Law

Chad writes me:

What jobs (particularly ones we think of as being inherently beneficial to society) might America have too many of? Political journalism comes to mind this particular month, since we apparently have enough to carefully monitor the Chipotle orders of presidential candidates 19 months before the election. Writers might be another, particularly in a world of self-publishing.

One can imagine lots of reasons for a greater-than-optimal number of people in a particular profession, from government subsidies to cultural biases, but I’m curious if you have a gut feeling about any professions in particular.

A good question, in my view the answer is not so simple.  Writers and artists are indeed a possible nomination, but some of the demand for these professions is likely for consumption, which makes the overinvestment difficult to judge.  And what about lawyers?  Relative to the number of laws and regulations (too many in my view, but take them as given), it is not obvious to me that we have too many lawyers.  Someone has to tell companies when it is safe to proceed, or not.

How about too many people selling medical devices and other high margin items?  Too many people making alcohol?  Too many people raising and selling animal meat?  Those would be my picks.

The finance sector is another obvious culprit, but as a fraction of wealth I do not think it is larger than in the past.  Admittedly people in the finance sector may be engaging in the wrong activities, but I am not sure the case for fewer employees per se is so obvious.  Still, it is another candidate, if only because it (often) involves people selling high-margin items.

I had not known such a thing exists:

There are raisins stored in California warehouses as part of the U.S. government’s National Raisin Reserve — but the program may shrivel in the face of a Supreme Court challenge.

The National Raisin Reserve — which is overseen by the Fresno-based Raisin Administrative Committee — is part of post-World War II-era program that forces raisin producers to give part of their annual crop to the government to prevent an oversupply of the dried fruit. Controversially, the program seizes the raisins from the farmers without paying them, and that has created friction, lawbreaking farmers, and a Supreme Court case. One scofflaw farmer, Marvin Horne, has refused to surrender his raisins to the government and owes hundreds of thousands of dollars in fines and over 1 million pounds of the sweet dried fruit to Uncle Sam.

The controversial raisin-seizing program could soon be, however, a relic of history.

Several Supreme Court justices expressed doubts Wednesday that federal officials can legally take raisins away from farmers without full payment even if the goal is to help boost overall market prices.

The article is here, via Jeffrey Lessard.  Here is commentary from Ilya Somin, here is an IJ video on the case.

…the warden of the Lee Correctional Institute, Cecilia Reynolds, said that in recent weeks her officers found 17 phones in one inmate’s cell. She said she suspected that the phones continue to come in on drones.

There is more here, interesting throughout.  How about this bit?:

Prison officials, echoing Ms. Reynolds, say that convicts and their families and friends are willing to pay more than $1,000 to get a device – like an iPhone — into a prison. Smartphones are so desirable because unlike pay phones at prisons, they are not recorded or monitored, enabling gang leaders to freely run their criminal activities from behind bars. The phones also allow them to watch pornography and communicate surreptitiously with fellow prisoners.

The phones are essential for coordinating with smugglers using drones, because the prisoners need to know where to find the deliveries in the yard. Most important for the smugglers, the prisoners can then use the phones to quickly pay them.

How about blocking cell phone signals inside the jail?  Elsewhere, a possibly radioactive drone was found on the roof of the office of Prime Minister Abe.  As I’ve said already on Twitter, the drone wars have begun…

Jonathan Chait writes:

At a growing number of campuses, professors now attach “trigger warnings” to texts that may upset students, and there is a campaign to eradicate “microaggressions,” or small social slights that might cause searing trauma. These newly fashionable terms merely repackage a central tenet of the first p.c. movement: that people should be expected to treat even faintly unpleasant ideas or behaviors as full-scale offenses.

Read his whole discussion, but he more or less disapproves.  I’ve long wanted to disagree with Chait “from the left,” and it seems this is my chance, I had better grab it while I can.

While teaching Law and Literature this year, I attached very gentle, low key “trigger warnings” to a number of items on the syllabus, namely those dealing with extreme violence, rape, and some other very unpleasant situations.  I am glad I did this.  I told students that if they preferred to do a substitute assignment, I could arrange that.  Is that so unreasonable?  There were no takers, but I don’t see it did anyone harm or limited free speech in the classroom (or outside of it) to make this offer.  If anything, it may have eased speech a slight amount by noting it is OK to feel uncomfortable with some topics, or at least serving up that possibility into the realm of common knowledge.  That struck me as better and wiser than simply pretending we were studying the successful operation of the Coase theorem the whole time.

I don’t doubt that trigger warnings may be misused in some situations by some professors, but overall they seem to me like another small step to a better world.  I do agree we need to liberate trigger warnings from the strictures of the PC movement, no argument there.

Addendum: I am pleased to see that GMU was moved into the highest category for university free speech, according to FIRE.

Or at least a plague on Louisville?  From Emily Badger in The Washington Post:

…they took advantage of a kind of natural experiment: In 2011, Louisville converted two one-way streets near downtown, each a little more than a mile long, back to two-way traffic. In data that they gathered over the following three years, Gilderbloom and William Riggs found that traffic collisions dropped steeply — by 36 percent on one street and 60 percent on the other — after the conversion, even as the number of cars traveling these roads increased. Crime dropped too, by about a quarter, as crime in the rest of the city was rising. Property values rose, as did business revenue and pedestrian traffic, relative to before the change and to a pair of nearby comparison streets. The city, as a result, now stands to collect higher property tax revenues along these streets, and to spend less sending first-responders to accidents there.

Gilderbloom and Riggs have also done an analysis of the entire city of Louisville, comparing Census tracts with multi-lane one-way streets to those without them. The basic pattern holds city-wide: They found that the risk of a crash is twice as high for people riding through neighborhoods with these one-way streets. The property values in census tracts there were also about half the value of homes in the rest of the city.

The full story is here.

This passage shook me up, bravo to the author:

…although nonviolence was crucial to the gains made by the freedom struggle of the 1950s and 1960s, those gains could not have been achieved without the complementary and still underappreciated practice of armed self-defense.  The claim that armed self-defense was a necessary aspect of the civil rights movement is still controversial.  However, wielding weapons, especially firearms, let both participants in nonviolent struggle and their sympathizers protect themselves and others under terrorist attack for their civil rights activities.  This willingness to use deadly force ensured the survival not only of countless brave men and women but also of the freedom struggle itself.

That is from the recent book This Nonviolent Stuff’ll Get You Killed: How Guns Made the Civil Rights Movement Possible, by Charles E. Cobb, Jr.  Also related is the 1962 book Negroes with Guns, by Robert F. Williams, Martin Luther King, Jr. and Truman Nelson, about the use of guns for protection against the Ku Klux Klan.  Martin Luther King of course did keep a gun in the house, and he relied on neighbors who, at times, protected his house by carrying guns.

*To the Edge*

by on April 19, 2015 at 3:00 pm in Books, Economics, Law | Permalink

That is the new Philip A. Wallach book and the subtitle is Legality, Legitimacy, and the Responses to the 2008 Financial CrisisPhilip is one of the underrated up-and-coming young policy economists, and this book focuses on the financial crisis and the law.  It is original, a rare quality for books on the crisis at this point.  My own blurb says: “Why did America respond to its recent financial crisis the way it did? And why did the bailouts so quickly become unpopular, even as the economy was recovering?  How much did the law stop the government from doing more? Philip Wallach’s To the Edge is the very best book on all of these questions.”

Christopher DeMuth puts it well: “The financial crisis of 2008 was also a crisis of law and a crisis of government legitimacy,” and Wallach is now the go-to guy on that angle.

No.  From Thomas J. Miles and Adam B. Cox in the JLE:

Prior research investigates whether immigrants commit more crimes than native-born people. Yet the central policy used to regulate immigration — detention and deportation — has received little empirical evaluation. This article studies a recent policy innovation called Secure Communities. This program permits the federal government to check the immigration status of every person arrested by local police and to take the arrestee into federal custody promptly for deportation proceedings. Since its launch, the program has led to a quarter of a million detentions. We utilize the staggered rollout of the program across the country to obtain differences-in-differences estimates of its impact on crime rates. We also use unique counts of the detainees from each county and month to estimate the elasticity of crime with respect to confined immigrants. The results show that the Secure Communities program has had no observable effect on the overall crime rate.

That is once again via the excellent Kevin Lewis.

Just when it seemed the image of bankers couldn’t get any more battered or bizarre, the Dutch central bank has fired a 46-year-old female employee claimed to have been working after hours as a highly paid prostitute – specialising in sadomasochism.

The Dutch central bank forbids “indecent behavior,” she had failed to register with the local chamber of commerce or pay appropriate taxes, and she was in violation of zoning laws.

There is more at the link.

Tyler Cowen’s three laws

by on April 15, 2015 at 9:55 am in Economics, Law, Philosophy | Permalink

Many of you have been asking for a canonical statement of what I sometimes refer to as Cowen’s Laws.  Here goes:

1. Cowen’s First Law: There is something wrong with everything (by which I mean there are few decisive or knockdown articles or arguments, and furthermore until you have found the major flaws in an argument, you do not understand it).

2. Cowen’s Second Law: There is a literature on everything.

3. Cowen’s Third Law: All propositions about real interest rates are wrong.

I coined those some time ago, when teaching macroeconomics, yet I remain amazed how often I see blog posts which violate all three laws within the span of a few paragraphs.

There is of course a common thread to all three laws, namely you should not have too much confidence in your own judgment.

Addendum: Kevin Drum comments.

Just in case you are tempted to go all Wesley Snipes and refuse to pay your taxes on “constitutional” grounds, the income tax is legal and mandatory. Sorry.

Jonathan Siegel, professor of law at GWU has carefully examined all the primary tax protester arguments. All are wrong. Some are quite interesting

Some tax protestors claim that [the 16th] amendment is not really part of the Constitution — it was never ratified! Therefore, they say, the income tax is unconstitutional. This argument was popularized by Bill Benson in a book called “The Law That Never Was.”

Surprisingly enough, this argument has a little something to it. When the Sixteenth Amendment was ratified by state legislatures in the early twentieth century, the versions that some states voted on contained minor textual errors. Some of them neglected to capitalize the word “States,” one had “income” in place of “incomes,” one said “remuneration” instead of “enumeration,” one said “levy” instead of “lay,” and so on.

If the states didn’t all vote on the same, identical text for the Sixteenth Amendment, can the amendment really be considered ratified? When Congress makes a law, the House and the Senate must vote on the same text. Similarly, if the states didn’t vote on the right text, one could argue that they didn’t ratify the amendment. No Sixteenth Amendment, no income tax, the argument goes.

However, it seems that the amendment really was ratified. The alleged defects in the ratification process were considered at the time of ratification in 1913. The Solicitor of the Department of State convincingly explained why the minor textual variations in the versions the states voted on should be disregarded.

First, it seems that the state legislatures intended to ratify the amendment as proposed by Congress. They understood themselves to be voting to approve the proposed Sixteenth Amendment. The text set forth in their instruments of ratification was for recitation purposes only. The errors in the text were not proposals to change the text being ratified; they were just inadvertent errors that do not detract from the intention of the state legislatures to ratify the amendment as proposed.

Benson denies this. He claims that states deliberately altered the text of the proposed amendment. But the evidence just isn’t there. In one of his court filings, Benson singles out Oklahoma as a particularly clear case. He says the facts “unequivocally show that Oklahoma intentionally amended what the United States Congress had proposed” (see page 2 of Benson’s filing). But looking at Benson’s own book (pp. 61-67), one can see that the Oklahoma legislature adopted what it called “A resolution ratifying an amendment proposed by the sixty-first Congress of the United States” (emphasis added). This resolution then begins its ratification by reciting that “Whereas . . . Congress . . . on Monday the fifteenth day of March, one thousand nine hundred and nine, by joint resolution proposed an amendment to the constitution of the United States, in words and figures as follows:” Then, it’s true, the resolution misstates the text of the amendment (and pretty badly too). But it sure looks as though the Oklahoma legislatorsthought they were ratifying the amendment that Congress had proposed on the specified date and just misstated it. So even in a case that Benson himself singles out, it seems quite clear that the state legislature thought it was ratifying the Sixteenth Amendment, not proposing to change it.

…For all these reasons, it seems clear that the Sixteenth Amendment really is part of the Constitution.

Certainly that has been the uniform holding of the courts in cases in which this argument has been raised. For some representative cases, see United States v. Benson, 941 F.2d 598 (7th Cir. 1991) (rejecting these arguments in a criminal case brought against the author of the “Law that Never Was” book); United States v. Foster, 789 F.2d 457 (7th Cir. 1986); Cook v. Spillman, 806 F.2d 948 (9th Cir. 1986) (calling the argument that the Sixteenth Amendment was never ratified “frivolous” and imposing sanctions of $1,500 on the party making it); United States v. House, 617 F.Supp. 237, 238-39 (W.D. Mich.1985).

So while this argument is not as utterly absurd as most tax protestor arguments, one can be confident that it would not succeed in any actual court proceeding.

Rortybomb argued yes, Paul Krugman too, but I don’t see it.  A lot of the interest in the GE loan portfolio is coming from private equity groups such as Blackstone.  Is that asset redistribution a move toward greater safety for the system?  Maybe so, but it also might just be pushing the risk around into different corners, and possibly less transparent corners at that.  After all, the Coase theorem suggests the loans will go where they have the highest private value, and if you favor Dodd-Frank in the first place you ought to worry some of that private value may be an arbitrage against bailout options and ultimately the taxpayer.

In the longer run banks might pick up more of this business, in part because they can raise funds through deposits, at basically zero pecuniary cost.  Is centralizing more lending in the TBTF parts of our banking system an improvement, or not?  Again, you can argue this one either way.

And is this good or bad news?:

…the company [GE] has embarked on a massive recruitment drive to hire risk managers and financial modelling experts to help it prepare for annual stress tests by the Federal Reserve. (same FT link as above)

In a nutshell, not every attempt to raise the cost of non-bank commercial credit is a favorable development.

I do get that GE received guarantees/subsidies during the financial crisis, but so did a lot of other institutions.  I don’t see that anyone making the “GE’s new policy is a triumph for Dodd-Frank” argument is stating the comparative analysis correctly, much less doing that analysis and reaching a defensible conclusion.

Where do pickpockets strike?

by on April 12, 2015 at 3:19 am in Education, Law, Science | Permalink

Kevin Beirne reports from an FT chat with James Freedman and tells us:

I ask if there are certain hotspots where pickpockets strike. Tourist spots, Freedman tells me, especially places such as Big Ben and the Eiffel Tower, where people’s attention is directed upwards and away from their belongings. He says that many pickpockets also operate near signs warning us to beware of pickpockets. The irony is that when people read the signs, they check their pockets or bag, thus alerting the lurking pickpocket to where their valuables are.

File under “Law of Unintended Consequences.”  And if you can get through the gate, the piece is interesting more generally.

Mayor of a city or town – 9.3% are willing to consider

Member of Congress – 8.8%

President – 6.4%

That is from Jennifer L. Lawless and Richard L. Fox, Running From Office: Why Young Americans Are Turned Off to Politics, a fascinating and also readable book.

Collinson, Ellen, and Ludwig have a new and long NBER paper (pdf) devoted to that topic.  Here are a few bits:

The United States government devotes about $40 billion each year to means-tested housing programs, plus another $6 billion or so in tax expenditures on the Low Income Housing Tax Credit (LIHTC).

Yet total subsidies for home ownership may run as high as $600 billion, most of those not going to the poor.

There are over twenty different federal subsidized housing programs and most of them are no longer producing new units.

I am speaking for myself here, and not for the authors, but I cannot imagine any better case for cash transfers than to read this 75 pp. paper.

How about this?:

In 2012, housing authorities nationwide reported more than 6.5 million households on their waitlists for housing voucher or public housing.

That to my eye suggests targeting this aid is not working very well.

I found this to be an interesting comparison (I am not suggesting it is being driven by these federal housing policies):

The median renter household in 1960 was paying approximately 18 percent of his/her total family income in rent; the equivalent figure today is 29 percent.

Overall, I would like to see more economists call for the abolition of these programs and indeed some approximation of laissez-faire toward housing more generally.