30 April 2008

Against Planners

No profession has done more harm to the American city than urban planners.

An op-ed in Sunday's Denver Post offered up planners as the solution to a host of social problems.

The article pleas for us to ignore the bad old days when:

Planners got a black eye for their role in demolishing inner-city communities during the post-World War II period of urban renewal and freeways slashing through poor neighborhoods — epitomized by New York's heavy-handed Robert Moses. . . . More commonly, though, planners simply looked for paychecks in suburbia, creating communities that carelessly devoured open lands and usually shunned the disadvantaged anyway.

Don't believe the hype from the American Planners Association. Planning is still the problem, not the solution. The problems described in their 100th anniversary report, "Overlooked America" are to a great extent created by the very notion urban planning laws. These laws don't simply need to be tweaked. They need to be repealed wholesale and replaced with very thin regulations closely tied to genuine requirements for providing urban services.

They bemoan the homelessness problem and NIMBY reactions to the construction of shelters for the homeless, and argue that planners "can help enable shelters and transitional shelter for the homeless, fighting off NIMBY voices by influencing zoning and employing conditional-use permits."

Where did this problem come from? Urban planners encouraged the destruction of single occupancy hotels (less charitably known as flop houses) and limited their presence to places where they weren't viable. The zoning laws and conditional-use permits that prevent people from offering services to the homeless, the poor and the mentally ill, among others, are the invention of planners and are the stock in trade of the daily work of planners. Before urban planning established this scheme, there was no democratic community veto on how you used your property. Planning insisted that all new development that alters the status quo be subject to hearings and ultimately the approval of elected officials who are elected by majority vote. Without planning laws, NIMBY concerns are not an impediment to otherwise lawful land uses.

This system has locked in mediocrity, suppressed innovation, and left economically needed but unpopular land uses, like low income housing, without a home.

It is not coincidence that today's most vibrant cities are the ones established before planners secured a strangle hold on property development. The rise of the planners has replaced an ability to identify economic opportunity, financing and innovative ways of using land with savy in handling local politics as the primary qualification for the job.

The APA decries the peril of "the elderly stranded in their homes when they can no longer drive." Why do the elderly live in unwalkable communities? Because planners decreed that residential and commercial land uses needed to be separated into different zones. We don't need planners to focus on "on building more pedestrian-friendly, mixed-use developments." We simply need them to get out of the way. There is no evidence that private developers will not meet the need for this kind of development if freed from the regulations that prevent them from doing so.

Planners decry racial segregation and urge people to make mixed race neighborhoods possible. But one of the main reasons that we don't have mixed race and mixed income neighborhoods is that zoning laws and building codes with aesthetic elements actively discourage these kinds of neighborhoods.

Aesthetic concerns, local tradition, historic preservation concerns, a desire to preserve community character and a desire to protect property values are the code words that neighbors use to defend income and racial segregation through the force of law with zoning requirements. These concerns mask illegitimate claims to control other people's property, to fight change for the sake of fighting change, and to give their prejudices (whether or not articulated) the force of law.

The place for urban planning is narrow. Some decisions are inherently governmental. Governments must decide how to deliver municipal services and manage government property like parks, streets, water and sewer systems and civic buildings, and there is no harm in planning how to make those investments.

Sometimes, the provision of municipal services may require some rules and regulations. It is reasonable to refuse to permit five story buildings when the fire department only has three story ladders, although those who want taller buildings ought to be able to pay to upgrade the fire department in exchange for permission to build a larger building. Since public health requires that someone collect trash, it is reasonable to require that property owners have some place to deposit trash for pickup that is accessible to trash collection trucks. Since cities provide storm sewers, it is reasonable that they impose compatible drainage requirements. Since cities provide street parking, it is reasonable for them to require that properties provide enough off street parking to prevent them from overwhelming the public supply of street parking. Fires and building collapses endanger whole neighborhoods, so it is reasonable to have some basic building codes.

But there is almost never a justifiable reason for preventing property owners from putting structurally sound, fire code compliant multi-family housing in single family neighborhoods, or to prevent property owners from putting non-polluting commercial uses with adequate parking in residential neighborhoods.

Denver's recent vote to prohibit new multi-family housing in Sloan's Lake and West Highland by downzoning it from R-2 to R-1 was a mistake. It stunts the health and gradual transformation of the city. It makes it harder for the Denver Public Schools to fill its empty classrooms, while forcing surban districts to build new schools. It pushes people out of the urban residential neighborhoods where it makes the most economic and enviromental sense to build additional housing into new surburbs that destroy open space. It prevents a neighborhood where high income residents and moderate income residents live side by side from evolving (ironically, in this case, the high income residents would have probably been the multi-family unit residents). It weakens the city's tax base. All of this is basically because they don't like the way new duplexes look next to their existing more modest single family homes. What hogwash!

Downzoning is a leading reason why Englewood has not thrived despite its close proximity to vibrant Denver neighborhoods nearby that were not as restrictive. Downzoning doesn't work. Diversity is what makes urban areas so much more vital than the Levittowns of the world. But diversity can't happen unless we remove property development from majoritarian control based on vague aesthetic sensibilities that often merely hide fear of change of prejudices conscious and unconscious.

The disadvantaged don't come out on top in either the marketplace or in political struggles. If they did, they wouldn't be disadvantaged. But they almost always do better in the marketplace than they do in the political arena. The marketplace allows for compromises that gives everyone part of what they want, while the political arena tends to be all or nothing. In politics, the powerful almost always win, and political power takes a large investment of time and energy (and sometimes money) to acquire. In contrast, meaningful and useful economic power can be secured in smaller chunks.

The more local the government, the more this is the case. Local government officials are elected by a narrower subset of voters than top of the ticket elected officials, in elections where meaningful information is harder to obtain, and are subject to less media supervision of their actions. No level of government is more indifferent to the common man and more prone to incompetence than local government. The only real check against bad local government is that residents of them can move elsewhere if their provision of urban services becomes intolerably bad.

One of the reasons that Denver is doing well now, compared to its suburban neighbors, is that it has only a single layer of government at the county level in a county large enough to force it to professionalize and address issues on a policy level, and whose elections impact enough people to make media coverage more thorough, while the suburbs must contend with county, municipal and special districts governments that become less representative and less competent as they get smaller.

Local governments and their partners in planning crime, neighborhood associations, are bastions of conservative local elites (as in "opposed to change" rather than Republican leaning) who smash promising ideas that someone is willing to risk large sums of their own money to attempt, with little or no regard for the systemic consequences of their actions, and no awareness of the harm that they are doing to their own neighborhoods.

If we want to make our city a better place, we could do far worse than jettisoning the city's byzantine zoning code entirely, and starting over with only the bare minimum of land use limitation and building code requirements necessary to allow the city to do its work.

Updated 5-7-2008 to correct typos only (I don't have a copy editor).

29 April 2008

Crawford Redux

The U.S. Supreme Court in the Crawford case held that an Indiana requirement that voters either produce photo ID, or to cast a provisional ballot and produce photo ID worthy documentation within ten days is valid, despite a complete lack of evidence that imposters showing up to vote is a genuine problem in the state. Photo IDs are free in Indiana (escaping the issue of a direct poll tax), but obtaining documentation to get a photo ID or to support a provisional ballot is not, nor are in person trips to the pertinent government offices which are difficult for people who generally do not have cars and often do not have access to public transportation.

The state conceded that as many as 1% of voters in the state (mostly elderly, poor, minority and disabled) would be affected by the law. The Democratic Party of Indiana claimed that more were impacted. The dissenting opinion noted that the Democratic Party had identified more than twenty people in a single Indiana precinct who cast provisional ballots and were likely eligible voters (due to signature matches with registration documents and a prior history of voting, for example) whose provisional ballots were not counted as a result of the photo ID requirement. There are thousands, if not tens of thousands, of precincts in Indiana.

The dissenting opinion by Justice Souter noted that there is no evidence that anyone has ever impersonated a voter in Indiana at the polls and also suggested why this might be the case. The leading opinion from Justice Stevens identified only one such proven case in the entire nation in recent history (in Washington State), and a corruption situation in New York State from 140 years ago.

Thus, the State of Indiana won this case on the law, in a divided opinion, but the facts revealed in the process make clear that this law disenfranchises many more people who have a right to vote than it prevents from casting ballots improperly. It also, once again, makes the U.S. Supreme Court look like it is acting in a partisan manner to disenfranchise voters in close elections, just as it did in the imfamous 2000 case of Bush v. Gore.

Still, from a practical perspective, the impact is not earth shaking. The percentage of people who lack photo IDs by the highest measure does not exceed 6%-10% of the population and may be 1% or lower. Voter turnout in the population of eligible voters without photo IDs has always been exceedingly low compared to other demographics, for the same kinds of reasons that make it hard for this population to obtain photo IDs.

To the extent that the barriers to obtaining photo IDs are primarily economic, the amount of money a non-profit would have to secure in Indiana to overcome these barriers is on the same order of magnitude as the value of the goods and services involved in taking a case all the way to the U.S. Supreme Court. A few hundred thousand dollars would be sufficient given the number of people impacted who really want to vote and the costs involved to help most people who are not voting due to economic barriers associated with photo ID requirements. Campaign technology is sophisticated enough that it is possible to be efficient about it by using techniques like targeting for assistance people who cast provisional ballots but did not validate them, and registered voters who didn't vote in counties where there were many provisional ballots cast but not validated.

Such a campaign would produce benefits to Democrats at the ballot box year after year, and unlike voter registration campaigns, which are already common, a photoID campaign would also help people without photo IDs clear other hurdles in life, such as obtaining government benefits and dealing with encounters with police.

Yes, this decision clearly helps Republicans in a razor thin election with high turnout in a Presidential election year (when marginal voters most often vote), and it is not inconceivable that Indiana could be a swing state in a statewide race in such a year. But, no Democrat with a two percentage point lead in any statewide race and a viable campaign war chest has much to fear from it, and the areas where the highest concentrations of disenfranchised voters live are likely to be the safest districts for Democrats at a less than statewide level.

All Three Candidates Miss Vaccine-Autism Point

In a disappointing development, all three candidates in the Presidential race: McCain, Obama and Clinton appear grossly uninformed about the state of the science on the alleged link between autism and vaccines (the research says "none" and thimerosal in childhood vaccines has been specifically ruled out), let alone the public health risks that result from that lack of knowledge (fewer vaccinated kids is a public health risk).

Saying you know and being wrong is obviously a bad thing.


Sen. John McCain, R-Ariz., declared that "there's strong evidence" that thimerosal, a mercury-based preservative that was once in many childhood vaccines, is responsible for the increased diagnoses of autism in the U.S. -- a position in stark contrast with the view of the medical establishment.

But, sometimes turning an "I don't know" statement into a "we don't know" statement is the wrong answer, although politicians love to use the phrase when they lack information. Obama and Clinton misstated science in this way:


"We've seen just a skyrocketing autism rate. Some people are suspicious that it's connected to the vaccines. This person included. The science right now is inconclusive, but we have to research it."


Senator Hillary Clinton, in response to a questionaire from the autism activist group A-CHAMP, wrote that she was "Committed to make investments to find the causes of autism, including possible environmental causes like vaccines." And when asked if she would support a study of vaccinated vs. unvaccinated children, she said: "Yes. We don't know what, if any, kind of link there is between vaccines and autism - but we should find out."

We can only hope that the candidates become better informed before they make policy decisions in this area.

Note: Two legal cases pressing an autism-vaccine link have made headlines recently.

One involved the highly unusual case of a thimersol preserved vaccine being administered to a pregnant woman in a manner pre-approved by the FDA and made headlines for abusive litigation tactics the Plaintiffs' lawyer directed at a blogger. Childhood vaccines, of course, are generally not administered in utero.

The other involved a similarly highly unusual case of a vaccinated child with a rare metabolic disease in addition to autistic symptoms, in which a vaccine compensation board chose to make an award rather than allow further expert witness and research intensive litigation in the unique case. The advocates for the child had argued that the combination of the vaccine and the metabolic disease may have had some connection to the autism symptoms. The child advocate's argument suggested that the extensive research showing a lack of an autism-vaccine link might to be applicable to a specially vulnerable child with a metabolic disease.

Financial Sleight of Hand

Are securitizated mortgages at fault for the subprime collapse?

Yes and no. As the inventor of junk bonds, who was also an innovator in the securitization market, who later went to prison for securities fraud explained, the real problem in the subprime collapse was bad underwriting, and bad security pricing.

But this doesn't get collateralization off the hook. Magicians do their sleight of hand by distracting the vast majority of the audience from what really matters, despite the fact that trick is conducted in plain sight. Collateralized mortgages work the same way. If you make a loan directly to a consumer, you focus like a laser beam on the quality of the underwriting decision in the loan, and are more prone to price the risk appropriately. In a collateralized mortgage transaction, the risk of bad underwriting is still central to the value of the security, but there are many distractions from this risk.

A collateralized mortgage pool does eliminate the risk that you will have the bad luck to get the loan that goes bad, rather than the loan that does not default, by random chance. The average default risk is shared, and interest rates can be priced to exceed that risk, seemingly eliminating or virtually eliminating risk in the deal.

Only, it isn't that simple.

When you have one loan, you simply have to make a good guess about the risk of default. When you have many loans in a pool, you have to know how much of the risk of default is independent from one loan to another (and hence can appropriately be averaged out) and how much of the risk of default is cyclic and will impact all loans.

This distinction is particularly important for adjustable rate loans where rising interest rates foreseeably increase the risk of default across the portfolio.

It is also an important distinction for loans in real estate bubble markets where a widespread decline in property prices is foreseeable, because a decline in real estate prices creates an incentive for homeowners with mortgages to walk away from their homes (particularly in California where a large share of residential mortgagages are non-recourse, and with first time, low down payment home buyers who have no assets from which a deficiency judgment after a foreclosure can be pursued).

As a result, the risk in a collateralized mortgage pool is greater than a mere averaging of default rates and losses in current years and the recent past would suggest. To know the risk that pools of mortgages faced you needed to know the likely future range of possible interest rates, the impact that this would have on default risk, and the likely impact of future real estate prices on default risk, which is hard to estimate because real estate price bubbles are fundamentally localized phenomena.

Investors know there there is some cyclic risk, of course, and so they insisted that the originating subprime lenders make good upon excessive defaults in the pool. This practice also hedged against insider manipulation of the pools by lumping bad loans in one pool and good loans in another without disclosing that fact.

The investors were wise when they imposed these terms. Cherry picking of loans in pools compounded by insider trading incentives didn't happen on a widespread basis. And, as a result of the excess default terms, much of the shareholder equity in companies in the subprime lending industry has been appropriated by collateralized mortgage investors -- buffering their losses and putting reckless subprime lending companies out of business.

But it turns out to be much harder to estimate cyclic risk than it is to estimate total risk in isolated loans. The available data are ill suited separating out cyclic risk from aggregate risk, so it was hard for even very smart people to make the distinction practically. As a result, investors were in a poor position to compare subprime lending company capital that was insuring them against excessly risky underwriting, to the amount of cyclic risk that they faced in their investments. They underestimated the cyclic risk, and as a result, didn't realize that subprime company capital was dwarfted by the cyclic risk in the loan pools.

By removing the underwriting decision several steps from the investment decision, understanding of the underwriting risk declined, so it was easier to misvalue the collaterized securities.

Collateralized mortgage pools also actively encouraged bad underwriting. By offering a purportedly much lower risk way for investors to participate in what had traditionally been a high risk, high transaction cost investment opportunity, the money available to make subprime loans increased dramatically. Since loan originators make profits more or less in proportion to the number of loans originated, the incentive for the subprime lenders was to make as many loans as possible, even if that meant making loans to people unlikely to be able to pay or with poor documentation.

This incentive certainly applied at the lowest level of subprime lending organizations which have pretty simple commission structures. Why, however, didn't senior management insist on taking a more cautious course that would protect shareholder equity from the risk of loans going bad? Surely, subprime lending executives who had to approve the underwriting standards used by their companies and had long experience in the field in most cases, understood that risk better than their collateralized mortgage pool investors.

The disconnect between shareholders and management at subprime lending companies was acute in this case, and it isn't the only case where this disconnection is important in explaining bad corporate decision making. High revenues boosted management compensation at subprime lending companies, even as shareholder equity was put at risk. Subprime lending company boards of directors, like most boards of directors, were rubber stamps for management.

A key terms that collateralized mortgage pool investors failed to bargain for was some mechanism that would align subprime lending company management with subprime lending company shareholders. The false assumption that the two were aligned was another reason that collateralized mortgage pool investors failed to appropriately recognize the risk they faced and as a result mispriced the securities. If shareholder and management interests had been aligned at subprime lending companies, it is likely that management would have insisted on tighter underwriting to control the risk to their shareholders from cyclic risk in the pools whose defaults they partially guaranteed. Management had no strong incentive not to take big risks with someone else's money.

The total dollar amount spent on the excessive part of executive compensation at subprime lenders was small compared to the losses. We could and probably should make subprime lending executives cough up their big bonuses. But the problem wasn't so much that the executive compensation was large in dollars as it was that the executive compensation packages gave executives insufficient reason to manage their companies in the interest of the shareholders.

Junk bonds, discussed in the link above, and the incredibly high levels of leverage found at investment banks like the collapsed Bear Sterns, go to the same idea. Leverage increases profits for shareholders and makes more money available for senior management in exchange for higher risk to shareholders.

Shareholders suffer a lot from downside risk. Management does not. Management can usually walk away with the compensation they received at anything but the eve of bankruptcy (although the 2005 bankruptcy law may change this situation) and usually can find future employment -- perhaps as a manager in their own company if it is acquired, perhaps with some other firm in the industry or a related industry.

Why should the public care if shareholders (predominantly savy institutional investors and sophisticated individuals in the top 5% of wealth with expert advisors)are harmed? The people who own publicly traded bonds that lose value in publicly traded bankruptcies are members of the same class of people who own publicly traded stock that loses all of its value in corporate bankrupcies.

There are several reasons why the public should worry about excessive risk taking by public companies that lead to bankruptcies:

1. Bankruptcies result in abrupt jobs losses to large numbers of people.

2. Bankruptcies delay or prevent payment to trade creditors and employees who are in short term relationships with the company and are not in position to evaluate the credit risks they take in offering short term trade credit. The amounts involved, moreover, are usually of fairly minor importance to the corporation's payout to its long term investors (bondholders and bank lenders for the most part), but are often important to the employees and trade creditors who a stiffed or have to wait to receive what is due to them.

3. Bankruptcies, as a result, undermine the ability of commerce to flow smoothly by undermining the likelihood that undisputed legitimate debts will be paid in full and on time, even with big businesses that are expected to be reliable in paying their debts.

4. Corporate bankruptcies always involve what amounts to a mutiny of management against shareholders to whom the management owes a fiduciary duty. Management keeps getting paid even after a bankruptcy, for a while at least. Shareholders lose everything immediately.

5. Bankruptcies often lead to partial or complete government bailouts harming the taxpayer. Bear Sterns is a blatant example of a government bailout. But any time a company sheds its defined benefit pension plan in bankruptcy, the Pension Benefit Guarantee Company has to step in and this risks government funds to make good on the PBGC obligation. Bank collapses put the FDIC on the hook to make good on private debts. Unemployment payments are a government obligation. And so on.

28 April 2008

Colorado Springs Earns Reputation

The The Colorado Springs Gazette supports systemic forced polygamous marriage for underaged girls in Texas.

If Texas authorities are on a crusade against statutory rape, they have far greater concern than the Yearning For Zion Ranch, where pregnant girls live under the supervision of their parents in a state that allows minors to wed adults with parental consent.

And who cares about polygamy laws? They should carry no more weight than laws against homosexual marriage. Eighteen states, including Texas, have statues or constitutional bans against homosexual marriage and they're almost never enforced. Imagine cops smashing down the doors of a Texas home to arrest two women living in marital bliss.

It is worth noting that one has to be age sixteen and voluntarily entering into a monogamous marriage supported by a marriage license application for a parent approved marriage to be valid in Texas (or for it to serve as a bar to statutory rape -- Colorado similarly prohibits minors from entering into common law marriages).

Likewise, the U.S. Supreme Court struck down as unconstitutional laws banning private, non-commercial homosexual sex between consenting adults in Lawrence v. Texas even though states are not required to grant the full privilege of marriage to those relationships.

Decades olders married men impregnating multiple thirteen and fourteen years olds who are strongly encouraged and pressued by their parents and community to do so is apparently right in line with the Colorado Springs values of the The Colorado Springs Gazette. Who knew that pimping was a family value?

There are also, of course, no cases in which two women living together in marital bliss have produced an unwed teen pregnancy, and I can think of any such relationships that have been coerced into being by parents or a religious community.

Then there is what Colorado House Republican leader Mike May has to say about the Republican State Representative from Colorado Springs:

Douglas Bruce might be the worst legislator in the history of Colorado.

Reagan's Eleventh Commandment is dead and gone too, or maybe it has a Doug Bruce exception.

Left Behind America

While the average American lives longer and is more affluent than in 1980, wide swaths of America viewed at a county level have been left behind from these positive trends.

From 1961 to 1999, the average life expectancy for men in the United States increased from 67 to 74 years. For women, it grew from 74 to 80 years. . . . [But] the trend to live longer stopped or reversed in many parts of the Deep South, Appalachia, Mississippi Valley, Great Plains and Texas in the 1980s and 1990s . . . To a lesser extent, the trend stalled in the Midwest and other parts of the country. During that time frame, women’s life expectancy flattened out in nearly 1,924 counties and decreased in 180 others. Men saw it stall in 427 counties and decline in 11, the researchers report in the April PLoS Medicine. . . .

[T]he United States has become a country in which life span is scarcely affected by infectious diseases, with only HIV having a significant impact. Instead, the prime factors shortening lives are high blood pressure, obesity and smoking . . . Over the long run, these lead to heart problems, stroke, diabetes, emphysema and lung cancer.

Lack of health insurance and quality health services is also identified as a key factor in the trend by the investigators.

From here.

A large share of the Colorado water systems that are contaminated are likewise in small Front Range communities.

The trend in income growth is similar as show here (via 5280.com):

25 April 2008

How To Find A Liar.

This judicial opinion takes the rare step of discussing through judicial notice, the research on what distinguishes false testimony from truthful testimony, rather than simply dredging up the usual precedents about deference fo finders of fact on the issue, although the outcome is the same.

So Much For Performance Pay

Countrywide Financial was one of the leading caused of the subprime mortgage crisis that has thrust the United States and the world economy into a recession. So, the man responsible for this dreadful economic mistake has been punished horribly by the markets for his inastute business judgment, right? Of course not.

Countrywide Financial's CEO Angelo Mazilo made $121.5 million in 2007 from exercising stock options under a Rule 10b5-1 plan. He also received $22.1 million in compensation -- $1.9 million in salary, $20 million in stock and option awards, no bonus. Countrywide, in contrast, lost $704 million, and its shares declined 79%.

From here.

Progressive State Taxes Work

[G]ross wages do not adjust so as to undo the effect of changes in state income taxes. On aggregate, more redistributive state taxes do not substantially affect interstate migration, nor do they reduce per–capita state personal income.

From here.

Pro-Business Maoist and More

The Maoists recently won a plurality in the Nepalese election. Apparently they ran on a "pro-business" platform. Who knew? The Chinese have apparently re-engineered this whole communism thing when no one was looking. The Maoists also favor the radical, for 1848, position that hereditary absolute monarchies should be abolished in favor of monarchies. Maybe we should start subsidizing Maoist revolutions in the Middle East. China and the U.S. could find common cause in the interests of democracy and cheap oil.

Perhaps coincidentally, and perhaps not, here at Aviano's in Denver (between 9th and 10th on Lincoln), they are giving away free books about a woman's experiences in Nepal.

The masters of foam art at Aviano Coffee have my support, by the way, for their team in the 2008 Mountain Regional Barista Competition. If lumberjacks and sheep shearers can have competitions, why not baristas?

It has been a mostly good few weeks for rail. Continuing discussions of an idea to create a freight rail bypass for through traffic on the front range from Denver to Pueblo are moving forward. This is an excellent idea for multiple reasons. It reduces conflicts with urban traffic, it gets night train noise away from more people, and it makes it easier for commuter rail and freight rail to share tracks.

The Front Range Express Bus has proven that there is a market for Colorado Springs-Denver corridor public transportation for commuters, even at highway speeds (where speed limits are incidentally going up in the former T-Rex construction project corridor in exchange for tighter enforcement). If a rail solution could be faster, it would not only increase the size of the commuter rail market with existing commuters, but would also more tightly bind the entire I-25 corridor expanding job and housing opportunities for about three million people.

Meanwhile, the idea of requiring a $5 toll on I-70 in the mountains has crashed and burned, while a consensus is developing that part of any solution to the ski traffic choked stretch from Denver to Vail should include some form of improved passenger rail.

Alas, FasTracks may go even further over budget in the wake of rising costs.

Who would have thought in 1958 or so, that trains and windmills would be icons of the future half a century later?

22 April 2008

Beyond Pennsylvania

After six weeks of waiting we have Pennsylvania results in the race of the Democratic party Presidential nomination:

With 96% precincts reporting:

Clinton 55%
Obama 45%

Clinton 52
Obama 46

These results are par for the course and probably keep Clinton in the race, but don't give her a lot of momentum going into the rest of the primary calendar.

The rest of the primary calendar is as follows:

Guam May 03 (4)
Indiana May 06 (72): Clinton leads slightly in the polls.
North Carolina May 06 (115): Obama leads by a lot in the polls.
West Virginia May 13 (28): Clinton is favored.
Kentucky May 20 (51) Clinton is favored.
Oregon May 20 (52) Obama is favored.
Puerto Rico Jun 01 (55)
Montana Jun 03 (16) Obama is favored.
South Dakota Jun 03 (15) Obama favored.

There are a total of 408 delegates at stake in the remaining nine contests.

According to CNN, there are about 313 superdelegates left who have not publicly favored on candidate or the other (another count puts the number remaining at 305).

According to CNN:

Barack Obama
- Total Delegates 1694
- Pledged Delegates 1464
- Superdelegates 230
- Additional Delegates Needed To Win: 331

Hillary Clinton
- Total Delegates 1556
- Pledged Delegates 1302
- Superdelegates 254
- Additional Delegates Needed To Win 469

A slightly different delegate count is found here it shows:

- Total Delegates 1713
- Pledged Delegates 1479
- Superdelegates 234
- Additional Delegates Needed To Win 311

- Total Delegates 1586
- Pledged Delegates 1328
- Superdelegates 258
- Additional Delegagtes Needed To Win 438

Nobody is going to go into the convention with enough pledged delegates to take the nomination without superdelegates. Obama would need more than three-quarters of the remaining pledged delegates, while it is mathematically impossible for Clinton to do so. In the proportional representation system used by Democrats, and in light of the remaining primary calendar, this simply isn't going to happen.

It is also exceedingly likely that Obama will have the most pledged delegates going into the Democratic National Convention in Denver in August, although it isn't clear how much of an edge will remain when all of the primaries and caucuses are over.

The recent trend in superdelegate endorsements has overwhelmingly favored Obama. It isn't yet clear if the Pennsylvania primary results will change that trend.

Michigan and Florida are not currently on track to have any delegates seated, although it isn't too late for some kind of deal to be struck regarding those states.

The odds at this point weigh heavily against Clinton. She needs about 60% of the remaining delegates (super and pledged) without Michigan and Florida. She didn't do that well in Pennsylvania, and the remaining states on the primary calendar are a mixed bag, so she is unlikely to do that well among the remaining pledged delegates. This means that she needs well over 60% of the remaining superdelegates' support to win.

The Meaning Of Twombly

The case Bell Atlantic Corp. v. Twombly has been cited in court decisions more than 5000 times since it was announced eleven months ago (I discussed it at the time it was decided here). It concerns the minimum amount that a legal complaint must include to allow a case to go forward. In doing so, it overruled the extremely lenient standard set forth in Conley v. Gibson, 355 U.S. 41, 47 (1957) which held that "the accepted rule that a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief."

Precisely what this means is a matter of controversy. I disagree with the position take by one commentator about the issue that "it has long been understood that Rule 8 requires pleadings to contain allegations in support of each material element of a claim."

Pleading all elements of a claim was not the law before Twombly, and is not the law even after Twombly, which required something short of that standard.

Indeed, the fact that one need not plead all elements was emphatically reiterated in the 7th Circuit just before Twombly was announced by Judge Easterbrook in Vincent v. City Colls. of Chicago, 485 F.3d 919, 923 (7th Cir. 2007) ("Any decision declaring ‘this complaint is deficient because it does not allege X’ is a candidate for summary reversal, unless X is on the list in Fed. R. Civ. P. 9(b).")

Similarly, as the Twombly court notes at slip op 23: "Swierkiewicz v. Sorema N. A., 534 U. S. 506, 508 (2002) . . . held that "a complaint in an employment discrimination lawsuit [need] not contain specific facts establishing a prima facie case of discrimination under the framework set forth in McDonnell Douglas Corp. v. Green, 411 U. S. 792 (1973)." And, the Twombly court makes clear that it is not reversing Swierkiewicz.

The distinction Twombly seems to make is not over how many facts must be provided or how specific they mus be, but instead concerns what counts as a factual allegation in a Complaint.

Twombly at slip op. 8 gets to the heart of the matter by saying (emphasis added and some citations omitted):

While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations . . . a plaintiff's obligation to provide the "grounds" of his "entitle[ment] to relief" requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do, see Papasan v. Allain, 478 U. S. 265, 286 (1986) (on a motion to dismiss, courts "are not bound to accept as true a legal conclusion couched as a factual allegation").

The allegations in the anti-trust case before it fail not because elements of the claim necessary to make out a prima facie case are omitted. The Complaint alleges that all material elements of the claim are present, including an allegation, made upon information and belief, that the agreement which must be shown to prevail exists. The Complaint is insufficient, instead, because the Plaintiff's language regarding the core issue of the existence of an illegal agreement isn't factual enough to constitute a genuine factual allegation. The key allegation that wasn't good enough in Twombly said:

In the absence of any meaningful competition between the [ILECs] in one another's markets, and in light of the parallel course of conduct that each engaged in to prevent competition from CLECs within their respective local telephone and/or high speed internet services markets and the other facts and market circumstances alleged above, Plaintiffs allege upon information and belief that [the ILECs] have entered into a contract, combination or conspiracy to prevent competitive entry in their respective local telephone and/or high speed internet services markets and have agreed not to compete with one another and otherwise allocated customers and markets to one another.

In other words, the Complaint in Twombly failed because the Plaintiffs only speculated that it seemed like an illegal agreement existed without having more than vague circumstantial evidence that didn't point "plausibly" in the words of the Twombly court to this conclusion in the absence of any corroborating allegations that there was really an agreement out there. If one bases a complaint not on what you know, but on information and belief, the "information" you do have that provides a basis for your "belief" must plausibly imply what you believe but do not know to be the case.

While you don't have to know all the details of the agreement, you need to have more than a mere hypothesis that this core element of an anti-trust case is out there.

As the Twombly court explains at slip op. 24: ""we do not require heightened fact pleading of specifics, but only enough facts to state a claim to relief that is plausible on its face."

Erickson v. Pardus, a Colorado case decided by the U.S. Supreme Court a month later, alleging lack of medical treatment dismissed on the pleadings because the harm suffered was not very specifically described by an unrepresented inmate, reemphasized the notion that as long as on is speaking the language of facts and not mere conclusions of law disguised as facts, that one need not be too specific and detailed to state a claim that is sufficient for further court action on its face.

Twombly and Pardis also both consider what is at stake in the case on the merits and who is doing the pleading. The Court implicitly recognizes in these cases that the distinction between a specific fact, a fact, and a mere legal conclusion, flows from context. In an extraordinarily large and complex class action case brought by specialist lawyers, counsel should be offered little slack because of the stakes involved in allowing half baked cases to go forward. In a simple case brought by a simple man, more reading between the lines is permissible.

Here too, plausibility is the guide. The justices are skeptical in Twombly because the inference made from "information" to the belief that there is an illegal agreement by the Plaintiffs is thin and can be explained many other ways that also make sense. The justices are more willing to accept the allegation made in Pardis because substantial harm is a natural and plausible consequence of denying an inmate treatment for a deadly disease.

A Complaint may legitimately require a judge to fill in some blanks that likely follow from context, but cannot demand that a judge make the same factual inferences that the Plaintiff does, if the judge finds it hard to swallow inferences the Plaintiffs offer.

Once upon a time, pleading rules and rules regarding expert opinions prohibited complaints and expert witnesses from offering up "ultimate facts" or bare legal conclusions. Only "real facts" were allowed. For half a century, that requirement was rolled back - ultimate facts and legal conclusions were good enough. Twombly is best viewed as a restoration of the ultimate facts rule. Complaints may now include ultimate facts and legal conclusions to guide the reader, but ultimate facts and legal conclusions by themselves are insufficient by themselves to state a claim. Instead, Complaints must now offer up a core of real facts that show that there is a plausible basis for the grievance, even when the ultimate facts and legal conclusions that frame those facts are stripped away.

Earth Day

The spirit of Earth Day is about rolling up your sleeves and getting down to the business of making a difference. There is no shortage of work to be done.

About Fish

Our fisheries are depleted. The will probably be no salmon fishing in the Pacific Northwest this year, a necessity that the commercial fishermen grudgingly acknowledge is necessary. But this is no fluke or temporary problem. Almost every major fishery is dramatically reduced. Our international institutions have not been strong enough to prevent a tragedy of the commons. It doesn't work to have have a fishing industry organized as hunting expeditions, in a world with agriculture sized populations.

Reinvigorating our fisheries requires less wild caught fishing, more fish farming, and less water pollution. The usual vanguard of environmental innovation who provide the bridge between industries at the start up, niche stage and the mass consumption lower price stage, the affluent consumer, has shunned fish farming. It is simply a matter of self-preservation. Farmed fish have more dangerous toxins, like mercury, than wild caught fish. All three solutions are intertwined. We need a grip on water pollution to boost wild fisheries and to make farm fishing viable so it can replace wild caught fish.

Global Warming

We don't have a real plan to slow down the global warming that we are causing. We know that it is caused by certain types of air pollution we emit. But we are uncomfortable about making the kinds of dramatic choices necessary to reduce them.

The United States is one of the worst global warming offenders. There are essentially three forums where we must change. We need to reduce emissions in the electrical energy sector, we need to reduce emissions in the transportation sector, and we need to reduce emissions in the industrial sector.

In the world of electrical energy, this means both more conservation and different ways of producing electricity.

On the conservation front we need to do a better job of communicating the value of conservation to consumers. Some of this is simply a matter of getting information on energy savings opportunities like energy efficient light bulbs and appliances to consumers when purchasig decisions are made on everything from light bulbs to appliances and computers to homes which can be designed to use less eletricity in building in mechanical systems and that have lower demands for energy with features like abundant natural light.

The other part of getting information to consumers is making sure that consumers share in the benefit not only of reduced consumption charges, but also of avoided costs like the power plants that don't have to be built, and the pollution that is reduced by their choices.

We also need on the electricity conservation front to develop energy efficient technologies -- like appliances that don't sip electricity when turned off and LED lighting systems.

I don't think that we should ban anything. There are niche places for inefficient technologies that override conservation needs. If a prize painting in a gallery, or an intangibly significant altar, or historic building looks better under an inefficient incandescent bulb or a polluting braizer, so be it. We should let people make those choices. But, a tax based, for example, on the number of watts a bulb requires over a state of the art number of watts to produce a given number of lumens, might be appropriate -- a sort of gas guzzlers tax for electricity hogs. If a bulb with the lumen output of a 100 watt incandescent bulb could be replaced by a 25 watt compact flourescent, maybe a 75 cent tax on the incandescent is in order. Small incentives can make a big difference in a shopping center environment.

On the production side we need to move away from fossil fuels, particularly coal, and towards nuclear power and renewables like wind, solar, and hydroelectric power, balanced against the costs of each. This means improved permitting for nuclear power (something already implemented to some extent), solving the high level nuclear waste problem (probably by biting the bullet and opening Yucca Mountain), imposing some kind of emissions taxes on coal production that contributes to global warming (ideally committed to a global warming reduction project fund) in which an emissions basis rather than a fuel basis in order to encourage clean coal technologies, and taking a comprehensive look at our hydropower infrastructure to identify how the system could be designed to increase production with management environmental costs (e.g. some old and inefficient or non-power producing dams might be removed or replaced).


We want fewer emissions from transporation. It is hard to decouple production from consumptions in this area.

One good place to impose environmental taxes designed to increase fuel efficiency and reduce emissions may be in the new vehicle sales market, rather than as a gas tax.

Once someone has purchased a new vehicle, they typically have not a lot of flexibility to alter the number of mile that they drive, and even if they sell the car in favor of another more fuel efficient one, someone is going to end up driving that car for its natural life. If gas taxes rise, used car buyers may be willing to pay less for the old car -- shifting some of the economic cost of the car's fuel inefficiency from the buyer to the seller of the fuel inefficient car, but someone is going to buy and drive that car at some price, unless the price of fuel is truly crushing.

CAFE standards are a blunt instrument for achieving this goal. While the fuel efficiency of the aggregate market of vehicles sold is what we want to change, it forecloes, for not terribly good reason, the possibility that some firms will focus their sale on big vehicles, or on less fuel efficient vehicles whose sales we want to discourage rather than ban, while providing firms that focus their sales on smaller and more fuel efficient vehicles to improve.

One option would a cap and trade emissions market. The average of the last few years fuel economy per vehicle would be determined and imposed as a cap (and then decreased year by year). Every vehicle sale of a more fuel efficient vehicle would give a company a credit. Every vehicle sale of a less fuel efficient vehicle would be permitted only if the company purchased enough credits to permit it from someone else. Selling Priuses or SmartCars would give companies are marketable commodity. Non-participants in the car market could also buy fuel efficiency credits on an equal footing with car companies and retire them, thus paying to improve air quality.

The only hard question is whether there ought to be some recognition of the fact that larger cars carrying more passengers are more fuel efficient than more fuel efficient cars in many cases. A single occupancy Prius (62 mpg) is less fuel efficient per passenger than fuel inefficient Dodge Durango (12 mpg) which routinely carries six passengers. One rough justice solution might be to have several different fuel efficiency standards for different classes of vehicles, based upon average occupancy in a class (determined empirically). Thus, one might have a small car, full sized car, small SUV, medium SUV, large SUV, regular cab pickup, full cab pickup, minivan, large passenger van, and full sized bus category. Regulations based upon EPA studies would establish an average occupancy for each type of vehicle in practice (something that already exists for passenger-mile estimates produced by the Department of Transportation). The target fuel efficiency rating for the entire fleet would set miles per gallon per average passnger per vehicle goal, which would then be translated into target fuel efficiencies in each class of vehicle.

Since we really want to do more than control fuel efficiency, vehicles that emit fewer greenhouse gases might get treated as if they were more fuel efficient than they actually are, and alternative fuel vehicles (ethanol or biodiesel or hydrogen or natural gas or plug in electricity) might receive similar adjustments.

This seems complex, and in some ways, it is complex. But, it would be entirely invisible to customers. The details would be relevant only to representatives of a dozen or so car companies and perhaps a similar number of environmental groups, and the fuel efficiency rights would be traded (on a government disclosed registry with disclosed prices) at the manufacturer level (the government might commit to buying unused credits at some price, essentially setting a floor to the market).

A trade and cap system would be invisible to car dealers and consumers who would simply observe that some vehicles like regular cab pickups were getting more expensive, while fuel efficient vehicles were getting cheaper. It also would not impact government revenues significantly. It would simply make more fuel efficient vehicles more profitable than less fuel efficient vehicles within the market.

The definition of vehicle, by the way, should be broad enough to include all passenger vehicles. Why? Because one of the most fuel efficient vehicles in existence is the full sized bus with any decent passenger load. This would provide a natural and proportionate way for the private car and truck market to subsidize the public transportation market.

The Third World

The shoe yet to drop for global warming and other environmental issues on a global scale is the environmental impact expected as third world and developing countries like China, India and Brazil develop and consumer more.

These nations inevitably will and should develop more advanced technology based economies. But since they are making decisions on more of a blank slate, it may be possible to steer those countries, at a relatively low cost, towards leapfrogging from their current less developed state immediately to more environmentally friendly sustainable economic arrangements without going through the grossly environmentally destructive intermedate steps that the Western world did.

Indeed, the advent of Peak Oil and its imapct on oil prices in the next few decades may make this an unavoidable choice.

Modest subsidies through R&D and other incentives now, may be a cost effective way of allowing everyone in the world to be developed in a cleaner way later.

21 April 2008

O.K., sometimes sappy is nice.

The webcomic Marry Me, may be mushy, but its website "marrymemovie.com" earns its aspirational moniker. It reads like a Hollywood romantic comedy, only it's free. It's also an American made union product.

Comics have long been a pretty cheap genre in which to develop ideas that translate well into expensive, and often profitable movies. Webcomics are a natural evolution of this model. Many are at least as good as the typical movie theater fare, and the cost of evaluating a failure is low.

Also, the serial nature of both genres is highly addictive. Don't say I didn't warn you.

Delaware Upholds Officer Liability

Delaware's courts are known for their pro-management stances in corporate law. But, not always. A recent case upholding a corporate officer's inaction in setting up a system to detect corporate wrongdoing is typical of the evolving sensibility of corporate law (notably in federal bankruptcy court, rather than in chancery court).

Shareholders may be no more culpable than bondholders, and directors may be empty suits, but management is culpable and has knowledge of relevant facts. As a result, they are appropriately held liable from time to time for their wrongful acts. The 2005 bankruptcy reform similarly increased the liability of corporate management through the device of preference status for some corporate bonuses.

McCain's Character Problem

Do you really want this guy to be President?

Do you think if Barack Obama had left his seriously ill wife after having had multiple affairs, had been a member of the "Keating Five," had had a relationship with a much younger lobbyist that his staff felt the need to try and block, had intervened on behalf of the client of said young lobbyist with a federal agency, had denounced then embraced Jerry Falwell, had denounced then embraced the Bush tax cuts, had confused Shiite with Sunni, had confused Al Qaeda in Iraq with the Mahdi Army, had actively sought the endorsement and appeared on stage with a man who denounced the Catholic Church as a whore, and stated that he knew next to nothing about economics -- do you think it's possible that Obama would have been treated differently by the media than John McCain has been? Possible?

And -- this is fun to contemplate -- if Michelle Obama had been an adulteress, drug addict thief with a penchant for plagiarism -- do you think that she would be subject to slightly different treatment from the media than Cindypills McCain has been? Anyone?

Sometimes neutrality requires the media to state the facts, even if they don't favor the candidates equally.

Blogger Fights Subpoena

Blogger Kathleen Seidel, of neurodiviersity.com, has done a solid job, pro se, of defending a subpoena in a vaccine litigation action in a motion reprinted in an April 3, 2008 posting at the site. As she has no personal knowledge of any facts related to the case, and is a layperson, rather than an expert in the field, the subpoena appears inappropriate to me. Her description of the subpoena, moreover, makes it clear that it is overbroad.

Angry Bear On Taxes

Angry Bear argues for higher capital gains taxes and tougher tax penalties (particularly a crackdown on expense account living) and eliminating the charitable deduction.

I've previously discussed similar reforms, although I suggested a dramatic limitation of the charitable deduction, rather than its elimination. In the pertinent parts:

Revenue Raisers

1. End all favorable tax rates for capital gains (other than gain on the sale of a principal residence). Rates might be capped at the greater of the individual's top ordinary income tax rate in the year or the highest rate that would apply to the gain divided by the number of years in the holding period for the asset, whichever was greater, to address the concern that an individual might be bumped into an artifically high tax bracket.

2. End the 1031 like-kind exchange (a capital gains tax deferral device), at least for real estate, which would be deemed never to be of like kind with any other real estate.

3. Tax accrued capital gains upon gifts and inheritances, based on a deemed transfer at fair market value, to the donor. Currently gifts are not taxed and receive a carryover basis, while inheritances are not taxed and receive a step up in basis to fair market value. (Similar treatment currently exists for 401(k)s and IRAs).

. . .

5. Eliminate favorable tax rates on dividends received, and the dividends received deduction of existing tax law, as well as the accumulated income tax and the personal holding company tax. These would be replaced by a simple dividend paid deduction for corporations.

. . .

9. Tax all income on stock received in exchange for either services, or for stock options granted in exchange for services, as ordinary income subject to self-employment taxation.

. . .

11. Narrow the scope of the Section 170 charitable income tax deduction to contributions that truly benefit the needy, as opposed to contributions to all 501(c)(3) organizations. For example, charitable deductions for educational contributions would generally be limited to scholarships, and charitable deductions for churches would be limited to funds specifically ear marked for ministries to the needy. Among the donations that would no longer qualify would be contributions to the general funds of universities and museums. These deductions would still apply for gift and estate tax purposes under the theory that those taxes are taxes in lieu of an income tax on the receipient.

12. Tax the net investment income of non-profits at corporate rates.

. . .

17. End the pastor's housing allowance.

18. Tax business food, clothing, entertainment and lodging expenses as not taxable to the customer or employee, but not deductible by the provider.

19. Disallow vehicle expenses except for the percentage of use documented as business travel.

. . .

Tax Cuts:

. . .

8. Create a charitable deduction for direct payments to non-family members/non-employees in need in the form of qualified vouchers.

20 April 2008

The War In Congo

Africa's seemingly never ending traumas can be Byzantine. Among the worst is a war being fought Democratic Republic of Congo. This war is sometimes known as the Second Congo War:

The Second Congo War, also known as Africa's World War and the Great War of Africa, took place between 1998 and 2003 in the Democratic Republic of the Congo (formerly called Zaire), and ended when the Transitional Government of the Democratic Republic of the Congo took power.

There are 5.4 million deaths attributed to the conflict, and a level of mass rape and torture of unthinkable proportions. There are about 62 million people in the DRC but it isn't entirely clear, in my cursory review, how many people live in the area where the conflict continues or what parts of the country were most severely impacted by the Second Congo War as a whole.

The trouble is that despite a peace treaty in July 2003, this war isn't over, and the line between it and related wars like the immediately preceding First Congo War (1996-1997), and multiple waves of massacre by partipants in the war including Rwanda (1994 genocide), Burundi (genocidal killings in 1965, 1972, 1988, and 1993), Uganda (massacres by Ida Admin in the 1970s and multiple wars some current) and Sudan (engaged in some form of civil war for all but 11 years since 1955), isn't always clear.

The international Hutu v. Tutsi conflicts in Africa in the last half century or so make the Israeli-Palestinian conflict look like a tea party. A UN peacekeeping force is present in the region, but is too small to end the violence and has had incidents of corruption itself.

Wikipedia identifies four primary factions in the Second Congo War, none of whom have obvious connections to any large geopolitical struggles.

The current post-treaty hostilities are described as follows:

The fragility of the state has allowed continued violence and human rights abuses in the east. There are three significant centers of conflict: North and South Kivu, where a weakened FDLR continues to threaten the Rwandan border and the Banyamulenge, and where Rwanda supports RCD-Goma rebels against Kinshasa; Ituri, where MONUC has proved unable to contain the numerous militia and groups driving the Ituri conflict; and northern Katanga, where Mai-Mai created by Laurent Kabila slipped out of the control of Kinshasa.

The ethnic violence between Hutu- and Tutsi-aligned forces has been a driving impetus for much of the conflict, with people on both sides fearing their annihilation as a race. The Kinshasa- and Hutu-aligned forces enjoyed close relations as their interests in expelling the armies and proxy forces of Uganda and Rwanda dovetail. While the Uganda- and Rwanda-aligned forces worked closely together to gain territory at the expense of Kinshasa, competition over access to resources created a fissure in their relationship. There were reports that Uganda permitted Kinshasa to send arms to the Hutu FDLR via territory held by Uganda-backed rebels as Uganda, Kinshasa and the Hutus are all seeking, in varying degrees, to check the influence of Rwanda and its affiliates.

North and South Kivu are provinces 13 and 12 respectively on the map above. Ituri is province 14 on the map above. Katanga is province 26.

In short, the active areas of the conflict at this point are confined to the country's far eastern border. This area lies on the western side of the Rift Valley that divides East Africa from the rest of the continent in the country's most mountainous region. The area is home to at least two active volcanos that have errupted several times in the 21st century, one of which poisoned Lake Kivu, after which two of the provinces where the conflict remains active are located.

The current conflict is roughly as far from the capital as Los Angelese is from Washington D.C., or Amsterdam is from the eastern fringes of Western Europe.

AIDS originated in or around the DRC and has a high prevailance there. It may have made the transition from primates to humans through humans eating or exposed to blood in bushmeat.

The Rift Valley area is home to vast mineral wealth.

Congo is also home to the closest primate ancestors of humans, the common chimpanzee and the bonobo.

Recent DNA evidence suggests the Bonobo and Common Chimpanzee species separated from each other less than one million years ago. The chimpanzee line split from the last common ancestor of the human line approximately six million years ago. Because no species other than Homo sapiens has survived from the human line of that branching, both chimpanzee species are the closest living relatives of humans.

Put another way, this war is being fought in Eden.

Flunking Out

A high percentage of Colorado high school students drop out. Many who do graduate don't go to college. Many who start college don't finish.

Too Much Respect?

The Denver Post today focused on the low percentage of students who graduate from public colleges in the state, and on the impact on ethnicity and preparation for college retention. Two big barriers to college are somewhat counter intuitive: excessive respect for authority and aversion to debt:

Misinformation runs rampant. One parent thought students had to pay for all of college upfront. Others are gripped by fear about taking out even a modest loan to pay for books or tuition.

"I'm changing my students' minds, but I'm also changing my parents' minds," Romero said. "I have to say, 'A student loan is not always a bad thing. It's a personal investment.' "

Students are coached to fight and advocate for themselves. They are taught to question professors about a bad grade and push for help understanding a tough math assignment.

"They come from traditional families where they don't question authority," she said.

The numbers present a less convincing case that ethnicity is important in retention rates. But the system does have a high tolerance for failure.

Retention Numbers

At the state's more selective institutions (shown with enrollment), CU-Boulder (31399), CSU-Ft. Collins (26723) and the School of Mines (4056), about one in three students fail to graduate within six years.

At the University of Colorado-Colorado Springs (8583), and the University of Northern Colorado (12981), fewer than half of students graduate in six years.

At Adams State (4899), CSU-Pueblo (6205), Fort Lewis (3907), Mesa State (5938), University of Colorado-Denver (19766) and Western State (2094), only about one out of three students graduate in six years.

At Metropolitan State in Denver (20761), only one out of four graduate in six years.

The situation in community colleges is even more dismal. At Morgan Community College, only 30% are still in college a year after they start. The Community College of Aurora, the Community College of Denver, Trinidad State Junior College, Otero Junior College, Front Range Community College and Colorado Northwestern Community College all lose more than half of their students in the first year.


Six year graduation rates are hardly a strict measure of student retention for college students who pursue full or near full time programs. Almost all of the other four year colleges mentioned fit a more traditional model than Metro State to some degree.

At Metro State, where a large share of the student body is part-time or taking classes on a continuing education basis, rather than genuinely working towards degrees, a six year graduation rate measure may distort the numbers, although it is worth noting that a large share of part-time college students pursuing four year college degrees never complete their degrees in any case.

One year retention is a very reasonable measure for community college retention.


Any way you cut it, a large share of the students who start college at public colleges in Colorado will never finish.

Few people deny that spending significant sums of money to allow residents of Colorado to graduate from four year colleges and earn degrees at community colleges, despite limited financial means, through a government subsidy, is a worthwhile end. It is good for Colorado's economy and it advances the ideal of equality of opportunity more effectively than anti-discrimination laws.

The harder question is whether the state is doing anyone any favors by admitting huge numbers of students who will ultimately drop out.

The Argument For The Status Quo

There are essentially two arguments for the status quo.

First, some people believe firmly that attending college is a good investment in individual human development, even if those individuals never earn degrees.

Second, many people believe that giving people the opportunity to sink or swim in an actual college environment is preferable to making that decision for them through a selective college admissions process.

Certainly, every year, some people who get into college despite poor graduates and test scores manage to graduate, while some people who are well academically prepared for college fail. Moreover, there will always be a gray area. Where should the cutoff be? A 10% chance of success? A 30% chance of success? A 50% chance of success? A 75% chance of success? A 90% chance of success? Many of the nation's law schools have 95% or better retention rates, and almost all have at least a 75%-80% retention rate. In contrast, no four year public college in Colorado has better than a 68% retention rate. Why should the different levels of education be treated so differently?

Also, it is worth noting that students on the college admission margins are disproportionately minorities. Even though academically weak students graduate less often than academically strong students, some consistently small percentage of them do graduate. Those academically weak students who nevertheless are admitted to college and graduate are disproportionately minorities and dramatize the costs of a selective admissions system that prevents people from even attempting college if they are too academically weak.

Also, no all college dropouts are created equal. The value of college is probably greatest for students who almost graduate, at a greater cost to the high education system. The value of college is probably least for students who drop out after only a semester or two, particular if, as is the case in most academically weaker students, this happens in a less expensive per student community college or non-flag ship four year college.

The Argument Against The Status Quo

There is some merit to both arguments, but there are strong arguments that this is no way to run a higher education system as well.

We can't know precisely who will graduate and who will drop out, but people who do poorly on traditional college admissions measures, like high school GPA, the mix of courses taken in high school, extracurricular involvement, ACT scores and SAT scores are meaningful predictors of whether or not someone will graduate from college. Academically strong applicants are much more likely to graduate than academically weak applicants.

Also, students who drop out of college tend to be the students who were failing academically. While, attending some college courses may add value to particular students, students who are academically weak to the point that they drop out are least likely to be benefiting from the courses that they are taking. The large percentage of students taking remedial courses in the state's community colleges and less selective four year colleges are a symptom of this problem.

The current system's open enrollment system doesn't do a great job of moving minority students towards graduation.

Pikes Peak [Community College] loses about 63 percent of black males after the first semester and about 82 percent after the first year.

To a meaningful extent, our secondary and higher education system is a time consuming and expensive test that sorts people by ability. For employers, the sorting value often exceeds the value of what is actually learned in high school and college.

We know from overwhelming data that students who graduate from high school do better economically than students who drop out of high school, that students who attend some college after graduating do better economically than students who merely graduate from high school, and that students who graduate from college do better economically than students who attend college and then drop out.

At face value, this seems to show that higher education adds value. But it isn't at all clear how much of the increased economic success of those who have some college comes from attending college, per se. Much of the economic value of education is a mere sorting effect.

Most high school dropouts were failing in high school (and had disciplinary problems) before dropping out. They drop out because they are less intelligent or less diligent (or both) than students who graduate from high school.

Students who apply to and are admitted to a college program are, on average, more intelligent and diligent than students who never even attempt college.

Success in college is meaningfully related to the intelligence and diligence that the graduating students had when they started, and success in college course work is closely tied to college completion.

There are much cheaper ways to sort people by ability if that is all that one wants to do. Particularly in the case of people who attend college and drop out, it isn't at all clear how much of the added economic value of college attendance comes from the sorting involved, and how much comes from what students who drop out of college learn in college. Partial evidence that the sorting value of college is more important than the education value for these students is that students who earn associates degrees do not fair better economically than students who drop out of four year programs.

If indeed college doesn't add much value to the average student who drops out of college, then the logical conclusion is that we should radically overhaul the way that we run our higher education system. We should be far more selective in college admissions, pretty much across the board, to free up resources now spent to subsidize students who flunk out or drop out on students with a greater chance of actually graduating.

One could easily imagine that tightened admissions standards would reduce the number of students graduating from public colleges in Colorado only negligibly, while reducing the number of students enrolled in institutions of higher education in the state by 25% or more. Indeed, the improved student-teacher ratios and higher educational resources per student might improve the value added by the system to the students who remain in it.

The removal of a huge swath of students who are likely to fail from the system could also change the prevailing attitudes on college campuses. A culture in which failure is the norm could be replaced by one in which success is expected. It would also encourage professors to develop less of a sink or swim attitude towards students, impossible in a context where most students are doomed to fail even if a professor makes herculean efforts to support them.

On the other hand, perhaps students who drop out, through their tuition dollars, are actually subsidizing their more academically successful peers. In a college lecture class, the cost of teaching a class with 80 students instead of 60 is modest, but the increased revenue per faculty member is great. Indeed, this kind of subsidy may explain why non-flag ship four year colleges are cheaper per student than flagship colleges, and why community colleges are cheaper per student than non-flag ship four year colleges.

Even if academically weak students do subsidize better students, one has to ask if the state is doing anyone any favors by perpetuating that system. Would academically weak students who are just barely strong enough academically to be admitted a non-flagship four year college or community college be better off with more work experience and income from working, instead of sitting in classes where they fail? If it fair to pay for the education of academically strong students on the backs of academically weak students?

Middle ground?

One approach would be to tighten admissions standards across the board in the four year college system, while leaving the community college system on its existing opens admission basis.

If we are to have system based upon weeding out students based upon actual performance in college, rather traditional admissions criteria, community college is the least expensive place for that experimentation for students and the state alike.

Enrollments at the state's four year colleges would be reduced. Many students who would have attended CU or CSU or the School of Mines in prior years, would be squeezed to less prestigious public four year colleges. Many students who would have attended non-flagship four year colleges would be squeezed into the community college system. Four year colleges statewide would have the smaller classes and greater climate of success that would help first generation college students succeed.

Community college enrollments would surge. But students who would have been admitted to non-flagship four year colleges in prior years would have a more meaingful chance of sticking it out for at least a year or two, than existing community college students. Indeed, these students would probably start to dominant second year classes in community colleges. This might increase academic standards in community colleges and also might greatly increase the number of students who end up transferring to four year college.

Today's article in the Denver Post doesn't provide a figure, but the number of students transferring from community college to four year colleges is not a large percentage of either community college students or of four year college students. But the numbers show that those community college students who do persist and transfer to a four year college do just as well as students who begin their studies at a four year college.

A recent study provided these figures:

The Community College Transfer Study, completed . . . by CU’s Boulder, Denver and Colorado Springs campuses, confirmed that the academic performance of Colorado community college transfer students from 13 state system community colleges and two local district community colleges is a “record of success.” The study considered the performance and relative success of 18,635 students who entered the three CU general campuses as undergraduates between the summer of 1995 through the spring of 1997. The review included 2,333 community college transfer students, 6,253 transfers from mostly four-year institutions and 10,049 first-time CU freshmen. The study considered first term and degree grade point average as well as the percentage of transfer and native students graduating. . . .

* Community college students transferring to the Boulder campus graduate with an average GPA essentially the same as those of native students;
*Community college transfer students to the Colorado Springs campus have higher first-term GPAs and graduate with GPAs nearly identical to other students. Additionally, community college transfer students graduate at a higher rate than do native students;
*At UCD, 51 percent of community college transfer students graduate compared to 40 percent of native students.

Perhaps six year graduatation rates at flagship schools could increase from two-thirds to three-quarters or four-fifths. Perhaps at non-flagship four year colleges, six year graduation rates could increase to the two-thirds that are the norm at flagship schools now. Perhaps at community colleges, two-thirds of students could make it to a second year, and many would complete associate degrees, at least.

There is no evidence that those would managed to transfer would be worse off, and those who dropped out of community college would still be better off than those who started at a more expensive four year college (or might get, at least, an associate degree rather than simply an unresolved fizzling out of their educational experience).

The total number of bachelor's degrees might not change much, or more even fall slightly, but far fewer Coloradans would be marched on a path to failure to may discourage them from ever pursuing education again.

18 April 2008

Iraq War Achievement: Record Suicide Bombings

Suicide bombers conducted 658 attacks around the world last year, including 542 in U.S.-occupied Afghanistan and Iraq. . . more than double the number in any of the past 25 years. . . More than four-fifths of the suicide bombings over that period have occurred in the past seven years, the data show. The bombings have spread to dozens of countries on five continents, killed more than 21,350 people and injured about 50,000 since 1983, when a landmark attack blew up the U.S. Embassy in Beirut. . . . since 1983, bombers in more than 50 groups from Argentina to Algeria, Croatia to China, and India to Indonesia [have used suicide bombers]. . . . Of 1,840 incidents in the past 25 years, more than 86 percent have occurred since 2001, and the highest annual numbers have occurred in the past four years. . . . The data show more than 920 suicide bombings in Iraq and more than 260 in Afghanistan, including some that killed scores of U.S. troops. All occurred after the U.S. invasions of Afghanistan in 2001 and Iraq in 2003. . . . At least two-thirds of suicide bombings since 1983 have targeted U.S. policy goals[.]

From the Washington Post.

Prior to Iraq and Afghanistan, suicide bombings were often associted with the Tamil Tigers in Sri Lanki and with the Israeli-Palestinian conflict.

The Liberation Tigers of Tamil Eelam, popularly known as the Tamil Tigers, is an avowedly secular rebel movement of the country's Tamil ethnic minority. It carried out scores of suicide bombings from the late 1980s until a cease-fire in 2002. The conflict between the Tigers and the government, which is dominated by members of the Sinhalese majority, began in 1983 and claimed an estimated 65,000 lives.

Though dominated by Hindus, the Tigers are predominantly ethnic and nationalist in outlook, with religion not playing a significant role in their actions. . . . The rebels carried out their first suicide bombing in 1987, when a captain blew himself up along with 40 government troops at an army camp in the northern part of the country. . . . [T]he group accounted for 76 of 315 suicide attacks carried out around the world from 1980 through 2003, compared with 54 for the Islamic Resistance Movement, or Hamas, and 27 for Islamic Jihad. . . .

Even as the Tigers have abandoned suicide attacks, others have adopted the tactic as their own. In Russia, Chechen Muslim radicals have mounted at least 19 suicide operations . . . including those in one terribly deadly week last year when hundreds died in a fiery siege at a school, a bombing at a Moscow train station and the downing of two airliners.

Al Qaeda has also favored suicide plots on more than 20 occasions since 1996 against the United States and its allies, including the unprecedented Sept. 11, 2001, hijackings that killed nearly 3,000 people. . . .

[Ed.A source different from the one in the first blockquote in this post estimates that] 31 of 35 groups that have used suicide bombings are Islamic. . . .

Judging by statistics, Israeli officials have made significant progress against suicide attacks since the start of the intifada in September 2000. At the height of the uprising in 2002, 42 suicide bombings killed 228 people. Two years later, the number had dropped to 12 bombings and 55 deaths.

Israeli officials say the construction of a concrete barrier that rises 24 feet high in some places and the intensive military operations in the West Bank have helped keep suicide bombers out of Israel. In addition, the Israeli military destroys the family homes of suicide bombers, a practice human rights groups have condemned as an illegal exercise of collective punishment.

Also from the Washington Post.

A summary of a report on the demographics of suicide bombers in the Israeli-Palestinian conflict can be found here

Approximately 90% of suicide bombings in Iraq are conducted by foreign fighters. "According to the U.S, military, records seized from al-Qaeda show that 40% come from North African countries such as Libya and Algeria, and 41% from Saudi Arabia." But foreign fighters are believed to make up a very small proportion (less than 1% of individuals detained by U.S. forces) of insurgents in Iraq.

Suicide bombings in Afghanistan began in notable numbers in 2005 and picked up dramatically in 2006 and 2007, although the Afghan attacks have often tended to inflict fewer casualties than those in other areas.

The Case For Two Track Tax Enforcement

Alex Raskolnikov, a tax professor, has an exceedingly clever idea for improving compliance with tax laws described in a pre-print draft article.

His idea: Give taxpayers two choices regarding how questions about their returns will be handled that give them an incentive to choose the regime most likely to cause them to comply.

One regime, which would apply by default, would be similar to the current regime, but with civil penalties five times as high.

The other regime, with penalties the same as those under current law, which could be elected by return filing taxpayers, would included features such as:

1. The IRS is right unless clearly wrong in interpreting tax laws and facts
2. Binding arbitration with the IRS
3. Waiver of tax preparer privileges
4. Voluntary waiver of foreign law privacy protections
5. Higher standards for tax preparers (re disclosing aggressive positions)
6. Higher penalties for tax preparers
7. Reimbursement of costs for prevailing taxpayers
8. Separate enforcement staffs (elective taxpayer staff would be nicer)

The notion is that existing civil penalties are too weak to deter people who try to game the current system, but that stiff penalties are harsh for people who fail to comply despite not trying to game the system, and that high penalties discourage cooperation with tax authorities by people who aren't trying to take aggresive positions on purpose.

The elective regime would impose make it much more likely for taxpayers and their advisors intentionally relying on aggressive interpretations of tax laws to lose upon an audit, while imposing minimal costs upon taxpayers who simply made mistakes in applying sometimes unclear tax laws. Thus, the election would be designed to give taxpayers most responsive to high penalties an incentive to choose the traditional regime with high penalties, and would give taxpayers more responsive to a less adversarial approach an incentive to choose the elective regime.

Also, taxpayers found to have gamed the system in an audit under the elective approach could be barred from using it in future years.

He argues for some complex reasons, that the best strategy to accompanying this change would be to make decisions to audit at all without considering whether or not a taxpayer has made the election.

Also, the approach avoids constitutional challenge because taxpayers are free to elect the traditional regime that preserves all traditional legal rights, and will not be penalized for doing so unless they are found upon an audit to have failed to comply with the tax laws. Nothing in the constitution imposes limits on how high civil penalties for tax law violations may be, so long as they are reasonably proportional to the violation (the vast majority of tax penalties are a multiple or percentage of the amount of tax not paid).

The proposal isn't a comprehensive approach to closing the tax gap, nor is it intended to be.

But, one of the issues the proposal does not address, non-reporting of domestic income, is well suited to an entirely different solution: expanded information reporting. Another approach within the plan would be to apply greatly increased penalties under both regimes in the narrow area of intentionally not reporting gross income not subject to information reporting.

Others unaddressed issues, like non-reporting of foreign income, may not have any good solutions through a taxpayer level audit process. One recent breakthrough on that front was to audit credit card companies that facilitated access to non-reported foreign funds. Another may be tough multi-national diplomatic action against tax havens. A third approach could involve aggressive federal criminal enforcement directed towards taxpayers who fail to report tax haven income, a strategy that may have benefits in curbing money laundering and bankruptcy fraud as well.

17 April 2008

The Power Of Expertise

An excellent article at Wired gives rise to two big picture observations.

1. Modern commercial ships are incredibly automated. The story features a mishap involving The Cougar Ace, a 654 foot long, 55,328 ton ship that carried about 5500 cars. Her crew was just 23 sailors.

By comparison, the 3,000 ton U.S. Navy Littoral Combat Ship just about to enter service is heralded for her tiny (by Navy standards) core crew of 50 sailors, about a quarter the crew of similar sized predecessor ships. The only warships in the U.S. Navy larger than The Cougar Ace are aircraft carriers (which are about 100,000 tons). They require crews the size of small cities to operate.

2. Small numbers of highly expert people can do amazing things. The focus of the story is the company Titan Salvage, which routinely salvages huge ships like The Cougar Ace despite having just 45 salaried and highly skilled employees, often through alternatives to brute force. Many jobs it undertakes, moreover, involve only a fraction of its total workforce.

Hat Tip to NewMexiKen.

School Based Abuse and Neglect Reporting Works

About 85% of the 160 children who died in Colorado from abuse or neglect in the past five years were under the age of five, according to a new report on the failures of Colorado's child welfare system, despite the fact that less than 30% of children in the state are under age eighteen.

Part of this is a consequence of the fact that younger children are fragile and less able to protect themselves. But I suspect that another important factor is that school systems credibly report abuse and neglect in situations involving school aged children, something that doesn't happen with pre-schoolers.