Heidi L. Williams says yes:

A long theoretical literature has analyzed optimal patent policy design, yet there is very little empirical evidence on a key parameter needed to apply these models in practice: the relationship between patent strength and research investments. I argue that the dearth of empirical evidence on this question reflects two key challenges: the difficulty of measuring specific research investments, and the fact that finding variation in patent protection is difficult. I then summarize the findings of two recent studies which have made progress in starting to overcome these empirical challenges by combining new datasets measuring biomedical research investments with novel sources of variation in the effective intellectual property protection provided to different inventions. The first study, Budish, Roin, and Williams (forthcoming), documents evidence consistent with patents affecting the rate and direction of research investments in the context of cancer drug development. The second study, Williams (2013), documents evidence that one form of intellectual property rights on the human genome had quantitatively important impacts on follow-on scientific research and commercial development. I discuss the relevance of both studies for patent policy, and discuss directions for future research.

The NBER link is here.

Paul Krugman describes their policies as a mix of “debt repudiation, capital controls, and massive devaluation.”  Matt Yglesias refers to putting some of their bankers in jail.  But I say there is not a generalizable formula here.

Neither mentions that a major part of the Icelandic recipe was letting foreign deposit holders twist in the wind.  That’s a transfer of wealth to the domestic economy and furthermore it was politically palatable; it is also a choice which won’t much help any larger country where most of the deposit holders are domestic.  It is noteworthy that this kind of choice loomed large for Cyprus, another small country with a lot of foreign depositors.

Iceland is also so small that cutting off these creditors won’t much damage the broader global economy or lead to significant contagion.  Today, in a much safer macroeconomic environment, we’re not even sure the same could be said for Grexit, and Greece is a pretty small country in economic terms.

On top of all that, not paying back the foreign depositors was a transfer to Iceland.  It is easy enough to see why Icelanders might like that idea, but the objective foreign analyst, who ought not favor the more Nordic peoples above the others, also should consider the loss side of the ledger, namely in the UK and Netherlands.

What else?

Don’t forget that the value of the Icelandic stock exchange fell by 90% – how many other countries could endure that or would accept it?  That is easier to pull off when there are only six stocks trading on your exchange and those equities are not central to your savings.

Capital controls are also not an option for many economies, including those that are serious about being financial centers or having reserve currencies.  More to the point, the flight of foreign capital is very often not a problem in the first place.  And we have plenty of experience with capital controls and the overall record is at best mixed; this is hardly a neglected heterodox innovation.  The imposition of Icelandic capital controls may well discourage foreign investment looking forward, and so the “record to date” will be misleading in this regard.  This is again a way in which Iceland has transferred the costs of its adjustment into the future.  On top of that, we still don’t yet know how well the Icelandic removal of capital controls will go.

I’m all for devaluing and accepting higher inflation in a lot of crisis situations.  This part of the Icelandic recipe is generalizable.  It’s worth noting, however, that the devaluation (especially with capital controls) imposed a harsh and immediate “austerity” on the Icelandic people, namely it was very hard to buy foreign goods for a while.  In other words, rapid real wage cuts were imposed on just about everybody.  If your country can do that, great, but it needs to be outlined how most economies will manage that trick.  See also Scott Sumner’s remarks on whether Iceland avoided traditional fiscal austerity.

Given some very tough circumstances, Iceland also did a reasonable job of “ring-fencing” its banks and separating the good from bad assets.  That may be generalizable too, although it doesn’t have the polemic punch of some of their other policy choices.

Overall, the experience from Iceland, upon closer inspection, is not very easily generalizable.  I suspect it receives much of its praise for reasons of mood affiliation — what could sound tougher than putting bankers in jail?  But overall, Iceland faced very different constraints and opportunities, relative to other countries in the financial crisis.

Addendum: Here are some relevant earlier posts.

Europe facts of the day

by on June 10, 2015 at 4:41 am in Current Affairs, Data Source, Law | Permalink

“At least half of Germans, French and Italians say their country should not use military force to defend a NATO ally if attacked by Russia,” the Pew Research Center said it found in its survey, which is based on interviews in 10 nations.

There is more here, and so every great moderation must come to an end…

This is also of note:

According to the study, residents of most NATO countries still believe that the United States would come to their defense.


Eighty-eight percent of Russians said they had confidence in Mr. Putin to do the right thing on international affairs…

Solve for the equilibrium, as they like to say.  It is much easier to stabilize a conservative power (e.g., the USSR) than a revisionist power (Putin’s Russia).

It is also worth thinking about how this entire state of affairs has come to pass.

The U.S. listing gap

by on June 9, 2015 at 2:02 pm in Economics, Law | Permalink

From a new NBER paper by Craig Doidge, G. Andrew Karolyi, and René M. Stulz:

The U.S. had 14% fewer exchange-listed firms in 2012 than in 1975. Relative to other countries, the U.S. now has abnormally few listed firms given its level of development and the quality of its institutions. We call this the “U.S. listing gap” and investigate possible explanations for it. We rule out industry changes, changes in listing requirements, and the reforms of the early 2000s as explanations for the gap. We show that the probability that a firm is listed has fallen since the listing peak in 1996 for all firm size categories though more so for smaller firms. From 1997 to the end of our sample period in 2012, the new list rate is low and the delist rate is high compared to U.S. history and to other countries. High delists account for roughly 46% of the listing gap and low new lists for 54%. The high delist rate is explained by an unusually high rate of acquisitions of publicly-listed firms compared to previous U.S. history and to other countries.

I do not currently see an ungated copy.

Lindsey M. Burke reports:

On Tuesday night, Nevada governor Brian Sandoval signed into law the nation’s first universal school-choice program. That in and of itself is groundbreaking: The state has created an option open to every single public-school student. Even better, this option improves upon the traditional voucher model, coming in the form of an education savings account (ESA) that parents control and can use to fully customize their children’s education.

…As of next year, parents in Nevada can have 90 percent (100 percent for children with special needs and children from low-income families) of the funds that would have been spent on their child in their public school deposited into a restricted-use spending account. That amounts to between $5,100 and $5,700 annually, according to the Friedman Foundation for Educational Choice. Those funds are deposited quarterly onto a debit card, which parents can use to pay for a variety of education-related services and products — things such as private-school tuition, online learning, special-education services and therapies, books, tutors, and dual-enrollment college courses. It’s an à la carte education, and the menu of options will be as hearty as the supply-side response — which, as it is whenever markets replace monopolies, is likely to be robust.

The pointer is from Adam Ozimek.

That is the new and excellent book from Claire A. Hill and Richard W. Painter, here is one excerpt:

That banking involves constant reminders of money also may weaken “the pull of morality,” perhaps making some bankers more inclined to be unethical.  Some recent research suggests that banker identity itself encourages dishonesty.  In an experiment involving employees of a large international bank, the experimenters found evidence that when “their professional identities as bank employees [was] rendered salient to them” (they were asked questions about their professional background in the banking industry), more of them [became] dishonest, cheating in reporting the results of coin tosses so as to increase their monetary payoffs than was the case with people from various other professions — making those other professional identities salient did not increase dishonesty.  The experimenters also found that bankers whose banker identity had been made salient to them — and bankers most likely to have cheated — were more apt to agree that social status was “primarily determined by financial success.”

You can pre-order the book here, the book’s home page is here.

I don’t think so, not really.  Here is one explanation:

The proposed changes would also remove tenure protections from state law. Darling and Harsdorf both said that Wisconsin is the only state that enshrines tenure in its statutes.

The GOP proposal puts the decision of whether to have tenure and how to define it in the hands of the Board of Regents.

“We believe in empowering the Board of Regents and the chancellors throughout the state of Wisconsin to be able to manage the System,” Nygren said. “I think this is a tool to enable them to do that.”

Cross and Board of Regents vice president Regina Miller pledged to uphold the tenets of shared governance and tenure in their policies.

For sure that is a decline in the relative status of tenure, but not an end to tenure itself.

By the way, I’ve seen so many criticisms of the $400 million Paulson gift to Harvard, almost making it sound worse than if he had kept the money for himself, as most people do with $400 million.  Without a well-worked out theory of university endowments, and their importance and function (they do seem to matter), I don’t see a hard and shut case for condemning this gift.  At the very least, it is likely to boost investment’ note that about 15% of Harvard’s endowment goes to private equity or venture capital.  I do understand however that this gift sends an anti-egalitarian message about status relations and where investment should go.

Emilio Depetris-Chauvin suggests a possible answer:

Using monthly data constructed from futures markets on presidential election outcomes and a novel proxy for firearm purchases, this paper analyzes the response of the demand for guns to the likelihood of Barack Obama being elected in 2008. Point estimate suggests the existence of a large Obama effect on the demand for guns. This political effect is larger than the effect associated with the worsening economic conditions. This paper presents robust empirical evidence supporting the hypothesis that the unprecedented increase in the demand for guns was partially driven by fears of a future Obama gun-control policy. Conversely, the evidence for a racial prejudice motivation is less conclusive. Furthermore, this paper argues that the Obama effect did not represent a short-lived intertemporal substitution effect, and that it permanently affected the stock of guns in circulation. Finally, states that had the largest increases in the demand for guns during the 2008 election race experienced significant changes in certain categories of crime relative to other states following Obama’s election. In particular, those states were 20% more likely to experience a shooting event where at least three people were killed.

The published paper is here, via Kevin Lewis.

I was asked about this recently, so I thought I would put down some basic thoughts.  Note that mental illness is a major underlying issue behind both crime and unemployment.  Federal, state, and local policies toward the mentally ill are highly complex, but here are a few points:

1. As is often the case in health care policy, my inclination is to fund research and development, in this case through the NIH and NSF, before worrying about improving coverage in extant programs.  The long-term dynamic gains have the potential to outweigh the one-time static gains.

2. Medicaid offers a highly imperfect coverage of mental illness.  Fine-tuning the coverage may well be a good idea, but perhaps first Medicaid needs to be put on a sounder footing.  If you are a liberal this may mean federalizing Medicaid, and if you are a conservative this may mean block grants to the states for Medicaid experimentation.  If we are simply asking which policy is better for the mentally ill, federalization is likely the answer, although that does not settle the broader debate as to which alternative would be better overall.

3. We could retool Obamacare mandates, and other health insurance default settings, to have more coverage for mental illness and less coverage for other health conditions.  Both practical and “individual responsibility” arguments might point in that direction.

4. The deinstitutionalization of the 1980s has come in for a lot of criticism, but I remain a fan of that policy.  I’m well aware of its connection to homelessness, and also how many mentally ill people have ended up in jail.  Still, that change ended a kind of slavery for many, and if you oppose slavery you should oppose the previous policies, even if the transition brought some very large practical problems.  Of course some of these people were lobotomized or otherwise treated coercively in addition to their involuntary confinement.  In 1955 the institutionalized population peaked at about 500,000 and many of those were not voluntary admissions; a 2003 measure put that same population at only 50,000.  I recommend this Samuel R. Bagenstos piece on the topic.

5. Further deregulation could boost telemedicine and also telepsychiatry; this would lower cost and is especially important for rural areas.

6. When the family of a mentally ill adult should be notified, given individual privacy rights, is worth further discussion.  I don’t have a simple answer, here is some background.

7. The future debate will be all about wearables, including those that monitor the excited or violent states of mentally ill people.  I am skeptical about this development, mostly for slippery slope reasons, but this will become a major policy issue, for criminals and high risk individuals too.

8. Crime rates have been falling since the 1980s.  That suggests some very large gains are coming through peer effects.  There is plenty of evidence that mentally ill people, to some extent, slot into their culture’s conception of what mental illness should consist of (mentally ill Malaysians for instance are more likely to “run amok,” because that is a salient concept there.)  It seems that our culture is communicating an increasingly peaceful notion of what mental illness should consist of.  This development should be studied further, as perhaps those gains can be extended or accelerated in some way.

Overall this is one of the most important topics which is most understudied by economists.

Agreement has been reached on the controversial wage agreement for members of four Icelandic unions. This means that major strike action will be called off.

The Icelandic Union of Commercial and Office Workers (VR), the Commercial Federation of Iceland (LÍV), Flóabandalagið and Stéttarfélag Vesturlands have agreed to a final version of the agreement and the characteristic aroma of waffles has filled the negotiation venue.

Making waffles is a traditional Icelandic way of marking and celebrating the successful conclusion of negotiation of this type.

The story is here, good photo of political leadership.  Note that some of the unions were asking for fifty percent pay hikes and threatening strikes, I believe they did not get everything they were asking for.  Yet not all is well and one can only hope that more waffling is in order:

Wage disputes remain ongoing with the Icelandic Nurse’s Association, the Icelandic Association of Academics (BHM) and the Icelandic Professional Trade Association (SGS) and strike action planned by members of these unions remains on the timetable.

For the pointer I thank Peter Kobulnicky.

Some of the faux companies even hold strikes — a common occurrence in France. Axisco, a virtual payment processing center in Val d’Oise, recently staged a fake protest, with slogans and painted banners, to teach workers’ rights and to train human resources staff members to calm tensions.

The article, by Liz Alderman in the NYT, is about imaginary companies in Europe, most of all France:

More than 100 Potemkin companies like Candelia are operating today in France, and there are thousands more across Europe. In Seine-St.-Denis, outside Paris, a pet business called Animal Kingdom sells products like dog food and frogs. ArtLim, a company in Limoges, peddles fine porcelain. Prestige Cosmetique in Orleans deals in perfumes. All these companies’ wares are imaginary.

The thing is, these imaginary companies come attached to some very real benefits for workers, and, it seems, some of the capitalists too.

For the pointers I thank Rian Watt and Samir Varma.

A memorial dedicated to the 32 Basque whalers who were killed in the West Fjords in 1615 in what’s known as Iceland’s only mass murder was unveiled in Hólmavík, the West Fjords, on April 22, the last day of winter. At the occasion, West Fjords district commissioner Jónas Guðmundsson revoked the order that Basques could be killed on sight in the region.

“Of course it’s more for fun; there are laws in this country which prohibit the killing of Basques,” Jónas told When asked whether he’s noticed an increase of Basque tourists since the order was revoked, he responded, “at least it’s safe for them to come here now.”

President of Gipuzkoa Martin Garitano spoke at the ceremony, as did Icelandic Minister of Education and Culture Illugi Gunnarsson, reports. The speeches were followed by musical performances and a moment of prayer.

The program included Xabier Irujo, descendant of one of the murdered Basque whale hunters, and Magnús Rafnsson, descendant of one of the murderers, taking part in a symbolic reconciliation, as it says on

There is more here, via Peter Kobulnicky.

Enough said

by on May 28, 2015 at 2:35 am in Current Affairs, Economics, Law | Permalink

Labor leaders, who were among the strongest supporters of the citywide minimum wage increase approved last week by the Los Angeles City Council, are advocating last-minute changes to the law that could create an exemption for companies with unionized workforces.

The push to include an exception to the mandated wage increase for companies that let their employees collectively bargain was the latest unexpected detour as the city nears approval of its landmark legislation to raise the minimum wage to $15 an hour by 2020.

The story is here.  And here is a mood-affiliated Jared Bernstein piece on the L.A. minimum wage hike; it would have been stronger if all he had written were the simple eleven words: “I’m sorry, but I don’t think this is a good idea.”  In a way, the labor unions have just said the same.

Hat tip goes to Modeled Behavior.

Some people are calling Steven Lubet’s new review of Alice Goffman’s On the Run “troubling” and even “devastating” but I am non-plussed. Lubet questions the plausibility of some of Goffman’s accounts:

She describes in great detail the arrest at a Philadelphia hospital of one of the 6th Street Boys who was there with his girlfriend for the birth of their child.  In horror, Goffman watched as two police officers entered the room to place the young man in handcuffs, while the new mother screamed and cried, “Please don’t take him away. Please, I’ll take him down there myself tomorrow, I swear – just let him stay with me tonight.” (p. 34). The officers were unmoved; they arrested not only Goffman’s friend, but also two other new fathers who were caught in their sweep.

How did the policemen know to look for fugitives on the maternity floor?  Goffman explains:

According to the officers I interviewed, it is standard practice in the hospitals serving the Black community for police to run the names of visitors or patients while they are waiting around, and to take into custody those with warrants . . . .

The officers told me they had come into the hospital with a shooting victim who was in custody, and as was their custom, they ran the names of the men on the visitors’ list.

This account raises many questions.  Even if police officers had the time and patience to run the names of every patient and visitor in a hospital, it would violate the federal Health Insurance Portability and Accountability Act (HIPAA) for the hospital simply to provide an across-the-board list….

In addition, Lubet contacted a source in the Philadelphia police department and asked if there was any such policy.

When I asked if her account was possible, he said, “No way. There was never any such policy or standard practice.”  In addition, he told me that all of the trauma centers in Philadelphia – where police are most likely to be “waiting around,” as Goffman put it, for prisoners or shooting victims – have always been extremely protective of their patient logs.  He flatly dismissed the idea that such lists ever could have been available upon routine request as Goffman claims.  “That’s outlandish,” he said.

It would also be outlandish for police to beat and kill people without cause but since Goffman’s book has appeared we have plenty of video evidence that the type of actions she claims to have witnessed do in fact happen.

Moreover, HIPAA does not provide privacy against the police. HIPAA was written specifically so that the police can request information from hospitals. Here is the ACLU on HIPAA:

Q: Can the police get my medical information without a warrant?

A: Yes. The HIPAA rules provide a wide variety of circumstances under which medical information can be disclosed for law enforcement-related purposes without explicitly requiring a warrant.[iii] These circumstances include (1) law enforcement requests for information to identify or locate a suspect, fugitive, witness, or missing person (2) instances where there has been a crime committed on the premises of the covered entity, and (3) in a medical emergency in connection with a crime.[iv]

In other words, law enforcement is entitled to your records simply by asserting that you are a suspect or the victim of a crime.

Finally, the records in question in this case were not even patient records but visitor records. Whether or not there is an official policy on what to do while waiting at a hospital for other reasons (say to speak to a suspect) it’s plausible to me that the police in Philadelphia can and do sneak a peek at visitor records when the opportunity arises. It’s certainly the case that people who have warrants against them avoid hospitals and other institutions that keep such records for fear of arrest (and here).

I was confused by Lubet’s other big reveal, “Goffman appears to have participated in a serious felony in the course of her field work – a circumstance that seems to have escaped the notice of her teachers, her mentors, her publishers, her admirers, and even her critics.” But this didn’t escape my notice. How could it? Goffman’s crime is the climax of the book! Lubet is talking about Goffman’s action after her friend, Chuck, is murdered:

…This time, Goffman did not merely take notes – on several nights, she volunteered to do the driving.  Here is how she described it:

We started out around 3:00 a.m., with Mike in the passenger seat, his hand on his Glock as he directed me around the area.  We peered into dark houses and looked at license plates and car models as Mike spoke on the phone with others who had information about [the suspected killer’s] whereabouts.

One night, Mike thought he saw his target:

He tucked his gun in his jeans, got out of the car, and hid in the adjacent alleyway.  I waited in the car with the engine running, ready to speed off as soon as Mike ran back and got inside (p. 262).

Fortunately, Mike decided that he had the wrong man, and nobody was shot that night.

The fact that Goffman had become one of the gang is the point. A demonstration that environment trumps upbringing. She only narrowly escaped becoming trapped by the luck of the victim’s absence. The sociology professor and the thug, entirely different lives, separated by the thinnest of margins.

Nebraska became the 20th state to adopt a law that makes it possible for nurses in a variety of medical fields with most advanced degrees to practice without a doctor’s oversight. Maryland’s governor signed a similar bill into law this month, and eight more states are considering such legislation, according to the American Association of Nurse Practitioners. Now nurses in Nebraska with a master’s degree or better, known as nurse practitioners, no longer have to get a signed agreement from a doctor to be able to do what their state license allows — order and interpret diagnostic tests, prescribe medications and administer treatments.

This is especially important for rural communities.  The economist speaks:

“The doctors are fighting a losing battle,” said Uwe E. Reinhardt, a health economist at Princeton University. “The nurses are like insurgents. They are occasionally beaten back, but they’ll win in the long run. They have economics and common sense on their side.”

The full article, by Sabrina Tavernise, is here.