The Mobbing Game

Klaus Abbink and Gönül Dogan have a horrific new paper. Horrific because despite being in a safe, experimental setting the results are all too realistic:

We introduce the experimental mobbing game. Each player in a group has the option to nominate one of the other players or to nominate no one. If the same person is nominated by all other players, he loses his payoff and the mob gains. We conduct three sets of experiments to study the effects of monetary gains, fear of being mobbed, and different types of focality. In the repeated mobbing game, we find that subjects frequently coordinate on selecting a victim, even for modest gains. Higher gains make mobbing more likely. We find no evidence that fear of becoming the victim explains mobbing. Richer and poorer players are equally focal. Pity plays no role in mobbing decisions. Ingroup members – introduced by colours – are less likely to be victims, and both payoff difference and colour difference serve as strong coordination devices. Commonly employed social preference theories do not explain our findings.

In short, the authors give experimental participants an opportunity to nominate a victim and redistribute towards themselves. Willingness to do this is common even in cases where the victims lose a lot and the bullies gain only a little. In some cases, the redistribution increases social welfare but these are also the cases where the bullies get a lot. Overall, it’s pretty clear that motivation is greed rather than increased social welfare but it would have been good to have an experiment that distinguished better the greed and social welfare cases. Importantly, distinguishing one of the players by making them poorer/richer/yellow also increased mobbing of that player.

I loved this footnote:

The labels [M,T, G, P] are also a hidden homage to the inmates Mather, Travers, Greenhill and Pearce, who escaped from a Tasmanian prison camp in a group of eight in 1822, only to get lost in the forest. When food ran out, the four conspired to apply the Custom of the Sea to the others. When no-one else was left, they turned to killing and eating one another, until only Pearce survived. All victims were chosen in decidedly non-random ways. This story is one of the great Australian foundation myths, and it was an inspiration for this study (for a dramatic reconstruction, see Van Diemen’s Land (2009)). We are confident that none of our Northern European subjects made that connection.

Hat tip: Rolf Degen.

Why Is the Fight for Free Speech Led by the Psychologists?

Jeffrey Sachs (not the economist) asks, Why are psychologists so prevalent in the free speech movement?:

If any academic field is associated with the contemporary debate surrounding free speech, it’s psychology. Haidt, Pinker, Peterson, Saad, Jussim, even Lehmann. All specialize or have backgrounds in academic psych.

The Scholar’s Stage offers a good answer:

I attribute this all to three things.

1. The conclusions academics reach tend to rankle the right. There are exceptions. If your research draws on evolutionary psychology, focuses on innate behavioral differences, or touches any sort of psychometrics (e.g., IQ), the angry tide does not sweep in from the right. The wave these men and women fear crashes in from leftward side. Moreover, the sort of leftist opposition that the academic consensus on these topics face leaves little room for rational debate or compromise: controversies over psychometrics or evolutionary psychology are usually framed in terms of good and evil, not right and wrong. The scientists involved are to be conquered, not reasoned with.

So that is point one: the people who want to shut controversial psychologists up are overwhelmingly creatures of the left.

2. Psychology, especially social psychology, is itself an overwhelmingly leftist discipline. We actually have data on this, and it is pretty grim: a recent survey of American tenure-track professors reveals that there 17.4 registered Democrat psychologists for every single registered Republican.[2] If there is a field of people who ought to be sympathetic to social justice railroading, these people are it.

3. Despite this, behavioral scientists have not yet adopted the rhetorical techniques or methodology of inquiry of “critical theory.”  In contrast, see how these modes of inquiry have swallowed up the fields of anthropology and communications, and established creeping colonies in history, sociology, and area studies.  Given the left-leaning sympathies of almost all in the profession, the threat that the same might happen to the study of human behavior is real.

…Haidt et. al. are confident they can win the debate if they are allowed to debate. For the heterodox anthropologist or sociologist the game is already over: their discipline has already been conquered. For the economist, the threat is too remote to take seriously. Behavioral science exists in that rare in-between: methodologically, it has the tools to fight back against the excesses of the activist. Socially, it provides a compelling reason for its practitioners to use them.

Maybe We Won’t All Die in a Pandemic

The high frequency of modern travel has led to concerns about a devastating pandemic since a lethal pathogen strain could spread worldwide quickly. Many historical pandemics have arisen following pathogen evolution to a more virulent form. However, some pathogen strains invoke immune responses that provide partial cross-immunity against infection with related strains. Here, we consider a mathematical model of successive outbreaks of two strains: a low virulence strain outbreak followed by a high virulence strain outbreak. Under these circumstances, we investigate the impacts of varying travel rates and cross-immunity on the probability that a major epidemic of the high virulence strain occurs, and the size of that outbreak. Frequent travel between subpopulations can lead to widespread immunity to the high virulence strain, driven by exposure to the low virulence strain. As a result, major epidemics of the high virulence strain are less likely, and can potentially be smaller, with more connected subpopulations. Cross-immunity may be a factor contributing to the absence of a global pandemic as severe as the 1918 influenza pandemic in the century since.

From a new paper in bioRxiv, the biological preprint service analagous to arXiv.

Hat tip: Paul Kedrosky.

Can Token Curated Registries Actually Work?

A Token Curated Registry (TCR) is a mechanism to incentivize the creation of high quality lists in a decentralized setting. TCRs are becoming popular in the token space. As part of advisory work on mechanism design for the startup Wireline, I wrote a research note on TCRs. I am not as enthused as many others. Here are some takeaways:

Token Curated Registries can work but there is no guarantee that voters will coordinate on the truth as a Schelling point so care needs to be taken in the design stage to imagine other Schelling points. The less focal or more costly it is to discover the truth, the more vulnerable the mechanism will be to biases and manipulation via coordination or collusion.

To understand whether a TCR will work in practice attention needs to be placed on the information environment. The key practical issues are the cost of acquiring high-quality information and the value to an applicant of getting on the registry. Put simply, TCRs are likely to work when high quality information is available at low cost. Vitalik Buterin’s examples of Schelling points were (wisely) all of this kind. Extensions of the Schelling point model to TCRs which are trying to surface information that is much more uncertain, variable and disputed need to recognize the limitations.

It will often be more important to put effort into lowering the cost of acquiring high quality information than it will be to modify the particulars of the mechanism. If high-quality, low-cost information is available many mechanisms will work tolerably well. If high-quality, low-cost information isn’t available, perhaps none will.

Read the whole thing at Medium.

And do check out Wireline. Wireline isn’t going to Mars but it is creating what could be a significant and very useful protocol to find and connect software services to quickly produce decentralized applications that can scale on demand.

Blockchains in Space!

As far as I can tell, this is Not From the Onion.

Blockchain venture production studio ConsenSys, Inc. has acquired the pioneering space company Planetary Resources, Inc. through an asset-purchase transaction. Planetary Resources’ President & CEO Chris Lewicki and General Counsel Brian Israel have joined ConsenSys in connection with the acquisition.

…Ethereum Co-founder and ConsenSys Founder Joe Lubin said, “I admire Planetary Resources for its world class talent, its record of innovation, and for inspiring people across our planet in support of its bold vision for the future. Bringing deep space capabilities into the ConsenSys ecosystem reflects our belief in the potential for Ethereum to help humanity craft new societal rule systems through automated trust and guaranteed execution. And it reflects our belief in democratizing and decentralizing space endeavors to unite our species and unlock untapped human potential. We look forward to sharing our plans and how to join us on this journey in the months ahead.”

As Eli Dourado quipped, cryptocurrency mining, asteroid mining, pretty much the same thing, right? ¯\_(ツ)_/¯

Can You Outsmart an Economist?

Can You Outsmart an Economist? is an excellent book of puzzles put together by Steven Landsburg. Steve includes a lot of classics such as the Girl Named Florida Problem, the Potato Paradox and Newcomb’s paradox, the former two problems are presented in slightly different and in the first case improved forms so you might not recognize them on first reading. Steve also includes many economic puzzles, Bayes puzzles, common knowledge problems and more. Readers of this blog will certainly know some of the puzzles but will also find lots of novel problems and puzzles. Also included are philosophical paradoxes. For example, the headache problem.

A billion people are experiencing fairly minor headaches, which will continue for another hour unless an innocent person is killed, in which case the headaches will cease immediately. Is it okay to kill that innocent person?

The puzzle here isn’t the answer. The answer is obvious. The puzzle is that smart people can’t agree which answer is obvious.

Overall, this is the best and most diverse collection of puzzles that I know. It’s meant to be dipped into and sampled at leisure. My only complaint is that the puzzles are followed by answers which makes it too easy to fool yourself into thinking you always knew the answer! Answers in the back of the book would have been a minor form of commitment. Recommended.

Shopping While Black: Past, Present and Future?

The original Sears mail-order catalogue changed how African Americans in the South shopped:

…the catalogue format allowed for anonymity, ensuring that black and white customers would be treated the same way.

“This gives African Americans in the Southeast some degree of autonomy, some degree of secrecy,” unofficial Sears historian Jerry Hancock told the Stuff You Missed in History Class podcast in December 2016. “Now they can buy the same thing that anybody else can buy. And all they have to do is order it from this catalogue. They don’t have to deal with racist merchants in town and those types of things.”

More recently, Uber has alleviated many of the traditional difficulties that blacks have had hailing taxis.

In a heartfelt essay Ashlee Clark Thompson explains how the “grab and go” technologies now being tested at Amazon Go made her confront lessons learned from decades of shopping while black:

The idea of walking into a store, taking an item or several off the shelves and strolling right back out again boggled my mind. It ran counter to everything I had learned about being black and shopping.

…I grabbed one of the orange Amazon Go bags and began to make my way around the perimeter of the store. I was studying the various bottled waters and debating whether to get fizzy or still, or a bottle of kombucha, when I realized what I was really doing: I was stalling. The fear I had carried with me for decades reared its head as I stood in front of the refrigerated display. I was afraid to make a choice, remove it from a shelf and put it in my bag. I was afraid someone would pop out from behind a display of Amazon-branded merch and scream, “Get your hands off that!” And I was mad that this fear couldn’t even let me fully enjoy an experience that’s designed for everyone to grab and go, no questions asked.

Eff this, I thought. I’m getting some Vitamin Water.

Once the plastic bottle hit the bottom of my reusable bag, I glanced around to see if anyone noticed. The Amazon employees shuffled around the small store and restocked shelves. Tourists chatted in small groups as they pointed and looked for the sensors that were keeping track of our every move. One guy with his phone on a selfie stick recorded himself as he selected snacks. And then there were the folks for whom the novelty had worn off and just wanted a vegetarian banh mi sandwich.

No one cared what I was doing. Is this what it feels like to shop when you’re not black?

…Amazon Go isn’t going to fix implicit bias or remove the years of conditioning under which I’ve operated. But in the Amazon Go store, everyone is just a shopper, an opportunity for the retail giant to test technology, learn about our habits and make some money. Amazon sees green, and in its own capitalist way, this cashierless concept eased my burden a little bit.

The similarities in these cases are interesting but so are the differences. In the Sears case most of the effect of diminished discrimination was driven by greater competition in one-shop towns. In the one-shop town the owners sometimes took a share of their monopoly profits in invidious racism–this appears to explain why shop owners would prevent blacks from buying more expensive products (or perhaps the one-stop shop had to cater to racist customers who demanded invidious discrimination.)

In the Uber case my bet is that a large share of the reduction in discrimination was due to the fact that Uber drivers don’t carry cash and so are less worried about robbery and the app increases safety because it records in detail rider, driver and trip data. In other words, the Uber system reduced the value of statistical discrimination. It’s difficult to know for sure, however, because there was probably also some decline in invidious discrimination brought about by Uber hiding some rider information from drivers until trips are accepted.

The last case, the Amazon Go case, is in part a decline in the value of statistical discrimination since shoplifting is no longer a problem (in theory, assuming the technology works) but in this case the decline in statistical discrimination is driven by much finer discrimination. The moment a shopper enters the Amazon Go store, Amazon knows their name, address, entire shopping history, credit history and potentially much more. Moreover, a shopper’s every movement within the store is tracked to a level of detail that no store detective could ever hope to match. To the customer, especially the black customer, it may feel like they are no longer being watched but in fact they are watched more than ever before–the costs of technological monitoring, however, are mostly fixed which means that everyone is monitored equally. No need for statistical discrimination in the panopticon.

Addendum: A good dissertation might be to incorporates the cost of information, the value of statistical discrimination and the demand for invidious discrimination in a general theory that explains the various cases mentioned here and the effects of information bans such as ban the box.

Quote of the Day

The state-the machinery and power of the state-is a potential resource or threat to every industry in the society. With its power to prohibit or compel, to take or give money, the state can and does selectively help or hurt a vast number of industries…The central tasks of the theory of economic regulation are to explain who will receive the benefits or burdens of regulation, what form regulation will take, and the effects of regulation upon the allocation of resources.

Regulation may be actively sought by an industry, or it may be thrust upon it. A central thesis of this paper is that, as a rule, regulation is acquired by the industry and is designed and operated primarily for its benefit.

Stigler, George J. 1971. “The Theory of Economic Regulation.Bell Journal of Economics Spring: 137–46.

The Year that Words Were First Used in Print

In the year that I was born, 1966, some words which were used for the first time in print were:

cryonics, art deco, assault weapon, ROM, biocontainment, hot button, kung fu, meth, male-pattern baldness, multitasking, multiorgasmic, Medicaid, number cruncher, paperless, street smarts, ranch dressing, z-score

I would have guessed that many of these terms were older.

New words in recent years are ico, manspreading, utility token and aquafaba (?).

All this is according to the Merriam-Webster Time Traveler.

Hat tip: Paul Kedrosky.

Specialization and the Flowering of Personality, and Choice

A new paper in Science adds support to the so-called gender-equality paradox. Using a survey of some 80,000 people across 76 countries Falk and Hermle find that for a variety of preferences the differences between the genders gets larger the greater is economic development and gender equality. The basic story is here:

As the authors put it:

In sum, greater availability of material and social resources to both women and men may facilitate the independent development and expression of gender-specific preferences, and hence may lead to an expansion of gender differences in more developed and gender-egalitarian countries.

As I pointed out in my post, Do Boys Have a Comparative Advantage in Math and Science? results like this can explain why there are proportionately fewer women entering STEM fields in richer and more gender-equal countries than in poorer and less gender-equal countries.

One point which many people are missing is that small but growing gender differences with development are only one minor effect of a much bigger phenomena. In a primitive economy, everyone does more or less the same thing, subsistence farming. Only in a market economy under the division of labor can people specialize. Specialization reflects and amplifies diverse personalities and interests. People sometimes complain about “excess” variety in a market economy but do they extend that complaint to careers, arts, and lifestyles? In a market society we get Corn Flakes, Frosted Flakes and Coconut Flakes and we get cardiologists, dermatologists and otolaryngologists and we get Chicago Blues, dub step, and K-Pop and we also get a flowering of sexual preferences and lifestyles. As Mises once said the very idea of personality as we know it today is a result of the market economy. The small gender differences some people focus on are merely the averaging by gender of much larger individual differences. Thus, I would revise the authors:

In sum, greater availability of material and social resources facilitates the independent development and expression of individual-specific preferences, and hence may lead to an expansion of individual differences in more developed and equal-opportunity countries.

Convergence, Big Time

In his influential 1997 paper, Divergence, Big Time, Lant Pritchett estimated:

…that from 1870 to 1990 the ratio of per capita incomes between the richest and the poorest countries increased by roughly a factor of five and that the difference in income between the richest country and all others has increased by an order of magnitude.

Pritchett was correct but Patel, Sandeful and Subramanian show that just where Pritchett’s study ended, convergence began!

While unconditional convergence was singularly absent in the past, there has been unconditional convergence, beginning (weakly) around 1990 and emphatically for the last two decades.

https://www.cgdev.org/sites/default/files/patel-sandefur-subramanian-beta_by_series.png

The figure above plots the coefficient (“beta”) from the plain vanilla unconditional convergence regression (relating average growth of real per capita GDP over the long run to its initial level). A statistically significant negative beta denotes convergence and divergence otherwise. Since we know from Johnson et al. (2013) that growth rates vary widely across datasets, we plot the annual betas for three such sets: the Penn World Tables (PWT), the World Development Indicators, and the Maddison Project (Bolt et al. 2014).[1] While the point estimates vary across datasets, the consistent pattern across them all is a statistically significant negative beta since around 1995 (unconditional convergence) and its lack prior to that (see also Roy, Kessler and Subramanian, 2016).

Our basic point doesn’t require regressions. Looking at the 43 countries the World Bank classified as “low income” in 1990, 65 percent have grown faster than the high-income average since 1990. The same is true for 82 percent of the 62 middle-income countries circa 1990.

Neo-liberalism has been incredibly successful, essentially delivering on all of its promises of economic growth, declines in poverty, and peace. Yet, the ideas behind what Andrei Shleifer called The Age of Milton Friedman are now under attack and in retreat.

The Big Push Failed

In 2004, Jeff Sachs and co-authors revived an old theory to explain Africa’s failure to develop, the poverty trap, and an old solution, the big push.

Our explanation is that tropical Africa, even the well-governed parts, is stuck in a poverty trap, too poor to achieve robust, high levels of economic growth and, in many places, simply too poor to grow at all. More policy or governance reform, by itself, will not be sufficient to over-come this trap. Specifically, Africa’s extreme poverty leads to low national saving rates, which in turn lead to low or negative economic growth rates. Low domestic saving is not offset by large inflows of private foreign capital, for example foreign direct investment, because Africa’s poor infrastructure and weak human capital discourage such inflows. With very low domestic saving and low rates of market-based foreign capital inflows, there is little in Africa’s current dynamics that promotes an escape from poverty. Something new is needed.

We argue that what is needed is a “big push” in public investments to produce a rapid “step” increase in Africa’s underlying productivity, both rural and urban.

Note also the mosquito bed nets being used for other purposes, AT.

As the title of the blog might suggest, I was skeptical. But even if a big push wasn’t exactly the right idea, I’m all in favor of Big Ideas and Sachs pursued his Big Idea with tremendous skill and media savvy. Pilot programs were soon up and running and then quickly expanded into full programs. In June 2010, the Millennium Villages Project released its first public evaluation and that is when things started to fall apart.

The initial MVP evaluation claimed great success but simply compared some development indicators before and after in the treated villages without comparing to trends elsewhere. In 2010 such a study was completely out of step with contemporary practices in impact evaluation. Red flag! Clemens and Demombynes showed that comparing to trends elsewhere significantly moderated the impact. A second MVP paper was published in the Lancet but then was quickly retracted when Bump, Clemens, Demombynes and Haddad demonstrated that it had  significant errors. Clemens and Demombynes wrote a summary piece on the controversy then in an astounding and under-reported scandal the MVP tried to stifle Clemens and Demombynes. The MVP, with Jeff Sachs at the head, also sicced their lawyers on Nina Munk and her book, The Idealist: Jeffrey Sachs and the Quest to End Poverty. More red flags.

Yet, despite all of this controversy and bad behavior, the MVP project continued to move ahead and in 2012, the UK Department for International Development (DFID) funded US $11 million into an MVP in Northern Ghana that ran until December 2016. Under the auspices of the DFID, we now finally have the first in-depth, independent evaluation of one MVP project and it doesn’t look great. The project did some good but the big push failed and the good that was done could have been done at lower cost.

Overall, the MVP in northern Ghana did not achieve the overall MDG target to reduce extreme poverty and hunger at the local level. Where there are attributable changes to the MDG targets, these tended to be the more limited changes than those that will fundamentally improve people’s health, educational and other outcomes. For instance, the project did increase attendance at primary school (Goal 2) but did not go beyond this MDG and improve the learning outcomes of children; the project did increase the proportion of births attended by professionals and women said to be using contraceptive methods (MDG indicators), but it is not possible to assess the effect on maternal health (Goal 5); and the project did increase the number of toilets (a target under Goal 7), but not beyond this MDG in terms of hygiene and sanitation practices. There are, however, exceptions. The project had a remarkable impact on stunting, which is a long-term health indicator and a predictor of socioeconomic outcomes in adulthood.

So the MVP had some good effects on some indicators:

But is this impact sufficient given the size of the investment? And, by doing everything together, is there a synergistic effect that offers greater value for money than would arise through implementing individual sector-based interventions? In our cost-effectiveness analysis, we demonstrate that the project has so far not yielded sufficiently positive results, and what has been achieved could have been attained at a substantially lower cost (even when we take account of investments made for future usage). As such, the project seems to have fallen short of producing a synergistic effect; and the impact is not large enough for the project to be regarded as cost-effective, even when each sector is assessed independently of the others. Of course, in the longer run, the MVP may produce welfare gains. Importantly the investments in improving the health care service may enhance health outcomes later on; or other considerable investments in infrastructure (roads, health and school facilities) may have an impact on future outcomes. 

Perhaps then, the most concerning findings are the early indications that the MVP approach will be difficult to be sustained by district institutions and at the community level; and there are signs that any gains made under the project are already being undermined.

Addendum: Andrew Gelman and co-authors, including Jeff Sachs, offer a broadly similar although less negative in tone evaluation of the entire MVP project.

We Cannot Avoid the Ugly Tradeoffs of Bail Reform

Many people think that “innocent until proven guilty” implies that everyone should be let loose on their own recognizance before trial. A moment’s thought reveals that this is idiotic. The white supremacist Dylann Roof killed nine people on June 17, 2015 at the Emanuel African Methodist Episcopal Church. His image was captured on security cameras and he was arrested the next day. Roof’s trial, however, didn’t start until more than a year later, December 7, 2016, and he wasn’t convicted of anything until December 15, 2016. Should Roof have been released before trial because he was “innocent until proven guilty”? Of course not. I stand second to none in demanding high standards before the state can deprive a person of their liberty but high standards do not demand binary divisions. Tradeoffs are everywhere and when the evidence against the accused is strong and the danger to the public is high, it’s not unreasonable to deprive the legally innocent of some liberty prior to trial. The tradeoffs are ugly, as they always are when trading off two sacred values, but the tradeoffs cannot be avoided.

Consider now the issue of bail reform. In the days when the default was that every accused person was held before trial, the idea of money bail was seen as a liberal, progressive measure that allowed more people to get out of jail. Today the natural default is seen as release until trial and bail is therefore perceived as a conservative, regressive measure that unjustly and unfairly keep poor people in jail. As a result, reformers are trying to reduce or eliminate money bail but they are doing so without thought for the ugly tradeoffs.

The bail reformers frame the issue in a way that I think is misleading. Anytime someone can’t pay for bail they call that “unaffordable bail”. Well that’s literally true but it also gives an incorrect impression of destitute people being denied their freedom because they don’t have a buck. To be sure that does happen but here’s an open secret of the judicial process. Judges sometimes set bail expecting and indeed hoping that it won’t be affordable. Everyone knows this but the bail reformers don’t like to acknowledge it because it brings up the ugly tradeoffs. Consider the following, from Chicago, where the bail reform movement is very active:

…there are about 2,700 people being held in jail because they can’t afford bail but [the Chicago court official noted] 87 percent had a current violent or weapons-related charge, a risk assessment recommending “maximum conditions” if released, an assessment flagging them for violence, and/or an active probation or parole case.

In other words, the judges set a high bail amount for a reason. Under orders from the Chief Judge, however, Chicago has been trying to reduce bail:

Chicago and its surrounding county was supposed to be a beacon of bail reform. After Cook County Chief Judge Timothy C. Evans imposed new rules and made sweeping changes to the bench, advocates hoped that virtually no one would be jailed because they didn’t have the money to make bail.

…At first, it seemed to have the intended effect: In the first month after the order, the number of people who had to post money bonds dropped by more than half, while the number of people who were released on their own recognizance—allowed to leave upon promising to return for trial—doubled. Bail amounts also decreased, as did the number of people in jail.

So what happened when bail reform met reality? Under the new system, judges that set a lot of “unaffordable” bail looked bad but most of the people who can’t pay their bail can’t pay not because they are especially poor but because the judge thought that they were a danger to the public. Judges continue to believe that many defendants are dangerous but now rather than setting bail they simply deny bail altogether. In fact, under the new system the rate of denying bail has risen fourfold. In addition, judges soon discovered that the cost of releasing defendants in terms of crime, failure to appear, and perhaps bad publicity was too high so they started to ignore the demands of the Chief Judge.

…But a year later, [the Coalition to End Money Bond] found that not only are judges still setting bail amounts that defendants can’t afford—meaning that more than 2,700 people are in Cook County Jail because they don’t have enough money [recall these are the 2,700 with serious records, AT] —but that things are getting worse. The initial gains “have steadily evaporated and bond court outcomes are now approaching pre-Order levels,” the report states. The authors note that if judges were sticking to the order, there would be no bail amounts set at levels that defendants can’t afford; instead, it says, nearly 30 percent of bail amounts were unaffordable. Between November 2017 and June 2018, judges set unaffordable bail amounts for more than 1,350 people.

Bail reformers are blind to the tradeoffs that must be made between public safety and the rights of defendants. Since the reformers are blind to these tradeoffs they can’t see that money bail actually helps to alleviate these tradeoffs. Reformers think that money bail simply keeps the poor in jail but in fact money bail is a half-way house between release on own recognizance and hold until trial. Money bail lets judges release more people. Bail reformers assume that if they eliminate money bail then judges will release everyone. In fact, as the Dylann Roof case illustrates, that is never going to happen. And when the public realizes that judges are releasing lots of defendants who subsequently commit more crimes there will be a backlash, as is already evident in Chicago. By eliminating the half-way house of money bail, bail reformers force judges to either release or hold until trial. Some people who under the current system are released on bail will, under the new system, be held until trial. Indeed, the unintended consequence of bail reform may be that more people are held until trial with no possibility of release.

Sometimes poor people are unfairly held until trial. Eliminating money bail, however, is a crude and dangerous approach to this problem. Instead we should deal with it directly by flagging and reevaluating jailed, non-violent offenders with low bail amounts, use alternative release measures such as ankle bracelets and most importantly, we should look to the constitution. The founders understood the ugly tradeoffs which is why the constitution guarantees the right to a “speedy trial.”  Unfortunately, that right today is widely ignored. My route to reform would begin by putting teeth back into the constitutional right to a speedy trial.

Addendum: Illinois doesn’t allow commercial bail so I haven’t mentioned bounty hunters but in other parts of the country their role in the criminal justice system is important, even if widely misunderstood and disparaged. My paper (with Eric Helland) shows that bounty hunters are more effective than the police at recapturing escaped defendants. More specifically, compared to similar defendants released using other methods, defendants released on commercial bail are much more likely to show up at trial and are much more likely to be recaptured should they flee. See also my adventures as a bounty hunter.

Unintended Consequences of Information Bans

Luke Froeb at Managerial Econ covers a number of cases in which information bans have led to unintended and negative consequences:

When I was at the Bureau of Economics at the FTC, we were asked by Congress whether using credit histories to price car insurance was discriminatory.  The resulting FACTA report found that:

  1. as a group, African-Americans and Hispanics tend to have lower scores than non-Hispanic whites and Asians.
  2. …scores effectively predict risk of claims within racial and ethnic groups.
  3. The Commission could not develop an alternative scoring model that would continue to predict risk effectively, yet decrease the differences in scores among racial and ethnic groups.

As a result, banning the use of credit scores would result in insurers finding other, less good and possibly discriminatory methods of distinguishing high from low risks, like selling insurance only in low risk areas.  Good drivers living in higher risk areas would be “pooled” with other drivers living in the high risk area, and would have to pay higher rates.

Previous studies (here and here) finds an analogous effect of preventing criminal background checks in employment, that doing so increases racial discrimination against African American men.

Adam Smith’s words are evergreen:

The man of system, on the contrary, is apt to be very wise in his own conceit…He seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board. He does not consider that the pieces upon the chess-board have no other principle of motion besides that which the hand impresses upon them; but that, in the great chess-board of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might choose to impress upon it. If those two principles coincide and act in the same direction, the game of human society will go on easily and harmoniously, and is very likely to be happy and successful. If they are opposite or different, the game will go on miserably, and the society must be at all times in the highest degree of disorder.

What Do We Learn from Amazon and the Minimum Wage?

Amazon’s widely touted increase in its minimum wage was accompanied by an ending of their monthly bonus plan, which often added 8% to a worker’s salary (16% during holiday season), and its stock share program which recently gave workers shares worth $3,725 at two years of employment. I’m reasonably confident that most workers will still benefit on net, simply because the labor market is tight, but it’s clear that the increase in the minimum wage was not as generous as it first appeared.

What lessons does this episode hold for minimum wage research? Amazon increased its wages voluntarily but suppose that the minimum wage had been increased by law. What would have happened? Clearly, Amazon would have, at the very least, eliminated their bonus plan and their stock share plan! In this situation, researchers examining employment data would discover that the increase in the minimum wage did not much lower employment. Such researchers might conclude that minimum wages don’t reduce employment much because the demand for labor is inelastic. The conclusion is correct but the reasoning is false. The correct conclusion and reasoning would be that the minimum wage didn’t reduce employment much because the minimum wage didn’t increase net wages much.

Amazon is a big and newsworthy employer so its actions have been closely monitored but in most cases we never know the myriad ways in which firms respond to a law. Even using administrative data it would be difficult to pick up changes in a stock share plan or a pension plan, as this compensation doesn’t show up in earnings until years after the work is completed. Even a simple employment contract is a complicated bargain with many margins. During the holiday season, for example, Amazon hires a CamperForce of workers who live in RVs and it pays their campsite fees–no big deal, but that is a form of compensation that is hard to find on a W-2. More generally, firms can respond to a minimum wage by changing compensation on non-wage margins, adjusting working conditions, reducing benefits, changing wage growth patterns, and adjusting the type of workers they hire, to give just a few examples–and notice that all of these changes are difficult to measure and none of them have a first-order effect on employment.