Law

Well, “endorsed” isn’t exactly the right word, but I did say “simpatizante.”  Here are my views:

1. I disagree with most of his economic policy, for reasons you can find stated in Adam Smith and the other classical economists.

2. Governments work very hard to stay in power.

3. In a weighted average of public opinion sense, I think of Bolivia as about 60-70% “indigenous,” one way or another.

4. If a Bolivian government is not strongly connected to the country’s indigenous population, that government cannot have a strong base.  Yet it will still work hard to stay in power (#2), which will mean it will resort to oppressions and distortions, with high long-run costs.  Bolivian history has seen an especially large number of coups and attempted coups, illustrating this weakness of the power base, which you can think of as the major problem in historical Bolivian public choice.  Think of Mancur Olson on permanent vs. temporary bandits, where most of the past bandits have been temporary, and thus Bolivian governance has been of extremely low quality, even relative to its region.

5. The government of Evo Morales is quite popular and pretty stable.  It has a strong and enduring power base, partly because of its specific policies and partly for symbolic reasons, such as its strong and explicit attachment to indigenous culture and “cosmovisions,” a notion newly embedded in the nation’s constitution.

6. The stability gains from #5 — the permanency of the bandit so to speak — exceed the costs from #1.

7. A democratic Bolivia will have “an indigenous government” sooner or later, better sooner.  Let’s hope they learn some better economic policy.  Something like the Morales government was in any case a necessary step, again without denying #1.

8. Bolivia is too decentralized for the Morales government to collapse into true dictatorship and Chavismo of Venezuela.  That said, I would feel better if it were assured that the Morales government were to be limited in term.

9. See also my reasons why I am optimistic about Bolivia, including their fiscal prudence, supported by Morales I might add.

I made this argument to an audience of elite Bolivians and elite Bolivian students.  Some of them hated it, some of them really liked it.  A speaker should usually try to shake up his or her listeners in some manner.

1. Bolivia became a semi-stable democracy in the early 1980s and it has stayed that way.

2. For all the rhetoric to the contrary, the current regime is a mix of 1990s-era market-oriented reforms and Evo Morales.  Probably you like one of these, though perhaps not both.

3. Many more Bolivian children go to school than before, and the incidence of malnutrition has been plummeting, with longer-run benefits for IQ.  You will read many fabricated or non-causally-backed claims about the connection between inequality and growth, but for Bolivia I believe these arguments.

4. Bolivia has done so many things wrong in the past, there is a lot of low-hanging fruit through purely internal improvements.  For instance the country is a fantastic tourist destination, but would not at this moment be experienced that way by mainstream American tourists, due to language, hotel, and infrastructure shortcomings.  Eventually those problems can be and will be solved.  Eventually.

5. Bolivia does not have much export exposure to China, and does not face much geopolitical risk.

6. Of all commodities, hydrocarbons may be relatively protected in price through the forthcoming global turmoil, because the Middle East implosion will make Bolivia’s current main resource more valuable.

7. Bolivia’s fiscal situation is surprisingly sound.

The three main reasons to be pessimistic about Bolivia are:

1. Most of their economic policy is quite bad, especially when it concerns the nationalization of foreign direct investment.  The FDI future of Bolivia will be extremely unfavorable.  The rhetoric and indeed the behavior of the government sometimes is like a villain from an Ayn Rand novel.

2. Their main trading partner is Brazil, a country which will have gone from eight percent growth to near-zero growth in but a few years time.  Argentina is either the number two or number three trade partner, along with the U.S., depending on the year in question.

3. Bolivia hasn’t done that well in the past.

Of those three reasons, #1 probably matters a bit less than you might think, and #3 a bit more.

It is much debated in Bolivia whether corruption is going up or down.  I believe it is going up, but partially for good reasons.  For instance the construction sector is doing well, and construction tends to be corrupt in many countries, for reasons intrinsic to the activity itself (e.g., lots of big contracts, easy to claim invisible expenses, etc.).  That means higher corruption but also a better corruption than the penny ante bribes of a shrinking economy.

Right now Bolivia is growing at a rate of above six percent.

Here is a new paper by Steve Brito, Ana Corbacho, and Rene Osorio Rivas, it seems the answer is yes:

This working paper studies the effect of remittances from the United States on crime rates in Mexico. The topic is examined using municipal-level data on the percent of household receiving remittances and homicides per 100,000 inhabitants. Remittances are found to be associated with a decrease in homicide rates. Every 1 percent increase in the number of households receiving remittances reduces the homicide rate by 0.05 percent. Other types of crimes are analyzed, revealing a reduction in street robbery of 0.19 percent for every 1 percent increase in households receiving remittances. This decrease is also observed using a state-level panel in another specification. The mechanisms of transmission could be related to an income effect or an incapacitation effect of remittances increasing education, opening job opportunities, and/or reducing the amount of time available to engage in criminal activities.

For the pointer I thank Axayacatl Maqueda.  Here is a Spanish-language discussion of the work.

Police Killings

by on August 27, 2014 at 7:08 am in Data Source, Economics, Law | Permalink

Richard Epstein writes:

Police officer deaths in the line of duty, year to date for 2014, were 67 of which 27 were by gunfire. For the full year of 2013, the numbers were 105 total deaths, with 30 by gunfire. It would be odd to say that police officer deaths (which are more common than deaths to citizens from police officers) should not count…

It would indeed be odd to say that police officer deaths should not count, which is perhaps why no one says this. Police officer deaths are counted but the literal truth is that we don’t count deaths to citizens. No one knows for sure exactly how many citizens are killed by police because the government doesn’t keep a count. Draw your own conclusions. What we do know, is that it is not true that police officer deaths are more common than deaths to citizens from police officers. Not even close.

105 officers were killed in the line of duty in 2013 but to be clear this includes heart attacks, falls, and automobile accidents. Deaths due to violent conflict include 30 deaths by gunfire, 5 vehicular assaults, 2 stabbings and a bomb. To be conservative, let’s say 50 deaths to police at the hands of citizens.

According to the FBI there are around 400 justifiable homicides by police every year, where justified is defined as the killing of a felon by a law enforcement officer in the line of duty. But note that if the killing of Michael Brown is found to be unjustified it won’t show up in these statistics.

The best information we have of citizens killed by the police, believe it or not, are private tabulations from newspaper accounts. On the basis of one such collection, DataLab at FiveThirtyEight estimates that police kill 1000 people a year.

Thus, killings by police seem to be on the order of 10 to 20 times higher than killings of police.

Markets in everything

by on August 25, 2014 at 4:05 pm in Food and Drink, Law, Uncategorized | Permalink

It’s a nail polish that doubles as a way to thwart sexual assault – and it’s being developed at N.C. State University: Undercover Colors.

The chemistry startup, developed by undergrads, is creating a nail polish that, when exposed to date rape drugs, changes color.

The full story is here, via Catherine Rampell.

In Beijing, I met Benjamin Liebman, a professor at Columbia Law School, who has published a study on “malpractice mobs” in China. He told me that protests consistently extract more money from hospitals than legal proceedings do. Family members can even hire professional protesters. One report in Shenzhen mentioned an average price of fifty yuan a day for the service of a protester. The radiologist in Shanghai told me, “If your mother dies in the hospital, there will be an agency that comes to you and says, ‘We can help you. We can have twenty guys who can come to the hospital, blackmail them, and share fifty per cent of the profits.’ They’re very professional.”

The article, by Christopher Beam in The New Yorker, is interesting throughout.

How much does poverty drive crime?

by on August 22, 2014 at 7:25 am in Economics, Education, Law | Permalink

Maybe less than you thought, at least after adjusting for other variables.  The Economist reports:

In Sweden the age of criminal responsibility is 15, so Mr Sariaslan tracked his subjects from the dates of their 15th birthdays onwards, for an average of three-and-a-half years. He found, to no one’s surprise, that teenagers who had grown up in families whose earnings were among the bottom fifth were seven times more likely to be convicted of violent crimes, and twice as likely to be convicted of drug offences, as those whose family incomes were in the top fifth.

What did surprise him was that when he looked at families which had started poor and got richer, the younger children—those born into relative affluence—were just as likely to misbehave when they were teenagers as their elder siblings had been. Family income was not, per se, the determining factor.

That suggests two, not mutually exclusive, possibilities. One is that a family’s culture, once established, is “sticky”—that you can, to put it crudely, take the kid out of the neighbourhood, but not the neighbourhood out of the kid. Given, for example, children’s propensity to emulate elder siblings whom they admire, that sounds perfectly plausible. The other possibility is that genes which predispose to criminal behaviour (several studies suggest such genes exist) are more common at the bottom of society than at the top, perhaps because the lack of impulse-control they engender also tends to reduce someone’s earning capacity.

The original research, by Amir Sariaslan, Henrik Larsson, Brian D’Onofrio, Niklas Långström and Paul Lichtenstein is here, here is how the authors report the conclusion:

There were no associations between childhood family income and subsequent violent criminality and substance misuse once we had adjusted for unobserved familial risk factors.

Department of Uh-Oh

by on August 21, 2014 at 1:00 pm in Food and Drink, Law, Uncategorized | Permalink

When it opened in 1990, the McDonald’s on Moscow’s Pushkin Square was a symbol of thawing relations with the U.S., attracting long lines and later becoming the fast-food chain’s most visited outlet world-wide.

On Wednesday evening, it stood empty, closed by Russia’s consumer-safety regulator amid the Kremlin’s most-serious confrontation with the West since the Cold War. The agency cited sanitary violations as it said that it had closed four McDonald’s Corp.’s restaurants in Moscow.

Analysts said the move was more likely the latest shot by Russia in response to U.S. and European sanctions over Moscow’s role in the armed conflict with its former Soviet neighbor, Ukraine.

Food inspectors “have been instruments of Russian foreign policy for years,” said Stephen Sestanovich, a senior fellow at the Council on Foreign Relations. He cited earlier bans on Moldovan wine and U.S. chicken.

There is more here, there is some context here.

How does a stop for jaywalking turn into a homicide and how does that turn into an American town essentially coming under military control with snipers, tear gas, and a no-fly zone? We don’t yet know exactly what happened between the two individuals on the day in question but events like this don’t happen without a deeper context. Part of the context is the return of debtor’s prisons that I wrote about in 2012:

Debtor’s prisons are supposed to be illegal in the United States but today poor people who fail to pay even small criminal justice fees are routinely being imprisoned. The problem has gotten worse recently because strapped states have dramatically increased the number of criminal justice fees….Failure to pay criminal justice fees can result in revocation of an individual’s drivers license, arrest and imprisonment. Individuals with revoked licenses who drive (say to work to earn money to pay their fees) and are apprehended can be further fined and imprisoned. Unpaid criminal justice debt also results in damaged credit reports and reduced housing and employment prospects. Furthermore, failure to pay fees can mean a violation of probation and parole terms which makes an individual ineligible for Federal programs such as food stamps, Temporary Assistance to Needy Family funds and Social Security Income for the elderly and disabled.

Ferguson1new report from Arch City Defenders, a non-profit legal defense organization, shows that the Ferguson municipal courts are a stunning example of these problems:

Ferguson is a city located in northern St. Louis County with 21,203 residents living in 8,192 households. The majority (67%) of
residents are African-American…22% of residents live below the poverty level.

…Despite Ferguson’s relative poverty, fines and court fees comprise the second largest source of revenue for the city, a total of $2,635,400. In 2013, the Ferguson Municipal Court disposed of 24,532 warrants and 12,018 cases, or about 3 warrants and 1.5 cases per household.

You don’t get $321 in fines and fees and 3 warrants per household from an about-average crime rate. You get numbers like this from bullshit arrests for jaywalking and constant “low level harassment involving traffic stops, court appearances, high fines, and the threat of jail for failure to pay.”

If you have money, for example, you can easily get a speeding ticket converted to a non-moving violation. But if you don’t have money it’s often the start of a downward spiral that is hard to pull out of:

For a simple speeding ticket, an attorney is paid $50-$100,
the municipality is paid $150-$200 in fines and court costs, and the
defendant avoids points on his or her license as well as a possible
increase in insurance costs. For simple cases, neither the attorney nor
the defendant must appear in court.

However, if you do not have the ability to hire an attorney or pay
fines, you do not get the benefit of the amendment, you are assessed
points, your license risks suspension and you still owe the municipality
money you cannot afford….If you cannot pay the amount in full, you must appear in court on that night to explain why. If you miss court, a warrant will likely be
issued for your arrest.

People who are arrested on a warrant for failure to appear in court
to pay the fines frequently sit in jail for an extended period. None of the
municipalities has court on a daily basis and some courts meet only
once per month. If you are arrested on a warrant in one of these
jurisdictions and are unable to pay the bond, you may spend as much as
three weeks in jail waiting to see a judge.

Of course, if you are arrested and jailed you will probably lose your job and perhaps also your apartment–all because of a speeding ticket.

As a final outrage, consider this story which ties together Ferguson, the courts, and the arrest of parents, often minority parents, for leaving their kids to play in parks (just as my parents did).

According to local judge Frank Vatterott, 37% of the courts responding to his survey unconstitutionally closed the courts to non-defendants. Defendants are then faced with
the choice of leaving their kids on the parking lot or going into court. As Antonio Morgan described after being denied entry to the court with his children, the decision to leave his kids with a friend resulted in a charge of child endangerment.

In a great paper, The Impact of Jury Race in Criminal Trials, Shamena Anwar, Patrick Bayer and Randi Hjalmarsson exploit random variation in the jury pool to estimate the effect of race on criminal trials. The authors have data from nearly 800 trials in two Florida counties. On any given day, a jury pool is randomly drawn from a master list based on driver’s licenses. On some days, the pool of about 30 people contains some black members and on other days, purely for random reasons, it does not. The voir dire process–>For every $1 spent on legal aid, the savings can range from $1.60 to $30.removals, excuses and challenges–whittles down the jury pool to 6 jury members with typically 1 alternate.

The authors have data on the race, gender, and age of each member of the jury pool as well as each member of the ultimate jury. The authors also know the race and gender of the defendant and the charges. What the authors discover is that all white juries are 16% more likely to convict black defendants than white defendants but the presence of just a single black person in the jury pool equalizes conviction rates by race. The effect is large and remarkably it occurs even when the black person is not picked for the jury. The latter may not seem possible but the authors develop an elegant model of voir dire that shows how using up a veto on a black member of the pool shifts the characteristics of remaining pool members from which the lawyers must pick; that is, a diverse jury pool can make for a more “ideologically” balanced jury even when the jury is not racially balanced.

The author’s results show not only that blacks and whites are treated differently depending on the composition of the jury pool but also that random variation in the jury pool adds to the variability of sentences holding race constant. Like is not treated as like. The results also suggest that we don’t need racial quotas to increase fairness. We can increase fairness and reduce variability in a racially neutrally way by expanding the size of juries. Six-person juries have become common because they are cheap(er) but a return to twelve person juries would reduce the variability of sentences and greatly equalize conviction rates across race.

A North Carolina diner that offers discounts to praying customers has ignited an internet firestorm across the US.

For the past four years, Mary’s Gourmet Restaurant in Winston-Salem, North Carolina, had been surprising customers with a 15% discount if they prayed or meditated before meals.

“It could be anything – just taking a moment to push away the world,” says Mary Haglund, the owner. “I never asked anyone who they were praying to – that would be silly. I just recognised it as an act of gratitude.”

However, it wasn’t until customer Jordan Smith shared her receipt with a Christian radio station on 30 July that the diner and its discount went viral.

“There was no signage anywhere that promoted the prayer discount. We just ordered our food and prayed over it once it arrived,” says Smith. “It wasn’t until the end when they brought the bill over and it said 15% discount for praying in public.”

The story is here, and for the pointer I thank Felix Morency-Lavoie.  By the way, the discount may violate the 1965 Civil Rights Act.

…as it turns out, some hydrants seem to be more tempting — and more costly — than others.

In Toronto, one hydrant stands above the rest. People are fined so often for parking in front of it that on Google’s Street View, a white Toyota can be seen with a yellow slip under its wiper blade as a parking-enforcement officer walks away.

Since 2008, cars that parked too close to the hydrant at 393 University Ave. have been ticketed 2,962 times. Those fines add up to $289,620 —more than any other hydrant in the city.

More generally:

A Canadian Press analysis of Toronto’s parking-ticket data found the city has collected more than $24 million since 2008 by fining people who parked too close to hydrants.

Fabrizi says all parking fines, including those from parking next to hydrants, add up to $80 million a year.

That may seem like a big number, but Fabrizi says it only represents about one per cent of the money needed to run all of the city’s programs.

“The amount of revenue that parking generates is so minuscule compared to the overall revenue that it really doesn’t serve a great purpose as a revenue generator.”

About half the revenue from parking tickets pays for parking enforcement and operations, he added.

The full article, which also lists the ten most lucrative Toronto hydrants, is here.  For the pointer I thank Michelle Dawson.

I’ve long wondered about this question, now there is a paper about it, from Johannes Abeler and Simon Jäger, forthcoming, “Complex Tax Incentives,” American Economic Journal: Economic Policy.  The abstract is here:

How does tax complexity affect people’s reaction to tax changes? To answer this question, we conduct an experiment in which subjects work for a piece rate and face taxes. One treatment features a simple, the other a complex tax system. The payoff-maximizing output level and the incentives around this optimum are, however, identical across treatments. We introduce the same sequence of additional taxes in both treatments. Subjects in the complex treatment underreact to new taxes; some ignore new taxes entirely. The underreaction is stronger for subjects with lower cognitive ability. Contrary to predictions from models of rational inattention, subjects are equally likely to ignore large or small incentive changes.

I would think the real world danger is that intermediaries will teach people how to game complex tax systems over time.  Still, the actual tax incentive faced by individuals may not be so transparent even to informed and strategic advisors, nor are the advisors always able to communicate actionable advice to the individuals facing the taxes.

Here is Simon’s paper on the returns to German higher education.

FDA Device Regulation

by on August 13, 2014 at 7:20 am in Economics, Law, Medicine | Permalink

In the interests of length I had to sacrifice a few points in my WSJ review of Innovation Breakdown by Joseph Gulfo (excerpted on MR yesterday). In the review, I argued that the FDA could speed the approval of medical devices and reduce uncertainty by not reviewing directly but becoming a certifier of certifiers as is done in Europe.

In fact, a US model is already in place. OSHA, the Occupational Safety and Health, requires that a range of electrical products and materials meet certain safety standards but it outsources certification to Underwriters Laboratories and other Nationally Recognized Testing Laboratories. We could and should do the same for medical devices and for drugs. Indeed, if a device or drug is permitted in a developed, advanced economy such as in Europe, Australia and Japan then I see no reason why it ought not to be provisionally approved in the United States (and vice-versa).

My paper with DiMasi and Milne showed that some FDA drug divisions appear to be much more productive than other divisions suggesting possibilities for substantial improvements if best practices were uniformly adopted. There also appear to be substantial differences between the regulation of drugs and devices especially in recent years. Ian Hathaway and Robert Litan have a new paper on Entrepreneurship and Job Creation in the U.S. Life Sciences Sector that shows that new firm creation in the medical device sector has fallen drastically since 1990 and far more than in the drug sector. Although there are likely many causes, the drop in the number of new firms is consistent with Gulfo’s experience of regulatory uncertainty and may suggest increases in regulatory cost for devices relative to drugs. Here is Hathaway and Litan:

The medical devices and equipment sector, on the other hand, saw new firm formations decline steadily and persistently between 1990 and 2011—falling by 695 firms or 53 percent during that period. Its share of new life sciences firms fell to 31 percent in 2011 from 50 percent in 1990. Unlike its life sciences sector counterparts, the decline in new firm formations in this segment appears to stretch beyond the cyclical effects of the Great Recession.

new device firms

“Fair Trade” Cocaine Is A Thing Now

For instance:

Even more intriguing is the use of marketing strategies that mimic corporate social responsibility initiatives. These may take the form of financial sponsorship of organizations likely to be viewed favorably by online drug consumers. For example, one Australian drug vendor recently advertised their enterprise as a: “Proud financial supporter of WikiLeaks and Bluelight.”

At the more extreme end of socially progressive marketing strategies used by online dealers are those that involve the promotion of drugs on the basis of supposedly “ethical”, “fair trade”, “organic” or “conflict-free” sources of supply:

“We are a team of libertarian cocaine dealers. We never buy coke from cartels! We never buy coke from police! We help farmers from Peru, Bolivia and some chemistry students in Brazil, Paraguay and Argentina. We do fair trade!”

Naturally, it is impossible to verify these claims.

For the pointer I thank Annie Lowrey.