Category: Law

SpaceX Versus the Department of Justice

The DOJ is suing SpaceX for focusing its hiring on US citizens and permanent residents. Yes, you read that right.

Semafor: The DOJ alleges that SpaceX discouraged refugees and asylum seekers from applying to open positions and refused to hire those that did, according to the complaint.

According to the complaint, SpaceX job postings wrongly stated that only U.S. citizens and lawful permanent residents could apply for openings, and that “SpaceX’s hiring practices were routine, widespread, and longstanding, and harmed asylees and refugees.”

Under U.S. law, both asylum seekers and refugees are protected from hiring discrimination regardless of citizen status.

The lawsuit is bizarre. I am sure Elon would be happy to hire some refugees from the Russian space program. So why does SpaceX advertise that only US citizens and lawful permanent residents can apply for some jobs? Because that’s what they understand the law requires:

People “don’t understand the chilling effect of the federal export control laws” that SpaceX allegedly cited in its job listings as a reason for excluding refugees and asylees as candidates, writes Abhi Tripathi, the director of mission operations at UC Berkeley’s Space Sciences Laboratory. The International Traffic in Arms Regulations (ITAR) only allows U.S. citizens and green card holders to access information in companies that make spacecraft and rockets for national security reasons. “Employees are PERSONALLY liable with huge fines and imprisonment if the wrong info gets out,” Tripathi says. It’s unclear which positions SpaceX allegedly refused refugee and asylum applicants for.

Now SpaceX may be wrong about the technicalities of the law, the distinction, as I understand it, rests on the difference between US Persons and US Citizens, but they are 100% correct that the DoD frowns on non-citizens working for military related ventures. As a result, jobs restricted to US citizens are common in industries that interact with the military or that involve technologies which are potentially dual-use, such as jobs at SpaceX. Jobs that require security clearances are, of course, typically restricted to US citizens but so are many jobs not requiring clearances. Here, for example, is an ad for an engineer at Northrup Grumman in aerospace structures that does not require security clearance but advertises US Citizen only. The U.S. military, of course, mandates citizenship or a green card for enlistment, a policy that is shared by another federal employer—can you guess? Surprise. The Department of Justice.

Below, for example, is an ad for a recreational specialist to work for the DOJ’s Bureau of Prisons–this is not a job involving national security!–but the ad states clearly that U.S. Citizenship is Required. Most federal government jobs, in fact, are restricted to US citizens. The Federal Reserve even requires US citizenship to get an internship.

In short, it seems that SpaceX is being singled out for punishment for a practice that is widespread in the industry and often encouraged by, sometimes required by, and usually practiced by the Federal government.

The Mother Church of the Common Law

The Temple Church is a small church in London built in 1185 by the Knights Templar. It’s now hidden behind Fleet Street amid the Middle and Inner Temple, two of the four “Inns of Court”the educational institutions and professional associations for common law barristers and judges. The Temple Church is known as the Mother Church of the Common Law both for its role in the creation of the Magna Carta and because of its location amid the Temple area.

King John used the Temple Church as his headquarters in 1214-1215 and it’s from here that he was forced to issue the first of the Magna Cartas. The real hero of the Magna Carta, however, was the knight William Marshal who negotiated the original agreement, reissued it again under his authority as regent to the boy King, Henry III, and then reissued it again–after, at the age of 70 personally leading troops into battle and defeating a French invasion–thereby cementing the Magna Carta and the rights it guarantees into British life.

William Marshall’s tomb can be found in the Temple Church.

Middle and Inner Temple were the heart of the common law for hundreds of years and the presence of the Temple Church meant that the idea of a bill of rights was always nearby. So much so that the Temple played a role in the American Revolution and not just as inspiration. Six members of the Inner or Middle Temple were signatories to the Declaration of Independence and seven were signatories to the US Constitution.

The Mother Church of the Common Law is well worth a visit if you are in London.

The Jones Act Enforcer

The Offshore Marine Service Association has a ship, the Jones Act Enforcer, whose only job is to spy on and harass European vessels that are installing wind farms off the coast of New England.

BostonGlobe: To get Vineyard Wind done, developers are turning to vehicles such as the Sea Installer, which arrived in Salem in early August. Owned by the Danish firm DEME Group, the vessel is one of the few on the planet capable of installing GE Haliade-X wind turbines that are the size of a skyscraper into the ocean floor.

Measuring more than 430 feet in length and 150 feet wide, Sea Installer is a “jack up” vessel that lifts itself out of the water on legs more than 300 feet long. Once elevated, the vessel becomes a platform where an immense crane, capable of lifting more than 1,600 tons, can install the tower sections, nacelle, and blades for each turbine.

The Jones Act Enforcer does not board the suspected ships. Instead, as it did this day with the Sea Installer, the crew photographs the vessels from about half a nautical mile away and, if they suspect violations, files complaints with US Customs and Border Protection and the Coast Guard. The outcomes of the complaints are confidential, Smith said.

The law prohibits foreign ships from transporting goods between two points within the US. But the actions that ships can and can’t take on American waters gets very technical.

For example, the Jones Act Enforcer observed Go Liberty, an American ship, perched beneath the Sea Installer. Smith said the American vessel was most likely transporting materials to the site so the Sea Installer could place a monopile — the bright yellow steel piles that support the turbines — into the ocean.

However, if the Sea Installer received material from the Go Liberty and then physically moved to another monopile in a different location, that act could violate the Jones Act.

The Jones Act Enforcer also observed the Italian ship Giulio Verne, which was working to connect underseas cables to an electric substation that would power the wind turbines. In this case, Smith claimed the Italian ship was violating the law because it was moving the cables from one point (the sea bed) to another point (the substation).

The stupidity, it burns. But Biden supports the Jones Act.

Compensating Kidney Donors

LA Times: Never in the field of public legislation has so much been lost by so many to one law, as Churchill might’ve put it. The National Organ Transplant Act of 1984 created the framework for the organ transplant system in the United States, and nearly 40 years later, the law is responsible for millions of needless deaths and trillions of wasted dollars. The Transplant Act requires modification, immediately.

We’ve got skin in this game. We both donated our kidneys to strangers. Ned donated to someone who turned out to be a young mother of two children in 2015, which started a chain that helped an additional two recipients. And Matt donated at Walter Reed in 2021, after which his kidney went to a Seattleite, kicking off a chain that helped seven more recipients, the last of whom was back at Walter Reed.

…The National Organ Transplant Act prohibits compensating kidney donors, which is strange in that in American society, it’s common to pay for plasma, bone marrow, hair, sperm, eggs and even surrogate pregnancies. We already pay to create and sustain life.

…Compensation models have been proposed in the past. A National Institutes of Health study listed some of the possibilities, including direct payment, indirect payment, “in kind” payment (free health insurance, for example) or expanded reimbursements. After much review, we come down strongly in support of indirect payment, specifically, a $100,000 refundable federal tax credit. The tax credit would be uniformly applied over a period of 10 years, in the amount of $10,000 a year for those who qualify and then become donors.

This kind of compensation is certainly not a quick-cash scheme that would incentivize an act of desperation. Nor does it commoditize human body parts. Going forward, kidney donation might become partly opportunistic rather than mostly altruistic, as it is now. But would it be exploitative? Not at all.

Long-time readers will know that I have argued for the greater use of incentives in organ donation both for live donors and cadaveric donors. Pecuniary compensation is one possibility but so are no-give, no-take laws that give those who previously signed their organ donor cards priority should they one day need an organ.

The Root of the Problem

It’s almost like the government’s imposing its will on its residents,” Trayon White, the D.C. council member for Ward 8, said at the council’s June 6 legislative meeting. He wasn’t talking about a proposed highway, a subway station, a power plant, or—perish the thought—an apartment building…White said he was concerned about the potential risk to property values and what he sees as a “reasonable fear”…[of] a public-safety concern.” He asked his colleagues to support an emergency resolution to remove them before this happened.

An incredible story by Jerusalem Demas about local politics that starts with small absurdities but raises larger questions. Can you guess the subject of concern?

Deregulating Oregon (from my email)

It is now legal to pump one’s own gas at gas stations in Oregon, making New Jersey the only US state where it’s not. (Article link.) The surprising part of the new Oregon law: The price must be identical for self-serve and attendant-pumped gas. Also, at least half the pumps must have an attendant. I’m no economist, but it does seem like the self-pump patrons will be subsidizing the “free” labor received by the others. I’m also no political scientist, but I wonder if this bit is intentional to dampen the possible success of self-serve gas. I’m also curious what the calculations on the part of station owners will be in terms of how much labor to employ. My estimate would be that if a $15/hr attendant takes about 4 minutes per service and each is $50, labor costs would be adding about 1% to the fuel price, but this would be much higher in places that are less busy and not working constantly, and lower in places that are busy enough to constantly have many overlapping cars being filled. There’s some sort of equilibrium balancing waiting times for attendants and gas prices that awaits…

That is from Raghuveer Parthasarathy.

Fairfax County facts of the day

Northern Virginia might be the safest region in the whole country, based on this Bloomberg analysis of crime and external-cause mortality data. The local commonwealth’s attorney likes to boast that Fairfax is the safest county of its size. Letting more people live there would not change that.

Forty percent of Fairfax residents aged five and older speak a language other than English at home, per the May strategic plan update. The county’s extraordinary ethnic and cultural diversity makes it a paradise for employers and food lovers alike.

That is from Luca Gattoni-Celli, most of the post concerning zoning issues.

More on the Merger Guidelines

Jason Furman and Carl Shapiro write about the merger guidelines. On the thrust of the guideline as political rather than summarzing existing law they are very much in agreement with the Hurwicz and Manne piece that I summarized last week.

Merger guidelines aren’t enforceable regulations. They have also never attempted to be a legal brief or offered an interpretation of the case law. Instead they have described widely accepted economic principles that the Justice Department and the FTC use to analyze mergers. As a result, the guidelines have commanded widespread respect and bipartisan support. Amazingly, for at least 25 years, when regulators have challenged mergers in court, the merging firms themselves have accepted the framework articulated in the guidelines.

The new draft guidelines depart sharply from previous iterations by elevating regulators’ interpretation of case law over widely accepted economic principles. The guidelines have long helped courts use economic reasoning to evaluate government challenges to mergers. They shouldn’t become a debatable legal brief or, worse, a political football.

But in addition Furman and Shapiro make specific critiques:

,,,parts of the draft lack an adequate economic foundation. They contain a structural presumption against many vertical mergers unsupported by theory or evidence. The proposed guideline on acquisitions of products or services that rivals may use to compete includes legal wishful thinking about how commitments made by the merging parties are treated, as the recent court rebuke of the FTC’s attempt to block Microsoft’s acquisition of Activision illustrates.

Likewise, a new guideline states that “mergers should not entrench or extend a dominant position,” where a “dominant position” means a market share of at least 30%. As we read this guideline, many nonhorizontal deals that enable the acquiring firm to become more efficient, and thus gain market share or compete more effectively in adjacent markets, would be considered illegal even if they benefit consumers and workers….we are troubled by the draft guidelines’ claim that efficiencies won’t be counted, even if they benefit consumers and workers, for a merger that furthers a trend toward horizontal concentration or vertical integration. Imagine if regulators had applied such a rule to the automobile industry in the 1910s.

Scrap AML/KYC Laws

Bruce Fenton writing on twitter  X:

It’s time to scrap AML / KYC entirely.

The idea that politicians should know how citizens spend their money is a new and deeply flawed idea.

An entire generation has been fooled into thinking this is a necessary part of finance and the world continues to double down on an unworkable system.

Only 30 years ago when I started my career as a stockbroker/ financial advisor I could call you on the phone and sell you MSFT or IBM stock and I did not need your DOB or your social security number. You didn’t even need to have money in the account.

The 1990s to the post 9-11 Patriot Act (which was a horrible law) saw a radical increase in AML /KYC requirements. These seem to get worse every year.

In my office when we were first required to take a drivers license, the older brokers were incredulous: “What do you mean we need an ID for someone buying stocks?!? What’s next, you need an ID to buy gas or groceries?”

Now, just 25 years later an entire generation thinks this is normal or how it should be. Worse yet, some think the system won’t work without it. The opposite is true — the compliance gums up the works and adds friction where it should not exist.

While the regulator class arrogantly acts as if AML KYC is their birthright and ending it is some sort of untouchable rail, the justifications are weak. Why do we have these regimes? To stop “money laundering”? What is that? Who is the victim? Is it to stop “human trafficking” or “terrorism”? If so, how? Is it to “stop” the 12,000 entities on the OFAC list by messing with the 2,000,000,000 people not on the list?

Are major criminals somehow stopped by this? Has it stopped crime? Even if it did, is it worth burdening millions of firms and billions of people with paperwork and procedures that slow down commerce? Shouldn’t efforts be made to go after the actual criminals rather than encumbering the entire world with an inefficient compliance regime?

Money must be able to flow and move. People must be able to take risks and make investments as they choose. This is the lifeblood of a solid economy and the jobs, growth, prosperity and peace that comes with it. The US (and by extension much of the world due to our influence) is sacrificing jobs, innovation and opportunities by chasing an extremely ineffective and indirect compliance regime.

The entire idea belongs back in the dumpster of history. Let the investigators chase terrorists & human traffickers for those actual crimes and let the other billions of us use and move our money as we wish.

Fenton is correct. As I pointed out earlier, the AML/KYC laws costs about $300 billion a year and recover perhaps $3 billion a year in illicit funds (a tiny, tiny fraction of the amount of illicit revenues). Indeed, AML/KYC laws have probably increased crime because they require so many companies to store personal information which is then vulnerable to hackers. More importantly, it’s absurd that the government forces you to show ID to buy a stock.

The Merger Guidelines

Gus Hurwitz (a former student) and Geoffrey Manne have an excellent piece in the WSJ discussing the FTCs new merger guidelines. First, what are these guidelines?

Since 1968, Justice and the FTC have issued guidelines to help companies understand when a proposed merger might raise antitrust concerns. The guidelines are a nonbinding public statement that describes how the agencies will approach the enforcement of merger laws. They have been updated from time to time to reflect changes in the law and improved economic understanding about the likely effect mergers will have on competition. They are neither a definitive statement of law nor binding on courts.

Over time the guidelines have nevertheless shaped U.S. courts’ understanding of merger law because past updates have striven to state what the law, as applied by courts, is, and have developed analytical tools faithful to that interpretation.

The new guidelines, however, are very different as they attempt not to summarize the law but to create new policy in the absence of legislation from Congress or rulings by the courts, in other words to subvert the rule of law.

…the proposal states what the agencies’ current leadership wishes the law to be and reflects a desire to change merger law by administrative fiat rather than through successful litigation or an act of Congress. Look at the antitrust agencies’ string of recent losses in major merger cases, including Microsoft’s acquisition of Activision and Meta’s acquisition of Within, to see that their views of antitrust law differ substantially from those of the courts.

Judicial acceptance of prior guidelines was a result of the agencies’ reputation as honest brokers of judicial precedent. The proposed guidelines jeopardize that reputation by selectively interpreting the law, relying on outdated precedents, and disregarding more-recent case law.

…This selective bias toward outdated judicial opinions and economic knowledge isn’t likely to impress the courts. The disconnect will lead to deep skepticism, casting a pall over all arguments (even sound ones) made by the Justice Department and FTC antitrust attorneys. The agencies might discover that it would have been better to go to court without guidelines rather than with a contentious interpretation of the law.

Progress

Mass incarceration fundamentally altered the life course for a generation of American men, but sustained declines in imprisonment in recent years raise questions about how incarceration is shaping current generations. This study makes three primary contributions to a fuller understanding of the contemporary landscape of incarceration in the United States. First, we assess the scope of decarceration. Between 1999 and 2019, the Black male incarceration rate dropped by 44%, and notable declines in Black male imprisonment were evident in all 50 states. Second, our life table analysis demonstrates marked declines in the lifetime risks of incarceration. For Black men, the lifetime risk of incarceration declined by nearly half from 1999 to 2019. We estimate that less than 1 in 5 Black men born in 2001 will be imprisoned, compared with 1 in 3 for the 1981 birth cohort. Third, decarceration has shifted the institutional experiences of young adulthood. In 2009, young Black men were much more likely to experience imprisonment than college graduation. Ten years later, this trend had reversed, with Black men more likely to graduate college than go to prison. Our results suggest that prison has played a smaller role in the institutional landscape for the most recent generation compared with the generation exposed to the peak of mass incarceration.

Here is the full article, via a loyal MR reader.  The causes of this advance should be a greater topic of discussion.

Fiona Scott Morton

French ministers lashed out Thursday at the European Commission for picking a U.S. professor for a top antitrust job overseeing U.S. Big Tech firms.

France’s Europe Minister Catherine Colonna said she was “astonished” by the choice of Fiona Scott Morton as chief competition economist, “which deserves to be reconsidered by the Commission.”

Digital Minister Jean-Noël Barrot said the Commission should rethink the hire, which raises “legitimate questions” at a time when the EU is rolling out ambitious digital enforcement legislation.

Here is the full Politico article, and here is her law review piece (with Herbert Hovenkamp) criticizing the Chicago School approach to antitrust law.  Here is her piece (with Michael Kades) on interoperability and tech.  Her views are not mine, but I am quite sure she would boost the quality of analysis and debate in those EU forums.  Perhaps that is not what everyone wants.

States rights tortoise nationalism is the worst tortoise nationalism

You can’t bequeath them to just anyone. Veronica Tomlinson, 52, had thought about leaving Walter, a 24-year-old desert tortoise, to East Coast relatives if she and her husband died first. But state laws prohibit people from moving desert tortoises out of the state where they were adopted. The Tomlinsons, of Las Vegas, have instructions in their will for Walter to be returned to the Tortoise Group, a Nevada-based nonprofit that arranges tortoise adoptions. The couple plan to leave the group their savings and life-insurance money, after paying debts and funeral costs, to cover Walter’s care.

Emphasis is added, not in the original.  Here is the full WSJ story, via Anecdotal.  No Coase theorem for Walter!

China estimate of the day

The paper’s title is “The Largest Insurance Expansion in History: Saving One Million Lives Per Year in China”:

The New Cooperative Medical Scheme (NCMS) rolled out in China from 2003-2008 provided insurance to 800 million rural Chinese. We combine aggregate mortality data with individual survey data, and identify the impact of the NCMS from program rollout and heterogeneity across areas in their rural share. We find that there was a significant decline in aggregate mortality, with the program saving more than one million lives per year at its peak, and explaining 78% of the entire increase in life expectancy in China over this period. We confirm these mortality effects using micro-data on mortality, other health outcomes, and utilization.

It is striking how few Westerns have even heard of this policy, one of the more important global events in recent years.  I do however wish to ask if this estimate is in accord with other, more general estimates from the literature.  The Amish, for instance, don’t see doctors so often and their life expectancy seems to be perfectly fineThe new paper is from Jonathan Gruber, Mengyun Li, and Junjian Yi.

Jeremy Howard on AI Safety and the Age of Disenlightenment

Proposals for stringent AI model licensing and surveillance will likely be ineffective or counterproductive, concentrating power in unsustainable ways, and potentially rolling back the societal gains of the Enlightenment. The balance between defending society and empowering society to defend itself is delicate. We should advocate for openness, humility and broad consultation to develop better responses aligned with our principles and values — responses that can evolve as we learn more about this technology with the potential to transform society for good or ill.

Here is the full paper, let us not forget these basic truths.  Should be put into the new Acemoglu and Lensman model!  (They do political economy, right?)