Law

To see the problem, consider Brian’s situation. He’s a single adult, age 45, earning $35,000 a year. BCRA (section 102(b)(2)) expects Brian to contribute a little more than 8.3% of that income to purchase a health insurance policy. That’s about $2,911. The federal government would chip in the amount needed to let Brian buy a “median benchmark” policy in his region. That policy won’t be lavish: on average it will pay for 58% of covered expenses, but it might well let Brian avoid bankruptcy if he gets extremely sick. It will also get Brian low, pre-negotiated rates for a lot of medical treatment instead of being subject to astronomical “Chargemaster” prices that hospitals often charge the uninsured. So, if that Bronze policy costs $4,500, Brian would pay $2,911 and the federal government would pay $1,089.

Suppose Brian succeeds at work and gets a $5,000 raise; or suppose Brian gets a part time job to help supplement his income and earns $5,000 more. Now, because his income is $40,000, section 102(b)(2) of BCRA expects Brian to contribute 11.3% of his income to healthcare. Since that’s $4,558, Brian in fact pays for the whole $4,500 policy; the federal government pays nothing. So, although Brian’s raise is $5,000, he pays an extra $1,589 in premiums. His effective marginal tax is almost 32% just from the BCRA alone. When one combines his loss of a subsidy with increased income taxes of $1,488 and an increased payroll tax of $382.50 (double that if Brian’s new job is deemed self-employment), Brian’s gets to keep at most $1,541 of his new $5,000. His effective marginal tax rate is at least 69%. It’s probably even higher if Brian faces state income tax or suffers a phase out of other government income-based benefits.

That is from Seth Chandler.  Ross Douthat has a good bottom-line take on the bill.

Toothpick crossbow that can shoot iron nails more than 20 metres (65 feet) the latest must-have toy in China https://t.co/z9PkpigjOB pic.twitter.com/duoHeZxoBF

Here is the story, via Mark Thorson.

In the past few months, China has announced two new crackdowns on research misconduct — one of which could lead to executions for scientists who doctor their data.

Scientists have been sounding alarms for years about the integrity of research in China. One recent survey estimated that 40 percent of biomedical papers by Chinese scholars were tainted by misconduct. Funding bodies there have in the past announced efforts to crack down on fraud, including clawing back money from scientists who cheat on their grants.

This month, in the wake of a fake peer review scandal that claimed 107 papers by Chinese scholars, the country’s Ministry of Science and Technology proclaimed a “no tolerance” policy for research misconduct — although it’s not clear what that might look like. According to the Financial Times, the ministry said the mass retractions “seriously harmed the international reputation of our country’s scientific research and the dignity of Chinese scientists at large.”

But a prior court decision in the country threatened the equivalent of the nuclear option. In April courts approved a new policy calling for stiff prison sentences for researchers who fabricate data in studies that lead to drug approvals. If the misconduct ends up harming people, then the punishment on the table even includes the death penalty. The move, as Nature explained, groups clinical trial data fraud with counterfeiting so that “if the approved drug causes health problems, it can result in a 10-year prison term or the death penalty, in the case of severe or fatal consequences.”

Here is the story, via the excellent Mark Thorson.

Here is a good summary and analysis from Megan McArdle, here is one key part:

But while there are a few things to like in this bill, overall, it’s a mess.  All of the problems created by Obamacare’s architecture remain, and some of the problems will get worse, because lower subsidies, higher deductibles and no mandate penalty probably means that a lot of people will exit the exchanges.  Those people are likely to be the folks we most need to stabilize those exchanges: healthy youngsters who don’t use much health care.  Which means that the exchanges will be at further risk from the death spirals we’ve already seen in some states.

I agree the bill is a bad idea.  That said, I do hope you keep in perspective some of the more, um, lurid critiques running around, including from health care economists (the Great Firewall won’t let me link to Twitter, and right now VPN is down).  You can read them as sociology, however, with a rather chilling effect.

That is the topic of my latest Bloomberg column, here is just one excerpt:

I see Trump as not a ruler but rather akin to the various fools, jesters or, in the case of Lear, the character of Edgar, who appears before the king in disguise and warns him of his enemies. Don’t interpret the word “fool” too literally here. The most common features of these characters is that they speak between the cracks in the action and utter sentiments that no one else dares  to voice. That’s Trump on Twitter. Would the word “covfefe” be so out of place in one of those poetic rants?

And:

And looking forward, what might a study of Shakespeare tell us to watch for in the evolution of the Trump administration? How’s this for a start?:

  • Blood may be thicker than water, but nonetheless power struggles can break family bonds rather easily.
  • Power cannot be given away and still retained.
  • Don’t overweight legitimacy and birth order in determining succession.
  • Love is a wild card.
  • There is no maximum limit to chaos.

Do read the whole thing.

Boston-based DNA sequencing company is offering to decode the complete genomes of newborns in China, leading some to ask how much parents should know about their children’s genes at birth.

Veritas Genetics says the test, ordered by a doctor, will report back on 950 serious early- and later-life disease risks, 200 genes connected to drug reactions, and more than 100 physical traits a child is likely to have.

Called myBabyGenome, the service costs $1,500 and could help identify serious hidden problems in newborns, the company says.

But some doctors say the plan is a huge overstep. “I think it’s vastly premature to peddle a completely unproven set of data, especially to a vulnerable population like neonates,” says Jim Evans, a professor of genetics at the University of North Carolina Chapel Hill.

The problem is that the risk posed by many disease genes remains uncertain. Even if a child has a mutation in a gene, he or she may never be affected, prompting debate among doctors about whether it’s useful to inform parents.

The Veritas test also steps into uncharted territory by making predictions about how children will look and act: how wide their nose will be, whether they will overeat or have a “novelty seeking” personality, and even whether they are likely to go bald decades in the future.

Evans is sharply critical of any effort to predict traits. Especially with psychology, he says, genetic factors aren’t well understood. “You run the risk of predestination based on bad science,” he says. “Frankly, I think it’s a little bit crazy to do genetic tests on your newborn to find out if 40 years from now they are going to be bald.”

Here is the full story, it has further interesting points.

Two years ago, Kansas repealed a law requiring that 20 percent of the state’s electric power come from renewable sources by 2020, seemingly a step backward on energy in a deeply conservative state.

Yet by the time the law was scrapped, it had become largely irrelevant. Kansas blew past that 20 percent target in 2014, and last year it generated more than 30 percent of its power from wind. The state may be the first in the country to hit 50 percent wind generation in a year or two, unless Iowa gets there first.

Some of the fastest progress on clean energy is occurring in states led by Republican governors and legislators, and states carried by Donald J. Trump in the presidential election.

The five states that get the largest percentage of their power from wind turbines — Iowa, Kansas, South Dakota, Oklahoma and North Dakota — all voted for Mr. Trump. So did Texas, which produces the most wind power in absolute terms. In fact, 69 percent of the wind power produced in the country comes from states that Mr. Trump carried in November.

That is from Justin Gillis and Nadja Popovich at the NYT.

Addendum: Kansas also just raised taxes.

That is the new James C. Scott book, and so far it is the most interesting non-fiction read of the year (I am about halfway through).  You can think of it as an extended essay on which technologies actually gave rise to economies of scale, expressed through governance but not only.  Ultimately the focus settles on Mesopotamia, but the discussion is wide-ranging and the lessons are applicable to much of human history.  Here is an opening summary bit:

I propose that cereal grains have unique characteristics such that they would be, virtually everywhere, the major tax commodity essential to early state building.  I believe that we may have grossly underestimated the importance of the (infectious) diseases of crowding in the demographic fragility of the early state.  Unlike many historians, I wonder whether frequent abandonment of early state centers might often have been a boon to the health and safety of their populations rather than a “dark age” signaling the collapse of a civilization.  And finally, I ask whether those populations that remained outside state centers for millennia after the first states were established may not have remained there (or fled there) because they found conditions better.

Here is one good passage:

It is surely striking that virtually all classical states were based on grain, including millets.  History records no cassava states, no sago, yam, taro, plantain, breadfruit, or sweet potato states. (“Banana Republics” don’t qualify!)  My guess is that only grains are best suited to concentrated production, tax assessment, appropriation, cadastral surveys, storage, and rationing.  On suitable soil wheat provides the agro-ecology for dense concentrations of human subjects.

In contrast the tuber cassava (aka manioc, yucca) grows below ground, requires little care, is easy to conceal, ripens in a year, and, most important, can safely be left in the ground and remain edible for two more years.  If the state wants your cassava, it will have to come and dip up the tubers one by one, and then it has a cartload of little value and great weight if transported.

The discussion of how the technology of fire is the ultimate root of economies of scale is alone worth the price of the book.  Scott analogizes complacency/peace to the domestication of non-human animals, including the phenomenon of less violent emotional reactions and greater conformity.

Urgently recommended, and fun to read as well.

Here are various articles on the work of James C. Scott.  Here is a good NYT profile of Scott and also his farming work.

Despite laws mandating a shelter within a 30-minute walk of every Swiss home, the government won’t tell anyone exactly where their spot is until they need it. Otherwise, people would complain about having to hole up with someone they don’t like.

That is from Malia Wollan at the NYT, the short article is interesting throughout.

Maybe not if deregulation is across the board:

Were we to unilaterally liberalize zoning, some builders would see new opportunities in Manhattan. But it seems far more likely gazillions of suburban folks would see the benefit to building a cheap extra unit in the yard and renting it.

In terms of raw potential, it seems quite likely there is more “zoning-prevented housing” in the suburbs or in fairly low-density areas than in already high-density ones. The result could easily be that uniform upzoning boosts metro-wide population, but also causes a shift of population out of the center, into the ‘burbs, where geography may prove less of a constraint. The fact that less-regulated places also seem to be less dense suggests that this outcome is at a minimum plausible. That is to say, if density is your goal, deregulation may be a very uncertain way to get there because, while there may well be demand for urban cores (maybe), land use rules are just one of many supply constraints. Geography, higher construction costs, large existing investments, and the dramatically lower costs to adding equivalent supply in the ‘burbs all combine to suggest blanket liberalization could cause the typical household to reside in a less dense neighborhood than they did under stricter regulation.

That is from a partially confused but still interesting short essay by Lyman Stone.  Here are some criticisms of the piece.

That is the topic of my latest Bloomberg column, here is one excerpt:

…it is possible to imagine an alternative vision where federal overhead allocations fall and the liberated money allows more scientists to get more (smaller) grants. Would that be a good idea?

If we look to the private sector as a model, maybe so. Private philanthropy is typically more oriented toward specific projects than toward overhead. One view is that makes federal government funding of overhead all the more important to fill in the gaps; an alternative take is that the private sector realizes a lot of overhead funding ends up wasted, and the federal government ought to see the same. There is some truth to both of these stories, but not surprisingly the academic scientific community is stressing the former.

Research funds spent on overhead strengthen the power and discretion of administrators (who capture and allocate the funds), senior scientists, the lab-based sciences and relatively expensive projects. They make universities more hierarchical and less egalitarian places, where the ability to bring in overhead funds yields status and influence.

Spending less on overhead and more on individual projects would favor small-scale research, and would decentralize authority and influence. Lower overhead allocations would give the government more authority over project choice, and the university less discretion, for better or worse. Overall, projects would have to prove themselves more in the broader world of prizes, donors and news coverage, rather than lobbying within the university for support.

A mixed bag of course — there is much more at the link.

That is the theme of my latest Bloomberg column, here is a snippet of the argument:

After the war, Germany undertook an extensive and largely successful campaign of denazification. Other defeated nations, such as Austria or Japan, didn’t attempt anything comparable, much less succeed. In a relatively short period of time, Germany really did turn into a largely tolerant, peace-loving nation, acutely aware of the extreme nature of its previous wrongdoing. For all the imperfections in this process along the way, it is difficult in world history to find a comparable switch in attitudes.

Or take German unification. It was hardly obvious this project to bring together East Germany and West after the fall of communism would succeed or even come to fruition, as there was plenty of talk at the time of a binational federation or perhaps a slowly phased evolution toward unity. Yet Chancellor Helmut Kohl and other German leaders, supposedly staid figures, had the vision to see unification could be achieved rapidly and relatively smoothly. They just went ahead and did it, even though many of the world’s leaders, such as U.K. Prime Minister Margaret Thatcher, were squeamish about the idea.

There are more arguments at the link, running up through the present day.  You also can count Germany’s role in the EU and also the construction of social welfare states.  Germany is in fact remarkably underappreciated as a political and also social innovator.

The Italian Job

by on May 29, 2017 at 7:37 am in Economics, Law | Permalink

Each year there are more bank robberies in Italy (approximately 3,000) than in the rest of Europe combined, with a 10 percent chance of victimization on average.

…The average robbery lasts 4.27 minutes and leads to a haul of approximately 16,000 euros. Given that more than half of all bank robberies involve two or more perpetrators, the average haul per criminal is approximately equal to 8,700 euros.

…only about 40 percent of all bank robbers disguise themselves when robbing a bank.

Those are a few interesting facts from a bold new paper, Optimizing Criminal Behavior and the Disutility of Prison. The authors, Mastrobuoni and Rivers, use extensive data on bank robberies to model bank robbery as a second by second optimization problem:

The key insight of our model is that bank robbers face a trade-off when deciding how long to stay in the bank. By staying an extra minute, the robbers can collect more money, but they also run the risk of getting caught and sent to prison. The cost of being apprehended is a function of the disutility each individual places on going to prison. By equating the marginal benefit with the marginal cost of time spent in the bank, we can back out the unobserved disutility that robbers assign to prison.

The authors create a sophisticated model of optimizing behavior which they estimate using extensive data. In their conclusion, they focus attention on their finding that higher ability bank robbers have a higher disutility of prison. Thus higher ability offenders can be (especially) deterred by longer sentences. The authors focus attention on high-ability offenders because those are the offenders most likely to fit the assumptions of their rational-actor model. I think it’s actually better to focus on the contra-positive conclusion: its hard to deter idiots.

Moreover, there are plenty of idiots:

Not surprisingly, traveling to the robbery by foot and targeting a bank with a security guard are both consistent with lower ability offenders….

The existence of idiots, however, calls into question the optimizing assumptions of the model. As I argue in What was Gary Becker’s Biggest Mistake? the poorly-socialized-child theory of crime can suggest other approaches to combatting crime (e.g. cognitive behavioral therapy):

Here’s a simple test for whether crime is in a person’s rational interest. In the economic theory if you give people more time to think carefully about their actions you will on average get no change in crime (sometimes careful thinking will cause people to do less crime but sometimes it will cause them to do more). In the criminal as poorly-socialized-child theory, in contrast, crime is often not in a person’s interest but instead is a spur of the moment mistake. Thus, even a small opportunity to reflect and consider will result in less crime.

The guy who robs a bank that has a security guard and then attempts to run away seems like a poor fit for a rational actor model. Perhaps more thinking would have led a better planned bank robbery but more plausibly it would have led to no robbery at all. Thus, I’d frame the author’s contributions in this path-breaking paper as telling us not just about rational bank robbery but about the limits and bounds of rational bank robbery.

That is an unpopular point — with both sides — but it might just well be true.  Here is a newly published study by Robert W. Crandall:

More than a year after a court invalidated its “net neutrality” rules on broadband Internet service providers (ISPs), the Federal Communications Commission (FCC) decided to extend public-utility (Title II) regulation on broadband services. This paper uses traditional event analysis of the movements in the values of major communications and media companies’ equities at key moments in the FCC’s path to this decision to estimate the financial market’s assessment of the likely effects of regulation on ISPs, traditional media companies, and new digital media companies. The results are surprising: the markets penalized only three large cable companies to any extent, and even these effects appear to have been short-lived. The media companies, arguably the intended beneficiaries of the regulations, were unaffected.

That is via the excellent Kevin Lewis.

That is the new NBER working paper by Alberto Alesina, Bryony Reich, Alessandro Riboni, here is the abstract:

The increase in army size observed in early modern times changed the way states conducted wars. Starting in the late 18th century, states switched from mercenaries to a mass army by conscription. In order for the population to accept to fight and endure war, the government elites began to provide public goods, reduced rent extraction and adopted policies to homogenize the population with nation-building. This paper explores a variety of ways in which nation-building can be implemented and studies its effects as a function of technological innovation in warfare.

That is related to some recent work by Ferejohn and Rosenbluth.