Category: Law
Can too much cultural similarity cause war?
Akos Lada has a new research paper (pdf) on this question:
Does sharing the same religion, civilization or racial proximity lead to more peaceful relations between countries? This paper argues that cultural similarity can actually cause wars, which occur to combat diffusion. This new theory of war combines the models of Acemoglu and Robinson (2006) and Fearon (1995), and shows that cultural similarity can lead to more warfare when old elites are afraid of losing their position to a newly inspired citizenry, as these elites try to destroy the external source of inspiration. The microfoundation for inspiration is derived from revealed information about the income level under given institutions, which are assumed to have positive correlation with cultural proximity. On the empirical side, I present case studies on the 1848 Revolutions, the 2013 Korean Crisis (using content analysis of official North Korean articles) and on the First World War, as well as statistical analysis on all the wars of the last two centuries.
Here is Lada’s blog post on Ukraine and Russia. Excerpt:
Perhaps because a more democratic Ukrainian government may serve as an example to Russian citizens of how culturally-similar people can be alternatively governed. As history shows, a dictator with an army does not wait for this to happen.
Should we extend EITC to childless workers?
Jason Furmans says yes, here is one bit:
Looking back at the history of poverty and the tax code in the last several decades reveals some important lessons for expanding opportunity and combating poverty going forward, including the value of having a pro-work, pro-family tax code. The most important new prospect in this area is expanding such an approach for households without children, a proposal that President Obama included in his 2015 budget, and an idea that is also being advanced across the political spectrum, from Senator Marco Rubio to Bush Administration economist Glenn Hubbard to Isabel Sawhill at the Brookings Institution.
It becomes more analytical after that. Here are some further basic facts about EITC extension. Here is a 2009 study (pdf).
The expected rate of return from denuclearization has fallen
Right? That is just one piece of fallout from the current crisis. As an American, with little at stake in Ukraine per se, I am glad the country gave up its nuclear weapons, so as to limit the risk of broader conflict. But if I were a Ukrainian citizen, my view would be somewhat different.
Here is an interesting study by Robert Stephen Mathers (pdf) on the denuclearization of Ukraine. It appears to have been written as a term paper for Martin Felstein in 2003. Excerpt:
The back and forth negotiations about Ukraine’s nuclear status would finally end in Moscow in January 1994 with the signing of the Trilateral Statement by Presidents Clinton, Yeltsin and Kravchuk. The agreement held Ukraine to the promise of “the elimination of all nuclear weapons, including strategic offensive arms, located in its territory.” In exchange for these concessions, the U.S. and Russia agreed to preserve Ukraine’s territorial integrity (a primary concern for Ukraine) and ensured that no state would use or threaten to use military force or coercion against it…Ukraine’s main concerns were finally met.
It seems the value of a formal NATO guarantee is falling as well. Rapidly. Various Eastern European countries are asking for stronger or clarified U.S. guarantees. What are they thinking in Latvia? Taiwan? Japan? How about the Israelis negotiating with John Kerry?
For the pointer I thank Bill Badrick.
Ryan Avent on why TPP is a good idea
Second, one of the stated ambitions of both TPP and the Trans-Atlantic Trade and Investment Partnership is reduction in non-tariff barriers, which in most cases add substantially more to goods costs than tariff barriers. According to estimates by the World Bank, for instance, American tariff restrictions on agricultural imports are relatively low on the whole, at just 2.2%. But the tariff equivalent of an all-in measure of restrictiveness, which takes into account non-tariff barriers, jumps to 17.0%. The all-in rates for many of the partners in TPP negotiations are substantially higher; Japan’s all-in tariff equivalent on agricultural imports is 38.3%. South Korea’s is 48.9%. Australia’s is 29.5%.
Third, “implicit protection of services” does indeed impose additional costs. For instance, the cost to foreign providers of some crucial transport and shipping services within the American market is basically infinite. Services account for four times as much economic output as goods production in America but only around one-fifth of American trade. Many services aren’t tradable, of course; haircut tariffs will not be on the TPP agenda. But a growing array are. And rules on service trade have barely changed at all in two decades. TTIP and TPP (as well as the Trade in Services Agreement) are aimed at updating rules on services trade to make it easier to sell insurance, or financial and consulting services, or IT and environmental services, and so on, across borders. Now maybe these deals are “really about” intellectual property, and all-powerful Hollywood has convinced the government to expend a lot of time and effort setting standards for services trade, the better to provide a smokescreen for its own nefarious activities. But I doubt it.
Investment is another key item on the agenda. At present rules on cross-border investment can be pretty ad hoc; a firm interested in buying shares in a business in another country often needs to be careful not to buy too much or not to invest in politically sensitive industries, lest the investment invite political scrutiny. TPP is working to reduce the scope for ad-hockery in interference in investment, which I think we would generally consider to be a good thing. TTIP is as well (that’s what the “I” is all about).
There is more here, useful throughout. I would add that this is also a foreign policy initiative and it will, if successful, allow various smaller countries in the region to resist pressures from various larger countries in same said region.
Software Patents are Not Good Property Rights
A good system of property rights establishes clear borders. Clear borders reduce disputes, encourage investment and promote efficient trade. Software patents, however, often fail to define clear borders. I am one of the amici in a amici curiae brief to the Supreme Court (regarding Alice Corp. v. CLS Bank) on software patents that makes this point:
Such abstract claims as “displaying data in
frames,” “recommending media based on past choices,” “reproducing information in material objects at a
point of sale,” or, as in the present case, using “a third
party . . . to eliminate ‘counterparty’ or ‘settlement’
risk,” simply cannot be reliably construed to define a
reasonable area of covered technology. See Wang, 197
F.3d at 1379; Interactive Gift, 256 F.3d at 1323; Pinpoint, 369 F. Supp. 2d at 995; cf. CLS Bank Int’l v.
Alice Corp. Pty. Ltd., 717 F.3d 1269, 1274 (Fed. Cir.
2013).A general counsel at a technology startup
would be hard-pressed to describe any concrete
bounds or permissible follow-on innovations to her
fellow engineers in the face of such claims. Any
software that resulted in a similar functional result
could be construed as infringing, and any investment
in the commercialization of those technologies could
inevitably carry liabilities, risks, and costs whose
magnitudes are impossible to predict in advance.
Thus, the property system that ostensibly exists to
assure investors that long-term rents are secure does
the very opposite, casting a pall of uncertainty over
the viability of any commercial product that happens
to be adjacent to a lurking abstract claim.
Eli Dourado and I note that the Federal Circuit seems to have quite willfully disregarded the intent of the Supreme Court regarding patents on abstract ideas and I think this case may provide further pushback from the SC.
The proliferation of (illegal?) drone flights
Commercial drones such as the one that left her and two friends with bruises are prohibited in the U.S. That hasn’t stopped a proliferation of flights nationwide that’s far beyond the policing ability of the Federal Aviation Administration, which is laboring to write long-awaited rules governing flights of unmanned aircraft. Drones, which are available online and at hobby shops, have been used to film scenes in The Wolf of Wall Street and to deliver flowers. They’ve been sent aloft to inspect oil-field equipment, capture sporting events, map farmland, and snap aerial photographs for real estate ads.
Some operators plead ignorance of the law. Others claim their flights are permitted under exemptions for hobbyists. Flying model aircraft below 400 feet and away from populated areas is generally permitted, provided it’s for recreation only. There’s not much the FAA can do to stop people from flouting the rules.
There is more here, from Bloomberg Businessweek.
Why was the housing bubble so much worse in Las Vegas?
There is an interesting new Justin Lahart piece, here is one bit from it:
The way Princeton’s Zhenyu Gao sees it, the problem in Las Vegas was that while land was available, constraints were high enough that it took time for homes to get put up — the data on land constraints matches up well with a separate data set on how long it takes to complete the review and approval of residential projects. As a result, it took time for the supply of housing to meet demand.
But investors didn’t appreciate the fact that more supply was eventually going to arrive, and rushed in. Indeed, Mr. Gao shows that areas of the country like Las Vegas fell into a sweet spot, with more investment home purchases than both more land-constrained and less land-constrained areas. Of course, by pushing prices higher the investors invited even more development, and an eventual oversupply of homes that made the bust all the more painful.
I would put it this way: space to build plenty more, and enough slowness in the building process to get over-committed before seeing the supply-side decisions of other investors. The original research is here (pdf).
Does immigration undermine public support for social policy?
Mostly not. Again, Kevin Lewis points us to a fascinating paper:
Does Immigration Undermine Public Support for Social Policy?
David Brady & Ryan Finnigan
American Sociological Review, February 2014, Pages 17-42Abstract:
There has been great interest in the relationship between immigration and the welfare state in recent years, and particularly since Alesina and Glaeser’s (2004) influential work. Following literatures on solidarity and fractionalization, race in the U.S. welfare state, and anti-immigrant sentiments, many contend that immigration undermines public support for social policy. This study analyzes three measures of immigration and six welfare attitudes using 1996 and 2006 International Social Survey Program (ISSP) data for 17 affluent democracies. Based on multi-level and two-way fixed-effects models, our results mostly fail to support the generic hypothesis that immigration undermines public support for social policy. The percent foreign born, net migration, and the 10-year change in the percent foreign born all fail to have robust significant negative effects on welfare attitudes. There is evidence that the percent foreign born significantly undermines the welfare attitude that government “should provide a job for everyone who wants one.” However, there is more robust evidence that net migration and change in percent foreign born have positive effects on welfare attitudes. We conclude that the compensation and chauvinism hypotheses provide greater potential for future research, and we critically consider other ways immigration could undermine the welfare state. Ultimately, this study demonstrates that factors other than immigration are far more important for public support of social policy.
There is an ungated version here.
Is Islamic political control bad for women’s empowerment?
Maybe not, once we control properly for endogeneity:
Islamic Rule and the Empowerment of the Poor and Pious
Erik Meyersson
Econometrica, January 2014, Pages 229–269Abstract:
Does Islamic political control affect women’s empowerment? Several countries have recently experienced Islamic parties coming to power through democratic elections. Due to strong support among religious conservatives, constituencies with Islamic rule often tend to exhibit poor women’s rights. Whether this reflects a causal relationship or a spurious one has so far gone unexplored. I provide the first piece of evidence using a new and unique data set of Turkish municipalities. In 1994, an Islamic party won multiple municipal mayor seats across the country. Using a regression discontinuity (RD) design, I compare municipalities where this Islamic party barely won or lost elections. Despite negative raw correlations, the RD results reveal that, over a period of six years, Islamic rule increased female secular high school education. Corresponding effects for men are systematically smaller and less precise. In the longer run, the effect on female education remained persistent up to 17 years after, and also reduced adolescent marriages. An analysis of long-run political effects of Islamic rule shows increased female political participation and an overall decrease in Islamic political preferences. The results are consistent with an explanation that emphasizes the Islamic party’s effectiveness in overcoming barriers to female entry for the poor and pious.
There are ungated versions here. That is via Kevin Lewis, who surveys other interesting papers on religion here.
What would Fedcoin look like?
JW, a loyal MR reader, writes to me:
It’s 2018, Janet Yellen has been renominated to be Fed Chair by President Walker having served a successful first term of solid growth and low inflation. However, to achieve such growth Yellen has had to maintain very low interest rates. Then, disaster strikes. France leaves the Euro unexpectedly and causes a world wide credit crunch. It’s 2008 all over again. President Walker is unwilling to do any stimulus. Yellen decides that a regime change is necessary at the Fed.
Taking to heart MMT, Keynes, Bernanke, Yellen merges Keynes’ idea of burying money in jars with Helicopter Ben’s idea of dropping money from the sky. The Fed announces that the United States is going to create its own cryptocurrency, which can be exchanged for US dollars at any US regulated depository institution. No or minimal fees can be charged by the banks for this exchange. They will be created just like Bitcoin, decentralized and according to a mining algorithm. American citizens can mine them, create businesses to do so, and put people to work. Unlike Bitcoin, the supply of DollarCoin will not be finite, capped at 21 million. Instead, DollarCoin will be targeted to grow at an inflation rate consistent with an NGDPLT of 20 trillion US dollars. Liquidity is restored. No QE is necessary. CNBC starts cheerfully referring to DollarCoin as YellenCoin.
Meanwhile, Bitcoin plummets in value. With the US Government now accepting a cryptocurrency, its advantages vanish. People’s belief in its value goes away, and looking down, it crashes. Remittances are now sent to relatives in Africa and Latin America by YellenCoin, just as people once did briefly in Bitcoin.
It is interesting to think about why this is so implausible. There are a few reasons:
1. YellenCoin would be a means of payment but not the medium of account. This would move the economy into a currency substitution model, a’la Girton and Roper, but would not have the effects of a straightforward monetary expansion.
2. Cryptocurrencies are much more likely to be used for some kinds of transactions than others. So this act of “monetary policy” would be very much non-neutral.
3. Central banks are not supposed to be seen as taking major risks or overturning the established order of things. They are highly risk-averse when it comes to their public reputations, and their very much prefer sins of omission to sins of commission. If the Fed established Fedcoin and something went wrong with the idea, they would be subject to especially heavy blame. In the meantime, few people (are there exceptions?) are blaming them for not establishing a cryptocurrency.
Why many government jobs are a bad idea for many academics
When the Obama White House requested that I serve on the National Council on the Humanities, I agreed to have my name put forward. I went through the lengthy FBI check, including repeated probing of friends about my nonexistent drug use.
But in the end the White House decided not to move my nomination forward. There were two reasons. First, taxes. In 2009 and 2010, the years of my divorce, I filed my taxes late — four weeks and 10 days, respectively. Second, I was not willing to commit to never criticizing the administration, nor to restricting my publishing agenda to topics that were unlikely to be controversial. There is just no point trying to be a public intellectual if you can’t speak your mind. This requirement was conveyed and discussed through phone calls; I have no written record to prove it. But that was how it went.
Why did the White House want such restrictions? Lawyers told me that the administration didn’t want to have to deal with even one news cycle being overtaken by media frenzy about something some low-level official had said. The administration was trying to survive in our 21st-century media environment.
That is from Danielle Allen.
Should we worry that Netflix is buying transit rights from Comcast?
I say no (for background read here, and Dan Rayburn has very useful coverage, dispelling a variety of myths). To be sure, one may believe there are monopoly problems at the retail level in the cable sector. We could alleviate those with local loop unbundling and/or deregulation, as I discussed yesterday. But within that setting, Netflix paying Comcast won’t make that monopoly worse.
In support of this conclusion, I would cite two literatures. The first is Ronald Coase’s analysis of payola. If a gatekeeper can extract payments from input suppliers, the end result of that process need not be bad for consumer welfare and very often is positively good for consumers. In a nutshell, the gatekeeper won’t want to exclude the programs which consumers really want. Those programs contribute to the profits of the gatekeeper.
The second literature is that on double marginalization. This literature considers settings where you have a retailer with market power and an input supplier with market power, and the input supplier needs the retailer for access to consumers. In those cases either integration or Coasean bargaining is usually in the interests of consumers, as it minimizes the double mark-up and thus lowers the costs of the market power. To put this more concretely, the two parties will deal so that the marginal cost of the input to the monopolist is lowered, the monopolist expands output (and profit), and those gains are shared between the two institutions with market power.
When you put those two theories together, Netflix buying transit rights from Comcast is likely fine. Don’t translate your opposition to cable monopoly into opposition to this agreement. Seton Motley asks a good question:
Should we worry Amazon (Prime) buys transit rights from UPS & USPS?
So, if someone criticizes this new deal, but cannot put the argument in Coasean language, they probably have not thought it through carefully enough.
Moving beyond that, can we think of reasons why the basic Coasean results may not hold?
1. Expected joint profit doesn’t map perfectly well into consumer surplus.
2. The status quo ex ante was based on some amount of queuing of Netflix access, rather than a dollar-based marginal cost for selling the input, as in basic Coasean models.
3. None of these transactions are purely Coasean when regulatory threats beckon and thus a wider range of outcomes is possible.
4. Comcast has read Doug Bernheim and can now construct a scheme to preempt Netflix from this market altogether,
I’ve pondered those long and hard, but the standard Coasean results still seem reasonably likely. And if they are not, it would be for reasons so convoluted it is unlikely to represent anyone’s actual worry. From that list only #4 seems to have any bite, but I don’t see that #4 applies empirically. Netflix has risen greatly in value over the last year, this new development is hardly a surprise, and the fees to Comcast, while secret, have been described as “de minimis.” There is quite a good chance that Netflix benefits from this deal and this is more of a “we are here for good” statement than Netflix falling off a cliff.
You also could try this argument:
5. By agreeing to pay a price for transit rights, Netflix imposes a negative pecuniary externality on smaller streaming services and content providers, which in the longer run will mean a negative non-pecuniary externality for variety-seeking consumers.
Maybe, maybe so. I do take that argument seriously. But it’s also unconfirmed, Coase on payola implies it won’t be so bad, and furthermore the Netflix transaction, in stand-alone terms, still would seem to be welfare-improving. Besides, what happens if Netflix expands by 5x or 10x, should the company never have to pay anything? Is it so terrible if tomorrow’s necessary equilibrium shows up today?
Addendum: Timothy Lee offers a different perspective. Perhaps I am failing to understand his argument, but I don’t see why having a cluster of mid-level intermediaries should make the market as a whole more competitive.
Or you may be tempted to write a screed about the dangers of moving away from net neutrality, and associate this development with that movement. I say you would do better to stick to the specific economics of this particular issue and explain, in terms related to the Coasean model, exactly what will go wrong.
Further addendum: Joshua Gans offers comment.
Local loop unbundling for cable
Felix Salmon endorses local loop unbundling for cable, so does Kevin Drum.
My earlier analysis simply was assuming that we will not make this policy shift and then asking how worried we should be about the resulting semi-monopoly power in that market. If you would like to see the pro-case, here is a UK study (pdf) showing unbundling improves quality. Here is French evidence for higher penetration, often through quality rather than just price effects. Here is Tom Hazlett on related issues (pdf) and Vernon Smith is a long-time proponent of related ideas.
I don’t, however, agree with Felix’s presumption that all we need do is refine the current infrastructure, or his claim that there are no other effective forms of competition at current margins. Penetration rates could be a few percentage points higher, and that is an economic cost from the status quo, but in Felix and some of the other commentators I am seeing a black and white version of a monopoly story that simply does not correspond to the facts. Furthermore the current monopoly power of cable means that infrastructure will be laid down more quickly next time around, and moving to local loop unbundling would weaken this incentive by confiscating some of the rents from the infrastructure investments of the cable companies. I probably would make this trade-off, but that further blunts any estimate of the net costs from the U.S. status quo.
Note also that Netflix has turned out to be worth a lot of money as a company, a reality which those who pushed the “cable as extreme monopoly” view denied could happen, out of a belief the cable companies would simply confiscate any Netflix rents.
And here is Peter Huber on how deregulation — yes the dreaded “D word” — can improve cable competitiveness.
New trend of people naming their kids after guns
Via Kottke, here is Abby Haglage:
In 2002, only 194 babies were named Colt, while in 2012 there were 955. Just 185 babies were given the name Remington in 2002, but by 2012 the number had jumped to 666. Perhaps the most surprising of all, however, is a jump in the name Ruger’s (America’s leading firearm manufacturer) from just 23 in 2002 to 118 in 2012. “This name [Ruger] is more evidence of parents’ increasing interest in naming children after firearms,” Wattenberg writes. “Colt, Remington, and Gauge have all soared, and Gunner is much more common than the traditional name Gunnar.”
The tax treatment of sperm and egg sales
But what kind of income is it?:
Also, Perez could pay lower tax rates on the income if it were treated as long-term capital gains. Eggs could be considered property she had possessed since birth, in which case the sale could be seen as a long-term capital gain.
If they’re not considered property until removed from her body, the eggs could be seen as generating short-term gains.
Richard Carpenter, Perez’s San Diego-based attorney, said the judge said after the trial that the capital gains questions wouldn’t apply in this case.
I like the phrase “future sperm tax certainty” from the title of the piece. There is more here, from Richard Rubin. For the pointer I thank Vic Sarjoo.