Category: Law
The ebb and flow of political correctness doctrine
That is the topic of my latest Bloomberg column, here is one excerpt:
What caused the P.C. movement to stall after the ‘90s? One theory is that it was due to two particular events. First, a Democratic president was impeached for his sexual conduct with an intern. That made the left (at least temporarily) less interested in rooting out and punishing all abuses of power. Second, the attacks of Sept. 11, and the subsequent wars in Afghanistan and Iraq, created a new and different focal point for activist energy: first anti-terror, then anti-war.
The history of political correctness also shows that ideas can have a long genesis, as this essay by Musa al-Gharbi illustrates. The idea of sensitivity training, for instance, was created by Kurt Lewin in 1946-47, and later popularized by Carl Rogers in 1961. The notion of “safe spaces” started in gay and lesbian bars in the mid-1960s. The term “microaggressions” comes from Chester Pierce in 1974. It is possible that the phrase “identity politics” comes from the Combahee River Collective Statement of 1977.
The lesson here is clear: If you are dealing in the world of ideas, play the long game — don’t be too discouraged by momentary setbacks. For all the talk of America having a throwaway culture that moves rapidly from one idea to the next, the history of political correctness does not support that vision. It is possible for people to promote and sustain ideas to give them resonance and influence.
Please note I am trying to learn from the history of the movement, and it is not the point of this column to condemn it excesses (which are very real).
What should I ask Daron Acemoglu?
There will be a Conversation with him, no associated public event. So what should I ask him?
How many NBA players have tweeted in support of Hong Kong?
As I am writing this post, zero (perhaps someone has done so by the time this pops up, but it won’t have been much). And yet there are about 300 players on opening day NBA rosters, more in the preseason of course, maybe 450?
Presumably the league has, either directly or indirectly, told them not to run off at the mouth on this topic.
I don’t feel I am trafficking in unjust stereotypes to note that many of these guys are pretty big, pretty tough, and not so used to being pushed around. They come from a wide variety of backgrounds and also countries and income classes.
One hypothesis is that all three hundred of these individuals are craven cowards, worthy of our scorn. Maybe.
Another hypothesis, closer to my view, is that it has turned out sports leagues (and players) are neither the most efficient nor the most just way to combat social and political problems related to China.
There is plenty of worthwhile China-related legislation and regulation on tap, including expanding the role for CFIUS, discouraging our allies from using Huawei 5G, and protesting against American companies working in Xinjiang (and yes that does include the NBA training camp there). Human rights legislation related to Xinjiang is another plausible option, though I have not studied the details of those proposals.
It is fine to favor those and other measures — in conjunction with our allies as much as possible — while simultaneously thinking this is not the NBA’s fight. Trump himself is far more “anti-China” than any other U.S. president in recent times, and he too decided to push this issue aside.
Should you really feel so much better about “the NBA standing up to China” if they are doing it because the U.S. Congress has intimidated them into this new form of “free speech”?
What I observe happening is that many people have been “dropping the ball” on China for years. A highly visible issue comes up, and one where they also can take a potshot at multinational corporations. So they take an isolated stand on an isolated case, mood affiliating on two different issues at once, namely “stand up to China,” and “criticize corporations for their craven corruptness.”
I say think through the problem in the broadest possible terms. The approach of “sound coordinated measures through our government and its allies, while retaining commercial friendliness and political neutrality for MNCs” is in fact a pretty good one. It could be much worse, and most likely it soon will be so.
My Conversation with Ben Westhoff
Truly an excellent episode, Ben is an author and journalist. Here is the audio and transcript, covering most of all the opioid epidemic and rap music, but not only.
Here is one excerpt:
COWEN: But if so much fentanyl comes from China, and you can just send it through the mail, why doesn’t it spread automatically wherever it’s going to go? Is it some kind of recommender network? It wouldn’t seem that it’s a supply constraint. It’s more like someone told you about a restaurant they ate at last night.
WESTHOFF: It’s because the Mexican cartels are still really strongly in the trade. Even though it’s all made in China, much of it is trafficked through the cartels, who buy the precursors, the fentanyl ingredients, from China, make it the rest of the way. Then they send it through the border into the US.
You can get fentanyl in the mail from China, and many people do. It comes right to your door through the US Postal Service. But it takes a certain level of sophistication with the drug dealers to pull that off.
COWEN: It’s such a big life decision, and it’s shaped by this very small cost of getting a package from New Hampshire to Florida. What should we infer about human nature as a result of that? What’s your model of the human beings doing this stuff if those geographic differences really make the difference for whether or not you do this and destroy your life?
WESTHOFF: Well, everything is local, right? Not just politics. You’re influenced by the people around you and the relative costs. In St. Louis, it’s so incredibly cheap, like $5 to get some heroin, some fentanyl. I don’t know how it works in, say, New Hampshire, but I know in places like West Virginia, it’s still a primarily pill market. People don’t use powdered heroin, for example. For whatever reason, they prefer Oxycontin. So that has affected the market, too.
And:
COWEN: Did New Zealand do the right thing, legalizing so many synthetic drugs in 2013?
WESTHOFF: I absolutely think they did. It was an unprecedented thing. Now drugs like marijuana, cocaine, heroin, all the drugs you’ve heard of, are internationally banned. But what New Zealand did was it legalized these forms of synthetic marijuana. So synthetic marijuana has a really bad reputation. It goes by names like K2 and Spice, and it’s big in homeless populations. It’s causing huge problems in places like DC.
But if you make synthetic marijuana right, as this character in my book named Matt Bowden was doing in New Zealand, you can actually make it so it’s less toxic, so it’s somewhat safe. That’s what he did. They legalized these safer forms of it, and the overdose rate plummeted. Very shortly thereafter, however, they banned them again, and now deaths from synthetic marijuana in New Zealand have gone way up.
COWEN: And what about Portugal and Slovenia — their experiments in decriminalization? How have those gone?
WESTHOFF: By all accounts, they’ve been massive successes. Portugal had this huge problem with heroin, talking like one out of every 100 members of the population was touched by it, or something like that. And now those rates have gone way down.
In Slovenia, they have no fentanyl problem. They barely have an opioid problem. Their rates of AIDS and other diseases passed through needles have gone way down.
And on rap music:
COWEN: This question is maybe a little difficult to explain, but wherein lies the musical talent of hip-hop? If we look at Mozart, there’s melody, there’s harmony. If you listen to Stravinsky’s Rite of Spring, it’s something very specifically rhythmic, and the textures, and the organization of the blocks of sound. The poetry aside, what is it musically that accounts for the talent in rap music?
WESTHOFF: First of all, riding a beat, rapping, if you will, is extremely hard, and anyone who’s ever tried to do it will tell you. You have to have the right cadence. You have to have the right breath control, and it’s a talent. There’s also — this might sound trivial, but picking the right music to rap over.
So hip-hop, of course, is a genre that’s made up of other genres. In the beginning, it was disco records that people used. And then jazz, and then on and on. Rock records have been rapped over, even. But what song are you going to pick to use? And if someone has a good ear for a sound that goes with their style, that’s something you can’t teach.
And yes on overrated vs. underrated, you get Taylor Swift, Clint Eastwood, and Seinfeld, among others. I highly recommend all of Ben’s books, but most of all his latest one Fentanyl, Inc.: How Rogue Chemists Are Creating the Deadliest Wave of the Opioid Epidemic.
Get Government Out of the Construction Business
USA Today: Nearly three years after city voters approved a $1.2 billion construction program over 10 years, the city has yet to see the first building completed. Average per-apartment costs have zoomed more than $100,000 past prior predictions, the study by city Controller Ron Galperin finds.
…At an average cost of $531,373 per unit – with many apartments costing more than $600,000 each – building costs of many of the homeless units will exceed the median sale price of a market-rate condominium.
…Prices rose dramatically because of higher-than-expected costs for items other than actual construction, such as consultants and financing. Those items comprise up to 40% of the cost of a project, the study found. By contrast, land acquisition costs averaged only 11% of the total costs.
Based on a recent audit of the program.
It’s absurd for a government to be building houses, a task for which it is manifestly unsuited. What the government should be doing is easing restrictions on building, improving public transportation which increases the supply of effective housing and dealing with any shortfalls by using housing vouchers.
California state taxes are too high and that is a problem
Among top-bracket California taxpayers, outward migration and behavioral responses by stayers together eroded 45.2% of the windfall tax revenues from the reform.
That is from a new NBER working paper by Joshua Rauh and Ryan J. Shyux. Here is the full abstract:
Drawing on the universe of California income tax filings and the variation imposed by a 2012 tax increase of up to 3 percentage points for high-income households, we present new findings about the effects of personal income taxation on household location choice and pre-tax income. First, over and above baseline rates of taxpayer departure from California, an additional 0.8% of the California residential tax filing base whose 2012 income would have been in the new top tax bracket moved out from full-year residency of California in 2013, mostly to states with zero income tax. Second, to identify the impact of the California tax policy shift on the pre-tax earnings of high-income California residents, we use as a control group high-earning out-of-state taxpayers who persistently file as California non-residents. Using a differences-in-differences strategy paired with propensity score matching, we estimate an intensive margin elasticity of 2013 income with respect to the marginal net-of-tax rate of 2.5 to 3.3. Among top-bracket California taxpayers, outward migration and behavioral responses by stayers together eroded 45.2% of the windfall tax revenues from the reform.
You can file this one under Arthur Laffer: “these days definitely underrated.”
The real China shock came to Mexico
Mexican manufacturing job loss induced by competition with China increases cocaine trafficking and violence, particularly in municipalities with transnational criminal organizations. When it becomes more lucrative to traffic drugs because changes in local labor markets lower the opportunity cost of criminal employment, criminal organizations plausibly fight to gain control. The evidence supports a Becker-style model in which the elasticity between legitimate and criminal employment is particularly high where criminal organizations lower illicit job search costs, where the drug trade implies higher pecuniary returns to violent crime, and where unemployment disproportionately affects low-skilled men.
That is from a recent paper by Melissa Dell, Benjamin Feigenberg, Kensuke Teshima, forthcoming in AER: Insights.
The Wage Penalty to Undocumented Immigration
This paper examines the determinants of the wage penalty experienced by undocumented workers, defined as the wage gap between observationally equivalent legal and undocumented immigrants. Using recently developed methods that impute undocumented status for foreign-born persons sampled in microdata surveys, the study documents a number of empirical findings. Although the unadjusted gap in the log hourly wage between the average undocumented and legal immigrant is very large (over 35%), almost all of this gap disappears once the calculation adjusts for differences in observable socioeconomic characteristics. The wage penalty to undocumented immigration for men was only about 4% in 2016. Nevertheless, there is sizable variation in the wage penalty over the life cycle, across demographic groups, across different legal environments, and across labor markets. The flat age-earnings profiles of undocumented immigrants, created partly by slower occupational mobility, implies a sizable increase in the wage penalty over the life cycle; the wage penalty falls when legal restrictions on the employment of undocumented immigrants are relaxed (as with DACA) and rises when restrictions are tightened (as with E-Verify); and the wage penalty responds to increases in the number of undocumented workers in the labor market, with the wage penalty being higher in those states with larger undocumented populations.
By George Borjas and Hugh Cassidy, via the excellent Kevin Lewis.
Why firms stay private longer?
Yes, Sarbanes-Oxley is one well-known reason but there are more reasons, most of all stemming from a shift in the balance of power toward founders, boosting their ability to raise private capital:
One such notable deregulation event has been the National Securities Markets Improvement Act (NSMIA), passed in October 1996. NSMIA has made it easier for both private startups and the private funds investing in them to raise capital. First, NSMIA exempts private firms selling unregistered securities under Rule 506 of Regulation D from state securities regulations known as blue sky laws (Rule 506 is one of the exemptions firms can use to issue private shares not registered with the SEC). As a result, NSMIA has made it easier for startups to raise private capital from out-of-state investors by exempting private firms from complying with the blue sky laws of every new state where they issue securities (public firms have long been exempt from blue sky laws). Second, NSMIA has made it easier for private funds such as venture capital (VC) and private equity (PE) funds to raise large amounts of capital by increasing the number of investors in a fund that force the fund to register under the Investment Company Act (ICA).2Registered funds have to regularly disclose their investment portfolio and face leverage and other restrictions, and so VC and PE funds tend to avoid having to register.
That is from a new NBER working paper by Michael Ewens and Joan Farre-Mensa.
Does regulation have a role in the repo rise?
Fed data show large banks are keeping a disproportionate amount in reserves, relative to their assets. The 25 largest US banks held an average of 8 per cent of their total assets in reserves at the end of the second quarter, versus 6 per cent for all other banks. Meanwhile, the four largest US banks — JPMorgan Chase, Bank of America, Citigroup and Wells Fargo — together held $377bn in cash reserves at the end of the second quarter this year, far more than the remaining 21 banks in the top 25.
Since the financial crisis, large banks have been obliged to meet a liquidity coverage ratio (LCR) — a portion of high-quality assets such as cash reserves and Treasuries that can be sold quickly to keep the lights on for a month in a crisis. But regulations also require them to track intraday liquidity — cash they can immediately access — which does not include Treasuries. This additional requirement can vary depending on their business models, which in turn inform supervisors’ and examiners’ bank-specific demands. Executives at several large banks say this puts a de facto premium on reserves that varies by bank..
Second-quarter data from the four largest reserve holders show Wells Fargo held 39 per cent of its high-quality liquid assets in reserves. JPMorgan held 22 per cent, Bank of America held 15 per cent and Citigroup 14 per cent.
“If you have a very large concentration in a few institutions and you lose one or two on any day, then you are losing a major portion of your funding,” said Jim Tabacchi, chief executive at South Street Securities, a broker dealer active in short-term debt markets. “Rates have to skyrocket. It’s simple math.”
Here is the full FT article.
Donor Cycle Dynamics
It’s an ill-wind that blows no good and in Allocating Scarce Organs, Dickert-Conlin, Elder and Teltser find that repealing motorcycle helmet laws generate large increases in the supply of deceased organ transplants. The supply shock, however, is just the experiment that the authors use to measure demand responses. It’s well known that the shortage of transplant organs has led to a long waiting-list. The waiting-list, however, is only the tip of the iceberg. Many people who could benefit from a transplant never bother getting on the list since their prospects are already so low. In addition, some people have access to substitutes for a deceased organ transplant namely a living donor. Finally, there is a quality tradeoff: as more organs become available the quality of the match may increase as people may pass on the first available organ to get a better match. The authors use the supply shock to study all these issues:
We find that transplant candidates respond strongly to local supply shocks, along two dimensions. First, for each new organ that becomes available in a market, roughly five new candidates join the local wait list. With detailed zip code data, we demonstrate that candidates listed in multiple locations and candidates living out-side of the local market disproportionately drive demand responses. Second, kidney transplant recipients substitute away from living-donor transplants. We estimate the largest crowd out of potential transplants from living donors who are neither blood relatives nor spouses, suggesting that these are the marginal cases in which the relative costs of living-donor and deceased-donor transplants are most influential. Taken together, these findings show that increases in the supply of organs generate demand behavior that at least partially offsets a shock’s direct effects. Presumably as a result of this offset, the average waiting time for an organ does not measurably decrease in response to a positive supply shock. However, for livers, hearts, lungs, and pancreases, we find evidence that an increase in the supply of deceased organs increases the probability that a transplant is successful, defined as graft survival. Among kidney transplant recipients, we hypothesize that living donor crowd out mitigates any health outcome gains resulting from increases in deceased-donor transplants.
In other words, increased organ availability increases the quality of the matches for organs that cannot be given by a living donor (hearts, lungs, pancreases, partially liver) but for kidneys some of the benefit of increased organ availability accrues to potential living donors who do not have to donate and this means that match quality does not substantially increase.
The authors also critique the geographic isolation of kidney donation regions. As I wrote when Steve Jobs received a kidney transplant:
Although there is no reason to think that Apple CEO Steve Jobs “jumped the line” to get his recent liver transplant, Jobs did have an advantage: He was able to choose which line to stand in.
Contrary to popular belief, transplant organs are not allocated solely according to medical need. Organs are allocated through a complex system of 58 transplant territories. Patients within each territory typically get first dibs on organs from that territory. That’s great if a patient happens to live in a territory with a lot of organ donors and relatively few demanders, but not so good for a patient living in New York, San Francisco or Los Angeles, where waiting lines are longest.
As a result of these “accidents of geography,” relatively healthy patients in some parts of the country get transplants while sicker patients in other parts of the country die waiting.
Who favors unbreakable commercial encryption?
Governments may be the main threat to big tech companies’ current approach to encryption, but there is another, more surprising threat: their own business interests. The techno-libertarians’ absolutist rejection of lawful access has never been tenable in a commercial context. Barr lambasted Silicon Valley for claiming that government access to consumer devices was never acceptable, even for a purpose as critical as stopping terror attacks, while insisting that its companies had to have access to all their customers’ devices for the purpose of sending them security updates (and, in Apple’s case, promotional copies of unwanted U2 albums). What’s more, Big Tech’s best customers—that is, businesses—don’t want unbreakable end-to-end communications direct to the end user. That encrypted pipe makes it impossible to find and stop malware as it comes in and stolen intellectual property as it goes out. It also thwarts a host of regulatory compliance mandates. So, pace the absolutists, tech companies have found ways to ensure that their business customers can compromise end-to-end security.
And there is this:
…I believe the tech companies are slowly losing the battle over encryption. They’ve been able to bottle up legislation in the United States, where the tech lobby represents a domestic industry producing millions of jobs and trillions in personal wealth. But they have not been strong enough to stop the Justice Department from campaigning for lawful access. And now the department is unabashedly encouraging other countries to keep circling the tech industry, biting off more and more in the form of law enforcement mandates. That’s a lot easier in countries where Silicon Valley is seen as an alien and often hostile force, casually destroying domestic industries and mores.
The Justice Department has learned from its time on the receiving end of such an indirect approach to tech regulation. It has struggled for 30 years against a European campaign to use privacy regulation to prevent tech companies from giving the U.S. government easy access to personal data. But as the tide of opinion turned against U.S. tech companies around the world, the EU was able to impose billions in fines on them in the name of privacy. Soon it really didn’t matter that these companies’ data practices weren’t regulated at home. They had to comply with Europe’s General Data Protection Regulation. And once they accepted that, their will to lobby against similar legislation in the United States was broken. That’s why California—and perhaps the federal government—is inching closer to enacting a privacy law that resembles Europe’s.
Here is the full Stewart Baker post, interesting throughout.
Economists have not exactly screwed things up
The lack of growth response to “Washington Consensus” policy reforms in the 1980s and 1990s led to widespread doubts about the value of such reforms. This paper updates these stylized facts by analyzing moderate to extreme levels of inflation, black market premiums, currency overvaluation, negative real interest rates and abnormally low trade shares to GDP. It finds three new stylized facts: (1) policy outcomes worldwide have improved a lot since the 1990s, (2) improvements in policy outcomes and improvements in growth across countries are correlated with each other (3) growth has been good after reform in Africa and Latin America, in contrast to the “lost decades” of the 80s and 90s. This paper makes no claims about causality. However, if the old stylized facts on disappointing growth accompanying reforms led to doubts about economic reforms, new stylized facts should lead to some positive updating of such beliefs.
Autonomous weapons need autonomous lawyers
With the arrival of autonomous weapons systems (AWS) on the 21st century battlefield, the nature of warfare is poised for dramatic change. Overseen by artificial intelligence (AI), fueled by terabytes of data and operating at lightning-fast speed, AWS will be the decisive feature of future military conflicts. Nonetheless, under the American way of war, AWS will operate within existing legal and policy guidelines that establish conditions and criteria for the application of force. Even as the Department of Defense (DoD) places limitations on when and how AWS may take action, the pace of new conflicts and adoption of AWS by peer competitors will ultimately push military leaders to empower AI-enabled weapons to make decisions with less and less human input. As such, timely, accurate, and context-specific legal advice during the planning and operation of AWS missions will be essential. In the face of digital-decision-making, mere human legal advisors will be challenged to keep up!
Here is more, by Colonel Walter “Frank” Coppersmith, via Air Genius Gary Leff.
p.s. What’s with the “Frank”? How about just Frank?
p.p.s. Don’t ask about the judges.
Who again wants ten percent less democracy?
The Prospect has identified 30 meaningful executive actions, all derived from authority in specific statutes, which could be implemented on Day One by a new president. These would not be executive orders, much less abuses of authority, but strategic exercise of legitimate presidential power.
Without signing a single new law, the next president can lower prescription drug prices, cancel student debt, break up the big banks, give everybody who wants one a bank account, counteract the dominance of monopoly power, protect farmers from price discrimination and unfair dealing, force divestment from fossil fuel projects, close a slew of tax loopholes, hold crooked CEOs accountable, mandate reductions of greenhouse gas emissions, allow the effective legalization of marijuana, make it easier for 800,000 workers to join a union, and much, much more. We have compiled a series of essays to explain precisely how, and under what authority, the next president can accomplish all this.
Here is more from David Dayen. Here is my previous post on the forthcoming Garett Jones book.