Category: Law
Sentences to ponder
The insurance commissioners in 11 states are elected. Under the Supreme Court’s Citizens United decision, insurers will now be able to finance the election campaigns of those who will be their regulators. Among other powers these state insurance regulators have authority over rates and policy forms.
That's a letter to The New York Times.
Addendum: See the comment by Michael Yuri.
Insiders, Outsiders and Unemployment
From today's NYTimes:
The Obama administration is planning to use the government’s enormous buying power to prod private companies to improve wages and benefits for millions of workers, according to White House officials and several interest groups briefed on the plan….
Because nearly one in four workers is employed by companies that have contracts with the federal government, administration officials see the plan as a way to shape social policy and lift more families into the middle class.
At a time of 10% unemployment when real wages need to fall this is bad business cycle policy. I am more worried, however, about the long term consequences of creating a dual labor market in which insiders with government or government-connected jobs are highly paid and secure while outsiders face high unemployment rates, low wages and part-time work without a career path.
Long-term unemployment is at shockingly high levels which in itself creates a dynamic of persistence because the longer a worker is unemployed the less employable they become (in part due to loss of human capital and signaling problems). Thus, getting these workers back to work is going to be hard enough as it is. Labor regulations which raise wages and make hiring and firing workers even more costly will make re-employing the long-term unemployed even more difficult.
Moreover, once an economy is in the insider-outsider equilibrium it's very difficult to get out because insiders fear that they will lose their privileges with a deregulated labor market and outsiders focus their political energy not on deregulating the labor market but on becoming insiders–see Blanchard and Summers on hysteresis in unemployment and more recently Larry Ball here. Many European economies found themselves stuck in the insider-outsider equilibrium and as a result unemployment levels in places like France and Italy hovered at 9% or more for decades.
Addendum: For a personal perspective see also Eric Raymond today in a post titled Marginal Devolution. Hat tip on the latter to Arnold Kling who also comments.
What is theft?
Chris Hartman does a fill in the blank exercise on Google — "_______ is theft?" — and reports this:
It's #2 that warms my heart. Of course you'll note that it's publishers who appear on this list four times.
Addendum: Chris reports some additional results.
*Reputation and Power*, a new theory of the FDA
The subtitle is Organizational Image and Pharmaceutical Regulation at the FDA and the author is Daniel Carpenter. Here is the book's home page but I don't yet see an Amazon listing. Here is a Barnes&Noble listing, note the price discount.
Where to start? It exhausts me to even write about this book, which is the most comprehensive and most detailed study of a regulatory agency written — ever – to the best of my knowledge. It supplements and overturns all existing work on its subject and it will prove a model for future investigations. It's not short!
The starting point is the notion of reputational capital and the claim that the FDA seeks to preserve and extend its reputation, for a variety of political reasons. One implication of this is that the FDA is sometimes too loose and other times too strict but that both biases are possible. The framework is then used to address numerous questions, including the following:
1. Why the U.S. has the most bureaucratically intensive drug regulation in the world.
2. Why the 1962 amendments were passed.
3. Why FDA regulation is so often treated as de facto irreversible.
4. Why the tenure of a division director matters for how the decisions of that division are treated.
5. Why there is so much judicial deference to the FDA.
6. Why the FDA has been so influential on a global scale.
7. How public attention affects the speed of FDA procedures.
The author makes a strong case that the FDA is one of the most powerful and most important regulatory agencies in the world and one of the most important extensions of state power. Everyone interested in the economics of regulation should read this book, just be prepared to be a little overwhelmed. I would also note that this is not mainly a partisan book in one direction or the other, though on net I read the author as wishing to see a stronger FDA. (On p.379, for instance, I read Carpenter as overly dismissive of the "drug lag" argument.)
Here is Carpenter's previous book, which I have not read. For the pointer to this work I thank Steve Teles.
The laws of New York City (not from *The Onion*)
Here is a new one:
Months after it barred schools from holding most food fundraisers, the city says bake sales can go on–as long as no homemade treats with undisclosed calorie counts grace the fold-out tables. The new regulation, designed to combat ever-increasing childhood obesity, limits bake sales to "fresh fruits and vegetables, or one of 27 specific packaged items" that include low-fat Doritos, Nutri-Grain Cereal Bars (blackberry only) and Linden’s Cookies (butter crunch, chocolate chip or fudge chip cookies in two cookie packs) among other things.
The article is here and hat tip goes to Elmira Bayrasli.
Latino immigrants and crime
The connection between Latino immigration and criminal behavior is much overstated. Here is an excellent article, full of good information. Excerpt:
The overall age-adjusted national imprisonment rates are shown in Chart 1. Hispanic incarceration rates are now between 13 and 31 percent above the white average, depending upon which age range we choose for normalization purposes.
And this:
Another important point to emphasize is the wide disparity in white incarceration rates throughout the country, even when adjusted relative to the number of whites in high-crime age ranges. For example, age-adjusted imprisonment rates for whites in large Southern states such as Florida, Texas, and Georgia may be 200 percent or even 300 percent higher than those for whites in large Northeastern or Midwestern states such as New York, New Jersey, or Illinois, as shown in Chart 5. Although it is impossible to disentangle completely how much of this gap may be due to higher criminality and how much due to harsher judicial systems, it seems likely that both play important roles. So even if the age-adjusted Hispanic incarceration rate is somewhat above the white rate–perhaps 15 percent higher on average–it still falls close to the center of the overall white distribution.
Don't forget this:
Nearly all of the most heavily Latino cities have low or even extremely low crime rates, and virtually none have rates much above the national average. Eighty percent Latino El Paso has the lowest homicide and robbery rates of any major city in the continental United States. This is not what we would expect to find if Hispanics had crime rates far higher than whites. Individual cities may certainly have anomalously low crime rates for a variety of reasons, but the overall trend of crime rates compared to ethnicity seems unmistakable.
And this:
…if we restrict our analysis to major cities of half a million people or more and compare the average crime rates for the five most heavily Hispanic cities–Albuquerque, Dallas, Los Angeles, San Antonio, and El Paso–to the those of the five whitest–Oklahoma City, Columbus, Indianapolis, Seattle, and Portland. This time, the more Hispanic cities are the ones with the lower crime rates–10 percent below the white cities in homicide and 15 percent lower in violent crime. A particularly remarkable result is that gigantic Los Angeles–50 percent Hispanic and frequently perceived as a dangerous urban hellhole–has violent crime rates close to those of Portland, Oregon, the whitest major city in the nation at 74 percent.
And finally:
Los Angeles today ranks as America’s least white European large city. Half of the population is Hispanic, and many of these are impoverished illegal immigrants and their families. Yet all crime rates have been falling steadily over the last two decades, with homicide dropping a further 18 percent just last year. As Chart 14 illustrates, most major crime categories are now back down to where they were in the early 1960s, when the population really did look very much like the actors appearing in “Dragnet” and “Leave It to Beaver.” And indeed, violent crime is now roughly the same as for Portland, Oregon, America’s whitest major city.
There is a lot more which I did not pass along, so read the whole thing. I thank The Browser and Ezra Klein for the pointers.
Rebuilding Haiti
Here is a new and very worthwhile short piece from Progressive Fix, authored by Jim Arkedis and Mike Derham. I am more skeptical of the UN than are the authors, but I agree with many of the recommendations and perhaps the UN is the only option anyway. Here is one excerpt:
Once order is established, the UN mission will essentially become a national police force in the absence of a Haitian alternative. To transfer power back to the local government, the UN mission should be tasked with building an effective security force and justice system. That means in addition to cops, the UN may solicit prosecutors and judges in a proxy judiciary. It’s a tall order, but it may be the only way that allows the remaining Haitian government to fully concentrate on reconstruction.
Here is a truly excellent article from the NYT, on the previous lack of Haitian openness and the need to mobilize Haitian expat expertise. Excerpt:
On an economic and political level, the Haitian diaspora could be threatening, said Harry Casimir, 30, a Haitian-born businessman who opened an information technology business there just before the earthquake. “Once the elites have money and power,” Mr. Casimir said, “they’re scared of people like me, the younger generation and so on. Because we travel around the world and see how other governments function, and obviously most countries are not corrupt like Haiti.”
The subsistence wage
Until the broken Haitian government can figure out how to distribute paychecks, the national police have been working for food. That's one meal a day, given to them by the foreigners, that "we have to beg for," said the chief of police.
The article is interesting throughout, as it focuses mostly on how corruption among the Haitian police has plummeted since the earthquake.
Jeff Ely on torture and commitment
Here is an easier-to-follow version of his argument on torture:
A big problem with torture in general is that its effectiveness is inherently limited by commitment problems. If torture leads to quick concessions then it will cease quickly in the absence of a concession (but of course continue once a concession has revealed that the victim is informed ). But then there would be no concession. And as we wrote last week, raising the intensity of the torture only worsens this problem.
Why should the FDA ban drugs?
305 Economists Called to Smart Questionnaire on the FDA:
Daniel Klein, Jason Briggeman, and Kevin Rollins have designed a questionnaire about the economic rationale for the policy that makes new drugs and devices banned until individually permitted by the FDA. Klein and Briggeman present the questionnaire and the list of economists. Will anyone provide a sensible market-failure rationale for the policy?
The link is here, take a look. I believe Congress should eliminate the "effective" part of the "safe and effective" clause, dating from 1962. If the question is allowing people to experiment with all pharmaceutical products, I see a few possible arguments (I'm not necessarily endorsing them) against doing that:
1. There will be more successes but also a greater number of bad events. This will possibly cause people to lose confidence in pharmaceuticals, just as many crazy theories circulate about vaccines and many people refuse them or refuse them for their children.
2. Our courts are not up to handling a greater number of liability suits, whether in terms of the quality of those courts or their ability to handle the case load. See Andrei Shleifer's recent paper on regulation as a substitute for an imperfect court system.
3. I am a fan of Robin Hanson's paper "Warning Labels as Cheap Talk: Why Regulators Ban Products." This was the piece Robin presented when we hired him, and it later appeared in JPubEc. The main point is that a verbal governmental warning: "We're really not sure this is safe, caveat emptor!" is not usually credible and people will regard the product as safe, thinking the government would not have otherwise let it come to market.
4. Parents cannot be trusted with their children.
Still, I think there is a good case for greater freedom for choice when it comes to pharmaceuticals.
Haiti fact of the day
In 2009, the cost of dealing with construction permits in Haiti was about 570% of income per capita.
Here is the source post, with further information. Had I mentioned that perhaps as much as eighty percent of the population of Port-au-Prince is homeless?
Act now
Nearly 55,000 Haitians have been approved for family visas but are on waiting lists to enter because Congress has set limits on how many may come each year, the State Department says.
There is more information on Haitian immigration here.
Free Hearing
Who gets the right to free speech is a status marker and disputes over this right a status game, so argues Robin Hanson:
The usual rationale for “free speech,” which seems persuasive, is that in the long run we as a society learn more via an open competition for the best ideas, where anyone can try to persuade us as best they can, and listeners are free to choose what to hear. Yet that concept would best be called “free hearing” – a freedom to hear and evaluate any case presented, based on any criteria you like (including cost).
“Free hearing” would apply not just to hearing from adult citizens in good standing, but also to hearing from children, convicts, corporations, robots, foreigners, or demons. We wouldn’t argue if corporations have a right to speak, but rather if we have a right to hear what corporations have to say.
But in fact we have “free speech,” a right only enjoyed by adult citizens in good standing, a right we jealously guard, wondering if corporations etc. “deserve” it. This right seems more a status marker, like the right to vote, than a way to promote idea competition – that whole competition story seems more an ex post rationalization than the real cause for our concern. Which is why support for “free speech” is often paper thin, fluctuating with the status of proposed speakers.
There are other explanations for our focus on free speech rather than free hearing such as it’s the speech makers who are easiest to punish and control (being so many smaller in number than the speech hearers) but Robin’s point remains characteristically insightful.
Speech Balloons
Here from Maya Sen are speech balloons illustrating the importance of various words from the majority and then dissenting/concurring opinions in Citizens United v. FEC (more frequently used words are larger). It's interesting to me that just looking at the balloons I can tell which side was more concerned with the Constitution and which side was more concerned with a particular view of the ideal polity.
See Bainbridge for a much more complete roundup of the issues.
The “health care betrayal” and Waxman-Markey
If there's one lesson from the health care debacle, it is that Waxman-Markey was and is a dead end. Many of us objected to the bill on the grounds that it supports a lot of phony offsets for twenty years, imposes lots of costs and regulation in the meantime, and then never really does much to help climate change, given the difficulties of political precommitment. I believe that people with these objections, such as myself, were viewed as "obstructionists" by many or as people who were simply looking for an excuse not to support the bill. But the idea that Congress was just playing around, and had no real will to address the problem, should now be much, much more credible. For all the talk about Waxman-Markey as a "framework," I see plenty of reasons — all the more now — to think Congress never meant to follow through.
The advantage of a carbon tax is that it forces Congress (and others) to demonstrate a certain amount of seriousness up front. A good rule of thumb for a climate change bill is whether a representative voting for it can and will say: "This will raise the price of gasoline in the next six months and that's the whole point."
Megan McArdle predicted all along, even after Ben Nelson folded, that the health care bill will fail because Congress isn't very interested in enacting unpopular policies. That's very good prophecy. It's no accident that she also is skeptical of Waxman-Markey, for reasons related to those expressed above.
I believe the health care debacle should cause all of us to rethink our positions on preferred paths, sequences, and strategies. No matter what your opinion of the health care bill, it's not a pretty picture.