Category: Law

The revenge of the pecuniary externalities on cryptocurrencies

The town of Plattsburgh, New York, has become the first in the US to place a moratorium on cryptocurrency mining. It’s not an outright ban, at least not yet — it doesn’t affect miners currently operating in the city, just new ones looking to set up shop, and it’s only in place for 18 months.

Why Plattsburgh, New York? It’s simple: the small town has the “cheapest electricity in the world,” as Mayor Colin Read told Motherboard. Mining involves using high powered computers to solve complex problems, and thus be rewarded with cryptocurrency. It generates a lot of heat and uses an inordinate amount of electricity. It makes sense that these mining enterprises would look for places with inexpensive electricity. The problem is that it’s resulted in higher electric bills for everyone else in the town.

Here is the full story, via the excellent Samir Varma.

My Conversation with Chris Blattman

The very very highly rated but still underrated Chris Blattman was in top form, here is the transcript and audio.  We had a chance to do this one when he was in town for a week.  We talked about the problem with cash transfers, violence, child soldiers, charter cities, Rene Girard, how to do an Africa trip, Battlestar Galactica, why Ethiopia is growing rapidly, why civil war has become less common, why Colombia and the New World have been so violent, the mysteries of Botswana, and Chris’s favorite Australian TV show, among other topics, including of course the Chris Blattman production function.  Here is one excerpt:

BLATTMAN: There’s this famous paper on Vietnam veterans in the US where they find that being conscripted into fighting in Vietnam had positive effects on the wages of blacks and negative effects on the wages of whites. The reason was, it was really down to, what was your alternative labor market and training experience in the absence of this war?

We found something similar in Uganda, something eerily familiar, which is that the women economically weren’t so worse off. I wouldn’t say they were better off, but they weren’t necessarily affected adversely in an economic sense — they were adversely affected in other ways 5 or 10 or 15 years down the road — while the men were.

It spoke to just how terrible women’s options were. Being conscripted and abducted to be a rebel wife, to some degree, wasn’t that different than what your marriage opportunities looked like if there wasn’t a war.

For men, it just meant that you were out of the civilian labor market, getting a bunch of skills that had turned out not to be very useful. It was bad for them. A different war, a different context, and a different labor market, and that can switch.

COWEN: How many northern Ugandan child soldiers have you interviewed?

BLATTMAN: A few hundred. At least a couple hundred, maybe more. It depends if you count someone who’s involved for a month versus two years. Certainly, the long, long-term soldiers who were there for many, many years are few, maybe only a couple dozen.

COWEN: Those contacts, those conversations, how have they changed your outlook on life emotionally, intellectually, otherwise?

And:

COWEN: True or false, most humans are bad at violence?

BLATTMAN: I think they learn quickly. Probably they’re bad at first.

COWEN: In the micro evidence on violence, and the more individual-level evidence, and then finally macro evidence — like will there be a civil war? — do you think there’s ultimately an overarching theory that ties these all together? Or are they just separate levels of investigation, where you have empirical results, and they stand somewhat separate, and they’ll always be distinct areas?

How optimistic are you about a grand unified theory of violence?

BLATTMAN: I think these individual, how I react in the moment, fight-or-flight-type mechanisms are quite distinct from the way that small groups or large groups or nations go to war. But once you get beyond that to the level of small groups and larger groups and nations, I see a lot of unity in the theory.

Do read or listen to the whole thing.  By the way, he says the Canadian political system is overrated.

Can Britain make itself less complacent?

Educators in Britain, after decades spent in a collective effort to minimize risk, are now, cautiously, getting into the business of providing it.

Out went the plastic playhouses and in came the dicey stuff: stacks of two-by-fours, crates and loose bricks. The schoolyard got a mud pit, a tire swing, log stumps and workbenches with hammers and saws.

“We thought, how can we bring that element of risk into your everyday environment?” said Leah Morris, who manages the early-years program at the school in Shoeburyness in southeast Britain. “We were looking at, OK, so we’ve got a sand pit, what can we add to the sand pit to make it more risky?”

Now, Morris says, “we have fires, we use knives, saws, different tools,” all used under adult supervision. Indoors, scissors abound, and so do sharp-edged tape dispensers (“they normally only cut themselves once,” she says).

Limited risks are increasingly cast by experts as an experience essential to childhood development, useful in building resilience and grit.

I suppose I am skeptical of this approach, as it may lead to harm and furthermore the benefits of risk have to arise more organically.  It will in any case be interesting to see how the public digests these changes as they play out in the lives of children.

Here is the full story by Ellen Barry.  In any case, there is also a bingo revival in Britain, is that a sign of renewed passivity?

The Nordic glass ceiling?

Iceland in particular stands out among the Nordic states, since it has a smaller welfare state than its larger Nordic cousins and also ranks among the highest share of female managers in the world. On the other hand, Denmark has the highest tax rate among all the nations in the Organisation for Economic Co-operation and Development and ranks at the bottom in terms of its proportion of female managers.

In the dataset for developed economies, there are three countries with equal or higher rates of female managers than Iceland: New Zealand, the United States, and Latvia. These countries have relatively low tax rates: 26.4 percent in the United States, 29.0 percent in Latvia, and 32.8 percent in New Zealand.

That is from a new Cato study by Nima Sanandaji.

Which are the most dangerous animals in America?

Beware the snake, the spider and the scorpion. But know this: You are much more likely to be killed by a bee or a dog.

Of the 1,610 people killed in encounters with animals between 2008 and 2015, 478 were killed by hornets, wasps and bees, and 272 by dogs, according to a study published in Wilderness & Environmental Medicine. Snakes, spiders and scorpions were responsible for 99 deaths over the eight years.

Using a database published by the Centers for Disease Control and Prevention, researchers found that 72 people annually were killed by “other mammals,” which includes horses, cattle and pigs.

Only six people a year died from snakebite, and six after being bitten by a venomous spider. Two people were killed by marine animals over the eight-year period, and no one was killed by a rat.

That is from Nicholas Bakalar at the NYT, via Michelle Dawson.

A radical solution to the occupational licensing mess

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

My radical proposal is therefore for the federal government to pre-empt as much occupational licensing as is possible. That’s right, these functions would be taken away from the state and local governments.

Unfortunately, I don’t expect the federal bureaucracy to usher in the reign of Milton Friedman’s Chicago School economics. But the federal regulatory process would likely pay less heed to local special interests, and it would produce a more homogenized and less idiosyncratic body of regulatory law more geared toward the most important cases, such as medicine and child care. The federal government is less likely than many state and local governments to obsess over licensing rules for fortune tellers, florists and athletic trainers.

A federal approach to these regulations would also bring standardization and uniformity across state lines, making it easier to move from one part of the country to another, and helping restore the great American tradition of mobility. As it stands now, imagine yours is a military family and you are transferred every few years or so, and your spouse works in a profession that would require relicensing. What justification could there be for such a hardship and inconvenience?

I consider how legally difficult this would be, and toward the end I argue:

If my idea sounds too ambitious, a smaller first step against anti-competitive licensing would have state governments pre-empt requirements at the city level, as Tennessee did last year. That doesn’t raise major constitutional issues, and at least it limits the possibility that American cities become a crazy patchwork of mobility-limiting interventions.

Keep in mind that the alternative to my suggestion is not the status quo but rather a regime where occupational licensing becomes progressively worse at multiple levels of government.

Do read the whole thing.

From the comments, on South Africa

I think the chances of a populist land grab in South Africa (never very high) have actually gone down over the past few months. Look at the ANC’s actions during its 24 years in power, not its rhetoric. Many bad policies for sure, but never anything close to radically populist, of the sort that would seriously scare the financial markets. Destruction of the (well entrenched and sophisticated) property rights system would certainly do that. So it’s unlikely to happen.

The only time there seemed to be a risk of edging in that direction was when Zuma and his faction started seriously losing support (2016-17). They responded by ratcheting up the populist and racist rhetoric (“white monopoly capital” etc), but ultimately it didn’t work. They lost, and power in the ANC has shifted back to the more market friendly centrists, typified by Ramaphosa.

That’s why I think the risks have gone down (since Zuma was ousted), despite the recent parliamentary vote to “expropriate without compensation”. The sound bite plays well to a certain audience, as other commenters have noted, but I agree it’s mostly just signaling. When you look at the details it’s not as scary as it sounds.

Firstly, they didn’t vote to do it, they voted to set up a committee to investigate doing it, subject to various caveats and constraints, e.g. must increase agricultural production and improve food security; there must be public and expert consultation; appropriate mechanisms, etc. It seems extremely unlikely that the ANC’s intention is to summarily expropriate all land without compensation, nor does it say that in the parliamentary motion or in any ANC policy statement (that is indeed the EFF’s position, but they have less than 10% electoral support). Far more likely is we’ll end up with some sort of watered down constitutional amendment that allows expropriation without compensation in certain defined and limited circumstances, but overall system of property rights remains intact for vast majority of land and other assets.

By the way, I suspect the most outsiders seriously underestimate the strength of South Africa’s constitution and supporting institutions. They have stood remarkably firm over the past few years in the face of concerted attempts by Zuma and his cronies to undermine them. Compared, for example, to a country like Turkey, whose constitution, judiciary, media and civil society have been crushed in the space of a few years by a similarly venal and power-deluded single politician.

That is from Greg.

The contributions of Rene Girard

Carl L asks: Address the scapegoating theory of René Girard in general, and its possible application to economics. Peter Thiel has repeatedly cited Girard as an important influence and has even said his theory was partly the reason he invested in Facebook.

From my idiosyncratic point of view, here are a few of Girard’s major contributions, noting that I am putting them into “stupid simple” language, rather than trying to communicate his nuances:

1. His understanding of Christianity as fundamentally and radically different from earlier religions, as it exalts the individual victim rather than the conqueror.  Here is one point from a summarizer: “Christianity is the revelation (the unveiling) of what the myths want to veil; it is the deconstruction of the mono-myth, not a reiteration of it—which is exactly why so many within academe want to domesticate and de-fang it.”

2. Seeing violence as a chronic problem of human societies, rather than as the result of a bug in rational choice or the collapse into a bad game-theoretic solution.

3. Understanding the import of “mimetic desire,” namely the desire to copy others, and also why this is not always an entirely peaceful process, due to scarcity.  The tech world, by the way, at least pretends to have found a solution to this in its extreme scalability of product; we’ll see how that pans out.

4. A theory of mediated and triangulated desire, not yet absorbed by behavioral economics, and partly summarized here: “Whereas external mediation does not lead to rivalries, internal mediation does lead to rivalries. But, metaphysical desire leads a person not just to rivalry with her mediator; actually, it leads to total obsession with and resentment of the mediator. For, the mediator becomes the main obstacle in the satisfaction of the person’s metaphysical desire. Inasmuch as the person desires to be his mediator, such desire will never be satisfied. For nobody can be someone else. Eventually, the person developing a metaphysical desire comes to appreciate that the main obstacle to be the mediator is the mediator himself.”

5. First and foremost approaching societies from an anthropological point of view, prior to the economic method.

6. Understanding various social situations in terms of the need of finding a scapegoat to sacrifice, if not violently with some kind of resolution and catharsis.  These days one of those victims would be the big tech companies, as it is remarkable how many weakly-argued critiques of them make the paper every day.  You’ll understand these writings through the eyes of Girard, not economic theory.  Girard is also one of the best lenses for understanding the writings of bad and manipulative pundits.

7. Girard is of great use for understanding literature.  Try any Shakespearean play with “doubles,” Merchant of Venice, Thomas Hardy’s Mayor of Casterbridge (an all-time favorite), or Coetzee’s Disgrace, all Girardian to the core and very much illuminated by familiarity with his key ideas.  These are perhaps his most underrated contributions.  Shakespeare, by the way, is Girard’s most important precursor, also throw in the New Testament, Hobbes, Tocqueville, and maybe Montaigne.

What should you read by him?: Violence and the Sacred, Things Hidden Since the Foundation of the World, Theatre of Envy.

Where is Girard weakest: His theory of language, his overemphasis on the destructive nature of mimesis, excess claims to have discovered universal mechanisms, just making lots of stuff up, and not knowing enough economics or empirical anthropology.

How important is he?: If you had to pick twenty thinkers from the latter half of the 20th century, he is definitely one of them.  By the way, Foucault and Baudrillard might be the other French writers on that list.

The Push

The Push on Netflix is a deeply disturbing replication of the Milgram Experiment. The question it asks is whether someone can quickly be convinced to commit a murder? Spoiler alert: yes. British mentalist Derren Brown and a cast of confederates create an evil version of the Truman Show. By taking an individual from one seemingly minor moral deviation–labeling meat canapes as vegetarian–to another, to another, Brown puts people in a situation where by the end of one hour they are so emotionally disoriented and stressed that they will try to commit a murder to relieve their tension.

If you had asked me yesterday whether I thought it would be ok to run the Milgram experiment again, I would have said yes, as science. Today, I am not sure. What Brown does to these people for our entertainment (?) is disgusting. I feel complicit in having watched. Yes, I know, I am writing about it. I’m not sure what to make of that either.

As far as I can tell, the experiment is real. I’d be happier if it were fake but the results are consistent with previous Milgram replications. But if it is real did we then watch attempted murder? I am reminded of Leo Katz’s, Bad Acts and Guilty Minds. If a man fires a gun aiming to kill but the gun is defective is it attempted murder? Surely, yes. If thinking it a deadly poison a man adulterates a drink with sugar is it attempted murder? What if a sincere believer in voodoo tries to kill by sticking pins in a doll?

Aside from the legal issues, what Brown does to the participants is awful. How will they live the rest of their lives? Jordan Peterson says that you cannot be a good person until you know how much evil you contain within you. Well the people Brown experiments on know the evil that they contain but will they become better people? Or will they break? Brown doesn’t seem to care.

In some sense, the subjects have consented. Months earlier they applied to be on a show but they were told that they had been rejected. Perhaps you think the participants figured it out. You will have to judge for yourself but it all happens so quickly that I don’t think that is plausible. Moreover, if you figured it out wouldn’t you want to be the hero rather than the prison guard directing the Jews to the ovens?

Does The Push have any socially redeeming value? I hope so. Phillip Zimbardo of the famous Stanford Prison Experiment was so upset by his research that he started the Heroic Imagination Project, (I wrote about it here). The Heroic Imagination Project attempts to turn the issue around by asking what helps people to resist authority? And how can we train people under stress to draw on their heroic reserves? Netflix has shown us that the Heroic Imagination Project is sorely needed. Maybe next time Netflix can devote some of their considerable resources to helping us resist the push.

Markets in everything

“They do what they want,” she says. “After the earthquake you would see [foreign workers] asking to have sex in exchange for supplies. I never did it, but I saw some people who did.”

A UN report, published in May 2015, found that members of its peacekeeping mission in Haiti traded sex for aid with more than 225 women between 2008 and 2014.

That is from Joe Parkin Daniels at The Guardian.

That was then, this is now

From the (early) MR archives

Bush to drop most steel tariffs, Tyler Cowen, on December 1, 2003 at 7:45 am

Bush decided in March 2002 to impose tariffs of 8 to 30 percent on most steel imports from Europe, Asia and South America for three years. Officials acknowledged at the time that the decision was heavily influenced by the desire to help the Rust Belt states, but the departure from Bush’s free-trade principles drew fierce criticism from his conservative supporters. After a blast of international opposition, the administration began approving exemptions.

The WTO’s ruling against the tariffs was finalized three weeks ago, clearing the way for the retaliatory levies, and Bush’s economic team concluded unanimously that the tariffs should be scrapped. The source involved in the negotiations said the consensus in the White House was that “keeping the tariffs in place would cause more economic disruption and pain for the broader economy than repealing them would for the steel industry.”

Here is the full story. The formal decision is expected to be announced later this week. This is the first piece of economic policy good news in some time, but it is sad that it required a WTO ruling and threats of European retaliation to come about.”

I recall visiting the White House with Vernon Smith around this time.  Smith told Bush that he had done the wrong thing with the steel tariffs, and Bush simply snapped back: “You’re the economist…leave the politics to me!”  I wonder how Trump put it to his advisors…

Addendum: Here is Bob Crandall criticizing Reagan steel protectionism from the 1980s.  Here is a 2003 retrospective analysis of the Bush steel tariffs.

South Africa update

The National Assembly on Tuesday set in motion a process to amend the Constitution so as to allow for the expropriation of land without compensation.

The motion, brought by the EFF leader Julius Malema, was adopted with a vote of 241 in support, and 83 against.

The only parties who did not support the motion were the DA, Freedom Front Plus, Cope and the ACDP.

The matter will now be referred to the Constitutional Review Committee which must report back to Parliament by August 30.

That is from a South African website, and the story really does seem to be true.  Yet reputable Western outlets do not seem to have much interest in reporting on this, except for this piece on Quartz.

There has been more coverage of Cape Town possibly running out of water.  I do understand that foreign troubles often look worse from a distance, but still in an era when emerging economies have been booming, including in most of Africa, it is hard not to be put off by these developments.  I am not sure how to interpret the data quality issues, but it is not obvious that the median wage has increased since the fall of apartheid.

*Radical Markets*

The authors are Eric A. Posner and E. Glen Weyl, and the subtitle is Uprooting Capitalism and Democracy for a Just Society.

“Suppose the entire city of Rio is perpetually up for auction.”  To be clear, I don’t agree with these proposals.  But if you want a book that is smart, clearly written, dedicated to Bill Vickrey, and sees its premises through to their logical conclusions, I am happy to recommend this one.  Think of it as a bunch of social choice and incentive mechanisms, based on market-like ideas, though not markets in the sense of a traditional medieval fair.

The authors call for perpetually open auctions, quadratic voting, a kind of apprenticeship system for the private sponsorship of immigrants, a ban on mutual fund diversification within sectors (to preserve competition by limiting joint ownership), and creating more explicit markets in personal data.  If nothing else, it will force you to clarify what you actually like about markets, or don’t, and what you actually like about economics, or don’t.

Most of all, I differ from the authors in seeing a larger gap between models and the real world than they do, and thinking we need a greater variety of kinds of evidence before making very radical changes.  But at the very least, it is worth thinking through why we do not handle life as a second price auction.

My Conversation with Robin Hanson

I am honored to have been able to do this, here is the podcast and transcript.  The topics we covered included…the ideas of Robin, most of all: “With Robin, we go meta. Robin, if politics is not about policy, medicine is not about health, laughter is not about jokes, and food is not about nutrition, what are podcasts not about?”

Here is one exchange:

COWEN: Let’s say I’m an introvert, which by definition is someone who’s not so much out there. Why is that signaling? Isn’t that the opposite of signaling? If you’re enough of an introvert, it doesn’t even seem like countersignaling. There’s no one noticing you’re not there.

HANSON: I’ve sometimes been tempted to classify people as egg people and onion people. Onion people have layer after layer after layer. You peel it back, and there’s still more layers. You don’t really know what’s underneath. Whereas egg people, there’s a shell, and you get through it, and you see what’s on the inside.

In some sense, I think of introverts as going for the egg people strategy. They’re trying to show you, “This is who I am. There’s not much more hidden, and you get past my shell, and you can know me and trust me. And there’s a sense in which we can form a stronger bond because I’m not hiding that much more.”

And:

COWEN: Here’s another response to the notion that everything’s about signaling. You could say, “Well, that’s what people actually enjoy.” If signaling is 90 percent of whatever, surely it’s evolved into being parts of our utility functions. It makes us happy to signal. So signaling isn’t just wasteful resources.

What we really want to do is set up a world that caters to the elephant in our brain, so to speak. We just want all policies to pander to signaling as much as possible. Maybe make signals cheaper, but just signals everywhere now and forever. What says you?

HANSON: I think our audience needs a better summary of this thesis that I’m going to defend here. The Elephant in the Brain main thesis is that in many areas of life, perhaps even most, there’s a thing we say that we’re trying to do, like going to school to learn or going to the doctor to get well, and then what we’re really trying to do is often more typically something else that’s more selfish, and a lot of it is showing off.

If that’s true, then we are built to do that. That’s the thing we want to do, and in some sense it’s a great world when we get to do it.

My complaint isn’t really that most people don’t acknowledge this. I accept that people may be just fine leaving the elephant in their brain and not paying attention to it and continuing to pretend one thing while they’re doing another. That may be what makes them happy and that may be OK.

My stronger claim would be that policy analysts and social scientists who claim that they understand the social world well enough to make recommendations for changes—they should understand the elephant in the brain. They should have a better idea of hidden motives because they could think about which institutions that we might choose differently to have better outcomes.

And of course I asked:

COWEN: What offends you deep down? You see it out there. What offends you?

And why exactly does it work to invite your date up to “see my etchings”?  And where is “The Great Filter”?  And how much will we identify with our “Em” copies of ourselves?  There is also quantum computing, Robin on movies, and the limits of Effective Altruism.  On top of all that, the first audience question comes from Bryan Caplan.

You should all buy and read Robin’s new book, with Kevin Simler, The Elephant in the Brain: Hidden Motives in Everyday Life.

Some Thoughts on School Shootings, Media, and the Consequences of Fear

“There is not an epidemic of school shootings,” he said, adding that more kids are killed each year from pool drownings or bicycle accidents.

James Alan Fox, the Lipman Family Professor of Criminology, Law, and Public Policy at Northeastern.

School shootings are actually down since the 1990s (with a lot of variability). Fewer students are carrying weapons to school and fewer students report having easy access to guns (data here).

It’s been said that we live in an increasingly divided media universe but on many issues I think we live in an increasingly uniform media universe. Social media is so ubiquitous and the same things sell so widely that I suspect the collective consciousness is less fragmentary than in the past. Does anyone not know about Parkland? Contrary to common wisdom, mass shootings also occur in European countries. I suspect, however, that the Finnish media don’t cover German shootings as frequently as shootings in Florida are covered in Nebraska–as a result the larger the media-market the greater the extent of availability bias. In other words, the larger the media market the greater the over-estimation of rare but vivid events. (Someone should test this theory.)

I worry about turning schools into prisons and what kinds of citizens this will create. My letter to my son’s high school principal was sent before the recent shootings but I stand by it now more than ever:

Dear Principal _____,

Thank you for requesting feedback about the installation of interior cameras at the high school. I am against the use of cameras. I visited the school recently to pick up my son and it was like visiting a prison. A police car often sits outside the school and upon entry a security guard directs visitors to the main office where the visitor’s drivers license is scanned and information including date of birth is collected (is this information checked against other records and kept in a database for future reference? It’s unclear). The visitor is then photographed and issued a photo pass. I found the experience oppressive. Adding cameras will only add to the prison-like atmosphere. The response, of course, will be that these measures are necessary for “safety.” As with security measures at the airports I doubt that these measures increase actual safety, instead they are security theater, a play that we put on that looks like security but really is not.

Moreover, the truth is that American children have never been safer than they are today. Overall youth mortality (ages 5-14) has fallen from 60 per 100,000 in 1950 to 13.1 per 100,000 today (CDC, Vital Statistics). Yet we hide in gated communities, homes and schools as never before.

When we surround our students with security we are implicitly telling them that the world is dangerous; we are whispering in their ear, ‘be afraid, do not venture out, take no risks.’ When going to school requires police, security guards and cameras how can I encourage my child to travel to foreign countries, to seek new experiences, to meet people of different faiths, beliefs and backgrounds? When my child leaves school how will the atmosphere of fear that he has grown up in affect his view of the world and the choices he will make as a citizen in our democracy? School teaches more than words in books.

Yours sincerely,

Alex Tabarrok