Category: Law
How much does social mobility ever change?
Here is Dylan Matthews interviewing Gregory Clark about his new book The Son also Rises:
Another remarkable feature of the surname data is how seemingly impervious social mobility rates are to government interventions. In all societies, what seems to matter is just who your parents are. At the extreme, we see in modern Sweden an extensive system of public education and social support. Yet underlying mobility rates are no higher in modern Sweden than in pre-industrial Sweden or medieval England.
There was one case where government interventions did seem to promote mobility, which was in Bengal, in India. There the strict quota system in educational institutions had benefited significantly people with surnames associated with the Scheduled Castes.
But the bizarre element here is that these quotas did not help those truly at the bottom of the social ladder. Instead, the benefits went to families of average social status whom the British had mistakenly classified as Scheduled Caste. These families have now become a new elite. The truly disadvantaged, such as the large Muslim community, have been correspondingly further burdened by being excluded from these quotas.
Interestingly, in China, the extreme social intervention represented by the Communist Revolution of 1949, which included executing large numbers of members of the old upper class, has not resulted in much of an increase in social mobility. Surnames of high status in the Imperial and Republican era continue to be overrepresented among modern elites, including Communist Party officials.
The families that have high social competence, whatever the social system is, typically find their way to the top of the social ladder.
The interview is interesting throughout. And you will of course note the new Chetty results — created with entirely different methods and data — showing economic mobility has not much changed in the United States for decades.
For the initial pointer I thank Samir Varma.
Equalizing the rate of tax on income and capital gains
I don’t usually like to recycle old material, but @ModeledBehavior just linked to this 2007 MR post, which remains relevant to current debates. Here is one excerpt:
My uninformed-by-ever-having-been-a-tax-lawyer sense is that loss offsets for the capital gains tax are worth a great deal to some investors. Sell your winners to coincide with selling some losers and claim a net gains income of zero or very low. Let the asset winners ride and they will end up in your bequest and have their taxable values reset upon your death. If your option values line up the right way, you have enough diversification, and you are not liquidity constrained, it seems that for many people the de facto rate of capital gains taxation is not 15 percent but rather close to zero. (Maybe not quite zero in expected value terms; it’s tricky because if the losses exceed the gains you can deduct only $3000 of the losses from regular income but on the upside you’re taxed all the way. On the other hand, you can offset with charitable deductions.)
Let’s say we raised the book rate of tax on capital gains to forty percent. For some people the net real rate of tax on capital gains could still be zero. For other people it would be forty percent.
Let’s say we raised the book rate of tax on capital gains to eighty percent. For some people the net real rate of tax on capital gains could still be zero. For other people it would be eighty percent.
Under which of these scenarios have we equalized the tax rates on capital gains and labor income?
Why the Worst Get on Top – India Edition
Consider this extraordinary figure: 30 percent of members of parliament have criminal cases pending against them…the answer to why political parties in India nominate candidates with criminal backgrounds is painfully obvious: because they win (see figure 1). In the 2004 or the 2009 parliamentary elections, a candidate with no criminal cases pending had—on average—a 7 percent chance of winning. Compare this with a candidate facing a criminal charge: he or she had a 22 percent chance of winning. Granted, this simple comparison does not take into account numerous other factors such as education, party, or type of electoral constituency. Nevertheless, the contrast is marked.
Writing at the Carnegie Endowment for International Peace blog, Milan Vaishnav goes on to note that those with criminal backgrounds appear to have ready access to cash and in addition their toughness appeals to voters:
In contexts where the rule of law is weak and social divisions are highly salient, politicians often use their criminal reputation as a badge of honor—a signal of their credibility to protect the interests of their parochial community and its allies, from physical safety to access to government benefits and social insurance.
…The appeal of candidates who are willing to do what it takes—by hook or crook—to protect the interests of their community provides some intuition for why the odds of a parliamentary candidate winning an election actually increase with the severity of the charges, with slightly diminishing returns in the most severe instances…
Does Medical Malpractice Law Improve Health Care Quality?
Maybe not so much. That is a new paper by Michael Frakes and Anupam B. Jena, the abstract is here:
Despite the fundamental role of deterrence in justifying a system of medical malpractice law, surprisingly little evidence has been put forth to date bearing on the relationship between medical liability forces on the one hand and medical errors and health care quality on the other. In this paper, we estimate this relationship using clinically validated measures of health care treatment quality constructed with data from the 1979 to 2005 National Hospital Discharge Surveys and the 1987 to 2008 Behavioral Risk Factor Surveillance System records. Drawing upon traditional, remedy-centric tort reforms—e.g., damage caps—we estimate that the current liability system plays at most a modest role in inducing higher levels of health care quality. We contend that this limited independent role for medical liability may be a reflection upon the structural nature of the present system of liability rules, which largely hold physicians to standards determined according to industry customs. We find evidence suggesting, however, that physician practices may respond more significantly upon a substantive alteration of this system altogether—i.e., upon a change in the clinical standards to which physicians are held in the first instance. The literature to date has largely failed to appreciate the substantive nature of liability rules and may thus be drawing limited inferences based solely on our experiences to date with damage-caps and related reforms.
There is an ungated version of the paper here.
Economic data on hitmen
The sample is pretty limited, but here is what they find:
The killers typically murder their targets on a street close to the victim’s home, although a significant proportion get cold feet or bungle the job, according to criminologists who examined 27 cases of contract killing between 1974 and 2013 committed by 36 men (including accomplices) and one woman.
…The reality of contract killing in Britain tended to be striking only in its mundanity, according to David Wilson, the university’s professor of criminology. He said: “Far from the media portrayal of hits being conducted inside smoky rooms, frequented by members of an organised crime gang, British hits were more usually carried out in the open, on pavements, sometimes as the target was out walking their dog, or going shopping, with passersby watching on in horror.”
Researchers found that the average cost of a hit was £15,180, with £100,000 being the highest and £200 the lowest amount paid. The average age of a hitman was 38 with the youngest aged 15 and the oldest 63.
The youngest, Santre Sanchez Gayle from north London, shot dead a young woman at point-blank range with a sawn-off shotgun in 2010 after she answered her front door. The oldest was David Harrison who, also in 2010, shot the owner of a skip-hire business in his Staffordshire home.
Most hits involved a gun, with three victims stabbed, five beaten to death and two strangled. The most conspicuous weapon was used in the killing of David King, a widely feared underworld figure known as “Rolex Dave”, who in 2003 was shot five times as he emerged from a Hertfordshire gym by hitman Roger Vincent and his accomplice David Smith, both 33. The killing was the first time an AK-47 assault rifle – apparently belonging to the Hungarian prison service – had been used on a British street.
For the pointer I thank Mike Brown. By the way, those records are focused on Birmingham, England, which perhaps is not like Lodi, New Jersey in this regard.
The original work is cited as appearing in the Howard Journal of Criminal Justice, but I do not seem to find the article at that link.
Where is the licensing burden heaviest?
Adam Ozimek reports:
…consider the Institute for Justice’s excellent report on occupational licensing. The top 10 worst ranked jobs in terms of average licensing burden are as follows:
1. Preschool teacher
2. Athletic trainer
3. Earth driller
4. Cosmetologist
5. Barber
6. School bus driver
7. HVAC Contractor
8. Skin Care Specialist
9. Pest Control Applicator
10. Bus Driver
And from Virginia Postrel on Twitter:
Sting catches Charleston rickshaw driver giving illegal tour, $1,092 fine for talking history w/o a license http://buff.ly/1cTeo02
@ij
The economic value of a law degree
Michael Simkovic and Frank McIntyre have a new paper on this topic:
Legal academics and journalists have marshaled statistics purporting to show that enrolling in law school is irrational. We investigate the economic value of a law degree and find the opposite: given current tuition levels, the median and even 25th percentile annual earnings premiums justify enrollment. For most law school graduates, the present value of a law degree typically exceeds its cost by hundreds of thousands of dollars. We improve upon previous studies by tracking lifetime earnings of a large sample of law degree holders. Previous studies focused on starting salaries, generic professional degree holders, or the subset of law degree holders who practice law. We also include unemployment and disability risk rather than assume continuous full time employment. After controlling for observable ability sorting, we find that a law degree is associated with a 73 percent median increase in monthly earnings and 60 percent increase in median hourly wages. The mean annual earnings premium of a law degree is approximately $57,200 in 2013 dollars. The law degree earnings premium is cyclical and recent years are within historical norms. We estimate the mean pre-tax lifetime value of a law degree as approximately $1,000,000.
For the pointer I thank the excellent Andres Marroquin.
Argentina tries to stave off a continuing financial crisis
Argentina has introduced new restrictions on online shopping as part of efforts to stop foreign currency reserves from falling any further.
…Items imported through websites such as Amazon and eBay are no longer delivered to people’s home addresses. The parcels need to be collected from the customs office.
Believe it or not, there is several hours wait at the customs office. There is more here, via Counterparties.
How Many Homicides were there in 2010?
How many homicides were there in 2010 in the United States? Well, that’s easy. Let’s just do some Googling:
Between the smallest and largest figures there is a difference of 3,292 deaths or 25%!
The differences are striking but not entirely arbitrary or without explanation. I assume the second figure adds late additions to the 2010 data and so should be considered more authoritative but that is a relatively small difference.
The difference between 2 and 3 is puzzling and seems to be that the number in 2 is drawn from the Supplementary Homicide Report (SHR) statistics on victims while the larger figure is drawn from homicide reports in the UCR. Not all agencies collect the more detailed statistics in the SHR while the UCR is nearly complete. Thus the victim figure is smaller than the report figure (this doesn’t appear to conform exactly to where the data is supposed to be sourced but it’s what the FBI tells me). It’s unclear why the FBI would report both figures when they know one is misleading.
The difference between 3 and 4 comes from different definitions of homicide. The FBI collects data on crimes. If a killing is ruled justified, i.e. not a crime, it doesn’t go into the FBI homicide statistics. The CDC collects data from death certificates which list as homicide any death caused by “injuries inflicted by another person with intent to injure or kill, by any means.” Thus, the CDC data includes justifiable homicide. In 2010 according to the FBI there were 387 justifiable homicides by law enforcement and 278 by private citizen for a total of 665 justifiable homicides, so that accounts for some but not all of the difference.
(By the way, the 278 justifiable homicides in 2010 by private citizens compared to 387 by law enforcement and 14,720 unjustifiable homicides would seem to be an important context for many claims about stand your ground laws. N.b. this doesn’t mean that the laws couldn’t be associated with more unjustifiable homicides).
The FBI (3) and NVSS (4) figures track each other closely over time but its important to be aware of the differences and to be consistent in one’s calculations.
Venezuela fact of the day
I knew gas in Venezuela was underpriced, but I had not known by how much. Nick Miroff brings us the latest:
Venezuela sits atop the world’s largest oil reserves, and its government sets the price of premium gasoline at about 5 cents a gallon. Its real price — adjusted to the soaring street value of the U.S. dollar — is half a penny per gallon.
But rest assured, there will be a move toward international prices:
The projected price hike is likely to push gas closer to 17 cents a gallon, at unofficial exchange rates.
There is more here.
Early data on ACA enrollees
Christopher Weaver and Anna Wilde Matthews report:
Early signals suggest the majority of the 2.2 million people who sought to enroll in private insurance through new marketplaces through Dec. 28 were previously covered elsewhere, raising questions about how swiftly this part of the health overhaul will be able to make a significant dent in the number of uninsured.
Insurers, brokers and consultants estimate at least two-thirds of those consumers previously bought their own coverage or were enrolled in employer-backed plans.
The data, based on surveys of enrollees, are preliminary. But insurers say the tally of newly insured consumers is falling short of their expectations, a worrying trend for an industry looking to the law to expand the ranks of its customers.
I would emphasize that we still don’t really know quite what is going on here. But the view that everything is now in the clear simply is not warranted by the available evidence.
Hat tip goes to Megan McArdle.
Back to the Amazon future (sign me up)
Amazon.comAMZN +0.43% knows you so well it wants to ship your next package before you order it.
The Seattle retailer in December gained a patent for what it calls “anticipatory shipping,” a method to start delivering packages even before customers click “buy.”
There is more here. And here are our previous posts on Amazon.
The pointer is from @MattYglesias.
Scottish independence: the bottom line
Christopher Pissarides, professor of economics at the London School of Economics, said being part of the Union gives a small economy like Scotland assurance that help will be forthcoming if something goes wrong.
“The last thing any Scot should wish is to give up the support potentially available from the UK (England?) for support from the European Union under Germany’s rules,” he said.
Here are related opinions:
Philip Rush, chief economist at Nomura investment bank, said: “Higher taxes on income would push many wealthy individuals and some companies they work for south of the Border, harming Scotland’s economy.”
Keith Wade, chief economist and strategist at Shroders, said “massive wrangling” between Holyrood and Westminster over tax and spending would be required for a currency union to work “to avoid a rerun of the euro crisis”.
“When combined with the considerable uncertainty over whether Scotland can remain in the EU, Scottish businesses would start to head south,” he said.
There is more here.
Will we be bailing out the insurance companies?
Megan McArdle has the latest:
This is the plan that Republicans hope to cleverly foil by framing the risk-adjustment provisions [of ACA] as an insurer bailout and repealing them. As designed, the risk-adjustment mechanism was supposed to be revenue-neutral, and that is how the Congressional Budget Office scored it in their last estimate. But unless the demographics of the exchanges improve pretty quickly, the three temporary risk-adjustment programs are probably set to transfer a large hunk of cash to the insurance companies. That’s what the administration, and the insurers, want to happen; it’s how they are going to keep the insurers on board for 2015. Phil Klein at the Washington Examiner points out that Humana Inc.’s latest filing with the Securities and Exchange Commission warns of a “more adverse than previously expected” mix of customers enrolling through the exchange — but it doesn’t change its earnings forecast for 2014. So either it thinks its losses will be trivial relative to overall earnings or Humana thinks the chances of a bailout from the administration are basically 100 percent.
There is more here, including background context if you are not up to speed on this issue.
Maryland as guinea pig for health care price controls
Sarah Kliff reports:
The Obama administration is set to announce Friday an ambitious health-care experiment that will make Maryland a test case for whether aggressive government regulation of medical prices can dramatically cut health spending.
Under the experiment, Maryland will cap hospital spending and set prices — and, if all goes as planned, cut $330 million in federal spending. The new plan, which has been under negotiation for more than a year, could leave Maryland looking more like Germany and Switzerland, which aggressively regulate prices, than its neighboring states. And it could serve as a model – or cautionary tale – for other states looking to follow in its footsteps.
“You can put Maryland in the company of Massachusetts and perhaps Vermont as the three states furthest out in trying to invent a new future for cost accountability in health care spending,” added Harvard University’s John McDonough. “Success creates a model that other states will want to look at emulating. And failure means it’s an option more likely to be crossed off the list.”
For Maryland, the new rules build on past success. Since the mid-1970s, it has been the only state to set the prices that hospitals charge patients. Typically, hospitals negotiate with each health insurer individually, leading to disparate rates. In Maryland, all customers — whether a private insurance plan, public program or uninsured patient — pay the same price. Researchers estimate the system has saved $45 billion for consumers over four decades and prices have grown more slowly in the state.
I am glad there is an experiment, but I’m also glad I live in Virginia. And there is of course a problem with drawing inferences from such experiments. A small area can institute price controls without much discouraging health care innovation, but perhaps the larger area cannot.