Thursday, January 31, 2013

Econ Journal Watch Watch

Ostensibly, the mission of Econ Journal Watch "watches the journals for inappropriate assumptions, weak chains of argument, phony claims of relevance, and omissions of pertinent truths. Pointed, constructive criticism" in order to provide "pointed, constructive criticism."  That seems like a noble endeavor.  Yet, apparently business is slow, because in the last volume Econ Journal Watch decided to publish David O. Cushman's moderation of a blog argument between Mankiw, Delong, and Krugman.  So I suppose now we should amend the name to Econ Journal and Blog Watch, which is a pretty herculean task.

A problem with Cushman's comment is that he attributed a position to Krugman that he never had, and Krugman voiced his displeasure.  So they've given him even more space to try to explain why Krugman saying "growth should be higher after severe recessions" is the same as saying "I completely agree 1000% with the administration forecast."  But don't focus so much on the note itself, focus on the fact that it is a note on a comment about a blog debate.  Why is this worth journal space?

Mankiw, Delong and Krugman are having a legitimate academic debate and the beauty of blogs is that we get a sneak peek at those debates (and people aren't always nice).  I thought the beauty of Econ Journal Watch was that it would be watching academic journals.  It should be an outlet for all the interesting criticisms of papers that are too important to be left unpublished, but not important enough to end up in anything but an obscure journal.  It should be publishing all the important comments that we worry journals themselves are rejecting (as it makes them look bad).  For instance, if a slightly different model makes all of a papers results go away, and that model seems relatively justified, then we know that paper's results are at the least not very robust.

If David Cushman wants to moderate a blog debate, I think Econ Journal Watch should tell him that his own blog would be an appropriate outlet.  On second thought, perhaps I should just lengthen the second paragraph into a few pages parsing the relevant quotes, and submit it to Econ Journal Watch.  Think they'll publish a comment on a note on a comment on a blog debate?

Baby Got Monopoly Pricing

The story so far:  Jonathan Coulton wrote a great cover of baby got back, Glee ripped the cover off (everything from Coulton's melody to a note-for-note copy of the arrangement) without contacting or citing Coulton, and John Cheese wrote awesome satire of it.

Glee was wrong to not cite Coulton and give him a shout-out, but the idea that they robbed Coulton is stupid. The important thing to note here is that, if you think Glee "stole" the song from Coulton, needed to get permission from Coulton, or should owe money to Coulton (under just laws), what you are really saying is, "Sir-Mix-Alot should have to pay Johnathan Coulton when Glee covers Baby Got Back."

That's because "copyright" is another word for "monopoly."  If you have a copyright on Baby Got Back, you have a complete monopoly over copies and most derivative works based on Baby Got Back.  And if you have a monopoly, you charge monopoly prices, IE, "as much as the market will bear."  So let's say Coulton comes along and covers your song, then Glee covers his cover.  In one world Glee only has to pay you, the original artist, (that's this world, under our current laws).  In another world, we say, "Coulton really poured a lot of creativity into that, and it is impressive.  Glee not only has to pay you but also him if they cover his cover, to reward the creativity."  Does this result in Glee paying more than they would in world one?  No, because in both worlds there is a monopoly,  in both worlds the rights to the song cost as much as the market will bear, and  "as much as the market will bear" means just that.  So if Glee isn't paying any more, how would they go about paying Coulton and Sir Mix-a-lot?  Easy, Sir Mix-a-lot would have to get less.

If you think Glee ripped off Coulton (other than by being jerks and not citing him), you aren't mad that Glee took money from Jonathan Coulton, you are mad that Sir Mix-a-lot did.  The issue here isn't whether the evil hacks at Glee should get to rob artists, it's whether one artist (Coulton) should get to take money from another (Sir Mixalot).

Wednesday, January 30, 2013

Return Predictabilty

Predictability has become a term of art in Finance.  That is to say, when we say it, it doesn't mean what it usually means.  If I ask, are returns predictable?  I don't mean, can I say for certainty if this stock or the market as a whole will go up.  I don't even mean, can I tell good investments from bad ones?  Return predictability means, can I use some information today to judge what the expected future return over some horizon will be?

Suppose that the long run average for stock returns is 8%.  The question, then, is the expected return on stocks over the next year always 8%.  This would be true if stocks followed a random walk, which for a long time was a basic assumption in Finance research.  If stocks follow a random walk, then all the ups and downs that prices take are just random fluctuation around an average return.  Stock returns would not be predictable.

Instead suppose that while the long run average is 8%, the expected return in any given year will vary over states of the economy.  When times are great and the economy is booming perhaps the expected return to stocks over the next year are 5%.  That is, stocks don't seem that risky, so stock prices are already pretty high and expected returns are a little bit low.  When times are terrible like the end of 2008 and prices go really low perhaps expected returns rise much higher, say 12%.  Stocks are risky.  No one wants to hold risk, as times look pretty bleak, so in order to hold on to stocks investors have to be compensated with a higher expected return.

Intuitively, I think predictability makes a lot of sense, but it's still an open question in finance as the empirical evidence is mixed.  Stocks are quite volatile, so the amount of data required to answer the question is immense.  Not to mention, dividends move as well.  Perhaps, it isn't the expected return that's changing it's the expected future dividend stream.  That is, the price of the market didn't go down, because the expected return went up, it went down because future profits/growth are likely to be low. 

Tuesday, January 29, 2013

Do good ideas usually win?

So the last hundred years have been a pretty good one for the triumph of good ideas.  Trade in goods got much freer, apartheid ended in several states, communism is pretty much done for, lots of European states made smart labor market reforms and got government increasingly out of business ownership, Latin America became democratic, the west started regulating pollution, the welfare state, etc.  Great stuff!

It's given me a huge bias towards good ideas, and made me really dislike disingenuous arguments.  When people who hate the welfare state try to get rid of it under the guise of hating deficits, it bothers me.  When people who want far reaching gun control talk like they only support little niggling increases in gun restrictions, it bothers me.  When people who want to legalize marijuana pretend like they care about the hemp industry, I get miffed.  The fact that they talk themselves into sincerely believing these positions doesn't much help, either.  Don't these people know that good ideas win out!?  If they really think their ideas are so great, why not just argue them honestly?!  You may win short term gains by watering ideas down, but ultimately you are weakening your long-term goals by keeping your great arguments and beliefs under a bushel.  If your ideas are right we'll all be better off when you fight for them honestly and win.  If they are wrong we'll all be better off when you argue for them honestly and lose.  Just be honest!

But looking at history, I certainly can't claim good ideas always win out, at least over an acceptable time frame.  "Let's import some black slaves to man our farms" was a pretty terrible idea, but lasted for centuries. "Let's have open borders" was a great idea, but I only know of one country in the modern world that really tried it and we stopped.

So is my bias wrong?  Do good ideas always (or usually) win out, or should I get more comfortable with hypocritical arguments?

Climate Change vs. Fiscal Crisis

There has been a spirited debate about whether people should compare the long-term debt to climate change.  Here's  former Treasury official Steve Rattner, quoted by Joe Scarborough:

"We are putting millions of tons of carbon in the air every day; we are also adding billions of dollars to our future entitlement obligations every day. We are borrowing (stealing?) from our children to pay far more in benefits to seniors than we are paying into the system.We have something like $60 trillion in unfunded liabilities to Medicare and Social Security. Paul Krugman would like us to just wait until those programs run out of money, at which point those unfunded liabilities would be just that much larger."

In other words, just like Krugman doesn't want us to wait when it comes to addressing climate change, he shouldn't want us to wait when it comes to addressing the deficit.

Krugman has responded to these types of arguments, and you can read that, but I think he's a little too clever and subtle to thoroughly convince the economically ignorant (aka, me) .  So I propose a simpler distinction that can illuminate the difference between climate change and the deficit: you can put off a future problem until it is a present problem, but once a problem shows up and bad things start happening, it is impossible to ignore the problem.  It will affect you.

And that's climate change.  Climate change is here.  Global temperatures are up.  Extreme weather events are up.  Climate change is doing bad things, to us, right now (key words in that article, "which has already begun to cause trouble").  You simply can't argue that climate change won't have bad consequences, it is having them.

That's not true with the deficit.  Fiscal crisis is not here (in America).  Inflation is not up.  Interest rates are not up.  Yields on treasuries are not up.  Etc.  For the time being, the deficit isn't doing anything bad.  If you are worried about America having a fiscal crisis because of its deficit, you are worried about the future.  We don't have that problem yet.  And even if you disagree with that, you have to acknowledge that Krugman thinks the deficit isn't doing anything bad right now, just like he thinks climate change is.

So yeah, that's the distinction.  When a bully is threatening you from across the playground, you can ignore him.  When he's punching you in the face, you've got to deal with it (or at least, have a really good reason why you should still ignore himt).  That's not proof that Krugman is right -- sometimes you shouldn't ignore the bully across the playground -- it's just proof that the comparison is dumb.

Sunday, January 27, 2013

You Can't Spell "Balanced Budget Amendment" without "A Damnable, Dumb, Decent Gent"

I agree with Arnold Kling that the Keynsian reasons for government running a deficit (IE, to stimulate the economy in a downturn) aren't very convincing.  But I strongly disagree with his conclusion that we should, therefor, adopt a balanced budget amendment.  I have five reasons for opposing a balanced budget amendment, in order from what I think is the worst to the best reason:

1.  Even if balanced budget amendment is a great idea in theory, I have some practical problems with it..  For one, the Republican party keeps wanting the balance budget amendment to cap the size of government and impose a super-majority requirement on tax increases.  I have opinions about how big government should be and about whether we should raise taxes, but I think future generations should get to make those decisions for themselves without the constitution tipping the scales.  I don't expect democrats, if they ever get around to wanting a balanced budget amendment, will be any better at keeping their other partisan goals out of it.

Secondly, I think the balanced budget requirement should be phased in.   I don't really want to see what happens if we force congress to cut a lot of spending or raise a lot of taxes over night; it's a body that works better over time.

2. I thinks sovereign debt promotes international peace.  If people invest in each others' governments, there is suddenly an international constituency for promoting stability in other countries, not going to war with them, and for promoting sounder budgetary and economic practices in your debtor nations.  If I loan a lot of money to Iran, I suddenly have strong feelings about war with Iran.  This doesn't always work to preserve peace and insure good policies, obviously, but I've got to think it has some sort of effect, and on balance I think the effect is positive (especially as the world gets more democratic, since a main negative effect is creditors propping up debtor dictatorships).  Balanced budgets means no government debt means (at the margin) more war.

3. I like the idea of a government not having to radically reform itself every time there is a downturn. Imagine we are in the great moderation and have a mild one year downturn, hurting tax revenue and increasing welfare expenditures   Is it really good to make the government  raise taxes and/or slash spending in order to keep the budget balanced?  Then come back a year later and undo their work?  That seems, to me, like 1. It would increase uncertainty a good deal, and 2. It would create a bonanza of lobbying.

Borrowing through recessions lets us keep the laws constant regardless of the business cycle.  That is probably a good thing.

4. I just don't see the harm.  The welfare state is well over a century old, but fiscal crises and default, especially in large, developed nations, are really rare.  I think Kling's article is especially telling here: his big example of why balanced budget amendments are good and not having them is bad is showing how much more indebted Canadian provinces (who can borrow) are to US states (who often can't).  This, according to Kling, makes them more likely to default.  But Canada is 146 years old.  When, exactly, are these provinces going to get around to defaulting?  When is the debt going to make something bad happen?

Don't get me wrong, countries can mismanage their debt, and healthcare costs/demographics are putting big pressures on debt to GDP ratios.  But "pressure" doesn't mean inevitable default.  Historically, countries have done a decent job of reforming and rolling back the welfare state when it starts causing major problems (See Thatcherism.  Over 25 years British government spending as a percent of GDP fell by over 15 percentage points), and there is every chance countries will rise to this challenge (see the trillions of dollars in deficit reduction over the next ten years we've already enacted, and the fact that both parties want to enact more).  

The story I think Kling wants to tell is, "for political economy reasons, welfare states that can borrow will get more and more indebted until there is a fiscal crisis.  So we can't let welfare states borrow."  To me, reality looks more like, "For over a century now, the the vast bulk of welfare states have done an effective job of managing their debt to gdp ratio and avoiding fiscal crises.  They might screw up their power to borrow, but they might screw up any power we give them."  

5. Keynesians could be right!  It's a big step to go from thinking people are wrong to making their policy recommendations unconstitutional.

As a final matter, it makes intuitive sense to me that borrowing let's governments shift costs into the future, when the public will be richer and able to bear costs with less loss of utility.  Even though future people are paying more (thanks to interest), they might suffer less (because they are richer).  I worry that this is one of those things in economics that seems intuitively right but is in fact wrong, though, so I don't list it as a reason.  

Saturday, January 26, 2013

Those Lying (Economist) Eyes

Dan Ariely points us to this paper:
Senders received 15 Euros every time they indicated a green circle, and only 14 when they communicated that the circle was blue. Receivers earned an even 10 euros regardless of the color, and so were unaffected by either the truthfulness or dishonesty of the senders.
That is, by design, no monetary harm is done by lying to either person in the experiment, but lying is beneficial to the liar.
The results showed little difference in honesty as a factor of socio-demographic characteristics or gender. A student’s major, however, was a different story. As it turned out, those in the humanities, who were the most honest of all, told the perfect truth a little over half the time. The broad group of “other” was a bit less honest with around 40% straight shooters. And how about the business and economics group? They scraped the bottom with a 23% rate of honesty.
That is, economics students were much more likely to tell a harmless lie that's in their own self-interest.  Dan is quite troubled by this.  I am fairly certain that I would lie in this experiment, but I am much less troubled by that.

 I would like to see the study where the payouts are reversed.  Let the sender only lie to benefit the receiver.  Is an economist more likely to lie for the other person's benefit as well, if it is at no cost?  If so, then perhaps the students are learning to think hard about independently about policies, laws and rules of thumb that they've grown up with, precisely what we are trying to teach them.

Friday, January 25, 2013

Answers for Tyler

Warning: LOOOOOONG post.

Tyler Cowen argues that it is unethical for scientists to clone Neanderthals in a post.  I find his line of reasoning kind of shockingly racist (it very arguably isn't racist, since neanderthals very arguably aren't a race of humans, but that is my perception of it). For starters I'll say that he might be right that it is wrong to clone neanderthals and/or that we should forbid cloning neanderthals.  His strongest reason for not creating them is up front:
For a start, the cloning process probably would require a lot of trial and error, with plenty of victims of experimentation being created along the way.
That's a real issue.  I'm not sure it clearly mitigates in favor of not cloning neanderthals, though.  Natural human reproduction, after all, has "victims" -- fertilized eggs that don't attach, aborted fetuses, still births, and children born with severe disabilities.    I would knowingly expose my child to all of those risks if I decided to try to have a kid. It seems like this is a situation where you've got to get specific -- show exactly how much more likely these bad outcomes are and what sort they will be -- before we can write off a neanderthal cloning experiment altogether.
But I see Tyler's point there.  The problem is the rest of the post, where Tyler makes people seeking to create neanderthals meet a burden he would never impose if they were seeking to create human babies.  When humans want to create humans, either the old fashioned way or with in vitro fertilization, we generally say they have a right to do that.  At most you might impose the moral duty on those people to 1. take care of the kid, and/or 2. ask, "is the life I am creating likely to be worth living from its own perspective."   Tyler doesn't ask those questions in this case, instead he asks a whole bunch of other ones.  I've tried to answer all of them.  Stupidly, I read the comments to the post after I wrote this, and some of what I am writing is reproduced there.
1. Could they be taught in our schools?  
They can be taught something!  Neanderthals were pretty smart.  I'm not sure if they could sit in regular classes, but there are some special needs human children who can't be taught in our schools without special accommodation   We do not conclude they should not exist, and even parents who know ex-ante their children might suffer from these problems aren't generally considered monsters for reproducing.  
2. Who would rear the first generation?  
Who rears a parent-less human child with no living ancestors?  Our society has already resolved the question Tyler asks, and has created a big infrastructure for raising parent-less children (foster homes, adoption, etc).  This infrastructure is capable of dealing with special needs children (maybe not well, exactly...).  We might want to make different rules for neanderthals (the scientists who decide to create them should probably have an obligation to rear them), but we don't need to.
3. Would human parents find this at all rewarding?  
Probably!  Raising animals is fun, even when they aren't humans.   But regardless, we generally don't think that people whose parent's didn't enjoy raising them should not exist, nor would I say people shouldn't be conceived as a moral or policy matter if I know ex ante that their parents wouldn't enjoy raising them.
4. Do they have enough impulse control to move freely in human society?  
Probably!  It would be weird for a social animal to not have impulse control.  I think, given what we know about them, the problem would be less impulse control and more excessive mental rigidity.  They were smart and social (well, less than us, but still pretty social) and had big brains, but they didn't adapt very quickly.
 Either way, we generally don't conclude that convicts or people prone to crime should not exist.  And again, I would not think they shouldn't' be conceived ex-ante.
5. How happy would they be with such a limited number of peers?  
Don't know!  But even assuming they get no satisfaction from homo sapiens peers, the same question could be asked of of a human birthing a child in an isolated village.  I would not conclude that that human should not exist.
I'd add that neanderthals lived in smaller groups than homo sapiens. 'Round 10 dudes.
6. What public health issues would be involved and how would we learn about those issues in advance?  
I don't know!  But that seems like a question you have to try to answer before you use it as an excuse to deny someone's right to exist or conceive.  The burden should not be on the scientists, here.
Regardless of the answer, we don't generally conclude that people prone to creating public health issues don't deserve to exist.  I would not conclude, categorically, that parents who were going to birth a typhoid Mary should never get pregnant.
7. What would happen the first time a Neanderthal kills a human child?  
Probably the same thing that happens to a human who kills a human child.  For example, in Texas our murder statute applies to any "person" who commits the crime, and I think any sensible court would conclude that something as intelligent and self-aware as a neanderthal is a person.  Either way, the fact that a person (animal?) could create a tricky definitional problem under the law isn't generally a reason they shouldn't exist.  
I realize that what Tyler is trying to imply here (and in a few other questions) is that the answer might be "angry mobs will do terrible things."  I'll answer that possibility when he brings it up more directly.
8. [What would happen the first time a Neanderthal] Carries and transmits a contagious disease?  
Someone gets sick?  Why would anything special happen?  I can't think of any reason a neanderthal would create new disease threats for humans in the first place, wouldn't the problem run the other way? Wait, that's the next question.
9. By the way, how much resistance would the Neanderthals have to modern diseases?
No idea!  Again, seems like a question we should ask a biologist before we decide a race doesn't deserve to live.  Beyond that, uncontacted tribes have low resistance to modern disease.  I don't generally take that to mean they don't deserve to exist or that parents in such tribes are wrong to conceive babies.
10. What kinds of “human rights” would we issue to them?  
In the US  the narrow question will be whether they are "persons."  If so, the 14th amendment applies to them.  I think they almost certainly are -- they are smart, sentient, look pretty human, many framers of the 14th amendment were comfortable with it covering subhuman breeds (in their eyes), etc.  IT's even more open and shut if neanderthals can breed with humans.
More broadly, as a dude who has studied international human rights law I am pretty confident that the International legal community would press to get them all first and second generation rights on par with homo sapiens, and I suspect there will also be an initiative to protect specific neanderthal rights.  In Europe I suspect the european court of human rights would extend them human rights pretty quickly and that would be that.  In other nations I can't say.  
Even more broadly, this is a bad question.  We don't ask what rights state's will afford people before deciding if they deserve to exist.  The correct question is what rights do neanderthals deserve and, again, the answer is pretty obviously (to me) "all of them."  This is an especially easy question if we can reproduce with them.
Did the nazis end up treating the holocaust victims better than lab chimpanzees?  Does the answer to that question determine whether european jews deserved to exist?  Knowing what you know, would you tell european jews in 1910 that they were wrong to give birth?  What if they knew the holocaust was coming when making their decision, but, via hypothetical question magic, would forget after they made the decision to conceive,  preventing the "just have the child and leave Europe" solution?  Same questions, but for German jews in 1936?
Anyways, yes, I think we would treat them better than chimps.
14. Would they be covered by ACA and have emergency room rights?
Again, I think the law will basically treat them as it does homo sapiens.  .
15. We don’t know the answers here, but I would expect to run up against a number of significant fails on these issues and others.
I do think we can make good guesses about a lot of the answers here.  I also think that even if we do fall short in resolving these conflicts, that is not proof that it is a bad idea to create neanderthals, anymore than you can non-controversially announce that it was a bad idea to create European Jews in the years leading up to the holocaust.
16. We do, however, know two things.  First, the one environment we know they could survive in (for a while) was a Europe teeming with wildlife.  That no longer exists.
This is nonsensical.  For one thing, there is the possibility that neanderthals did not completely die out but interbred with us (as I understand it academical clevermen are currently fighting over this).  For another, we don't generally assume that because humans have moved into a species's territory and caused their extinction that they are incapable, given transplantation or better management, of surviving.  On the contrary, when species start dying out we vigorously fight to preserve their existence   
Plus, you know, that's some weird biological determinism there, Tyler.
17. Second, we’ve already run the “human/Neanderthal coexistence experiment” once, and it seems to have ended in the violent destruction of one of those groups.  It would be naive to expect anything much better the second time around.
For one thing, this is just wrong.  I don't think any scientists think neanderthals were "violently destroyed."  I think a better formulation would be "and it appears to have ended with the gradual extinction of one of those groups at the hands of starvation and occasional attacks by humans.  It also might have ended in interbreeding"
For another, we ran the dodo/human experience once too, but if 1500's Mauritius suddenly reappeared in American territory, I think there is a pretty good chance the little guys would stay alive this time.  Not shockingly, modern humans have different priorities and ecological impacts compared to humans in the age of sail, much less compared to early modern humans. 
And, again, this really isn't as decisive as Tyler pretends it to be.  The fact that someone's life might have a bad outcome (or even "will definitely have a bad outcome") is not clearly a good reason to say his parents shouldn't birth him.  Certainly the fact that their species might have a bad outcome shouldn't matter.  The better question is, again "will this life be worth living from its own perspective."
18. Most likely the Neanderthals would end up in some version of concentration camps, with a lot of suffering and pain along the way, and I don’t see that as an outcome worth bringing about.

Tyler has gone form "we can't know the answers to these questions" to deciding an outcome is "most likely."   I liked the first formulation better, and don't agree with him that genocide is an inevitability. 
But again, even if it is, I'll say it for the millionth time: the fact that a life might be full of sad events and have a sad end is not proof positive that you should not create the life.  Even the strong possibility a life will have sad stuff happen in it doesn't mean it won't be a life worth living.  
I keep coming back to humans who actually lead the kind of life Tyler is worried neanderthals will lead.  If we shouldn't create neanderthals because they might suffer a holocaust,  when exactly does Tyler think Jewish parents in Germany started acting immorally by conceiving children?  Would he be comfortable telling any surviving children from that period that their existence is an ethical failing on their parents' part?  Is he confident that the children who didn't survive were sad that they were created in the first place?  Because at most I am comfortable saying, "given the strong possibility that my child will cause social problems, be discriminated against, and die in a holocaust, I might not conceive him."  Going to, "given that possibility, you were *wrong* to conceive him" is a big step.  I can only see getting there in this case if you 1. weirdly prioritize natural conception, or 2. think of neanderthals as sub-humans.

Not humans, yeah, but sub-humans seems a bit much.  Especially given how little we know about them.  

Thursday, January 24, 2013

Symbionese Liberation Army Marshal

When I was an undergrad I wrote my term paper for US Military History on S.L.A. Marshall, so I'm displeased to see the news doing it's normal shitty job of covering him.  To set the record straight, there are two big things you need to know about S.L.A. Marshall:

1. He was a brigadier general and official army historian who did a lot of post-battle interviews with American soldiers in WWII Europe, concluding that about 80 percent of soldiers weren't firing in combat.  Partially thanks his recommendations* for how to fix the problem of low fire ratios, we saw a titanic shift in how infantry platoons fought between WWII and Korea: 1. Training changed to condition people to fire on humans (training marksmanship on pop-up, man shaped targets vs. stationary, bullseye type targets, for example), 2. Platoon organization changed to allow closer management of individual soldiers (the smallest unit in a platoon shifted from a squad of 12 or so people to a fire team of only four people), 3. How platoons were equipped changed (Marshall noticed that soldiers were much more willing to use crew operated weapons than personal weapons on the enemy.  Because of this, as well as an increased doctrinal emphasis on suppressing fire, the number of squad automatic weapons per soldier was vastly increased, from one per squad to one per fire team).  Marshall recorded much higher fire rates in Korea and Vietnam (well into the 90th percentiles), and by the gulf war fire rates when confronted with the enemy were above 99 percent.  So all these reforms worked (at a possible psychological cost for vets, according to the work of retired LTC Dave Grossman, a shrink).

2. Except maybe they didn't, because Marshall's "statistics" are probably bullshit.  He never published his data, and as his people began going through his archives after he died most concluded that there was no data.  He interviewed lots of soldiers,  sure, and his qualitative summaries of their reports have a lot of power, but his quantitative figures about what percent fired in combat might have been pulled directly out of his ass.

So there is sort of a mixed history there.  On the one hand, his reforms were adopted so rapidly and so widely by militaries after WWII that I have to think they rang true to the battle hardened veteran officers and non-coms of the day.  And the fact that infantry platoons still fight along the lines he outlined proves that his recommendations stood the test of time.  So there is probably a lot of truth to his observations.

On the other hand, his stats were possibly full of shit and should only be quoted with heavy caveats.

The media tends to only report one story or the other, so we get this article saying that we know for a fact that only 20 percent of soldiers fired on the enemy in WWII.  We don't!  Alternately you'll get articles saying that Marshall is a proven fraud and that we should conclude fire rates were as high in WWII as they were in Korea.  We shouldn't!  It's a more mixed story than that: there is a lot of evidence that S.L.A. Marshall was dishonest, but also a lot of evidence that he was right.

Anyways, his wiki page summarizes some of this if you'd like to know more.

*I want to emphasize that he was only one of many influences that brought about the shift I'm talking about.  The marines first tried out the fire team while occupying Nicaragua between WWI and WWII, for example.

Wednesday, January 23, 2013

New Co-Blogger!

New Co-Blogger!  Sarah M. studies digital media communications and technology management at the University of Washington. Until 2012, she was an active duty Staff Sergeant in the U.S. Marine Corps.  The number of co-bloggers who are smarter than me multiplies like wet mogwais.  

Tuesday, January 22, 2013

The Swartz is With You (Provided You are a Lenient Prosecutor)

Aaron Swartz was a smart computer programmer/activist who sneakily downloaded millions of copyrighted articles off of JSTOR, an academic search engine, to protest academic articles being placed behind pay-walls (and possibly to distribute them via file sharing).  JSTOR said it didn't mind, but he was nevertheless prosecuted very severely by the Massachusetts US attorney, and ultimately killed himself under the strain of the lawsuit (plus the strain of mental illness, obviously).  You can read about it, plus the political fallout from it, here.

Orin Kerr has a post that, among other things, provides justification forthe prosecutors wanting to punish Swartz harshly. It can be summed up in two steps: 1. People who break duly passed democratic laws in an attempt to undermine or change them should be punished, especially when they attempt to change them through non-democratic means 2. The correct measure of punishment is specific deterrence -- what it takes to keep them from doing it again.  To use his own words:

We live in a democracy.   We might not like all the rules in a democracy, but the way to change those rules is through democratic change.  Swartz could have tried to be punished under the law to bring attention to the law in the hope of changing it through the democratic process.  But instead he had something anti-democratic in mind [IE, to circumvent JSTOR's copyrights by illegally distributing the articles]. I think it’s pretty clear that in a democratic system, that kind of anti-democratic cause is something that we should disfavor.  You can break the law to draw punishment, but the ultimate goal of traditional civil disobedience is achieving change through the legal means of democracy.  Swartz had something else in mind, it seems;  changing the law de facto by his unilateral action. Given the importance of the difference, a punishment that was the minimum sufficient to persuade Swartz to follow the law in the future seems appropriate.

This makes no sense to me.  I can accept that people have a duty to obey democratic laws for the sake of argument, and should especially refrain from trying to change laws in non-democratic ways .  I can accept arguendo that Swartz violated that duty.

But while we have a duty to obey dumb laws, we obviously don't have a duty to fight for stupid laws.  We 1. don't have to put in any effort to see dumb laws are enforced (beyond some simple requriments, like "don't obstruct justice"), 2. can actively fight to bring down dumb laws in legal ways -- blog against 'em, protest against 'em, and 3. can even do stuff to help law breakers, provided it is legal -- represent 'em court, blog on their behalf, etc.

 In other words, when it comes to dumb laws we have a duty to not break the law and that's it.  But Kerr seems to be saying that, were I a US attorney, I would be morally obligated to do more than that.  Not just obey the law, but actively fight for it.  Makes it my life work to see that dumb laws are not broken, even above and beyond my legal duty to do so.  Because US attorneys don't have a duty to prosecute every crime they hear about, the law very specifically gives US attorneys prosecutorial discretion.  If, within that discretion, a US attorney wants to punish a lawbreaker more lightly because the law he broke was stupid, they get to (as a legal matter).  That they don't get to as a moral matter apparently rests on us saying "breaking dumb laws is bad, but none of us have a moral duty to help enforce dumb laws beyond what is legally required of us.  Except for US attorneys, upon whose shoulders alone rests the charge of preserving democracy by vigorously prosecuting those who violate dumb laws."  To me, that begs the question:  Why do *I* get to fight within the law to undermine dumb laws and help lawbreakers as much as possible, but US attorney's don't?  Or did I get that wrong, and I do in fact have a moral obligation even above my legal obligations to support dumb laws?

Basically Ortiz is arguing against prosecutorial discretion, more-or-less saying that prosecutors have a moral duty to vigorously prosecute anyone likely to be a recidivist and likely to comity crimes that undermine democratically created laws (and since most of our laws are democratically , that basically means "anyone likely to break the law again").  I think that imposes a bizarre obligation on prosecutors.  Just so, I don't think prosecutorial discretion undermines the rule of law (there are lots of ways to reign in prosecutors who abuse prosecutorial discretion, from firing them to prosecuting them to voting them out of office).  So I basically disagree all around.

Swartz didn't much harm anyone, wasn't likely to much harm anyone again, and was acting in a good cause.  He deserved, at most, a slap on the wrist.  I have no moral duty to yell at him on this blog in order to preserve our democratic laws, and prosecutors had no moral duty to harshly punish him in order to preserve dumb laws.

Saturday, January 19, 2013

Protecting NBA Players from Themselves

Matt Yglesias floats an idea to help keep NBA players from blowing all their money:
Establish something like a flat $500,000 per year salary for every player. Then any financial compensation a player receives over $500,000 has to come in the form of an annuity—a fixed annual payout every year for the rest of your life. A player who's more in-demand will get offered a larger annuity than a player whose services are less-demanded.
I wonder to what extent it would help.  The problem with the idea is that NBA players would be able to borrow against their annuity.  If players did indeed do that and basically spent the same amount, the annuity would just add unnecessary transaction costs .  To work, it has to rely on some taboo against borrowing.  That could be true, but certainly many athletes that end up broke have no problem with taking on lots of debt.

My advice to NBA players would be to blow your money on a big house or several houses or apartments and pay in cash.  The key here is to trick yourself into thinking investment is consumption.  At least when all the money is gone, you'll have an asset left over.  It's not a well-diversified portfolio of stocks and bonds, but it's something.  Besides, stocks and bonds aren't baller, but sweet cribs are.  If their is an element of peer pressure to spending a lot, this should satisfy some of the signalling requirements.

Of course, if they end up spending all their money, selling the house and then spending all their money again, all is lost, but maybe there are a few more road blocks and wake up calls along the way.  Plus, if Allen Iverson had a baller apartment in NYC, a sweet mansion in Philly, and beach house outside of LA.  He'd at least have some assets for the $200 million he ran through.  Plus, this is a guy that refused to pack and would just buy new clothes in every city he went (and leave them in a hotel).  At least, this way he'd have stocked closets in three cities.

Friday, January 18, 2013

I Love the 90's

I think people forget a big part of why the 90's were (fiscally) awesome.  Talking about the Friendsiest decade, Arnold Kling says in his comments section:

My assessment is that the main reason that the budget did so well is that revenue came in unexpectedly high.  

That happened and it was a big part of it.  But it's not all of it.  Government spending was also kept incredibly stable in and around the 90's (graph stolen from Veronique de Rugby):

There is some noise and some wiggling in between, but real federal outlays per capita were more-or-less the same in 2001 as they were in 1985.  Sixteen years of no spending growth!  That's pretty awesome!  And it's proof that the good budgets in the Clinton years weren't just thanks to more revenue, congress toed the line on the spending side too (i think the main culprits here were cutting defense spending after the cold war and social security reform).

There's a myth on the right that once the government gets heavily into redistribution  people will vote themselves more and more goodies, special interests will grab more and more rents, and government will grow and grow.  And maybe sometimes it will.  But for sixteen years it didn't.  Either something incredibly exceptional happened in those 16 years, or else welfare state does not = perpetual growth in government.

Wednesday, January 16, 2013

The Republican Chip No One Is Talking About

I've been trying to think through a little bit about the Game Theory of the Debt Ceiling talks.  Mike Konczal has a nice little primer.  If one knows enough about the players and the politics, there is no reason one couldn't solve a game theory model like the one Konczal presents.  Unfortunately, it isn't easy.  What do the players really want?  What do they believe about each other?  What are their relevant payoffs?  These aren't trivial questions.  Also, the public's response--who they will blame as we approach the deadline in February--will be important and is somewhat uncertain.

That said, there is one thought I keep coming back to that no one else is talking about.  Even if the Administration is committed to not negotiating on the debt ceiling, the public will end up blaming Republicans, and the Republicans will eventually balk.  There is one other chip that Republicans can play (that as far as I know is completely off the table right now).  Republicans can offer up the McConnelll plan that basically puts the debt ceiling in the President's hands (though it allows Congress to complain loudly and officially when it is raised).  The plan would eliminate the debt ceiling game of chicken forever.  Even if the President turns out to be right and the Republicans will pay a large cost as we get closer to the deadline, as the House Republicans realize this, they can always put this plan back on the table.  In itself, it is valuable enough to get some concessions (though what they really would want I don't know).  It's also potentially valuable at breaking the President's resolve.  What if they use this carrot to induce the President back into talks and then talks break down?  Does that make the President complicit in the failure?  Its harder to argue "we don't negotiate with terrorists" after negotiations have just broken down.

Thursday, January 10, 2013

Are Stocks Excessively Volatile?

An important part of John Quiggin's book, previously discussed here, here and here, is the argument that stocks are excessively volatile.  Unfortunately, he doesn't really lay out the argument he points to Shiller's work and quotes another economist vouching that the puzzle is unresolved and moves right along.  In this post, I want to explain why Shiller thinks stocks are too volatile.

Below is a simple model that explains the value of a stock.  It says, if you take the value of all of a stocks future dividends and discount that by the appropriate discount rate, that must equal the value of a stock. 
Shiller measured changes in the growth of dividends as well as changes in the prices of stocks (Vo) and found that stock prices are much more volatile that dividends.  Thus, he concluded that stock prices are irrationally volatile prone to large moves in investor sentiment.

Where's the rub?  Why weren't all financial economists convinced markets are hugely inefficient?   Shiller's argument assumes that k, the required return on stocks, is constant through time.  In fact, that was the dominant paradigm at the time.  This wasn't dictated by theory, and certainly many were aware of the possibility that k could change over time (see this Fama article), but it seems as though the dominant model in most people's head was that of a random walk and there was no strong evidence at the time that k changed.

Now, thirty-five years later, there is lots of evidence that returns change over time, and it is, in fact, hard to imagine that they wouldn't.  Maybe in 2005 an 8% return that could easily be +50% or -50% though is likely to be between +30% or -30% seems like a pretty good bet.  Especially if you are pretty well off with a lot of life left.  That same bet in the depths of the financial crisis probably seems a lot worse.  No one wanted to hold risk at the depth of the financial crisis.  Its likely k, the required rate of return on stocks rose very high, though there was tremendous risk associated with this return.  Stocks did very well, and there expected return was likely very high, but in another world things could have gone very badly and returns could have been very low.

Perhaps, it is obvious now that it is difficult to differentiate between rational changes in the required rate of return on stocks and irrational swoons in sentiment.  In regards to the decline in stocks during the financial crisis, Shiller might argue that this was a swoon in investor sentiment, an irrational pessimism, whereas an efficient markets advocate might attribute it to the dismal state of the economy and the uncertain state of the future.  Is it possible to tell the two views apart?  In order to do so, we need a model of what k should be.  

Shiller has to some extent worked on that problem.  He's tried to argue that k moves in response to things it shouldn't.  For instance, one that I like is legalized gambling.  Shiller argues that periods of lax gambling laws may cause asset price bubbles.  Maybe the roaring 2000s were really caused by the rise in internet poker and collapsed due to the anti-poker legislation.  Nevermind that the dates don't work too well, sentiment is a funny thing and there are other causes.  I'm still skeptical, but Shiller works hard and attempts to address the problems in a rigorous way.

Tuesday, January 8, 2013

Ratio Rapiens

Now that people are starting to report all the various reasons the chart I blogged about is dumb, an equally dumb debate about false rape accusations  has sprung up.  For example, there's a big argument about this on reddit I would link to were it not terrible.

A big problem here is that no one should be as certain of their position in this debate as 90 percent of people are.  That's because no one knows how often rape accusations are false.  The data law enforcement collects is awful and biased, the outside studies are all over the board (and generally awful), and the question is inherently hard to answer.  You can get a feel for that from this Wikipedia article, and if you have access to academic databases you can look up all the studies the article references and see the shit-storm for yourself.  Sorting through it all, I tend to think 5 percent is the best guess from all the studies, but I also think a certain shade of blue is the prettiest color.  I wouldn't describe either position as factual.  

More importantly, it is a dumb debate.  This isn't a zero sum game, here.  Society can protect both rape victims and people falsely accused of rape by 1. having law enforcement thoroughly investigate every rape accusation, 2. having the public keep an open mind and not rush either to punish the accused, absolve the accused, or ignore/shame accusers, 3. having prosecutors treat rape like the serious crime it is, and 4. having our legislatures not create rules of evidence to tip the scales either in the favor of conviction or acquittal.  

Now there are real barriers to getting to that world, but they have nothing to do with this argument.   When people don't take rape complaints seriously or slut-shame accusers, it isn't because those people are mistaken as to the ratio of false to true accusations, it's normally because they are misogynistic assholes.  Just so, when people rush to equate an accusation of a crime with definite proof of guilt (and this happens in a lot more contexts than rape), it normally has less to do with statistics and more to do with them being impatient, judgmental assholes. 

So yeah, the problems here are much deeper than a disagreement about this one fact, and this one fact is too unclear to be worth passionately arguing about anyways.  

Monday, January 7, 2013

Rape is Worse than Bad Charts But Harder to Stop with Blogging

At the risk of turning this into the, "Hey, here's a marginally more misogynistic way to interpret data!" blog, I have some questions about this chart currently making the blogger rounds:

They say their data comes from the national crime victimization survey, but I have some problems with that.

1. The national crime victimization survey doesn't measure the number of falsely accused rapists, as near as I can tell.  The FBI measures "unfounded reports" of forcible rape, but 1. "unfounded reports" is a dumb statistic with definitions varying from police department to police department, 2. as near as I can tell they just measure forcible rape, not all rape (I probably just haven't dug enough), and 3. it comes to 8 out of a 100 reports being false.  I don't get how you go from there to a graph showing that there are two falsely accused rapist for every thousand rapists.

There are lots of studies of false rape accusations, and that is a remarkably low number.  It looks like the way they got there was by creating a vast universe of unreported rapists: "sure, 5 out of 100 rape reports are false, but there are a thousand unreported rapes for every reported one" gets you to a very low number of falsely accused people per rapist (numbers in that example were made up).  But there's a problem with that:

2. The national crime survey has found that two out of three rapes aren't reported, which is obviously terrible.  But this chart looks much more terrible, showing 90 percent of rapists going unreported.  Now it's possible for both statistics to be true: if the reported rapists were committing lots of rapes per person  and the unreported rapists were committing less rapes per person (IE, you could have 66 unreported rapes committed by 66 different people, but 33 reported rapes committed by, say, 3 people who committed 11 rapes each).  But it isn't immediately obvious to me how you can conclude that reported rapists are serial rapists and unreported rapists only rape once.  I just can't find that data in the survey.

So yeah, this chart could be absolutely right and I just haven't dug through the numbers enough.  But at first glance, it looks weird.

I'd add that "number of people falsely accused of rape against the number of people who have raped" is a weird statistic.  For what I think they are trying to show, "you should tend to believe people who accuse other people of rape," the statistic you want is the number of accusations to number of false accusations.  Or maybe they are trying to show that we should prioritize rape victims over victims falsely accused of rape when making policy decisions, in which case they should focus on number of raped people to number of people falsely accused of rape.  Or maybe they are trying to say, "there are way more rapist bad guys than false reporting bad guys, when making policy trade offs we should go after the rapist bad guys," in which case we want to know the number of rapists to the number of false accusers.  But this metric -- comparing victims of one crime to perpetrators of a completely different crime -- doesn't make much sense to me.  It would be like comparing "number of burglars to number of identity theft victims" to show that burgling is a bigger problem.

Edit: The enliven project has posted an explanation of where they got their "data."

Interview with Michael Woodford

If you recall from this post, Michael Woodford is one of the most important active monetary economists.  Bloomberg conducts a recent interview.  Here are some highlights:

Q: What was the thought process that led you to support nominal GDP targeting?

A: Actually, it's an approach I've been advocating for at least a decade, though in my earlier writing about this I referred to a more technical variant of the proposal (what I called an "output-gap-adjusted price-level target") rather than to nominal GDP targeting. The idea is to have a target criterion with two qualities: It must focus on the level of a nominal variable rather than its growth rate, and it should involve some combination of prices and economic activity...I see it more as a refinement than as a move away from inflation targeting.
Q: To what extent have the Fed's latest moves -- stating the levels of unemployment and inflation at which it would consider raising rates -- brought its policy closer to what you propose?
A: They have moved closer in one important respect: They are now talking about future policy in terms of economic outcomes, rather than a calendar date that will determine when interest rates should begin to rise. And it has some flavor of nominal GDP targeting because it involves both inflation and the real economy. The problem is that it's not clear what the new policy means for the longer term...  A nominal GDP target would explain why they're doing what they're doing now, and also how they would shift to a less accommodative regime in the future, once the "catch up" to the target path has occurred.

Sunday, January 6, 2013

Gender of Directors: The Critical Mass is Critical

There is lots of excitement about "Does the Gender of Directors Matter?" a paper by Miriam Schwartz-Ziv.  I think the reporting about this paper has been a bit misleading and has missed the novel and interesting contribution made.

Cosider Matt Yglesias title, "Boards with more women on them are more aggressive, and their companies perform better."  Alas, Miriam didn't find that more women on boards or attending board meetings improves oversight or performance.  She found that have AT LEAST three women at a meeting and on a board increased oversight and performance.  The difference is important, as reported in the paper, currently no relationship exists between gender and performance, "Rhode and Packel (2010) survey more than two dozen studies examining the association between the gender composition of boards and financial performance, and conclude that no robust and consistent relation has been documented between these two variables."

If the author had taken her eleven firm sample (note 11 firms!) and just entered another data point into the findings above, it wouldn't be all that interesting.  Instead, the author confirms the findings reported above.  The fraction of women on the board has no effect on performance or board meetings, "No significant linear or U-shaped relation is documented between the gender composition of boards and the variables measuring board activeness" (table 5).

So why is it interesting?  Because the author adds a big caveat.  If at least three women (and to a lesser extent at least three men) attend a meeting, the board is much more active in oversight that it otherwise would be.  Also, boards with at least three women serving have higher ROEs and higher profit margins (the better more aggressive performance).  This result doesn't hold with increasing the percent of women or even with at least two women attending (p. 17).

The author argues that for women's participation to be valuable that there must be a critical mass of at least three women and offers some theory to support this view.  It's an interesting result, but I think lots of caution is important.  The study only uses a peculiar data set of eleven Israeli firms.  We have lots of female board participation in Norway and due to legislation a somewhat natural experiment of female board participation.  I'd like to see the results hold up out of sample before I got very excited about them.  It's true when Yglesias says, "This is important not only for what it reveals about gender, but for the fact that it suggests that firms are being systematically mismanaged," but that's also a reason to be initially skeptical, until we have a lot of evidence to the contrary.

Most importantly, the critical contribution of the paper is that a critical mass is required for female board participation.  Let's make sure we emphasize that in our reporting of the study.  This interpretation changes the class of policies we should consider useful in improving board performance.

Saturday, January 5, 2013

Answering My CoBlogger

Charlie asks, "Is the debt ceiling constitutional?"

I'll answer with another question: Imagine congress doesn't resolve the debt ceiling crisis, we are being forced to default on our debts.  Everyone predicts disaster.  Markets are maybe starting to panic.  Obama says, "You know what?  I'm not going to default on the US debt.  Turns out I think the debt ceiling is unconstitutional, because the fourteenth amendment guarantees that the federal government's debt can't be questioned." Markets calm down and everything proceeds as normal.

Now my question:  Does John Roberts want to keep Obama from doing that, revive the crisis, and go down in history as the man who destroyed the global economy over an arcane constitutional debate?  

My answer is "no."  I suspect, if it comes to that, he'll avoid the question of constitutionality altogether and say that no one has standing to sue the president (IE, no one can demonstrate a clear harm) and/or invoke the political question doctrine (the idea that, when the law is unclear but clearly leaves an issue to other branches of government, courts should let coequal political branches resolve questions with policy decisions, not make up laws and resolve the question with a legal decision).  

If you want to hear all the dumb legal arguments, this is a good summary.  But this isn't really a legal question, it's a is-John-Roberts-crazy-or-blind-to-how-history-will-judge-him question.  And he answered that when he voted to uphold obamacare.

Charlie's other question is harder, and I'll get to it in time.

Minarchy Is Coercive

For some bizarre reason, ideological libertarians make arguments like this:

Instead, suppose you try to convince people of the similarity between government and organized crime. You say that both provide “protection” backed by coercion. The advantage of this is that if you can get someone to shift to looking at issues along the freedom-coercion axis, that person will be less receptive across the board to arguments for state intervention based on the oppressor-oppressed axis or the civilization-barbarian axis.

Just a reminder that minarchy is coercive.  Libertarian government will coerce me if I try to tort you, rob you, break our contract, tack a nap in your bed, walk through your yard, whatever.

The scale of coercion isn't even necessarily smaller in a libertarian state.  You could imagine a state where social norms are breaking down -- maybe there is a bad recession or a war of self defense or a disruptive technological change afoot -- and *lots* of people *really* want to steal or break and enter or tort or assault.   The threat or use of force is actually having to be invoked super often to change people's behavior.   Just so, you can imagine (and might be living in) a state where most people don't particularly mind paying their taxes, and the threat of and actual use of force is less necessary to get them to comply with tax law than it is to get our people in the first state to respect property law.  Even more important, you can imagine (though it may be unlikely) taxation and redistribution transforming the first state into the second state -- maybe the state taxes people and subsidizes public education, giving people a road out of poverty and, over time, making the masses less grumpy.  Maybe it's a social insurance program.  Whatevs.  Point is I can imagine a welfare state ultimately coercing less than a libertarian state would, with coercion defined as using force or the threat of force to change behavior.

Now you may think it is extremely unlikely that welfare-state policies will have that outcome, but that's an empirical and economics question more than it is a philosophical one.  To the extent it is true based on empirical observation that libertarian states coerce less, we are making a pragmatic or consequentialist argument,  not an ex-ante ideological argument.  And pragmatic libertarians are all right in my book.

Which isn't to say ideological libertarians are clearly wrong.  Ideological libertarians like minarchy because they think it coerces for the morally right reasons, IE to enforce the harm principle.  But they should argue that.  This whole "its all about coercion vs. freedom" thing is either a wrong or a pragmatic argument, it isn't a self evident philosophical truth.  The argument they want to make is "it is about justified coercion vs. unjustified coercion."  The state isn't the mafia because it is possible for the state to coerce you for justified reasons, but it *can* *be* like the mafia if it goes too far.

Friday, January 4, 2013

Questions for My Co-blogger

I've been traveling and am short on posts, though on the road I mentally wrote several.  Rather than let the day go by without a post, I figure I'd bait my co-blogger with some things I've been thinking about.

Should we have a legal market for kidneys in the U.S.?

I've written a post about kidney markets and Wophugus has a post about not having a market for slavery (which is quite persuasive).  I think the argument for a market in kidney donation is very persuasive.  I certainly have blind spots, but as my recent Satz post emphasizes, I'm not very content with the arguments meant to convince me I'm wrong.  Should there be a market in kidneys?  If so, what regulations should we require for the market?

Is the debt ceiling constitutional?

I'm a (financial) economist, so it's my prerogative to say dumb things about the law.  It seems imminent that the House Republicans will hold the nation hostage each time the debt ceiling comes up and if I were this administration I'd be working on counters to that strategy.  One thing I do know a little bit about is game theory, and a lesson from game theory is often the outcome is decided by rounds of the game that will never be reached.  That is, if the administration can increase its position in the event of no debt ceiling deal, it can matter to the deal that is eventually reached, even if the chances of reaching a deal are 100%.

If the debt ceiling isn't passed, the treasury will have more outstanding obligations than money to pay them.  They are obligated to pay debt holders, they are obligated to pay federal employees, they are obligated to pay government contractors, and they are obligated to pay for any future spending that congress has enacted into law.  As far as I know, there is no contingency for who is to be paid what in the event that congress is not allowed to borrow money.  I can think of a lot of things for the administration too do, if they couldn't borrow more money.  Stop paying defense contractors (they could pay in IOUs).  Stop paying congressional salaries.  I think it would get us an agreement pretty quickly.  I can't imagine the administration could unilaterally decide who and who not to pay, but then again, they can't pay everyone, so in the end I think the debt ceiling is likely unconstitutional.

Right now, the Republicans are trying to pay the crazy dictator game.  The crazy dictator tries to convince the world that he will build or launch a nuclear bomb and then the world bribes him not to do that.  The crazier and more powerful the dictator appears the more he can extract.  On the other hand, if the world can weaken the dictator's bargaining position by threatening his base of power, he will extract less.  The administration should be thinking hard about increasing their bargaining position, even though I think the Republicans are all bluff and bluster.  Even if some deal will be reached and Armageddon avoided, the shape of that deal will depend to some extent on the position of the parties in Armageddon.

Wednesday, January 2, 2013

Responsible Gun Ownership Can Mean Heavily Restricted Gun Ownership

I've been floating the idea with fellow firearm owners that maybe gun control is justified as a means to restrict suicide.  The number one response I get is, "that's interesting, but I don't feel like responsible gun owners should have to suffer here.  There have to be better ways to curb suicide."

The problem with that thinking is we have a dumb definition of "responsible gun owner."  When they teach you how to be a "responsible" firearm owner pretty much every lesson is about how to shoot people.  Don't point your weapon at people you don't want shot because you might accidentally shoot them.  Treat your weapon as loaded or you'll accidentally shoot the wrong people.  This stance is good for when you need to shoot people.  This is how you mantain your weapon for shooting.  Don't point your firearm at anyone you don't want to instantly respect you.  Etc.

The problem is, again, in the majority of tragic firearm deaths in this country the shooter correctly identifies and fires on  his target.  I'm talking 'bout suicide. Suicides don't need lessons on how to not accidentally hit the wrong target and how to cleanly hit the target they are aiming for, the target they are aiming for is, like, half an inch away from the firearm.  "Responsible gun ownership," as it is now conceptualized, does nothing for suicides, positive or negative.

But that's crazy, because the single biggest risk we impose on the community when we own firearms is that someone will kill themselves with them.  Again, for American citizens this isn't just the biggest category of firearm death, it is the majority of firearm deaths. It dwarfs accidents and self defense and murder and war.  Responsible firearm owners who aren't thinking about how to prevent suicides from using their firearms aren't responsible.

That said, it's *hard* to keep people from killing themselves with your firearm.  It imposes big restrictions on where you can keep it.  Pretty much the only way to stop fire arm suicide is to keep firearms out of the hands of people at risk for suicide, or at least to impose barriers between them getting their crazy impulse and them acting on it.  But just targeting at risk people isn't enough, because it is hard to identify who is "at risk for suicide."  So you have to cast an even wider net than that.

So here are some "responsible gun ownership" tips I follow:

1. No gun in the home if teenagers live there.
2. No guns in the home if anyone who has ever experienced suicidal ideation lives there.
3. No guns in the home if anyone who suffers from depression or a related disorder lives there.  Not even diagnosed, just "seems to get sad sometimes."
4. Sure as hell no guns in the home if anyone who has tried to kill themselves lives there.
5. No guns in the home if anyone is now depressed.
6. No guns in the home if a close family member of anyone living there recently died (especially a spouse or child).
7. No guns in the home if anyone recently lost a job.
8. No guns in the home if people you don't know well live there.
9. No guns in the home if anyone has a substance abuse problem.
10. If you fit one of these categories, no guns in the home.

This doesn't mean no firearm ownership.  Keep 'em at a friends house.  But it does mean that about half of the people I know who own firearms are, by my lights, irresponsible owners, and don't have a leg to stand on when they protest gun control.

Matt Yglesias Wisely Calls For A New Policy That Already Exists

Matt Yglesias thinks that straight up handing money to disaster relief victims subsidizes dumb behavior, and instead that money should be accessed as a low interest loan.  This doesn't remove the subsidy,  but it solves the "we are paying people to live in dumb, flood prone places" problem.  If we loan them money then we aren't paying them, they're paying us, albeit at a subsidized interest rate.

The problem is we already do this.  I worked in disaster relief.  These are the steps:

1. Fema comes and gives you some "don't die on the side of the road" help.  Food, shelter, etc.
2. The SBA comes and checks out your damaged home/small business.  If a vacation home was damaged, you are out of luck.
3. If you can afford a loan at market rates, they offer you a loan at market rates.  That's the only relief you get.  The loan is collateralized by the best collateral available, normally the repaired property.
4. If you can only afford a low interest loan, you get a low interest loan.  Again, collateral is taken.
5. If the SBA decides you can't afford even a super low interest loan (interest around 3 percent), you get your big bags of free money from FEMA.  I assume.  I didn't work for FEMA.
6. Eventually, the insurance company will decide how much they are going to pay you.  Duplicated proceeds (IE, the SBA gave you a loan to rebuild your porch and you just got the same amount from the insurance company) are assigned to the government.

It's true that this still encourages bad behavior, but steps are taken even there:

1. If your home (or business?  I forget) was very badly damaged, the SBA will let you use your loan to move to a non-flood zone rather than rebuilding.
2. If your home or business was damaged by rising water or is in a flood zone, you must purchase flood insurance after you repair it (of course, flood insurance is itself subsidized).
3. If you want extra funds to make improvements that the SBA's appraisers think will make the home more disaster resistant (stilts, say), you get that.

Now Yglesias's system is different from what we have in place, and may have more merit .  He wants to have *states* borrow the money, not individuals, and to do this by giving states access to a fund that doesn't require jumping through congressional hoops every disaster to get its funding.  This would shift the subsidizing of people who can't afford loans from areas of the country not prone to disasters to areas of the individual state not prone to disasters, which is a good or bad idea, depending on how you like federalism.  But his basic insight -- we should loan rather than give disaster relief funds and should be sensitive to the fact that we are encouraging bad behavior -- is one congress has already taken on board.