Sober Look has the numbers, for instance:
The area’s CPI is now below 0.5% on a year-over-year basis. Yesterday we saw German CPI hit new lows (see chart) and Italy’s inflation rate is now hovering just above zero.
What is the most economical model here? The ECB invested in building up a lot of credibility in some areas, such as price level stability, but that means less credibility when it comes to pushing higher inflation. So to get two percent inflation, perhaps the ECB has to genuinely and truly seek four percent inflation, because a big chunk of the market won’t believe they really want four percent. Four will get them to two.
The ECB in fact may be wishing for two percent price inflation and getting…less than that. Which in turn conditions market participants to doubt the commitment of the ECB to the rates of price inflation which it claims to be seeking. The ECB and the citizenry can get stuck in a self-fulfilling prophecies equilibrium, yet without requiring a standard liquidity trap.
I don’t by the way think of this as a time consistency problem. The ECB doesn’t want to be in a position where it is genuinely shooting for four percent inflation, even if that means it will end up imposing only two percent on the Germans. They are still caught with their proverbial pants down and their internal culture of inflation love would be seen as unacceptable and illegal too. Yes, the ECB is selfish, and law-abiding as well, as its charter mandates price stability as the goal.
And you know what? When “selfish” and “law-abiding” point in the same direction, that is very often what you will get.
The notice is here, signers include Bob Solow and Dani Rodrik. I agree with their arguments, and you will find my slightly different but still consistent earlier critique here. Here is one bit from the press release:
“It’s a widely shared opinion among economists that the court’s attempt to force Argentina into a default that nobody – not the debtor nor more than 90 percent of creditors – wants, is wrong and damaging,” said Mark Weisbrot, economist and Co-Director of the Center for Economic and Policy Research, who helped circulate the letter.
Matt Levine has a good post on the situation here.
State corporate law requires that “natural persons” provide director services. This Article puts this obligation to scrutiny, and concludes that there are significant gains that could be realized by permitting firms (be they partnerships, corporations, or other business entities) to provide board services. We call these firms “board service providers” (BSPs). We argue that hiring a BSP to provide board services instead of a loose group of sole proprietorships will increase board accountability, both from markets and from courts. The potential economies of scale and scope in the board services industry (including vertical integration of consultants and other board member support functions), as well as the benefits of risk pooling and talent allocation, mean that large professional director services firms may arise, and thereby create a market for corporate governance distinct from the market for corporate control. More transparency about board performance, including better pricing of governance by the market, as well as increased reputational assets at stake in board decisions, means improved corporate governance, all else being equal. But our goal in this Article is not necessarily to increase shareholder control over firms; we show how a firm providing board services could be used to increase managerial power as well. This shows the neutrality of our proposed reform, which can therefore be thought of as a reconceptualization of what a board is rather than a claim about the optimal locus of corporate power.
That is from a Stanford Law Review piece by Stephen M. Bainbridge and M. Todd Henderson. For the pointer I thank Kevin Lewis.
While European governments deny paying ransoms, an investigation by The New York Times found that Al Qaeda and its direct affiliates have earned at least $125 million in revenue from kidnappings since 2008, of which $66 million was paid just in the past year.
In various news releases and statements, the United States Treasury Department has cited ransom amounts that, taken together, put the total at around $165 million over the same period.
These payments were made almost exclusively by European governments, who funnel the money through a network of proxies, sometimes masking it as development aid, according to interviews conducted for this article with former hostages, negotiators, diplomats and government officials in 10 countries in Europe, Africa and the Middle East. The inner workings of the kidnapping business were also revealed in thousands of pages of internal Qaeda documents found by this reporter while on assignment for The Associated Press in northern Mali last year.
In its early years Al Qaeda received most of its money from deep-pocketed donors, but counterterrorism officials now believe the group finances the bulk of its recruitment, training and arms purchases from ransoms paid to free Europeans.
The full story is here. by Rukmini Callimachi. Oh, and don’t forget this:
Negotiators take a reported 10 percent of the ransom, creating an incentive on both sides of the Mediterranean to increase the overall payout, according to former hostages and senior counterterrorism officials.
It turns out that Al Qaeda hardly ever executes prisoners any more.
For the pointer I thank Michael Rosenwald.
…in Germany, the government is rolling out a red carpet by simplifying immigration procedures, funding free language classes, even opening “welcome centers” for newcomers looking to carve out a piece of the German dream.
In the rankings of the globe’s most prosperous countries, this economic powerhouse of 82 million has now leapfrogged Canada, Britain, Italy and Spain to become the largest destination for immigrants after the United States, according to the Paris-based Organization for Economic Cooperation and Development.
The article is here.
It would be much easier if (some) people would simply say “Of course this normally should be kicked back into the legislature for clarification. But I don’t want to do that because I don’t regard Republican control of the House, and how that control is used, as a legitimate form of rule.” One may agree, or not, but the nature of the case is pretty clear.
Instead we read irrelevant blog posts and tweets about how the experts meant to have subsidies at all levels all along. Of course they did. But did Congress know what it was doing in a detailed sense, one way or another? Hard to say, personally I doubt it, and Alex says no. The basic starter hypothesis here is that many of them knew this was a health care bill, it would extend coverage, it had a mandate, it had some subsidies, it had a Medicaid expansion, it had some complicated cost control, it was approved by leading Democratic Party experts, it met some CBO standards, and beyond that — if you pull out those who were confused on the details of the exchanges and the subsidies do you still have majority support? I doubt it. Most absurd of all are the tweets asking the critics to show Congress intended no federal-level subsidies.
So, to return to the title of this post, the import of the Gruber fracas is to show that if he can be confused (more than once, at that, and is “confused” even the right word?) a lot of ACA supporters in Congress probably were confused too.
So given that across-the-board subsidies are not written into the bill formally, and given the importance of precedent, and rule of law, why not kick the matter back into the legislature for redrafting? Which brings us back to the first paragraph of this blog post…
I have drawn on some Ross Douthat tweets in thinking through this post.
Like much of her commentary, I find this considerably overstated. Still, it suggests a few points of interest and also concern:
The mere existence of this facility could exacerbate liquidity runs during times of market stress. Borrowers in the short-term debt markets will have to compete with it for investment dollars and all, to varying degrees, will be viewed as higher risk than lending to the Fed. Even a relatively minor market event could encourage a massive flow of funds to the Fed while contributing to a flow away from other short-term borrowers.
Nonfinancial companies could find themselves unable to find buyers for their commercial paper. Banks could confront a sudden outflow of deposits, particularly those which are uninsured. Even the U.S. Treasury—traditionally viewed as the safest harbor—could see its borrowing costs spike as investors decide that the Fed is even safer.
Ironically, faced with a more acute liquidity crisis, the Fed would likely have to use the funds it is borrowing through reverse repos to provide a lifeline to the very markets that suffered. For investors seeking safety, the Fed would become the borrower of first resort. For borrowers affected by the resulting diversion of funding, the Fed would become the backstop lender.
The reverse repurchase facility also seems to be at cross-purposes with Congress’s efforts to contain the government safety net. After many years of consideration, Congress in 2008 reluctantly gave the Fed authority to pay banks interest on the money they keep on deposit with it. The reverse repurchase facility essentially gives large nonbank financial institutions the routine ability to place money in the functional equivalent of an overnight deposit with the Fed and receive interest.
In December 2012 Congress allowed the Federal Deposit Insurance Corporation’s crisis-era program to provide unlimited guarantees for non-interest-bearing transaction accounts—such as those used by businesses and local governments to process payroll and other expenses—to lapse. So the Transaction Account Guarantee Program is dead—but the Fed’s reverse repurchase facility enables large nonbank financial institutions to obtain explicit government backing for billions placed with the Fed, but without the burdens of deposit insurance premiums and the kind of prudential supervision that applies to banks.
The full WSJ Op-Ed is here.
Now seems like an apposite time to remember, Congress intends no more than Congress smiles. As Ken Shepsle put it in his classic paper Congress is a “They,” not an “It”:
Legislative intent is an internally inconsistent, self-contradictory expression. Therefore, it has no meaning. To claim otherwise is to entertain a myth (the existence of a Rousseauian great law giver) or commit a fallacy (the false personification of a collectivity). In either instance, it provides a very insecure foundation for statutory interpretation.
Shepsle’s point is that Arrow’s impossibility theorem shows that not only do collectives not have preferences they can’t even be understood as if they had preferences. As I wrote earlier:
Suppose that a person is rational and that we observe their choices. After some time we will come to understand their choices in terms of their underlying preferences (assume stability–this is a thought experiment). We will be able to say, “Ah, I see what this person wants. I understand now why they are choosing in the way that they do. If I were them, I would choose in the same way.”
Arrow showed that when a group chooses, there are no underlying preferences to uncover–not even in theory. In one sense, the theorem is trivial. We know or should always have known that a group doesn’t have preferences anymore than a group smiles. What Arrow showed, however, is that without invoking special cases we can’t even rationalize group choices as if leviathan had preferences.
Put differently, if we do try to rationalize a leviathan with preferences and intention we will find that such a leviathian has the preferences and intention of a madman. Quoting Shepsle again:
…the Hart and Sacks (1958) notion that legislation should be treated as the result of “reasonable people pursuing reasonable purposes reasonably” is insufficient. Even if we do adopt this posture, even if legislators are the kinds
of reasonable people Hart and Sacks envision, it is still fruitless to attribute intent to
the product of their collective efforts. Individual intents, even if they are unambiguous,
do not add up like vectors. That is the content of Arrow; that is the malady of
majority rule….
…The courts cannot defer to something that is nonsense.
By the way, if legislative intent was nonsense in 1992 when Shepsle wrote, then today, when Congress is more divided than ever, it is nonsense on stilts.
Addendum: Zywicki and Stearn’s excellent book, Public Choice Concepts and Applications in Law has a good discussion of the issue and some of the alternative methods of interpreting a statute. One might begin with Holmes statement, “We do not inquire what the legislature meant; we ask only what the statutes mean.”
What’s important to remember politically about this is if you’re a state and you don’t set up an exchange, that means your citizens don’t get their tax credits — but your citizens still pay the taxes that support this bill. So you’re essentially saying [to] your citizens you’re going to pay all the taxes to help all the other states in the country. I hope that that’s a blatant enough political reality that states will get their act together and realize there are billions of dollars at stake here in setting up these exchanges.
There is more detail here, from Peter Suderman, along with the video and also the fuller context for those (such as myself) who have not been following this issue very closely.
Elaine Sciolino is pretty critical. She writes:
A new consumer protection law meant to inform diners whether their meals are freshly prepared in the kitchen or fabricated somewhere off-site is comprehensive, precise, well intentioned — and, to hear the complaints about it, half-baked.
Public decree No. 2014-797, drafted and passed by the French Parliament and approved by the prime minister, went into effect last week. It allows restaurateurs to use the logo if they have resisted the increasing temptation to buy ready-made dishes from industrial producers, pop them in the microwave and pass them off as culinary artistry.
It doesn’t seem to be working to encourage quality:
French fries, for instance, can bear the “fait maison” symbol if they are precut somewhere else, but not if they are frozen. Participating chefs are allowed to buy a ready-made pâte feuilletée, a difficult-to-make, multilayered puff pastry, but pâte brise, a rich pastry dough used to make flaky tart shells, has to be made on-site. Cured sausages and smoked hams are acceptable, while ready-made terrines and pâtés are not.
…Périco Légasse, a food critic for the weekly magazine Marianne, wrote: “ ‘Homemade’ doesn’t mean freshly made. A dish totally prepared with frozen products, even if they come from a Romanian slaughterhouse, can enjoy this happy distinction as it was cooked on-site.”
Mark Bittman piles on. I would stress there is no substitute for consumers who demand the right kind of food and who otherwise won’t buy it.
Accepting 60,000 children in a population of 317.2 million — less than two hundred-tenths of 1 percent (.02 percent) of our population — would hardly be straining our resources.
Despite the vast differences in wealth and resources between our country and those of Lebanon, Jordan and even Iran, which currently has one of the world’s largest refugee populations, the end-of-the-world scenarios proffered by some ring of hyperbole.
At a time when we were a more generous, caring nation, we brought 14,000 children into the United States from Cuba under Operation Peter Pan. In 1966, we flew 266,000 Cuban men, women and children into the United States from the Port of Camarioca. At the time, those 266,000 Cubans represented .14 percent of our population, seven times the number of migrants we are talking about today.
That is from Ira Kurzban, via Timothy Ogden.
There is a new and extremely distressing NBER paper by Derek Neal and Armin Rick:
More than two decades ago, Smith and Welch (1989) used the 1940 through 1980 census files to document important relative black progress. However, recent data indicate that this progress did not continue, at least among men. The growth of incarceration rates among black men in recent decades combined with the sharp drop in black employment rates during the Great Recession have left most black men in a position relative to white men that is really no better than the position they occupied only a few years after the Civil Rights Act of 1965. A move toward more punitive treatment of arrested offenders drove prison growth in recent decades, and this trend is evident among arrested offenders in every major crime category. Changes in the severity of corrections policies have had a much larger impact on black communities than white communities because arrest rates have historically been much greater for blacks than whites.
The paper is here. There are ungated copies here.
There is a new NBER paper by Scott Cunningham and Manisha Shah:
Most governments in the world including the United States prohibit prostitution. Given these types of laws rarely change and are fairly uniform across regions, our knowledge about the impact of decriminalizing sex work is largely conjectural. We exploit the fact that a Rhode Island District Court judge unexpectedly decriminalized indoor prostitution in 2003 to provide the first causal estimates of the impact of decriminalization on the composition of the sex market, rape offenses, and sexually transmitted infection outcomes. Not surprisingly, we find that decriminalization increased the size of the indoor market. However, we also find that decriminalization caused both forcible rape offenses and gonorrhea incidence to decline for the overall population. Our synthetic control model finds 824 fewer reported rape offenses (31 percent decrease) and 1,035 fewer cases of female gonorrhea (39 percent decrease) from 2004 to 2009.
Alas, I do not see ungated versions on Google, or maybe try this one (pdf).
