Month: March 2019

Facebook and the new privacy revolution

It seems to me that the new, pending reconfiguration of Facebook will bring much more user privacy, most significantly from the forthcoming integration of all of the Facebook messenging services.  More concretely, WhatsApp is way better than Facebook Messenger as it stands, so why not make Messenger more like WhatsApp?

In some ways this will mean considerable sacrifice for the company.  Facebook has been pushing through this plan for general, end-to-end encryption, even though one of the top product people at the company just resigned for exactly this reason, a very real loss to the building process.

There are inevitable trade-offs between “ability to control messages,” and “promoting user privacy.”  In the longer run I think company control of messages does not face objective standards that can command social consensus, or for that matter survive competition from less salubrious and less mainstream alternatives.  I fear also that company control of messages will evolve all too suddenly into government control, First Amendment or not.  Even with a non-activist government, a large and publicly visible company cannot help but look over its shoulder, and consider the possible regulatory or antitrust reaction from the government, when making post/not post decisions.

General encryption and thus user privacy is the right way to go.  Of course there will be public relations bumps along the way, and probably today we are seeing one of them, namely the personnel shifts.  Facebook and Mark Zuckerberg are currently in a kind of PR trap where any decision, any announcement, can and will be taken the wrong way and as a sign that some value or another simply isn’t being served the proper way.  We all know that negative news typically has more clicks and longer legs than positive news.  But if you’ve been talking about user privacy, I think this is a decision you have to favor.

You can debate whether there should be one, two, or three cheers here, but the actual reality is we are taking some pretty big steps toward truly private internet social media.

Thursday assorted links

1. East Germans cheat more.

2. The most influential academic books of the last twenty years?  Source here.

3. Claims about religion and liberalism in India.

4. How to infer when an intervention mattered, or not.

5. “The episode rattled New Zealand, which Mr. Huggins described as “a very close-knit community and a very open society.”” (NYT)

6. Did many more people die from Chernobyl than we had thought?

How Much Time Do Criminals Really Serve?

Many people were surprised at Paul Manafort’s relatively light sentencing for bank fraud, filing fake tax returns, and failure to report foreign assets and compared his sentence of 47 months to other cases of seemingly lesser crimes given longer prison terms. A viral tweet thread from public defender Scott Hechinger began:

For context on Manafort’s 47 months in prison, my client yesterday was offered 36-72 months in prison for stealing $100 worth of quarters from a residential laundry room.

Anecdotes, however, run the risk of misleading if they are not representative. The Bureau of Justice Statistics just released Time Served in State Prison 2016. Stealing laundry quarters sounds like larceny (no break in). The average time served for larceny was 17 months and the median time served was 11 months.

Hechinger also notes this outrageous case:

15 years in prison for drug possession. You shouldn’t need more info than that to be outraged. But then learn: Juanita is a mother of 6. Her 18 year old is now head of household. Raising 5 kids. Crime is not even a felony in Oklahoma anymore.

The average time served for drug possession was 15 months and the median time 10 months. Arguably too long but a far cry from 15 years.

For a serious violent crime like robbery, taking property by force or threat of force, the average time served was considerably higher, 4.7 years and the median time served 3.2 years.

You can see the table below for more data. Judge for yourselves, but for most crimes mean and median time served don’t seem to me to be obviously too high. Moreover, keep in mind that most crimes do not result in an arrest let alone a conviction or time served.

In 2017, for example, victims reported 2,000,990 serious violent crimes (rape or sexual assault, robbery, and aggravated assault). In the same year there were approximately 446,510 arrests for these crimes (crime definitions may not line up exactly). In other words, the chance of being arrested for a serious violent crime was only 22%. Data on convictions are harder to obtain but convictions are far fewer than arrests. In 2006 (most up-to-date data I could find but surely lower today) there were 175,500 convictions for serious violent crimes. Thus, considerably fewer than 10% of violent crimes result in a conviction (175,500/2,000,990=8.7%).

Put differently, the expected time served for a serious violent crime is less than 5 months*. Do you want to reduce expected time served? What I would like to do is put more police on the street to increase the certainty of arrest and conviction. If we double the conviction rate, I’d happily halve time served.

I support decriminalization of many crimes, shorter sentences for some crimes and fewer scarlet letter punishments. I want to reduce bias and variability in the criminal justice system. But I do not want to return to the crime rates of the past. Even as crime rates fall, we should be careful about declaring the war won and going home. We are under policed in the United States and despite anecdotes that rightly shock the conscience, average time served is not that high, especially given very low arrest and conviction rates.

* Using the normalized percent of total releases for rape, robbery and assault to form the weighted average. Corrected from an early version that said 14 months.

Do female board members matter?

Maybe less than you might think, at least once you adjust for geographic distance:

Recent literature has shown that gender diversity in the boardroom seems to influence key monitoring decisions of boards. In this paper, we examine whether the observed relation between gender diversity and board decisions is due to a confounding factor, namely, directors’ geographic distance from headquarters. Using data on residential addresses for over 4,000 directors of S&P 1500 firms, we document that female directors cluster in large metropolitan areas and tend to live much farther away from headquarters compared to their male counterparts. We also reexamine prior findings in the literature on how boardroom gender diversity affects key board decisions. We use data on direct airline flights between U.S. locations to carry out an instrumental variables approach that exploits plausibly exogenous variation in both gender diversity and geographic distance. The results show that the effects of boardroom gender diversity on CEO compensation and CEO dismissal decisions found in the prior literature largely disappear when we account for geographic distance. Overall, our results support the view that gender-diverse boards are “tougher monitors” not because of gender differences per se, but rather because they are more geographically remote from headquarters and hence more reliant on hard information such as stock prices. The findings thus suggest that board gender policies, such as quotas, could have unintended consequences for some firms.

Here is the paper by Zinat S. Alam, Mark A. Chen, Conrad S. Ciccotello, and Harley E. Ryan.  Via the excellent Kevin Lewis.

Does a Carbon Tax Reduce CO 2 Emissions? Evidence From British Columbia

From Felix Pretis:

Using difference-in-differences and a novel break-detection approach I show that the introduction of a carbon tax has not ‘yet’ led to a significant reduction in aggregate CO2 emissions in British Columbia, Canada. Despite the lack of detectable aggregate effect, there are heterogeneous emission reductions across sectors: the tax led to a reduction in emissions from transportation incl. personal vehicles (-5%), buildings (-5%), waste processing (-3%), and light manufacturing, construction and forestry (-11%). Introducing a new method to assess policy based on breaks in difference-in-differences fixed effect panel models, I demonstrate that neither the carbon tax, nor the carbon price and emissions trading schemes introduced in other Canadian provinces are detected as significant interventions in aggregate emissions. The absence of significant aggregate reductions in emissions is consistent with existing evidence that current carbon taxes (and prices) are too low to be effective.

Since current carbon taxes are already not so popular, I don’t take this as especially good news.  For the pointer I thank Warren Smith.

My Conversation with Raghuram Rajan

Here is the transcript and audio, we covered so much, here is the CWT summary:

How much has the U.S. actually fixed the financial system? Does India have the best food in the world? Why does China struggle to maintain a strong relationship with allies? Why are people trading close-knit communities for isolating cities? And what types of institutions are we missing in our social structure? Listen to Rajan’s thorough conversation with Tyler to dive into these questions and much more.

Here is one excerpt:

COWEN: A lot of observers have suggested to me that the notion of a kind of Anglo-American liberalism as ascendant in India is now a dead idea, that ideologically, India has somehow shifted, and the main currents of thought, including on the so-called right, are just really not liberalism anymore. Do you have a take on that view?

RAJAN: I’m not sure I would agree. I would say that we’ve had a government over the last five years which has elements of the majoritarian, Hindu nationalist group in it. But I would argue the country, as a whole, is still firmly secular, liberal in the Nehruvian idea, which is that we need a country which is open to different religions, to different ethnicities, to different beliefs if we are to stay together.

And democracy plays an important role here because it allows some of the pressures which build up in each community to essentially get expressed and therefore diffuses some of the pressure. So I think India’s ideal is still a polyglot coming together in this country.

COWEN: But someone like Ramachandra Guha — what he symbolizes intellectually — do you think that would be a growing part of India’s future? Or that will dwindle as colonial ties become smaller, the United States less important in global affairs?

RAJAN: I think that an open, liberal, tolerant country is really what we need for the next stage of growth. We are now reaching middle income. We could go a little faster. We should go a little faster there.

Once we reach middle income, to grow further, I think we need an intellectual openness, which only the kind of democracy we have — the open dialogue, a respectful dialogue — will generate the kinds of innovative forces that will take us more to the frontier.

So I keep saying, and I say this in the book, we’re very well positioned for the next stage of growth, from middle to high income. But we first have to reach middle income.

And:

COWEN: Will current payments companies end up as competitors to banks or complements to the banking system? Or are they free riders on the banking system?

RAJAN: I think they’re trying to figure out their space. As of now, sometimes they’re substituting for . . . Certainly, my daughter uses her payment system completely separate from her bank account. But longer term, we’ll find ways of meshing these in and reduce the costs of making payments. Those costs are really too high at this point, and reducing those costs makes a lot of sense.

COWEN: Will banks ever be truly excellent at doing software?

RAJAN: I think we will have a combination of the guys who are truly good at software — the fintech companies — merging with banks who know how to do the financial side. They’ll bring each of their talents together. I’ve seen a lot of fintech people who have no clue as to what finance is really about. And I’ve seen a lot of banks who have no clue as to what tech is about. I think some merger will happen over time.

There is much more at the link.  And here is Raghu’s new book The Third Pillar: How Markets and the State Leave Community Behind.

The Daily Beast Hit Piece on Amazon

The Daily Beast hit piece on Amazon, ‘Colony of Hell’: 911 Calls From Inside Amazon Warehouses, insinuates (while denying that this is what they are doing) that Amazon warehouses are an unsafe space that generates mental health problems. The upshot is this:

Between October 2013 and October 2018, emergency workers were summoned to Amazon warehouses at least 189 times for suicide attempts, suicidal thoughts, and other mental-health episodes, according to 911 call logs, ambulance and police reports reviewed and analyzed by The Daily Beast.

The reports came from 46 warehouses in 17 states—roughly a quarter of the sorting and fulfillment centers that comprise the company’s U.S. network. Jurisdictions for other Amazon warehouses either did not have any suicide reports or declined requests for similar logs.

So how many employees does this cover? No answer. Note also the weasel words, jurisdictions which “did not have any suicide reports or declined requests” are not included. So that could mean that a majority of fulfillment centers reported no serious mental health problems. Basically the report is devoid of useful information.

As far as I can tell from the report, there were no actual suicides at Amazon warehouses during this time period. Nevertheless, let’s try to do some back of the envelope calculations. Amazon has about 125,000 full time workers in its fulfillment centers but in a typical year they will double that during holiday season so say 250,000 employees in a year. The US suicide rate for working age adults is 17.3 per 100,000 so over five years we would expect 216 suicides and many more “suicide attempts, suicidal thoughts, and other mental-health episodes”. Indeed, the National Institute for Mental Health reports that 0.5% of Americans aged 18 years or over attempted suicide in 2016 so we would expect 6,250 suicide attempts in a population of Amazon-sized workers (250000*.005*5=6,250). Of course, the Daily Beast’s numbers don’t cover all fulfillment centers, most suicides wouldn’t occur at work and there are a variety of other issues so cut these numbers down as you see fit. For any reasonable estimate, however, there is no reason, in this data, to think that Amazon’s numbers are in any way unusual for a large employer.

The CDC does have some limited data on suicide by occupation and the real outlier is the construction and extraction industry which has a suicide rate over 50 per hundred thousand, several times the national average.

Moreover, if you really want to find out what it’s like to work at an Amazon fulfillment center don’t look at anecdotes, look instead to the over 5 thousand reviews for this job at Indeed.com which gives Amazon 3.6 stars out of 5. Not stellar but not bad either. Costco, one of the most beloved and best ranked employers in the United States, has a rating of 4.2.

It’s obvious that there is a political impetus to go after big tech companies. Whatever one’s thoughts about that, we shouldn’t let propaganda infect our decisions.

Was concentrated big business behind the Nazi rise?

No, there isn’t much evidence for that now-common claim:

As I show below, the claim that big business contributed to the rise of the Nazi Party is simply inconsistent with the consensus among German historians. While there is some evidence industrial concentration contributed in Hitler’s ability to consolidate power after he was appointed chancellor in 1933, there is no evidence monopolists financed Hitler’s rise to power, and ample evidence showing industry leaders opposed his ascent.

Here is the longer essay, with much more additional detail, from the soon-to-be-better-known Alec Stapp.

The college bribery scandal

Of course universities have long taken money to let in unqualified applicants, what is happening here is they are going after the local rate busters.  Here is my Bloomberg column on this topic, excerpt:

My second worry is that the number of bribery cases suggests that many wealthy Americans perceive higher education to be an ethics-free, law-free zone where the only restraint on your behavior is whatever you can get away with.

I suspect that most of those charged in this case never expected they might have to answer in court for their actions. To consider a parallel situation: I wouldn’t dream of shoplifting. Yet I sometimes drive 32 mph in a 25 mph speed zone. Like most of us, I draw a distinction between laws we are expected to follow, and laws we aren’t.

To me, the number of people caught up in this scandal indicates that too many Americans do not take seriously the idea that our system of higher education is a set of institutions bound by morality and laws. They take its governing rules as optional and conditional, depending on convenience, much as we do many speed-limit signs.

In this case, those charged are mostly wealthy Americans of high social status, not gangsters. They probably thought of themselves as law-abiding Americans, with exceptions so minor as to be negligible. In other words, this case illustrates what a low opinion America has of its system of higher education. As a university professor, I would feel much better if it had been mobsters charged with these alleged crimes.

There is much more at the link.

It is easier to do this when there is no single dominant company involved

Or is it that real estate developers are somehow especially popular these days?:

New York was riveted for weeks by a debate over whether Amazon should receive $3 billion in tax breaks and other incentives in return for setting up a headquarters in Queens and creating 25,000 jobs. But with far less public attention, the city government has for more than a decade been funneling even more aid to Hudson Yards, a 28-acre complex of gleaming office buildings and luxury residential towers that is one of the nation’s biggest real estate projects in recent years.

In all, the tax breaks and other government assistance for Hudson Yards have reached nearly $6 billion, according to public records and a recent analysis by the New School.

Here is more from Matthew Haag at the NYT,

Does common ownership really matter?

We derive a measure that captures the extent to which overlapping ownership structures shift managers’ incentives to internalize externalities. A key feature of the measure is that it allows for the possibility that not all investors are attentive to whether a manager’s actions benefit the investor’s overall portfolio. Empirically, we show that potential drivers of ownership overlap, including mergers in the asset management industry and the growth of indexing, could in fact diminish managerial motives. Our findings illustrate the importance of accounting for investor inattention and cast doubt on the possibility that the growth of common ownership has had a significant impact on managerial incentives.

That is from a new NBER working paper by Erik P. Gilje, Todd Gormley, and Doron Y. Levit.

Opioids and the Labor Market

Do not believe those who tell you the only labor market problems have been demand side!:

This paper studies the relationship between local opioid prescription rates and labor market outcomes. We improve the joint measurement of labor market outcomes and prescription rates in the rural areas where nearly 30 percent of the US population lives. We find that increasing the local prescription rate by 10 percent decreases the prime-age employment rate by 0.50 percentage points for men and 0.17 percentage points for women. This effect is larger for white men with less than a BA (0.70 percentage points) and largest for minority men with less than a BA (1.01 percentage points). Geography is an obstacle to giving a causal interpretation to these results, especially since they were estimated in the midst of a large recession and recovery that generated considerable cross-sectional variation in local economic performance. We show that our results are not sensitive to most approaches to controlling for places experiencing either contemporaneous labor market shocks or persistently weak labor market conditions. We also present evidence on reverse causality, finding that a short-term unemployment shock did not increase the share of people abusing prescription opioids. Our estimates imply that prescription opioids can account for 44 percent of the realized national decrease in men’s labor force participation between 2001 and 2015.

The fact that the demand side blade of the scissors can be powerful does not imply the supply side blade does not matter, no matter how many snide tweets you may read to the contrary.

The paper is by Dionissi Aliprantis, Kyle Fee, and Mark E. Schweitzer at the Cleveland Fed.

Via Ilya Novak.