May God Bless and Keep Bad Arguments.... Far Away From Us!

By Robert H.

Law stud Eugene Volokh has a completely incoherent critique of how a study investigating rates of sexual violence defined "rape."  This is what I can figure out from his blog post: he correctly notes that the study uses a broader definition of rape than what is supported in either American law or traditional usage (they included sex obtained via emotional coercion).  He also thinks the study shouldn't use that definition.  What is incoherent, to me, is how he got from the first sentence to the second one.  Surely he isn't dumb enough to argue that legal or traditional concepts of rape exclusively define how to use the word?

Rape as both a concept and as an English word predates rape as an American crime by centuries (14th century English adoption, from the Latin rapio rapere, meaning to seize), so it would be weird if American legal statutes now get to dominate the word's usage.  What's more, our definition of rape has expanded before and will again, both culturally and legally.  For example, violent spousal rapes used to not be considered rape.  Most people are glad that they now are.

So that puts a big burden on most of us: we cannot oppose any expansion of the definition of rape with arguments that would also have applied, decades ago, against those who expanded "rape" to cover husbands assaulting wives.  These bad arguments include:

1. But that's not how rape is defined legally!
2. But I do that!  Are you calling me a rapist?
3. But lots of people do that, are you trying to make them all rapists?
4. Most people don't use the word that way, so while I agree with you that those actions are wrong, it is imprecise to call them rape.
5. That isn't how the word is traditionally used.
6. That isn't how the word is traditionally understood.

Instead, try "The actions you want to call rape should not be a crime for reason x (bad consequences, unjust, whatever), or should be a different crime from rape because rape's dominant character is y, and the actions you describe lack y.  Rape's dominant character should be Y because of z."

So maybe Volohk could have said,  "Society abhors physical violence and the threat of physical violence, that is why society abhors rape, and therefor 'rape' should only cover situations involving sex coerced by violence or the threat of violence.  Society is cool with pressuring each other emotionally, though, so sex coerced that way isn't rape."  Then the other side can respond.

No one can respond to "no because TRADITION!  Tradition!"

Edit: I am having trouble getting the video to embed, so yo: http://youtu.be/gRdfX7ut8gw

Murphy Attacks the EMH With Evidence of the EMH's Success

By Charlie Clarke

Robert Murphy linked to some articles attacking the Efficient Markets Hypothesis.  Ironically, with the little more hindsight that we have today, we can see that both articles really point to an EMH success.

The articles rely heavily on the claim that Mark Thornton or Austrian Business Cycle Theory beat the market by predicting the housing crash:

Fama says he doesn't see how any of the investors could have predicted the sudden collapse in housing prices. But what if they were familiar with Austrian business-cycle theory, and had read Mark Thornton's 2004 prediction that the boom in housing was too good to be true?

Fama would presumably say that Thornton got lucky, and that his general macro forecasting (using Austrian theory) would "beat the market" half the time and be beaten by the market the other half.

That seems like a reasonable statement.  If Mark Thornton has lots of insight into when the market will be wrong, then he can make lots of money of this insight.  Yet, since the housing price crash, Mark Thornton has been predicting high inflation.  That's not surprise as that comes right out of Austrian Business Cycle Theory and has also taken down wrong famed bubble predictor Peter Schiff after his many hyperinflation forecasts.  Robert Murphy himself made an inflation bet he has since lost.

In hindsight, there is a little more evidence that the Austrians were just lucky.  I should note that these are just two predictions over 10 years, so we are very far from having any data to actually test a theory.  If this is the rate at which Austrian business cycle theory makes predictions, it may take many hundreds of years to actually perform a real test of the predictions.  This highlights some of the challenges of defending EMH.  At any given time, there are numerous predictions that some assets price will rise or fall.  The market proves people right (and wrong) all the time.  And since at any given time there are people both long and short in an asset, any time an asset has a large change in price there are some people making boatloads of money.

Lots of Federal Debt is Held by the Federal Government

By Charlie Clarke

I am not sure it's generally appreciated that the debt ceiling is on gross debt and includes debt that the Federal Government itself holds.  Thus, the treasury issues a bond (an IOU) and then also buys the bond to hold in a government account.  This counts as outstanding debt, but it isn't the more meaningful "debt held by the public."  The debt ceiling constrains the somewhat meaningless gross debt.  Of the $16.8 trillion in total debt, $12 trillion is owed to the public and $4.8 trillion is held by the U.S. government.  Below I have a picture of where those government Treasuries end up.

Libertarian Foot Fetish

By Robert H.

Ilya Somin has a post up arguing for the relative advantages of foot voting vs. ballot box voting.  The argument is drawn from his latest book, so see that for more.  I have two bones to pick with it.

1. Somin is missing, I think, the major critique of foot voting.  He says "I cover several standard objections to foot voting, the problem of moving costs, the danger of  'races to the bottom,' and the likelihood that political decentralization might harm unpopular racial and ethnic minorities."  But he misses the biggest problem with foot voting: it's hard to know what the hell people are voting for.

If a polity elects a politician, it's pretty clear that that happened because of what kind of politician she is.  Special interests or ignorant voters or wise crowds or whoever sat down and said, "this gal's going to a better job than the other guy," or at the very least "this gal belongs to the political team I belong to, and voting for her flatters my team pride."  Whatever the reasoning, the outcome is mainly a reflection of the selectorate's political calculations, political prejudices, political signaling, political whatever.   

But if I move to California, who the hell knows why I did it?  Maybe there's a gold rush.  Maybe I love the ocean.  Maybe I figure it's my last, best chance to be cast in a star trek film (these are presented from least to most likely).  But one thing is for dang sure, we can't know it's related to political anything. 

You can see this in demographics: our most populous states are New York (generally liberal government), Texas (generally conservative government), and California (generally incompetent government).  If good political policies determined foot voting, why are people voting for totally different political policies?  Or maybe your affinity for local politics, not political outcomes, determines foot voting.  In that case, why do huge minorities of republicans live in NYC or democrats live in Texas?  Or maybe Texas is attracting tons of migrants because of its good policies, and New York and California only retain large populations because some sort of population stickiness makes people stay in place.  Ok, but then won't population stickiness undermine the whole "we will get good policy when people vote with their feet" thing?  People won't vote with their feet, they'll just hang around where they live now.  Or maybe this only happens because the federal government is so much more important than state government that it fudges the outcome.  Ok, then, why haven't most Greeks moved to Germany?  

So all this adds up to a big problem.  If people move for lots of non-political reasons, relying on people moving as a way to determine political outcomes has problems.  The best policies in the world could fail to attract migrants for exogenous reasons, and the worst (ok, maybe not the worst) could take advantage of, say, a resource boom to attract lots of folks.  

***

2. Here and elsewhere, I think Somin has been too down on voting voting.  Yes, voters are ignorant.  Yes, they are rationally ignorant, since their vote will normally never matter.  Yes, the heuristics voters could be using ("reward incumbents when things are good" being a classical one) don't really get you to great government.

No, that does not mean democracy is useless.  High praise time: despite those and other political economy constraints, democracy is pretty good at keeping politicians from passing policies that are disastrous for most people.  For example, I'm pretty confident that a party running on an "enslave most of the voters" platform would not win.  Under a rationally ignorant voter model, if the Enslave Everyone party ever comes close to winning then the relative gains from paying attention and voting would go up and lots of voters would stop being ignorant.  Under a median voter model, the median voter would not want to be enslaved.  I could keep going through different models, but come on.  People will rarely vote themselves into slavery. 

That may seem like a really low bar, but it is not!  Human government has just been incredibly freaking awful over the centuries, ranging from the genocidal to the overly bellicose to the (and this is most common) widely extractive.  Governments *have* enslaved most of their people.  At the very least, almost all governments have made women second class citizens.  Any system of government that can avoid that stuff and routinely churn out merely bad policy is doing great.  A few special interests shaving off some GDP and GDP growth?  Possible national debt crisis in 20 years?  Weird predilection for subsidizing the old rather than the poor?  Yes please!  So much better than being a serf!

Point being, the least bad governments have gotten there through representative democracy, and there are theoretical reasons for functioning democracies to give us not-terrible policies, despite voter ignorance. Foot voting, on the other hand, has not been used as often to reach good political outcomes, and doubts about the ability of good policy to attract migrants seriously undermine the theoretical case for relying on foot voting.  

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As I final point, I just want to be clear, if it is not obvious, that relying on voting and relying on foot voting are in tension.  For example, let's say you make American states autonomous power centers that can set their own policy because you want to create a world where people can move between them and foot vote.  Well, by necessity you just stripped folks of their ability to vote vote for a range of federal policies, namely those that would cut into state power.  

The Market Doesn't Know This Isn't Twitter Stock

The Twitter IPO is now public and the suggested ticker symbol is TWTR.  This announcement has created a rally for an unrelated, near bankrupt, retailer named Tweeter Electronics whose stock is traded over the counter under the ticker TWTRQ.  The stock rose from two cents to over ten cents, before trading was halted at five cents.  Sometimes the market is dumb...

Your Plan to Resolve a Debt Ceiling Crisis is Arguably Wrong

Robert H.

I'm seeing people way too confident in their view of what the "correct" constitutional resolution to a breach of the debt ceiling would be, so I want to emphasize how hard the problem is.

In normal times:

1. The president arbitrarily deciding not to fund a program, or to fund it less than congress wants, is a massive usurpation of congress's powers to legislate and to spend money to promote the general welfare.  What's more, in normal times the president not giving a welfare recipient money because he wants to use it for a different purpose would be a due process violation.  Same with not paying out a contract.  Not paying out money to a creditor or pensioner would be a fourteenth amendment section 4 violation.  All totes unconstitutional.

In short, the Prez simply deciding he is going to arbitrarily choose how to spend America's funds is crazy unconstitutional and a crazy infringement on congress's power.

2. In normal times, the president deciding, without constitutional approval, to raise some funds would be crazy unconstitutional.  Congress has the power to tax or borrow, the President doesn't.  This is, like, separation of powers 101 stuff, you guys.

***

Ok, so all those things are clearly true.  But people don't seem to recognize that they are both true?  Matt Yglesias emphasizes point 1 and then says "so clearly the president should just breach the debt ceiling."  Laurence Tribe emphasizes point 2 and then says "so clearly the president prioritizing payments is the lesser of two evils."

But no, guys, neither of these are clearly a lesser evil.  They are both terrible.  Which one of these terrible and unconstitutional things might be, due to circumstances, constitutional in this case is a hard question.

That said, these are what I think the two correct answers might be, from most likely to least likely, but I am still very unsure about either:

1.  This is clearly a failure of the constitution and there is no "correct" way out.  So long as he limits his unconstitutional looking actions to narrowly solving the crisis, either by prioritizing payments or by borrowing more, how the President resolves two contradictory and equally grave constitutional obligations is a political question and the courts shouldn't review it.

2. Both arbitrarily choosing what to fund and borrowing money to cover what congress wants to spend seize congressional power in a (normally) hideously unconstitutional way, but arbitrarily prioritizing payments has the added problem of violating the due process rights of the people owed those payments, since the amount of due process you are owed when you are deprived a legal benefit is normally greater than "the president doesn't prioritize your program and really wants to spend the money elsewhere."  So, given the extra constitutional problems prioritizing payments brings, go with borrowing more.

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A simple "he has to do it because of the fourteenth amendment says you have to honor debt" argument, by the by, is likely wrong.  The fourteenth amendment makes a distinction between debts and obligations, and only says that the validity of the former cannot be questioned.  In the fourteenth amendment "debt" is probably stuff like money the government owes to creditors, money owed to pensioners, and payment for services rendered.  I'm pretty sure you could pay all of that out of the revenue we collect.

Interest and Prices, p.16

Blogging Woodford's classic tome:

The effectiveness of changes in central-bank targets for overnight rates in affecting spending decisions (and hence ultimately pricing and employment decisions) is wholly dependent upont the impact of such actions upon other financial-market prices, such as longer-term interest rates, equity prices, and exchange rates...It is the expected future path of short-term rates over coming months and even years that should matter for the determination of these other asset prices, rather than the current level of short-term rates by itself.  Thus the ability of central banks to influence expenditure, and hence pricing, decisions is critically dependent upon their ability to influence market expectations regarding the future path of overnight interest rates.