Category: Law

*Divided: Why We’re Living in an Age of Walls*

That is the new book by Tim Marshall, yes Trump and Israel and the like, but it goes much further than that.  Here is one excerpt:

Since 1971, Assam’s population has more than doubled, from 14.6 million to over 30 million, much of which is due to illegal immigration.  Hindu nationalists have argued that the area might have a Muslim majority by 2060.  In 2015 there were 19 million Hindus and 11 million Muslims, nine of the twenty-seven districts being Muslim majority.  Equally importantly, the 2017 census showed that people who are ethnically Assamese are now a minority in the state as a whole, and as people continue to arrive their proportions will continue to drop.

This is a depressing but thought-provoking book.  Bangladesh, by the way, is smaller than the state of Florida, but has 165 million people.  And I had not known there are about 800,000 Nigerians in South Africa.  You can order the book here.

Asian-American admissions at Harvard

Here is basic NYT coverage of the case:

University officials did concede that its 2013 internal review found that if Harvard considered only academic achievement, the Asian-American share of the class would rise to 43 percent from the actual 19 percent.

Here is the plaintiff’s brief by Peter S. Arcidiacono.  Here is David Card’s brief in defense of Harvard and Asian-American admissions.  Here is Arcidiacono’s response to Card.

Gabriel Rossman noted on Twitter: “Once you control for lacrosse, founding an NGO in high school, legacy status, alumni evaluation of personality, woke personal essays, and a 23&me test for EDAR, there’s no effect”

My take is simple.  Harvard is risk-averse with respect to the stream of future donations, as are many other schools.  Asian-American admissions don’t have the same donating track record as the white students traditionally cultivated by Harvard and other top universities.  Either Asian-Americans may seek out “diaspora philanthropy,” or they simply may have a more cynical attitude toward top institutions that they basically have never had any control over.

Furthermore, there is a common fear — repugnant to me I should add — that if a student body becomes “too Asian,” many white students will be less interested in going there.  I taught at UC Irvine for several years and found it to be a delightful experience, but this is exactly what many schools are afraid of (the UCI student body is disproportionately Asian, and the honors class I taught in my first year had only one non-Asian student in it).

And so they come up with every excuse possible — sometimes cemented in by self-deception — for maintaining a “balanced” student body.

It is incorrect to call it “racism,” but it is non-meritocratic and we should move away from those attitudes as quickly as possible.

In related news, the University of Chicago is moving away from the use of SAT scores in admissions.  The cynical might suggest this is so they are more insulated from potential lawsuits and also so they have more discretion in admissions.  If Chicago feels the need to do this, perhaps the system really is buckling under the strain of all these outside pressures.

Nonetheless, I predict ultimately the status quo will not change very much.  I just don’t see a strong enough popular or judicial constituency for righting the wrongs done to Asian-Americans.  Some kind of partial concession will be made, various terms and standards will be somewhat redefined, and we’ll be back to “rinse and repeat.”  Meritocracy: can’t live with it, can’t live without it.

I am pleased to report that none of this tomfoolery goes on at my home institution, which is highly and truly diverse.

*Blockchain and the Law*

The authors are Primavera De Filipp and Aaron Wright, and the subtitle is The Rule of Code and it is published by Harvard University Press.  I am sent many books on crypto and blockchains, but this is the one I feel is useful to an educated readership.  It’s not for specialists, but if you have a good general economics and also law background, as one would expect from MR readers, but don’t “get” crypto, this is the book-length treatment for you.  It sees merit and potential in crypto, without buying into any particular claim just for the sake of hype.

It is striking that crypto learning and debate really has not occurred through books much at all, nor in the mainstream media.  It has been through white and yellow papers, various on-line fora, Medium essays, Twitter, Reddit threads, and a variety of other venues.  I believe this is a paradigmatic example of how knowledge spreads these days and it should be studied very seriously as such, because it is the most extreme case of the new methods I know.

Towards An International Court of Smart Contract Arbitration

Firms involved in international commerce routinely contract that disputes are to be resolved by private courts of arbitration such as the International Court of Arbitration, the London Court of International Arbitration or the Singapore International Arbitration Center. These courts of arbitration compete for clients and thus have an incentive to resolve disputes fairly, quickly and inexpensively. Courts compete, for example, to provide arbiters who are experts not simply in the law but in the relevant area of commerce. The New York Convention of 1958 says that private arbitration decisions will be enforced by the national courts of any of the 159 signatories; thus private arbitration leverages national enforcement but is otherwise not tethered to national law (e.g. in US see, Mitsubishi v. Soler Chrysler, National Oil v. Libyan Sun). Over time private courts of international arbitration have developed a system of law that transcends nations, an anational law–this is the new lex mercatoria.

I propose that courts analogous to the courts of arbitration that govern international commerce be created to govern smart contracts in virtual space. Arbitration of smart contracts will develop a new private law that will evolve to meet the needs of virtual commerce, a true lex cryptographia. At first, it might seem contradictory to advocate for courts of smart contracts and the development of lex cryptographia. Isn’t the whole point of smart contracts that no courts or lawyers are needed? Similarly, lex cryptographia is usually understood to refer to the smart contracts themselves–code is law–rather than to law governing such contracts. In fact, it is neither desirable nor possible to divorce smart contracts from law.

Smart contracts execute automatically but only simple contracts such as those involving escrow are really self-enforcing. Most contracts, smart or dumb, involve touchstones with the real world. Canonical examples such as the smart contract that lets you use an automobile so long as the rent has been paid illustrate the potential for disputes. Bugs in the code? Disputes over the quality of the car? What happens when a data feed is disputed or internet service is disrupted? Smart contracts applied to the real world are a kind of digital rights management with all of DRMs problems and annoyances.

Some of these problems can be dealt with online using decentralized mechanisms. But we don’t yet know which decentralized mechanisms are robust or cost-effective. Moreover, when marveling at the wisdom of crowds we should not forget the wisdom of experts. Nick Szabo once remarked that if contract law was suddenly forgotten it would take hundreds of years to recover the embedded wisdom. Contract law, for example, is filled with concepts like mistake, misrepresentation, duress, negligence and intention that are not easily formalized in code. Contract law is a human enterprise. And the humans who write contracts want law with terms like negligence precisely because these terms fill in for gaps which cannot be filled in and formalized in contracts let alone in code.

I am enthusiastic about smart contracts on blockchains. Smart contracts will significantly reduce transaction costs and thus let people create valuable, new private orderings. But it will be more profitable to integrate law and code than to try to replace law with code. Integration will require new ways of thinking. The natural language version of a contract–what the parties intend to agree to–may not map precisely to the coded version. Arbiters will be called in to adjudicate and thus will have to be experts in code as well as in law. Smart contracts can be made by anonymous parties who may want a dispute resolved not just privately but anonymously. Smart contracts can be designed with escrow and multisignatory authority so arbiters will also become decision enforcers. All of these issues and many more will have to be understood and new procedures and understandings developed. The competitive market process will discover novel uses for smart contracts and the competitive market process among arbiters will discover novel law. Law will adjust to business practice and business practice to law.

In short, the best way to create a vital new lex cryptographia is through competitive, private arbitration built on the model that already governs international commerce.

Maybe British common law wasn’t so great for colonies after all

Legal Origins and Female HIV

Siwan Anderson

More than one-half of all people living with HIV are women, and 80 percent of all HIV-positive women in the world live in sub-Saharan Africa. This paper demonstrates that the legal origins of these formerly colonized countries significantly determine current-day female HIV rates. In particular, female HIV rates are significantly higher in common law sub-Saharan African countries compared to civil law ones. This paper explains this relationship by focusing on differences in female property rights under the two codes of law. In sub-Saharan Africa, common law is associated with weaker female marital property laws. As a result, women in these common law countries have lower bargaining power within the household and are less able to negotiate safe sex practices and are thus more vulnerable to HIV, compared to their civil law counterparts. Exploiting the fact that some ethnic groups in sub-Saharan Africa cross country borders with different legal systems, we are able to include ethnicity fixed effects into a regression discontinuity approach. This allows us to control for a large set of cultural, geographical, and environmental factors that could be confounding the estimates. The results of this paper are consistent with gender inequality (the “feminization” of AIDS), explaining much of its prevalence in sub-Saharan Africa.

That is from the latest American Economic Review.  Here is an earlier version and related material.

Why we still should be optimistic about free trade

That is the topic of my latest Bloomberg column, here is one bit:

A lot of the recent cross-border migration is planting a hugely positive, pro-trade legacy that will yield dividends for decades to come. The Chinese, Indians, Nigerians and many other groups around the world will continue to build economic connections, even when the countries involved aren’t always so geographically close. I expect the positive trade gains from these connections and personal networks will outweigh the downside from some higher tariffs in the meantime. Ultimately the opportunities are there, and the biggest problem is the lack of human talent to execute on them.

I do however see one big problem:

The internet shows some signs of breaking down into separate networks, connected only imperfectly. The Chinese “Great Firewall” has proved robust, and recently the European Union has moved toward creating its own set of stringent privacy and data protection laws, such as the new General Data Protection Regulation standards. Sitting here in Norway for a conference, I find I am unable to access many American websites, such as the Chicago Tribune, which are not (yet?) GDPR-compliant. There is thus a danger that the internet will become carved into three or more separate systems, to the detriment of trade, data flows and eventually personal  connections.

Do read the whole thing.

How much is deep sea fishing subsidized?

While the ecological impacts of fishing the waters beyond national jurisdiction (the “high seas”) have been widely studied, the economic rationale is more difficult to ascertain because of scarce data on the costs and revenues of the fleets that fish there. Newly compiled satellite data and machine learning now allow us to track individual fishing vessels on the high seas in near real time. These technological advances help us quantify high-seas fishing effort, costs, and benefits, and assess whether, where, and when high-seas fishing makes economic sense. We characterize the global high-seas fishing fleet and report the economic benefits of fishing the high seas globally, nationally, and at the scale of individual fleets. Our results suggest that fishing at the current scale is enabled by large government subsidies, without which as much as 54% of the present high-seas fishing grounds would be unprofitable at current fishing rates. The patterns of fishing profitability vary widely between countries, types of fishing, and distance to port. Deep-sea bottom trawling often produces net economic benefits only thanks to subsidies, and much fishing by the world’s largest fishing fleets would largely be unprofitable without subsidies and low labor costs. These results support recent calls for subsidy and fishery management reforms on the high seas.

Emphasis added, that is by Enric Sala,, via Anecdotal.

Why is there no lead-homicide connection in Eastern Europe?

Children growing up in former communist CEE countries during the 1980s were subjected to horrific amounts of industrial pollution, including extreme levels of prolonged lead exposure. Since lead is theorized to be a primary culprit in exacerbating violent crime, you would assume there would be a sizeable discrepancy in the homicide rate between, say, former East Germany and West Germany, or Western Europe and Eastern Europe as a whole. But the difference in the homicide/violent crime rate is negligible, with many former communist CEE countries having a lower homicide rate than Western Europe. I suspect the same is true when comparing the rate of mental disorders, which is another malady that is supposedly influenced by exposure to high levels of industrial pollution.

That is from commentator Aurel at SSC.

Markets in everything

Meditation app Calm provides what it calls “bedtime stories for grown-ups” (an eclectic mix of lullabies, fairy tales, and short stories in audiobook form). But it’s now added highlights from the GDPR legislation to its roster, narrated aloud by former BBC radio announcer Peter Jefferson, who is famous in the UK for his readings of the Shipping Forecast — a nightly maritime weather report that’s cherished by non-maritime listeners for its repetitive and ritual qualities.

Jefferson doesn’t read the entire legislation (“which would take more than all night”), but he picks out more than half an hour of material, which is enough to send anyone to sleep. You can listen to an excerpt for yourself below, or download the app from Google Play or the App Store. Unfortunately, you have to pay to unlock the full GDPR reading (and a number of other Calm features), but you can test them all with a seven-day free trial.

Here is more, via the excellent Samir Varma.

GDPR is centralizing the market

GDPR, the European Union’s new privacy law, is drawing advertising money toward Google’s online-ad services and away from competitors that are straining to show they’re complying with the sweeping regulation.

The reason: the Alphabet Inc. GOOGL +2.58% ad giant is gathering individuals’ consent for targeted advertising at far higher rates than many competing online-ad services, early data show. That means the new law, the General Data Protection Regulation, is reinforcing—at least initially—the strength of the biggest online-ad players, led by Google and Facebook Inc.

Here is the full WSJ story.

Software is Eating the World-Tesla Edition

Last week Consumer Reports refused to recommend Tesla’s Model 3 because it discovered lengthy braking distances. This week Consumer Reports changed their review to recommend after Tesla improved braking distance by nearly 20 feet with an over the air software update!

Last week, after CR’s road test was published, Tesla CEO Elon Musk vowed that the automaker would get a fix out within days.

Until now, that type of remote improvement to a car’s basic functionality had been unheard of. “I’ve been at CR for 19 years and tested more than 1,000 cars,” says Jake Fisher, director of auto testing at Consumer Reports, “and I’ve never seen a car that could improve its track performance with an over-the-air update.”

…In retesting after the software update was downloaded, the sedan stopped in 133 feet from 60 mph, an improvement of 19 feet.

…The improved braking distances raised the Model 3’s Overall Score enough for the car to be recommended by CR

Tesla is also responding to other concerns raised by Consumer Reports. It’s quite astounding that Tesla is able to improve something as physical as braking distance with a software update and also astounding that they are able to update so quickly–even pure software firms don’t respond this quickly! Quite the win for Tesla.

The larger economic issue is that every durable good is becoming a service. When you buy a car, a refrigerator, a house you will be buying a stream of future services, updates, corrections, improvements. That is going to change the industrial organization of firms and potentially increase monopoly power for two reasons. First, reputation will increase in importance as consumers will want to buy from firms they perceive as being well-backed and long-lasting and second durable goods will be rented more than bought which makes it easier for durable goods producers not to compete with themselves thus solving Coase’s durable good monopoly problem.

Will Ethiopia be the next China?

That is the topic of my latest Bloomberg column, noting that they have been averaging about ten percent growth for the last decade.  I basically make a “deep roots of state capacity” argument, here is one excerpt:

Ethiopia also had a relatively mature nation-state quite early, with the Aksumite Kingdom dating from the first century A.D. Subsequent regimes, through medieval times and beyond, exercised a fair amount of power. Most important, today’s Ethiopians see their country as a direct extension of these earlier political units. Some influential Ethiopians will claim to trace their lineage all the way to King Solomon of biblical times.

In other words, the process of organized, national-level governance has been underway for a long time. It was this relative strength of Ethiopian governance that allowed the territory to fend off colonialism, a rare achievement. It is also why, when you travel around the country, a lot of the basic cuisine doesn’t change much: Dishes are seen as national and not regional…

Like many Iranians, they think of themselves as a civilization and not just a country. They very self-consciously separate themselves from the broader strands of African history and culture. And, as in China, they hold an ideological belief that their country is destined to be great again.

Do read the whole thing.

Who’s complacent?

Or is he just an *******?:

An upstate New York judge Tuesday ordered a 30-year-old man to move out of his parents’ house after they went to court to have him ejected.

Michael Rotondo told the judge he knows his parents want him out of the split-level ranch they share. But he argued that as a family member, he’s entitled to six months more time.

State Supreme Court Justice Donald Greenwood rejected that as outrageous, the Post-Standard of Syracuse reported.

Rotondo told reporters he’ll appeal.

Mark and Christina Rotondo brought the court case after several eviction letters offering money and other help were ignored.

Here is the full story, via Michelle Dawson.