Human Rights and Economics: The Non-Tradeoff

In common political conversation, economics and human rights can be pitted against one another. Whether we are talking about the environment, tax policy, public health, or human service provision, we often talk about the growth of the economy as a tradeoff against human rights considerations, such as the rights to health, safety, and education.

In policy after policy area, however, we find that economics and human rights are not truly in tension. As a matter of fact, when we look closer at policy, we find you can often improve human rights by growing the economy or vice-versa.

In the area of long-term care, we see the improvements made in deinstitutionalization over the past decade improving both the fiscal picture for governments as it improves the rights and freedoms for elderly residents. Providing more support for elderly people to age in their homes is cheaper, thus freeing up economic resources for other uses at the same time that it allows for people to live lives that are more free and self-directed. 

We’ve seen a similar dynamic play out in tax and transfer policy. A cost-benefit analysis conducted by Scioto Analysis shows that the earned income tax credit, the most important anti-poverty program in the United States outside of Social Security, both reduces poverty and grows the economy.

Proper considerations of the true economic costs of carbon emissions shows that environmental policy is also punctuated by a positive relationship between human rights and economic growth. Understanding that pollution is a negative externality that levies costs on people not involved in the supply or purchase of energy shows that pollution is a drag on the economy. Thus, measures to reduce pollution can both secure the rights of people who are impacted by pollution and can help grow the economy.

One more example is that of high-quality child care. Child care subsidies are often seen as a subsidy for low-income families to work or for children from low-income families to receive care. High-quality child care and early childhood education also has a strong economic benefit it achieves by helping train tomorrow’s workforce, outfitting children with fundamental socio-emotional skills that increase earnings and educational attainment.

Income is a fundamental indicator in human development. The Human Development Index uses income along with education and health as a cornerstone of understanding how well countries are securing the rights of their citizens. Income is a fundamental tool families use to achieve the goals they wish to achieve.

While it is easy to demonize economics and its influence on the public policy process, at its foundation economics is about getting people more of what they want. And what do families want? They want to be healthy, educated, productive, comfortable, and to contribute. Giving people the resources they need to do so allows them to secure their rights. 

This is the logic behind the historic 2020-2021 expansions of the child tax credit. When a child grows up in poverty, it is harder for her to get access to healthy foods, to secure opportunities for education, to have adequate housing, and to access the plethora of other resources a family can get access to with more income. Thus, transfers that increase the resources of low-income families reduce poverty in the short-term while improving the long-term prospects of their children to contribute to the broader economy.

Economics is not in essential tension with the concept of human rights. Ultimately, economics is the study of how we can get more benefit out of the resources we have. What better tool is there for the sincere activist for human rights?

Proposed trucking reforms offload costs on public

In April of 2020, the world saw the largest immediate contraction of consumer spending in recorded history. The fits and starts in the bounce back from this contraction is largely a function of the speed at which the world shut down and opened back up again. While 2020 was the year of hundreds of thousands of onions rotting in the soil, 2021 is the year of longer pizza delivery times and longer times on hold with customer support.

In light of the issues of supply chain readjustment in 2021, Gov. Mike DeWine has called for lifting regulations on the trucking industry to increase the flow of goods in the state. Will these efforts at deregulation have a substantial impact on supply chain inefficiencies in Ohio?

One change DeWine calls for permanently increasing the number of pounds a truck can carry without a permit from 80,000 to 90,000, a 13% increase. While ODOT spokesman Matt Burning says that this change could save drivers up to an hour per load, he minimizes the cost borne to communities in the form of higher maintenance costs on roads due to more wear and tear on them.

Permitting is a market-friendly approach to dealing with this problem. A trucking company must pay a fee that reflects the cost it exacts on the public by damaging roads. Making the extra damage caused by higher weight limits free for trucking companies transfers the cost of hauling from the trucking company to the public. This increase in allowance for unpermitted hauling is in effect a proposed subsidy for the trucking industry from the state, not a particularly market-friendly reform.

Another proposal from DeWine is to lift the federal COVID-19 vaccine mandate for truckers. This is a strange proposal from a governor who has been as supportive of vaccination as to put forth one of the most innovative public relations programs in the country to promote vaccination. Industry groups have decried vaccine mandates, claiming that over two-thirds of the current trucking workforce will quit their jobs over the vaccine mandate, a figure 14 times higher than credible public health polling has found among the unvaccinated.

While some are likely to quit their jobs over vaccine mandates, the widespread evidence of the effectiveness of the vaccine suggests building public health policies around their desires is playing with viral fire. The loss in economic value from people switching to new jobs is unlikely to outweigh the potential loss of life by further spread of a dangerous virus.

Other proposals the governor is pushing for is to lower the age for commercial driver’s licensing and letting drivers stay on the road longer. While the governor maintains reducing regulations on age of drivers and hours drivers should spend on the road would have minimal public health impacts, crash rates for 18 and 19-year-olds are 28% higher than those for 20 to 24-year-olds and it has long been established that more time driving leads to higher crash rates.

Some approaches to deregulation like reduced requirements for licensing could be beneficial to improving industry prospects. Increased loads, less vaccinations, and younger drivers working longer hours, however, are likely to unload costs of the industry on third parties. While some of these changes could have some benefits for the industry, they will come at substantial cost to the public.

This commentary first appeared in the Ohio Capital Journal.

$300 million for nursing homes is a head scratcher

Late last month, Republican state Rep. Sara Carruthers of Hamilton introduced House Bill 461, a bill designed to appropriate $300 million in federal American Rescue Plan funds as a one-time payment to Ohio nursing facilities.

We all know that as people age, they need extra support. Nursing facilities are a key piece of the puzzle for providing people with support as they enter a phase of their life when independent living becomes more and more difficult.

Traditionally, Ohio has leaned heavily on nursing facilities to provide long-term care support to its aging residents. For instance, in 1993, 91% of Ohioans receiving state Medicaid dollars to pay for their long-term care services were in nursing homes.

Over time, this reliance on nursing facilities for long-term care has come under scrutiny by policymakers. There is strong evidence that nursing facilities represent diseconomies of scale, where the services required for a nursing facility end up being much more expensive on a per-patient basis than smaller, community-based models for providing long-term care services.

On top of this, many worry about the quality of care associated with use of nursing facilities. People who stay in nursing facilities usually have less control over their day-to-day activities and less friendships than people in community care settings, two key aspects of quality of life in old age.

These twin problems of costs and quality have driven policymakers to shift public dollars to supporting seniors’ ability to stay in the community rather than moving into nursing homes. By 2015, a majority of people receiving Medicaid were in community settings rather than in nursing facilities.

Nursing facilities became a flashpoint during the COVID-19 pandemic. About one in three deaths statewide have been among long-term care facility residents according to Ohio Department of Health data. 

Part of the reason nursing homes have been so deadly is because COVID-19 has been much more deadly for elderly Ohioans: nearly 3 in 4 COVID-19 deaths in Ohio have been among people age 70 and older. Part of the reason nursing homes have been so deadly is because of the congregate care nature of nursing facilities. Just as Ohio’s densely-populated prison settings made them early flashpoints for massive COVID outbreaks, the dense settings of nursing homes and close contact between workers and residents made them especially dangerous places for spread of the deadly disease.

The American Rescue Plan Act provides $250 million nationwide for “strike teams” to fight COVID-19 outbreaks in nursing homes. It also provides an additional $200 million nationwide for quality improvement around infection control and vaccination uptake at nursing homes.

In light of these allocations, the suggested unrestricted funding for nursing homes in House Bill 461 of $300 million, over a third of what Ohio has remaining to spend from the American Rescue Act, seems very high. Additionally, much has been made in the media about the fact that the bill does not direct funding toward specific programs to combat COVID-19 or provide additional specific health supports for residents.

In a world where we are moving more toward cheaper, higher-quality options for seniors to spend more of their lives in their homes rather than facilities, a large, lump-sum grant of unrestricted funding to facilities that do the opposite of this seems like a strange choice. Policy should be built on what provides the most benefit beneficiaries at the least cost to the public, and nursing homes have not traditionally done this.

This commentary first appeared in the Ohio Capital Journal.

Ohio economists skeptical of stadium subsidies

In a survey published by Scioto Analysis this morning, only two of 23 Ohio economist respondents agreed that subsidies for sports stadiums create local economic benefits that outweigh their economic costs.

Among the 18 economists who disagreed with the statement, a number noted that money spent at stadiums would usually be spent elsewhere, so new economic activity is often not being generated by a new stadium. Those who agreed also tended to mention that other uses of public dollars could have larger social returns, offering the examples of education, infrastructure, parks, housing improvements, environmental interventions, youth and re-entry programs, and addition and recovery services as alternate uses of funds.

Among those uncertain about the economic value of stadium subsidies, their comments focused on the details of a given subsidy. These economists mentioned considerations such as the multiplier effects of subsidies, the timing of subsidies, and the magnitude of subsidies as all playing into the size of the benefit.

Of the two economists who agreed subsidies had net benefits, one noted that stadiums can provide national advertising for a city and promote social cohesion.

The Ohio Economic Experts Panel is a panel of over 40 Ohio Economists from over 30 Ohio higher educational institutions conducted by Scioto Analysis. The goal of the Ohio Economic Experts Panel is to promote better policy outcomes by providing policymakers, policy influencers, and the public with the informed opinions of Ohio’s leading economists.

How can we improve Ohio’s commercial activity tax?

Last month, the Ohio House’s Ways and Means Committee held a hearing on House Bill 234, a bill that would repeal Ohio’s commercial activity tax. 

The commercial activity tax raises about $2 billion a year by taxing revenues of businesses in the state. Lawmakers worry, though, that the focus on gross receipts hurt businesses with tighter profit margins to the benefit of those that enjoy healthier profit margins.

While the criteria policymakers champion here for this reform is fairness, there is also an economic efficiency consideration for this reform. If an investor is trying to decide whether to put her money into a low-margin new restaurant or a high-margin new jewelry retailer, a tax on gross receipts will encourage her to put her money toward the jeweler. This has nothing to do with the viability of the business or the economic fundamentals of the investment, specifically the value it will generate for consumers, suppliers, and investors. It is only based on the structure of profits within the company.

So there is both a fairness and economic justification for reform of the tax. Does this mean outright repeal is the right answer to this problem? Most of our largest taxes such as state income taxes and sales taxes are distortionary in some way, but we don’t jump straight to repeal as the policy solution. Inefficient taxes can actually have net economic benefits if they are used to fund investments like education which build human capital and grow our state economy in the long run.

Imagining that an inefficient or unfair tax requires a dichotomous choice structure between preservation and repeal is an oversimplification. Ideally, a state tax structure works to balance ideals of equity, efficiency, and fairness with the need to raise revenue for public projects that do the same. Do we have better tools to do this than the commercial activity tax?

A popular solution for this problem in Europe is the value added tax, a tax on sales that is levied at every level of production of goods and services, thus spreading the tax across the economy and making it much less distortionary than other taxes. European countries use this tax to fund safety net features that make up for its regressive nature, thus ending up with more equitable outcomes while distorting the economy less than an income tax or a simple sales tax.

Policymakers in the United States are not ignorant of value added taxation. A value added tax was in the original version of the Tax Cut and Jobs Act during the Trump administration. Our neighbor to the north Michigan had a state version of a value added tax for decades. Ohio could look to models overseas and proposed in the United States for inspiration.

In today’s polarized environment, it’s easy to talk about taxes like they are all good or all bad, but a more sober analysis reveals a more complex truth: taxes are simply tools. Taxes can destructively push people into poverty if designed poorly and can cause minimal economic damage while reducing inequality and funding vital public services if designed well. More thoughtful analysis will lead to a tax structure that is more efficient, fair, equitable, and robust than the one we have now.

This commentary first appeared in the Ohio Capital Journal.

Ohio House legislation could make Ohio’s bad water problems worse

For the past few years, my firm Scioto Analysis has published a series of studies of Ohio’s Genuine Progress Indicator, a “GDP+” measure that monetizes the impact of environmental damage and external social benefits and costs of nonmarket activity in the state.

One of the biggest takeaways we’ve found year after year from doing this study and comparing Ohio’s results to those in other states is how poorly Ohio stacks up when it comes to water quality. Lower water quality means less opportunities for residents to fish, boat, and swim and can lead to negative health impacts and loss of biodiversity, all of which exact costs on the residents of a state.

While the average state had a typical resident bearing about $139 in costs in 2011 (the most recent year we have state-by-state Genuine Progress Indicator data for), the average Ohioan bore $219 in costs, a rate more than 50% higher than that in other states.

Ohio tends to be pretty middle-of-the-road with most indicators, so this sort of exceptionally large problem should be an area of concern for policymakers, especially those who care about environmental protection and those who have districts that benefit from lake and river tourism.

Top policymakers in the state including the governor and legislative leaders have identified harmful algae blooms as a policy priority and have passed some legislation to reduce fertilizer runoff. At the same time they have shied away from a fertilizer tax that leading state economists endorse as a solution for reducing fertilizer runoff and thus algae blooms.

Most recently, the legislature has been considering a bill that could exacerbate Ohio’s problems with water quality. House Bill 175, passed by the Ohio House last month, would exclude streams and pools that appear during rainstorms from water pollution control programs, specifically eliminating their requirement to undergo water quality certification review in order to reduce the cost of development associated with building around these streams and pools.

It is easy to see why this sort of legislation is attractive to policymakers. Those worried about the cost of development see this as a tool the public sector can wield to reduce a cost for development. Those who are interested in development of more affordable housing should see reason to reduce barriers to development that can increase the supply of housing and thus stabilize increases in the cost of housing.

That being said, the $5 water quality certification review fee per linear foot of stream to be impacted is not likely to have a massive impact on whether a development can happen or not. Also, though the magnitude of the problem is hard to ascertain, the reduction in water quality review will likely have some negative impacts on water quality. If these “ephemeral features” run fertilizer or chemicals into the water supply, they could contribute to the further degradation of a natural asset that Ohio already struggles to maintain.

Keeping costs of development low can be a worthy cause, but what do we lose in the process of doing it? Possible environmental damage needs to be balanced against the supposed benefits of such a policy.

This commentary first appeared in the Ohio Capital Journal.

Ohio's economists agree coal subsidies are not good for Ohio's economy

In a survey published by Scioto Analysis this morning, all 22 Ohio economists who responded were skeptical of the ability of coal subsidies to improve Ohio’s economy.

Of the 22 economists who responded, 21 disagreed with the statement that subsidies for coal plants would grow the economy, with 13 disagreeing strongly. The remaining economist was uncertain about the impact. Among those who disagreed with the statement, the problem of the negative external cost of coal pollution was raised in comments multiple times.

Economists who disagreed with the statement also talked about the way subsidies distort the market in the absence of positive externalities, with the public sector picking certain projects over others that do not provide a net benefit to society. Multiple economists also talked about how renewable energy sources that have positive social benefits would be a better target for subsidies than nonrenewable resources with net negative social benefits.

The Ohio Economic Experts Panel is a panel of over 40 Ohio Economists from over 30 Ohio higher educational institutions conducted by Scioto Analysis. The goal of the Ohio Economic Experts Panel is to promote better policy outcomes by providing policymakers, policy influencers, and the public with the informed opinions of Ohio’s leading economists.

What is “economics” and why do we care about it in public policy?

When you hear the term “economics,” what images are conjured to your mind? If you’re like most people, you probably think of stacks of dollar bills, shops, and generally the study of commerce. 

This definition of “economics” comports with the definition put forth by Merriam-Webster: “a science concerned with the process or system by which goods and services are produced, sold, and bought.” But this isn’t the only way people think of economics.

An alternative definition for “economics” is “the study of how humans make choices under conditions of scarcity.” This definition focuses on the root word “economize,” which centers on the concept of gaining the most value using the resources one has.

A simple supply/demand model illustrates this conception of economics. Suppliers will create as much of a product as they can until the value they can recoup from sales on the market falls below the cost to produce a product. Consumers will consume more and more of a product until the cost to purchase the product exceeds the value they receive from the product when consuming it.

Though dollar values are often the easiest way to conceptualize value, they are not the only thing that people economize. Another example is time. Surveys like the American Time Use Survey give us a snapshot into how people economize their personal time, one of the most scarce resources people have.

Similarly, economists have turned their focus to a range of topics that people don’t necessarily associate with dollars and cents. This ranges from Gary Becker’s studies of whether discrimination can be statistically detected to Steven Levitt’s study of whether sumo wrestlers throw games. 

Understanding economics as the study of human behavior under conditions of scarcity is a helpful framework for people who want to apply economic models to public policy problems. For instance, in our genuine progress indicator study, we estimate the value of unpaid housekeeping and child care and compare it to other sectors of the economy. Even though dollars don’t change hands when someone cleans their house or spends time caring for a child, value is created the same way it would be if a housekeeper were hired or a child care service were utilized. The thing being traded, though, instead of dollars, is time.

Understanding economics in this broader sense helps us to use economic models to improve welfare in new ways. We can’t understand the child care system in a comprehensive way by just looking at the formal market for child care: this market interacts with an informal market that provides a large amount of the child care throughout the country.

In the same way, we cannot understand energy markets without understanding the external costs borne by consumers and the public due to how energy markets function: how pollution impacts public health and environmental assets not involved in the direct economic transaction.

In our genuine progress indicator study, we monetize all of these impacts. But there are other ways to use an economic framework to understand public policy. The Human Development Index does this by focusing on welfare as a collection of basic needs, namely income, education, and health. Subjective well-being measures do this by focusing on welfare as self-reported assessments of personal happiness. Any of these can be maximized given other resources we have.

It’s easy to think of “economics” as the study of dollars and cents. And that is one way to think of it. But when we open our mind and accept that people economize a range of things that are important to living a good life, we start to understand the power of this framework for someone who cares about public policy.

How can Ohio fight climate change today?

The Union for Concerned Scientists has an incredible interactive map that provides county-by-county projections for how temperatures will change in the United States over the 21st century.

Historically, most of Ohio experiences 11-25 days when the heat index is above 90 degrees Fahrenheit, which is the threshold at which sun stroke, heat cramps, and heat exhaustion start to pose a threat to risk groups. These days have been a little more common in counties on the southern border and a little less common in northeast Ohio.

The Union for Concerned Scientists projects that by 2050, much of northern and eastern Ohio will be experiencing about 40 days over 90 degrees barring significant action to curb climate change, over double the current rate. Central, southern, and western Ohio will fare worse, cracking 50 days over 90 degrees by midcentury.

While many people and community leaders in Ohio have an interest in reducing climate change, the problem is a global one that local action cannot ameliorate on its own. This is why agreements like the Paris Accord are so important: climate change is a problem that can only be tackled at the level of international cooperation.

That being said, Ohio may have its hand forced to reduce carbon emissions. The Biden Administration has made climate change a priority and will have similar tools to the Obama administration to push states to reduce carbon emissions. These usually focus on setting carbon emission goals and leaving it up to states to decide how they will meet these goals.

If the Biden administration promulgated a plan like this, Ohio would have to meet carbon reduction goals as a part of a national plan to reduce carbon emissions.

In a study my firm released in the summer, we analyzed three different approaches Ohio can take to reducing carbon emissions: a renewable portfolio standard, a cap-and-trade system, and a carbon tax.

A renewable portfolio standard is pretty close to a classic command and control regulation. The state sets guidelines for what percentage of power in the state needs to be generated from renewable sources of energy and utilities comply. Ohio had a fairly popular renewable portfolio standard passed over a decade ago that has been watered down since.

Cap-and-trade and carbon tax policies are more market-oriented approaches to reducing carbon emissions. A cap-and-trade program caps the amount of carbon that can be released in the state, then auctions off rights to emit this carbon to companies. This means that emitters need to balance the cost of buying emission rights against the cost of reducing emissions, incentivizing them to develop cost-effective approaches to reducing carbon emissions.

A carbon tax works similar to a cap-and-trade program, but rather than setting a cap on the amount of carbon emitted, it sets a price for emitting carbon that then creates an incentive for emitters to reduce emission so they don’t need to pay that price.

In our study, we found all three of these approaches to be much more effective than the status quo at reducing carbon emissions. If Ohio wants to do its part to fight climate change, it has three good options to do it with.

This commentary first appeared in the Ohio Capital Journal.

What can Ohio do about childhood lead exposure?

On Monday, a group of medical researchers published an original investigation in JAMA Pediatrics examining the individual and community-level blood lead levels in children across the United States.

As reported in the Ohio Capital Journal, this study found Ohio’s rate of blood lead elevation in children well over double the national average and higher than every other state with data aside from Nebraska.

In a world in which everything seems to be a political issue, reducing lead poisoning in children seems like an obvious problem to rally resources around whatever your political affiliation may be. And the economics of the problem justify intervention well.

Altarum, a Michigan-based nonprofit health and health care research and consulting firm, estimates the lifetime economic burden of lead exposure in Ohio at $2.8 billion. These costs are borne in the form of reduced lifetime productivity, increased spending on health care, education, and social assistance, and premature mortality.

Luckily, governments have options to reduce lead hazards for children. One option is controlling current lead hazards through strategies such as treating paint, dust, and soil with lead contamination and replacing old windows. According to Altarum, a half-billion dollar lead hazard control program would help about 50,000 households and 64,000 children and would yield $660 million in gross benefits, a return of $1.40 in benefits for every $1 spent on lead abatement.

Outside of paint, childhood lead exposure also comes from lead pipes. Governments can therefore also reduce lead exposure by replacing homeowner and utility lead service lines for those without lead. According to Altarum, a $170 million lead service line replacement program in Ohio would replace 25,000 lines, help protect 32,000 children, result in $230 million in gross economic benefits, and result in a return of $1.40 in benefits for every $1 spent on replacing lead pipes.

Additionally, the Environmental Protection Agency has issued standards for renovation, repair, and painting, requiring lead-safe work practices. Since enforcement for Environmental Protection Agency standards often falls to state government, this can be another cost-effective tool for reducing lead exposure for children. Altarum reports that a $74 million enforcement program could impact 200,000 renovations, protect 11,000 children, and yield $220 million in gross benefits, a return of $3 in benefits for every $1 invested in the program.

These numbers make the efficiency case for investment in lead abatement: Lead poisoning leads to lower productivity, more spending on health care, education, and social assistance, and premature mortality. Interventions that can reduce lead poisoning and these impacts at low cost can thus grow the economy. But lead poisoning reduction can also improve equity outcomes in the state. For instance, the counties with the highest rates of elevated blood lead levels in the state, Cuyahoga, Hamilton, Lucas, and Mahoning, all have rates of elevated blood lead of over 12%, more than twice the state average and six times the national average. They are also many of the counties with both the highest poverty rates and the largest Black populations.

Lead treatment, pipe replacement, and enforcement of Environmental Protection Agency building standards are all cost-effective tools for reducing lead exposure that also can improve equity outcomes. If Ohio wants to do something about lead exposure among children, it has the tools to do so.

This commentary first appeared in the Ohio Capital Journal.