Thursday, May 29, 2014
The United States can end the export ban and simultaneously stabilize the insolvent Highway Trust Fund. Bridges are collapsing and 18-wheelers are falling into potholes the size of Rhode Island, and we complain that Congress has not raised the gasoline tax since 1993. That tree-hugging pit of Marxism, the US Chamber of Commerce, has called for a gas tax increase.
IHS Energy, a consulting group headed by energy writer and wonk Daniel Yergin, today released a report advocating for an end to the domestic crude oil export ban. The IHS report, downloadable from this IHS page, reports that lifting a crude oil ban would create an average of almost 400,000 jobs between 2016 and 2030. Surprisingly, ending the ban would lower gasoline prices by an average of 8 cents per gallon. This is because US gasoline prices are set by global crude oil prices not domestic production costs, and lifting a US export ban would add to the world supply by a significant amount. The only losers would be domestic refiners such as Valero, which enjoy discounted crude prices, and have opposed lifting the ban. Wah.
So here is an idea: lift the ban, and at the same time impose a gas tax of 8 cents per gallon. The gasoline consumer is no worse off, because the gas tax only counteracts the lower gas prices resulting from ending the export ban, and generate about $9.7 billion annually for the Highway Trust Fund (135 billion gallons of gasoline were consumed in the United States last year, 13 billion of which were ethanol). Ideally, the crude oil export ban should be accompanied by an $9 per ton of CO2 carbon tax, but that's another story.
Enacted as part of the Energy Policy and Conservation Act of 1975, the crude oil export ban was meant to secure energy supplies in the wake of the 1973 oil embargo that shocked an energy-complacent United States. The actual legislation just provides that "[t]he President may, by rule, under such terms and Export conditions as he determines to be appropriate and necessary to carry out the purposes of this Act, restrict exports of -- ... coal, petroleum products, natural gas, or petrochemical feedstocks. .." Section 103 goes on to provide that the "President shall exercise the authority provided for in Exemption, subsection (a) to promulgate a rule prohibiting the export of crude oil and natural gas produced in the United States, except that the President may, ... exempt from such prohibition such crude oil or natural gas exports which he determines to be consistent with the national interest..." So it is pretty clear that the ban is a matter of executive discretion. It is just that Presidents Ford, Carter, Reagan, Bush, Clinton, Bush, and Obama have all decided that exporting oil was not in the national interest.
But that was 1975, and the United States is now one of the major oil producers of the world today. Much of the EPCA's provisions, aimed at insulating the United States from volatile global energy prices, still seem useful today, like the Strategic Oil Reserve and fuel efficiency standards for motor vehicles. But lifting the crude oil ban now has bipartisan interest, with Senators Wyden and Cantwell joining Murkowski in calling for at least consideration to ending the ban.
Tuesday, May 27, 2014
The IRS says
What are the consequences to the employer if the employer does not establish a health insurance plan for its own employees, but reimburses those employees for premiums they pay for health insurance (either through a qualified health plan in the Marketplace or outside the Marketplace)?,
and answers: You are big trouble, because that counts as an improper insurance plan, so you pay a fine of $100/day per employee. That may or may not be a reasonable interpretation of the statute, but it seems to me unimportant. What the IRS has said is that an employer can't cancel its insurance plan and give each employee $5,000 they must use for an exchange plan. It does not say that the employer can't cancel its insurance plan and give each employee a $5000 raise to compensate. That's what an employer should do anyway, since it has no incentive to make the employee spend the money on health insurance. The only thing that could matter (and maybe it does) would be if employer contributions to employee-bought health insurance are exempt from income tax for the employee. Then, this ruling does cut out the tax benefit.
(hat tip: TaxProf)
From our inbox:
[The Journal of Law, Finance, and Accounting, a newly-launched publication from some great folks] invite[s] you to submit your manuscript for presentation at the JLFA 2014 Conference. The extended deadline for submissions is 11:59 pm, on Monday June 9, 2014 (Eastern time). Please submit papers through SSRN at http://hq.ssrn.com/conference=jlfa-2014. All submissions will be reviewed by the JLFA editors. Accepted papers will be eligible for expedited publication in JLFA, if desired by the authors (subject to the authors’ compliance with referee and editor requests).
The conference will be held at NYU on Friday, September 19, 2014. We will pay (reasonable) travel expenses for presenters and discussants. We look forward to receiving your submissions.
The Journal of Law, Finance, and Accounting (JLFA) is a new publication sponsored by the NYU Stern School of Business and NYU School of Law. JLFA will offer an outlet for high quality empirical or theoretical scholarly work at the intersection of law, finance, and accounting. It will be published by Now Publishers and hosted by the Social Science Research Network (SSRN). This intersection includes research having implications for the ways law and regulation affect the structure, governance, performance, and function of the firms, markets, and institutions that comprise the financial system, as well as research that addresses the different ways capital is raised and the links between financial markets and the real economy. This interdisciplinary research area is sometimes called “law and finance,” although much relevant work comes from scholars whose principal home may be in accounting, economics, or political science. For more information, see the journal website at www.jlfaonline.com.
JLFA executive editors:
Viral Acharya (NYU Stern School of Business, Department of Finance)
John Armour (Oxford, Law Faculty and Said School of Business, Department of Finance)
Barry Adler (NYU Law School)
Lucian Bebchuk (Harvard Law School)
Bernard Black (Northwestern: School of Law and Kellogg School of Management, Department of Finance)
Ronald Dye (Northwestern Kellogg School of Management, Department of Accounting)
Julian Franks (London Business School, Finance)
Joshua Ronen (NYU Stern School of Business, Department of Accounting)
Sunday, May 25, 2014
Erwin Chemerinsky (UC-Irvine), Creating a Law School That Emphasizes Public Interest Law, 7 DePaul J. for Soc. Just. 1 (2013) talks about his deanship in the project of founding the law school in Irvine.
It really is a shame Irvine, with all that money, just aimed to be a generic top 20 law school instead of experimenting. And more important than money: it began with no vested interests in the form of stodgy and divided faculty to overcome. It's only chance to truly make top 20, as opposed to a safe number 50 or whatever it is, was to take a risk by doing something new that might turn out to be a total fiasco. But the risk, and lack of imagination, was probably why it didn't try. It could have been a banking-and-real-estate law school, or pure tax (including public-interest tax stuff), or even a pure criminal-law school, offering other stuff only as necessary to get accreditation, or even going unaccredited since in California that's not such a problem.
(hat tip: TaxProf)
There seem to be three main potential pillars for the criticism on rationality and consequently to Behavioral Law and Economics Literature; The biases and heuristics literature which focuses on limited cognition, the limitations of self-interest motivation which focuses on fairness and morality, and finally behavioral ethics which focuses on the motivational forces that limit people’s ability to recognize the wrong-doing of their own behavior. Yet, while the first two are considered as classical areas criticizing rationality with thousands of papers and dozens of books, the third- behavioral ethics- still lacks a stand, in my view, for no good reason.
Behavioral ethics focuses on people’s inability to recognize their wrongdoing. This process is explained as either the higher involvement of automatic reasoning through an unaware self-deception, or as post hoc rationalization justifying oneself unethical behavior. The emerging focus on “good people” in the psychology and management literature represents the growing recognition that many unethical decisions are not done by deliberate intention to act wrong, and are rather consequential to the situation.
Behavioral ethics is a huge and growing aspect of the management literature. It study topics such as implicit discrimination and is far less researched than the two mentioned above, especially from a legal perspective, leaving highly important questions completely unanswered, while its potential impact on legal theory is much more important. If, for example, the biases and heuristics literature challenges people’s ability to commit to long term decisions, research of behavioral ethics literature challenges people recognition that something is wrong with their behavior –the core question of the law. This is highly important because it challenges the ability of the law to change people's behavior. Supposedly, few people will change their behavior if they fail to see the wrongdoing of their own behavior.
The main intellectual history rationale behind this omission might be the fact that behavioral ethics emerged from management rather than economics. If this is the case, it is yet another reason to focus the behavioral analysis of law, to law rather than to economics.(See previous blog)
Banaji, M. R., & A. G. Greenwald. (2013). Blindspot: Hidden Biases of Good People.
Bersoff, D. M. (1999). Why Good People Sometimes Do Bad Things: Motivated Reasoning and Unethical Behavior. Personality and Social Psychology Bulletin, 25(1), 28–39.
Mazar, N., O. Amir, & D. Ariely. (2008). The Dishonesty of Honest People: A Theory of Self-Concept Maintenance. Journal of marketing research, 45(6), 633-644.
Feldman, Yuval, Behavioral Ethics Meets Behavioral Law and Economics Handbook of Behavioral Law and Economics, Forthcoming. Available at SSRN: http://ssrn.com/abstract=2226711
Wednesday, May 21, 2014
In "U.S. Students from Educated Families Lag in International Tests," Hanushek, Peterson, and Woessman report on a study they did that looked at how well 15-year-olds did on math tests in different states and countries. We hear about that kind of thing all the time. What's different here is that they stratify by parental education. Regardless of education of parents, Korea does best. For well-educated parents, Massachusetts is number 6, between the Netherlands and Germany. For poorly-educated parents, Texas is number 7, between Estonia and Finland. (Oddly enough, they are symmetric in their rankings: for highly-educated, Texas is number 18, between Slovakia and Washington State, and Massachusetts is number 19, between Minnesota/Denmark and Kansas/UK.) Texas's performance is particularly important because the numbers are not adjusted for race, a key variable in explaining performance.
Somebody might make use of the difference in relative performance of high- vs. low-education families to think about who controls the governments in different places. It seems rich people run things in Massachusetts, poor people in Texas. One might think that the results imply Massachusetts people care less about equality than Texans, too. That seems odd in view of the political alignments, but less so if you think of Massachusetts as technocratic and Texas as populist.
Regardless of the deep implications, given the amount I'll be paying for rent in Belmont, Mass. next year while on sabbatical ($4,100/month--- which is actually a good deal in two senses), I'm happy to hear these results.
(Hat tip: MM)
Tuesday, May 20, 2014
I was at the bank yesterday getting something notarized. I explained to my daughter Lily that a notary verifies that somebody with the person's ID has signed their name to a document. She asked a very sensible question: "Why don't they take a video of you signing it?"
Why not indeed? The cost would be trivial. In fact, holding up the document and the ID to a cheap camera would reduce the cost, already trivial, of the notary recording that the signature had taken place.
Now that Lily has thought of this idea, how could she profit from it? Or, since it isn't patentable and she isn't of an age to go round doing consulting work for state governments, how could she get the idea to someone who could get it implemented? (in which case, she can get some credit for it too and use that on her college applications seven years from now...)
The Obama Administration indicted several Chinese military officials for corporate espionage -- not, we suppose, military espionage, which is fair game. Even administration officials admit it will probably not result in anything other than retaliation, but it is worth stopping to think about the implications for international law, and for me, international environmental law.
I am preparing for a webinar in series hosted by the Canadian Bar Association, with the administrative leadership of Marc McAree, partner at the Toronto law firm of Willms and Shier, on Cross-Border environmental disputes. My old friend and co-author, Austen Parrish (now Dean at IU-Maurer), will be on hand, and he will lament the breakdown of reliance on international institutions in favor of unilaterial measures, such as domestic litigation. In Austen's previous work, he has outlined his view of the problem, which is that this leads to a breakdown of the implicit norms of international comity, and will lead to an unproductive tit-for-tat world of international diplomacy. In Austen's view, courts are even creatively redefining extra-territoriality out of existence, essentially making almost everything into a "domestic matter." Austen politely (he is Canadian after all) presses a disagreement with "sovereigntists" such as Eric Posner, Jack Goldsmith, and Curtis Bradley for advocating for a world less dependent on international institutions than say, domestic litigation or economic sanctions.
But I think Dean Parrish's cautionary notes ring hollow in several contexts, and the cyber-security threat is a good example of why. Austen's worry is about a breakdown in international legal institutions, and an over-reliance on litigation as a means of settling cross-border disputes. But really, how have they been working lately? China announced their withdrawal from a joint body of cybersecurity cooperation with the US, but it has not done very much anyway. The United Nations and climate change? And let's stop and wonder here: what is the endgame? Is it true that this tit-for-tat world will give rise to a breakdown in international cooperation altogether? Surely trade between China and the United States will not suffer too much as a result of this spat over cyber-security. What exactly will bring Russia to heel over its regional ambitions to re-create some subset of the former Soviet Union? I think the U.N. is not up to it, especially with Russia and China on the Security Council. Being unable to use VISA or MasterCard -- now that sounds scary! International institutions, while not dead, are not going to be the sole bulwark against international lawlessness in the future. The deep economic interdependencies among nations will be important, and markets will play a role in disciplining both international lawlessness, and the running amok of domestic litigation. The difficulty of enforcement in areas such as cyber-security also limits the capacity of international institutions to police.
Fundamentally, the effects test as a basis for jurisdiction over foreign entities has fallen on hard times, and perhaps that is the problem. But if there is going to be some resurgence in the role of international institutions, some grappling with extra-territorial effects is going to have to take place. Without a more complex discussion of extra-territorial effects, both the "sovereigntist" and the "internationalist" positions in the abstract sound unrealistic and overbroad. In environmental as in cybersecurity issues, it becomes harder to think of the world in the traditional Westphalian way.
Wednesday, May 14, 2014
Professor Cole tells me that the Society for Environmental Law and Economics is meeting May 23-24 in Chicago. The program is at: http://rasmusen.org/special/SLEC-2014ChicagoProgram.docx.
Looking for a good research topic? Here's a good methodology for finding political influence in state-funded laws schools from Watchdog.com:
Normally, almost nobody who gets into UT Law fails the bar. Watchdog.org found 90 students who had failed it twice or more. That should be reason enough for university officials to double-check their grades and Law School Admission Test — or LSAT — scores to see which students actually earned admission, and who benefited from a political favor.
We found additional reasons to scrutinize 24 names on that list:
At least 15 of the students are politically connected, either through office, personal relationships, or campaign donations to officeholders who have figured in the fight over UT’s leadership.
At least 12 of the students have roots in Laredo, home of state Sen. Judith Zaffirini, who is known to have pulled strings on behalf of other applicants. As Laredo has just 2 percent of the state’s population, it’s highly over represented in this sample.
A half-dozen of the students have connections to state Rep. Joe Straus, his close allies, or a lobby shop that rose to prominence with Straus’s ascendance to speaker in 2009.
Monday, May 12, 2014
Certainly, a number of smart people have connected this lame economic recovery to income inequality. But why? Paul Beaudry and David Green continue their work on the changing U.S. labor market, noting in a paper that since 2000, demand for high-skilled workers has actually declined. That seems counter-intuitive, since it seems to matter more than ever that workers obtain the right skills. True, but having the right skills has become a necessary, but not a sufficient condition to employment commensurate with skill training. What Beaudry, Green and Sand document is a pushing-down of the labor market: with some high-skilled workers settling for lower-skilled jobs, lower-skilled workers are getting pushed down even further, and often into unemployment. That might help explain why this economic recovery still seems so unsatisfying.
Why did the labor market change in 2000? Beaudry, Green and Sand argue that the information technology revolution and the accompanying organizational changes first built up a huge stock of skilled labor to service that revolution, and then, once that market reached maturity -- when a lot of "organizational capital" had been built up that ultimately replaces skilled labor -- those markets wound up with a surplus of that skilled labor. BGS call this an “over-shooting property.” Doesn’t that sound like a lot of boom and bust cycles? Fishermen and oil and pipeline workers come immediately to mind.
What are the legal implications? Well, why do we have to put up with boom and bust cycles? Are there no legal interventions worth considering?
The American Law and Economics Association meeting in Chicago last week was good. Here are few tidbits.
Higher IQ workers in government and private-sector jobs with only a high school education have higher earnings, and so do higher IQ workers with college education in the private sector. The exception is college grads in government, where earnings are not correlated with IQ. Max Schanzenbach, “The State and Local Pay Penalty: the Effect of Institutions, Skill,
and College Major”
Tuesday, May 6, 2014
Much has now been made of a fairly spectacular blunder made by Justice Scalia in his dissent in the EME Homer case announced last week. Scalia opined that EPA was trying to smuggle cost considerations into rulemakings under the Clean Air Act. He also said it was not the first time that EPA had tried this little bit of chicanery, and he cited Whitman v. American Trucking as an example. The problem is that EPA's position was the exact opposite, as Scalia's own opinion reflects. Scalia also ignores another of his opinions in Entergy v. Riverkeeper, in which EPA declined to mandate a very expensive technology on cost considerations. Granted, Scalia is the author of a large number of opinions (over 1000), so maybe he should get a break. Still, Dan Farber notes the casual nature of the writing from his dissent ("Look Ma, no hands!" "Wow, that's a hard one -- almost the equivalent of asking who is buried in Grant's Tomb") that is really unusual for a Supreme Court opinion. Perhaps Justice Scalia is, in his advancing years, shedding the few inhibitions he still has.
There are other aspects of Scalia's opinion which suggest a more significant about-face. The broader about-face is what seems to be an about-face in "conservative" (they would call themselves that, I am not sure I would) circles on cost-benefit analysis, as cost-benefit analyses start to make some regulations look sensible, like climate policy. The dismay over the social cost of carbon is a driver of that movement. But we should not be surprised that "conservatives" have discovered postmodernism late in their intellectual lives, including that of climate skepticism. As Eric Rasumussen points out, arguing over facts is more personal than arguing over theories. My view is that "conservatives" sense they are going to be on the losing end of empirical arguments, and are driven less by data than by ideology.
My experience is that we care a lot about student teaching evaluations where I teach (at Berkeley Law). Indeed, I think we pay far too much attention to student teaching evaluations, considering the literature on how problematic these evaluations are, some of which Jennifer cites in her posts.
For promotion purposes (but not generally for lateral hiring), we also rely on classroom observations by colleagues. But the problem here is that evaluations of observed classroom teaching by colleagues almost always come out positive. No one wants to be a stinker and write a negative evaluation of someone who is likely to be a colleague for a long time. And even were reviewers more willing to write negative evaluations of classroom observations, this would raise significant concerns about the potential for bias.
Few disagree with the importance of evaluating teaching. The question is whether and how this can be done effectively.
I’ve been pondering the following proposal: What if we required all candidates for lateral positions and for promotions to submit to appointments committees several videos of their classroom teaching along with their syllabi and other supporting materials. These videos and materials could then be sent out for anonymous evaluation, similar to how we currently review scholarship.
Of course, videos of classroom teaching could only capture certain aspects of the professor-to-student relationship. I wouldn’t want to propose relying on this system of review as the sole mechanism for evaluating teaching. But I’m inclined to think we should deemphasize student teaching evaluations by making anonymous reviews of videos of classroom teaching an important component of our evaluation processes.
I’d welcome thoughts or reactions to this proposal. Is this a harebrained idea or a plausible direction for reform?
While I was a visiting scholar at Yale Law in 1992, I audited Robert Ellickson’s Property class. It was one of the best classes I have ever seen--- a great mix of calling on students, cases, economic theory, real-world non-law examples, and lecture, particularly encouraging to me because Professor Ellickson is no better than average in charisma. The strengths of his class were things untalented people could hope to emulate.
One thing I recall him saying, in preparation to talking about housing markets, was that people don’t get most angry when you disagree with them about theories or values. Rather, the bitterest feelings arise when you disagree on facts. I was just thinking about why this might be so, and have come up with a rational-choice reason, though it covers more than just facts. Rather, let us think why people get angriest when it’s most clearly shown that they are wrong.
Saturday, May 3, 2014
Friday, May 2, 2014
We are all, of course, responsible pet owners. We always clean after our pets, regardless of whether someone is likely to judge us. Despite that, consider (other) people who are affected by social norms while deciding whether to clean after their pets. If one sees a lot of dog poop laying around in the park, then he may believe that not cleaning after his pet is acceptable behavior. If so, a type of ‘herding effect’ (I am using this phrase loosely) may be observed. Suppose at t=0 the norm is that one ought to clean after his pet. An irresponsible person, who also cares very little about norms, may decide not to clean after his pet (whose name is Fluffy). At t=1 people who encounter the mess left by Fluffy and who care some, but only a little, about norms, may decide not to clean after their pets either. At t=2, people may start believing that it is the norm to not clean after their pets, and only those people who, like us, clean after their pets regardless of existing norms, may continue to clean after their pets. Thus, we started with a society where the norm is to clean after pets and where parks are clean, and ended up with a society where parks are disgusting and the norm is to not clean after pets. How can this transformation be avoided? Perhaps resources can be allocated at t=0 towards hiring professional cleaners to clean after irresponsible pet owners. (Another option is, of course, fining and hoping such fines deter) When should resources be expended towards hiring professional cleaners? When the cost of doing so is smaller than the expected cost associated with the transformation.
One can replace the act of not cleaning after one’s pet with petty theft (or any other crime) to ask and answer the following questions. Might it be a good idea to conceal information regarding the prevalence of the commission of various crimes? What are the costs of concealing such information? May transparency be a bad thing in this setting? Within the economics of law enforcement literature, what does this observation imply regarding the optimal punishment of manifest v. non-manifest crimes?