The Southern Poverty Law Center Indictment
The excellent Patrick McKenzie has a very long Bits About Money post on the the Southern Poverty Law Center (SPLC) indictment. It is filled with details about bank operating procedures. I’m going to summarize. The post is divided into what I think of as two parts. First, did the SPLC commit bank fraud? Second, what is the backstory behind the indictment?
The first part is simple, McKenzie argues that yes the SPLC committed bank fraud, more specifically false statements to a federally insured bank under 18 U.S.C. §1014–the main reason why this is not a hard call is that almost any false statement made to influence a bank, no matter how small, is illegal and can get you 30 years. Moreover, the banks are essentially an investigatory arm of the state and they collect data for decades, any piece of which can generate an indictment. The main way in which the SPLC committed bank fraud is that they set up fake businesses to pay secret informants. Neither of these things, as far as I know, are per se illegal but lying to your bank about the ownership, control and purposes of accounts opened in fictitious business names is illegal.
When Bank-1 investigated, an SPLC employee asked the bank to close several of the accounts and transfer the remaining balances to an SPLC account. Later, SPLC’s president/CEO and board chair confirmed in writing that the accounts were opened for SPLC operations and operated under SPLC authority. As Patrick writes, the letter is “a succinct confession to bank fraud.” Thus, the case that the SPLC paid informants through bank accounts opened under fictitious business names appears strong.
But the government had long been aware of SPLC’s informant work, indeed the existence of the informant program has been public knowledge for decades. It’s hard to see how to run a secret network to pay informants without hiding some information–could the SPLC simply have told the bank what they were doing? It seems to me that the punishment for false statements to a bank ought to depend on the motive and intention of the false statements but the law isn’t written that way. Another administration, however, would certainly look away. Which brings us to the second part of the story.
The SPLC itself was embedded in banking and private-sector decision making. Suppose Acme Inc., a large business, wanted to offer its employees matching grants for charitable donations. Acme, however, doesn’t want newspaper headlines like “Acme donated to the KKK!” So Acme contracts with a firm that vets charitable donations, and that firm uses a blacklist created by the SPLC. This was routine. Amazon used the SPLC list for AmazonSmile; workplace-giving vendors used or advertised SPLC screening; all of this gave the SPLC and the broader Change the Terms coalition power to pressure social media, tech, and financial infrastructure firms over speech, blacklisting, and payments because they were already in the door and embedded in their systems.
When the SPLC was mostly identifying nearly universally despised organizations like the KKK, all of this was more or less accepted by everyone in the know, except perhaps for a few hard core civil-libertarians. But in the woke era the SPLC overplayed their hand. The SPLC and related organizations began to take on conservative, Trump affiliated organizations with widespread support. Through a massive PR and outreach campaign they pressured social media organizations, tech firms, and finance firms to follow along–and this was not just a media campaign, the Change the Terms coalition had hundreds of meetings with top level staff. The partisan nature made it legally questionable but when your allies are in power. these things can be overlooked. In perhaps the most remarkable part of the document, Patrick quotes a donor fundraising letter from Free Press and Free Press Action (not the SPLC but part of the larger coalition):
Our efforts have yielded numerous concrete changes. After years of pressure from Free Press and our allies, Twitter finally banned Trump[.]
…Facebook initially suspended Trump “indefinitely” and later changed his suspension to a two-year ban. We’re now pushing the company to permanently ban Trump and to close a loophole that’s allowing a Trump PAC to fundraise and organize on his behalf.
…FUND THE FIGHT. Your generosity makes our work possible. Please give what you can today to make sure we have the resources we need to keep fighting for equitable media policies that improve people’s lives.
As Patrick notes, the fund raising letter closed with the following deadpan disclaimer:
Free Press and Free Press Action are nonpartisan organizations….Free Press and Free Press Action do not support or oppose any candidate for public office.
Trump won. Many people will say the indictment is the result. That may well be true but that doesn’t make the indictment legally weak.
Read the whole thing for a lesson in how SPLC’s list and coalition work became embedded in private-sector decisioning systems and more generally for a behind the scenes look at how institutional power actually works.
What makes art great?
That is the title of the new and very stimulating essay by Nabeel Qureshi. It is difficult to summarize, but here is one excerpt:
2. Great art contains multiple overlapping layers of echoes.
This is often harder to spot in verbal artifacts, but it is this feature that I think distinguishes really good works of art from merely ‘ok’ ones.
Most of us are familiar with the surface level ways of doing this: rhyme, for example, knits together different lines of a poem in a semantically irrelevant way that nevertheless makes it feel like part of a unifying whole. Same with assonance and other such effects most of us are familiar with from English class. It is echoes, for example, that make so many verses from the King James Bible so pleasing and beautiful to listen to:
“Arise, shine; for thy light is come, and the glory of the Lord is risen upon thee.” (Isaiah 60:1)
Note the echoing vowel sounds throughout in ‘arise’, ‘shine’, ‘light’, and ‘thy’. Rhyme and assonance are verbal echoes.
In music, the most famous example perhaps is Beethoven’s Fifth, with its famous “ba-ba-ba-BUM“ theme; the short-short-short-long statement in the beginning then echoes through that movement in thousands of ways, sometimes stretched, sometimes slowed down, so that the whole movement feels like an organic thing that has grown from that single seed.
Good art layers these, one on top of another, to build up artifacts of stunning complexity. These are the text equivalents of Gothic cathedrals. Each layer alludes to other layers, too, adding more and more constraints, until you get an artifact where changing any one word does violence to the whole.
To see this density in action, let’s look at Shakespeare’s Sonnet 15…
Do read the whole thing. And here are some comments from Henry Oliver.
*Last Evenings with Teresa*
The author is Juan Marsé, this novel is set in 1956, first published in Spain in 1966, and only now appearing in English. Here is the Amazon link. Marsé is one of the handful of great authors who has no real presence in the Anglo world, Bioy Casares would be another. You can think of the story as covering class conflict, romance, and their intersection in the Barcelona of the 1950s. Definitely recommended, I am excited to see this finally out and am reading it avidly (in Spanish it is too difficult and slow for me). Here is one review out of a very small number in English.
Sunday assorted links
1. “data centers are now responsible for nearly half of county tax revenue in Loudon County, VA”
2. The emerging role of competition in health care markets.
3. Did the Swedes boost tax revenue by abolishing their inheritance tax?
4. WSJ profile of Reihan Salam.
5. Are NJ diners doomed? (NYT)
6. How far back does European family structure go?
7. Why Coase needs Hayek, AI essay and the limits of the firm.
The ‘Ordinary Men’ of the Nazi Party
We digitize and analyze the near-universe of National Socialist German Workers’ Party (NSDAP) membership records and link them to population and industrial censuses. Four findings emerge. First, as the party expanded, its membership came to resemble the broader population more closely in occupational, demographic, and religious terms. Second, SS members’ characteristics remained different: younger, more educated, and more fanatical, as measured by the display of Nazi insignia in membership portraits. Third, within communities, coworkers, and families, early membership generated hysteresis, with subsequent entrants drawn from the same groups. Finally, local increases in party membership are associated with subsequent deportations of Germany’s Jews.
That is from a new NBER working paper by
Is there a recent growth in negative-sum assets?
That is the topic of my latest Free Press column, starting with that rebranding of the sneaker company to “an AI company.” Here is one excerpt:
As an economist, I find positive-sum gambles more appealing than negative-sum gambles. Positive-sum gambles might include buying blue-chip stocks, exercising more (even if there is always risk of injury), marrying, initiating a new friendship, or trying out a new idea at work.
We collectively, as Americans, are trying out more and more of these positive-sum gambles all the time. Contrary to common reports, younger generations are accumulating wealth at roughly the same pace as older ones, and each generation as a whole has been richer than the previous one. Real, inflation-adjusted wages in the United States are higher than ever before, even if we might feel the pinch of affordability relative to our expectations.
And there’s the rub: It seems to be a feature of human nature that as good things happen we have a desire to. . . piss some parts of those gains away. Entrepreneurs will step into those slots and create new, exotic, and appealing ways for us to do so. Sports gambling can be destructive and addictive, but for a lot of people it is mostly harmless fun. Yes, you’re more likely to end up losing, but a bet on how many points LeBron James will score might make the game more exciting.
So if NewBird AI is your idea of a modest thrill, who am I to stop you? Most people who trade in such stocks are spending discretionary funds rather than their lunch money. They may be making mistakes, but they are unlikely to end up in the breadlines.
The intertwining of successive ups and downs reminds me of how many people use GLP-1 drugs. They help you lose weight, and if they work for you, they ensure your weight will not rise above a certain level. So why not eat more chocolate ice cream? The penalty for overeating is smaller, just as in an economy of generally greater affluence and security, the consequences of losing some of your money on fun but highly speculative wagers diminish.
Unfortunately, the picture is not that smooth and safe for everyone.
I expect the policy issues here will only rise in importance.
Saturday assorted links
Have online worlds become the last free places for children?
Major public intellectuals and politicians have responded by arguing that children should rarely, if ever, participate in digital spaces. As a result, many schools in the US now demand that students seal their smartphones in magnetic pouches. A number of countries, including Australia, the United Kingdom and France, are even considering or have already implemented bans on social media accounts for children and teenagers.
Such restrictions, however, are not the tools of liberation we may imagine them to be.
In fact, for some children, the internet may be one of the last remaining spaces where they can grow up doing what children everywhere have evolved to do: independently play and explore with their peers.
Here is more from anthropologist Eli Stark-Elster. I would add a point. I do accept the evidence suggesting that limiting or banning cell phones in schools brings marginally better academic results. Yet the people who advocate such policies never point out that so many schools are just deadly dull and not very intellectually stimulating? Often what is on the phone is in fact more interesting and sometimes more instructive as well, even if the students do worse in terms of the standards set by the school.
Words of wisdom, on China shock 2.0
Michael Pettis frequently claims that, by running large surpluses, China is forcing “the demand-suppressing cost of their policies onto their trading partners.” The idea here is relatively straightforward: by disincentivizing consumption within China, China’s policies are reducing domestic demand, which, ceteris paribus, reduces global demand.
The problem with this logic should be fairly obvious: ceteris is not in fact paribus. It assumes other countries passively hold their own demand fixed in response to suppressed Chinese demand. But if that were the case, we should expect to see excess unemployment in the rest of the world in response to rising Chinese surpluses.
The empirical record decisively rejects this prediction: both US and EU unemployment was falling during China Shock 1.0 (2000-08), and post-2021 we’ve seen falling unemployment in the EU and stable full-employment in the US.
Monetary policy in other countries adjusts, preventing any shortfall of demand. The more sophisticated version of this argument recognizes that it only bites if other countries are constrained by the zero lower bound (ZLB). In that case, monetary policy cannot lower interest rates to offset a fall in demand elsewhere in the world.
But reports of the death of domestic demand levers at the ZLB have been greatly exaggerated. The monetary authority can raise the inflation target, implement (NGDP or price) level targeting, use forward guidance, and open up the spigots on QE. Furthermore, fiscal policy remains an adequate tool for boosting demand.
That is from J. Zachary Mazlish, the rest of the post has separate interesting points about China shock 2.0
My NPR debate on whether science is too risk-averse
This coming Tuesday at Johns Hopkins University in Baltimore, here is the event information, with three others as well. With debate partner Brandon Ogbunu I will be arguing the “yes” side, science is too risk-averse. Self-recommended!
Here is the Open to Debate Substack.
Friday assorted links
1. Does trade cause peace? (FT)
2. Where the goblins came from.
3. The next big advance to come from AI?
4. Georg Baselitz, RIP. And now in English. I am happy to own a print of his, one of the upside-down eagles.
6. In spite of what polling says, political events do not much affect voter attitudes?
Ryan Avent’s new book *In Good Faith*
The subtitle is How the Nature of Belief Shapes the Fate of Societies. Here is Ryan doing a podcast with Brink Lindsey. As Brink writes:
All of the blessings of modernity, Ryan Avent argues in a fascinating new book, rest on faith. It is our faith in others, our ability to trust strangers we will never meet, that makes possible the large-scale cooperation that has given us science, modern economic growth, and liberal democracy. But if everything depends on our ability to weave and maintain particular webs of complex meaning, what happens when we allow those webs to weaken and fray? In his book In Good Faith, Ryan contends that the dysfunctions and discontents plaguing 21st century democracies reflect such underlying neglect.
I am pleased to see “thought books,” as one might call them, headed in this direction and I was happy to blurb Ryan’s latest effort.
New results on AI mental health therapists
AI-powered mental health apps have attracted growing interest as a low-cost way to expand care. Yet questions remain about their effectiveness, safety, and whether they may crowd out psychotherapy. We evaluate one such app in a randomized controlled trial among 1,964 Mexican women with mild to severe psychological distress. Over six months, app access improved mental health by 0.3 standard deviations with no evidence of harm, improved sleep quality, increased healthful behaviors, and reduced missed work, yielding considerably larger benefits than costs. Treated participants were also more likely to seek traditional psychotherapy, but this increase does not explain most of the mental health gains. App use was high in the first month but then declined, as is common in digital interventions. Despite this drop in use, treatment effects persisted. Participants continued to implement practices promoted by the app, suggesting that even short-term engagement can produce durable improvements through sustained behavioral change.
That is from a new paper by Manuela Angelucci, Raissa Fabregas, and Antonia Vazquez. Those are some pretty strong results for a cheap intervention, let us hope they hold up. Via John Holbein.
Do Market Reforms Cause Growth?
Do market-oriented reforms cause economic growth? This paper revisits this question using a cross-country panel of reform episodes identified from various changes in well-known economic freedom and structural reform indices. We exploit the timing of reforms using distributed-lag and event-study frameworks that trace the dynamic response of per-capita GDP. We find little evidence of immediate growth gains and some short-run adjustment costs following reform. However, growth rises gradually and persistently over time, with economically meaningful effects emerging after several years. These patterns are robust across alternative measures of reform and specifications. The results reconcile conflicting findings in the literature by showing that market reforms generate long-run growth gains despite short-run disruptions. Overall, the evidence supports the view that institutional liberalization operates through slow-moving channels that accumulate into sustained improvements in economic performance.
That is from a recent paper by Jon Hartley and Brian Wheaton.
Thursday assorted links
2. An SRO approaching to regulating AI.
3. Dwarkesh: “We don’t talk enough about how any state or group which is harvesting encrypted packets right now will be able to read those contents once quantum computers arrive. There’s a huge espionage and transparency overhang on any information that is currently “secret” and hasn’t been encrypted using post-quantum cryptography.”
4. Craig Venter, RIP. Here is the NYT obituary.
6. With the UAE’s departure, OPEC will become much more an instrument of Iranian power (FT). But also weaker.