Law

The actual title is “Decision-Making under the Gambler’s Fallacy” (pdf) and the authors are daniel Chen, Tobias J. Moskowitz, and Kelly Shue.  Here is one short bit from what is more generally a very interesting paper:

We test our hypothesis in three high-stakes settings: refugee court asylum decisions in the US, a field experiment by Cole et al. (2013) in which experienced loan officers in India review real small-business loan applications in an experimentally controlled environment, and umpire calls of pitches in Major League Baseball games. In each setting, we show that the ordering of cases is likely to be conditionally random. However, decisions are significantly negatively autocorrelated. We estimate that up to 5 percent of decisions are reversed due to the gambler’s fallacy.

To make that more concrete, if a baseball umpire first calls a ball, the next pitch he is more likely to then call a strike.  Of course this may plague your paper refereeing decisions, whether or not you finish your next book, and your dating life.

The original pointer was from Cass Sunstein on Twitter.

The first randomized controlled trial of police body cameras shows that cameras sharply reduce the use of force by police and the number of citizen complaints.

We conducted a randomized controlled trial, where nearly 1,000 officer shifts were randomized
over a 12-month period to treatment and control conditions. During ‘‘treatment shifts’’
officers were required to wear and use body-worn-cameras when interacting with members
of the public, while during ‘‘control shifts’’ officers were instructed not to carry or use the
devices in any way. We observed the number of complaints, incidents of use-of-force, and
the number of contacts between police officers and the public, in the years and months
preceding the trial (in order to establish a baseline) and during the 12 months of the
experiment.

The results were that police use of force reports halved on shifts when police wore cameras. In addition, the use of force during the entire treatment period (on shifts both using and not using cameras) was about half the rate as during pre-treatment periods. In other words, the camera wearing shifts appear to have caused police to change their behavior on all shifts in a way that reduced the use of force. A treatment that bleeds over to the control group is bad for experimental design but suggests that the effect was powerful in changing the norms of interaction. (By the way, the authors say that they can’t be certain whether the cameras primarily influenced the police or the citizens but the fact that the effect occurred even on non-camera shifts suggests that the effect is primarily driven by police behavior since the citizens would not have been particularly aware of the experiment, especially as there would have been relatively few repeat interactions for citizens.)

It is possible that the police shaded their reports down during the treatment period but complaints by citizens also fell dramatically during the treatment period from about 25-50 per year to just 3 per year.

Here’s a graph of use of force reports before and during the treatment period.

cameras

Police cameras will have some negative effects. When a police officer is accused of something will lawyers have the right to subpoena years of camera footage looking for anything problematic? Think about the OJ case. Perhaps tape should be erased after one year.

Nevertheless, the results of the study are impressive. More generally, I worry that there is no solution to the problem of government mass surveillance but at the very least we can turn the cameras around and even the playing field.

That is a new (early 2014) and excellent book by Elaine Scarry, the subtitle is Choosing Between Democracy and Doom.  Here is one good sentence:

…the British government arranged a secure fallout shelter for 200 leading officials, it neglected to include the queen in its plans…

Here is a more thematic sentence:

The impossibility of “governing” nuclear weapons emerges across many pages of this book.

Recommended, and consistent with my long held view that the production of nuclear weapons represented one of the most fundamental revisions of the U.S. Constitution.  The discussion of nuclear submarines, and how hard it can be to send them revised orders, is both fascinating and scary.

More than 220k, apparently:

The gang allegedly numbered 18-20 people and spent $220,798 on the attack, including $4,000 on two sniper “Barret” .50 calibre rifles that the accountant who compiled their expenses said were “not really necessary, but could be very useful”. Each man had $4,000 to cover costs while they were in Gambia.

But the coup attempt failed and this week, US federal prosecutors charged a Texas businessman with conspiring with a former US Army sergeant and others to orchestrate an attack in Gambia on the last two days of 2014.

There is more here in the FT.  And here is a tidbit of note:

US authorities accuse Cherno Njie, a 57-year-old US citizen of Gambian descent who made a small fortune in the housing industry in Texas, of bankrolling the coup.

The article is interesting throughout, there was at least the ostensible motive of restoring democracy to the country.  I wonder to what extent he viewed this as a philanthropic rather than selfish venture.

That is the new and excellent Sam Quinones article from Pacific Standard, here is one excerpt:

Some of this is a state and national story, as violent crime declined by about 16 percent in both California and the nation from 2008 through 2012. But the decline has been steeper in many gang-plagued cities: 26 percent in Oxnard, 28 percent in Riverside, 30 percent in Compton, 30 percent in Pasadena, 30 percent in Montebello, 50 percent in Bell Gardens, 50 percent in El Monte.

Santa Ana once counted 70-plus homicides a year, many of them gang-related. That’s down to 15 so far in 2014, even as Santa Ana remains one of the densest, youngest, and poorest big cities in California. “Before, they were into turf,” says Detective Jeff Launi, a longtime Santa Ana Police gang investigator. “They’re still doing it, but now they’re more interested in making money.”

No place feels so changed as the city of Los Angeles. In 2014, the Los Angeles Police Department announced that gang crime had dropped by nearly half since 2008.

Obviously this is welcome news, not only for its own sake, but also for those of us who have been arguing that Latino immigration is going to work out.

From a 1991 essay, “What purposes can “international terrorism” serve?”:

…I want to offer another conjecture on why international terrorism is so rare…whereas individual acts of terrorism may be easily within the capabilities of quite ordinary individuals , a sustained campaign on any scale may require more people and more organization than could be viable in most target countries.  And there may be some negative feedback from the low success rate to the low attempt rate: Resourceful individuals, people with brains or people with money, may find terrorism so unpromising that they do not choose to contribute effort or money.  And any organization that is secret and dangerous risks both defection and infiltration; a group of people large enough to carry on a sustained campaign, perhaps simultaneously in different target areas, may simply be too vulnerable in defection and infiltration.  Even seeking financial help risks being informed on.

That is one of the essays in the book Violence, Terrorism, and Justice, edited by R.G. Frey and Christopher W. Morris.  By the way, Schelling cites the campaign of Palestinian radicals against Palestinian moderates as one of the examples of a successful terrorist plan.

There is a new paper on this topic, not by Bruno Frey, rather by Mikael Elinder, the abstract is this:

Since the sinking of the Titanic, there has been a widespread belief that the social norm of “women and children first” (WCF) gives women a survival advantage over men in maritime disasters, and that captains and crew members give priority to passengers. We analyze a database of 18 maritime disasters spanning three centuries, covering the fate of over 15,000 individuals of more than 30 nationalities. Our results provide a unique picture of maritime disasters. Women have a distinct survival disadvantage compared with men. Captains and crew survive at a significantly higher rate than passengers. We also find that: the captain has the power to enforce normative behavior; there seems to be no association between duration of a disaster and the impact of social norms; women fare no better when they constitute a small share of the ship’s complement; the length of the voyage before the disaster appears to have no impact on women’s relative survival rate; the sex gap in survival rates has declined since World War I; and women have a larger disadvantage in British shipwrecks. Taken together, our findings show that human behavior in life-and-death situations is best captured by the expression “every man for himself.”

The pointer is from Ben Southwood.

The ruble and the fiscal theory of money

by on January 4, 2015 at 1:06 pm in Economics, Law | Permalink

John Cochrane writes:

Facts

1. Oil prices have gone down by half. Russia is a big exporter, and the Russian government gets a lot of revenue from oil exports, 45% by one media account.

2. The Ruble is collapsing.

There is more to the argument than that, but that is not such a bad start.  The problem I have with the fiscal theory of money is that I do not know how to define the fundamental value of money.  It may work analytically to treat money as a “get out of jail card” of a defined value, yet it seems doubtful to me that is the only factor pinning down money’s value.  Multiple equilibria are running around in the background somewhere…we just don’t quite know how and where.

Feline tax collateral in Russia

by on December 26, 2014 at 3:26 am in Current Affairs, Economics, Law | Permalink

Tax collectors in Russia have stumbled across a new way of getting people to pay their debts – by threatening to take away their cats, it’s been reported.

State collectors in the Siberian city of Novosibirsk recently succeeded in getting a resident to pay 12,000 roubles ($198; £127) he owed in unpaid taxes after threatening to seize his expensive pedigree cat, Interfax news agency reports. When bailiffs arrived at the student’s flat, they initially found nothing of value worth seizing – that is until they spied the British Shorthair cat he was holding and three of its kittens running around the place. “Because the animals are pedigree and expensive, the representative of the law decided to place the cat brood under arrest”, Interfax quotes a statement from the region’s court marshal’s service.

In another case, bailiffs in the Siberian region of Tomsk placed four pedigree Scottish Fold kittens “under arrest” after their owner, a former businesswoman, failed to make payments into a company pension fund, Tass news agency reports. She was eventually allowed to keep the cats after managing to get hold of the money. And it seems it’s not just people’s beloved felines that have fallen prey to the latest scheme. In another Siberian region, Krasnoyarsk, a man who owed 20,000 roubles in unpaid utility bills had his “British Shorthair cat named Yasmin and his fluffy pet rabbit” seized, Interfax reports.

The link is here, via the excellent Mark Thorson.  And by the way, via Abigail Tucker, it was not so long ago that “Russian Bank Will Send a Cat to Your House if You Sign.”  Hmm…

Iranian markets in everything

by on December 25, 2014 at 2:59 pm in Current Affairs, Economics, Law | Permalink

Iran has been hit so hard that its government, looking for ways to fill a widening hole in its budget, is offering young men the option of buying their way out of an obligatory two years of military service. “We are on the eve of a major crisis,” an Iranian economist, Hossein Raghfar, told the Etemaad newspaper on Sunday. “The government needs money badly.”

There is more here, mostly on how falling oil prices have affected other countries.

The Internal Revenue Service is putting outfielder Darryl Strawberry’s retirement annuity on the auction block next month.

The annuity, seized by the IRS because Strawberry owed back taxes, was part of a contract he signed in 1985, back when he was slugging home runs for the New York Mets.

The annuity will be worth about $1.3 million, to be paid out over nearly 19 years, when it goes up for sale on January 20, according to court documents.

The starting bid is $550,000.

There is more here, and for the pointer I thank Zachary Klein.

The polity that is Singapore

by on December 23, 2014 at 7:50 am in Current Affairs, Law, Science | Permalink

The city-state will open one of its neighborhoods to driverless cars in 2015…

Combined with a version of Uber it would seem, there is more here.

Smuggling Cubans

by on December 18, 2014 at 7:30 am in Economics, Law, Sports | Permalink

This post isn’t about smuggling Cuban cigars it’s an incredible story about smuggling Cuban baseball players.

The average wage in Cuba is about $20 per month so a typical Cuban might earn 50 times more in the United States but a star Cuban baseball player (who also earns about $20 per month in Cuba) might earn 10,000 times more in the United States. Markets abhor a price differential so there is an active market in smuggled Cubans.

Yasiel Puig, now a star player for the Los Angeles Dodgers, was smuggled out of Cuba in 2012. The smuggling operation was paid for by a group of Miami businessmen:

Investigators and court documents say Suarez was one of the Miami-based financiers of the 2012 smuggling venture in which Puig was taken by boat from Cuba to a fishing village near Cancun, Mexico, eventually crossing into the U.S. at Brownsville, Texas, on July 3 of that year. In return, the financiers were getting a percentage of the seven-year, $42 million contract Puig signed with the Dodgers.

The story is not unique

The plea is the second in Miami federal court this year involving the smuggling of a Cuban baseball player into the U.S. Last month, 41-year-old Eliezer Lazo was sentenced to 14 years in federal prison for conspiring to smuggle 1,000 Cubans, including baseball players such as Texas Rangers outfielder Leonys Martin.

Puig did in fact pay Suarez $2.5 million. A high price for a relatively simple operation–the going rate to smuggle an ordinary Cuban is about $10,000–but, as we will see, more than smuggling was involved. It took five attempts before Puig reached the shores of Mexico. On one of the earlier attempts Puig was captured by the US Coast guard who sent him back–after some of the crew asked for his autograph!

On the fifth attempt, Puig, along with “a boxer, a pinup girl, and a Santeria priest, the latter of whom blessed their expedition with a splash of rum and a sprinkle of chicken blood” managed to escape Cuba guided by the smugglers and their accomplices—“The Chinaman” and “The Hungarian”. Once in Mexico, however, the operation got messy because Mexico’s Zetas gang were acting as intermediaries and with Puig in hand they demanded a greater share of the proceeds.

“If they didn’t receive the money, they were saying that at any moment they might give him a machetazo”—a whack with a machete—“chop off an arm, a finger, whatever, and he would never play baseball again, not for anyone.” 

The case has lots of interesting asides: Why flee to Mexico first and only then to the United States? It’s all about the money and the weird rules of MLB:

A foreign-born player who immigrates without a contract is treated as an amateur by MLB; he can negotiate only with the team that drafts him. By declaring himself a free agent before arriving, that player can entertain all comers; the difference is worth millions. Federal law, of course, bars Americans from paying money to Cubans—or “trading with the enemy”—so a ballplayer like Puig needs not only to defect but also to establish legal residency in a country that he does not actually intend to live in.

Now back to the Zetas and the hostage negotiations.

As the standoff entered its third week, the smugglers began looking elsewhere to recoup their costs. The idea occurred to them that they could auction Puig off.

Eventually a rescue operation was staged by the Miami businessmen (details are unclear) and Puig escapes to Mexico City where in essence an auction is held in which the Dodgers win with a bid of $42 million over seven years. 

Puig, however, continued to be threatened by the Zetas, hence, it seems, the aforementioned $2.5 million dollar payment to the Miami businessman who in turn paid off the Zetas (a murder also appears to be related).

As if all of this isn’t astounding enough these details have come to light only because of a US civil case against Puig. Puig had been approached a few years earlier when he was just 19 by another would be smuggler. Fearing the state police who monitored him constantly, Puig alerted the sports ministry to the offer and they notified state security. The alleged smuggler was arrested by the Cuban police, jailed, and perhaps tortured. Now here is where it gets really strange. The alleged smuggler, still in jail in Cuba, and his mother are suing Puig in American court for $12 million dollars for turning the smuggler over to the Cuban authorities and thus potentially violating the Torture Victim Protection Act.

There are many lessons here about open(ing) borders, rent seeking, the law, and how making some trades illegal creates black markets often ruled by violence. Thankfully an opening of relations with Cuba may cause this market to wither away. Next up, college athletes.

I received this email:

A colleague forwarded your post this morning, and there is an easy reply to your concerns.

Nothing in our analysis implicates academic freedom in the least, and the paper addresses this point directly in the text at page 12:

“The Harvard Proposal’s incomplete and categorical analysis of the academic literature could be published in any academic journal without raising any risk of violating the federal securities laws. But when scholars avail themselves of SEC regulations to force issuers to place statements describing academic research in the corporation’s proxy materials, the scholars voluntarily subject themselves to standards of legal liability that do not apply in other venues. There is no “professor exemption” from the requirement that a proxy proposal not be materially false or misleading.”

Thus, the salient point is that the proposal appears in the proxy only because the Harvard SRP voluntarily decides to avail itself of an SEC rule that forces the company to put the statement on the company’s proxy. In order to benefit from this rule, the proponent has to agree to abide by SEC rules that prohibit proposals from making statements that suffer from material omissions. The Harvard SRP can write or say whatever it wants without any of the concerns raised in the paper, provided that those statements don’t appear in Rule 14a-8 proposals. But, once the statements are submitted as a Rule 14a-8 proposal, they have to abide by the same rules as any other 14a-8 proposal.

The article’s analysis therefore suggests no constraint on academic freedom. We academics can write and say what we want without any concern regarding any of these SEC rules, provided we are not submitting shareholder proposal. And, for what it’s worth, to the best of my knowledge, the Harvard SRP is the only university-run program that engages in Rule 14a-8 campaigns, and no research by any Harvard scholar is at all affected by our article’s analysis, other than the materials that appear within the four corners of the shareholder proposals voluntarily submitted by the SRP.

Indeed, as an academic who benefits from academic freedom, I too would be concerned about any suggestion that our analysis has any effect on academic freedom whatsoever. It doesn’t.

Hope that’s responsive to your concerns.

Here is the home page of Joseph A. Grundfest.  Here is his Wikipedia page.

Just this week, Commissioner Daniel M. Gallagher and former Commissioner Joseph A. Grundfest issued a draft of a paper that takes on the Harvard Shareholder Rights Project.  The Harvard SRP describes itself as “a clinical program operating at Harvard Law School and directed by Professor Lucian Bebchuk.”  From 2012 through 2014, the Harvard SRP focused on proposing precatory shareholder resolutions under Rule 14a-8 seeking the elimination of staggered boards.  It claims that 121 companies receiving these proposals “have agreed to move toward annual elections following the submission of board declassification proposals for 2012, 2013 and/or 2014 meetings.”

The Commissioners take issue with the Harvard SRP’s reliance on academic research finding that staggered boards are inimical to shareholder interests.  They note that the Harvard SRP omits the larger body of academic research that contradicts the research relied upon by the Harvard SRP.  They claim not to take sides in the debate over the merits of board classification, but they do conclude:

  • The Harvard SRP proposal could be described as materially false and misleading because it omits the contradictory research…

There is more to the story, but that is already enough to make me nervous.  Here is Matt Levine on the same:

Here is an utterly loony paper by Securities Exchange Commissioner Daniel Gallagher and former SEC commissioner Joseph Grundfest arguing that Harvard is violating the securities laws in its Shareholder Rights Project. That project, run by Harvard professor Lucian Bebchuk, submits shareholder proposals to public companies asking them to de-stagger their boards, so that all directors are elected every year instead of electing one-third of directors a year to three-year terms. Staggered boards make activism hard and hostile takeovers nearly impossible, and so are often viewed as shareholder-unfriendly. There is some empirical evidence that they are in fact bad for shareholders. There is other empirical evidence that they are good for shareholders. There is yet other empirical evidence that they are sometimes good and sometimes bad. (This is how empirical corporate governance research always works out, by the way.) Harvard, in advocating against staggered boards, cites the research that supports its side, and doesn’t cite the research that supports the other side. Gallagher and Grundfest argue that this could be “a material omission that violates” the proxy rules. Umm? It is not exactly news that some people think staggered boards are good and others think they are bad, and that the ones who think they are bad will, you know, say that they’re bad. It would be hard to argue that Bebchuk et al. don’t believe that their arguments are true.

“If the SEC took the more draconian step of suing Harvard, the agency would be ‘in my opinion, very likely to prevail,’ Mr. Grundfest said in an interview,” though, I mean, it won’t? The purpose of this paper is to make life a bit easier for companies that are targeted by the Harvard Shareholder Rights Project. First, it will probably drive Harvard to soften the language of its proposal a bit. Second, and more importantly, it will give companies that oppose de-classification a very authoritative-sounding source of empirical data for their position (“Look, the SEC says staggered boards are good!”). And third, it may allow companies to exclude the Harvard proposal from their proxies entirely, by arguing to the SEC that it is false and misleading.