Business Insider’s Chart of the Day purports to show the “dismal” state of America’s household net worth. The authors describe the chart as showing the ratio of household net worth to disposable personal income “falling back to levels last seen in the late 1980s and early 1990s.”
Now, the main thing that makes our current position look bad is those two big spikes on the far right. As the authors note, those correspond to the dot-com bubble and housing bubble, respectively. And since those were, y’know, bubbles, they don’t really represent the value of fundamentals. Those years should arguably be ignored. But once you ignore those years, a quick eyeball reveals that the profile is pretty much flat. The ratio has hovered around 500% for over half a century, with the exception of a dip during the 1970s and early 1980s. And 500% is where we are now. How is this a problem?
Maybe the authors think the figure should be rising over time, and the flatness of the graph (once the bubble are removed) reflects stagnation. But that’s a non sequitur. Since the figure is a ratio, it’s perfectly consistent with both rising net worth and rising disposable income. For the ratio to trend upward, net worth would need to rise more quickly than disposable income. But as far as I know, there’s no reason to expect that. Am I missing something?
Monday, July 26, 2010
How Is This a Problem?
Thursday, July 15, 2010
When Nudging Isn't Enough
In a New York Times op-ed, George Loewenstein and Peter Ubel argue that policymakers are relying too heavily on behavioral economics, when traditional -- that is, rational choice -- economics would often serve them better.
On cursory reading, you might think this op-ed repudiates the facile use of behavioral economics to guide policy. But in fact, the authors encourage us to go further down that road. They do so by questioning the efficacy of behavioral policies while implicitly accepting behavioral welfare analysis.
Consider, for instance, their position on the “obesity epidemic.” They begin by diminishing the impact of New York’s nudge-like mandate on restaurants to post calories in restaurants, while nevertheless supporting it:Calorie labeling is a good thing; dieters should know more about the foods they are eating. But studies of New York City’s attempt at calorie posting have found that it has had little impact on dieters’ choices.
Aha! So it’s just the law of demand, a prediction of traditional rational-choice models. Do Loewenstein and Ubel conclude that consumers are rationally choosing greater girth in the face of lower prices (and, I might add, superior healthcare), and therefore recommend leaving them alone? Let’s see:
Obesity isn’t a result of a lack of information; instead, economists argue that rising levels of obesity can be traced to falling food prices, especially for unhealthy processed foods.To combat the epidemic effectively, then, we need to change the relative price of healthful and unhealthful food —- for example, we need to stop subsidizing corn, thereby raising the price of high fructose corn syrup used in sodas, and we also need to consider taxes on unhealthful foods.
In other words, Loewenstein and Ubel remain convinced that consumers are making poor choices that require government correction. If nudges don’t work, then shoves may be warranted.
(Removing corn-syrup subsidies could indeed make consumers better off, according to the traditional model, because doing so would eliminate the inefficiency resulting from a distorted price ratio. But for the very same reason, a tax on unhealthful foods would make consumers worse off. Notice that Loewenstein and Ubel see no important difference between removing a subsidy and imposing a tax.)
The pattern repeats through the rest of the op-ed. If gallons-per-mile laws don’t induce people to choose different vehicles, then we need higher gas taxes. If telling people how much electricity their neighbors use doesn’t cause them to turn out the lights, then we need a carbon tax. To be fair, these cases may involve genuine externalities -- which are recognized as a problem in traditional economics -- rather than the “internalities” of behavioral economics. But Loewenstein and Ubel don’t mention that distinction. The behavioral goals of policy are taken as given; only the means get scrutiny.
In our first paper on paternalist slopes, Mario Rizzo and I warned about precisely this kind of process. When a policy is enacted to achieve a specific goal and then fails to achieve it, further policies are justified on grounds of achieving the goal that “we” have already agreed upon. In Loewenstein and Ubel’s op-ed, I believe our prediction is vindicated.
[Cross-posted at ThinkMarkets.]
Monday, June 28, 2010
Barbie, Political Philosopher
Toy Story 3 offers many pleasures and not a little wisdom. I absorbed them with a shocking output of tears, both the laughing kind and otherwise. At one point, too, I raised my fist in solidarity, moved by the political philosophy voiced by Barbie (brilliantly played by Barbie). I liked Barbie's quote so much that I put it on a t-shirt:
Nice, huh? Click on the picture to customize the shirt for your build and style.
Fellow Bluebook geeks will notice that, despite its graphic fripperies, the shirt sports a proper legal citation. Scholars might take comfort in the fact that I crosschecked the quote against the junior novel version of Toy Story 3. Lawyers for Disney/Pixar must admit that my usage falls within the traditional bounds of the fair use defense to copyright infringement, and Hasbro cannot justly complain that the shirt's use of "Barbie" violates that trademark.
Tyrants might not like the shirt, granted. But Barbie showed us what happens to tyrants. I won't say more about that, here; just go see the movie!
UPDATE: Notwithstanding law and logic, Zazzle.com pulled the shirt almost immediately after I posted it for sale. I'm currently trying to correct the matter. Sorry for the inconvenience.
[Crossposted at Agoraphilia and The Technology Liberation Front.]
Monday, June 14, 2010
You Might Do Not Have to Use Files
The grandly-named Public Domain Archive, evidently a production of Osaka-based Digirock, Inc., offers a few MP3s of classical music and historical speeches. Thanks to a suggestion from Tyler Cowen, I'm enjoying a 1942 recording of Beethoven's 9th even as I type. Am I breaking the law in so doing? The copyright notice posted on the Public Domain Archive, while quite charming, hardly reassures:
To the People
In japan, All files open to the public on this site are certainly lawful.
But, if you do not live in Japan, You might do not have to use files.
You should check the law of your country.
As proves too often true for works, like this 1942 recording, that fall under the aegis of the 1909 Copyright Act, it is not easy to figure out if the underylying work enjoys any claim to protection under U.S. law. Perhaps, after all, it was not published with the proper formalities, here, and thus fell into the public domain.
In this case, though, it looks like we can dodge those complications. U.S. copyright law affords exclusive rights only to copying, creation of derivative works, public distribution, public performance, and public display. See 17 USC § 106. So long as I listen to a MP3 solely via streaming, without saving a copy, it is hard to see how I've violated any of those rights. Perhaps Digirock, Inc. has violated U.S. law by offering me the MP3, but that is no concern of mine (and probably not much of a concern to Digirock, Inc.).
That legal scenario suggests an interesting conclusion: an offshore copyright-free zone—one set up by intellectual pirates or in a stubbornly independent country—might give U.S. residents ample, free, and legal access to all sorts of copyrighted works—even ones protected under U.S. law.
[Crossposted at Agoraphilia and The Technology Liberation Front.]
Wednesday, June 02, 2010
A T-Shirt to Save Miranda
Professor Crim Pro I ain't, but it seems to me that anybody who has used a computer can pretty easily grasp the holding of Berghuis v. Thompkins, 560 U.S. __, No. 08-1470 (June 1, 2010) [PDF]. In that opinion, handed down just yesterday, the U.S. Supreme Court toggled the default on the Miranda warning. A five-justice majority held that silence will not suffice for citizens who want to invoke Miranda's protections against self-incrimination; we now must ask for our Constitutional rights. Think of it like a computer program that annoyingly assumes you want unsolicited advice from a chirpy paper clip--except this paper clip throws you in cuffs and tazes you if you talk back.
The Berghuis decision inspires me to offer a new piece of legal armor—this time in the form of a t-shirt:
Click on the picture to buy a shirt, or borrow the text (I've uncopyrighted it) to make your own version from scratch. Combine that notice of your Miranda rights with the bumper sticker and magnetic sign I offered earlier, in defense of your rights to record and report what public officials do to you, and you might just dodge some serious legal hurt. Or—who knows?—you might inspire some interesting and important litigation.
I leave detailed analysis of how Berghuis jibes with Miranda and other precedents to other, more knowledgeable commentators (see supra, "ain't Prof. Crim Pro" disclaimer). I dare say, though, that Justice Sotomayor's dissent hit a nice note:
Today’s decision turns Miranda upside down. Criminal suspects must now unambiguously invoke their right to remain silent—which, counterintuitively, requires them to speak. At the same time, suspects will be legally presumed to have waived their rights even if they have given no clear expression of their intent to do so. Those results, in my view, find no basis in Miranda or our subsequent cases and are inconsistent with the fair-trial principles on which those precedents are grounded.Slip. op. at 23 (Sotomayor, J. dissenting).
I guess that you could say the Berghuis majority took a cue from the (so-called) libertarian paternalists and engaged in some legal nudging. In this case, however, the Court nudged our defaults away from individual liberty and toward prosecutorial power. Call it statist paternalism.
Thanks, Supremes, for giving us worse than nothing. Ah, well. As I read Berghuis, even the justices in the majority would not deny us the opportunity to answer their new default with a firm "No!" Thus might we recover our Constitutional rights with a t-shirt.
[Crossposted at Agoraphilia and The Technology Liberation Front.]
Sunday, May 30, 2010
Police May be Monitored for Quality Control Purposes
While police and prosecutors have encouraged the growth of a surveillance state, they don't seem so enthusiastic about the growth of a surveillance citizenry. Maryland and other states have recently seen privacy laws invoked to squelch the unauthorized recording of public officers performing public duties in public areas. Until courts put an end to those bogus claims, we should make sure that police officers know that we may monitor traffic stops to protect our rights; I below offer a bumper sticker and magnetic door sign that ought to help on that front.
Radley Balko recently reported on the latest attempt to use privacy laws to punish citizens for recording police misconduct. In this case, Anthony Graber was arrested for posting on YouTube a video he'd captured on an un-uniformed Maryland state trooper, driving an unmarked car, pulling over and rushing at Graber with a drawn handgun. Soon after Graber posted the video, he was charged for violating the Maryland Wiretapping and Electronic Surveillance Act, Md. Code Ann., Cts. & Jud. Proc. § 10-401 et seq. (2010), which basically outlaws secretly recording a private conversation.
Maryland's police must be feeling a bit testy, these days, about getting recorded on-the-job by uppity citizens. Earlier this spring, an inconvenient video of the beating of Jack McKenna put the lie to the claims of Maryland police that McKenna had provoked the incident by attacking the officers and their horses. State and federal officials have since launched "excessive force" inquiries.
Did that video violate the privacy of the three officers, clad in riot gear and swinging batons, who surrounded and beat the unarmed McKenna? No. Neither did the video that Graber shot of the Maryland trooper strutting towards him with a drawn handgun. Courts have already explained that wrongs under the Maryland Wiretapping and Electronic Surveillance Act require a showing that someone's reasonable expectation of privacy has suffered violation (see Fearnow v. C & P Tel. Co., 104 Md. App. 1, 655 A.2d 1 (1995), rev'd on other grounds, 342 Md. 363, 676 A.2d 65 (1996)), and no officer can have a reasonable expectation of privacy while on a public street, performing public duties.
The Maryland ACLU has stepped forward to help defend Graber, and with any luck will soon educate local prosecutors about the proper scope of the Maryland Wiretapping and Electronic Surveillance Act. In the meantime, and in other jurisdictions where police threaten to deploy privacy laws against whistle-blowers, we citizens would do well to remind public servants that we can and will record their on-the-job performance. I've worked up a couple of notices to help.
This bumper sticker should help to put police on notice that you may record them during traffic stops, thus negating any claim to a reasonable expectation of privacy:
To make doubly sure that you give adequate notice to an officer who subjects you to a traffic stop, you might also want to carry this handy magnetic sign:
Click on either image to buy a copy for yourself or a friend. All proceeds will go to aid the defense of Anthony Graber. Perhaps his case would have turned out differently if he had had that bumper sticker on his helmet, or that magnetic sign on his gas tank. (I thank Prof. Orin Kerr for inspiring the wording of these notices, though he of course bears no blame for my legal hijinks.)
In the long run, as Prof. Glenn Reynolds has observed, we in the surveillance citizenry have an edge over those trying to create a surveillance state. We have more eyes, more cameras, and a more sympathetic message. There remain, however, several legal wrinkles to iron out before we can safely say we've turned the tables. I'll try to say more about those, and offer an all-purpose notice designed to cover a wide variety of citizen surveillance practices, in a subsequent post.
[Crossposted at Agoraphilia and The Technology Liberation Front.]
Saturday, May 22, 2010
"Robot Weds Couple in Japan"
Want to know my reaction to the headline above? Just read this old post (starting with the second paragraph).
Thursday, May 20, 2010
The Fundamental Transformation in Breaking Dawn
If you’re on Team Edward, you might think the fundamental transformation in Twilight: Breaking Dawn is a person getting turned into a vampire. Or if you’re on Team Jacob, you might think it’s a boy morphing into a wolf. But if you’re an economist, it’s the conversion of undifferentiated assets into relationship-specific assets.
That came out more boring than I planned. But it’s true! On Deadline Hollywood, Nikke Finke reports that several supporting actors played hardball during negotiations for the final installments of the Twilight series:
Really, my eyes glazed over at the recent ruckus that those secondary actors were demanding as much as $4 million each to do the 4th and 5th installments of the Twilight Saga. ... I’m all for higher pay for thesps, and Summit has tons of cash to spread around. But in this case Summit gave these actors their big break, and offered them 10 times what they’d made in the first movie, and could have replaced every one of them with hungry unknowns had it not been for the execs’ fears of offending fans.We’ve seen this happen before, of course, most notably when the six leads on Friends wangled $1 million each per episode in their final season. In economics jargon, stories like these illustrate what Oliver Williamson dubbed the fundamental transformation (see p. 176).
When an organization (such as a firm) acquires new assets (such as employees), those assets are typically undifferentiated at the outset. The firm has many other equally suitable options, and thus the potential employees have limited bargaining power. But after they join the organization, they undergo a transformation. They gain value to the organization that they lack outside of it, and thus they’re no longer undifferentiated from all the other options. Now there’s more room for bargaining, and the parties may try to claim a larger share of the gains from continuing the relationship. That’s just what the Twilight supporting actors have done.
What’s less obvious is the symmetry of the situation. The owner of the relationship-specific asset can threaten to hold-up the process, but so can the buyer. Say having the specific actor from previous installments of a series is worth $5 million to the studio. Meanwhile, the actor’s best alternative movie offer is $1 million. Then there’s a $4 million pie to be cut, and an offer of $3 million would exactly split the gains from trade. But the studio may hold-up the process by refusing to pay a dime over $2 million, while the actor may threaten to walk for anything less than $4 million. Both parties stand to lose if they walk away, which is why they usually end up settling somewhere in the middle (often with the final number undisclosed to the public). But every now and then, the deal falls through -- especially when the parties disagree about how valuable that relationship-specific asset really is.
Human assets aren’t the only assets subject to the fundamental transformation. To take another example from the movie business, the selection and creation of sets transforms undifferentiated assets (apartments, furniture, lumber, etc.) into relationship-specific assets. And in some cases -- for instance, a private home rented as a location -- the same problems can arise. But for physical assets, there’s often a simple solution: buy the asset outright. That solution is not available for human assets... although some would argue the old studio system came close.
(For another application of the fundamental transformation, see here. Cross-posted at ThinkMarkets.)
U.S. News: Less Transparency = More Fairness
Robert Morse today announced that, in response to evidence that law schools had been gaming its rankings, U.S. News would change the way it estimates the "Employment at 9 Months" measure for schools that decline to report that figure. Paul Caron offers some background here. Said Morse: "U.S. News is planning to significantly change its estimate for the at-graduation rate employment for nonresponding schools in order to create an incentive for more law schools to report their actual at-graduation employment rate data. This new estimating procedure will not be released publicly before we publish the rankings."
I understand that U.S. News generated the formula it formerly used to estimate the Emp9 figure for non-reporting schools by running a regression comparing the Emp0 and Emp9 data from reporting schools. It used to puzzle me that U.S. News did not evidently re-run the regression each year, but rather stuck with the original estimate. In retrospect, though, I see that sticking to the same formula might have partially helped U.S. News offset the gaming it so dislikes. After all, as more and more schools with low numbers refused to report Emp9 data, opting to rely instead on the publicized formula, the correlation between Emp0 and Emp9 scores would change so as to favor non-reporting schools. Better to stick with the old formula, dated though it might be, than to increase the incentive to opt out of reporting.
U.S. News thus avoided a vicious cycle, but only at the cost of signaling to schools exactly when hiding Emp9 data would help their rankings. Will its new reticence work? Schools can now only guess at how U.S. News will turn Emp0 numbers into Emp9 estimates, and will rightly worry that they might misjudge the new cutoff. Even if big-E ethics does not counsel reporting Emp9 numbers, therefore, small-c conservatism will. Granted, a school might reason, "U.S. News will still try to find a reasonably accurate way to turn Emp0 data into Emp9 estimates, and it has always helped us to not report in the past, so it remains a gamble worth taking." But such schools should also rightly worry that U.S. News might throw a punitive little kick into its new formula, to encourage schools to worry more about accuracy than about rankings.
[Crossposted at Agoraphilia and MoneyLaw.]
Sunday, May 09, 2010
Sex For Me But Not For Thee?
Robin Hanson links to an interesting article about which activities young adults count as “having sex.” The article purports to reveal a double-standard: people are less likely to call a given act sex when they did it, and more likely to call it sex when their long-term partner did it. Here’s the abstract:
The purpose of this study was to determine if undergraduates (N=839) apply the same standard to themselves when labeling a behavior ‘‘having sex’’ as they apply to their significant others if those persons engage in the same behaviors outside the relationship. Using a between-participants design, one form asked participants if each of 11 behaviors constituted having sex if they engaged in the activity; the other form asked participants if each of the same behaviors constituted having sex if their significant other engaged in the activity outside their relationship. Participants answering for themselves were less likely to indicate a behavior was having sex for all behaviors except penile–anal and penile–vaginal intercourse. Men were also more likely than women to indicate most behaviors were having sex. The authors discuss what they define as a definitional discontinuity in undergraduate emerging adults’ definitions of having sex. Fundamental attribution error (FAE) and emerging adulthood literature are used to explain the findings. Health and relationship implications are identified. [emphasis added]These are fascinating results, but I don’t think they really demonstrate what the authors say they do.
Let’s take an example: does oral sex count as sex? It turns out that men are less likely to say “yes” when they’re the ones who did it, and more likely to say “yes” when it’s their girlfriends who did it. And the same is true for women; they’re more likely to call it sex when their boyfriends did it than when they did it themselves.
The authors interpret this as evidence of a self-favoring bias known as the Fundamental Attribution Error. People wish to see themselves in a favorable light and so they cut themselves some slack, but they are less forgiving when it comes to other people.
But let’s look at how the survey questions were actually phrased. On Form A, respondents were asked to classify an activity involving themselves, such as:
A person had oral contact with your genitals.On Form B, respondents were asked to classify an activity involving their S.O. (defined as an actual or hypothetical boyfriend/girlfriend or spouse), such as:
Another person had oral contact with your S.O.’s genitals.Note that the phrasing of the latter activity instantly implies cheating. It mentions an S.O., which by definition means there exists a committed relationship. (The past tense phrasing leaves open the possibility of the event having occurred before the relationship, but the “S.O.” phrasing nevertheless brings the possibility of cheating to mind.) The phrasing of the former activity, on the other hand, does not imply cheating; no S.O. is ever mentioned.
So here’s an alternative hypothesis: the differential results may represent a framing effect rather than a self-serving bias. People tend to define “having sex” in a broader way when faithfulness is an issue, but in a narrower way when the issue is perceived as simply definitional. Thus, a person might consider oral sex to be not-quite-sex as a matter of definition, but count it as sex for purposes of policing loyalty. And that could be true even if the potential cheater is oneself.
This is not to say that there’s no FAE here, just that something else could easily be going on. To distinguish FAE from the framing effect, you’d want to phrase the activities in a more symmetrical fashion, something like this:
A person, not your current S.O., has oral contact with your genitals.
Another person, not you, has oral contact with your S.O.’s genitals.A difference in answers here would isolate the FAE, since in both cases cheating is clearly involved. On the other hand, if you wanted to isolate the framing effect, you could phrase the activities like this:
A person has oral contact with your genitals.
A person who is not your current S.O. has oral contact with your genitalsThis pairing focuses entirely on one person (the respondent) while differing on whether the possibility of cheating is invoked.
The larger point is that the existing question-pairs differ on two dimensions (the person involved and whether an S.O. is mentioned). But to isolate a particular kind of difference, they need to differ on just one dimension.
Friday, May 07, 2010
A Separate Peace in the Drug War: It Has Begun
Three years ago, I blogged about a "longstanding policy pipe dream" of mine: that the state of California would declare a separate peace in the drug war.
“Yes,” the argument would go, “California does not have the power to repeal federal laws. But it does have to the power to dispose of its own budget and use its own state and city employees as it sees fit. From this point forward, if the federal government wishes to enforce federal drug laws in California, it will have to do so with federal tax dollars and employees. No state tax dollars or state employees will participate in fighting the drug war.”And now it looks like it might actually happen, at least with respect to marijuana. In a sense I'm late to this party -- news of the California ballot measure broke over a month ago -- but given the blog post quoted above, I prefer to say I'm three years early.
So why am I blogging about it today? Mainly because of the video of a SWAT team raiding a house and shooting two family dogs, all over an apparently tiny quantity of weed. The video has gone viral now, with most (though sadly not all) viewers voicing anger and outrage. So now is as good a time as any to recommend that if you want to help stop events like this, which happen with sickening frequency, you should contribute to the cause. I just did.
And I'm not just talking to Californians. If marijuana gets legalized in one state without ending the world, that could set the precedent for change nationwide. So help us get it right here. In return, I promise to contribute to the next serious campaign in another state to do the same thing.
(As an aside, I'm irritated by the fact that the name of the campaign is "Control & Tax Cannabis." That's kind of burying the lead. But make no mistake, this is really about legalization.)
Wednesday, May 05, 2010
New Paternalism: Odds & Ends
The Cato Unbound discussion on new paternalism has come to a close, but I want to address a few loose ends that came up during the exchange.
The Demand for Evidence
Richard Thaler has demanded empirical evidence that the new paternalism has led to slippery slopes. Given that the new paternalism is a relatively new phenomenon, I certainly don’t claim that the slope has already occurred.
I do claim that slippery slopes are real, that slopes are most likely when certain features are present, and the new paternalism has many of those dangerous features.
Historically, there can be little doubt as to the existence of slippery slopes. Examples that came up during the Cato Unbound forum included the run-up to Prohibition, the escalation of the drug war, and the gradual encroachment of smoking restrictions. I believe an honest examination of other, non-paternalist domains yields similar conclusions. For instance, after passage of the 16th Amendment, the vast majority of people paid no income tax at all, and the top marginal tax rate was only 7%. We all know how that turned out. A much more complex story could be told about early interventions in healthcare that laid the groundwork for more extensive intervention later.
For examples more closely related to the new paternalism, consider two stories David D. Friedman relates on his blog. Both involve a college whose supposedly optional contributions to certain causes (a fund for environmental projects and one of Ralph Nader’s PIRGs) became, in the process of implementation, de facto mandates. I don’t know whether the college in question is private, but since there is competition among colleges both public and private, I’m not overly concerned about things getting far out of hand. Nevertheless, the process Friedman describes is illustrative:But the people constructing the choice architecture know what result they want to get, they believe they are doing good and so not constrained by what they themselves would consider proper principles of morality and honesty in a commercial context, so it is very easy to make the ‘wrong’ choice more and more difficult and obscure until what is optional in theory becomes mandatory in practice.
Put that process in a political context, and there’s good reason to be worried after all.
Other Goals
New paternalist techniques can be used for purposes other than helping people “by their own standards.” Thaler offers the example of organ donation: by defaulting people into donor registration, or at least forcing them to choose explicitly one way or the other, it may be possible to increase organ donations. Other examples, such as inducing lower energy usage, appear frequently in Nudge.
During the Cato Unbound discussion, I largely ignored these examples because I considered them off-topic. Paternalism is about changing your behavior for your own good, not the good of others, right? But now I see the connection. The process starts with the (possibly correct) assumption that some people already want to help some good cause, and all they need is a little nudge to do it. Ostensibly, then, the goal is still making people better off by their own standards. From there, the slide is quick and almost unnoticeable. Is the new policy’s goal to help people better satisfy their own preferences, which might happen to include supporting a good cause? Or is the goal simply to advance that cause?
In the comments to a previous post on Agoraphilia, Gil Milbauer reports that his Washington state driver’s license renewal includes “a $5 ‘donation’ to state parks that I have to deduct from the total in order to avoid paying.” I have to agree with Gil’s assessment: “This opt out gimmick was not a reasonable attempt to help people satisfy their actual preferences. It's a way to scam them out of money, and that’s how I expect most uses of these techniques to be used.”
The concern, then, is that new paternalism will provide justificatory cover for a panoply of interventions that eventually take on a life of their own, fully unmoored from the “by their own standards” goal.
A Silver Lining for Liberty?
In the wider blogosphere, some libertarians ask whether the new paternalism has the potential to improve liberty in some domains by rolling back harder paternalism. (Julian Sanchez expresses this hope more positively, Bryan Caplan more negatively.)
In Nudge, Thaler and Sunstein do, in fact, support a handful of liberty-improving proposals, and for this they should be lauded. Nevertheless, if you consider the new paternalist literature as a whole, you’ll find the balance is heavily on the side of greater intervention. Most new paternalist authors simply don’t acknowledge liberty-improving possibilities at all. Even in Nudge, Sunstein & Thaler don’t go as far as (say) pushing to repeal the prohibition of drugs or prostitution and replace it with knowing-and-voluntary waivers. Their liberty-improving proposals are more modest: privatizing marriage, allowing school choice, and (maybe) privatizing Social Security.
I think the reasons for the imbalance in libertarian paternalism are clear enough. When it comes to liberty-improving policy changes, it’s the “libertarian” that does most of the work. When it comes to liberty-diminishing policy changes, it’s the “paternalism” that does the work.
To put it another way, what self-described libertarian ever needed paternalism (or behavioral economics) to think of liberty-improving proposals? Libertarians have supported school choice and Social Security privatization for literally decades. David Boaz called for privatizing marriage at least 13 years ago (and I remember discussing the idea with him years earlier). Libertarians have long sought ways to weaken the drug war short of full-blown legalization, such as ending mandatory minimum sentences and legalizing marijuana for medical use.
The motivation behind such proposals has, in general, been to assuage the fears of those who think a sudden leap to laissez-faire would result in a hard, painful landing. People unaccustomed to a certain kind of liberty may lack the personal and social tools to cope with it (a result of the “unlearning” effect that is one argument against paternalist laws), so some hand-holding may be required. Now behavioral economists are offering us a new set of tools that may help us better craft these intermediate policies.
That’s great. But unfortunately, their liberty-improving suggestions have been offered up as a package deal. That package includes an awful lot of unnecessary, and I think damaging, baggage. When the rubber of new paternalism hits the road of real politics -- where numerous processes support expanding intervention while few support rollback -- I predict the balance liberty-diminishing to liberty-improving policies will become increasingly lopsided.
(Cross-posted at ThinkMarkets.)
Tuesday, April 27, 2010
The Hand Rule
Judge Learned Hand famously opined that if the burdens of preventing an accident outweigh its cost multiplied by its probability, it does not constitute carelessness to avoid those burdens. Doesn't that little gem make you want to break out in song? I've got just the thing: The Hand Rule, a little ditty I recently composed and played for some students at Chapman Law School.
Though I've yet to record The Hand Rule, I can offer you a .pdf of the lyrics and chords as well as a PowerPoint, complete with pictures of Learned Hand, to accompany the performance (both uncopyrighted). Here's a sample of a verse and the refrain:
In the case of Carrol Towing Co., Learned Hand set forth to showSilly? Yes, but it gets students to pay attention and remember what they learn. So goes the modus operandi of the Law and Fun school.
The meaning of "reasonability."
Defendant failed to leave in charge, a man to watch its unmoored barge.
And plaintiff's cargo met calamity.
"Negligence!" plaintiff complained and on appeal, Judge Hand explained,
The proper scope of liability.
Learned, learned, Learned. Learned in the law was he.
Learned Judge Hand, Learned, he judged so learnedly!
So learn what the Hand Rule teaches: "There's no liability,
If the burden of the cost exceeds the loss times the probability."
[Crossposted at Agoraphilia and MoneyLaw.]
Wednesday, April 14, 2010
Rejoinders at Cato Unbound
At Cato Unbound, I've replied to Richard Thaler here, and to Jonathan Klick here. My reply to Shane Frederick should go up tomorrow.
UPDATE: My reply to Frederick is here.
Monday, April 12, 2010
Klick and Frederick Responses
Jonathan Klick and Shane Frederick have now posted their responses. I am now at liberty to respond to all three responses, which I plan to do by today or early tomorrow.
