Current Affairs

A while ago I had some email with Noah Smith on this topic, now we are getting somewhere, this is from a new NBER working paper by Daniel M Hungerman, Kevin J. Rinz, and Jay Frymark:

We use a dataset of Catholic-parish finances from Milwaukee that includes information on both Catholic schools and the parishes that run them. We show that vouchers [funded by the government] are now a dominant source of funding for many churches; parishes in our sample running voucher-accepting schools get more revenue from vouchers than from worshipers. We also find that voucher expansion prevents church closures and mergers. Despite these results, we fail to find evidence that vouchers promote religious behavior: voucher expansion causes significant declines in church donations and church spending on non-educational religious purposes. The meteoric growth of vouchers appears to offer financial stability for congregations while at the same time diminishing their religious activities.

I’ve long maintained that the fiscal effects of vouchers, if they were implemented on a much larger scale, are the elephant in the room.  For better or worse.

The White House Council of Economic Advisers is being demoted by the Trump administration, which said in a statement Wednesday that the president’s cabinet won’t include the chairman of the CEA, an official that President Donald Trump also has yet to name.

The diminished stature for the CEA, which was part of President Barack Obama’s cabinet and has advised presidents for over seven decades on the economic impact of their policies, means Mr. Trump will likely rely more heavily on other advisers, such as Gary Cohn, the former Goldman Sachs president who is head of the National Economic Council, and Peter Navarro, the trade critic who is leading the National Trade Council.

Here is more from Josh Zumbrun at the WSJ.

Vice President Mike Pence has hired Mark Calabria as his chief economist, according to several people familiar with the move.

Calabria was director of financial regulation studies at the Cato Institute, where he was a prominent voice on financial services and economic policy and an expert on mortgage and housing reform.

Before joining Cato in 2009, Calabria worked for the Senate Banking Committee, where he handled housing, mortgage finance, economics, banking and insurance for then-ranking member Richard Shelby (R-Ala.).

Here is the Politico linkMark is also a George Mason Ph.d.

Here is a description of the proposed rule change.  Felix Salmon asked:

I know nothing about baseball, but wouldn’t this give even more of an advantage to the team batting first?

I would expect the opposite (NB: I am not suggesting a weakness in Felix’s analytical abilities, only that British people don’t usually “get” baseball).  The team batting second in the inning always has more information than the team batting first, because the home team (which bats second) knows what the visitors scored in their half of the inning.

The closer you are to “runs,” the more valuable is this differential in information.  To see this, take those cases where the first-batting team fails to score in the top of the tenth inning.  The home team can then play for “only one run.”  If no one is on base, the strategies for “only one run” and “a bunch of runs” aren’t that different.  You’d like to start with some extra base hits, home runs, etc., in either case.  But with a man already on second (or on third, to see the point more clearly), you can consider some alternate strategies, such as just poking the ball to the opposite field.  You don’t need to swing for a home run so much, or try to stretch a single into a double, and so on.  You can play more conservatively in the offense, because you know that a single run suffices to win the game.

For the team that bats first, playing for “only one run” isn’t the sure-fire clincher, and so this helps the team that bats second in the inning, the home team.

Or so it seems to me.

Addendum: Via J.C. Bradbury, Cowen’s Second Law!

Nicholas R. Parrillo of Yale Law School has a new paper on this topic.  I have not yet read it, but here is the abstract:

Scholars of administrative law focus overwhelmingly on lawsuits to review federal government action while assuming that, if plaintiffs win such lawsuits, the government will do what the court says. But in fact, the federal government’s compliance with court orders is imperfect and fraught, especially with orders compelling the government to act affirmatively. Such orders can strain a federal agency’s resources, interfere with its other legally-required tasks, and force it to make decisions on little information. An agency hit with such an order will often warn the judge that it badly needs more latitude and more time to comply. Judges relent, cutting slack and extending deadlines. The plaintiff who has “won” the suit finds that victory was merely the start of a tough negotiation that can drag on for years.

These compliance negotiations are little understood. Basic questions about them are unexplored, including the most fundamental: What is the endgame? That is, if the judge concludes that the agency has delayed too long and demanded too much, is there anything she can do, at long last, to make the agency comply?

What the judge can do, ultimately, is the same thing as for any disobedient litigant: find the agency (and its high officials) in contempt. But do judges actually make such contempt findings? If so, can judges couple those findings with the sanctions of fine and imprisonment that give contempt its potency against private parties? If not, what use is contempt? The literature is silent on these questions, and conventional research methods, confined to appellate case law, are hopeless for addressing it. There are no opinions of the Supreme Court on the subject, and while the courts of appeals have handled the problem many times, they have dealt with it in a manner calculated to avoid setting clear and general precedent.

Through an examination of thousands of opinions (especially of district courts), docket sheets, briefs, and other filings, plus archival research and interviews, this Article provides the first general assessment of how federal courts handle the federal government’s disobedience. It makes four conclusions. First, the federal judiciary is willing to issue contempt findings against agencies and officials. Second, while several federal judges believe they can (and have tried to) attach sanctions to these findings, the higher courts have exhibited a virtually complete unwillingness to allow sanctions, at times swooping down at the eleventh hour to rescue an agency from incurring a budget-straining fine or its top official from being thrown in jail. Third, the higher courts, even as they unfailingly thwart sanctions in all but a few minor instances, have bent over backward to avoid making pronouncements that sanctions are categorically unavailable, deliberately keeping the sanctions issue in a state of low salience and at least nominal legal uncertainty. Fourth, even though contempt findings are practically devoid of sanctions, they have a shaming effect that gives them substantial if imperfect deterrent power.

The efficacy of litigation against agencies rests on a widespread perception that federal officials simply do not disobey court orders and a concomitant norm that identifies any violation as deviant. Contempt findings, regardless of sanctions, are a means of weaponizing that norm by designating the agency and official as violators and subjecting them to shame. But if judges make too many such findings, and especially if they impose (inevitably publicity-grabbing) sanctions, they may risk undermining the perception that officials always comply and thus the norm that they do so. The judiciary therefore may sometimes pull its punches to preserve the substantial yet limited norm-based power it has.

For the pointer I thank the excellent Kevin Lewis, note the link to Kevin is Kevin survey some new and interesting papers on international trade.

The vast majority of left-wing protesters arrested on suspicion of politically-fuelled offences in Berlin are young men who live with their parents, a new report found.

The figures, which were published in daily newspaper Bild revealed that 873 suspects were investigated by authorities between 2003 and 2013.

Of these 84 per cent were men, and 72 per cent were aged between 18 and 29.

More than half of the arrests were made in the Berlin districts of Friedrichshain, Kreuzberg and Mitte, mostly during demonstrations.

A third of them were unemployed, and 92 per cent still live with their parents.

The figures published in the Berlin newspaper said of the offences committed against a person, in four out of five cases the victims were police officers.

Here is the article, Eli Dourado was in some manner involved.

That is the topic of my latest Bloomberg column, the proposed answer is Pakistan, here is the closing conclusion:

When I started pondering this “underrated” question about 15 years ago, it was mainly about guessing hidden strengths of various economies, based on esoteric knowledge of sectors and regions and histories. These days, it is most of all an exercise in gauging media overreactions. The underrated countries are places you read and hear lots about, not obscure locales you’ve barely heard of.

It’s a sad world where discarding “what you think you know that ain’t so” has so grown in importance.

Do read the whole thing.

A few days ago Conor Sen tweeted:

It’s close right now, but today might be the lowest close for the VIX since February, 2007.

Here is the broader chart.  How can that be?  Not to mention a high Dow.

The consensus view is that the first two weeks for Trump have been an extreme disaster.  But is that true?  Protest has been robust, and so far checks and balances seem to be working.

He issued a bunch of executive orders that mostly cannot be carried through.  He still hasn’t filled most of the second-tier positions of import, and for the State Department he fired/induced to quit a whole bunch of senior figures.  That militates in favor of not much getting done.  Obamacare abolition and tax reform are being postponed until next year it seems, for better or worse.  The Wall is stupid but won’t matter much and may not even happen, given environmental review, Native American rights, and the preferences of Texas Republicans.

Trump also trampled on just about every sacred icon held by those who inhabit my Twitter feed, most of all by having Bannon insult the press by telling them to shut up for a while, and the steady stream of absurdities continues.  Yet the underlying story (NYT) seems to be about six guys in the White House who don’t know how to use the levers and pulleys of the Executive Branch.

Or consider the assessment of E. Richards:

As of now, however, events since January 20 support the conclusion that Donald Trump is not very sincere about actual, rather than verbal chaos and that his administration will mostly defend the world order status quo.

As for beating up on the marmite crowd, is there a better form of training wheels?

People, I do not favor this kind of experiment with governance or with rhetoric.  And the market is by no means always a correct forecast.  But right now it is worried less than many of you are.  I do understand that America is consuming some of its political and reputational capital.  Yet so far the best prediction is that the relatively manageable scenarios are coming to pass.

Addendum: Just think what kind of embedded embarrassment this is for the Democrats.  Whether you agree with Democratic economic policy or not, and whether you agree with the markets or not, the Democrats in effect cannot convince the markets that their presidential rule is better for capital values than is the…scenario of Trump.  The more stupidities you see, and the more you criticize him, the more painful that ouch should become.

In 2015, to make extra point plays after touchdowns more uncertain, the NFL moved the extra point distance from the 2-yard line to the 15-yard line. Since the rule change, the expected points from an extra point attempt has fallen from 0.99 (averaging between the 2002 and 2014 NFL seasons) to 0.94 (averaging the 2015 and 2016 NFL seasons) while the expected points from the two point conversion remains 0.95 (averaging between 2002 and 2016 NFL seasons). While the total number of two point conversion attempts per season has almost doubled, most coaches still rarely attempt 2 point conversions when it would be point maximizing (and win maximizing under risk neutral or risk seeking preferences). Using dynamic programming, this paper argues that this result is evidence of a conservative bias and that teams could improve expected wins by attempting more two point conversions.

Hartley is at the Wharton School, here is the link (pdf).

Britain has changed since 1998.

Back then, it only took workers about three years to save enough money for a down-payment on a house. Now it takes 20 years, on average, according to the Resolution Foundation, which published a landmark report on income, housing, and inequality in Britain last week.

Here is further information, via the excellent Samir Varma.

A very good sentence

by on February 6, 2017 at 7:59 am in Current Affairs, Law, Travel | Permalink

“Unless the goal is to have an outright travel ban forever, and we should take the president at his word that that’s not the goal, then let’s just have calmer heads prevail and conduct the security analysis that was going to be conducted during these 90 days.”

Here is the WaPo article, citing Leon Fresco, the deputy assistant attorney general for the Office of Immigration Litigation in Obama’s Justice Department.

The Demand for Applause

by on February 5, 2017 at 2:07 am in Current Affairs, History | Permalink

I was reminded today of the story recounted by Solzhenitsyn in The Gulag Archipelago about how the great leader demanded applause:

At the conclusion of the conference, a tribute to Comrade Stalin was called for. Of course, everyone stood up (just as everyone had leaped to his feet during the conference at every mention of his name). … For three minutes, four minutes, five minutes, the stormy applause, rising to an ovation, continued. But palms were getting sore and raised arms were already aching. And the older people were panting from exhaustion. It was becoming insufferably silly even to those who really adored Stalin.

However, who would dare to be the first to stop? … After all, NKVD men were standing in the hall applauding and watching to see who would quit first! And in the obscure, small hall, unknown to the leader, the applause went on – six, seven, eight minutes! They were done for! Their goose was cooked! They couldn’t stop now till they collapsed with heart attacks! At the rear of the hall, which was crowded, they could of course cheat a bit, clap less frequently, less vigorously, not so eagerly – but up there with the presidium where everyone could see them?

The director of the local paper factory, an independent and strong-minded man, stood with the presidium. Aware of all the falsity and all the impossibility of the situation, he still kept on applauding! Nine minutes! Ten! In anguish he watched the secretary of the District Party Committee, but the latter dared not stop. Insanity! To the last man! With make-believe enthusiasm on their faces, looking at each other with faint hope, the district leaders were just going to go on and on applauding till they fell where they stood, till they were carried out of the hall on stretchers! And even then those who were left would not falter…

Then, after eleven minutes, the director of the paper factory assumed a businesslike expression and sat down in his seat. And, oh, a miracle took place! Where had the universal, uninhibited, indescribable enthusiasm gone? To a man, everyone else stopped dead and sat down. They had been saved!

The squirrel had been smart enough to jump off his revolving wheel. That, however, was how they discovered who the independent people were. And that was how they went about eliminating them. That same night the factory director was arrested. They easily pasted ten years on him on the pretext of something quite different. But after he had signed Form 206, the final document of the interrogation, his interrogator reminded him:

“Don’t ever be the first to stop applauding.”

MSNBC and Fox News are capitalizing on President Donald Trump’s TV watching habits, dramatically increasing issue advocacy advertising rates in recent weeks as companies and outside groups try to influence Trump and his top lieutenants.

The ad rates for “Morning Joe” have more than doubled post-election, according to one veteran media buyer. Trump, who reportedly watches the show most mornings, has a close relationship with “Morning Joe” host Joe Scarborough, and they talk regularly.

Fox News’ “The O’Reilly Factor” and other primetime programs on Fox News have boosted their rates about 50 percent. Trump also is a frequent viewer of the network’s primetime shows.

“The president’s media habits are so predictable, advertisers migrate to those areas,” said one media buyer.

One prominent D.C. consultant said some of his clients, including a big bank and major pharmaceutical company, were negotiating this week to buy ads on “O’Reilly” and “Morning Joe” because they knew they had a good chance of reaching the president.

That is from Daniel Lippman and Anna Palmer, via Kevin Lewis.

That is one of the news stories of the end of this week, namely that the Trump administration eliminated a previous Obama administration ruling on this, see Brad Plumer for details.  That sounds horrible, doesn’t it?

I took a look at the cost-benefit study (pointed out on Twitter by Claudia Sahm, or try this link, and please note it was prepared by consultants, not by the government itself).  I spent some time with these hundreds of pages, and they are not always easy to parse (my apologies to the authors for any misunderstandings).  Anyway, I quickly came upon this and related passages (p.45, passim):

In summary, the Final Rule is expected to reduce employment by 124 jobs on average each year due to decreased coal mined while an additional 280 jobs will be created from increased compliance activity on average each year.

Of course those “newly created jobs” are a cost, not a benefit, and should be switched to the other side of the ledger.  That is not what this study did.  And if I understand p.4-31 correctly, this study is using a multiplier of about 2.  This approach is completely wrong, and if it were right Appalachia would love a lot of this coal regulation for its job-creating proclivities, but of course the region doesn’t.

The claimed annual benefit from the changes, from the side of coal demand (not the only effects), is $78 million, fairly small potatoes.  Note the study doesn’t consider what are commonly the most significant costs of regulation, namely distracting the attention of managers and turning companies into legal and regulatory cultures rather than entrepreneurial cultures.  The study does mention uncertainty costs from regulation, although I could not find any quantification of them.

Furthermore, I am not able to scrutinize the introductory section “SUMMARY OF BENEFITS AND COSTS OF THE STREAM PROTECTION RULE” and figure out the final assessment of net benefits for the rule and where that assessment might come from.  I find that worrisome, and paging through the study did not put my mind at ease in this regard.

Now, I know how this works.  Many of you probably are thinking that we need to do whatever is possible to attack or shrink the coal industry, because of climate change.  Maybe so!  Maybe we want to stultify the coal companies, for reason of a greater global benefit.  But a) there is still a role for evaluating individual policy changes by partial equilibrium methods and reporting on those results accurately, and b) “putting down the coal companies,” as you might a budgie, is not what the law says is the proper goal of policy.

Imagine holding an attitude that places the Trump administration as the actual defenders of the rule of law!  Besides, don’t get too worked up (p.174):

Our analysis indicates that there will be no increase in stranded reserves under any of the Alternatives.

There is, however, a very small decline in annual coal production (pp.5-20, 5-21) from the rule that had been chosen.  Water quality is improved in 262 miles of streams (7-26), in case you are wondering, that’s something but hardly a major impact and that almost entirely in underpopulated parts of the country.  All the media coverage I’ve seen implies or openly states a badly exaggerated sense of total water impact, relative to this actual estimate (are you surprised?).  Returning to the study, there is also no region-specific estimate of how large (or small) those water benefits might be, at least not that I could find (again, maybe I missed it, but I did find some language suggesting that no such estimate would be provided).

Chapter seven calculates the benefits of the resulting carbon emissions, but after reading that section my best estimate for those marginal benefits is zero, not the postulated $110 million.  The “social cost of carbon” is actually an average magnitude, and it does not measure benefits from very small changes.  Again, you might think there is an imperative to consider “this policy is conjunction with numerous other anti-coal changes,” but that is not what the law stipulates as I understand it and furthermore it hardly seems that many other anti-coal regulatory changes are on the way.

If it were up to me, I would not have overturned the coal/stream regulations, and my personal inclination is indeed to fight a war on coal.  But if you look at the grounds for evaluation specified by law, and examine the cost-benefit study with even a slightly critical mindset, we don’t know what is the right answer on this individual policy decision.  The study outlines nine different regulatory alternatives and it is not able to conclude which is best, nor is the quantitative thrust of the study aimed toward that end.

Mood affiliation aside, to strike this regulation down, as the Trump administration has done, is in fact not an indefensible action.

On a more practical political level, Trump wishes to send a signal to Appalachian voters that he is looking out for coal and looking out for them.  This is actually a very weak action, and it was chosen because for procedural reasons it was quite easy to do.  The more you complain about it, the stronger it looks, and that’s probably a more important fact than any of the particular details of this study.  Whether you like it or not, the coal debate is not really one that favors the Democrats.

Addendum: Here is the CRS paper, which seems to be derivative of other work, most of all this study.

On February 27, I’ll be having a Conversation with Tyler with Malcolm Gladwell.  (Sorry the event is already sold out!  In due time I’ll get you information on the live stream.)  What should I ask him?

I thank you in advance for your intelligent and scintillating suggestions.