Make the world a better place: 15 weird tricks

How can we make the world a better place? This comes up every time we choose a job or a career, give money or time, advocate, or vote. There is a surprising amount of evidence about what works from economics. Many ideas involve widespread deployment of innovation, medical science, and technology. Let’s attempt to summarize some of the best opportunities and tricks.

Improve democratic institutions and trust

It is deeply helpful to live in a democracy with democratic institutions that function well and strong trust. Functioning democracies are a leading provider of many good things, from human rights to economic well-being. Most people in the world who are doing well are doing well largely because they live in a country whose institutions function well. What are the opportunities to improve? There are many. For a list of areas where you may want to advocate for improvements, look up your country on Freedom House (US), which is one site that offers detailed country-by-country analysis of institutional quality.

Innovate

Many of the best things we can do for the world are to innovate more, at scale. This means coming up with new helpful inventions, like toilets, the internet, cheaper education, and mobile phones.  Innovators think up these ideas, implement them, and keep grinding away at them until they can be deployed cheaply enough that everyone can use them. Thomas Crapper was doing this in 1890 when he invented some features of the modern toilet. Sal Khan is doing it today as he improves The Khan Academy. Innovation happens in at least three major ways: economic growth, government-sponsored R&D, and government spending on public health and infrastructure.

Grow the economy

As the economy grows, our well-being as individuals grows too. In fact, in the US, well-being of regular citizens rises a bit more quickly than the economy as a whole (see this little book).

Just how quickly are economies growing? In the world’s most populous countries, China and India, surprisingly fast. For the 25-year period ending in 2016, China grew by 9% per year, and India grew by 5%. If this were maintained over the course of an 80-year life in China, it would literally be 1000x growth. A staggering amount! That hasn’t happened for 80 years yet. What has happened is that the Chinese economy grew 10x in the 25 years to 2016. In the US growth has been a much slower 1.5% per year, which over an 80-year life-span means 3.4x growth. 

This suggests an obvious opportunity to improve: we should all try to grow our economies. More. A lot more.

How do you contribute to this yourself? Work in a sector that innovates, and be one of the people driving innovation forward. Keep growing your company, and make sure it provides real value to its customers.

How do governments grow the economy? In the US, there are a series of huge improvements available, from targeted regulatory fixes to increasing medical research, which are many of the remaining twelve tricks.

Increase immigration to rich countries

Immigration is a magic trick. Remember the Chinese citizen we discussed above? In 2016 an average share of Chinese GDP was $14,400, and a Mexican counterpart had a similar share at $17,200 but a US counterpart had a $53,400 share – about 3.7x more. The obvious trick really does work: you can immigrate from China to the US and increase your well-being by 3.7x. Those around you also benefit, probably by a similar amount. Contrary to the unfounded claims of, say, Donald Trump, we in the US are all better off when there are more immigrants. This is because economic actors generally have many of what are called positive externalities. For example, remember how Jeff Bezos’s Cuban Dad funded his little startup, and Russian dude Sergey Brin founded another little startup? Just those two companies have close to a million employees between them, and those jobs have positive externalities not only for those employees, but for other workers who might take those jobs but didn’t, and for waiters and plumbers who earn a living selling stuff to those employees, and for billions of people who use their products. The products, Google and Amazon, didn’t exist before. They are new things that create new benefits. Recent economic growth in the US is largely due to these and other immigrants, and if we had 4x as many elite immigrants, we’d have more economic growth – maybe, if we were lucky, 4x as much. (Though most increasing functions do have diminishing returns.)

I’m enjoying the existing economic growth, which, without any help from me, is increasing my well-being by 3.4x over the span of my life. My childhood in the 1970s was fine, but it is much better to have the internet, fresh food, cars that don’t break down, and phones that actually work (i.e. they are mobile internet phones, not landlines). But I’d be enjoying it even more if US economic growth increased by 4x, from 1.5%/year to 6%/year. Because of the way exponentials work, that would mean a 100x increase in well-being over 80 years. A staggering possibility that would make most Americans much, much better off, and is ours for the taking.

At the same time, immigrants who suddenly make 3.7x more money also send a lot of money back to their families (“remittances” total $600 billion/year), making them better off, as well as those around them.

At the end of the day, allowing millions more immigrants into the US and other rich countries is a way to lift up millions or even billions of people from incomes like $14,400/year to incomes like $53,400/year, while doing well for other people at the same time. Immigration is sometimes referred by economists to as “the trillion dollar bill on the sidewalk”, because it makes us all richer. See this comic book for more details. 

The President of the US has the power to let in many more immigrants than either President Biden or Trump has, so one of the simplest things you can do if you are a politically active Democrat is advocate to others in the political realm that President Biden should allow in more immigrants. Both Democrats and Republicans vary a lot in how much they support immigration, so your primary vote is one source of influence.

Build more housing

There is a similar opportunity in housing. Housing costs are high in desirable coastal cities because building is restricted by local NIMBY governments, and this means less housing – and less cheap housing –  for everyone. The simple path forward is for state governments to do a variant of what California is slowly doing, led by Democratic State Senator Scott Wiener: when metro areas have housing that costs more to buy than it does to build, those metro areas lose their ability to restrict housing supply. A simple workable formula is for the state to choose small localized downtown areas throughout those metro areas and remove all restrictions outright (zoning, height limits, etc), without imposing any new limits, and with the condition that when the metro area gets its housing costs back down to build costs, they can resume control. In California this can be done by ballot initiative.

The work of Hsieh and Moretti estimates the economic growth available by eliminating housing restrictions in just three overpriced coastal cities (New York, San Francisco, and San Jose): a 36% increase to GDP. This would make an immense positive difference to all of us across America, starting with those who live in overpriced cities now. This subject is explored in depth in Moretti's book. 

An excellent essay, The Housing Theory of Everything, by Sam Bowman, John Myers, and Ben Southwood, points out the harm caused is probably far worse than Hsieh and Moretti suggest, since housing misregulation also creates regional inequality, makes it harder to afford a family, increases obesity, and causes huge environmental harms.

Build more green infrastructure

A similar regulatory error interferes with green infrastructure, including nuclear power plants. Building these projects can usually be blocked by the NEPA, which is written in a way that brings about incorrect cost-benefit analyses – ones that weigh only the environmental costs of a project, but not its environmental benefits – it fails to consider counterfactuals correctly. You can learn more from reading  Eli Dourado in the New York Times.

The best way to repair this is with an act of Congress that mandates correct cost-benefit analyses for environmental reviews, or sharply curtails them.

Approve more life-saving drugs and tests

Covid showed us another opportunity for a targeted regulatory fix. Many countries, including Australia and New Zealand, managed to stop pre-Omicron Covid entirely, mostly by the simple act of testing actively early on. The US public health apparatus failed to do this. Instead, it prevented scientists from testing people for Covid. This cost hundreds of thousands of lives. Then, they slowed down the vaccine efforts of Pfizer and Moderna, and failed to ask them to do fast clinical challenge trials. This again cost hundreds of thousands of lives. Uncontrolled Spread and The Premonition give good accounts of these events.

These deaths are an outrage, and one we can expect to be repeated with many other medications. And the problem is easily solved. HHS should rewrite their policies so that FDA and CDC routinely write correct cost-benefit analyses of all their actions, that include the cost of lives lost due to time that passes due to FDA or CDC action, including treatment withheld. HHS should appoint an independent auditor to review these cost-benefit analyses and direct FDA and CDC to improve their performance.

Let’s move from the exciting world of regulatory detail to the even more exciting world of tax efficiency.

Tax efficiently, and use carbon taxes

Some taxes are much more efficient than the other taxes or regulations they replace. The most familiar examples are ones that tax economists have long sought without success: we should replace property taxes (which discourage building housing) with land value taxes, and prefer progressive consumption taxes over progressive taxes on labor, savings, and capital gains (which discourage innovation).

Carbon taxes are a new, more achievable opportunity. Many or most measures we take to reduce carbon would best be replaced with carbon taxes, which incentivize all innovations that reduce carbon, not just the ones that Congress finds passable in some particular year. At the same time, carbon taxes produce revenue – so they replace less efficient regulations and less efficient taxes simultaneously.

Redistribute with tax credits

Much of what the US government does is redistribute funds to Americans who need them most. Unfortunately, this is often done “in kind”, which means we decide what poor people need, spend money on it, and give them the thing. As you know if you’ve ever received a gift, people are much better at figuring out what they need than others are, especially when those others are a bunch of government bureaucrats sitting in suburban Maryland. As you know if you’ve ever had $1000 worth of food stamps or child care subsidies, you are much better off if you have $1000 instead, because now you can choose how much to spend on food vs. child care vs. other things you need more. Worse, in-kind benefits often distort the markets for those items and drive up prices, so that your $1000 child care benefit only buys $500 of pre-price-distortion child care. (This happens with college loans, too.) $1000 cash is still $1000.

Giving cash like this is called a tax credit. It is already much used in the US, via the Child Tax Credit (CTC) and Earned Income Tax Credit (EITC). Many (but not all) in-kind programs are such that if we replace them with cash, the recipients will be better off.  

Redistribute to the poorest, including fighting malaria

Redistribution does good because resources benefit the poor more than others. So it’s most impactful to redistribute money to very poor people in poor countries.  Government redistribution programs don’t do much of this, which leaves an opportunity for each of us to give to charitable programs that do. An effective altruist group called GiveWell reviews charitable programs to see which do the most good per dollar, and they highlight The Against Malaria Foundation as turning every $4500 donated to it into a life saved. An extremely good value. Another of their favorites is GiveDirectly, which literally gives all of its funds directly to farmers in poor countries.

Waste less time on education theater

Education is one of the few major expenditures that gets more expensive over time, but it has a much greater cost than that. Education is partly intended to give people better economic futures, but it’s obvious that most of it is not doing that. Instead we waste most of eight years going through high school and college. There is some education going on there, but mostly it is theater. This is a massive opportunity cost, equal to about 20% of our adult working lives. The world would be a lot better off if we all used those eight prime years for some mix of a 20% increase in GDP and eight years of recreation or early retirement. 

There are at least three three streams of evidence for this case against education, which is laid out in detail in this book.

First, we certainly learn many invaluable things in grade school and junior high – most obviously reading, writing, and arithmetic. But if you’ve ever had a plumb job as, say, a software engineer, or an office job in sales, you’ve probably noticed that only a handful of classes in high school or college contributed to you being able to do that job. Engineering, science, programming, statistics, and writing classes certainly help with some of those jobs – probably about 10% of your classes if you are an engineer and somewhere under 5% if you’re a salesman.

Second, earnings of college dropouts with 7 semesters complete are nearer to those of high school graduates than they are to college grads (8 semesters), so apparently the financial rewards to college come from completion, not from actual learning.

Third, have I mentioned that two of the best four software engineers I’ve worked with didn’t go to college? I know a lot of very good software engineers, many many of them with PhDs. But it’s plain that those PhDs aren’t necessary.

So what’s going on? High school and college’s main positive economic impacts are to provide credentials that serve two purposes: (1) an IQ test that could be administered in an afternoon (2) evidence that the student can complete instructions and get things done, repeatedly, in semester-long chunks. In other words, they are not even remotely providing benefits that accord with their massive, massive costs.

What best to do about this? As Ryan Craig argues, employers are in the best position to make this better. If you hire people, hire more people without college. For example, if you hire software engineers, hire people whose credential is from a coding bootcamp rather than college.

Better unemployment transitions

Unemployment transitions are a flawed aspect of our social safety net. Unemployment insurance is good – indeed great! – as far as it goes, but not everyone makes those transitions. What’s really needed is to offer retraining that can be completed on a manageable time scale, with manageable cost. The New U (above) talks a lot about how to build good apprentice programs, mostly from the perspective of one large altruistic employer who’s dedicated to training his employees for careers. We should also redirect the attention we spend crafting an 8-year-long program that takes the place of a 3-hour IQ test – redirect it toward guiding people into new careers, in months not years, multiple times in each person’s life, when they see fit to change careers.

Working from home: a productivity revolution

During the Covid pandemic most office jobs were done from home, and this taught many of us something important about productivity: we are more productive if we have the option of doing office work from home. It provides many large direct benefits. Employee productivity goes up 5-10% during hours worked. Many people find their open-floor-plan offices noisy and distracting – at home, they both get more done and are happier. Most people’s homes are much, much nicer than their offices. Introverts feel more comfortable in the privacy of their homes. Employees save 40 minutes of commuting per day, increasing their productivity over an 8-hour day by 8%. Employees spend more time with their families, leading to god knows what positive effects. Traffic is reduced, leaving the freeways to people who need them to get to jobs that need to be done in person. Couples who chose a compromise city where both of them have jobs no longer have to compromise. People are free to gain the extra value that comes with living in one place they like – perhaps with grandparents, perhaps in a cheaper city, perhaps in a beautiful place – and working for a company homed elsewhere, resulting in thicker labor markets, which mean better job choice and higher pay.

Finally and importantly, most people still have the choice of working in an office, so the nine benefits above are choices, and those who find offices better can continue to use them. For more about remote work, read Nick Bloom.

Medical research, and other government R&D

The value society gets from government-sponsored medical research is a large multiple of the cost of that research. We should strive to increase spending on medical research by a large multiple: 2x, 4x, maybe more. This almost certainly applies to some other government-sponsored research too, e.g. perhaps fusion and other green energy, and parts of chemistry and economics. But the case is especially clear for medical research, which is a major input to the biomedical revolution that surrounds us, saving lives hand over fist, with covid vaccines and treatments for cancer and heart disease. For those of us who live in countries rich enough to fund this research, this is something we should advocate for and vote for.

Public health and energy infrastructure

Finally, public health infrastructure and energy infrastructure have been major drivers of increased lifespan for the last 150 years, with innovations from sewage treatment, which has saved millions from dying of cholera, to water chlorination, to rural electrification, to the many vaccine drives which are why we all survived childhood, and most recently the infrastructure roll-out portion of the covid vaccine effort (Operation Warp Speed, etc). One good place to read more:

Government spending is often (usually?) a main driver here: the government makes a bet, pulls out a few bags of cash, and awards the money as contracts to private companies like Moderna who have the expertise to get the work done.

Looking forward, poor countries still have massive needs for public health and energy infrastructure, and I hope all of us – people donating money, poor governments lacking infrastructure, rich governments wanting to help – will push life-saving infrastructure forward in those countries.

Read more about these topics, and many others, at Didero Books.