Month: August 2017

Companies run by lawyers (who’s complacent?)

We looked at about 3,500 CEOs, about 9% of whom have law degrees. They were associated with nearly 2,400 publicly traded firms in the S&P 1500 from 1992 to 2012.


Companies run by lawyers behaved differently in several dimensions related to risk taking than those run by non-lawyers. CEOs with legal training tended to implement more-cautious earnings management policies, especially in industries with high litigation risk, like pharmaceuticals. One measure we used was current accruals, where managers accelerate recognition of revenues and delay recognition of expenses. Lawyers were much less aggressive in accrual accounting relative to industry levels.


We found that lawyer CEOs were not only associated with less litigation but, conditional on experiencing litigation, were also associated with better management of litigation.

That is all from M. Todd Henderson, more at the link.

Monday assorted links

1. Premium mediocrity: “As a result, as another buddy Rob Salkowitz put it in our Facebook discussion, premium mediocrity is creating an aura of exclusivity without actually excluding anyone.”

2. Machine learning and the new physiognomy.  Interesting, and neglected.

3. Uncovering Somalia’s forgotten music from the 1970s.

4. Today the St. Louis minimum wage falls from $10 to $7.70.

5. “But in recent weeks, the monsoon rains have relentlessly pounded this part of Bangladesh.  Rainwater from the Himalayas is travelling down through Nepal’s lower lying areas, through swollen rivers in north-east India and eventually through the floodplains of Bangladesh.  Vast swaths of land across all three countries are under water.”  Link here.  In Bangladesh alone, 7.1 million people are affected.

6. The great Pessoa.

Facts about flood insurance

The National Flood Insurance Program (NFIP) owes $24.6 billion to the Treasury. Most of it covered claims from Hurricane Katrina in 2005, Superstorm Sandy in 2012, and floods in 2016, the program’s third most severe loss-year on record with losses exceeding $4 billion, according to the Federal Emergency Management Agency (FEMA), which manages it.

The NFIP was extended 17 times between 2008 and 2012 and lapsed four times in that period. A 2012 law extended the program to September.

The only source of flood insurance for most Americans, it will be in place for homeowners and businesses in Harvey’s path along the central Texas coast.

But Harvey-related claims covered under the program could push it deeper into the red and possibly toward its borrowing limit of just over $30 billion, said Steve Ellis, vice president of Taxpayers for Common Sense, a nonpartisan budget watchdog in Washington, D.C.

Federal law requires that homes in flood-risk areas have flood insurance before a mortgage can be completed. The program is the only flood insurance available to the vast majority of Americans, although a small market for private flood insurance is sprouting in flood-prone states such as Florida.

Here is the article.  Note the Trump administration previously was pushing a plan to cut the insurance to pay for The Wall.  I do see a case for doing without a federal role for this insurance, but the benefits there come ex ante, not from yanking it away ex post.

Where India Goes

Where India Goes, a book about the problem of open defecation in India, is the best social science book I have read in years. Written by Diane Coffey and Dean Spears, Where India Goes, examines an important issue and it does so with a superb combination of human interest storytelling and top-notch empirical research made accessible.

Drawing on the academic literature, Coffey and Spears show that open defecation sickens and kills children, stunts their growth, and lowers their IQ all of which shows up in reduced productivity and wages in adulthood.

The dangers of open defecation are clear. Moreover, Gandhi said that “Sanitation is more important than independence” and Modi said “toilets before temples,” yet in India some half a billion people still do not use latrines. Why not? Jean Dreze and Amartya Sen (2013), offer a typical explanation:

In 2011 half of all Indian households did not have access to toilets, forcing them to resort to open defecation on a daily basis…

The phrasing presents the problem as a lack of access that forces people to resort to open defecation. From this perspective the solution seems obvious, provide access. After all, if you or I had access to latrines we would use them so if someone else isn’t using latrines it must be because they don’t have access. A bit of thought, however, dispels this notion.

Latrines are not expensive. Many people in countries poorer than India build their own latrines. If access is not the problem then building latrines may not be the solution. Indeed, India’s campaign(s) to build latrines have been far less successful than one might imagine based on the access theory. Quite often latrines are built and not used. Sometimes this is due to poor construction or location but often perfectly serviceable latrines are simply not used as latrines. In fact, surveys indicate that 40 per cent of households that have a working latrine also have at least one person who regularly defecates in the open (Coffey and Spears 2017).

For many people in India, open defecation is preferred to latrine use. The reasons relate to issues of ritual purity and caste. Latrines in or near homes are considered polluting, not in a physical so much as a spiritual or ritual sense. Latrine cleaning is also associated with the Dalit (out)-caste, in itself a polluting category (hence untouchable). That is, the impurity of defecation and caste are mutually reinforcing. As a result, using or, even worse, cleaning latrines is considered a ritual impurity. The problem of open defecation is thus intimately tied up with Hindu notions of purity and caste which many do not want to discuss, let alone condemn.

In the villages the idea of open defecation is also associated with clean air, exercise, and health. Thus, in surveys “both men and women speak openly about the benefits of open defecation and even associate it with health and longevity.” Even many women prefer open defecation if only because it gives them a chance to get out of the house and have some freedom of movement.

Eventually, flush toilets and sewage will eliminate the problem of open defecation, but many people will die before sewage comes to rural India. Building latrines is not enough but is there an opportunity for an Indian entrepreneur? If standardized latrines were bundled with service contracts and provided by professional, uniformed workers who emptied the latrines mechanically (and thus had dignity), demand could well be high. A Walmart for latrine construction and management.

Coffey and Spears, however, offer no silver bullets. Problems brought about by belief and behavior are usually more difficult to solve than material problems. Nevertheless, by demonstrating the importance of the problem and by facing the causes squarely, Coffey and Spears have done India a tremendous service.

Where should you fear private internet censorship the most?

Alex already has covered this topic.  I am less worried than he is, and I’ll go through a list, but first here are a few general remarks.

Most of the ban attempts seem directed at versions of alt right ideas.  Whether you like it or not, those ideas have benefited from the internet perhaps more than any other.  I am seeing a small amount of that gain clawed back, but in a manner consistent with principles of liberty and free association and probably Coasean efficiency as well.  The claim “the tech companies are way more open than the previous mainstream gatekeepers, but they have to spend more customer and employee goodwill to be all the more open yet” has some resonance with me, but I can’t say it is in the top 300 list of demands I wish to place on the world.  It might not be in the top 1000.

It remains the case that the most significant voluntary censorship issues occur every day in mainstream non-internet society, including what gets on TV, which books are promoted by major publishers, who can rent out the best physical venues, and what gets taught at Harvard or for that matter in high school.  In all of these areas, universal intellectual service was never a relevant ideal to begin with, and so it seems odd to me to pick on say Facebook.  It’s still not nearly as important an influence as the above-mentioned parts of non-internet society, nor is it anywhere close to being as discriminatory.

That all said, I am happy when I see people complain about voluntary censorship, even when I disagree with the complaints, or think the complainer is being too pessimistic.  Complaining > complacency.  That said, here is my wee dose of complacency, in the form of a list across various parts of the internet:

1. On-line dating services.  No fears here.  Christian, Jewish, and other dating services are already set up to include some groups and exclude others.  If OK Cupid excludes neo-Nazis, or supposed neo-Nazis, this seems entirely in order.

2. Amazon.  You can order Mein Kampf on Amazon, and few seem to complain about that.  Does it make sense to have a world where Hitler is available but Milo is banned?  Well, a lot doesn’t make sense these days, but still I don’t ever expect that to happen.  There are cultural and also business reasons why universal booksellers will be among the last to embrace voluntary censorship.

Can you order a swastika, of the evil kind, on Amazon?  It seems not.  Presumably that has been the case for a while, it doesn’t bug me, and I wouldn’t mind if Amazon selectively stopped carrying other political symbols as well.  I bet Wal-Mart doesn’t carry them either.

3. Facebook.  Here my worry quotient at least potentially rises, if only because Americans spend so much time on Facebook.  Let’s say Facebook bans some neo-Nazi groups and communications, and then goes too far and keeps off some groups that offer valuable intellectual contributions, even if their quality might be too “high variance.”

Yet here’s the thing: given my mixed feelings toward Facebook, I see this as OK either way.  If Facebook gets better, well, how bad can “better” be?  But say the Facebook censors overreact, some groups are booted off, and Facebook gets worse.  I don’t mind if Facebook gets worse!  People will spend more time doing other things.  And the unjustly banned group still have plenty of other outlets on the web.  We know from history that every medium encourages some kinds of ideas and discourages others (TV for instance seems to let people think crime rates are pretty high, because crimes get covered on the evening news).  Not long ago, there was no Facebook and those unjustly banned groups couldn’t get on the evening news either.  Maybe that was bad, but it was hardly the end of the world, and even with an overly aggressive Facebook censor we are still far closer to a kind of neutrality across ideas than was the case twenty years ago.

4. Google.  In China I found it very easy to switch to Bing, because Bing is a second or so quicker in China (that is using Google through VPN, otherwise you can’t).  Now maybe Bing bans the same web sites.  And maybe the lower-tier search engines are too crummy, or people are simply not used to using them.

On this issue I have modest fears.  Still, what I’ve seen so far is a Google (and Bing) that want to be as universal as possible, and the constraints as coming from the regulators, such as the EU “forgetting” policy.  Google covers so much material, I think of them as not wanting to devote many resources to adjudicating content.  At the very least, they still seem quite willing to take me to Amazon selling Mein Kampf.

I do expect to become more mainstream over time, and indeed it already has.  They are more careful about what pops up on the page.  This too doesn’t bug me, it probably improves average quality, and furthermore it is still a more open forum than is the news on television.

Here you can read a long list of complaints against Google and affiliated services.  Given how much data the company handles, and how many cases arise, I’m amazed they’ve done so well.  Salil Mehta was just restored, by the way.

5. Twitter.  For many people it might be an advantage to be banned from Twitter.  Still, for some views Twitter is an important means of connecting with the audience, Donald Trump being the most prominent example.  So I have a bit of a worry, but I don’t see Twitter as that powerful in the world of ideas.  And overall I have a pretty fluid view of what is likely to matter.  I do not think it is impossible or even implausible that some really important ideas, twenty years from now, are circulated using fanzines, or perhaps something like the old usenet groups.  More generally, our ability as outsiders to judge the health and quality of an intellectual ecosystem just isn’t that great, so maybe we shouldn’t be so judgmental at each step along the way?

6. YouTube (owned by Google).  Due to copyright law, YouTube is already in the business of making plenty of judgments about content and it has the infrastructure to do so.  And unlike Google the search engine, content is posted directly on YouTube itself.  YouTube is a hosting service, not just a search engine, though it is that too.  YouTube search and recommendation algorithms drive a lot of views.  If YouTube won’t host your videos, that is a problem.

But I am not very worried about “YouTube as we know it.”  The forum seems to work quite well (no need to mention Jordan Peterson in the comments, his account was restored).  I am happy that gangs can’t post videos of their killings, and the biggest problem remains government censorship of YouTube.  If you google “banned from YouTube,” I do not see a long list of outrages, that said I would not have banned the Prager University videos.  Whether you like it or not, it is easy to watch Milo on YouTube, even though the publishing world dropped his book like a stone.  The tech companies still seem so much more open than the older media gatekeepers.

Cloudflare, and other internet choke point services: I worry about them a lot.  They can in essence kick you off the entire internet through a single human decision not to offer the right services.  I focus almost all of my worry on them, noting that so far all they have done is kick off one Nazi group.  Still, I think we should reexamine the overall architecture of the internet with this kind of censorship power in mind as a potential problem.  And note this: the main problem with those choke points probably has more to do with national security and the ease of wrecking social coordination, not censorship.  Still, this whole issue should receive much more attention and I certainly would consider serious changes to the status quo.

A bit more

I hope the tech companies do not go further with voluntary censorship, but I don’t think it is obvious that they will.  It seems they felt the need to do something, and now they are hoping the storm will pass.  I do favor vigilance against further overreach, but let’s not overrate the importance of what are so far largely symbolic disputes.

By the way, what’s the deal with the Left favoring net neutrality but wanting all this voluntary internet censorship?

*Love, Africa*

The author is Jeffrey Gettleman, the subtitle is A Memoir of Romance, War, and Survival, and this travel romance of East Africa has taken a beating on Twitter and elsewhere, for its apparently “neo-colonial” approach.  I bought the book, wondering if I might find a contrarian take to offer.  I’ve only browsed it, but here was one random passage I ran across, noting the scene will culminate in the two making out (and perhaps intercourse?):

As my eye traveled across the faces, I kept coming back to the same one.  It belonged to a girl with high cheekbones, wide-set eyes, heavy eyelids and dark hair; her features looked Eurasian, maybe even Eskimo.  She was wearing a red dress that showed off her back; she was lithe and freckly.  As she danced, the blacks of her eyes shone.  There was something in them that I had seen before.  She seemed deeply, freely happy, like those kids on Lake Malawi.  I could tell she really dug dancing.

Now, I am not here to offer him a deserved bad writing award, nor to shame him, but still I consider this data and I am puzzling over what this data means.  In a mere minute of browsing, I found several similar passages, and with a few more minutes they seemed to multiply endlessly.  Nor was it easy to stumble across pages with lots of information about Africa on them.  And yet he is a Pulitzer winner and a foreign correspondent for The New York Times, East Africa Bureau Chief for a decade.

But exactly which views do I need to revise?  The NYT writers and journalists I have met are uniformly impressive.  It is not easy to win a Pulitzer Prize.

Here is a review from Laura Seay, she is harsh but it seems to me probably fair.  Is Derek Parfit right about the self after all?  At the very least, my opinion of the political correctness scolds went up a bit today.  And I once again ask myself whether I should spend more or less time writing negative reviews of books (mostly I don’t, though this week’s reading was pretty meh).

Please advise.

Sunday assorted links

1. Anti-abortion group to buy late-term clinic.

2. A short video on how capital deepening does not always improve productivity.

3. Will all future tennis stars be tall? (NYT)

4. “…but she balks at the idea of Jabba the Hutt getting his own film.”  Here we’re talking high fixed costs, high mark-up…

5. Are aggregate wages sluggish because older, retiring workers are being replaced by the less experienced?  And also from The Economist: Should more orphanages in Rwanda be closed?

6. Drones for shark detection in Australia.

The cost of running Harvard

This is from the 28 August 2017 Bloomberg Businessweek:

Salaries and wages: $1.8 billion

Services purchased (catering, security, etc.): $583 million

Benefits: $530 million, roughly equal to the revenue from graduate programs

Depreciation: $338 million

Real estate (leases, utilities, etc.): $345 million

Other (subcontractors, publishing): $323 million

Supplies and equipment run $257m, scholarships $142m, and interest on the debt $235m, with travel expenses, advertising, and postage at smaller amounts.

Total operating costs are $4.7 billion, with undergraduate tuition covering 6.4 percent of that, graduate tuition covering 11.2 percent.

That is from Kyle Stock, I cannot find it on-line.  (I am a biased source, but do note that the new, gated version of Bloomberg Businessweek is consistently excellent.)  One of the difficulties with scaling up, of course, is that Harvard cannot always so easily scale the quality and resources of its donors.  “Harvard as we know it” may be as large as the current set of donors can support.  And “Harvard as we know it” likes…”Harvard as we know it,” not some other Harvard.

The health care polity that is Texas

The Texas Legislature just enacted landmark health care reforms by opening the state to telemedicine. This success shows that states have great power to improve health care without waiting on Washington. This is especially important as the Affordable Care Act (ACA, or “Obamacare”) grows more unstable and neither party in Congress seems capable of responding.

Telemedicine can improve health and lives—especially in a sprawling state with vast, thinly populated areas. As high-quality video conferencing and remote telemetry become more sophisticated and less expensive, telemedicine offers high-quality care without the need for face-to-face contact in many (not all) situations.

Since an episode of cardiac arrhythmia, I’ve carried a $99 device ( that conducts clinical-quality electrocardiograms, analyzes them, and gives one-touch, low-cost access to professional help. My then-92-year-old mother’s life was probably saved by an iPad FaceTime conversation with her grandson (an M.D.), who sensed the onset of sepsis. Low-cost digital stethoscopes, blood pressure cuffs, and other devices can plug into smartphones or tablets, transmitting information directly to teledoctors.

…Senate Bill 1107 allows patients to receive prescriptions from doctors whom they meet for the first time via electronic means.

Here is more from Robert Graboyes.

Saturday assorted links

1. Smart people usually look smart.

2. 1991 NYT profile of Krugman, Summers, and Sachs.

3. Is Yunnan cuisine about to sweep the U.S.?

4. There is a tendency toward excessive entry in homogeneous product markets (pdf).  If that link doesn’t work for you, google “free entry mankiw whinston.”  And Growth Econ blog on mark-ups.

5. NBA players and start-up equity.  And the network behind Twitter.

6. The cost of fiddling with Shakespeare.

That was then, this is now — churchyard burial edition

Although all church fees were wrong, argued Francis Sadler in a much-reprinted 1738 tract, “selling” one part of the churchyard for three times the price of another “to keep Rich and Poor asunder as if there were a difference in their dust” was especially ridiculous.

Within the courtyard, “the chancel was a better address than the center aisle, which was, in turn, preferred to the side aisles.”  And lead coffins cost ten times more than coffins of wood.

That is from the excellent The Work of the Dead: A Cultural History of Mortal Remains, by Thomas Laqueur.  Here is a truly splendid Marina Warner review of the book.

What I’ve been reading

1. Karl Ove Knausgaard, Autumn.  While this volume of very short essays does reflect a literary sensibility, I didn’t find it fun or insightful to read.  By the way, “Vomit is usually yellowish and can range from pale yellow to yellowish-brown, with certain areas of quite different colours, like red or green.”  So I suppose the Knausgaard canon really is just the first two volumes of My Struggle.

2. Alex Millmow, A History of Australasian Economic Thought.  A very good introduction, New Zealand too.  There is no problem filling a book with substance on this topic, in fact it left me wanting more.

3. Robert B. Ekelund, Jr., John D. Jackson, and Robert D. Tollison, The Economics of American Art: Issues, Artists, and Market Institutions.  A useful overview and survey of the role of economics in the development of art markets in American history.

4. Cynthia Estlund, A New Deal for China’s Workers? The best book I know on labor unions and labor policy in China: “It surprises many Westerners to learn that the labor standards established by Chinese law on the books, apart from actual wage levels, track modern Western (especially European) labor standards rather closely in many respects…Professor Gallagher has described China’s labor standards regime as one of “high standards-low enforcement.””

5. Beowulf, translated by Stephen Mitchell.  I cannot judge veracity, but to read this is in the top tier of Beowulf renderings to date.  The Old English is presented on the opposing page, this book I will keep.

6. Orhan Pamuk, The Red-Haired Woman.  Eh. Contrived.

Arrived in my pile are:

Robert Wuthnow, American Misfits and the Making of Middle Class Respectability.

Jean Tirole, Economics for the Common Good, with nary an equation in sight.

Friday assorted links

1.  CFOs don’t do well on a test of financial literacy.

2. More on why Haiti is so poor.

3. After 20 years and $4 billion, the new Tappan Zee Bridge is to open (NYT), first major bridge in the NYC area since 1964 (!).

4. Iceland will transport hamburger and beer by drones.  And German autonomous vehicles: “The software may not decide on its course of action based on the age, sex or physical condition of any people involved.

5. A London family is offering their future nanny $129,000 and access to a Maserati.

6. A revelation about ancient Babylonian maths.

7. My WSJ podcast on The Complacent Class.

We should do more to privatize bus systems

Local governments spend roughly $1.6 trillion per year to provide a variety of public services ranging from police and fire protection to public schools and public transit. However, we know little about public sector’s productivity in delivering key services. Public bus service represents a standardized output for benchmarking the cost of local government service provision. Among the top twenty largest cities, there exists significant dispersion in the operating cost per bus mile with the highest being more than three times as high as the lowest. Using a regression discontinuity design, we estimate the cost savings from privatization and explore the political economy of why privatization rates are lower in high cost unionized areas. Our analysis suggests that fully privatizing all bus transit would generate cost savings of approximately $5.7 billion, or 30% of total U.S. bus transit operating expenses. The corresponding increased use of public transit from this cost reduction would lead to a gain in social welfare of $524 million, at minimum, and at least 26,000 additional transit jobs.

That is from Rhiannon Jerch, Matthew E. Kahn, and Shanjun Li, forthcoming in the Journal of Public Economics.