Monday, June 30, 2014

The Awkwardness of Addressing Grade Inflation

 I ran into a spot of awkwardness recently that is a good example of the difficulty of changing policies at a university. I'm on a faculty committee that decides who should get various teaching awards based on nominations by department chairmen.  I looked up the class grade averages for the nominees. That's public info at IU (you can look them up too---just google), along with, very interestingly, the average GPA of the students in the class going in. [Research note: someone should do something with that data.]

      Anyway, I thought we should rank nominees low if they commonly did one of three things in their grading: 1. Violated school policy and gave more than 15% A's in MBA classes (or more than 50% A's and A-s), 2. Violated school policy and gave more than 10% A's in 100-student-plus undergraduate courses, or 3. Had a class average of more than 3.5 in an undergraduate course (that is, roughly speaking, more than half the class got A's or A-s). 

    This would knock out  about 2/3 of the nominees, it turned out. Unfortunately, it appeared that about half of my committee also grades that high. The chairman had decided to have us all turn in our rankings by email and then he'd tote up the results, and he was reluctant to have a meeting. So I boldly sent out an email laying out my arguments. The response was frosty. Two arguments were that members had already made up their rankings and didn't want to do any more work, and that grading wasn't relevant. I replied again, and we'll see what will happen.  

   What can we learn? Probably this is just another illustration of the power of incentives and the oddly principled behavior of economists.  What is most rewarded in teaching is high student evaluations. Departments get extra faculty lines if they have bigger enrollments. High grades facilitate both things.  In addition, of course, the course atmosphere is more pleasant for the instructor, especially just after midterms, if most of the students get A's. Why, then is my own department somewhat resistant to grade inflation? I'll bring up the subject and see. We do get brighter-than b-school average students majoring in bus econ,  so scaring off worse students is one thing going the other way. But what we probably should really do is bimodalize our grading so that reasonably good students get A-, A, or A+, with A+ being a large category in itself, and lazy or dim students, of whom there are now relatively few get grades from F to C+. 

June 30, 2014 | Permalink | Comments (0)

Sunday, June 29, 2014

External vs. Internal Validity in Empirical Legal Studies

Last week, we have hosted in Israel a conference on Behavioral Legal Studies dealing with Cognition, Motivation and Moral Judgment. The conference was organized by Hebrew U and Bar –Ilan U and involved leading international psychology and legal scholars.

An interesting discussion that emerged in the conference, due to the mixed audience of psychologists and legal scholars was related to the interaction between psychology, behavioral economics and empirical legal studies.

This tension was demonstrated through the presentation of my longtime collaborator Doron Teichman on Anchoring legal standards. (Feldman, Schurr & Teichman, 2014).

Anchoring in short is usually defined as ”a cognitive bias that describes the common human tendency to rely too heavily on the first piece of information offered when making decision” (Shrotriya & Pandey, 2013).   

The classical studies in psychology (e.g. Tversky & Kahneman, 1974) which examined anchoring usually relied on the effect of some random 4 digits number or the number that emerged from a wheel of fortune on people’s judgment. In contrast, the studies done by legal scholars, including us, are usually related to damages asked by lawyers or numbers that emerged from a different legal source.

The mostly justified criticism of this argument is that legal usage of anchoring is not a pure anchoring effect because the original stimuli is not completely orthogonal to the target, meaning the stimuli is not clean and might carry other types of rational influence. Clearly, the number argued for by a lawyer, even in an adversarial system, does have some meaning regarding the size of the claim, relative to the wheel of fortune example in the original psychological experiment.

That being said, we ask ourselves whether empirical legal studies need to compete with psychology on the same term. If we take the example of the wheel of fortune vs. the number coming up from a legal suit, clearly the first one carries much greater internal validity – any kind of effect in the first case could not be interpreted as nothing but a cognitive bias. Admittedly, this is not the case when we look at the influence in judgment following a legal claim.

However if we see empirical legal studies as an academic community which tends to understand how cognitive biases might affect the legal system, clearly, the likelihood that someone would use a wheel of fortune to try and affect a judgment is highly unlikely.

Hence, nn my view, empirical legal studies should recognize that trade-offs do exist and that measuring pure effects is not the only measure of good science. 

June 29, 2014 in Science | Permalink | Comments (0)

Friday, June 27, 2014

Casting a Cold Eye on Mandated Disclosures of Corporate Political Activity?

            With the SEC still sorta thinking about requiring U.S. public firms to disclose their political expenditures, a newly posted paper by Saumya Prabhat and David Primo (of the Indian School of Business in Hyderabad and University of Rochester, respectively) should be getting some  play.  Prabhat and Primo claim to find evidence that the U.K.’s enactment of similar disclosure rules in 2000 was bad for shareholders of politically active firms, and they argue this is a reason to oppose possible U.S. reforms.  I think they’ve got at least one really big methodological problem, and even taking their results at face value they’re just misinterpreting them.

            Let’s start with their findings.  Prabhat & Primo report that news of the expected reforms increased stock-price volatility for politically-active firms (16) and that a portfolio of active firms performed worse after news broke than a portfolio of other firms (18).  For some reason they emphasize the first much more, even though it’s kind of a no-brainer that there will be stock price volatility for regulated firms when the market gets information about a new regulation affecting them. 

    I’ll focus on the second finding.  First, causation or correlation?  As P&P themselves note, many firms lobby as a fallback when things go badly, or to close off entry by threatening new competitors.  Others lobby to head off government investigations or regulatory actions.  Is it surprising, then, that the firms that were lobbying just before the period P&P observe performed worse than other firms?  Probably not: lobbying is itself a red flag that there’s a rocky road ahead.  Or, at a minimum, it is a signal to the market that managers know there is a potential pothole looming.   

    Since this is a post about the value (or not) of disclosure, let me say that again.  News about firm lobbying could provide information to the market about managers’ private knowledge of looming challenges for the firm.  And nothing that P&P report is inconsistent with that story.

    Here’s another way in which their results show that disclosure was good for shareholders.  Let’s say that most lobbying by individual firms is firm-specific rent-seeking.  (Firms may also sometimes be willing lobby for collective goods, but often that is done through trade associations).  From a diversified shareholder perspective, all firm-specific rent-seeking is destructive.  The lobbying is moving money from Firm A to Firm B.  I’m invested in both.  So the two firms are wasting resources to fight over which of my pockets my money is in.  (Contrast this with money spent on, say, R&D, which does just shift pockets to some extent but also contributes to growth).  And maybe I’m also a consumer.  They’re trying to shut out new competitors, keeping the prices I pay high.

    Disclosures allow me, the diversified investor, to identify which firms are wasting my investment in this way.  You can understand why undiversified managers would prefer to enrich themselves at the expense of competitors, but this is exactly the kind of self-serving behavior that investors want to curtail.   So, long story short, if disclosure is actually reducing firm value, that could simply represent the fact that shareholders are unwilling to invest in managerial self-dealing.

Continue reading

June 27, 2014 | Permalink | Comments (4)

Tuesday, June 24, 2014

King Putin the Green

Via Steve Sailer we find from  Nato Secretary- General Rasmussen (no relation---one of those ss'ers) in the Daily Mail article below that Vladimir Putin and Gazprom believe in strong environmental regulation.  A good example for class. 



Putin has spy plot to halt fracking in UK, warns Nato chief: ‘Agents are working with green campaigners to make sure Europe still has to rely on Russian energy’

PUBLISHED: 17:14 EST, 19 June 2014 | UPDATED: 03:31 EST, 20 June 2014

Putin: Fracking makes ‘black stuff come out of the tap’

Russian agents are secretly working with environmental campaigners to halt fracking operations in the UK and the rest of Europe, the head of Nato warned yesterday.

Vladimir Putin’s government has ‘engaged actively’ with green groups and protesters in a sophisticated operation aimed at maintaining Europe’s reliance on energy exports from Moscow, said Nato Secretary-General Anders Fogh Rasmussen.

He said the Russians had mounted a highly developed disinformation campaign to undermine attempts to exploit alternative energy sources such as shale gas.

Moves to start fracking in the UK have been disrupted following a sustained campaign by environmentalists that has created fears about its impact.

Speaking at the Chatham House foreign affairs think-tank in London, Mr Rasmussen said: ‘I have met allies who can report that Russia, as part of their sophisticated information and disinformation operations, engaged actively with so-called non-governmental organisations – environmental organisations working against shale gas – to maintain European dependence on imported Russian gas.’ …

Mr Putin has repeatedly voiced concerns about fracking, once telling a global economic conference that ‘black stuff comes out of the tap’.

And Russia’s state-owned gas giant Gazprom, the world’s biggest gas producer, says fracking has ‘significant environmental risks’ including water contamination....

Mr Rasmussen’s comments drew an angry response from Greenpeace, which saw a group of activists threatened with up to 15 years in jail last year after they staged an anti-drilling protest on a Russian off-shore oil platform.

A Greenpeace spokesman said: ‘The idea we’re puppets of Putin is so preposterous that you have to wonder what they’re smoking over at Nato HQ.

‘Mr Rasmussen should spend less time dreaming up conspiracy theories and more time on the facts.

‘Fracked gas will probably cost more than Russian imports. There’s little chance fracking will generate more than a small fraction of Europe’s gas needs and it won’t even do that for at least ten years.’...


June 24, 2014 | Permalink | Comments (0)

Government Support for Charity: What Are We Getting for Our Money?

            Most readers know that the U.S. has the most extensive nonprofit sector in the world.  It also, not surprisingly, has among the most generous of subsidies for private contributions to charitable organizations.  Congress periodically gets interested in fiddling with “tax expenditures” that support charity, although the most recent proposals were swatted aside with a “blah, blah, blah, blah” from the House Speaker.  Still, for folks like me who study charitable organizations, the rationale for and design of those subsidies are a big deal.

            One standard story for why government supports charity is that it’s a cost-effective way to produce public goods.  If one dollar of government support can trigger more than a dollar of private spending, all else equal, we should invest that dollar.  Studies do find that the tax deduction for contributions to charity is cost-effective in this way, returning somewhere in the range of $1.10 to $1.40 of contributions for each dollar of government revenue foregone.

            A worry about these studies is that they are based on donors’ tax returns, not information from the recipient firms.  What if changing tax subsidies also influences how charitable organizations behave?  These behavioral responses could either improve or undermine the net efficacy of government supports.  For example, how much does an average firm spend in fundraising to bring in a dollar of donations?

            It turns out, as I report in a new draft, that the answer itself depends on the government’s policy. 

Continue reading

June 24, 2014 | Permalink | Comments (0) | TrackBack (0)

Monday, June 23, 2014

Canada Approves Pipeline to West Coast

Last week, the Canadian government approved the construction of the Northern Gateway pipeline that is intended to ship crude oil produced from the oil sands of Northern Alberta to Kitimat, a small port city on the West Coast in British Columbia. The approval comes with 209 conditions, an unusually high number for the legally parsimonious Canadians, but this is a very controversial project. The Canadian Prime Minister, Stephen Harper is from Alberta, and is desperate to make sure Canadian oil sands crude has an export outlet. Harper is many things, but he is not stupid; he wants to sell oil before greenhouse gas regulations start to gain currency worldwide and the demand for crude starts to ebb. An outlet to the West, and a shipping lane to China, a country that is likely to be one of the last to embrace fossil fuel curtailment, would be a great alternative to Keystone XL, or even the patched-together pipeline route to the East. 

However, Northern Gateway faces intense opposition from the 70 some-odd distinct aboriginal groups in the pipeline's path. The 209 conditions are not likely to be a big deal as far as the federal government is involved, as long as Stephen Harper is Prime Minister. The question is whether the Canadian Supreme Court will uphold aboriginal challenges to the pipeline that are almost certain to arise from at least some of the groups. What must be very alarming, from the perspective of the pipeline proponent, Enbridge, is that aboriginal groups in British Columbia have already accepted a natural gas pipeline that will pass through much of the same territory. In particular, the Haisla Nation, which claims territorial rights around Kitimat, accepts the gas pipeline but vigorously opposed the crude oil pipeline. This suggests that aboriginal groups such as the Haisla are fine with natural gas, but not oil. It will be hard to characterize that legally as unreasonable, as gas pipelines pose less local environment risk than oil pipelines. I have always found it hard to guess at what the Canadian Supreme Court will do, but past cases such as Haida v. BC Ministry of Forests signal that the Court will expect some pretty sincere efforts to accommodate aboriginal claims and interests.

There is a larger economic question for the whole country of Canada. In the past, large parts of the Canadian economy have centered upon timber, fish, and minerals, and Canada's possession of the second-largest reserve of oil in the world seems to consign Canada to staying that way for a while. I do not believe that crude imposes a traditional resource curse on Canadian exports -- there are many other political factors that render Canada uncompetitive other than a strong petroloonie -- but I do worry that the political economy of Canada will tether Canada's education and commerce infrastructure towards resource extraction. A 2012 paper by Elena Suslova and Natalya Volchikova suggests that a second kind of resource curse is the diversion of public monies towards resource development rather than the development of a more diverse base of human capital, like say, high technology. The pipeline really could create some path-dependencies for the Canadian economy. 

June 23, 2014 | Permalink | Comments (1) | TrackBack (0)

Sunday, June 22, 2014

Farms vs. Developers or Farms vs. Farms?

The New York Times ran an article a couple of weeks ago on a new kind of retirement community: not just a sprawling collection of tract houses solely for retirees, but mixed-use and mixed-age communities with special resources for older people. The visionary developer credited with leading the way of this new, more enlightened model of retirement living was Del E. Webb, whose first retirement community was Sun City, near Phoenix. First-year law students should remember that name. Del Webb developed Sun City, which grew and grew and grew, towards a feedlot owned by Spur Industries, a cattle feedlot. The feedlot had been there since 1956, farming in the area since 1911, and Sun City since 1960. Sun City literally grew toward the feedlot, and when Webb started having trouble selling houses, he sued Spur on the grounds that the feedlot was a nuisance. Most students think it wrong that the late-comer Webb should be able to sue the feedlot, which was already there. The chutzpah!

But as we learn in Property class, why should there be a first-in-time, first-in-right rule? Why should a feedlot essentially foreclose residential development by virtue of being there first? Back when Phoenix was a growing city and residential development was a valuable activity (let's not talk about the water usage for now), why should a feedlot stay there just because it was there? The Arizona court held in Spur Industries v. Del E. Webb that it shouldn't, and sided with Del Webb -- to an extent. Spur had to move its feedlot, but Webb had to pay for the move. My students generally like that result, as land moves to its most valuable use (let's not talk about the water usage for now), and the feedlot is made whole. The "coming to the nuisance" defense is not an absolute defense, but merely a factor.

But that case did not sit well with farmers. In every single state plus Puerto Rico, some form of a "Right-to-Farm" law was passed. RTF statutes provide farms with a defense to nuisance claims by plaintiffs that migrate toward (or "come to") any allegedly nuisance-creating farm. RTF statutes commonly set out some definition of the agricultural operations that can raise the defense, a list of permitted operational changes that can be undertaken without losing the defense, and some time limit that serves as an effective statute of limitations on any claims of nuisance against a farm.

So now the coming to the nuisance defense *is* (to varying degrees and subject to lots of qualifications) an absolute defense. Are we happy?

Well, it depends on who you are. The usual justification of Right-to-farm laws of protecting farms from encroaching residential development rings hollow in light of modern developments in agricultural operations. For example, in Parker v. Obert's Legacy Dairy, an Indiana court upheld a fairly long-standing interpretation of Indiana's Right-to-Farm law as protecting a farm that expanded operations from about 100 cows to almost 1000, holding that such a change was not a "significant change" in the type of agricultural operation, and thus enjoyed the protection of Indiana's RTF statute, despite its fairly significant scaling-up. The dairy could therefore not be the subject of a nuisance lawsuit brought by neighbors.

But maybe this is not really just about the right to farm anymore. The plaintiff's property in Parker was also a farm, albeit a small-scale farm. As between the plaintiff's farm and the defendant's farm, the Right-to-Farm law acts as a subsidy for the defendant's large-scale farm. While economies of scale accrue to larger, more intensive agricultural operations, a variety of environmental and land use laws provide a check on the uncontrolled growth of such farms, ensuring that the negative externalities of such farms are at least commensurate with the economic benefits of efficient large-scale farming. Right-to-Farm laws upset this balance, providing incentives to intensify agricultural operations and enlarge capital investments. The result is a skewing of the distribution of farms toward the larger, the more intensive, and the greater polluting operations.

June 22, 2014 | Permalink | Comments (0) | TrackBack (0)

Monday, June 16, 2014

The Latest News in Adultery Law

Volokh Conspiracy has a post, “The First Amendment protects a right to engage in adultery?: on Rothrock v. Cooke (N.C. Super. Ct. June 11, 2014). Judge John Craig is being an activist and a sloppy lawyer here. He has eliminated two torts, alienation of affections and criminal conversation, on the grounds of violation of the 1st amendment rights of freedom of speech and freedom of association as incorporated by the 14th amendment. It’s commonplace, if wrong, to incorporate the 1st amendment via the 14th, but it’s going a bit far to say that private sexual acts count as free speech, no matter what judges may say about them if they're done publicly in exchange for admission fees. (Or perhaps I'm wrong on that--- if the couple charges admission, does that make it commercial speech and hence subject to almost no 1st amendment protection?)

Here’s what the 2nd Restatement of Torts says about the two torts:

@ 683 ALIENATION OF SPOUSE'S AFFECTIONS. One who purposely alienates one spouse's affections from the other spouse is subject to liability for the harm thus caused to any of the other spouse's legally protected marital interests.

@ 685 CRIMINAL CONVERSATION WITH A SPOUSE. One who has sexual intercourse with one spouse is subject to liability to the other spouse for the harm thus caused to any of the other spouse's legally protected marital interests.

      Note that these are distinct torts. Mothers in law have been sued for alienation of affections, and a rapist would be liable under the action of criminal conversation.

     Alienation of affections is akin to tortious interference with contract; the tort is to act so as to cause someone to violate legal rights established by previous agreement. In tortious interference, the tortfeasor causes the third party to break a contract, which is illegal in the sense that it gives him a cause of action. In alienation of affections, the tortfeasor causes the third party (say, the husband) to deny the plaintiff the affection to which marriage entitles her---- though of course it is not unlawful for a husband to be emotionally cruel to his wife. Freedom of speech could be involved in alienation of affections since, as in tortious interference and many conspiracy cases, the unlawful action takes the form of words and the communication of ideas. It’s hard to see how criminal conversation is freedom of speech, though, since it can be carried out in complete silence and without communicating anything except, perhaps, an unpleasant disease.

     At any rate, this attracted my attention because I am the chief (because the only) scholar of the law and economics of adultery that I know, as a result of my article on the subject, "An Economic Approach to Adultery Law," Chapter 5, pp. 70-91 of Marriage and Divorce: An Economic Perspective, edited by Antony Dnes and Robert Rowthorn, Cambridge: Cambridge University Press, 2002, It has a lot of law and history in it, with a focus on Indiana as an example (did you know Indiana was the divorce mill state of the 19th century, to which New York couples would travel for easy divorces?)

June 16, 2014 | Permalink | Comments (0) | TrackBack (0)

Sunday, June 15, 2014

Student Loans III: The Redistribution Question

We’ve been talking about student loans, and the fact that the federal government is turning a multi-billion dollar profit on them (especially law-school and other graduate loans).  These profits may be the equivalent of a progressive tax on borrowers.  Is that a reason to support the current design of the program?  Assuming that the program actually is progressive (admittedly, an unanswered question, as we saw last time), I would say yes.  I’ll argue co-blogger David Gamage should say yes, too, but that many other folks would disagree.

              Standard public finance economics analysis would suggest that government shouldn’t use its own market participation as a way of redistributing wealth.  The reasoning is what I’ll call the “heavy buckets” theory, but most people follow Kaplow & Shavell in terming it a “double distortion” argument.  Let’s say you have to schlep some water from the river to your house.  Would you rather use a heavy steel bucket or a nice light plastic one, assuming both hold the same amount of water?  That’s a no-brainer.

            The double-distortion argument is roughly the same.  The claim is that any time we redistribute income, we will change people’s incentives to work, as the expected after-tax returns for earning more are diminishing.  So whether government imposes a pure transfer, or just charges more for the brownies at its bake sale, either way the after-transfer value of my salary is lower.  That’s the water in the bucket.  The bake sale, though, is the heavy bucket, because it has a second drag on the economy: it also discourages me from eating brownies. 

            Anyway, that’s the standard story, but Gamage has a different one

Continue reading

June 15, 2014 | Permalink | Comments (1) | TrackBack (0)

Tuesday, June 10, 2014

Why Has Thomas Piketty Hit Such a Nerve?

Thomas Piketty has attained a public figure status in the United States dwarfing his celebrity in his native France, and it isn't just because of the now-tired debate about the "one percent" and the "ninety-nine percent." Yes, there is wealth concentration in the United States. It is unprecedented in the United States, but not Old Europe. Piketty makes much of the Belle Epoque, the Gilded Age, a bright period of optimism and joie de vivre, but also extreme French aristocracy and wealth concentration. But in modern America, optimism is still slumping, and the wealth gap is increasing. Piketty proposes a progressive wealth tax; ideally, a global one. That proposal itself could be the focal point of the controversy surrounding his book. I don't think it's the only one.

It isn't just wealth concentration that haunts Americans. Wealth concentration just focuses a unease about the extent to which we control our futures and that of our children. We have handed over much of our lives to singular entities, private or not, consciously or not, voluntarily or not, and it is never clear if we are better off for it. Whether it be due to economies of scale, or some other reason that things are concentrating in the hands of a few, our diminishing lack of choice is disquieting. So much of our day-to-day experiences as Americans are impacted by extremely concentrated industries. The Hachette Book Group has gotten into a dispute with Amazon, through which about 44% of all books sales are made, in which Amazon is reportedly delaying shipments of Hachette books as retaliation for its refusal to agree to ebook rates. This is putatively for our own benefit as bookbuyers, but as a publisher or a writer, are we better off with one widespread, brutally efficient distributor? What are our choices of cable providers? And how do you feel when you get off of a flight on the one of now-three major airlines that you are forced to patronize? [nb: you can always file air travel complaints with the FAA consumer complaint site, which I did after an American Airlines gate agent in Miami slammed a boarding door in my panting, sweating face, sneering "sorry, flight's closed."] [nb2: airlines, it has to be said, are not making money hand-over-fist like the other concentrated industries]. Yesterday, the President announced an executive order that will cap student loan repayments at ten percent of income. That, too, seems aimed at an American malaise about access to success. It gets couched by the President as making sure everyone gets a "fair shot" at success, but what he really means is that success and material wealth should not be concentrated. Piketty himself focuses much of his reform proposals around access to higher education.

This brings me to my earlier post about climate change being a national security threat. Piketty is finds it "terrifying" that the wealth gap could increase back up to Belle Epoque levels. Why? Well, what happens when there are vast wealth inequalities, and a decreasingly small fraction of people that own an increasingly large part of the pie? Can you imagine what it feels like to be one of the 0.1%? Vast inequalities of wealth, concentrated in a vanishingly small few, creates a comparative advantage for violence on the part of the dispossessed. It could be that even expensive, sophisticated security systems, while offering an absolute advantage in violence, suffer a comparative disadvantage when faced with swarms of angry crowds with little opportunity cost of violence. That is the kind of calculus confronting oppressive governments when facing frustrated and hungry mobs with little to lose from violence. This may sound fantastic in modern America, but it is not solely a dystopian, futuristic Hollywood sci-fi risk, as evidenced from the many modern-day political upheavals. Moreover, the problem with this risk is that it is a potential spiral. Once a police state -- private or public -- is erected, it becomes difficult to reverse. Marx warned that class struggles would come; Durkheim warned that they may result in violent upheaval.

 Maybe this backdrop of potential violence is why Piketty has hit such a nerve.

June 10, 2014 | Permalink | Comments (0) | TrackBack (0)

Monday, June 9, 2014

Should Death End Criminal Penalties?

  In the tax blog Procedurally Taxing I recently came across U.S. v. Molen, E.D. Cal. No. 2:10-cv-2591 MCE KJN (May 21, 2014); 113 AFTR 2d ¶ 2014-842 , only available on PACER at the moment:

“Generally, to determine whether a federal cause of action survives the death of a defendant, the court must first determine whether the claim asserted against that defendant is civil or penal in nature. Reiserer v. United States, 479 F.3d 1160, 1162 (9th Cir. 2007) (citing United States v. $84,740.00 Currency, 981 F.2d 1110, 1113 (9th Cir. 1992)). “It is ‘a well-settled rule that actions upon penal statutes do not survive the death’ of a party.” Id. (quoting United States v. Oberlin, 718 F.2d 894, 896 (9th Cir. 1983)).””

  This seems like a very bad rule, and someone should write a law-and-economics paper on it. It reduces or eliminates penalties, effectively freeing someone near death or willing to commit suicide from criminal liability. Of course, such a person won’t worry about prison, but he will worry about financial penalties and whether the effects of his crime can be reversed.  This matters not only for deterrence, but for restitution and retribution.  Suppose  Mr. Smith defrauds Mr. Jones of a million dollars, leaves it to his daughter, Mrs.  Brown, and commits suicide. Brown is safe from criminal  money penalties (and from punitive damages, presumably--- she didn’t commit an intentional tort), so the worst Smith need fear about his daughter’s financial future is that she will have to give back the million dollars. She will have to bring her own civil lawsuit for that, however, without the benefit of having a government-financed criminal prosecution first, and without the investigatory powers of the government.   Would she have to worry about being an accessory after the fact? I don’t know.  Consider, too, the informational value of punishment, which is lost.  It would be good for the truth to be established about Smith’s criminality. Knowing that his reputation would be ruined after his death would affect Smith in advance, and if his criminality in this were established, it might prompt people to investigate his other, earlier, dealings and discover more crimes.

    This bad rule is not new, though. Here is an excerpt from U.S. v. Oberlin. 718 F.2d 894, 896 (9th Cir. 1983):

“Death pending appeal of a criminal conviction abates not only the appeal but all proceedings in the prosecution from its inception. Durham v. United States, 401 U.S. 481, 483, 91 S.Ct. 858, 860, 28 L.Ed.2d 200 (1971) (per curiam); United States v. Bechtel, 547 F.2d 1379 (9th Cir.1977). In such a case, the appeal is dismissed and the cause remanded to the district court with instructions to vacate the judgment and to dismiss the indictment. Id. See also United States v. Pauline, 625 F.2d 684, 685 (5th Cir.1980); United States v. Moehlenkamp,557 F.2d 126, 128 (7th Cir.1977); United States v. Crooker, 325 F.2d 318, 320 (8th Cir.1963). If the sentence included a fine, this rule of abatement ab initio prevents recovery against the estate. See Pauline, 625 F.2d at 684; United States v. Morton, 635 F.2d 723, 726 (8th Cir.1980). Similarly, an abated conviction cannot be used in any related civil litigation against the estate. See Pauline, 625 F.2d at 684.

In early cases, the reasoning behind this rule is stated simply as "all private criminal injuries or wrongs, as well as all public crimes, are buried with the offender." United States v. Dunne, 173 F. 254, 258 (9th Cir.1909),quoting United States v. Daniels, 47 U.S. (6 How.) 11, 13, 14 L.Ed. 323 (1848). More recently, the rationale has been expressed as follows:

[W]hen an appeal has been taken from a criminal conviction to the court of appeals and death has deprived the accused of his right to our decision, the interests of justice ordinarily require that he not stand convicted without resolution of the merits of his appeal, which is an "integral part of [our] system for finally adjudicating [his] guilt or innocence." “





June 9, 2014 | Permalink | Comments (2) | TrackBack (0)

Should Government Profit From Student Loans, Part II: Are Student Loans Regressive?

Readers might remember that a while back I was sorta-defending the idea that the government might be turning a profit on student loans.  Loan repayment reform is also in the news.  In my opening post I left open a few big questions.  One of the biggest: does relying on interest revenue shift the burden of government from richer to poorer households?  I suspect a lot of people are fine with funding high school programs with a bake sale, and not so thrilled about paying for education by selling lottery tickets.  Lotteries are a pretty regressive way to fund government, and so I’m mostly on the side of their critics.  Are student loans like lotteries?

            The difficulty is that to answer the question, we have to be more specific about what we mean by “regressive.”  Are we talking about how much money borrowers have right now?  Almost by definition, folks who are borrowing money don’t have a lot of it at the moment.  But is that the right way to think about whether loans are regressive? 

            Looked at from a longer-term perspective, the loan system is arguably on net progressive.  Graduate students, after all, earn more than any less-educated group as a whole, and historically law students have done more than ok.  Those results, though, pool together borrowers and debt-free degree holders.  Borrowers are likely to have considerably less family wealth, on average (or, at many graduate programs, are likely to have had less-desirable admissions profiles).  So the question, which is empirically unresolved as best I can tell, is whether graduate borrowers on average are better off than the marginal taxpayer -- that is, the taxpayer who would have to bear the cost of replacing the loan-program revenues.

            Many economists support this life-time view of progressivity, but co-blogger Manuel Utset and I have a bit of different view.  We suggest that the decision to prioritize lifetime over, say, annual welfare depends in part on empirical evidence about people’s preferences.  If one reason we re-distribute wealth is to satisfy popular preferences for redistribution, our measure of redistribution should be influenced by how the public actually formulates that preference.  My own intuition is that “don’t give that homeless man a quarter, he used to be rich” would not strike most voters as the right way to think about redistribution. 

            In other words, I think that the fact that loans might cause some short-term hardship for borrowers should count against the appeal of profiting from those loans.  But suppose that, even accounting for that, student loans are on net progressive.  Maybe surprisingly, a lot of smart folks don’t think that would be a reason for relying on them.  Let’s kick that discussion to a third post.       

June 9, 2014 | Permalink | Comments (3) | TrackBack (0)

Friday, June 6, 2014

"Does Economics Need an Infusion of Religious or Quasi-Religious Formulations?"

Econ Journal Watch came out recently with an issue on: "Does Economics Need an Infusion of Religious or Quasi-Religious Formulations?" Editor Dan Klein has a prologue suggesting that conventional economic theory is "flat" and that religion might inform an approach better than maximization subject to constraints. Various economists, including me, respond with short articles.  I recommend  A. M. C. Waterman's "Can ‘Religion’ Enrich ‘Economics’?", in particular. 

   One surprise is that though there have been 458 downloads of the complete issue, one article has had 26,433! It's Rupert Read and Nassim Nicholas Taleb's "Religion, Heuristics, and Intergenerational Risk Management". Taleb wrote the book The Black Swan and has his own website. The article's worth reading, though I completely disagree with his view of the state of economics. Econ Journal Watch allows comments on articles, a very good thing, though you have to work a bit to read or write them, which eliminates much of the feature's usefulness.

June 6, 2014 | Permalink | Comments (0) | TrackBack (0)

Tuesday, June 3, 2014

Is Climate Change a National Security Threat?

In his commencement address to the United States Military Academy last week, President Obama called climate change a "creeping national security crisis." He means that there will be refugee flows, natural disasters, and conflicts over water and food. But really, in my narrow mind, nothing is a security crisis unless it involves violence or the threat of it. Does climate change pose that threat? Then-Defense Secretary Robert Gates made that point over six years ago.

Bruce Johnsen at George Mason once offered this example. "I'm a big guy [he is]. But if I am threatened by violence on a dark street by someone smaller than me who wants my wallet, I will give it to him even if he is unarmed. Even though I may have an absolute advantage in violence, that person is likely to have a comparative advantage in violence." I am paraphrasing, but you get the point. Also, surely Professor Johnsen is not the only person to have made this point, but he is the only big guy I know to have made this point.


The point is that people have different opportunity costs of violence. A poor mugger on the streets may have a less than 50-50 chance of winning a fight against Bruce Johnsen (that was a few years ago), but because of his extraordinarily low opportunity costs of injury, it is a chance he might take. Professor Johnsen, on the other hand, might have to cancel classes, miss conferences, and *gasp* -- even miss faculty meetings! His costs of injury would be very high. Wealth inequalities are dangerous precisely because they create vast disparities in the opportunity costs of violence.

So goes it with climate change. As the rich get richer and the poor get relatively poorer (indulge me for a moment, as Professor Johnsen noted that these claims are inferential, and may underestimate the adaptive capacity of poor nations) in a climate-changed world, the poor are likely to respond by fighting. Poorer nations are likely to respond with violence, because, after all, when your country is threatened by flooding and tropical storms, what really do you have to lose?

June 3, 2014 | Permalink | Comments (0) | TrackBack (0)

Monday, June 2, 2014

EPA Rule on Greenhouse Gas Emissions: when they said it was a long time in the making ....

they meant it. 

Some attentive Canadian will point out that the Canadian federal government -- the Conservative Party-led Canadian federal government, headed up by the almost comically unloved Prime Minister Stephen Harper, introduced roughly the same rule as early as 2011, and finalized it in 2012. The rule, like EPA's announced rule yesterday, sets a rate standard for power plants that is easy for natural gas-fired power plants to meet, impossible for coal-fired power plants to meet, unless a heretofore non-existent carbon capture and storage technology is deployed. The Canadian rule was quite realistic (and unambitious) in requiring that the CCS technology achieve a 30% emissions reduction rate.

No one who has had any experience with Environment Canada, the Canadian version of something like the EPA, believes that Environmental Canada, much less one under the government of Stephen Harper, was capable of forming such a rule (the Canadian rule was also not 645 pages like the EPA rule was). There is a 100% chance that the Canadian rule was developed with considerable EPA input. The Canadian rule also grandfathers up to the end of the "useful life" of a power plant -- 45 years. Sensible to some, but I've argued against grandfathering, as have many.

I can appreciate timing considerations, but remain puzzled. I can see the Obama Administration wishing to avoid rolling it out right before the 2012 re-election bid, but why wait until now? There is no margin for error if the President truly wants this in place by the time he leaves office. If that was his wish, he squandered 18 months getting this rolled out. And all the time, Bob and Doug Mackenzie had already set a useful precedent.

June 2, 2014 | Permalink | Comments (0) | TrackBack (0)

Sunday, June 1, 2014

Empirical legal studies – The new law and economics of non-American legal scholars?

Next week, I will be participating in a conference in London organized by Cornell law school (Dawn Chutkow, Valerie Haies and Michael Haise, who have stepped up to replace the late Ted Eisenberg). The conference attempts to establish the global society of Empirical Legal Studies. I will further elaborate my description about the conference itself, however one item of the report I prepared about Israel, is the trigger for this blog. A while ago, few papers have been written about the dominance of Israelis in law and economics (e.g., Oren Gazal-Ayal 2007). An argument raised in these papers claims that Israelis who want to participate in the global market of ideas, with special emphasis on the U.S academic market, has focused on law and economics, which tends to be a more universal area, relative to more doctrinal areas of research. Indeed, intuitively everyone who sees the amount of Hebrew speaking participants in ALEA, could relate to this argument, and I am guessing it is also true for other countries. This is not yet the situation in the annual conference of empirical legal studies. However, when making the report for the above mentioned conference, I could not have helped noticing that something like 10-15 percent of the legal academics in Israel, have empirical legal studies as their main methodological community, number that seems to outnumber that of the law and economics community (there is an obvious overlap between the two communities).

              There are some preliminary questions that one should ask, if interested in evaluating whether empirical legal studies could have similar “universal” effect to that of the law and economics method. In principle, one can identify many similarities; in both approaches the necessary knowledge of the doctrine is minimal, the knowledge of math and or statistics, respectively, could replace knowledge of U.S law, and both partly rely on disciplinary fields which argue to be universal (e.g. economic or psychology). However, there are also some notable differences between these two communities of knowledge. First, in many strands of empirical legal studies, much of an argument's development process is related to collecting data about legally relevant institutions. In much of these institutions, the variation among countries is such that when brought as evidence, it could never influence American legal policy, without further “local” findings. Another strand of empirical legal studies, is based upon experimental methods. Admittedly, in most aspects of experimental psychology, the country where the experiment was conducted in, is secondary to the question of interval validity. However, in the experimental legal analysis, question of external validity seems to play a much larger role, as in any other applied science. Nonetheless, scholarship wise, it seems that being non-American will be less of an advantage.

Next week I hope to come back with some answers to the potential contribution of empirical legal studies to the emergence of a truly global legal academic. 

June 1, 2014 in Science | Permalink | Comments (0) | TrackBack (0)