Category: Law

From the comments, on the Coase theorem

#1 on prefiguring of the so-called Coase theorem, consider also p. 396-7 of W.H. Hutt, “Co-ordination and the Size of the Firm,” South African Journal of Economics 2(4), December 1934:

“Now, under one ownership, their relations would, given competitive institutions, be exactly the same, provided that both methods were equally efficient from the social standpoint. There is no reason why the spreading of the lines of responsibility back to several sources should lead to less effective planning than subordinacy to an authority emanating from one source, given the equal availability of relevant knowledge to the managers who devise the plans…The most important significant difference between the two cases is that, in practice, in the one case there may not be the availability of relevant knowledge that there is in the other.”

That is from Daniel B. Klein.  And:

For a still earlier ‘discovery’ with transaction costs and all see my former colleague Yehoshua Liebermann’s “The Coase Theorem in Jewish Law,” Journal of Legal Studies, Vol. 10, No. 2 (Jun., 1981), pp. 293-303

That is from Moshe Syrquin, link for both here.

How strong is the evidence that the EITC boosts labor supply?

New work from Henrik Kleven:

This paper reconsiders the impact of the Earned Income Tax Credit (EITC) on labor supply at the extensive margin. I investigate every EITC reform at the state and federal level since the inception of the policy in 1975. Based on event studies comparing single women with and without children, or comparing single mothers with different numbers of children, I show that the only EITC reform associated with clear employment increases is the expansion enacted in 1993. The employment increases in the mid-late nineties are very large, but they are influenced by the confounding effects of welfare reform and a booming macroeconomy. Based on different approaches that exploit variation in these confounders across household type, space and time, I show that the employment effects align closely with exposure to welfare reform and the business cycle. Single mothers who were unaffected by welfare reform (but eligible for the EITC) did not respond. Overall and contrary to consensus, the case for sizable extensive margin effects of the EITC is fragile. I highlight the presence of informational frictions, widely documented in the literature, as a natural explanation for the absence of extensive margin responses.

Via A. Dube.  The effectiveness of EITC used to be a consensus view, so if this result holds up, it would require some substantial revisions in how we think about both welfare and job incentives.

What should I ask Henry Farrell?

I will be doing a Conversation with him, no associated public event.  As you read blogs, you might know Henry’s longstanding work over at CrookedTimber, and also his role in Monkey Cage.  Henry is also professor of political science at George Washington University, has with Abraham L. Newman recently published a path-breaking book on the increasingly important concept of weaponized interdependence, is an expert on comparative labor relations, and is an all-around polymath, including on fiction, science fiction, and the politics of Ireland, his home country.  Here is his home page.

So what should I ask Henry?

The ho-hum of environmental politics

For better or worse, it is not the source of so much political romance or glamour:

The public influences government policy primarily through elections. Elections affect policy largely by determining which party controls the government. We show that a majority of the public supports policies to protect the environment. But the environment is rarely the most important issue for voters, and thus the environment usually does not have a large impact in elections. Moreover, there are increasingly large divisions between Democrats and Republicans, which incentivizes politicians from both parties to embrace extreme positions. Democratic and Republican elected officials are increasingly polarized on environmental issues, with Democrats staking out much more liberal positions than Republicans in Congress. At the state level, Democratic control of legislatures and governorships leads to more stringent environmental policies. Democratic control of state government seems to have smaller effects, however, on environmental outcomes, such as air pollution emissions.

That is the abstract of a new working paper by Parrish Bergquist and Christopher Warshaw.

How Harvard makes admissions decisions

Here are some new and very thorough results from Peter Arcidiacono, Josh Kinsler, and the excellent Tyler Ransom:

The lawsuit Students For Fair Admissions v. Harvard University provided an unprecedented look at how an elite school makes admissions decisions. Using publicly released reports, we examine the preferences Harvard gives for recruited athletes, legacies, those on the dean’s interest list, and children of faculty and staff (ALDCs). Among white admits, over 43% are ALDC. Among admits who are African American, Asian American, and Hispanic, the share is less than 16% each. Our model of admissions shows that roughly three quarters of white ALDC admits would have been rejected if they had been treated as white non-ALDCs. Removing preferences for athletes and legacies would significantly alter the racial distribution of admitted students, with the share of white admits falling and all other groups rising or remaining unchanged.

Am I allowed to observe that this seems wrong to me?  And that our “liberal elite” (not my preferred term, but what you see in the discourse and I don’t know which other referent to use) has failed us?

And from Garett Jones:

Controlling for academic traits and much else, being Asian American predicts a substantially lower probability of Harvard admission… And being female predicts a substantially higher probability of admission.

Here is the full paper.  For the pointer I thank various MR readers.

Why we will end up piercing the corporate veil

The internet is one big reason why we will find it increasingly difficult to separate out the assets of a company from the assets of its founders or CEOs, as I discuss in my latest Bloomberg column:

More important, social media personalizes agency — in effect, making it easier to accuse particular individuals of wrongdoing. Mark Zuckerberg, Jeff Bezos, and the Koch brothers all have images or iconic photos that can be put into a social media post, amplifying any attack on their respective companies. It is harder to vilify Exxon, in part because hardly anyone can name its CEO (Darren Woods, since 2017), who in any case did not create the current version of the company. Putting the Exxon logo on your vituperative social media post just doesn’t have the same impact. With Bill Gates having stepped down as Microsoft CEO in 2000, it is harder to vilify that company as well.

This personalization of corporate evil has become a bigger issue in part because many prominent tech companies are currently led by their founders, and also because the number of publicly traded companies has been falling, which means there are fewer truly anonymous corporations. It’s not hard to imagine a future in which the most important decision a new company makes is how personalized it wants to be. A well-known founder can spark interest in the company and its products, and help to attract talent. At the same time, a personalized company is potentially a much greater target.

The more human identities and feelings are part of the equation, however, the harder it will be to keep the classic distinction between a corporation and its owners. As the era of personalization evolves, it will inevitably engulf that most impersonal of entities — the corporation.

Do read the whole thing.

Lebanese/Gaza marriage markets in everything

Political parties sponsor weddings for young members to reinforce their loyalty, and gratitude. Religious and ethnic minorities — which means everyone in splintered Lebanon — consider marriage and procreation essential to their long-term survival. And armed groups encourage their fighters to marry so that their children can become the fighters of the future.

A few weeks before the Maronite nuptials, Hezbollah, the Shiite militant group and political party, oversaw a similar enormous wedding for 31 couples. That was tiny compared with a mass wedding in Lebanon earlier this year that brought together 196 couples and was sponsored by the Palestinian Authority president, Mahmoud Abbas.

But the nearby Gaza Strip — where an Egyptian-Israeli blockade keeps people poor and locked in — beats them all, often because of competition between foreign sponsors eager to win friends by expediting marriages.

In 2015, the United Arab Emirates sponsored a mass wedding there for 200 couples. Two months later, Turkey seriously upped the ante, bankrolling a ceremony for 2,000 couples that was attended by officials from Hamas, the militant group that rules the territory…

Fadi Gerges, an official with the league, said it was natural for minorities to encourage their youths to procreate in a country where demographics affect power.

Here is the rest of the Ben Hubbard NYT story, via the excellent Kevin Lewis.

Yak loose in Virginia after escaping transport to the butchers

A yak is on the loose in the US state of Virginia after escaping from a trailer on its way to the butchers.

Meteor, a three-year-old who belongs to farmer Robert Cissell of Nature’s Bridge Farm in Buckingham, Virginia, has been missing since Tuesday.

Mr Cissell told the BBC Meteor had been raised for meat and described the animal as “aloof”.

He said if captured the yak would “most likely live out his life here with our breeding herd”.

Kevin Wright, an animal control supervisor for Nelson County, said: “It broke through a stop sign and we’ve been trying to catch it for a while. It’s a well-mannered creature and clearly doesn’t want to be handled.”

…The animal was seen at a bed and breakfast in the county but is believed to have wandered to the mountains.

Here is the full story, via Michelle Dawson.

Uber and Lyft drivers as employees: check your mood affiliation at the door

A reminder that if drivers become employees and so no longer can be on both Uber and Lyft, welfare will be lower with higher prices and higher wait times. See this paper. papers.ssrn.com/sol3/papers.cf In Australia, driver multihoming is baked in.

That is a tweet from Joshua Gans.  Keep in mind Uber or Lyft could simply insist on “unihoming” as a condition of employment, as indeed George Mason will not let me take a part- or full-time job teaching at another university.

Brazil is not entirely an environmental villain

It is unfair to single out Brazil for criticism. It is one of the world’s greenest countries: over 60 per cent of its territory is covered with natural vegetation, its agriculture grew based on productivity gains and technology rather than land expansion, and about 45 per cent of its energy comes from renewables, compared with a global average of 14 per cent. It also has one of the world’s most stringent land usage regulations, known as the forest code. How many farmers around the world are required to leave aside 20-80 per cent (depending on the biome) of their native forest land?

That is from Sylvia Coutinho from the Financial Times.

My Conversation with Samantha Power

Samantha Power has a new and excellent book out, The Education of an Idealist: A Memoir, which I very much enjoyed.  And so a Conversation with Tyler was in order, here is the audio and transcript, here is one bit:

COWEN: For a final closing segment, I just have some super simple questions about foreign policy again. Over the course of the last summer, Iran apparently seized two British tankers. There’ve been other incidents in the Strait of Hormuz in some way connected with Iran. From a game-theoretic point of view, why would they do this? Why does this make sense?

POWER: Well, the one thing that they would know that would give them some point of leverage is the extreme war fatigue within the United States, and really within the Western world. So, by upping the stakes, arguably — I mean, who knows why the hell they’re doing what they’re doing?

But by upping the stakes, they arguably could be sending a signal like, “You want to get in this game? It’s not as if we’re an island and you can just break the deal, penalize us gratuitously, penalize the people who are still trying to maintain the terms of the deal, and that there won’t be collateral consequences outside the nuclear space.”

Because the nuclear consequences, as they begin to enrich and violate the terms of the deal — having legitimately argued that we had violated the terms of the deal — the effects of those are not day-to-day effects in the news world. It’s a bit abstract for the public and even for policymakers. It’s an incremental abrogation.

But acts like this show that they have leverage, that they are active militarily in parts of the world where we have a vested interest in maintaining freedom of navigation. So I think they’re showing that they can hit in domains outside the nuclear domain. I think that is probably what they’re doing.

Here is another segment:

COWEN: In which ways do you feel your thought is in some manner still Irish in orientation in a way that would distinguish you from, say, American-born individuals?

POWER: It’s hard to know because I can’t run the counterfactual, so I don’t know what’s just because my mother is a physician and very empathetic toward her patients, and do I learn from that? Or am I moved by having come from a small country, at that time a poor country, that was sending —

COWEN: With a history of oppression, right?

POWER: With a history of oppression, with a history of the dignity of its people being trampled. Is that why I care so much about individual dignity? Again, I can’t run the history a different way.

And finally:

COWEN: Very simple — are baseball games too long? Why not make it 7 innings?

POWER: Why not make it 12?

COWEN: It’s boring, right?

POWER: For you and, as it turns out, for others.

COWEN: For me. So many games are over 3 hours. Shouldn’t the game be 2 hours, 17 minutes?

We also cover her first impressions of America, being a wartime correspondent, China and Iraq, Star Wars vs. Star Trek, van Morrison vs. Bob Dylan, robot empires vs. robot umpires, her favorite novel, how personal one should get in a memoir and why, and German defense spending, among other topics.

Definitely recommended.

*Jewish Emancipation: A History Across Five Centuries*

That is the new and excellent book out by David Sorkin.  I feel I have read many good books on Jewish history, and I don’t always see the marginal value of adding to that pile, but this one really delivered.  Plenty more detail without losing any conceptual overview.  Ever wonder what exactly happened to Jewish emancipation, and why, as the Napoleonic conquest of Europe was reversed?  This is the place to go.  By the way, in the middle of the eighteenth century there were more Jews in Curacao, Suriname and Jamaica than in all of the North American colonies combined.

You can order it here, worthy of my year-end “best non-fiction of the year” list.

Do mass shootings lead to liberalized gun laws?

It seems so, at least in Republican-controlled states:

There have been dozens of high-profile mass shootings in recent decades. This paper presents three main findings about the impact of mass shootings on gun policy. First, mass shootings evoke large policy responses. A single mass shooting leads to a 15% increase in the number of firearm bills introduced within a state in the year after a mass shooting. This effect increases with the extent of media coverage. Second, mass shootings account for a small portion of all gun deaths, but have an outsized influence relative to other homicides. Third, when looking at bills that were actually enacted into law, the impact of mass shootings depends on the party in power. The annual number of laws that loosen gun restrictions doubles in the year following a mass shooting in states with Republican-controlled legislatures. We find no significant effect of mass shootings on laws enacted when there is a Democrat-controlled legislature, nor do we find a significant effect of mass shootings on the enactment of laws that tighten gun restrictions.

That is the abstract of a new NBER working paper by Michael Luca, Deepak Malhotra, and Christopher Poliquin.

Do Inheritance Customs Affect Political and Social Inequality?

That is a new paper from Anselm Hager and Hanno Hilbig, here is the abstract:

Why are some societies more unequal than others? The French revolutionaries believed unequal inheritances among siblings to be responsible for the strict hierarchies of the ancien régime. To achieve equality, the revolutionaries therefore enforced equal inheritance rights. Their goal was to empower women and to disenfranchise the noble class. But do equal inheritances succeed in leveling the societal playing field? We study Germany—a country with pronounced local‐level variation in inheritance customs—and find that municipalities that historically equally apportioned wealth, to this day, elect more women into political councils and have fewer aristocrats in the social elite. Using historic data, we point to two mechanisms: wealth equality and pro‐egalitarian preferences. In a final step, we also show that, counterintuitively, equitable inheritance customs positively predict income inequality. We interpret this finding to mean that equitable inheritances level the playing field by rewarding talent, not status.

The potentially surprising bit in there is “equitable inheritance customs positively predict income inequality,” emphasis added by this blogger.

For the pointer I thank the excellent Kevin Lewis.

No man can be judge in his own case

Cash bail and bounty hunters can be an important and useful part of the criminal justice system. The practice in New Orleans, however, of funding court and judicial benefits with a tax on bail is obnoxious. In recent years, the tax on bail has funded 20-25% of the Judicial Expense Fund which is used to pay staff and office supplies, travel and other costs. The 5th U.S. Circuit Court of Appeal was right to affirm that this tax violates a defendant’s due process rights because it gives judges an incentive to require bail for their own benefit rather than to incentivize the defendant’s court appearance.

“No man can be judge in his own case.” Edward Coke, INSTITUTES OF THE LAWS OF ENGLAND, § 212, 141 (1628). That centuries-old maxim comes from Lord Coke’s ruling that a judge could not be paid with the fines he imposed. Dr. Bonham’s Case, 8 Co. Rep. 107a, 118a, 77 Eng. Rep. 638, 652 (C.P. 1610). Almost a century ago, the Supreme Court recognized that principle as part of the due process requirement of an impartial tribunal. Tumey v. Ohio, 273 U.S. 510, 523 (1927).

This case does not involve a judge who receives money based on the decisions he makes. But the magistrate in the Orleans Parish Criminal United States Court of Appeals District Court receives something almost as important: funding for various judicial expenses, most notably money to help pay for court reporters, judicial secretaries, and law clerks. What does this court funding depend on? The bail decisions the magistrate makes that determine whether a defendant obtains pretrial release. When a defendant has to buy a commercial surety bond, a portion of the bond’s value goes to a fund for judges’ expenses. So the more often the magistrate requires a secured money bond as a condition of release, the more money the court has to cover expenses. And the magistrate is a member of the committee that allocates those funds. Arrestees argue that the magistrate’s dual role—generator and administrator of court fees—creates a conflict of interest when the judge sets their bail. We [agree with the district court] that this dual role violates due process.

The plaintiffs also argued that judges must take into account a defendant’s ability to pay when setting bail. The appeals court didn’t rule on that issue but ironically judges who get a percent of the proceeds from bail do have an incentive to take into account ability to pay because only paid bail generates revenues. Eliminating the judge’s cut eliminates the incentive to think about ability to pay. Still, I support the decision. We should try for first best. The theory of second best leads only to madness and ruin.