Category: Law
*Hun Sen’s Cambodia*
That is the new and excellent book by Sebastian Strangio, which you can think of as a post-Sihanouk look at the country from a political economy point of view. Here are just a few bits:
The cruelty and callousness that allowed jilted wives to order and commit such brutal attacks on young women also had its echo in history. As the historian Michael Vickery has written, patterns of sudden and extreme violence had deep roots in Cambodia, especially against those groups and individuals defined in some way as enemies. Through cruel violence found its fullest expressions under Pol Pot, it long predated Democratic Kampuchea, stemming from cultural notions of face, honor, and revenge, in which personal grudges (kum) could elicit a disproportionate and overwhelming response.
And:
Hun Sen’s rise over the past two decades has been accompanied by the rise of what might be called HunSenomics — a blend of old-style patronage, elite charity, and predatory market economics. Since the transition to the free market in 1989, Hunsenomics has succeeded in forging a stable pact among Cambodia’s ruling elites, but has otherwise done little to systematically tackle the challenges of poverty and development.
And:
Because Hunsenomics provides few incentives for sustainable agricultural development, Cambodia’s land and water resources remain drastically underutilized. Just a third of Cambodia’s total land area is currently under cultivation — a much lower proportion than in neighboring countries. Only 18 percent of this land was irrigated as of 2005, compared to 33 percent in Thailand and 44 percent in Vietnam, and due to lack of maintenance only a fifth of irrigation systems were fully functional. As a result, rice yields per hectare lag far behind the likes of Vietnam and Thailand.
Definitely recommended, and as Dan Klein and I used to say to each other “You so much learn the whole book.”
The highest-ranking rooster has priority to announce the break of dawn
Tsuyoshi Shimmura, Shosei Ohashi, and Takashi Yoshimura have a new paper:
The “cock-a-doodle-doo” crowing of roosters, which symbolizes the break of dawn in many cultures, is controlled by the circadian clock. When one rooster announces the break of dawn, others in the vicinity immediately follow. Chickens are highly social animals, and they develop a linear and fixed hierarchy in small groups. We found that when chickens were housed in small groups, the top-ranking rooster determined the timing of predawn crowing. Specifically, the top-ranking rooster always started to crow first, followed by its subordinates, in descending order of social rank. When the top-ranking rooster was physically removed from a group, the second-ranking rooster initiated crowing. The presence of a dominant rooster significantly reduced the number of predawn crows in subordinates. However, the number of crows induced by external stimuli was independent of social rank, confirming that subordinates have the ability to crow. Although the timing of subordinates’ predawn crowing was strongly dependent on that of the top-ranking rooster, free-running periods of body temperature rhythms differed among individuals, and crowing rhythm did not entrain to a crowing sound stimulus. These results indicate that in a group situation, the top-ranking rooster has priority to announce the break of dawn, and that subordinate roosters are patient enough to wait for the top-ranking rooster’s first crow every morning and thus compromise their circadian clock for social reasons.
In case you had any doubts. The pointer is from Michelle Dawson.
Monitoring the Language Police
The University of New Hampshire’s Bias-Free Language Guide came in for widespread criticism earlier this week for possibly chilling speech by labeling words such as “American,” “illegal alien,” “foreigners,” “mothering,” and “fathering” as problematic and non-preferred.
Commendations are due, however, to university president Mark Huddleston. The UNH reports:
The associate vice president for community, equity and diversity removed the webpage this morning after a meeting with President Huddleston. The president fully supports efforts to encourage inclusivity and diversity on our campuses. He does not believe the guide was in any way helpful in achieving those goals. Speech guides or codes have no place at any American university.
The minimum wage, the great reset, and the research of Isaac Sorkin
From Free Exchange at The Economist:
In the first [paper] Isaac Sorkin of the University of Michigan argues that firms may well substitute machines for people in response to minimum wages, but slowly. Mr Sorkin offers the example of sock-makers in the 1930s, which took years to switch to less labour-intensive machines after the federal minimum wage was brought in. He also explains how this finding squares with other research. Most studies look at past minimum wage increases that were not inflation-proofed. Firms may decide not to go through the hassle of investing in labour-saving machines if the minimum wage will affect them less over time. But they could respond differently to a more permanent increase.
Mr Sorkin crunches the numbers, using a model of the American restaurant industry in which companies choose between employees and machines. He investigates the effect of a permanent (ie, inflation-linked) increase in the minimum wage and shows that the tiny short-run effects on employment normally seen are fully consistent with a long-run response over 100 times larger. The lack of evidence for a big impact on employment in the short term does not rule out a much larger long-term effect.
In a second paper, written with Daniel Aaronson of the Federal Reserve Bank of Chicago and Eric French of University College London, Mr Sorkin goes further, offering empirical evidence that higher minimum wages nudge firms away from people and towards machines. The authors look at the type of restaurants that close down and start up after a minimum-wage rise. An increase in the minimum wage seems to push some restaurants out of business. The eateries that replace them are more likely to be chains, which are more reliant on machines (and therefore offer fewer jobs) than the independent outlets they replace. This effect has not been picked up before because the restaurants which continue to operate do not change their employment levels, so the jobs total does not shift much in the short run.
The piece offers further points of interest.
Inputs are imported too
Ted Diamantis, an importer of Greek wines who is based in Chicago, has been helping his suppliers stock up on bottles, labels and printing ink. The barrels, though, have him worried.
In two or three weeks, some of Greece’s winemaking regions will begin their annual grape harvest. The wineries Mr. Diamantis buys from age their wine in barrels from Italy and France, but Greece’s capital controls make it difficult for them to send money out of the country to pay for the barrels they need for this season. No barrels means no wine for Mr. Diamantis.
“Without the ability to access your capital, you can’t buy anything,” said Mr. Diamantis, who is in Greece meeting with his business partners. “The marketplace is frozen.”
That is from Stacy Cowley at the NYT. Similar examples illustrate why Greece leaving the euro, even if a better idea for the longer term, would not have been such a picnic in the short run. Exports would have collapsed, not boomed.
A very good sentence
We care about African animals and British people, but ignore African people and British animals.
That is from Andrew Pearson, via Ben Southwood. And here is an interesting WaPo Lindsey Bever article about the economics of hunting big game.
Data on lion hunting (Cecil fact of the day)
Killing lions right outside of park boundaries seems like a systemic problem, not just a one-off instance:
Between 1999 and 2004 we undertook an ecological study of African lions (Panthera leo) in Hwange National Park, western Zimbabwe to measure the impact of sport-hunting beyond the park on the lion population within the park, using radio-telemetry and direct observation. 34 of 62 tagged lions died during the study (of which 24 were shot by sport hunters: 13 adult males, 5 adult females, 6 sub-adult males). Sport hunters in the safari areas surrounding the park killed 72% of tagged adult males from the study area. Over 30% of all males shot were sub-adult (<4 years). Hunting off-take of male lions doubled during 2001-2003 compared to levels in the three preceding years, which caused a decline in numbers of adult males in the population (from an adult sex ratio of 1:3 to 1:6 in favour of adult females). Home ranges made vacant by removal of adult males were filled by immigration of males from the park core. Infanticide was observed when new males entered prides. The proportion of male cubs increased between 1999 and 2004, which may have occurred to compensate for high adult male mortality.
The 2007 paper is here (pdf), by Loveridge, Searle, Murindagamo, and MacDonald, via Hollis Robbins.
The long-run consequences of Russian serfdom
They are not good, as evidenced by a new paper by Buggle and Nafziger (pdf):
This paper examines the long-run consequences of serfdom in the countries of the former Russian Empire. We combine novel data measuring the intensity of labor coercion on the district level in 1861 with several intermediate and present-day outcomes. Our results show that past serfdom goes along with lower economic well-being today. We apply an instrumental variable strategy that exploits the transfer of serfs on monastic lands in 1764 to establish a causal link between past serfdom and current economic development. Tracking the evolution of city populations throughout Soviet times corroborates the finding of persistent economic differences. Furthermore, our results suggest a political economy mechanisms linking higher historical economic inequality with worse public goods provision (roads and education), as well as lower urbanization and structural change towards factory production, as explanation for this persistence. We do not find differences in contemporaneous cultural attitudes and preferences.
The pointer is from Pseudoerasmus.
What the Not Very Serious People among the Not Very Serious People were up to
Arresting the central bank’s governor. Emptying its vaults. Appealing to Moscow for help.
These were the elements of a covert plan to return Greece to the drachma hatched by members of the Left Platform faction of Greece’s governing Syriza party.
That is from the FT, and there is more:
The plan demonstrates the apparently ruthless determination of Syriza’s far leftists to pursue their political aims — but also their lack of awareness of the workings of the eurozone financial system.
For one thing, the vaults at the Nomismatokopeion currently hold only about €10bn of cash — enough to keep the country afloat for only a few weeks but not the estimated six to eight months required to prepare, test and launch a new currency.
The Syriza government would have quickly found the country’s stash of banknotes unusable. Nor would they be able to print more €10 and €20 banknotes: From the moment the government took over the mint, the European Central Bank would declare Greek euros as counterfeit, “putting anyone who tried to buy something with them at risk of being arrested for forgery,” said a senior central bank official.
“The consequences would be disastrous. Greece would be isolated from the international financial system with its banks unable to function and its euros worthless,” the official added.
For all the flaws of the euro, the case for it has never been made more effectively.
Sanity on financial transactions taxes
Overall, the dogmatic argument that a financial transactions tax is unworkable is clearly false. It operates in a lot of countries. The wide-eyed hope that such a tax can be a truly major revenue source also seems to be false. In part because of concerns over the risk of creating counterproductive incentives–either just to structure transactions in a way that minimizes such a tax or even to react in a way that reduces liquidity and increases volatility in financial markets–the rate at which such taxes are set is typically pretty low. As the authors write, “the idea that an FTT can raise vast amounts
of revenue—1 percent of gross domestic product (GDP) or more—has proved inconsistent with actual experience with such taxes.”The question with any tax is not whether it is perfect, because every real-world tax has some undesirable incentive effects. The question is whether a certain tax might have a useful role to play as part of the overall portfolio of real-world taxes. For what it’s worth, this particular review of the evidence leaves me skeptical that expanding the currently existing US financial transactions tax from its very low present level would be a useful step.
That is from Timothy Taylor.
The progressive closure of San Francisco
…San Francisco does not have a massive network of regional public transit connecting hundreds of different high-density, walkable communities to the city. In fact, neighborhoods that foster urban life and convenience are tremendously scarce in the Bay Area. All of this means the pressure on San Francisco has proven to be even greater than other cities in the country.
Regardless of these realities, most San Francisco progressives chose to stick with their familiar stance of opposing new development, positioning themselves as defenders of the city’s physical character. Instead of forming a pro-growth coalition with business and labor, most of the San Francisco Left made an enduring alliance with home-owning NIMBYs. It became one of the peculiar features of San Francisco that exclusionary housing politics got labeled “progressive.” (Organized labor remained a major political force throughout this time period, and has allied with both pro-growth and anti-growth forces, depending on the issue.) Over the years, these anti-development sentiments were translated into restrictive zoning, the most cumbersome planning and building approval process in the country, and all kinds of laws and rules that make it uniquely difficult, time-consuming, and expensive to add housing in San Francisco.
That is from Jed Kolko, hat tip to Conor Sen.
Patent Trawls and the Total Profit Rule
Patents should be made more difficult to obtain, say by raising the obviousness standard or more speculatively by requiring patent terms to vary with investment. Aside from these types of changes, however, damages for infringement can also be made more reasonable. The issue is especially pronounced for design patents.
In the recent Apple v. Samsung case, the infringement of a handful of “look and feel” design patents resulted in Apple being awarded Samsung’s total profits on the infringing devices. A friend of the court brief from industry heavyweights, Dell, eBay, Facebook, Google, Hewlett-Packard, Limelight Networks, Newegg, and SAS Institute explains:
In this closely watched case, the panel upheld a jury’s award of the entirety of Samsung’s profits on smartphones that were found to have infringed three Apple design patents relating to a portion of the iPhone’s outer shell and one graphical-user-interface screen. Although the design patents covered only minor features of those complex electronic devices, the panel rejected Samsung’s argument that damages must be limited to the profits made from those infringing features. See slip op. 25-28. It instead concluded that the relevant statute, 35 U.S.C. § 289, “explicitly authorizes the award of total profit from the article of manufacture bearing the patented design.” Id. at 26-27. Viewing the smartphone as a single “article of manufacture,” the panel held that the statute required it to award the total profit where the “innards of Samsung’s smartphones were not sold separately from their shells as distinct articles of manufacture to ordinary purchasers.” Id. at 27-28.
A typical device might involve many design elements and what the total profit rule means is that a finding of infringement on any of these elements can get you all of the profits. The total profits rule is an invitation to rent seek. For a complex product, trawling the patent databases will almost always find some handful of patents that some court might rule were infringed. Defendants are put in the unenviable position of having to be right one hundred percent of the time while trawls need only be right once.
Do we really want to turn serifs into billion-dollar weapons of commercial war?
Hat tip: Mark Thorson.
Addendum: Keep in mind the general point: Patents are supposed to protect innovators but when weak claims of imitation are easily made and well-rewarded then patent law can harm innovators and reduce innovation, as the Tabarrok Curve illustrates.
U.S. minimum wage fact of the day
In Arkansas, the median hourly wage is $14.01. In Mississippi, it’s an astoundingly low $13.76. It’s likewise below $15 in six other states, and three U.S. territories.
That is from Catherine Rampell. In such situations, a $15 an hour minimum wage is…shall we say…risky?
Modern German nationalism
There are plans to legally restrict the export of some paintings from Germany, and so far the proposed policy is not working out well. Collectors are rushing to take their loans off museum walls and get them out of the country, or hold them incognito.
The law would apply to works of historical importance more than fifty years old, worth more than 150,000 euros, and judged by regional boards to be of historic importance. It is interesting which works may fall under this designation:
In one interview, she [Germany’s culture minister] raised the prospect that foreign works could be classified as national treasures. For example, she said the Warhol silk-screens of Elvis Presley and Marlon Brando that were sold by the state-owned casino were “emblematic” of the collecting history of the Rhineland.
Apparently Gerhardt Richter is a hard-core libertarian, like most other painters, because he asserted: “No one has the right to tell me what I do with my images.”
For the pointer I thank Cyril Morong, a loyal MR reader.
The Happy Meal Fallacy
Some restaurants offer burgers without fries and a drink. These restaurants cater to low-income people who enjoy fries and drinks but can’t always afford them. To rectify this sad situation a presidential candidate proposes The Happy Meal Act. Under the Act, burgers must be sold with fries and a drink. “Burgers by themselves are not a complete, nutritious meal,” the politician argues, concluding with the uplifting campaign slogan, “Everyone deserves a Happy Meal!”
But will the Happy Meal Act make people happy? If burgers must come with fries and a drink, restaurants will increase the price of a “burger.” Even though everyone likes fries and a drink they may not like the added benefits by as much as the increase in the price of the meal. Indeed, this must be the case since consumers could have bought the meal before the Act but chose not to. Requiring firms to sell benefits that customers value less than their cost makes both firms and customers worse off.
The Happy Meal Fallacy is fairly obvious when it comes to happy meals but now let’s consider the debate over the gig economy and the hiring of employees versus contractors. Employees are entitled to benefits that contractors are not. Thus the standard conclusion is that classifying workers as contractors “is great for employers but potentially terrible for workers.” Wrong. Employees get their wages with fries and a drink while contractors get wages only. Would a law requiring firms to provide all workers with fries and a drink help workers?
If firms are required to provide benefits to contractors they will lower the contractor wage. But how do we know the extra benefits aren’t worth the reduction in wages? If the extra benefits were worth more to workers than they cost firms, firms would have eagerly provided these benefits as a way of increasing profits. Firms can profit whenever buyers are willing to pay more for a product than its cost. Benefits are a product that workers buy from firms.
Workers buy benefits from firms by offering to work at a lower wage. Firms are happy to sell benefits when workers will accept a wage reduction that covers the cost of the benefit. Thus, if workers value a benefit by more than its cost, there is a mutually profitable deal to be made. The firm will provide the benefit and wages will fall by more than the cost but by less than the value of the benefit. Both firms and workers will be better off. It’s implausible that firms and workers will overlook mutually profitable exchanges. Thus requiring firms to provide benefits with every job means requiring firms to sell benefits that workers value less than their cost and that makes both firms and workers worse off–just like requiring restaurants to sell burgers with fries and a drink makes firms and customers worse off.
If the cost of the benefits far exceed their value to workers, the firm will close. But even if the firm doesn’t close, firms and workers will both be worse off. The exact division of the burden will vary depending on particulars but the workers who value wages the highest and benefits the least will be the most burdened. Often these will be the lowest income workers.
The Happy Meal Fallacy can lead to very unhappy firms and workers.
Addendum: The theory of compensating differences in wages with benefits was pioneered by Adam Smith. See Matt Kahn for a short overview and Sherwin Rosen for a full treatment of the theory. Jonathan Gruber and Craig Olson offer empirical evidence. The MRU video, The Tradeoff Between Fun and Wages presents another application.