Category: Law

Should Oregon fund college through equity?

by  Tyler Cowen in

Here is the latest proposal, which seems to stand a chance of actually happening:

This week, the Oregon Legislature approved a plan that could allow students to attend state colleges without paying tuition or taking out traditional loans. Instead, they would commit a small percentage of their future incomes to repaying the state; those who earn very little would pay very little.

I’m all for this as an experiment, but I’m not sure how effective it will be.  Here is one more detail:

The plan’s supporters have estimated that for it to work, the state would have to take about 3 percent of a former student’s earnings for 20 years, in the case of someone who earned a bachelor’s degree.

Twenty years is a long time and I fear the implied selection mechanism embedded in that time horizon.  At the margin I would expect this to attract people who don’t have a vivid mental image of the distant future.  Furthermore the terms of the program discriminate against those who expect high earnings or for that matter those who expect to finish.  In other words, the drop out rate of the marginal students here may be relatively high.  And what are the payback terms for dropouts?  Do they get off scot free?  Pay proportionately for what they finished?  Pay much much less to reflect their lower expected wages?  The six-year graduation rate at Oregon State is only about 61%.  This is not a small question.

Funding education through debt or through family-based crowd-sourcing may serve up a better mix of students.  By the way, this source says the repayment period is over 24 years, not 20.  Again, keep in mind that “the rate of return for the marginal student” is not the same as the “rate of return for the marginal student who would be attracted by these terms.”

And is this a better or worse deal for the median student at say Oregon State?  If most students take this offer, I fear that the university’s incentive to improve the quality of education will not stay intact at the margin.  I do understand there is a version of this plan where the tuition revenue simply comes from a state program rather than from the student, but more likely than not Oregon would end up with a “complex formula” which weakens the incentives of the institutions at the relevant margin.  (On the state side of the equation, there is an incentive to conserve on cash and make the marginal tuition “free,” rather than pay the same amount of cash to the school the student would have paid.)  Alternatively, if most students do not take this offer, one has to wonder what is wrong with it and adjust one’s estimate of the adverse selection problem accordingly.

Let’s assume, for the purposes of argument, that the 3% future “tax” won’t hurt labor supply at all.  How is this program so different from moving to the European model, where higher education is free or near-free and general taxes on the population are higher?  Yet the European systems of higher education are generally worse than those in America, so why should we be trying to copy them or move toward them?  If anything, they are trying to move closer to American models.

At the end of the day, I am willing to let Oregon make a likely mistake to find out how this works.  Go ahead guys, do it, we are all watching.

I thank several loyal MR readers for the pointer.

How bad were the Navigation Acts really?

by  Tyler Cowen in

Adam Smith supported them and he was no mercantilist.  Here is another take:

…that remains the consensus view among a broad sample of modern scholars: a recent study concluded that nearly 90 percent of the economists and historians surveyed agreed with proposition that “[t]he costs imposed on the colonists by the trade restrictions of the Navigation Acts were small.”

if the burden of the Navigation Acts was so slight — no more than one percent of GDP, according to Thomas’ calculation — why did the Americans make such a fuss over it?  The short answer is that although the burden to the American colonies as a whole was low, it did not fall evenly across the entire economy: some sectors and regions suffered disproportionately, while others were barely affected.  The regions and sectors that suffered the most from the Navigation Acts tended to be the strongest supporters of the American Revolution.

That is from the forthcoming useful book by Richard S. Grossman Wrong: Nine Economic Policy Disasters and What We Can Learn from Them.  For the two relevant Robert Paul Thomas pieces (jstor) see here and here.

To further brighten your day, here is a non-gated piece by Robert Whaples, “Where is There Consensus Among American Economic Historians?  The Results of a Survey on Forty Propositions” (pdf).

*Napoleon’s Egypt*

by  Tyler Cowen in

The author of this interesting work is Juan Cole and the subtitle is Invading the Middle East.  Here is one excerpt:

Many of the French took seriously Bonaparte’s proclamations that he intended to bring liberty to the Egyptians through institutions such as the clerically dominated divan.  The French not only interpreted Egypt in terms familiar to their eighteenth-century world, they were also capable of reinterpreting their own history in light of what they saw in Egypt.  Just as rationalist officers coded popular Islam as reactionary Catholicism, so the Republican French mapped the defeated beys as analogous to the French Old Regime and saw their overthrow and institution of municipal elections as the advent of liberty.

This book is one good place to start.  Here is the Wikipedia page on the French invasion of Egypt and Syria.

How might democracy disappear?

by  Tyler Cowen in

From my latest request for requests, anonymous asked:

It’s 2050. Democracy has ended in most countries, with a few exceptions. What happened?

Another reader, Dirk, asked:

If democracy ended in the USA, how do you think it would most likely play out?

Maybe you are thinking in terms of war or pandemic, but external conditions would have to be truly extreme to end democracy in the United States.   The poor military fortunes of the Confederacy in the South, during the Civil War, did not lead to non-democracy (for Whites, slanted source here).  Nor did siege by the Nazis make Great Britain less democratic, if anything the contrary.

If the Anglo democracies are to disappear, it will be because they will have voted themselves out of the idea, democratically of course.

As for many other parts of the world, my view is if you haven’t had democracy for one hundred years or more, it probably isn’t as stable as it may at first appear.

Repeal the employer mandate altogether

by  Tyler Cowen in

I agree with Ezra Klein, who writes:

Delaying Obamacare’s employer mandate is the right thing to do. Frankly, eliminating it — or at least utterly overhauling it — is probably the right thing to do. But the administration executing a regulatory end-run around Congress is not the right way to do it.

Ezra notes:

– By imposing a tax on employers for hiring people from low- and moderate-income families who would qualify for subsidies in the new health insurance exchanges, it would discourage firms from hiring such individuals and would favor the hiring — for the same jobs — of people who don’t qualify for subsidies (primarily people from families at higher income levels).

– It would provide an incentive for employers to convert full-time workers (i.e., workers employed at least 30 hours per week) to part-time workers.

– It would place significant new administrative burdens and costs on employers.

By tying the penalties to how many full-time workers an employer has, and how many of them qualify for subsidies, the mandate gives employers a reason to have fewer full-time workers, and fewer low-income workers.

We can only hope that repeal of this one part of the law is what the Obama Administration actually has in mind, though as Ezra notes Congress is not currently in a cooperative frame of mind.  Still, this way it has a chance of serious reexamination after the 2014 elections.

Evan Soltas offers relevant comment on how this will change implementation in the short-run, namely that it puts more burden on the exchanges.  Sarah Kliff comments on the politics, a very good post.  Here is one good quotation from a source: “Politically, it won’t get easier a year from now, it will get harder,” he said. “You’ve given the employer community a sense of confidence that maybe they can kill this. If I were an employer, I would smell blood in the water.”

My view is you don’t serve up a delay and PR disaster like this, on such a sensitive political issue, unless you really wish to derail the entire provision.

Do positive wealth shocks stick?

by  Tyler Cowen in

There is a new paper by Hoyt Bleakley and Joseph P. Ferrie, titled “Up from Poverty? The 1832 Cherokee Land Lottery and the Long-run Distribution of Wealth.”  This paper uses a very clever experimental design, relying on random, lottery-based allocations of land.  The question is how much winning this land lottery helped people in the longer run.  Here is the abstract:

The state of Georgia allocated most of its land to the public through a system of lotteries. These episodes provide unusual opportunities to assess the long-term impact of large shocks to wealth, as winning was uncorrelated with individual characteristics and participation was nearly universal among the eligible population of adult white male Georgians. We use this episode to examine the idea that the lower tail of the wealth distribution reflects in part a wealth-based poverty trap because of limited access to capital. Using wealth measured in the 1850 Census manuscripts, we follow up on a sample of men eligible to win in the 1832 Cherokee Land Lottery. We assess the impact of lottery winning on the distribution of wealth 18 years after the fact. Winners are on average richer (by an amount close to the median of 1850 wealth), but mainly due to a (net) shifting of mass from the middle to the upper tail of the wealth distribution. The lower tail is largely unaffected.

The bottom line is that the grants increased inequality, many people were helped a great deal, and a large chunk of people weren’t helped at all.  An ungated version of the paper is here.

New evidence on marginal tax rates and income

by  Tyler Cowen in

There is a new paper (pdf) from Karel Mertens:

This paper estimates the dynamic effects of marginal tax rate changes on income reported on tax returns in the United States over the 1950-2010 period. After isolating exogenous variation in average marginal tax rates in structural vector autoregressions using a narrative identification approach, I find large positive effects in the top 1% of the income distribution. In contrast to earlier findings based on tax return data, I also find large effects in other income percentile brackets. A hypothetical tax reform cutting marginal rates only for the top 1% leads to sizeable increases in top 1\% incomes and has a positive effect on real GDP. There are also spillover effects to incomes outside of the top 1%, but top marginal rate cuts lead to greater inequality in pre-tax incomes.

The political economy of drones

by  Tyler Cowen in

That is a new paper by Christopher Coyne and Abigail Hall, here is the abstract:

This paper provides a political economy analysis of the evolution of unmanned aerial vehicles (UAV) or “drones”, in the United States. Focus is placed on the interplay between the political and private economic influences; and their impact on the trajectory of political, economic, and, in this case, military outcomes. We identify the initial formation of the drone industry, trace how the initial relationships between the military and the private sector expanded over time, and discuss how the industry has expanded. Understanding the history and evolution of UAV technology, as well as the major players in the industry today, is important for ongoing policy debates regarding the use of drones, both domestically and internationally.

Who is the most influential public intellectual of the last twenty-five years?

by  Tyler Cowen in

A while ago I asked a related question.  But my answer blew it on one major possibility.  Doesn’t Andrew Sullivan have a reasonably strong claim to that title, especially after the recent Supreme Court decisions on gay marriage?  Sullivan was the dominant intellectual influence on this issue, from the late 1980s on, and that is from a time where other major civil liberties figures didn’t give gay marriage much of a second thought, one way or the other, or they wished to run away from the issue.  Here is his classic 1989 New Republic essay.  Here is a current map of where gay marriage is legal and very likely there is more to come.

Sullivan was also a very early blogger, and an inspiration for many in that regard (myself included), and the blogging innovation seems like it is going to stick.  That’s two big wins right there, and how many other people can even come up with one?

Many of you will complain about his “war blogging,” his connection to Obama, and perhaps other matters, but no matter what you think on these issues it still seems to me he holds the lead.

Pre-Sullivan, I would give the honors to Milton Friedman.

On the Hayek-Pinochet connection

by  Tyler Cowen in

Corey Robin has a long post on this, here is one part:

Hayek complied with the dictator’s request. He had his secretary send a draft of what eventually became chapter 17—“A Model Constitution”—of the third volume of Law, Legislation and Liberty. That chapter includes a section on “Emergency Powers,” which defends temporary dictatorships when “the long-run preservation” of a free society is threatened. “Long run” is an elastic phrase, and by free society Hayek doesn’t mean liberal democracy. He has something more particular and peculiar in mind: “that the coercive powers of government are restricted to the enforcement of universal rules of just conduct, and cannot be used for the achievement of particular purposes.” That last phrase is doing a lot of the work here: Hayek believed, for example, that the effort to secure a specific distribution of wealth constituted the pursuit of a particular purpose. So the threats to a free society might not simply come from international or civil war. Nor must they be imminent. As other parts of the text make clear, those threats could just as likely come from creeping social democracy at home. If the visions of Gunnar Myrdal and John Kenneth Galbraith were realized, Hayek writes, it would produce “a wholly rigid economic structure which…only the force of some dictatorial power could break.”

Hayek came away from Chile convinced that an international propaganda campaign had been unfairly waged against the Pinochet regime (and made explicit comparison to the campaign being waged against South Africa’s apartheid regime). He set about to counter that campaign.

He immediately wrote a report lambasting human rights critics of the regime and sought to have it published in the Frankfurter Allgemeine Zeitung. The editor of this market-friendly newspaper refused, fearing that it would brand Hayek as “a second Chile-Strauss.” (Franz Josef Strauss was a right-wing German politician who had visited Chile in 1977 and met with Pinochet. His views were roundly repudiated by both the Social Democrats and the Christian Democrats in Germany.) Hayek was incensed. He broke off all relations with the paper, explaining that if Strauss had indeed been “attacked for his support for Chile he deserves to be congratulated for his courage.”

There is much more at the link.

No One is Innocent

by  Alex Tabarrok in

I broke the law yesterday and again today and I will probably break the law tomorrow. Don’t mistake me, I have done nothing wrong. I don’t even know what laws I have broken. Nevertheless, I am reasonably confident that I have broken some laws, rules, or regulations recently because its hard for anyone to live today without breaking the law. Doubt me? Have you ever thrown out some junk mail that came to your house but was addressed to someone else? That’s a violation of federal law punishable by up to 5 years in prison.

Harvey Silverglate argues that a typical American commits three felonies a day. I think that number is too high but it is easy to violate the law without intent or knowledge. Most crimes used to be based on the common law and ancient understandings of wrong (murder, assault, theft and so on) but today there are thousands of federal criminal laws that bear no relation to common law or common understanding. The WSJ illustrates:

Last September (2011), retired race-car champion Bobby Unser told a congressional hearing about his 1996 misdemeanor conviction for accidentally driving a snowmobile onto protected federal land, violating the Wilderness Act, while lost in a snowstorm. Though the judge gave him only a $75 fine, the 77-year-old racing legend got a criminal record.

Mr. Unser says he was charged after he went to authorities for help finding his abandoned snowmobile. “The criminal doesn’t usually call the police for help,” he says.

Or how about this:

In 2009, Mr. Anderson loaned his son some tools to dig for arrowheads near a favorite campground of theirs. Unfortunately, they were on federal land….

There is no evidence the Andersons intended to break the law, or even knew the law existed, according to court records and interviews. But the law, the Archaeological Resources Protection Act of 1979, doesn’t require criminal intent and makes it a felony punishable by up to two years in prison to attempt to take artifacts off federal land without a permit.

The Anderson’s didn’t even find any arrowheads but the attempt to find was punishable by imprisonment. Under statutes such as the Lacey Act one can even face criminal prosecution for violating the laws of another country. Ignorance of another  country’s laws is no excuse.

If someone tracked you for a year are you confident that they would find no evidence of a crime? Remember, under the common law, mens rea, criminal intent, was a standard requirement for criminal prosecution but today that is typically no longer the case especially under federal criminal law .

Faced with the evidence of an non-intentional crime, most prosecutors, of course, would use their discretion and not threaten imprisonment. Evidence and discretion, however, are precisely the point. Today, no one is innocent and thus our freedom is maintained only by the high cost of evidence and the prosecutor’s discretion.

One of the responses to the revelations about the mass spying on Americans by the NSA and other agencies is “I have nothing to hide. What me worry?” I tweeted in response “If you have nothing to hide, you live a boring life.” More fundamentally, the NSA spying machine has reduced the cost of evidence so that today our freedom–or our independence–is to a large extent at the discretion of those in control of the panopticon.

Report from Bangalore, 2013

by  Tyler Cowen in

Okalipuram corporator Queen Elizabeth was granted anticipatory bail in a forgery case.

Allowing her bail plea, high court vacation judge AN Venugopala Gowda told her to surrender her passport before the trial court and execute a personal bond for Rs 50,000.

The corporator has to be available for interrogation as and when required on any day between 8am and 6pm and shouldn’t make attempts to induce or issue threat/promise to persons acquainted with the facts of the case, the judge said.

An FIR was registered against Queen Elizabeth under sections 198 and 420 of the IPC and section 3(1)(ix) of SC/ST(Prevention of Atrocities) Act, 1989, for allegedly forging documents and obtaining a false caste certificate.

The story is here, via James Crabtree, and yes the person’s name is Queen Elizabeth and she is on the city council.