Tuesday, July 29, 2014

Public Choice Economics in Action, Caveat Venditor Edition

Via A-Tab, a dog-bites-man story remarkable not for its content, but for its Straussian content.

Staples offered a deep discount on a few items to entice the State of New York to use them as exclusive vendor. To their astonishment, they found that demand curves slope downward. Now there are relatively small bureau offices with minor warehousing problems as they've stuffed their cabinets with more tissue paper than they're likely to need in a month of Sundays.

Big deal, right? Totally predictable if you're taken even a high school level economics class (or, yes, even no economics courses whatsoever).

But look at what it shows: government employees are ordinary people. They respond to incentives just the same as everyone else. There is no mystical alchemy that transforms the clay of humanity into a godhead of divine public service. Assuming away problems of agency or self-interest, dismissing or ignoring human foibles, hand-waving intractable organizational issues detracts from the rigor of analysis. This incident should be yet more evidence in support of the hypothesis that good intentions are insufficient to secure good outcomes.

But is it exploitation? One powerful organization took clear advantage of the letter of the contract, while obviously violating the spirit. Is there a moral duty to refrain from plundering an obvious unintentional loophole? Or must people who write words down on paper be held strictly accountable for the exact content of those words?

NB, as of the time of the publication of this post, Halbig hasn't yet advanced to SCOTUS to the best of my knowledge.

Monday, July 28, 2014

IRB SchmaiRB

via The Peej, paying transients for Phase 3 (or earlier!) drug testing.


A slice:
The main ethical issues here, of course, are the competence and judgment of the prospective subjects. “When you say ‘money,’ everything else goes out the window,” said Hanif Jackson, a former program supervisor at the Ridge Avenue shelter in Philadelphia, which recently closed down. I heard the same thing from Harvey Bass, a chaplain who has worked at the Sunday Breakfast Rescue Mission shelter for 15 years. He said drug study recruiters often park outside the shelter and approach residents on the sidewalk. Although Bass didn’t think it was his place to warn residents away from the studies, it was clear that he was not exactly a fan. “These guys have no job, no home, and a habit,” he said. “You have people at their lowest state, and they’ll say yes to anything.”
Much of the piece is an indictment of the accuracy of tests involving indigent subjects. Many of them are schizophrenic and therefore resistant to anti-psychotic medication, but:
Volunteers are typically paid $40 to $50 per visit. “The payments are low enough to not be coercive, but they’re enough to supposedly compensate them for the time they’ve spent here, and give them an incentive to come back,” Sfera said. Still, Walters, who has since left South Coast, added that money is what motivates most subjects. “I’d say at least 85 to 90 percent of clients, that’s why they do studies.”
These subjects are cheaper than enlisting, say, college students, and considerably more ethical than, oh... say, exposing Soldiers to treatment without their knowledge or consent (to pick a totally off-the-wall hypothetical example). More subjects for the same price means more precision, following quite naturally from the statutory requirements imposed by the FDA.

Another good quote:
Concepts like “coercion” and “undue influence” are poorly suited for economic transactions, however. Offering desperate people money to take risks to their health may be wrong, but nobody is being coerced. No one is threatening to harm people if they refuse to become test subjects. One parallel would be sweatshop labor. The ethical problem is not that people are coerced into working in sweatshops—people are desperate to work there, under horrific conditions, for pennies. The ethical problem is whether it is acceptable to take advantage of their desperation.
Agreed. This is an ethical problem. Like most (all?) problems, there are no solutions, only tradeoffs. Should the legislature ban testing on transients? Would that make them better off? Is it even true that, "[o]ffering desperate people money to take risks to their health may be wrong," when the alternative is panhandling, exposure, or starvation? Does not their alternative situation already pose risks to their health?

And is the price wrong? Offer them too much money and it's taking advantage of their desperate situation. Offer them too little and it's... taking advantage of their desperate situation. Remove them from consideration at all, and it's forcing them to accept their next available alternative, which by their own economic calculus is worse.

But the real brine this pickle soaks in is one of compos mentis. Whatever the ethical dilemmas of sweatshop labor, at least folks who work in factories in less-developed countries aren't any more (or less) prone to mental illness than the general population. Homeless people have made it through a rather selective filter to land in a bin marked 4F, and are often characterized by debilitating mental disorders. Under the UCC, people with debilitating mental illness don't have capacity, which is legalese for you can't generally enforce a contract (over $500 yadda yadda) against them. In other words, the common law recognizes that mentally ill people aren't suited to make responsible decisions.

And that leaves alternative institutional arrangements still to be considered. For Phase 1 and 2 testing, the manufacturer is still trying to establish safety, which even if you're as skeptical as I am about the charter of the FDA, safety testing is still important prior to a general release. What other population would you target? The elderly? Children? College students? Housewives? Business executives? Longshoremen? Would you ban all testing in humans? Is there a superior path to getting drugs to market? Describe it.

It might be a tragedy that America's homeless population ends up being a collective pincushion for the pharmaceutical industry, but does that speak louder to the collusion of big pharma and the FDA or to the manifold tragedies that lead to homelessness in the first place? There are good ways to advocate on behalf of the indigent. Denying them opportunities is probably not as helpful as exposing the mundane corruptions that are ordinary transfer payments: massive bailouts to well-connected constituents, and payola by the truckload to middle class voters. Given the choice between helping vulnerable populations and securing votes in the next election, politicians tend to act in their own best interests.

I do sometimes wonder if it's ever ethically possible to hire an exceptionally poor person to do anything. Doesn't paying them to any kind of work, even ostensibly honest work, take advantage of their desperate situation? Is there any way to break the Catch-22?

Friday, July 25, 2014

Sumner's Switzerland

When I claim that "migration is not euvoluntary", I mean to acknowledge the BATNA disparity that tends to exist across national borders. Many countries have poor political and economic institutions, low productivity, appalling civil rights (both de jure and de facto), and high rates of poverty. Very often, migration restrictions mean that willing migrants find themselves obliged to accept the worse of the but-for-immigration-quotas options.

Scott Sumner recently addressed some of Bryan Caplan's claims about the benefits of open migration by example. ATSRTWT. A slice:
I'd rather explain this problem using Switzerland, as it will be easier to make my point. Switzerland has 8 million people living in a small mountainous country. The built up environment is very neat and tidy, and indeed often quite beautiful. It's safe. I once accidentally left a wallet with lots of cash clearly visible on a ledge in a Geneva train station. When I came back later it was still there, with the cash. That doesn't happen in lots of other countries. With open borders Switzerland might attract tens of millions of immigrants. It would no longer be a "land of the Swiss." It would be much more crowded, much poorer, less well-educated, more crime-ridden, etc. Culturally it might become more like Kyrgyzstan, another small mountainous country. The Swiss greatly value the neat and orderly characteristics of their country. I find it quite plausible that they would feel worse off.
Thankfully, Sumner does not commit the uneconomic error of claiming fixed-sum labor transfer (dey took our jerbs). But his other claims bear closer inspection. Since I don't know what it means, I'll ignore the "etc." in there after "crime-ridden." Everything else should be fair game.

On congestion. Complaints about crowding are difficult to square with the prosaic observation that net migrations tend to be toward cities rather than away from them, even within nations (see R. Lucas's famous 2004 JPE piece). Congestion is a bit like pollution: it's an unwanted by-product of a desirable process. I have no doubt that visitors to Zurich would prefer a more sparsely-populated Switzerland—charming views of the mountains and the brisk blue sky unrent by the serration of skyscrapers are part of the appeal. But I urge anyone thinking about this closely to consider Adam Smith's habit of the mind: exercise analytical sympathy. Resist the urge to apply tourists' aesthetics to residents' best interests. Would you have Lower Manhattan vacated because you preferred emptier streets on your stroll to Central Park or do you recognize that the people of New York are made better off because other people live there? For tourists, crowded is a bug. For residents, it's a feature.

On poverty. n = 3 people have w1 = $100 each. Their average wealth is Σ(w1)/n = $100. Three more people show up with w2 = $20 each. Average wealth is Σ(w1, w2)/n = $60. Average wealth has fallen by $40. But the three original people are no poorer than they were before. Simplistic? Yes, but that's basically how national income is counted. It is my sincere hope that an economist as thoughtful as Scott Sumner isn't making this sort of elementary error, conflating national income accounting statistics with actual flesh-and-blood humans. To make the claim that Switzerland would be poorer, it's wise to distinguish between incumbent citizens and immigrants, and then to show what impact immigrants would have. For the incumbent citizens to be actually poorer, you'd have to disprove the First Welfare Theorem (surely a Nobel-worthy accomplishment) or you'd have to demonstrate how the median immigrant is a net [discounted] lifetime tax consumer rather than a net [discounted] lifetime tax payer. I admit a lacuna in my own knowledge here, as I'm insufficiently familiar with existing Swiss statutes on transfer payment eligibility for immigrants. I do know from work by friends of EE Zac G. and Alex N. that immigrants to the US are emphatically in the latter category: even in spendthrifty California, immigrants are still net lifetime taxpayers.

On education. First-generation immigrants tend to be less well-educated than the native-born population. Second-generation immigrants tend to be better educated than their more established peers. At least in the US. Please contact me at spivonomist@gmail.com if you'd like to see my data and regressions.*

More crime-ridden. No. First-generation immigrants are marginally less prone to commit crime than incumbent citizens (h/t M. Clemens). I think the reason this myth persists is because the average crime rate in net emigrant countries is higher than net immigrant countries, but this confuses averages with margins. The marginal emigrant is not the average resident. The marginal immigrant tends to have lower discount rates (evidenced by household savings rates and remittance payments), higher conscientiousness (again, see high educational attainment for second-generation immigrants) and when controlling for other factors such as language acquisition and education, higher IQ (again, contact me for GSS data & regressions). The myth of the criminal immigrant is just that: a myth. The laws that "illegal" immigrants break are the ones written specifically to target them. In a nation with institutions that refrain from indulging in dominion and discrimination, the median immigrant would be more law-abiding than the median native-born citizen.

On culture. When I was a boy visiting the DC Metro area, if I wanted Chinese food, I'd have my choice of "Hunan" or "Hunan". It was wretched. Not so anymore, and that's just food, a frippery. American culture is enriched by the people that voluntarily, joyously, felicitously choose to call it home. However, this is already wordy enough, so I'll stow a more detailed critique of the cultural arguments for another day.

*[edit] Second-generation in this context is defined as people born in the US, whose parents were also born in the US, but whose four grandparents were all board abroad. n=2213

Thursday, July 24, 2014

Cupcakes [hoax]

It's tough to tell what is and isn't dedicated satire sometimes. I'm strongly inclined to think that the person responsible for the @CupcakeCrewNYC Twitter account is having a big ol' laugh at their followers' expense, but I'm not exactly sure what the joke is supposed to be.

For those of you with the good sense not to click through, this is the account listed on the website of an itinerant cupcake business. Nothing on the predictably bland website will prepare you for the, let's call it charged political commentary and colorful language you'll encounter on the Twitter account. It's, well, it's incongruous.

Some might even classify it as hate speech.

Here's the puzzle: would you still be morally justified in buying their cupcakes? Does shopping there implicitly endorse their political beliefs? Does boycotting them send a signal that their political beliefs are wrong?

Prices are information, but they're sort of a dumb signal. If someone doesn't buy from me, it just (credibly) tells me that the alternative uses of their cash are more attractive. To explain why, we need to rely on (non-credible) speech. Hence the importance of preserving First Amendment protections. Without the ability to doubly signal displeasure, making clear how and why this particular cupcake vendor is wrong.

Still though, the market rewards people who are good at delivering value to customers. Are political beliefs separable from business practices? Should they be? Why or why not? Can it ever be euvoluntary to truck, barter, or exchange with hateful people? Explain.

Update: further investigations suggest that the Twitter account has been compromised and that the cupcake truck is out of business. The point about commerce and morality is still salient however. Are vendors' political beliefs relevant to shoppers?

Where's the Harm?

I don't see how this is taking value from NJTP

The products are not similar.  An interesting example of the state as patent troll. 

And, yes, I apppropriated the image, without permission.  The source is here.

Judge Dredd Political Economy

"The best argument against democracy is a five-minute conversation with the average voter." - Winston Churchill

"If you can't have a five minute conversation with the average voter, listening to C-Span on the way to work will suffice." - Sam Wilson

I had the misfortune of exercising Wilson's Lemma this morning as callers-in cited statute law time and again against the Honduran & Guatemalan exodus knocking on the southern border of the US.

Consider the following claims:

  1. There is a moral imperative to offer sanctuary to the distressed. The children and families fleeing drug-related violence deserve basic humanitarian consideration. This is consistent with nearly all commonplace Western moral code (yes, there are a few minor exceptions).
  2. It is unjust to force American taxpayers to cover the costs of feeding and housing these refugees, particularly when local, county, state, and federal budgets are already well in the red.
  3. US immigration quota statutes have force but no moral authority, similar to the Jim Crow laws of the 19th and 20th centuries. 
  4. Individuals retain ordinary property rights over their own land and may exercise standard anti-trespassing measures consistent with long-established common law prescriptions.
  5. Individuals retain the common law rights of association and are able to contract peaceably with whom they see fit. 
  6. Individuals retain the common law rights of association and are able to refuse association with whom they see fit, for any reason, or for no reason at all.
  7. Men and women of good conscience should strive to overturn unjust legislation, and to that end enjoy moral justification for civil disobedience. Letter from the Birmingham Jail was written by a prisoner held under the auspices of dishonorable, unjust laws. King is rightly remembered as a national hero, not as a petty criminal.
  8. Liberalizing immigration statutes will have a positive marginal effect on the propensity for migration.
  9. Immigrants tend to identify with the Democratic Party at greater rates than native-born citizens.
  10. Immigrants tend to identify as "liberal" or "very liberal" at greater rates than native-born citizens.
  11. Immigrants do not tend to hold specific policy positions consistent with their self-identified party affiliation or political views. The left-right political axis has less predictive power over their policy preferences than it does for native-born citizens.
  12. Free migration could strain the resources of a welfare state in the short run.
  13. Immigrants, even low-skilled immigrants, tend to be net tax payers, rather than net tax consumers. And when this is not true, the fault lies with the legislature rather than with the immigrants.
  14. The private costs of estimating the justice of statute law almost always exceed the private benefits, particularly when the bulk of the benefit accrues to outside groups. There is little natural incentive for ordinary constituents to be especially reflective about the contents of the U.S.C..
Now I ask you: are these claims internally consistent? Is it possible to believe each of these to be true, jointly and severally? If you can, as I do, hold these claims to be both true and consistent, you might come to the same conclusion as I: immigration restrictions are unjust, unnecessary, and quite likely to remain intact.

"It's the law" is a fine defense so long as the law is just. But if the law is unjust, then I encourage he who utters it to consider carefully whether or not he is begging the question.

Wednesday, July 23, 2014

Sex Offender

Rape is a crime.

Unfortunately, it's a crime unlike any other. Before I mansplain why, a brief review of hypothesis-testing errors.

First, a reminder of how to construct a null hypothesis. In the most basic form, start with a control group that receives no interventions, they're all business-as-usual. Then get yourself a treatment group, those subjects who are otherwise identical to the control group but for one change, the treatment of interest. Your null hypothesis should be that the treatment produces no effect. The aim of inquiry is to reject the null hypothesis.

This is where error comes in and why the results of hypothesis tests sound like they were written by a mental patient. We don't say "X causes Y", but rather something closer to "with 95% confidence, we reject the null hypothesis that X has no effect on Y". Similarly, we don't say "X doesn't cause Y", but rather "with 95% confidence, we cannot reject the null hypothesis that X has no effect on Y." The wordiness and the careful construction of the result statements are explicit nods to the limits of statistical inference. Hypothesis testing is still, for all its sophistication, a bit like rolling one of those fancy Dungeons and Dragons dice: every now and again, you roll a natural 20. In other words, sometimes we erroneously reject a true null hypothesis (Type I) or erroneously fail to reject a false null hypothesis (Type II). A type I error suggests that X causes Y even when it actually doesn't, and a type II error suggests that X doesn't cause Y even when it actually does.

What does this have to do with rape? Well, the null hypothesis is that X did not rape Y, and the job of the criminal justice system is to attempt to reject this null hypothesis. In the case of rape, this task is rife with epistemological confusion, at least for marginal cases. Consent, or at least a plebeian notion of consent, is murky, especially when one or more parties is intoxicated. Add to that the barbaric habits of victim-blaming and perpetrator-excusing (particularly when it comes to cases involving strong social class disparities) and it shouldn't be too surprising when conscientious folks want to work to rid the system of type II errors, ultimately with the aim of effectively deterring incident rates.

Hence the rise of sex offender registries. Hence the rise of minimum mandatory sentences. Hence the conflation of forcible rape with other sex offenses (such as consensual sex between people slightly on opposite sides of statutory bright lines or public nudity or snapchatting nudes). The purpose of all these measures is to raise the relative price of sexual deviancy in an effort to discourage the deviant behavior. It's plain vanilla ordinary law and economics, straight out of Becker or Epstein.

The costs, of course, are an increase in the incidence of type I errors, where kids end up permanently on sex offender registries. Thanks to typical precautionary heuristics, landing on one of those registries severely curtails someone's options. Offenders can't buy property in certain areas, there are lots of places that won't hire registrees, and forget registered fathers volunteering at school, or even picking their kids up from soccer practice.

Still, it's a matter of trade-offs. Maybe swapping one type of error for another is acceptable to the median voter. Maybe the concentrated costs and diffuse benefits of registries are good on net for communities. Maybe. Still, it's worth considering what institutional failures prevent rape from being handled the same basic way as, say, armed robbery. It is my impression that police aren't terribly inclined to say to a B&E victim "well, maybe you shouldn't have been flaunting your living room like that" or to an arson victim, "did you leave the house with a gasoline can in your garage this morning?"

Euvoluntary sexual encounters can be mutually felicitous. Coercive sexual encounters not so. In between are a wide galaxy of indeterminacy, and it seems reckless to assume that even a well-meaning legislature, far from the specifics of the thing can adequately anticipate the nature and details of such encounters, much less to accurately prescribe punishments that both fit the crime and are suitable to basic common-sense justice.

Much of the world (not just the US) has a nasty problem with how the crime of rape is handled. It seems an affront to justice to stymie progress by handicapping the evolution of the common law with restrictive ex ante legislative tinkering. Our euvoluntary future deserves better.