Category: Law
The Cyprus surprise
Announced Friday night of course:
Final details being inked on
#Cyprus bailout as we speak. Most significant measure: 9.9% levy on bank deposits over €100,000, says source.
That is from Peter Siegel. (Addendum: and here is more information.) I believe that is not the full deal (do depositors get some kind of equity claim?) and there is more information to come. Elsewhere, all four games were drawn in the Candidates Match for the right to play against Anand for the world chess championship. It will be interesting to see who makes the next move.
p.s. I don’t like to give investment advice (other than “diversify” and “buy and hold”), but if you have any deposits in Cyprus banks, I would recommend asking yourself whether you are sure that this is the final haircut or step one in a series.
*With Charity for All*
I am a fan of this book. The author is Ken Stern and the subtitle is Why Charities are Failing and a Better Way to Give, with emphasis on the former I would say. Here is one excerpt:
The CBO study and other reporting on the practices of charitable hospitals did in fact spur reforms efforts, including a proposal in Congress to require a minimum uncompensated care rate of 5 percent in return for tax-exempt status. All the major proposals, however, have been beaten back, with reform advocates having to settle for greater public reporting obligations for charitable hospitals on the theory that greater transparency would ratchet up pressure for change. It hasn’t worked. A 2012 nationwide study found continuing low levels of uncompensated care, only 1.51 percent on average, a number less than half the profit margins for the same group of hospitals.
Thwarted body part markets in everything
The Chicago-based nonprofit faces “the same challenge any business would have, whether I’m selling Hostess Twinkies or cadavers,” says Stephen Burnett, a professor of management and strategy at Northwestern University’s Kellogg School of Management.
To stay ahead, the association wants to supply body parts to the FBI and launch new products, including its own plastinated bodies, says Mr. Dudek, 62, executive vice president since 2005. He draws on his entrepreneurial experience as a co-owner of an MRI center in the south suburbs, which he sold to join the association.
Originally known as the Demonstrator’s Society, the association has not changed its business plan since its founding in 1918. Bodies are donated, embalmed and transferred to institutions such as med schools, where dissection remains a rite of passage.
Reasons for donations vary. Some gifts are part of estate planning, while others are made by relatives who cannot afford funerals.
By law, bodies cannot be sold, although groups like the association can be paid for processing. Member med schools pay about $1,300 per cadaver; nonmembers pay $2,300.
Nationwide, there’s a shortage of cadavers, in part because of the rise in organ donation. Cadavers without their organs are not suitable for medical education, Mr. Dudek notes. The association needs about 425 bodies a year for its members but missed that mark in 2009 and has barely met it in three of the last six years.
And yet globalization and government may come to the rescue:
The Middle East, where the culture discourages body donations, could be a new market. Schools in Lebanon and Saudi Arabia have recently expressed interest, he says. Law enforcement agencies also are prospects. Anatomical Gift is close to signing a contract to supply the FBI’s K-9 unit, which uses body parts to train dogs to find crime victims, he says. Limbs cost $570, plus $335 for HIV and hepatitis testing, since they are not embalmed, Mr. Dudek says. An FBI spokeswoman declines to comment.
There is more here, and for the pointer I thank G. Patrick Lynch.
InTrade has closed down
Their somewhat mysterious announcement, which refers to financial irregularities, can be read here.
Canada projection of the day
In Toronto, 63 percent of the population will be foreign born by 2031…In Vancouver, the foreign-born population will be 59 percent.
That is from the quite interesting The Big Shift: The Seismic Change in Canadian Politics, Business, and Culture and What it Means for Our Future, by Darrell Bricker and John Ibbitson. If you are into the “how should the Republican Party reinvent itself?” question, this book is a must-read. That’s not so much my thing, but it’s also a fascinating introduction to the new ethnic politics in Canada and why so many Canadian immigrants have seen fit to vote for the conservatives.
Dept. of unintended consequences
…local residents and city officials developed a plan to force convicted sex offenders to leave their neighborhood: open a tiny park.
Parents here, where state law prohibits registered sex offenders from living within 2,000 feet of a school or a public park, are not the only ones seizing on this approach. From the metropolis of Miami to the small town of Sapulpa, Okla., communities are building pocket parks, sometimes so small that they have barely enough room for a swing set, to drive out sex offenders. One playground installation company in Houston has even advertised its services to homeowners associations as an option for keeping sex offenders away.
In many cities sex offenders are finding it hard to live anywhere at all, or they cluster in a few park-less neighborhoods. The article is, as they say, interesting throughout.
Sentences of interest
IBM is also working to program Watson so that it can pass the U.S. Medical Licensing Examination.
Here is more.
Coasean markets in everything?
A consortium of Central Texas businesses and communities has floated a novel solution to the tug of war over Colorado River water: Pay downriver rice farmers not to farm rice.
Members of the Central Texas Water Coalition are asking the Lower Colorado River Authority to pay rice farmers at least $100 million not to farm rice in perpetuity. They figure that’s cheaper than the cost of a proposed downriver reservoir, whose costs the LCRA estimates at $206 million.
The full story is here, and for the pointer I thank Bill, a marginally loyal MR reader.
The privatization of law enforcement in Melbourne and the restriction of entry
THE new sex industry police unit – created by the Baillieu government one year ago in a bid to crack down on crime in the sex industry – is hamstrung by lack of resources and has not charged any illegal brothel operators since its inception.
The unit has managed to shut down one illegal parlour but is not directly policing them – instead focusing its enforcement and monitoring activities on licensed brothels.
Frustrated licensees of legal brothels have resorted to vigilante action, sending spies into illegal parlours. They have given police statutory declarations swearing they received sexual services at five illegal brothels around Melbourne – all of them close to police or politicians’ offices, including Premier Ted Baillieu’s office in Camberwell.
Police are also understood to have been provided last year with a further list of 62 premises suspected of providing illegal sex – all of which are believed to be still operating.
Here is more, and for the pointer I thank David H.
CAFE Standards are Extremely Inefficient
In Modern Principles, Tyler and I explain that a command and control regulation is a less flexible and thus more expensive way of reducing energy consumption than is a tax. How much more expensive? A recent analysis estimates that the new fuel economy standards are 6 to 14 times more expensive than an equal consumption-reducing gas tax. Valerie Karplus, one of the authors of the new analysis, writes in the NYTimes:
I and other scientists at the Massachusetts Institute of Technology estimate that the new standards will cost the economy on the whole — for the same reduction in gas use — at least six times more than a federal gas tax of roughly 45 cents per dollar of gasoline. That is because a gas tax provides immediate, direct incentives for drivers to reduce gasoline use, while the efficiency standards must squeeze the reduction out of new vehicles only. The new standards also encourage more driving, not less.
Questions that are rarely asked
From the comments, from VTProf:
Another consistency question: can you simultaneously believe that minimum wages have small disemployment effects (implying inelastic demand for labor) and that higher immigration has small negative wage effects (implying elastic demand for labor). Sign me up for relatively elastic demand for labor (in the long run) – that’s why I support immigration and am skeptical about min wage!
Napoleon Chagnon and his *Noble Savages*
I started reading Napoleon Chagnon’s Noble Savages: My Life Among Two Dangerous Tribes — the Yanomamo and the Anthropologists. The first fifty pages are excellent fun and well-constructed, though I cannot speak to the details of his claims about the frequency of conflict or the motivation of conflict by sexual competition for women. At some point, however, I realized I don’t want to read an entire book on either tribe, at least not at this moment. I am not suggesting that the book gets worse, but my interest did ebb.
I do not have a view about the controversies surrounding Chagnon, and ultimately that is what should decide the merits of this work. Here is Dreger’s systematic defense of Chagnon. Here is a survey of the Chagnon disputes. I wonder if he has ended up with less credibility from having the first name “Napoleon”?
Intrade Traffic Plummets
From the FT
The number of people using Intrade has plummeted since a US government crackdown late last year…At its peak, Intrade counted 112,000 users. At midday on Wednesday, the site said there were 509 – and 498 were guests.
The vanishing traffic raises questions about the predictive value of a market feted by journalists and academics as a pioneering gauge of public opinion.
The government failed to protect the public from CDOs plumped up with bad mortgages or from swindlers like Bernie Madoff but don’t worry when it comes to the markets that Arrow, Schelling, Smith, Hanson, Wolfers et al. said have “great potential for improving social welfare” the government has got it covered. Call me cynical but I suspect Intrade would have been better treated had it been a project of Goldman Sachs.
Aviation, Liability Law, and Moral Hazard
By 1994 the threat of lawsuits had driven the general aviation industry into the ground. Cessna and Beech ceased production in the 1990s and the other major player, Piper, went bankrupt. The problem was caused by liability law and the long-tail. Cessna, Beech, and Piper had been producing planes since 1927, 1932, and 1927, respectively, and airplanes last a long time. Thousands of aircraft built in the 1930s and 1940s are actively flown today and the average age of the general aviation fleet (small non-commercial aircraft) is more than 24 years. Liability law also grew stronger in the 1980s and 1990s so aircraft manufacturers found themselves being sued for aircraft that they had produced decades earlier. Essentially, the manufacturers found that they could be sued for any aircraft that they had ever produced.
In 1994, however, Congress passed GARA, the General Aviation Revitalization Act. GARA said that small airplane manufacturers could not be held liable for accidents involving aircraft more than 18 years old. When it was passed a huge stock of potential liability claims were lifted from the manufacturers and the industry was indeed revitalized. GARA also provided an interesting test of moral hazard theory. Usually, when liability is moved from producers to consumers, both the producers and the consumers adjust; the product changes and so does behavior, so it is difficult to parse out the effect of moral hazard alone. In the case of GARA, however, liability was lifted from the manufacturers on planes that they had produced decades earlier and no longer controlled so we can isolate the influence of the liability change on the consumers of aircraft.
My latest paper (with Eric Helland) just appeared in the JLE. We use the exemption at age 18 to estimate the impact of tort liability on accidents as well as on a wide variety of behaviors and safety investments by pilots and owners. Our estimates show that the end of manufacturers’ liability for aircraft was associated with a significant (on the order of 13.6 percent) reduction in the probability of an accident. The evidence suggests that modest decreases in the amount and nature of flying were largely responsible. After GARA, for example, aircraft owners and pilots retired older aircraft, took fewer night flights, and invested more in a variety of safety procedures and precautions, such as wearing seat belts and filing flight plans. Minor and major accidents not involving mechanical failure—those more likely to be under the control of the pilot—declined notably.
GARA thus appears to be a win-win because it revitalized the industry and increased safety. The latter came, in a sense, at the expense of the pilots and owners who now bore a greater liability burden but they were the least cost avoiders of accidents. Moreover, the pilots and owners of small aircraft were big supporters of GARA thus suggesting strongly that prior to GARA liability law for aircraft had been inefficient and destructive.
Economic agents ponder the collapse of the pooling equilibrium
Robert Pear reports:
“The new health care law created powerful incentives for smaller employers to self-insure,” said Deborah J. Chollet, a senior fellow at Mathematica Policy Research who has been studying the insurance industry for more than 25 years. “This trend could destabilize small-group insurance markets and erode protections provided by the Affordable Care Act.”
It is not clear how many companies have already self-insured in response to the law or are planning to do so. Federal and state officials do not keep comprehensive statistics on the practice.
Self-insurance was already growing before Mr. Obama signed the law in 2010, making it difficult to know whether the law is responsible for any recent changes. A study by the nonpartisan Employee Benefit Research Institute found that about 59 percent of private sector workers with health coverage were in self-insured plans in 2011, up from 41 percent in 1998.
And:
Large employers with hundreds or thousands of employees have historically been much more likely to insure themselves because they have cash to pay most claims directly.
Now, employee benefit consultants are promoting self-insurance for employers with as few as 10 or 20 employees.
And from the FT:
The penalty for not providing coverage is $2,000 per worker. According to the Kaiser Family Foundation, a non-partisan policy group, the average annual cost to employers of insurance is $4,664 for a single worker and $11,429 for a family.
(Do note that the worker will find the job less attractive without health insurance., so this may not translate into a net gain for the employer.)
Here is an update on the 50% premium that can be charged to smokers, assuming the repeal movement for that feature does not succeed.
And now let me stress that you should not expect salvation from the (stand-alone) private sector. DNA sequencing seems to be making real progress, which will make private solutions harder to sustain, a problem which Alex pioneered the analysis of.
Addendum: Here is a good Christensen, Flier, and Vijayaraghavan Op-Ed on ACOs and their problems.