Category: Law
Markets in everything
I heard reports of inmates checking out popular books like The Da Vinci Code, then auctioning off reading rights to fellow inmates.
That is from Avi Steinberg’s Running the Books: The Adventures of an Accidental Prison Librarian, which is often annoying, intermittently very interesting.
Toward a parallel market in Cypriot euros
Some people are trying to get this off the ground, although the legal issues appear to be murky:
Is your cash stuck in a Cypriot bank? Someone might be willing to take it off your hands.
Distressed-debt investors and brokers are circling Cyprus, the Mediterranean island that last month plunged its two main banks into an emergency restructuring and blocked thousands of depositors from touching all their money.
The idea: investors buy frozen bank deposits, at a discount. Depositors who need access to their money get a payoff immediately, instead of waiting months or years for the bank restructuring to be completed. Investors get a shot at a big payoff down the line.
The article is here, and hat tip goes to @RobinWigg.
Sentences to ponder
Indeed, for customer-support calls, people with a criminal background actually perform a bit better.
I do not think that result is subject to all of the ideal statistical adjustments, although it is based on some “Big Data” correlations.
The longer story is here, and for the pointer I thank DW.
Substitutes for the Second Amendment
One of the purposes of the 2nd Amendment was to protect the people from government tyranny. The most important aspect of this was probably not to arm the public per se but rather to minimize the necessity and use of a standing army. Unfortunately, Americans have long gone from fearing standing armies to loving them. So isn’t it time for an additional or substitute amendment? Given the immense changes since the founding what amendments would best protect the people from tyranny today? Here are some possibilities:
- The right of the people not to bear arms shall not be infringed (i.e. no conscription. Requiring someone to bear arms, thus taking all of their freedom, is a far worse example of tyranny than preventing them from bearing arms.)
- If 1/3rd or more of the Supreme Court rule that a law is unconstitutional it shall be unconstitutional. (Greater protection of minority rights).
- Congress shall pass no law abridging the right of the people to encrypt their documents and effects. (Modern supplement to the fourth amendment.)
Other ideas?
The 2nd Amendment does have an important (unique?) advantage in protecting against tyranny namely that the right is self-enforcing, it creates the conditions, an armed public, which make the right difficult to abrogate. To some extent, free speech works in a similar way but “you’ll have to take my gun from my cold, dead hands” is a bigger threat than “you’ll have to take my free speech over my objections.” Are there are other self-enforcing amendments?
Hat tip for discussion to Bryan Caplan.
German markets in everything
Responding to an order from above, a Munich court has reopened the media accreditation process for reporters covering the biggest neo-Nazi trial in German history. Seats will now be allotted by raffle, with several being reserved for the Turkish, Greek and other foreign press.
Here is more, note there are several reserved for Persian, Greek, and Turkish media.
Sentences to ponder
Irish homeowners applying for debt writedowns will have to give up satellite television, foreign holidays and private school educations for their children under a strict new insolvency law introduced to tackle the country’s debt crisis.
On Thursday Ireland’s Insolvency Service set out monthly spending limits for people seeking debt deals from their creditors, highlighting the impact austerity is having on Irish spending habits. A single person will be allowed just €247.04 a month for food, €57.31 for heating and €125.97 for “social inclusion and participation”, an expenses category that includes tickets for sporting events and the cinema.
…In most cases, people seeking debt deals will also have to give up private health insurance and their cars, although they will be able to keep their vehicles if they do not have access to public transportion.
From the FT, here is more. The Irish Times has an ungated version.
The idea of wealth taxes is only getting started
Two top advisers to German Chancellor Angela Merkel have called for a tax on private wealth and property in eurozone debtor states to force the rich to fund rescue costs, marking a radical new departure for EMU crisis strategy.
Here is more. I tell you again, this will be a major issue for the next twenty years and not just in the eurozone. Take a look at all those state and local U.S. pension funds expecting seven percent rates of return.
Notice of the article is from @LindaYueh.
The culture that is Washington
The Senate has severely scaled back the Stock Act, the law to stop members of Congress and their staff from trading on insider information, in an under-the-radar vote that has been sharply criticised by advocates of political transparency.
The changes, if they become law, will exclude Congressional and White House staff members from having to post details of their shareholdings online. They will also make online filing optional for the president, vice-president, members of Congress and congressional candidates.
The House was expected to pass a similar bill on Friday.
Here is the FT article, here are other sources. Some officials suggested that transparency “could threaten national security,” more detail on that here. Here are some further interesting details.
The Real Estate Commission Puzzle
Some seven years ago I wrote that the system of real estate commissions is horribly inefficient:
Consider, house prices are much higher in California than in Idaho but commissions are stable at around six percent. Thus, even though the realtor’s job, brokering a deal, is the same in California as in Idaho, a realtor in California will make much more per-house. As a result, there are far too many realtors in California and many of them will spend an entire year selling only a handful of houses. [At the height of the real estate boom in CA there were 437,000 real estate agents and only 680,000 home sales a year!, AT added 2013] Indeed, many realtor’s spend most of their time prospecting for clients rather than actually selling houses – this is a huge waste of resources. The same relationship holds over time as over space. That is, when house prices go up we don’t see a fall in commission rates. Instead, we see more entry. Since the same number of houses are being bought and sold, the extra realtors don’t make the buyer or seller better off and sadly the realtors aren’t better off either – instead the excess return is siphoned off in wasteful prospecting for clients. Unfortunately, no one really understands why commissions are stable.
When I wrote this in 2005 many commentators argued that fees would drop with the entry of online brokers. That has not happened. Indeed, as a recent piece in Bloomberg titled Why Redfin, Zillow, and Trulia Haven’t Killed Off Real Estate Brokers notes, the puzzle has in some ways gotten more difficult to understand. Today, lots of people use the internet to find homes by themselves, so brokers are doing less work, yet fees have by and large not fallen and most sales continue to use agents. Add to all this the Levitt and Syverson result that brokers sell houses too quickly and get lower prices than would be optimal for the seller and the puzzle deepens even further. As I wrote earlier the obvious answers don’t seem correct:
The answer is not monopoly. It’s very easy to enter the market for realtors. So why don’t commissions fall? One can certainly point to some restrictive practices by the NAR but I don’t think that is the whole or even the major part of the story. A clue to the puzzle is that we also see stable commission rates in law (contingency fees) and in services (tipping). Why is the appropriate tip 15% at an expensive restaurant and at a cheap restaurant? Does the tuxedoed waiter really have a harder job than the diner waitress? Maybe (indeed, I have argued along these lines elsewhere) but the commonality across these very different markets tells me something else is going on. Is it signaling? Would you distrust a realtor offering lower commissions? Again, maybe, but it’s hard to believe that with so much money at stake there aren’t enough people willing to take a risk on a discount realtor for long enough for reputations to be established. I think part of the problem in the realtor market is that other realtors can easily discriminate against discount brokers by pushing their clients one way or the other – that says the antitrust actions will probably not be very effective [and may help to explain why Zillow and Trulia which don’t compete with agents have been very successful while Redfin which offers more value but does compete with agents is still a very small player, AT 2013]. But this doesn’t explain stable commissions in law or waiting.
Hat tip: Newmark’s Door.
Inform pedestrians, not drivers
From Sacha Kapoor and Arvind Magesan (pdf):
Most empirical studies on the role of information in markets analyze policies that reduce asymmetries in the information that market participants possess, often suggesting that the policies improve welfare. We exploit the introduction of pedestrian countdown signals – timers that indicate when traffic lights will change – to evaluate a policy that increases the information that all market participants possess. We find that although countdown signals reduce the number of pedestrians struck by automobiles, they increase the number of collisions between automobiles. We also find that countdown signals caused more collisions overall. The findings imply welfare gains can be attained by revealing the information to pedestrians and hiding it from drivers. We conclude that policies which increase asymmetries in information can improve welfare.
Hat tip goes to @m_sendhil.
“Could this euro have been made out of ice?”
It is becoming increasingly clear that moves out of the euro will be done furtively, sometimes gradually, and most of all non-transparently. At some point we’ll start arguing over whether “the euro” is a “rigid designator.”
First Cyprus has capital controls and now Portugal may be making a different kind of plunge:
The Portuguese government is considering a plan to pay public workers and pensioners one month of their salary in treasury bills rather than cash after a high court ruled out wage cuts…
Of course these “treasury bills” (is that a rigid designator?) will have a floating price with respect to the euro, with respect to the “euro trapped in a Portuguese bank” (eventually), and other Portuguese treasury securities for that matter. Which will be the real money of Portugal?
If indeed this happens (one government spokesperson has denied the report) and perhaps then continues, at what point do we conclude that the Portuguese have opted for a dual currency?
Would the new scrip currency push out the euro or vice versa or can they coexist? One central question is at what rate the government would accept the new scrip for payments and taxes or otherwise offer to redeem or convert it.
Another question is banking confidence. If the new scrip goes badly, that may lower confidence in the Portuguese banking system. If the new scrip goes well…that may also lower confidence in the Portuguese banking system. The government will issue more of it and it will come closer to a dual currency. Bank accounts denominated in euros may become less credible in terms of their underlying protection. Once a new alternative currency is up and running, Portugal can leave the euro much more easily, converting bank deposits into the new currency along the way to ease their fiscal crunch. After the Cyprus episode, they are probably counting less on help from others.
Ideally the Portuguese government would like to be in a position of promising that the new script will be retired/repurchased within a month or some other very short time frame.
That’s not usually how it ends up working.
Garett Jones offers related comment. Here are a few remarks on lecterns made of ice.
Buried treasure in clickthrough agreements
Do you know anyone who stops to read “click-through” agreements on websites in the middle of performing a task? One company, PC Pitstop, deliberately buried a clause in its end-user license agreement in 2004, offering $1,000 to the first person who emailed the company at a certain address. It took five months and 3,000 sales until someone claimed the money. The situation hadn’t improved by 2010 when Gamestation played an April Fools’ Day joke by embedding a clause in their agreement saying that users were selling them their souls.
Here is another good bit:
Ponder the fact that a dermatologist must sign his name to forms almost 30,000 times a year, according to a 2008 article in the Southern Medical Journal.
The article is here and for the pointer I thank Olaf.
The ACA’s four cliffs
…(1) the 50th employee (firms with 49 employees that don’t offer medical insurance will be hit with a $40,000 penalty if they hire just one more worker); (2) the 200 percent threshold (one households cross 200 percent of the poverty line, deductibles might sharply increase); (3) the 400 percent threshold (the dropoff is even bigger once households cross 400 percent of the poverty line); and (4) the early retirement incentive (ACA creates an incentive for many older workers below age 65 to exit the workforce) — reshapes the American labor market, the dominant narrative will be that the $85 billion in sequestration cuts are responsible for sluggish growth.
That is from Reihan, most of the post is on sequestration.
Irving Fisher on Prohibition
Here is one typical passage:
We see from the papers that Prohibition in Norway was given up. Do you know what Prohibition was in Norway? It allowed drinks containing 21 per cent alcohol! The people were so disgusted with the results that they overthrew this “Prohibition.” The heavy drinkers wanted their “personal liberty”; they did not want to stop at 21 per cent. It is easier to stop at one-half of one per cent than at 21. This is the lesson of experience. The only thing to do is what they did in Kansas – to tighten it up whenever there is an attack on Prohibition. The whole strength of the opposition consists in saying, “It can’t be done; it doesn’t work”; it is not that the object is a bad thing, but that it does not work. Now the more you tighten it the better it will work, and the more you loosen it up the worse it will work; and therefore the more you will have the very conditions that led to the overthrow of such Prohibition as they had in Norway and Ontario. In Ontario they originally allowed 2.2 per cent beer, then they “loosed up” and allowed 4.4 per cent and now they have loosened up still further. Experience shows that there is never a stable equilibrium at midway points and never any permanent solution of the liquor problem in a wide-open policy. The only stable equilibrium and permanent solution lies in the utter extermination of the liquor traffic.
William Shakespeare, grain hoarder
There seem to be some new results about the life of the Bard:
The Bard of Avon, who championed the downtrodden in plays like “Coriolanus,” was a conniving character in his personal life, British researchers claim — a tax dodger who profiteered in food commodities during a time of famine.
William Shakespeare was fined repeatedly for illegally hoarding grain, malt and barley for resale during a time of food shortages. He also was threatened with jail for avoiding taxes, according to the study of court and tax archives by researchers at Aberystwyth University in Wales.
The profits were channeled into real-estate deals, the researchers wrote, making Shakespeare one of Warwickshire’s largest landowners.
…It would seem that Shakespeare was drawing on personal knowledge when he wrote “Coriolanus,” a political tragedy that includes an early 1600s version of an Occupy protest against the 1%:
“They ne’er cared for us yet: suffer us to famish, and their storehouses crammed with grain; make edicts for usury, to support usurers; repeal daily any wholesome act established against the rich, and provide more piercing statutes daily to chain up and restrain the poor.”
Adam Smith of course argued that the grain hoarder was usually welfare-improving. Other accounts of the new Shakespeare results are here. Here is one good article with this interesting bit:
She said the playwright’s funeral monument in Stratford’s Holy Trinity Church reflected this. The original monument erected after his death in 1616 showed Shakespeare holding a sack of grain. In the 18th century, it was replaced with a more ”writerly” memorial depicting Shakespeare with a tasseled cushion and a quill pen.
So far I cannot find a draft of the original research paper itself.