released Tuesday morning, is the Census’ regular monthly summary of the basic U.S. trade data, with figures on exports, imports, goods, services, countries, and so on. Tuesday’s edition covers December 2021, and is a good point for stock-taking as it covers the full year 2021, the Biden/Harris administration’s first year in office. This found U.S. exports at $2.53 billion: 2.1 million cars and $2 billion in sports and fishing equipment; 170 million cubic meters of liquefied natural gas; $59 billion in telecommunications, information, and computer services; 25 million tons of wheat; $5 billion in wine, liquors, and beer; $30 billion worth of medical devices, etc. This represents a $394 billion jump from $2.13 trillion in COVID-stricken 2020, which in one way is a very impressive pace of growth, unmatched since 2010 but in another way essentially brings exports back to the pre-COVID levels of $2.53 trillion in 2019 and $2.54 billion in 2018.

(2)  The second report, out last November, is “U.S. Exporting Firms by Demographics”.  This is a deep dive into the nature of the businesses that produce these things, using tax, trade, and other data for 2018 to provide a survey of the ownership, employment, payrolls, and foreign markets of 178,000* of that year’s 293,000 known U.S. exporters.  Some findings:

*    Exporters offer high employment and pay:  Exporting businesses averaged 274 workers, at payroll per worker of $69,000.  Non-exporters, by comparison, employed 14 workers on payroll at $44,000 per worker. About 16,500 exporting businesses are large, presumably publicly held forms (in Census’ terminology, “unclassifiable” by ownership type).  Dropping these from the tables, U.S. exporters averaged employed 54 workers, on payroll at $64,210 per worker. The comparable figures for “unclassifiable by ownership type” non-exporters were 10 workers and $41,027 per worker. The sharpest pay premium appears to be among the 23,500 women-owned exporters: They average 38 workers at $61,000 in payroll per worker, as against 9 workers and $38,000 in women-owned non-exporting businesses.

*    Diverse business ownership is a national asset:  An ethnically and racially diverse business community appears to help the U.S. find customers and income abroad.  As one example, about 1 in 12 U.S. exporters sell to Africa; for African American owned firms, the share is 1 in 7. A similar comparison from a different angle finds Hispanic-owned firms making up 5.5% of all U.S. exporters, but 10% of exporters to Latin America and 12% of exporters to Central America specifically.

(3)  Finally, “Profile of U.S. Importing and Exporting Companies,” also from this past November (though in “preliminary” form, pending a final count in April) counts the total number of exporting businesses as of early 2020.  It glumly reports 270,000 such firms, about 35,000 below the peak count of 305,000 in 2013/2014, and 23,000 below the 293,000 reported for 2016 and 2018. Mirroring this decline in numbers, the export sector’s place in the U.S. economy has diminished in recent years, falling as a share of GDP from a 13.5% peak in 2013 and 2014 to 11.8% in 2018, and then 10.3% of GDP in 2020 — the lowest level since 2006.

 

 

Against this long-term backdrop, the big jump in yesterday’s FT-900 is good news, but still leaves the U.S. exporting well short of the role it held five or 10 years ago.

What explains the erosion?  And will it last?  One obvious but presumably transient contributor is the impact of COVID-related economic closures (especially in the first half of 2020).  These affected almost all exporting sectors, and are still powerful in “transport” and “travel” services, whose exports remain far below pre-COVID levels. Another is recent policy choices: Trump-era tariffs provoked direct retaliations against U.S. exporters, and may also, by raising the cost of parts and materials for American manufacturers and farmers, be contributing to a slower erosion of export competitiveness.  Beyond this, and not yet felt, implementation of the Asia-based “Regional Closer Economic Partnership” — a 15-country Asia-Pacific trade agreement joining China, Japan, Korea, Australia, New Zealand, and the 10 ASEAN members, together accounting for about a third of all world imports outside the U.S. — presages a Pacific tariff tilt in favor of the cars, wines, fishing rods, wheat, etc. produced by U.S. competitors.

In sum, Census numbers say many good things about the U.S. export economy in 2021.  And they suggest some ways for exporters might contribute more to both workers and macroeconomic health in the next few years.  But they also offer grounds for concern, and reasons for energetic policy.

Note: PPI Trade and Global Markets staff thank Census staff for helping with interpretation of several of these releases, and more generally for their sustained excellence in statistical work in trade and other areas.

 

FURTHER READING

From Census 

The “FT-900” series has the basic monthly trade figures, updated Tuesday for full-year 2021.

… and the accompanying “Historical Series” has a convenient one-page annual summary of imports, exports and balances from 1960 through 2021.

And “U.S. Exporting Firms by Demographics” looks deeply into 178,000 of 2018’s 293,000 exporting businesses* by owner type: male/female; race and ethnicity (with white, African American, Hispanic, Asian American, Native American, and Pacific Islander); veteran ownership; and 200 export markets ranging in scale from “Vanuatu” and to “Africa” to “EU-27” and “All Countries.” Available with data for 2018, 2017, 2012, and 2007.

* The 115,000 whose ownership couldn’t be accounted for include non-employing firms, agricultural producers, and businesses located in Puerto Rico and the U.S. insular territories.

The “Profile of Importing and Exporting Companies” looks at exporters and importers by size, with state-by-state figures, SMEs, 25 countries, sectors, etc.

Also on exporters, from two of Census’ sister Commerce Department agencies

Writing for the Minority Business Development Agency in 2015, Sharon Freeman reviews export opportunities and challenges for African American, Hispanic, Asian American, and Native American small businesses.

And the International Trade Administration summarizes research on the count and nature of “jobs supported by exports.”

And overseas

ASEAN announces entry into force for RCEP.

 

ABOUT ED

Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.

Ed returns to PPI after working for the think tank from 2001-2011. He most recently served as the Assistant U.S. Trade Representative for Trade Policy and Economics at the Office of the United States Trade Representative (USTR). In this position, he led USTR’s economic research unit from 2015-2021, and chaired the 21-agency Trade Policy Staff Committee.

Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank ProgressiveEconomy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.

Ed is the author of Freedom from Want: American Liberalism and the Global Economy (2007).  He has published in a variety of journals and newspapers, and his research has been cited by leading academics and international organizations including the WTO, World Bank, and International Monetary Fund. He is a graduate of Stanford University and holds a Master’s Degree in International Affairs from Columbia Universities and a certificate from the Averell Harriman Institute for Advanced Study of the Soviet Union.

 

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Railroads, “Supply-and-Data Chains,” and the Forced Unbundling of Transportation Services

Posted on by The Progressive Policy Institute

The Surface Transportation Board (STB) has resurrected a 2016 regulation on “reciprocal switching” that would require railroads to “unbundle” their transportation services and provide competitors with access to their infrastructure, at regulator-determined prices and service requirements. There are plenty of problems with this proposed regulation, including discouraging private sector investment and increasing operational problems. In this note, however, we will focus on the broader question of why forced unbundling of railroad transportation services is precisely the wrong regulatory strategy for today’s “Supply Chain Economy,” leading to the potential worsening of supply chain disruptions and an increase in inflation.

To understand why a 2016-vintage regulatory approach is totally wrong for the 2022 economy, we must first consider the underlying economics of supply chains. A supply chain consists of a flow of goods, of course, from producers to buyers and consumers, via transportation links such as railroads, container ships, airlines and truckers, and intermediaries such as importers and wholesalers. But equally important is the flow of data which allows all of this production and movement to be coordinated.

As I note in a forthcoming article in the Winter 2022 issue of The International Economy, it is better to think of a supply chain as a “supply-and-data chain.” In that spirit, supply-chain management has been defined by the Association of Supply Chain Management as the “design, planning, execution, control, and monitoring of supply-chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand and measuring performance globally.”

Today’s domestic and global economies are built around these “supply-and-data chains.” A retailer like Walmart uses its knowledge of expected U.S. consumer demand to place orders with factories around the world months ahead of when the goods are needed, and then coordinates the movements of these goods to its far-flung stores. At every point along the way, the goal is to use data to reduce costs and ensure a smooth flow of goods.

This “Supply Chain Economy” is very different than the classic picture of an economy consisting of a series of unbundled arms-length transactions. In an economy with forced unbundling, factories would have to commit themselves to production runs without knowing if the demand existed, and without knowing if the transportation capacity was available.

In a supply chain economy, companies compete on the basis of who can best use data to organize production and logistics across the global economy, lowering costs and increasing reliability. The key is to take a big picture view across a wide range of markets, rather than focusing on competition in individual markets.

From this perspective, forced “reciprocal switching” would divert resources away from the optimization of supply chains. Railroads would have to give a high priority to moving goods in a way that met the reciprocal switching requirements, rather than lowering costs and speeding goods to their ultimate customers. The result would be more supply chain disruptions, and higher inflation. That’s not an outcome that anyone wants right now.

Popovian for Inside Sources: We Need to Avert the Next Public Health Disaster

Posted on by The Progressive Policy Institute

By Dr. Robert Popovian

Years from now, healthcare professionals, economists, public health officials, and policymakers will evaluate the true impact of the COVID-19 pandemic on the U.S. and the world. However, here in the present, the pandemic has shone a spotlight on both the negative and positive aspects of our current healthcare system. We confirmed that flaws in our healthcare system leave seniors and individuals living in low-income communities exposed to an excessive burden of illness and that ethnic and racial minorities of all ages have markedly diminished access to preventative care such as immunizations. But we also witnessed how healthcare professionals cared for the sick under tremendous pressure while sacrificing their health and saw how private and public partnerships can develop and deploy life-saving vaccines in record time.

Finally, we observed how the pandemic depressed routine childhood vaccinations across the U.S. When the country shut down in March 2020, pediatrician visits were put on hold. That inevitably led to kids falling behind on their vaccine schedules. The majority of recommended routine immunizations by the Centers for Disease Control (CDC) are for children at birth up until the age of six, with most vaccines given by age two. The successful administration of vaccines prevents diseases we rarely hear about anymore—mumps, measles, polio. However, because of significantly reduced routine immunization of children over the past two years, those diseases could become an unfortunate reality and a serious public health hazard we must deal with amid a pandemic. This will further delay a return to normalcy, which everyone is yearning for.

Read the full piece in Inside Sources.

PPI Report Deconstructs Modern Monetary Theory and Demands Advocates Prove Economic and Political Practicality

Posted on by The Progressive Policy Institute

A new report from the Progressive Policy Institute’s Center for Funding America’s Future dives into the economic and political debate around Modern Monetary Theory (MMT), looking closely at the challenges MMT advocates would have in delivering on their goals without drastically harming our economy. The report, authored by Dr. Eric Leeper of the University of Virginia, is titled “Modern Monetary Theory: The End of Policy Norms as We Know Them?”.

“Dynamic democracies should periodically reconsider existing policy norms to evaluate if they continue to serve policy goals well. If MMT seeks to change long-standing policy norms, the onus is on its advocates to persuade us that old norms do not serve us well and to communicate precisely what new norms will prevail and how they will affect the economy’s performance,” writes Eric Leeper in the report. “Until MMTers are ready to take these steps, their ideas must remain in the realm of guess and conjecture. In the meantime, we should apply to economic policy the basic principle we apply to health policy: follow the science. Economic science, such as it is, provides no support for MMT’s central claims.”

“For years, advocates of MMT have argued that policymakers should only care about budget deficits when the economy is facing inflation,” said Ben Ritz, Director of PPI’s Center for Funding America’s Future. “Now that inflation has finally materialized, they’ve moved the goalposts and left policymakers seeking answers about what to do in response. Dr. Leeper’s thorough deconstruction of MMT makes clear that they have none to offer. Democrats should reject this ‘supply-side economics’ of the left that is nothing more than a recipe for economic misery.”

For several years, politicians and leaders on the Far Left argued that a monetarily sovereign nation, like the United States, can simply print more currency needed to purchase goods and services for its constituents. As more exorbitant expensive spending programs were introduced and pitched to the American public, politicians often leaned on MMT to ensure voters that the economy could remain strong, even with deficit-financed spending. The only constraint on deficit spending, these advocates argued, was inflation.

This report breaks down several flaws in the economic thought behind MMT, including the constraints that ultimately finite resources place on governments, the inability of MMT to explain the relationship between inflation and demand when an economy is operating below its resource constraint, how it would overcome the structural and political challenges that prevent elected lawmakers from responsively managing inflation, and the indiscriminate approach it takes to the impact of different tax and spending policies, among others.

Mr. Leeper calls for the advocates of MMT to persuade the economic community that the standing norms of economic theory no longer serve us well, and to thoroughly evaluate the effects of the new economic theory with an eye on the practical and political implications of the proposal. He calls for the economic community, economic journalists, and policymakers to pause on active or passive exaltation of MMT until this evaluation is made, and continue to follow the science on economic theory and history – which unwaveringly points away from MMT’s fiscal financing plans.

Read the report here:

 

Eric Leeper a contributing scholar for the Progressive Policy Institute. He is also the Paul Goodloe McIntire Professor in Economics at the University of Virginia, a research associate at the National Bureau of Economic Research, director of the Virginia Center for Economic Policy at the University of Virginia, and a visiting scholar and member of the Advisory Council of the Center for Quantitative Economic Research at the Federal Reserve Bank of Atlanta.

The Progressive Policy Institute (PPI) is a catalyst for policy innovation and political reform based in Washington, D.C. Its mission is to create radically pragmatic ideas for moving America beyond ideological and partisan deadlock. Learn more about PPI by visiting progressivepolicy.org.

Launched in 2018, PPI’s Center for Funding America’s Future  works to promote a fiscally responsible public investment agenda that fosters robust and inclusive economic growth. We tackle issues of public finance in the United States and offer innovative proposals to strengthen public investments in the foundation of our economy, modernize health and retirement programs to reflect an aging society, and transform our tax code to reward work over wealth.

Follow the Progressive Policy Institute.

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Media Contact: Aaron White – awhite@ppionline.org

Modern Monetary Theory: The End of Policy Norms As We Know Them?

Posted on by The Progressive Policy Institute
By Eric Leeper
Contributing Author for the Progressive Policy Institute

 

EXECUTIVE SUMMARY

Modern Monetary Theory (MMT) gained popularity at a time when U.S. inflation was benign, income and wealth inequality was on the rise, and progressive politicians saw a political opportunity to pass big-ticket spending programs. To the nagging perennial question, “How do we pay for it?,” MMT serves up a tasty answer. You don’t need to raise taxes or reduce other spending. You don’t need to secure low-cost borrowing. A monetarily sovereign nation, like the United States, can create more currency to buy the goods and services that the programs require.

Large new spending programs often invoke in U.S. voters fears of persistent budget deficits and rising inflation. MMT delivers the reassuring message that those fears are grounded in defunct “orthodox” economic reasoning that limits the federal government’s capabilities: we have nothing to lose but our outmoded fiscal bromides and much to gain by replacing historic policy norms with fresh ideas. MMT explicitly ties itself to populist policies, self-labeling their plans “the birth of the people’s economy” [subtitle of Kelton (2021)]. Any sensible elected leader, whose vision is not impaired by conventional economic thought, would happily gobble up such a fiscal banquet.

MMT is the progressive counterpoint to supply-side economics. It supplants the claim that tax cuts pay for themselves with the claim that “…[federal] spending is self-financing” [Kelton (2021, p. 87), emphasis in original]. Both claims contain a germ of economic substance. Both claims are carefully crafted to provide elected officials seemingly plausible economic grounds to support their preferred fiscal policies (though at opposite ends of the political spectrum). Both offer policy makers an ideology freed of trade offs.

Because economic policy is too important to be reduced to catchy phrases and clever marketing, this essay analyzes MMT economics dispassionately. It does not assess the worthiness of MMT’s goals. Instead, it asks if MMT can achieve its goals without doing grave damage to America’s fiscal standing and, quite possibly, its economy. The answer: probably not.

MMT suffers from several flaws:

 

1. It denies a fundamental concept in economics: in a society with finite resources but unlimited wants, market prices adjust to induce individuals and policy makers to make trade offs that ultimately align supply and demand. Economics quantifies the costs and benefits of those trade offs to inform policy makers.

2. That denial leads MMT to see no need to offer a comprehensive theory of inflation. It maintains that inflation gets triggered when economy-wide demand for resources exceeds the economy’s resource limit, but has little to say about inflation and its determinants when, as it usually does, the economy operates below that limit.

3. MMT’s solution to inflation from high resource utilization is to raise “taxes,” without specifying which taxes. Governments have many tax instruments at their disposal—labor, sales, capital, wealth, and inflation—and each tax affects individuals and the macro economy differently. Generic advice to control inflation with higher taxes is vacuous until MMTers provide far more detail.

4. MMT does not acknowledge that even well-intentioned policy makers face incentives to use inflation to achieve employment or fiscal financing goals. Because those incentives to inflate are especially powerful for elected officials, many countries, including the United States, have adopted the norms of (i) independent central banks tasked with inflation control and macroeconomic stabilization and (ii) fiscal policies that largely pay for government spending with current and future taxes. Those policy norms have improved inflation performance and social welfare. MMT overthrows those norms to move inflation control and countercyclical policies from the Federal Reserve to Congress, to finance federal spending by creating new currency, and to subjugate monetary policy to fiscal needs.

5. It does not appreciate the central role that safe and liquid U.S. Treasurys perform in the global financial system. Neither does it apprehend the extent to which its policy proposals may destabilize financial markets and undermine the special status of Treasurys and the dollar in the world economy, a status that strengthens the U.S. economy.

The problems begin with the basic assumptions that underpin MMT. Its advocates attribute all unemployment to insufficient demand for workers and believe unemployment should be alleviated through a federal guaranteed jobs program. Weak demand frequently underlies unemployment, particularly during economic downturns. But workers themselves have a say in their employment status. During the COVID-19 pandemic, a broad cross section of workers left the labor market and voluntarily have not re-entered. From March 2020 to October 2021, labor force participation rates were depressed relative to the previous year: 2.5% for men, 2.6% for women, and 3.8% for workers 55 and older. Employers across the country have positions that remain unfilled. COVID is surely an unusual situation, but it serves to illustrate that employment outcomes are not always driven by insufficient demand.

MMT is at its weakest when addressing inflation, how it gets determined and how policies can control it. Its most common argument reduces to: inflation control is not a problem until it is. Problems arise when resource utilization reaches some limit, at which point higher taxes can keep inflation in check.  But resource utilization is not the only factor that affects inflation. In late 2021, consumer price inflation hit a 40-year high of over 6%, yet compared to their pre-COVID levels, employment, capacity utilization, and industrial production are lower, while the unemployment rate is higher. Inflation is not rising because the overall economy has hit its resource limit. To be sure, supply-chain issues have driven up some prices relative to others, but these issues are not what anyone means by economy-wide resource limits. MMT’s weak theory of inflation is stunning because the potential of the MMT agenda to trigger inflation is the most frequently voiced criticism of the theory [Summers (2019), Cochrane (2020), Hartley (2020), Mankiw (2020)].

The guaranteed jobs program points to a more general theme of MMT: the federal government can solve big problems once policy makers grasp the key tenets of MMT. Kelton (2021) identifies seven “deficits,” defined in terms of both quantity and quality, that MMT can help to close: good jobs, saving, health care, education, infrastructure, climate, and democracy. MMT promises to address each of these deficiencies by first altering policy makers’ understandings of fiscal financing matters.

MMT abandons two long-standing policy norms. The first came from Alexander Hamilton in 1790 and can be summarized as “federal budget deficits beget budget surpluses,” meaning that debt-financed spending is backed by future taxes. This norm has contributed to less costly financing and bestowed on U.S. treasurys status as the world’s go-to safe and liquid assets, enabling their critical role in global financial markets. The second norm evolved from the 1951 Treasury-Fed Accord to make monetary policy operationally independent. Legislation houses countercyclical policy primarily in the Federal Reserve with the mandate that the Fed achieve price stability, maximum sustainable employment, and low long-term interest rates, and facilitate financial stability.

MMT instead posits that a dollar of new government debt need not carry any assurance of tax backing. It regards treasury securities solely as a means for the central bank to achieve its interest rate target. MMT shifts responsibility for achieving full employment and controlling inflation from monetary policy to fiscal policy. The central bank’s primary tasks are to serve as the Treasury’s bank and to maintain zero interest rates. Despite MMT claims to the contrary, monetary policy is completely subservient to fiscal policy, tossing aside Federal Reserve independence and the social benefits that accrue from it.

Full embrace of MMT’s policy proposals and new norms—whatever they may be—carries significant risks. Those risks include higher and more volatile inflation and interest rates and financial market instability, which would disrupt and depress real economic activity and harm most the people MMT aims to benefit.

 

DOWNLOAD AND READ THE FULL REPORT

 

 

ABOUT THE AUTHOR

Eric Leeper is a contributing scholar for the Progressive Policy Institute. He is also the Paul Goodloe McIntire Professor in Economics at the University of Virginia, a research associate at the National Bureau of Economic Research, director of the Virginia Center for Economic Policy at the University of Virginia, and a visiting scholar and member of the Advisory Council of the Center for Quantitative Economic Research at the Federal Reserve Bank of Atlanta.*

* The author thanks Joe Anderson for many helpful discussions and insights and Campbell Leith, Jim Nason, and PPI staff for detailed comments.

Congress’ Anti-Tech Bills Will Not Prevent Algorithmic Harm to Consumers

Posted on by The Progressive Policy Institute

A new report from the Progressive Policy Institute (PPI) explains how the ubiquity of algorithms and their ever-expanding sophistication often come at a cost to consumers and the public at large. And Congressional proposals to break up Big Tech companies, rather than address the root causes of “algorithmic harm,” represent a solution in search of a problem — not a sober assessment of this highly problematic phenomenon. The report, “Breaking Up Big Tech Will Not Prevent Algorithmic Harm to Society,” is authored by Dr. Kalinda Ukanwa, Assistant Professor of Marketing at the University of Southern California’s Marshall School of Business.

“This paper argues that forcing Big Tech companies to sell parts of their businesses will not prevent algorithms at large from circulating extremist, incendiary, and other harmful content,” writes Dr. Ukanwa. “Algorithms are everywhere, and they all operate on the same two guiding principles. To attack the algorithm problem at its roots, society must implement policy that applies to all algorithms.”

Although the way in which algorithms circulate content may not appear problematic at first glance, as Dr. Ukanwa explains, the patterns of recycling and amplifying content categories that typify them are what create echo chambers, often to harmful effect. In service of their main objective — increased engagement and greater profits for developers — algorithms can promote everything from biased understandings of societal concepts to blatantly harmful content.

The report concludes that current bills proposed in Congress are ill-equipped to protect consumers from algorithmic harm because they fail to take into account algorithmic design principles and the wide-ranging nature of algorithmic activity.

Read the full paper and expanded conclusion here:

 

Dr. Kalinda Ukanwa is an Assistant Professor of Marketing at the University of Southern California’s Marshall School of Business. A quantitative modeler, Professor Ukanwa researches how algorithmic bias, algorithmic decision-making, and consumer reputations impact firms. She is the winner of the 2018 Eli Jones Promising Young Scholar Award and a finalist for the 2018 INFORMS Service Science Best Student Paper Award, 2019 Howard/ AMA Doctoral Dissertation Award, and the 2020 AMS Mary Kay Doctoral Dissertation Award.

The Progressive Policy Institute (PPI) is a catalyst for policy innovation and political reform based in Washington, D.C. Its mission is to create radically pragmatic ideas for moving America beyond ideological and partisan deadlock. Learn more about PPI by visiting progressivepolicy.org.

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Breaking Up Big Tech Will Not Prevent Algorithmic Harm to Society

Posted on by The Progressive Policy Institute

Algorithms are all around us. In the United States, a person could have hourly interactions with an algorithm and not even realize it. Some people use algorithm-driven devices like smartphones, digital clocks, or personal digital assistants (e.g., Amazon’s Alexa or Apple’s Siri) to wake them up in the morning. Others navigate to work, school, and other destinations with algorithmic GPS technologies, such as Google Maps, Apple Maps, Waze, or Garmin GPS devices. Many institutions use algorithms to decide whether applicants get jobs, places to live, seats at schools, loans from banks, insurance for medical bills, and public assistance benefits to feed themselves. In fact, when it comes to mobile or internet activity, almost every component of the digital world employs algorithms. Search engine results on Google, Bing, or Yahoo!, consumer product recommendations on Amazon or Netflix, customer service chatbots, and targeted digital advertisements are driven by algorithms. Using social media sites and mobile apps like Facebook, Twitter, TikTok, or Instagram means interacting with an algorithm. Their algorithms will monitor whether the content posted is appropriate or should be removed. They will determine whether posts will be featured or trending on other users’ feeds. At night, an algorithm may put people to sleep by reminding them that it is their bedtime based on their past sleeping behavior. Then algorithms wake us up again the next day, bright and early. It is easy to see why the claim that algorithms are everywhere is not hyperbole.

Regardless of what tasks algorithms are designed to accomplish, virtually all of them operate on two guiding principles: 1) optimize an objective they have been given, and 2) learn how they can best optimize that objective from historical data (i.e., training data).[1] For example, Facebook whistleblower Frances Haugen shared in interviews and congressional testimony that one of the biggest objectives of Facebook’s algorithms is to make money from the ads they display on their site. However, Ms. Haugen also testified that Facebook’s pursuit of this objective sometimes came at the cost of what was good for the public.[2]

After Haugen’s bombshell testimony about the harm Facebook’s algorithms enact against everyday people, there has been a groundswell of support for congressional action to reduce algorithmic harms by breaking up Big Tech — the collective of top tech companies that run many aspects of billions of consumers lives. The notion is that breaking up Big Tech companies like Facebook, Google, Apple, and Twitter will free society from the algorithmic echo chambers that endlessly and increasingly circulate harmful content.[3] However, breaking up Big Tech will not eradicate algorithmic harm. Why? Because virtually all algorithms operate on the previously mentioned two guiding principles: 1) optimize an objective, and 2) learn from training data how to best optimize that objective. Hence, the harrowing problems that algorithms perpetuate are not unique to algorithms deployed by Big Tech companies. Algorithms used by small companies, nonprofits, and governments operate the same way. While breaking up Big Tech could temporarily reduce the scale of harmful content, doing so will not stop algorithmic bias and echo chamber facilitation in its tracks. This is because other organizations deploying algorithms will fill the vacuum. As long as algorithms, in their current design, operate in the background of daily life, people will continue to suffer from harmful and biased algorithmic outcomes.

This is how algorithms work. To make money from an online ad, users must see or click on the ad. The ad within a page is surrounded by user-generated content. People are drawn to the page in the first place by the content posted. If Facebook’s algorithm is given the objective to maximize the number of views or clicks of the ad, then it will use information about user content and user viewing and clicking behaviors that led them to click on ads.

Algorithms continually evolve. Just as humans change as they learn new things, algorithms change by updating themselves as they learn from training data. In the case of the Facebook algorithm, to accomplish the objective of getting users to look at an ad and click on it, the algorithm must learn what kind of content users like. The algorithm accomplishes this task by inspecting the content users have typically viewed in the past. The algorithm seeks patterns in terms of content characteristics that increase user engagement (likes, clicks, and reshares of a post). Algorithms can also learn from patterns in content that users have posted themselves. For example, if a user frequently posts about, views, and engages with fashion, beauty, and weight loss content, the algorithm learns over time that the user is interested in those topics.

Algorithms often become even more advanced by learning which users have similar interests across an entire consumer base.[4] This algorithmic capability is often called “look-alike modeling.”[5] If the algorithm learns that the aforementioned user who seems to like beauty, fashion, and weight loss topics is a 16-year-old girl from a Columbus, Ohio, suburb, it may look at the behaviors of other teenaged girls who live in mid-western suburbs to discover general patterns that are common among them all. Then the algorithm exploits these learned similarities across users by sending them content they have not seen before about beauty, fashion, and weight loss. Because similar users are receiving in their content feed more of the same type of content that they may or may not have engaged with before, they stay longer on the site. Consequently, content and advertisement views increase.

Although this kind of content circulation might not seem problematic at first glance, this continual recycling and amplifying the same content categories to the same users is how echo chambers arise (scenarios where beliefs are reinforced and amplified inside a closed communication system).[6] If girls are clicking on harmful content that leads to feeling bad about or even harming their bodies, the algorithm may exploit that knowledge and amplify the volume of similar content directed to those girls through trends, news feeds, and highlights of posts by friends in their networks. If algorithms learn that young men who feel disenfranchised from society like to click on extremist hate content, then algorithms will direct more content to them based on the same topics. Such potentially harmful recommendation patterns serve the algorithm’s main objective: to increase average engagement with content and the amount of time users spend on the site so that users view and click more ads (and deliver more profit to the algorithm’s developers).

Algorithms can also be problematic if they inherit a biased understanding of societal concepts. If user behavior or content is imbued with inherent biases, then the algorithm will also learn and amplify those biases. For example, imagine that a website creates a social media post with a list of the smartest people in the world. Say the post features the 2021 Nobel Prize winners, and the post generates a lot of engagement (likes, reshares, reposts). An algorithm would learn that this type of content is engaging and would update its understanding of the content characteristics associated with “smart.” Though most would agree that Nobel Prize winners are indeed some of the smartest people in the world, 77% of the 13 Nobel Prize winners in 2021 are white and male.[7] The algorithm could learn from the website’s post and other widespread, highly engaging content that “smart” is associated with white and male. It will serve and boost similar content, and in doing so, produce mass-scale biased output that amplifies the idea that people who are not white and not male are not associated with “smart.”

Thoroughly solving the issues brought to light by Haugen first requires acknowledgement that algorithmic harm is not solely created by Big Tech. The algorithm problem spans across all sectors and organizations, large and small. An effective and feasible solution requires a tactical approach more closely aligned with the design and inner workings of algorithms. An effective solution must also consider the incentives at play for organizations like Facebook. For-profit firms will seek to maximize profit. They will consequently build profit maximization into the objectives of the algorithms they use. Therefore, one solution is to require that constraints be built into algorithmic objective functions to ensure that algorithms serve not only the firm’s goals, but also the public good. Research has shown that designing algorithms to maximize profits while minimizing social harm can be done.[8]

While free market and commercial rights advocates might decry this proposal, opponents should note that similar restrictions are commonplace in other sectors of business activity. For example, mainstream TV entertainment companies have had to follow the Federal Communication Commission’s (FCC) rules for decades that limit the types of content they can expose the public to.[9] It is plausible that TV entertainment companies could increase ratings and revenue if they included more hardcore pornographic or ultra-violent content in their entertainment products. But should they? Despite society’s regrettable predilections and companies’ constant pursuit of maximal profits, regulations successfully prevent viewers from seeing pornographic and ultra-violent content on mainstream TV in order to protect viewers from the social harm such content can cause. Importantly, there has been no need to break up big entertainment companies to achieve the objective of reducing social harm. Instead, regulators provide guidelines detailing what type of content was acceptable for viewers to be exposed to prevent public harm while also allowing companies to grow and flourish.

Regulators today can take a similar approach to reducing algorithmic harm. Algorithms can be reprogrammed to optimize their objective while fulfilling constraints designed to protect the public. For example, a Facebook algorithm could still identify and disseminate popular beauty content among teenage suburban girls, as long as the content does not contain glorification of anorexia, bulimia, or other body dysmorphic behaviors. Furthermore, Facebook could mitigate algorithmic bias in the beauty content served by incorporating characteristics that ensure content features a variety of beauty standards into their algorithm’s design.

To rebuild and reprogram algorithms with constraints requires substantial investment, resources, and research into algorithmic approaches that achieve company objectives while reliably minimizing societal harm. Modifying existing algorithms also requires firms to actively audit, monitor, and update their work because the algorithms learn from data and change constantly. To catalyze the process of algorithm redesign, a credible and capable third-party entity must be empowered to spur action. Fortunately, many of the large companies perpetuating algorithmic harm on a massive scale have the very resources required to successfully accomplish this task. The Big Tech companies in particular are best positioned to lead the way because they possess the knowledge, talent, and financial resources. In contrast, smaller companies with fewer resources may struggle to update their algorithms with the required restrictions, even if they possess the requisite knowledge.

CONCLUSION

Current bills proposed in Congress and the Senate are not well-equipped to protect consumers from algorithmic harm because the underlying policies do not take algorithmic design principles and the ubiquitous nature of algorithmic activity into account. Presently, the proposed legislation aims to ameliorate algorithmic harm by restricting the power that Big Tech platforms currently have over smaller home-grown competitive offerings. However, this article argues that forcing Big Tech companies to sell parts of their businesses will not prevent algorithms at large from circulating extremist, incendiary, and other harmful content. Algorithms are used by large companies and small, and by for-profits and nonprofits. Algorithms are everywhere, and they all operate on the same two guiding principles. To attack the algorithm problem at its roots, society must implement policy that applies to all algorithms. Breaking up Big Tech will not accomplish that objective.

 

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REFERENCES

[1] Stuart J. Russell and Peter Norvig, Artificial Intelligence: A Modern Approach, 4th ed., (Hoboken, NJ: Pearson, 2020).

[2] Seth Flaxman, Sharad Goel, and Justin M. Rao, “Filter Bubbles, Echo Chambers, and Online News Consumption,” Public Opinion Quarterly 80, no. S1 (2016): pp. 298-320, https://doi.org/10.1093/poq/nfw006.

[3] Cat Zakrzewski and Cristiano Lima, “Former Facebook Employee Frances Haugen Revealed as ‘Whistleblower’ Behind Leaked Documents that Plunged the Company Into Scandal,” The Washington Post, October 4, 2021, https://www.washingtonpost.com/technology/2021/10/03/facebook-whistleblower-frances-haugen-revealed/.

[4] Jun Yan et al.,  “How Much Can Behavioral Targeting Help Online Advertising?” ACM Proceedings of the 18th International Conference on World Wide Web, April 2009, https://doi.org/10.1145/1526709.1526745.

[5] Anna Mariam Chacko et al., “Customer Lookalike Modeling: A Study of Machine Learning Techniques for Customer Lookalike Modeling,” Intelligent Data Communication Technologies and Internet of Things: Proceedings of ICICI 2020, February 2021, pp. 211-222, https://doi.org/10.1007/978-981-15-9509-7_18.

[6] Kelly Hewett et al., “Brand Buzz in the Echoverse,” Journal of Marketing 80, no. 3 (May 2016): pp. 1-24, https://doi.org/10.1509/jm.15.0033.

[7] Niklas Elmehed, “All Nobel Prizes 2021 – NobelPrize.org,” Nobel Prize, https://www.nobelprize.org/all-nobel-prizes-2021/.

[8] Kalinda Ukanwa and Roland T. Rust. “Algorithmic Bias in Service,” USC Marshall School of Business, (November 2021), https://ssrn.com/abstract=3654943.

[9] “Obscene, Indecent and Profane Broadcasts,” Federal Communications Commission, accessed January 30, 2022, https://www.fcc.gov/consumers/guides/obscene-indecent-and-profane-broadcasts.

 

PPI Applauds Passage of America COMPETES Act

Posted on by The Progressive Policy Institute

Today, the House of Representatives passed the America COMPETES Act, which will help ease supply chain tension, invest in American innovation, and strengthen our standing in the race to technological leadership.

Aaron White, Director of Communications for the Progressive Policy Institute (PPI) released the following statement:

“The Progressive Policy Institute is encouraged to see the House passage of the America COMPETES Act, a companion bill to the Senate’s bipartisan United States Innovation and Competition Act, which will invest in American innovation, ease the tensions on U.S. and global supply chains, and strengthen America’s standing in our race with China for technological leadership.

“This bill has the potential to spur long-term growth through significant investment in scientific innovation and new-age manufacturing and logistics advancements. The American technology sector has long been a leading global innovator; by investing in emerging technologies, research and development, the future workforce and the U.S. high-tech productive base, America can once again lead the world with a robust 21st century economy and expand opportunity for generations to come.

“Notably, it is unfortunate that House Republicans refused to vote for legislation that mirrored bipartisan bills and committee provisions, particularly given the Senate was willing to compromise and pass their companion bill on a bipartisan vote months ago. Important issues like supporting American innovation, technological leadership, and strengthening our economy should transcend partisanship, especially as we recover from the pandemic.

“We must acknowledge that there is still room for improvement. As the Senate and House begin the conference process for the United States Innovation and Competition Act and the America COMPETES Act, PPI encourages conference committee members to more closely examine the trade provisions within the final bill, and take the time needed — through hearings, public comments or other means — to consider the wide ranging implications for U.S. exporters and importers of several of the bill’s trade provisions.

“We also encourage the conference committee to consider reverse the Trump and GOP-era tax increase on scientific research that took effect this year. If left in place, this tax change threatens to undo much of the good that this legislation would do for American innovation. Finally, we hope lawmakers will wait for an official score from the Congressional Budget Office before voting on passage of the bill in its final form. Even if some public investments generate high enough returns to justify borrowing to pay for them, as PPI believes may be the case for some provisions in this bill, it is essential that our leaders have the necessary information to consider all the costs and tradeoffs.

“We thank Speaker Pelosi and Majority Leader Schumer for their continued work in advancing this legislative package, and congratulate President Biden for spearheading this historic advancement in American economic leadership. The finished product will be a major win for American workers, consumers, and manufacturers alike.”

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New IFP Report Argues U.S. Faces New “Sputnik Moment”

Posted on by The Progressive Policy Institute

U.S. Technological Innovation Needs Government Procurement to Succeed

Ongoing geopolitical pressures, primarily the modern rise of China, have brought American technological superiority back to the fore as a central political objective. By revitalizing corporate science and economic innovation through government procurement, policymakers can promote U.S. scientific leadership while protecting our national security, argues a new report from the Progressive Policy Institute (PPI)’s Innovation Frontier Project.

The report, authored by Sharon Belenzon and Larisa C. Cioaca of Duke University’s Fuqua School of Business, is titled “Government Procurement: A Policy Lever to Revitalize Corporate Scientific Research.” It details the history of government procurement from the 1957 Sputnik shock to the rise of China, along with evidence that an increase in procurement contracts leads firms to invest more in upstream R&D, especially when private market incentives are weaker.

“There’s no reason that America can’t lead the world again in science and technology. And as the authors of this report argue, the rise of China represents not only a threat, but an opportunity,” said Jack Karsten, Managing Director of the Innovation Frontier Project at PPI. “By bolstering corporate scientific research with the right targeted reforms to the procurement process, the U.S. government can constructively address the national security challenges it faces while reinvigorating domestic innovation.”

Belenzon and Cioaca call for the government to incentivize the participation of the private sector in procurement, while still responsibly and efficiently managing taxpayer dollars. They recommend that policymakers consider returning to the practice of rewarding firms that demonstrate technological superiority, encouraging domestic innovation while keeping us competitive abroad.

PPI releases this report as the U.S. House of Representatives considers the America COMPETES Act, a package meant to address supply chain issues, increase domestic production, and invest in American scientific and technological leadership. The legislation would appropriate $45 billion to prevent supply chain shortages and disruptions and $52 billion for semiconductor production in America, along with a collection of bipartisan science, research and technology bills.

Read PPI’s report and its full conclusion here:

 

Based in Washington, D.C., and housed in the Progressive Policy Institute, the Innovation Frontier Project explores the role of public policy in science, technology and innovation. The project is managed by Jack Karsten. Learn more by visiting innovationfrontier.org.

The Progressive Policy Institute (PPI) is a catalyst for policy innovation and political reform based in Washington, D.C. Its mission is to create radically pragmatic ideas for moving America beyond ideological and partisan deadlock. Learn more about PPI by visiting progressivepolicy.org.

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Media Contact: Aaron White – awhite@ppionline.org

Living with COVID in the New Year and Beyond

Posted on by The Progressive Policy Institute

As variants of the COVID-19 virus continue to emerge, it’s becoming more and more clear that this epidemic is becoming endemic. As the world continues to grapple with the reality that this virus is here to stay, how do we begin to live in our new normal, and how do we balance the tradeoffs between combating the spread of COVID-19 and letting normal life resume?

Last week, PPI’s Director of Health Policy Arielle Kane brought together an esteemed panel of experts, including Congresswoman Lori Trahan (D-MA) and Dr. Leana Wen, for a panel event to discuss living with COVID in the New Year and Beyond. This episode is a segment of their conversation.

Learn more about the Progressive Policy Institute here.

Telehealth helps low-income individuals access care, but disparities persist with video use

Posted on by Alyssa Brown

A new study found low-income people were more likely than other groups to use telehealth services during the pandemic, proving that telehealth does increase access to needed care for underserved people.

Telehealth use skyrocketed during the pandemic when restrictions around telehealth use were eased. In particular, Medicare expanded the number of services allowed to be delivered via telehealth and allowed greater flexibility with the acceptable technology platforms providers could use, even expanding audio-only services. However, though audio-only services are an important part of telehealth, video-enabled telehealth allows for a better patient interaction and may be better in many clinical situations.

The study found that people earning less than $25,000 were more likely to use audio-only services and less likely to have video appointments than other groups. Without addressing barriers like unequal broadband distribution and limited access to video-capable devices, telehealth won’t live up to its potential.

Using data from the Census Bureau’s Household Pulse Survey from April to October 2021, researchers at HHS’ office of Assistant Secretary for Planning and Evaluation (ASPE) found that a quarter of respondents reported using telehealth in the previous four weeks. While there was some variation across demographic groups, the most significant disparities were between those who used audio versus video telehealth services.

Video telehealth rates were higher among young adults ages 18 to 24 (72.5% reported using video telehealth), those earning at least $100,000 (68.8%), those with private insurance (65.9%), and white individuals (61.9%). Conversely, video telehealth use was lowest among those without a high school diploma (38.1%), adults ages 65 and older (43.5%), and Latino (50.7%), Asian (51.3%), and Black individuals (53.6%).

For people without access to broadband internet, phone visits can make it easier to access to care. But video appointments allow for more physical examination, better communication, and a more substantial patient-provider relationship. Further, a video connection allows a provider to have a glimpse into the patient’s home where some social indicators may increase understanding of a patient’s health condition.

But video appointments require video-capable devices, broadband access, software literacy, and often English proficiency. These all prevent barriers for older patients, lower-income patients, non-English speaking patients, and those who don’t have privacy in their homes.

The report underscores the urgency of bringing high-speed broadband to everyone, so that telehealth doesn’t become another example of health disparities where only the relatively affluent can take full advantage of the easy access and lower costs digital health enables. While Medicare has decided to permanently cover audio-only mental health visits if the patient doesn’t have access to video capable devices, a video connection allows for more expansive clinical evaluation for other types of care. Payers should not limit access to audio-only services at this time, but rather should push for broadband expansion so that more people can access video-enabled care.

Trade Fact of the Week: Florida’s sea turtle nest counts are growing

Posted on by Alyssa Brown

FACT:

Florida’s sea turtle nest counts are growing.

 

THE NUMBERS: 

Average counts of green turtle nests at 27 Florida “core index beaches,” two-year average*

2020-2021    ~23,000 nests
2010-2011     ~10,000 nests
2000-2001    ~4,000 nests
1990-1991      ~1,000 nests

* Florida Wildlife Commission; using two-year averages as green turtle nesting totals appear to vary in a two-year cycle.  These are not total statewide (or U.S.) nesting estimates; they are counts of nesting at 27 long-studied beaches, representing about 10% of the known Florida nesting beaches.

WHAT THEY MEAN:

Here’s a good idea:  Somewhere around 320 B.C., proto-conservationist Mencius offers King Hui of Liang (near present-day Kaifeng) a simple solution to a complex problem:

“If you ban nets with fine mesh from ponds, there will be more fish and turtles than the people can eat.  If you ban axes from the forests on the hillsides except in the proper season, there will be more timber than the people can use.”  

Twenty-three centuries later, and in the ocean rather than in ponds, all seven sea turtle species are “endangered,” “threatened,” or “critically endangered.” As large, armored reptiles with few natural predators, these turtles are very tough. Their nesting season this summer will be roughly the 150 millionth; the series has outlasted not only the last seven ice ages, but the end-of-Cretaceous asteroid that wiped out their early contemporaries the ammonite and the plesiosaur.

But maybe they are no longer tough enough. Some are caught and traded for shell jewelry.  Many more fall victim to “by-catch,” as shrimp and fishing fleets suck them into bag-shaped shrimp trawl nets or catch them on long lines meant for shark and tuna.  And many more, with beach erosion and harvesting of nests for eggs, never hatch at all.  This series of losses accelerated in the mid-20th century; to take one example, the global estimate of nesting leatherback females done by the International Union for the Conservation of Nature dropped from about 90,000 in 1980 to 54,000 in 2010.

How to respond?  Sea turtle protection in the United States may, tentatively, be succeeding, with a mix of three measures:

(1)    Trade restriction:  The 184 countries and territories in the Convention on International Trade in Endangered Species, the world’s first international trade-and-environment agreement, listed all sea turtles in ‘Appendix I,’ in the 1980s, banning trade in turtle jewelry and other products.

(2)    By-catch reduction:  To reduce by-catch, the United States in 1987 banned sale or import of shrimp caught by boats which do not use Turtle Excluder Devices or “TEDs.”  These are barred metal grills — something like the wide meshes like those Mencius recommended for fishnets in ponds — placed in the neck of the bag-shaped shrimp nets to let mistakenly captured turtles swim out.  They cost about $375.  Each summer, the State Department publishes a list of countries which, through compliance with this rule, can export ocean-caught shrimp to the U.S.  The most recent certifies 41 countries and territories as “equivalent” to the U.S. in turtle protection, and thus able to export wild-caught shrimp to the United States.

(3)    Beach protection:  National and state laws, and local regulations set aside beaches for nesting, and limit their use.  As an example, Florida’s Marine Turtle Conservation Act (passed in 1991 under then-Gov. Lawton Chiles) bars over-building, lighting schemes that can disorient hatchlings in season, and disruption of nesting by tourists.

Does it work?  Tentatively, yes.  Florida’s green turtle population is a case in point:  while totals vary up and down each year, Florida Wildlife Commission figures shows about 20 times as many nests in the 2020/2021 season as there were in the early 190s, when the national TED and Florida beach protection laws began.  Kemp’s Ridley turtle nesting levels (almost exclusively on a single stretch of Mexican beach, though with outposts in Texas and Cape Hatteras) are up from a near-extinction low of 200 in the 1980s to about 5000 a decade ago, and perhaps as many as 20,000 in 2020.  On a larger scale, the International Union for the Conservation of Nature’s estimate of leatherback nesting females has risen from 54,000 in 2010 to 64,000 as of 2020, and looks ahead under current population trends (driven by strong growth in Atlantic populations) to 79,000-110,000 by 2040.

Just a start, of course.  Hardly Mencius’ “more than you can eat”; and (as an example) the IUCN’s optimistic take on Atlantic leatherbacks is offset by continuing Pacific leatherback decline.  And apparently positive trends remain open to newer questions about rising ocean temperatures, acidification, plastics accumulation, and beach erosion as sea levels rise.  But this said, a promising start and some validation for Mencius’ rather old, still simple, and still good idea.

FURTHER READING

 

The Florida Wildlife Commission reports on nesting totals for five turtle species at “index beaches” from 1989 forward.

A worried World Wildlife Fund fact-sheet.

The IUCN has assessments for all seven sea turtle species; optimistic projections for the leatherback here.

Reports from:

Florida: UCF ponders growth in small-turtle nesting.

… and Fort Myers explains beach lighting rules in the May to October nesting season.

Hawaii: NOAA’s Pacific Islands office on hawksbills in Hawaii.

Texas: The National Park Service on Kemp’s Ridley nesting.

Australia: Australia’s Department of Agriculture, Water, and the Environment on flatback turtle conservation.

Oman: The Oman Times reports on green turtle nesting and tourism at Ras al-Hadd in Oman (certified as U.S.-equivalent in turtle protection).

Belize: Oceana reports on hawskbills.

Policy

The State Department announces 2021 shrimp trade certifications: Oman, Australia, Belize joined by Bahamas, Malaysia, Fiji, et al.

The CITES (Convention on the International Trade in Endangered Species) homepage.

Sea turtle protection page from the National Oceanic and Atmospheric Administration.

Litigation

A famous WTO dispute of the 1990s, “DS-58”, wound up validating the U.S. TED rule against complaints.

And last…

Mencius, with the brief passage on nets, excluder devices and turtles in Chapter A3.

In A New Voyage Round the World (1699), English professional navigator, part-time pirate, and amateur naturalist William Dampier discusses the massive Caribbean green turtle populations of the 17th century:

“I heard of a monstrous green turtle once taken at Port Royal in the Bay of Campeachy that was four foot deep from the back to the belly, and the belly six foot broad.  Captain Roch’s son, of about nine or ten years of age, went in it as in a boat on board his father’s ship, about a quarter mile from the shore.  … One thing is very strange and remarkable in these Creatures; that in the breeding-time they leave for two or three months their common Haunts, where they feed most of the year, and resort to other places only to lay their Eggs: and ‘tis not thought that they eat any thing during this Season: so both the He’s and the She’s grow very lean. … Altho’ multitudes of Turtles go from their common places of feeding and abode, to those laying eggs:  and at the time the Turtle resort to these places to lay their Eggs, they are accompanied by abundance of Fish, especially Sharks; the places that the Turtle then leave being at that time destitute of Fish, which follow the Turtle.”

Dampier’s New Voyage, with the turtle passage in Chapter 5.

ABOUT ED

Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.

Ed returns to PPI after working for the think tank from 2001-2011. He most recently served as the Assistant U.S. Trade Representative for Trade Policy and Economics at the Office of the United States Trade Representative (USTR). In this position, he led USTR’s economic research unit from 2015-2021, and chaired the 21-agency Trade Policy Staff Committee.

Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank ProgressiveEconomy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.

Ed is the author of Freedom from Want: American Liberalism and the Global Economy (2007).  He has published in a variety of journals and newspapers, and his research has been cited by leading academics and international organizations including the WTO, World Bank, and International Monetary Fund. He is a graduate of Stanford University and holds a Master’s Degree in International Affairs from Columbia Universities and a certificate from the Averell Harriman Institute for Advanced Study of the Soviet Union.

Read the full email and sign up for the Trade Fact of the Week

Targeting App Stores Reduces Consumer Choice in the Market for Mobile Devices

Posted on by Alyssa Brown

A bipartisan group of legislators is looking to improve competition within app stores and lower barriers to entry for developers in the market for mobile apps, though the reality of the bill’s impact is decidedly less clear. The Open App Markets Act would require that companies — namely Google and Apple — allow applications to be downloaded onto their operating systems from sources other than their respective app stores in a process known as sideloading. The bill also prohibits companies from requiring that apps facilitate in-app transactions through an operating system’s own payment mechanisms — an issue that took center stage in the 2020 lawsuit in which Epic Games sought to bypass the 30% revenue cut taken by Apple’s app store by implementing an external payment process. While the intention may be to promote competition, this bill misrepresents current industry standards by targeting practices of two major companies which are commonplace among competitors. The consequences of this action will fall on consumers, who will lose the ability to choose preferred methods of obtaining mobile apps by forcing identical business models between competing companies.

Approximately 85% of apps listed on the Apple App Store do not charge consumers or enable in-app purchases of any kind, meaning the commission fees for which this bill seeks to provide alternatives are irrelevant to the vast majority of developers utilizing the marketplace. Because of this, the 1.8 million apps available on Apple’s platform can reach billions of iOS users worldwide at a low cost. However, for those which do enable transactions — many of which operate within the realm of mobile games similar to those offered by Epic — the fees imposed by the Apple and Google app stores both currently operate at or below levels consistent with the standard set by the market. Apple and Google both collect 30% commission on digital goods and services and both implement a model where fees on subscriptions fall to 15% after a year. Both companies also lower fees to 15% for developers making under $1 million in revenue in order to lower barriers to entry for small developers. This is on par with the 30% fee charged by the Samsung Galaxy Store, Amazon App Store, and gaming platforms such as the Microsoft Store on Xbox consoles and the PC gaming store Steam.

In addition to disrupting current industry standards, efforts targeting Apple and Google’s app stores disregard the impact the bill will have on consumer choice in the market for mobile devices. Sideloading apps from sources other than Apple and Google’s approved listings is a useful feature for those who want to customize their devices and maintain a higher level of control over software installed, but there are significant security risks associated with doing so which are left unacknowledged by the Senate legislation. Google’s Android operating system currently allows users to enable the ability to sideload apps from unknown sources, but users doing so assume the risks associated with downloading untested software, potentially exposing their devices to malware. App store review processes are in place to ensure that apps work as intended and do not pose harm to users prior to becoming available to consumers. When sideloading, users have a limited amount of information about the applications source and content, and if the app has not been through the approval processes needed to list an app on a major app store, it is all too easy to misrepresent the content of the app, exposing consumers to potentially dangerous applications. This risk is heightened on any app which requires transactions, as payment information can be easily compromised by unknown third parties when operating outside an operating system’s payment platform. In 2020, Apple’s app review process rejected more than 48,000 apps containing hidden content or undocumented features, as well as 215,000 for privacy concerns, which Apple says saved consumers more than $1.5 billion in fraudulent transactions.

Despite the risks, the autonomy that comes with the Android model is a draw for many consumers as they choose between competing mobile operating systems. For the more tech-savvy consumer, security risks can be mitigated by the ability to make informed choices, and the results can be an enhanced level of functionality on mobile devices which are therefore customized to meet the needs of the individual user. But the average consumer may not want to weigh the benefits and risks of every download they make. App stores which are designed for the specific operating system ensure a level of security, and the payment systems used make it so that financial information is not compromised by exposure to unknown third parties. By requiring that Apple follow the lead of Google and enable sideloading on their devices, consumers lose the option to take advantage of this ensured security and will be open to malware — a practice which Apple has reported results in Android devices having an estimated 15 to 47 times more infections from malicious software compared to their iOS counterparts.

A common critique of this bill is that by targeting only two major companies, the Senate is artificially deciding winners and losers in a market where competition is already present. By manipulating the market to require identical business models by leading app stores, this critique appears especially salient. The assurance of safeguards for privacy and security is a feature of Apple products, and if a consumer feels confident in their ability to monitor their own security risks when downloading unapproved applications from third-party sources, switching costs to another operating system are relatively low from an antitrust perspective. It is thus not the role of Congress to regulate what is considered an ideal business model in areas where innovation and competition are present, particularly when that regulation exposes the everyday consumer to significant security risks.

RAS REPORTS: Celebrating National School Choice Week

Posted on by The Progressive Policy Institute

In this week’s episode of RAS Reports, Curtis Valentine and Tressa Pankovits, Co-Directors of PPI’s Reinventing America’s Schools Project, celebrate National School Choice Week by discussing new developments in the movement to provide access to affordable, quality education to all of America’s youth. The hosts highlight Innovation Schools in Indianapolis, IN which serve as a prime example of the benefits of granting schools the flexibility to make decisions tailored to the specific needs of their student body. Curtis and Tressa discuss how these “schools of choice” attract high-quality teachers, produce higher learning outcomes, and gives parents more power to decide what educational environment is best for their student.

Learn more about the Reinventing America’s Schools Project here. 

Learn more about the Progressive Policy Institute here.

PPI’s Mosaic Economic Project Statement on Biden’s Federal Reserve Nominations

Posted on by The Progressive Policy Institute

Jasmine Stoughton, Program Lead for the Mosaic Economic Project at the Progressive Policy Institute (PPI), released the following response in reaction to Biden’s Federal Reserve Nominations:

“President Biden’s nomination of the Hon. Sarah Bloom Raskin, Dr. Lisa Cook, and Dr. Philip Jefferson to the Board of Governors of the Federal Reserve System is a key step toward ensuring stable economic growth that will be felt by every American, and it is a demonstration of Biden’s commitment to uplift leaders that reflect the diversity of our country.

“Raskin, Cook, and Jefferson are well-respected and highly qualified to serve on the Board. Combined, they have decades of experience in academia and government and have each shown extraordinary judgement and skill throughout their careers.

“Diversity in leadership is among the most important elements of successful governance. If the Senate confirms Biden’s nominations, the complete Board will be majority women for the first time in its 108-year history. Incredibly, Cook will be the first Black woman to serve on the Board, and Jefferson will be the fifth Black governor — representation that is long overdue.”

The Mosaic Economic Project is a network of diverse women with expertise in the fields of economics and technology. Mosaic programming aims to bring new voices to the policy arena by connecting cohort members with opportunities to engage with top industry leaders, lawmakers, and the media.

The Progressive Policy Institute (PPI) is a catalyst for policy innovation and political reform based in Washington, D.C. Its mission is to create radically pragmatic ideas for moving America beyond ideological and partisan deadlock. Learn more about PPI by visiting progressivepolicy.org.

Follow the Progressive Policy Institute.

Follow the Mosaic Economic Project.

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Media Contact: Aaron White – awhite@ppionline.org

PPI Statement on Historic Federal Reserve Nominations

Posted on by The Progressive Policy Institute

The Progressive Policy Institute (PPI) released the following statements ahead of the Senate Banking Committee’s hearing on the nominations of the Hon. Sarah Bloom Raskin, Dr. Lisa Cook, and Dr. Philip Jefferson for the Board of Governors of the Federal Reserve System:

“President Biden has overseen a year of remarkable achievement in restoring economic growth, with steady job creation and strong evidence of wage increases. With the economy stabilized after the COVID-19 pandemic experience but concerns about inflation rising, the country needs both professional management and imaginative policy in the coming years,” said Ed Gresser, Vice President and Director of Trade and Global Markets for PPI.

“President Biden’s excellent nominations for the Federal Reserve Board of Governors demonstrate his awareness of this challenge. The current chair and nominee for vice chair, Jerome Powell and Lael Brainard, are exceptional public servants who have helped to steer the Fed through the turbulence of the Trump years and the COVID crisis, and fully merit confirmation. New nominees Lisa Cook, Sarah Bloom Raskin, and Phillip Jefferson are outstanding economists who will bring a diversity of strengths and experience to the Fed, with its dual mandate of price stability and full employment, and will help ensure that the Board of Governors takes its next steps with consideration for both macroeconomic consequences and impacts on Americans at all income levels and in all walks of life. This is a very strong group of nominees which will serve the country well during a very complex time, and deserves support,” concluded Gresser.

“The Progressive Policy Institute applauds President Biden and the Biden-Harris administration for this historic, diverse, and highly qualified slate of nominees to the Board of Governors of the Federal Reserve. At a time when our nation faces several economic challenges — caused primarily by the COVID-19 pandemic and evolving variants — this group will bring steady, competent leadership. America is getting back on track after an unimaginable health and economic crisis, and President Biden is proving his commitment to Build Back Better by prioritizing strong leadership in every facet of the federal government,” said Sarah Paden, Vice President and National Political Director.

The Progressive Policy Institute (PPI) is a catalyst for policy innovation and political reform based in Washington, D.C. Its mission is to create radically pragmatic ideas for moving America beyond ideological and partisan deadlock. Learn more about PPI by visiting progressivepolicy.org.

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Media Contact: Aaron White; awhite@ppionline.org