Law

Donald Trump created quite the stir a few days ago when he suggested that the forthcoming Presidential election was going to be “rigged.”  I’m not sure what exactly he meant by that, or even if it’s worth debating, but I did see my Tweeter feed respond with real furor.  This will undercut faith in democracy I read, and thus the media needs to call him out on it.  Yet over the last few years or indeed decades I also have seen the following:

1. Numerous arguments insist that money buys elections and campaign finance reform is imperative.  That’s not exactly my view, with Trump himself now being Exhibit A on the other side of the issue, but please try to be consistent.  A lot of you believe that elections are (were?) rigged!  (Hey, psst…when can we go back to them being rigged againAsking for a friend!)

2. Numerous arguments that Republican-backed voter registration requirements are keeping significant numbers of voters, most of all minority voters, away from the polls.  That wouldn’t quite count as “rigging,” because the outcome still is not preordained, but it would be a form of slanting.

3. Not long ago, the conventional wisdom was that the race would be Clinton (Hillary) vs. Bush (Jeb).  Fortunately, that is not rigging, rather we call it “spontaneous order.”  Besides, it didn’t happen.  We ended up with Clinton vs…Tormentor of Bush.

4. Do we not all teach the Gibbard-Sattherthwaite theorem to our Principles classes on week three?  In case you forget, the theorem shows that under some fairly general assumptions elections processes are manipulable in a rigorous sense which is defined in social choice theory.  You can think of this as a corollary of the Arrow Impossibility Theorem, actually.

People, I am so glad we don’t teach our students that elections are rigged, it is so much more important to teach that they are “manipulable” in the precise sense defined by social choice theory.  Sadly, Mr. Trump failed that part of the course, because the silly boy wrote down the word “rigged” instead and botched the whole answer, heal so messed up the distinction between inter- and intra-profile versions of the theorem.

5. A related branch of social choice theory, stemming from Dick McKelvey’s work in 1979, suggests that when the policy space has more than one dimension, the agenda setter in Congress has a great deal of power and typically can shape the final outcome.  True, that is Congress rather than a general democratic election.  By the way, how many dimensions does the policy space have these days?  If you’re not sure, that means the answer is “more than one.”  Good thing that only “Congress keystone of the Washington establishment” is rigged!

6. Major political scientists from schools such as Princeton tell us that elites determine policy and ordinary voters have very little say in what happens.  Don’t know if he used “the r word” or not!  (By the way, I agree with the critique of Dylan Matthews.)

7. The American electoral system is designed to give the two major parties a huge initial advantage.  I’m not suggesting that the public is actually itching to elect Jill Stein, but it would shape final outcomes a good deal, for better or worse, if the electoral playing field were more even in this regard.

Personally, I think median voters more or less get what they want on a large number of issues, especially broad-based ones in the public eye.  You won’t find the word “rigged” popping up too much in the MR search function, besides I started blogging (and breathing) after Kennedy vs. Nixon.  But my goodness, I can in fact understand why Donald Trump thinks the system is rigged.  For years, you have been telling him that it is.

p.s. I don’t in fact teach the Gibbard-Sattherthwaite theorem in Principles and you won’t find it in the world’s very best Principles textbook.  That we rigged.

Addendum: How many Democrats have alleged that the 2000 Presidential election was rigged?  Or that today most Americans want some form of tougher gun control, but that the system is rigged against that outcome happening?

I would stress that it is the very long run results that matter, once all lock-in and morale effects are gone or redrawn and the eventually-old legislated minimum wage is simply a relative price like any other.  But what about the short run?  Timothy Taylor has a good survey of a recent study (pdf), and here is his concluding paragraph:

I’m willing to let the evidence tell me the story, and on many economic issues, it takes time for the evidence to accumulate. As more cities raise minimum wage, the picture will clarify. But the early evidence from Seattle is that a higher minimum wage at the city level doesn’t raise total earnings by much, because low-skilled workers end up with fewer hours on the job.

There are many other points at the link.

Welcome to public housing in Puerto Rico, a realm of high intentions and low outcomes. The island has America’s second-largest public housing system, after New York’s. Roughly 125,000 people inhabit 54,000 apartments, paying rent according to a federal formula: Rent, plus utilities, must be no more than 30 percent of a household’s adjusted income.

Paychecks here are small, and the tenants’ rents are never enough to cover the system’s costs. So Washington subsidizes the rest, currently to the tune of $254 million a year.

It isn’t the housing that’s making Ms. Ramos want to leave. It’s the crime and a culture of cheating.

“Negative rent!” she exclaims. “It doesn’t exist in other parts of the world, but in Puerto Rico, sí!”

Public housing experts say “negative rent” is theoretically possible; Ms. Ramos says she sees it all around her. She pays to live in the projects, but other people have found ways to be paid.

That is from Mary Williams Walsh at the NYT.  And here is some more detail on negative rent:

Federal Housing and Urban Development records say that 36 percent of the families in Puerto Rico’s housing projects have incomes of zero. By law, tenants with no income must pay $25 a month. This turns into “negative rent” when their electric bills are factored in.

That’s because Washington gives public housing tenants a “utility allowance,” which is normally deducted from their rent. But if someone is paying just $25 a month, for example, and gets a utility allowance of $65 a month, they’ll end up with a “negative rent” of $40. It’s paid in cash.

Some people pocket the money and stiff the Electric Power Authority, a government monopoly with a bad track record for bill collections. The Power Authority is responsible for $9 billion of the government’s $72 billion debt. It could use the money.

Ms. Ramos suspects that if rates go up, Washington will send bigger utility allowances — and people living on “negative rent” will get more money.

Solve for the equilibrium, as they say…

The Right to Try

by on August 7, 2016 at 7:36 am in Economics, Law, Medicine | Permalink

Right to Try legislation permits patients fighting a terminal illness to get access to not-yet-FDA-approved drugs. Thirty-one states have passed Right to Try legislation with massive shows of support but so far these laws are untested by the courts so it’s not clear whether they are anything but expressive. The massive support for Right to Try laws, however, suggests that there is demand for a better FDA as Bartley Madden writes:

Freedom is a powerful rallying call and 31 states have now passed Right To Try legislation with sky-high approval ratings by citizens.

…[But] the states do not have the legal authority to circumvent the FDA. Moreover, drug developers have a major disincentive to participate because, to survive, drug developers need to secure FDA approvals for their new drugs. And circumventing the FDA by providing not-yet-approved drugs to terminally-ill patients could easily slow or prevent FDA approvals.

…A better solution is Free To Choose Medicine (FTCM). It would solve the dilemma facing politicians who are pulled in one direction by citizens’ demands for more freedom and in the opposite direction by FDA proponents with demands for a highly-controlled process. A clear, brief explanation of FTCM is available on the Internet in the PowerPoint presentation, “Free To Choose Medicine and Right To Try.” It explains how we will all benefit from more freedom of choice.

First, the Free To Choose track (separate from the FDA’s conventional clinical testing track) enables patients and their doctors to make informed decisions about the use of FDA-approved drugs or not-yet-FDA-approved drugs. Patients, under the guidance of their doctors, would learn about initial safety results and up-to-date treatment results of FTCM drugs. FTCM drugs for a wide range of illnesses (not just terminal illnesses addressed by Right To Try) would be available up to seven years before conventional FDA approval.

Second, FTCM legislation would provide for government oversight of an open-access, Internet-accessible database. It provides up-to-date information for patients and doctors about a FTCM’s drug’s potential benefits and risks before they choose to use it. This is a self-adjusting system wherein more patients use FTCM drugs that work well and vice versa.

The open-access database would contain treatment results of FTCM patients including their genetic makeup and relevant biomarkers. This database (not part of Right To Try legislation) would reveal subpopulations of patients who do extremely well or poorly with the new drug. Pinpointing such groups of patients is a huge benefit to, not only patients, but to biopharmaceutical researchers working on new breakthroughs in medicine.

Third, FTCM federal legislation needs to provide a new type of drug approval – Observational Approval – based on treatment results for real-world patients who receive the FTCM drugs. This would motivate drug developers to participate as well as expedite insurance reimbursement for patients.

Naturally, I agree with Bart on the need for FDA reform.

…there were at least two instances in which top officials tried to slow, or undermine, the president’s nuclear authority.

The first came in October 1969, when the president ordered Melvin R. Laird, his secretary of defense, to put American nuclear forces on high alert to scare Moscow into thinking the United States might use nuclear arms against the North Vietnamese.

Scott D. Sagan, a nuclear expert at Stanford University and the author of “The Limits of Safety,” a study of nuclear accidents, said Mr. Laird tried to ignore the order by giving excuses about exercises and readiness, hoping that the president who sometimes embraced the “madman theory” — let the world think that you are willing to use a weapon — would forget about his order.

But Nixon persisted. Dr. Sagan reports that during the operation, code-named Giant Lance, one of the B-52 bombers carrying thermonuclear arms came dangerously close to having an accident.

Then, in 1974, in the last days of the Watergate scandal, Mr. Nixon was drinking heavily and his aides saw what they feared was a growing emotional instability. His new secretary of defense, James R. Schlesinger, himself a hawkish Cold Warrior, instructed the military to divert any emergency orders — especially one involving nuclear weapons — to him or the secretary of state, Henry A. Kissinger.

It was a completely extralegal order, perhaps mutinous. But no one questioned it.

That is from William Broad and David Sanger at the NYT.

Addendum: Here is a 2008 Alex post on the same.

Richard “Scott” Silverthorne, the mayor of the City of Fairfax, has been arrested after he allegedly gave methamphetamine to an undercover detective in exchange for a sexual encounter, Fairfax County police say.

Story here.  It is nonetheless a wonderful place to work and live!

For the pointer I thank Yana and Scott.

Copyright Protectionism

by on August 5, 2016 at 7:26 am in Economics, Law | Permalink

ChairThe argument that copyright encourages innovation is simply a pretense for protectionism. Some protection for intellectual property probably does encourage innovation, as the “Tabarrok Curve” illustrates, but the pretense becomes clear when we see copyright repeatedly extended for works already in existence. Walt Disney was long-dead when his copyright to Mickey Mouse was extended. Rumors to the contrary, Walt ain’t coming back no matter how much we incentivize him with a longer copyright.

The latest case in point is last week’s extension of copyright in the European Union for design:

Mid-century design classics, such as Charles Eames chairs, Eileen Gray tables and Arco lamps are set to rocket in price, following EU regulations which came into force this week that extend the copyright on furniture from 25 years to 70 years after the death of a designer.

…Companies can currently sell replica goods providing 25 years has passed from the date the designer died, but the EU ruling – speeded up by the British government – has extended that period to 70 years. Eames died in 1978, so the new protection extends the copyright of the many chairs, tables and clocks he designed until 2048. For items designed jointly with his wife, Ray, the copyright would extend for a further 10 years, as she died in 1988.

Dead people tend not to be very creative so I suspect that the retroactive extension of copyright will not spur much innovation from Eames. The point, of course, is not to spur creativity but to protect the rents of the handful of people whose past designs turned out to have lasting value.

Retroactive extensions of copyright throw the entire reasoning behind copyright into reverse. The incentive argument for copyright would have to run, We don’t have enough designs so we should increase the incentive to produce more. The actual argument for copyright runs–We have lots of popular designs and we need to keep selling them at a high price.

Moreover, if this nonsense were not enough, how is this for a kicker:

Companies which publish design books may have to get numerous licences to reproduce photos because designs have come under copyright.

Hat tip: The excellent Mark Thorson.

Here is my latest Bloomberg column, based on the research of Kenneth R. Ahern at USC.  Here is to me the most interesting bit:

Some aspects come pretty close to what we see in the movies. The average insider trader is 43 years old, and nine out of 10 are male. The practice also seems correlated with some features of recklessness: Insider traders are younger than their associates, less likely to own real estate, and have fewer family members on average. More than half have criminal records, with almost all charges stemming from traffic violations.

To my eye, the most striking data involve personal connections: Insider traders appear to be pretty careful in choosing their accomplices. Of the known pairs of people who provide and act upon private information (“tipper and tippee”), 64 percent met before college, and 16 percent met in college or graduate school. Another 23 percent are family relations — more siblings and parents than aunts and uncles, despite the added capital that the latter might have provided. Tips are also commonly shared among people with ethnically similar surnames: Of 24 tips coming from people with Celtic surnames, for example, 14 went to individuals who also had Celtic surnames.

The choice of accomplices demonstrates how hard it is to trust people you haven’t known very long, especially if you’re not all that trustworthy yourself. It also implies that modern corporations are, in some ways, more honest places than one might think. Not that people are always so law-abiding; rather, many workplace relationships may be too superficial and too transient to develop the trust and cooperation typically required for villainy and law-breaking.

Do read the whole thing, there is much more at the link, including information on the size of profits earned, and how much the practice is addictive.

Tokyo, Japan’s capital city, has a growing population of over 13 million people but house prices have hardly increased in twenty years. Why? Tokyo has a laissez-faire approach to land use that allows lots of building subject to only a few general regulations set nationally. Robin Harding at the FT has a very important piece on the Tokyo system:

tokyoHere is a startling fact: in 2014 there were 142,417 housing starts in the city of Tokyo (population 13.3m, no empty land), more than the 83,657 housing permits issued in the state of California (population 38.7m), or the 137,010 houses started in the entire country of England (population 54.3m).

Tokyo’s steady construction is linked to a still more startling fact. In contrast to the enormous house price booms that have distorted western cities — setting young against old, redistributing wealth to the already wealthy, and denying others the chance to move to where the good jobs are — the cost of property in Japan’s capital has hardly budged.

This is not the result of a falling population. Japan has experienced the same “return to the city” wave as other nations.

How is this possible? First Japan has a history of strong property rights in land:

Subject to the zoning rules, the rights of landowners are strong. In fact, Japan’s constitution declares that “the right to own or to hold property is inviolable”. A private developer cannot make you sell land; a local government cannot stop you using it. If you want to build a mock-Gothic castle faced in pink seashells, that is your business.

But this alone cannot explain everything because there was a huge property price-boom in Japan circa 1986 to 1991. In fact, it was in dealing with the collapse of that boom that Japan cleaned up its system, reducing regulation and speeding the permit approval process.

tokyo-japan

…in the 1990s, the government relaxed development rules, culminating in the Urban Renaissance Law of 2002, which made it easier to rezone land. Office sites were repurposed for new housing. “To help the economy recover from the bubble, the country eased regulation on urban development,” says Ichikawa. “If it hadn’t been for the bubble, Tokyo would be in the same situation as London or San Francisco.”

Hallways and public areas were excluded from the calculated size of apartment buildings, letting them grow much higher within existing zoning, while a proposal now under debate would allow owners to rebuild bigger if they knock down blocks built to old earthquake standards.

Rising housing prices are not an inevitable consequence of growth and fixed land supply–high and rising housing prices are the result of policy choices to restrict land development.

The policy choices were made–they can be unmade.

The paper title is “Strip Clubs, ‘Secondary Effects’, and Residential Property Prices,” and the authors are Taggart J. Brooks, brad R. Humphries, and Adam Nowak, here is the abstract maybe strip clubs are more popular than I thought:

The ‘secondary effects’ legal doctrine allows municipalities to zone, or otherwise regulate, sexually oriented businesses. Negative ‘secondary effects’ (economic externalities) justify limiting First Amendment protection of speech conducted inside strip clubs. One example of a secondary effect, cited in no fewer than four United States Supreme Court rulings, is the negative effect of strip clubs on the quality of the surrounding neighborhood. Little empirical evidence that strip clubs do, in fact, have a negative effect on the surrounding neighborhood exists. To the extent that changes in neighborhood quality are reflected by changes in property prices, property prices should decrease when a strip club opens up nearby. We estimate an augmented repeat sales regression model of housing prices to estimate the effect of strip clubs on nearby residential property prices. Using real estate transactions from King County, Washington, we test the hypothesis that strip clubs have a negative effect on surrounding residential property prices. We exploit the unique and unexpected termination of a 17 year moratorium on new strip club openings in order to generate exogenous variation in the operation of strip clubs. We find no statistical evidence that strip clubs have ‘secondary effects’ on nearby residential property prices.

Is this evidence for or against “the death of distance”?

For the pointer I thank the excellent Kevin Lewis.

Statement: I think it is more than appropriate and indeed imperative to raise and indeed investigate questions about the suspicious ties between the Trump candidacy and Putin’s Russia.

Question: Given what is now an extensive and proven history of Communist spies in the United States government from 1933 to 1945, was it also appropriate for Joseph McCarthy to raise such questions about (lower-level) political officers in his day?  If you insinuate or make the charge outright that Trump and/or staff might be Russian agents on the basis of incomplete evidence, not yet demonstrated in a court of law, shall we downgrade you or upgrade McCarthy?  Or both?

Statement: I think it is more than appropriate to raise questions about whether Trump’s rather cavalier attitude toward the U.S. Constitution disqualifies him from the Presidency on those grounds alone.  I consider myself a fairly strict Constitutionalist, most of all for the Bill of Rights.

Question: Do you feel the same way about FDR’s court-packing scheme and internment of Japanese-Americans?  Were the Democratic Congressmen — wasn’t that just about all of them? — who stood with FDR on the latter issue better or worse than Paul Ryan for standing with Trump today?  If FDR had offsetting virtues as President, because he did in fact “get a lot done,” and you in general support him for that, are Trump supporters allowed to have a similar belief today about their candidate, viewing him in the lineage of FDR?  On the basis of this one FDR data point, is it possible that presidential achievement is positively correlated with presidential oppression?  Or is that sheer coincidence and all Trump supporters ought to believe as such?

Question: To paraphrase Bill Easterly, if you agree that defeating Trump is a national emergency, do you also think the Democrats should be compromising more on actual policies?  Raise your left hand if you have come out and said this.  See in addition Ross Douthat’s column.

Statement: During the 1930s, a large number of New Deal Democrats admired the fascism of Mussolini’s Italy, and less commonly but still sometimes Hitler’s Germany in its earlier years.

Question: Does this history cause you to have a more positive view of Trump and his supporters?  Or do you instead significantly downgrade your sympathy for the Democrats of the New Deal era, now that you have lived through the Trump phenomenon?  Does the Trump phenomenon now seem to you more in accord with traditional and historic American values?  (I haven’t even mentioned slavery or race until now, nor Nagasaki nor Native Americans.  And oh — did I mention that the New Deal coalition signed off on a lot of bigotry and segregation to keep the party together and get the core agenda through?  Or how about the forcible repatriation of perhaps up to 2 million Mexicans, without due process of law, and many being American citizens, during the 1930s?)

Final question(s): Would American history have taken a better or worse course if none of our Presidents had had significant authoritarian tendencies?  Or do you insist that is the wrong question to ask, instead preferring to stress the issue of “our authoritarians” vs. “their authoritarians” and stressing the relative virtues of the former and the evils of the latter?  And if that is indeed the case, do you now understand why Trump has come as far as he has?

File under: Nothing New Under the Sun, That was Then This is Now, Authoritarianism for Me but Not For Thee, Why We Can’t Have The Good Things in Life, Asking for a Friend, other.

The first home pregnancy tests were controversial because it was believed that women could not be trusted to do the tests correctly or to use the results appropriately:

NYTimes: When a mail-order New York firm tried to sell Organon test kits to American consumers in 1971, it faced opposition from the United States Public Health Service. In 1973, a New Jersey drugstore bought kits made by the drug company Roche and offered fast and private tests to their customers, and though the technology was similar to that available in medical clinics, the state medical examiner questioned the legality of the service.

Why so much opposition? Some regulators worried that “frightened 13-year-olds” would be the main users of the test kits. But after the product did become available in the United States in 1977, it appealed instead to college-age and married women — many of whom desperately hoped for children.

Even so, the Texas Medical Association warned that women who used a home test might neglect prenatal care. An article in this newspaper in 1978 quoted a doctor who said customers “have a hard time following even relatively simple instructions,” and questioned their ability to accurately administer home tests. The next year, an article in The Indiana Evening Gazette in Pennsylvania made almost the same claim: Women use the products “in a state of emotional anxiety” that prevents them from following “the simplest instructions.”

The tale of the home pregnancy test is not unique. Breakthroughs that give patients control over their bodies are often resisted. Again and again, the same questions come up: Are patients smart enough? Can they handle bad news? And do they have the right to private information about their bodies?

I wrote about these issues in Our DNA, Our Selves which discussed the FDA’s unconstitutional over-regulation of DNA tests. The legal questions in that case are yet to be fully resolved but the technology is pushing towards the freedom to know our own bodies.

…anyone with a grandparent born in Ireland is entitled to claim Irish citizenship, and the numbers entitled to that status in Britain may exceed the entire population of Ireland.

Here is the story, via @eurocrat.

Inside, two stocky men could be heard debating the merits of the different ambassadorships they hoped to earn under Mrs. Clinton. Even a low-ranking posting meant having “ambassador” on a child’s wedding invitation, the two agreed, and would be helpful in wrangling invitations to sit on corporate boards.

Here is the full NYT story, by Nick Confessore, and no I am not suggesting this is worse under one party than another.  That is via Mark Leibovitz and Henry Farrell.

Land use regulations raise prices, reduce mobility and increase income inequality in the United States. In many parts of the developing world, however, the situation is worse, much worse.

In an excellent piece Shanu Athiparambath writes:

Land is not scarce in Delhi, as I learned in one of those days, when a friend drove me around the city. There is enough land for everybody to live in a mansion. Delhi has nearly 20,000 parks and gardens. Large tracts of land remain idle or underutilized, either because the government owns it, or because property titles are weak. Politicians and senior bureaucrats live in mansions with vast, manicured lawns in the core of the city. Some of these political eminentoes farm on valuable urban land while firms and households move to the periphery or satellite cities where real estate prices are lower. So the average commute is long, roads are too congested, and Delhi is one of the most polluted cities in the world.

Zoning regulations inflict great harm. But it is difficult for Americans to imagine the cost of zoning in Indian cities. Delhi is one of the most crowded cities in the world, and there is great demand for floor space. But real estate developers are not allowed to build tall buildings. In Delhi, for apartment buildings, the regulated Floor Area Ratio (FAR) is usually 2. FAR, an urban planning concept, is the ratio of built-out floor space to the area of the plot.

This means, in Delhi, developers are not allowed to build more than 2,000 square feet of floor space on a 1,000 square feet plot. If a building stands on the whole plot, this would be a two-storey building.

To understand the harm this inflicts on the world’s second-most populous city, remember that in Midtown Manhattan, FAR can go up to 15. In Los Angeles, it can get as high as 13, and in Chicago, up to 12. In Hong Kong’s downtown, the highest FAR is 12, in Bahrain it is 17, and in Singapore it can get as high as 25. Not surprisingly, office space in Delhi’s downtown is among the most expensive in the world. It is impossible to profitably redevelop these crumbling buildings in Delhi’s downtown because they are under rent control.

You might expect the capital city to be especially restrictive, just as is Washington, DC, but in Mumbai, the densest major city in the world, the downtown FAR is an absurdly low 1.33.

Think about it like this: A FAR is like a tax on manufacturing land. Why would you impose prohibitive taxes in places where land is most desperately needed?