Category: Law
How happy should we be about ACA supply-side responses to work less?
Following the CBO report that Obamacare will induce many people to leave the workforce or cut back on their hours, I have read numerous blog posts suggesting this is benign or possibly even favorable. After all, why should people be forced to work just to keep their health insurance? Imagine a 57-year-old man, freed from the necessity to grub for pay at a second-class retail job, which he had to take just to get insurance to cover the bills for his periodic back treatments.
Alternatively, when I read about demand-side shocks which induce unemployment, I am reminded of the work of Alan Krueger. In two papers, one of which is quite recent, and does not stem from the Heritage Foundation, Krueger shows rather convincingly that the unemployed maintain reservation wages which are simply too high. They would be better off lowering those wages, being more realistic, accepting work, and getting back on their feet again. In other settings (not considered by Krueger), other workers seem to be too slow to move to new areas for new jobs, given the costs of being unemployed long-term.
A lot of Keynesians try to maintain the communication of the feeling (if not the outright statement) that demand-driven employment shocks have very little to do with the choices of workers but that is closer to wrong than right. (By the way, sarcastic comments about soup kitchens causing the Great Depression belie an understanding of both this argument and of contemporary search models for the labor market.)
OK, given all that, when those workers, hit by negative shocks, do not rush to go back to work at lower reservation wages, we then read a portrait of hysteresis, despair, and soul-crushing joblessness, a psychic swamp so difficult to escape that even summoning up the strength to go back to work may be difficult.
In other words, would-be workers irrationally undervalue the benefits of having a job and they also underestimate the costs of remaining unemployed.
Now let’s switch settings. A benefit shock comes along, positive for many people, and it induces many of them to work less or not work at all. How happy should we be? And here I mean happy at the margin, due to their change in employment decision.
People, it is rather difficult to have it here both ways. I guess it is possible that workers are irrational in changing their employment decisions in response to changes in relative dollar wage opportunities, but rational when changing their employment decisions in response to changes in relative benefit opportunities. It really is possible. But are any of you actually arguing that or holding some deep-seated reason for believing in that difference, other than perhaps the reason this post might have induced you to come up with? No, I see one assumption about a destructive choice in one context and the opposing assumption about a beneficial choice in the other context, without much regard for the tension or contradiction between those two assumptions. A lot of you may be subbing in general feelings — “unemployment is terrible,” and “ACA is good,” and simply transferring those general feelings to feelings about the respective marginal changes in employment in each case. That is a fallacy and dare I say it is a “mood affiliation” fallacy?
And by the way, the distinction between a substitution effect and an income effect is a little tricky in this context. But providing ACA-subsidized health insurance for non-workers is in general a substitution effect which switches them out of working in a way that, if pro-ACA stories about adverse selection and uninsurability are true, a simple equivalent cash grant would not.
A simpler possibility is that people undervalue the long-term benefits of having a job and thus in both settings the contraction in employment is a quite negative outcome. That is then very bad news for ACA, if only in expected value terms.
I am reading what people write on this topic and seeing massive fog through my spectacles, a bit on both sides of the debate in fact.
Addendum: Ross Douthat made a good point:
At 500,000-800,000, I wasn’t *that* troubled: http://nyti.ms/1exzxlm At 2-2.5 million, I am. Is there a # that would trouble
@CitizenCohn?
Ross has additional comments here.
Gangland average is over the rent is too damn high, Southland edition
So many gang members have been priced out of the neighborhood, he said, that their presence can be hard to spot during the week. But on Fridays and Saturdays, they make a pilgrimage back to their roots. They ride in from El Sereno, Eagle Rock, even the Inland Empire, to hang out. Each Monday, trash cans and stop signs wear fresh “ExP” graffiti.
“It becomes a weekend gang,” Arellano said.
The pointer is from Binyamin Applebaum.
New estimates on ACA and employment
The Affordable Care Act will also reduce the number of fulltime workers by more than 2 million in coming years, congressional budget analysts said in the most detailed analysis of the law’s impact on jobs.
The CBO said the law’s impact on jobs would be mostly felt starting after 2016. The agency previously estimated that the economy would have 800,000 fewer jobs as a result of the law.
The impact is likely to be most felt, the CBO said, among low-wage workers. The agency said that most of the effect would come from Americans deciding not to seek work as a result of the ACA’s impact on the economy. Some workers may forgo employment, while others may reduce hours, for a equivalent of at least 2 million fulltime workers dropping out of the labor force.
That is from The Washington Post.
Addendum: Annie Lowrey adds comment.
Does immigration expand or contract the welfare state?
Bryan Caplan reports:
If you look at the fifty United States, however, immigration has no detectable effect on TANF/AFCD, K-12 education, or Medicaid spending. This is true for both per capita and total spending…
He is drawing on a new Cato study (pdf) by Zachary Gochenour and Alex Nowrasteh.
A model of Catalonian independence
There is a September 2013 paper (pdf) on this topic by Ryan D. Griffiths, Pablo Guillen, and Ferran Martinez i Coma:
We propose a game theoretical model to assess the capacity of Catalonia to become a recognized, independent country with at least a de facto European Union (EU) membership. Support for Catalan independence is increasing for reasons pertaining to identity and economics. Spain can avoid a vote for independence by effectively ‘buying-out’ a proportion of the Catalan electorate with a funding agreement favorable to Catalonia. If, given the current economic circumstances, the buying-out strategy is too expensive, a pro-independence vote is likely to pass. Our model predicts an agreement in which Spain and the European Union accommodate Catalan independence in exchange for Catalonia taking a share of the Spanish debt. If Spain and the EU do not accommodate, Spain becomes insolvent, which in turn destabilizes the EU. The current economic woes of Spain and the EU both contribute to the desire for Catalan independence and make it possible.
My worry however is this. If Catalan took away its share of the Spanish debt, or even more than its share, I don’t think this would help the Spanish fiscal situation. For similar reasons, I have never been convinced that the debt-to-gdp ratio is such an important variable. I myself put greater stress on the ability of a government to rule its territory, command the wealth and allegiance of its subjects, and continue to generate a more or less stable political equilibrium. Every developed country has the wealth to pay off its debts, if at least it has the political willingness to do so. If you view fiscal stability in this kind of macro public choice framework, the unwilling loss of a major piece of wealthy, high status territory is a much, much bigger fiscal blow than can be offset by a marginal improvement in the debt-to-gdp ratio. Besides, which part of Spain might be then next in line with demands for greater autonomy?
I am entirely fine with the idea of a Catalonian independence referendum in normal economic times, however, as I do not in general wish to maintain nation-states on those who are truly unwilling. I am very happy for instance that Estonia is no longer part of Russia/USSR, and in turn one can see that an Estonian independence referendum would pass in either good economic states or bad. If the same is true for Catalonia, we should all be willing to wait.
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.