Monday, September 15, 2014

Wind and Sun, Conquerors of Fossil Fuels

The New York Times ran an article Sunday about how Germany is rapidly expanding its wind energy capacity, and realizing unexpectedly lower costs because of economies of scale never before seen in any non-hydro renewable energy industry. Large demand from Germany, Denmark, and a hanful of climate-conscious countries has helped induce the entry into the sector from Chinese businesses, which of course benefit from government support.

The question that hangs over environmentally-focused groups is why don't American utilities seem to be so intransigently wedded to fossil generation? This article seemed to point to the unease of utility executives. My theory is that in addition to a lot of physical capital in the industry, there is a lot of human capital tied up on fossil fuel extraction, transmission, and combustion. Economist and former Enron official John Palmisano used to talk about how he went around the country talking to utility executives, and made what he thought was a pretty strong case for switching to natural gas away from coal. The objection that seemed most heartfelt was that "[Utility Company X] was a company that is the coal-burning business, not the natural gas-burning business. Assuming we could retrofit coal plants to accept natural gas, what would do with all the people that know how to handle coal but not gas?" Add to that the infrastructure demands (gas pipelines, e.g.), it starts to look very difficult to switch from coal to natrual gas, or anything else. If it is that hard to get utility execs to think hard about another fossil alternative, it becomes even harder to think about non-hydro renewable energy sources. But it is not narrow-mindedness per se; it is form of capital that is specific to one way of doing things, and is not easily transferable to another way of doing things. That difficulty may be illusory, but it at least appears to those embedded in the fossil industries as very difficult.

September 15, 2014 | Permalink | Comments (0)

Paying It Forward: An Empirical Perspective

BC is hosting an exciting conference this week on the future of philanthropy.  One of our major focuses will be on whether current law has gotten the right balance between current and future spending.  For example, should we be doing more to encourage large foundations to pay out their considerable fortunes, rather than hoarding them for the future? 

I'll blog a bit more with some of my thoughts on those questions this week.

Let's start today with some background.  Descriptively, most foundations pay out a small fraction of earnings; the law imposes penalty taxes on those that pay out less than five percent, but the median firm pays distributes slightly less than that:

Found exp by ptile

What you're looking at are the proportions of private foundation's investment assets distributed annually for charitable purposes.  The dashed line is the five percent "minimum payout" encouraged by a federal tax on foundations that distribute below that threshold.  The upshot, for me, is that three-quarters of the 80,000 or so private foundations tracked in these data spend less than 6% of their investment assets each year.  In other words, their spending plan is massively slanted towards future, rather than current, payouts.  

What, if anything, justifies that pattern?

 

 

September 15, 2014 | Permalink | Comments (0)

Sunday, September 14, 2014

Informality and Formality in Cost-Benefit Analysis

Professor Amy Sinden at Temple has posted a paper titled Formality and Informality in Cost-Benefit Analysis. This is an important paper that seeks to transcend a debate about cost-benefit analysis that has gotten intellectually (though not politically) stale in recent years. Professor Sinden points out that there are many levels of cost-benefit analysis, formal and informal, precise and imprecise, analyzing many alternatives and few. The mistake that is made according to Professor Sinden, (who is a critic of how CBA is used in environmental law and related fields) is that the case for CBA is often made by appealing to the intuitive usefulness of informal CBAs, while the formal but falsely precise formal CBAs actually bend public policy. I wonder if this is just a variant of the "false formalism" critique of CBA, but even if it is, it deserves some attention because of the nuance with which it treats different CBAs. Here is the abstract:

Abstract:      

Cost-benefit analysis (CBA) is usually treated as a monolith. In fact, the term can refer to a broad variety of decision-making practices, ranging from a qualitative comparison of pros and cons to a highly formalized and technical method grounded in economic theory that monetizes both costs and benefits, discounts to present net value, and locates the point at which the marginal benefits curve crosses the marginal costs curve. This article develops a typology that helps to conceptualize and analyze the multiple varieties of CBA along the formality-informality spectrum. It then uses this typology to analyze the treatment of CBA by the academic community and the three branches of the federal government. In academic and policy circles, the formal end of this spectrum generates far more controversy than the informal end. Additionally, the law (federal environmental statutes and federal case law) seems to favor informal over formal varieties of CBA. Nonetheless, the executive branch appears to be moving toward the formal end of the spectrum. Executive Orders and guidance documents direct agencies to conduct a highly formal mode of CBA. And anecdotal evidence suggests that agencies often go out of their way to give their CBAs the trappings of formality, sometimes in ways that lead to irrational results. I argue that 1) failing to distinguish between formal and informal CBA, and the many varieties in between, has led to muddled thinking and to misuses of CBA; and 2) the trend toward formality in the executive branch is a bad development, in part because it can, and often does, lead to what I call "failed formalism" — a corruption of CBA that can occur when agencies fail to clearly and consistently define where on the formality-informality spectrum a particular CBA falls.

September 14, 2014 | Permalink | Comments (0)

Tuesday, September 9, 2014

The Uber-Awesomeness of Uber Being Awesome

I consider Uber and its competitors to be among the most potentially exciting innovations of the past few years (at least, of the innovations that I know of).  In support of this contention, let me offer a couple of personal anecdotes.

First, my wife and I were planning to buy a second car this summer.  But we decided to experiment with using Uber instead.  So far, this is going so well that we don’t think we will need a second car.  This strikes me as potentially huge, at least if a sufficient number of other families find themselves similarly situated.  Extrapolating from our experience, its not too hard to imagine a future in which individual ownership of cars becomes rare, with most of us instead relying on services like Uber.

Second, in taking Uber home from work today, my wife asked her Uber driver how much he makes.  This is only one unverified anecdote, of course; but the driver reported that he makes approximately $50 an hour when driving in San Francisco and $30 an hour when driving in Oakland.  (If you are wondering why any Uber drivers drive in Oakland at all, in light of this disparity, see below).  Again, this strikes me as potentially huge.

It costs us about $12 to Uber to our house in the Oakland hills from the UC Berkeley campus, or about $25 to Uber between downtown San Francisco and our house.  This is significantly cheaper for us than it would cost to take a traditional taxi.

How then is it possible for Uber drivers to make so much and yet for Uber to remain so affordable for passengers? 

The answer comes from high utilization.  When we call a taxi, the taxi driver has to get to our house before the driver can start charging us, and then the driver has to get from wherever we are dropped off to the location of another paying customer before the driver can start charging again.  In contrast, when we request an Uber, we quickly end up with a driver who just happened to be nearby.  Presumably, the Uber driver can make $30 an hour driving in Oakland because the driver can get 2-3 fares equivalent to driving between the Oakland hills and the UC Berkeley campus per hour.  My guess is that a traditional taxi driver would be very unlikely to get 2-3 such fares per hour.

And this answers the question of why Uber drivers drive in Oakland at all, rather than just remaining in San Francisco where they can earn more per hour.  Presumably, many of the Uber drivers that find themselves near our house when we request an Uber got there by dropping off passengers that were picked up in San Francisco or elsewhere.

Ten years ago, if you had asked me to list the benefits of being truly wealthy, as opposed to merely well off, I might have placed having a personal chauffer near the top of that list.  Today, Uber and its competitors offer most of the benefits of having a personal chauffer, but on the cheap.  

September 9, 2014 | Permalink | Comments (1)

Saturday, September 6, 2014

The Salaita Kerfuffle at the University of Illinois

Friday, September 5, 2014

What if everyone became empirical legal scholars?

As numerous people have written, empirical legal studies are on the rise. More and more scholars define themselves as empirical legal scholars and it seems that this trend is only growing stronger in recent years (See for example, Heise, 2002 & George, 2006).  

Many scholars have discussed the relationship between empirical legal studies and more classic approaches such as law and society, law and psychology and law and economics, that all carry some empirical component within them. Regardless of one’s stand in the debate on this issue, it is clear that empirical legal studies are on the rise in top law school in the U.S as well as around the world, as I have previously mentioned, when describing the global movement of empirical legal studies (see my previous blog).

The main question I want to raise in this post (against my own interest, as I definitely consider myself as an empirical legal scholar) is whether at some point could all legal scholars become empirical. To put it in a more realistic context, what is the optimal ratio of empirical legal scholars, in a given faculty or a given community of legal academics (e.g. contract law, tort law, etc).

The obvious objection to such situation is the notion of diversity, where the need in multiple theoretical perspectives is important for a rich discussion among scholars and for exploring conflicting perspective to any legal question. However, one might argue that in contrast to law and economics,  empirical legal scholarship doesn’t have to adopt a narrow theoretical standpoint, as for example, many of the scholars who attend the ELS conference come from diverse backgrounds. Moreover, taking a broader approach to ELS, would include for example, scholars who use qualitative methods, would ensure an even broader theoretical perspective. Furthermore, most ELS scholars usually study one or two doctrines and hence the diversity of legal doctrines could be achieved. Even with that, there is naturally a limitation in the empirical research conducted in these different legal doctrines; if too many scholars study law empirically, very few scholars will need to carefully read cases for their research, as the focus would shift to the quantifiable factors in the case.

A second possible objection would be the legal expertise of such legal scholars. Accounting for the fact that people have limited time and energy to read and learn. Almost by definition, a scholar who have to master all the methods of empirical legal research could not dedicate the same amount of effort and time to learn the legal doctrine.

A final objection might be the dominant community of knowledge in such situations. For example, in the area of decision-making, there are a few dozen ELS  scholars but several thousand psychologists and economists. Since one might assume that the interest of legal scholarship and other disciplines may not be always aligned, it is possible to speculate that the larger and more established community would be more dominant. Without an established “non-ELS” empirical community in every sub-legal scholarship,   it might be hard for ELS to fulfil the needs of the legal community (see my past blog on external validity).

In sum, while on a personal level, I try my best to convince all of my colleagues to become empirical legal scholars, I feel obliged to recognize the existence of a trade-off. 

September 5, 2014 | Permalink | Comments (0)

Monday, September 1, 2014

Argentina's Pari Passu Clauses (with lengthy additions, September 11)

  Argentina defaulted on its government debt about 15 years ago. It offered a take-it-or-leave-it writedown to the bondholders, and most of them took it. The others got nothing. Now, the U.S. courts have ruled that the dissenting bondholders are entitled to full repayment, and have enjoined any bank with Argentine government money not to pay out anything unless all are paid equally. This is because of what is called the "pari passu" clause in the bond contract, which I read from Mark Weidemaier's Credit Slips post, " Argentina's (not so) unusual pari passu clause,"  says: 

Continue reading

September 1, 2014 | Permalink | Comments (2)

Saturday, August 30, 2014

French Economists Are Fashionable

Paul Caron posted on the TaxProf Blog a link to the IMF's list of the top 25 economists under the age of 45. Of course, elite institutions and economics departments are heavily represented, but am I the only one to have noticed that seven out of the 25 are French? They include Thomas Piketty, whose book has become a blockbuster (and which I reviewed), and his comrade in arms, Emmanuel Saez (Berkeley). Esther Duflo (MIT), Emmanuel Farhi (Harvard), Xavier Gabaix (NYU), Thomas Philippon (NYU), and Helene Rey (London Business School) complete the list.

What's going on here? Don't they just teach socialism in France?? Are there any OECD countries in greater need of labor reform? Why does a country with just five percent of the population of OECD countries produce seven out of the top 25 young economists? My speculation is that the work of these French economists have taken on increased relevance: poverty and  inequality, the causes and effects of the financial crisis, and exhorbitant executive compensation. That, plus they're really good.

August 30, 2014 | Permalink | Comments (0)

Friday, August 29, 2014

What does law do in Thomas Piketty's Capital in the Twenty-first Century?

There is not a lot of law discussed in Thomas Piketty's book Capital in the Twenty-first Century. Piketty drops a few hints here and there about what laws he thinks likely contributes to widening wealth inequality (the advent of dynastic trusts, the lowering of marginal rates for the highest personal income tax brackets, which contribute to executive "super-salaries"), but his basic policy prescription is a small global wealth tax.

There is something elegant about such a tax, if the international tax haven problem can be solved. But in my review of the book, I suggest that some examination of the legal order is in order. Legal rules and institutions contribute to wealth inequality indirectly. In Piketty's world, wealth inequality increases when the rate of return on private capital is greater than the rate of economic growth, or r > g in his vernacular. My review examines several areas of law in which legal rules and institutions drive up rates of return on private capital (r in Piketty-speak) without doing much to increase overall economic growth. These areas are financial regulation, antitrust law, oil and gas tax policy, electric utilities regulation, and the generic practice of grandfathering. In my view, a rather simplistic faith in trickle-down economics has caused policy-makers to support any policy in which Δg > 0, however speculatively, and if Δr >> 0, well then, God Bless. Of course, Δg very often turns out negative, after all.

August 29, 2014 | Permalink | Comments (0)

Tuesday, August 26, 2014

Could a Qui Tam Suit Be Brought Based on the Unlawfulness of the Bergdahl Prisoner Exchange?

     Professor Solmin at Volokh Conspiracy has a post on how the General Accounting Office has announced that the Obama administration violated   federal law when it exchanged five  Taliban leaders for  the  U.S. deserter Private Bowe Bergdahl without giving Congress  the  30 days   notice required by law. The GAO also said this violates the Anti-Deficiency Act. The GAO report  was in response to a request by a number of Republican senators.  The Department of Defense lawyers told GAO that Obama’s action was legal under the relevant statute and that the statute is unconstitutional anyway. GAO was asked in 2010 about another Obama use of funds for the Secret Service and found that it violated the Anti-Deficiency Act. The current report says: 

Like the Secret Service, DOD obligated funds that were not legally available for obligation because DOD did not satisfy the notification requirements under section 8111. Accordingly, DOD violated the Antideficiency Act. See 31 U.S.C. § 1341(a). If Congress specifically prohibits a particular use of appropriated funds, any obligation for that purpose is in excess of the amount available.[7] B‑321982. Here, DOD obligated at least $988,400 in excess of available appropriations. 

So what happens next?   ---A qui tam suit!

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August 26, 2014 | Permalink | Comments (0)

Political Diversity in Economics in 1960: Stigler, Coase, Goldwater, Buchanan, and the Ford Foundation

Sunday, August 24, 2014

Update on Stock Prices & Political Activity

Readers may recall we recently reviewed a draft paper on the effects of political activity on the stock price of British firms. One of the authors, David Primo of U. Rochester, dropped a gracious note to your blogger with news that there’s now an updated version of the paper on-line.  The paper accounts for some of my concerns about method (see esp. p. 18), and Prof. Primo notes that resolving my point about selection bias still leaves most of their main results intact.  I continue to differ with the authors on the interpretation of their results.  But at least now we are closer to having results we agree on before we fight about what they mean.  

August 24, 2014 | Permalink | Comments (0)

Thursday, August 21, 2014

A Few More Special Topics in the Final Tax Whistleblower Regulations

   I’m posting again on the August IRS final regulations for tax whistleblowers,  whose principal author is Melissa A. Jarboe of the Office of theAssociate Chief Counsel (Procedure and Administration). This could be a very boring post, because what I’ll do is compare what I suggested and what was done on several unrelated topics. If you’re interested in whistleblowing, in how little details require regulations because statutes don’t include them, or in how notice-and-comment works,   you might like this blogpost.  

Relevant links are my previous blog post  that used these regulations to illustrate the usefulness of public comment on technical details,  my public comment on the proposed regulations,  the final regulations,  Dean Zerbe’s article arguing that awards should be paid for violation of reporting requirements and on the basis of criminal fines for violation of laws not in the Tax Code, and   Erica   Brady’s nice blog summaries of (a)  the Pro’s and Con’s of the final regulations,  and (b) the important new procedures for rejections and appeals.  I agree with Erica Brady that these final regulations are an improvement over the proposed regulations and a huge improvement over the status quo. I am heartened by them; the IRS has shown distaste for the whistleblower statute in the past, but these regulations will make it run better rather than worse. 

The topics follow. 

(1) How to treat whistleblower information about false tax attributes such as net operating loss carryforwards (NOL’s).

Continue reading

August 21, 2014 | Permalink | Comments (0)

Wednesday, August 20, 2014

Final Tax Whistleblower Regulations Were Recently Issued

      I’m experiencing the thrill of influencing national policy--- something Law-and-Econ-Blogger Gamage is well acquainted with, since he worked on government health care regulations.  It’s a modest thrill, though. The regulations for whistleblowers who provide information on tax underpayment for a reward have just been issued. The IRS is notoriously hostile to whistleblowers (Congress forced the program on them in 2006), but these regulations are an improvement over the transition period. Lots of law firms and lawyers submitted detailed public comments, as did I, on both practical and policy matters.  I’ll use this post as a way to talk about the comment process in administrative law, as something I can have my undergraduates read when I teach them about regulation starting two weeks from now. I’ll just talk about one comment in this post, and maybe write a second post once I’ve read through the entire regulations and reminded myself of what my other comments were. 

   My thrill comes from definitely improving the regulation, even though the IRS didn’t do exactly what I suggested.

Continue reading

August 20, 2014 | Permalink | Comments (0)

Do preventive law enforcement methods increase type-I errors?

I've recently been working on an article on preventive law enforcement methods. By preventive law enforcement methods, I mean any kind of pre-crime intervention that has the goal of preventing crime before it actually occurs. A good example is law enforcers interrupting a larceny while the attempt is ongoing. Another common example is a simple Terry stop. 

While thinking about these methods, I thought that one of the most important costs that come with the use of such methods is increased wrongful conviction or wrongful intervention costs. I collectively refer to these and similar errors as type-I errors. It seemed quite intuitive to me that the use of preventive methods would increase the frequency of type-I errors. This is because, convictions for interrupted attempts, or interventions due to suspicions, require less evidence than convictions for completed crimes. Therefore, preventive methods, compared to non-preventive methods, are likely to increase type-I errors. 

A friend, after I ran my ideas by him, told me that this need not be true: preventive enforcement also reduces the amount of evidence available, therefore, such methods can reduce type-I errors. After thinking about his comment, I agreed that as a theoretical matter the 'evidence reduction effect' can be greater than the 'reduction in the amount of evidence required'.  

However, as an empirical matter, I still believe that the more frequent use of preventive methods is very likely to increase type-I errors for two primary reasons. First, preventive methods increase the number of people who are candidates for being subject to type-I errors: everyone can be subjected to a Terry stop, the same is not true for post-crime investigations.  Moreover, the unfortunate presence and frequency of law enforcer misconduct suggests that allowing preventive methods to be used liberally is likely to increase the instances in which police officer can misuse their powers.

I am unable to locate conclusive data for my assumption. However, the numbers quoted in Floyd v. City of New York appear quite convincing:

    -4.4 million Terry stops were conducted between 2004-2012 by the NYPD.

    -By 2009, for 36% of the stops the officer could not state what specific crime he was suspecting

     -94% of all stops did not result in an arrest. 

    -52% of them were followed by a protective frisk for weapons. 1.5% of the frisks resulted in the finding of a weapon.

    -About 350,000 stops led to a search into the person's clothing, based on the officer's belief that the person was concealing a weapon, or an object immediately perceived to be contraband. 91% of the time, the object was not a weapon.  86% of the time the object was not contraband. 

I am not aware of any study that compares error rates associated with preventive vs. non-preventive enforcement methods. But, are we safe to assume that preventive law enforcement methods increase type-I errors? 

This is of course not to suggest that we should only focus on costs, and not focus at all on benefits. Such methods surely result in benefits by preventing harm before it happens. In fact, are these benefits not, at least theoretically, exactly what we should be balancing against type-I error costs in figuring out how often preventive enforcement methods ought to be used?

August 20, 2014 | Permalink | Comments (0)

Monday, August 18, 2014

Why Is Insider Trading Illegal?

I’ve been reading up on insider trading recently (as part of a project on what happens when government applies price instruments to limited-liability firms), and it’s tough to find academics who think trades by insiders should be universally prohibited.  This is odd not least because every modern economy that I know of in fact bans insider trading.  What gives?

(UPDATE 8/20: Bainbridge points you to some much more thoroughly thought-out answers here: http://www.professorbainbridge.com/professorbainbridgecom/2014/08/why-is-insider-trading-illegal.html)

The academic defense is fairly straightforward, as I understand it.  For one (per Carlton & Fischel), it allows managers to hedge, which should help to make them more risk-seeking, reducing the need for other forms of costly incentive pay.  Defenders also still sometimes say that inside sales can send signals to the market, which is potentially useful information that would otherwise be unavailable or slower to arrive (Henry Manne is the go-to cite for this one).

Well, sure, maybe. How costly would insider trading be as an incentive-aligning device, though?  The costs would be off the books, which would look nice to rationally ignorant shareholders.  But the costs could be quite large.

As a Columbia guy, I tend to agree with John Coffee that the big cost here is the lemons problem.  If I know the manager *could* be trading on bad news known only to her, I discount the value of the stock; the fact that she is willing to sell even at my discount price tells me the stock really is a lemon.  (Sung Hui Kim also offers a recent spin on this point.)

Carlton & Fischel acknowledge the lemons argument, and they say in response that traders always know that there is someone better informed than them, and yet this does not seem to paralyze markets.  Jon Macey also makes a version of this point.  I’m not sold.  

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August 18, 2014 | Permalink | Comments (0)

Thursday, August 14, 2014

What if the Problem is Not Global Warming, but Continued High Temperatures?

    We were discussing global warming at the Indiana Law and Economics Lunch, and the curious path of world temperatures.  From NASA data, which is standard, the pattern is that temperatures rose from 1980 to 2000 and then stopped increasing (but stayed high). This doesn’t necessarily mean we can forget global warming as a problem, though--- something I hadn’t thought about before--- because maybe the continued high temperatures will cause big problems even if temperatures don’t rise any more.  It could be, for example, that Greenland’s ice will melt and raise the sea level. Whether that would happen or not, if the temperature stays constant, I don’t know.

 

Fig.A2

 

Fig.C

 

 

But this implies current suggestions for global warming policy are totally misguided.

      If temperature has stalled, but we still have  a big problem because of continued high temperatures, then carbon taxes, cap-and-trade, etc.  won't help in the slightest. Restricting carbon output is only good for keeping the temperature from rising, and if it's not rising any more, that’s addressing the wrong problem. Rather,  we'd need to actually REDUCE the amount of carbon in the atmosphere (if carbon was  indeed the cause of the 1990's warming, and it has stopped only because of negative feedback via clouds, etc.), which absolutely nobody proposes. Rather,  if we need to actually reduce the temperature rather than stop it from increasing, the only solution would be climate manipulation via putting some kind of particulate in the atmosphere. 

The Supreme Court decided in EPA vs. Massachusetts in 2007 that  carbon dioxide was a pollutant and needed regulating, regardless (if I remember rightly) of whether the regulation would make any detectable difference to the global temperature (or the Massachusetts seashore, the plaintiff's alleged source of injury).  Suppose the global temperature continues to stall for 30 years, or even decline. Would that affect the Supreme Court decision? Or would it be like  with Brown v. Board of Education, where the experiments with black and white dolls and self esteem wasn't really the key to the holding? 

 

August 14, 2014 | Permalink | Comments (4)

Regulating Greenhouse Gas Emissions Under the Clean Air Act, Version 0.0

There has been so much clamor about the Environmental Protection Agency's introduction of a proposed rule for regulating greenhouse gas emissions from power plants, it's hard to shout above it all. And yet, not much has really been added to the conversation from a policy point of view, and not much can be said. The rule sets an emissions reduction target for each state, but is very vague (or, in EPA's words, "flexible") about how states can achieve those targets. There has been so much sky-is-falling nonsense that one loses sight of the fact that the rule doesn't actually do all that much. The rule provides neither much guidance nor much admonition. Under this part of the Clean Air Act, states will be required to submit for EPA approval State Implementation Plans that set out a regulatory scheme by which they intend to carry out the broader mandates set out by EPA. The required emissions reductions are the product of complicated formulas, but have their ultimate root in emissions rate standards for coal-fired power plants, which were then adjusted for a number of political factors, like individual state efforts to reduce emissions before this rule. The vagueness is intentional. Former EPA general counsel Roger Martella characterizes EPA's posture towards states as "any way you want to reduce greenhouse gas emissions, we'll find a way to make it work." EPA is bending over backwards to let states do whatever they want to do, at the price of perhaps accomplishing too little. Charles Komanoff of the Carbon Tax Center estimates that the implicit price of emitting carbon dioxide under these targets is about $2.15 a ton. That's trivial.

My friends at Element IV, a consulting group founded by a former oil executive and a former Sierra Club lobbyist (!), are not optimistic about the survival about this much-ado-about-not-much rule. They cite legal challenges that were filed within moments of the publication of the rule. 

Despite the disappointment with the ambition of the rule, this rule is important for several reasons. Although Bailey and Bookbinder minimize the significance of what this rule can accomplish -- "give the President something concrete to say at the Paris climate talks next year," and "claim a political legacy beyond that" -- there is real game-theoretic significance to being able to say something "concrete." I noted a few years ago that international climate negotiations are extremely fragile, and that signals of cooperation were very important in preventing the unraveling of agreements. This greenhouse gas rule does allow leaders from other countries, if they are so inclined, to be able to say to skeptical constituents that the United States has done something. Not much, but something. So the facile dismissal that we should do nothing because anything we do will be canceled out by the fact that "China" -- whatever they mean about a nation of 1.3 billion people -- will do nothing, is far too simplistic. Like it or not, the nature of climate negotiations is going to have to be the taking of unilateral steps that are necessary, but not sufficient conditions for international agreement to take place. 

I would like to see a carbon tax, too, but little steps will have to do for now.

 

 

August 14, 2014 | Permalink | Comments (0)

Tuesday, August 12, 2014

An "All of the Above" Taxation approach

I wish to call attention to a paper written by my co-blogger David Gamage, Analyzing the Optimal Choice of Tax Instruments: the Case for Levying (all of) Labor-Income taxes, Value-Added taxes, Capital-Income Taxes, and Wealth Taxes. His argument is that although different taxes may be distortionary, there are some real-world issues with the purely theoretical treatments as a basis for policy. Enforcement is one of those pesky real-world problems. 

I see only one problem with wealth taxes: international tax havens. Otherwise, it seems
straightforward to tax wealth. Am I wrong? If not, then it is true that wealth taxes could be a central part of Treasury diet, if some international coordination could be achieved. That doesn't seem politically crazy to me.

It seemed that for a time, there was this notion that using the tax code to implement policy was a dangerous and wrong-headed thing. That concern seems to me to have disappeared entirely. It would seem to make sense, however, to reduce the number of objectives of tax law. I have just two in mind: revenue raising and wealth distribution. Hence, a wealth tax. 

August 12, 2014 | Permalink | Comments (1)

Friday, August 8, 2014

Danny Markel, parent

I have been struggling to figure out what to write about my fallen colleague, Danny Markel, the Sandy D'Alemberte Professor of Law at the Florida State University College of Law. He was shot in his home on July 18, and died later that night. The assailant has not yet been identified.

I could acknowledge Danny's contribution to criminal law and the legal academy. But that seems too easy, and I would guess that although he did not peddle himself as law and economics scholar, his work was already appreciated in these circles. What I found most human about Danny was not his sizable commitment to intellectual life, but his commitment to his two children. Danny's children were slightly younger than our children, and they shared a daycare with our younger child. Danny would do anything for his two sons. That sounds like a cliche, but often when I dropped off my own son at daycare, I would see him there, sitting at a table full of children, singing songs or sharing breakfast. He taught me a lot, too, like Brian, but I think I will try to remember above all else that mental picture I have of him, not a giant of a scholar, but just a grown-up scrunched into a children's chair, making himself small so he could truly be there with his children.

 

August 8, 2014 | Permalink | Comments (0)