Category: Law

Is the trade war with China over?

That is the topic of my latest Bloomberg column, here is one excerpt:

The basic problem with any U.S.-China trade conflict is that there is not very much the Chinese are interested in offering, and their intransigence is more than just a bargaining stance. They are willing to buy more American soybeans and manufactured goods (and probably wish to anyway), and they might give U.S. financial institutions freer rein within China. But they won’t dismantle their system of state-owned enterprises, as those companies are among China’s most powerful special interest groups. Nor will China give the major U.S. tech companies free rein in China, if only for reasons of national security and China’s desire to build a surveillance state based on data controlled by China.

Overall, the grievances on the U.S. side are significant, and the possible concessions on the Chinese side are minor. So the most likely outcome is only modest progress in difficult negotiations. It’s also likely that the power and focus of the Trump administration will wane as it deals with investigations from the new Democratic-controlled House of Representatives. It might be said that the trade war you now see is the trade war you are going to get. Foreign relations gridlock will set in.

Nonetheless, it’s not quite fair to describe the trade war with China as a problem that Trump started and then pretended to solve. The reality is that hostility toward Chinese trade practices has been building for some time. Anti-China measures have long commanded bipartisan support not only in Washington but also among corporate leaders, who see themselves as victims of unfair Chinese trade practices and espionage. This is an issue that predates Trump, and he deserves some credit for doing something to help solve it.

Do read the whole thing, which contains other points of interest.

*Order Without Design: How Markets Shape Cities*

That is the new and excellent book by Alain Bertaud, so many pages have excellent food for thought.  Here is one simple bit:

Cities are primarily labor markets.

Or this:

…large cities are growing at about the same rate as medium and small cities in the same countries or regions.  It seems that cities’ growth rates follow Gibrat’s law of proportionate effect, which states that the size of a city is not an indicator of its future growth rate — that is, cities’ growth rates are random, with the same average expected growth rate and same variance…The population of larger cities keeps growing, but on average, so do smaller cities.  This seems paradoxical, given that larger cities are more productive than smaller ones.  However, larger cities do not play the same economic role as smaller ones do.  They complement each other’s activities.  The increase productivity of larger cities is therefore linked to the existence and growth of smaller cities.  In turn, smaller cities’ economic growth is dependent on larger cities’ innovations and inventions.

How about this:

In 1830…London’s population density had reached a very high density of 325 people per hectare.  By 2005, however, the density of London had decreased to only 44 people per hectare.  The larger decrease in London’s density has not caused a corresponding decrease in mobility.  On the contrary…

I learned a great deal from the discussion (starts p.287) of Indonesia’s “kampungs,” and how the Indonesian has managed their integration with local infrastructure relatively well.  In contrast, this is the common alternative procedure:

The predictable first reaction of governments has usually been to set minimum urbanization standards to prevent the legal construction of these unsanitary urban villages.  The regulations made the situation worse, as they prevented these informal settlements from obtaining normal urban services from the municipality.  They also created a risk of future demolition, which discourages housing improvement that the households would have naturally done themselves.  Eventually, many governments slowly regularized the older informal settlements in a piecemeal fashion, as is the practice in India, for instance.  But the regularization of informal settlements usually had been conducted with a provision that after a set date, no more informal settlements would be regularized.

The outcomes of these successive policies — first ostracism, then benign neglect followed by reluctant integration — has been disastrous.  A significant share of the urban labor force, otherwise gainfully employed, live in large “informal” settlements often with unsafe water supplies, deficient sanitation, and sporadic solid waste collection.

But:

What made a difference [in Indonesia] was a decision taken in 1969 by the government of Indonesia to concentrate its resources on the improvement of the kampungs’ infrastructure without trying to remove or restructure the existing housing, however small or inadequate it was…And, even more exceptional, since 1969 to this day, the Indonesian government’s support for KIP has been unwavering…The government housing policy objective consists of allowing the poor to settle in and around existing villages at the standards of their choice, while the government concentrates its efforts not on housing construction but on gradually improving residential infrastructure and services to all residential settlements.  The policy has proved largely successful.

Later in the book, pp.351-352 have a fascinating discussion of how relatively good urban/suburban policy, and also the fragmentation of municipalities, contributed to the early success of the tech community in Silicon Valley.

Definitely recommended, this is now one of my favorite books on cities, and it will be joining my “best non-fiction of 2018″ list.  Again, you can buy it here.

The Political Economy of Lobotomies in the United States

The actual title starts with: “Gordon Tullock Meets Phineas Gage:”, and here is the abstract:

In the late 1940s, the United States experienced a “lobotomy boom” where the use of the lobotomy expanded exponentially. We engage in a comparative institutional analysis, following the framework developed by Tullock (2005), to explain why the lobotomy gained popularity and widespread use despite widespread scientific consensus it was ineffective. We argue that government provision and funding for public mental hospitals and asylums expanded and prolonged the use of the lobotomy. We support this claim by noting the lobotomy had virtually disappeared from private mental hospitals and asylums before the boom and was less used beforehand. This paper provides a more robust explanation for the lobotomy boom in the US and expands on the literate examining the relationship between state funding and scientific inquiry.

That is from Raymond March and Vincent Geloso, via the excellent Kevin Lewis.

Legalize Pay Toilets!

Image result for CEPTIAPay toilets are common in Europe but uncommon in the United States. Sophie House writing at City Lab explains why. Pay toilets were made illegal in much of the United States in the 1970s:

In 1969, California Assemblywoman March Fong Eu smashed a porcelain toilet with an axe in front of the California state capitol, protesting the misogyny of restrooms that charged entrance fees for stalls but not urinals. She was not alone in her frustration. The grassroots organization CEPTIA—the Committee to End Pay Toilets in America—mobilized against pay toilets, putting out a quarterly newsletter (the Free Toilet Paper) and exchanging warring pamphlets with Nik-O-Lok, the leading pay-toilet manufacturer. The group won a citywide ordinance banning pay toilets in Chicago in 1973, followed by bans in Alaska, California, Florida, Illinois, Iowa, Michigan, Ohio, New Jersey, New York, Tennessee, and Wyoming.

The logic seems to be if we cannot sit for free then you cannot stand for free. House calls the pay toilet ban a triumph over sexism. Is it so hard to understand why urinals are cheaper to operate and more difficult to lock than stalls?

In any case, CEPTIA was remarkably effective. In 1970 there were some 50,000 pay toilets in America and by 1980 there were almost none. The attentive reader, however, will not be surprised to learn that smashing the pay toilet conspiracy did not result in an abundance of free toilets.

In the decades since CEPTIA disbanded, however, pay-toilet bans have proven to be a Pyrrhic victory. The committee’s vision of free toilets for all never came to pass. Cities have persistently refused to construct public restrooms, and existing facilities have fallen into disrepair. Citing the difficulty of keeping bathrooms safe and clean, municipalities are often unwilling or unable to pay. Even assuming that funds are available for initial construction of public toilets, the maintenance and operating costs are a deterrent.

By contrast, in cities from Europe to India to Latin America, small entrance fees help to cover the costs of keeping facilities in good condition. Creating a similar revenue stream to defray operating costs would likely make pay toilets more attractive to U.S. municipalities. For example, fees could offset the costs of hiring restroom attendants—an excellent, but expensive, way to keep bathrooms safe. Pay toilets also redistribute the operating costs of restrooms. Free toilets are, of course, taxpayer-funded, while under pay-toilet schemes, tourists who use urban infrastructure also contribute to its functioning.

Daredevil and the Doctrine of Double Effect

Image result for daredevil season 3Daredevil on Netflix: Season 3 is excellent. A fight scene (in the prison) is as good as the famous hallway scene in Season 1. Another stellar performance by Vincent D’Onofrio. A good plot and a satisfying filling in of Karen’s backstory. Sophisticated visuals and use of sound.

That was my tweet. One thing that did annoy me was the prominent reliance of the writers on the Thou Shall Not Kill trope. Foggy even says “once you cross that line, there’s no return”. Ugh, give me a break. The trope is tired and it also annoys me as an economist. Daredevil has been in a lot of fights and with probability approaching 1 he has already killed. Did none of those prison guards or cops have thin skulls? And why should there be a line? Is killing two people with expected probability of 1/2 really so much better than killing one person with expected probability 1?

As I thought about this more, however, the Thou Shall Not Kill trope is least objectionable in Daredevil. Daredevil is a serious Catholic and can thus call upon Thomas Aquinas’s Doctrine of Double Effect. Aquinas argues that:

moral acts take their species according to what is intended, and not according to what is beside the intention…

Thus, Foggy, the ever-precise lawyer, is correct. Catholic doctrine draws a line between intending to kill and expecting to kill. Expecting to kill is ok, intending to kill is not. I am not a fan of the doctrine of double effect as among other flaws it too easily allows people to shrug off war crimes and the killing of innocents (heh, we only intended to kill the groom, the fact that we also killed the soon-to-be wife and guests, well that was beside the intention). Nevertheless, I will allow that the doctrine of double effects gets the Daredevil writers off the hook for inappropriate use of cliche. Batman, however, has no excuse.

Addendum: For an excellent review of Daredevil Seasons 1-3 from the point of view of Christianity, see this post at Christ and Pop Culture.

Facts about lotteries

The $29.8 billion Americans spent on the lottery in 1995 worked out to about $112 per capita. Today, per capita spending is up to $225 dollars a year. Again, part of that is the result of more states jumping on the lotto bandwagon.

These are per capita figures, accounting for every man, woman and child in the country. The average lottery player spends quite a bit more than that: If we subtract the 73 million people under age 18, and divide the remaining 250 million in half (since only 49 percent buy a lotto ticket in a given year), it works out to $600 a year in expenses for the average lotto player. Some survey data show that a disproportionate share of regular lottery players fall into low-income brackets.

…Massachusetts leads the nation with an astonishing $767 in annual per capita lotto spending. It’s followed by West Virginia ($594), Rhode Island ($513), Delaware ($421) and New York ($421).

Here is the story by Christopher Ingraham.

Why We Can’t Have Nice Things–Elon Musk and the Subways

In New York it costs billions of dollar per mile to build new subways, a price far higher than anywhere else in the world. That’s one reason why Elon Musk’s The Boring Company has been anything but. Even if hyperloop technology doesn’t pan out, Musk’s goal of reducing tunneling costs by a factor of ten is laudable. The Boring Company purchased a tunnel boring machine in April of 2017 and incredibly has already completed a two-mile test-tunnel underneath Hawthorne, LA! Awesome, right? Well, some people just can’t be happy.

“[I]nvaders are coming from underground” proclaims Alana Semuels in a big story in The Atlantic. The title and splash page indicate the theme:

When Elon Musk Tunnels Under Your Home

The billionaire is drilling for futuristic transit under Los Angeles. He didn’t have to ask the neighbors first.

Billionaires are undermining your home. And democracy! Grab your pitchforks! Yet dig a little deeper underneath the lurid headline and the actual complaints are–dare I say it–boring.

I talked to a dozen people who live along the tunnel’s route, and most said they hadn’t witnessed any extra noise or traffic. But none had been informed ahead of time that a private company would be digging a tunnel beneath the street.

But what about all the displaced people?

As the tunnel neared completion, disruptions to the community increased. The company bought another building, this one on the corner of 120th Street and Prairie Avenue, for $2 million, according to public records, to allow for the extraction of tunneling equipment. Adrian Vega had run a cabinet business in that building for 18 years. When his landlord sold the building, the Boring Company came in and offered Vega’s company, Los Vegas Kitchen Cabinets and Doors, extra cash to get out in three months. Vega took the money, and asked for even more time from the Boring Company, which he was granted. But he couldn’t find another space; since moving in August, his business has been closed and his customers don’t know that he’s moved, he told me.

…Shunyaa Turner lives in a small house on 119th Place with his wife and two kids. He said that in the past year, they’ve had to battle more pests, such as raccoons, mice, skunks, and opossums, which they’ve never seen before. He isn’t sure if this is related to the digging; the Hawthorne airport has also been doing more construction as it gets busier, so the animals could have fled from there. He and his wife said they’ve also noticed more cracks in their impeccably maintained walkway.

…The initial document also claimed that the test tunnel would not involve digging under private property, but that, too, has changed—though the company has now bought all the private property it is tunneling underneath. The company has also closed a lane of Jack Northrop Avenue, a street on the other side of SpaceX headquarters

In the author’s own words:

Meanwhile, in Hawthorne, the company that promised its transit test projects would be completely unnoticeable by the community has since uprooted a small business, purchased a house, and closed a lane of traffic indefinitely.

The horror.

The whole framing of the piece is ass-backwards. Semuels is correct that:

[this] would have been unimaginable in a higher-income neighborhood. Indeed, when Musk tried to build another underground tunnel in a wealthier neighborhood in West L.A., residents quickly sued. The project got tied up in court, and [died].

In comparision:

The CEQA allows residents 35 days to push back against granted exemptions…in Hawthorne, the 35-day window passed with little fanfare.

But unfortunately Semuels takes the posh, lawsuit-loving, NIMBY crowd as the appropriate normative standard and any deviations from that as suspect and indicative of the power of billionaires to run roughshod over other people’s rights. Instead, the Boring Company, the Hawthorne city government, and the people of Hawthorne should be applauded for their sensible, forward-thinking, and optimistic approach to new ideas. Bravo to Hawthorne! Hawthorne: Where the future is being made!

I do give Semuels credit, however. She writes honestly so that one can see the real story behind the false frame and she even tips the audience to the correct (Straussian?) reading in her final clever paragraph.

Vega [the owner of the cabinet business who was paid to vacate] has nothing negative to say about the Boring Company—he just blames himself for agreeing to be out so quickly. Nothing like this had ever happened to him before, so he didn’t know what was fair. Nor did he know how hard it would be to set up a new store—the process of getting new city permits, he said, is a lengthy one, and he can’t find a way to cut through the red tape.

Procurement and compliance costs (from the comments)

From my time in both the military and healthcare I can say that the biggest problem are the compliance costs.

For example, I have a phone app that allows me to send texts. We pay very good money to have said app. It does nothing that my phone cannot innately do – except be HIPAA compliant. EMR software is clunky, an active time suck, and adds little or no value … but we are required by law to use it. In each case there are scads of less specific programs out there which are insanely cheaper and more functional, but those programs cannot justify the costs of becoming compliant for a small niche of their business.

In the military we had similar difficulties. If you want systems to be secure, you need to pay extra as the marketplace does not do real security for consumer goods. Likewise, if you worry about logistical tails, building in assured access drastically increases costs.

And I fully suspect that prices will continue to diverge. As ever more of the internet ends up in a giant interconnected mess there will be fewer people able to code in a secure fashion. There will be fewer parts of the ecosystem that can be used by security conscious actors.

Then we get to actual procurement itself. People worry that arcane institutions will somehow make off with lots of money and spend it either poorly or nefariously. Absent easily observed price and cost data in both sectors we began developing rules. These rules drive firms out of the market (e.g. we needed some light interior remodeling to comply with a regulation that specified inches between things, the contractor who has been most affordable and highest quality refused to bid because the hassle on his side was too great). Eventually the rules become too complicated and you start needing specialists to interpret them. Costs skyrocket and firms abuse rules to pad profits. Then the lawyers get involved and things get more expensive. Again, medical and military consumers become a captive market facing greater monopoly as fewer firms can navigate the thicket of rules to even try to make money.

Then we have the problem that people look at these sectors and say that it is public money. All public money should help with goal X (e.g. going “green”, affirmative action, boycotting South Africa/Israel, patriotism, “America first”) and then we become even more overly constrained. Find vendors who meet one hurdle is hard, finding ones that meet 30 is nigh unto impossible unless the vendor is engineering the firm to market solely to this niche – and charging monopoly rates as his reward.

Any single thing would not be too bad for prices, but the marketplace in general is diverging from military and healthcare. Even education is diverging with mandates in FERPA and political business constraints. We have pretty effectively restricted supply, why exactly would we not expect an increase in cost?

That is from “Sure.”

Underargued claims, installment #1437

From Tim Wu, in a recent NYT Op-Ed, he presents a polemic against “monopoly”:

Postwar observers like Senator Harley M. Kilgore of West Virginia argued that the German economic structure, which was dominated by monopolies and cartels, was essential to Hitler’s consolidation of power. Germany at the time, Mr. Kilgore explained, “built up a great series of industrial monopolies in steel, rubber, coal and other materials. The monopolies soon got control of Germany, brought Hitler to power and forced virtually the whole world into war.”

To suggest that any one cause accounted for the rise of fascism goes too far, for the Great Depression, anti-Semitism, the fear of communism and weak political institutions were also to blame. But as writers like Diarmuid Jeffreys and Daniel Crane have detailed, extreme economic concentration does create conditions ripe for dictatorship.

The first ten words are already a give-away, as is the beginning of the second cited paragraph.  For contrast, this is from Thomas Childers, well-known historian of Nazi Germany:

In his biography of Henry Kissinger, historian Niall Ferguson notes that “old man Thyssen” — that is, German steel magnate Fritz Thyssen — “bankrolled Hitler.” Businessmen such as Thyssen using their financial assets to assist the Nazis was “the mechanism by which Hitler was funded to come to power,” according to John Loftus, a former U.S. attorney who prosecuted Nazi war criminals.

But the Nazis were neither “financed” nor “bankrolled” by big corporate donors. During its rise to power, the Nazi Party did receive some money from corporate sources — including Thyssen and, briefly, industrialist Ernst von Borsig — but business leaders mostly remained at arm’s length. After all, Nazi economic policy was slippery: pro-business ideas swathed in socialist language. The party’s program, the Twenty-Five Points, called for the nationalization of corporations and trusts, revenue sharing, and the end of “interest slavery.”

And Wu’s two other cited sources?  Both focus mainly on IG Farben.  Diarmuid Jeffreys is “an award-winning journalist and television producer with thirty years’ experience in the media industry.”  He does have a book on IG Farben and the making of the German war machine, but it does not demonstrate how economic concentration brings totalitarian regimes to power, instead focusing on how IG Farben profited from Nazi war aims and helped build the Holocaust.  Earlier in the 1930s, IG Farben had in fact resisted Nazification. though the company did jump on board once it saw Nazification as inevitable.

Here is the Daniel Crane essay on antitrust and democracy.  Try this excerpt: “… it does not necessarily follow that Farben’s monopolistic position in the German chemical industry is causally related to the rise of fascism—or that monopoly enabled Nazism. Two matters should give us pause before making such an inference.”  Read p.14 to see what follows, but here is one tiny bit: “Though gigantic, Farben remained smaller than three American industrial concerns—General Motors, U.S. Steel, and Standard Oil. Nor was Farben’s wartime market power exceptional.”  On the other side of the ledger, Crane does note that fascistic governments, once in power, find it easier to take over and co-opt more highly concentrated industries, Farben being an example of that.  So there is an argument here, but mainly one data point and also some very serious qualifiers.

Does that all justify the sentence “But as writers like Diarmuid Jeffreys and Daniel Crane have detailed, extreme economic concentration does create conditions ripe for dictatorship.”?  “Ripe” is such a tricky, non-causal word.

I would instead stress that war, civil war, scapegoating, and deflation create the conditions “ripe for dictatorship.”  You might want to toss Russia and China into the regression equation, or how about Cuba and North Korea and Albania and Pol Pot’s Cambodia?  How would the coefficient on industrial concentration end up looking?  I’d like to know.

When big business is the target, and tech in particular, the standards of proof for Op-Eds seem to decline.  Somehow, because we all know that the big tech companies are bad, or jeopardizing democracy, it is OK to make weakly argued claims.

Blockchains in Space! Revisited

Last week I titled a post, Blockchains in Space!, as a satirical comment on blockchain mania. Obviously, I forgot the new rule that satire is no longer possible.

SpaceChain’s blockchain node has been launched into space on Oct 25, 2018. In the map below, you can track its movements to see exactly where it is in orbit.

The SpaceChain FAQ also provides a good example of a kind of doublethink that is very common in the blockchain world:

What is the difference between having a blockchain on Earth as opposed to in space?
Blockchain technology is hosted on centralized servers on Earth and are vulnerable to hacking. One way to prevent this issue is to get these platforms on a decentralized network such as SpaceChain’s blockchain-based network of satellites. Blockchain technology in space will be safer from other vulnerabilities such as internet kill switches or governments that are against the technology. In addition, blockchain technology in space will prove as a great use case for supply chains especially since there are certain places on Earth that are outside of coverage zones such as oceans, deserts and forests. These satellites will be able to track, monitor and scan these dead zones.

How do you ensure legal compliance with regulatory bodies in various countries?
We have a legal team to ensure full compliance. We also have team members and partners in China, Israel, Singapore and the US who work with local governing bodies to ensure that we are fully compliant with local regulations.

Ironically, I’m bullish on blockchain (I advise several firms in the space) but it would be nice to see real products with real customers before we start putting blockchains in space.

How is Obamacare doing?

Yes, it is more popular, but how is it doing?:

Obamacare has continued to devastate the individual health insurance market:

  • In March of 2016, there were 20.2 million people covered in the individual health insurance market according to a hard count of state insurance department filings done by Mark Farrah and Associates.
  • In March of 2017 that count was down to 17.7 million.
  • In March of 2018 the count was 15.7 million–a 22% drop in two years.

This means 4.5 million people lost their individual health insurance in just two years.

Hardest hit are the 40% of middle class individual market consumers who are not eligible for a subsidy.

  • In March of 2016 there were 7,520,939 people covered in the off-exchange individual health insurance market where subsidies are not available.

  • In March of 2017 5,361,451 were covered.

  • In March of 2018 4,004,522 were covered–a 47% drop in two years.

And, the Obamacare subsidies paid to consumers are hardly sustainable.

According to the CBO, the average Medicaid outlay for a non-disabled adult is $4,230–a program that virtually has no premiums and co-pays. But because the risk pool is so bad and therefore expensive in the Obamacare exchanges, the average subsidy cost for taxpayers is $6,300–and that doesn’t include what the consumer pays in premiums and out-of-pocket expenses for Obamacare coverage.

Why has the Obamacare individual market melted-down in these last two years? Because its premiums and deductibles are sky high–for all but the lowest income participants.

In Northern Virginia, for example, the cheapest 2019 Obamacare individual market Silver plan for a family of four (mom and dad age-40) making a subsidy eligible $65,000 a year costs $4,514. That plan has a $6,500 deductible meaning the family would have to spend $11,014 on eligible health care costs before collecting other than nominal first dollar benefits.

That same family, but making too much for a subsidy, as 40% of families do, and a typical family in the affluent Virginia 10th, would have to spend $19,484 in premiums plus a $6,500 deductible, for a total of $25,984 in eligible costs before they would collect any meaningful benefits.

That is from Robert Laszewski, with additional interesting points at the link.  Do see my earlier post on what does and does not make sense in Obamacare — the risk pool for the individual market simply isn’t big or robust enough.

Spain Debates Whether Left Hand or Right Hand Should Pay Tax

Spain is currently embroiled in tremendous debate over who should pay the AJD tax, a tax on the creation of a mortgage. Should the buyers (consumers) or the sellers of the mortgage (the banks) pay the tax? The Supreme Court, the President, and the legislature have all stepped in.

At the beginning of this year,  the civil division of Supreme Court clearly ruled that the tax on mortgages should be paid by consumers and not banks. However, on the 18th of October the Contentious-Administrative division pronounced the other way, that banks should pay. So two divisions of different jurisdictions of the Supreme Court (civil and administrative) have issued conflicting sentences producing a legal mess…

that was the situation as of October 24. But then on Tuesday:

The Spanish Supreme Court has done a U-turn again: it is the clients who must pay for a controversial mortgage tax, and not the banks

…The decision was reached on Tuesday evening in the Administrative Division of the Supreme Court after two days of intense debate, and with just two votes of difference: 15 justices were in favor of making the client pay the levy, and 13 voted to confirm a groundbreaking decision reached by this same court in mid-October that it should be the banks who pick up the tab.

Leaders are up in arms and street protests are threatened:

Leaders of the anti-austerity Podemos party have already announced protests over a decision that “calls into question” the court’s independence and undermines democracy, in the words of party leader Pablo Iglesias. …Alberto Garzón, head of the United Left coalition, went even further: “Private banks are thieves, they are the main enemy of democracy and they are responsible for gutting our economies. A majority of the Supreme Court sides with them, ratifying that justice has a price and that the system is rotten and spent,” he tweeted.

Under pressure, the socialist Prime Minister announced “a Royal Decree would be approved ‘so that Spaniards will never pay this tax again’,” and the Prime Minister pledged that the new law would be in place by Friday!

What’s amazing is that the Spanish uproar is over a decision that Econ 101 says does not make a whit’s worth of difference to anything of importance. Whether the buyers send the check to the government or the sellers does not change the true incidence of the tax. As Tyler and I say in Modern Principles, “Who pays the tax does not depend on the laws of Congress but on the laws of supply and demand.” The tax simply drives a wedge between what the buyers pay and what the seller receives. Since sellers typically post prices, when the sellers must send the check the posted price will include the tax but the price the sellers receive will be the posted price minus the tax. If buyers must send the check to the government the posted price will not include the tax but the buyers will have to pay the posted price plus the tax. Either way, the seller, buyer, and government all end up net the same amount. It’s little different than debating whether the right or left hand must pay the tax. See Tyler in the video below for the diagram and further details.

Thus, the whole Spanish imbroglio has been caused by a failure to understand Econ 101.

Addendum: Bank shares fluctuated as the tax jumped back and forth which might suggest non-neutrality but that is because an earlier proposal would have had the banks pay consumers “back” for taxes the consumers paid years ago. A retroactive tax would indeed be bad for banks because while the tax would be retroactive the price would not. Going forward, however, the price adjusts with the placement of the tax so there is little beyond convenience and transaction cost to prefer one system to the other. In fact, once it was established that the tax would not be retroactive, bank share prices recovered.

Hat tip: Mauricio Drelichman.

Why Is the Fight for Free Speech Led by the Psychologists?

Jeffrey Sachs (not the economist) asks, Why are psychologists so prevalent in the free speech movement?:

If any academic field is associated with the contemporary debate surrounding free speech, it’s psychology. Haidt, Pinker, Peterson, Saad, Jussim, even Lehmann. All specialize or have backgrounds in academic psych.

The Scholar’s Stage offers a good answer:

I attribute this all to three things.

1. The conclusions academics reach tend to rankle the right. There are exceptions. If your research draws on evolutionary psychology, focuses on innate behavioral differences, or touches any sort of psychometrics (e.g., IQ), the angry tide does not sweep in from the right. The wave these men and women fear crashes in from leftward side. Moreover, the sort of leftist opposition that the academic consensus on these topics face leaves little room for rational debate or compromise: controversies over psychometrics or evolutionary psychology are usually framed in terms of good and evil, not right and wrong. The scientists involved are to be conquered, not reasoned with.

So that is point one: the people who want to shut controversial psychologists up are overwhelmingly creatures of the left.

2. Psychology, especially social psychology, is itself an overwhelmingly leftist discipline. We actually have data on this, and it is pretty grim: a recent survey of American tenure-track professors reveals that there 17.4 registered Democrat psychologists for every single registered Republican.[2] If there is a field of people who ought to be sympathetic to social justice railroading, these people are it.

3. Despite this, behavioral scientists have not yet adopted the rhetorical techniques or methodology of inquiry of “critical theory.”  In contrast, see how these modes of inquiry have swallowed up the fields of anthropology and communications, and established creeping colonies in history, sociology, and area studies.  Given the left-leaning sympathies of almost all in the profession, the threat that the same might happen to the study of human behavior is real.

…Haidt et. al. are confident they can win the debate if they are allowed to debate. For the heterodox anthropologist or sociologist the game is already over: their discipline has already been conquered. For the economist, the threat is too remote to take seriously. Behavioral science exists in that rare in-between: methodologically, it has the tools to fight back against the excesses of the activist. Socially, it provides a compelling reason for its practitioners to use them.

Gang update

From El Salvador (WSJ):

Politicians must ask permission of gangs to hold rallies or canvass in many neighborhoods, law-enforcement officials and prosecutors said. In San Salvador, the nation’s capital, gangs control the local distribution of consumer products, experts said, including diapers and Coca-Cola . They extort commuters, call-center employees, and restaurant and store owners. In the rural east, gangs threaten to burn sugar plantations unless farmers pay up.

At what point do we say the government has been replaced?  On the analytics:

“We’ve left behind the era of the cartel and the kingpin,” said Alejandro Hope, a security consultant in Mexico City. “Today, most violence in Latin America is the result of a new system that’s more diverse, harder to control, and much more local.”

In Brazil to the south (NYT):

In Rio de Janeiro state alone, more than 5,197 people have been killed this year — far more than the 3,438 civilians killed in conflict last year in Afghanistan, according to United Nations figures.

One-quarter of those may have been killed by the state, a sign of state weakness not strength.

One approach is to view all this as a problem to be solved, and surely there is something to that attitude.  Another approach, not mutually exclusive, is to view it as a problem that is getting harder to solve.