The impersonator priced the book at $555 and it was posted to multiple Amazon sites in different countries. The book — which as been removed from most Amazon country pages as of a few days ago — is titled “Lower Days Ahead,” and was published on Oct 7, 2017.

Reames said he suspects someone has been buying the book using stolen credit and/or debit cards, and pocketing the 60 percent that Amazon gives to authors. At $555 a pop, it would only take approximately 70 sales over three months to rack up the earnings that Amazon said he made.

“This book is very unlikely to ever sell on its own, much less sell enough copies in 12 weeks to generate that level of revenue,” Reames said. “As such, I assume it was used for money laundering, in addition to tax fraud/evasion by using my Social Security number. Amazon refuses to issue a corrected 1099 or provide me with any information I can use to determine where or how they were remitting the royalties.”

Reames said the books he has sold on Amazon under his name were done through his publisher, not directly via a personal account (the royalties for those books accrue to his former employer) so he’d never given Amazon his Social Security number. But the fraudster evidently had, and that was apparently enough to convince Amazon that the imposter was him.

Here are additional points of interest, as the practice is more common than you might have thought.  Via the estimable Chug.

SB 827, a new bill before the California Senate, would require that all areas within a mile of a high-frequency transit stop, or within a half-mile of a bus or transit corridor, allow heights of at least 45 or 85 feet (depending on distance from transit, width of street, and other characteristics). That’s roughly four to eight stories, far higher than what many local zoning commissions allow.

SB 827 would also waive any minimum parking requirements in those areas and prohibit any design requirement that would have the effect of arbitrarily lowering the square footage allowed on a lot.

The bill’s changes would apply to huge swathes of the state, including the majority of land in several major cities. It would unleash dense development In markets long dominated by powerful anti-housing activists (often called NIMBYs, for Not In My Backyard). It represents a housing revolution.

There is much more at the link, David Roberts interviews Brian Hanlon at Vox.

The subtitle is The End of Empire and the Birth of Neoliberalism.  Imagine a novel and interesting coverage of the post-war Austrian School, here relabeled the “Geneva School,” a well-done partial history of the WTO and EU, and a book where the central characters are not only Mises and Hayek, but also Alexander Rüstow, Wilhelm Röpke, and Michael Heilperin.

And it’s written by a Wellesley historian who appears to be entirely sane and responsible throughout.

The main lesson, and here these are my own words not those directly of the author, is that various liberals came to realize that their dreams for a free world order in fact involved quite an extensive international legal apparatus, far removed from the traditional nightwatchman state.  The EU and the “Four Freedoms” are in this view the actual instantiation of historic classical liberalism, arguably more than anything the United States has done of late.  And if you don’t like the over-regulation and excess bureaucracy of the EU, well maybe you’d better realize those are difficult to avoid secondary consequences of having the international law be so strong as to actually constrain state power (again my words, not Slobodian, though his book may lead you to this idea).

Wilhelm Röpke it turns out is the (a?) bad guy, and I have to say I always considered him a third-rate, misguided agrarian thinker.  It turns out his views on Africa were not entirely sound, and furthermore he sought to pull the rest of the liberals away their “economic libertarianism,” keeping in mind that Hayek already favored a social welfare state and socialized health insurance, among other interventions.

I folded over 12 separate pages in this book, which is considerably higher than average.

That all said, I don’t quite buy onto the whole story.  I read Hayek as rebelling against the vanquished Austro-Hungarian Empire, rather than keeping it as a mental model for reform.  Nor am I persuaded by the idea of a identifiable “Geneva School,” whether as an independent group or as a sub-branch of the Austrians.  In my view, the connections running through Geneva are historical ones (various people and institutions got put there), not intellectual in nature.  Haberler and Machlup I would have covered in greater detail, and that would have strengthened the author’s core thesis.  Oddly, there is no mention of Melchior Palyi at all.

pp.271-272 have a good fifteen-point summary of what the Geneva School is supposed to stand for, you might try #5: “World law trumps a world state. International institutions should act as mechanisms for protecting and furthering competition without offering spaces for popular claims-making.”

Henry Farrell has very good remarks on the book.  You can pre-order it here.

And by the way, use of the word “neoliberalism” in a book’s title is almost always a major negative signal, but here it is actually appropriate.

Legal Money Illusion

by on February 21, 2018 at 12:09 am in Current Affairs, Economics, Law | Permalink

The state of Virginia is raising the financial threshold for defining a theft as a felony for the first time in almost four decades. Virginia’s experience highlights a peculiarity of American criminal law that results in petty criminals in many states being charged and punished as if they were big-time criminals.

For property crimes such as theft or vandalism, states set financial thresholds that are intended to differentiate low-level crimes chargeable as misdemeanors from more serious offenses chargeable as felonies. In Virginia, the legislature in 1980 defined theft as a felony if the property stolen was worth more than $200. Because of inflation, more and more petty thefts that were originally defined as misdemeanors became felonies with each subsequent year. In 2017, someone who shoplifted a $240 pair of eyeglasses that would have cost only $80 in 1980 would be charged as a felon — even though that was not the law’s original intent. A felony charge can result in a petty criminal receiving a prison term, being barred from many occupations and in some states losing the right to vote.

Virginia is raising its felony standard to $500.

That is from Keith Humphreys at WaPo, note that Alaska uses indexing.

Manhattan land prices

by on February 20, 2018 at 7:04 pm in Data Source, Economics, History, Law | Permalink

Using vacant land sales, we construct a land values index for Manhattan from 1950 to 2014. We find three major cycles (1950–1977, 1977 to 1993, and 1993 to 2009) with land values reaching their nadir in 1977, just after the city’s fiscal crisis. Overall, we find the average annual real growth rate to be 5.5%. Since 1993, land prices have risen quite dramatically, and much faster than population or employment growth, at an average annual rate of 15.8%, suggesting that barriers to entry in real estate development are causing prices to rise faster than other measures of local well-being. Further, we estimate the entire amount of developable land on Manhattan in 2014 was worth approximately $1.74 trillion. This would suggest an average annual return of about 6.4% since the island was first inhabited by Dutch settlers in 1626.

The article is by Jason Barr, Fred Smith, and Sayali Kulkarni, via the excellent Kevin Lewis.

Here is the transcript and audio, Matt was in great form.  We covered Uber, derivatives, crypto, Horace, Latin and the ancient world, neighborhoods of New York City, whether markets are volatile enough, Buffy the Vampire Slayer, whether IPOs are mispriced, Nabokov and modernist literature, Achilles and Homer, and of course the Matt Levine production function (“panic”).

Here is one excerpt:


…What I’d like the story to be is that financial markets have gotten smarter and they reacted less to news. So even though the news is noisier, they react less to that noisy news because it turns out not to affect asset prices in as noisy a way as you’d think by watching TV.

I think that there is something compelling to that because we actually have seen smart people build smart things that do a good job of making investing decisions. So you’d expect over time, as people build more rational investing tools, investing would become more rational.

The good counterargument to that is that investing is not a technological problem in the world that can be solved. It’s an interpersonal fight. Trading, in particular, is an attempt to be better than someone else. You can never make trading more rational because as you get better, someone else gets better. The residue will ultimately still be your human biases.

I’m biased towards the view that we have gotten smarter at decoupling our emotional reactions to the news from financial asset prices. Part of that is — whether or not that’s true globally — there’s a local sense in which the first day of Trump’s election everyone panicked. Then he said another crazy thing, and then he said another. Eventually you tune it out. That’s a form of this thing of financial assets reacting less to human reactions to the news.

Here is another:

COWEN: Do you have a single biggest worry [about asset markets], however tiny, tiny, tiny it may be?

LEVINE: I don’t think I do. I don’t think I do. The thing that I find weirdest is the lack of volatility in the face of a very strange and volatile world, but I’ve reconciled myself to that. This is my efficient markets optimism, where I assume that if something bad is happening, it would happen.

COWEN: But efficient markets is also a pessimism, right? It’s harder to make the world better than it already is because you can’t see past what others are seeing very easily.

LEVINE: Sure, it’s an efficient markets conservatism or something.

And finally:

LEVINE: I have an idiosyncratic take on Book 9 of the Iliad. The Iliad is the story of Achilles is the great warrior on the Greek side in the Trojan War. He gets mad at some slight, and he goes back to his tent to sulk, and the Greeks start losing.

So then they send emissaries to his tent to say, “Please come back.” And he says, “No.” Then, the Greeks start losing some more.

Eventually, he comes back, and he gets killed. That’s basically the story of the Iliad. Book 9 is where they send the emissaries to say, “Please come back,” and he says, “No.”

He gives this speech, this response that is weird, where he says, effectively, “The prophecy is that if I go back to fight here, I will die here. My name will be immortal. If I don’t go back to fight, I’ll go home and live a long life and will be forgotten.” He chooses to go back and be forgotten. Then, later, he changes his mind because his friend gets killed.

I think the existential examination of this Greek warrior and this heroic culture that clearly valorizes heroism and deathless fame and everything, and who is, canonically, the most famous heroic warrior and the one with the most deathless fame, he’s the one who says, “Nah, I’d rather go back and live a long life on my farm.”

The forcing of that choice is the central point of the highest work of Greek art, sort of prefigures a lot of existentialist thought in the future, I think.

Do read and listen to the whole thing

In 1971 Irving Kristol said yes, today Ross Douthat says yes.  I am sympathetic with the notion that porn in the “I know it when I see it sense” is a net negative bad for society, even if it helps some people revitalize their sex lives (Alex differs).  That said, I cannot find an attractive way of censoring it.

Ross tweeted:

I think you start with the rules we have, and think about how they might be applied to ISPs.

Yet playing whack-a-mole with ISPs does not always go well, a truth to which a number of emotionally well-balanced MR commentators can attest.  And porn users and suppliers I think would be especially willing to find workarounds, including VPNs.  So I don’t think porn would end up all that ghettoized.  My fear is that the American internet would evolve rather rapidly toward Chinese-style institutions of control (though they would not used right now), without stopping porn very much, but leading to increasing calls to censor many other things too.

Keep in mind also that porn has been a major driver of innovation, not just for the VCR but for the internet too, including for means of payment, methods of streaming, and anti-piracy.  Might porn drive the demand to build networks of virtual reality?  So I’m not ready to ban it just yet.

Yes, here is Keith Humphreys from Wonkblog:

Although some people believe prohibiting drugs is what makes their potency increase, the potency of marijuana under legalization has disproved that idea. Potency rises in both legal and illegal markets for the simple reason that it conveys advantages to sellers. More potent drugs have more potential to addict customers, thereby turning them into reliable profit centers.

In other legal drug markets, regulators constrain potency. Legal alcohol beverage concentrations are regulated in a variety of ways, including through different levels of tax for products of different strengths as well as constraints on labeling and place of sale. In most states, for a beverage to be marketed and sold as “beer,” its alcohol content must fall within a specified range. Similarly, if wine is distilled to the point that its alcohol content rises too high, some states require it be sold as spirits (i.e., as “brandy”) and limit its sale locations.

As states have legalized marijuana, they have put no comparable potency restrictions in place, for example capping THC content or levying higher taxes on more potent marijuana strains. Sellers are doing the economic rational thing in response: ramping up potency.

How about the Netherlands?:

The study was conducted in the Netherlands, where marijuana is legally available through “coffee shops.” The researchers examined the level of delta-9-tetrahydrocannabinol (THC), the main intoxicant in marijuana, over a 16-year period. Marijuana potency more than doubled from 8.6 percent in 2000 to 20.3 percent in 2004, which was followed by a surge in the number of people seeking treatment for marijuana-related problems. When potency declined to 15.3 percent THC, marijuana treatment admissions fell thereafter. The researchers estimated that for every 3 percent increase in THC, roughly one more person per 100,000 in the population would seek marijuana use disorder treatment for the first time.

The Dutch findings are relevant to the United States because high THC marijuana products have proliferated in the wake of legalization. The average potency of legal marijuana products sold in the state of Washington, for example, is 20 percent THC, with some products being significantly higher.

I believe that marijuana legalization has moved rather rapidly into being an overrated idea.  To be clear, it is still an idea I favor.  It seems to me wrong and immoral to put people in jail for ingesting substances into their body, or for aiding others in doing so, at least provided fraud is absent in the transaction.  That said, IQ is so often what is truly scarce in society.  And voluntary consumption decisions that lower IQ are not something we should be regarding with equanimity.  Ideally I would like to see government discourage marijuana consumption by using the non-coercive tools at its disposal, for instance by making it harder for marijuana to have a prominent presence in the public sphere, or by discouraging more potent forms of the drug.  How about higher taxes and less public availability for more potent forms of pot, just as in many states beer and stronger forms of alcohol are not always treated equally under the law?

The Uber Pay Gap

by on February 7, 2018 at 7:31 am in Economics, Law | Permalink

Using data on over one million Uber drivers and millions of trips, Cody Cook, Rebecca Diamond, Jonathan Hall, John A. List, and Paul Oyer show that female Uber drivers earn 7% less than male drivers. What makes this paper new, however, is that UBER’s extensive data lets the authors understand in great detail why the pay gap exists. It’s not discrimination:

Uber uses a gender-blind algorithm and drivers earn according to a transparent formula based on the time and distance of trips. There are no negotiated pay rates or convex returns to long hours worked, factors that have been shown to open a gender earnings gap in other settings. Our research also finds that both average rider ratings of drivers and cancellation rates are roughly equivalent between genders and we find no evidence that outright discrimination, either by the app or by riders, is driving the gender earnings gap.

The authors find that three factors explain the gap; driving speed, experience, and choices about where to drive.

First, driving speed alone can explain nearly half of the gender pay gap. Second, over a third of the gap
can be explained by returns to experience, a factor which is often almost impossible to evaluate
in other contexts that lack high frequency data on pay, labor supply, and output. The remaining
20% of the gender pay gap can be explained by choices over where to drive.

Male Uber drivers, like other males, drive a bit faster than female drivers, about 2.2% faster after controlling for experience and location. Since Uber pays by time as well as by distance the returns to speed are not very high and the difference in speed is small but overall this results in an increase in pay for males of about 50 cents an hour.

Drivers learn by doing and more men than women have driven for Uber for years:

A driver with more than 2,500 lifetime trips completed earns 14% more per hour than a driver who
has completed fewer than 100 trips in her time on the platform, in part because she learn where
to drive, when to drive, and how to strategically cancel and accept trips. Male drivers accumulate
more experience than women by driving more each week and being less likely to stop driving with

Overall, female and male Uber drivers behave remarkably similarly but small differences aggregated over large samples produce a small but systematic gender gap in wages of about 7%. The gap, however, is an artifact, a social construct that has no implications for “social justice,” drivers are treated equally.

The author’s conclude:

Overall, our results suggest that, even in the gender-blind, transactional, flexible environment
of the gig economy, gender-based preferences (especially the value of time not spent at paid work
and, for drivers, preferences for driving speed) can open gender earnings gaps. The preference
differences that contribute to pay differences in professional markets for lawyers and MBA’s also
lead to earnings gaps for drivers on Uber, suggesting they are pervasive across the skill distribution
and whether in the traditional or gig workplace.

Cryptocurrencies are among the largest unregulated markets in the world. We find that approximately one-quarter of bitcoin users and one-half of bitcoin transactions are associated with illegal activity. Around $72 billion of illegal activity per year involves bitcoin, which is close to the scale of the US and European markets for illegal drugs. The illegal share of bitcoin activity declines with mainstream interest in bitcoin and with the emergence of more opaque cryptocurrencies. The techniques developed in this paper have applications in cryptocurrency surveillance. Our findings suggest that cryptocurrencies are transforming the way black markets operate by enabling “black e-commerce.”

Here is the paper, by Foley, Karlsen, and Putniņš, via the excellent Kevin Lewis.

My paper with the excellent Nathan Goldschlag, Is regulation to blame for the decline in American entrepreneurship? has finally been published. Our paper tests the plausible theory that regulation reduces dynamism as it builds up over time. Michael Mandel explains:

…it’s possible for every individual regulation to pass a cost-benefit test, while
the total accumulation of regulation creates a heavy burden on Americans. The number of
regulations matter, even if individually all are worthwhile.

I call this the ‘pebble in the stream’ effect. Thrown one pebble in the stream, nothing happens.
Throw two pebbles in the stream, nothing happens. Throw one hundred pebbles in the stream,
and you have dammed up the stream. Which pebble did the damage? It’s not any single pebble,
it’s the accumulation.

This is also the theory of regulation and declining dynamism that Mancur Olson puts forward in his classic, The Rise and Decline of Nations. We find, however, that declining dynamism cannot be explained by growing federal regulation. The reason turns out to be simple: the decline in dynamism is widespread across many different industries and, in particular, it is widespread across heavily and lightly regulated industries. Our finding does not imply that regulation is necessarily good–regulations could fail a cost-benefit test and yet not have much of an effect on dynamism–nor does it imply that no regulation could explain declining dynamism only that we should probably look elsewhere for an explanation of declining dynamism than the cumulative growth of federal regulation. See the paper for some suggestions.

Frankly, it’s difficult to publish a paper that fails to reject the null hypothesis. A positive or negative effect is a natural stopping point–ok, they got it, let’s move on–but a zero-effect always leads to complaints that you didn’t run the regression in such and such a way or you could have done such and such a test. The asymmetry in paper evaluation leads to the file drawer problem where published results tend to reject the null even when a random sample of all results would find that the null is supported. We know the file drawer problem is serious because it predicts that studies with small sample sizes should have larger effect sizes–an effect that has often been found.

I can’t complain too much, however, because our paper was published in Economic Policy, a highly-ranked journal, and is the Editor’s Choice paper for that issue. The referees certainly made the paper better.

One of the things we did in the paper to counter the claim that our methods or data were defective was to look for entirely independent tests of the regulation hypothesis. If regulation is the main cause of declining U.S. dynamism, for example, then we ought to find that declining dynamism is associated with declining industry size. But when we look at dynamism, as measured by excess job reallocation rates, and industry employment what we see is that dynamism is declining in both shrinking and growing industries (see above). The paper has many additional tests.

The data and tools in our paper have other applications. Our methods, for example, can be used to distinguish between special-interest and general-interest regulation and could be used to test many other theories in political economy.

But wait, isn’t Chicago a fiscal mess? How about the state of Illinois?  It remains the case that living in Chicago is still remarkably affordable, and many of the neighborhoods have wonderful food, buildings, and offer a relatively safe (not always) and walkable environment.  You may even hope to find a parking spot.

I would put it this way: there are many ways to impose a Georgist land tax, fiscal insolvency being one of them.  Very wealthy people and institutions know that if they relocate to Chicago, they will be required to ante up for the final bill.  And so they stay away.  For a city of its size and import, Chicago just doesn’t have that many billionaires, nor do I think a rational billionaire should consider moving there.

In other words, there is a pending wealth tax.  Either directly or indirectly, this will place fiscal burdens on Chicago land, the immobile factor.  And this keeps down rents in Chicago now.

Overall, I do not recommend this fiscal course of action, and Chicago may well become a worse city due to eventual insolvency at the local and state levels.  Still, if you are wondering how it is that Chicago is so affordable — and wonderful — right now, this is part of the answer.

I also should note that not every neighborhood in Chicago benefits from this equilibrium, as in some parts gentrification is difficult to come by.

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

Using land value capture for New York City subway improvements makes sense because other funding methods have failed politically. Earmarking some of the state income tax to the subway might be better, but people who don’t use the subway — the majority in New York State — just don’t want to pay. So the state must look elsewhere.

In the meantime, new subway lines are rare, even though the population and economic output of the city have grown substantially. The new Second Avenue line opened only last year, though construction started in 1972 and had to overcome numerous fiscal and political obstacles. On the older lines, delays are frequent and the system lacks modern technology. It is not unusual for signal switches to date from the 1930s. By one estimate, a much-needed revamp of the New York City subway system would cost more than $100 billion.

It is also good practice to consider when one’s argument doesn’t hold:

My own locality, Fairfax County in northern Virginia, treats landowners and real estate developers pretty favorably. They have been a dominant special interest group with many state and local politicians. That might not sound ideal, but those individuals have strongly supported the building out of the community, creating jobs and keeping down home prices. If landowners had been asked to foot more of the bill, the local political pressures for pro-growth policies probably would have been less strong and a NIMBY mentality would have prevailed. Unlike with the New York City subway, here the local interests have much greater sway, and thus land value capture could clog up politics rather than inducing new construction.

Recently I spent a day at a conference discussing Henry George’s “Progress and Poverty,” a late 19th century work that is perhaps the best-selling economics book in U.S. history. George spent much of his life campaigning for a relatively high tax on land and thus landlords, developing the fairness and efficiency arguments I mentioned above. By the end of the conference, I concluded that George had some good economic arguments, but also that he was politically naive. At the margin we should move in George’s direction, but ultimately landowners have to be part of the building coalitions rather than pure victims.

Do read the whole thing.

Rent control is not the only problem plaguing housing in Mumbai, India. Mumbai also makes it very costly to build skyscrapers. In this video, I discuss the floor space index (FSI), a regulatory tool used around the world to tradeoff plot size and height. Higher FSI lets builders economize on land, reduces sprawl, and increases the value of public transportation. The lessons in urban economics go well beyond Mumbai. Check out the video. It’s one of the best in MRUniversity‘s India series.

In Police Union Privileges I explained how union contracts and police bill of rights give police officers privileges not afforded to regular people. What differences do these privileges make? A new paper, The Effect of Collective Bargaining Rights on Law Enforcement: Evidence from Florida, suggests that police union privileges significantly increase the rate of officer misconduct:

Growing controversy surrounds the impact of labor unions on law enforcement behavior. Critics
allege that unions impede organizational reform and insulate officers from discipline for
misconduct. The only evidence of these effects, however, is anecdotal. We exploit a quasi-experiment in Florida to estimate the effects of collective bargaining rights on law enforcement
misconduct and other outcomes of public concern. In 2003, the Florida Supreme Court’s
decision extended to county deputy sheriffs collective bargaining rights that municipal police
officers had possessed for decades. We construct a comprehensive panel dataset of Florida law
enforcement agencies starting in 1997, and employ a difference-in-difference approach that
compares sheriffs’ offices and police departments before and after
Williams. Our primary result is
that collective bargaining rights lead to about a 27% increase in complaints of officer misconduct
for the typical sheriff’s office. This result is robust to the inclusion of a variety of controls. The
time pattern of the estimated effect, along with an analysis using agency-specific trends, suggests
that it is not attributable to preexisting trends. The estimated effect of
Williams is not robustly
significant for other potential outcomes of interest, however, including the racial and gender
composition of agencies and training and educational requirements.

This is important research but although I’m not surprised that collective bargaining rights lead to more misconduct I do find the size of the effect implausibly large. One reason is that police union privileges are only one brick in the blue wall. Juries, for example, often fail to convict police even when faced with video evidence that would be overwhelming in any other context [e.g. Philando Castile]. Police union privileges are unjust and should be abolished but solving the problems with policing requires more than a change in naked incentives.

To solve this problem we need to adopt the same kind of systems wide thinking that has led to large reductions in fatal accidents in anesthesiology, airplane crashes, and nuclear accidents. Criminologist Lawrence Sherman writes:

The central point Perrow (1984) made in defining the concept of system accidents is that the
urge to blame individuals often obstructs the search for organizational solutions. If a system-crash
perspective can help build a consensus that many dimensions of police systems need to be changed
to reduce unnecessary deaths (not just but certainly including firing or prosecuting culpable shooting officers), police and their constituencies might start a dialog over the details of which system
changes to make. That dialog could begin by describing Perrow’s central hypothesis that the interactive complexity of modern systems is the main target for reform. From the 1979 nuclear power
plant near-meltdown at Three Mile Island in Pennsylvania to airplane and shipping accidents,
Perrow shows how the post-incident reviews rarely identify the true culprit: It is the complexity of
the high-risk systems that causes extreme harm. Similarly, fatal police shootings shine the spotlight
on the shooter rather than on the complex organizational processes that recruited, hired, trained,
supervised, disciplined, assigned, and dispatched the shooter before anyone faced a split-second
decision to shoot.