Tuesday, January 31, 2017

How Much Can Cutting Federal Regulation Boost the U.S. Economy?

by Josh Zumbrun

Wall Street Journal

January 30, 2017

Financial markets and the White House are betting that a rollback of federal regulations can provide a significant boost to the U.S. economy. Research suggests that’s no sure thing.

The volume of federal regulation has grown dramatically over recent decades and Donald Trump says that’s holding back growth. But estimates of the costs and benefits of the expanding regulatory state are so disparate, it’s nearly impossible to pin down the payoff for Mr. Trump’s plan to cut back red tape.

Conclusions vary so much not only because of the differing political instincts of researchers, but because studying regulations piece by piece produces different estimates than trying to gauge the impact of all regulations at once.

Mr. Trump signed an executive order to cut the number of federal regulations, requiring that two old regulations be eliminated for every new one created. Here’s a primer on the regulatory state and its effect on the economy.


Monday, January 2, 2017

The 25 best books I read in 2016 (by Prof. Aristides N. Hatzis)

Sunday, October 9, 2016

The Provocative Life of Judge Richard Posner

by John Fabian Wittoct

New York Times

October 7, 2016

Once in every great while, nature and nurture combine in a single person the qualities of erratic genius, herculean work ethic and irrepressible ambition. Think of Picasso in art, Ali in boxing or Roth in literature. Add a penchant for provocation untethered to the constraints of conventional human interaction and you get, in the law, Judge Richard Posner of the United States Court of Appeals for the Seventh Circuit in Chicago.

In the past half-century there has been no figure more dominant or more controversial in American law than Posner. He has written more than 50 books, over 500 articles and nearly 3,000 majority opinions for his court. Not even Supreme Court Justice Oliver Wendell Holmes Jr. — to whom he is often compared — matches his productivity and range.

William Domnarski’s biography, the first such book on Posner, draws on extensive interviews and on access to Posner’s correspondence at the University of Chicago. “Richard Posner” portrays a man who aims self-­consciously to be (in his words) a “Promethean intellectual hero,” remaking the world of the law by sheer will. The questions Domnarski asks are, What makes this extraordinary character tick — and to what end?

Posner was born in New York City in 1939 to parents who were Communists, or at least fellow travelers. He held traditionally left-liberal views into adulthood, including the time of his clerkship on the Supreme Court with a liberal lion, Justice William Brennan. But he was restless and sometimes even bored. He considered leaving the law for graduate training in literature. In the late 1960s, however, he discovered economics. Legal thought has never been the same.


Wednesday, August 17, 2016

Brexit – Britain is paying the price for a badly designed choice

by Richard Thaler

Financial Times

August 17, 2016

The Brexit vote has created an environment of great uncertainty for Britain, the EU and the global economy. No one can predict with any confidence what will happen for at least the next three years, but economists are in unusual agreement that if Brexit occurs it will be bad for the UK and bad for the EU.

How did we get here? One answer lies in “choice architecture”, the decision-making framework in which choices are made.

Consider the original charter of the EU. An important principle of good choice architecture is to anticipate how things might go wrong and take steps in advance to mitigate the damage. In the formation of the EU, this step did not seem to attract the attention it deserved. What will happen if a country breaks the rules but is financially unable to repay its debts? The ambiguity in this answer has been evident in the drama surrounding Greece and a possible Grexit.

Another question that appears to have been left unanswered originally is what would happen if a country wanted to leave, as the UK might wish to do. The EU resembled the Hotel California described in the Eagles song, where, “You can check out any time you like / But you can never leave”. Eventually this omission was addressed by the creation of the now famous Article 50 of the Lisbon treaty, adopted in 2009, which provides the rules for a country that wishes to secure a divorce from the EU. (It has to be said that few states have provisions for leaving a union to which they belong; the US fought its deadliest war over such an issue.)


Friday, January 29, 2016

Richard A. Posner’s ‘Divergent Paths: The Academy and the Judiciary’

by Kermit Roosevelt

New York Times

January 29, 2016

If Richard Posner did not exist, who would dare invent him? The most-cited legal scholar of all time, who is arguably America’s greatest living judge; a man who publishes a book a year while writing all his own judicial opinions; an icy ration­alist who once confessed to unrequited love for his cat. . . . It’s all a bit too much to believe. Arthur Conan Doyle’s Sherlock Holmes and Gene Roddenberry’s Mr. Spock are probably the closest anyone has come.

Fortunately, Posner does exist. A judge on the United States Court of Appeals for the Seventh Circuit since 1981, he remains a senior lecturer at the University of Chicago Law School and from these dual positions continues to produce an astounding amount of work. He made his reputation as a scholar by pioneering the economic analysis of law in the 1970s and since then has ranged widely, covering topics like the relationship between law and literature, the regulation of sex, the 2000 election and antiterrorism. Recently he has turned his attention to the federal judiciary and written two books, “How Judges Think” and “Reflections on Judging.”

His latest, “Divergent Paths,” continues that trend, though its aim is less illumination than critique and reform. The book has two parts. The first, and longer, identifies problems facing the modern federal judiciary; the second offers suggestions for how law schools might alleviate them. Both display Posner’s characteristic clearheaded insights. “Divergent Paths” is a valuable contribution to debates over the future of federal courts and law schools alike.


Tuesday, November 17, 2015

Law and Economics: Philosophical Issues and Fundamental Questions

Edited by Aristides N. Hatzis & Nicholas Mercuro

London/New York: Routledge, 2015

The Law and Economics approach to law dominates the intellectual discussion of nearly every doctrinal area of law in the United States and its influence is growing steadily throughout Europe, Asia, and South America. Numerous academics and practitioners are working in the field with a flow of uninterrupted scholarship that is unprecedented, as is its influence on the law.

Academically every major law school in the United States has a Law and Economics program and the emergence of similar programs on other continents continues to accelerate. Despite its phenomenal growth, the area is also the target of an ongoing critique by lawyers, philosophers, psychologists, social scientists, even economists since the late 1970s. While the critique did not seem to impede the development of the field, it certainly has helped it to become more sophisticated, inclusive, and mature. In this volume some of the leading scholars working in the field, as well as a number of those critical of Law and Economics, discuss the foundational issues from various perspectives: philosophical, moral, epistemological, methodological, psychological, political, legal, and social.

The philosophical and methodological assumptions of the economic analysis of law are criticized and defended, alternatives are proposed, old and new applications are discussed.

The book is ideal for a main or supplementary textbook in courses and seminars on legal theory, philosophy of law, jurisprudence, and (of course) Law and Economics.

Aristides N. Hatzis is an Associate Professor of Legal Theory at the University of Athens, Greece.

Nicholas Mercuro is Professor of Law in Residence ath the Michigan State University College of Law and Member of the faculty of James Madison College, Michigan State University, USA.

Here you can find the Preface, the Table of Contents and Two Chapters (by Judge Richard Posner and Prof. Martha Nussbaum)

Thursday, September 10, 2015

‘Date-Onomics,’ ‘The Sex Myth’ and ‘Modern Romance’

by Kristin Dombek

New York Times

September 9, 2016

Back when adultery and gay sex were widely criminalized in the United States, when masturbation was thought to make you crazy and fellatio was taboo, the Kinsey Institute famously revealed that Americans were secretly less faithful, more gay, more various in their sexual practices and more perverse than most wanted to think. Sixty years later, many of us have come to regard sex — preferably passionate, hot, transformative sex — as central to our lives. In the time of Tinder, our sexuality feels anything but secret. But romance is still mysterious — what does it feel like for everyone else? — and three new books try to explain modern mating.

Rachel Hills, an Australian journalist who lives in New York, argues in “The Sex Myth” that there is a new gap between what we believe and what we do: Americans are secretly having less and worse sex than everyone thinks, and feeling bad about it. She cites a recent study, which shows that on any given weekend, 80 percent of male college students think their schoolmates are having sex (it’s actually 5 percent to 10 percent). Hills argues persuasively that when our value is tied to sexual desirability and performance, we live with a new kind of shame: If we’re not having good sex, all the time, there’s something wrong with us. In this way, the liberation of sex actually regulates us.

Motivated by her own sense of falling short of some sexual ideal, and by conversations with friends who felt the same way, Hills attempts to show how we moved from “a culture that told us we were dirty if we did have sex to one that tells us we are defective if we do not do it enough.” She examines social science literature and media, and interviews hundreds of people to contrast the “myth of a hypersexual society” with our lived reality. “The Sex Myth” provides a clarifying framework for understanding new versions of old contradictions — that women must choose between being “wholly ‘pure’ or ‘empowered,’ innocent Madonna or self-assured Gaga.” Hills makes a smart argument against that strain of neo- or anti-feminism that would have women rebel against objectification by objectifying ourselves: We might be better off, she argues, to stop identifying ourselves primarily with our sex lives.


Friday, May 15, 2015

How Homo Economicus Went Extinct

by Carol Tavris

Wall Street Journal

May 15, 2015

As a social psychologist, I have long been amused by economists and their curiously delusional notion of the “rational man.” Rational? Where do these folks live? Even 50 years ago, experimental studies were demonstrating that people stay with clearly wrong decisions rather than change them, throw good money after bad, justify failed predictions rather than admit they were wrong, and resist, distort or actively reject information that disputes their beliefs. In recent years, a new field has emerged—“behavioral economics”—to propose an alternative to the rational man of traditional economics. A spate of popular books and empirical studies have been published exploring human irrationality—in decision making, beliefs and actions. Researchers in this field are making up for lost time, or perhaps realizing that they are social psychologists after all.

As the offspring of traditional economics and experimental social psychology, behavioral economics shows remarkable hybrid vigor, and Richard Thaler, one of the new field’s founders, acknowledges its debt to psychological science throughout his highly enjoyable intellectual autobiography, “Misbehaving.” Indeed, his opening aphorism is Vilfredo Pareto’s 1906 claim that “the foundation of political economy and, in general, of every social science, is evidently psychology. A day may come when we shall be able to deduce the laws of social science from the principles of psychology.” That day is here, as Mr. Thaler explains.

For all of his creative career spanning 40 years, Mr. Thaler, who is a professor of behavioral science and economics at the University of Chicago Graduate School of Business, has been studying “the myriad ways in which people depart from the fictional creatures that populate economic models.” As human beings who arrogantly and often wrongly consider ourselves “sapiens,” we simply don’t match the model of human behavior favored by economists, one that “replaces homo sapiens” (whom Mr. Thaler calls Humans) with “a fictional creature called homo economicus” (whom he calls Econ). “Econs do not have passions; they are cold-blooded optimizers,” he says. “Compared to this fictional world of Econs, Humans do a lot of misbehaving”—thus the book’s title.


Friday, February 6, 2015

The Rise of the Frugal Economy

by Navi Radjou & Jaideep Prabhu

Project Syndicate

February 6, 2015

In a famous 1937 essay, the economist Ronald Coase argued that the reason Western economies are organized like a pyramid, with a few large producers at the top and millions of passive consumers below, is the existence of transaction costs – the intangible costs associated with search, bargaining, decision-making, and enforcement. But with the Internet, mobile technologies, and social media all but eliminating such costs in many sectors, this economic structure is bound to change.

Indeed, in the United States and across Europe, vertically integrated value chains controlled by large companies are already being challenged by new consumer-orchestrated value ecosystems, which allow consumers to design, build, market, distribute, and trade goods and services among themselves, eliminating the need for intermediaries. This bottom-up approach to value creation is enabled by the horizontal (or peer-to-peer) networks and do-it-yourself (DIY) platforms that form the foundation of the “frugal” economy.

Two key factors are fueling the frugal economy’s growth: a protracted financial crisis, which has weakened the purchasing power of middle-class consumers in the West, and these consumers’ increasing sense of environmental responsibility. Eager to save money and minimize their ecological impact, Western consumers are increasingly eschewing individual ownership in favor of shared access to products and services.


Tuesday, January 20, 2015

Henry Manne: A Champion of Law Informed by Economics

Wall Street Journal
January 19, 2015

Editor’s note: Henry G. Manne, dean emeritus of the George Mason School of Law, died Saturday at age 86. The author of “Insider Trading and the Stock Market” (1966) and a pioneer in the field of law and economics was a frequent Journal contributor. Some samples:

From “For Milken, Verdict First, Trial Later,” Feb. 3, 1990:

The government wants $1.8 billion in RICO forfeitures from [Michael] Milken and his co-defendants. The government claims that Mr. Milken’s alleged securities infractions were RICO violations, which made Drexel part of a RICO “enterprise,” which means he must forfeit all his Drexel compensation. Kafka, hell; anyone for Torquemada?

The government wants $1.8 billion in RICO forfeitures from [Michael] Milken and his co-defendants. The government claims that Mr. Milken’s alleged securities infractions were RICO violations, which made Drexel part of a RICO “enterprise,” which means he must forfeit all his Drexel compensation. Kafka, hell; anyone for Torquemada?

Every American’s basic civil liberties are critically endangered by this hysterical, politically inspired drive to demean our financial markets and convict or at least disgrace targeted individuals. That the principal defendant has been a disruptive and unsettling innovator in the usually staid financial world makes it all the more important to be vigilant about possible abuse of fair procedures. We hardly need a regime of civil liberties to protect passive, unventuresome members of the community. Tough business competitors should get at least the same legal fairness we normally give Klansmen or crack dealers.


See also


Wednesday, January 7, 2015

‘Scoring’ Legislation for Growth

by Edward P. Lazear

Wall Street Journal

January 6, 2015

The House of Representatives on Tuesday adopted a rule that will change Washington and lawmaking for the better. When legislation is proposed, the Congressional Budget Office is tasked with estimating its fiscal consequences. In most cases, the CBO assumes there is no effect on economic growth, positive or negative. In the future, the House will instruct the CBO to take macroeconomic effects into account when estimating the cost of legislation.

The old approach, that ignored effects on economic growth, has been defended as being “neutral,” a way to prevent political pressure from affecting nonpartisan CBO calculations.

The White House has already released a blog post that opposes the change, based on the supposed neutrality of the old approach and arguing that the new rule will introduce bias. But the House, not White House, has it right. Ignoring the macroeconomic impacts of legislation is far from neutral.

Every piece of legislation has economic consequences. Most are small, but some are significant. When the CBO ignores them, it disregards the detrimental effects on economic growth of bad legislation as well as the positive effects on growth of good legislation.


Monday, December 1, 2014

Professor Gordon Tullock: A Personal Remembrance

by Richard B. McKenzie

Library of Economics & Liberty

December 1, 2014

Professor Gordon Tullock will be remembered by economists around the world who never met him, much less walked in his considerable academic shadow. Gordon—I call him that because he was a mentor, co-author, and good friend—was one of the hundred most influential economists of the twentieth century. Many still lament the fact that Gordon did not share the 1986 Nobel Prize in Economics with James Buchanan, who won it for his development of public choice economics. Gordon, along with Buchanan, nurtured public choice from its birth in the late 1950s, co-authoring or authoring several of the subdiscipline's classic works.

Many economists will reflect on how, at the time of his death at age 92, Gordon could well have been on the "short list" for a future Nobel for his path breaking work on "rent seeking," which is concerned with how businesses and other interest groups seek—with lobbying and campaign contributions—monopoly profits, or "rents," through government-provided largesse or market restrictions. Gordon's work on rent-seeking spawned a mountain of journal articles that changed people's assessment of how political processes work. The concept of rent-seeking is now so widely adopted in economists' public commentaries that the expression need no longer be placed in quotes.

Beyond his many path-breaking accomplishments, however, Gordon was a real character. Many who knew him still carry the sting of dismissal or insult, while others remember epiphanies that Gordon freely distributed. Gordon could be abrasive, especially in his early years and especially when he could readily pick out flaws in arguments. Some who felt (and may still feel) his sting, but did not stay around long enough to really know him, may remember him as mean-spirited. But those of us who lingered came to realize that he was virtually incapable of being intentionally mean-spirited. He was an economist who saw argument as a serious sport. He would not drop arguments or even sugarcoat them out of concern for political (or personal) correctness.


Thursday, November 20, 2014

Aristides Hatzis: The Economic Crisis and the Economic Science

Crisis Observatory

November 19, 2014

Aristides N. Hatzis, Associate Professor at the University of Athens (Department of Methodology, History & Theory of Science), answers the following questions of the Crisis Observatory, concerning Economics and the way it is being taught since the beginning of the crisis.

Question 1: In the wake of both the financial crisis and the economic crisis that ensued (and continues to cause problems, especially to the European economy), Economics came under harsh criticism. This criticism involved its failure to foretell the crisis, but also the validity of its established models and approaches in general, as well as their capacity to correctly diagnose economic problems and to offer appropriate policies therefore. In your opinion, is this criticism justified and, if so, what do you think are the lessons that Economics should draw from the recent crisis?

Question 2: Based on your previous response, what do you think that ought to change in the way Economics is being taught in universities, considering that the economic policy makers of tomorrow are today's the students of Economics?


Tuesday, November 4, 2014

Impact of the Work of Gary S. Becker

University of Chicago
November 3, 2014

Keynote Address by James Heckman and remarks by Robert J. Zimmer, president of the University of Chicago, and Lars Peter Hansen, the David Rockefeller Distinguished Service Professor in Economics, Statistics, and the College. James Heckman is the Henry Schultz Distinguished Service Professor in Economics and the College.

Wednesday, October 29, 2014

Where not to invest in Europe

October 29, 2014

Doing business in Europe's periphery is hampered by slow legal systems

The World Bank released its annual "Doing Business" report on October 29th, ranking the world's 189 countries by how attractive they are to companies. That tiny Singapore led the list again this year and Eritrea was stuck in last place was not particularly surprising. Other performances were less easy to explain. Ukraine—which since February has been embroiled in a conflict with neighbouring Russia—leapt up the rankings, partly because some of the data capturing improved administrative practices was collected before hostilities flared.

Yet the report's most interesting data—on the time it takes to settle a dispute, or wind up a company—sheds light on the lacklustre business investment in Europe's periphery since the financial crisis. Countries where it is quick and easy to enforce contracts or wrap up failing firms are usually more attractive to investors than places with lethargic legal systems. In Greece and Slovenia, hit hard by the financial crisis, it takes much longer to do these things than countries such as France and Germany, whose economies have generally performed better. The situation has got much worse over the last few years. It now takes over two months longer to enforce a contract through the Slovenian court system than it did a year ago. And to do that in Greece now takes more than four years, up around 18 months from 2010. The only bright spot is that there may be a lot more business for Greek lawyers in the near future.


Read the Report