Wednesday assorted links

Personal bankruptcies have declined during the pandemic

The number of people seeking bankruptcy fell sharply during the pandemic as government aid propped up income and staved off housing and student-loan obligations.

Bankruptcy filings by consumers under chapter 7 were down 22% last year compared with 2019, while individual filings under chapter 13 fell 46%, according to Epiq data. After holding above 50,000 filings a month in 2019 and in the first quarter of 2020, bankruptcy filings have remained below 40,000 a month since last March when the pandemic hit.

By contrast, commercial bankruptcy filings rose 29%, with more than 7,100 businesses seeking chapter 11 protection last year, according to Epiq…

Economists and bankruptcy lawyers say federal suspensions of evictions, home foreclosures and student-loan obligations have helped limit bankruptcies—though they worry bankruptcy rates could go up after aid ends. Household spending also dropped as people stayed home, canceled travel and socially distanced to avoid the coronavirus. Several rounds of government aid padded incomes with direct payments to households and enhanced unemployment benefits. The personal saving rate rose.

Here is more from the WSJ.

What I’ve been reading

1. Devaki Jain, The Brass Notebook.  What is it like to grow up in a Tamil Brahmin family, be molested by relatives and Nobel Prize winners, and go on to be an economist?  Short and extremely readable.  The personal tale is very charming, the politics (Nyerere and Castro, never repudiated) are not.

2. Walter Isaacson, The Code Breaker: Jennifer Doudna, Gene Editing, and the Future of the Human Race.  This excellent book is exactly as you think it is going to be.

3. S.M. Ulam, Adventures of a Mathematician.  Memoir involving many of the 20th century’s top mathematicians and physics types, including von Neumann, Gamow, Banach, Edward Teller, and Ulam himself, among others.  Scintillating on every page, as a historical chronicle, as biography, and as a look into how a brilliant mathematician thinks.

4. Eric Berger, Liftoff: Elon Musk and the Desperate Early Days That Launched SpaceX.  A fun and informative treatment of what the title promises.  I hadn’t know that Musk met personally with the first three thousand employees of SpaceX, to make sure the company was hiring the right kind of people.  He thought he could detect a good hire within fifteen minutes of conversation.

5. Matthew E. Kahn, Adapting to Climate Change: Markets and the Management of an Uncertain Future.  I read this some time ago, it is just published, here is my blurb: “Are you looking for an approach that recognizes the costs of climate change, and approaches the entire question with an economic and political sanity?  Matthew E. Kahn’s new book is then essential reading.”

The new Peter Boettke book is The Struggle for a Better World, which is his best statement of classical liberalism to date.

What should I ask Pierpaolo Barbieri?

I will be doing a Conversation with him, here is the opening part of his Wikipedia page:

Pierpaolo Barbieri (Buenos Aires, May 17, 1987) is an economic historian, researcher, Executive Director at Greenmantle[and founder of Ualá, an Argentina-based personal financial management mobile app. He is the author of the book Hitler’s Shadow Empire: The Nazis and the Spanish Civil War. He has been featured in publications like Financial Times, New York Times, Foreign Affairs, El País, and The Wall Street Journal.

Ualá has been highly successful as of late in the payments space, including with the unbanked, and here is Pierpaolo on Twitter (mostly Spanish language).

So what should I ask him?

Misdemeanor Prosecution

Misdemeanor Prosecution (NBER) (ungated) is a new, blockbuster paper by Agan, Doleac and Harvey (ADH). Misdemeanor crimes are lesser crimes than felonies and typically carry a potential jail term of less than one year. Examples of  misdemeanors include petty theft/shoplifting, prostitution, public intoxication, simple assault, disorderly conduct, trespass, vandalism, reckless driving, indecent exposure, and various drug crimes such as possession. Eighty percent of all criminal justice cases, some 13 million cases a year, are misdemeanors. ADH look at what happens to subsequent criminal behavior when misdemeanor cases are prosecuted versus non-prosecuted. Of course, the prosecuted differ from the non-prosecuted so we need to find situations where for random reasons comparable people are prosecuted and non-prosecuted. Not surprisingly some Assistant District Attorneys (ADAs) are more lenient than others when it comes to prosecuting misdemeanors. ADH use the random assignment of ADAs to a case to tease out the impact of prosecution–essentially finding two similar individuals one of whom got lucky and was assigned a lenient ADA and the other of whom got unlucky and was assigned a less lenient ADA.

We leverage the as-if random assignment of nonviolent misdemeanor cases to Assistant District Attorneys (ADAs) who decide whether a case should move forward with prosecution in the Suffolk County District Attorney’s Office in Massachusetts.These ADAs vary in the average leniency of their prosecution decisions. We find that,for the marginal defendant, nonprosecution of a nonviolent misdemeanor offense leads to large reductions in the likelihood of a new criminal complaint over the next two years.These local average treatment effects are largest for first-time defendants, suggesting that averting initial entry into the criminal justice system has the greatest benefits.

We find that the marginal nonprosecuted misdemeanor defendant is 33 percentage points less likely to be issued a new criminal complaint within two years post-arraignment (58% less than the mean for complier” defendants who are prosecuted; p < 0.01). We find that nonprosecution reduces the likelihood of a new misdemeanor complaint by 24 percentage points (60%; p < 0.01), and reduces the likelihood of a new felony complaint by 8 percentage points (47%; not significant). Nonprosecution reduces the number of subsequent criminal complaints by 2.1 complaints (69%; p < .01); the number of subsequent misdemeanor complaints by 1.2 complaints (67%; p < .01), and the number of subsequent felony complaints by 0.7 complaints (75%; p < .05). We see significant reductions in subsequent criminal complaints for violent, disorderly conduct/theft, and motor vehicle offenses.

Did you get that? On a wide variety of margins, prosecution leads to more subsequent criminal behavior. How can this be?

We consider possible causal mechanisms that could be generating our findings. Cases that are not prosecuted by definition are closed on the day of arraignment. By contrast, the average time to disposition for prosecuted nonviolent misdemeanor cases in our sample is 185 days. This time spent in the criminal justice system may disrupt defendants’ work and family lives. Cases that are not prosecuted also by definition do not result in convictions, but 26% of prosecuted nonviolent misdemeanor cases in our sample result in a conviction. Criminal records of misdemeanor convictions may decrease defendants’ labor market prospects and increase their likelihoods of future prosecution and criminal record acquisition, conditional on future arrest. Finally, cases that are not prosecuted are at much lower risk of resulting in a criminal record of the complaint in the statewide criminal records system. We find that nonprosecution reduces the probability that a defendant will receive a criminal record of that nonviolent misdemeanor complaint by 55 percentage points (56%, p < .01). Criminal records of misdemeanor arrests may also damage defendants’ labor market prospects and increase their likelihoods of future prosecution and criminal record acquisition, conditional on future arrest. All three of these mechanisms may be contributing to the large reductions in subsequent criminal justice involvement following nonprosecution.

So should we stop prosecuting misdemeanors? Not necessarily. Even if prosecution increases crime by the prosecuted it can still lower crime overall through deterrence. In fact, since there are more people who are potentially deterred than who are prosecuted, general deterrence can swamp specific deterrence (albeit there are 13 million misdemeanors so that’s quite big). The authors, however, have gone some way towards addressing this objection because they combine their “micro” analysis with a “macro” analysis of a policy experiment.

During her 2018 election campaign, District Attorney Rollins pledged to establish a presumption of nonprosecution for 15 nonviolent misdemeanor offenses…After the inauguration of District Attorney Rollins, nonprosecution rates rose not only for cases involving the nonviolent misdemeanor offenses on the Rollins list, but also for those involving nonviolent misdemeanor offenses not on the Rollins list (and for all nonviolent misdemeanor cases)…. the increases in nonprosecution after the Rollins inauguration led to a 41 percentage point decrease in new criminal complaints for nonviolent misdemeanor cases on the Rollins list (not significant), a 47 percentage point decrease in new criminal complaints for nonviolent misdemeanor cases not on the Rollins list (p < .05), and a 56 percentage point decrease in new criminal complaints for all nonviolent misdemeanor cases (p .05). 

It’s unusual and impressive to see multiple sources of evidence in a single paper. (By the way, this paper is also a great model for learning all the new specification tests and techniques in the “leave-out” literature, exogeneity, relevance, exclusion restriction, monotonicity etc. all very clearly described.)

The policy study is a short-term study so we don’t know what happens if the rule is changed permanently but nevertheless this is good evidence that punishment can be criminogenic. I am uncomfortable, however, with thinking about non-prosecution as the choice variable, even on the margin. Crime should be punished. Becker wasn’t wrong about that. We need to ask more deeply, what is it about prosecution that increases subsequent criminal behavior? Could we do better by speeding up trials (a constitutional right that is often ignored!)–i.e. short, sharp punishment such as community service on the weekend? Is it time to to think about punishments that don’t require time off work? What about more diversion to programs that do not result in a criminal record? More generally, people accused and convicted of crimes ought to find help and acceptance in re-assimilating to civilized society. It’s crazy–not just wrong but counter-productive–that we make it difficult for people with a criminal record to get a job and access various medical and housing benefits.

The authors are too sophisticated to advocate for non-prosecution as a policy but it fits with the “defund the police,” and “end cash bail” movements. I worry, however, that after the tremendous gains of the 1990s we will let the pendulum swing back too far. A lot of what counts as cutting-edge crime policy today is simply the mood affiliation of a group of people who have no recollection of crime in the 1970s and 1980s. The great forgetting. It’s welcome news that we might be on the wrong side of the punishment Laffer curve and so can reduce punishment and crime at the same time. But it’s a huge mistake to think that the low levels of crime in the last two decades are a permanent features of the American landscape. We could lose it all in a mistaken fit of moralistic naivete.

Vaccine Roundup

1. Politico: The Biden administration is rethinking a costly system of government-run mass vaccination sites after data revealed the program is lagging well behind a much cheaper federal effort to distribute doses via retail pharmacies….The vaccination hubs, which are run by FEMA and staffed in part by National Guard troops and other Pentagon personnel, have administered…about 67,000 shots a day, according to a series of internal FEMA briefing documents and data sets obtained by POLITICO….By comparison, the federal retail pharmacy program reported March 11 it had administered nearly 1 million doses over a single day.

Using the retail pharmacies is what Scott Duke Kominers and I argued for in mid-February in our piece titled, America’s Pharmacies Can Do a Lot More Vaccinations. Good to see the Biden administration is making adjustments. Nothing wrong with the clinics, by the way, only use the pharmacies more.

2. New CDC study of health care workers in the United States shows that the first dose of the Moderna or Pfizer vaccine is 80% effective within two weeks. Big cuts in transmission as well. N.B. not an RCT.

3. One common criticism of delaying the second dose or of using the AstraZeneca vaccine or of making or not making other changes was that this would increase “vaccine hesitancy.” Frankly, in my view this was just an all-purpose rationalization for inaction. I thought that delaying the second dose could just as easily reduce vaccine hesitancy as increase it–not that I knew this would happen, I simply knew what would happen was uncertain. More generally, I thought that we should do the thing designed to save the most lives simpliciter, address vaccine hesitancy directly, and not try to do some complicated bank-shot based on ill-informed psychological speculation. Well Britain did everything that people were worried about–Britain delayed the second dose, used the AstraZeneca vaccine, used the AstraZeneca in the elderly and didn’t halt the use of the AZ vaccine and the result is the least vaccine hesitancy of 26 countries surveyed.

If UFOs are alien beings, are they just doing mood affiliation in visiting us?

Robin Hanson has a long and very interesting blog post on that question.  The point is not to argue that the UFOS are alien beings of some kind, but rather if they were which kinds of theories might help us understand them? Here is just part of Robin’s much longer take:

If the main block to believing in UFOs as aliens is a lack of a plausible enough social theory of aliens, then it seems a shame that almost no one who studies UFOs is a social science theorist. So as such a person, why don’t I step in and try to help? If we can find a more plausible social theory, we could become more willing to believe that UFOs are aliens…

Stylized fact #2: Aliens are rare and self-limited, and yet are here now.

Indirection –  We can think of a number of plausible motives for rare limited aliens to make an exception to visit us. First, they may fear us as rivals, and so want to track us and stand ready to defend against us. Second, if their limitation policies are intentional, then they’d anticipate our possibly violating them, and so want to stand ready nearby to enforce their limitation policies on us.

In either of these two cases, aliens might want to show us their power, and even make explicit threats, to deter us from causing problems. And there’s the question of why they don’t just destroy us, instead of waiting around. Third, independent alien origins could be a rare valuable datapoint about far-more-capable aliens who they may fear eventually meeting. In this case they’d probably want to stay hidden longer.

My best bet is this.  The vehicles would be “unmanned” drone probes, if only because the stresses of long trips through space would keep the actual alien beings close to home.  So the relevant social science question is what kind of highly generalized software instructions you would give such drones.  “Seek out major power sources, including nuclear, and seek out rapid flying objects, and then send information back home” would be one such set of instructions roughly compatible with the stylized facts on the ground (or in the air).  Of course the information sent back to alien worlds will not be arriving for a very, very long time, so long that the concrete motives of the aliens may not be the major consideration.  Collecting the information about other planets across some very long time frame might simply seem worthwhile, relative to the cheap cost of the drone probes.  It reminds me a bit of that “put the DNA of all the species on the moon” project we have started, or those seed banks up in the Arctic.  Why exactly did we do it?  Why not I say!?  And yet most humans do not even know those projects are going on.

A further generalized software instruction would be “if approached or confronted, run away fast.”  Indeed that is what those flying vehicles seem to do.

The drone probes do not destroy us, because of Star Trek-like reasons: highly destructive species already have blown themselves up, leaving the relatively peaceful ones to send drones around.  The drones probably are everywhere, in the galactic sense that is.  Yet given the constraints imposed by the speed of light, it is difficult to do much with them that is very useful to the decision-makers that send (sent?) them out.  So the relevant theory is one of how advanced civilizations allocate their surplus when there is a lot of discretion and not much in the way of within-lifetime costs and benefits to determine a very particular set of plans and goals.  Not even for the grandkids.

In this hypothesis, of course, you have to be short immortality.  And short usable wormholes.

By the way, don’t those photos of the drone probes make them look a bit like cheap crap?  No tail fins, no “Close Encounters of the Third Kind” music signature, no 3-D holograms, just a superfast vehicle.  Like something a second-rate alien non-profit picked up at the local Walmart and sent off into space en masse with solar-powered self-replication.  Which is consistent with the view of them being a discretionary resource allocation stemming from projects with fairly fuzzy goals.

A problematic question for any theory is whether competing drone navies have come to visit us, and if so are they fighting over the spoils?  Colluding?  Hiding from each other?  Or what?  If aliens are afoot, why should it be only one group of them?  That would seem strange, as in most things there are multitudes, at least speaking in Bayesian terms.  Aren’t there at least both Klingon probes and Romulan probes, maybe Federation probes too.

Robin’s hypothesis, that they are elatively local panspermiacs, who feel some stake in us, appeals to me.  Bayesian logic suggests in any case that the chance of us having resulted from panspermia is pretty high; there are lots of baby civilizations for each parent, so why deny you are probably a baby?

Perhaps our visitors are exercising some “mood affiliation” in wishing to visit and record us!  They could be the parents, or perhaps another baby civilization.

Of course since the photos are of such poor quality, and since there is no corroborating evidence of any kind, these UFO sightings probably are not of alien creations, so all of this is pure fantasy anyway.

The mortality of scholars

After recovering from a severe mortality crisis in the seventeenth century, life expectancy among scholars started to increase as early as in the eighteenth century, well before the Industrial Revolution. Our finding that members of scientific academies—an elite group among scholars—were the first to experience mortality improvements suggests that 300 years ago, individuals with higher social status already enjoyed lower mortality. We also show, however, that the onset of mortality improvements among scholars in medicine was delayed, possibly because these scholars were exposed to pathogens and did not have germ theory knowledge that might have protected them. The disadvantage among medical professionals decreased toward the end of the nineteenth century.

Here is more from Robert Stelter, David de la Croix, and Mikko Myrskylä.  Via the excellent Kevin Lewis.

Monday assorted links

How might depopulation reverse itself?

That is the topic of my latest Bloomberg column, drawing upon an earlier discussion by Robin Hanson.  The problem is this: if families find that having three or four kids just isn’t that fun, and women wish to focus more on their careers, which forces might be capable of reversing that trend?:

One possibility is that a shrinking population itself will bring self-reversing mechanisms. For instance, a Japanese population half its current size would make Japan an emptier place, presumably lowering land prices. Some families would find it easier to afford a larger apartment in central Tokyo and perhaps decide to have more children.

But that mechanism seems more likely to reduce population decline than to reverse it. Living space is only one of many factors behind decisions about family size. And as population declines, the stock of houses and apartments will decline too, so in the longer run the amount of space per family may not increase by very much…

Another factor in declining fertility, especially in the U.S., is single parenthood. If a potential mother is facing a fertility decision without another full-time parent on the scene, she is more likely to choose to have fewer children. As population falls, will single-parent families become less common? It is hard to see why. Whether the issue is a lack of marriageable men, unstable family norms or women who simply prefer to go it alone, there is no particular reason to think those factors will disappear in an era of population decline.

And:

What might be some other intervening factors to restore fertility? Perhaps tender and loving robots will make it much easier to raise young children. Or maybe, as populations fall to much lower levels, a sense of moral panic will set in. Families might decide to have more children, feeling that the very survival of their country is at stake. A more elaborate and dystopian scenario would be that corporations take over empty parts of the globe and pay for the raising of children there, in return for a share of their future income.

Here is Ross Douthat’s Sunday column on broadly similar issues, each column was written independently of the other.  As I interpret his discussion, he is more (potentially?) optimistic about ideological and religious forces reversing the decline than I am, in any case an interesting contrast of approach.  By the way, here is Robin Hanson’s proposal for how to escape the problem, more economistic than either Ross or myself.

Adam Ozimek asks about inflation, for his bartender

A question for econtwitter from my bartender. If the US government via deficit spending engages in economic development in other countries, does that increase inflation here?

I would approach this question as follows.  Assume the government is running a foreign aid program that mostly makes purchases and investments abroad with non-U.S. suppliers, furthermore assume floating exchange rates.

The foreign aid, a kind of capital outflow, will induce the dollar to depreciate somewhat, a’ la “the transfer problem” of the 1920s.  That will lead to a modest inflationary impact on imported goods, possibly of a one-off nature if the foreign aid is itself a one-off policy.  American exporters will gain, noting that under some unusual assumptions about the terms of trade the U.S. domestic economy can end up better off.  (Induced profits on the depreciation can in principle outweigh the initial loss from the transfer, though please “do not try this at home.”)

If the deficit is monetized, the exchange rate may depreciate all the more, as individuals shift their future expectations toward a more expansionary monetary policy.  Furthermore, the higher global money supply of dollars would give foreigners a higher option value on making purchases in the United States, another form of (likely modest) inflationary pressure.

If the deficit is financed by borrowing, someday that debt must be repaid.  If it is repaid by higher taxes, that has a deflationary effect on aggregate demand, though the incentive effects of the taxes will lower supply in the future, again creating a (probably modest) upward push on the price level as a further effect.

If you wish, you can toss in added second- and third-order effects on those taxes on exchange rates, terms of trade, and so on.

As an exercise to be performed at home, what if the U.S. sends aid to a dollarized economy, such as Ecuador or El Salvador?

A quiet war, with mutual option values on both escalation and further Clubhouse comments

‘Neither Israel nor Iran want to publicly take responsibility for the attacks because doing so would be an act of war with military consequences,’ Hossein Dalirian, a military analyst affiliated with Iran’s Islamic Revolutionary Guards Corps, told The New York Times in a Clubhouse discussion on Thursday.

Here is the full NYT article.