Month: June 2019

*The Nonsense Factory: The Making and Breaking of the American Legal System*

That is the new book by Bruce Cannon Gibney, and it is one of my favorite books on the American legal system and one of my favorite books of this year.  Here is just one driblet from the work:

…only in America would an administrative law judge sue a local dry cleaner, claiming damages of $67 million for a lost pair of pants.

And this I had not known:

Worse, the legal content of any given state’s bar exam is not actually the law in that state.  The “multistate” part of the bar exam is exactly what it sounds like, but there is no such thing as “multistate” law: different states have different laws.  But even though the larger states, notably New York, California, and Texas, could create their own bar exams, almost all states use the synthetic law of a multistate exam, which is worse than useless: the right answer for the bar might not be the right answer in any state, which wastes students’ time and risks confusing them about the actual law.

I learned also that America has at least 940 legal journals.  Yet the Harvard Law Review had only 1,722 paid subscriptions for 2012, and the extremely well-known University of Virginia review had only 304 subscribers.

Between 1987 and 2017, staff available to Congress declined by about 30 percent.  The Capitol Police, however, expanded in numbers.  Congressional aides often make less than the janitors of the Senate.

OIRA, which is tasked with reviewing major regulations, typically has about 45 staffers.

The book offers up numerous anecdotes about how poorly some Supreme Court justices understand modern technology; Judge Scalia, for instance, was afraid that people could “capture” HBO signals from the airwaves.

…the entire federal judiciary costs about $7 billion, not even enough to buy 55 percent of the Gerald R. Ford aircraft carrier or fund federal health-care programs for fifty hours.”

Recommended, you can buy the book here.

What I’ve been reading

Vaclav Smil, Growth: From Microorganisms to Megacities.  This book was too much a pile of facts for my taste — and facts I already know — but it is about the most important topic, namely growth and economic growth, so some of you should read it.  When you get right down to it, there are worse things than a pile of facts!

Swapan Dasgupta, Awakening Bharat Mata: The Political Beliefs of the Indian Right.  What do those people actually believe and why?  A summary and also a collection of original texts, strongly recommended for insight into one of the world’s most important nations and thus one of the world’s most important intellectual movements.

Gabriel García Marquez, The Scandal of the Century, and Other Writings.  His early journalistic pieces are a revelation, both for their connections to a Borges-Cortázar style, and for how they show the roots of his later more literary productions.  His best-known work is perhaps overrated, but his body of work as a whole is still considerably underrated, and this volume will add to your appreciation of him.

I’ve only browsed Owen Matthews, An Impeccable Spy: Richard Sorge, Stalin’s Master Agent, but it seems to be based on a remarkable amount of original research.  I do not care so much about the history of spying, but for some of you this should be a very good book.

Sarah L. Quinn, American Bonds: How Credit Markets Shaped a Nation.  Less broad than the title suggests, this is still a clear and useful history of some parts of American securitization, starting with such (important) oddities as the Federal Farm Loan Act of 1916.

Adam Minter, Secondhand: Travels in the New Global Garage Sale delivers exactly what readers of Adam’s previous work would and should expect.  I am a big Adam Minter fan.

Here is what Ben Casnocha has been reading.

Eric Nelson, The Theology of Liberalism: Political Philosophy and the Justice of God is an interesting look at Pelagianism and related free will ideas as the possible origin for classical liberal ideas.  But is free will so important?  Isn’t there a Hayekian/Calvinist/Straussian case for the limits of political power?  Do the Pelagian roots of liberalism collapse more into current progressivism?  In any case I found this book both readable and stimulating, the discussion of the early theology of Rawls was interesting too.

Saturday assorted links

People like working with their friends, but it makes them less productive

From Sangyoon Park:

Through a field experiment at a seafood-processing plant, I examine how working alongside friends affects employee productivity and how this effect is heterogeneous with respect to an employee’s personality. This paper presents two main findings. First, worker productivity declines when a friend is close enough to socialize with. Second, workers who are higher on the conscientiousness scale show smaller productivity declines when working alongside a friend. Estimates suggest that a median worker is willing to pay 4.5 percent of her wage to work next to friends.

That is from American Economic Journal: Applied Economics, via Adam Ozimek.

Crypto is here to stay?

That is the theme of my latest Bloomberg column, here is one excerpt:

One reason for the rise in Bitcoin’s price may have to do with the U.S. and China and the trade war. It no longer seems that China will join the international economic order as that term might have been understood 15 years ago. Instead, there will be an ongoing cold war; China will not liberalize, and capital controls may persist. In that world, Bitcoin will continue to prove a useful way of getting funds out of China. The Chinese Communist government may or may not crack down on that practice, but outright liberalization would have ended this use of Bitcoin altogether.

For related reasons, a China that does not liberalize may influence the broader tenor of the global economy away from freedom, again giving Bitcoin additional uses around the world for evading central authorities.

A second development is that the Democratic Party in the U.S. continues to shift to the left, including on the possibility of a wealth tax. As America’s fiscal deficits grow (due often to the Republicans, I might add), there will be a long-term need to restore fiscal sanity. Presidential candidate Elizabeth Warren, for one, advocates a 2% wealth tax (over $50 million) toward this end.

No matter what you think of this idea, it likely would boost the demand for Bitcoin and other crypto assets, as cryptocurrencies are potentially a way to store assets out of reach of many tax authorities. And the U.S. is hardly the only nation that may be looking to a wealth tax in the future to balance the books. In essence, the new and higher price of Bitcoin is telling us that fiscal solvency will be hard to come by, and the wealthy will not give up their assets without a fight.

Do read the whole thing.

Friday assorted links

Gender and competition

From American Economic Journal, Applied Economics:

“Do Women Give Up Competing More Easily? Evidence from the Lab and the Dutch Math Olympiad,” by Thomas Buser and Huaiping Yuan.

We use lab experiments and field data from the Dutch Math Olympiad to show that women are more likely than men to stop competing if they lose. In a math competition in the lab, women are much less likely than men to choose competition again after losing in the first round. In the Math Olympiad, girls, but not boys, who fail to make the second round are less likely to compete again one year later. This gender difference in the reaction to competition outcomes may help to explain why fewer women make it to the top in business and academia.

Here is the link to the paper.  Here are earlier, ungated versions.

Is Bitcoin Halal?

Press TV: A report by Iran’s Mehr news agency last week showed that bitcoin miners were using power in buildings and properties that enjoy a lower price for electricity, including factories, greenhouses, government offices and mosques.

…A spokesman of Iran’s Ministry of Energy said on Monday that the country’s power grid had become unstable as a result of increased mining of cryptocurrencies.

Bitcoin mining in a mosque may seem outré but at least it’s not money lenders in the mosque. In fact, Bitcoin is halal, at least according to one source (quoted here):

As a payment network, Bitcoin is halal. In fact, Bitcoin goes beyond what more conventional closed banking networks offer. Unlike conventional bank networks which use private ledgers where there’s no guarantee that the originator actually owns the underlying assets, Bitcoin guarantees with mathematical certainty that the originator of the transfer owns the underlying assets. Conventional banks operate using the principle of fractional reserve, which is prohibited in Islam.

Muhammad was a merchant and much more open to business than some traditional Christian interpretations. For example, compare Jesus, “it is easier for a camel to go through the eye of a needle than for a rich man to enter the kingdom of God” with one of Muhammad’s sayings:

Abu Said related that the Prophet said: The truthful and trustworthy businessman will be in the company of Prophets, saints and martyrs on the Day of Judgment. (Darimi, Tirmidhi)

Libra as a medium of exchange

I’ve already outlined the case for how Libra might be able to significantly lower the 7-8% costs and commissions currently charged for making remittances.  That would make Libra a widely used means of payment.  I am less optimistic, however, about Libra being widely used as a medium of exchange.

Let’s say the core rate of inflation in a country is eight percent, which is about the current rate of price inflation in Myanmar.  It is still not the case that an unbanked farmer holds currency for the entire year (he is more likely to buy land or animals as a means of large-scale saving).  I am not sure what monetary velocity is for this group of people (readers?), but say currency turns over four times a year on average.  That is in essence a two percent tax on currency holdings, not an eight percent tax.  I don’t think that individuals will switch monies for such a small gain, noting that decreasing their demand for money (i.e., increasing currency velocity) is another possible response.

If an unbanked farmer is in debt, I would think the velocity of currency would be well over 4x a year (consider monthly microcredit borrowings and repayments), although certainly some MR readers can enlighten us here.

A few decades ago, when inflation was much more common, it was generally believed that people were not very interested in switching monies until inflation rates hit about forty percent.  I am not sure if that same number would hold today, but of course that is pretty high.  Furthermore, the countries with the highest inflation rates, such as Venezuela, can be impossible to do business in.

Don’t forget that Libras are specified as paying zero nominal interest throughout.

You might think that Libras have some advantages over current e-monies and smart phone banking systems.  It is hard to make that judgment for a product which does not exist yet, but it is unlikely those advantages will run close to the range of seven to eight percent.

For those reasons I am more optimistic about Libra as a means of payment — most of all for remittances — than as a general medium of exchange.

Is free college a good idea?

C’mon people, this one should be a no-brainer, can’t you at least call upon your craven loyalty to the higher education lobby to reject the free tuition proposals from Warren and Sanders?:

Just three German universities placed in the top 100 world institutions in rankings compiled by Quacquarelli Symonds, a British education consultancy…

In Germany, public funds covered $14,092 per student in 2015, the latest year for which the OECD has compiled numbers. In the United States, public funds covered $10,563 per student. But once private money was taken into account, U.S. university spending was far higher: $30,003 per student, compared with $17,036 in Germany…

“The best German universities look a lot like the University of Colorado. It’s not going to be like the top privates. It’s not even going to be like the top publics,” said Alex Usher, a Canadian education consultant who has studied how countries fund their university systems. “They’re perfectly good schools. They churn out good graduates. They’re not as focused on creating an elite. And in many ways that’s what the top systems in the United States are trying to do.”

The German system is entirely defensible if you believe that higher education is largely a matter of wasteful signaling; that is not my view, but believe it or not I know a few people who hold it.

The simple reality is that when it comes to higher education policy, President Trump is much better than the Democratic Party thought leaders.

#thegreatforgetting

Here is the full WaPo article by Michael Birnbaum.

Prisoners

New Yorker: On May 13, 1943, Axis forces in North Africa surrendered. The Allies suddenly found themselves saddled with nearly three hundred thousand prisoners of war, including the bulk of General Erwin Rommel’s famed Afrika Korps. Unable to feed or house their share, the British asked their American comrades to relieve them of the burden. And so, by the tens of thousands, German soldiers were loaded aboard Liberty Ships, which had carried American troops across the Atlantic. Eventually, some five hundred P.O.W. camps, scattered across forty-five of the forty-eight United States, housed some four hundred thousand men. In every one of those camps, the Geneva conventions were adhered to so scrupulously that, after the war, not a few of the inmates decided to stick around and become Americans themselves. That was extraordinary rendition, Greatest Generation style.

That’s the opening to a piece by Hendrik Hertzberg from 2011 and thus the piece is motivated neither by President Trump nor about separating children from their parents on the border. For that reason it is perhaps more relevant to these issues than otherwise. We can and have been worse but let no one say that we have not and cannot be better.

Hat tip: Jason Kuznicki.

Model this (spoiled rich kids edition)

  • “About 80 percent of respondents reported drinking alcohol at least two or three times a month, and 39 percent reported drinking at least twice a week.” (60% reported drinking once a week or more)
  • “Students who came from lower-income households were much less likely to drink than their wealthier peers; 35 percent of respondents whose parents make less than $40,000 in combined income drank at least once a week while that figure was 69 percent for students whose parents make at least a combined $250,000.”

Via Tyler R.

Is Los Angeles the next Silicon Valley?

That is the theme of my latest Bloomberg column, here is one excerpt:

How could L.A.’s tech scene develop even further? Imagine that virtual reality is the “next big thing” and the gamification of just about everything, including education, proceeds apace. For the next generation of startups, that might throw the balance of power in the direction of expertise in entertainment and design — a sense of the theatrical, in other words, intermediated through tech. That could favor the culture of Los Angeles and Hollywood. Southern California also has a strong background in aerospace and military contracting, two areas that could produce a spillover effect for the next tech booms, especially if they involve transportation. The region also remains the leading U.S. manufacturing center, and that too could be a source of future synergies.

And:

Northern California had an original advantage over Southern California as a center of free thinking and thus as a tech hub. Think back to Haight-Ashbury, the 1960s, Beatniks, LSD and the Whole Earth Catalog, the psychedelic movement, the bohemian and gay cultures of San Francisco. All of that bred an atmosphere of rebellion, and it helped birth the personal computer and a large movement of non-conformist hippie programmers, often working out of their proverbial garages.

But those cultural roots have largely faded, and if anything today San Francisco and the Bay Area are better known for political correctness and a conformist culture of scolding and groupthink. That can’t be good for the region’s long-term creativity.

There is much more at the link.