Archive for the 'Current Events' Category

Family Values

Followup to last night’s debate:

Didn’t Rubio essentially disqualify himself when he said he’d prioritize his job as a parent over his job as President of the United States?

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Debate Blog

Heard only a little of the undercard, but I do have some comments on it. But I’ll add those later.

Re the main debate (I’ll add to this every twenty minutes or so till the debate is over): (Note this is live-blogging, hence not always carefully thought through).

Continue reading ‘Debate Blog’

Overprotective Parents, Falling Optimists, and Other Dangers

My friend and former colleague (and our occasional commenter), James Kahn, weighs in on Federal Reserve policy in a thoughtful piece over at Fox Business.

Some highlights:

Proponents of the Fed’s ZIRP (zero-interest rate policy) will quickly point out that the low inflation numbers in recent years belie any claim that policy has been too loose. In a sense they are right: Policy has not been as loose as interest rates suggest, because the Fed has been pushing forward on one lever (asset purchases) while pulling back on another (paying interest on bank reserves). With the economy’s mediocre fundamentals (those supply factors mentioned above), banks are happy to hold large reserves of cash, thus blunting the impact of the Fed’s enormous balance sheet increase.

Bernanke’s gloating about the lack of inflation is thus somewhat misplaced. The concern about losing control of inflation (in one direction or the other), has always been (or should have been), on the Fed’s ability to manage the transition back to normalcy, i.e. the unwinding of its balance sheet, the raising of interest rates, and the drawing down of bank reserves. The Fed may be able to manage all this, but so far it is just lots of rhetoric – it brags about the ability to do so while postponing actually doing it.

In other words, thoughtful critics have said all along that there’s an inflation risk associated with the (future) transition back to normal monetary policy. Less thoughtful counter-critics have claimed to refute that observation with the counter-observation that right now, inflation doesn’t seem to be a problem. Like the optimist in free fall, they figure we’re doing alright so far.

Another highlight:

Continue reading ‘Overprotective Parents, Falling Optimists, and Other Dangers’

Party of the Rich

I did not watch the debate. I chose to go to my aerial silks lesson instead.

When I got home, the debate was half over. I turned it on for about a minute, during which Marco Rubio managed to turn my stomach to the point where I just couldn’t go on.

Apparently he’s all worried about American tech companies “taking advantage” of relaxed immigration laws to hire foreigners who can work more efficiently than Americans. Any firm that does this should be subjected to strict regulations on who they can hire going forward, etc. etc. And there should be a 180 day waiting period before they can hire that foreigner in the first place, etc. etc.

So let’s be clear about this: Rubio cares enormously more about American engineers than about American consumers, American investors, and low-skilled American workers, all of whom benefit from more efficient engineering. Who do you suppose is richer to begin with — the average engineer, or the average consumer/investor/low-skilled worker?

I cannot stand this stuff.

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Bad Planning

ppIn a bid for ongoing taxpayer support, Planned Parenthood president Cecile Richards will be appearing before Congress today. It’s reported that as part of her testimony, she will admit that only 1 percent of Planned Parenthood’s affiliates currently harvest fetal tissue, and that even those affiliates charge only modest fees of $60 per tissue specimen.

Which raises the question: Why should we give money to an organization that has access to a valuable resource but can’t be bothered to sell it to the highest bidder?

When your brother-in-law is out of work, you might be inclined to help him out. When your brother-in-law is out of work, deluged with job offers, and refusing even to consider them, you’ll probably be less inclined. Planned Parenthood is that brother-in-law.

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Ask Not What the Church Can Do For You; Ask What You Can Do For the Church

Pope Francis is coming to New York, and Cardinal Timothy Dolan is disturbed about ticket-scalping:

“Tickets for events with Pope Francis are distributed free [via lottery] for a reason — to enable as many New Yorkers as possible, including those of modest means, to be able to participate in the Holy Father’s visit to New York,” Cardinal Dolan, the archbishop of New York, said in a statement. “To attempt to resell the tickets and profit from his time in New York goes against everything Pope Francis stands for.”

So according to Cardinal Dolan, “everything Pope Francis stands for” consists of the proposition that for New Yorkers of modest means, nothing should take precedence over turning out to see Pope Francis — not groceries, not medicine, not car repairs, not any of the other things that people can buy with the proceeds from selling their tickets.

I doubt that Pope Francis is quite as egomaniacal as the Cardinal paints him. But apparently the Cardinal himself would rather see poor people cheering for the Pope than improving their lives.

Minimum Logic, Part 2

Yesterday’s post touched on several related points, and I’m afraid the most important one got buried near the end, so I want to repeat it:

1) In the presence of an effective minimum wage, all benefits of the earned income tax credit are transferred to employers. This is, as they say, a matter of Economics 101. (Edited to add: As Bennett Haselton points out in comments, I should have said “dissipated”, not “transferred to employers”. The point remains that the benefits don’t go to the workers, which, for this discussion, is what matters.)

2) Paul Krugman argues that we should have an effective minimum wage in order to prevent some of the benefits of the earned income tax credit from being transferred to employers.

In this context, it should be remembered that Krugman ordinarily reserves his deepest scorn for those who, according to Krugman, willfully ignore the lessons of Economics 101.

Let’s review the argument for 1), with reference to the graph below. In the presence of, say, a $5-an-hour minimum wage, employers will hire 1000 workers. Because more than 1000 people want to work, employers can extract extra concessions in the form of reduced on-the-job-training, shorter breaks, and harsher working conditions. They can get away with exactly $1-an-hour’s worth of this, because even at an effective wage of $4, there are still 1000 people willing to work.

Edited to add: I am assuming that these concessions are of relatively little value to employers (otherwise they wouldn’t have waited for the EITC to demand them!), so that the quantity of labor demanded does not change.

Now let’s add a $3-an-hour earned income tax credit, which shifts the labor supply curve to the dashed position. Ordinarily, this would lead to a lower equilibrium wage, transferring some of the benefits of the EITC to employers. But in the presence of the $5 minimum, wages can’t drop, and employment remains fixed at 1000, though now even more people want to work, allowing employers to impose even harsher conditions until the effective wage drops to $1 an hour (the wage at which there are still 1000 people willing to work). This process transfers all the benefits of the EITC away from the workers.

Continue reading ‘Minimum Logic, Part 2′

Minimum Logic

The question is often raised: “Why would you ever want to raise the minimum wage when you could raise the earned income tax credit instead?”. In other words, if you’ve got a choice between two ways to increase the effective wage rate, why would you choose the one that reduces employment over the one that increases employment?

Paul Krugman has an answer. He’s argued on numerous occasions that the EITC and the minimum wage are complements, not substitutes — that is, each makes the other more effective. So, according to Krugman, once you’ve raised the EITC, the case for a minimum wage hike becomes stronger, not weaker.

Here’s his argument: When you raise the EITC, more people enter the labor market. The increased supply of labor tends to drive wages down, which transfers some of the benefit from the workers you intended to help to the employers and/or consumers who you presumably care about less. To prevent this perverse consequence, one needs a hike in the minimum wage.

The other day, a colleague (who I’m not naming because I’m not sure whether he’d want to be quoted) pointed out that this argument makes not a shred of sense. Here’s why: Any effective minimum wage (that is, any minimum wage set above the wage rate that would prevail in an unregulated market) suffices to do the job Krugman wants it to do. At best, then, Krugman has made an argument for having some minimum wage, not a case for raising it.

Here’s the picture:

Continue reading ‘Minimum Logic’

The Ashley Madison Test of College Faculty Cluelessness

Science marches on. Recent developments have made it possible to answer the age-old question: What percentage of your college faculty used their work email addresses to establish accounts at Ashley Madison?

In a sample of 33 highly ranked colleges, the answer ranges from a low of 1.6% at Oberlin to a pretty much unbelievable 22.6% at the University of Minnesota. (The full rankings appear at the bottom of this post.)

I got these percentages by counting the number of unique email addresses ending with, say, “” in the leaked Ashley Madison database, and dividing by the number of Harvard faculty, as reported by the college either on its website or in its Common Data Set filings.

The methodology, is, of course, fraught with peril. First, the majority of academic email addresses belong not to faculty, but to students. But it seems like a good guess that faculty (by virtue of their average age) are both far more likely than students to be trolling Ashley Madison, and far more likely than students to be clueless about acquiring anonymous email addresses. Besides, a quick spotcheck of the email addresses in the Ashley Madison database does indeed confirm that most of them (at least in one small but random sample) belong to faculty members.

There are also, of course, staff, and the staff-to-faculty ratio probably varies a lot from school to school, so weeding out the staff could change the relative rankings quite a bit. But again, my (still small but still random) sample continues to indicate that these are mostly faculty members.

A far more important issue might arise from the fact that some universities have multiple campuses. It’s possible, for example, that the 657 email addresses in Minnesota’s numerator came from many campuses, while the 2913 facuty in their denominator represents only the main campus. This will tend to inflate the rankings of the big state schools, and might account for the appearance of Minnesota, Virginia, Michigan and Cornell at the top — suggesting that if the numbers were crunched more carefully, the prize might go to Liberty University. If I were going to use these rankings for anything important, I’d give this issue a harder look.

One might also note that anybody can type anybody else’s email address into Ashley Madison, but I’m inclined to discount the importance of that, because it’s hard for me to see what the motive would be (except, perhaps, as part of a campaign to flood someone’s email box with unwanted replies).

With those caveats, feel free to use these rankings as a measure of your college faculty’s average cluelessness, at least when it comes to maintaining anonymity over the Internet.

Continue reading ‘The Ashley Madison Test of College Faculty Cluelessness’

Politics As Usual

paulTo me, the biggest disappointment of this camapaign season has been Rand Paul. I’m sure there will be others.

I just saw Senator Paul on Fox News, where he made four substantive statements, one nonsensical, one innumerate, one economically illiterate, and one evasive to the point of dishonesty.

On the subject of collecting cellphone data without warrants, the host posed a hypothetical situation where a foreign terrorist is identified and we want to know which Americans he’s been talking to for the past six months. Paul’s answer: Get a warrant. The problem, of course, is that not even the US government, even newly armed with a warrant, is powerful enough to gather calling data that vanished into the ether six months ago. When the host pointed this out, Senator Paul ignored it.

On the subject of his tax plan, when presented with estimates that he’d be cutting taxes by 3% for the poor and by 13% for the rich, the senator could either have denied those numbers or defended them. Instead, he patiently explained that if you cut everyone’s taxes by 10%, then of course the rich will get bigger cuts (in absolute terms) than the poor. True, but to think that this was in any way relevant to the question requires a complete abandonment of all knowledge of arithmetic.

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The Second Debate in Real Time

This thread is your opportunity to post comments on the second (9PM eastern time) Repbulican candidates’ debate, in real time as the debate occurs. I might or might not find the stomach to participate.

Keep in mind the guidelines I posted yesterday:

I will have zero tolerance for comments that contribute nothing to the enterprise. In other words, anything of the form “Ha ha! I knew so-and-so was an idiot” will be deleted as soon as they appear. Ideally, all comments will contain food for thought. Bonus points for pointing out subtle self-contradictions. If you insist on posting pure insults, they should at least be hilarious.

Now have at it.

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The First Debate in Real Time

This thread is your opportunity to post comments on the first (5PM) Repbulican candidates’ debate, in real time as the debate occurs. I might or might not find the stomach to participate.

Keep in mind the guidelines I posted yesterday:

I will have zero tolerance for comments that contribute nothing to the enterprise. In other words, anything of the form “Ha ha! I knew so-and-so was an idiot” will be deleted as soon as they appear. Ideally, all comments will contain food for thought. Bonus points for pointing out subtle self-contradictions. If you insist on posting pure insults, they should at least be hilarious.

Now have at it.

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Goin’ To the Candidates’ Debate

I might regret this, but…..

Thursday evening (August 6) there will be two debates among the Republican candidates for president, the first beginning at 5PM eastern time and the second at 9PM eastern time.

Shortly before each debate, I plan to open a thread and invite readers to post comments in real time as the debates progress. Each thread will appear on this site ten minutes before the debate’s starting time.

I will have zero tolerance for comments that contribute nothing to the enterprise. In other words, anything of the form “Ha ha! I knew so-and-so was an idiot” will be deleted as soon as it appears. Ideally, all comments will contain food for thought. Bonus points for pointing out subtle self-contradictions. If you insist on posting pure insults, they should at least be hilarious.

I might or might not join the fray myself.

The first post will appear slightly before 5 and the second shortly before 9. I am heading out now to stock up on junk food.

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News Flash

Today, the Supreme Court ruled that the president of the United States can do any damn thing he wants to, regardless of the law. Where were these guys when Nixon needed them?

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Bosonic Ka-Ching Theory

George Johnson of the New York Times writes that:

In a saner world, where science and the law meshed more precisely, a case like Firstenberg v. Monribot would have been dead on arrival in court.

Arthur Firstenberg, you see, is suing his neighbor, Raphaela Monribot, for bombarding him with photons from her iPhone, her WiFi connection, her dimmer switches and her fluorescent bulbs (all as side effects of her ordinary use of these devices). Mr. Firstenberg believes (or claims to believe) that said photons are damaging his health — a belief with essentially no scientific basis.

Mr. Firstenberg requests $1.43 million in damages, so perhaps we should think of this as an exercise in bosonic “ka-ching” theory. The case has gone on for five years, and might be headed to the New Mexico Supreme Court. Estimated court costs so far exceed a quarter of a million.

It would be easy — in fact, Mr. Johnson of the Times finds it extremely easy — to see this case as nothing but a minor tragedy with comic overtones. But the issues it raises are deeper than that.

Continue reading ‘Bosonic Ka-Ching Theory’

Sweet Talk

Is it only me who is driven crazy by the American Heart Association’s campaign against “added sugars”, and the attendant campaign to label foods for their added sugar content?

Look. I am no expert, so correct me if I’m wrong, but as far as I can tell from a trip around the Internet, sugar is sugar. More precisely, fructose is fructose, glucose is glucose, and so it goes. The fructose in an apple is exactly as bad for you as the fructose in a Cola drink.

Now an apple provides all sorts of good nutrients and fiber that are missing from the Cola drink. But if you want to send that message, the way to send it is to advertise that apples provide all sorts of good nutrients and fiber that are missing from Cola drinks — not to suggest (nonsensically, as far as I can tell) that the “added sugar” in the Cola drink is somehow different from the non-added sugar in an apple. If your main concern is to watch your sugar intake, the distinction doesn’t matter. If your main concern is, say, Vitamin C, then sugar counts are irrelevant anyway. If you care a little about a lot of things, then it’s good to know sugar contents, vitamin contents, and a whole lot more. But I cannot imagine any individual, in any state of the world, who is better off counting added sugar than counting total sugar.

Continue reading ‘Sweet Talk’

Life in Baltimore

Christopher Ingraham, writing in the Washington Post, points with alarm to a 20-year gap in life expectancies between the poorest and the richest Baltimoreans. This begs the question of whether that gap is too small or too large, or better yet, what the optimal gap would be. Surely it is not zero, which is to say that longevity is only one of the problems poor Baltimoreans face, that directing more resources to life extension means directing fewer resources elsewhere, and that redirecting enough resources to close a 20-year longevity gap would almost surely leave poor Baltimoreans worse off than they are. Even if we were prepared to spend whatever it takes to close that gap, it’s not implausible that most poor Baltimoreans would rather have the cash.

More striking is Ingraham’s observation, in the same article, that in some Baltimore neighborhoods, life expectancies are lower than they are in North Korea. Poor Baltimoreans are certainly wealthier than average North Koreans, so you’d expect them to live longer. Unless there’s some other variable at play (like, for example, a Korean genetic predisposition to long life), this suggests either that poor Baltimoreans die too young or that North Koreans live too long. It’s not clear which.

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Those Clinton Emails

Hillary ClintonIf Jeb Bush is elected president and appoints me Secretary of State, the first thing I will do is set up a private server to handle my official email correspondence. This is not because I expect to have anything to hide, but because I expect my email to be important, and I do not want my service to depend on the whims of the sorts of aggressively incompetent nincompoops who, in my experience, tend to populate the IT departments of large institutions.

The University of Rochester, where I work, provides email services to all its employees. I do not use those services. Instead, I own several Internet domains and manage my own email For all I know, the University IT center might currently be 100% nincompoop-free, but all past experience suggests that it’s unlikely to stay that way very long.

Yes, I realize that one is still at the mercy of one’s upstream providers. But I am here to tell you from experience that the frequency of outages and other disasters is now about 10% of what it was in the years when I was at the mercy of the IT managers.

Continue reading ‘Those Clinton Emails’

What Is Larry Summers Thinking?

Larry Summers, writing in the Washington Post, tells us that:

While the recent decline in energy prices is a good thing in that it has, on balance, raised the incomes of Americans, it has also exacerbated the problem of energy overuse. The benefit of imposing carbon taxes is therefore enhanced.

He might have an argument in mind, but he doesn’t seem to have presented it.

The benefit of carbon taxes, as Summers says, comes from “the recognition that those who use carbon-based fuels or products do not bear all the costs of their actions.” In other words, without a tax, people use more oil than they should. I’m with him so far. Now what Summers appears to be thinking is that when the price of oil falls, people use more oil, which increases the gap between what they do use and what they should use. What this overlooks is that when the price of oil falls, there are increases in both the amount people do use and the amount people should use — and hence no particular reason to believe that the gap has grown.

Having made such an argument, one should draw a picture to make sure it’s right. Here are the demand and supply curves for oil. Points on the demand curve show the value to consumers of individual gallons of oil; points on the supply curve show the cost to producers of supplying those individual gallons; points on the social marginal cost curve show the cost to society (including pollution costs) of supplying those individual gallons:

Ideally, oil would be supplied only up to the point where demand crosses social marginal cost and no further. Unfortunately, it’s supplied up to the point where demand crosses supply. Those excess gallons create social losses measured by the skinny rectangles in the left-hand panel (the social loss from a gallon of oil is equal to the social cost of providing that gallon, minus its value to a consumer). These add up to the area labeled X on the right. The value of an appropriate-sized carbon tax is that we’d avoid that social loss. That is, the benefit of a carbon tax is measured by area X.

Now suppose oil becomes available more cheaply. This shifts both the supply curve and the social marginal cost curve vertically downward by the same amount and shifts area X to a new location. As you can see in the picture, there’s no particular reason to think that the area’s gotten any bigger:

Continue reading ‘What Is Larry Summers Thinking?’

Trey Gowdy Thinks You’re Stupid

Here we have six and a half minutes of Representative Trey Gowdy badgering Jonathan Gruber while studiously avoiding any form of substance.

There’s a lot Gowdy could have asked, like “So, is it actually the case that a tax on insurers is equivalent to a tax on the insured?” or “Can you explain why those taxes are equivalent?” or “Are there any important ways in which the two policies are not equivalent?” or “Why do you think a tax on `Cadillac plans` was good policy in the first place?”

Instead, all he can think of to ask — over and over and over and over and over and over and over again — is, “Why did you call the American people stupid?”, as if there were anything useful to be learned from the answer.

I see one possible explanation here. Apparently Gowdy believes his constituents prefer mindless bullying to policy enlightenment. In other words, he acts on the assumption that the American voters are fundamentally stupid. Maybe someone should spend six and a half minutes asking him why.

Edited to add: I said this in a comment, but want to add it to the post. It either is or is not important to determine the truth of the matter regarding the issues on which Gruber spoke deceptively — e.g. in what sense are these two taxes equivalent, etc. If these questions are not important, why are we having this hearing in the first place? If these questions are important, then why is Gowdy so uninterested in them?

Edited to add further: I said this also in a comment, but want to add it here. Gruber is lying. Gowdy has a chance to question him. Gowdy can use that chance either to chant the equivalent of “Liar, liar, pants on fire” or to pin him down on the substance of what he’s lying about, e.g. “Do you or do you not stand by the statement that a tax on insurers is equivalent to a tax on the insured?”. I assure you that Gruber prefers the former, and that’s what Gowdy is giving him. Presumably that’s because he thinks voters are too stupid to appreciate the latter.

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In yesterday’s post about Eric Garner, I wrote:

Suppose you are a typical street vendor of an illegal product, such as, oh, say, untaxed cigarettes.

Suppose the police make a habit of harassing such vendors, by confiscating their products, smacking them around, hauling them off to jail, and perhaps occasionally killing a few.

I have good news: The police can’t hurt you.

Here’s why: Street vending can never be substantially more rewarding than, say, carwashing. If it were, car washers would become street vendors, driving down profits until the rewards are equalized. If car washers were happier than street vendors, we’d see the same process in reverse. (The key observation here is that it’s very easy to move back and forth between street vending and other occupations that require little in the way of special training or special skills.)

Because police harassment of street vendors has no effect on the happiness of car washers, and because street vendors are always just as happy as car washers, it follows that police harassment has no effect on the happiness of street vendors.

So if you’re a street vendor, the police can’t hurt you. On the other hand, when the police go around putting people in deadly chokeholds, they’re clearly hurting someone. So the question is: Who?

Answer: Not the vendors, but their customers. Fewer vendors means higher prices. That hurts consumers, and the sum total of that harm adds up to the harm that we see in the viral videos.

Several commenters jumped in to question the claims that:

  1. If you’re a street vendor, the police can’t hurt you.
  2. The costs of police harassment ultimately fall on consumers.

I’d like to thank those commenters — particularly David Sloan, Keshav Srinivasan and Eric — for keeping me honest and for persisting when I was initially too quick to dismiss their questions.

With regard to the first point, what I actually should have said was:

  • If you’re a street vendor, the police can’t hurt you more than an eentsy weentsy bit.

That’s because harassment causes street vendors to move into a great many other occupations, one of which is car washing. For every displaced street vendor we get, say, 1/2000 of an extra car washer — bringing wages ever so slightly down in the car washing industry and therefore making both car washers and street vendors ever so slightly worse off.

I do not consider this a significant correction.

With regard to the second point, it would have been more accurate to say this:

  • The greater the harassment, the more of its burden falls on consumers in the harassed industry.

More precisely, if we consider the harassment equivalent to a tax of T, then the burden on producers tends to grow linearly in T while the burden on consumers in the harassed industry tends to grow quadratically in T.

However, here are two points I now realize I’d overlooked:

  1. The linear/quadratic thing is at least partially misleading, because there is a limit on how big T can be — if T grows beyond a certain point, then the first industry disappears entirely. So we’re not looking at arbitrarily large T’s here, making “growth rates for large T” less relevant. Thus workers collectively can in fact — and in contrast to what I said yesterday — bear a substantial burden of the cost.
  2. While consumer surplus in the first industry shrinks quadratically in T, consumer surplus in the other industries grows quadratically in T, and in fact, the total consumer surplus across all industries can increase as a result of the street harassment. Thus it’s possible for workers to bear more than the entire burden of the harassment!

Here’s an explicit model:

Continue reading ‘Corrections’

Three Short Essays on Eric Garner


If you asked me to make the best possible argument in favor of the police action that led to the death of Eric Garner, it would go like this:

  1. Cigarettes are taxed.
  2. You can’t have taxes without enforcement. In this case, the enforcers are the police.
  3. Where there are enforcers, there will be confrontations.
  4. When sellers refuse to cooperate, the enforcers have only two options: Walk away, or resort to violence.
  5. Enforcers who walk away soon lose their credibility and their effectiveness. This is more than doubly important for a police officer, who needs that credibility when he confronts far more dangerous criminals.
  6. Therefore, we cannot fault the police for resorting to violence.
  7. Violence is sometimes catastrophic. That’s sad, but it’s not news.

If you asked me to make the best possible counterargument, it would go like this:

  1. You could say exactly the same thing about a protection racket.

That is, every protection racket needs an enforcer. When shopowners don’t pay up, the enforcer has only two options: Walk away or resort to violence. To walk away would sacrifice credibility. Therefore we cannot fault the enforcer for resorting to violence. Sometimes violence gets pretty messy. So it goes.

The force of that reductio ad absurdum depends on the analogy between taxation of cigarettes and the demand for protection money. I think that reasonable people can disagree about the depth of that analogy.

But the lesson remains that every law must occasionally be enforced through potentially catastrophic violence, or, to put this more succinctly, all legislation is deadly. Violence is part of the cost of making laws, and it’s a cost the makers of new laws would be well advised to contemplate.

Continue reading ‘Three Short Essays on Eric Garner’

Two Questions for Bob Murphy

Bob Murphy objects to my recent defense of Jonathan Gruber. I have two questions for Bob.

Suppose a newly elected Republican president wants to exempt all investment income from taxation. There are two ways to do this:

1) Retain the income tax, but exempt all interest, dividends, and capital gains (while also abolishing the corporate and estate taxes).

2) Scrap the income tax and replace it with a national consumption tax.

The president’s chief economic advisor, like all economists, is well aware that these two policies are essentially equivalent in the sense that, once prices, wages and interest rates adjust to the new policies, each individual taxpayer is burdened exactly as much by policy 2) as by policy 1). More precisely, at least following an initial adjustment period each individual taxpayer enjoys exactly the same lifetime stream of consumption under policy 2) as under policy 1).

Let’s suppose also that the chief economic advisor believes that policy 1) is vulnerable to scurrilous class-warfare-themed attacks and therefore cannot be sold to the American people. Policy 2), however, stands a chance of passage. He therefore goes around honestly touting what he perceives to be the clear virtues of policy 2), choosing not to mention that it’s equivalent to policy 1).

Continue reading ‘Two Questions for Bob Murphy’

More Thanks

Yes, I’ve already got one Thanksgiving post up. But we should not skimp on gratitude, so here’s another:

Today I am thankful that I live in a time and a place where indictments are handed down (or not) by grand juries that have weighed a wide range of evidence, and not by angry mobs.

I’m thankful too for all my readers. Have the very best of holidays.

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Borderline Disorder

Here’s one difference between me and Paul Krugman: He enthusiastically supports President Obama’s new immigration policy, which he calls a matter of human decency. I grudgingly support President Obama’s new immigration policy, which I call a bit less indecent than the policy it replaces.

krugHere’s another difference between me and Paul Krugman: I believe it’s the job of an economics journalist to call attention to unpleasant tradeoffs and offer frameworks for resolving those tradeoffs. Krugman apparently believes it’s the job of an economics journalist to sweep all tradeoffs under the rug in the name of advancing your policy agenda — appealing, if you will, to the stupidity of the American op-ed reader.

Krugman, for example, tells us that he opposes deportations because they’re cruel, but also opposes open borders because they’d make it both economically and politically impossible to maintain the modern American welfare state.

In furtherance of which, he offers this kind of claptrap:

Second, there are large numbers of children who were born here … but whose parents came illegally, and are legally subject to being deported.

What should we do about these people and their families? There are some forces in our political life who want us to … deport the undocumented parents of American children and force those children either to go into exile or to fend for themselves.

But that isn’t going to happen, partly because, as a nation, we aren’t really that cruel

Dammit, I hate this stuff. Krugman says (and I agree with him) that it’s cruel to deport people. He ignores the fact that it’s also cruel to keep other people out. Krugman says (and I agree with him) that letting more people in would put pressure on the welfare system. He ignores the fact that allowing people to stay also puts pressure on the welfare system. Why should we prioritize kindness to those who are already here over kindness to those who are clamoring to get here?

There might be a really good answer to that question, but you’d never know it from reading Krugman. In fact, the takeaway from Krugman’s column is that the cruelty of deportations is unacceptable only because Krugman says so, and the cruelty of closed borders is a necessary evil only because Krugman says that too. So the next time you want to know whether some other policy is unacceptably cruel or not, the only way to find out is to ask Paul Krugman.

And then there’s more:

Continue reading ‘Borderline Disorder’

Who I Hope We Are Not as Americans

So let me get this straight. We drew this imaginary line in the desert. We’ll no longer use force to move people from this side to that side, but we will still use force to prevent movement from that side to this side.

This is good news for the people who are on this side at the moment, and I share their joy. But it does little for their less fortunate cousins who never made it here in the first place.

The president talks about “who we are as Americans”. I’d have hoped that we as Americans were not so basely hypocritical as to find it imperative that we stop bullying Group A (i.e. those who are here), but equally imperative that we continue to bully the even less fortunate Group B (i.e. those who aspire to be here).

This is a day to celebrate and a day to mourn.

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In Defense of Gruber

Regarding Jonathan Gruber and the Cadillac tax, I think a little historical context will be useful:

1) Our tax system subsidizes employer-provided health insurance. That’s dumb. Pretty much all economists agree that it’s dumb.

2) On the other hand, it’s politically hard to eliminate a subsidy once people get used to it.

gruber3) In 2008, we had an election. The candidates were named Barack Obama and John McCain. Exactly one of those candidates took the politically courageous step of proposing to eliminate the subsidies (and replace them with other subsidies, far more sensibly designed). The other candidate took the low road, leaping to the defense of subsidies he had to know were indefensible, playing to the crowd, and staking all on what could reasonably be called “the stupidity of the American voter” (though I myself would prefer to call it “the inattentiveness of the American voter”). That candidate won in a landslide.

4) Once elected, President Obama’s demagogy came back to haunt him. On the one hand, he knew that you cannot have sensible health care reform without curtailing those subsidies. On the other hand, he’d publicly committed himself to preserving them.

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The Rising Sea

grothAround 1970, Alexander Grothendieck, the greatest of all modern mathematicians and arguably the greatest mathematician of all time, announced — at the age of 42 — the official end of his research career. Another great mathematician once told me that he thought he knew why. Following two decades of discoveries and insights that, one after the other, stunned the mathematical world, Grothendieck had, for the first time, achieved an insight so unexpected and so consequential that he himself was stunned. Grothendieck had discovered his own mortality.

I am told that just a few hours ago, his vision proved accurate. But the notion of Grothendieck as a mortal seems hard to swallow. He dominated pure mathematics not just through the force of his ideas — ideas that seemed eons ahead of everyone else’s — but through the force of his personality. When, around 1960, he announced his audacious plan to solve the notoriously difficult Weil conjectures by first rewriting the foundations of geometry, dozens of superb mathematicians put the rest of their careers on hold to do their parts. The project’s final page count, including the twelve volumes known as SGA (Seminaire de Geometrie Algebrique) and the eight known as EGA (Elements de Geometrie Algebrique) approached 10,000 pages. The force and clarity of Grothendieck’s unique vision scream forth from nearly every one of those pages, demanding that the reader see the mathematical world in a new and completely original way — a perspective that has proved not just compelling, but unspeakably powerful.

In Grothendieck, modesty would have been ridiculous, and he was never ridiculous. Here, in his own words — words that ring utterly true — is Grothendieck’s own assessment of how he stood apart (translated from French by Roy Lisker):

Most mathematicians take refuge within a specific conceptual framework, in a “Universe” which seemingly has been fixed for all time – basically the one they encountered “ready-made” at the time when they did their studies. They may be compared to the heirs of a beautiful and capacious mansion in which all the installations and interior decorating have already been done, with its living-rooms , its kitchens, its studios, its cookery and cutlery, with everything in short, one needs to make or cook whatever one wishes. How this mansion has been constructed, laboriously over generations, and how and why this or that tool has been invented (as opposed to others which were not), why the rooms are disposed in just this fashion and not another – these are the kinds of questions which the heirs don’t dream of asking . It’s their “Universe”, it’s been given once and for all! It impresses one by virtue of its greatness, (even though one rarely makes the tour of all the rooms) yet at the same time by its familiarity, and, above all, with its immutability.

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Now What?

It was the election of 1994 that knocked the idealism out of me. Republicans ran on a national platform of reform, they won — and nothing happened. My recollection (someone correct me if I have this wrong) is that a series of substantial reform bills passed the Republican house in short order, and all of them died in the Republican senate. My guess (without having thought too hard about it) is that this is the natural order of things because Senate campaigns are so expensive that no matter what legislation the House sends up, there’s always some committee chairman with a large donor who opposes it.

There is no reassurance to be had from the identities of the likely new chairmen-to-be: Thad Cochran at Appropriations, Pat Roberts at Agriculture, Jeff Sessions at Budget, Orrin Hatch at Finance. Even aside from the question of what you can or can’t get past the White House, these are not the sort of people I want rewriting the tax code; they are not the people I want setting agricultural policy; they are not the people I want in charge of immigration reform.

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Amazon’s Bargemen

In early 20th century China, goods were frequently transported by barges pulled by teams of six men. The men were paid only if they delivered their goods on time. Therefore they all agreed to pull as hard as possible.

This is a classic example of what economists call a Prisoner’s Dilemma — a situation where everyone wants to cheat, regardless of whether he believes the others are cheating. Any bargeman might reason that “If the others are pulling hard, we’re going to make it anyway, so I might as well relax. And if the others are not pulling hard, we’re not going to make it anyway — so I still might as well relax .” Therefore they all relax and nobody gets paid.

According to my late and much lamented colleague Walter Oi, the bargemen frequently solved this problem by hiring a seventh man to whip them whenever they appeared to be giving less than 100%. You might suppose, at least if you’re a person of ordinary tastes, that hiring a man to whip you is never a good idea. There’s a sense in which you’d be right. But hiring a man to whip your colleagues can be a very good idea indeed, and if that requires getting whipped yourself, it might prove to be an excellent bargain.

If I’d lived in China a hundred years ago, I believe I’d have gone out of my way to buy goods from the teams with whipmasters — partly because that’s where I’d expect the best service, but also partly because I’d feel a certain combination of admiration and loyalty for the teams who were working so hard to earn my business.

That’s how I feel about the folks at Amazon. Based on the fabulous service I’ve been getting, I’m confident these people are knocking themselves out to do a good job for me. In fact, it’s been widely (and perhaps accurately) reported that during a heat spell a couple of summers ago, workers in an un-airconditioned Pennsylvania warehouse continued to fill orders even as several were being treated for heat sickness.

There’s a narrative going around that tries to paint these workers as victims, though I’ve heard no version of that narrative that makes clear who, exactly, is supposed to have victimized them — the stockholders? the management? the customers? the do-nothing Congress? But there’s little point in trying to make sense of this narrative, since it’s so obviously wrong to begin with.

Imagine a team of ambitious but relatively low-skilled workers. They know that if they all push themselves to the limit, they’ll all be more productive and therefore earn higher wages. They also know that if they all promise to push themselves to the limit, they’ll all break their promises, figuring that success or failure depends almost entirely on what the others do.

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