Category: Law

Paying People to Stay Out of Jail

Should we pay people not to commit crime? Could we? Murat Mungan from GMU Law shows that it could pay in principle:

This article considers the possibility of simultaneously reducing crime, prison sentences, and the tax burden of …financing the criminal justice system by introducing positive sanctions, which are benefits conferred to individuals who refrain from committing crime. Specifically, it proposes a procedure wherein a part of the imprisonment budget is re-directed towards financing positive sanctions. The feasibility of reducing crime, sentences, and taxes through such reallocations depends on how effectively the marginal imprisonment sentence reduces crime, the crime rate, the effectiveness of positive sanctions, and how accurately the government can direct positive sanctions towards individuals who are most responsive to such policies. The article then highlights an advantage of positive sanctions over imprisonment in deterring criminal behavior: positive sanctions operate by transferring or creating wealth, whereas imprisonment operates by destroying wealth. Thus, the conditions under which positive sanctions are optimal are broader than those under which they can be used to jointly reduce crime, sentences, and taxes. The analysis reveals that when the budget for the criminal justice system is exogenously given, it is optimal to use positive sanctions when the imprisonment elasticity of deterrence is small, which is a condition that is consistent with the empirical literature. When the budget for the criminal justice system is endogenously determined, it is optimal to use positive sanctions as long as the marginal cost of public funds is not high.

It’s harder to implement in practice, however. Increasing the minimum wage and the EITC might be easier or maybe not.

Hat tip: Kevin Lewis.

Temperature and judicial decisions

The title is “Temperature and Decisions: Evidence from 207,000 Court Cases,” the authors are Anthony Heyes and Soodeh Saberian, and here is the abstract:

We analyze the impact of outdoor temperature on high-stakes decisions (immigration adjudications) made by professional decision-makers (US immigration judges). In our preferred specification, which includes spatial, temporal, and judge fixed effects, and controls for various potential confounders, a 10°F degree increase in case-day temperature reduces decisions favorable to the applicant by 6.55 percent. This is despite judgements being made indoors, “protected” by climate control. Results are consistent with established links from temperature to mood and risk appetite and have important implications for evaluating the influence of climate on “cognitive output.”

Here is the (gated) link to American Economic Journal: Applied Economics.  Here are ungated versions.

How NIMBY leads to urination in the streets

That is the topic of my latest Bloomberg column, here is one excerpt:

…step back and consider two 19th-century “classical economists” who focused on high rents: David Ricardo and Henry George. Both built models where land is so scarce that the cost of renting land absorbs most of the social surplus. We are not (yet?) at that point, but these models give insight into where today’s most expensive cities are headed.

Consider an increase in the quality of public services — say, garbage collection, or perhaps in San Francisco the elimination of public urination. You might think that would make life much better for everyone. But in a Ricardo-George model, that is not the case. Mainly what happens is that rents go up and landowners capture most of the newly created surplus.

How would this work? Take the example of San Francisco; with nicer streets, even more people might want to move there. That would push up rents by an amount roughly equal to the value created — putting the gains from the higher quality of life into the pockets of landowners. In a normal market economy, those higher rents would then induce more construction and, eventually, a corresponding decline in rents. But San Francisco is a “not in my backyard” locale where the amount of new construction just isn’t that high, for legal and regulatory reasons. Again, as both Ricardo and George realized, the incidence of the benefit falls upon the very scarce factor, namely land.

The political economy problem now should be obvious: Why exactly would non-landowners press for improvements in their cities? The value of those improvements will be captured mainly by other parties.

There is much more at the link.

Tabarrok on Bail

I spoke recently at Brookings on the movement to eliminate cash bail. I think we hold too many people pre-trial and the use of judicial aids such as algorithms could safely increase the number of people released prior to trial as well as reduce the variance and disparity of treatment. Nevertheless, I think eliminating cash bail is a poorly thought out idea that may very well backfire. The proponents of eliminating cash bail also present a misleading picture of who is held on bail, the focus of my remarks at Brookings.

I was the only one at the event to oppose eliminating cash bail and I think the audience was a bit shell-shocked. Certainly, not everyone on the panel agreed with my comments. The American Bail Coalition posted the clip from CSPAN but otherwise had nothing to do with my remarks which begin around 35 seconds in.

Why do states privatize their prisons?

Why Do States Privatize their Prisons? The Unintended Consequences of Inmate Litigation.” (Job market paper).
The United States has witnessed privatization of a variety of government functions over the last three decades. Media and politicians often attribute the decision to privatize to ideological commitments to small government and fiscal pressure. These claims are particularly notable in the context of prison privatization, where states and the federal government have employed private companies to operate and manage private correctional facilities. I argue state prison privatization is not a function of simple ideological or economic considerations. Rather, prison privatization has been a (potentially unintended) consequence of the administrative and legal costs associated with litigation brought by prisoners. I assemble an original database of prison privatization in the US and demonstrate that the privatization of prisons is best predicted by the legal pressure on state corrections systems, rather than the ideological orientation of a state government. PDF of most recent version here, comments welcome.​ Appendix here.

Do Private Prison Companies Suffer When Inmates Win Lawsuits? The central claim of my dissertation argues it is the advent of inmates’ rights and rising prisoner litigation that contributed to the rise of prison privatization in the state. A separate dissertation chapter considers this relationship from the viewpoint of the business: is it the case that the economic future of the company is vulnerable to the announcement of successful court orders? I use event study methodology and find I find that on aggregate, investors are not particularly concerned with these judicial decrees. Rather, investors respond to the lawsuits in those states that are the most consequential for private prison firms’ business. This chapter fleshes out the behavior of private prison companies and provides further empirical evidence for the central claim of the dissertation, that private prison firms are indeed vulnerable to the announcement of court orders.

Those are new papers by Anna Gunderson, Ph.D candidate in political science from Emory, starting at Louisiana State, and I note she just won the Elinor and Vincent Ostrom award from the Public Choice Society.  Here is her home page.

Ross Douthat on some reasons for the electoral college

Is there a case for a system that sometimes produces undemocratic outcomes? I think so, on two grounds. First, it creates incentives for political parties and candidates to seek supermajorities rather than just playing for 50.1 percent, because the latter play is a losing one more often than in a popular-vote presidential system.

Second, it creates incentives for political parties to try to break regional blocs controlled by the opposition, rather than just maximizing turnout in their own areas, because you win the presidency consistently only as a party of multiple regions and you can crack a rival party’s narrow majority by flipping a few states.

According to this — admittedly contrarian — theory, the fact that the Electoral College produces chaotic or undemocratic outcomes in moments of ideological or regional polarization is actually a helpful thing, insofar as it drives politicians and political hacks (by nature not the most creative types) to think bigger than regional blocs and 51 percent majorities.

That is from the NYT, he also considers some arguments against.

How bad would a hard Brexit really be?

This account has some gloomy rhetoric, but doesn’t drum up such an awful scenario, for instance:

Among the little-noticed impacts: U.K. citizens and businesses will no longer be able to register internet sites using the .eu domain, and any U.K. entities that currently have such sites will not be able to renew them.

As mentioned, no doubt British truckers would be badly hurt, but what else?  This sounds correct to me:

Custom delays could create food shortages. The U.K. is vulnerable because an extreme heat wave and summer drought caused by global warming have already reduced food output.

Tariffs would be reimposed. They are as high as 74 percent for tobacco, 22 percent for orange juice, and 10 percent for automobiles. That would hurt exporters. Some of that pain would be offset by a weaker pound.

Tariffs would increase prices of imports into the U.K. One-third of its food comes from the EU. Higher import prices would create inflation and lower the standard of living for U.K. residents.

Is this the biggest danger?:

Health Secretary Matt Hancock has warned medical drug companies to expect six months of “significantly reduced access” to the main trade routes between Britain and Continental Europe if there is a no-deal Brexit.

This one seems exaggerated:

“Bodies may remain uncollected and children might miss exams due to gridlocked roads in the event of a no-deal Brexit”, the report said.

So people, what’s the deal?  Put aside the longer and medium-term effects on gdp and the like, what are the greatest short-run dangers of a hard Brexit in the weeks to come?  Or is it a big, overstated worry, the new Y2K?

The culture that is Alexandria, VA

A proposal to open a halal butchery facility in Alexandria hit a snag Saturday after some local business owners and dog owners objected. DC Poultry Market wants to open a facility that would sell fresh, humanely killed chickens on Colvin Street in a mostly industrial area of Alexandria between Duke Street and railroad tracks. There are no residential properties in the immediate area, but pet businesses abound: Pinnacle Pet Spa & More, Frolick Dogs, Dogtopia, and the Wholistic Hound Academy.

Therein lay a problem. Though city staff and Alexandria’s planning commission recommended approving DC Poultry Market’s application, dog  lovers showed up to the Alexandria City Council’s March 16 meeting to object on olfactory grounds (“My dog can smell when there’s a cookie down the block,” one resident said) and on proximity to poultricide (“Knowing that my dogs may be walked by a business that holds chickens in a windowless room before their throats are slit while fully conscious does not make me feel that my dogs are in a safe environment,” another said).

Here is the full story, via Bruce A.  Few seem to be complaining about the chickens.

British sentences to ponder

But holding the government to account is one thing, setting the agenda another. The Brexit crisis has shown this. In January and February, when MPs tabled amendments that would truly empower backbenchers — by giving them control of what is debated in the Commons, or setting up voting systems for MPs to rank different Brexit options — the majority stepped back. “I think the most remarkable thing is how unsuccessful we’ve been in taking control,” says one shadow minister. Faced with a choice of now or never, MPs generally decided it couldn’t be now. Only this week did they become bolder, rejecting May’s deal for a second time. In response, the government agreed to facilitate a vote on different Brexit options if they rejected it a third time.

“The last two years have thrown into sharp relief the things that parliament is good at and the things it is not good at. It is generally not good at legislating,” says Lisvane. “The things that have gone really well are select committees.”

That is from a long FT piece by Henry Mance, perhaps the best article I have read this week.

Spufford has done a Narnia sequel

The award-winning writer Francis Spufford has spent three years on a new novel for the CS Lewis Chronicles of Narnia series despite not having permission from the Lewis estate….

Spufford, who has printed 75 copies and distributed them free to friends and fellow writers, said it was “not intended to get out into the world unless, long shot, I come to terms with the estate”.

The Lewis estate has resisted all entreaties to continue the Narnia novels, the last of which was published in 1956 by Lewis, who died in 1963. His work remains in copyright until 2034.

In part he did the sequel for his daughter.  Here is the (London) Times link, gated.  This guy has tweeted some of the work.

How Much Time Do Criminals Really Serve?

Many people were surprised at Paul Manafort’s relatively light sentencing for bank fraud, filing fake tax returns, and failure to report foreign assets and compared his sentence of 47 months to other cases of seemingly lesser crimes given longer prison terms. A viral tweet thread from public defender Scott Hechinger began:

For context on Manafort’s 47 months in prison, my client yesterday was offered 36-72 months in prison for stealing $100 worth of quarters from a residential laundry room.

Anecdotes, however, run the risk of misleading if they are not representative. The Bureau of Justice Statistics just released Time Served in State Prison 2016. Stealing laundry quarters sounds like larceny (no break in). The average time served for larceny was 17 months and the median time served was 11 months.

Hechinger also notes this outrageous case:

15 years in prison for drug possession. You shouldn’t need more info than that to be outraged. But then learn: Juanita is a mother of 6. Her 18 year old is now head of household. Raising 5 kids. Crime is not even a felony in Oklahoma anymore.

The average time served for drug possession was 15 months and the median time 10 months. Arguably too long but a far cry from 15 years.

For a serious violent crime like robbery, taking property by force or threat of force, the average time served was considerably higher, 4.7 years and the median time served 3.2 years.

You can see the table below for more data. Judge for yourselves, but for most crimes mean and median time served don’t seem to me to be obviously too high. Moreover, keep in mind that most crimes do not result in an arrest let alone a conviction or time served.

In 2017, for example, victims reported 2,000,990 serious violent crimes (rape or sexual assault, robbery, and aggravated assault). In the same year there were approximately 446,510 arrests for these crimes (crime definitions may not line up exactly). In other words, the chance of being arrested for a serious violent crime was only 22%. Data on convictions are harder to obtain but convictions are far fewer than arrests. In 2006 (most up-to-date data I could find but surely lower today) there were 175,500 convictions for serious violent crimes. Thus, considerably fewer than 10% of violent crimes result in a conviction (175,500/2,000,990=8.7%).

Put differently, the expected time served for a serious violent crime is less than 5 months*. Do you want to reduce expected time served? What I would like to do is put more police on the street to increase the certainty of arrest and conviction. If we double the conviction rate, I’d happily halve time served.

I support decriminalization of many crimes, shorter sentences for some crimes and fewer scarlet letter punishments. I want to reduce bias and variability in the criminal justice system. But I do not want to return to the crime rates of the past. Even as crime rates fall, we should be careful about declaring the war won and going home. We are under policed in the United States and despite anecdotes that rightly shock the conscience, average time served is not that high, especially given very low arrest and conviction rates.

* Using the normalized percent of total releases for rape, robbery and assault to form the weighted average. Corrected from an early version that said 14 months.

Do female board members matter?

Maybe less than you might think, at least once you adjust for geographic distance:

Recent literature has shown that gender diversity in the boardroom seems to influence key monitoring decisions of boards. In this paper, we examine whether the observed relation between gender diversity and board decisions is due to a confounding factor, namely, directors’ geographic distance from headquarters. Using data on residential addresses for over 4,000 directors of S&P 1500 firms, we document that female directors cluster in large metropolitan areas and tend to live much farther away from headquarters compared to their male counterparts. We also reexamine prior findings in the literature on how boardroom gender diversity affects key board decisions. We use data on direct airline flights between U.S. locations to carry out an instrumental variables approach that exploits plausibly exogenous variation in both gender diversity and geographic distance. The results show that the effects of boardroom gender diversity on CEO compensation and CEO dismissal decisions found in the prior literature largely disappear when we account for geographic distance. Overall, our results support the view that gender-diverse boards are “tougher monitors” not because of gender differences per se, but rather because they are more geographically remote from headquarters and hence more reliant on hard information such as stock prices. The findings thus suggest that board gender policies, such as quotas, could have unintended consequences for some firms.

Here is the paper by Zinat S. Alam, Mark A. Chen, Conrad S. Ciccotello, and Harley E. Ryan.  Via the excellent Kevin Lewis.

Does a Carbon Tax Reduce CO 2 Emissions? Evidence From British Columbia

From Felix Pretis:

Using difference-in-differences and a novel break-detection approach I show that the introduction of a carbon tax has not ‘yet’ led to a significant reduction in aggregate CO2 emissions in British Columbia, Canada. Despite the lack of detectable aggregate effect, there are heterogeneous emission reductions across sectors: the tax led to a reduction in emissions from transportation incl. personal vehicles (-5%), buildings (-5%), waste processing (-3%), and light manufacturing, construction and forestry (-11%). Introducing a new method to assess policy based on breaks in difference-in-differences fixed effect panel models, I demonstrate that neither the carbon tax, nor the carbon price and emissions trading schemes introduced in other Canadian provinces are detected as significant interventions in aggregate emissions. The absence of significant aggregate reductions in emissions is consistent with existing evidence that current carbon taxes (and prices) are too low to be effective.

Since current carbon taxes are already not so popular, I don’t take this as especially good news.  For the pointer I thank Warren Smith.

My Conversation with Raghuram Rajan

Here is the transcript and audio, we covered so much, here is the CWT summary:

How much has the U.S. actually fixed the financial system? Does India have the best food in the world? Why does China struggle to maintain a strong relationship with allies? Why are people trading close-knit communities for isolating cities? And what types of institutions are we missing in our social structure? Listen to Rajan’s thorough conversation with Tyler to dive into these questions and much more.

Here is one excerpt:

COWEN: A lot of observers have suggested to me that the notion of a kind of Anglo-American liberalism as ascendant in India is now a dead idea, that ideologically, India has somehow shifted, and the main currents of thought, including on the so-called right, are just really not liberalism anymore. Do you have a take on that view?

RAJAN: I’m not sure I would agree. I would say that we’ve had a government over the last five years which has elements of the majoritarian, Hindu nationalist group in it. But I would argue the country, as a whole, is still firmly secular, liberal in the Nehruvian idea, which is that we need a country which is open to different religions, to different ethnicities, to different beliefs if we are to stay together.

And democracy plays an important role here because it allows some of the pressures which build up in each community to essentially get expressed and therefore diffuses some of the pressure. So I think India’s ideal is still a polyglot coming together in this country.

COWEN: But someone like Ramachandra Guha — what he symbolizes intellectually — do you think that would be a growing part of India’s future? Or that will dwindle as colonial ties become smaller, the United States less important in global affairs?

RAJAN: I think that an open, liberal, tolerant country is really what we need for the next stage of growth. We are now reaching middle income. We could go a little faster. We should go a little faster there.

Once we reach middle income, to grow further, I think we need an intellectual openness, which only the kind of democracy we have — the open dialogue, a respectful dialogue — will generate the kinds of innovative forces that will take us more to the frontier.

So I keep saying, and I say this in the book, we’re very well positioned for the next stage of growth, from middle to high income. But we first have to reach middle income.

And:

COWEN: Will current payments companies end up as competitors to banks or complements to the banking system? Or are they free riders on the banking system?

RAJAN: I think they’re trying to figure out their space. As of now, sometimes they’re substituting for . . . Certainly, my daughter uses her payment system completely separate from her bank account. But longer term, we’ll find ways of meshing these in and reduce the costs of making payments. Those costs are really too high at this point, and reducing those costs makes a lot of sense.

COWEN: Will banks ever be truly excellent at doing software?

RAJAN: I think we will have a combination of the guys who are truly good at software — the fintech companies — merging with banks who know how to do the financial side. They’ll bring each of their talents together. I’ve seen a lot of fintech people who have no clue as to what finance is really about. And I’ve seen a lot of banks who have no clue as to what tech is about. I think some merger will happen over time.

There is much more at the link.  And here is Raghu’s new book The Third Pillar: How Markets and the State Leave Community Behind.