Category: Law
Deregulating Oregon (from my email)
It is now legal to pump one’s own gas at gas stations in Oregon, making New Jersey the only US state where it’s not. (Article link.) The surprising part of the new Oregon law: The price must be identical for self-serve and attendant-pumped gas. Also, at least half the pumps must have an attendant. I’m no economist, but it does seem like the self-pump patrons will be subsidizing the “free” labor received by the others. I’m also no political scientist, but I wonder if this bit is intentional to dampen the possible success of self-serve gas. I’m also curious what the calculations on the part of station owners will be in terms of how much labor to employ. My estimate would be that if a $15/hr attendant takes about 4 minutes per service and each is $50, labor costs would be adding about 1% to the fuel price, but this would be much higher in places that are less busy and not working constantly, and lower in places that are busy enough to constantly have many overlapping cars being filled. There’s some sort of equilibrium balancing waiting times for attendants and gas prices that awaits…
That is from Raghuveer Parthasarathy.
Fairfax County facts of the day
Northern Virginia might be the safest region in the whole country, based on this Bloomberg analysis of crime and external-cause mortality data. The local commonwealth’s attorney likes to boast that Fairfax is the safest county of its size. Letting more people live there would not change that.
Forty percent of Fairfax residents aged five and older speak a language other than English at home, per the May strategic plan update. The county’s extraordinary ethnic and cultural diversity makes it a paradise for employers and food lovers alike.
That is from Luca Gattoni-Celli, most of the post concerning zoning issues.
More on the Merger Guidelines
Jason Furman and Carl Shapiro write about the merger guidelines. On the thrust of the guideline as political rather than summarzing existing law they are very much in agreement with the Hurwicz and Manne piece that I summarized last week.
Merger guidelines aren’t enforceable regulations. They have also never attempted to be a legal brief or offered an interpretation of the case law. Instead they have described widely accepted economic principles that the Justice Department and the FTC use to analyze mergers. As a result, the guidelines have commanded widespread respect and bipartisan support. Amazingly, for at least 25 years, when regulators have challenged mergers in court, the merging firms themselves have accepted the framework articulated in the guidelines.
The new draft guidelines depart sharply from previous iterations by elevating regulators’ interpretation of case law over widely accepted economic principles. The guidelines have long helped courts use economic reasoning to evaluate government challenges to mergers. They shouldn’t become a debatable legal brief or, worse, a political football.
But in addition Furman and Shapiro make specific critiques:
,,,parts of the draft lack an adequate economic foundation. They contain a structural presumption against many vertical mergers unsupported by theory or evidence. The proposed guideline on acquisitions of products or services that rivals may use to compete includes legal wishful thinking about how commitments made by the merging parties are treated, as the recent court rebuke of the FTC’s attempt to block Microsoft’s acquisition of Activision illustrates.
Likewise, a new guideline states that “mergers should not entrench or extend a dominant position,” where a “dominant position” means a market share of at least 30%. As we read this guideline, many nonhorizontal deals that enable the acquiring firm to become more efficient, and thus gain market share or compete more effectively in adjacent markets, would be considered illegal even if they benefit consumers and workers….we are troubled by the draft guidelines’ claim that efficiencies won’t be counted, even if they benefit consumers and workers, for a merger that furthers a trend toward horizontal concentration or vertical integration. Imagine if regulators had applied such a rule to the automobile industry in the 1910s.
Scrap AML/KYC Laws
Bruce Fenton writing on twitter X:
It’s time to scrap AML / KYC entirely.
The idea that politicians should know how citizens spend their money is a new and deeply flawed idea.
An entire generation has been fooled into thinking this is a necessary part of finance and the world continues to double down on an unworkable system.
Only 30 years ago when I started my career as a stockbroker/ financial advisor I could call you on the phone and sell you MSFT or IBM stock and I did not need your DOB or your social security number. You didn’t even need to have money in the account.
The 1990s to the post 9-11 Patriot Act (which was a horrible law) saw a radical increase in AML /KYC requirements. These seem to get worse every year.
In my office when we were first required to take a drivers license, the older brokers were incredulous: “What do you mean we need an ID for someone buying stocks?!? What’s next, you need an ID to buy gas or groceries?”
Now, just 25 years later an entire generation thinks this is normal or how it should be. Worse yet, some think the system won’t work without it. The opposite is true — the compliance gums up the works and adds friction where it should not exist.
While the regulator class arrogantly acts as if AML KYC is their birthright and ending it is some sort of untouchable rail, the justifications are weak. Why do we have these regimes? To stop “money laundering”? What is that? Who is the victim? Is it to stop “human trafficking” or “terrorism”? If so, how? Is it to “stop” the 12,000 entities on the OFAC list by messing with the 2,000,000,000 people not on the list?
Are major criminals somehow stopped by this? Has it stopped crime? Even if it did, is it worth burdening millions of firms and billions of people with paperwork and procedures that slow down commerce? Shouldn’t efforts be made to go after the actual criminals rather than encumbering the entire world with an inefficient compliance regime?
Money must be able to flow and move. People must be able to take risks and make investments as they choose. This is the lifeblood of a solid economy and the jobs, growth, prosperity and peace that comes with it. The US (and by extension much of the world due to our influence) is sacrificing jobs, innovation and opportunities by chasing an extremely ineffective and indirect compliance regime.
The entire idea belongs back in the dumpster of history. Let the investigators chase terrorists & human traffickers for those actual crimes and let the other billions of us use and move our money as we wish.
Fenton is correct. As I pointed out earlier, the AML/KYC laws costs about $300 billion a year and recover perhaps $3 billion a year in illicit funds (a tiny, tiny fraction of the amount of illicit revenues). Indeed, AML/KYC laws have probably increased crime because they require so many companies to store personal information which is then vulnerable to hackers. More importantly, it’s absurd that the government forces you to show ID to buy a stock.
The Merger Guidelines
Gus Hurwitz (a former student) and Geoffrey Manne have an excellent piece in the WSJ discussing the FTCs new merger guidelines. First, what are these guidelines?
Since 1968, Justice and the FTC have issued guidelines to help companies understand when a proposed merger might raise antitrust concerns. The guidelines are a nonbinding public statement that describes how the agencies will approach the enforcement of merger laws. They have been updated from time to time to reflect changes in the law and improved economic understanding about the likely effect mergers will have on competition. They are neither a definitive statement of law nor binding on courts.
Over time the guidelines have nevertheless shaped U.S. courts’ understanding of merger law because past updates have striven to state what the law, as applied by courts, is, and have developed analytical tools faithful to that interpretation.
The new guidelines, however, are very different as they attempt not to summarize the law but to create new policy in the absence of legislation from Congress or rulings by the courts, in other words to subvert the rule of law.
…the proposal states what the agencies’ current leadership wishes the law to be and reflects a desire to change merger law by administrative fiat rather than through successful litigation or an act of Congress. Look at the antitrust agencies’ string of recent losses in major merger cases, including Microsoft’s acquisition of Activision and Meta’s acquisition of Within, to see that their views of antitrust law differ substantially from those of the courts.
Judicial acceptance of prior guidelines was a result of the agencies’ reputation as honest brokers of judicial precedent. The proposed guidelines jeopardize that reputation by selectively interpreting the law, relying on outdated precedents, and disregarding more-recent case law.
…This selective bias toward outdated judicial opinions and economic knowledge isn’t likely to impress the courts. The disconnect will lead to deep skepticism, casting a pall over all arguments (even sound ones) made by the Justice Department and FTC antitrust attorneys. The agencies might discover that it would have been better to go to court without guidelines rather than with a contentious interpretation of the law.
Progress
Mass incarceration fundamentally altered the life course for a generation of American men, but sustained declines in imprisonment in recent years raise questions about how incarceration is shaping current generations. This study makes three primary contributions to a fuller understanding of the contemporary landscape of incarceration in the United States. First, we assess the scope of decarceration. Between 1999 and 2019, the Black male incarceration rate dropped by 44%, and notable declines in Black male imprisonment were evident in all 50 states. Second, our life table analysis demonstrates marked declines in the lifetime risks of incarceration. For Black men, the lifetime risk of incarceration declined by nearly half from 1999 to 2019. We estimate that less than 1 in 5 Black men born in 2001 will be imprisoned, compared with 1 in 3 for the 1981 birth cohort. Third, decarceration has shifted the institutional experiences of young adulthood. In 2009, young Black men were much more likely to experience imprisonment than college graduation. Ten years later, this trend had reversed, with Black men more likely to graduate college than go to prison. Our results suggest that prison has played a smaller role in the institutional landscape for the most recent generation compared with the generation exposed to the peak of mass incarceration.
Here is the full article, via a loyal MR reader. The causes of this advance should be a greater topic of discussion.
Fiona Scott Morton
French ministers lashed out Thursday at the European Commission for picking a U.S. professor for a top antitrust job overseeing U.S. Big Tech firms.
France’s Europe Minister Catherine Colonna said she was “astonished” by the choice of Fiona Scott Morton as chief competition economist, “which deserves to be reconsidered by the Commission.”
Digital Minister Jean-Noël Barrot said the Commission should rethink the hire, which raises “legitimate questions” at a time when the EU is rolling out ambitious digital enforcement legislation.
Here is the full Politico article, and here is her law review piece (with Herbert Hovenkamp) criticizing the Chicago School approach to antitrust law. Here is her piece (with Michael Kades) on interoperability and tech. Her views are not mine, but I am quite sure she would boost the quality of analysis and debate in those EU forums. Perhaps that is not what everyone wants.
States rights tortoise nationalism is the worst tortoise nationalism
You can’t bequeath them to just anyone. Veronica Tomlinson, 52, had thought about leaving Walter, a 24-year-old desert tortoise, to East Coast relatives if she and her husband died first. But state laws prohibit people from moving desert tortoises out of the state where they were adopted. The Tomlinsons, of Las Vegas, have instructions in their will for Walter to be returned to the Tortoise Group, a Nevada-based nonprofit that arranges tortoise adoptions. The couple plan to leave the group their savings and life-insurance money, after paying debts and funeral costs, to cover Walter’s care.
Emphasis is added, not in the original. Here is the full WSJ story, via Anecdotal. No Coase theorem for Walter!
China estimate of the day
The paper’s title is “The Largest Insurance Expansion in History: Saving One Million Lives Per Year in China”:
The New Cooperative Medical Scheme (NCMS) rolled out in China from 2003-2008 provided insurance to 800 million rural Chinese. We combine aggregate mortality data with individual survey data, and identify the impact of the NCMS from program rollout and heterogeneity across areas in their rural share. We find that there was a significant decline in aggregate mortality, with the program saving more than one million lives per year at its peak, and explaining 78% of the entire increase in life expectancy in China over this period. We confirm these mortality effects using micro-data on mortality, other health outcomes, and utilization.
It is striking how few Westerns have even heard of this policy, one of the more important global events in recent years. I do however wish to ask if this estimate is in accord with other, more general estimates from the literature. The Amish, for instance, don’t see doctors so often and their life expectancy seems to be perfectly fine. The new paper is from Jonathan Gruber, Mengyun Li, and Junjian Yi.
Jeremy Howard on AI Safety and the Age of Disenlightenment
Proposals for stringent AI model licensing and surveillance will likely be ineffective or counterproductive, concentrating power in unsustainable ways, and potentially rolling back the societal gains of the Enlightenment. The balance between defending society and empowering society to defend itself is delicate. We should advocate for openness, humility and broad consultation to develop better responses aligned with our principles and values — responses that can evolve as we learn more about this technology with the potential to transform society for good or ill.
Here is the full paper, let us not forget these basic truths. Should be put into the new Acemoglu and Lensman model! (They do political economy, right?)
Why the NYC congestion pricing plan is bad
I am seeing some critical comments on my latest column, mostly from people who are not reading it through, or in some cases they are making basic mistakes in economics. Let me start with part of my conclusion:
I suspect that I could endorse a properly targeted version of congestion pricing for Manhattan, for instance, one that encouraged mass transit without discouraging density.
Many people are responding by making a version of that point and thinking it contradicts me. Here are a few basic facts about the current proposal:
1. The off-peak price is too high at $17, relative to $23 for peak.
2. There is an odd and unjustified discrete notch at 60th St, which will cause further distortions of its own.
3. There is no difference for cars passing through and cars with passengers spending money or doing something productive in lower Manhattan.
This is not the traffic congestion charge you should be looking to implement.
A second line of responses (Erik B. and Alex) suggests that the congestion charge will not lower the flow of humans into Manhattan. I am sorry, but demand curves slope downward! The resulting auto commute does become more predictable and regular, but that holds only because there are fewer trips and to some extent because trips are time-shifted. (Note that the small gap between the $17 and $23 prices suggests a small benefit from time shifting.) Fewer outsiders will benefit from Manhattan, and those outsiders will skew richer and older. The methods for improving the quality of the trip really do lower the number of trip-makers, probably both peak and off-peak. It is not going to mean higher or even constant throughput for vehicles or humans. (If you think it does, does that imply a big subsidy to car trips would get us to a carless city? There are some non-linear scenarios where a congestion charge boosts throughput, such as when otherwise no cars move at all in extreme gridlock. In reality, it seems cars are moving at about 12 mph in Manhattan.)
The actual possible gain — oddly not cited by the critics — is that a congestion charge might get a given visitor more effective time spent learning from Manhattan. Though do note an offsetting effect — the higher the traffic problem, the more you will make each trip to Manhattan a grand and elaborate one, and it is your externality-less domestic time in Long Island that will suffer all the more. So per person learning externalities from effective time spent in Manhattan could go either way, noting the number of visitors still goes down.
You might think such a congestion charge improves welfare (a sounder point than suggesting it will not have a standard price effect), but the whole point is that Manhattan density involves massive positive externalities, including for visitors and note that visitors also finance the externality-rich activities of the natives:
In some urban settings, the clustering of human talent is of utmost importance. Manhattan is the densest urban area in the US, and it succeeds in large part because it is so crowded. You want to be there because other people want to be there. Even though I don’t live there, I nonetheless benefit from Manhattan, both when I visit and when I consume the television shows, movies, music, and art works that come, either directly or indirectly, out of this urban environment. Manhattan also supports America’s financial center, many tech start-ups, and much more.
I don’t want Manhattan to be less crowded, even though it probably would make many Manhattanites happier and less stressed. I want Manhattan to be efficient for me and others, not just for the residents. If there is any part of America where ideas rubbing together lead to great things, it is Manhattan (and the Bay Area). Arguably, Manhattan should be more crowded, at least if we consider everyone’s interest. That militates against congestion tolls, even though such charges are usually a good idea.
The actually useful solution is to make mass transit, most of all the subway, a reliable and predictable method of getting around. Right now it is not. (I doubt if lowering the already low subway prices gets you much.)
If you look at visits into Manhattan, whether by car or not, they already face lots of implicit taxes. Those include poor roads, mediocre subway performance, high variance public infrastructure including on issues such as trash, pollution issues, some degree of crime, awful connecting infrastructure (NJ Transit anyone?) and much more. And yet Manhattan is one of the world’s very top TFP factories and we are already taxing entry in so many different ways.
It does not make good economic sense to impose higher yet entry fees into that TFP factory. Given that multiple externalities are present, the correct mix is to lower many different costs of entry and mobility (including within Manhattan), while shifting the relative use benefits toward mass transit and the subway. Density really does have positive externalities here, and we all know how much idea makers and distributors are undercompensated.
There are a few more threads of responses on Twitter. One is to note the noise and pollution costs of vehicles. That is relevant, but fairly soon we will have lots more electric vehicles, which should be encouraged. The tolls will become a revenue source that lasts forever and they will not be taken away, but the noise and pollution costs of the vehicles soon will be much lower.
Another thread is to argue that most of the people who drive will switch to mass transit if there is a congestion cost. Some will, but we are asked to believe that a) current traffic congestion is so awful, b) people put up with it anyway, and c) they nonetheless can be easily nudged into taking mass transit. That is an uncomfortable blend of views that fails to understand the initial motivations behind the car trips. There are plenty of people with young kids, or elderly relatives, or multiple packages, or multiple stops, or unreliable mass transportation for getting back home at the end of the evening. Many of those people cannot feasibly switch to mass transit and that is precisely why they put up with the bad traffic. Say you finish your Manhattan doings at 10:45 p.m., and have to get back to your New Jersey home in a timely and safe manner. The PATH train will work for some, but a lot of these people really do need cars to consummate the trip.
(It is a theoretically defensible argument to claim that this congestion tax is the only way of financing mass transit improvements. That may or may not be true, but if it is one should still “regret” the plan, which is not the attitude people are taking. And are there guarantees this will lead to a refurbishment of the subway? It has proven remarkably difficult to improve the system, and that is with rising NYC budgets. Another argument that might work is if non-car visitors so hate seeing cars in Manhattan that the net human inflow, due to auto trips, goes down rather than up. Do note however that the car trips are still helping to finance retail and cultural infrastructure that attracts the non-car visitors, so don’t just take complaints about cars at face value. Furthermore this car hatred factor also should become less serious as we transition to electric vehicles.)
On net, do you think our most important cities should be more or less dense? If you support YIMBYism, which surely does make traffic worse, have you not already answered that question? So either become a NIMBY or — better yet — be a little more consistent applying your intuitions about the net positive externality from Manhattan density. A simple way to put the point is that an export tax on your TFP factory is unlikely to be the best way to reduce congestion.
How is Portuguese drug decriminalization going?
Is there fatigue with the experiment?:
Portugal decriminalized all drug use, including marijuana, cocaine and heroin, in an experiment that inspired similar efforts elsewhere, but now police are blaming a spike in the number of people who use drugs for a rise in crime. In one neighborhood, state-issued paraphernalia — powder-blue syringe caps, packets of citric acid for diluting heroin — litters sidewalks outside an elementary school.
Porto’s police have increased patrols to drug-plagued neighborhoods. But given existing laws, there’s only so much they can do. On a recent afternoon, an emaciated man in striped pants sleeping in front of a state-funded drug-use center awoke to a patrol of four officers. He sat up, then defiantly began assembling his crack pipe. Officers walked on, shaking their heads.
Portugal became a model for progressive jurisdictions around the world embracing drug decriminalization, such as the state of Oregon, but now there is talk of fatigue. Police are less motivated to register people who misuse drugs and there are year-long waits for state-funded rehabilitation treatment even as the number of people seeking help has fallen dramatically. The return in force of visible urban drug use, meanwhile, is leading the mayor and others here to ask an explosive question: Is it time to reconsider this country’s globally hailed drug model?
For a while the experiment seemed to be working (see the story), but matters have worsened:
Overdose rates have hit 12-year highs and almost doubled in Lisbon from 2019 to 2023. Sewage samples in Lisbon show cocaine and ketamine detection is now among the highest in Europe, with elevated weekend rates suggesting party-heavy usage. In Porto, the collection of drug-related debris from city streets surged 24 percent between 2021 and 2022, with this year on track to far outpace the last. Crime — including robbery in public spaces — spiked 14 percent from 2021 to 2022, a rise police blame partly on increased drug use.
Here is the full WaPo story.
The order of spousal names on tax returns
Married couples filing a joint return put the male name first 88.1% of the time in tax year 2020, down from 97.3% in 1996. The man’s name is more likely to go first the larger is the fraction of the couple’s allocable income that goes to him, and the older is the couple. Based on state averages, putting the man’s name first is strongly associated with conservative political attitudes, religiosity, and a survey-based measure of sexist attitudes. Risk-taking and tax noncompliance are both associated with the man’s name going first.
Here is the full NBER working paper by Emily Y. Lin, Joel Slemrod, Evelyn A. Smith, and Alexander Yuskavage.
Nigeria reform of the day (again)
President Bola Ahmed Tinubu signed the Electricity Bill 2023 into an Act (Electricity Act 2023) on June 10, 2023, to much frenzy and a bit of confusion – erstwhile president, Muhammadu Buhari, signed into law an amendment enabling states in the country to license, generate, transmit, and distribute electricity earlier in March 2023.
To begin, let’s distinguish between the recent assents by President Buhari and President Tinubu in relation to electricity. President Buhari’s amendment to the constitution marked a necessary initial step toward decentralizing the electricity sector, granting states greater control over generation, regulation, and distribution. However, it did not establish specific laws or regulations for the sector itself.
President Tinubu’s recently signed Electricity Act, on the other hand, constitutes the second phase of decentralization. This Act sets the stage for the electricity market by introducing rules governing generation, transmission, and distribution. Moreover, it empowers states to develop their own laws and regulations tailored to their unique circumstances.
In summary, President Buhari’s constitutional amendment laid the foundation for increased state autonomy, while President Tinubu’s Electricity Act provides the framework for implementing this autonomy.
Here is the full discussion from Basil Abia, who tells me his Substack will be covering Nigeriam reforms in more detail.
My excellent Conversation with Reid Hoffman
Here is the audio, video, and transcript. Here is the episode summary:
In his second appearance, Reid Hoffman joined Tyler to talk everything AI: the optimal liability regime for LLMs, whether there’ll be autonomous money-making bots, which agency should regulate AI, how AI will affect the media ecosystem and the communication of ideas, what percentage of the American population will eschew it, how gaming will evolve, whether AI’s future will be open-source or proprietary, the binding constraint preventing the next big step in AI, which philosopher has risen in importance thanks to AI, what he’d ask a dolphin, what LLMs have taught him about friendship, how higher education will change, and more. They also discuss Sam Altman’s overlooked skill, the biggest cultural problem in America, the most underrated tech scene, and what he’ll do next.
Here is one excerpt:
COWEN: Given GPT models, which philosopher has most risen in importance in your eyes? Some people say Wittgenstein. I don’t think it’s obvious.
HOFFMAN: I think I said Wittgenstein earlier. In Fireside Chatbots, I brought in Wittgenstein in language games.
COWEN: Peirce maybe. Who else?
HOFFMAN: Peirce is good. Now I happen to have read Wittgenstein at Oxford, so I can comment in some depth. The question about language and language games and forms of life and how these large language models might mirror human forms of life because they’re trained on human language is a super interesting question, like Wittgenstein.
Other good language philosophers, I think, are interesting. That doesn’t necessarily mean philosophy-of-language philosophers à la analytic philosophy. Gareth Evans, theories of reference as applied to how you’re thinking about this kind of stuff, is super interesting. Christopher Peacocke’s concept work is, I think, interesting.
Anyway, there’s a whole range of stuff. Then also the philosophy, all the neuroscience stuff applied with the large language models, I think, is very interesting as well.
COWEN: What in science fiction do you feel has risen the most in status for you?
HOFFMAN: Oh, for me.
COWEN: Not in the world. We don’t know yet.
HOFFMAN: Yes. We don’t know yet.
COWEN: You think, “Oh, this was really important.” Vernor Vinge or . . .
HOFFMAN: Well, this is going to seem maybe like a strange answer to you, but I’ve been rereading David Brin’s Uplift series very carefully because the theory of, “How should we create other kinds of intelligences, and what should that theory be, and what should be our shepherding and governance function and symbiosis?” is a question that we have to think about over time. He went straight at this in a biological sense, but it’s the same thing, just a different substrate with the Uplift series. I’ve recently reread the entire Uplift series.
Self-recommending!