Category: Law
When should DOGE scream in public and push for maximum transparency?
Here is a tweet from Elon, I won’t reproduce it directly on MR. Suffice to say it is strongly worded on the visas issue. Here is a summary of that debate. Much of it is about who should rise or fall in status (duh).
I have some simple, to the point free advice for the DOGERs — the public is not always with you. Making your fight more public, and putting it more on social media, is no guarantee of victory, and indeed it often boosts the chance you will lose or be stymied.
Right now there is an anti-immigration mood, for better or worse, in many countries. But how many voters (former immigrants aside) know what these different types of visas mean, or how many o1s are given out in a year? Yet a lot of influential tech people, and tech donors, know this information pretty well.
So in a non-public fight, you have a big advantage. Trump could maintain or up the number of o1 visas, or make other changes to please the tech people, and few MAGA voters would be very aware of this. But when you scream about this issue, and make it A BATTLE, suddenly it becomes “your pro-immigration sentiment vs. the anti-immigration sentiment of the voters.”
And that is a fight which is very easy to lose. It becomes “The Current Thing,” and everyone is paying attention to the new status game.
So please develop a better sense of when to keep your mouths shut and work behind the scenes.
Full-length documentary on the life and legacy of Rene Girard
Very well done.
The New FDA and the Regulation of Laboratory Developed Tests
The FDA under President Trump and new FDA head Martin Makary should rapidly reverse the FDA’s powergrab on laboratory developed tests. To recap, laboratory developed tests (LDTs) are the kind your doctor orders, they are a service not a product and are not sold directly to patients. Congress has never given the FDA the authority to regulate LDTs. Indeed, in 2015, Paul Clement, the former US Solicitor General under George W. Bush, and Laurence Tribe, a leading liberal constitutional lawyer, wrote an article that rejected the FDA’s claims writing that the “FDA’s assertion of authority over laboratory-developed testing services is clearly foreclosed by the FDA’s own authorizing statute” and “by the broader statutory context.”
Moreover, in addition to legal reasons there are sound public policy reasons to reject FDA regulation of LDTs. Lab developed tests have never been FDA regulated, except briefly during the pandemic when the FDA used the declaration of emergency to issue so-called “guidance documents” saying that any SARS-COV-II test had to be pre-approved by the FDA. Thus, the FDA reversed the logic of emergency. In ordinary times, pre-approval was not necessary but when speed was of the essence it became necessary to get FDA pre-approval. The FDA’s pre-approval process slowed down testing in the United States and it wasn’t until after the FDA lifted its restrictions in March that tests from the big labs became available.
In a remarkably prescient passage, Clement and Tribe (2015, p. 18) had warned of exactly this kind of delay:
The FDA approval process is protracted and not designed for the rapid clearance of tests. Many clinical laboratories track world trends regarding infectious diseases ranging from SARS to H1N1 and Avian Influenza. In these fast-moving, life-or-death situations, awaiting the development of manufactured test kits and the completion of FDA’s clearance procedures could entail potentially catastrophic delays, with disastrous consequences for patient care.
We are seeing the same kind of FDA-caused delay for tests for bird-flu.
Moreover, unlike some of the proposals associated with incoming HHS head Robert Kennedy, reversing the FDA on lab-developed tests has significant support from a wide-variety of experts. Here, for example, is the American Hospital Association:
…we strongly believe that the FDA should not apply its device regulations to hospital and health system LDTs. These tests are not devices; rather, they are diagnostic tools developed and used in the context of patient care. As such, regulating them using the device regulatory framework would have an unquestionably negative impact on patients’ access to essential testing. It would also disrupt medical innovation in a field demonstrating tremendous benefits to patients and providers.
The Trump administration has a number of options:
…the LDT Final Rule was promulgated in time to escape Congressional Review Act scrutiny; however, the executive branch and a Republican-controlled Congress have other tools to limit or vitiate FDA’s authority. These include, in no particular order:
The U.S. Department of Health and Human Services (HHS) could revoke the LDT Final Rule. The recission of a rule is treated the same as the promulgation of a new rule. If HHS revokes the final rule, the cases will likely be dismissed as moot. The timing of such action is uncertain at this time.
FDA could extend or revise its policies of enforcement discretion. LDTs are currently subject to FDA’s phaseout policy which has five stages, the last of which begins in May 2028. Specific categories of IVDs will continue under an enforcement discretion policy indefinitely as described in the preamble to the final rule. HHS could quickly issue such a revised policy or policies without prior public comment if it determines such policy meets the threshold in 21 CFR 10.115(g)(2).
Congress could act. With a Republican-controlled House and Senate to start the new Trump administration, there is a chance that efforts to legislate the regulation of LDTs could be reignited. Based on prior congressional efforts, it is likely that such legislation would place LDTs under control by CMS and CLIA, rather than require LDTs to comply with FDA requirements.
HHS could let the litigation continue. The new administration may view the U.S. District Court for the Eastern District of Texas to be sympathetic to the Plaintiffs’ arguments and therefore proceed unabridged assuming the final rule will be struck-down, if that is indeed the deregulatory objective of the new administration.
The U.S. Department of Justice (DOJ) could act concerning the litigation. DOJ options are constrained by ethics rules but DOJ could request to amend its filings, pause the case pending rule-making proceedings, or take other actions intended to stall or moot the litigation in a deregulatory fashion.
Jefferson’s DOGE (that was then, this is now)
Jefferson swiftly undid twelve years of Federalism. He allowed the Sedition Act to expire and adopted a more catholic naturalization law. He reduced the federal bureaucracy — small even by today’s standards — particularly in the Treasury Department (a slap at Hamilton, who had been Secretary under Washington), slashing the number of employees by 40 percent and eliminating tax inspectors and collectors altogether. He cut the military budget in half, which was then 40 percent of the overall federal budget. He eliminated all federal excise taxes, purging the government of what he called Hamilton’s “contracted, English, half-lettered ideas.” Reluctantly he kept the First Bank of the United States, but paid off nearly half the national debt. “No government in history,” the historian Gordon S. Wood has observed, “had ever voluntarily cut back on its authority.”
That is from the new and very good book Martin van Buren: America’s First Politician, by James M. Bradley. Later things were different:
Martin van Buren went into office deermined to avoid Andrew Jackson’s fateful staffing mistakes. The backbiting and intrigue wasted two years of Jackson’s presidency. This van Buren could not afford.
And a wee bit later:
Then the voters had their say. The November elections in New York were an absolute bloodbath for the Democrats. There were 128 elections for assembly in 1837, and the Whigs won 101 of them.
The book is well-written.
Incarceration sentences to ponder
My analysis reveals a significant change in political beliefs since being incarcerated. There is an increased effect of changing political beliefs for women and people of color incarcerated. The effect reveals that people of color are becoming, either for the first time or further aligned, with the Republican Party since being incarcerated.
That is from researcher Hope Martinez. And here is the explanation for the mechanism:
The experience of violence and abuse while incarcerated extends the tools of white supremacy in the prison system by influencing feelings of shame, hopelessness, and cultural inferiority, further aligning vulnerable groups to conservatism and whiteness.
Via tekl.
Midnight regulations on chip access
Let us hope the Biden administration does not do too much damage on its way out the door (WSJ):
The U.S. is preparing rules that would restrict the sale of advanced artificial-intelligence chips in certain parts of the world in an attempt to limit China’s ability to access them, according to people familiar with the matter.
The rules are aimed at China, but they threaten to create conflict between the U.S. and nations that may not want their purchases of chips micromanaged from Washington.
…The purchasing caps primarily apply to regions such as Southeast Asia and the Middle East, the people said. The rules cover cutting-edge processors known as GPUs, or graphic processing units, which are used to train and run large-scale AI models.
Should we not want to bring the UAE more firmly into the American orbit? Is there not a decent chance they will have the energy supply for AI that we are unwilling to build domestically? Might not these regulations, over time, encourage foreign nations to become part of the Chinese AI network? More generally, why should an outgoing administration be making what are potentially reversible foreign policy decisions for the next regime?
Tax arbitrage through your business
That is the topic of my latest Bloomberg column, here is one bit:
This phenomenon is one reason that many office jobs in Nordic countries seem so pleasant. The workers have nice lunches and the use of comfortable and stylish furniture, which they are not taxed on, though of course their take-home pay may be less.
If you think that such workplace comforts make people happier than cash, then you may approve of such arrangements. And it is one vision for how to make society marginally less competitive.
An alternative model is that, with a proliferation of workplace perks and a diminution of earning power, workers become somewhat less ambitious on the earnings front. Peer norms may change, and the dynamism and innovation of the economy can decline accordingly. There are, in fact, signs of these problems in current-day Europe.
And this:
A recent study looked at some comparable effects in Portugal where the in-kind benefits accrue to a firm’s owners rather than its workers. When people own enough of a firm to control its behavior, they charge some of their personal consumption to the firm. Or, to put it another way: They draw more in-kind income from the firm, and take less cash. That lowers their total tax burden.
For the top quintile of the Portuguese income distribution, once those people are able to control a business, about 20% to 30% of their consumption expenditures are switched to benefits reaped within the firm. For the top 1% of earners, attaining a position of business manager is associated with an almost 18% drop in monthly expenditures. And lest there be any doubt about what’s happening here, the paper notes that “business expenditures on hotels and restaurants significantly increase by 9.8% in the birthday month of the owner-manager and by 6.1% in the birthday month of the owner-manager’s spouse.”
Worth a ponder.
Marriage markets in everything (tax arbitrage!)
Looking to marry someone with $1m+ of short-term capital gains (LA California) for tax savings (I have $1m+ in losses) and split the savings
I (unfortunately) lost a bunch of money this year with some risky gambles and have ~$1.2m of context of capital losses.
I would like to marry someone with very large ($1m+) short-term capital gains and split the difference on the tax savings.
I am proposing keeping ~40c for every $1 of capital losses I provided for myself and offering you the remainder (~10c or so, $120k context if you are at the highest tax bracket). The formal agreement can be formalized with a lawyer in relation to the marriage
Slight preference for females but open to males too (preference is just to avoid having to explain why I (straight male) married a man in the future).
Prefer if you are in the LA / Socal Area as that’s where I’m located.
That is from Reddit, via Stephen J.
Jennifer Pahlka on DOGE
An excellent piece, one of the best I have read all year. Here is the concluding paragraph:
We can wish that the government efficiency agenda were in the hands of someone else, but let’s not pretend that change was going to come from Democrats if they’d only had another term, and let’s not delude ourselves that change was ever going to happen politely, neatly, carefully. However we got here, we may now be in a Godzilla vs Kong world. Perhaps we’re about to get a natural experiment in which Elonzilla faces off with Larry ElliKong. One of the things we need to be ready to learn is that Elonzilla could lose. Or worse, since Elon and Larry are friends, the expected disruptive could get co-opted. And what would that say about the problem? Conjuring Elon is not bringing a gun to a knife fight. It was never a knife fight.
Recommended.
The Effects of Gender Integration on Men
Evidence from the U.S. military:
Do men negatively respond when women first enter an occupation? We answer this question by studying the end of one of the final explicit occupational barriers to women in the U.S.: in 2016, the U.S. military opened all positions to women, including historically male-only combat occupations. We exploit the staggered integration of women into combat units to estimate the causal effects of the introduction of female colleagues on men’s job performance, behavior, and perceptions of workplace quality, using monthly administrative personnel records and rich survey responses. We find that integrating women into previously all-male units does not negatively affect men’s performance or behavioral outcomes, including retention, promotions, demotions, separations for misconduct, criminal charges, and medical conditions. Most of our results are precise enough to rule out small, detrimental effects. However, there is a wedge between men’s perceptions and performance. The integration of women causes a negative shift in male soldiers’ perceptions of workplace quality, with the effects driven by units integrated with a woman in a position of authority. We discuss how these findings shed light on the roots of occupational segregation by gender.
That is all from
Tabarrok on Bail
I appeared on the Bail in the Midwest Podcast (Apple) to talk about crime and bail. Here is one bit:
I’ve talked about capturing these people and recapturing them and that of course is what you see on television. That’s the sexy part of it but actually a lot of what is going on, as you well know, is that the bail bondsmen understand the system much better than the the clients do. So what they’re often doing is helping their clients to navigate the system and to remind them that “you have a court date”. They call them up and send them a text, “don’t forget you have to be at court at this time in this place,” you know these these people are not necessarily putting it on their Google Calendar right? So the bail bondsmen they really perform a social service in helping people to navigate the intricacies of the criminal justice system at a time of high stress.
Spotify: https://open.spotify.com/episode/7dwB1NX43CEqNzBA2crSDp
Podcast Index: https://podcastindex.org/podcast/5314589?episode=30862010733
Should crypto receive a tax exemption?
Probably not, or so I argue in my latest Bloomberg column. Excerpt:
The most obvious argument against the proposal is simply that uniform taxation is better than selective tax exemptions. If a lower capital gains tax rate is preferable, then the goal should be to make a smaller cut that applies to all assets. Exempting a single kind of asset is likely to lead to abuses. You might think that boosting crypto is important now, but which sector or asset will be selected next for special treatment? It may be one you don’t think deserves it.
And:
Another problem is that tax exemption is probably not the best route to crypto normalization. What crypto assets and institutions require is predictable treatment, and on that score the nomination of Paul Atkins to lead the SEC is a good sign. Is a capital gains tax rate of zero even sustainable? A future Democratic president could raise the rate back to standard levels, or higher yet. The crypto industry would still be whipsawed by politics.
A tax exemption for crypto also would skew the population of crypto investors, and not necessarily in a beneficial fashion. The US economy offers a variety of options for tax-free savings, ranging from 401(k) plans to IRAs to pension funds. These vehicles make the most sense for investors who are liquid enough to put aside some money and lose immediate access to their funds.
It would be unfortunate if crypto became a preferred tax-free savings vehicle for lower-income groups. Crypto prices may well remain volatile in the future, and crypto investments are still more likely to be associated with scams and questionable business practices. This is obviously true even if you, like me, see plenty of legitimate uses for crypto assets and institutions.
And:
Another issue is one of tax arbitrage. If crypto assets truly are not taxed on their capital gains, many other investment vehicles might, over time, be repackaged in crypto form. Rather than holding some equity in a company, why not hold a crypto token backed by that same company? That is hard to do under today’s laws and regulations, but it may well become easier under a Trump administration, which seems committed to the normalization of crypto. That normalization, however beneficial it may eventually prove, should not be allowed to serve as a way to dodge taxes.
“Be careful what you wish for, you might get it…”
My excellent Conversation with Stephen Kotkin
It was so much fun we ran over and did about ninety minutes instead of the usual hour. Here is the audio, video, and transcript. Here is part of the episode summary:
Tyler sat down with Stephen to discuss the state of Russian Buddhism today, how shamanism persists in modern Siberia, whether Siberia might ever break away from Russia, what happened to the science city Akademgorodok, why Soviet obsession with cybernetics wasn’t just a mistake, what life was really like in 1980s Magnitogorsk, how modernist urban planning failed there, why Prokofiev returned to the USSR in 1936, what Stalin actually understood about artistic genius, how Stalin’s Georgian background influenced him (or not), what Michel Foucault taught him about power, why he risked his tenure case to study Japanese, how his wife’s work as a curator opened his eyes to Korean folk art, how he’s progressing on the next Stalin volume, and much more.
And here is one excerpt:
COWEN: What did you learn from Michel Foucault about power, or indeed anything else?
KOTKIN: I was very lucky. I went to Berkeley for a PhD program in 1981. I finished in 1988, and then my first job was at Princeton University in 1989. In the middle of it, I went for French history, and I switched into Habsburg history, and then finally, I switched into Russian Soviet history. I started learning the Russian alphabet my third year of the PhD program when I was supposed to take my PhD exams, so it was a radical shift.
Foucault — I met him because he came to Berkeley in the ’80s, just like Derrida came, just like Habermas came, Claude Lévi-Strauss, the anthropologist, came through. It was California. They were Europeans, and there was a wow factor for them. Foucault was also openly gay, and San Francisco’s gay culture was extraordinarily attractive to him. It was, unfortunately, the epoch of the AIDS epidemic.
One time, I was at lunch with him, and he said to me, “Wouldn’t it be amazing if somebody applied my theories to Stalinism?” I’m sitting there, okay, I’m 23 years old. Imagine if you had traveled to Switzerland in the late 19th century, and you went up in those Engadin mountains, and you were at some café in the mountain air, and there’s this guy with a huge forehead and hair up in the air sitting there, and you went and introduced yourself. You said, “Hello, I’m Tyler,” and he said, “Hello, I’m Friedrich Nietzsche.” You would say, “Well, geez, this is interesting. I should have more conversations with you.”
So, that’s the experience I had. I had read Foucault in seminar because it was very fashionable to do so, obviously, especially at Berkeley, especially in a culture that tilts one way politically, and I think you’ll guess which way that might be. But I didn’t understand what he said, so I went up to him as a naïf with this book, Madness and Civilization, which we had been forced to read, and I started asking him questions. “What does this mean? What does this mean? What is this passage? This is indecipherable.”
He patiently explained to the moron that I was what he was trying to say. It sounded much more interesting coming from him verbally, sitting just a few feet away, than it had on the page. I was lucky to become the class coordinator for his course at Berkeley. He gave these lectures about the problem of the truth-teller in Ancient Greece.
It was very far removed from . . . I had no classical training. Yes, I had Latin in high school because I went to Catholic school, and it was a required subject. I started as an altar boy with the Latin Mass, which quickly changed because of what happened at Vatican II. But no Greek, so it was completely Greek to me. Forgive me, that wasn’t planned that I was going to say that. It just happened spontaneously.
Anyway, I just kept asking him more questions and invited him to go to things, and so we would have lunches and dinners. I introduced him to this place, Little Joe’s in Little Italy, part of San Francisco, which unfortunately is no longer there. It was quite a landmark back then, and then he would repair after dinner to the bathhouses in San Francisco by himself. I was not part of that. I’m neither openly nor closeted gay, so that was a different part of Foucault that I didn’t partake in, but others did.
Anyway, I would ask him these things, and he would just explain stuff to me. I would say, “What’s happening in Poland?” This is the 1980s, and he would say things to me like, “The idea of civil society is the opiate of the intellectual class.” Everybody was completely enamored of the concept of civil society in the ’80s, especially via the Polish case, and so I would ask him to elucidate more. “What does that mean, and how does that work?”
He told me once that class in France came from disease in Paris — that it wasn’t because of who was a factory worker, who wasn’t a factory worker, but it was your neighborhoods in Paris and who died from cholera and who didn’t die from cholera. A colleague of ours who was another fellow graduate in Berkeley ended up writing a dissertation using that aside, that throwaway line.
I was able to ask him these questions about everything and anything. What he showed me — this is your question — what he showed me was how power works, not in terms of bureaucracy, not in terms of the large mechanisms of governance like a secret police, but how all of that is enforced and acted through daily life. In other words, the micro versions of power. It’s connected to the big structures, but it’s little people doing this. That’s why I said totalitarianism is using your agency to destroy your own agency.
That means denouncing your neighbors, being encouraged to denounce your neighbors for heresies, and participating in that culture of denunciation, which loosens all social trust and social bonds and puts you in a situation of dependency on the state. You’re a gung-ho activist using your agency, and the next thing you know, you have no power whatsoever. So, those are the kinds of things that I could talk to him about.
After he passed away from AIDS in the summer of 1984 — it was the AIDS epidemic, horrific. He passed away, and we had a memorial for him. I was still a PhD student, remember. I didn’t finish until ’88. There was this guy, Michel de Certeau, who wrote a tribute to Foucault in French that he was going to deliver at the event. It was called “The Laughter of Foucault.” I had these conversations with de Certeau about his analysis of Foucault and the pleasure of analytic work, which had been a hallmark of Foucault.
De Certeau taught me a phrase called “the little tactics of the habitat,” which became one of the core ideas of my dissertation and then book, Magnetic Mountain, about this micropower stuff. Even though Foucault was gone, I was able to extend the beginning of the conversations with Foucault through de Certeau.
I learned how power works in everyday life, and how the language that you use, and the practices like denunciation that you enact or partake in, help form those totalitarian structures, because the secret police are not there every minute of every day, so what’s in your head? How are you motivated? What type of behavior are you motivated for?
We say, “Okay, what would Stalin do in this situation?” Many people approach their lives — they’ve never met Stalin; they’ll never meet Stalin — but they imagine what Stalin might do. That gets implanted in their way of thinking; it becomes second nature. I learned to discuss and analyze that through Foucault.
I have to say, I didn’t share his analysis that Western society was imprisoning, that the daily life practices of free societies were a form of imprisonment in its own way. I never shared that view, so it wasn’t for me his analysis of the West that I liked. It was the analytical toolkit that I adapted from him to apply to actual totalitarianism in the Soviet case.
Excellent throughout.
Why are no trillion dollar companies being created in Europe?
That is the theme of a new Substack by Pieter Garicano, here is one excerpt:
These answers, according to a recent paper by Olivier Coste and Yann Coatanlem, two French investors, miss the point: the reason more capital doesn’t flow towards high-leverage ideas in Europe is because the price of failure is too high.
Coste estimates that, for a large enterprise, doing a significant restructuring in the US costs a company roughly two to four months of pay per worker. In France, that cost averages around 24 months of pay. In Germany, 30 months. In total, Coste and Coatanlem estimate restructuring costs are approximately ten times greater in Western Europe than in the United States…
Consider a simple example. Two large companies are considering whether to pursue a high risk innovation. The probability of success is estimated at one in five. Upon success they obtain profits of $100 million, and the investment costs $15 million.
One of the companies is in California, where if the innovation fails the restructuring costs $1 million. The other company is in Germany, where restructuring is 10x more expensive, it costs $10 million (a conservative estimate).
The expected value of this investment in California is a profit of $5 million. In Germany the expected value is a loss of $3 million.
Recommended.
China markets in everything
This is very interesting, and I think a world first: a local government in China has just sold its sky, literally. This is the government of Pingyin County, Jinan, Shandong Province who sold for 924 million yuan (approximately $130 million) a 30-year concession to operate and maintain its low-altitude economic projects to a company called Shandong Jinyu General Aviation Co., Ltd. The “low-altitude economy” is a big trend in China at the moment. XPeng, one of China’s leading EV manufacturers, recently released a low-altitude flying car for instance. Drone deliveries are becoming increasingly common in Chinese cities, and various regions are actively developing low-altitude transportation networks. Shanghai, for instance, plans to establish 400 low-altitude flight routes by 2027. But this is the first time a local government has monetized its low-altitude airspace…
Here is more from Arnaud Bertrand. Via Jesper.