Privacy is overrated

by Richard A. Posner

New York Daily News
April 28, 2013

This past Monday, Mayor Bloomberg said that in the wake of the Boston Marathon bombings, the country’s interpretation of the Constitution “will have to change” in order to enable more effective prevention of and response to terrorist attacks and other violence, such as attacks on schoolchildren.

In particular, he wants a more welcoming attitude toward surveillance cameras, which played a crucial role in the apprehension of the Boston Marathon bombers — and would have been crucial had Tamerlan and Dzhokhar Tsarnaev come to New York to detonate a bomb in Times Square, as they apparently planned to. (Bloomberg has also announced a “Domain Awareness System” that will consolidate and distribute information received by the cameras and other tracking devices.)

All of which is to say that he wants concerns with privacy to take second place to concerns with security.

I strongly agree, though I’m not sure that the Constitution will have to be reinterpreted in order to enable the shift of emphasis that he (and I) favor. Neither the word “privacy” nor even the concept appears anywhere in the Constitution, and the current Supreme Court is highly sensitive, as it should be, to security needs. The Court can and doubtless will adjust the balance between privacy and security to reflect the increase in long-run threats to the lives of Americans.

There is a tendency to exaggerate the social value of privacy. I value my privacy as much as the next person, but there is a difference between what is valuable to an individual and what is valuable to society. Thirty-five years ago, when I was a law professor rather than a judge, I published an article called “The Right of Privacy,” in which I pointed out that “privacy” is really just a euphemism for concealment, for hiding specific things about ourselves from others.

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Η Γραφειοκρατική Τανάλια

του Αθαν. Χ. Παπανδρόπουλου

European Business Review
2 Απριλίου 2013

Το γραφειοκρατικό τέρας δεν παίζεται, στην Ελλάδα και χλευάζει κυριολεκτικά υπουργικές δηλώσεις και κενά περιεχομένου νομοθετήματα. Την ώρα που πολύς λόγος γίνεται για fast track και άλλα παρόμοια, το τέρας γελάει σαρκαστικά και περιμένει τους αφελείς που πιστεύουν υπουργικές εξαγγελίες.

Έτσι, σήμερα, για να ανοίξει μία επιχείρηση αποθήκη ή να προεκτείνει ήδη υπάρχουσα, η ταλαιπωρία δεν έχει προηγούμενο. Ο ενδιαφερόμενος επιχειρηματίας θα χρειαστεί περίπου 90 ημέρες για να εξασφαλίσει άδεια εγκατάστασης, 45 ημέρες για να συνδεθεί με το δίκτυο της ΔΕΗ, ενάμιση μήνα για να συνδεθεί με την εταιρεία ύδρευσης, μία εβδομάδα για να αποκτήσει αποχέτευση και τηλέφωνο και τρεις ημέρες για να λάβει τις απαιτούμενες άδειες από την αστυνομία και τις δημοτικές αρχές. Μέσα από την οδύσσεια αυτή, ο επιχειρηματίας έρχεται σε επαφή με όλο το μεγαλείο της ελληνικής δημόσιας διοίκησης, καθώς γνωρίζει από κοντά τον δικηγορικό σύλλογο της περιοχής του, το οικείο επιμελητήριο και υποθηκοφυλακείο, την τοπική τράπεζα, την εφορία, το ΙΚΑ, τον ΟΑΕΔ, την νομαρχία, τον δήμο, μέχρι και την πυροσβεστική υπηρεσία. Σε κάποιες δε περιπτώσεις δεν αποκλείεται να χρειαστεί να περάσει και ιατρικές εξετάσεις.

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The Science on Same-Sex Marriage

by Ronald Bailey

Wall Street Journal
April 3, 2013

Last week, the U.S. Supreme Court heard oral arguments in two cases challenging legal restrictions on same-sex marriage. Proponents and opponents sought to cudgel one another with sociological and psychological studies aiming to prove that science is on their side. Well, what does the science say?

Impact on Traditional Marriage

Some opponents told the court that same-sex marriage will undermine conventional marriage among heterosexuals. So what do the data say about how legalizing gay marriages affects conventional marriages?

A 2009 study by University of Sherbrooke economist Mircea Trandafir investigated the effect of the legalization of same-sex marriage in the Netherlands, the first country to recognize same-sex marriage. In 1998, the Dutch created registered partnerships, which are open to all couples, and in 2001 a law allowing full same-sex marriages. His analysis found that same-sex marriage leads to a decline in the different-sex marriage rate, but not in the different-sex union (marriage plus registered partnership) rate. In other words, Dutch heterosexual couples are taking advantage of the “marriage lite” registered partnership alternative.

At the time of Prof. Trandafir’s study, the chief difference between registered partnerships and marriage was that the former could be dissolved at the civil registry by mutual agreement. In a 2012 West Virginia Law Review article, Mercer School of Law professor Scott Titshaw shows that the political compromises provoked by the initial refusals to extend full marriage rights to same-sex couples result in a proliferation of civil union alternatives. Prof. Titshaw agrees with Prof. Trandafir that different-sex couples increasingly find the new marriage alternatives attractive; in effect, refusing to give full legal recognition to same-sex couples ends up diminishing the status and benefits associated with conventional marriage for everyone. Ironically, conservatives, by opposing the extension of full marriage rights to gay people, have ended up weakening the institution they sought to defend.

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Brain Scans Predict Who’s Likely to Commit Crime

by Daniel Akst

Wall Street Journal
April 3, 2013

Researchers using magnetic resonance imaging have found that they can predict which inmates are likeliest to break the law again after they’re released.

In a study of 96 male offenders in New Mexico, scientists found during a four-year follow-up that those with low activity in the anterior cingulate cortex were twice as likely to commit another offense as those who had high activity in this brain region. The researchers figured this out by asking participants to take a “go/no go” test that involved pressing a button every time they saw the letter X on screen, but being careful not to press when they saw the letter K. MRIs performed during this test mapped brain activity.

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Read the Paper

What do the numbers say? A cost-benefit analysis of love and sex

by Zosia Bielski

The Globe and Mail
February 28, 2013

How’s your marriage portfolio doing?

In her book Dollars And Sex: How Economics Influences Sex and Love, University of British Columbia economics professor Marina Adshade suggests that almost every option, decision and outcome in love and sex is better understood when you look at matters through an economic lens.

Adshade reveals how economics trickle down to our most intimate moments, affecting everything from teen pregnancy rates to child care. While people don’t consciously do the “promiscuity math” every time they fall into bed with someone, she reveals how economic factors shift consequences in our lives, and how this shapes the way men and women behave. Adshade spoke to The Globe and Mail from Vancouver.

Is it politically incorrect to view sex and love via economics – unless you’re talking about straight-up prostitution, where value is easily measured? It makes everything people do seem opportunistic.

Somebody said to me the other day that this is a very cold perspective. The value of the economic approach is to offer some clarity on the decisions that we ourselves make. These are decisions that we can measure: how people match on income or education or political beliefs and how long those marriages last and how happy those people are.

Let’s turn to some of your counterintuitive findings: Birth control has actually increased unintended pregnancy rates outside of marriage. How?

The rate planet-wide is surprisingly high, given how much technology we have to control our own fertility. The unintended consequence of access to contraceptives is that you get more unintended pregnancies because social norms have evolved in a way that allow people to more freely express their sexuality. When more people have sex outside of marriage, you’re bound to get more pregnancy and child birth outside of marriage.

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An Economist Who Made the Science Less Dismal

by David R. Henderson

Wall Street Journal
February 19, 2013

In 1975, I attended a week-long conference in Connecticut at which the star attraction was Friedrich Hayek. Hayek, who had shared the 1974 Nobel Prize in economics with Swedish economist Gunnar Myrdal, was doing a kind of victory tour of the United States. I told him that I thought Armen Alchian, one of my mentors when I earned a Ph.D. at UCLA, also deserved the Nobel Prize. I asked Hayek what he thought.

Hayek gave his characteristic wince, paused, and said, "There are two economists who deserve the Nobel prize because their work is important but won't get it because they didn't do a lot of work: Ronald Coase and Armen Alchian."

Sixteen years later, in 1991, Ronald Coase did win the Nobel Prize. When I got the news, I called Armen and told him the story. He got a kick out of it and seemed to have a new hope that he would win. He didn't, and now he can't. Armen Alchian died on Tuesday at the fine age of 98.

What was so important about Alchian's work? There were three aspects. First, he was one of the last economists of his generation to communicate mainly in words and not equations. Second, although economists often use the word "unrigorous" to refer to communication in words rather than math, Alchian was profoundly rigorous, writing clearly and carefully and using basic logic to reach sometimes-startling conclusions. As a result, many of Alchian's papers, even those from the 1950s, are still widely cited.

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Armen Alchian (April 12, 1914 – February 19, 2013)

Armen A. Alchian

by Robert Higgs

Independent Institute
February 19, 2013

Arline Alchian Hoel reports that her father, Armen Alchian, “passed away peacefully in his sleep early this morning at his home in Los Angeles.” He was 98 years old.

Armen Alchian was a major figure in the economics profession for more than half a century. At UCLA, where he spent his academic career as a faculty member in the department of economics, he was a legend to generations of graduate students, who were required to take the price theory course he taught in the first year of the program. He used the Socratic method: he simply walked into the class each day and asked a student a question. From that point, the discussion went back and forth between teacher and students. Woe to any student who had arrived unprepared—and sometimes to those who had prepared. Public embarrassment was the price such students had to pay. But in the end, the students came away from the course with a healthy measure of their teacher’s mastery of applied price theory.

And master he was. Besides having a knack for making sense of countless aspects of economic and social life by viewing them as relative-price problems, Alchian helped to blaze trails toward extremely valuable improvements in microeconomic analysis by bringing into the analysis careful treatments of information, uncertainty, transaction costs, and property rights. For him, little difference existed between micro and macro; both were to be understood by using the same basic economic analysis of individual choice.

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Give Me Your Tired, Your Poor and Your Economists, Too

by N. Gregory Mankiw

New York Times
February 9, 2013

All the recent talk in Washington about reforming immigration policy brings to mind Pat Paulsen, the comedian who, every four years, conducted faux campaigns for president.

“All the problems we face in the United States today,” Mr. Paulsen would say, “can be traced to an unenlightened immigration policy on the part of the American Indian.”

That quip contains a deep truth. Almost all Americans today are beneficiaries of a policy that welcomed our ancestors when they arrived at the border.

As an economist, I am often surprised at the hostility that some segments of the population express toward immigration. Most members of my profession are far more receptive to it, and for three main reasons.

First, many economists, especially conservative ones, have a libertarian streak. Ever since Adam Smith taught us about the wonders of free markets and the magic of the invisible hand, we have been loath to prohibit mutually advantageous trades between consenting adults. If an American farmer wants to hire a worker to pick fruits and vegetables, the fact that the worker happens to have been born in Mexico does not seem a compelling reason to stop the transaction.

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The Tyranny of Political Economy

by Dani Rodrik

Project Syndicate
February 8, 2013

There was a time when we economists steered clear of politics. We viewed our job as describing how market economies work, when they fail, and how well-designed policies can enhance efficiency. We analyzed trade-offs between competing objectives (say, equity versus efficiency), and prescribed policies to meet desired economic outcomes, including redistribution. It was up to politicians to take our advice (or not), and to bureaucrats to implement it.

Then some of us became more ambitious. Frustrated by the reality that much of our advice went unheeded (so many free-market solutions still waiting to be taken up!), we turned our analytical toolkit on the behavior of politicians and bureaucrats themselves. We began to examine political behavior using the same conceptual framework that we use for consumer and producer decisions in a market economy. Politicians became income-maximizing suppliers of policy favors; citizens became rent-seeking lobbies and special interests; and political systems became marketplaces in which votes and political influence are traded for economic benefits.

Thus was born the field of rational-choice political economy, and a style of theorizing that many political scientists readily emulated. The apparent payoff was that we could now explain why politicians did so many things that violated economic rationality. Indeed, there was no economic malfunction that the two words “vested interests” could not account for.

Why are so many industries closed off to real competition? Because politicians are in the pockets of the incumbents who reap the rents. Why do governments erect barriers to international trade? Because the beneficiaries of trade protection are concentrated and politically influential, while consumers are diffuse and disorganized. Why do political elites block reforms that would spur economic growth and development? Because growth and development would undermine their hold on political power. Why are there financial crises? Because banks capture the policymaking process so that they can take excessive risks at the expense of the general public.

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Sandors make major gift to Law School; Coase-Sandor Institute named to honor mentor

University of Chicago News
February 7, 2013

Dean Michael Schill announced today that Dr. Richard Sandor, Chairman and CEO of Environmental Financial Products LLC, and his wife Ellen are the principal donors to a $10 million endowment in law and economics at the University of Chicago Law School. The Sandors made the gift in honor of Richard’s mentor, Nobel Laureate Ronald Coase, Clifton R. Musser Professor Emeritus of Economics at the Law School.

In honor of Coase’s path-breaking work and Sandor’s own extraordinarily important innovations in the world of finance and the environment, the Institute for Law and Economics will be renamed the Coase-Sandor Institute for Law and Economics. Current and future work of the Coase-Sandor Institute will focus on the role of law, private property rights and transaction costs in promoting efficient markets. Scholars at the Institute also will study the appropriate relationship between transactions, government regulation, self-regulation and economically efficient outcomes in such disparate substantive areas as climate change, water, endangered species, health care, education, housing and corporate restructuring.

“Over half a century, Ronald Coase’s pioneering work has exemplified the distinctive and powerful nature of University of Chicago scholarship. By transcending the traditional boundaries of two disciplines, Professor Coase helped shape a new field of thought in law and economics,” said University President Robert J. Zimmer. “It is fitting that the inquiry he helped spark continues in an institute that bears his name, and we are grateful to Richard and Ellen Sandor for making that possible.”

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Taming Leviathan

by Michael Boskin

Project Syndicate
January 27, 2013

A successful society needs effective, affordable government to perform its necessary functions well, and that includes sufficient revenue to fund those functions. But a government that grows too large, centralized, bureaucratic, and expensive substantially impairs the private economy by eroding individual initiative and responsibility; crowding out private investment, consumption, and charity; and damaging incentives with high tax rates. It also risks crowding out necessary government functions such as defense. That is today’s Europe in a nutshell, with America not far behind.

The recent death of James M. Buchanan, the father of public-choice economics, is reason to reflect on his sage warnings. Buchanan was awarded the Nobel Prize in 1986 for bringing to the study of government and the behavior of government officials the same rigorous analysis that economists had long applied to private economic decision-making. Buchanan concluded that politicians’ pursuit of self-interest inevitably leads to poor outcomes.

Buchanan’s analysis stood in marked contrast not only to Adam Smith’s dictum that the pursuit of self-interest leads, as if “by an invisible hand,” to desirable social outcomes, but also to the prevailing approach to policy analysis, which views government as a benevolent planner, implementing textbook “solutions” to market failures.

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Η αποτυχία των θεσμών

του Π.Κ.Ιωακειμίδη

Τα Νέα
25 Ιανουαρίου 2013

Στο σημαντικό βιβλίο τους Γιατί τα έθνη αποτυγχάνουν: Οι καταβολές της ισχύος, της ευημερίας και της φτώχειας (Why Nations Fail: The Origins of Power, Prosperity and Poverty - Profile Books, 2012), οι καθηγητές D. Acemoglu και J. Robinson διατυπώνουν τη βασική υπόθεση ότι «οι χώρες διαφέρουν στον βαθμό της οικονομικής τους επιτυχίας λόγω της ποιότητας των θεσμών και των κανόνων που προσδιορίζουν το πώς λειτουργεί η οικονομία καθώς και των αξιών και κινήτρων που εμπνέουν τους πολίτες». Οι συγγραφείς αποδίδουν δηλαδή την ύπαρξη ευημερίας ή φτώχειας καθώς και την οικονομική σταθερότητα σε μια χώρα σε πολιτικούς (θεσμούς) και πολιτιστικούς λόγους (κίνητρα για δράση). Μολονότι οι συγγραφείς μελετούν κυρίως αναπτυσσόμενες κοινωνίες και οικονομίες (Αφρικής, Λ. Αμερικής, Ασίας κ.ά.), η θέση τους ότι «οι θεσμοί είναι αυτοί που ευθύνονται, αυτοί που κρατούν τις φτωχές κοινωνίες φτωχές και τις εμποδίζουν να προωθήσουν τη διαδικασία ανάπτυξης ή ακριβώς το αντίθετο» προβάλλεται ως ισχύουσα και για άλλες περιπτώσεις ανεπτυγμένων κρατών. Και όταν αναφέρονται στους θεσμούς συμπεριλαμβάνουν το σύνολο των κρατικών, διοικητικών, πολιτικών δομών που συγκροτούν μια ορισμένη πολιτική οντότητα.

Η θέση των συγγραφέων είναι απολύτως σχετική με την Ελλάδα. Κατά βάση η οικονομική κρίση στην οποία οδηγήθηκε η χώρα συνιστά θεσμική/πολιτική αποτυχία ενώ τροφοδοτήθηκε από ένα ορισμένο πολιτιστικό μόρφωμα. Η θεσμική αποτυχία έγκειται στην αδυναμία κρατικού συστήματος, διοίκησης και πολιτικών φορέων να επιλύουν προβλήματα, να λειτουργούν ουδέτερα για την προαγωγή του γενικού συμφέροντος, να υπηρετούν την κοινωνία και τους πολίτες γενικώς και όχι επιμέρους συμφέροντα. Το πολιτιστικό μόρφωμα που τροφοδότησε την κρίση συναρθρώνεται με τα στοιχεία του ανορθολογισμού, της απουσίας εμπιστοσύνης σε θεσμικές δομές και ανάδειξη των διαπροσωπικών σχέσεων, στην ελάχιστη έμφαση στην ανάγκη απαρέγκλιτης τήρησης των κανόνων (ανομία), την ανάδειξη του κράτους στο ρόλο του απόλυτου προστάτη (ή του απόλυτου αντιπάλου), στην προβολή της προσωπικότητας μέσω εξωτερικών στοιχείων (κατανάλωσης, επιδεικτικής συμπεριφοράς).

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The voice of public choice

Economist
January 19, 2013

A list of things that Americans judge more favourably than Congress, according to Public Policy Polling, a survey firm, includes colonoscopies, root canals, lice and France. America seems to have stumbled from economic crisis to political paralysis. That would have come as little surprise to James Buchanan, a Nobel prize-winning economist and the architect of “public-choice theory”, who died on January 9th, aged 93.

Mr Buchanan was an outlier in his field. He eschewed the profession’s embrace of complex models and maths in favour of serious reflection on political philosophy (leading some to dismiss him, wrongly, as a lightweight). A Tennessean by birth, he mistrusted north-eastern elites and spent most of his career at universities in Virginia. He challenged his profession’s casual treatment of variables such as economic cost, which he considered to be a deeply subjective matter. He adopted heterodoxies such as a 100% inheritance tax, on egalitarian grounds. Yet his greatest contribution was in the realm of political economy.

His interest in the workings of the state reflected its growing importance. From having only a minimal role in pre-industrial days, Leviathan came to control swathes of economic activity as the 20th century progressed. National-security demands were partly responsible. Government responses to market failures, from unscrupulous business practices to the trauma of the Depression, also played their part. As demands on the state grew, so too did the need to understand its behaviour.

Mr Buchanan was one of a small group of economists wondering whether the state was up to the task. Untrammelled markets may fail—by producing more pollution than society as a whole would prefer, for example. That creates the potential for welfare-improving government intervention, such as a tax on pollution. Yet there is no guarantee a state will get it right. Whether interventions are justified, Buchanan pointed out, depends on whether government officials are motivated by self-interest as well as a sense of public duty. Weighing up the pros and cons of policy choices requires an unsentimental view of government actions, a position he called “politics without romance”. In exploring this he helped create public-choice theory.

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Extrenalities and the Coase Theorem

Learn Liberty
June 29, 2011

In economic activity, there are sometimes 'externalities' or spillover effects to other people not involved in the original exchange. Positive externalities result in beneficial outcomes for others, but negative externalities impose costs on others. Prof. Sean Mullholland addresses a classic example of a negative externality, pollution, and describes three possible solutions for the problem: taxation, government regulation, and property rights. The first two options are difficult to monitor and may create perverse incentives. A better solution to overcome the externality is property rights, as described by Ronald Coase. As long as property rights are well-defined, divisible, and defendable, parties can negotiate to reduce the impact of the pollution.

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Have We Lost the War on Drugs?

by Gary S. Becker and Kevin M. Murphy

Wall Street Journal
January 4, 2012

President Richard Nixon declared a "war on drugs" in 1971. The expectation then was that drug trafficking in the United States could be greatly reduced in a short time through federal policing—and yet the war on drugs continues to this day. The cost has been large in terms of lives, money and the well-being of many Americans, especially the poor and less educated. By most accounts, the gains from the war have been modest at best.

The direct monetary cost to American taxpayers of the war on drugs includes spending on police, the court personnel used to try drug users and traffickers, and the guards and other resources spent on imprisoning and punishing those convicted of drug offenses. Total current spending is estimated at over $40 billion a year.

These costs don't include many other harmful effects of the war on drugs that are difficult to quantify. For example, over the past 40 years the fraction of students who have dropped out of American high schools has remained large, at about 25%. Dropout rates are not high for middle-class white children, but they are very high for black and Hispanic children living in poor neighborhoods. Many factors explain the high dropout rates, especially bad schools and weak family support. But another important factor in inner-city neighborhoods is the temptation to drop out of school in order to profit from the drug trade.

The total number of persons incarcerated in state and federal prisons in the U.S. has grown from 330,000 in 1980 to about 1.6 million today. Much of the increase in this population is directly due to the war on drugs and the severe punishment for persons convicted of drug trafficking. About 50% of the inmates in federal prisons and 20% of those in state prisons have been convicted of either selling or using drugs. The many minor drug traffickers and drug users who spend time in jail find fewer opportunities for legal employment after they get out of prison, and they develop better skills at criminal activities.

Prices of illegal drugs are pushed up whenever many drug traffickers are caught and punished harshly. The higher prices they get for drugs help compensate traffickers for the risks of being apprehended. Higher prices can discourage the demand for drugs, but they also enable some traffickers to make a lot of money if they avoid being caught, if they operate on a large enough scale, and if they can reduce competition from other traffickers. This explains why large-scale drug gangs and cartels are so profitable in the U.S., Mexico, Colombia, Brazil and other countries.

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Brazilian student auctions virginity

CNN
January 2, 2013

A Brazilian student set off a firestorm in her hometown by putting her virginity up for auction.

 

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